Financings Of The Fortnight: Bluebird Spots Brighter Skies For Gene Therapy Investment

Plus news on recent financings by California Institute for Regenerative Medicine, Alimera Sciences, Durata Therapeutics and CoDa Therapeutics.

While a $60 million Series D round, the third significant venture-backed financing for bluebird bio Inc. since early 2010, indicated a brighter forecast for investment in gene therapy technology, the past two weeks also a $150 million investment in stem-cell and regenerative medicine by California’s state government. Meanwhile, Alimera Sciences Inc. grossed $40 million in a preferred offering, Durata Therapeutics Inc. picked up $68 million in an initial public offering and the Rusnano/Domain Associates partnership invested in CoDa Therapeutics Inc.

Read on for the latest installment of Financings of the Fortnight:

Bluebird Bio

Once an area that drew great skepticism, gene therapy is now drawing big money. Cambridge, Mass.-based start-up Bluebird Bio raised its third big round of funding since the beginning of 2010, tapping a diverse syndicate of investors for $60 million in Series D money that will support ongoing trials of gene therapies for rare diseases (Also see "Bluebird Bio Raises $60M Series D Round To Treat Rare Diseases" - Pink Sheet, 25 Jul, 2012.). The funding comes just as European regulators have approved the first gene therapy product in Europe, another strong sign of the advances the field has made the past decade (Also see "EU's CHMP Clears Europe's First Gene Therapy, UniQure's Glybera" - Pink Sheet, 20 Jul, 2012.).

The Bluebird deal includes contributions from public and private growth investors Deerfield Partners and RA Capital Management, hedge fund operator Ramius Capital Group and two unnamed public investment funds, as well as strategic backer Shire PLC. They join returning venture firms Arch Venture Partners, Third Rock Ventures, TVM Capital and Forbion Capital Partners.

Bluebird Bio raised $35 million in a Series B round in early 2010, then was slated to take $30 million in two tranches of Series C capital in an April 2011 agreement (Also see "Bluebird Bio Raises $30 Million Series C To Accelerate Pipeline Development" - Pink Sheet, 20 Apr, 2011.). The startup, however, held a call option which it never exercised on the second tranche; its venture capital backers instead put that $15 million into the Series D round at a higher price, according to Bluebird CEO Nick Leschly.

The firm plans to conduct a Phase II/III study of a treatment for childhood cerebral adrenoleukodystrophy and a Phase I/II study of a beta-thalassemia and sickle-cell disease therapy. Both are built on Bluebird’s lentiviral technology, in which a patient’s own bone marrow stem cells are genetically modified and returned to the patient, potentially obviating the need for a transplant.

California Institute for Regenerative Medicine

The California Institute for Regenerative Medicine, the state agency that funds stem-cell and other regenerative medicine R&D announced July 26 $150 million in grants for translational projects that are expected to file an IND or complete an early-stage clinical trial within four years.

Only one of the awards goes to a for-profit entity, the San Francisco Bay Area firm StemCells Inc., which wants to use stem cells to treat spinal cord injuries in the neck both in patients with new injuries and in patients who have been paralyzed for months or years. The other six awards are going to academic or institutional researchers and range from $14 million to $20 million per project.

The lack of private-sector recipients underscores the challenges of turning stem-cell-related research into product candidates. Three years ago, CIRM handed out $225 million in grants to move 14 preclinical projects toward the clinic; only one of the 14 was based at a for-profit company.

Alimera Sciences

Publicly-traded ophthalmic company Alimera said July 18 it has grossed $40 million in a sale of preferred shares to Palo Alto Investors, Sofinnova Ventures and New Enterprise Associates[See Deal]. The trio gets 1 million preferred shares and warrants to buy 300,000 more, with each preferred share convertible into 13.75 common shares. Investors can trigger a conversion at will, outside of a lockup period and other constraints.

The preferred shares entitle their holders to dividends and other distributions pro rata with the common stock, as well as unspecified downside protection. The shares also can convert to common if Alimera’s lead product gains regulatory approval or if Alimera raises additional equity at predefined share prices, Sofinnova partner Garheng Kong told FOTF. Kong was among Alimera’s original investors at Intersouth Partners and is now one of the partners investing Sofinnova’s new $440 million life-sciences-only fund, up to 25% of which could go toward positions in public biotech companies, Kong said. (Alimera is the fourth investment from the fund.)

