June
2008 issue
Drugs, Devices
And Diagnostics For The Heart:
Significant Venture Funding Devoted To Cardiovascular Space
In the past five years or so, a
significant amount of venture capital has been committed to companies
developing drugs, devices, diagnostic tools and other products for the
cardiovascular market.
...
Private Placements Return, With A Vengeance:
Health Care Companies Raise More In One Month Than Four
After four very slow months, the private
placement financing market for public health care companies staged a
rebound, including two large deals.
...
Committed Equity Deals
Three of the private placements announced
during the month are, specifically, committed equity financing facility
agreements (CEFFs).
...
Mergers & Acquisitions
While the health care technology sectors
remained active, the health care services sectors remained relatively
inactive again during May.
...
Venture Capital Transactions
Venture capital deals were
announced at a fairly steady pace during May, but no records were broken in
terms of number of deals or dollars invested.
...
Venture Capital Funds
Venture capital fund closing and launch announcements were issued in May by
three firms active in health care.
...
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Healthcare Corporate Finance
News Read the past
headlines.
Companies mentioned in this issue:
June 2008
A
Abbott Laboratories p5
ACT Biotech p7
Advanced Technology Ventures p8
Advantage Capital Partners p9
Advocate Health Care p5
Affinity Capital Management p8
AIG Investments p9
Aisling Capital p8
Aldagen p3
Alexza Pharmaceuticals p11
Allos Therapeutics p3
Alloy Ventures p8
Alltracel Pharmaceuticals p5
Alta Partners p8
Alternecare Health Products p5
Altitude Life Science Ventures p8
AM-Pharma p9
Amarin p10
Ambulatory Services Of America p8
Amira Pharmaceuticals p6
AmSurg Corporation p5
Antisoma p4
Apoptos p7
Apothecary Capital p8
Arboretum Ventures p8
Arcapita Ventures p2
ARCH Venture Partners p8
Astute Medical p6
Auspex p9
Avalon Ventures p6
Avista Capital/Nordic p4
Aware Interweave p4
Azimuth Opportunity Limited p11
B
Bausch & Lomb p12
Bay Area Equity Fund p6
Bayer HealthCare p9
BBT Capital Management p8
BBT Fund p5
BioAlliance Pharma p4
Biofrontier Corporation p2
Biogen Idec p6
BIOMOL International p4
Boston Millennia Partners p2
Bristol-Myers Squibb p4
Burrill & Company p6, p9
C
Camp Braveheart p12
Canaccord Adams p11
Cardima p11
Cardiokine p6
CardioMEMS p1
CardioNet p2
Cardiva Medical p9
CareScout p4
Cavit Sciences p5
CBay Systems Holdings p4
Cell Genesys p11
CellCeuticals Skin Care p9
China Pharma Holdings p11
CMEA Ventures p9
Cohera Medical p9
Condell Medical Center p5
ConvaTec p4
Corcept Therapeutics p11
Cornerstone BioPharma p4
Cowen p3
Cowen & Company p10
Credit Suisse Securities p11
Critical Therapeutics p4
CSK Venture Capital p9
Cyberkinetics Neurotechnology Systems p5
Cyclacel Pharmaceuticals p11
CyDen p9
D
Daiichi Sankyo p4
De Novo Ventures p6
Delphi Ventures p8
Delta Health Systems p4
Derma Sciences p11
Discovery Laboratories p3
Draper Rehabil. and Care p5
Duff Ackerman p6
Dundee Securities p11
E
Easton Capital Partners p2
EKR Therapeutics p6
Elixir Pharmaceuticals p3
Elmarco p5
Emergent BioSolutions p4
Emphasys Medical p3
EmploymentCrossing.com p12
Ensign Group p5
Enzo Biochem p4
EnzymeRx p9
ESP Equity Partners p6
Esperion Therapeutics p7
Evanston Northwestern p5
Everett Partners p7
F
Forbion Capital p9
Fusion Capital Fund p11
G
Garden State Life Sciences Venture Fund p6
GBS Venture Partners p8
Genworth Financial p4
George T. Hawes p11
Georgia Department of Community Affairs p2
GeoVax Labs p11
GlaxoSmithKline p6
Great Lakes Pharmaceuticals p7
Guidant Corporation p2
H
H. Lundbeck A/S p4
Hambrecht & Quist p2
Health Management Associates p1, p10
Health.com p12
Healthcare Strategic Initiatives p4
Healthscreen p11
HeartWare p11
HemCon p5
HepaLife Technologies p11
Histogen p9
I
I2S Micro Implantable Systems p5
Ignition Partners p9
Image Sensing Systems p3
InfoLogix p4
InNexus Biotechnology p11
Innovative Biosensors p7
