Welcome to the latest edition of our weekly EuroBiotech Report. We lead this week on Bayer Pharma's investment in High-Tech Gründerfonds II, a German venture fund that provides seed financing to local startups. Founders always have to give up something to access cash, but those who turned to Russia's venture capital sector for financing may have lost more than they realize. The U.S. claims Russian VC shops could be stealing tech. While the economic wrangling over Crimea may lead to Russian companies delisting from foreign stock markets, in calmer parts of Europe biotechs are still looking overseas for investment. Oryzon Genomics and Serendex Pharmaceuticals are the latest to consider listing outside their home territory. Cuts to the biotech teams of Swiss banks could push its startups to list overseas too. British biotech NuCana has raised $57 million to expand its oncology clinical program. And more. -- Nick Taylor (email | Twitter)
1. Bayer backs German startup financing fund
2. FBI paints Russian VC shops as potential spies
3. Oryzon and Serendex weighing up merits of overseas IPOs
4. NuCana raises $57M to expand oncology program
5. Immigration laws and banking trends mar solid 2013 for Swiss biotech
And more >>
Bayer backs German startup financing fund
Bayer Pharma is investing in High-Tech Gründerfonds II, a €304 million ($419 million) German venture capital fund run by a company with a portfolio of more than 40 biotechs. And having become the first pharma company to invest in the public-private partnership, Bayer is positioned to get an early look at the next generation of German drug developers.
High-Tech Gründerfonds--which runs two funds, HTGF I and II--uses money from its mix of private and public backers to provide seed funding to startups in their first year of business. Typically the VC shop provides an initial €500,000 loan and reserves a further €1.5 million for follow-up financing. Focusing on small, early-stage investments has given High-Tech Gründerfonds a big, diverse portfolio of biotech startups, with developers of cardiovascular drugs, companion diagnostics and RNAi tech on its books.
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| Bayer's Andreas Busch--Courtesy of Bayer |
Bayer isn't saying how much it is investing in the fund, but it is unlikely to be a material amount for an organization that is ratcheting life science R&D spending up past €3 billion a year. When chemical company Evonik joined the fund in 2012, it committed €2.5 million. The advice offered by the fund's industrial partners is as important as the cash. "We want to support young entrepreneurs in testing their creative ideas and … bring in our expertise," Bayer's global drug discovery chief, Dr. Andreas Busch, said in a statement.
While the fund already has relationships with big businesses in telecoms, cars and other industries, it has lacked a pharmaceutical investor to provide it and its portfolio with expertise. Stefanie Zillikens, a spokesperson for High-Tech Gründerfonds, told FierceBiotech there is no particular reason for pharma signing up later than other industries. Zillikens expects Bayer to provide "significant additional value" to the fund and the 15 life sciences startups it financed last year. -- here's the press release
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FBI paints Russian VC shops as potential spies
The escalating economic and diplomatic responses to Russia's takeover of Crimea spilled over into biotech this week when the U.S. Federal Bureau of Investigation (FBI) issued a startling warning: Russian venture capitalists may steal your intellectual property.
Lucia Ziobro, the assistant special agent who made the claim in a Boston Business Journal op-ed, singled out the Skolkovo Foundation as a possible spy. Since being founded by Russian Prime Minister Dmitry Medvedev in 2010, the nonprofit has set up a biomed cluster and established partnerships with European and U.S. institutions and businesses. In 2012 the group attended the BIO conference and now lists Johnson & Johnson ($JNJ), Tel Aviv University and King's College London as partners.
The Skolkovo Foundation also says it has relationships with 19 venture capital funds that have committed $230 million (€167 million) of investment. Ziobro made a big claim about the purpose of the group's relationships. "The Foundation may be a means for the Russian government to access our nation's sensitive or classified research, development facilities and dual-use technologies with military and commercial applications," Ziobro wrote.
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| Dmitry Akhanov--Courtesy of Rusnano |
Later, in an interview with Beta Boston, Ziobro said the FBI has no evidence this is happening. Instead, the claim is based on Russia's track record of corruption and lax intellectual property rights. These fears were rubbished by Dmitry Akhanov, CEO of the U.S. arm of the Russian government-backed VC shop Rusnano, who said he "thought it was an April Fool's joke." Renowned MIT scientist Robert Langer, who worked with Rusnano to fund BIND Therapeutics, also downplayed worries. "I've seen no evidence of this," he said.
