March 2008 issue
Slow Month
Produces Some Unique Deals--
We Talk With CEOs Of Two Companies That Closed Venture Rounds
February was a slow month for
deals, but the CEOs of two health care companies that raised venture rounds
in February took some time to talk with us.
...
Financing Available For Quality Companies:
New Venture Funds Raised, Ready and Willing To Invest In The Best
We talk with two venture capital
investors whose firms have recently closed large funds focused on health
care.
...
Public Equity Market
In addition to IPOs priced, filed and withdrawn in February, we take a look
at IPOs that have been withdrawn in the past two years.
...
Mergers & Acquisitions
The amount of capital committed to fund health
care M&A deals increased slightly in February, compared with the prior
month.
...
Private Placement Market
Deal flow has not picked up since last month, but a bit more funding was
invested through PIPEs in February.
...
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Companies Mentioned in this issue:
March 2008
Symbols
3i Group Plc p6
5AM Ventures p10
A
Accumetrics p10
Acorda Therapeutics p4, p6
Adnavance Technologies p11
Advanced Technology Ventures p2
Aerovance p9
Aethlon Medical p4
Affimed Therapeutics p11
AgeChem Venture Fund p10
Agemark p8
Alexion Pharmaceuticals p6
Alpinvest Partners p12
Alta Partners p3
Alverix p11
Amberbrook p10
AMN Healthcare Services p8
Angel Capital Association p12
Antigenics p4
Apex Bioventures p3, p4
ARCH Venture Partners p10
Archemix p4
Arnerich Massena & Associates p10
Arriva Pharmaceuticals p11
Arthrosurface p11
AthenaHealth p4
Avalon Ventures p12
Avantis Medical p12
AxiCorp GmbH p6
B
Bay City Capital p14
Bayer AG p6
BB Biotech Ventures; Merck KGaA p11
BBT Fund p10
Beijing Med-Pharm p4
BioCon p6
Biodel p4
Bioheart p3
BioIQ p11
Biolex Therapeutics p4
BioVascular, Inc. p11
BioVentures Investors p11
Black Mountain Ventures p11
BMO Capital Markets p5
Boston Millennia Partners p11
Brandywine Senior Living p8
Burrill & Company p11
C
Cadence Pharmaceuticals p14, p15
Canaan Partners p11
Canaan VIII p11
CapitalSource p8
CardioNet p3, p4
CDIB BioScience p10
Celgene Corporation p6
CellGate p6
Cerexa p12
Certified Diabetic Supply p15
Chemokine Therapeutics p15
China Sky One Medical p15
CHL Medical Partners p10
Chronicity p11
Chrysalis Ventures p1
Cianna Medical p11
Citi p4
Clarus Lifesciences II, L.P. p1
Clarus Ventures p1
CollaGenex Pharmaceuticals p6
CoMentis p9
Concentric Medical p4
Connecture p11
Cowen and Company p3
Criticare Systems p6
Cross Creek Capital p10
Cypress Biosciences p6
CytRx p4
D
Dakim p11
Dara BioSciences p3, p4
Dawson James Securities p5
De Novo Ventures p10
Diabetic Plus p15
Direct Patient Solutions p1
Domain Associates p10, p14
DOR BioPharma p4
Dynogen Pharmaceuticals p3, p4
E
Edison Ventures p11
EKR Therapeutics p6
Emdeon Business Services p6
Encysive Pharmaceuticals p6
Epic Ventures p10
Esaote Group p11
Essex Woodlands p10
eutsche Bank p4
F
Family Home Health Care p8
Fininvest p10
FinTech p10
Fisher Healthcare p1
Fog City Fund p11
Forest Laboratories p6
Frazier Healthcare Ventures p14
Frost & Sullivan p4
FUJIFILM Holdings p6
Fusion Capital p4
G
Galderma p6
Galen Partners p11
GE HealthCare p6
General Atlantic p6
Genoptix Medical Lab p4
Genta Incorporated p15
Gentiva Health Services p8
GlaxoSmithKline p6
GlaxoSmithKline plc p6
Global Healthcare Exchange p2
Global Hunter Securities p15
Globus Medical p9
Great Pacific Capital p11
Grove Street Advisors p12
GrowthWorks Capital p11
GTC Biotherapeutics p14
H
Harris & Harris Group p2
