Overview^*

Markets

Fund flows data for March 2012 (excluding ETFs) showed a net of $355.9M leaving the global healthcare sector, with $258.7M (net) leaving the U.S. healthcare market specifically.

The BTK Index (^BTK) closed last month up 4.3% from March 2012 and up 0.8% as compared to April of last year. The broader NASDAQ Biotech Index (^NBI) was also up 1.6% compared to the month prior and performed even better when compared to April 2011 (up 16.5%). This continues the positive trend we have seen the past couple of months.

The Dow was basically unchanged compared to the close of March 2012 (up $1.59, a 0.01% change), and was up 3.1% as compared to April of last year. The S&P 500 was down just slightly (0.7%) compared to March, but was still up 2.5% as compared to April 2011.

Despite the fact that indices were up in April and people are excited the sector, it was a weak month across the board for financings.

 

Industry Trends

Venture. The venture world continues to generate positive news, indicating that the model still has a lot of life despite predictions of its demise. BioCentury reported on law firm Cooley’s upbeat analysis of life science venture capital with recent bullish signs such as double the number of up rounds, more friendly terms for syndicate members and better liquidation preferences.

In addition, H.I.G. closed an oversubscribed fund with commitments of $268 million and Flagship teamed up with two Merck entities to fund innovative life sciences companies.

 

M&A. Still lively in April with Amylin reportedly in an auction process following a rejected bid from Bristol-Myers; Roche “dropping” its offer for Illumina (many think this just a tactic) and AstraZeneca paying $1.26 billion (>50% premium) for Ardea. As well as the usual rumors: at the moment, Bayer for Onyx (yet again).

There were a couple of intriguing articles and observations in the press regarding biotech M&A this month. TheStreet.com’s Adam Feuerstein ran an analysis showing that transactions overwhelmingly occurred either in mid- to late-stage development (the cute toddler stage) or after launch when the commercial opportunity is more easily quantified (the young adult stage) BUT NOT immediately around approval or even early in launch (the awkward adolescent stage).

In addition, Tara Lachappelle of Bloomberg noted that M&A premiums in biotech exceeded 71% for transactions larger than $500 million, the highest they’ve been since at least 2000. The article attributes this to the massive patent cliff being faced by Big Pharma in 2012-2016. (Hat tip to Richard Pops, who pointed out this article in a recent tweet).

 

JOBS Act. We noted last month (along with every law firm in the universe) the passage of the JOBS Act, which seeks to make it easier for “emerging growth companies” to go public and of course applaud initiatives that seek to encourage emerging growth in the U.S. On the other hand, we wonder how much SEC restrictions and reporting requirements around IPOs have really posed significant challenges to the biotech industry, as opposed to, say, arbitrary and unpredictable behavior by the FDA.

From an IR point of view, we would note that JOBS creates some interesting opportunities: the ability to meet with investors while the company is in registration and possibly to stealth file the S-1 while the company tests the waters.

 

Hepatitis C. Not to weigh in or judge too heavily in this very complex area, but of course this April also saw great results at EASL (European Association for the Study of the Liver) of a combination trial of Gilead’s GS-7977 and Bristol-Myers drug daclatasvir: pan genotypic 100% sustained viral response (including the difficult genotype 1) for hepatitis C. (Mark Schoenebaum refers to the competition between the two as the hep C “death match”.) The two companies are jockeying about whether they will actually collaborate on the combination – BMS has publicly said it would like to; GILD has been more reticent (BMS says its overtures have been rebuffed), even though it seems clear the two are talking. So here is a another example of the thorny moral issues that occur when for profit institutions are responsible for drug development – on the one hand, it seems clear that the optimal outcome for society and patients would be to engage in a combination trial but each company has also to serve its own economic needs and value-creation obligations to its shareholders.

