VC Spending Up 60%

	Jenks Healthcare Business Report Your complete source for market intelligence, M&A and venture capital transactions in health care
September 2004 issue VC Spending Up 60% Health care companies are dressed for success in the venture capital market this month, with a plush $705.0 million draped over 51 deals. ... M&A: Business As Usual? The market for health care mergers and acquisitions, though not in bad shape, has seen more exciting days than the past four weeks. See page 1 ... Public Equity Market Although several new IPOs have been filed in the past 30 days, none have actually been priced. Two secondaries got done though, and one IPO got pulled. See page 12 ... Private Placement Market It’s been a slow ride through Sunday traffic in the private equity market over the past four weeks, idling down with a 41% decrease in deal volume and 62% decrease in total capital committed, compared with last month. See page 12 ... Departments & Details Public Market p3 M&A Deals p5 Venture Investment Profiles p7 Venture Capital p7-10 Private Placements p12-13 Notes & Briefs p14 Sign up for a trial subscription and get the current issue! Read the past headlines.	VC Spending Up 60% The venture capitalists must be back from vacation. Between mid-August and mid-September, the health care venture capital market saw a total of 51 deals financed for a total of $705.0 million. During the same period, six companies have announced "very big" deals, each for over $30.0 million, and twice as many have announced "big" deals, ranging from $15.0 million to $30.0 million, plus 33 smaller deals were made. Biotechnology, pharmaceutical and biopharmaceutical companies dominate the VC landscape this month; these three sectors collectively account for 36 of the 51 deals. The really big deal is that, compared with the year-ago period, there has been a 42% increase in deal volume and a 60% increase in total capital committed to fund the business activities of burgeoning health care companies. What hasn’t changed much is where the money is going—the same three sectors that prevailed over the market at this time last year, are still leading the way this year. Nearly $545.0 million, or approximately 77% of the total dollars spent to finance the health care venture capital deals in this issue, financed deals in biotechnology, biopharmaceuticals and pharmaceuticals. Compared with our last monthly issue, money is still flowing into mostly the same sectors, but the number of deals has increased by 82% and the total dollars committed to health care venture capital has increased by 103%. The largest deal we are reporting in this issue took place on foreign shores, in Scotland, where Arakis, Ltd. raked in $52.0 million to support its goal of becoming a leading player in the specialty pharma arena. Arakis will use the proceeds of the financing for ongoing clinical trials of one drug for chronic obstructive pulmonary disease, developed under a partnership with Vectura Group plc, another drug for rheumatoid arthritis, for which Arakis received IND status this year, and to fund the commencement of trials for compounds for cancer pain and chemotherapy side effects. Arakis’ investors include the almost omnipresent entities, 3i Group, the 3i Bioscience Investment Trust, and Novo A/S, as well as several other specialist institutional life sciences investors and the company’s management and directors. MediciNova, a specialty pharmaceutical company located in San Diego, California, garnered the second-largest venture investment this month, $44.0 million. By comparison, in our last issue the biggest deal was for $48.0 million, which went to another San Diego-based company, Avera Pharmaceuticals, which focuses on the development and commercialization of neuroscience-related therapeutics. MediciNova is backed by Essex Woodlands Health Ventures, another prominent force contributing venture capital to the life sciences industry. Founded four years ago, MediciNova is acquiring, developing and globally commercializing pharmaceutical products. Earlier this year, the pharma closed its Series B financing with $29.0 million, bringing to $73.0 million the total capital it has raised in a relatively short period of time. MediciNova is using the funding to advance the development of several clinical projects and to add new products to its portfolio. The company’s business strategy involves forming alliances with biotechs and other pharmas in North America, Europe and Japan, in order to build its portfolio. The first therapeutic area for which MediciNova is building a core portfolio is urology and obstetrics/gynecology. The company also plans to develop a partnering portfolio that includes therapies for asthma, nervous system disorders and other major diseases. Another aspect of the company’s strategy is its aim to out-license compounds to other pharmas. Currently the most advanced compound in MediciNova’s portfolio, which includes several drug candidates, is in Phase II trials. Since inception, the pharma has acquired an anxiety compound from Mitsubishi Pharma Corporation (PK: MPHMF), a premature labor compound from Kissei Pharmaceutical Co., Ltd. (PK: KSPHF), and the rights to a series of cancer drugs from Angiogene Pharmaceuticals Ltd. Its last publicly announced round of venture capital, $5.0 million committed in October 2000, came solely from Tanabe Seiyaku Co., Ltd. (PK: TNBSF). As an aside, it’s actually been a few months since we have seen venture capital investments of $50.0 million or more. In June, two pharmaceuticals companies received hefty commitments, Altus Pharmacueticals with $51.0 million and Idun Pharmaceuticals with $65.6 million, and a drug discovery company, ARYx Therapeutics, got $55.0 million. In the past thirty days, only Arakis secured a financing that amounted to more than $50.0 million. Sunesis Pharmaceuticals announced that it has secured venture capital through its research agreement to discover and develop small molecule cancer therapeutics targeting kinases, a family of cell signaling enzymes that play a major role in the progression of cancer, in concert with Biogen Idec (NYSE: BIIB). Including the capital from BIIB, the company has raised more than $120.0 million in venture funding since its founding in 1998. Sunesis, based in South San Francisco, California, announced in late July that it has entered into a multi-year collaboration agreement with Merck Pharmaceuticals (NYSE: MRK) to develop orally available drugs for the treatment of viral infections. This is the second collaboration between Merck and Sunesis; in February 2003, the companies began to research and discover small molecule medicines for Alzheimer’s disease. The biopharma also has an agreement with Johnson & Johnson Pharmaceutical Research & Development, L.L.C., inked in 2002 and extended in January 2004, the focus of which is on the discovery of small molecule enzyme inhibitors for the treatment of major chronic diseases, including inflammatory and autoimmune diseases. Financial terms of the latter collaboration agreements were not disclosed. In each of the collaborations, Sunesis’ proprietary technology, which was designed to increase the efficiency and productivity of small molecule drug discovery, will be used. The pharmaceutical companies will support the advancement of drug candidates through development and clinical studies, and Sunesis is slated to receive royalty, milestone and other payments, pending the successful outcomes of the projects. This year Sunesis also anticipates filing its first Investigational New Drug (IND) application with the U.S. Food & Drug Administration for an anti-cancer compound, the exclusive worldwide development and marketing rights to which Sunesis had acquired from Dainippon Pharmaceutical Co., Ltd. (PK: DNPUF) in late 2003. The clinical candidate, known as SNS-595, acts as a cell-cycle modulator that may stop the proliferation of cancer cells and induce programmed cell death of cancer cells at a certain phase of disease progression; according to Sunesis, the compound has shown broad anti-tumor activity in multiple preclinical in vitro and in vivo models, including multi-drug-resistant tumor models.
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