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    PE Week Wire -- Thursday, March 17

What's So Bad About Biotech IPOs?

Another series of quick notes, before settling in for an afternoon of watching NCAA tourney games work:

TargaCept Inc. pulled its proposed IPO yesterday, citing "difficult market conditions that exist in the life science industry." For those of you who generally don't read such documents, the decision to be more descriptive than just "market conditions" is fairly unusual, although regular readers of this space know that there has been a bubbling debate about the life sciences IPO space (Is a sub-$75 million IPO worthwhile given Sarbanes-Oxley costs of $1 million to $2 million per year? Are public-market life sciences valuations still preferable to private-market life sciences valuations? Etc.), with BusinessWeek's Sarah Lacy pursuing the topic with particular vigor and pessimism.

In order to get a bit more insight, I spoke this morning with Alan Musso, vice president and chief financial officer of TargaCept. It might just be me, but he seemed kind of pleased to take a press call (quiet periods can be tough for folks who like to promote their company). Anyway, I asked if he could pinpoint the "difficult market conditions that exist in the life science industry." He responded by saying that most recent biotech IPOs priced below their offering range and, more importantly from an institutional buyer's perspective, they have not performed well in the aftermarket. For what it's worth, here's the VC-backed batch from 2005, along with their offering price, yesterday's closing price and the percentage difference:

  • Viacell; $7; $8.43; 20.42%
  • Favrille; $7; $6; -14.29%
  • Icagen; $8; $7.15; -10.62%
  • Threshhold Pharmaceuticals; $7; $6.06; -13.43%
  • Aspreva Pharmaceuticals; $11; $12.05; 9.55%

The average aftermarket performance for VC-backed life sciences IPOs in 2005, therefore, is -1.67 percent. This obviously isn't good, but actually is better than is the overall Nasdaq performance in 2005 (-7.34%), and just nominally worse than is the average Dow performance in 2005 (-1.39%). In other words, if institutional buyers are being scared off by aftermarket performance, then they are using crystal balls, because the historical evidence indicates that such companies have been outperforming the index upon which most of them trade. No conclusion here, just an observation. As a quick addendum, Musso says that his company had $50 million in the bank as of year-end 2004, and was not yet planning to raise another round of venture capital funding.

** It seems that all the existing March Madness groups are full, so I've created one more for procrastinators: Group ID: 110333 Password: capital. Check Monday's Wire for entry info, and make sure to send me your team name.

** Testa, Hurwitz & Thibeault has issued its legal response to the eight former partners who filed an involuntary bankruptcy petition against their former firm. Not all that interesting a read, except for the fact that THT has paid off all obligations to its landlord (a.k.a. its biggest creditor). A judge is expected to hear the petition on Monday morning (or at least I hope it's in the morning, because I do not want to wait around all day).

** Finally, a sad note as former Bay Area venture capitalist David Hurley passed away Saturday from cancer at the age of 69. He is survived by wife Debra, four sons, one daughter and three grandchildren. A memorial service is planned for today at 10:30am at St. Hilary's Church in Tiburon, Calif.

 
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    Top Three

TorreyPines Therapeutics Inc. (f.k.a. Neurogenetics Inc.), a La Jolla, Calif.-based small molecule drug company focused on central nervous system disorders like migraine headaches and Alzheimer's disease, has raised $34.8 million in Series C funding. Johnson & Johnson Development Corp. and return backer Alta Partners co-led the round, and were joined by fellow NIF Ventures, Sorrento Ventures, GIMV, Advent International, Novartis Venture Fund and S.R. One. The company has raised over $65 million in total VC funding since its 2000 inception. www.torreypinestherapeutics.com

Toys 'R' Us reportedly has accepted a $5.7 billion buyout offer from consortium that includes Kohlberg Kravis Roberts & Co., Bain Capital and Vornado Realty Trust. A losing bid had been submitted by Cerberus, Goldman Sachs and Kimco Realty Trust

PanAmSat Holding Corp., a Wilton, Conn.-based provider of satellite communications services, priced 50 million common shares at $18 per share (below its $19-$21 offering range), for a lower-than-expected IPO take of $900 million. The company has been controlled since last year by Kohlberg Kravis Roberts & Co. (24.69% post-IPO position, with over-allotment) The Carlyle Group (15.23%) and Providence Equity Partners (15.23%). www.panamsat.com

