Crowdfunding is a method of raising capital in small amounts from a large group of people using the Internet and social media. Unlike funds from venture capitalists or angel investors, the money raised through crowdfunding doesn’t necessarily buy the lender a share, and there is no guarantee that it will be repaid if the venture is successful. Instead, individuals are asked to make microinvestments or donations to causes and ventures within a framework of providing rewards including sponsorships, offer to make a loan (microfinance), and gifts.
The purpose of crowdfunding varies, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns. Crowdfunding is also used for startup companies.
In February 2011, a group of entrepreneurs banded together and formed ‘The Startup Exemption’ with the goal to lobby Washington, DC to update the Federal Security Laws to make it legal for entrepreneurs to use crowdsourcing for a limited amount of early-stage equity-based financing. With the assistance of the Small Business and Entrepreneurship Council (SBEC) they partook in two hearings on Capitol Hill. Their framework was the basis for the Entrepreneur Access to Capital Act (H.R. 2930) introduced by Rep. Patrick McHenry (R-NC). In November 2011, the U.S. House of Representatives passed H.R 2930 in a vote 407-17. It reduces restrictions on small-scale crowdfunding of for-profit businesses currently present in state and securities law. The Democratizing Access to Capital Act (S.1791) and Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure of 2011, or CROWDFUND (S. 1790) bills are awaiting action in the U.S. Senate.
President Barack Obama signed the “JOBS Act” (Jumpstart Our Business Startups Act) on April 5th, 2012
- JOBS Act leaves many of the details of crowdfunding and private offerings in the hands of the Securities and Exchange Commission (SEC) and FINRA; had 270 days to conduct rulemaking, at which time crowdfunding was supposed to become available for issuers. Final regulations from SEC/FINRA projected late 2013/2014
- Rule 144 (shares pursuant to a registration exemption have restrictions on transferability) may not govern equity sales.
- SEC expected to provide a safe harbor for crowdfunding securities; Congressional intent is to make transferability as inexpensive as possible
- The Capital Raising Online While Deterring Fraud and Unethical non-Disclosure Act of 2012, or the “CROWDFUNDING ACT” allows issuers to raise $1 million in a 12-month period from investors over the Internet.
- Fraud protection provisions include limiting the amount investors can risk and requiring that crowdfunding equity sales take place through an intermediary
- Investors are limited to investing: (i) the greater of $2,000 or 5% of the investor’s annual income or net worth, if the investors income or net worth is under $100,000; or (ii) the lesser of $100,000 or 10% of the investor’s income or net worth, if the investor’s annual income or net worth is $100,000 or greater over a 12 month period
- Investors can fund one company or several companies as long as they remain within these annual limits
- An investor must wait 12 months before selling her/his securities unless the sale is to a family member, the issuing company, or an accredited investor
- Offers must be made through a Broker-Dealer or a “funding portal” that is registered with the SEC
- Intermediaries would have to obtain a “background and securities enforcement regulatory history check” on an equity-issuing company’s officers, directors and investors holding stakes of at least 20%
- Prohibits issuers and intermediaries from paying promoters, finders, or lead generators to obtain information on prospective investors
- The current version augments the previous with disclosure requirements for companies raising capital. The requirements, which tend to lack the stringency of Sarbanes-Oxley requirements, depend on the amount of the offering. Those seeking to raise $100,000 or less will need to provide tax returns and financial statements certified to be true by the company’s principal
- For offerings of more than $500,000, companies would have to provide financials reviewed by an independent accountant
- In terms of state law, the current version of the bill was also amended to add funding portals to the entities state regulators can oversee. The previous version limited the states’ purview to broker-dealers.
Leading Boutique Healthcare Investment Bank Healthios has partnered with S. Jordan Associates. Together they will create and launch HealthiosXchange, the industry’s preeminent crowdfunding portal.
When it goes live, the new platform will enable emerging growth healthcare companies to raise capital from accredited investors via Non-Dilutive Capital, Reg D, and Managed Institutional Funds. Equity crowdfunding for life science companies includes seed, bridge and side car financing.
Pending finalized JOBS-Act rules, HealthiosXchange would also be able to provide additional services for non-equity or “compassionate use” crowdfunding.
HealthiosXchange’s easy-to-use interface will facilitate private placements and partnering via eSignature/legal documents, due diligence/company scoring, custodial/ePayment, research/capital flows, financial reporting, and integration with industry conferences. For more information, click here.
The past five years have been one of the more challenging periods for raising capital in the biotechnology industry, especially for early-stage companies. Numerous factors, including a challenging FDA environment upon NDA submission, long timelines to approval and the high rate of drug failure, have contributed to a dim venture capitalist view of the sector’s prospects. As a result, emerging growth biotechnology companies are increasingly pursuing alternative financing vehicles, including Equity Crowdfunding, to advance their drug development programs.
Watch this live webinar, recorded Feb. 26, hosted by ShareVault and S. Jordan Associates:
- Learn about the different platforms available to Life Science companies including Equity and Non-Equity/”Compassionate Use” Crowdfunding
- See a review of the JOBS Act and its provision for Equity Crowdfunding
- Assess the value of Equity Crowdfunding for Life Science companies including Seed, Bridge and Side Car financings
One of life sciences’ most promising therapeutic areas of study is attacking cancer stem cells by inhibiting the Wnt/β catenin pathway:
• In a normal cell, β Catenin is in the cell membrane and cytoplasm, where it regulates cell to cell junctions, and stays in biological balance through destruction by proteolysis.
