SOURCE: Burrill & Company

Burrill & Company

November 01, 2012 08:45 ET

Public Equity Life Sciences Financings Show Strength in October, Says Burrill & Company

More Than $1 Billion Raised Through Series of Offerings

SAN FRANCISCO, CA--(Marketwire - Nov 1, 2012) - A flurry of follow-on financings raised nearly $1.2 billion for the life sciences sector in October, up from $157 million in September as markets hit multi-year highs at the beginning of the month and clinical progress helped drive activity, according to Burrill & Company.

In all, 12 of the 15 life sciences follow-ons in October were on U.S. exchanges for a total of $640.5 million, up from just $6 million for the same period a year ago. Life sciences follow-on activity is up 28.7 percent in the United States as activity has grown to $5.5 billion through the first ten months of 2012 compared to $4.3 billion for the same period a year ago. The global follow-on totals included China's already-public Fosun Pharma's $511.6 million initial listing on the Hong Kong Exchange. But overall, global follow-on activity has fallen 19.6 percent to $6.4 billion through the first ten months.

Among the largest offerings completed on U.S. exchanges was Puma Biotechnologies, which raised $137.6 million through the sale of 8.6 million shares that reflected a 1 million share increase in the size of the offering as well as the full overallotment granted to underwriters. The development-stage biotech's lead experimental drug is an oral treatment for HER2 positive metastatic breast cancer and is in multiple mid-stage clinical trials.

Rigel Pharmaceuticals also completed a $130 million secondary offering. Both companies like many of the others that completed follow-ons, are advancing drug candidates in the clinic and reported clinical success.

"Many companies have been waiting for opportune moments to raise capital," says G. Steven Burrill, CEO of Burrill & Company, a diversified global financial services firm. "In the United States, with a strong market at the start of the month, companies with positive stories to tell about their clinical successes and the start of late-stage trials seized the moment."

The month also witnessed three initial public offerings. Regulus Therapeutics, a developer of microRNA therapeutics, slashed its offering price to $4.00 a share, well below its target range of $10 to $12, and sold more than twice the number of shares it originally planned to sell to raise a total of $45 million. That was in line with what many other therapeutics companies have had to do this year. Seven of the nine companies in the sector that have gone public in 2012 had to cut their expectations to get their deals done.

However, October also saw two therapeutics IPOs price at the top of their ranges. Intercept Pharmaceuticals raised $86.3 million and Kythera Biopharmaceuticals raised $81 million. Both companies have lead compounds in late-stage development. New York City-based Intercept has a first-in-class treatment for primary biliary cirrhosis, a rare chronic autoimmune liver disease that can ultimately lead to liver failure. The offering was bolstered by existing investors purchasing 20 percent of the IPO. Southern California-based Kythera, has an injectable drug that reduces submental fat, otherwise known as a "double chin." Both companies filed with regulators under the newly passed JOBS Act, allowing them to first file confidentially so that they could test investor interest.

"Investors viewed Regulus, a preclinical company, as presenting relatively higher risk," says Burrill. "On the other hand, Intercept and Kythera are late-stage companies that investors view as largely de-risked through clinical successes and partnerships."

Overall, a total of 15 life sciences companies have gone public on U.S. exchanges through the first 10 months of the year raising a total of $1.1 billion. That compares to 14 companies that raised a total of $1.2 billion through the same period a year ago. The performance of new issues in 2012 remains in positive territory with these offerings up an average of 8.7 percent through the end of October. The poor performance of industrial biotechnology IPOs weighed down the group. The 12 therapeutics IPOs completed in 2012, though, were up an average of 21.8 percent.

October Burrill Indices                
                     
BURRILL INDICES   12/30/2011   9/28/2012   10/31/2012   Month Change   Year Change
Burrill Select   432.49   606.82   575.48   -5.2%   33.1%
Burrill Large Cap   529.22   737.59   693.83   -5.9%   31.1%
Burrill Mid-Cap   295.33   340.66   308.82   -9.3%   4.6%
Burrill Small Cap   82.75   112.89   102.5   -9.2%   23.9%
Burrill Diagnostics   175.42   201.96   188.74   -6.5%   7.6%
Burrill Personalized Medicine   100.62   119.34   115.99   -2.8%   15.3%
Burrill Biogreentech   149.36   163.95   159.77   -2.5%   7.0%
NASDAQ   2605.15   3116.23   2977.23   -4.5%   14.3%
DJIA   12217.56   13437.13   13096.46   -2.5%   7.2%
S&P 500   1257.6   1440.67   1412.16   -2.0%   12.3%
Amex Biotech   1091.42   1558.24   1397.78   -10.3%   28.1%
Amex Pharmaceutical   332.94   369.94   369.01   -0.3%   10.8%
                     

