The biotech community could use a little comedy after the last couple of years, and the final panel at this week's Bio Investor conference in San Francisco provided plenty. All the classic elements were there as host George Milstein, a longtime West Coast biotech banker, played the straight man to his ensemble cast of characters, er, panelists.

The context of the discussion was more sobering, what with three-quarters of the year behind us and the situation becoming clear: recession or not, it's still pretty damn hard for biotechs and their investors to find cash.

First, venture capital firms are still struggling to raise it. DowJones VentureSource reported this week that 2010 fundraising is on track to equal 2009, which represented a six-year low. Second, pharmas are unwilling to spend it. For example, overall licensing activity is down 20% from 2007, and, within that, option-based license deals are up. M&A volume is behind 2009's pace so far, and what there is has skewed toward companies with marketed products and generics, bad news for those trying to carry the torch of emerging science and innovation, or better yet, fund it. Finally, is it even necessary to mention the initial public offering market - this year's IPOs, such as they are, have been a terrible investment (median performance of -20%).

Cue the mirth. Milstein summarized the ho-hum landscape but soon, thankfully, went for the cheap laughs. A typical example: panelist David Sable of Special Situations Funds admitted he'd only been an investor for a few years; before that the trained ob-gyn said he "was doing pap smears."

Milstein waited a perfect beat then countered, "So, how is this different?"

Later, Milstein asked panelists what they thought of Sanofi-Aventis' hostile bid for Genzyme. Biotechnology Value Fund portfolio manager Matthew Perry produced a Magic 8-Ball, shook it, waited, and read the result: "Sweet deal!"

Public-side investor that he is, Perry proceeded to berate Genzyme for the temerity of putting money into research and development instead of shareholder dividends. Just because the company brought one or two products to market, said Perry, doesn't mean it'll bring more. "Quit while you're ahead and give the extra cash to me," seemed to be his message. It didn't quite jibe with Perry's lament a few minutes earlier that biotechs weren't being allowed to grow and aspire to be the next Biogen Idec, Amgen or Genentech.

No matter: Perry was faithfully playing the role of the large, loose cannon and did so to the hilt, badmouthing a few more companies, or the investors who poured money into them, along the way. (Theravance, Xoma and Maxygen were among them.)

Milstein chose other sidekicks perfectly. New Leaf Ventures managing director Srini Akkaraju was the over-the-top gloomer who pretended he'd rather be anywhere else than talking biotech investing on a late Wednesday afternoon ("We should all be asking ourselves what we're doing here.") Akkaraju was also glum about Big Pharma, whose cycles of merger and job-cutting were doing little to solve unmet medical needs. "They're dealing with their problems in a MacGyver kind of way." (We love the idea of Pfizer being held together with used bubble gum, a pair of shoelaces, and a bottle of nail polish.)

Then again, said Akkaraju, investing in biotech is "completely irrational." At one point, he called his own business "ludicrous" three times in one sentence, provoking nervous laughter. Sometimes the best comedy has the audience squirming in their seats.

The panel had serious moments, too. Sofinnova's Jim Healy made the excellent point that the rise of contingency-based M&A is on a collision course with the time limits of venture funds. What happens, he asked, when the contingencies in deals pay out past the expiration date of the funds that hold the rights?

And for all his boisterousness, Perry said something that sent chills up the spines of any biotech hoping to tap the public markets soon. "Most of our capital is in cash," Perry said. "I'd love to find great early-stage companies, but they're all getting acquired."

Perry will pull the trigger when he sees fit. His firm earlier this year bought a 6.6% position in Swiss firm Addex Pharmaceuticals, which had recently been crushed by a Phase IIb failure of its lead mGluR5 modulator for migraine. BVF then followed with a $20 million investment via combined registered direct and convertible debt, the latter of which was necessary to get around strict Swiss laws limiting size of public investment. The gymnastics were all the more impressive seeing how Addex did the deal without a financial advisor, as its CEO Tim Dyer said earlier at the conference.

[Editor's note: Look for a round up of notable biotech financings reported by the editors of IN VIVO about every other week in "The Pink Sheet" DAILY. For comprehensive tracking of biopharma financings and deal-making, see Elsevier Business Intelligence's Strategic Transactions database.]

Convergence Pharmaceuticals: The CNS exodus from GlaxoSmithKline has begun. GSK said in February it would end central nervous system research and sold its facility in fair Verona, Italy, where Aptuit now makes its scene. Two clinical assets and six earlier programs targeting ion channels in chronic pain are now in the hands of Convergence, backed with $35.4 million from a syndicate led by Apposite Capital.

