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Friday, June 20, 2008

VCs ready for stem cells?

Traditional wisdom on the street (that's main st. not wall st.) says that VCs are not yet backing cell therapies or regenerative medicine type investments because (a) it's too early, (b) they got burned at the tip of the gartner curve in or around 2000, (c) they're waiting for the first home-run/blockbuster or even modest success story, (d) the regulatory pathway is too ambiguous, (e) the business models are not clear, and/or (f) all of the the above or any any other logical sounding reason.

While there certainly is some truth to the cited reasons, it's not true that VCs have stayed away from the cell therapy/regen med pool - ok maybe they've just rolled up their pants and stepped gingerly into the wading pool end! While VC participation to-date may be modest relative to the size, number, and/or enthusiasm of VC funding in other sectors, there certainly is evidence to counter a blanket statement about lack of VC participation.
  • I maintain a database which today lists ~225 investors with one or more investments in a cell therapy or regen med play representing ~290 investments in ~110 cell therapy companies plus ~23 pharma, biotech, or device companies with an investment in an external stem cell and/or cell therapy-related venture.
  • Toucan Capital - likely one of the undisputed pioneers in VC funding for stem cells - has been building a very early-stage portfolio for several years.
  • So far this year there has been deals announced representing ~$500M largely in the purchase or license of product lines. Additionally there has been~$149M in direct investment deals announced.
  • Certainly companies like Geron on the public side and Tengion on the private side have done just fine raising money to-date.
This week's positive sign was the announcement of Kleiner Perkins Caufield & Byers funding of iZumi Bio Inc - an induced pluripotent stem cells play. KPCB (namely Beth Seidenberg and perhaps others) has been following the sector for some time but to my knowledge has not made any investments.

While iZumi has not revealed their business strategy, the announced focus of their research will be "
potential use of stem cells in cardiovascular medicine and drug discovery". Certainly the use of stem cells for drug discovery and testing is now the sexy low-hanging fruit for investors and companies looking to create revenue in the short-term while funding their longer-term therapeutic programs (similar in a way to the approach Gail Naughton's new company (Histogen Inc) is taking).

While Bioheart's IPO did not fare so well earlier this year, Aldagen has announced its intention to launch an $8o+M IPO sometime soon and given their success in raising private money appears to have reason to have some confidence.

This IPO and the progress of Proteus Venture Partners in closing their regenerative medicine fund should be two very interesting events to watch in the second half of 2008!


1 comment:

Lee Buckler said...

Just saw an interesting related blog on this at