Harvard Management p12
Healthcare Discoveries p8
HealthMedia p9
Healthsport p4
Helix BioMedix p15
Hellman & Friedman p6
High Country Venture p3
HLTH Corp. p6
Home Health Care Affiliates p8
Humana p8, p9
I
Iasis Healthcare p8
ICON plc p8
IDG Ventures Boston p2
ImmunoCellular Thera. p6
Institutional Venture Partners p10
InterWest Partners p10
INVESCO p10
Invitrogen p10
J
Janney Montgomery Scott p5
Johnson & Johnson p1
JPMorgan p3, p4
K
Kaiser p11
Kaiser Permanente Ventures p10
Kane Biotech p15
KB Partners p10
Kingsbridge Capital Limited p14
L
Lehman Brothers p4
Light Sciences Oncology p4
Lotus Pharmaceuticals p15
M
MAKO Surgical p3
Mary Conrad Center p8
McKesson Corporation p2
MedVenture Associates p2
Merck Capital Ventures p11
Merck KGaA p11
Meridian Health p8
Merrill Lynch p4
Merriman Curhan Ford & Co. p5
Mesa Verde Partners p11
Midtown Partners p15
Millennium Pharmaceuticals p9
Molecular Discoveries p6
Momentum Medical Group p8
Montagu Newhall p10
Montreux Equity Partners p11
Morgan Stanley p3, p4
Morgenthaler Venture p11
MPM BioVentures p11
N
NanoImaging Services p11
Natl. Medical Health Card p8
Neoforma p2
Nerites p11
New Leaf Venture Partners p10
New Venture Partners p11
Nordic Biotech p11
Novacardia p12
Novo Nordisk Biotech Fund p11
O
Ocera Therapeutics p10
Optimata p11
Opto Circuits (India) p6
Orexigen Therapeutics p12
Ouachita Comm. Hospital p8
Owens & Minor p2
OXiGENE p14
P
Pappas Ventures p10
Parish Capital Advisors p12
Paul Capital p12
Pediatrix Medical Group p8
Peninsula Pharmaceuticals p12
Pfizer p6
PhaseRx p10
Platinum Select, L.P p8
POINT Biomedical p10
Point Therapeutics p3, p4
Polaris Venture Partners p11
PolyRemedy p1
Portico Systems p11
Possis Medical p6
Pro-Pharmaceuticals p15
Progen Pharmaceuticals p6
Promedior p11
Proprius Pharmaceuticals p6
PTV Sciences p10
Q
Q Therapeutics p10
R
Ranier Technology p10
RBFSC, Inc. p15
Regeneration Technol. p6
RiverVest p10
Rodman & Renshaw p14
Rolling Oaks Radiology p8
RXi Pharmaceuticals p3, p4
S
Safeguard Scientifics p11
Saints Capital p10
Salt Lake Life Science Angels p10
San Diego Tech Coast Angels p11
Sanderling Ventures p3
sanofi-aventis p6
Saratoga Ventures, p10
Sciona p11
Senior Hsg. Properties Tr. p4
Sequel Pharmaceuticals p12
Shepard House p8
Sofinnova Ventures p10
SXC Health Solutions p8
Synergy Life Science Partners p12
T
Takeda Pharmaceutical p6
Taligen Therapeutics p1
Tango p3
TechniScan Medical Systems p11
Thomas, McNerney & Partners p10
TLC Health Care Services p8
Tobira Therapeutics p12
Toucan Capital p10
Toyama Chemical Company p6
TransForm Pharmaceuticals p9
Transoma Medical p4
Traversa p11
Tutogen Medical p6
TyRx Pharma p10
U
UBS Investment p4
University of Colorado at Denver p13
University of Utah Research Foundation p10
V
Vedanta Capital p10
Vein Assoc. of Amer. p4
Venrock Associates p9
Venture Investors p11
Versant Ventures p10, p14
Viscorp p4
Vital Health Technologies p8
vSpring Capital p10
W
Wachovia Securities p3
WebMD Health Corp. p6
Whatman plc p6
William Blair Capital Partners p10
Windamere Venture Partners p11
Working Opportunity Fund p11
Z
Zogenix p9 |
Financing Available For Quality Companies:
New Venture Funds Raised, Ready and Willing To Invest In The Best
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Even though the health care
venture capital market is off to a slow start this year, some recent fund
closings suggest that investors are ready to get busy, so maybe the pace
will pick up during the second quarter. This month we talked with two
venture capitalists who are enthusiastic about putting new money to work.
