LSEN Biotech Bulletin
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The document provides information on recent developments in the Philadelphia life science industry. It includes an article summarizing corporate inversions and the impact of new US Treasury rules. Another article discusses risk transfer techniques for biotech companies. A section tracks the performance of local publicly traded biotech companies through the Sarian Group Index. Finally, it summarizes recent local acquisitions and IPOs in the biotech sector, such as funding rounds for Aclaris Therapeutics and Adaptimmune, and the IPO of Vitae Pharmaceuticals.
![BIOTECH BULLETIN FALL 2014 PAGE 2
THREE SAMPLE RISK TRANSFER TECHNIQUES
BY WAYNE CROWTHER, ESQUIRE
Odell Studner | Risk Management. Solved.
Many early and growth stage biotech companies have
adopted a virtual model where they outsource various
responsibilities to other companies. When negotiating
contracts with these entities, risk transfer techniques are
sometimes overlooked. By utilizing a few simple tips, your
company may be able to effectively limit its liability and
save on insurance premiums.
The three main ways to insulate your company from
responsibility from another partys negligence are
Certificates of Insurance, Waivers of Subrogation, and Hold
Harmless Agreements. Adding these techniques to your
companys procedures will act as a belt and suspenders
to reduce exposure and losses, which should, in turn,
reduce premiums.
Certificates of Insurance should be requested of all
suppliers, vendors and subcontractors performing work
on behalf of your organization. This will attest to the
existence and limits of their coverage and should be
checked for General/Products Liability as well as Workers
Compensation. You should be certain that the limits
are equal to those carried by you and that the insurer is
reputable and solvent.
A Waiver of Subrogation is an endorsement to the other
partys insurance policy which limits their insurers ability
to subrogate or come back to you if they believe
your company shared the blame for an accident. This
endorsement should be added to your subcontractors
policy and should not contain any limitations as to type of
work or location. It is necessary to have this in place prior
to any loss.
The final risk transfer technique involves adding a Hold
Harmless clause to your contracts. This protects you by
requiring the other party to hold you harmless for any
liability arising out of their work, whether or not covered
by insurance. This may apply even in situations where you
are solely negligent.
that it and the IRS intended to issue regulations to combat
inversions by reinterpreting its regulatory guidance of a
number of Tax Code provisions, according to ISI analyst
Terry Haines.
According to FirstWord, during the period 2010-2014,
there have been 10 successful pharmaceutical corporate
inversions, with relocations of corporate headquarters
primarily to Ireland and Canada. In 2014 alone there have
been eight attempted inversions in the industry, only four
of which were successfully completed. Of the remaining
four, Auxilium has been approached by Endo (a pre-rule-
change-inverted company) for takeover and has since
rescinded an inversion offer for QLT; and Salix (Cosmo), as
well as AbbVie (Shire) (despite a $1.64B poison pill!) have
deemed that the new requirements and diminished benefits
of inverting have been detrimental enough to kill their
deals. Mylan, on the other hand, has deemed it worthwhile
to restructure its agreement with Abbott in order to bring it
into compliance with the new rules, and plans to complete
its inversion in Q1 2015.
In its disappointment about the turn of events, AbbVie cited
the Treasury department for re-interpreting longstanding
tax principles in a uniquely selective manner designed
specifically to destroy the financial benefits of these
types of transactions. Whether the U.S. Treasury and IRS
overreached their powers of interpretation of the existing
code remains to be determined, but for some of these
companies, a significant opportunity has been lost. As
AbbVie Chairman and CEO Richard A. Gonzalez has noted,
the U.S. Department of Treasury may have destroyed the
value in this transaction [with Shire], but it does not resolve
a critical issue facing American businesses today The
U.S. tax code is outdated and is putting global U.S.-based
companies at a disadvantage to foreign competitors in
an area of critical importance, specifically investing in the
United States. Comprehensive tax reform is essential to
create competitiveness and to stimulate investment in the
economy.