    VC Deals

Xeround Systems, a Tel Aviv, Israel-based provider of scalable signaling solutions to VoIP carriers, has raised $6.5 million in startup funding from Benchmark Capital and Giza Venture Capital. www.xeround.com

Telcontar Inc., a San Jose, Calif.-based provider of location-based solutions for in-vehicle, Internet and wireless platforms, has raised $10.68 million in Series B-1 funding. Norwest Venture Partners was joined on the deal by return backers Mobius Venture Capital, Ford Motor Co. and Cardinal Venture Capital. www.telcontar.com

IntraLens Vision Inc. (f.k.a. Anamed), a Lake Forest, Calif.-based provider of implantable products to correct and maintain vision, has raised $12 million in Series C funding co-led by Canaan Partners and InterWest Partners co-led the deal. www.intralensvision.com

Genetic Solutions Pty Ltd., a Brisbane, Australia-based genetic information technology company, reportedly has received Au$2.5 million in funding from Sidney-based Nanyang Ventures. www.geneticsolutions.com.au

Zanox.de AG, a Berling, Germany-based provider of multi-channel commerce solutions has raised its first round of venture capital funding from an unspecified group of Asian inv*stors. No financial terms were disclosed, although The Deal reports that it was worth 15 million euros. www.zanox.de

Vanson HaloSource Inc., a Redmond, Wash.-based provider of anti-microbial solutions for patient care and consumer hygiene, has raised $5 million in second-round funding. Return backers include Alexander Hutton Venture Partners and Buerk Dale Victor LLC, while Mars Inc. and WRF Capital also participated. www.vanson.com

NewspaperDirect, a Vancouver, Canada-based provider of digital newspaper distribution solutions, has raised Cdn$8.5 million in venture capital funding. Soses Inv*stments led the deal. www.newspaperdirect.com

OpenLogic Software Inc., a Broomfield, Colo.-based provider of enterprise software and services to enable open source development and deployment environments, has raised $4 million in Series A funding. Participants include Appian Ventures, Red Rock Ventures, Highway 12 Ventures and Village Ventures. www.openlogic.com

Update: VhaYu Technologies Corp., a Los Gatos, Calif.-based provider of real-time analysis software for the financial industry, has raised $10.25 million in Series C funding from Silicon Valley Bank, Menlo Ventures and DB Capital Partners. Tuesday's Wire put the deal at just $9 million, and didn't include SVB. www.vhayu.com

    Buyout Deals

Duke Street Capital and Englefield Capital have agreed to acquire publicly-traded Cox Insurance Holdings PLC for GBP 296 million. Cox shareholders Warburg Pincus (23.3%) and Palamon European Equity (10.3%) both accepted the bid. www.cox.co.uk

The Carlyle Group has received Hawaii Public Utilities Commission approval for its $1.65 billion acquisition of Verizon Hawaii from Verizon Communications (NYSE: VZ), although the Commission insisted that Carlyle provide additional equity so as to improve the equity-to-debt ratio. The deal includes Verizon's Hawaii-based local telephone operations, plus its print directory, long distance and Internet service provider assets, which reported combined 2003 sales of $610 million. Once complete, Verizon Hawaii will be renamed Hawaiian Telecom. www.verizon.com

MidOcean Partners has acquired a majority position in Vitaquest International, a New Jersey-based provider of specialty nutritional products. No financial terms were disclosed

BC Partners and Cinven Group have received European Union Commission approval for their 4.34 billion euros buyout of Amadeus Global Travel Distribution SA, a Spain-based travel reservations company currently is owned by airlines Air France, Iberia Lineas Aereas de Espana SA and Deutsche Lufthansa SA.

PAI Partners is nearing an agreement to purchase Italian clothing retailer Gruppo Coin SpA for $463 million, according to The Deal. www.paimanagement.com

Bridgepoint, Benchmark Capital and Allco Finance Group have teamed up to acquire clinical decision support software providers CAS Services Ltd. and MDS International Inc. No financial terms were disclosed.

