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Good News from Capital Markets: Some VCs Taking a Long View  

2008-09-04 17:08:25|  分类: Bio-Pharma |  标签: |举报 |字号 订阅

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http://www.tmcnet.com/usubmit/2008/08/29/3626034.htm

(BioWorld Today Via Acquire Media NewsEdge) The National Venture Capital Association (NVCA) has been gloomy about the sorry state of the capital markets, at least when it comes to IPOs for their investments. They recently declared a crisis, suggesting dire consequences for innovation and job creation if the situation doesn't improve. (See BioWorld Today, Aug. 4, 2008.)


Luckily, venture capitalists don't actually think in the limited time frames that define most economic downturns, market corrections and IPO windows. And if you measure the health of venture capital by the money it is raising and investing, it's doing just fine, thank you.

In 2007, VC funds raised almost $35 billion, the highest level since the waning go-go days of 2001. For the first half of 2008, despite a serious downturn in the economy and some alarming developments in the credit markets, VC funds actually are tracking ahead of where they were this time last year, having raised more than $16 billion.

Life science funds are a big part of that. Just in August we saw new funds raised by Versant Ventures ($500 million) and InterWest Partners ($650 million), with TPG Ventures looking to raise a new $550 million biotech fund.

Is that sustainable? Absolutely, according to NVCA, which observes that we're still a far cry from the $108 billion raised in 2000. Of course, the turn-of-the-century excesses of the VC industry only became unsustainable because the capital markets were no longer willing to buy the increasingly silly things VCs were selling.

I wouldn't suggest that we're in the same situation today. But there are a couple of similarities between today and yesterday's dotcom excesses. For one thing, even modest VC financing can become unsustainable if corporations and the public markets are uninterested in the goods, which is where we seem to find ourselves at the moment. And while there are a lot of macroeconomic reasons for that hesitancy, I'd argue that at least a bit of it has to do with investors not particularly liking what they're being sold.

Lack of exit opportunities is unlikely to be a long-term problem. The $35 billion raised in 2007 was below the $38.7 billion in total exit value (IPOs and mergers) from that year. Admittedly, this year looks a little different - $16 billion raised in the first half of 2008 vs. about $6.3 billion in exit value, almost all of it from mergers and acquisition (which is more likely to come at a fixed price and not offer the possibility of rising in value later). Nevertheless, it's likely a temporary reversal. But the second issue - lackluster companies - could be a longer-term problem.

That's why it's been encouraging to see not just a lot of money being raised by VCs, but some more long-term thinking, some more genuine risk taking, in the companies they help create.

To be sure, many of the life science companies raising capital over the past few months have followed some sort of "de-risked" business model.

Portola Pharmaceuticals, for example, has brought in some big VC bucks lately; it raised $60 million in July, bringing its total cash raised to more than $200 million. It commands those big figures because it has relatively advanced candidates - all in-licensed.

Betrixaban, in-licensed from Millennium Pharmaceuticals in 2004, is a Factor Xa inhibitor now in Phase II. PRTO60128, a platelet adhesion inhibitor also in Phase II, was in-licensed from Astellas in 2005.

The company does have internal discovery based around Syk kinase inhibition, but that is pretty much classic "accelerated commercialization" - similar to the in-licensing models at other recent recipients of VC funding like Anthera Pharmaceuticals.

I'm not necessarily knocking it - those companies could produce very successful drugs - but the emphasis here is on the in-licensed opportunities, not the company's ongoing ability to create successful new products.

Alvine Pharmaceuticals, pursuing a much-needed treatment for celiac disease, recently added $5 million to its first venture round from 2006, according to VentureWire, bringing the total to an impressive $26 million as it pursues a Phase I trial of its lead (and apparently only) candidate. Alvine may do great things for the world, but it's pretty much a one-product company without a clear means of building out its pipeline.

And it is in many ways emblematic of another in-vogue biotech start-up model: a discrete opportunity, built around just one or two molecules. Another example is InteKrin Therapeutics, which just raised a $20 million Series C round and is pretty much built around a former Amgen molecule.

If successful, those companies could create attractive returns, but as long-term investments, they create binary risk profiles that seem a better fit within a larger company with more discovery capability.

A wrinkle on that profile is CoMentis, which raised $20 million in June. It is really a combination of three one-product companies: Athenagen, Osprey Pharmaceutical and Zapaq.

How refreshing, then, to see a different kind of deal come down the pike. Cambridge, Mass.-based Proteostasis just raised $45 million in a Series A round from some prominent VCs, despite the fact that it has nothing in the clinic and probably won't for years. The company is working on small-molecule regulators of protein homeostasis - the mechanisms that fold proteins, traffic them around cells and break them down - with an initial focus on neurodegenerative diseases.

It is big idea stuff - with top-shelf scientists who will be a long time in turning the science into something of tangible value for its investors, but who potentially could create a platform with enduring value.

And it follows a small handful of similarly encouraging deals. Agios Pharmaceuticals, for instance, which raised a $33 million Series A round in July to develop a platform based on modulating cancer metabolism. Constellation Pharmaceuticals raised $32 million in April to pursue its epigenetics platform. Neither of those companies have any clinical or even preclinical drug candidates. Neither has any in-licensed drugs or any other apparent plans to give their early investors a speedier exit.

With money coming in at a healthy pace but not finding an easy exit, VCs may want to think more about these kind of "big idea" platform companies. They take longer to nurture and mature, but ultimately offer the chance of creating more long-term value. And after all, what's the hurry these days? n

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