VentureBeat

TODAY’S HEADLINES:

• Vantia Thera spins out of Ferring, raises £19M (PDF release)
• Third Eye gets $150K for intracranial-pressure monitor (release)
• Diabetes tester Oculir closes doors, returns capital (VentureWire)
• Catalyst Health Ventures raising $60M fund (VentureWire)

Vantia Thera spins out of Ferring, raises £19M – Vantia Therapeutics, a U.K. spinout of Ferring Pharmaceuticals, has launched and raised £19 million ($37.7 million) in a first funding round (PDF link). Investors included MVM Life Science Partners, SV Life Sciences and Novo A/S.

Vantia inherits a collection of traditional “small molecule” drugs from its parent, including two that are already in clinical trials. Both drug candidate target the hormone vasopressin, which among other things regulates the body’s retention of water. One candidate is being tested as a possible treatment for enlarged prostate, the other for painful menstruation.

Diabetes tester Oculir closes doors, returns capital – Oculir Inc., a San Diego startup that aimed to develop a non-invasive glucose-testing device for diabetics, has instead shut down, VentureWire reports. The startup, founded in 2003, was working on technology designed to measure blood-sugar levels using infrared light bounced off the white of the eye. Such testing currently requires diabetics to prick their fingers for a tiny blood sample, often several times a day.

Unfortunately, the technology proved too challenging for the company and its backers. “It turned into a research project, and our venture investors wanted to invest in development, not research,” CEO John Burd told the news service.

Oculir raised $7.3 million back in December 2005 from Onset Ventures, CHL Medical Partners, Canaan Partners, Three Arch Partners, Shepherd Ventures and Windamere Venture Partners. It now plans to return an undisclosed sum to its investors — a fairly clear sign that Oculir’s VCs demanded that the company wind down its operations.

Catalyst Health Ventures raising $60M fund – Catalyst Health Ventures, a Newton, Mass., VC firm, hopes to raise a $60 million second fund, VentureWire reported. The fund will invest in medical-device, diagnostics, instrument and drug-screening startups.

Catalyst had pulled in $3.5 million of a planned $25 million as of Feb. 14. The firm intends to focus on early-stage companies and is looking to invest in six or more startups, often with initial investments of $2 million to $3 million.

TODAY’S HEADLINES:

• Precision Thera merger with “blank check” Oracle Healthcare collapses (release)
• Sleep Solutions takes in $21M for sleep-apnea diagnostics (release)
• Trevena takes in $24M for drugs targeting G-proteins (release)
• “Specialty biotech” PanGenetics gets €23M for antibody drugs (release)
• Cancer-drug maker Unibioscreen pulls in €5M (release)
• Danish contract manufacturer CMC Biologics raises new funding (PDF release)
• Healthcare investor EDF Ventures postpones fourth fund (VentureWire)
• Global TB-drug alliance names former Sanofi-Aventis exec Jerome Premmeurer as CEO (release)
• Liquidia Tech names Neal Fowler as CEO (release)

(NOTE: Sorry for the minimal posting yesterday — I was at the Health 2.0 conference with extremely limited Internet connectivity. Normal posting resumes today.)

Precision Thera merger with “blank check” Oracle Healthcare collapses – This item is now a standalone post here.

Sleep Solutions takes in $21M for sleep-apnea diagnostics – Sleep Solutions, a Pasadena, Md., developer of diagnostic devices for sleep apnea, raised $20.5 million in a new funding round. Investors included TPG Biotechnology, MedVenture Associates, Emergent Ventures and Lava Ventures.

Sleep Solutions has developed a home-use diagnostic device for identifying sleep apnea, which are breathing difficulties during sleep. Diagnosing apnea has traditionally required patients to spend the night in a sleep laboratory. Left untreated, apnea can increase the risk of more serious problems, including stroke and heart attack.

Trevena takes in $24M for drugs targeting G-proteins – Trevena (no Web site), a Berwyn, Penn., biotech focused on a new area of drug discovery, raised $24 million in a first funding round. Investors included Alta Partners, Healthcare Ventures, New Enterprise Associates and Polaris Venture Partners.

Like many biotechs, Trevena plans to develop drugs that attack a particular biological mechanism rather than any particular disease. In this case, the company is targeting a class of proteins known as G-protein coupled receptors, or GPCR, which according to the company are affected by close to 40 percent of all drugs on the market today. The company didn’t describe its plans in any detail.

Healthcare investor EDF Ventures postpones fourth fund – EDF Ventures, an Ann Arbor, Mich., VC firm specializing in early-stage healthcare, has delayed a planned fourth fund, VentureWire reports. The postponement is related to the departure last year of managing director Beau Lasky, who left for Steamboat Ventures.

The firm intends to begin talking to potential investors again in several months. EDF didn’t say how much it hopes to raise in the new fund; its third fund closed in 2005 with $55 million in commitments.

