December
2007 issue
Venture Capital Deals In 2008: Health Care
VCs See Steady Stream Of Funding
We get the inside view on the upcoming year from a few health care venture
capital investors, who seem to expect 2008 will be just about as active as
2007.
...
New Funding
For Drug Delivery--
Zosano Attracts More Capital For Development
Zosano is moving forward with its clinical and fund-raising activities under
its new name, with a technology that has been in development for some time.
...
Public Equity Market
In spite of some shuddering in the broader markets, IPOs and secondary
offerings of stock in health care companies continue to get priced.
...
M&A Market, 2008
Provident Healthcare Partners is one firm that anticipates a relatively
strong market for certain health care mergers and acquisitions in the coming
year.
...
Mergers & Acquisitions
Transactions for generic pharmaceutical companies are a highlight of this
month’s health care M&A activity, which included a few more deals than
usual.
...
Venture Capital, November
Health care companies continued to raise venture capital funding, with
medical devices and biopharmaceuticals garnering most of it during November.
...
Private Placements
November was a quiet month for private
placements in health care companies, compared with some recent months, but
had some interesting deals.
...
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News Read the past
headlines.
Companies Mentioned in this issue:
December 2007
A
Abbott Laboratories p9
Acrongenomics p7
Actelion p12
Addington Place p8
Adenosine Therapeutics p11
Advanced Technology Ventures p11
Aegerion Pharmaceuticals p4, p5
Agensys p7
AGF Private Equity p11
AIM Therapeutics p11
Akrihin p6
Albert Einstein College of Medicine of Yeshiva Uni p12
Alliance Imaging p8
Alloy Ventures p10, p11
Alta Partners p11
Altarum Institute p11
ALZA p1
Ambit Biosciences p9
Amedisys p9
American Academy of Home Care Physicians p16
American Board of Radiology p5
Amgen p2
Amicus Therapeutics p12
Ampersand Ventures p11
Amylin p11
Analogix p7
Anaptys Biosciences p9
Antisense Pharma p11
AorTx p7
Apposite Capital p9, p10
Apria Healthcare Group p9
Arena Pharmaceuticals p4
Artemis Pharmaceuticals p7
Arterial Remodeling p11
ARYx Therapeutics p4
Aspen Group p6
Astellas Pharma p7
ATEL Ventures p11
Aurora Funds p11
Austin Ventures p11
Avalon Ventures p11
Averion International p8
Avidia p12
Axcan Pharma p7
B
BBT Fund p10
Beulah Land p8
BIND Biosciences p11
BioForm Medical p4
Biogen Idec p7
Biomerix p11
Biopure p4
Biospace Med p11
Bristol-Myers Squibb p11
Broncus Technologies p5
C
C.E. Unterberg, Towbin p5
Cadence Pharmaceuticals p12
Canaan Partners p12
Capella Healthcare p8
Carbylan Biosurgery p11
Cardica p4
Cardinal Health p9
CardioVations p7
CaseNET p11
Cavidi p11
Celgene Corporation p7
Centice p11
Cerus Corporation p12
ChemoCentryx p4, p5
CIBC p4
CIBC World Markets p5
Cielo p11
CIGNA p8
Clarus Therapeutics p11
Clinicient p11
CM Capital Investments p11
Co-pharma p6
Coalition America p7
Cognizant Technology p7
Coley Pharmaceutical p7
Collins Stewart LLC p5
ConcepTx Medical p11
Corriente Master Fund p14
CoTherix p12
Craig-Hallum Capital Group p4
Credit Agricole Private Equity p11
Credit Suisse p4
Critical Therapeutics p13
Cutlass Capital p10
D
D.A. Davidson & Co. p5
De Novo Ventures p11
Delphi Ventures p9
Derma Sciences p7
Deutsche Bank p4
Dicerna Pharmaceuticals p11
DnBNor p11
Domain Associates p10, p12
Dynavax Technologies p4
E
Edwards Lifesciences p7
Emergent Medical Ventures p9
Emeritus p6
Ensign Group p5
EnteroMedics p4
Epicept p4
EPIX Pharmaceuticals p15
ePlanet Ventures p11
eResearchTechnology p8
Evalve p9
Excaliard p11
Excela Health p8
Exiqon A/S p7
Eyetel Imaging p5
F
f-star p11
Favrille p15
Fiserv p8
Flagship Ventures p11
FlexPoint Partners p9
Forest Laboratories p12
ForHealth Technologies p11
FORMAC Pharmaceuticals p11
Formula Naturelle p6
Forward Ventures p10, p11
Frazier Healthcare Ventures p11, p12
Frazier Healthcare VI p12
Fresenius Medical p7
G
Gedeon Richter p7
Genechem p10
Genefar BV p6
General Electric Pension Trust p14
Gentiva p9
Geodon Richter p6
Getinge AB p7
Gezina p11
GIMV p10
GlaxoSmithKline p5
Golden Pond Healthcare p4
Goldman, Sachs p5
