December
2006 issue
Open Window For Health Care: IPO Pricings Outnumber 2005, Expected to
Continue in 2007
The health care IPO market has been more active this year, and the bankers
we talked with did not seem to think it will be slowing down anytime soon.
...
The Case For Private Equity: One Biotech Tells Us What Lured It Away From
The Public Market
Private equity deals offer a compelling alternative with advantages over the
public market for companies in certain situations, including one in
November.
...
Public Equity Market
Five health care companies priced IPOs, five priced secondary public
offerings and two withdrew IPOs.
...
Mergers & Acquisitions
With four billion-dollar deals and several smaller ones, the health care M&A
market is still in full swing.
...
Venture Capital Market
More than one trend is taking shape in health care, as investors show
support for services businesses, in the bariatric market and others.
...
Private Equity Market
Private placement activity in the health care sectors during November, which
included six deals for $40 million or more, was fairly average for the year.
...
Notes & Briefs
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News Read the past
headlines.
Companies Mentioned in this issue:
December 2006
A
Abbott Laboratories p6
Abingworth Management p7
Accentia p3
Accuray p3
Acorda Therapeutics p1
ActivBiotics p3
AdCare Health Sys. p3
AdCare Health Systems p4
Advantage Capital Partners p8
Advantedge Healthcare Solutions p8
ADVENTRX Pharmaceuticals p10
Aegera Therapeutics p8, p9
Aesthetic Sciences p8
Affymax p3
Alba Therapeutics p8
Alexion Pharmaceu. p3
Allergan p8
Alliance Imaging p3
Alpha Associates p7
Alta Biopharma p8
Alta Partners p7, p8
Alteon p3
Amerigroup p4
Ampersand Ventures p7
Amphion Innovations p8
Anesiva p10
Apax Partners France p7
Aquilo Partners p9
Arcapita Ventures p8
ARCH Venture Partners p7
Arena Pharmaceut. p3
Artes Medical p3
AspenBio Pharma p3
Atel Ventures p8
Atlas Venture p7
Austin Ventures, p8
Aveta p4
Avida Group p7
B
Baker Brothers Investments p11
Bariatric Partners p9
Bay City Capital p8
Bear, Stearns p3
BioAdvance Greenhouse Fund p8
Biophan Technologies p3
BoneSupport AB p8
Boston Community Venture Fund p7
Boston Millennia Partners p8
Brookdale Senior Living p4
Brookside Capital Partners p7
Burrill and Company p7
C
California Lyme Disease Association p12
California Technology Ventures p8
Cambridge Devices p8
Cara Therapeutics p8
CardioMEMS p8
Caremark Rx p6
Catalyst Pharmaceuticals p2
CDIB p7
Celerity Partners p8
Celgene Corporation p3
Cell Therapeutics p3
Centene p4
Centers for Disease Control and Prevention p12
Cerenis Therapeutics p7
Chiasma p7
Citigroup p3
CMEA Ventures p7
CollaGenex Pharmaceuticals p10
Concert Pharmaceuticals p7
Conor Medsystems p6
Cordis p6
Cross Atlantic Partners p8
CVS Corporation p6
D
Daaichi Sankyo p11
DexCom p4
DoctorsDirect.com p12
Domain Associates p8
Dr. Reddy’s Labor. p3
DSM Venturing p8
E
Eastside Partners p8
EDF Ventures p7
Elan Pharmaceuticals p9
Elixir Parmaceuticals p9
Elixir Pharmaceuticals p7
Emergent BioSolut. p3
Endocare p3
EpiCept Pharmaceut. p3
Epix Pharmaceutic. p3
eStudySite p8
EyeGate Pharma p8
F
F-2 Ventures p7
Familymeds Group p3
Federated Kauffman Fund p11
FFP Holdings p8
First Albany Capital p4
Flagship Ventures p7
FMRC Family Trust p10
Founders Equity p8
Frazier Healthcare Ventures p8
Fusion Capital p3
G
Goldman, Sachs p3
Greenway Medical Technol. p8
Greylock Partners p7
H
H.I.G. Ventures p8
Hambrecht & Quist p7, p9
Hansen Medical p3
Health Hero Network p8
HealthCap p7, p8
HealthCare Ventures p8
HLM Venture Partners p8
I
iCardiac Technologies p8
IDev Technologies p8
Ignition Partners p8
Inamed p8
Infectious Diseases Society of America p12
Innoven Partenaires p8
InSite Vision p3
IntegraGen p8
InterWest Partners p11