At first it seems odd that VCs are willing to fund development of assets whose mechanism is old hat. They also address a large, potentially primary care area like chronic pain and face huge clinical trials and high regulatory safety hurdles. But the Cambridge, U.K., firm says its assets, unlike most of the sodium- and calcium-channels out there or in development, are state-dependent. That is, they only inhibit neurons in the rapid-firing state that's associated with chronic pain.

CEO Clive Dix, who helped steer PowderMed into Pfizer's arms in 2006 for $300 million, takes over with a dozen ex-GSK employees in tow. New Leaf Ventures and SV Life Sciences also joined the round. GSK currently holds an 18% stake in the tranche of funds that Convergence has received to date, which SV's Bingham says is roughly half the full £22 million. Its stake will dilute as further funds are provided, but the Big Pharma will receive further equity if Convergence hits certain milestones. GSK has a board observer seat but no other strings attached.

Agennix: SAP cofounder Dietmar Hopp strikes again. Through his investment company dievini Hopp BioTech holding, Hopp has ended up with 59% of German biotech Agennix following a €76 million ($104 million) PIPE (private investment in public equity) financing that will allow Agennix to complete a Phase III trial of its lead oral compound, talactoferrin, in non-small cell lung cancer.

Having previously held 29% of Agennix, dievini is applying to German financial regulators for an exemption to the rule that it must make an offer for all of the company's shares if it owns more than 30% of them, but as of Oct. 1 hadn't heard back from the Bundesanstalt fuer Finanzdienstleistungsaufsicht, also mercifully known as the BaFin. In the financing, 20.5 million new shares were offered at €3.81 per share; 29% were taken up by existing investors, and 71% by new investors in a private placement or by dievini.

Agennix also has plans to develop talactoferrin for severe sepsis, and it has a multi-targeted kinase inhibitor in Phase I. Investor Hopp has supported the German biotech sector for a number of years; in recent weeks dievini also participated in a €54 million series C funding round for immatics biotechnologies, which is developing cancer vaccines and is based in Tubingen, Germany.

Tobira Therapeutics: On Sept. 29, the antiviral developer announced a $31.2 million Series B round that was led by Novo AS and included earlier backers Domain Associates, Frazier Healthcare Ventures, Montreux Equity Partners, and Canaan Partners. According to the Form D filing, the company has sold $14.2 million so far.

The money will fund a Phase IIb trial of lead candidate TBR652 in CCR5-tropic, treatment-naive HIV patients, slated to start mid-2011. Tobira launched in 2007 with exclusive global rights to the CCR5/CCR2 antagonist plus a follow-on HIV compound from Takeda Pharmaceutical. New Jersey-based Tobira believes TBR652 has advantages over Viiv Healthcare's marketed CCR5 antagonist Selzentry (maraviroc) due to its anti-inflammatory properties through CCR2 antagonism, with the potential to be dosed only once daily and administered with other antiretrovirals.

Tobira, which previously raised $31mm in Series A financing, was established by Domain partner Eckard Weber who has a reputation for starting up companies around one or two molecules rescued from the shelves of Japanese drug firms. In previous efforts - NovaCardia and Conforma Therapeutics, for example - his firms raised capital quickly and sold off the assets through acquisition or spin-off.

CytomX Therapeutics: Backed by angels in its infancy, antibody developer CytomX has turned to VCs for a tranched $30 million Series B round that will support a northbound move from Santa Barbara, Calif., to the San Francisco Bay Area. Third Rock Ventures provided the lion's share of the round alongside Roche Venture Fund's minority stake.

Third Rock itself recently established an office in San Francisco, with new CytomX board member Charles Homcy anchoring the firm on the West Coast; Boston-based partner Neil Exter also took a seat. Both have roots at Millennium Pharmaceuticals, as does CytomX CEO Nancy Stagliano. Third Rock invested from its $378 million Fund I, closed in 2007, rather than its new $426 million Fund II.

CytomX is developing modified antibodies, trademarked as Probodies, which ideally will affect diseased tissues while sparing healthy ones. They are designed to avoid unwanted reactions or to respond directly to proteases present in diseased tissue. The company intends to use the funds for a pair of oncology-related INDs, and will receive a portion of the funding in a second tranche based on milestones related to staffing, platform research, ongoing product development and the relocation.

-Alex Lash (a.lash@elsevier.com), Melanie Senior (m.senior@elsevier.com), John Davis (j.davis@elsevier.com), Amanda Micklus (a.micklus@elsevier.com) and Paul Bonanos (p.bonanos@elsevier.com)

Financings Of The Fortnight: Finding Comedy In Today's Financial Environment

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