Venture Round: Venture Capital To Go

That's the thing about Asian venture capital news. A week later and you find yourself still hungry for more.

Well, last week we profiled MPM Capital's first foray into India, a $20 million investment in Sai Advantium Pharma, a contract research organization. At the time, we declared it the first investment that a U.S.-based VC made in an Indian life sciences company, a designation we later had to undeclare as we failed to identify TPG Biotech (previously known as TPG Ventures, also recognizable as the venture firm affiliated with Texas Pacific Group) had invested in its own CRO, Matrix Laboratories Inc., two or three years ago.

Well, you're better off just reading what colleague Ellen Licking wrote about TPG's investment here or about other opportunities here.

But if you'd enjoy another little nibble. Dow Jones VentureSource's yesterday issued its first quarter report on venture investments in India. The report says India $99 million in venture investment with 16 deals completed, "a 27% drop from the fourth quarter that saw a record $135 million put into 17 deals."

Life sciences deals didn't account for much. The report mentions only two biopharmaceutical deals were done, totaling $11 million. Last year, life sciences and health care companies brought in $99.5 million, so in the words of Peter's Evil Boss Bill Lumberg "we need to sorta play catch up."

William Greene, general partner at MPM, says he expects other life sciences deals to follow the investment in Sai. "Given the quality of the deal flow and the interest these entrepreneurial companies have in accessing international venture capital I do think this is an area that is really going to grow," Greene says. But he's not ready to predict when the next deal might be done. "I can't say whether it's one month, two months or two years."

Well, after last week's experience, if he's not going out on a limb on this one, neither will we.

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Meanwhile, a few remote areas within the US are getting a little more attention, according to assorted reports.

Utah
VentureWire Lifescience reported that vSpring Capital well on its way to raising $200 million for its third venture fund. The firm is based in Salt Lake City, Utah and has offices in Albuquerque, New Mexico. vSpring invests in "Intermountain West region" companies operating in life sciences and other industries, according to the firm's web site.

Canopy Ventures secured $100 million for its second fund. The fund previously invested only in information technology companies, but General Partners Ron Heinz and Brandon Tidwell will target life sciences companies as well. Obviously, there's no shortage of opportunities there as we've written about opportunities and investments in medical device and personalized medicine.

San Diego
San Diego--which as we noted back in November suffers from an disproportionately low number of local VCs for a region so rich in pharma and research--has a new seed fund, again according to VentureWire. Mesa Verde Venture Partners, a successor firm to IngleWood Ventures, wrapped up $15 million for a seed fund in March, with some of the capital coming from two venture firms, vSpring and Sanderling Ventures. General Partner Daniel Wood--the Wood of IngleWood--and a team of venture partners scattered across the SouthWest will invest the capital in new health care start-ups in their respective regions. The strategy is an interesting one for Sanderling, which also has offices in San Diego. General Partner Fred Middleton told VentureWire the relationship provides Sanderling access to early-stage deals without committing too much partner time. It's made similar investments in the past in seed-stage firms in Pittsburgh and Silicon Valley.

Midwest

Finally, we leave you hopes and dreams from the Mid-West that coastal VCs will invest more capital in flyover states.

As evidence, the article--actually a report from a local venture conference--points to the recent $22.75 million spin off of Esperion Therapeutics from Pfizer Inc. as perhaps the beginning of a trend.

But clearly Esperion is too unusual a deal to build a thesis around. VCs will travel far and wide to invest in a ready made biopharmaceutical company led by its original CEO Dr. Roger Newton. You'll find an interview with Newton in our upcoming IN VIVO the Magazine. We'll link to it here when it's available.

But states like Minnesota and Michigan are drawing more attention from VC, particularly device VCs who see an fresh resource of talent coming from the recent spate of layoffs the spate of recent layoffs from Medtronic and Boston Scientific.

This rush of thousands of experienced medical device workers who don't have the require the same compensation as their Silicon Valley counterparts already is interest from coastal venture capitalists. New incubator--or accelerator--ConceptTx Medical Inc. is just one effort that will be able to tap this new pool of talent.

As always, if you have any private suggestions, tips, or if you really jonesing to talk venture this holiday weekend email me here. I'll get back to you Tuesday.

(Image courtesy of Flickr user Hfabulous through a Creative Commons license.)

Venture Round: Asian Flavor

A few years ago, back when it seemed like a firm bent on world domination, MPM Capital led a $48 million first round in TaiGen Biotechnology, a small molecule drug discovery company focused on oncology and immunology.