Intradigm Corporation p8
Inverness Medical p3
Iomai Corporation p3
J
JAFCO, p7
Johnson & Johnson p6
Joseph Gunnar & Co. p4
JPMorgan Securities p3
K
Kalologie Skincare p8
Kalypsys p7
KBL Healthcare Ventures p7
Kingsbridge Capital p1
Kodiak Venture Partners p8
Kos Pharmaceuticals p6
KT Venture Group p7
L
Latterell Venture p8
Lazard p3
Lazard Capital Markets p10
Leerink Swann & Company p10
LifeMed Media p8
Lowrey Organ p12
M
Magellan Biosciences p7, p9
MannKind p3
Marina Urgent Care Center p12
Maverick Capital p11
Mayflower p7
McKesson p6
MedCath Corporation p3
Medecision p3
MedGenesis Therapeutix p8
MedMarket Diligence p12
Merck p11
Merlin Biosciences p7
Mesa Laboratories p3
Metabasis p1
Millennium Research Group p12
Mindray Medical p2
Morgan Keegan and Company p9
Morgan Stanley p3
Morgenthaler Ventures p8
MPM Asset Management p11
MPM BioEquities p7, p9
MPM Capital p7, p9
MVM Life Science Partners p8
Myconostica p8
N
Nanospectra Biosciences p8
Navigant Capital Advisors p9
NBGI Ventures p8
Needham & Company p10
Neurochem p10
Neurostar Solutions p8
Neurotech Pharmaceuticals p7
NEW Capital Fund p8
New England Partners Capital p7
New Leaf Venture Partners p7, p8, p9
New Leaf Ventures p11
Newbridge Securities p3
Newbridge Securities Corporation p4
NewHope Bariatrics p8
NewStar Financial p7, p9
Nexus Medical Partners p7
NIF, p7
NightHawk Radiology p4
Novelos Therapeut. p3
O
Obagi Medical p3
OcuCure Therapeutics p8
Oculus Innov. Scien. p3
Ofer Hi-Tech p7
Omega Fund p7
OMRIX Biopharmaceuticals p2
On Assignment p3
Optimer Pharmaceu. p3
Option Care p3
OrbiMed Advisors p7
OREXIGEN Therapeutics p7, p9
Osage Ventures p8
Osiris Therapeutics p2
OVP Venture Partners p8
Oxford Bio- Science Partners p7
Oxford Bioscience Partners p8
Oxford Finance Corporation p8
P
Pathway Medical Technologies p8
Per-Se Technologies p6
Pharmacyclics p3
Pharmos Corporation p3
Picchio Pharma p10
Piper Jaffray & Co. p2
Pound Capital p7
Power Corporation of Canada p10
Power Technology Investment Corporation p10
Psilos Group p8
Q
Quinnova Pharmaceuticals p8
QVT Fund p7
R
Regeneron Pharmac. p3
Renovar p8
Rivervest Venture Partners p8
Rodman & Renshaw p10
Roth Capital p3
S
Safeguard Scientifics p8
Santa Monica Bay Physicians’ Playa p12
SG Cowen p11
Skyline Ventures p7
SMBC Ventures p7
Sofinnova Partners p7
Solstice Neurosciences p9
Split Rock Partners p8
Sprout Group p7, p11
Square 1 Bank p8
St. Cloud Capital p8
Stanford Financial Group p9
Stifel Nicolaus p1
Stonehenge Capital p8
Stryker p12
SunTrust Robinson Humphrey p2
SV Life Sciences p7
Synta Pharmaceuticals p4
T
Talyst Systems p8
Tavistock Life Sciences p7
Texas Emerging Technology Fund p8
Thermage p3
ThinkEquity Partners p10
Thomas, McNerney & Partners p8
Three Arch Partners p7
Ticonderoga Capital p8
Transcend Medical p8
Tufts Center for the Study of Drug Development p12
TVM Capital p7
TVM Capital, p7
U
UBS Investment Bank p3
UBS Securities p10
V
VenGrowth Advanced Life Sciences Fund p8
Ventech p8
Versant Ventures p7, p8
Visicu p4
Vital Images p3
Volcano Corp. p3
Volcano Corporation p2
W
Wachovia Capital Partners p8
Wasatch Advisors p7, p9
WI Investment Partners p8
WorldHeart p3
X
Xanthus Pharmaceuticals p8
Y
Yaupon Therapeutics p8
YFY Bioscience p7
Z
Zila, Inc. p10
Zimmer p12 |
The Case For Private Equity: One Biotech Tells
Us What Lured It Away From The Public Market
Email Editor
Publicly traded health care
companies have already raised more than $5.12 billion in private equity
funding this year, through November 30, 2006. About 260 deals have been
announced, including a fair number of committed equity financing
facilities (CEFFs). Aside from the obvious appeal of private equity, such
as cheaper capital with less hassle, we wondered what was drawing more
health care companies, including biotechs and biopharmas, to the scene.
