VC Roundup: Annexon, Mersana Benefit As Investors Favor Private Over Public Biotechs

Biotechnology firms that are happy to remain private while US stock market investors continue to thrash public drug developers are benefitting from the industry's ongoing venture capital boom, including Annexon Bioscience Inc., Mersana Therapeutics Inc. and six other US and EU companies.

The Nasdaq Biotechnology Index (NBI) has fallen 33.2% during the past year and only one therapeutics company has gone public this month since Clearside Biomedical Inc. priced its IPO on June 1. Selecta Biosciences Inc. launched an offering at $14 per share on June 21, grossing $70m from the sale of 5m shares. (Also see "IPO Update: With No New Offerings, Kadmon Steals The Spotlight" - Scrip, 16 Jun, 2016.) It was the 15th drug maker to go public so far in 2016 versus 29 in the first half of 2015 and 41 in the first six months of 2014. (Also see "IPO Update: Haircuts Needed To Price Biotech Offerings" - Scrip, 4 Jun, 2016.) (Also see " INFOGRAPHIC: A US biotech IPO surge? Data are mixed " - Scrip, 2 Jul, 2015.)

However, venture capital investment of $1.81bn made the first quarter of 2016 one of the best quarters on record for biotech companies, so second quarter figures will be watched closely to see if investor support for private therapeutics firms continues to outpace enthusiasm for IPOs. (Also see "Biotech VC Funding Rises As Fewer Companies Get More Dollars" - Scrip, 5 May, 2016.)

What remains to be seen is whether the decline in IPOs – one of two options for VC backers to exit their investments – will eventually hurt the ability of biotechs to raise venture capital going forward. But crossover investors who tend to support public offerings continue to participate in VC funding rounds, which suggests that the IPO window will open a little wider for therapeutics companies in the not-too-distant future.

CRISPR Therapeutics appeared to be gearing up for an IPO on June 24 when the company revealed a $38m addition to its Series B round, which started at $64m in April 2015 and now totals almost $140m. The company's new backers include crossover investors, i.e. investment firms that represent large institutional clients: Franklin Templeton Investments, Clough Capital Partners LP and Wellington Capital Management LLP. (Also see "CRISPR Therapeutics raises $64m 'validating' uncertain patent position" - Scrip, 30 Apr, 2015.)

If CRISPR Therapeutics launches an IPO in 2016, it would be the third company developing the gene editing technology known as CRISPR/Cas9 to go public this year, following Editas Medicine Inc. and Intellia Therapeutics Inc. into the stock market. (Also see "IPO Update: Intellia Launch Shows CRISPR Still Excites While Others Struggle" - Scrip, 8 May, 2016.)

CRISPR's new investor Wellington also was a first-time funder for Mersana when it led that company's recent $33m Series C round, which also attracted venture capital from Cormorant Asset Management, Arrowpoint Partners and Mersana's collaborator Takeda Pharmaceutical Co. Ltd. Prior backers New Enterprise Associates (NEA) and Rock Springs Capital also invested in the Series C.

Annexon Raises $44m To Test Classical Complement Theory

NEA backed Annexon for the first time as the lead investor for the South San Francisco-based company's $44m Series B round with participation by Correlation Ventures and prior investors Novartis Venture Fund, Clarus and Satter Investment Management LLC.

Annexon will use the money to start its first clinical trial during the first quarter of 2017 and to start additional trials if the first-in-class classical complement pathway inhibitor ANX005 appears to be safe in a Phase I trial. ANX005 and a second compound called ANX007 inhibit the protein C1q, which is the initiating molecule of the classical complement pathway. By inhibiting C1q, Annexon hopes to block complement activation involved in neurodegeneration.

The company is focused on the treatment of complement-mediated loss of nerve connections in the brain and retinal cells, which lead to Alzheimer's, Parkinson's and other diseases as well as glaucoma. President and CEO Doug Love told Scrip that the company will make decisions about the platform's opportunities in autoimmune diseases during the second half of 2016.

