February
2007 issue
Investors’ Eyes On Vision, For The Future -
Venture Capitalists See Ophthalmology Opportunities Expanding
Highlighting activity in a slice of the market that includes drugs and
devices, biotechs and biopharmas, we take a look at the ophthalmology space.
...
IPO of Many Aims to Beat IPOs of One, and Funds - Exchange Traded Funds
Offer Transparency, Vertical Diversification
In an interesting twist on investing, one firm is launching a family of
publicly traded funds that could lure smaller, bold investors to mid-size
biotechs.
...
Venture Capital Market
Venture capitalists continue to pump funding into a variety of health care
companies, and this year is already off to a strong start, in terms of both
dollars invested and deals announced.
...
Public Equity Market
Just one health care company priced an initial public offering in January, a
few priced secondaries, and several amended IPO filings.
...
Mergers & Acquisitions
The number of billion dollar deals seems to keep increasing, as the number
of private equity entities making acquisitions also increases; January saw
seven deals priced at this level.
...
Private Equity Market
With all the private equity capital in the market, little was flowing to
private placements in publicly traded health care companies during January.
...
Notes & Briefs
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News Read the past
headlines.
Companies Mentioned in this issue:
February 2007
20/10 Perfect Vision Optische p1
3SBio p7
4-Antibody AG p5
5AM Ventures p4
A
Abbott Pharmaceuticals p9
Aberdare Ventures p5
Abingworth Management p4, p5
ABN AMRO Capital p3
ABN AMRO Capital Life Sciences p3
ACCEL Instruments p8
Accuray p6
Adherex Technologies p8, p14
Advanced Medical Optics p11
Advanced Technology Partners p5
Advanced Viral Research p14
Advantage Capital p5
Advent Venture Partners p5
Affiliated Computer p8
Albion p8
Allendale Pharmaceuticals p8, p13
Allergan p11
Allos Therapeutics p6, p7
Alnylam p6, p8
Alphatec Holdings p7
Altana p2
Althea Technologies p5
American Policy Roundtable p16
Amgen p12
Amicus Therapeutics p16
Amsterdam Molecular Therapeutics p5
Angiosyn p11
Antisense Therapeutics p14
Apax Partners p9
Aperture Venture Partners p4
Apothecary Capital p4
AquaCap Pharmaceutical p8
Arboretum Ventures p5
Arcadia Resources p6, p8
ARCH Venture Partners p4
Argenta Discovery p9
Ascent Biomedical Ventures p4
Asset Real Estate & Inv. p8
Assured Pharmacy p14
AstraZeneca p9
Atlas Venture p5
Atrium Biotechnologies p8
Avalon Pharma p6
Avesthagen p4
Avexa Limited p8
B
BA Venture Partners p3
Baker Brothers Advisors p4
Banc of America Securities p6
Bank of America p3
Bausch & Lomb p11
Baxano p5
Bay City Capital p5
Bayonne Medical p8
BBT Fund p5
Bear, Stearns p6
Beijing Med-Pharm p6
Bennett Coleman p4
BioCapital Asset Management p13
Biogen Idec p8
Bionovo p13
BioVentures Investors p4
Bioventures Investors p5
BIP Investment Partners p4
Blackstone Group p8
Blaylock & Co. p13
Bloomberg p2
Blue Acquisition p8
Blue Cross and Blue Shield Association p16
BridgePoint Medical p5
Bristol Myers Squibb p3
Bristol-Myers Squibb p9
Brookside Capital p4
Burrill & Company p4
C
C.E. Unterberg p6
Callisto p6
Callisto Pharmaceuticals p14
Calypso Medical Technologies p4
Cambria Capital p13
Cardinal Health p9
Cardio Devices p2
CardioMEMS p7
CareerBuilder.com p16
Caritas Health Care p8
Celgene Corp. p4
Century Foundation p16
Ception Therapeutics p3
Chicago Growth Partners p5
CibaVision p14
CIBC p6
CIBC Capital Partners p5
Claros Diagnostics p5
Clarus Ventures p4
Clinical Pathology p8
Coller Capital p5
