The embattled cell-therapy startup Bioheart finally limped across the IPO goal line yesterday, but it was a Pyhrric victory. The startup, which once sought $70 million, ended up netting as little as $1.5 million. And almost half of that amount came directly from Bioheart founder Henry Leonhardt instead of outside investors.
Bioheart, of course, has had no shortage of problems, which we’ve chronicled over at VentureBeat Life Sciences. For the latest installment, see here.
The New York Giants they ain’t, but the team at embattled cell-therapy startup Bioheart still managed to defy long odds and successfully dragged their company into the IPO endzone earlier today. No doubt football great Dan Marino — one of the Sunrise, Fla., biotech’s backers — fired everyone up with a suitable locker-room pep talk.
Not for Bioheart was the easy dodge of yanking its IPO due to “unfavorable market conditions” — although conditions are, in fact, pretty awful. The company’s long slog to the public markets, however, came at quite a cost. Just last September, Bioheart hoped to raise $70 million in its offering. Now, it stands to net as little as $1.5 million on the sale of 1.1 million shares once it accounts for underwriting, commissions and unspecified “offering costs” of $4.3 million. The offering values Bioheart at a bit over $75 million, which is pretty low for a public biotech, and a mere fraction of the $270 million market capitalization it once sought.
(For what it’s worth, the company says it will actually generate $4.6 million in cash from the IPO, since it’s already paid $3.1 million of those offering costs. On the other hand, the company’s founder and executive chairman, Henry Leonhardt, also apparently found it necessary to purchase just over 10 percent of the offering himself for roughly $600,000, which amounts to 40 percent of Bioheart’s net proceeds. You sure don’t see founders plunking additional cash into their companies at the time of the IPO very often.)
Any way you look at it, those proceeds represent a fairly miserable return on the year of effort Bioheart put into this offering. Since Feb. 13 of last year, the company has slashed its expected offering price twice, fired three of its underwriters (on two separate occasions), and cut the number of shares offered by almost 75 percent. This is one company that was determined to go public, no matter what it took.
I’ve given the company a fair share of grief over that time. Its leading product, a cardiac cell therapy called MyoCell, has shown decidedly mixed results in clinical trials, as I detailed back in July. Add to that its shaky cash position (just over $9 million in cash and cash equivalents as of last Sept. 30), the fact that it owes a $3 million on a technology license covering MyoCell and the looming expiration of a key MyoCell patent next year, and you still have what looks like a disaster waiting to happen. (I took a second whack at the company in October when its offering seemed to be on the brink of collapse.)
Still, I have to give the company credit for determination, if nothing else. Unfortunately, true grit only gets you so far — Bioheart’s shares traded down 25 cents today, closing at $5.
I should also note the interesting fact that two Bioheart officials — the aforementioned Henry Leonhardt and board member Peggy Farley — have apparently availed themselves of the opportunity to tout Bioheart and criticize our coverage in comments here at VentureBeat Life Sciences, despite the “quiet period” restrictions that companies normally labor under during the offering period. (Leonhardt’s comment appears here; Farley’s is here.)
I say “apparently” because I don’t have independent confirmation that these commenters are who they appear to be, although their statements do strike more or less exactly the tone of boosterism, belligerence and desperation I would have expected from folks in their position. The presumed Leonhardt comment — which came in response to an item on another Florida life-science startup slashing its offering price — includes this gem (emphasis added):
Raising $63.8 million is a great accomplishment! MAKO is another South Florida Biosciences success story! Home of Cordis, World Medical, Bolton and Bioheart, Inc. other great life science companies.
I guess $64 million does look pretty good when your own company wouldn’t have netted even $1 million without your own purchase of IPO shares. Leonhardt, by the way, now owns just over 32 percent of the company, a holding worth about $24 million at Bioheart’s current valuation. Ms. Farley, meanwhile, exercises control over a 3.4 percent stake in the post-IPO company, now worth about $2.5 million.