For some, creative financing vehicles are part of the lure, offering
companies greater control over their finances and their public image.
John Beck, Chief Financial
Officer, SVP of Finance and Treasurer of Metabasis (NASDAQ: MBRX)
talked with us about the CEFF his company announced in November. Metabasis
secured the largest health care private equity deal of the month, with $50
million in capital committed by Kingsbridge Capital. By opting for
the committed equity financing facility, Metabasis is hoping to mitigate
some of the risk that other financing methods could create. "Right now
there is a lot of market risk associated with a biotech that announces
definitively-timed financings. This way, the market cannot dictate the
timing of our next financing, and there is a relatively low cost of
capital that is competitive with other financing options." He also noted
that "The committed equity financing facility provides Metabasis with
greater flexibility, in that there is a committed source," but, MBRX
controls the timing and terms of the draw-downs, subject to certain
conditions. "This tool allows incremental draw-downs that give the company
the ability to target specific events and amounts."
Basically the
financing enables MBRX to, at its discretion, offset the company’s burn
rate on a monthly basis. Prior to the arrangement, Mr. Beck said the
company did a lot of diligence work, including talking with other
companies that have made similar arrangements with Kingsbridge. "We have a
high level of comfort with the investor, who we feel is in for the long
haul," he stated.
"The
financing gives us added leverage in corporate partnership deals, too,"
Mr. Beck pointed out. Currently, Metabasis has established two
partnerships with two out of its five clinical-stage products, and three
partnerships based on earlier research. Its corporate partners include
Daaichi Sankyo (PK: DSKYF) and Merck (NYSE: MRK). All of
Metabasis’ products are based on its proprietary technologies, which the
company will continue to use to identify and develop new product
candidates.
Metabasis
will continue to execute its strategy of discovering, developing and
commercializing novel drugs to address some of the most widespread and
costly chronic diseases involving pathways in the liver. It’s too early to
say yet, however, when its products will be ready to market. The proceeds
from the CEFF with Kingsbridge Capital will be used for ongoing and other
clinical trials.
Metabasis has actually done
a series of financings in the past two years, including a registered
direct offering in March 2006, a PIPE deal that was arranged in October
2005 by SG Cowen, and the company’s IPO, which was in June 2004. As
of September 30, 2006, Metabasis had about $83 million in cash and
securities on its balance sheet, with a cash burn rate of about $3 million
per month. Metabasis is interested in the possibility of doing a
traditional follow-on offering, but Mr. Beck said that the timing would
depend on market conditions as well as internal results.
MBRX’s primary venture
backers, who are still invested in the company, include MPM Asset
Management, InterWest Partners and New Leaf Ventures,
which was spun out of Sprout Group, as well as Maverick Capital,
Federated Kauffman Fund and Baker Brothers Investments. Mr.
Beck said that current investors reacted quite favorably to the latest
financing, and that Sprout Group just upped its stake in the company, too,
by purchasing 500,000 more shares of common stock.
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