The real news at the time was that TaiGen was based in Taiwan. MPM had teamed up with a number of local firms to back the company, becoming the first U.S.-based VC to invest in a Taiwanese biotechnology company. At the time, in 2001, MPM looked to be the tip of the sword as life sciences venture capital firms looked East (or West really) for the opportunity to make investment in Asian companies. But no one followed MPM’s lead until just recently when firms like OrbiMed Advisors LLC and others began sponsoring Asian-focused firms. Still, early-stage investment in Asian biotechnology companies are rare. (Our February feature on recent investments in Chinese firms is here and an earlier 2006 discussion of VC reluctance to drop money in China and India is here.)

Why are we bringing this up? Well, MPM Capital appears to be Lewis-and-Clarking it again, this time in India. MPM made a $20 million investment in Sai Advantium Pharma, a contract research organization in Hyderabad, India. MPM made the investment after spending the “past couple of years” developing its emerging market strategy and developing deal flow in India. “Out of that work came a handful of opportunities, one of them being pharmaceutical outsourcing,” says William Greene, the general partner who managed the deal. “We then in parallel asked our portfolio companies if they were using preclinical outsourcing services and if they were going to India or China to do it. What came back was more than a handful of companies saying that we are doing chemistry outsourcing and we use this company in India called Sai Advantium.”

MPM followed through with more traditional due diligence. Everything checked out and MPM came to terms with Sai. While MPM was examining the company, Sequoia Capital’s India fund arranged to buy the shares of a Sai executive who was leaving the company and wanted to cash out. Greene said MPM considered buying the shares itself, but it didn’t want to obtain a stake through a secondary purchase. It wanted a piece of the company. Furthermore, Sequoia is among the US VCs with most experience in India, so MPM welcomed the expertise, he said.

A cynic—okay we—might wonder whether MPM’s initial search was fruitful since the firm’s first deal came through a referral from portfolio companies. But Greene says, “There are definitely a lot of opportunities there.

“I think we have pretty good deal flow in India considering that we are largely working with partners and talking about doing our kind of investment. There is no shortage of growth equity opportunities in hospital and health care infrastructure and that is the sort of thing we could invest in.” But MPM prefers to stick with its core strategy of investing in life sciences companies. “Those types of deals are certainly [out there]. The fact is the entrepreneurial environment for biotech and medical devices is early there. But even in the two or three years we’ve been traveling there, the fact of the matter is the country is poised, I think, to be a really good target for life sciences.” MPM also benefits from having Reliance Life Sciences, an India-based life sciences group, as a limited partner in its current fund.

Greene isn’t comfortable making this statement, but we’re going to go out on very wide limb and say this is the first significant investment that a US-based life sciences VC has made in an Indian company. “I’ve had a hard time finding [comparable investments],” Greene says. Buyout firms, however, are finding deals in more established health care companies.

(Update: Well, that limb wasn't as wide as we thought. We should have directed you to TPG Biotech's investment in Matrix Laboratories Ltd. , a contract research and manufacturing outfit in Secunderabad, India. Yes, TPG is affiliated with Texas Pacific Group, the buyout megafund. But it's still venture fund. Read all about it in our April 2006 START-UP here and here.)

Still, MPM, once again, finds itself ahead (check that, at the head) of the pack. However, unlike in Taiwan with the Taigen investment, we probably won’t have to wait very long for another venture firm to step up.

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Fund-raising Tidbits: Greene wouldn't say this, but it appears as if MPM will be out raising a new round, maybe as early as this year. It has invested more than half of its fourth fund.

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Merlin Nexus announced a first close of $40 million Merlin Nexus III, L.P. As it's done with its previous funds, Merlin (not to be confused with the former UK-based firm now operating under the Excalibur brand) will invest in late-stage private and public companies in the biotechnology, medical device, specialty pharmaceutical and molecular diagnostic fields. Merlin Nexus III has a $125 million target.

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Meanwhile, MVM Life Science Partners has closed on GBP130 million ($253 million) toward its third venture fund, according to this morning's VentureWire. MVM expects to hit its GBP150 million ($292 million) target in a few weeks.

As always, if you have any private suggestions, tips, or if you know if the Sunday Red Sox game is likely to be rained out email me here.

Golden Temple photo @ Wikimedia Commons

Deals of the Week: far from the Westin St. Francis

Attention JPMorgan attendees: we trust you've consumed enough resveratrol to make up for the pickled brain cells. Your steadfast Deals of the Week writer has been keeping tabs from afar and sighing over the gossip missed. (Feel free to drop a line with any juicy conference post-mortems.) Meantime, here's a review of the items you may have missed while talking it up at the Westin St. Francis.