 

And from the thought leaders…

In a recent editorial, the always impressive Susan Desmond-Hellman advocated for a new social contract with patients to develop a new and very expansive database in which real world clinical information would be married with research on molecular makeup of disease that would result in a more accurate disease “taxonomy” that would ultimately materially enhance diagnosis and treatment – a new world of “precision medicine.” The social contract refers to the quid pro quo that patients would get in terms of their own care in exchange for providing the clinical information.  While we wouldn’t presume to pass on the feasibility and promise of such a system, given the complexity of data being generated by the biotechnology industry, it does appear that this kind of integration could cause a material inflection in our ability to understand biologically complicated diseases.

Mark Schoenebaum of ISI, in the course of adding Big Pharma coverage to his already very influential biotechnology research universe, noted a key difference between biotechnology and pharma investors: that the latter doesn’t seem to have the conviction that products really “matter” to the behemoths, because no one product can really move the needle. Mark reacted strongly and noted that (1) products really do matter to Big Pharma stocks and (2) there was an opportunity because those stocks reacted more slowly to product news.

Rachel McMinn of BofA/ML observed that even blockbuster drugs can be slow to ramp up (50% of drugs launched generate <$50 million in the first year). The implication is that investors, spooked by recent flagging launches, may just need to be more patient.  

 

In Memoriam. We join the chorus of voices in our industry remembering George Rathmann this week. My most vivid memory was encountering him on the NY-Boston shuttle on a roadshow to raise money to commercialize EPO, on a rainy evening in the 90s. He was already a recognized industry pioneer, and sociable as always, soaking wet on a late plane, and doing whatever it took to build Amgen.

 

 

Financing Updates

Financings

Total equity raised year-to-date equals roughly $4.9B globally, compared to $5.2B at this point last year. Just last month 2012 was beating the 2011 data, but April 2012 was no match for the action we saw in April 2011.

• IPOs:On average, 2012 U.S. IPOs are performing well compared to their IPO prices (up 27.4%). Verastem is the only IPO that has dropped, trailing its $11 IPO price at $10.38 per share. Cempra and Merrimack have both gained about a dollar since they went out, but ChemoCentryx is the real winner – up 72% from its $10 offering price.
• No IPOs priced last month, compared to the two that priced in March 2012 (raising $153.7M in total). April 2011 saw two IPOs, Sagent and Tranzyme, which together raised $163.2M. Let’s hope this lull in IPO activity is just building up to a more active spring, with Supernus pricing on the first day of May (at more than half its original range) and Hyperion and Stemline filing S-1s in early April.

 

• Follow-ons: Follow-on offerings raised $314.5M globally last month, down 34% compared to March ($314.5M vs. $475.3M) and down 19% compared to April 2011 ($314.5M vs. $389.4M). This low figure results not only from fewer transactions last month, but also less money raised on average ($39.3M vs. $59.4M in March 2012 and $43.3M in April 2011).

 

• PIPEs: PIPE financings raised a mere $63.8M in April, down 73% as compared to the amount raised in March ($63.8M vs. $239.0M) and down 61% as compared to April of last year ($63.8M vs. $162.6M). Last April saw a similar drop from the month prior – it looks like March is a popular month for PIPEs – but last month’s figure is still quite low in comparison. Much like the follow-ons, not only were there half as many PIPEs last month as in March 2012, but they were also only able to raise about half the average amount.

 

• Venture rounds:Private financings raised a total of $362.8M in April, continuing an upward trend we saw in March (up 21% as compared to the prior month). However, the amount raised is down 50% from April 2011 ($362.8M vs. $726.3M). April 2011 again looks to be an outlier month, as the total raised in venture rounds was nearly three times the amount raised in March 2011.

Client Events/Updates

 

Stern IR Client Events

Acorda Therapeutics hosted an R&D Day in New York on April 17^th, where management reviewed the Company’s current R&D programs and independent experts in the fields of heart failure, spinal cord injury and chronic stroke provided perspectives on current standards of care and Acorda’s development compounds.

