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February 2006 issue
Boning Up on Orthopedics: Growing Market
Drives Investments in Medical Devices and Technology Sign up for a trial subscription and get the current issue! Read more about Healthcare Corporate Finance News Read the past headlines.
Companies Mentioned in this issue:
3F Therapeutics p5 |
Most VC Deals In Three Years: Specialty Interests, Strategic Moves And Foreign Concerns Fuel ActivityDuring the month of January, 53 venture capital investments totaling more than $689 million were announced by health care companies. This is the largest number of deals we have reported in one issue since we began tracking health care venture capital investments in 2003. We heard an additional 12 deals amounting to $87 million were signed last month, but were not publicly disclosed. The largest health care venture capital investment in January, $51.1 million, was announced by Nabriva GmbH, a new spin-off of Austria-based Antibiotic Research Institute from Sandoz GmbH. In other international news, some investors are getting more involved in the Asian markets, while others stay closer to home. Socios Mayores en Salud, a managed care company in Puerto Rico, secured $9.4 million in its Series A financing, announced in early January, from investors including SV Life Sciences and HLM Venture Partners. In the months preceding this deal, SV Life Sciences had been looking for another managed care investment, we learned in a recent conversation with Eugene Hill, a General Partner at the firm. SV initially looked at Socios in late Spring of last year, then reengaged in September after Socios secured its CMS contract. Previously, Socios had raised a seed round, which included participation from management and physicians. SV found in Socios an experienced management team that had already formed partnerships with individual physicians, to leverage the historic relationship between doctors and patients. The company has a series of regional IPAs, including primary and specialty care. Socios works in partnership with American Health Medicare to offer several Medicare Advantage HMO products. And in the Puerto Rican market, the firm found attractive socio-demographics with regard to age and economic status. Puerto Rico is home to a growing number of elderly people, many with low incomes, and the market is not as penetrated as most of the United States. Also compelling SV Life Sciences to invest in Socios were recent structural changes in the market. The government improved reimbursement for managed care HMOs, and included risk stratification (meaning greater reimbursement for sicker patients), with the Medicare Modernization Act. Mr. Hill said that Socios offers good, generous drug benefits and even some relief from the confusion created by recent changes to Part D. Socios will be using the proceeds of this investment primarily to expand its enrollment base, which it hopes will include about 9,000 members by the end of this year. Socios Mayores en Salud had about 1,000 members as of initial enrollment, January 1, 2006. Getting back to Europe, Nomura Phase4 Ventures led the $51.1 million financing of Nabriva GmbH, with investors including Novartis Venture Fund and HBM Partners. Nabriva, focused on the development of small molecule antibiotics for use in community and hospital infections, was no longer a strategic fit with Sandoz, Novartis’ generic pharma. Nabriva has a pipeline of antibacterial drugs, including three late preclinical projects and one about to enter Phase I clinical trials. With the proceeds of it Series A investment, Nabriva has sufficient funding to bring core products to Phase II trials. Other international activity has been in the Asian markets, which we suspect will generate more deals during the coming months. CanBas Co. Ltd. raised $20 million in its Series D and is the first Japan-based health care company we have seen in the venture capital market since 2004. And North Carolina-based Quintiles Transna-tional Corp. recently signed a joint venture deal with Interpharma Asia Pacific (the parent of drug distributor Zuellig Pharma) and Temasek Holdings Limited. The partnership will handle a $112 million investment fund and intends to provide pharmaceutical companies with an outsourcing channel for product registration, sales and marketing. It is estimated that the Asia-Pacific pharmaceutical market is worth about $21 billion. Quintiles provides a range of professional services, information and partnering solutions to pharmaceutical, biotechnology and other health care companies, and has access to patient-level health care information and data products from Verispan, L.L.C., a joint venture co-founded by Quintiles and McKesson Corporation (NYSE: MCK). One division of Quintiles, PharmaBio Development, is responsible for creating non-traditional alliances that help customers obtain the company’s product development and commercialization services. Among Quintiles’ investments are several biotechs and biopharmas based in Europe, Replidyne, Inc., a biopharma focused on discovering and developing anti-infective drugs, and Illinois-based First Genetic Trust, an e-health company focused on medical and genetic information. Venture capitalists continue to help bridge the gap between university technology and the market for new products. HandyLab, spun out from the University of Michigan in 2000 and focused on in vitro diagnostics, will use the proceeds of its Series C to complete the FDA submission process and launch its first product later this year. The Wolverine Venture Fund, the University of Michigan’s student-managed fund, is one of HandyLab’s investors. Separately, Telemolecular Corp., a Sacramento, California-based biotech, inked a deal with UNeMed, the licensing agent for the University of Nebraska Medical Center. Telemolecular licensed rights to proprietary biodegradable nanoparticles that may lengthen chromosomal telomeres in living animals, which it will use to develop new types of pharmaceutical products. In other fund news, Aisling Capital, the New York City-based life sciences private equity firm spun out from Perseus-Soros Management, raised $550 million in equity for its second fund, which will be invested primarily in companies developing biopharmaceutical products and advanced life science technologies. As of the closing of this fund, Aisling Capital has a total of $1 billion in committed capital under management and will continue to participate in the management of the Perseus-Soros BioPhar-maceutical Fund. The Aisling Capital team manages a portfolio that includes Adams Respiratory Therapeutics (NASDAQ: ARXT), CollaGenex (NASDAQ: CGPI), Replidyne, Inc., and MAP Pharmaceuticals. In early January, life sciences venture firm Care Capital LLC closed its third fund, Care Capital Investments III, L.P., at $300 million. Lazard Freres & Co. acted as the placement agent for the fund, which included participation from approximately 20 limited partners and was oversubscribed by $75 million. Care Capital Investments III will invest in preclinical and clinical stage drug development companies, with a focus on later stage pharmaceutical and biotechnology enterprises. Salix Ventures, a Massachusetts-based health care venture capital firm that also has offices in California and Tennessee, announced its intention in late January to raise up to $150 million for Salix Ventures III, L.P. Salix manages two venture capital partnerships with more than $180 million of committed capital. Active investments in the firm’s portfolio include Aethon, Inc., the company with “the Tug” robotic transport device for hospitals; Elder Health, a Maryland-based operator of Medicare Advantage Plans; and Trilogy Health Services, a developer and operator of long-term care facilities that acquired its 30th facility last month. Other sources are also channeling venture capital into the state of Maryland, through fund of funds manager Montagu Newhall Associates, for one. The Baltimore-based firm closed its third fund in early January with $250 million—$50 million above target and greater than the total of its first two funds combined. Montagu Newhall invests within and outside the United States, across different sectors, including information technology, communications as well as health care and life sciences. Domain Associates, HealthCare Ventures, Venrock Associates and New Enterprise Associates are some firms that have received funding from Montagu Newhall and maintain a presence in the health care sectors. |
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