Newly Formed Durata Therapeutics Acquires Pfizer's Vicuron ...
Newly Formed Durata Therapeutics Acquires Pfizer’s
Media Coverage Report
December 21, 2009-January 4, 2010
• January 4, “VCs take over dalbavancin”
• December 21, “Durata acquires Vicuron”
BioCentury Part II
• January 4, “Deals”
• December 23, “NewCo News: Pfizer Spinout Durata Pushing Dalbavancin to FDA
• December 22, “Other News to Note”
Dow Jones VentureWire
• December 28, “Venture Firms Jump Back Into Antibiotics, With Winning Results”
• December 22, “Investors Spin Pfizer's Vicuron Into New Co. Durata Therapeutics”
Genetic Engineering & Biotechnology News
• December 21, “Durata Therapeutics Acquires Pfizer’s Subsidiary that Develops
Private Equity Hub
• December 21, “Durata Therapeutics Launches, Buys Virucon Pharma”
• January 4, “Experts Predict More Attrition, But More Opportunities As Well”
Press Release Postings
Genetic Engineering & Biotechnology News
Private Equity Hub
Dow Jones VentureWire
December 28, 2009
Venture Firms Jump Back Into Antibiotics, With Winning Results
By Brian Gormley
When Cubist Pharmaceuticals Inc. (CBST) bought Calixa Therapeutics Inc. last week, it marked
the third time in the last four years that an antibiotics start-up funded by Canaan Partners and
Domain Associates had been sold.
Canaan and Domain were also among the investors in Peninsula Pharmaceuticals Inc., acquired
by Johnson & Johnson (JNJ) in 2005, and Peninsula spinout Cerexa Inc., which merged with
Forest Laboratories Inc. (FRX) in 2007. Investors at the two firms, working with other, like-
minded venture capital firms, made several good moves along the way to drive the companies
In the 1990s, pharmaceutical companies pulled away from antibiotics in favor of other markets,
such as medicines for large, chronic conditions. But the problem of antibiotic resistance
wouldn't go away just because drug makers had, something Canaan, Domain and other
firms recognized early this decade.
In response they started Peninsula Pharmaceuticals to develop drugs for life-threatening
infections. Peninsula licensed doripenem, a treatment for serious conditions in hospitalized
patients, and a cephalosporin antibiotic aimed at a broad spectrum of pathogens, including the
hospital bug methicillin-resistant Staphylococcus aureus.
Peninsula's success in demonstrating doripenem's clinical potential led to its $245
million merger with Johnson & Johnson, which wasn't interested in the company's
cephalosporin. That drug became the basis for Cerexa, whose backers also included Peninsula
investors Pappas Ventures and Montreux Equity Partners.
While developing this therapy, Cerexa added an arm to its Phase II study in which it compared
the product to vancomycin, an antibiotic hospitals use when others have failed. Though not
powered to show superiority over vancomycin, the encouraging results of that study gave
acquirers one more reason to believe Cerexa's drug would succeed, said Canaan General
Partner Brent Ahrens. Forest bought Cerexa for just under $500 million in January 2007.
That same year, Canaan, Domain and Frazier Healthcare Ventures launched Calixa around an
Astellas Pharma Inc. (ALPMY, 4503.TO) drug Cerexa considered but never acquired. The drug,
CXA-101, targeted Gram-negative bacterial infections, which have emerged as an increasingly
serious problem. Though CXA-101 is potent on its own, Calixa elected to combine the drug with
a generic antibiotic, tazobactam--which is also part of the marketed anti-infective, Zosyn--to
give it broader activity.
The opportunity to obtain such a drug candidate enticed Cubist to pledge $92.5 million up
front, plus $310 million in milestones, for Calixa.
Canaan and Domain, which have invested together in several other deals as well, share many
views on how to build biotechnology companies, said Ahrens. Peninsula, Cerexa and Calixa ran
lean operations early on to minimize expenses. Another plus was continuity in management of
the three companies, since Dennis Podlesak, now a Domain partner, served as chief executive
of each one. "Not that we don't disagree on some things, but there's a lot of
similarities about how we go about running our businesses," Ahrens said.