INVERSION IMPLOSION? (CONTINUED)](https://image.slidesharecdn.com/7d90261e-b3e6-474b-9156-1902ed65f918-150130100159-conversion-gate01/85/LSEN-Biotech-Bulletin-2-320.jpg)
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LSEN Biotech Bulletin
- 1. TABLE OF CONTENTS 1. INVERSION IMPLOSION by Regina M Maxwell, MLIS 2. THREE SAMPLE RISK TRANSFER TECHNIQUES by Wayne Crowther, Esquire 3. THE SARIAN GROUP INDEX 4. PHILLY FUNDING NATIONAL AND LOCAL ACQUISITIONS/IPOS 5. EVENTS Stay up to date on the pulse of the Philadelphia Life Science industry with our NEW Biotech Bulletin. A quarterly newsletter, with data and perspectives from local leaders within the industry. Greg Sarian of The Sarian Group at High Tower and Regina Maxwell of Maxwell Research Services, LLC are the co-authors of the Biotech Bulletin. Each issue will include insight on the latest industry trends, performance metrics on local biotech companies as well as current acquisitions and IPO news in this area. REGINA M MAXWELL, MLIS Principal GUEST CONTRIBUTOR GREGORY C. SARIAN CPWA速 | CIMA速 | CFP速 | CHFC速 Managing Director & Partner FOUNDER BIOTECH BULLETIN FALL 2014 TRACKING THE PULSE OF THE PHILADELPHIA LIFE SCIENCE INDUSTRY INVERSION IMPLOSION? BY REGINA M MAXWELL, MLIS Maxwell Research Services LLC Weve been hearing a lot about corporate inversions in the industry, of late. What exactly are inversions? Why have U.S.-based companies been employing this strategy? And how have the new U.S. Treasury rules changed the playing field for corporations seeking relief from the highest corporate taxes in the world? The U.S. tax code imposes a marginal rate of up to 35% at the federal level (39.2% once state taxes are accounted for) according to the 2013 OECD Tax Database. The global average corporate tax is much lower than that of the U.S., at 25%, and Ireland has the lowest overall rate at 12.5%. In an effort to protect more earnings from high U.S. rates, corporations have increasingly resorted to corporate inversions. A corporate inversion is a transaction in which a U.S. based multinational corporation restructures so that the U.S. parent is replaced by a foreign parent, in order to avoid U.S. taxes. With growing Administration alarm about the reduction in federal revenues as a result of these inversions, on September 22nd the U.S. Treasury Department issued a notice explaining
- 2. BIOTECH BULLETIN FALL 2014 PAGE 2 THREE SAMPLE RISK TRANSFER TECHNIQUES BY WAYNE CROWTHER, ESQUIRE Odell Studner | Risk Management. Solved. Many early and growth stage biotech companies have adopted a virtual model where they outsource various responsibilities to other companies. When negotiating contracts with these entities, risk transfer techniques are sometimes overlooked. By utilizing a few simple tips, your company may be able to effectively limit its liability and save on insurance premiums. The three main ways to insulate your company from responsibility from another partys negligence are Certificates of Insurance, Waivers of Subrogation, and Hold Harmless Agreements. Adding these techniques to your companys procedures will act as a belt and suspenders to reduce exposure and losses, which should, in turn, reduce premiums. Certificates of Insurance should be requested of all suppliers, vendors and subcontractors performing work on behalf of your organization. This will attest to the existence and limits of their coverage and should be checked for General/Products Liability as well as Workers Compensation. You should be certain that the limits are equal to those carried by you and that the insurer is reputable and solvent. A Waiver of Subrogation is an endorsement to the other partys insurance policy which limits their insurers ability to subrogate or come back to you if they believe your company shared the blame for an accident. This endorsement should be added to your subcontractors policy and should not contain any limitations as to type of work or location. It is necessary to have this in place prior to any loss. The final risk transfer technique involves adding a Hold Harmless clause to your contracts. This protects you by requiring the other party to hold you harmless for any liability arising out of their work, whether or not covered by insurance. This may apply even in situations where you are solely negligent. that it and the IRS intended to issue regulations to combat inversions by reinterpreting its regulatory guidance of a number of Tax Code provisions, according to ISI