Nicholas Galakatos, Ph.D., a co-founder and managing director of Clarus
Ventures, commented, “Now is an exciting time to put money to work in
health care, because valuations of late-stage private companies and
small-cap public companies are depressed, creating potential for
investments.” In late February, the firm announced the closing of
Clarus Lifesciences II, L.P., a $660 million fund dedicated to
investing in select biotechnology, specialty pharmaceutical and medical
technology companies.
David A. Jones, Jr., who is chairman and managing director of Chrysalis
Ventures, stated, “We have an active pipeline right now, with particularly
good deal flow in health care.” At the end of February, Chrysalis
Ventures announced the closing of its fourth fund at $163 million. Mr.
Jones co-founded Chrysalis Ventures in 1993; other managing directors at
the firm include Koleman E. Karleski and Robert S. Saunders. “I grew up in
Louisville and am a lawyer by training. I’ve done a great deal of health
care and international work,” Mr. Jones told us. “My father is one of the
two founders of Humana (NYSE: HUM), so I had quite a bit of early
exposure to the business side of health care. Later on, as a lawyer I
worked with a lot of entrepreneurs, which I really enjoyed. So, the
venture business was started in 1993, and fortunately has recruited some
really great talent.”
In spite of uncertainty in other areas of the financial markets, venture
capitalists—at least, those who talked with us recently—have not had any
trouble securing commitments from LPs. Clarus Ventures’ Dr. Galakatos
commented that the process of raising the second fund was, “For us, not
really any different—it is essentially the same investor base.” Chrysalis’
Mr. Jones noted, “With our latest fund, in addition to new LPs, including
Morgan Stanley, Credit Suisse and the Kentucky Teachers’
Retirement System, we received very good follow-on support from our
existing LPs.”
Dr. Galakatos’ experience includes positions at Millennium
Pharmaceuticals (NASDAQ: MLNM), TransForm Pharmaceuticals and
Venrock Associates. Clarus Ventures, which has offices in Boston,
Massachusetts and South San Francisco, California, closed its first fund
at $500 million in December 2005. The firm has not yet exited any of its
Fund I investments, but some are now at a level of maturity such that this
is a good time to consider some liquidity event. Dr. Galakatos remarked,
“We feel there are some companies in our portfolio right now that could be
solid IPO candidates—for example, Globus Medical. Globus is on
pretty solid ground financially because the company has significant
revenues, earnings and a good growth plan.”
In addition, he said, “Zogenix is a late-stage specialty pharma
company anticipating approval of its lead product late this year. They did
a mezzanine round recently, and are considering an IPO to provide funding
for a commercial launch.” Among other companies in Clarus’ portfolio that
Dr. Galakatos is excited about, two are biopharmas that are currently
conducting phase II trials. “CoMentis and Aerovance both
have a first-in-class drug that targets a particular indication. CoMentis
is working on a product for Alzheimer’s disease and Aerovance is working
on an inhaled therapy for asthma.”
Dr. Galakatos pointed out that, “Investing in the life sciences space is a
long-term commitment, and we are all subject to market fluctuations, but
we need to maintain focus and have patience.” Clarus Ventures specializes
in specific areas of the health care market. “Our strategy balances
investing in biopharmaceuticals and medical devices, and we are very
disciplined,” he explained. “Valuations in medical devices may be a little
higher right now, but this is a cyclical business and therefore likely to
change in the future.” The firm essentially seeks out high-caliber
investment opportunities to support the development of products that will
ultimately enhance patient care. As Dr. Galakatos put it, “Our primary
focus is on quality, including quality of science, clinical assets, and
management. The health care industry is in constant need of high-quality,
innovative products that improve care and the delivery of care.”
Chrysalis Ventures is regionally focused on opportunities in the Midwest
and South, in three market areas: health care services and technology,
media and communications, and business services. “Within health care, we
really have a dual focus, seeking to invest in companies that enhance
productivity, and in companies that are benefiting from the shift to the
consumer-directed benefit design. For example, we expect that HSAs will
continue to grow in popularity and stimulate new opportunities in this
market,” elaborated Mr. Jones. As the shift towards consumer-directed care
continues, he said, “We feel consumers are going to be demanding higher
value, better outcomes, and useful communication and information systems.”