The firms are now teaming up with Aisling Capital, New Leaf Venture Partners and Sofinnova
Ventures to spin the former Pfizer Inc. (PFE) antibiotics subsidiary Vicuron Pharmaceuticals out
into a new company, Durata Therapeutics Inc., which aims to propel the injectable antibiotic
dalbavancin to U.S. approval.
While Peninsula, Cerexa and Calixa were developing earlier-stage assets, Durata plans to begin
testing dalbavancin in Phase III studies in late 2010. And whereas those companies were
acquired before their products completed Phase III studies, Durata's fate hinges on the
success of dalbavancin in the upcoming trials.
Part of the appeal of antibiotics, however, is that early studies are predictive of future clinical
results. Peninsula's doripenem, for instance, has gone on to earn U.S. approval. In
dalbavancin, venture firms are getting a product that has generated Phase III data in acute
infections of the skin and skin structures, and one that has been in more than 1,000 patients.
There is potential that dalbavancin, which could be dosed once weekly, will enable patients
who would now be hospitalized to receive daily intravenous antibiotic infusions to go home.
That would make it easier for patients to comply with their antibiotic regimen, said Domain
Partner Nicole Vitullo.
Domain and Canaan continue to consider new investments in antibiotics, which are a good fit
for small companies because the regulatory pathway is straightforward and clinical studies
relatively inexpensive. "We find the anti-infective area feels very comfortable from the venture
point of view," Vitullo said.
Dow Jones VentureWire
December 22, 2009
Investors Spin Pfizer's Vicuron Into New Co. Durata Therapeutics
By Brian Gormley
Five venture firms are financing a Pfizer Inc. spinout that plans to drive a new injectable
antibiotic to U.S. approval.
Venture firms have formed Durata Therapeutics Inc. to acquire Pfizer subsidiary Vicuron
Pharmaceuticals and its Phase III drug, dalbavancin. The amount Aisling Capital, Canaan
Partners, Domain Associates, New Leaf Venture Partners and Sofinnova Ventures have
committed to Durata is undisclosed, but New Leaf Managing Director Ron Hunt said it is
Some of the capital was paid to Pfizer, which does not own equity in Durata, but the majority
will go to develop dalbavancin, which is expected to enter Phase III trials in late 2010, Hunt said.
Spinouts are complex transactions, but they enable venture firms to piggyback on the
investment that has gone into assets that are not priorities for their corporate owners. Pfizer,
which paid $1.9 billion to acquire Vicuron in 2005, is keeping Vicuron's marketed antifungal,
Eraxis, but is parting with dalbavancin and two preclinical Vicuron antibiotics.
Venture firms executed a similar deal in April 2008, when Aisling, Domain, Alta Partners and
Arboretum Ventures funded Esperion Therapeutics Inc., which spun out of Pfizer after being
acquired by the company in 2004. More recently, New Leaf and Domain teamed up with
Pappas Ventures and Third Rock Ventures early this month to spin pain-therapeutics start-up
Afferent Pharmaceuticals Inc. out of Roche Holding Ltd.
In Durata, venture investors saw an unusual opportunity to finance a drug all the way to U.S.
approval, Hunt said. Dalbavancin is a long-acting, injectable, lipoglycopeptide antibiotic that has
generated Phase III results in acute bacterial infections of the skin and skin structures. More
than 1,000 patients have received the drug, which has potent activity against Gram-positive
bacteria, including methicillin-resistant Staphylococcus aureus, according to Durata.
The drug's properties give it potential to be dosed once weekly, which could be a key value
driver, according to Hunt. Instead of hospitalizing patients to control infection with daily
intravenous infusions, hospitals could treat them with dalbavancin once a week and allow them
to go home.
"Because [of] once-a-week dosing, we think it has the opportunity to be quite a large drug,"
Hunt said, though he did not give specifics. Durata is virtual for now, but Hunt said it will likely
be based on the East Coast, and that details about its team and clinical strategy would come
Antibiotics have been a fertile field for venture investors lately. Last week, Calixa Therapeutics
Inc., an antibiotics start-up funded by Canaan, Domain and Frazier Healthcare Ventures, was
acquired by Cubist Pharmaceuticals Inc. for up to $402.5 million in cash and milestones.
