Biotech fundraising up amid vaccine hype, cash need

Biotech firms have raised $5.7 billion through an assortment of 39 debt and share offerings, according to data from Thomson Reuters. Follow-on offerings have been the most prevalent form of fund-raising, with 29 such transactions, the data showed.

Amgen Inc led the fund-raising with debt offerings that generated proceeds of $1.99 billion, according to Thomson Reuters data.

"It's an opportunistic time to raise money -- there's a lot of attention on vaccines, cancer and emerging drugs to fill drug pipelines," said one healthcare investment banker who declined to be named because he was not authorized to speak to the media.

Goldman Sachs Group Inc and Bank of America Merrill Lynch led the league tables in terms of biotech fund-raising activity. Morgan Stanley followed as No. 3 in terms of bookrunning, the data showed.

Some of the activity was driven by pent-up demand after weakness in financial markets made it difficult to raise money last year, and eroded many biotech's cash cushion.

"Last year a combination of depressed valuations, limited investor appetite for risk and illiquid trading profiles created a scenario where many biotech companies were within one years worth of cash remaining," said Jim Cooney, managing director of Equity Capital Markets at Bank of America Merrill Lynch.

"Traditionally a biotech company would access the equity markets well in advance of eighteen months of cash remaining. When market sentiment improved and investors appetite for risk increased, a scenario was created for these companies to issue equity in an accelerated manner," Cooney said.

The wave of follow-ons in the sector comes at a time biotech stocks have surged. The Nasdaq Biotech Index .NBI is up 33.9 percent since March lows.

"If market performance continues the way we expect it to, with the demand we've seen, the activity we'll see in the next 18-24 months will make this wave we've had seem de minimis in nature," Cooney said.

Some capital raising came in the wake of excitement over H1N1 (swine flu) vaccines as several small companies used positive data trials as springboards for share offerings.

"One strong study can set the stage for a new round of fund-raising or venture capital money," the investment banker said.

For example, Vical Inc announced on May 21 that it had advanced the development of its H1N1 vaccine. The next day, Vical said it would sell shares worth $15.4 million. Four days after that, it said it would sell shares and options worth an additional $4.6 million.

Inovio BioMedical in July also followed on the success of its H1N1 vaccine in animal studies with news it would sell shares and warrants worth $30 million.

IPOs SHOW MIXED RESULTS

Biotech and pharma IPOs have been less prevalent and have had mixed results.

Cumberland Pharmaceuticals Inc, which broke a nearly two-year drought for IPOs in the drug sector, raised $85 mln in August, but its stock has dropped 9.1 percent since its debut.

Meanwhile, shares of Talecris Biotherapeutics Holdings Corp gained 11.3 percent in their first day of trading last week -- marking the largest biopharmaceuticals IPO in three years.

Unlike most IPOs in the sector, Talecris already has products on the market in addition to those in development, allowing it to attract more interest, analysts said.

Its products are used to treat a number of diseases, including immune deficiencies, bleeding disorders, infections and severe trauma.