Genzyme/Isis: The deal of the week, and the one generating all the buzz in the Westin hallways and Union Square restaurants was Genzyme's agreement with Isis for the southern California biotech's phase III anti-cholesterol medication mipomersen. As we wrote here, the deal, which included a $325 million up-front, $825 million in development and regulatory milestones, and an additional $750 million in commercial milestones, is a bold statement by specialist play Genzyme to remain an independent entity. Mipomersen, a lipid-lowering compound that targets apolipoprotein B-100, is a weekly injectable being investigated first for the rare, inherited disorder familial hypercholesterolemia (FH). Henri Termeer, Genzyme's CEO, describes the asset in the press release as a “very Genzyme-like product.” No doubt he's also eyeing its possible use in the general population in patients with high cholesterol and at high risk of cardiovascular events who are ineligible for statin therapy.

Pfizer/Tacera: Genzyme wasn't the only company dealing in the biologics space this week. On Monday, Pfizer signed yet another large molecule deal, this time with Tacere Therapeutics for world-wide non-Asian rights to the biotech's RNAi hepatitis C drug, TT-033. (Back in June, Tacere brokered with Oncolys BioPharma for the Asian rights to the same compound.) TT-033 is pre-IND, but that didn't stop Pfizer from agreeing to pay--potentially--more than $145 million in development and commercialization milestones. And that doesn't include the undisclosed up-front fee signed by the two companies. Pfizer has been among the most aggressive of big pharma's biologics acquirers, buying both Coley Pharmaceuticals (vaccine technology) and CovX (antibody scaffolds) late last year, as well as inking licensing deals with Xoma (antibodies) and Direvo Biotech (bioengineered proteins) last fall.

Wyeth/ Mochida Pharmaceuticals: Wyeth was another big pharma betting heavily on a preclinical compound this week. On Jan. 9, the pharma announced a deal with Japanese drug maker Mochida Pharmaceuticals for that company's experimental pain medication, a TRPV1 antagonist. Financial terms were not disclosed, but news reports cited Wyeth paying a one-time payment upon the signing of the contract, as well as milestone payments. In addition, Mochida retains the right to co-develop and market the drug in Japan. TRPV1 antagonists are in vogue within Big Pharma: Eli Lilly and Merck both have compounds belonging to this class in development. As we've mentioned before, Wyeth is not known for its overly aggressive business development team, which prefers early stage licensing deals over major acquisitions. Clearly Mochida's TRPV1 dovetails nicely with such a strategy and adds to the company's pain franchise, which also includes (the recently delayed at FDA) methylnatrexone thanks to a 2005 deal with Progenics Pharmaceuticals. (Though whether the deal can stem some of the pain resulting from last summer's troubles with Pristiq and bifuprenox remains an open question.)

Teva Pharmaceuticals/India: The Business Standard reports that Israel's Teva Pharmaceuticals plans to invest more than $1 billion dollars over the next 24 months buying Indian drug companies and setting up manufacturing facilities. We admit this isn't really a canonical deal of the week, but it does represent yet another example of off-shoring infrastructure, one of our major themes for 2008. (For more, check out the January issue of IN VIVO.) And it's not like this is something Teva is musing about doing. A few weeks ago, Teva acquired over 100 acres of land near Gwalior, Madhya Pradesh, to set up active pharmaceutical ingredient (API) manufacturing facilities that will match the production capacity of India's major generic players Ranbaxy, Cipla, and Dr Reddy’s.

Another Look at Asia

As a small follow up to our post last week on Sofinnova Partners' hiring an Asia-focused professional, VentureWire Lifescience reported this week that Canaan Partners added a principal whose partial duties include finding deal flow from Asia.

Mickey Kim will from Canaan's Westport, Conn. office. He joined the firm in July according to his bio.

Mickey joined Canaan from Pacific Point Ventures, a venture capital fund investing in healthcare infrastructure companies in Asia. Prior to co-founding Pacific Point Ventures, he invested in biotech and medical device companies at BioVentures Investors, including ActivBiotics, Applied Spine Technologies, Cylene Pharmaceuticals, Hydra Biosciences and Sciona. Mickey also served as a strategy consultant at McKinsey & Company and CSC Healthcare, and co-founded an Asian technology venture capital fund.

Canaan doesn't appear to have any health care portfolio companies in Asia at this point. It does have two IT-oriented deals in India.

No doubt there will be more news like this to come.