 

AACR 2012

Several Stern IR clients were in attendance at AACR this year, announcing the following preclinical data:

• Acceleron’s collaborators at Beth Israel Deaconess Medical Center presented preclinical data showing that ACE-041, an activin-receptor like kinase 1 receptor ligand trap, when used in combination with sunitinib, inhibited tumor growth in a model of VEGF-inhibitor-resistant renal cell carcinoma.
• Agios presented preclinical data highlighted in two poster sessions and an oral presentation, which demonstrated that the anti-cancer activity of BPTES acts directly through the inhibition of glutaminase; that high levels of 2-hydroxyglutarate lead to the epigenetic rewiring of cells and tumorigenesis; and that that pharmacological activation of PKM2 in cancer cells makes those cells dependent on the availability of the amino acid serine for continued survival. Agios also disclosed that it has developed potent mutant-selective inhibitors of both IDH1 and IDH2, which were capable of lowering 2HG levels by greater than 90% in in vivo tumor models.
• Curis presented data in a poster session focused on CUDC-907, which showed that, in in vitro and in vivo testing, CUDC-907 outperformed a first-in-class HDAC inhibitor as well as an investigational pan-PI3K (Class I) inhibitor given as a single agent or in a combination of both agents. CUDC-907 also demonstrated enhanced antitumor activity in animal models of B-cell lymphoma and multiple myeloma when co-administered with standard of care agents.
• Infinity presented new preclinical data for saridegib (IPI-926), which showed that the ability of saridegib to delay tumor recurrence is time dependent, providing a rationale for the development of saridegib in residual disease settings, such as ovarian cancer and small cell lung cancer.
• Rexahn presented new preclinical data in a poster session on the metabolism and mechanism of action of RX-3117. RX-3117 is a small molecule, new chemical entity (NCE), nucleoside compound that inhibits DNA methyltransferase, a cyclin-dependent kinase, and DNA synthesis.

 

Additional Announcements

Aside from data presented at AACR, Stern IR clients also issued several clinical and corporate announcements in April (click link to access press release):

• Presentations/Publications:
  • Acorda presented data at the American Academy of Neurology Meeting in New Orleans on April 25^th showing that the increase in walking speed demonstrated by people with MS who responded to treatment with AMPYRA^® during three-month Phase 3 trials was also observed for up to five years in open-label extension studies. In addition, long-term safety and tolerability of AMPYRA was consistent with that observed in clinical trials, with no new safety signals emerging.
  • Alnylam reported positive results for its Phase 1 trial of ALN-PCS at AHA’s Arteriosclerosis, Thrombosis and Vascular Biology 2012 Scientific Sessions in Chicago on April 20^th, which showed that administration of a single dose of ALN-PCS, in the absence of concomitant lipid-lowering agents such as statins, resulted in statistically significant and durable reductions of PCSK9 plasma levels of up to 84% and lowering of LDL-C of up to 50%. The new data also highlighted continued improved efficacy and tolerability for Alnylam’s second-generation lipid nanoparticle (LNP) delivery technology.
  • Endocyte presented previously reported data on vintafolide and etarfolatide at the European Lung Cancer Conference in Geneva on April 21^st.

 

• Clinical Development/Milestones:
  • Allos announced that, following its request for re-examination, the EMA’s Committee For Medicinal Products for Human Use (CHMP) confirmed its previous negative opinion on the marketing authorization application for FOLOTYN^® as a treatment for patients with peripheral T-cell lymphoma whose disease has progressed after at least one prior systemic therapy. Allos intends to review the CHMP opinion and evaluate its potential options for continuing to pursue regulatory approval of FOLOTYN in Europe for this indication.
  • ImmunoGen announced in its 3Q12 earnings release that its partner Roche reported that the PFS endpoint was met in the EMILIA Phase III trial for trastuzumab emtansine and that it will apply in 2012 for marketing approval in the US and Europe.
  • Earlier, ImmunoGen announced that the IND application was now active for its IMGN853 product candidate, which is a potential new therapeutic for ovarian cancer, NSCLC, and other epithelial malignancies which over-express FOLR1. The Company expects Phase 1 evaluation of IMGN853 to begin in mid-2012.
  • ImmunoGen also announced that it has initiated the Phase 1 trial of its novel IMGN529 anticancer compound in non-Hodgkin’s lymphoma (NHL) patients. The trial evaluates the safety, tolerability, pharmacokinetic profile and anticancer activity of escalating doses of IMGN529 in NHL to establish the dose for future clinical trials.
  • Ironwood and its partner Forest Labs announced that the FDA will require a three‐month extension to complete its review of the data supporting the NDA for linaclotide for the treatment of irritable bowel syndrome with constipation and chronic constipation.
  • Mesoblast announced that its Phase 2 clinical trial investigating the use of its off-the-shelf Mesenchymal Precursor Cells for non-surgical restoration of degenerated intervertebral discs and treatment of low back pain has enrolled 50% of the total study patients. Mesoblast expects to complete full enrollment by early 3Q12.
  • Tengion announced that it completed a successful pre-IND meetings with the FDA for its lead preclinical program, the Neo-Kidney Augment. The FDA and the Company have agreed on a GLP animal study program to support an IND filing and Tengion anticipates it will submit the IND filing during 1H13.