Canaan, Domain and New Leaf were also among the investors in Cerexa Inc., an antibiotics
company acquired by Forest Laboratories Inc. in 2007 for just under $500 million.
In addition to Hunt, the Durata board will include Aisling Partner and former Vicuron Chief
Financial Officer Dov A. Goldstein; George Horner, an executive partner of Sofinnova and
Vicuron's former chief executive; Sofinnova General Partner James Healy; Domain Partner
Nicole Vitullo and Canaan General Partner Brent Ahrens.
December 23, 2009
NewCo News: Pfizer Spinout Durata Pushing Dalbavancin to FDA Approval
By Jennifer Boggs
Assistant Managing Editor
Pfizer Inc.'s antibiotic dalbavancin, which had advanced all the way to FDA review before
getting hung up in the agency's shifting guidelines regarding noninferiority studies, is ready to
head back to the clinic with start-up Durata Therapeutics Inc.
Five venture investors - Domain Associates LLC, New Leaf Venture Partners, Aisling Capital,
Sofinnova Ventures and Canaan Partners - worked with New York-based Pfizer to structure a
stock-purchase deal under which they would acquire the assets of Vicuron Pharmaceuticals
Inc., which Pfizer bought in 2005 for $1.9 billion. The big pharma firm is hanging on to Eraxis
(anidulafungin), a marketed antifungal agent, but the rest of Vicuron's pipeline, consisting of
dalbavancin and two preclinical antibiotic programs, was transferred to Durata. (See BioWorld
Today, June 17, 2005.)
That kind of spinout, especially one involving a late-stage asset, can be tricky, said Ron Hunt,
managing director at New York-based New Leaf Ventures. "But we had a unique set of
circumstances here," he told BioWorld Today. "We had a group of investors and a pharma firm
willing to work collaboratively to fund a win-win [agreement]."
The VCs had been looking for a promising candidate in the antibiotic space, which is "still quite
an interesting field to invest in," Hunt said, pointing to clinical development plans that require
shorter trials than drugs in other indications such as cancer and a handful of recent successful
deals involving antibiotic firms.
Last month, Cubicin (daptomycin) maker Cubist Pharmaceuticals Inc., of Lexington, Mass.,
agreed to pay $92 million for San Diego-based Calixa Therapeutics Inc., in a deal that could
bring up to an additional $310 million in milestones to Calixa shareholders. Cubist will gain
rights to a Phase II-stage antibiotic for Gram-positive Pseudomonas aeruginosa infections. (See
BioWorld Today, Dec. 15, 2009.)
In October, Boston-based Paratek Pharmaceuticals Inc.'s late-stage antibiotic for drug-resistant
infections scored a potential $485 million deal with Novartis AG, of Basel, Switzerland. And, a
month later, Trius Therapeutics Inc., of San Diego, joined the list of biotech firms hoping to go
public, filing for an $86 million initial public offering to fund Phase III studies of torezolid in
complicated skin and skin structure infections (cSSSIs). (See BioWorld Today, Oct. 9, 2009, and
Nov. 10, 2009.)
But for Hunt and Durata's other investors, Pfizer's glycopeptide antibiotic dalbavancin stood
For starters, the drug is backed by a wealth of clinical data, having been tested in more than
Results have shown "very nice Gram-positive coverage, including MRSA," he said. And,
importantly, its pharmacokinetic profile allows for once-a-week dosing vs. the twice-daily
dosing regimens required by other antibiotics, and could limit hospital stays for patients and
even offer the possibility of outpatient treatment.
"So it lends itself to a very interesting health economics story," Hunt said.
It also helps that two of the VCs - and now board members - had formerly been execs at King of
Prussia, Pa.-based Vicuron. Dov A. Goldstein, of Aisling, had served as vice president and chief
financial officer, while George Horner, of Sofinnova, was CEO.