Columbia Lab p6
Comprehensive Care Corp. p8
Conatus Pharmaceuticals p5
Confidant p5
Cornell Capital Partners p14
Council Ventures p5
Cowen p6
CSF Therapeutics p5
Cylene Pharmaceuticals p3
Cytochroma p5
D
Daninvest p4
De Novo Ventures p5
Delphi Ventures p4
diaDexus p3
Diagnostics p2
Dyadic International p6
Dynamic Healthcare Systems p5
E
Eagle River p5
eBay p16
Emerging Cancer p2
Enabling Technologies p2
Essex Woodlands Health Ventures p4
EyeGate Pharma p11
Eyetech Pharmaceuticals p11
F
f-star p5
FDA p11
Ferghana Partners p1
Ferghana Wellspring p1
Fidelity International p4
Fletcher Spaght p5
Flexpoint Partners p5
Forbion Capital Partners p3
Formation Capital p5, p8
Forward Ventures p5
Foundation Capital p5
Foundation Medical p5
Frazier Healthcare p4
Fresenius Medical Care p9
G
GAVI Alliance p16
GE Healthcare p9
Genentech p8, p9
Genesis HealthCare p8
Gentiae Clinical Research p5
Gentium p8
Geron p6
Geron Corporation p14
Gilde Healthcare Partners p5
GIMV p4
GlaxoSmithKline p4
Glenview Capital Management p4
GMP Companies p5
GPC Biotech p14
Grail Partners p3
Green Hill Manor p8
Gynesonics p5
H
H & Q Life Science p14
Haemonetics p8
Harris & Harris Group p5
HBM Bio- Ventures (Cayman) Ltd. p4
HealthShares p1
Hemosense p6
Highland Manor p8
Hikma Pharmaceuticals p8
Hoana Medical p5
Horizon Therapeutics p5
Hythiam p6, p8
I
Icagen p14
iCo Therapeutics p14
Idera p6
Inflazyme Pharmaceuticals p14
InnerPulse Technologies p3
Inogen p5
Inovio Biomedical p6
InteKrin Therapeutics p5
IntraLase p11
Intraop Medical p6
Inverness Medical p6
Investor AB p8, p9
Investor Growth Capital p4
Ironwood Capital p13
Isis Pharmaceuticals p14
Isotechnika p11
J
Janus p5
Jiate Excelsior p9
Johnson & Johnson Development p4
JP Morgan p3
JP Morgan Principal Investments p9
JPMorgan p6
Juniper Communities p8
Juniper Village Forest Hills p8
Juvaris BioTherapeutics p5
K
KBC p4
Kleiner Perkins Caufield & Byers p5
Knott Partners p5
Kodak Health Group p8
Kolis Scientific p5
L
Lake Morton Plaza p8
Launchpad Venture p5
Life Sciences Partners p5
Life Sciences Ventures p4
LifeHouse Retirement p8
Lilly Ventures p3, p4
Limagrain Group p4
Longworth Venture Partners p5
LSP p5
Lux Biosciences p1
M
Magnolia Health p8
Maine Angels p5
Matritech p14
Maxim Group p7
MDS Capital p4
MDS, Inc. p8
MediVas p11
Medsciences p5
Medtronic p3
Memory Pharma p6
Merrill Lynch p6
Michael J. Fox Foundation p16
Mindray Medical p7
Mitsui & Co. Venture Partners p4
MMV Capital p5
Molecular Devices Corp. p8
Molecular Insight p6
Molnlycke Health Care Group p9
Monogram Biosciences p14
Moog p8
Mosaix Ventures p4
Movetis p3
MPI Research p6
MPM Capital p5
N
Napo Pharmaceuticals p14
Nastech p6
National Eye Institute p11
Neuroptix Corporation p5
Neurotech p9
New Enterprise Associates p5
New Science Ventures p4
NexMed p6
Nexus Group p5
Noble Fund Managers p5
Norwich Ventures p5
NovaDel Pharma p6
Novagali Pharma p1
Novartis BioVenture Fund p4
Novartis BioVentures p3
Novartis Ophthalmics p14
NovaVision p11
Novo A/S p4, p5
NuLens p1
NuVasive p8
O
Oculus Innovative Sciences p7
Omeros Corporation p5
OncoGenex p6, p14
Onex Corp. p8
Ophthonix p1
Optasia Medical p5
Optimer Pharma p6
Orbimed Advisors p5
Orexigen p3
OSI Pharmaceuticals p11
Osprey Pharmaceuticals p5
Othera Pharmaceuticals p1
Oxford BioScience p5
Oxford BioScience Partners p5
P
Pacific Growth Equities p14
PacificCap Group p5
Palatin Technologies p9
PanGenetics p5
Paramount p13
Patient Care Services p2
PBI Regional Medical p8
Pequot Capital p4
Pfizer p9
PharmAthene p8
Pharmion p3
Pharmos p6
Piper Jaffray p6
Plaza at Clover Lake p8
Plunkett Research p16