GPT Group p8
Great Lakes Home Health p9
Great Point Partners p14
Great-West Healthcare p8
Greatbatch p7
Gyrus Group p7
H
H.I.G. Ventures p11
Hana Biosciences p4
Hansen Medical p7, p12
HBM BioVentures p11
HBM Partners p13
HemaQuest p11
HemoSense p7
Hesperion AG p8
Highway 12 Ventures p11
HLM Venture Partners p11
Home Solutions p9
Horizon Technology Finance p10
HouseMD Today p16
HSBC Private Equity p11
Hythiam p15
I
I-trax p8
Ilypsa p2
Integral Capital Partners p10
InterMune p7
Inverness Medical p5
J
Jefferies & Company p5
Johnson & Johnson p1
Johnson & Johnson Development Corporation p11
Jov-CMDF p10
JPMorgan p4
K
Kaiser Permanente p11
Krka p7
Kyphon p3
L
LabNow p11
Lazard p4
Lazard Capital Markets p5, p14
Lazard Freres & Co. p14
LBBW Venture Capital p11
LEAD Therapeutics p11
Leerink Swann p4
Lehman Brothers p5
Lilly & Co. p1
LogistiCare p8
M
Macrochem p4
Macroflux Corporation p1
MAP Pharmaceuticals p12
marketRx p7
Matignon Technologies p11
MedAssets p4
Medco Health Solutions p9
Medical Research Council p12
MedImmune Ventures p9, p10
Mediware p7
Memory Pharmaceuticals p16
Merck p12
Mercy Jeannette Hospital p8
Merrill Lynch p4
Merrill Lynch & Co. p5
Metastatix p12
Michigan Pre-Seed Capital Fund p11
MIG Funds p11
Molecular Vision Limited p7
Montreux Equity Partners p10
Morgan Stanley p4
MPM BioVentures IV Fund p2
MPM Capital p1
Mylan Pharmaceuticals p4, p5
N
N Spine p7
Nanosphere p4
NBGI Ventures p11
NeoStem p7
New England Health p8
New Enterprise Associates p9, p10, p13
NimbleGen p12
Nimblegen Systems p4, p5
NLV Partners p1
Nomura Phase4 Ventures p13
NovaCardia p12
Novalar Pharma p10
NovaQuest p9, p10
Novartis p15
Novo A/S p11
Numenor Ventures p10
NutraMax p7
O
Olympus Corporation p7
Omnicell p7
Oncotech p7
Optimer Pharmaceuticals p4
OrbiMed Advisors p9, p10, p12
Oxford BioScience Partners p11
P
Palmetto Vein Center p8
Papastavros Group p8
Pappas Ventures p11
ParadigmHealth p8
Park Regency p8
Perseus-Soros Biopharmaceutical Fund p10
Pfizer p7
Pharmion p7
Piedmont Pharmaceuticals p11
Piper Jaffray p4, p5
Polaris Venture Partners p11
Polpharma p6
Posit Science Corporation p16
Pouschine Cook p9
Precimed p7
ProFitness Health Solutions p8
ProHealth Care p8
ProQuest p13
Providence Service p8
Provident Healthcare Partners p6
Q
Queensland BioCapital Funds p11
QuestMark Partners p11
R
Radius Ventures p9, p10
RadNet p8
RadPharm p11
Raven biotechnologies p7
Reliant Pharmaceuticals p5
Relypsa p2
Renal Solutions p7
Rich Healthcare p8
Rioux Vision p7
Roche p4, p5, p12
Roche Venture Fund p11
Rodman & Renshaw p14
Rural Hospital Acquisition p8
S
S-Group Direct Investments p11
S.R. One p10
Salix Ventures p11
Sammons Enterprises p11
Sanofi-aventis p6
sanofi-aventis p7
SantoSolve p11
Sears Capital Management p12
SGAM p11
SGX Pharmaceuticals p15
Sigma Partners p11
Sirtris Pharmaceuticals p12
Skyline V p12
Skyline Ventures p11, p12
Sloning Biotechnology p11
Split Rock Partners p9
St. Francis Medical p3
Stanislaus Behavioral p8
Stem Cell Technologies p7
Stifel, Nicolaus & Company p5
Strides Arcolab p6
Strides Latina p6
Synthes GmbH p7
T
Taconic Farms p7
TAD Pharma p7
Takeda Pharmaceuticals North America p16
Targanta Therapeutics p12
Tenet Healthcare p8
The Buck Institute p16
The SeniorCare Investor p5
Thomas, McNerney & Partners p11
Thomas Weisel Partners p5
TPG Capital p7
Tranzyme Pharma p11
Tri-Isthmus Group p8
Trivitron p11
Trubion Pharmaceuticals p12
U
UBS Investment Bank p5
UnitedHealth Group p8
Uroplasty p4
V
Vapotherm p11
Varian, Inc. p7
Vaxart p11
VaxGen p7
Vericare p11
Versant III p3
Versant Ventures p1
Village Ventures p11
Virtual Radiologic Corporation p5
Vivacta p11
Vivo Ventures p11
W
Walgreen p9
William Blair & Company p5
WS Investment Company p10
X
Xanodyne p4, p5
Xenome p11
Xlibris p16
Z
Zosano p1 |
Venture Capital Deals In 2008:
Health Care VCs See Steady Stream Of Funding
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Even though there is no
crystal ball to show us 2008 today, experience can bring the gift of
insight, if not second sight. So recently, we talked with three venture
capitalists who have the experience of being investors in the health care
field, to find out how 2007 went and what they think might happen in 2008.