Pfizer, which already markets Zyvox (linezolid) for cSSSIs, received an approvable letter for
dalbavancin in 2007 as a once-weekly, two-dose treatment in cSSSIs, including those caused by
MRSA (methicillin-resistant Staphylococcus aureus). At that time, Pfizer said the FDA, which had
recently published draft guidance on noninferiority studies as the basis for approval of
antibacterial products, had requested additional data.
Dalbavancin wasn't the only antibiotic to stumble at the regulatory level. Cambridge, Mass.-
based Targanta Therapeutics Corp. (later acquired by The Medicines Co.) received a complete
response letter for oritavancin, as did ceftobiprole from Basel, Switzerland-based Basilea
Pharmaceutica AG. And the agency informed another Swiss firm, Arpida A/S (now merged with
Evolva SA), that another trial would be needed for approval of its antibiotic, iclaprim, in cSSSI.
(See BioWorld Today, Jan. 21, 2009.)
South San Francisco-based Theravance Inc. and partner AstraZeneca plc, of London, finally won
approval for Vibativ (telavancin) in September, nearly three years after first submitting its new
drug application. (See BioWorld Today, Sept. 15, 2009.)
Durata has not yet released details for its clinical plan for dalbavancin. Hunt said the firm
anticipates initiating another trial in the second half of 2010.
The good news is that Durata should be funded through to dalbavancin approval. The amount
of investment by the five venture firms was not disclosed, but Hunt called it a "significant
amount of capital," most of which will go directly to dalbavancin work.
After approval, the company will have to decide how to proceed with commercialization, but
taking the drug to market on its own "could be one of the scenarios," Hunt said.
Durata has started putting together a management team. Its board consists of Hunt, Goldstein
and Horner, as well as Nicole Vitullo, of Domain Associates; James Healy, of Sofinnova; and
Brent Ahrens, of Canaan
December 22, 2009
Other News to Note
Durata Therapeutics Inc., of New York, has acquired Vicuron Pharmaceuticals from Pfizer Inc.,
also of New York. Durata is a newly formed biotech company that was created by a five-
member venture capital syndicate to pursue late stage clinical development of antibiotic
programs. The acquisition was funded through a stock purchase by New Leaf Venture Partners,
Domain Associates, Aisling Capital, Sofinnova Ventures Inc. and Canaan Partners. Durata is
focused primarily on Vicuron’s antibiotic drug candidate, dalbavancin. Durata’s product
portfolio also includes two preclinical antibiotic programs. Pfizer will retain the marketed
antifungal agent, Eraxis (anidulafungin), which was formerly owned by Vicuron. Terms were not
January 4, 2010
VCs take over dalbavancin
By Michael Flanagan & Stacy Lawrence
Four years and three complete response letters after dalbavancin was brought into Pfizer Inc.
(NYSE:PFE) as part of the pharma’s $1.9 billion acquisition of Vicuron Pharmaceuticals Inc., a
group of VCs have spun the asset back out with plans to do the clinical work needed for
regulatory approval. Newco Durata Therapeutics Inc. plans to begin a Phase III trial of the once-
weekly injectable antibiotic in 2H10.
The syndicate could reprise its successful role in bankrolling Cerexa Inc., which spun out just as
Peninsula Pharmaceutical Inc., was being acquired by Johnson & Johnson (NYSE:JNJ) in 2005.
Starting with $50 million in initial funding, Cerexa ran a Phase II trial of ceftaroline, a fifth-
generation cephalosporin, and was sold to Forest Laboratories Inc. (NYSE:FRX) a year later for
just under $500 million (see BioCentury, Dec. 16, 2006).
Durata’s VCs include three Cerexa alums: Canaan Partners, Domain Associates and New Leaf
Venture Partners. They were joined by Aisling Capital and Sofinnova Ventures. Aisling’s Dov
Goldstein and Sofinnova’s George Horner know dalbavancin well, as they were CFO and CEO,
respectively, at Vicuron when it was acquired in 2005.
Dalbavancin completed three Phase III trials showing noninferiority to vancomycin, cefazolin
followed by oral cephalexin, and to linezolid on the primary endpoint of clinical response in
complicated skin and skin structure infections (cSSSI). Nonetheless, FDA issued three
approvable letters; the most recent in 2007 requested additional data.