TODAY’S HEADLINES:

• InfraReDx takes $17M for arterial-plaque detection (VentureWire)
• Cancer-drug developer Serenex sells out to Pfizer for undisclosed sum (release)
• Life-sciences fund Longitude Capital raises $95M (VentureWire)
• Hospital consultant Intercede Health names Gray Miller as CEO (release)

InfraReDx takes $17M for arterial-plaque detection – InfraReDx, a Burlington, Mass., developer of diagnostic systems that detect arterial plaque, raised $17 million in a third funding round, VentureWire reports. Sanderling Ventures led the round, joined by new and previous individual investors.

InfraReDx previously planned to raise up to $40 million in order to support expected commercialization of its near-infrared device, which can identify buildups of arterial plaque that can rupture and lead to heart attacks (see our coverage). The test, however, requires a minimally invasive procedure in which the device is threaded into a patient’s circulatory system, making the InfraReDx device primarily useful for preventing second heart attacks in patients who are being treated for their first.

The company submitted its device for FDA approval in October, and is planning on a limited rollout if the device is cleared this quarter, as InfraReDx expects.

Cancer-drug developer Serenex sells out to Pfizer for undisclosed sum – Durham, N.C.-based Serenex, a biotech working on drugs that could be useful in cancer and other conditions, agreed to be acquired by Pfizer. The release is here. The companies didn’t disclose terms of the deal.

Serenex claimed to have a technology for developing drugs against a wide variety of cellular proteins, but in practice Pfizer appears to have been most interested in drugs that inhibit heat-shock protein 90, or Hsp90, a molecule that regulates other proteins crucial to cellular growth and survival. The startup’s lead compound, SNX-5422, is in early-stage, phase I testing against a variety of tumors.

Pfizer, of course, will also walk away with Serenex’s drug-discovery technology and a library of other drug candidates. Notably, however, Pfizer did not buy the startup’s leading experimental drug, SNX-1012, which is being tested against oral mucositis, a common side effect of chemotherapy. That, of course, leaves open the possibility that Serenex management — or someone else — will try to form a new company around that drug. This sort of strategy is increasingly popular; for my take on it, see here.

Life-sciences fund Longitude Capital raises $95M – Menlo Park, Calif.-based Longitude Partners, a spinout of Pequot Ventures, raised $95 million of an anticipated $325 million first fund, VentureWire reports. The fund will invest in biotech, medical-device and drug-development startups.

TODAY’S HEADLINES:

• Microsoft launches $3M fund to support online health-improvement tools (release)
• Clarus Ventures raises $660M life-sciences fund (release)
• Iverson Genetics raises $1.1M for blood-clotting tests, seeks $9.3M more (VentureWire)
• Upstart Ventures aims for $30M fund to seed Utah life-science ventures (release)
• CalHealth takes in $750K for blood-pressure monitoring (VW)
• Regenerative medicine co. Organogenesis acquires NanoMatrix (release)
• Electronic health-record firm MediNotes acquires Bond Technologies (release)
• Eclipsys acquires Enterprise Performance for healthcare financial-management (release)
• Healthcare analytics firm Urix acquires Predicted Solutions (release)

Microsoft launches $3M fund to support online health-improvement tools – Software giant Microsoft, hoping to make a splash at the annual meeting of the Healthcare Information and Management Systems Society in Orlando — don’t laugh; HIMSS is apparently the largest healthcare IT meeting in the world — announced a new $3 million fund intended to stimulate the development of online tools that “improve health.” In typical Redmond fashion, the fund will be known as the “Microsoft HealthVault Be Well Fund,” which is the sort of name only a committee could love.

Microsoft is soliciting grant applications in six areas ranging from primary and “secondary” prevention (essentially, the monitoring of vital signs such as blood pressure for hypertension or blood sugar for diabetes) to women’s and community health. The fund will make grants of up to $500,000, with selections made by “healthcare industry leaders” — read, representatives of Microsoft partners — chosen by the Microsoft Health Solutions Group.

Of course, funded applications must make use of Microsoft’s HealthVault platform, which we’ve written about here and here as a decidedly mixed bag of technologies and Web applications. Three million bucks sounds like a pretty trivial amount to spend to in an attempt to jump-start HealthVault, but I guess Microsoft has to start somewhere.

Clarus Ventures raises $660M life-science fund – Clarus Ventures, a Cambridge, Mass., VC firm, closed a second life-science fund of $660 million. The fund will aim to make investments of $20 million to $60 million in biotechnology, medical devices and specialty pharmaceuticals.

Clarus raised its first $500 million fund in Dec. 2006. That fund has made significant investments in a variety of life-science companies including Globus Medical (our coverage), Pelikan Technologies (our coverage) and Taligen Therapeutics (our coverage).

