Two Life Sciences IPOs and Strengthening Markets Offer Encouragement to Sector One Year After Passage of JOBS Act, Biotechs Take Advantage of the New Law, Says Burrill & Company SAN FRANCISCO, CA -- (Marketwire) -- 04/01/13 -- Two companies focused on infectious disease successfully completed IPOs in March, ending a drought in life sciences initial public offerings since the $2.6 billion debut of Pfizer's animal health business Zoetis at the end of January. Watertown, Massachusetts-based Enanta Pharmaceuticals, developing a pipeline of novel small molecule drugs targeting hepatitis C, completed a $56 million offering selling 4 million shares at $14. The offering came at the bottom of its expected $14 to $16 range. Existing investors, along with other insiders, committed to purchase about one third of the offering. Shares in the company ended March up 30 percent. Tetraphase Pharmaceuticals, also based in Watertown, Massachusetts and using synthetic chemistry to develop new antibiotics, completed a $75 million offering. The company sold a little more than 10.7 million shares at $7 each. The company originally planned to sell 6.8 million shares at between $10 and $12 each but to complete the IPO it had to cut the price and upsize the number of shares. Existing investors and insiders committed to purchasing up to a third of the offering at the IPO price. Tetraphase shares ended March up 1 percent. Both companies qualified as emerging growth companies under the JOBS Act, the legislation that passed a year ago with the intention of making it easier and more attractive for emerging growth companies to raise capital through IPOs. Specifically, newly public companies with limited or no revenue have reduced reporting requirements for the first five years or until they reach $1 billion in revenue. Though rulemaking under the JOBS Act is incomplete, biotech companies have embraced the new law. In fact, 11 of the 13 life sciences companies that completed IPOs since the passage of the law, did so under the JOBS Act. "We know anecdotally that biotech companies like the ability to test the waters with investors and avoid having to make disclosures of competitive confidential information until they are ready to go through with an IPO," said G. Steven Burrill, CEO of Bu rrill & Company, a global financial services firm focused exclusively on the life sciences. "Investor interest, while improving, continues to remain the critical barrier to emerging growth biotechs going public." Overall, the six life sciences IPOs completed during 2013 ended the first quarter of 2013 up 10.9 percent collectively. Enanta, up 30 percent, is the best performer with Kalobios, down 25, the weakest and only one of the six deals to be in negative territory. Four of the six deals came in below their target range, selling 22 percent more shares than they had planned to sell to raise the money they did. The total capital raised through global life sciences IPOs took a big jump to $2.9 billion, more than twice the amount raised during the same period a year ago, but that's largely due to the $2.6 billion Zoetis IPO. Though overall IPO market conditions appear to be improving, there has not been a significant follow-through to the enthusiastic reception investors gave Zoetis. The markets delivered a solid performance during the first quarter with all of the major indices up. The Burrill Select Index ended the quarter up 14.3 percent, outperforming the Dow Jones Industrial Average (up 11.3 percent), the Nasdaq Composite Index (up 8.2 percent), and the S&P 500, which ended the quarter at a record 1569.19 (up 10 percent). But the best performer by far was the Burrill Small Cap Index, which rose 25.1 percent during the quarter. Notably, four leading biotech companies -- Amgen, Biogen Idec, Gilead, and Celgene -- all ended the first quarter trading at all-time highs. "With the approval of Biogen's new oral multiple sclerosis drug and growing expectations for Gilead's experimental hepatitis C drug, investors are recognizing the true value these companies are creating," says Burrill, author of the newly released book Biotech 2013-Life Science: Capturing Value. "This should help generate investor enthusiasm for the sector more broadly." Month Year BURRILL INDICES 12/31/2012 2/28/2013 3/29/2013 Change Change Burrill Select 607.66 638.61 694.44 8.7% 14.3% Burrill Large Cap 736.90 