In September 2008, Pfizer said it was withdrawing global marketing applications and planned to
run an 18-month Phase III trial to show non-inferiority to other antibacterial drugs in severe
Ron Hunt, managing director of New Leaf, said Durata won’t discuss its development strategy
until early this year after a management team is in place. “But we think it offers an interesting
and unusual investment opportunity for a venture syndicate to fund a company with the
objective being FDA approval.” If successful, this could lead to an early exit.
While the details of the deal weren’t disclosed, Hunt said Pfizer was willing to structure the
terms so that “the vast majority of our committed capital will be put towards advancement of
the asset,” rather than for upfront payments to the pharma.
Durata also received rights to Vicuron’s preclinical pleuromutilin and lincosamide antibiotic
programs, while the pharma retained its marketed anti-fungal agent Eraxis anidulafungin.
December 21, 2009
Durata acquires Vicuron
Newco Durata Therapeutics Inc. (New York, N.Y.) acquired Vicuron Pharmaceuticals Inc., a
subsidiary of Pfizer Inc. (NYSE:PFE), for an undisclosed amount. Durata gains dalbavancin, a
lipoglycopeptide antibiotic slated to begin a Phase III trial in 2H10 for complicated skin and skin
structure infections (cSSSIs). In 2008, Pfizer withdrew an NDA in the U.S. and an MAA in Europe
for dalbavancin. FDA has issued three approvable letters for the compound, the most recent of
which came in 2007 and requested additional data.
Durata also gains Vicuron's preclinical pleuromutilin and lincosamide antibiotic programs. Pfizer
will retain rights to its marketed anti-fungal agent Eraxis anidulafungin, which it also acquired
through its 2005 acquisition of Vicuron. Durata was formed by New Leaf Venture Partners;
Domain Associates; Aisling Capital; Sofinnova Ventures; and Canaan Partners.
BioCentury Part II
January 4, 2010
Durata Therapeutics Inc., New York, N.Y.
Pfizer Inc. (NYSE:PFE), New York, N.Y.
Newco Durata acquired Pfizer’s Vicuron Pharmaceuticals Inc. subsidiary for an undisclosed sum.
The deal includes dalbavancin, which is slated to start a Phase III trial to treat complicated skin
and skin structure infections (cSSSIs) in 2H10. In 2008, Pfizer withdrew an NDA in the U.S. and
an MAA in Europe for the second-generation, once weekly glycopeptide antibiotic. FDA has
issued a total of three approvable letters for the compound, the most recent of which came in
2007 and requested additional data. Dalbavancin already has completed three Phase III trials
for CSSI (see BioCentury, Sept. 15, 2008). The deal also includes Vicuron’s preclinical
pleuromutilin and lincosamide antibiotic programs. Pfizer will retain rights to marketed anti-
fungal agent Eraxis anidulafungin, which it also acquired through its 2005 acquisition of
Durata was formed and funded through a stock purchase by New Leaf Venture Partners;
Domain Associates; Aisling Capital; Sofinnova Ventures; and Canaan Partners. Two former
Vicuron executives will serve on Durata’s board: Aisling’s Dov Goldstein, who was formerly EVP
and CFO of Vicuron; and Sofinnova’s George Horner, the former CEO, who will serve as an
Genetic Engineering & Biotechnology News
December 21, 2009
Durata Therapeutics Acquires Pfizer’s Subsidiary that Develops Antibiotics
Durata Therapeutics is taking over a Pfizer subsidiary focused on antibiotics called Vicuron
Pharmaceuticals. It gains late-stage dalbavancin and two preclinical programs. Pfizer will retain
the marketed antifungal agent Eraxis™, used to treat Candida infections in the blood, stomach,
Durata is a newly formed biopharmaceutical company, created by a five-member venture
capital syndicate to pursue late-stage clinical development of novel antibiotic programs. The
acquisition of Vicuron was funded through a stock purchase by New Leaf Venture Partners,
Domain Associates, Aisling Capital, Sofinnova Ventures, and Canaan Partners.
