Government, Academic, and Venture Firms Come Together in March to Fund Translational and Early-Stage Development

Government, Academic, and Venture Firms Come Together in March to Fund Translational and Early-Stage Development
Burrill & Company Says Flurry of Initiatives Seek to Bridge a Critical Gap in Moving Discoveries From the Lab to the Marketplace

SAN FRANCISCO, CA, Apr 02, 2012 (MARKETWIRE via COMTEX) -- A host of new initiatives focused on funding translational research and early-stage companies brought together the public and private sector, particularly with the goal of building life sciences centers in specific locations. In all, Burrill & Company identified more than $2.6 billion in expected funding through nine initiatives announced since the end of February.

The largest of these efforts, a $760 million partnership between Russia's Rusnano and the U.S. venture capital firm Domain Associates, will invest in emerging life sciences technology companies, foster the transfer of technology into Russia, and establish manufacturing facilities in Russia for production of advanced therapeutic products. As part of the effort, Rusnano and Domain expect to co-invest in about 20 U.S.-based healthcare technology companies.

Other initiatives include an effort by the Welsh government to create a biotech hub through an $80 million commitment to what is targeted to be a $375 million fund; a $100 million R&D fund backed by Merck Canada, Lumira Capital, and other venture capital firms to attract pharmaceutical companies to Quebec; and a Wellcome Trust project to invest $317 million in emerging healthcare and life sciences businesses and technologies in Europe in early-stage development with significant potential to grow.

Among the most unusual efforts is a $250 million initiative from Cleveland's University Hospital, which is establishing a non-profit entity to fund and advise physician-scientists on translational research and a related for-profit accelerator that will develop selected compounds to proof of concept.

"These efforts reflect broad attempts to forge creative new models for funding translational research and spur development of important new therapies," says G. Steven Burrill, CEO of Burrill & Company, a diversified global financial services firm focused on the life sciences industry. "It also demonstrates that governments across the globe, despite facing fiscal pressure, see the importance of investing in the life sciences to build innovation-based economies that can provide high quality jobs."

The development of new funding and business models to accelerate the commercialization of innovation at a time traditional models are failing to produce adequate returns on investment is a focus of the just published Biotech 2012: Innovating in the New Austerity, Burrill & Company's 26th annual report on the life sciences industry. Copies can be purchased on the Burrill & Company website at , where a complimentary chapter is also available for download. The print edition will become available in mid-April.

Though 2012 got off to a solid start in life sciences financing, activity has slowed in March. M&A, partnering, and initial public offering activity have been lackluster. With the exception of debt, financings across all types of public and private deals fell from the previous month. For the first quarter, total global financings for the life sciences fell to $12.5 billion from $29.2 billion during the same period a year ago. A large portion of the drop reflected a $15.9 billion drop in global debt offerings.

Life sciences stocks posted solid gains in the first quarter with the Burrill Select Index rising 20.7 percent. That bested the Dow Jones Industrial Average's 8.1 percent gain and the Nasdaq Composite Index's 18.7 percent rise. Threshold Pharmaceuticals outperformed all other life sciences stocks during the quarter as it rose more than 622.9 percent to close the quarter at $8.82 on a co-development and commercialization agreement with Merck KGaA for its experimental cancer drug TH-302 and the strength of mid-stage data. Cardiome Pharma posted the biggest loss for the quarter, falling 73.2 percent to 71 cents after it reported Merck would discontinue a deal to develop the company's oral formulation of Vernakalant, a treatment for maintenance and prevention of atrial fibrillation recurrence.

                                                                       Month    Q1
        BURRILL INDICES                 12/30/2011 2/29/2012 3/30/2012 Change Change
        Burrill Select                      432.49    498.89    522.12   4.7%  20.7%
        Burrill Large Cap                   529.22    607.33    640.06   5.4%  20.9%
        Burrill Mid-Cap                     295.33    338.51    329.88  -2.6%  11.7%
        Burrill Small Cap                    88.26     96.08     99.21   3.3%  12.4%
        Burrill BioGreenTech                175.42    190.45    197.05   3.5%  12.3%
        Burrill Diagnostics                 100.62    110.18    112.47   2.1%  11.8%
        Burrill Personalized Medicine       149.36    155.02    160.15   3.3%   7.2%
        Canadian Biotech                     59.17     64.27     62.12  -3.4%   5.0%
        NASDAQ                             2605.15   2966.89   3091.57   4.2%  18.7%
        DJIA                              12217.56  12952.07  13212.04   2.0%   8.1%
        S&P 500                            1257.60   1365.68   1408.47   3.1%  12.0%
        Amex Biotech                       1091.42   1314.31   1402.85   6.7%  28.5%
        Amex Pharmaceutical                 332.94    332.88    340.40   2.3%   2.2%

Venture capital financings in both the United States and globally rose in the first quarter of 2012 as compared to the first quarter of 2011. In the United States, venture funding rose 22.1 percent to $2 billion, thanks in large part to a 63.4 percent increase in capital raised by medical device companies. Globally, several large private equity investments in private companies drove the venture number up 35.4 percent.