analyst Terry Haines. According to FirstWord, during the period 2010-2014, there have been 10 successful pharmaceutical corporate inversions, with relocations of corporate headquarters primarily to Ireland and Canada. In 2014 alone there have been eight attempted inversions in the industry, only four of which were successfully completed. Of the remaining four, Auxilium has been approached by Endo (a pre-rule- change-inverted company) for takeover and has since rescinded an inversion offer for QLT; and Salix (Cosmo), as well as AbbVie (Shire) (despite a $1.64B poison pill!) have deemed that the new requirements and diminished benefits of inverting have been detrimental enough to kill their deals. Mylan, on the other hand, has deemed it worthwhile to restructure its agreement with Abbott in order to bring it into compliance with the new rules, and plans to complete its inversion in Q1 2015. In its disappointment about the turn of events, AbbVie cited the Treasury department for re-interpreting longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions. Whether the U.S. Treasury and IRS overreached their powers of interpretation of the existing code remains to be determined, but for some of these companies, a significant opportunity has been lost. As AbbVie Chairman and CEO Richard A. Gonzalez has noted, the U.S. Department of Treasury may have destroyed the value in this transaction [with Shire], but it does not resolve a critical issue facing American businesses today The U.S. tax code is outdated and is putting global U.S.-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the United States. Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy. INVERSION IMPLOSION? (CONTINUED)
- 3. BIOTECH BULLETIN FALL 2014 PAGE 3 Past performance does not guarantee or indicate future results. Analytics are presented for informational purposes only and do not constitute an offer or recommendation to buy or sell securities or to engage an investment manager. Mutual fund results do not reflect the deduction of sales loads. Market Indices included are a general source of information and may not be the designated benchmark to evaluate an investment's performance. 息 2014 Markov Processes International LLC. All Rights Reserved. Neither MPI nor its content providers are responsible for any damages or losses arising from any use of this information. September 30, 2014 September 30, 2014 Performance Evaluation Benchmark S&P 500 Index Top Ten Losers YTD September 30, 2014 Regado Biosciences Inc -76.31 Echo Therapeutics Inc -73.25 Onconova Therapeutics Inc -62.54 TetraLogic Pharmaceuticals Corporation -56.30 PhotoMedex Inc -52.12 Akers Biosciences Inc -46.98 The Medicines Company -42.21 Cancer Genetics Inc -34.69 Alliqua Inc -33.10 Fibrocell Science Inc -28.57 Top Ten Gainers YTD September 30, 2014 PTC Therapeutics Inc 159.34 Amicus Therapeutics Inc 153.19 Pacira Pharmaceuticals Inc 68.59 Auxilium Pharmaceuticals Inc 43.99 Lannett Co Inc 38.01 Merck & Co Inc 21.16 Ophthotech Corp 20.34 Johnson & Johnson 18.82 Active Control Technology Inc 16.67 Aerie Pharmaceuticals Inc 15.20 Dec-13 - Sep-14 90 95 100 105 110 115 120 125 Growthof$100 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Total SG Regional BioTech Index S&P 500 Index iShares Nasdaq Biotechnology Portfolio Holdings ActiveControlTechnologyInc AdvaxisInc AeriePharmaceuticalsInc AgileTherapeuticsInc AkersBiosciencesInc AlliquaInc AmicusTherapeuticsInc AuxiliumPharmaceuticalsInc CancerGeneticsInc CelatorPharmaceuticalsInc CelgeneCorp CyclacelPharmaceuticalsInc DiscoveryLaboratoriesInc EaglePharmaceuticalsInc EchoTherapeuticsInc EgaletCorp EndoInternationalPLC EnzonPharmaceuticalsInc FibrocellScienceInc GlaxoSmithKlinePLC ImmunomedicsInc Incyte Corp Ltd InovioPharmaceuticalsInc InsmedInc Johnson&Johnson Lannett Co Inc TheMedicinesCompany Merck & Co Inc MylanInc NPSPharmaceuticalsInc OnconovaTherapeuticsInc OphthotechCorp PaciraPharmaceuticalsInc PhotoMedexInc ProPhaseLabsInc PTCTherapeuticsInc RegadoBiosciencesInc SafeguardScientificsInc TetraLogicPharmaceuticalsCorporation THE SARIAN GROUP INDEX The Sarian Group Index started in January 2013 to track regionally located HealthCare oriented businesses whose stock is traded above $1 a share against the S&P 500 and Nasdaq Biotechnology index. It is an equally weighted index of publicly traded life sciences companies headquartered in PA, NJ and DE and is rebalanced monthly. Below is a look at the performance pattern since December 2013 