Biotech Fundraising Options for Those With No Options

Yes, the financing climate for biotech appears to be thawing, and for those with good data, it’s been positively hot. But there are still plenty of biotechs that haven’t been blessed with skyrocketing shares to support a public offering, that don’t have assets to monetize, or that are still waiting for a call back from big pharma. And they’re getting creative.

A few micro-cap biotechs are turning to rights offerings, a European approach that involves selling newly-issued, discounted shares to existing shareholders. The discount doesn’t matter because there’s no dilution: each shareholder has the option to buy into the rights offering pro-rata and maintain their percentage of ownership.

Rights offerings aren’t mainstream for U.S. biotechs, but Pharmacyclics raised about $29 million through one this summer, and BioMimetic Therapeutics used one to raise $17 million. Israel-based D-Pharm also raised about $15 million through a rights offering recently.

Another relatively unknown financing approach starting to make biotech inroads is the at-the-market (ATM) offering. ATMs involve selling shares into the market in small chunks, and while they can’t be used to raise a boatload of money, they can avoid the discounts and warrants that can make registered direct offerings and PIPEs unattractive.

Avanir Pharmaceuticals raised $10.6 million recently through its ongoing ATM, and Array BioPharma set up a $25 million ATM last week. Antigenics, Novavax and Peregrine Pharmaceuticals also have used the approach in the past.

Small public biotechs trying to close a PIPE might also offer to take the money in tranches tied to the achievement of milestones, more like a private company financing. That approach helped Sunesis Pharmaceuticals close its $43.5 million private placement.

ATM photo by Flickr user TheTruthAbout…, CC