    PE-Backed IPOs

FastClick Inc., a Santa Barbara, Calif.-based provider of online advertising solutions, has set its proposed IPO terms to 6.5 million common shares being offered at between $12 and $14 per share. It still plans to trade on the Nasdaq under ticker symbol FSTC. FastClick raised $75 million in Series A funding last September at a post-money valuation of $96.54 million. Round participants included Highland Capital Partners, Oak Inv*stment Partners and Disney corporate venture arm Steamboat Ventures.

TargaCept Inc., a Winston Salem, N.C.-based drug company focused on the central nervous system, has withdrawn its proposed $86.25 million IPO, citing "difficult market conditions that currently exist for initial public offerings in the life sciences industry." TargaCept has raised over $120 million in VC funding from firms like Nomura Phase4 Ventures, New Enterprise Associates, EuclidSR Partners, Oxford Bioscience Partners, R.J. Reynolds Tobacco Holdings, Burrill & Co. and Advent International. www.targacept.com

    PE-Backed M&A

Seacor Holdings Inc. (NYSE: CKH) and Seabulk International Inc. (Nasdaq: SBLK) have signed a definitive merger agreement, to create a combined provider of marine fleet and other offshore services to the oil, gas and chemical industries. The total transaction is valued at $532 million, plus approximately $471 million in net d*bt obligations that will be assumed by Seacor. The deal is being supported by DLJ Merchant Banking Partners and Carlyle/Riverstone Global Energy & Power Fund, which collectively own approximately 75% of Seabulk's common shares. www.seacorholdings.com www.seabulkinternational.com

Akamai Technologies Inc. (Nasdaq: AKAM) has agreed to acquire Speedera Networks Inc., a Santa Clara, Calif.-based provider of distributed application hosting and content delivery services. The stock-for-stock transaction is valued at approximately $130 million, with Akamai issuing approximately 12 million shares of common stock. It is expected to close sometime next quarter. Speedera has raised over $47 million in total venture capital funding since its 1999 inception, from firms like ABS Ventures, Trinity Ventures, Comdisco Ventures, Continuum Group, Banc of America, Industry Ventures, DB Inv*stor, Oracle, Hewlett-Packard, Palo Alto Inv*stors and Stanford University. www.akamai.com www.speedera.com

MAP ROI Systems Inc., a Sterling, Va.-based maker of a system that helps business qualify for, and manage, government contracts, has acquired the assets of Privia Inc., a San Mateo, Calif.-based provider of enterprise software that automates the qualification, development and delivery of commercial bids on large government contracts. No financial terms were disclosed. MAP ROI has raised over $4 million in VC funding since its 2003 inception from The Aurora Funds and Novak Biddle Venture Partners, while Privia has raised over $8 million in venture funding since its 1999 inception, from Benchmark Capital, CAP Ventures and VSP Capital (f.k.a. Venture Strategy Partners). www.maproi.com www.privia.com

Clarity Visual Systems Inc., a Wilsonville, Ore.-based , has acquired the CoolSign software and services division of Adspace Networks Inc., a New York-based provider of digital advertising solutions for malls and movie theaters. No deal terms were disclosed. CoolSign provides high-definition digital content for networked digital display systems, and the acquisition includes CoolSign-related assets that include enterprise sales, engineering, and creative and client services teams located in Burlingame, Calif. Clarity Visual has raised $6.5 million in venture capital funding from Needham Capital Partners. Adspace has raised approximately $20 million from AIG Capital Partners, DCM-Doll Capital Management, TWB Inv*stment Partners, Angel Inv*stors LP and Allen & Co. www.clarityvisual.com www.coolsign.com

Epimmune Inc. (Nasdaq: EPMN) has agreed to merge with IDM SA in an all-stock transaction that will result in a San Diego-based company with manufacturing facilities in Irvine, Calif. and Paris, France. IDM develops immunotherapies for cancer, and has received VC funding from Sofinnova Partners, Atlas Venture, Apax Partners, Clal Biotechnology Industries, China Development Corp., Banexi Ventures, XAnge Capital, Alta Partners and JPMorgan Partners. www.epimmune.com www.idm-biotech.com

    Firm & Fund News

Allianz AG Holdings says that it plans to continue increasing its private equity exposure over the next three to five years. www.allianz.com

 

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March 17, 2005















 

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