Annexon Biosciences President and CEO Doug Love

Annexon Biosciences

Annexon closed a $34m Series A round in December 2014 with plans to take its first compound into the clinic within two years. Love said the company has accelerated and expanded its development plan since then, adding more indications and capabilities to the classical complement pathway inhibition platform. ANX005 will be developed for central nervous system (CNS) and potential autoimmune indications while ANX007, which is a fragment of ANX005, will be developed for ophthalmic disorders. (Also see "Elan veterans grab $34m for neurodegenerative diseases" - Scrip, 16 Dec, 2014.)

"We have created some good preclinical data over the past 18 months," Love said.

Now, with its Series B cash, Annexon is prepared to enter the clinic without a partner, but the CEO said the company is "opportunistic" and will consider partnership proposals "if we can collaborate with someone with the right know-how and if partners would collaborate under the right circumstances."

For now, Annexon is focused on its own expertise and the company is pleased that preclinical research by the company and others has shown consistent evidence of the role of the classical complement pathway in neurodegeneration. Based on those data and with its new financing, the company has modest plans for growth.

"We are now roughly 12 employees with offices and labs in San Francisco," Love said. "We will continue to bring in resources as appropriate as we move into the clinic."

Mersana Edges Closer To Clinic With $33m Series C Round

Cambridge, Massachusetts-based Mersana has raised $120m since the beginning of 2015 in partnership fees and venture capital, including its $33m Series C round, to advance the company's proprietary Fleximer technology for the development of antibody-drug conjugates (ADCs). That includes the company's $35m Series B round in March 2015 and a $40m upfront fee from Takeda in February when it the partners expanded their existing agreement. (Also see "Mersana raises $35m, names former Millennium president CEO" - Scrip, 3 Mar, 2015.) (Also see "Mersana/Takeda Deal Adds To ADC Pipeline" - Scrip, 3 Feb, 2016.)

Mersana also has a partnership worth up to $792m with Merck KGAA that was signed in mid-2014 and the company revealed an agreement with Asana BioSciences LLC (formerly Endo Pharmaceuticals Inc.) for up to $270m in March 2012. (Also see "Merck Serono enters antibody drug conjugate fray " - Scrip, 24 Jun, 2014.) (Also see "Endo begins Mersana's foray into antibody-drug conjugates with $270 million deal" - Scrip, 8 Mar, 2012.) In between, the ADC developer closed a $27m Series A-1 round in August 2012. (Also see "Targeted antibody ventures Mersana and CytomX attract venture dollars amid partnering promise " - Scrip, 1 Aug, 2012.)

Mersana intends to submit an investigational new drug (IND) application to the US FDA in mid-2016 for lead ADC candidate XMT-1522, which targets HER2 and is being developed in partnership with Takeda, with plans to begin a Phase I study before the end of the year. The ADC will be studied in certain breast, gastric and lung cancer patients.

The company also is taking XMT-1536, which targets anti-sodium-dependent phosphate transport protein 2B (anti-NaPi2b), into IND-enabling studies. The target is expressed on the surface of lung and ovarian cancer cells.

"We have great financial resources to fund the pipeline," Mersana President and CEO Anna Protopapas told Scrip. "We will take our second program into the clinic next year."

Like all companies at Mersana's stage of development, Protopapas said the company is "evaluating a range of financing options. We don't need to access the public markets, but we're watching closely and we will use different financial options as appropriate."

Mersana has 52 employees with plans to recruit another 10 or 15 before the end of 2016.

Another $312.7m In Recent VC Financings

In other recent private funding rounds, Cambridge, Massachusetts-based microbiome specialist Vedanta Biosciences Inc. closed a $50m financing earlier this month (Also see "Microbiome Drug Developer Raises $50m For First-In-Human Studies" - Scrip, 6 Jun, 2016.). Also, the antifungal developer F2G Ltd. in Manchester, England revealed a $60m financing on June 20, continuing a recent uptick in venture capital fundraising by companies in the EU … or, at least, companies that were in the EU until the UK's Brexit vote on June 23. (Also see "Antifungal F2G Raises $60m, Sees Harmonized Route To Market" - Scrip, 21 Jun, 2016.) (Also see "UK Votes To Leave The EU – Where Next For The Life Sciences?" - Scrip, 24 Jun, 2016.)

See the table below for other recent US and EU venture financings.