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May 2007 issue
IPO Re-filings All The Rage In Health Care? - Some
Recent IPO Withdrawals Have Been Re-filed, Others May Follow Sign up for a trial subscription and get the current issue! Read more about Healthcare Corporate Finance News Read the past headlines.
Companies Mentioned in this issue:
21st Century Jobs Fund p11 |
Venture Capital Market Heating Up For Aesthetics - Dermatology, Cosmetic And Aesthetic Medicine Attract More DollarsAfter tracking a bit of a trend in the therapeutic area that encompasses dermatology, aesthetic and cosmetic medicine, we talked with some investors and executives about what is currently going on in this market. Jim Scopa, a general partner at MPM Capital, has noticed that, "This area has received more attention, both publicly and privately, in the past few years." But, he said, "New chemical entities with applications in dermatology have been few and far between, compared with other market spaces, such as cardiology." MPM Capital has investments in Peplin, which has product candidates in phase II clinical trials for a common type of pre-cancerous lesion and for the most common form of skin cancer, as well as Neosil, which early this year revealed phase IIa clinical data demonstrating that its lead product increased hair growth significantly in men diagnosed with androgenetic alopecia (pattern hair loss). Companies targeting dermatology and aesthetic medicine are working on devices, drugs, delivery methods, reformulations and biologic products. Mr. Scopa gave us a few good reasons why this space is expanding. "First of all, people want to look good, and are willing to pay to improve age-related conditions," as well as other conditions, such as rosacea and acne. "This is largely a non-reimbursed area—but consumers are willing to spend money on dermal fillers and other emerging products—with lots of consumer interest and unmet medical needs." He continued, "There has been an increase in the awareness of skin cancer and the precursors to the various types of skin cancer." In addition, "Larger pharmas have been less focused on dermatology lately, partially because it is a more manageable task for smaller companies and the mid-cap companies—like Medicis and Allergan—to sell to this market than the big pharmas." Mr. Scopa pointed out that the current market offers younger, smaller companies a good opportunity to bring forth innovation. In the industry, the task of developing medicinal and cosmeceutical products has gone to specialty companies, including pharmas, biotechs and devicemakers. In addition, he said, "As venture capitalists, right now we have the opportunity to invest in the development of products for smaller, targeted market segments, such as the dermatologists, or plastic surgeons." In the largest venture capital deal announced during April, Sientra secured $85 million from investors including OrbiMed Advisors, Clarus Ventures, Goldman, Sachs and TIAA-CREF. The specialty medical device company is focused on plastic surgery and aesthetic medicine, which it considers a rapidly growing market. Sientra simultaneously announced this financing and its acquisition of the assets of Silimed, a developer of plastic surgery implants for both cosmetic and reconstructive surgery. The proceeds from the financing are being used, in part, for the Silimed acquisition. Santa Barbara-based Sientra was founded by Hani Zeini, who has recent experience with INAMED Aesthetics. The other company in this space that received funding in April, Reliant Technologies, secured $15 million in Series E financing and is using the proceeds to aggressively build its marketing, clinical education and distribution infrastructure worldwide, among other initiatives. Reliant’s Fraxel lasers have received multiple FDA clearances for use on all areas of the face and body, and are used primarily by aesthetic physicians to treat periorbital wrinkles, pigmented lesions, acne scars and surgical scars. We also got some insight on the dermatology market from Steven S. Porter, the chief executive officer of Ceragenix (OTCBB: CGXP), who said, "There are about 10,000 dermatologists in the United States, but about 3,000 of them write close to 80% of the prescriptions in this space. There is actually a very nice niche market in this space that can be targeted with a sales force of as little as 30 people," because, he continued, "A good-sized drug in this market produces about $50 million in annual sales." Denver, Colorado-based Ceragenix has rather unique beginnings, in that it was spun off from a cosmeceutical company, called Osmotics. Mr. Porter founded Osmotics together with his wife, Francine, who is now the chief executive officer of that company, which provides cosmeceutical products to high-end retail stores. Ceragenix is targeting dermatologists and also pediatricians as its initial market. In April, CGXP announced positive results from its post-clearance marketing study, which compared the efficacy of CGXP’s EpiCeram to that of Cutivate cream in 113 pediatric patients. Both products produced significant improvement in patients’ conditions after 28 days of treatment, in terms of itching (pruritus) and also improvement in sleep habits. Also recently, Ceragenix began enrolling patients in a multi-center pediatric clinical study designed to assess the efficacy of EpiCeram compared to Elidel, the leading topical immunosuppressant prescribed for treating patients with mild-to-moderate atopic dermatitis (eczema). Moving to the M&A market, in the 62 mergers and acquisitions announced from 2000 to 2006, about $7.2 billion has been spent to finance deals with disclosed prices (71% of deals) that include companies involved in dermatology and aesthetic medicine, with more than half in the pharmaceutical sector. These include cosmetic surgery practices, laser body sculpting centers, cosmetic dentistry practices, developers, manufacturers and marketers of dermal fillers, botox, breast implants, as well as pharmas focused on dermatology indications and deals for single compounds, products or development rights. Most of the targets were privately held at the time of the acquisition. Of these deals, the two largest were the $3.1 billion acquisition of Warner Chilcott (NASDAQ: WCRX) by Waren Acquisition in 2004 and the $933 million acquisition of Viatris AB by Meda AB in 2005, but both targets were larger companies with programs in other therapeutic areas beyond dermatology. The third-largest deal was made for a company strictly focused on aesthetic medicine: Laserscope, which was a unit of American Medical Systems (NASDAQ: AMMD), was acquired in 2006 by IRIDEX (NASDAQ: IRIX), a provider of therapeutic-based laser systems and delivery devices, for $715 million. Also in 2006, Stiefel Laboratories, a specialty pharma focused on dermatology and skin care, acquired Connetics Corp., another a specialty pharma focused on dermatology, for $640 million. In the last of the top five deals, private equity firm DLI Holding paid $480 million for Del Laboratories, a producer of cosmetics and over-the-counter pharmaceuticals, in 2004. |
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