Biopharma Dealmaking Quarterly Statistics, Q1 2014

Biopharma financing totaled $9.8 billion, a 53% increase over Q4 2013. Twenty-two M&As were completed with a combined potential value reaching $31.3 billion, and there were 103 biopharma alliances totaling $1.9 billion in potential pre-commercialization value, down 30% from the previous quarter.

Financings

During the opening quarter of 2014, biopharma companies raised $9.8 billion (up 53% from Q4), with 18% of the deals having a value of $100 million or greater. (See Exhibit 1.)

Follow-on public offerings accounted for most (40%), with 53 deals bringing in $3.9 billion. In Q1’s largest FOPO, InterMune Inc. netted $233 million. [See Deal] Recent positive Phase III trial results of its candidate for idiopathic pulmonary fibrosis (an orphan disease) bolsters the company’s chances for FDA approval. (See (Also see "ASCEND Data Puts InterMune’s Pirfenidone On Top" - Pink Sheet, 25 Feb, 2014.).) Big transactions by Synageva BioPharma Corp. – another rare-disease-focused company – ($201 million) [See Deal] and gastrointestinal therapeutics developer Ironwood Pharmaceuticals Inc. ($191 million) [See Deal], along with 10 other FOPOs valued over $100 million, helped contribute to this total.

Other public companies opted for private placements instead, and at $1.3 billion the PIPE financings category showed a large jump from Q4’s $247 million. Leading the Q1 pack was Irish drug delivery firm Alkermes PLC’s $248 million sale of ordinary shares to Invesco, which now holds a 4% stake in the company [See Deal]. In March, infectious disease-focused Knight Therapeutics Inc. did back-to-back financings that included a rather unconventional sales of special warrants, bringing in a total of $326 million from both offerings. [See Deal] [See Deal]

Exhibit 1

Q1 2014 Biopharma Financing

By Deal Type ($M)

Strategic Transactions

Initial public offerings represented 25% of the Q1 financing deal activity, with 33 IPOs amassing $2.5 billion, more than tripling the previous quarter’s nine deals and showing a steep increase over Q4 2013’s $952 million aggregate. In the heftiest Q4 IPO and one of the largest ever, British biotech Circassia Pharmaceuticals PLC raised £191 million ($317 million) in a March offering on the London Stock Exchange. [See Deal] The allergy vaccines company will use proceeds to help commercialize lead vaccine candidate Cat-SPIRE, in Phase III for cat allergies. (See (Also see "Europe’s Biotechs Break Records With Circassia IPO, Inotrem‘s Series A" - Pink Sheet, 17 Mar, 2014.).) Although most of the other IPO activity consisted of US companies filing on US exchanges, several foreign issuers – including uniQure NV (Netherlands) [See Deal], MediWound Ltd. (Israel) [See Deal], Egalet Corp. (UK) [See Deal], and Galmed Pharmaceuticals Ltd. (Israel) [See Deal] – completed Nasdaq IPOs. One US company, ophthalmology drug developer Acucela Inc., netted $149 million through its initial public offering on the Mothers market of the Tokyo Stock Exchange. [See Deal]

In late-stage VC rounds, German biotech Glycotope GMBH raised an impressive €55 million ($77 million) Series C [See Deal], bringing its total venture financing to date to €130 million. The company will use the proceeds to fund Phase IIb trials in the US and Europe for its PankoMab-GEX for ovarian cancer (also in Phase I for non-small cell lung cancer) and CetuGEX for multiple solid tumor types. Orphan disease medicines developer Auspex Pharmaceuticals Inc. did three financings during Q1. First it closed concurrent Series E [See Deal] and debt financings [See Deal], and then completed a $78 million IPO in February. [See Deal] Versartis Inc. (growth hormone deficiency therapies) followed suit with a $55 million Series E in February [See Deal] and subsequently brought in $117 million through its IPO the following month. [See Deal]