 

• Corporate News:
  • Acorda was again recognized as one of the Best Companies to Work for in New York based on an independent survey identifying the best places of employment in the state. Acorda was ranked 7th among large companies, defined as employing more than 250 people. Acorda was also named to the Forbes 2012 100 Most Trustworthy Companies, a list compiled by independent financial analytics company GMI Ratings, earlier last month.
  • Acorda launched a new interactive patient website called Ampyra Journeys (www.AmpyraJourneys.com) spotlighting treatment with Ampyra, which is the first-ever stand-alone patient site to focus on walking problems associated with multiple sclerosis.
  • Allos announced that it has signed a definitive agreement with Spectrum Pharmaceuticals under which Spectrum will acquire all of the outstanding shares of Allos for $1.82 per share.
  • Alnylam elected Dr. Dennis Ausiello to its Board of Directors and Scientific Advisory Board. Dr. Ausiello is the Jackson Professor of Clinical Medicine at Harvard Medical School and Chief of Medicine at Massachusetts General Hospital.
  • Endocyte announced that it entered into an exclusive worldwide agreement with Merck to develop and commercialize Endocyte’s Phase 3 novel investigational therapeutic candidate vintafolide (EC145) in cancer. Endocyte remains responsible for the development, manufacture and commercialization worldwide of etarfolatide, a non-invasive companion diagnostic imaging agent that is used to identify folate receptor positive tumor cells.
  • Millennium and its partner Seattle Genetics announced that they have formed a collaboration with Ventana Medical Systems, a member of the Roche Group, under which Ventana will seek to develop, manufacture and commercialize a molecular companion diagnostic test with the goal of identifying patients who might respond to treatment with ADCETRIS based on CD30 expression levels in their tissue specimens.
  • Earlier, Millennium announced that it entered into a cancer research agreement with Presage Biosciences, which will provide Millennium with access to Presage’s proprietary technology platform to enable non-clinical identification of effective novel oncology drug combinations in solid tumors.
  • NPS Pharma was named one of the “Best Places to Work in New Jersey.” This is the first time NPS has received this honor, which is awarded by NJBIZ every year to the 100 companies recognized for providing the best work environment throughout the state.
  • Rexahn announced that the Japanese Patent Office has issued to the Company patent No. 4,934,432, which covers Rexahn’s anti-cancer candidate RX-1792 and related compounds, and a composition for treating anti-proliferative and anti-tumor activities.
  • SciClone filed a prospectus supplement to a previously effective Form S-3 registration statement, pursuant to which approximately 9.2 million shares of its common stock held by certain affiliates of Sigma-Tau were registered for resale under the Securities Act of 1933. Separately, the Company announced that it repurchased approximately 650,000 shares of its Common Stock from affiliates of Sigma-Tau pursuant to the Company’s previously announced stock repurchase program, under which the Board authorized the repurchase of up to $20,000,000 worth of stock.
  • SciClone announced that Trevor M. Jones, Ph.D., C.B.E., resigned from its Board of Directors due to increasing demands of his other professional obligations and, separately, that Dr. Israel Rios has resigned due to the Company’s winding down of its US-based product development programs.
  • Tengion announced the listing transfer from The NASDAQ Global Market to The NASDAQ Capital Market and that it will seek stockholder approval of an amendment to its Certificate of Incorporation to effect a reverse stock split in the range of 1-for-6 to 1-for-10 shares of common stock.

