New $225M VC Fund Aims For Dozen Stem Cell Firms; Proteus Venture Partners Plans to Invest In 10 to 15 Companies at $10-$20M Per Investment
Published: Jul 28, 2008
Proteus Venture Partners plans to invest in 10 to 15 so-called regenerative medicine companies at $10 million to $20 million per investment, said Jeffrey Karan, senior partner with the Palo Alto firm.
Its investments could range from early-stage research straight out of academia to public companies with clinical trials, from Bay Area startups to international companies, and from embryonic stem cell innovations to cord blood technology, Karan said.
"It depends on the science and the developmental stage of the science," Karan said.
Proteus, led by Anthem Venture Partners founder Greg Bonfiglio, has focused on getting its lead investors since last summer, Karan said.
It's the second such venture for Bonfiglio, whose Anthem plowed $1 million to $5 million each into 20 companies, including Advanced Cell Technology and Corus Pharma, which was acquired by Gilead Sciences. Anthem investors included some from Saudi Arabia.
The fund-raising effort for Proteus comes against the backdrop of a dour market. Venture capital in Bay Area companies totaled $2.17 billion in the second quarter, down more than 9 percent from the year before, according to Dow Jones VentureSource.
There also remain questions whether stem cell therapies can work and can make it to market in the short window typically given by venture investors.
Advanced Cell Technology Inc. -- one of the better known embryonic stem cell companies, with facilities in Alameda and Worcester, Mass. -- said July 15 that its losses from operations, negative cash flows, stockholders' deficit and liabilities are such a burden that its current cash wouldn't last beyond July 31.
Other stem cell companies also have said that they are struggling to keep enough cash on hand to make it from the lab to the bedside, the so-called "valley of death."
But Karan said stem cell company costs rise modestly as products move beyond the preclinical stage and into later-stage trials. Typical biotech company costs, on the other hand, start low and escalate significantly as trials enter their latter stages.
What's more, Proteus looks to spread its fund's cash around, not just focus on embryonic stem cells.
Stem cell investing got new attention last month when Kleiner Perkins Caufield and Byers and Highland Capital backed iZumi Bio Inc. That Mountain View startup is working with the J. David Gladstone Institutes to reprogram adult stem cells -- which researchers believe will offer the same ability as embryonic stem cells to change into any sort of tissue cell -- for cardiovascular treatments.
Karan would not identify the two "highly significant" lead investors that Proteus hopes to snag in the next couple of months or how much they will put in. Proteus, he added, is in discussions with a number of institutional investors and is looking at investors globally.
"To some extent, this reflects the fund's global focus in regenerative medicine as we are seeking to invest in the best companies from around the world, not just in the U.S.," Karan said.
Proteus' venture partners include Fayad Dandashi, who established the first private cord blood bank in Saudi Arabia; Asma Ibrahim Al Asad, a co-founder of the Dubai Cord Blood & Research Centre; Susan Lim, CEO of Stem Cell Technologies in Singapore; and J. Ward Hills, CEO of a biotech consulting firm in the United Kingdom.
Bonfiglio also is a Portola Valley neighbor of Bob Klein, the chairman of the citizens oversight board of the California Institute for Regenerative Medicine. CIRM was formed out of voter approval of Prop. 71, which authorized the sale of $3 billion in state bonds to fund stem cell research.
Bonfiglio also is on the board of VistaGen Therapeutics Inc., a South San Francisco company that is developing a diagnostic screen that could help pharmaceutical companies use stem cells to determine the toxicity of a drug.