Twenty companies completed early-stage venture rounds during Q1, a steep drop from Q4 2013’s 38 transactions. Bringing in the most with a $70 million Series A [See Deal] was Human Longevity Inc., recently founded by a team that includes entrepreneur and former Celera CEO Craig Venter, PhD, to study extension of the human life span by centralizing genotypic and phenotypic information into a massive database. (See (Also see "Craig Venter Wants To Extend Your Life (And Own Your Data)" - Scrip, 27 Mar, 2014.).) Two new companies were launched in January, each concurrent with $20 million Series A raises. (See (Also see "Strategic Spin-Outs: Biotechs Structure Their Progeny For Success" - Scrip, 20 Feb, 2014.).) The University of Oxford spun off NightstaRx Ltd. to focus on retinal dystrophy therapeutics; Syncona (a Wellcome Trust affiliate) and Imperial Innovations invested in the round. [See Deal] RNA biotech Moderna Therapeutics LLC spun out its oncology assets into Onkaido Therapeutics Inc. and invested in the company to get it started. [See Deal] (See (Also see "Onkaido Therapeutics Inc." - Scrip, 20 Feb, 2014.).)

Acquisitions

Twenty-two biopharma M&A transactions brought in $31.3 billion during 2014’s opening quarter; 76% of this total is from an outlier February transaction in which Allergan PLC bought US specialty pharmaceutical company Forest Laboratories Inc. [See Deal] (See Exhibit 2.) The merged company, which expects over $15 billion in 2015 revenues, will hold generics and branded franchises across nine therapeutic areas including CNS, gastroenterology, women’s health, cardiovascular, urology, and dermatology. Forest’s CNS portfolio, which makes up between 80% and 90% of its net sales, features blockbuster Alzheimer’s disease drug Namenda (memantine) and antipsychotic Saphris (asenapine; exclusive US rights were acquired from Merck & Co. Inc. in December 2013 [See Deal]). (See (Also see "Actavis’ Big Bet On A Diversified Hybrid Model" - In Vivo, 21 Mar, 2014.).) In another Q1 transaction, Actavis sold off its Chinese operations to Zhejiang Chiral Medicine Chemicals Co. Ltd., opting instead to commercialize products through partnering. [See Deal]

Four of the top five acquisitions in Q1 were of specialty pharmaceutical firms, and more than one-third of all Q1 pharma acquisitions were for this type of company. The month before its acquisition by Actavis, Forest paid $2.9 billion to acquire spec pharma Aptalis Holdings Inc. [See Deal], which had scrapped its just-announced IPO plans in favor of this sweeter deal. Aptalis, owned by private equity firm TPG Capital since 2007, is focused on GI diseases and cystic fibrosis and adds a 227-person sales force. (See (Also see "Forest Builds On Saunders’ Strategy With $2.9B Aptalis Buy" - Pink Sheet, 8 Jan, 2014.).)

Exhibit 2

Top Biopharma M&As, Q1 2014

Month	Acquirer/Acquired (Business)	Terms
February	Actavis/Forest Laboratories (spec pharma)	$23.9 billion: $88.04 ($26.04 in cash and $62 in Actavis stock) for each Forest share, a 29% premium; 7.63x sales
January	Forest Laboratories/Aptalis (spec pharma)	$2.9 billion in cash; 4.22x sales
February	Mallinckrodt/Cadence (hospital products in-licenser)	$1.2 billion; 24.36x sales
March	Sterigenics/Nordion (medical isotopes/sterilization)	$727 million: $11.75 per share, a 13% premium; 3.12x sales
March	Horizon Pharma/Vidara Therapeutics (spec pharma)	$660 million: $200 million in cash and $460 million in Horizon stock

Strategic Transactions

Irish spec pharmaMallinckrodt PLC acquired US hospital products in-licenser Cadence Pharmaceuticals Inc. for over 10 times the projected 2013 sales of Cadence’s only product, Ofirmev (intravenous acetaminophen), and 24 times its actual 2012 revenues of $50.1 million. [See Deal] In its first acquisition since its spin-out from Medtronic Minimally Invasive Therapies in July 2013 [See Deal], Mallinckrodt says the expensive purchase adds a hospital sales channel to its existing generic drugs and pain medication franchises. It also plans to grow the number of hospital formularies that include Ofirmev and increase prescribers and patients. (See (Also see "Covidien Spin-Out Mallinckrodt Makes First Move With $1.3B Cadence Buy" - Pink Sheet, 11 Feb, 2014.).)