Iverson Genetics raises $1.1M for blood-clotting tests, seeks $9.3M more – Iverson Genetic Diagnostics, a Seattle maker of molecular diagnostics, raised $1.1 million in a first funding round and hopes to close a $9.3 million second round within a few weeks, VentureWire reports. Individuals provided the first round of cash, and Iverson is courting a “strategic investor” — that is, a corporate or laboratory partner of some kind — for the second.

Iverson recently won FDA approval for a genetic test designed to predict patient response to warfarin, a commonly used generic blood thinner intended to prevent dangerous blood clots. Last August, the FDA required the drug’s manufacturers to note that certain genetic factors can help establish proper dosing of warfarin, which can cause internal bleeding at high doses. (See our coverage here.) Although two million people in the U.S. take warfarin every year, adoption of the genetic tests has been slow. Iverson is one of at least three companies now offering those tests, which Iverson plans to roll out first in the Seattle area.

TODAY’S HEADLINES

• Sonoma Ortho names Glen Coleman as CEO, preps launch of bone implant (VentureWire)
• TechniScan draws $13M for ultrasound CT scanners (release)
• OrbiMed plans $150M Asian life-science fund (VentureWire)
• Accelerated Tech pulls in $47M, aims for $125M in second med-tech fund (VentureWire)
• Amedisys buys out TLC Health Care for $395M (release)
• Intertek acquires microbe measurer CML Biotech (release)
• Medical-device maker Cianna Medical names Jill Anderson as CEO (release)

Sonoma Ortho names Glen Coleman as CEO, preps launch of bone implant – Santa Rosa, Calif.-based Sonoma Orthopedic Products, until recently a stealthy developer of implants for treating bone fractures, named a new CEO as it prepares for the launch of its first product, VentureWire reports.

The company hired Glen Coleman, former U.S. head of sales and marketing for Wright Medical Technology, as CEO last October in preparation for the anticipated FDA approval of its first bone implant. That product, which Sonoma calls Ensplint, is a flexible implant intended for the hollow space of a broken bone, where it is supposed to speed the healing of fractures.

Ensplint is installed via a minimally invasive procedure, and is intended first for use in wrist fractures, an indication for which the company hopes to soon receive approval. Sonoma will request FDA clearance to use Ensplint in collarbone fractures later this year.

For more details, check out this May 2007 piece from the North Bay Business Journal, which makes clear — as VentureWire didn’t — that the market for bone-fracture treatment is primarily associated with osteoporosis. According to VentureWire, Sonoma has so far raised $13 million in two funding rounds.

TechniScan draws $13M for ultrasound CT scanners – Salt Lake City’s TechniScan Medical Systems, a developer of ultrasound breast-imaging systems for cancer detection in conjunction with mammography, raised $13 million in a fifth funding round. Investors included the Esaote Group and return backers from TechniScan’s board and angel investors.

OrbiMed plans $150M Asian life-science fund – OrbiMed Advisors aims to close a $150 million fund that will target Asian life sciences and healthcare services, VentureWire reports. The fund, Caduceus Asia Partners, will invest in 10 to 15 companies, primarily in China and India.

Accelerated Tech pulls in $47M, aims for $125M in second med-tech fund – Accelerated Technologies Partners, a VC firm and accelerator in Hackensack, N.J., raised $46.5 million toward an expected $125 million second medical-device fund, VentureWire reports. The firm has a primary focus on heart-related applications, and plays an active role in getting startups it funds off the ground.

TODAY’S HEADLINES:

• Teva acquires protein-therapeutic maker CoGenesys for $400M (release)
• ViewRay takes in $25M for MRI radiation-therapy guidance (release)
• NovaMed, Chinese clinical-research outfit, receives $14M (release)
• Progentix Ortho raises first funding round (release)
• Medical imaging co. Point Biomedical recaps with $25M (VentureWire)
• Lumidigm takes in $7M for optical-fingerprint ID systems (VW)
• Medical-software co. Compressus aims to close $14M round (VW)
• Channel Medical Partners aims for $150M med-tech fund (VW)
• Spinal-implant maker Scient’x names Michael Huggins as CEO (release)
• Specialty pharma Cardiokine names Manuel Worcel as CEO (release)
• Respiratory-disease co. Pulmatrix appoints Robert Connelly CEO (release)

Teva acquires protein-therapeutic maker CoGenesys for $400M — CoGenesys, a Rockville, Md., protein-drug biotech spun out of Human Genome Sciences in 2006, has been acquired by Israel’s Teva Pharmaceutical Industries for $400 million in cash. The companies’ joint release is here.

CoGenesys, like its former parent HGS, is focused on the development of protein and peptide drugs for a variety of conditions. The company’s two lead drug candidates aim to treat neutropenia, a depletion of white blood cells that puts people at risk of serious infection, and heart failure.