The timing of the FBI warning--which comes weeks after the U.S. first imposed sanctions against Russia--suggests it is at least partly politically motivated. Having initially gone after Russian President Vladimir Putin's allies, the U.S. last month placed sanctions on a bank, effectively barring it from making dollar-based transactions. Russia is now calling for companies to delist their shares from overseas stock exchanges to protect themselves from the sanctions, Bloomberg reports. -- read the op-ed, Beta Boston article and Bloomberg piece
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Oryzon and Serendex weighing up merits of overseas IPOs
The trickle of European biotechs planning to emulate the IPO exits of their U.S. peers continued this week, with Spain's Oryzon Genomics and Denmark's Serendex Pharmaceuticals the latest names to add to the list. Both may ultimately look outside their home markets for investors, though.
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| Oryzon CEO Carlos Buesa--Courtesy of Oryzon |
Oryzon CEO Carlos Buesa revealed he is considering taking the company public in an interview with Bloomberg to discuss this week's deal with Roche ($RHHBY). The Swiss pharma has committed $21 million (€15 million) in upfront and near-term target payments to license Oryzon's epigenetic cancer-blocking drug. As the treatment advances beyond Phase I/IIa, Oryzon will begin racking up milestone earnings worth up to $500 million. And with this potential revenue stream now in place, Oryzon is mulling an IPO, with a listing in the U.S. one possibility.
The timing and location are still being decided, with Oryzon now tracking the trends in multiple stock markets to assess which is the best fit. As it stands, overseas markets have the edge, but this could change. "The Spanish market is still far away from the U.S. and some key European stock markets, but there have been some cases of success. Spain is still a possibility," Oryzon Business Development Officer Emili Torrell told FierceBiotech.
Danish biotech Serendex is further along with its plans and already knows when and where it wants to list. CEO Kim Arvid Nielsen told Reuters the plan is to tap into the money washing into the Norwegian stock exchange with a June IPO. Norway's stock market benefits from the international pulling power of its shipping industry, which Nielsen thinks will make it possible to pull off an IPO that values the company at €125 million. Serendex is still two years away from launching its first drug, but its strategy of repurposing existing molecules should allow it to expand its portfolio relatively quickly and cheaply. -- check out Bloomberg's article and Reuters' piece
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NuCana raises $57M to expand oncology program
British biotech NuCana has snagged $57 million (€41 million) in Series B financing, with new investor Sofinnova Ventures leading the round. Having raised the cash, NuCana is readying to expand clinical trials of its lead candidate, the oncology drug Acelarin, and move another treatment into Phase I.
Both drugs are part of a pipeline of candidates based on NuCana's ProTide technology, an attempt to overcome cancer resistance mechanisms by tweaking the chemistry of oncology drugs. The process is designed to get more of the active ingredient into cancer cells, boosting efficacy while also cutting side effects. Researchers at Cardiff University invented and patented the process in the 1990s. Inhibitex, which Bristol Myers-Squibb ($BMY) bought for $2.5 billion, used the process for its hepatitis C drug.
NuCana was founded in 2008 with exclusive worldwide rights to use the approach in cancer. A $10.4 million Series A round in 2011 gave the company the cash to advance Acelarin into the clinic. And at the American Association for Cancer Research meeting this week, NuCana reported that the drug works as hoped in cell lines and mice, with cytotoxicity exceeding that of the Eli Lilly ($LLY) chemotherapy from which it is derived, Gemzar. A Phase I trial is underway, with NuCana focusing initially on biliary, pancreatic, lung and ovarian cancers.
Armed with the Series B funds, NuCana is also preparing to advance a second drug into clinical trials, with two more to follow in 2015. -- here's the financing news and AACR abstract
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Immigration laws and banking trends mar solid 2013 for Swiss biotech
The Swiss biotech sector progressed in 2013, with Ernst & Young reporting headcount, investment and the number of companies were all up. Yet the advances mask unease. Observers fear that immigration laws will make it harder to recruit skilled staff, while shifts in Swiss banking are making the U.S. a better bet for IPOs.
