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— Analysis —
Building another ImClone might be a bit ambitious, but the success of the company helps explain why venture capitalists have taken a keen interest in the area. VCs poured more than $1.5 billion into drug, device and other cancer-focused startups last year and so far this year have invested about $600 million in the sector, according to data supplied by the National Venture Capital Association. Investment will likely rise as baby boomers age and as startups try to develop innovative ways to improve the quality of patients' lives. "There are patients dying because the available therapies simply don't work very well," says Llew Keltner, co-founder, president and CEO of Light Sciences Oncology Inc., a venture-backed developer of light infusion therapy to treat solid tumors.
There is demand for new treatments. Almost 600,000 people are expected to die this year in the United States from some form of cancer, and the illness is expected to afflict about 1.4 million, the American Cancer Society reports. With public markets all but dried up, startups are relying on investors' backing to continue development. Light Sciences canceled its $80 million initial public offering in February and then raised $40.1 million in Series C funding in mid-July from undisclosed investors. The Snoqualmie, Wash., company, whose backers include Essex Woodlands Health Ventures and Adams Street Partners LLC, plans to use the latest funds in part for two ongoing Phase 3 clinical trials for patients with liver carcinoma and metastatic colorectal cancer. Keltner says potential buyers have already pursued the company. There's general agreement that the fundraising environment has been challenging, but overall, investors in the cancer-therapy sector have been generous and patient. Cambridge, Mass., drug developer Merrimack Pharmaceuticals Inc. closed a $60 million Series F private equity financing in June, giving it $203 million in funding since its inception eight years ago. OmniGuide Inc., a Cambridge developer of a laser scalpel used in minimally invasive surgery, has made it to a fifth round, having closed a $25 million Series E private equity round in May, led by New York's Psilos Group. "Long-term our hope is to make an excellent return but we're very much about building great companies and not about rushing to exit," says Psilos co-founder and managing member Lisa Suennen. Others have managed to stretch out their funding. Durham, N.C., immunotherapy developer Argos Therapeutics Inc. closed a $35.2 million third round of funding in April from insiders and outside investors. Its $62 million in total VC backing, along with $98 million from licensing and partnership deals, will bankroll Argos through early 2010 at its current burn rate, says president and CEO John Bonfiglio, and will help support further development of treatments for cancer and HIV. "Whether we need another round is going to be determined by what kind of partnership deals we can do and what the environment looks like for an IPO," he says. New York's NGN Capital LLC sees so much promise in cancer treatment that in May it launched ACT Biotech Inc. of San Francisco and infused it with $12 million in funding. A developer of oral cancer drugs, ACT was founded through the acquisition of oncology assets from Bayer HealthCare LLC, which maintains a minority equity stake in the startup. ACT chief executive Wolf-Dieter Busse, (pictured) a former Bayer employee, says the company plans to close an initial Series A round of $24 million within two months. NGN co-founder and managing general partner Georg Nebgen says his firm helped launch ACT because it was confident about acquirers' interest in the opportunity to buy Bayer's compounds. "We will be highly pursued," he says. If Bristol-Myers' pursuit of ImClone is any indicator, he could be right. |
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