   

Calendar^**

Seven investor conferences are coming up in May, all in the first half of the month:

• Deutsche Bank 37^th Annual Health Care Conference (7-9 May, Boston)
• Baird Growth Stock Conference (8-10 May, Chicago)
• 11^th Annual JMP Securities Research Conference (14-16 May, San Francisco)
• BioEquity Europe 2012 (15-16 May, Frankfurt)
• ThinkEquity 8^th Annual  Private Company & Venture Capital Summit (15-16 May, East Palo Alto)
• Bank of America Merrill Lynch 2012 Health Care Conference (15-17 May, Las Vegas)
• William Blair Life Sciences Conference 2012 (16 May, New York)

 

There are 8 medical meetings lined up for May:

• World Stem Cells & Regenerative Medicine Congress  (14-16 May, London)
• American Society of Gene and Cell Therapy (ASGCT) 15^th Annual Meeting (16-19 May, Philadelphia)
• 25^th International Conference on Antiviral Research (ICAR) (16-19 May, Sapporo, Japan)
• American Pain Society (APS) 31^st Annual Scientific Meeting (17-19 May, Honolulu)
• Digestive Disease Week (DDW) (19-22 May, San Diego)
• American Urological Association (AUA) Annual Meeting 2012 (19-24 May, Atlanta)
• The 80^th European Atherosclerosis Society (EAS) Congress (25-28 May, Milan)
• Consortium of Multiple Sclerosis Centers 2012 Annual Meeting (30 May – 2 June, San Diego)

 

Personnel Updates

There were a number of noteworthy industry moves in April:

 Buyside

• Amy Ballew left Carlson Capital and it’s TBD where she will land (Dallas)
• Dan Chai left Surveyor Capital to join Iguana Healthcare Partners (New York)
• Christopher Pettine left Franklin Equity Group and it’s TBD where he will land (New York)
• Elena Ridloff left Maverick Capital to join BioVisio Consulting (New York)
• Eunice Kreider left Adamant Biomedical Investments and it’s TBD where she will land (Zurich)
• Joel Emery joined Fred Alger Management after leaving Carlson Capital back in December 2011 (New York)
• Mark Goldsmith left Constellation Pharma to join Third Rock Ventures (San Francisco)
• Michael Jasulavic left Traxis Partners and it’s TBD where he will land (New York)
• Richard Simons left Turner Investment Partners and it’s TBD where he will land (Berwyn)
• Robert Marcus left AllianceBernstein L.P. and it’s TBD where he will land (New York)
• Robert Park left Grantham, Mayo, Van Otterloo and it’s TBD where he will land (Boston)
• Tom Tang joined Apex Capital after leaving BAM Capital back in June 2011 (New York)
• Tony Yao left Janus Capital Management and it’s TBD where he will land (Pasadena)

 

Sell-side

• Adam Cutler left Credit Suisse and it’s TBD where he will land (New York)
• Andrew Fein joined Chardan Capital Markets after leaving Jefferies & Co. back in December 2010 (New York)
• Avik Roy launched Roy Healthcare Research after leaving Monness, Crespi, Hardt & Co. back in January 2012 (New York)
• Bert Hazlett joined Roth Capital Partners after leaving BMO Capital Markets back in May 2011 (New York)
• Josh Schimmer left Leerink Swann and it’s TBD where he will land (New York)
• Leland Gershell left Madison Williams to join Tonix Pharmaceuticals (New York)
• Marko Kozul left ThinkEquity and it’s TBD where he will land (New York)
• Vernon Bernadino left Dawson James to join Oceros Advisors (New York)

 

Banking

• Paul Henderson left UBS Securities and it’s TBD where he will land (New York)

 

Have a great May!

Lilian, Stephanie, Sarah, Paul, Rachel, Renée and Jesse

*All figures reflect data as of April 30, 2012 (AMC)