Generally speaking, it seems that venture capital activity is expected to
continue at a fairly steady pace—at least in health care.
Jim Scopa, a general partner at
MPM Capital, stated, "The level of activity from 2006 to 2007 has been
fairly consistent." Dr. Ross Jaffe, a managing director at Versant
Ventures, focused primarily on medical devices, commented, "Deal flow
was strong in 2007, driven in part by an open window in the IPO market for
medical device companies. We expect deal flow will continue to be strong
in health care venture capital in 2008." Philippe Chambon, a managing
director at NLV Partners, expects that, "For health care venture
capital, 2008 will probably be a pretty unremarkable year, because there
is no reason for any major increase or decrease in funding."
Biopharmaceuticals, medical devices,
special pharmaceuticals and diagnostics are expected to be among the most
active areas for health care venture capital investing in 2008. In the
case of MPM Capital, Mr. Scopa revealed, "Recently, we have been focusing
more on going overseas, to find technology or companies that can be
brought to the U.S., or into earlier opportunities. Also, we are
concentrating some energy on finding spin-off opportunities, including one
deal we are working on now."
Mr. Chambon said NLV Partners has seen a fairly steady
stream of activity in the health care venture capital market, which will
likely continue through the coming months. "We are in a kind of holding
pattern, I think, through 2008 and possibly into 2009, since we are going
into an election year and many people will want to understand the thinking
of the new administration before changing course in any significant way,"
he surmised. "I think 2008 will be interesting, with the upcoming
election, and with questions surrounding the FDA and reimbursement—but at
the business level it will only be a year of transition. Huge disruptions
that would affect our business are probably not likely."
Dr. Jaffe pointed out, "Historically, health care reform
has been very difficult to implement from Washington," so he is not
anticipating any fundamental changes in the health care venture capital
market in the near term. "But, the fact that health care is costing more
means health care is a major issue in this election. This may cause some
uncertainty, perhaps some slowing in the markets, based on concerns that
changes could happen," said Dr. Jaffe. Mr. Scopa stated, "In
biotechnology, no matter who wins the upcoming election, reimbursement
will be an issue. As investors our focus will be more on determining what
will be an attractive commercial, as well as clinical, opportunity."
Mr. Chambon said, "Right now, we think the hottest
opportunities are in therapeutic areas including metabolic,
cardiovascular, anti-inflammation and anti-infective products," he said.
In addition, the market for cancer treatments is of interest, but exactly
where that market is headed will be more apparent in a few months, we
learned. NLV Partners announced in October that it had closed its most
recent fund at $450 million, and is currently deploying that capital,
primarily investing in the development of biopharmaceuticals, medical
devices and diagnostics.
"We expect the M&A market for medical devices to continue
re-awakening. Activity in diagnostics, for example, is increasing—we like
this field, where we are seeing greater deal flow, although it is more a
trickle than a flood," Mr. Chambon stated. Some opportunities that NLV is
currently evaluating are in the anti-infective space, others involve
monoclonal antibody technology or anti-inflammation mechanisms, and others
are potential spin-offs out of large pharma.
"Valuation is going up on the late-stage private side of
biopharma," noted Mr. Chambon, even to the extent that excessive valuation
figures are being placed on some late-stage biopharmas, "driven by the
perception of increases in valuation on the public side. We do not believe
that it can be a lasting trend." On the more positive side, strategic
buyers are actively seeking to fill pipelines and auctions for interesting
assets remain competitive, helping to boost valuation in the overall
health care market. NLV invested in both Ilypsa, which was sold to
Amgen (NASDAQ: AMGN) for $420 million in June 2007, and Relypsa,
the spin-out formed with certain assets from Ilypsa, after the sale.