along with a list of the companies that are currently included. Also listed is the Top Ten Companies who have had the largest gains and losses YTD within the index. PTC Therapeutics Inc 159.34 Amicus Therapeutics Inc 153.19 Pacira Pharmaceuticals Inc 68.59 Auxilium Pharmaceuticals Inc 43.99 Lannett Co Inc 38.01 Merck & Co Inc 21.16 Opthotech Corp 20.34 Johnson & Johnson 18.82 Active Control Technology Inc 16.67 Aerie Pharmaceuticals Inc 15.20 Regado Bioscience Inc -76.31 Echo Therapeutics Inc -73.25 Onconova Therapeutics Inc. -62.54 TetraLogic Pharmaceuticals Corporation -56.30 PhotoMedex Inc -52.12 Akers Bioscience Inc -46.98 The Medicines Company -42.21 Cancer Genetics Inc -34.69 Alliqua Inc -33.10 Fibrocell Science Inc -28.57 Active Control Technology Advaxis Inc Aerie Pharmaceuticals Inc Agile Therapeutics Inc Akers Biosciences Inc Alliqua Inc Amicus Therapeutics Inc Auxilium Pharmaceuticals Cancer Genetics Inc Celator Pharmaceuticals Inc Celgene Corp Cyclacel Pharmaceuticals Inc Discovery Laboratories Inc Eagle Pharmaceuticals Inc Echo Therapeutics Inc Egalet Corp Endo International PLC Enzon Pharmaceuticals Inc Fibrocell Science Inc GlaxoSmithKline PLC Immunomedics Inc Incyte Corp Ltd Inovio Pharmaceuticals Inc Insmed Inc Johnson & Johnson Lannett Co Inc The Medicines Company Merck & Co Inc Mylan Inc NPS Pharmaceuticals Inc Onconova Therapeutics Inc Ophthotech Corp Pacira Pharmaceuticals Inc PhotoMedex Inc ProPhase Labs Inc PTC Therapeutics Inc Regado Biosciences Inc Safeguard Scientifics Inc TetraLogic Pharmaceuticals Corporation The Sarian Group is a group of investment professionals registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC. PORTFOLIO HOLDINGS TOP TEN GAINERS YTD 9/30/2014 TOP TEN DECLINERS YTD 9/30/2014
- 4. BIOTECH BULLETIN FALL 2014 PAGE 4 UPCOMING EVENTS SavetheDateforournext LifeScienceExecutive NetworkLunch-Friday, January30th2015 WhatsInStorefor2015? Challenges and opportunities in leading early to mid stage biotech companies. Discussion Group Facilitator: Dr.FinnyKuruvilla,MDPh.D This event is by invitation only. For more information, please contact Megan Rehling, 610-850-9052, mrehling@hightoweradvisors.com PHILLY FUNDINGS A summary of local acquisitions and IPOs in the biotech industry from Q3. The first three quarters of 2014 marked a 10 year high for M&A and IPO activity in the Global Pharma & Biotech sector. The majority of the deal flow has been in the pharma sector up more than 200% from the same time in 2013. Drug developers nationwide raised over $1.4 billion in IPOs in the third quarter alone. The strong data shared that 24 companies went public in Q3 up from 15 in Q2 with an average raise of $60 million. If this pace continues, 2014 may be the strongest year in the industry in M&A and IPO activity since 2000. Below are some notable local transactions. Aclaris Therapeutics in Malvern, PA recently raised $21 million in its second round of investor financing, following positive results from a Phase 2 clinical trial of Aclaris lead product candidate, A-101. The new funding boosts Aclaris capital- raising to $42 million since 2012 and was committed by Aclaris earlier backers: Vivo Ventures, Fidelity Biosciences and Sofinnova Ventures. Adaptimmune Ltd in University City, PA completed a $104 million private stock sale with their offices in Oxford, England, and Philadelphia. The companys initial targets are multiple myeloma, melanoma, sarcoma and ovarian cancer. Scilex Pharmaceuticals in Malvern, PA raised $5 million in a private stock sale. The flagship product under development at the privately held company is Ztlido, a lidocaine patch formulated single layered analgesic tape. Vitae Pharmaceuticals Inc. of Fort Washington, PA completed a $55 million IPO. The company which has developed a proprietary structure-based, drug-discovery platform, plans to use the bulk of the proceeds to fund the continued development of its new drug candidates, identify additional new drug candidates and pay down debt. VWR Corporation in Radnor, PA announced that it has priced an underwritten initial public offering of 25,532,000 shares of its common stock at a price to the public of $21.00 per share. The shares started trading on the NASDAQ under ticker symbol VWR on October 2, 2014. Zynerba Pharmaceutical in Radnor, PA announced the successful closing of $13 million in funding. Zynerba is a specialty pharmaceutical company dedicated to the development of innovative transdermal cannabinoid treatments.