Teva said the acquisition advances its recently revised strategic goal of pursuing biotech drugs (”biopharmaceuticals”) and generic biologics (”biogenerics”). It’s not entirely clear whether Teva is interested in pursuing CoGenesys’ actual drug pipeline or simply putting its manufacturing technology to use in Teva’s existing international biogenerics business. No biogenerics have been approved for use in the U.S.

ViewRay takes in $25M for MRI radiation-therapy guidance — Gainesville, Fla.-based ViewRay, a developer of MRI-based cancer-radiation systems, raised $25 million in a second funding round. Investors included OrbiMed Advisors, Fidelity Biosciences, Aisling Capital and Kearny Venture Partners.

ViewRay claims its system will be the first to offer real-time “volumetric” imaging of tumors concurrent with radiation treatment, which ostensibly allows radiation oncologists to compensate for organ movement. The funding will go for additional staff and the manufacture and validation of advanced prototypes of the system. Our previous coverage of the company is here.

NovaMed, Chinese clinical-research outfit, receives $14M — NovaMed, a Chinese startup that performs outsourced commercial and clinical-trial management for Chinese and international drug companies, raised $13.8 million in a second funding round. Investors included Fidelity Asia Ventures, its US affiliate, Fidelity Biosciences, and Atlas Venture.

Founded in 2005 by a former AstraZeneca executive and a Chinese Internet entrepreneur, NovaMed essentially acts as a middleman for companies with drugs they’d like to sell or test in China. Depending on the client, NovaMed says it will do everything from running clinical trials and shepherding drugs through the Chinese regulatory process to manufacturing, distributing and selling pharmaceuticals.

The company had previously raised roughly $6 million. NovaMed said it will use the new funding to expand its operations and also to in-license new drugs for deveopment or sale in China.

Lumidigm takes in $7M for optical-fingerprint ID systems — Lumidigm, an Albuquerque, N.M., developer of multispectral fingerprint scanners, raised $7 million in a third funding round, VentureWire reports, citing a regulatory filing. Investors included Epic Ventures led the round, joined by new investor Sun Mountain Capital and existing investors Fort Washington Capital Partners, Motorola Ventures, Draper Fisher Jurvetson New England and Intel Capital. Lumidigm’s technology aims to read fingerprint information both from the skin surface and from subsurface layers to improve accuracy and foil attempts to spoof the technology.

Medical-software co. Compressus aims to close $14M round — Compressus, a Washington, D.C., software maker whose products link hospitals and doctors to government agencies for public-health monitoring and emergency response, is looking for an additional $1.3 million to close out a $14.3 million third funding round, VentureWire reports. The company, which was founded by three lobbyists, has so far raised more than $27 million from angel investors.

Channel Medical Partners aims for $150M med-tech fund — Channel Medical Partners, a Skokie, Ill., VC firm focused on medical-device investments, aims to raise a $150 million second fund, VentureWire reports. The new fund would be more than triple the size of its $40 million initial fund, raised in 2001. Channel aims to fund 12 to 15 startups with the new cash, and will concentrate on device firms, although it is open to investing in diagnostics, drug delivery and “specialty supply” companies as well.

It was another steady quarter of moderate growth for venture financings, with overall 2007 fundings setting a six-year high. Biotech edged out software as the recipient of the most largesse, while medical devices and cleantech showed strong growth. We slice and dice the numbers over at VentureBeat Life Sciences.

Venture-capital funding continued to rise in the fourth quarter, continuing a recent boom despite economic jitters sown by the subprime-mortgage financial mess.

VCs tossed $7 billion at startups in the fourth quarter, a substantial 12 percent rise over the same quarter last year, according to data published by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Financial. Fourth-quarter funding slumped a bit compared to the average of $7.5 billion raised in each of the first three three quarters, although it’s difficult to say at this point whether that reflects early economic nervousness or simply a seasonal Q4 slowdown in the deal flow.

Overall 2007 investment in venture firms also rose 11 percent to $29.4 billion, a six-year high. (Of course, the 2007 figure is still dwarfed by the staggering $105.1 billion that flowed into Web and genomics startups in 2000 at the height of the bubble.)

Biotech companies led in overall financing, raising $1.29 billion in the quarter — a four percent rise over last year — which let the sector narrowly edge out software, which pulled in $1.27 billion. The two sectors are effectively tied at this point, and have traded the first-place slot back and forth since mid-2006.

Medical devices also had a strong quarter with $900.7 million in funding, nearly a 35 percent increase over last year. Two of the top ten financings in the quarter were the medical-device firms Evalve , a maker of heart-valve repair kits, and Zosano Pharma, which is developing needle-free patches that deliver drugs through the skin. These companies raised $60 million and $45 million, respectively. Biotech’s sole representative in the top ten deals was Ambit Biosciences, which received $49.3 million to support its development of new cancer drugs.