On the private side, global venture capital funding kept pace with the amount raised in October last year, with a total of $748 million raised in life sciences deals during the month. The largest funding was raised by Trivitron Healthcare, an Indian medical device and equipment distributor, which raised $75 million in private equity capital from Fidelity Growth Partners India. In the United States, however, there was a slowdown as funding levels fell to $519 million compared to $654 million a year ago, a 20.6 percent drop. Vital Therapies, which is developing the first human cell-based bioartificial liver, raised $60.1 million. It was the largest U.S. venture funding in the sector in October. Despite the slowdown in U.S. life sciences venture funding, both globally and in the United States, total funding for privately-held companies remains about 22 percent ahead of the same period a year ago.

M&A activity continued to trail 2011 levels as total global deal values reached $6.5 billion in October, 9.1 percent less than the $7.1 billion in October 2011. Overall, the $94.7 billion in life sciences deals announced during the first ten months is down 32.4 percent from the same period in 2011. Large pharmaceutical and biotech companies have used M&A activity in 2012 to largely add new revenue sources and gain access to new markets and instead have relied on partnering transactions as a less risky way to get access to innovative drugs in development.

Although Burrill & Company's financing statistics don't include health insurance acquisitions, UnitedHealth Group's announced plans to acquire a 90 percent stake in Amil Participações, Brazil's largest healthcare insurer for $4.9 billion was among the most compelling deals in October. The deal gives the United States' largest healthcare benefits and services company a base from which to target the big growth opportunity of serving customers in the emerging markets of South America.

Life Sciences Scorecard in USD M
 
  YTD Oct 31, 2012   YTD Oct 31, 2011   Change
           
Global Venture Capital 9,982   8,199   21.7%
U.S. VC 7,597   6,230   22.0%
           
IPOs (32 in 2012 v. 41 in 2011) 2,067   3,689   -44.0%
U.S. IPOs (15 in 2012 v. 14 in 2011) 1,083   1,212   -10.6%
           
Global PIPEs 4,717   2,732   72.6%
U.S. PIPEs 1,562   1,191   31.1%
           
Global Follow-ons 6,366   7,923   -19.6%
U.S. Follow-ons 5,537   4,301   28.7%
           
Global Other Equity 1,841   583   215.8%
U.S. Other Equity 912   288   216.7%
           
Global Debt Offerings 30,508   36,708   -16.9%
U.S. Debt 22,874   22,171   3.2%
           
Global Other Debt 13,120   9,802   33.9%
U.S. Other Debt 11,621   4,186   177.6%
           
Total Global Public Financings 58,589   61,176   -4.2%
Total U.S. Public Financings 43,348   33,248   30.4%
           
Global Partnering 32,995   29,256   12.8%
U.S. Partner/Licenser 16,803   17,929   -6.3%
           
Global M&A 94,738   140,059   -32.4%
M&A, U.S. Target 68,729   78,454   -12.4%

Through the end of October, the U.S. Food and Drug Administration approved 28 new drugs and biologics, the same number it had approved by the end of October 2011. New approvals in October included ThromboGenics' Jetrea, the first drug approved to treat symptomatic vitreomacular adhesion, an eye condition related to aging that can lead vision loss. It also included Eisai's Fycompa tablets to treat partial onset seizures in patients with epilepsy ages 12 years and older.

With the presidential election days away and the potential for both the House and Senate to swing to either party, the fate for the Affordable Care Act remains uncertain. Republican presidential candidate Mitt Romney has vowed to repeal the legislation. The outcome could also have a significant impact on funding for scientific research, as analyses of Romney's budget plan have suggested it would result in sharp cuts to funding for biomedical research as well as other discretionary spending.

"Life sciences companies will be watching the election closely," says Burrill. "With the White House, Senate, and House all in play, it will take some time to determine the full impact of the election. Nevertheless, meaningful reform has already been set into motion, driven by payers, physicians, patients, and technology. The pace of that reform will only accelerate."

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 publications. 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.

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