779.13 855.73 9.8% 16.1% Burrill Mid-Cap 309.52 347.58 350.34 0.8% 13.2% Burrill Small Cap 105.48 116.90 132.00 12.9% 25.1% Burrill Diagnostics 191.32 203.60 207.78 2.1% 8.6% Burrill Personalized Medicine 119.22 128.02 131.90 3.0% 10.6% Burrill Biogreentech 162.27 181.56 182.13 0.3% 12.2% NASDAQ 3019.51 3160.19 3267.52 3.4% 8.2% DJIA 13104.14 14054.49 14578.54 3.7% 11.3% S&P 500 1426.19 1514.68 1569.19 3.6% 10.0% Amex Biotech 1547.03 1702.36 1826.75 7.3% 18.1% Amex Pharmaceutical 369.57 392.434 412.613 5.1% 11.6% First quarter 2013 global M&A deal values stayed in line with 2012 numbers, buoyed by strong activity in January and February. Global M&A deal values fell 65 percent in March, however, compared to the same period in 2012, with just $2.1 billion in 14 announced deals, none of which were for more than $400 million. Valeant Pharmaceuticals' acquisition of Obagi Medical Products for $344 million was the second largest deal in March. The price represents a 28 percent premium to Obagi's closing share price before the announcement was made public. Obagi markets several topical aesthetic and therapeutic skin care systems. Global partnering deal values in the first quarter of 2013 fell by 30 percent compared to the first quarter of 2012. Several factors may be contributing to the drop, such as fewer deals with disclosed financial terms, more collaborative dealmaking with non-profits and academic institutions, and fewer deals announced altogether. In contrast, March partnering deal values were 75 percent above the same period in 2012. Two big deals at the end of the month accounted for the most of the total. H. Lundbeck and Otsuka Pharmaceuticals entered into a potential $825 million deal for the development of Lundbeck's mid-stage investigational therapeutic to treat Alzheimer's disease. Separately, privately-held Edison Pharmaceuticals' entered into a licensing agreement with Dainippon Sumitomo Pharma for the development and commercialization rights in Japan to two mid-stage compounds for the treatment of orphan pediatric mitochondrial disease and adult central nervous system diseases. That deal is worth $50 million in upfront and research payments to Edison, up to an additional $495 million in milestones, and royalties on commercialized products of the collaboration. Scorecard First Quarter 2013 First First Change Quarter Quarter 2013 2012 Global Venture Capital 2,578 3,042 -15.2% U.S. VC 1,959 2,004 -2.3% IPOs (7 in 2013 vs 13 in 2012) 2,887 907 218.3% U.S. IPOs (6 in 2013 vs 7 in 2012) 2,863 499 473.6% Global PIPEs 775 1,370 -43.4% U.S. PIPEs 246 512 -52.0% Global Follow-ons 2,649 2,104 25.9% U.S. Follow-ons 2,579 1,996 29.2% Global Other Equity 330 511 -35.4% U.S. Other Equity 271 495 -45.2% Global Debt Offerings 8,177 5,519 48.2% U.S. Debt 7,005 4,512 55.3% Global Other Debt 3,785 1,492 153.6% U.S. Other Debt 1,108 1,443 -23.2% Total Global Public Financings 18,603 11,903 56.3% Total U.S. Public Financings 14,073 9,457 48.8% Global Partnering 7,095 10,173 -30.3% U.S. Partner/Licenser 5,138 4,886 5.1% Global M&A 16,523 16,675 -0.9% M&A, U.S. Target 7,370 14,397 -48.8% While global public financings were up 56 percent in the first quarter of 2013 compared to the first quarter of 2012, global venture financings were down by 15 percent compared to the same period last year mostly due to a drop-off in financings outside the United States. Financings for privately-held companies in March remained flat in the United States compared to March 2012, but were down 8 percent globally. Early-stage financings were notably lacking in March, with most deals greater than $20 million in later-stage rounds. A breakdown of categories in global venture financings showed that medical device companies took in one-third of the capital raised, therapeutics developers garnered 28.4 percent of the total, industrial biotechs accounted for 14.8 percent, Tools/technology companies for 9.2 percent, diagnostics developers for 6.8 percent, and digital health and healthcare technology companies for 7.4 percent. Non-traditional sources of capital continue to be important for startups. U.K.