Cleantech funding almost doubled over the previous year, reaching $468.7 million in the quarter — apparently a record quarter. Major deals included EverPower Renewables, which raised $55 million for wind-power farms and Serious Materials, which drew $50 million for green building materials.

It’s notable that the funding directed to early stage companies has continued to edge up over the past six years, reaching $6.3 billion in 2007. That comes against a backdrop, however, in which expansion- or late-stage companies are absorbing an increasing portion of all funding. (See the second chart at the bottom of this post.)

For a closer look, check out these lists of the top ten deals in the fourth quarter and all of 2007 (Excel spreadsheet files). If you prefer, here is a slide show of Q4 and 2007 trends (PDF), and here are the raw numbers (Excel spreadsheet).

A competing set of VC-funding numbers from Dow Jones VentureOne and Ernst & Young aren’t due out until Tuesday, but I’ll poke through them then to see if there’s any news worth reporting. Meanwhile, here are some more graphics for your weekend enjoyment.

TODAY’S HEADLINES:

• ViOptix pulls in $12M for tissue-oxygen sensors (release)
• Tethys Bioscience raises funding, preps diabetes-prediction test (release)
• Synergy Life Sciences closes $143M medical-device fund (release)
• Venture-backed Go Fig. files for bankruptcy protection (VentureWire, sub req’d)
• Whole-genome sequencer Knome strikes deal with Beijing Genomics Institute (release)
• Omeros, inflammation and CNS drug developer, files for $115M IPO (Edgar)
• Clinipace, clinical-trial software maker, seeks $2.6M (Triangle Business Journal)
• Seno Medical receives $1M from Texas state fund(release)
• Cardiovascular Systems pulls in $11M for arterial-plaque device (PE Hub)
• Escoublac draws $6.7M for diabetes treatments (PE Hub)
• Invitrogen acquires liver-cell product maker CellzDirect for $57M (release)
• RxElite buys drug-ingredient maker FineTech Labs for $17M (release)

ViOptix pulls in $12M for tissue-oxygen sensors — ViOptix, a Fremont, Calif., developer of tissue-oxygen sensors, raised $12.2 million in a fourth round of funding. Investors included Channel Medical Partners, Lincoln Funds International, Canadian Medical Discoveries Fund and Morningside Technology Ventures.

ViOptix, which was founded in 1999, makes non-invasive monitors that measure oxygen levels in the body’s tissues. Low oxygen levels can signal that a patient may have poor blood circulation, vascular disease, a tissue graft that isn’t taking, or even cancer. The company has so far raised a total of $28.7 million.

Synergy Life Sciences closes $143M medical-device fund — Synergy Life Science Partners, a newish Portola Valley, Calif., venture-capital firm, raised $143 million for its first fund, which will focus on medical-device investments. The firm was founded in 2006.

The firm intends to invest in early-stage companies developing medical devices or “combination” devices that deliver a drug of some sort to a particular location in the body. The company’s areas of interest include heart disease, bone and spinal disorders, metabolic conditions such as diabetes, neurological problems and eye conditions.

Synergy was founded by John Onopchenko, Richard Stack and William Starling. Onopchenko was most recently lead medical-device investor for Johnson & Johnson’s VC unit. Stack and Starling co-founded Synecor, a medical-device incubator with operations in California and North Carolina. Synergy will have the right to invest in Synecor companies.

Venture-backed Go Fig. files for bankruptcy protection — Go Fig., a venture-backed “medical aesthetics” startup in St. Louis, Mo., has filed for bankrupty protection, VentureWire reports (subscription required). Last month, the company closed 17 of its 18 clinics across the U.S.

Go Fig., formerly known as Advanced LipoDissolve, offered “micro-injections” that it claimed would dissove fat cells. The active chemical in its procedure isn’t regulated by the FDA, although some state officials have raised concerns about its safety. The company was backed by Bessemer Venture Partners, which last September plowed at least $10 million into Go Fig. to assist with its clinic-expansion plans.

TODAY’S HEADLINES:

• Specialty pharma Innocoll raises $30M for collagen technologies (release)
• Immusol changes name to ItherX Pharma, names Jeffery McKelvy CEO (release)
• Austin’s Santé Ventures raises $130M healthcare VC fund (release)
• Belgium’s AlgoNomics, immunogenicity screener, names Philippe Stas as CEO (release)

Specialty pharma Innocoll raises $30M for collagen technologies — Ashburn, Va.-based Innocoll, a developer of collagen-based drugs and drug-releasing implants, raised $30 million in an equity financing. Investors included Camulos Capital, NewSmith Asset Management and Morgan Stanley. In addition, previous investors Rolf and William Schmidt converted $16 million of existing loans into convertible preferred stock.