Separately, while I’ve previously described MyoCell as an “adult” stem-cell therapy, there’s apparently some disagreement in the scientific community as to whether the muscle-precursor cells used in MyoCell actually qualify as “stem cells.” To avoid confusion, I’ve used the term “cell therapy” here instead.
TODAY’S HEADLINES:
TransEnterix gets $21M for minimally invasive GI surgery — TransEnterix (no Web site), a Research Triangle Park, N.C., device maker developing tools for “natural orifice” gastrointestinal surgery, raised $21 million in a first funding round. Investors included SV Life Sciences, Parish Capital Advisers and Synergy Life Science Partners.
According to the Web site for Synecor, a North Carolina incubator that founded TransEnterix, the company is at work on tools and devices for minimally invasive “trans-oral” surgery using an endoscope passed through the mouth and down the esophagus. This procedure is designed to enable surgeries through the stomach wall and other unspecified “natural entry points,” potentially in a way that could supplant minimally invasive laparoscopic procedures that require entry through the abdominal wall. Patients would be consciously sedated during the procedure.
The funding will allow TransEnterix to “deliver” its first-generation tools, presumably for use in clinical trials, and to fund development of next-generation devices.
Stem-cell developer Bioheart’s IPO postponed — Bioheart, a Sunrise, Fla., developer of a stem-cell-based heart therapy, has postponed its troubled IPO. Although the company doesn’t seem to have officially yanked it yet, odds are now good that it will.
Bioheart’s woes started last October, when it abruptly slashed its offering price and fired its underwriters. The company’s IPO has lingered on life support ever since. We gave readers some good reasons to be skeptical about Bioheart — which, notably, is backed by former football great Dan Marino, among others — as long ago as last July.
Medical-practice software provider AdvancedMD acquired by Francisco Partners — AdvancedMD, a Salt Lake City provider of Web-based medical-practice management software — now there’s a mouthful — announced that it was acquired by the private-equity firm Francisco Partners. Financial terms weren’t disclosed.
AdvancedMD, founded in 1999, sells a series of Web-based products designed to handle administration, billing and electronic medical records for physicians. The company had previously raised venture funding from Dominion Ventures, Windward Ventures and Hunter Capital. Francisco has already named a new CEO, and said that it intends to “leverage” the company’s success with “additional resources” to accelerate its growth.
Peptimmune draws $8.2M for MS drug trials — Cambridge, Mass.-based Peptimmune, a biotech at work on drugs for autoimmune and metabolic conditions, raised $8.2 million in the first stage of its fourth funding round. The company anticipates closing a second tranche in the second quarter. Investors included New Enterprise Associates, MPM Capital, Hunt Ventures, Boston Medical Investors and Silicon Valley Bank Capital.
Peptimmune is focused on using protein fragments known as peptides to disrupt or otherwise modulate immune-system reactions associated with disease. Its lead candidate, PI-2301, is a “random sequence” peptide similar in certain respects to the approved drug Copaxone, which Peptimmune is currently testing against multiple sclerosis in early-stage human tests.
Alimera Sciences aims for autumn IPO to fund diabetic eye-disease drug — Alimera Sciences, an Alpharetta, Ga., biotech focused on eye disease, is contemplating an IPO this fall, VentureWire reports (subscription required). The funds will ideally support the launch of the company’s first innovative product, a treatment for a blinding complication of diabetes known as diabetic macular edema.
Alimera, which started life as a specialty pharma that resold over-the-counter eye products, began development of its current candidate, Medidur, in 2005. The treatment, co-developed with the nanotech company pSvidia, is a tiny structure designed to be injected into the back of the eye, where it steadily emits a corticosteroid called fluocinolone acetonide. The idea is to provide the smallest possible quantity of the steroid directly to the back of the eye, where a fluid buildup in the retina steadily obscures vision. Many ophthalmologists currently treat the condition with steroid injections, although no drugs are approved for the disease.