Irish spec pharma Vidara Therapeutics Research Ltd. was bought out by US-based Horizon Pharma PLC [See Deal] The main draw for Horizon was Vidara’s Actimmune (interferon gamma-1b), acquired from InterMune in 2012 [See Deal] and marketed in the US for the rare immune disorders chronic granulomatous disease and severe malignant osteopetrosis; the drug had 2013 sales of $59 million. The combined company expects to reach pro forma 2014 revenues between $250 million and $265 million and will relocate in Ireland under the name Horizon Pharma PLC, taking advantage of the lower corporate tax rates. [See Deal] (See (Also see "Investors Set Their Sights On Horizon Pharma" - In Vivo, 22 May, 2014.).) After acquiring Irish firms in 2013, Perrigo Co. PLC (bought Elan Corp. PLC [See Deal]) and Actavis (acquired Warner Chilcott PLC [See Deal]) also relocated their headquarters to Ireland for this very reason.

Although the top M&A deal structures didn’t include earn-outs, several other large Q1 deals did; most of the money was paid up front, with an additional payment contingent upon product performance or company sales. In its acquisition of private skin care firm PreCision Dermatology Inc., Valeant Pharmaceuticals International Inc. paid $475 million in cash, and could shell out an additional $25 million in sales-based earn-outs. [See Deal] Alnylam Pharmaceuticals Inc. bought Merck’s RNAi division Sirna Therapeutics Inc. for $186 million up front, plus undisclosed earn-outs and royalties. [See Deal] Charles River Laboratories International Inc. acquired Galapagos NV’s Argenta Discovery Ltd. and BioFocus DPI divisions for a total of €129 million ($179 million) in cash up front, plus up to another €5 million in performance-based earn-outs. [See Deal]

Alliances

Despite large-cap companies exiting the RNAi space, most notably and recently Merck & Co. and Novartis AG, there is still a push to innovate in this area and advance research. In Q1, Sanofi’s Genzyme Corp. reaffirmed its commitment to RNAi by expanding and replacing a collaboration that began in 2012 [See Deal] with Alnylam. In their new alliance [See Deal], which has a pre-commercial value of $700 million, Genzyme is getting additional regional rights to multiple clinical and preclinical programs led by Alnylam’s Phase III patiseron for TTR-mediated amyloidosis in patients with familial amyloidotic polyneuropathy, a rare disease caused by abnormal deposits of protein in the tissues. Genzyme now holds 12% of Alnylam’s equity. (See (Also see "How And Why Genzyme And Alnylam Expanded Their Alliance" - In Vivo, 14 Feb, 2014.).) Interestingly, especially given its recent decision to get out of RNAi, Novartis still has a 13% stake in Alnylam as well; while Novartis terminated their broad RNAi deal in 2010 [See Deal], the Big Pharma still retained rights to 31 gene targets. But now Alnylam may face some risk because of Novartis’ exit from RNAi. That could trickle down to the other oligonucleotide players, which have been impacted, if only tangentially, by Alnylam’s advancements. (See (Also see "Does Alnylam Lift All Oligo Boats? The Dicerna IPO" - In Vivo, 14 Feb, 2014.).)

Other types of oligonucleotide technology besides RNAi triggered dealmaking activity during Q1. Start-up Moderna Therapeutics licensed Alexion Pharmaceuticals Inc. 10 exclusive worldwide options to messenger RNA Therapeutics for rare diseases [See Deal] (see (Also see "Moderna Scores Another Cash-Rich Partnership For Its Preclinical Work" - Pink Sheet, 13 Jan, 2014.)), while within just a day, Roche Innovation Center Copenhagen AS teamed up with both Roche [See Deal] and GlaxoSmithKline PLC [See Deal] in collaborations involving its antisense LockedNucleic Acid technology.