Dalbavancin is a long-acting, injectable, lipoglycopeptide antibiotic. It is being tested in Phase III
as a treatment for acute bacterial infections of the skin and skin structures. The drug has
pharmacokinetic properties that enable once-a-week dosing and offers activity against Gram-
positive bacteria including MRSA, according to Durata.
Private Equity Hub
December 21, 2009
Durata Therapeutics Launches, Buys Virucon Pharma
Durata Therapeutics Inc., an antibiotic development platform recently formed by five venture
capital firms, has acquired Vicuron Pharmaceuticals, developer of an antibiotic drug candidate
called dalbavancin, from Pfizer. No financial terms were disclosed. Durata’s backers are New
Leaf Venture Partners, Domain Associates, Aisling Capital, Sofinnova Ventures and Canaan
January 4, 2010
Experts Predict More Attrition, But More Opportunities As Well
By Trista Morrison
The beginning of every new year brings an inevitable desire to dust off the old Magic 8-Ball and
make predictions about what's to come.
There's no question as to the fallibility of such predictions: In early 2008, no one could have
fathomed just how bad things would get, and in early 2009 no one dared hope things would
rebound as well as they have recently. But that doesn't make mankind any less eager to guess
what fortune has in store - especially this year, when the biotech industry is surrounded by so
Is the current economic recovery sustainable? Will there be more attrition, or has the industry
right-sized itself? Will there be an IPO window? What's the health of the venture sector, and
what kind of deals will they be funding? Will there be money for innovation?
These are just a few of the financial issues weighing heavily on the minds of biotech executives
interviewed by BioWorld Insight. Below, a panel of experts offers their predictions.
Is the Darwinian Attrition Over? Outlook Not So Good.
BioWorld reported on 11 biotech bankruptcies late last year and 22 more this year. Between
liquidations and last-resort mergers, the industry lost some well-known names, among them
Altus Pharmaceuticals Inc., Genaera Corp., Metabasis Therapeutics Inc., Oscient
Pharmaceuticals Corp. and many more.
Yet one buy-side investor said what's really amazing is how many companies didn't disappear
that probably should have. Those borderline biotechs were saved by a retail frenzy, in which
the surprise success of companies like Vanda Pharmaceuticals Inc. and Vermillion Inc. created a
rush into microcap stocks. The momentum allowed many struggling companies to raise money
and literally buy themselves a respite.
That respite is likely temporary, however. Unfavorable financing terms, such as heavy warrant
coverage, could make future fundraising difficult. And investors warned that when a company
raises just $5 million after claiming this is the last cheap entrance to a stock everyone wants, it's
a difficult sell the next time around. (See BioWorld Insight, Dec. 14, 2009.)
Michael Ross, managing partner at SV Life Sciences, agreed that the industry hasn't right-sized
itself yet. "There are a lot of companies that are going to need funding over the next year or
so," he said.
But continued attrition is good, according to Bob More, general partner with Frazier Healthcare
Ventures. More noted that biotech always has been an "exceptions business" - the folks that
succeed are the exception rather than the rule - so attrition is inevitable.
"I don't think there's anything wrong with that," More said. "That's the great thing about
entrepreneurship - everyone has a right to take a shot at it, even if not everyone has a right to
Will There Be an IPO Window? Most Likely.
With initial public offering paperwork on file from 10 biotech companies and three drug stocks
already out the door, execs are wondering, "Is it all wishful thinking or is an IPO window really
going to happen?"
The consensus seems to be that there will be a limited window for quality companies,
particularly those "within an arm's length of commercialization," according to Ross. More
pointed to recent filer Ironwood Pharmaceuticals Inc., which already has good Phase III data
with its bowel drug, as an ideal candidate.
Yet buy-siders tend to dislike all the focus on whether or not the window is opening because it
"makes the IPO seem like something special and it's not - it's just a financing event," according
to one portfolio manager. Good companies will be able to raise money, and whether they do it
through a venture round, an IPO or a follow-on offering is immaterial.
Nicholas Galakatos, managing director at Clarus Ventures, disagrees. He argued that the
prospect of an IPO window - "something we couldn't even begin to think about last year" -
indicates renewed interest in the biotech sector.
