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Sofinnova Ventures Raises $440 Million for Biotech-Only VC Fund


10/17/2011 7:27:20 AM

Amid the doom and gloom of venture investing in biotech, Sofinnova Ventures said Monday that it has raised a $440 million life sciences-focused fund.

Sofinnova's eighth fund is aimed at late-stage companies — including those spun out of drug-development programs acquired by Menlo Park-based Sofinnova — so it won’t necessarily help cash-hungry startups or other young companies. Yet Sofinnova general partner Mike Powell said the cash is earmarked for life sciences companies only.

“It’s clinically later-stage assets, but we’re the Series A investor in 80 percent of companies,” Powell said.

This comes against the backdrop of a National Venture Capital Association survey in which 39 percent of venture groups claimed to decrease their U.S. life sciences investments over the past three years. Third-quarter health-care deals fell 22 percent year-over-year to 143, according to a recent report from CB Insights.

Seed rounds as a share of all deals, however, jumped 11 percent in the third quarter, according to CB Insights.

Much of the hesitancy is connected to the moribund IPO market — only six drug companies have gone public this year.

One of Sofinnova’s investments, Anthera Pharmaceuticals (NASDAQ: ANTH) of Hayward,raised $42 million in March 2010. It opened at $7 per share but closed Friday at $5.85.

What’s more, the average stock price of this year’s 13 life sciences IPOs have fallen 7.4 percent by the end of August, compared to their IPO price, according to San Francisco life sciences financial services firm Burrill & Co.

“This is my fifth fund at Sofinnova, and it’s the first time in 14 years when I went into LPs and they asked, ‘Why should I be investing in venture at all?’” Powell said.

Sofinnova’s new fund, Sofinnova Venture Partners VIII, is the first life sciences fund raised by Sofinnova since a $375 million fund 2007 that was 85 percent focused on life sciences and invested in nearly 20 companies.

Partners of the new fund, Sofinnov’a first dedicated solely to life sciences, are Powell, Dr. Jim Healy, Dr. Garheng Kong, Dr. Anand Mehra, Dr. Lars Ekman and David Kabakoff.

About 60 percent of the fund will be used for spinouts, Powell said. In those cases, Sofinnova takes a whole division out of a pharma company — teams, individuals, intellectual property or products — and forms a new company around those assets.

Off limits for the fund are areas like type 2 diabetes and obesity, where the Food and Drug Administration’s bar is set high. That translates into more patients in a trial, which means higher costs.

Meanwhile, Powell said, Big Pharma knows it can wait later and later — for Phase IIb or III results or even the first two or three quarters of sales — before paying for a drug.

“What we don’t want to do is a Phase IIa or b, spend $40 million, and then no one will partner with you,” Powell said.




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