VentureBeat

TODAY’S HEADLINES:

• HealthExtras buys venture-backed PBM HospiScript for $100M (release)
• Urological device-maker NeoTract adds $7.4M (VentureWire)
• RNAi-drug startup Intradigm seeks $35M (VentureWire)
• Israel’s Arbel Medical raises $3.5M for tumor cryotherapy (release)

HealthExtras buys venture-backed PBM HospiScript for $100M — HospiScript Services, a Montgomery, Ala., prescription-benefits manager, agreed to be acquired by HealthExtras of Rockville, Md. HealthExtras will pay $100 million in cash for the venture-backed firm, which services the hospice industry.

HospiScript had raised at least $4 million in funding, according to VentureWire. That amount represents a 2005 round that involved Advantage Capital Alabama and Waveland NCP Alabama Ventures. The company declined to say more about its funding history.

Both companies manage the use of prescription drugs — HealthExtras for corporate, government and nonprofit health plans, HospiScript for hospices — in ways that are intended to reduce costs. HealthExtras said the acquisition will help it expand in the fast-growing hospice space.

Urological device-maker NeoTract adds $7.4M – Pleasanton, Calif.,-based NeoTract (no Web site), a devicemaker focused on urological problems, added $7.4 million to its first round of financing, VentureWire reports. The new funding brings that round to a total of $21.4 million.

New Enterprise Associates provided the cash.

NeoTract is working on a device to treat benign prostate hyperplasia, which is a non-cancerous growth of the prostate. The company doesn’t describe its device, although it says the product should enter clinical trials next year.

TODAY’S HEADLINES:

• VaxGen, Raven Bio terminate merger agreement (release)
• Aerovance gets $20M in venture debt for respiratory disease (release)
• EKOS raises $5M for ultrasound catheters (peHUB)
• Intelligent Bio-Systems draws $353K for high-speed genome sequencing (peHUB)
• Quintessence Bio takes in $5M for cancer-directed proteins (VentureWire)
• 7 Health Ventures adds three members to investment team (release)
• Contract manufacturer Cytovance names Darren Head CEO (release)

VaxGen, Raven Bio terminate merger agreement – A weirdly structured, always hard-to-understand merger between the failed vaccine biotech VaxGen and startup Raven Biotechnologies has collapsed. The two companies called off the combination after it became clear that a majority of VaxGen shareholders would reject it.

The deal aimed to create a new company out of VaxGen’s cash holdings and biomanufacturing facilities and Raven’s antibody-drug program, which remains at an early stage of development. The merger would also have given Raven a quick route to public listing of its stock. Both companies are located in South San Francisco, Calif.

But many VaxGen shareholders — in particular, the investment firm MedCap Management & Research, which waged a sharp effort to derail the deal — believed the deal undervalued VaxGen, which they figured would yield a better return to investors through liquidation. VaxGen, a once pioneering maker of experimental vaccines against HIV and anthrax that is now little more than an empty shell, said it would immediately assess its strategic alternatives, including possible liquidation.

Aerovance gets $20M in venture debt for respiratory disease – Aerovance, a Berkeley, Calif., developer of asthma and eczema drugs, took on $20 million of venture debt. The startup drew down $10 million of that sum at closing; the rest will become available once it achieves unspecified milestones.

A syndicate of lenders provided the funding, including Oxford Finance Corporation, Silicon Valley Bank and Comerica Bank. Aerovance, which spun out of Bayer Pharmaceuticals in 2004, said the funding would enable it to continue looking for a drug-company partner for its asthma drug and to pursue other “strategic goals.”

EKOS raises $5M for ultrasound catheters – EKOS, a Bothell, Wash., maker of ultrasound-enhanced drug-delivery systems, raised $5 million in new equity funding, peHUB reports, citing a regulatory filing. No investors were disclosed. As we wrote last June when the company raised $10 million in venture debt, EKOS makes catheters that use both drugs and ultrasound to break up blood clots.

Intelligent Bio-Systems draws $353K for high-speed genome sequencing – Waltham, Mass.-based Intelligent Bio-Systems raised $353,000 in a first funding round, peHUB reports, citing a regulatory filing. The company is developing next-generation DNA analysis systems and promises to deliver technology that can sequence a full human genome for just $5,000 in about 24 hours, as we described earlier.