The company doesn’t yet have a Web site — even the link in its release doesn’t work — but apparently specializes in biodegradable surgical implants that release drugs over a period of time, as well as topical versions of existing drugs. Its main product is an implant that releases the antibiotic gentamicin at the site of surgical procedures. Innocoll is also developing a topical form of gentamicin and an implant for the control of postsurgical pain.

Austin’s Santé Ventures raises $130M healthcare VC fund — Santé Ventures, a newly formed Austin, Tex., VC firm, raised a debut $130 million healthcare fund. The fund will invest in seed and early-stage companies working on new medical technologies and healthcare services.

Santé traces its roots to three organizations — Ascension Health, a network of Catholic hospitals; Ascension Health Ventures, an associated $150 million VC fund; and Austin Ventures. The firm will invest nationally, although with a focus on the central U.S., and has offices in Austin and Nashville, Tenn.

TODAY’S HEADLINES:

• Essex Woodlands raising $1.25B for life-scences fund (VentureWire, sub req’d)
• SCP VitaLife raises $122M for life sciences (VW)
• Pantec Bio draws CHF 6.3M for laser-drug delivery (release)

Essex Woodlands raising $1.25B for life-scences fund — Essex Woodlands Health Ventures, a Palo Alto, Calif., VC firm, is in the process of raising a new $1.25 billion fund for life-sciences investments, VentureWire reports. The fund could close as early as this month, but might slip into early 2008, according to the newswire.

The fund, Essex Woodlands’ eighth, would be double the size of the firm’s previous $600 million fund. It would also be the largest such healthcare-focused fund ever raised, dwarfing a $900 million fund MPM Capital pulled together in 2002.

With such a large fund in hand, Essex is likely to favor later-stage investments, which typically require far larger commitments, as well as venture investments in public companies. The firm has recently bolstered its investment team and expanded its geographical reach, having recently closed its first two deals in China.

SCP VitaLife raises $122M for life sciences — SCP Vitalife, a life-sciences fund formed by the U.S. investment firm SCP Partners and the Israeli VC firm Vitalife, has secured $122 million toward an expected $150 million life-science fund, VentureWire reports. The firm currently believes the fund will exceed its target, but won’t go above its “hard cap” of $200 million.

A pre-existing partnership between the late-stage U.S. VC firm and its early-to-mid stage counterpart has already produced two successful investments — Sightline Technologies, a startup developing endoscopic diagnostic systems, which was acquired in March 2006, and Can-Fite BioPharma, which listed on the Tel Aviv stock exchange in 2005. The firms then decided to raise the current fund together.

MPM Capital, a VC firm headquartered in Boston and South San Francisco, Calif., wants to put Indian life-science firms on notice that it’s comin’ a-huntin’. The VC firm told reporters for VentureWire, Reuters and others that it plans to actively pursue equity investments in privately held Indian healthcare firms over the next six months.

William Greene, a general partner at MPM, said he would like to see the firm make one or two Indian investments over the next six months, each “in the range” of $20 million. MPM would plan on taking stakes of 10 percent to 40 percent in the life-science companies it invests in, Greene said.

Areas of interest for MPM include drug discovery outsourcing, contract research and manufacturing services and medical devices. Greene said he’d also be interested in companies developing novel therapeutics. “India is a highly under-penetrated market for life sciences,” he told reporters.

MPM has already take steps to raise its profile in the subcontinent. In April, the firm announced a partnership with Mumbai-based Reliance Life Sciences (PDF link), in which Reliance invested in MPM’s BioVentures IV fund and will advise MPM as it identifies and invests in emerging Indian life-science companies. Among other things, MPM said it would explore the possibility of establishing a seed fund devoted to India.

Because Yahoo! News stories often succumb to linkrot, the text of the Reuters piece follows the jump. Read the rest of this entry »

Are venture capitalists really shunning biotechnology, as I wrote a few days ago? A deeper look at the data suggests the answer is still yes, although not exactly for the reasons I first suspected.

First off, the most striking data point I noted in my earlier post — that VC funding accounted for just 62 percent, or $872 million, of the $1.4 billion invested in biotech startups during the third quarter — did indeed turn out to be a statistical anomaly. According to Jessica Canning, director of global research at VentureOne, a single private-equity deal accounts for most of the difference: Blackstone Group’s $500 million investment (PDF) in Stiefel Laboratories, a maker of skin-care products.

Although I didn’t know this until recently, VentureOne counts private-equity startup investments as “venture capital” so long as the investment doesn’t amount to a buyout and at least one traditional VC firm is involved. As a result, VentureOne’s VC-funding numbers don’t actually differentiate between VCs and private equity, as I had mistakenly assumed. Since the Stiefel deal didn’t involve traditional VC, however, VentureOne classified it as a non-VC equity investment, thereby skewing the top-line “equity-finance” numbers. “Skewing,” by the way, is my term, not Canning’s — I find it kind of hard to believe that any investment in a 150-year-old company like Stiefel (it was founded in 1847) should be included in what is ostensibly a measure of startup funding, but Canning said a VentureOne client had specifically requested that the deal be included in the data. Since it was apparently a minority investment, in it went.