-based Infirst Healthcare, a spin-out of the U.K. drug discovery group Seek, raised $38 million from Invesco Asset Management managed funds. Infirst bills itself as a consumer healthcare company that is commercializing fast-to-market medicines. The new funding will be used for the launch of its drugs into the cough and cold and pain consumer healthcare markets where it says there has been little innovation in many years. Reviewers at the U.S. Food and Drug Administration in March approved two new drugs and a new imaging agent for use in treating certain cancers, raising to eight the total number of new molecular entities approved by the agency's Center for Drug Evaluation and Research during the first quarter of 2013. That matches the total approved in the first quarter of 2012. In March, Biogen Idec won approval for Tecfidera, a new pill for adults with relapsing forms of multiple sclerosis that was also recommended for European approval. The FDA also approved a new first-in-class Janssen Pharmaceuticals pill for type 2 diabetes, the most common form of the disease. In addition, Navidea Biopharmaceuticals got a green light to market Lymphoseek, its radioactive diagnostic imaging agent that helps doctors locate lymph nodes in patients with breast cancer or melanoma who are undergoing surgery to remove tumor-draining lymph nodes. The FDA also made further progress on defining its approach to the emerging world of healthcare information technology in March as Congressional hearings were held to discuss whether regulation will hamper innovation in the sector. During the hearings, the agency said that only a fraction of mobile apps would require its review, citing as examples cases in which an app transforms a mobile device into a medical device already regulated by FDA or acts an accessory to a medical device already regulated by agency. The agency also said that it plans to issue final guidance that will help companies determine whether their product will require FDA clearance or approval within weeks. Senator Ron Wyden, D-Oregon, sent a letter to National Institutes of Health Director Francis Collins expressing concerns that patients are paying too much and taxpayers are not sharing in the financial returns the pharmaceutical industry enjoys when new drugs result from NIH-funded research. Wyden's letter focused on Pfizer's rheumatoid arthritis drug Xeljanz, which is expected to cost $25,000 and reach peak sales of $2.5 billion. Wyden called on the NIH to convene a panel that examines the pricing of drugs developed with public funds and said in this economic climate of increasing scarcity, "It is time to revisit the idea of striking a better balance between encouraging profit, innovation, accessibility and affordability." "Senator Wyden's efforts ignore the tremendous funding, time, and risk that drugmakers face when they seek to take discoveries made in the lab and develop them into marketed products that benefit patients," says Burrill. "Senator Wyden could help to lower the cost of drugs and increase accessibility to innovative new products by working to address the problems with translational research today and finding ways to address the high cost and complexity of human clinical trials." Biotech 2013-Life Sciences: Capturing Value, Burrill & Company's 27th annual report on the life sciences industry, is now available. A complimentary chapter, along with the table of contents and a list of the nearly 200 charts and graphs can be downloaded for free at www.burrillmedia.com. About Burrill & Company Founded in 1994, Burrill & Company is a diversified global financial services firm focused on the life sciences industry. With $1.5 billion in assets under management, the firm's businesses include venture capital/private equity, merchant banking, and media. By leveraging the scientific and business networks of its team, Burrill & Company has established unrivaled access and visibility in the life sciences industry. This unique combination of resources and capabilities enables the company to provide life sciences companies with capital, transactional support, management expertise, insight, market intelligence, and analysis through its investments, conferences, and publica tions. Headquartered in San Francisco, the company oversees a global network of offices throughout the United States, Latin America, Europe, and Asia. For more information visit: www.burrillandco.com. Contact: Daniel Levine Managing Director Burrill & Company email@example.com 415-591-5449
Two Life Sciences IPOs and Strengthening Markets Offer Encouragement to Sector
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