In February the Swiss narrowly voted in favor of a plan to reintroduce immigration quotas, potentially limiting the ability of biotech and other industries to hire skilled staff. The government has three years to implement the law, and at this stage it is unclear how it will play out. But with the vote fresh in the minds of the authors of Swiss Biotech Report 2014, its impact was listed as a concern for the sector. Swiss politician Johann Schneider-Ammann said the government is working to limit the detrimental effects of the law by ensuring that the country can still take part in European programs that benefit R&D.
The immigration debate is raging across Europe, with British businesses criticizing their government for making it harder to recruit too. Swiss biotechs fear the law will add to headwinds created by shifts in banking. "The small banks have all closed their biotech research and the large ones have scaled theirs down. The number of specialized investors has declined," Cosmo Pharmaceuticals CFO Chris Tanner told the report. The cuts have affected the attractiveness of the Swiss stock market. "Were we to do an IPO again we would most probably give serious consideration to Nasdaq," Tanner said.
Despite these concerns, the report shows the Swiss biotech sector gained across multiple metrics in 2013. Headcount was up 3%, while capital investment in Swiss biotechs jumped 60%. Investment in private companies drove the rise, although public companies also brought in more cash than in 2012. Swiss newspaper Tages Anzeiger reports that local companies are happy to keep tapping venture capitalists and biopharma partners for cash, with Molecular Partners, Novimmune and other IPO candidates in no rush to go public. -- read the report and Tages Anzeiger's feature (German)
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Swedish specialty pharma company Meda has knocked back a bid from Mylan ($MYL), the New York Times reports. Mylan was reportedly ready to pay a "significant" premium for Meda--which had a market value of $4.5 billion before news of the bid leaked--but the Swedish company's board rejected the offer. For Mylan, the deal represented a way to cut its tax bill by moving its headquarters outside of the U.S. NYT
Swiss biotech Piqur Therapeutics has raised $12 million (€8.7 million) from Versant Ventures to help advance its PI3K/mTOR inhibitor through Phase II. Novartis ($NVS) is also targeting the cancer pathway and has high hopes for its mid-stage candidate. Having raised $42 million from California-based Versant and other investors, Piqur is tucked in behind Novartis ($NVS) in the race to bring a drug to market. FierceBiotech
Positive data from a Phase III trial of haemophilia A drug Eloctate gave Sweden's Sobi (STO:SOBI) a boost. Sobi is developing the drug with Biogen Idec ($BIIB). The partners hope the data will help win approval in Europe and expand labels in other markets to include children. The news caused Sobi's stock to jump 6%, clawing back some of the value it lost when another of its drugs flunked a late-phase trial a few weeks ago. Release | Story
Teva ($TEVA) has licensed a preclinical oncology candidate from Cancer Research Technology, the commercial arm of a British nonprofit. The drug inhibits the atypical class of protein kinase C proteins, which are activated in some cancer patients. Teva has made an upfront payment--and is on the hook for milestones--to license the drug, which it claims is a first-in-class inhibitor. Release
E-Therapeutics and uniQure ($QURE) both rejigged their financial leadership teams. Steve Medlicott replaced Daniel Elger as finance director at British biotech e-Therapeutics and immediately began talking up the prospect of future licensing deals in an interview with Proactive Investors. Netherlands-based uniQure is also set to hire a new CFO after Piers Morgan stepped down. Eric Goossens has joined the company as chief operating officer. Proactive Investors I UniQure
A Milan-based venture capitalist has given a glowing appraisal of the Italian startup scene in a Wall Street Journal op-ed. While Italy is more traditionally associated with inertia than innovation, EOS and Silicon Biosystems have emerged from the country--and made successful exits--in recent years. Tax breaks for innovative startups and a liberal crowdfunding law are in place to help the next generation of biotechs, but the VC warns that Italy's financial market still lags behind those of its European neighbors. WSJ
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Read previous editions of the EuroBiotech Report here.
