Venture capital may be advancing like a glacier these days, but earlier investments now melting into profits could be a sign investment is about to pick up.
Triathlon Medical Ventures, a Cincinnati-based biotech and medical-device venture fund that has an office in Indianapolis, is reaping millions of dollars from its earlier investment in BioVex Group Inc.
The Massachusetts-based developer of cancer drugs was acquired by Amgen Inc. in a $1 billion deal earlier this year. The sale has already netted Triathlon a tidy sum from its $8 million investment in BioVex: more than $26 million, plus more expected in the form of milestone and other payments.
Triathlon also invested in West Lafayette-based cancer drugmaker Endocyte, before its recent initial public stock offering that raised $79 million.
With an initial offering price of $6.40, Endocyte’s shares lately have been flirting with $12.
On the heels of such successes, Triathlon’s goal is to create an additional fund and begin fundraising, perhaps yet this year, said Suzette Dutch, managing partner of Triathlon.
The recent returns have helped stoke its existing fund, which also has stakes in such Indianapolis firms as CoLucid Pharmaceuticals Inc. and CS-Key Inc., which is developing cancer diagnostics and therapeutics.
CoLucid is developing a drug to treat and prevent migraine headaches.
“We’ve been very pleased with the performance of their product” in trials, Dutch said.
To the extent such venture firms continue to take successful payoffs from earlier investments, they are going to be in a much stronger position to raise money from investors for future deals, said David Johnson, president and CEO of BioCrossroads, which promotes Indiana’s life sciences sector.
Such successful payoffs are key to garnering new investment in venture funds because investors have been more cautious than ever in recent years. Spooking them are the economic downturn, health care reform, changes in insurance reimbursement for drugs and medical devices, and higher hurdles for U.S. Food & Drug Administration approval.
So nowadays, venture investment often chases later-stage opportunities in the form of companies with human trial data aplenty. Odds of landing investment are often best for companies in less risky, underserved niche sectors.
“Overall, innovation and novelty is going to win the day in getting substantial backing,” Jonathan Silverstein, general partner of New York City–based Orbimed Advisors, told the Indiana Life Sciences Summit last fall.
“They’re wanting a more certain promise of returns earlier. … The dollars are just getting more selective and more risk-averse,” BioCrossroads’ Johnson added.
One such firm was Carmel-based Marcadia, a promising diabetes and obesity drugmaker launched by former Lilly scientists. The 5-year-old, 11-person firm earlier this year sold to drug giant Roche for $537 million, with venture firms on the coasts raking in much of the return.
Evidence that venture firms are being more selective may be reflected in data kept by PricewaterhouseCoopers and the National Venture Capital Association. In the first quarter, dollars invested in the biotech sector rose a modest 6 percent from the fourth quarter, to $784 million.
But the number of deals dropped 17 percent, to 83 deals.
“This marks the fewest number of deals in a single quarter for the biotechnology sector since the second quarter of 2003,” stated the report.
Time will tell whether returns venture funds have made of late on companies such as BioVex will result in additional funding in the region’s life sciences and medical device sector.
Carrie Bates, a managing director of Triathlon at its Indianapolis office, said the firm is focusing on companies with strong prospects of reducing health care costs and that address an unmet clinical need.•