And even though IPOs have represented a financing event rather than an exit for quite some
time, they offer VCs the ability to recoup some money, which can be passed back to limited
partners and then redeployed in the sector. This "capital recycling" is critical to supporting VC
investment in new companies, according to Steve Gullans, managing director of Excel Venture
More added that ultimately, if a newly public biotech continues to perform well, an IPO
eventually can offer a path to liquidity.
Bankers, investors and venture capitalists alike worry that in addition to rock solid IPO
contenders, the window will attract struggling firms that have failed to find money through
private investors or partners and that view the public market as their final option.
"What would be sad to me is if an IPO window opened and everyone got funding," More said. "I
don't think that will happen, but we just can't lose the discipline we've built over the last two
Will Venture Firms Fund New Deals Again? Signs Point to Yes.
Regardless of whether or not an IPO window opens, biotechs need a way to generate the large
sums of money required for Phase III trials. Partnering is the obvious answer, but Ross warned
"you have to have a way to say, 'If we get a low-ball offer from pharma, we can take it all the
Some companies are already doing just that. Gloucester Pharmaceuticals Inc. funded lymphoma
drug Istodax (romidepsin) through FDA approval without public money or a partner (though the
firm later was acquired by Celgene Corp.). Although Gloucester was the first privately held
biotech to achieve such a feat in at least five years, Ross predicted more will follow. (See
BioWorld Insight, Nov. 16, 2009.)
As venture investors prepare to fund companies farther, the traditional venture model is
starting to evolve. Ross said the Series A-Series B-Series C-IPO approach, in which each round
adds a new investor and offers an uptick in valuation, has almost disappeared. "When you start
a company, you better have the folks around the table who can finish the job," Ross said. (See
BioWorld Insight, Aug. 24, 2009.)
More agreed the initial syndicate must be prepared to carry the company all the way to an exit,
and he noted that's one of the biggest changes in the venture world. But he also senses that
some venture firms are finally starting to look at new investments, after a year of focus on
internal rounds and sustaining portfolios.
"I think there will be third party-led transactions this year," More said.
Finding new investors and pulling together syndicates may be harder with fewer VCs to choose
from. Many venture firms that postponed fundraising in 2009 will have to start pounding the
pavement this year, and the experts don't expect all of them to find a favorable reception with
their limited partners.
At a conference last fall, Dennis Purcell, senior managing director with Aisling Capital, predicted
the venture industry will shrink by half in the next 10 years.
Are VCs Going to Pony Up for Innovation? Don't Count on it.
Fewer investors means a higher bar for investments. Who's going to get the money? Ross said it
will go to experienced management teams, as always - particularly those developing mature
Some of those assets might be licensed failed companies, such as how Alnara Pharmaceuticals
Inc. spun out the Phase III cystic fibrosis drug liprotamase (formerly Trizytek) from Altus
Pharmaceuticals Inc. Others might get divested in the wake of mega-mergers, such as how
Pfizer Inc. outlicensed dalbavancin and other antibiotic assets to start-up Durata Therapeutics
Ross also believes venture firms will remain interested in distressed assets, which he defined as
"good companies with lower pre-money valuations." Such investments have historically
provided solid returns for VCs, he noted.
More agreed VCs will look to invest in experienced management teams, and he predicted an
uptick in diagnostics investment as well as funding for "people who can do more with less and
projects that can be validated fairly quickly." Gullans, too, believes capital efficiency will remain
critical, with virtual business models continuing to replace the idea of building a full-fledged
But what about funding for early stage companies? More predicted that some money will start
to trickle into innovation, but he said there probably won't be a return to the old "put some
smart scientists in a pot, add money and mix" approach.
Gullans believes the lack of funding for innovative companies is transient and may ease up once
the IPO window opens. If some of the later-stage companies can exit, their low-priced, de-
risked models will cease to temp VCs away from earlier-stage, riskier investments.
Yet Ross noted that, in the end, VCs are hired to make money for their limited partners, not to
fund the biotech industry. "If we can't make money in early stage stuff, we won't do it," he