Canning also argued that VC backing for biotech remains strong, and sent along the following data to underscore that aggregate biotech funding over the first three quarters of this year remains up compared to last year (click on the image for a larger and more legible version):

I’m not wholly reassured. Those aggregate numbers obscure the fact that biotech funding went gonzo in the first quarter — jumping to a record $1.8 billion that exceeded the previous high by almost 30 percent — but then fell sharply for the subsequent two quarters. Biotech backing in Q3 was lower than any quarter since the first quarter of 2006, and if you want to discount possible seasonal effects, it was also the worst third quarter since the dark, post-bubble days of 2002. In fact, when measured against the prior-year quarter, Q3 marked the first time biotech funding has fallen in two-and-a-half years. The number of deals also dropped to a level not seen since early 2005.

That said, one quarter of data doesn’t make a trend, as a commenter kindly pointed out earlier. Still, I suspect the relatively horribleness of this quarter might have gotten a bit more attention without the confounding effects of the Blackstone/Stiefel deal on the top-line numbers. We’ll be keeping a close eye on this going forward.

(UPDATED: See below.)

At first glance, life-sciences investments seemed largely to hold steady in the third quarter, despite failing to match a 7.6 percent rise in overall funding, according to data from VentureOne and Ernst & Young. A closer look, however, reveals a very different story — namely, the fact that venture capitalists appear to be fleeing the biotech sector with great speed. Private equity and other non-VC funding sources are presumably taking their place, at least for now.

Biotech startups raised $1.4 billion in equity financing during the quarter, according to the top-line data VentureOne/E&Y normally makes available (click on the chart thumbnail at left for more detail). It turns out, however, that only 62 percent of that, or $871 million, originated with VCs, with private equity and other non-VC sources making up the difference.

Overall VC investment in biotech dropped by more than a third — 38 percent — in the quarter compared to a year earlier. That precipitous drop stands in sharp contrast to 2006 and the first half of 2007, when VCs accounted for the vast majority of biotech financings. (According to VentureOne, VCs still account for almost all medical-device investments as well, although now I wonder if that data can still be trusted on that point; see below.)

As you’d expect, many of the top biotech deals in the quarter involved non-VC investors. GlobeImmune, which raised $41.2 million in September in the quarter’s third-largest biotech funding, counts a number of private-equity and hedge funds among its investors, including Wexford Capital. (See a detailed list in our coverage here.) Tengion, which raised $33 million last month, was backed by non-VC financiers such as Deerfield Partners, Bain Capital and Johnson & Johnson.

That said, the reason for the sharp one-quarter drop in VC funding remains kind of a mystery. VentureOne’s quarterly financing data is often pretty “chunky,” in the sense that the numbers can swing wildly based on whether a just a few deals fall on one side or the other of the quarterly cutoff. On the other hand, a few VC firms with interests in life science have recently announced cutbacks or cancellation in new fundraising — see, for instance, news on Enterprise Partners here, while Matt Marshall noted problems at Sequel Venture Partners in Boulder, Colo., here — and while there’s not exactly an avalanche of such issues, these announcements might be trailing indications of bigger problems to come. I’ll be looking into this more closely as soon as I can.

On a separate note: What seemed like a nascent revival in innovative, early-stage biotech companies earlier this year may have petered out. Looking only at VC fundings, seed rounds accounted for only 6.9 percent of all deals, compared to 11 percent a year ago. Second and later-stage fundings accounted for 60 percent of all VC biotech fundings, way up from 47 percent last year.

Overall, healthcare-related equity financings rose a meager 3.7 percent in the quarter compared to a year earlier. By contrast, total startup investments rose 7.6 percent. Biotech fundings dipped slightly compared to a year earlier, falling 2.3 percent to $1.4 billion. Medical-device investments continued to rise sharply on that basis, jumping 19 percent to $830.3 million, although funding was down compared to the first and second quarters.

Major deals in medical devices during the quarter included Globus Medical ($110 million), Simplex Diabetic Supply ($50 million) and Satiety ($30 million). Arguably, however, neither Globus nor Simplex really qualifies as a VC deal, as I noted at the time (here and here). Which could, in fact, suggest that VCs may be pulling back from the device sector as well, and that only definitional issues with the data are obscuring that fact for now.

UPDATED: Rewritten to focus on the sharp decline in biotech VC financing.

UPDATE REDUX: I’ve since taken a closer look at the data with the help of VentureOne. Things aren’t exactly what they seemed, although the outlook for biotech still isn’t good: See here.