Innoven Partenaires p7
Intelligence Squared U.S. p12
Intercell AG p4
Intrexon p7
Inventages Venture Capital p9
INVESCO Private Capital p8
Iomai p5
J
JAFCO p8
JapanBridge, Inc. p4
Javelin Pharmaceuticals p11
Jazz Pharmaceuticals p3
JP Morgan Partners p8
Jump-Start p7
K
Kern Medical p9
Kingsbridge Capital p3
Klargen Biotherapeutics p4
Kleiner Perkins Caufield & Byers p6
Kosan Biosciences p4
Kythera Biopharmaceuticals p8
L
La Jolla Pharmaceutical p3
Ladenburg Thalmann p11
Leerink Swann p11
Lehman Brothers p11
Liberator Medical p11
Life Sciences Facilities Fund p2
Life Sciences Partners p7, p9
Lindsay Goldberg p8
LLR Partners p6
LocumTenens.com p12
Longbow Ventures p9
M
Mary Ann Liebert, Inc. p12
May Acquisition p5
McClendon Venture Company p8
Medipacs p9
MedQuist p4
Medtronic p2
MedX Health Corp. p11
Merrill Lynch p3
Mesa Verde Venture Partners p9
MINRAD International p11
Miragen Therapeutics p7
MPM Capital p6
Myconostica p7
N
Natus Medical p3
Needham & Co. p3
NeoStem p11
New England Cryogenic Center p11
New Enterprise Associates p5
NewSpring Capital p6
Nexus Medical Partners p7, p9
NGN Capital p7, p9
NIF SMBC Ventures p9
Nomura Phase4 Ventures p8
North Coast Angel Fund p7
Novant Health p3
Novasys Medical p8
Novelis p5
Novo A/S p6
NursingCrossing.com p12
NuVasive p4
NxStage Medical p11
O
OccuLogix p11
Ohio TechAngels p7
Omega Healthcare Investors p10
OmniGuide p7
OncoGenex Technologies p4
ONSET Ventures p8
Opko Health p4
Oragenics p11
OrbiMed Advisors p8
Orem Rehabil. and Nursing p5
Oryx Pharmaceuticals p4
OVP Venture p9
OXiGENE p11
P
Pac-Link Ventures p9
Palladium Capital Advisors p11
Patient Safety Technologies p11
Paul Capital Healthcare p11
PDSHeart p2
Pequot Capital Management p9
Perseus-Soros Biopharmaceutical Fund p6
PFM p8
Plethora Solutions p11
ProCure Treatment Centers p7, p8
Prolog Ventures p9
Prospect Venture Partners p8
Prospect Ventures p6
Protein Sciences Corp. p4
Proventys p9
Psilos Group p8
Q
Quaker BioVentures p6
Quality Systems, Inc. p4
R
Research Capital Corporation p11
Riverbank Capital p11
Rosenkranz Foundation p12
Rush North Shore Med. Ctr. p5
S
Sagent Pharmaceuticals p4
Sai Advantium Pharma p9
Sanderling Ventures p2
Secure Medical p9
Sepracor p4
Sequoia Capital p9
Shiloh Health Services, Inc. p3
Skyline Ventures p8
Somaxon Pharmaceuticals p3
Sonus Pharmaceuticals p4
Southern California Reproductive Center p12
Spectranetics p4
Split Rock Partners p5
Sprout Group p6
SWIP p8
T
Takeda Pharmaceutical p4
Talyst p9
Telemedicine and e-health p12
Texas Pacific Group p6
Thomas, McNerney & Partners p9
ThreeArch Partners p8
TPG Growth p8
Transdel Pharmaceuticals p11
TVM Capital p8
U
U.S. Department of Health and Human Services p12
U3 Pharma AG p4
UBS Investment p3
UBS Securities p3
UMIP Premier Fund p7, p9
Unilever Ventures p9
V
Validapro BioSciences p5
Venrock p8
Veran Medical p9
Versant Ventures p6, p8
Vidus Ocular p4
Volcano Corporation p5
W
Wachovia p3
Welichem Biotech p11
Wellington Financial p11
Wellmont Health System p3
Wilson Sonsini Goodrich and Rosati p8
Wyeth p6
X
Xanthus Pharmaceuticals p4
XDx p6 |
Private Placements Return, With A Vengeance:
Health Care Companies Raise More In One
Month Than Four
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During the month of May
2008, publicly traded health care companies raised more funding through
private placements than in the entire first quarter of the year.
Approximately $830 million in total financing was committed to 26
companies, including three deals that are committed equity financing
facilities (CEFFs). This is more than the total amount of private
placement financing raised by health care companies in the first four
months of the year combined. Incidentally, even if no CEFFs had been
announced during the month, private placement activity still would have
notched upwards.
Since 2008 began, May is the
second month in a row that more than $200 million was invested in health
care private placements—and that would still be true even if Health
Management Associates (NYSE: HMA) hadn’t announced a $250 million
deal.