MPM Capital is currently deploying the MPM BioVentures
IV Fund, which closed at $550 million in February 2007. "We had a good
number of repeat investors in BV IV and we got some new ones," Mr. Scopa
noted. Ninety percent of the work that MPM does is in biotechnology,
specialty pharmaceuticals or medical devices. "A precipitous falloff is
unlikely, and while health care is not back to the levels we saw in 2000,
growth could taper a bit," stated Mr. Scopa. For example, "Biotechnology
has grown tremendously as a commercial business in the past few years," he
said—but this doesn’t mean every bio opportunity will lead to good
returns. He continued, "In some cases the clinical data may be good, but
commercialization may not go well." So, at MPM Capital, "We are looking
not at just approvability, but also at how clinically compelling, how
differentiated a product really is."
Mr. Scopa explained that, "In terms of exit strategies, we
saw more IPOs in 2007 than other recent years, and M&A activity remained
strong. M&A will likely continue to be a strong market in 2008, with
strategic buyers especially contributing to deal flow." He has noticed,
"The extent of M&A activity that we’ve seen recently is self-sustaining,
in a sense—because the entrepreneurs become a renewable resource, if you
will. When these guys build one successful business and sell it, they go
out and start another one."
Mr. Scopa went on to say that these days, "Because of the
larger buyers in the M&A market, particularly strategic buyers, it is now
possible to make earlier stage investments with a three- to four-year
timeframe to exit, upon receipt of positive phase II data, whereas that
may not have been possible five to seven years ago." Changes in
reimbursement could occur, but are not expected to change much for MPM
Capital. Mr. Scopa told us, "We always assume the FDA will be as
conservative as possible, so new restrictions would not necessarily affect
the way we do business."
Dr. Jaffe explained, "Our last fund, Versant III,
closed in 2005, and currently we are focused on deploying that capital."
He sees the M&A market providing meaningful exit opportunities, too, "with
larger companies needing to buy smaller businesses to fill their pipelines
and continue to grow," he stated. At the end of 2006, for example, St.
Francis Medical acquired Kyphon for $725 million. At Versant,
"Recently we have been looking at doing more internal start-ups, or
incubating entrepreneurs we already know or have worked with," he told us.
"In addition, there is a shift toward looking more at the economics of
clinical need."
Another change Dr. Jaffe sees occurring in health care is
a shift away from a "phenotype" approach to disease, where physicians look
at disease from the manifestation to the cause, to a "genomic" approach to
disease, where physicians look at how the patient’s genetic makeup
contributes to disease. Physicians are trying to assess each patient’s
proclivity for certain conditions so as to help prevent or mitigate them,
and also trying to sub-classify diseases genetically so as to better
target therapy. "This focus on developing better molecular diagnostics is
driving a renewed interest in the diagnostics area."
"In 2007, medical devices attracted relatively more of the
health care investment dollar than it had in the past, although the
biotech and pharmaceutical sectors remain very active areas of investment.
We don’t expect to see any big changes in where the funding goes in 2008,"
Dr. Jaffe stated. He continued, "Challenges to market adoption are still
an issue, with reimbursement always a question and increased scrutiny on
new technology and safety." For the firm to respond to such challenges, he
said, "We need to do good clinical studies demonstrating the value of new
technologies. We also need to educate people that the benefits of health
care treatment rarely come without risks."
Dr. Jaffe believes, "There will continue to be great
opportunities in health care. We are constantly assessing new
opportunities, as well as growing and harvesting our existing portfolio
companies." Although he declined to disclose exactly what deals he’s
working on right now, he did mention, "We’re not as interested in what’s
hot right now, as much as we are in finding opportunities with solid
business fundamentals that will play out well in the long term." Looking
ahead to 2008, Dr. Jaffe isn’t so sure we’ll see more health care venture
funding in 2008 than in 2007, but he doesn’t expect a major falloff,
either. "It’s possible that activity may flatten, or even slightly
decline, mainly because of uncertainties related to the election, the FDA
and regulatory reform, and reimbursement," he said.
Right now, Dr. Jaffe observed, "It’s very competitive to
get into the best opportunities because there is so much venture capital
available for health care." He concluded, "I view health care investing as
one of the most important businesses to be in, and it is here to stay. I
joke that I invest in things that I hope that I never have to use
personally, but we will all be glad we developed these new products or
services if we, our family members or our friends ever need them." In the
end, he said, "We only do well as investors if we do well by patients." |
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