TODAY’S HEADLINES:

• Affinergy gets $3M in grants for biological “linkers” (release)
• Specialty pharma EUSA raises $50M, spends $23M for public biotech Cytogen (release)
• Calderome takes in $12M for cancer diagnostics (peHUB)
• Pulse Health raises $2M for handheld free-radical device (release)
  
• LifeMasters takes in $15M for wellness, disease-management programs (release)
• Dubai Techno Park launched $300MVC fund for life sciences, other sectors (release)

Affinergy gets $3M in grants for biological “linkers” – Affinergy, a Duke University spinout in Research Triangle Park, N.C., received grants worth more than $3 milllion to support development of biological “linker” molecules with potential uses in coatings for medical devices and the development of new therapeutics. The grants were awarded by the federal National Institutes of Health through its small-business innovation research program.

The startup is developing biological molecules that can selectively bind various substances to particular surfaces. Such linkage molecules could, for instance, attach healing growth factors to surgical meshes or other implanted biomaterials or help target drugs at particular cell-surface proteins. The company hasn’t described its goals in much detail, although it said one of the grants is for work aimed at accelerating a patient’s natural healing process.

Specialty pharma EUSA raises $50M, spends $23M for public biotech Cytogen – In today’s man-bites-dog news, the venture-backed specialty pharma EUSA Pharma agreed to acquire the publicly traded biotech Cytogen for $22.6 million. The EUSA release is here; Cytogen has its own release here.

In one sense, the news isn’t terribly surprising, as Cytogen effectively put itself up for sale last November when it announced it was “reviewing strategic alternatives.” The twist here is that EUSA is taking the biotech private — a sign of just how far Cytogen’s fortunes have fallen since the heady days of the 1999-2000 biotech bubble, when its stock almost touched $200 a share. EUSA, which has offices in Doylestown, Pa., and Oxford, England, is offering 62 cents a share, a 35 percent premium over Cytogen’s closing price yesterday of 46 cents.

On the business front, however, it’s hard to say that the combination will be much more exciting than either company has been individually. Both EUSA and Cytogen traffic in a range of largely unrelated drugs for pain and cancer treatment.

EUSA raised $50 million to finance the cash transaction, for working capital and to restructure Cytogen. Investors included TVM Capital, Essex Woodlands, 3i, Goldman Sachs, Advent Venture Partners, SV Life Sciences, NeoMed and NovaQuest.

Calderome takes in $12M for cancer diagnostics – Calderome (no Web site), a South San Francisco, Calif., developer of cancer diagnostics, has taken in $11.9 million of a $23 million first funding round, peHUB reports. (peHUB identifies the company as located in Menlo Park, Calif., but two Calderome job postings on Biospace indicate its headquarters are actually in South San Francisco.)

In fact, I’m loving job listings at the moment, because the company also advertised one of those positions on Craigslist here. According to that listing:

Calderome, Inc. is an early stage cancer diagnostics company addressing the emerging opportunities in personalized medicine. The Company’s strategic vision is to develop a novel molecular cytology approach to improve the diagnosis of cancer, saving patients thousands of unnecessary surgeries every year. The company has spent the last year validating its business model with key stakeholders: physicians, patients and payers and has recently closed a significant round of private equity financing with premier venture capital investors….

In other words, it sounds very much like the company is developing a cell-based diagnostic, possibly involving a test that can pick up tumor cells that circulate in the bloodstream, that can help diagnose cancer without the need for invasive biopsies. That’s merely speculation, however.

Investors in the round include Kleiner Perkins Caufield & Byers, TPG Biotechnology Partners and Versant Ventures.

TODAY’S HEADLINES:

• France’s TxCell raises €11M for cell therapy (release)
• Healthcare IT firm TriHealix takes in $7M (release)
• Healthcare-software provider Anodyne Health acquires Piedmont Healthcare (release)
• CEO, CFO resign at inhaled-drug biotech Topigen (release)

France’s TxCell raises €11M for cell therapy – TxCell, a French cell-therapy biotech, raised €10.5 million ($16 million) in a second funding round. Investors included Auriga Partners, AXA Private Equity, Bioam Gestion, CDC Innovation and Seventure.