Featured companies: 20/20 GeneSystems, Bellicum Pharmaceuticals, Cumbre Pharmaceuticals, Dara BioSciences, Enterprise Partners Venture Capital, Fermentas, International, Iasis Medical, New Leaf Venture Partners, Point Therapeutics, Power Medical Interventions, Rules-Based Medicine, Spinal Restoration, Still River Systems, Targanta Therapeutics

(UPDATED: See below.)

[NOTE: In the interests of getting items up as quickly as possible, I'm going to begin posting linked headlines, which I'll subsequently flesh out in many -- but not all -- cases. As the news gets heavier, the briefing is taking longer and longer to put together, to the point where I sometimes don't have much time to write about anything else. Feel free to let me know in comments how well this works for you.]

Spinal Restoration raises $16M for disc augmentation — Spinal Restoration, an Austin, Tex., developer of an implantable material designed to treat lower back pain, raised $16 million in a second funding round. Investors included Santé Health Ventures, MB Venture Partners, Austin Ventures and Path4 Ventures.

The startup is working on a filler biomaterial for ruptured spinal discs. This fibrin sealant, which is derived from human sources, is designed to be injected into ruptured discs in order to seal internal fissures and to prevent the leakage of the disc’s contents, potentially in a way that could encourage further healing. If it works, the process could potentially replace spinal fusion for patients whose injuries don’t respond to rest and physical therapy.

Antibiotic maker Targanta becomes latest disappointing biotech IPO — The Cambridge, Mass., developer of an in-licensed antibiotic for drug-resistant infections priced its IPO below its expected range, then saw its newly listed shared decline in early trading. Targanta priced as many as 5.8 million shares at $10 apiece, below its $12 to $14 range (see our coverage), raising the company a maximum of $57.5 million — down considerably from the $92.6 million it had hoped for.

Following the listing, Targanta’s shares dropped almost immediately, and by early afternoon were trading at $9.35, down 65 cents, or 6.5 percent.

I raised concerns about Targanta’s strategy here (capsule version: The company’s antibiotic Oritavancin faces a slew of competition and hasn’t even been tested in-house, as Targanta licensed it at a late stage from another company). Now it looks as though investors may have harbored similar reservations.

Power Medical sets IPO terms, aims to raise up to $62M for computer-assisted surgical instruments — Power Medical, a Langhorne, Pa., developer of computer-assisted surgical tools, said it would price up to 4.4 million shares at $12 to $14 apiece, which would allow it to raise as much as $61.6 million. Its SEC filing is here.

The company’s latest plans amount to a significantly smaller IPO than the $100 million offering it had initially contemplated. We last wrote about Power Medical’s IPO plans here.

Tularik spinoff Cumbre Pharma raises insider financing for anti-infective drugs — Dallas-based Cumbre Pharmaceuticals, a specialty pharma developing new anti-infective drugs, raised a new funding round from individual investors. Terms of the transaction weren’t disclosed.

Cumbre spun out of the former biotech Tularik (since acquired by Amgen) in 2001. It is focused on developing “hybrid” antibiotics formed by fusing together individual antibiotic compounds in hopes of producing more potent drugs that can take on microbes resistant to current antibiotics. Its lead compound, CBR-2092, has completed early-stage human trials, and is intended to attack drug-resistant staphylococcus infections.

Investors in the round included a number of prominent individuals in the life sciences. Among them were Tularik co-founder David Goeddel, Tularik and Cumbre co-founder Steven McKnight, Xenoport president William Rieflin, and former EDS president Morton Meyerson.

New Leaf Venture Partners raises $450M healthcare fund — New Leaf, a bicoastal VC firm with offices in New York and Menlo Park, Calif., raised $450 million for a new healthcare-technologies fund. The firm intends to target later-stage biotech and specialty pharma companies, early-stage medical-device developers, and new molecular diagnostics.

Bellicum Pharma draws in $3.8M for cancer vaccines — Bellicum Pharmaceuticals, a Houston biotech aiming to develop cancer vaccines, drew in $3.8 million in seed funding and a grant from the state of Texas. The company pulled in seed funding of $2.3 million from local angel investors; the $1.5 million grant was awarded by the state’s Emerging Technology Fund.

Bellicum is developing a therapeutic vaccine against prostate cancer that is designed to turn the body’s own immune-system defenses against tumors. (Dendreon, whose Provenge vaccine has been in the news over the past several months, is taking a similar approach.) The new wrinkle in Bellicum’s approach is that the company genetically modifies dendritic cells, which help direct immune responses against invaders in the body, so that they can be “activated” at a particular time and in a particular location in the body by applying a triggering chemical. There’s more here.

Other headlines of note:

• Dara BioSciences goes public with Point Therapeutics merger (release)
• Genetic Immunity raises $2M in bridge financing for HIV immunotherapy
• Rules-Based Medicine acquires EDI (release), wins $1.1M federal contract (release)