PointCare Technologies p5
Poniard Pharma p6
PrairieStone Pharmacy p8
Pro-Pharmaceuticals p6
ProMed p14
Proprius Pharmaceuticals p5
Prosensa Holding p5
Prospect Venture Partners p5
Provid Pharmaceuticals p8
Punk, Ziegel p6
Q
Quaker Bio p5
Quan Ventures p5
Queen City Angels p5
Quest for Growth p4
Quick Study Radiology p5
R
RA Capital p13
Radius Medical p8
RBC Capital p6
Regent Medical p9
Repros Therapeutics p7
Research Corporation Technologies p4
Rho Ventures p4
Ribosepharm p8
Rodman & Renshaw p14
Rosetta Genomics p6
Roth Capital Partners p7
RWI p5
S
Saffron Hill Ventures p5
Sanderling Ventures p4
Santaris Pharma p5
Scale Venture Partners p3
SCG Group p5
Schering p2
Schwarz p2
SDS Capital p14
Seattle Genetics p9
Select Medical Corp. p8
Semafore Pharmaceuticals p5
Senior Whole Health p5
Sermo p5
Sofinnova Partners p4
Sofinnova Ventures p5
SoftBank Capital p5
Somaxon Pharmaceuticals p3
Sonic Healthcare p8
Spectrum Pharmaceuticals p14
SpineForm p5
Spray Venture p5
SSL International p9
St. Francis Medical p6
St. Mary’s Hospital p8
Standard & Poor’s p3
Stanley Medical Research Institute p5
Sutter Hill Ventures p5
SV Life Sciences p1
Symphogen p5
Synergy Life Science Partners p4
Synosis Therapeutics p4
Synova Healthcare p8, p13
Syntronix Pharmaceuticals p8
T
Targeted Genetics p6, p14
Telegraph Hill Partners p5
The Blackstone Group p9
The Medicines Co. p6
Therative p5
Three Arch Partners p5
Tigris Pharmaceuticals p5
Tissera p14
TJM Properties p8
U
UBS Investment Bank p6
United Surgical Partners p8
University of Miami p11
V
Van Dam Family Partnerships p5
Vanda Pharma p6
Vanda Pharmaceuticals p7
Varian p8
Variation Biotechnologies p4
VenGrowth Advanced Life Sciences Fund p5
Versant Ventures p1
VioQuest p6
W
Wal-Mart p16
Waller Lansden Dortch & Davis p16
Welsh, Carson p8
Wexford Capital p5
WR Hambrecht p14
Wyeth p3
X
Xcellerex p5
Xradia p5
XShares Advisors p1
XShares Group p1
Xtent p6
XTL Biopharma p8
Z
ZEVEX International p8
Zila p6 |
IPO of Many Aims to Beat IPOs of One, and
Funds - Exchange Traded Funds Offer Transparency, Vertical Diversification
Email Editor
In the midst of an IPO
market that is challenging for many companies and positively hostile for
some, one firm is selling a strategy that aims to combine certain
advantages of both single stock and mutual fund style investing, by
simultaneously specializing and diversifying. XShares Advisors LLC,
a subsidiary of registered investment adviser XShares Group LLC, is
bringing to market a number of Exchange Traded Funds (ETFs) that
vertically target specific industry sub-sectors. XShares is in the process
of building and managing HealthShares, a family of ETFs targeting
the health care space, starting with five that were launched on the NYSE
on January 23, 2007. Recently we found ourselves engaged in a long chat
with Bill Kridel, who together with Jeff Feldman, is co-founder of XShares
(formerly Ferghana Wellspring), and is also the founder and senior
partner at Ferghana Partners, a boutique investment bank
specializing in biotechnology and life science.
Mr. Kridel filled us
in on the history of HealthShares, recounting that the genesis of these
funds occurred when Mr. Kridel met Mr. Feldman, "who is the genius behind
the vertical investing concept," in August 2005 in New York City.
Each of the ETFs that
XShares is launching is an equal-weighted basket of securities, comprised
of 22 to 25 companies in the same market space, with "no whales and no
minnows." So far the SEC and NYSE have approved 20 HealthShares funds,
focused on the most advanced medical therapies and treatment devices. Mr.