Medidur is currently in late-stage, phase III human tests. Alimera expects data from that trial in late 2009 and could file for approval in 2010.
Bioheart’s IPO-related chest pains continue — The week of Oct. 22 has come and gone, and there’s no sign of the scheduled — and already battered — IPO of Bioheart, the Florida company that hopes to treat damaged hearts with patients’ own muscle stem cells. IPO Home now lists the IPO as scheduled on a “day-to-day” basis.
So the jury is still out as to whether the company’s recent halving of its IPO terms will still get it out the gate, but the signs aren’t good. By the way, my last piece on the company — which, admittedly, was a tad on the snide side — drew a critical comment from someone identifying themselves as “Peggy Farley.” According to Bioheart’s latest SEC filing, Peggy Farley is a Bioheart board member, the CEO of Ascent Capital Management and the beneficial owner of 494,410 Bioheart shares. I don’t have any independent confirmation that the commenter and the Bioheart director are one and the same — among other things, the commenter used a Hotmail account — but it’s interesting nonetheless.
Bioheart isn’t the only life-sciences startup in this pickle. Merrion Pharmaceuticals, an Irish company that rejiggers existing drugs, was scheduled to go out last week and is now also scheduled on a “day-to-day” basis. (Our coverage of the company is here.) Of course, even Merrion’s situation looks good compared to Cumberland Pharmaceuticals, which is still listed as “day-to-day” and has been since mid-August (see, for instance, a mention in the Zars item here).
Reliant vs. Reliant — One of the oddest doppelganger acts in the life-sciences financing world has hit the road. Back in August, I thought it odd when Reliant Technologies — a Mountain View, Calif., medical-laser startup — filed for an IPO just three days after New Jersey-based specialty pharma Reliant Pharmaceuticals had done so. That apparently wasn’t enough, though, as this week both companies set their IPO terms back to back. The companies’ latest SEC filings are here (Reliant Pharma) and here (Reliant Tech).
Can investors keep these road-tripping twinsies straight? Let’s take a look:
Specialty
Reliant Pharma: Cardiovascular disease
Reliant Tech: Skin “rejuvenation”
Maximum IPO take
Reliant Pharma: $364 million
Reliant Tech: $86 million
Proposed ticker symbol
Reliant Pharma: RRX
Reliant Tech: RLNT
Potential Market Capitalization
Reliant Pharma: $1.4 billion
Reliant Tech: $236.6 million
Good luck, investors. We’ll be thinking of you.
Life-sciences IPOs scheduled this week:
(UPDATED: See below.)
I’m not usually one to gloat — oh, who are we kidding? The news today that Bioheart, an oddball “adult” stem-cell company based in Sunrise, Fla., has slashed its IPO price range — essentially halving the company’s value — and fired its underwriters may not be exactly what I predicted when I hazed the company back in July– but it’ll certainly do for now.
For Bioheart — which, I just realized, is backed by the noted biotech investor Dan Marino (yes, that Dan Marino) — today’s admission is basically the equivalent of seeing a Hail Mary pass in the last seven seconds intercepted and run back for a touchdown. It may or may not kill the IPO dead — I suspect it will — but it’s definitely a huge vote of no-confidence in a company that looked pretty shaky to begin with. (The company’s latest SEC filing is here.)
Bioheart’s main claim to fame is MyoCell, a stem-cell treatment intended to reverse the damage that oxygen starvation causes in heart muscle during a heart attack. The company harvests precursors to muscle cells called myoblasts from a patient’s thigh, cultures them for 21 days and then injects them into scar tissue in the heart. This is not too different from other attempts to use various types of stem cells to repair the heart, although none of them have actually ever been proven to work.
