Warming Up For Another Record Year? Health Care Venture Capital Spending Springs Up

The dollar total of venture capital investments in health care companies increased during the past 30 days by approximately 60% compared with the prior month, and by nearly 21% compared with our first issue of the year. Approximately $726.7 million of venture capital financed 40 deals during the period February 16 to March 15, including the first $100 million deal of the year. The most capital raised in any one sector amounted to nearly $289.0 million, raised by 10 biopharmaceutical companies, followed by $184.5 million raised by eight pharmaceutical companies and $164.5 million raised by 12 medical device companies. Six biotechnology companies raised $52.5 million, plus an e-health company and a few others closed venture rounds in the past four weeks.

Fibrogen, a San Francisco, California-based biopharma, closed the largest venture round of the month, and for the year, so far, with $100 million from an international syndicate of investors that participated in the financing. In nearby Mountain View, California, Perlegen Sciences, the pharma spun out from Affymetrix (NASDAQ: AFFX) more than four years ago, completed a respectably large financing of $74.0 million, with continued support from Affymetrix, plus new and existing investors from the United States and abroad.

Fibrogen has a pipeline with several early-stage compounds that may develop into treatments for anemia, pancreatic cancer, diabetic nephropathy and other conditions. Fibrogen also has collaboration agreements with Yamanouchi Pharmaceutical and Medarex (NASDAQ: MEDX), and is also working on a dermal filler. Fibrogen commenced lab operations in 1995, with the intention of discovering, developing and commercializing therapeutic products that address fibrosis, or pathological scarring, that may result from diabetes, surgical procedures or tumor metastasis. The biopharma focuses primarily on internal research to develop unique, proprietary compounds that have the potential for use in major markets.

Perlegen is focused on analyzing and scanning individuals’ DNA, to identify useful information that will allow health care professionals to select the most synergistic drug therapy for each patient’s unique chemistry. The company is studying the way variations in DNA sequences can contribute to a person’s propensity for common diseases, or be indicative of drug response, based on technology originally developed at Affymetrix. Perlegen is finding applications for its research and technology in the drug trial and development process, and is also in-licensing existing compounds that could be enhanced clinically and pharmacogenically.

In the three next-largest venture capital deals of the month, foreign companies once again captured the attention of investors from the United States and abroad. Speedel of Switzerland closed a round for $39.8 million. Newron Pharmaceuticals of Italy raised $39.6 million and Zealand Pharma of Denmark raised $34.0 million.

PharmAthene, Inc. closed its third round of venture financing to support the acquisition of all operations and assets of Protexia from Nexia Biotechnologies (TXS: NXB). The continuing development of Protexia, or recombinant human butyrylcholinesterase, will be managed by a newly-formed, wholly-owned subsidiary, PharmAthene Canada. With its portfolio of biological and chemical defense products, PharmAthene anticipates playing a major role in preparing the United States to be able to respond to bioterrorist attacks. PharmAthene, based in Annapolis, Maryland, has raised approximately $76.2 million in venture financing since inception.

Cogene Ventures, a Houston, Texas-based firm, announced its $157 million venture capital fund focused exclusively on life science and health care investments. During the next five years Cogene’s fund, the largest of its kind in the Southern United States, will make expansion-stage investments ranging in size from $4.0 million to $8.0 million per company, primarily in Texas and Southeastern states. Cogene expects to be involved in the commercialization of life science technologies, including some from the Texas Medical Center, as Houston grows into a larger center for research and development in life science and health care. According to BioHouston, a nonprofit corporation, the greater Houston area receives approximately $1.4 million annually in federal money for the life sciences; by comparison, the San Francisco Bay area receives $2.0 billion and the Boston area receives $1.5 billion annually. The five principals of Cogene Ventures have previously invested in 57 life science companies over 48 combined years of experience.

MedImmune (NASDAQ: MEDI), based in Gaithersburg, Maryland, allocated an additional $100 mil-lion to its venture capital subsidiary. Since mid-2002, MedImmune Ventures has invested approximately $85.0 million in biotechnology companies, primarily those of strategic interest to MedImmune, which is focused on infectious disease, immunology and oncology. MedImmune Ventures’ investments include Tercica, Inc. (NASDAQ: TRCA), Cellective Therapeutics, Arriva Pharmaceuticals and Applied Genetic Technologies.

Medsonix, Inc. closed its seed round with an undisclosed amount from DaVinci-Franklin Fund I. The Las Vegas, Nevada-based company has developed a technology for non-invasive, therapeutic pain relief using a low frequency sound wave. Medsonix plans to market its product on television and has engaged Stoecklin Law Group to assist in future financings, with the ultimate goal of going public.