Anatomy of a Deal: Avid Radiopharmaceuticals

Posted by | October 12, 2012

This morning, I presented at the 2012 Annual RBC Biotech Conference, which focused on the “Biotech Success Stories of the [Philadelphia] Region”. I was asked to speak about Safeguard’s success with our life sciences partner company, Avid Radiopharmaceuticals, which was acquired in December 2012 by Eli Lilly. The following presentation, entitled “The Success of Avid Pharmaceuticals from an Investor’s Point of View”, provides a brief overview of some key factors that drove our well-timed exit; however, I’d like to elaborate on this success story as part of our Anatomy of a Deal series.

 

About Avid Radiopharmaceuticals

Avid Radiopharmaceuticals, headquartered in Philadelphia, PA, spun out of the University of Pennsylvania in 2005, and has become a leader in the development of molecular imaging products to enable early detection of pathology associated with neurodegenerative diseases, such as Alzheimer’s disease and Parkinson’s disease.

Financing

In May 2007, Safeguard co-led a $26 million Series C round for Avid (of which Safeguard provided $7.3 million) with AllianceBernstein Venture Fund. Additional funding was provided by Pfizer Strategic Investments Group, Lilly Ventures (the venture capital arm of Eli Lilly and Company), RK Venture Group, and BioAdvance. Then in May 2009, Safeguard participated in the $34.5 million Series D financing, which was led by Alta Partners. In total, Avid raised approximately $70 million between 2005 and 2009, of which Safeguard deployed $12 million.

Development

Between 2007 and 2010, Avid progressed through various clinical, regulatory and financial milestones, and established itself as a leader in the development of molecular imaging agents that have the potential for early disease detection of pathology associated with Alzheimer’s and other neurodegenerative diseases. The company grew from a single employee to over 50 employees, raised approximately $70 million in financing, and moved offices and R&D facilities from its original location at the University of Pennsylvania to a state-of-the-art facility at the University City Science Center in Philadelphia’s life science cluster.

Leading organizations in the life science industry took note of Avid’s accomplishments. In December 2007, Avid received Frost and Sullivan’s Molecular Imaging Technology Innovation of the Year Award, and was named the Eastern Technology Council’s Life Science Start-Up Company of the Year that same month. In 2009, Avid’s Founder, President and CEO Daniel M. Skovronsky, MD, PhD, was named Ernst and Young Entrepreneur of the Year. Then in November 2010, the Cleveland Clinic named the technology behind Avid’s imaging agent for the earlier detection of amyloid plaques one of the top 10 innovations of the year.

Of course the lion’s share of credit for Avid’s success lies with its founder and CEO, Daniel M. Skovronsky, M.D., Ph.D. Without Dan’s vision, focus, and ability to hire a talented team, Avid could not have executed the research and development of its molecular imaging agents as successfully as it did. As Avid met research milestones, the company was recognized by Tier 1 publication such as The New York Times and a Bloomberg Businessweek, among others.

Exit

On December 20, 2010, Safeguard announced that Eli Lilly had acquired all outstanding shares of Avid for an upfront payment of $300 million. This represented an initial cash-on-cash return of 3x for Safeguard.

Subsequent to the acquisition, on April 6, 2012, Eli Lilly and Avid Radiopharmaceuticals announced that the U.S. Food and Drug Administration (FDA) approved Amyvid, a radioactive diagnostic agent indicated for brain imaging of beta-amyloid plaques in patients with cognitive impairment who are being evaluated for Alzheimer’s Disease and other causes of cognitive decline. The achievement of this milestone triggered the payment of $5.6 million in additional proceeds to Safeguard, increasing expected total net proceeds to $41.3 million and a 3.4x cash-on-cash return. Depending on the achievement of difficult future regulatory and commercial milestones, Safeguard could see its cash-on-cash return increase to up to 8x.

Final thoughts

Avid’s accelerated progress through various clinical milestones since May 2007 demonstrates the importance of partnering with life sciences companies that have strong management, innovative products or services, and capital-efficient paths towards commercialization. As a result of Avid’s fortitude and vision, Lilly recognized that Avid become the leader in the development of molecular imaging agents that have the potential for early disease detection of pathology associated with Alzheimer’s and other neurodegenerative diseases. In addition, Avid’s story, like that of many of Safeguard’s partner companies, illustrates the value of the Safeguard Access Platform, which avails greater opportunities for start-ups beyond the capital we deploy.

 

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