For MyoCell, the picture is even murkier. None of Bioheart’s data so far seems to suggest the treatment does what it is supposed to do, and the company can’t even offer a plausible theory as to why it should work. (A 40 patient trial called Seismic is expected to yield some fresh results by the first quarter of next year.) Worse, the existing data suggests that MyoCell might actually be contributing to declines in heart efficiency, multiple organ failure and irregular heartbeats. On top of all that, Bioheart’s primary patent on MyoCell is set to expire the year after next, giving the company exactly no commercial protection should it ever bring MyoCell to market.
So the only surprise in today’s meltdown is that Bioheart apparently expects to carry on with its IPO, which was initially scheduled to hit the market last week. Odds seem good to me that the company will still pull the offering — it’s kind of hard to recover from a screwup like the one the company has effectively just admitted, and the smell of desperation in the new IPO terms is almost palpable. But who knows — maybe they can still find some investors, somewhere, who believe in stem cells so much that they’ll be willing to set aside their better judgment and pony up.
Bioheart now plans to offer 4.2 million shares at a price of $6 to $8 apiece. Counting the overallotment, that could yield the company a maximum take of $38.3 million, which is fairly pathetic by recent standards. Pricing at $8 would value the company at $140 million, or almost exactly half of the $270 million market cap Bioheart might have fetched before the cataclysm. (The company previously planned to sell as many as 4.1 million shares at $14 to $16 apiece, for a maximum take of $65.8 million.)
According to VentureWire (subscription required), Bioheart has raised $51 million from investors that include Ascent/Meredith Asset Management, Getz Medical, Guidant, Tyco Ventures, Getz Bros., St. Jude Medical, Advent-Morro-Guayacan Private Equity Fund, Astri Group, Dan Marino Investments, Minnesota Bio-Med Partners, New World Angels, Presidential Capital Partners and individuals.
UPDATE: On Feb. 19, 2008, Bioheart finally made it across the goal line in what is arguably one of the worst IPOs ever — it netted the company only $1.5 million, of which $600,000 came directly from Bioheart founder Henry Leonhardt. See our coverage here.
Featured companies: CeraPedics, Lab21, Incisive Surgical, Orasi Medical, Transoma Medcal, ZyGem
(UPDATED: Expanded items on Transoma, Lab21 and Orasi.)
Medical-device maker Transoma files for $75M IPO — St. Paul, Minn.-based Transoma Medical, a developer of implantable wireless diagnostic sensors, filed to raise $75 million in an initial offering. The company is currently focused on the markets for heart patients and general biomedical research.
Transoma received FDA “clearance” for its first product on Oct. 1. That device, called the Sleuth ECG system, records, analyzes and transmits electrocardiogram data for patients at risk of irregular heartbeats. The company anticipates expanding its use to a broad range of cardiovascular conditions, and also sells the technology for data collection in test animals during preclinical drug and device trials. (If the technology eventually makes its way to human tests, it will certainly be interesting to see how trial participants react to the notion of being “wired for sound” this way.)
Diagnostics firm Lab21 raises £2M in debt — Lab21, a U.K. biotech that makes a variety of genomic and other diagnostic tests, raised £2 million ($4.1 million) in venture debt, VentureWire reports (subscription required). The company declined to say who provided the funding. Lab21 had previously raised £10 million in equity from Merlin Biosciences.
The company also recently licensed a coronary heart-disease test from Ark Therapeutics Group. Terms of that agreement weren’t disclosed.
Lab21 was considering a £2.5 million third funding round in April, and told VentureWire it is still looking into that and the possibility of an IPO, although the company would like to boost its valuation first. It has previously raised £10 million in equity from Merlin Biosciences. “We’re still considering the IPO route, even though everyone knows the IPO market isn’t the greatest right now,” CEO Jerry Walker told VentureWire. “The next step is to get revenue from the coronary [diagnostic] product, which will come to market early in the new year.”
Orasi Medical raises $2.4M for Alzheimer’s diagnostic — It’s a big day for companies based in St. Paul, Minn. (Incisive Surgical, headlined below, makes the third such in today’s news). Orasi Medical, a University of Minnesota spinout that’s developing a diagnostic test for Alzheimer’s disease, raised $2.4 million, according to the Minneapolis-St. Paul Business Journal. (There’s no release that I can find.) Investors included PrairieGold Venture Partners, CentreStone Ventures and individuals.
