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Upstart Biotechs Rake in the Cash as Sector Rally Continues


Small public and private drug developers are experiencing a wave of aggressive financing, while biotech stocks of all sizes extended their rally into a fourth week.

This article published with permission from The Burrill Report.

Reata Pharmaceuticals is filling its coffers ahead of late-stage trials with a lucrative deal for its mid-stage treatment for chronic kidney disease. The private Irving, Texas-based biopharma is granting Abbott Laboratories (NYSE: ABT) exclusive rights to develop and commercialize bardoxolone outside the U.S., excluding certain Asian markets. In return, Reata will receive $450 million in upfront and near-term payments, and a minority equity investment in the company.

Under the terms of the agreement, Reata will be eligible for additional unspecified milestone payments and royalties on any future product sales. The deal also gives Abbott licensing rights to other compounds in Reata’s pipeline for chronic kidney disease, and for cardiovascular and metabolic indications, in the licensed territories. Abbott shares were trading at $51.94 early Monday.

“This partnership allows us to meet our strategic goal of establishing our own commercial presence in the United States and building a sustainable, fully integrated pharmaceutical company,” says Warren Huff, Chief Executive of Reata.

With this deal, Reata has brought in more than $500 million in the past year, including licensing the rights to develop and commercialize bardoxolone in Japan and certain Asian markets to Kyowa Hakko Kirin for $35 million upfront last January, and completing a $78 million private equity financing in July.

Bardoxolone is an oral, first-in-class antioxidant inflammation modulator that was originally developed as a cancer treatment. However, in one study researchers noticed a marked improvement in kidney function among all renal cancer patients. The company decided to focus on this aspect and mounted two mid-stage trials in 2008, which were completed last year. Results showed bardoxolone significantly improved kidney function in patients with advanced chronic kidney disease and type 2 diabetes. Chronic kidney disease currently affects more than 50 million adults worldwide, and the number of patients is rapidly increasing -- making the drug a potential blockbuster.

Elsewhere, medical-device company Asthmatx Inc. agreed to be acquired by Boston Scientific Corp. (NYSE: BSX) in a structured deal worth as much as $443.5 million. Boston Scientific is paying $193.5 million cash upfront for the closely held company, and up to $250 million contingent upon achievement of specified revenue-based milestones through 2019. Boston Scientific shares were at $5.74 early Monday.

Asthmatx designs, manufactures and markets a less-invasive, catheter-based bronchial thermoplasty procedure for the treatment of severe persistent asthma in adults whose asthma is not well controlled with drugs. The company received U.S. Food and Drug Administration approval to market its system in April.

Other biotechs garnered their cash from venture capital firms. Immatics Biotechnologies raised $71 million in a series C financing round from Dievini Hopp Biotech, Wellington Partners and other existing shareholders, and new investors MIG-advised funds and AT Impf. The money will allow the company to start a late-stage trial of its lead therapeutic cancer vaccine candidate in renal cell carcinoma, and continue development of its pipeline of therapeutic vaccines. Immatics presented mid-stage results at the American Society of Clinical Oncology meeting in June.

Immatics’ technology platform rapidly generates defined therapeutic cancer vaccines which are based on multiple tumor-associated peptides with the ability to specifically stimulate the immune system against cancer cells. Based in Tuebingen and Munich, the German biotech has raised more than $130 million in private equity in three financing rounds.

Santa Barbara-based CytomX Therapeutics LLC completed a $30 million series B round of financing led by Third Rock Ventures, with participation from the Roche Venture Fund. The money will enable the company advance its Probodies antibody platform and expand its current team of eight and move to the San Francisco Bay area by the end of the year. CytomX hopes to develop more effective and less toxic therapies for severe illnesses such as cancer and inflammatory diseases.

The U.S. government is another source of funding, especially for companies developing solutions to bioterror threats. Emergent BioSolutions Inc. (NYSE: EBS) signed a five-year contract with the Biomedical Advanced Research and Development Authority of the Department of Health and Human Services valued at up to $186.6 million for the development of a recombinant protective antigen anthrax vaccine.

The contract consists of a two-year base period of performance valued at approximately $51 million, three successive one-year option periods valued at approximately $126 million, and funding for optional non-clinical studies valued at approximately $9 million.

Emergent's anthrax vaccine candidate is a purified recombinant protective antigen protein formulated with an alum adjuvant and is designed to induce antibodies that neutralize anthrax toxins. The company has already received two research and development grants valued at $100 million for development of the vaccine from the National Institute of Allergy and Infectious Diseases. The company also markets the only approved vaccine for the prevention of anthrax infection. Emergent’s shares were at $18.29.

In other market moving news:

For the fourth straight week, the biotech sector finished in positive territory. The strengthening capital markets boosted biotech stocks. With the exception of Biogen Idec Inc. (NASDAQ: BIIB), big blue chip botech companies all posted strong gains. Biogen’s shares took a hit after the FDA approved Novartis AG’s (NYSE: NVS) Gilenya, the U.S. market's first oral drug to treat multiple sclerosis. The Swiss drug giant’s MS treatment was approved with fewer restrictions than many analysts had expected, which doesn’t bode well for Biogen’s rival MS treatments Avonex and Tysabri. Biogen’s shares were at $56.42.

In other upbeat Novartis news, the company said it will seek regulatory approval for its potentially first-in-class Cushing’s drug SOM230 by the end of the year. In a late-stage study, the experimental drug reduced the level of the stress hormone cortisol in patients with Cushing's, a rare disease where a tumor on the adrenal gland causes the body to produce excess cortisol. Novartis American depositary shares were at $57.85.

Amgen Inc. (NASDAQ: AMGN) is voluntarily recalling certain lots of its Epogen and Procrit vials because they may contain extremely thin glass flakes. Shares of Amgen were at $56.32.

OncoGenex Pharmaceuticals Inc. (NASDAQ: OGXI) shares rose 5 percent after it said results from a Phase II trial showed a improved survival with custirsen in patients with prostate cancer. Custirsen inhibits the production of clusterin, which is associated with cancer-treatment resistance. Its shares were at $12.88.

Seattle Genetics Inc. (NASDAQ: SGEN) said 75 percent of patients treated with advanced Hodgkin lymphoma responded for greater than six months on the experimental drug brentuximab vedotin. Seattle Genetics is developing the drug in collaboration with Japan’s Takeda Pharmaceutical Co. Ltd. Brentuximab vedotin has been granted orphan-drug status by the FDA and has fast-track designation for Hodgkins lymphoma. Orphan drug designation gives drug makers special tax breaks and exclusive licensing rights for seven years to develop treatments for rare conditions -- “rare” meaning fewer than 200,000 individuals in the U.S. have the disease. The company is expected to report top-line data from its Phase II trial of brentuximab vedotin in patients with relapsed or refractory systemic anaplastic large cell lymphoma within the next few weeks. Its shares were at $13.70.

AstraZeneca PLC’s (NYSE: AZN) experimental prostate-cancer drug zibotentan failed in a Phase III clinical trial to significantly improve survival rates. As a result, the drug giant said it won’t pursue regulatory approval. AstraZenaca’s setback provided a boost to Dendreon Corp. (NASDAQ: DNDN) — had zibotentan been approved, it would have been a direct competitor to Dendreon’s prostate cancer therapy Provenge. AstraZeneca’s shares were at $52.11 early Monday, while Dendreon’s shares were at $42.98.

Copyright 2010 Burrill & Company. For more life sciences news and information, visit www.burrillreport.com.

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