Alimera’s lead product is Iluvien, an eye implant that delivers drug up to 36 months to treat vision loss associated with diabetic retinopathy. It is approved in France, Austria, Portugal, the U.K. and of this week, Germany. The FDA asked for more clinical data last November, the second time it has issued a “complete response” letter for Iluvien (Also see "FDA Issues "Complete Response" On Alimera's Iluvien; Eyes More Data" - Pink Sheet, 30 Dec, 2010.). No new PDUFA date has been disclosed.

Durata Therapeutics

With a handful of biotechs knocking on the IPO window over the past fortnight, only one has gotten through. Antibiotic developer Durata on July 18 raised $68 million by selling 7.5 million shares at $9 each [See Deal]. The firm missed its original goal of $75 million by pricing below the intended $11 to $13 per share range, but it sold more shares to bridge part of the gap.

Existing investors Domain Associates, New Leaf Venture Partners, Aisling Capital, Sofinnova Ventures and Canaan Partners agreed to buy 3.8 million shares, more than 50% of the offering, to get the deal done. That’s par for the course these days. It’s rare for a biotech to go public without insider participation, as our sister publication START-UP detailed in February (Also see "In 2012, Biotech IPOs Continue Their Inside Story" - Scrip, 27 Feb, 2012.). Nothing’s changed since then. If biotech backers want to reach liquidity, they’ll more than likely need to help get the glass half-full. Investors are adding not subtracting Durata shares, but their holding times to date have been relatively short.

Durata was founded less than three years ago from the ashes of Pfizer Inc.’s nearly $2 billion acquisition of Vicuron Pharmaceuticals Inc.[See Deal]. In Pfizer’s hands, one of Vicuron’s main products, the antibiotic dalbavancin for skin and soft-tissue infections, received three rejections from the FDA. But with the agency rolling out new regulatory guidelines for certain antibiotics, Durata feels it can do it right this time and recoup the rewards of bringing a once-weekly intravenous gram-positive antibiotic to market (Also see "FDA Continues To Clarify Antibiotic Requirements With New Guidance On Complicated UTI" - Pink Sheet, 5 Mar, 2012.). It currently is conducting two Phase III trials.

BofA Merrill Lynch and Credit Suisse Group led the underwriting team, which has the option to buy 1.1 million additional shares for 30 days following the IPO.

CoDa Therapeutics

San Diego-based CoDa is the first to benefit from venture firm Domain Associates’ new strategic alliance with the Russian sovereign fund Rusnano. On July 24, Domain said wound-healing firm CoDa has completed a $40 million Series B financing, with contributions split equally between Rusnano and a Domain-led syndicate of CoDa’s current investors (Also see "CoDa Therapeutics Closes B Round with $40 Million from Rusnano/ Domain-Led Syndicate" - Pink Sheet, 24 Jul, 2012.). These include the Australian VC firm GBS Ventures and the New Zealand firm BioPacific Ventures.

In March, Domain and Rusnano each said it was committing up to $330 million over the next three to five years to fund Domain portfolio companies (Also see "Rusnano Teams With Domain Associates To Co-Fund Life Sciences Companies And Establish Pharma JV In Russia" - Scrip, 7 Mar, 2012.). CoDa came first because it needed financing, according to Domain partner Brian Dovey. It is in Phase IIb trials for a wound-healing compound aimed at venous leg ulcers and in Phase II trials for the same compound for treatment of diabetic foot ulcers.

Domain companies that receive Rusnano funds are obligated to license exclusive rights to sell their products in Russia and the CIS regions to NovaMedica LLC, a new Russian company that Rusnano and Domain are spending up to $190 million to create. The partners claim it will be Russia’s first fully integrated, innovative domestic drug firm, and will be structured as a joint venture between Rusnano and Domain. As a condition of its Series B financing, CoDa has licensed exclusive rights to its lead product and related technologies in Russia and the CIS to the new company, in exchange for undisclosed royalties on sales.

Domain is one of several U.S. life sciences venture capital firms that are working with Rusnano, a five-year-old, $10 billion sovereign fund charged with helping Russia jump start domestic high-tech industries, and as profiled this past February in START-UP's Capital Matters column, it has been aggressive making investments in western biotech, both directly and through other funds such as Domain and Burrill & Co. (Also see "Rusnano’s Grand Ambitions In Biotech" - Scrip, 27 Feb, 2012.).