| Feature
Article |
 |
Bullish
on Biotech
Richmond
biotech start-ups are attracting venture
capital from Silicon Valley, validating
the region's emergence as an
up-and-coming biotech center.
by Peter Galuszka
Like
the life processes it seeks to
understand and harness, the biotechnology industry grows
in fits and starts. The late 1990s were boom
years for biotech as venture capitalists
funneled billions of dollars into the
sector, but they were
followed by several years of
retrenchment. Now
biotech appears to be in vogue again --
and Greater Richmond's life
sciences sector is a beneficiary.
Three
Richmond firms snared a total of $28 million
in venture capital funding this year. Leading the
local list of VC funding are
CellPoint Diagnostics and its sister
firm Living Microsystems, which won $26 million in finance rounds
this fall between the two of them. Another firm, Vital Sensors
Inc., is being awarded $2 million in
venture capital funding.
The
come-back in VC funding highlights the
fact that Greater Richmond's biotech
sector, once confined mainly to academic
research at Virginia Commonwealth
University and a handful of corporate
labs, has reached the stage of
development where it is spitting out new
businesses and is attracting national
notice. Richmond still may
be a relatively small player in the national
biotech scene, but it's
growing, says David Lohr, executive
director at the Virginia Biosciences
Development Center. “I have
a very bullish opinion on what [the
venture funding]
means.”
All
three companies that snagged VC
financing this year are housed in the
Virginia Biotechnology Research Park in
downtown Richmond, a sprawling complex
of private life sciences operations and
government labs. One of the park's
missions is to incubate firms in early
stages of development just like
Living MicroSystems, CellPoint and Vital
Sensors.
Biotech/life
sciences companies in the Greater
Richmond region managed to attract $36
million in venture funding in 2000. Following
the bust of the national high-tech
market, such funding in the area dropped to $3.2
million in 2002, according to figures from the National
Venture Capital Association.
Although
start-up capital was hard to come by, the Research
Park continued attracting new tenants. Two years
after giant Phillip Morris USA moved its
corporate headquarters to Richmond, the
cigarette manufacturer announced plans to invest
$350
million in a research facility that
would support a major research
initiative. Total space of 450,000 square feet
in the Biotech Park will support scientists, engineers and
other staff.
Observers
are hoping that Philip Morris will act
as a magnet for firms that will either
provide services to the research giant
or be drawn to the same research
disciplines. Meanwhile, existing tenants
are growing, and the Biotech Park is
erecting a new building to accommodate
them.
What's
particularly encouraging about the
latest round of funding is that it comes
from Silicon Valley, the hub of biotech
funding nationally. It helps that
Michael Grisham, founder of Living
MicroSystems and CellPoint Diagnostics,
is a serial entrepreneur who moved to
Richmond from California and had
experience in the kinds of business
plans and management teams that could
raise funding.
Gene Winter, senior vice president
of the Greater Richmond Partnership,
sees a virtuous cycle developing. "Success feeds on
itself," he says. "As local companies demonstrate they can
get funding, other entrepreneurs gain
confidence that they
can locate here and have a shot of
raising capital. More entrepreneurs
means more deal flow, which means even
more credibility for the region in the
eyes of venture
capitalists."
Alloy Ventures of Pal Alto,
Calif., is providing $18 million Series B
funding for Living Microsystems, which
has a product that uses a rare
cell-detection technology to help with
prenatal screening in the first
trimester for chromosomal abnormalities
that could lead to problems such as
Down Syndrome. The funds will be used to
complete clinical trials and
introduce the product to market.
Another
Silicon Valley VC firm, Mohr Davidson
Ventures of Menlo Park, Calif., will
provide $8.5 million in Series A funding
to help CellPoint Diagnostics with a
product that captures and analyzes rare
circulating tumor cells from the blood
stream of people suffering from breast,
lung, prostate or colorectal cancer.
Those funds will be used to establish
beta testing, initiate clinical trials
and prepare for regulatory and market
review.
Vital
Sensors, founded in Hannover, Germany, in 2002 and
now under ownership by a U.S. firm, uses
extremely small devices to continuously
monitor a patient’s cardiovascular
system in hospitals or at home. The
firm declined to give details about its
VC funding.
The resurgence in biotech
funding appears to
be national in scope. North Carolina’s
Research Triangle Park, a major biotech
research center is enjoying more VC
funding, says Keith Hall, president of
Human Resources Consultants, LLC, based
in North Raleigh, N.C. “Over the past
18 months things have improved in the
venture market here. I have seen
additional investment here as well as
more venture capital to life sciences
companies. These tend to be early stage
companies, but not for early stage
research,” says Hall who works as a
headhunter and talent scout for biotech
firms.
According to the National Venture Capital
Association, from Jan. 1, 2005, to Sept.
30 of this year, Silicon Valley bagged
the largest number of biotech VC deals
– 301, followed by New England and San
Diego. No. 4 was the Southeast, of which
the Research Triangle is a part. The
NVCA computes Richmond as being the
Greater Washington area. The region,
with its many biotech firms near the
National Institute of Health in suburban
Maryland, tied with Philadelphia as No.
6, with 83 deals apiece.
Venture
capital funding for biotech now stands at more than
$150 million, or roughly one third of
all VC funding
in the area. Yet the increase in VC
funding does not tell the whole story.
Companies like Virginia Bionutrients,
producer of the Fuser Energy Micro Bar
using a proprietary mix of
neutraceutical
supplements, recently raised a round of
angel capital. And at least two large local biotech players
went directly to the public equity
markets, bypassing the venture
capitalists entirely.
One is the research park’s first
tenant, Commonwealth Biotechnologies, a
contract research laboratory that offers DNA, peptide and protein
sequencing and other advanced
capabilities.
Since its founding in 1997, the company has
grown to sales of $7.8 million and 65
employees. It did this without VC
funding. “We haven’t been funded
with VC, but went through an IPO
(initial public offering) and a couple
of pipe transactions," says Chairman and
Chief Operating Officer Richard J.
Freer. “Commonwealth Biotechnologies
did not search for venture capital
because unless you are going to be a
one-hit wonder, there wasn’t much
reason to do so,” he says.
Another biotech firm that has grown with
public money is Glen Allen-based Insmed
Incorporated, which has three products
including IPLEX, a human insulin-like
growth factor. IPLEX, which went on the
market this year, can help children who
are unusually short in stature.
Last winter, the firm netted $42.8
million after an IPO. The funds will
be used as working capital, help
the commercial launch of iPLEX and win
regulatory approval for it in Europe.
Insmed is way past the incubation stage,
notes investor relations
officer Jody LoMenzo. The firm, which
has a deficit of about $289 million, has
already gone through the long slog of
developing a marketable drug, gaining
regulatory approval and
going from being “totally cash
negative to generating income,” she
says.
Philip Young, Insmed’s chief business
officer, believes that venture
capital funding is distinctly on the
rise in Greater Richmond as well as in
Western Virginia around Blacksburg and
Virginia Tech. “There’s no lack of
good ideas for venture funding,” says
Young, who spent years working in
biotech in the Bay Area before moving to
Richmond two years ago. “We in
Virginia are doing a better job of
packaging for the VCs.”
If that’s
the case, then Greater Richmond’s big
bet on biotech is beginning to look like
a winner.
-- December
19, 2006
|
