The Washington Post today reported that the House Financial Services' Subcommittee on Capital Markets and Government Sponsored Enterprises held a hearing on “Reducing Barriers to Capital Formation, Part II” today to discuss reducing regulatory burdens and other capital market reforms that will allow publicly traded biotech companies easier access to capital. In it, Kenneth I. Moch, President and Chief Executive Officer of Chimerix, Inc. and a member of BIO’s Emerging Companies Section Governing Board stated:
“The public market plays a pivotal role in financing the search for groundbreaking cures and treatments, as growing innovators often turn to an IPO to fund late-stage clinical trials…The financing challenges that emerging biotechs face are unique, but when our industry is successful it has the potential to deliver life-saving cures and treatments. I urge the Congress to consider these reforms to help save lives and treat patients in desperate need of hope.”The subcommittee meeting is very timely considering that the window for biotech IPO’s is “open” for the first time in well over a decade. Year-to-date, there have been 17 life sciences IPO’s with average aftermarket performance up 20.9% (through May 31st).
The open public financing environment is of particular interest to CIRM and our for-profit grantees since it provides an additional source of capital to leverage CIRM funds and help advance CIRM-funded programs. One of the key goals for CIRM’s business development effort is securing follow-on financing for CIRM-funded projects and having our grantees raise money though an IPO is a great way to access additional capital. Bluebird bio recently raised $101 million after a successful IPO (which we wrote about here), and Cellular Dynamics is in the queue to go public, having filed an S-1 registration statement targeting to raise $57 million.
Although the IPO window may be open, an IPO is not the only way for CIRM’s for-profit grantees to access the public markets. Recently, Capricor announced a reverse merger with Nile Therapeutics, a publicly traded company for an undisclosed price. According to Nile’s CEO Darlene Horton, M.D.: "The combined company should have better access to capital, more potential for steady pipeline development and more risk diversification." Capricor recently received a $20 million disease team award from CIRM to begin a clinical trial testing their stem cell approach to treating heart failure.
In addition to the public markets providing a source of capital to CIRM grantees, the private financing market also still represents a viable option. For example, today ViaCyte announced the completion of a private equity financing transaction which provided the company $10.6 million to match the previous CIRM grant of $10.1 million through a Strategic Partnership Award to fund development of their diabetes product. The financing included ViaCyte’s largest existing investors - Johnson & Johnson Development Corporation, Sanderling Ventures and Asset Management Company (Johnson Trust).
While the private financing environment for early stage technologies remains challenging, deals such as ViaCyte’s $10.6 million raise are getting done providing much needed capital that leverage CIRM funds and which will ultimately be used to move technologies forward and into patients. The open financing window for biotech IPO’s is very exciting, especially consider the after-market performance of the group is up over 20%. This serves to create an exit for early investors to generate a return on their invested capital, which in turn will generate interest for them to invest again in early stage opportunities. It also has the effect of making an IPO a viable financing alternative to a pharma M&A exit, and will serves to create leverage for small companies negotiating with pharma.
Neil Littman is the Business Development Officer at CIRM