• In an aberrant cancer cell, it cannot be properly degraded, and activates and accumulates in the cytoplasm, finding its way into the nucleus where it promotes transcription and oncogenesis.
βeta Cat Pharmaceuticals, LLC (“βCat” or “Company”) is a leader in this field of study. Their lead product, βC2059, is a potent inhibitor of β catenin activation complex.
βCat Pharma, LLC investors can benefit from Maryland’s Biotechnology Investment Incentive Tax Credit providing income tax credits equal to 50% of an eligible investment for investors in qualified Maryland biotechnology companies.
Learn more about how β Catenin affects cancer growth, and how βCat’s lead product works to inhibit cancers.
Salarius Pharmaceuticals: Salarius’ lead compound is SP-2528, is a First-In-Class selective and reversible LDS1 inhibitor with low nanomolar potency against Lysine-Specific Demethylase 1 (LSD1) – Oncology Epigenetic Therapy. LDS1 is over-expressed in cancer tissues compared to normal cells including prostate, breast, small cell lung cancer, bladder, and neuroblastoma. SP-2528 has demonstrated strong activity in vitro and in vivo.
- Strong and experienced executive team capable of executing the oncology translational period for SP-2528 to get to a sale to a pharmaceutical company
- Novel compound series with a strong IP position: Lead Compound, SP-2528; Backup Compounds, SP-2509, SP-0665
- Highly selective and potent LSD1 inhibitor that possess excellent drug-like properties
- Displays potent and reversible activity in biochemical assays, potent on-target activity in cell-based systems, and performs well in in vivo systems
- Animal safety studies so far show remarkable lack of toxicity
The company leverages partnerships with large pharma to “De-Risk” pre/clinical programs (secured a term sheet from a pharma partner in pre-clinical development)
The company optimally uses non-dilutive capital and academic-industrial partnerships
SP-2528 is exciting because by blocking LSD1 it allows the lysines in histone 3 to methylate, which reawakens tumor suppressor genes previously silenced by the cancer. This has the potential to cause breast and prostate cancers which have become resistant to hormone therapy to become sensitive again, and to cause tumor cell death in these tumors. In some hematological cancers, it causes the cancer cells to begin differentiation and stop being cancerous and become normal again. This exciting cancer therapy is being hotly pursued by cancer companies, but Salarius has the first in class program. LSD1 function is a very strong subject in basic cancer biology as its role is becoming more important every month.
SCIENCE AND TECHNOLOGY
- LSD1 Discovery Approach
- Crystal Structure of LSD1 used for in silico molecular modeling
- Fragment screening library employed to refine and validate
- Compounds with favorable drug like properties selected for optimization
- LSD1 assays were developed for further structure activity relationship
- Optimization was completed
- Company is completing its final in-vivo animal models and then will start its IND enabling work
- Phase 1 expected to start in June, 2013
By far, the oncology drug market is the largest therapeutic category and continues to grow impressively. Global sales of cancer drugs will grow at a CAGR of 12 to 15%, reaching $75-80 billion by 2015 from $48 billion in 2008.
ViDAC Pharma (“ViDAC” or “Company”) has discovered drug candidates that selectively kill cancerous cells while sparing healthy tissue. Targeted drugs dominated the top-10 best-selling oncology therapeutics in 2012 including Herceptin (global annual sales of $5.5 billion) and Erbitux (global annual sales of $2.0 billion).
ViDAC pioneered a revolutionary approach to treating cancer via targeting cancer metabolism. Unlike healthy tissue, cancer cells require an extreme amount of energy to fuel its growth. The additional energy is generated through a unique association between two proteins in the cell – VDAC and HK. ViDAC’s technology detaches these proteins – the way they are in healthy cells – and, as such, reinstates the normal level of energy produced. ViDAC’s lead compound, VDA-1203, “starves” the cancer of its food supply.
Cancer metabolism is one of the most important biological pathways to large pharma/biotech companies as evidenced by two recent deals:
- Threshold Pharmaceuticals signed a $525 million licensing pact with Merck KGaA, which was sweetened with $80 million in upfront and near-term milestone payments, for the rights to Threshold’s compound, TH-302
- Agios’ exclusive partnership with Celgene for the development of two programs that seek to starve tumors to death by blocking metabolic pathways. Under the terms of the deals, Agios received upfront milestones of $150 million, as well as $120 million in downstream milestone payments and royalties as well.
ViDAC has validated its targeted approach to killing cancerous cells in animal studies and established an encouraging safety profile in humans.
- ViDAC’s technology covers multiple cancer indications including prostate, lung, cervical, and pancreas
- The Company’s lead compound, VDA-1203, is in Lead Optimization-stage of development
- ViDAC’s business model is to build a robust data package and prepare the Company’s lead compound for human trials, which is expected to take 12-18 months
Read ViDAC’s value proposition document here.