Biopharmaceutical,
biotechnology and pharmaceutical companies accounted for 41% of the total
funding for the month, with a combined total of 14 deals. Medical devices
had the greatest number of deals in any single sector, with eight deals
totaling $132 million. One e-health company announced a small deal. HMA’s
large financing was the only private placement announced in the health
care services sectors during May. Health Management Associates is a
Naples, Florida-based company operating acute-care hospitals located
primarily in non-urban areas of the southeastern and southwestern states.
Other corporate activity at
HMA includes its most recent acquisitions, in 2006, when it purchased four
hospitals. During 2007, HMA divested two hospitals to Wellmont Health
System—after a deal fell through to sell them to Shiloh Health
Services, Inc., which couldn’t come up with the financing necessary to
complete the deal. More recently, in April, HMA announced that as part of
a joint venture agreement, it sold a 27% minority interest in its seven
hospitals located in North and South Carolina to Novant Health for
$300 million.
HMA and Novant, a
not-for-profit health care system based in North Carolina, will share
governance of the joint venture through a partnership board, with HMA
continuing to manage the hospitals on behalf of the joint venture. In the
four months following the deal closing, Novant is assuming ownership and
operation of the hospitals’ employed physician practices, which HMA has
agreed to partially subsidize for up to three years, if necessary.
In perspective, although May was a
bang-up month for health care private placements, at this point it looks
like the year-end total for 2008 may not be so thrilling. After such a
slow first quarter, every month for the rest of the year would have to
produce more than $776 million in private placement financings just for
the 2008 annual total to be equal to the 2007 total.
Committed Equity Financing Facilities
About one-quarter of the
total dollars committed to private placements during May are accounted for
by three committed equity financing facilities (CEFFs), which total $185
million, led by Jazz Pharmaceuticals (NASDAQ: JAZZ) with $75
million. Discovery Laboratories (NASDAQ: DSCO) announced a $60
million CEFF, and Somaxon Pharmaceuticals (NASDAQ: SOMX) announced
one for $50 million. In each of those deals, Kingsbridge Capital
has agreed to provide financing to JAZZ, DSCO and SOMX.
Kingsbridge Capital Advisors
Limited, the private equity arm of Hardt Group, is a European
private equity firm that manages private equity allocations through
different investment funds, with a parallel focus on both distressed
debt/equity assets and leveraged buy-outs. Kingsbridge focuses on mid-cap
companies in Europe.
The amount of each CEFF
refers to the maximum amount Kingsbridge has committed to invest in each
company over three years. Under the terms of each agreement, the number of
shares the companies may sell through the CEFF is limited to the number of
shares they may sell without shareholder approval under NASDAQ market
rules. Both DSCO and SOMX agreed to sell shares to Kingsbridge at a
discount of 6% to 12%, depending on certain conditions, while Jazz agreed
to sell shares at a discount of 6% to 10%.
These deals are designed to
allow companies to minimize dilution to shareholders, while providing
access to capital as needed. Additionally, the CEFF agreements are
expected to afford these companies greater financial flexibility. In
connection with the signing of each agreement, Kingsbridge received a
warrant for the purchase of common shares that is exercisable for five
years from the date of the six-month anniversary of the agreement.
In all three deals, the
terms specify that JAZZ, DSCO and SOMX may draw down funds by selling
shares to Kingsbridge in tranches of up to approximately 3% of the
respective company’s market capitalization at the time. The terms prohibit
Kingsbridge from engaging in any short selling transaction relating to the
companies’ common stock while the CEFFs are in effect. The agreements do
not contain any restrictions on the companies’ operating activities and
they do not obligate the companies to utilize any of the committed
capital.
Jazz Pharmaceuticals and
Discovery Labs each noted that their CEFFs do not prohibit them from
entering into or completing debt or equity financings—other than
financings similar to the CEFF, in JAZZ’s case, and other than those that
would involve certain future-priced securities, in DSCO’s case. Somaxon
noted that its CEFF contains no restrictions on SOMX’s automatic pricing
resets or minimum market volume restrictions.
Other CEFF transactions
involving Kingsbridge Capital that have been announced in the past six
months include two with biopharmaceutical companies: a $40 million deal
with OXiGENE (NASDAQ: OXGB) and a $60 million deal with Cyclacel
Pharmaceuticals (NASDAQ: CYCC). The firm also made a deal with
Corcept Therapeutics (NASDAQ: CORT), a pharmaceutical company, for $25
million.
Other firms that have been
making similar deals with health care companies in the past six months
include Azimuth Opportunity Limited and Paul Capital Healthcare.
Paul Capital agreed to a $25 million CEFF with Plethora Solutions
(LSE: PLE), a specialty pharma based in the United Kingdom. Azimuth
Opportunity inked a $50 million CEFF with Alexza Pharmaceuticals
(NASDAQ: ALXA), a specialty pharma with six product candidates in clinical
development that are based on ALXA’s drug delivery technology.
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