On the IPO front, Merrimack Pharmaceuticals was the only company to go public in the United States in March. The cancer therapeutics developer raised $100 million, far less than the $150 million it had hoped to raise. The company sold 14.3 million shares at $7 each, below its initial $8 to $10 per share target. The JOBS Act, legislation designed to lower barriers to going public for emerging growth companies and exempt them from the need to comply with burdensome requirements of the Sarbanes-Oxley Act for up to five years, won rare bipartisan support and is awaiting President Barack Obama's signature. Passage of the law is expected to improve the ability of biotech companies to access capital through the public markets.

M&A activity slowed in March with the two top deals during the month involving medical device companies. Asahi Kasei is acquiring Zoll Medical, a maker of resuscitation and critical care devices, for $2.2 billion in cash. Boston Scientific said it would buy privately held Cameron Health, developer of a leadless defibrillator, for $150 million in cash and milestone payments that could increase the total deal value to nearly $1.4 billion.

The most interesting M&A activity continues to be the deals yet to be consummated. Roche increased its hostile bid for Illumina by $1 billion to $6.7 billion. Amylin reportedly spurned a $3.5 billion offer from Bristol-Myers Squibb. And Mylan and Watson Pharmaceuticals are both said to be bidding for generic drugmaker Actavis Group in a deal that could fetch nearly $7 billion.

"All of this is setting April up to be potentially a big month for M&A activity in the sector," says Burrill.

        Life Sciences Scorecard in USD M, First Quarter 2012
                                                           Q1 2012  Q1 2011  Change
        Global Venture Capital                               2,990    2,207    35.5%
        U.S. VC                                              1,956    1,602    22.1%
        IPOs (13 in 2012 v. 20 in 2011)                        884    1,787   -50.5%
        U.S. IPOs (7 in 2012 v. 8 in 2011)                     480      521    -7.9%
        Global PIPEs                                         1,257    1,031    21.9%
        U.S. PIPEs                                             473      427    10.8%
        Global Follow-ons                                    2,098    2,292    -8.5%
        U.S. Follow-ons                                      1,990    1,471    35.3%
        Global Other Equity                                    517       N/A
        U.S. Other Equity                                      495       N/A
        Global Debt Offerings                                6,300   22,162   -71.6%
        U.S. Debt                                            4,408    8,842   -50.1%
        Global Other Debt                                    1,482    1,958   -24.3%
        U.S. Other Debt                                      1,441      316   356.0%
        Total Global Public Financings                      12,538   29,230   -57.1%
        Total U.S. Public Financings                         9,287   11,577   -19.8%
        Global Partnering                                   10,175   11,943   -14.8%
        U.S. Partner/Licenser                                4,889    9,363   -47.8%
        Global M&A                                          16,570   49,533   -66.5%
        M&A, U.S. Target                                    14,293   39,535   -63.8%


The U.S. Supreme Court took center stage in March for the life sciences industry rendering one decision that could significantly alter the ability of diagnostics companies to patent their tests and hearing oral arguments on the 2010 healthcare reform legislation. Though there is much speculation that the court may throw out part of the Affordable Care Act, the outcome of the case will not be known until June.

In a unanimous decision, the court in Mayo v Prometheus ruled that a Prometheus test for determining optimal dosing for a given patient of certain gastrointestinal drugs based on levels of metabolites in the blood is not patentable because it relied solely on laws of nature. In another closely watched patent case, the Supreme Court has now ordered a Federal Appeals court to review its decision in a challenge to patents held by Myriad Genetics on two genes associated with breast and ovarian cancer and apply the Prometheus decision to that.

March also saw the Indian government take the unusual step of ordering a compulsory license of Bayer's patented kidney cancer drug Nexavar. The government ordered Bayer to license the drug to Natco Pharma, an Indian drugmaker. Natco will pay Bayer a 6 percent royalty and sell the drug for $176 a month. That compares to the $5,600 a month Bayer charges for the drug in India.

"As pharmaceutical companies turn to emerging markets as bright spots of growth, the action by the Indian government should prove quite sobering," says Burrill. "Companies will need to think carefully about strategies for protecting their patent rights in these markets and may need to turn to partnerships with local companies to provide them with a solid footing."

About Burrill & Company Founded in 1994, Burrill & Company is a diversified global financial services firm focused on the life sciences industry. With $1.5 billion in assets under management, the firm's businesses include venture capital/private equity, merchant banking, and media. By leveraging the scientific and business networks of its team, Burrill & Company has established unrivaled access and visibility in the life sciences industry. This unique combination of resources and capabilities enables the company to provide life sciences companies with capital, transactional support, management expertise, insight, market intelligence, and analysis through its investments, conferences, and publications. Headquartered in San Francisco, the company oversees a global network of offices throughout the United States, Latin America, Europe, and Asia. For more information visit: .

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SOURCE: Burrill & Company