Biotechs are raising money in more creative ways, says Cheryl Reicin in Financial Post

Cardiome Hits Potential $1 Billion Home Run

April 15, 2009

Vancouver's Cardiome Pharma inked a licensing deal last week with Merck & Co., which has the potential to be worth $1 billion if all the milestones are met—making it the largest licensing deal ever involving a Canadian life sciences company.

The deal, which flew under the radar last week, will see Merck pay US$60 million up front and provide a $100 million line of credit. If all goes well with the commercialization of the drug vernakalant, there is an additional $300 million in clinical milestone payments and $340 million in commercial milestones, along with tiered royalties.

Vernakalant is being investigated as a treatment for atrial fibrillation, an abnormal heart rhythm.

Cardiome's deal with Merck, which took seven weeks to structure, comes at a time when many Canadian life sciences companies are struggling. They are running low on cash and the capital markets are essentially closed. Fortunately, big pharmas are looking to fill their pipelines as existing patents expire. They are stepping into the financing void.

Cheryl Reicin says "there is this unquenchable need for cash," and "some of these companies are being forced to license earlier." While that would normally lead to lower prices, it is not happening because big pharma companies are providing a buffer by competing for the deals that are out there. So "prices are still being kept at a healthy level," says Cheryl.

The situation is also opening doors to venture capital firms that are willing to take on the risk of developing a drug that may fizzle out. Says Cheryl: VCs can provide a viable alternative to biotechs that do not want to license until they have advanced their drug further, but that cannot tap capital markets.

Zoticon Bioventures of Philadelphia, one of Cheryl's clients, has stepped in to fill the void in a number of recent deals, including earlier this year, when it brought together Canadian angel investors and provided $55 million in series C financing to Sopherion Therapeutics, the developer of Myocet, used in relation to cancer therapies. According to BioWorld Today, this was the largest biotech VC deal to close in 2009.

VC money is a viable option for biotechs, says Cheryl. "A number of companies are saying, we don't want to go to pharmas, our preference is still to hold out. There are still deals getting done, they are just getting down a little more cleverly, and a little more judiciously. You have to think a little bit outside the box. There was a formulaic way of raising money for biotechs in the past. Those traditional routes are now very, very limited. It requires a little more creativity."

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