Immune checkpoint targets provide a potential new therapeutic modality for treating cancer. Propelled by the success of the advanced melanoma drug Yervoy (ipilimumab), an antibody against the CTLA-4 receptor and the first approved immune checkpoint inhibitor, multiple deals were signed in the immune checkpoint space in Q1, including a couple agreements each by Johnson & Johnson [See Deal] [See Deal] and the University of Texas’ MD Anderson Cancer Center. [See Deal] (See Exhibit 3.) Yervoy’s marketer Bristol-Myers Squibb Co. also got in on the action by tapping into Five Prime Therapeutics Inc.’s platform of human extracellular protein targets, in exchange for $20 million in cash up front plus a $21 million equity investment. [See Deal] (See (Also see "Bristol Gets Five Primed For Immuno-Oncology Expansion" - Pink Sheet, 17 Mar, 2014.).)

Exhibit 3

Immune Checkpoint Targets Draw Dealmaking Interest In Q1 2014

Month	Partners	Subject of Deal	Disclosed Financial Terms
January	BiocerOX/Janssen	Janssen gets exclusive worldwide rights to mAb against an immune checkpoint modulator for cancer	NA
January	MD Anderson Cancer Center/Pfizer	Three-year collaboration to develop immunological cancer drugs blocking immune checkpoints, combo drugs, and biomarkers	NA
January	Janssen/MD Anderson Cancer Center	Three-year collaboration to develop immunology-based oncology therapeutics that block immune checkpoints	NA
March	BMS/Five Prime	BMS gets exclusive worldwide rights to drugs that target immune checkpoints in two pathways	$20 million up front in cash; $21 million equity investment (1.3 million shares at $16.14, for a 4.9% stake); $9.5 million in R&D funding; $300 million in total MS per target; and a tiered mid-single-digit to low-double-digit royalty
March	AnaptysBio/Tesaro	Tesaro gets exclusive worldwide rights to antibodies targeting PD1, TIM3, and LAG checkpoint receptors	$17 million up front; R&D funding; $108 million in total MS; and tiered single-digit royalties

Strategic Transactions

Biogen Inc. and J&J were the most active dealmakers in the first quarter. For $20 million up front, Biogen received exclusive global rights to Sangamo BioSciences Inc.’s sickle cell and beta-thalassemia candidates, as well as the latter’s zinc finger nuclease (ZFN) technology platform. [See Deal] (See (Also see "Biogen, Sangamo Team To Cure Sickle Cell Disease, Beta-Thalassemia" - Pink Sheet, 9 Jan, 2014.).) Biogen’s other two in-licenses involved Alzheimer’s disease (with Eisai Co. Ltd.) [See Deal], (see (Also see "Biogen Hedges Its Bet On Alzheimer’s With Eisai Tie-Up" - Pink Sheet, 5 Mar, 2014.)) and multiple therapy areas (Massachusetts Institute of Technology’s Whitehead Institute for Biomedical Research). [See Deal] Biogen was also on the out-partnering end of a couple alliances, granting UCB Group rights to sell certain products in Asia [See Deal], and licensing its preclinical Bruton's tyrosine kinase inhibitor SNS062 to Sunesis Pharmaceuticals Inc. [See Deal]

In addition to the aforementioned checkpoint deals, J&J signed a pair of drug discovery collaborations with Nodality Inc. (via Janssen Pharmaceutical Cos.’s Janssen Biotech Inc.) [See Deal] and Adaptive Biotechnologies Corp. (via Janssen R&D LLC) [See Deal] involving their Single Cell Network Profiling and immunoSEQ immune profiling platforms, respectively. J&J’s Innovation Center, which arranged the immune checkpoint transaction with BiocerOX Products BV (a division of Bioceros Holding BV [See Deal]), also set up research funding for Alector LLC, which is developing a treatment for Alzheimer’s. The Alector tie-up marked J&J’s second recent deal in this disease area next to its work with Evotec AG. [See Deal] Finally, Janssen Biotech is co-developing Capricor Therapeutics Inc.’s cardiovascular cell program [See Deal], and teamed up with Scholar Rock Inc. for autoimmune disease and cancer immunotherapies against TGF-beta1. [See Deal]