Orasi is apparently still pretty quiet about its strategic direction — its Web site is barely a stub. It does, however, point the curious to mainstream-press articles such as this one (PDF) in the Economist, which describes University of Minnesota neuroscientist Apostolos Georgopoulos and his work studying the magnetic fluctuations of the human brain for possible clues to the onset of neurological diseases such as Alzheimer’s and schizophrenia. It’s not too hard to connect the dots from there.
OTHER HEADLINES OF NOTE:
(UPDATED: See below.)
Sunrise, Fla.-based Bioheart thinks enough of its stem-cell treatment for heart disease that it has just boosted its expected IPO take by $10 million, to $45 million. A close reading of its latest SEC filing, however, raises a fair number of questions for would-be investors.
Bioheart’s leading therapy candidate is MyoCell, a treatment designed to reverse heart-attack damage. MyoCell consists of myoblasts — a kind of muscle stem cell — that are removed from a patient’s own thigh muscles, cultured for roughly 21 days, and then injected into the scar tissue surrounding the individual’s heart in a minimally invasive procedure. If all goes well, these myoblasts then engraft into the scar tissue, transform into normal skeletal-muscle cells and then, in some still-mysterious fashion, restore some muscular activity to damaged portions of the heart.
So far, so good, even if Bioheart can’t explain why the transformed cells might bolster the heart, since they don’t appear to “link up” with chemical signals that direct the heart’s cells to beat in unison. The company does offer several theories, including the possibility that the injected cells somehow “stretch,” channel electrical currents, fuse with or otherwise “acquire” properties of existing heart-muscle cells, or release proteins that inhibit scar formation.
Unfortunately, two early clinical trials so far haven’t demonstrated that MyoCell significantly improves heart function, and some data suggest the therapy might even be dangerous. The first test, a 20-patient safety trial called Myoheart, provided no statistically significant evidence that the treatment helped patients walk farther, improved their quality of life or bolstered their hearts’ efficiency (as measured by a parameter called left ventricular ejection fraction). To be fair, Myoheart wasn’t designed to provide proof of efficacy. Still, two of the 20 patients died, possibly because of MyoCell, and four experienced irregular heartbeats thought to be related to the cell therapy.
A larger 40-patient trial in Europe called Seismic also turned up cause for concern. Although this trial compared heart patients who received MyoCell with others who didn’t, it still hasn’t generated any statistically significant data suggesting the stem-cell treatment helps patients. (Only interim data is available, although the company says it doesn’t expect to see significant data for several months.) More disturbing, however, is the fact that the MyoCell patients actually saw their heart efficiency decline, on average, almost four times faster than the untreated group in the six months following the procedure. One patient died from multiple organ failure, possibly attributable to MyoCell, and eight others had irregular heartbeats possibly linked to the therapy.
The Seismic data also aren’t statistically significant and may well be skewed if, by chance, the MyoCell group included especially sick patients or if healthier people dominated the control group. Still, it’s not exactly an encouraging sign, so it beats me why the company thinks its IPO chances have greatly improved all of a sudden, particularly in a market environment that has recently been fairly dismissive of biotech offerings.
One other interesting fact that would-be investors might want to consider: Bioheart’s primary patent on MyoCell expires in 2009, which is when the company is expecting to see final data from a pivotal U.S. trial. That could crimp commercialization of the treatment even if it is approved, to say the very least. (The company does say it thinks it can win a five-year extension of the patent, but even that isn’t very much.)
Bioheart’s original SEC filing, in case you’re curious, is here. (Hat tip: VentureWire, subscription required)
UPDATE (10/12/07): Bioheart slashes its offering price, effectively halving the company’s value. I gloat about it here.
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