The biotech is developing a patient-specific cell therapy for the gastrointestinal autoimmune condition Crohn’s disease. Its technique involves isolating specific regulatory immune cells known as Tr1 cells, which help tamp down inflammation, from a patient’s blood. After selecting only Tr1 cells that respond to a particular biochemical stimulus (technically, a particular antigen) and reinfusing them into the patient, doctors would then activate the cells locally — here, presumably, in the gut — by administering the trigger antigen and thus “downregulating” the immune response that’s causing problems.

Healthcare IT firm TriHealix takes in $7M – Norwalk, Conn.-based TriHealix, a healthcare IT provider focused on payment processing and consumer accounts, raised $7 million in a third funding round. Lemhi Ventures led the funding.

The TriHealix system integrates financial and medical information by tying together doctors and hospitals with insurers and patients. In theory, at least, the idea is to give patients a single card that handles both insurance and payments and may even provide a line of credit to handle deductibles and other out-of-pocket expenses. This approach is also supposed to free consumers from having to fill out reimbursement forms, as their medical information is forwarded directly to their insurer.

Healthcare-software provider Anodyne Health acquires Piedmont Healthcare – Venture-backed Anodyne Health, an Alpharetta, Ga., developer of “revenue-cycle management” services for doctors and hospitals, agreed to acquire Charlotte, N.C.-based Piedmont Healthcare Management Group. The companies’ release is here.

The firms didn’t announce financial terms. Anodyne’s technology is designed to streamline the process of billing insurers and patients for medical services. Piedmont does much the same thing, only with a particular focus on emergency-room care. Anodyne is backed by Brook Venture Partners and Frontier Capital.

(UPDATED: See below.)

Another one bites the dust.

The saga of Precision Therapeutics, a Pittsburgh biotech developing what struck me last August as a particularly crude type of cancer-chemotherapy diagnostic, continues apace. In a tersely worded press release, the special-purpose acquisition company, or SPAC, Oracle Healthcare Acquisition said it has terminated its planned merger with Precision. The release blamed “currently prevailing market conditions” for the decision, which carries some fairly ominous consequences for both sides.

Oracle’s plight is fairly simple: The blank-check company will now dissolve itself and return the money it raised, minus expenses, to investors. For Precision, however, the outlook is much starker. The merger would not only have taken the company public, it would have left Precision with $120 million in cash, ample resources to bolster sales of its ChemoFx test and to develop new potential products.

Now, after getting jilted at the altar by Oracle and withdrawing its IPO, the startup is most likely almost out of cash. As of September 30, Precision had only $15.6 million in cash and cash equivalents and a working-capital deficit of $1.1 million against debts of $17 million — plus a burn rate of roughly $3 million a quarter. Those numbers don’t look good by any measure

The first real sign the merger was in trouble came just about two weeks ago, when Oracle and Precision effectively cut the overall size of the deal by 15 percent — never a good sign. Oracle’s decision to walk away remains murky to me given the complexity of the deal, and external market events might have somehow triggered provisions that made the acquisition untenable. But I can’t help wondering if the buyers may have simply concluded that Precision’s prospects weren’t at all what they once thought.

For more on these special-purpose acquisition outfits and their adventures in life science, see our coverage here.

UPDATE: Tom Salemi at the In Vivo blog has more:

A majority of the investors who buy into the SPAC through an initial public offering must approve of the merger. In deciding how to vote, investors must weigh whether or not they’d be better off cashing out now rather than letting their bets ride on a company like Precision Therapeutics.

In fact, according to Oracle’s annual filing, any shareholder that voted against the merger stood to receive roughly $8 for each of their shares if they were outvoted and the deal went through. To us, the question would appear to be simple. Were investors better off taking the $8 for their share or rolling the dice with shares in the new Precision Therapeutics shares?

Given the recent performance of IPOs, IN VIVO Blog is guessing the $8 was looking pretty good to Oracle investors.