He continued, “Our focus is on companies in Middle America that use
technology to make traditional business processes substantially more
effective, or to build new business opportunities.” The firm is wasting no
time finding and funding such opportunities. “Already we have committed
about $20 million of the new fund, invested in four companies. We expect
that we’ll invest in around 20 companies through this fund.” Mr. Jones
also remarked, “One company I’m very excited about is HealthMedia,
which has grown rapidly, has an impressive customer base and is currently
at an exciting point to consider alternatives, such as an M&A
opportunity.” HealthMedia is a portfolio company in Chrysalis Ventures’
previous fund, which closed in 2002. “This company,” he said, “provides
automated disease management and wellness solutions. That is, they go
beyond traditional disease management, which puts nurses on the phone to
connect with patients, by leveraging the lower cost, but highly effective,
personalized capabilities of the Internet. HealthMedia offers disease
management and preventive health and wellness services to patients through
providers, self-insured employers and pharmaceutical companies. For
example, Kaiser is one of its clients.”
Mr. Jones also explained, “In the case of disease management, the idea is
to help diagnosed patients avoid the most serious possible complications
of progression of a disease, such as heart disease or diabetes, and to
actively manage their disease. HealthMedia facilitates the coaching of
people with chronic conditions and helps provide them with motivation to
maintain healthier habits.” Other health care companies in its current
portfolio the firm is very excited about include Chronicity and
Connecture.
In the sectors Chrysalis focuses on, we wondered if the firm has seen more
convergence lately between health care IT and business services. Mr. Jones
perceives that, “There is a good deal of crossover between the health care
and business services sectors right now. In health care, we concentrate
primarily on services, information technology and information providers.”
He continued, “Especially with the new communications technology today,
there are new opportunities in health care business services.”
Canaan Partners also announced the closing of quite a large fund in
February, bringing the firm’s total capital under management to $3
billion. Canaan VIII closed at $650 million, which will be invested
in next-generation, market-leading opportunities in both the technology
and health care sectors. Canaan’s previous funds have resulted in more
than 120 positive exits, including 53 IPOs. Within health care, Canaan
Partners specifically focuses on biopharmaceutical companies, particularly
those that are developing ways to combat infectious disease; medical
device companies working on next-generation devices for treating chronic
and major diseases; and diagnostic products that are tied to specific,
personalized therapies. Canaan expects that the size of its latest fund
will help facilitate the firm’s global expansion. Canaan intends to invest
up to 25% of Canaan VIII internationally, including through the expansion
of its activities in India and Israel.
Montreux Equity Partners also closed a good-sized fund recently,
MEP IV, a $250 fund that is to be invested primarily in
therapeutic-oriented life sciences companies. Located in Menlo Park,
California, Montreux has invested in companies including Cerexa,
Novacardia, Peninsula Pharmaceuticals and Orexigen Therapeutics
(NASDAQ: OREX). MEP IV has already invested in several companies,
including Avantis Medical, Tobira Therapeutics and Sequel
Pharmaceuticals.
Other fund closings that have been announced since the beginning of the
year include Synergy Life Science Partners, LP, a $143 million fund
dedicated to investing in emerging medical device technologies. This is
the debut fund for Synergy, which is based in Portola Valley, California,
and counts Parish Capital Advisors among its LPs. Founded in 2006,
Synergy’s team includes three principals who each have 25 or more years of
experience in the medical device industry. The firm’s areas of interest
include cardiovascular, orthopedic and metabolic diseases.
Avalon Ventures, a La Jolla, California-based firm that focuses on
investing in biotechnology, wireless communications and Web media
applications, is also concentrating on early-stage opportunities. The firm
closed Avalon VII with $150 million from LPs including Harvard
Management, Alpinvest Partners, Paul Capital and Grove Street
Advisors. In conjunction with the fund closing, Avalon has added two
new managing directors to its team, including Dr. Jay B. Lichter, an
experienced biotech and pharma business exec who has expertise in
management, scientific research and business development.
With ample funding available for investments in health care, we hope to
see more venture capital deals in each of the next ten months than we did
in the first two. We won’t be surprised if an increasing number of
investments feature milestone-based tranches. These days, venture
capitalists may be working more conscientiously than usual to invest in
opportunities that will result in a liquidity event. It would not surprise
us if the pace of investing becomes a bit less fervent this year. However,
the Angel Capital Association (ACA) recently released the results
of a survey showing that angel investors are optimistic about the
investment climate for early-stage businesses in 2008. According to ACA’s
data, nearly half of angel organizations expect deal flow to improve in
both quantity and quality this year. The organizations surveyed generally
expect investment activity to increase or remain level in the coming year.
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