Kridel is already working on a few more, with this family of funds likely
to top out at 25, he said. Another 15 to 20 HealthShares ETFs are expected
to be trading by the end of February or early March, after the NYSE
finishes coordinating with the LSE and other foreign exchanges on high
speed data feeds, to enable 15-second pricing of the funds.
The vertical
investment strategy lends itself well to life sciences and health care, it
seems, with the advancement of technology fueling the IPO market for
biotechs, biopharmas and specialty pharmas. The HealthShares ETFs that are
already being traded are Cardio Devices (NYSE: HHE), Diagnostics
(NYSE: HHD), Emerging Cancer (NYSE: HHJ), Enabling Technologies
(NYSE: HHV) and Patient Care Services (NYSE: HHB). As we were going
to press, these ETFs were each trading in the neighborhood of $25 per
share. Diagnostics was up and the others were down slightly or unchanged,
but all five ETFs were trading above their opening bid prices.
Essentially, the vertical strategy aims to diminish the binary risk
inherent in purchasing a single stock by providing a themed basket of
companies that are "high growth, high innovation and highly likely to be
bought out," from what Mr Kridel calls the "fat middle market." By
investing in vertical slices of an industry, Mr. Kridel explained, "ETF
shareholders have broader diversification and mitigated risk, compared to
buying a single stock, especially in a sector like biotech which is well
known for its many binary events, such as clinical trials, regulatory
approvals and patents."
HealthShares
ETFs are designed to offer advantages over traditional mutual funds, in
that the ETFs are tradable on an intra-day basis, allowing shareholders to
buy and sell shares at their own discretion, quickly. HealthShares ETFs
are quite unlike mutual funds that tend to be comprised of various stocks
in market-cap weighted fashion in unthemed sub-segments of an industry
area, but like mutual funds, offer investors the benefit of not taking on
the risk of investing in a single company. These ETFs allow investors to
target a specific subsector, such as Emerging Cancer, which includes
health care, life sciences and biotech companies working on treatments for
a wide variety of cancers. Mr. Kridel described the ETF as "a flexible
tool, lending itself to many long-term investment and trading strategies."
Other
benefits to owning HealthShares ETFs, Mr. Kridel said, include, "The
strategy should lead to better long-term gains, the management fees are
cheaper than mutual funds and there are no tax consequences involved with
ETFs. Shareholders also have the opportunity to act with speed on any
market news, and at any moment, can transparently look at all the current
lists of companies comprising each ETF by going to Bloomberg or to
HealthShares’ Web site (www.healthsharesinc.com)."
The
composition of each ETF will change slightly over time, as companies
within each fund may be acquired, grow too big, change in nature or be
taken private. Since Mr. Kridel started working on these ETFs, there have
been about 25 buyouts of companies in the funds, including Altana
(NYSE: AAA), Schwarz (DE: SRZG) and Schering (DE: SCH),
which were part of his European Drug index, and Myogen, which was
in HealthShares’ Cardiology Device index. Mr. Kridel has developed a
rigorous algorithm that is applied as the methodology for selecting stocks
for the ETFs. He turned this selection algorithm over to Standard &
Poor’s, which acts as an index calculation and maintenance agent for
the funds. Quarterly meetings are the forum for any changes in or
rebalancing of the weighting for the stocks included in each ETF. ETFs are
more risky than some investments for the same reason they are less risky
than other investments, because if one company in an ETF does
exceptionally well, the overall performance of the ETF would be enhanced,
but if one stock does very poorly, overall value could fall.
With the ETF,
however, the concept is that shareholder risk is minimized, compared to
owning stock in an individual company, and more useful in returning value
than a mutual fund with a very broad, or soft horizontal, focus. Mr.
Kridel indicated that the HealthShares funds will appeal to individual
investors, institutional investors and hedge funds, among others.
HealthShares differentiates itself from other health care ETFs with its
distinguished board of directors, which includes former top level
executives from Pharmion (NASDAQ: PHRM), Wyeth (NYSE: WYE),
Bristol Myers Squibb (NYSE: BMY) and the health care equity
research group at JP Morgan. He said he knows of no other board
managing a health care ETF with credentials like HealthShares.
As we were
going to press, XShares announced it had closed on $10 million in
financing from Grail Partners, to support its plan to bring a range
of ETF offerings to market. XShares currently has plans to launch 45 or
more ETFs in 2007, including HealthShares and also other ETFs targeting
specific sectors in other industries or geographies. Thanks to Steve
Brodeur, a Florida-based Regional Director of XShares, for tipping us off
to the launch of HealthShares.
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