Contributing Writer
San Francisco-based venture capital firm Sofinnova Ventures brought in more than it anticipated, and sooner, for its seventh fund, SVP VII. The fund closed Tuesday at $375 million, exceeding its initial target of $300 million, and was "about two-times oversubscribed," said general partner Jim Healy.
Two-thirds of the money will go to life science companies, with the remaining third earmarked for the IT sector. That split is indicative of Sofinnova's investment strategy: About 66 percent of the more than $600 million it raised in its first six funds went toward life sciences.
Sofinnova is an early stage investor that likes to lead or co-lead financing rounds and take an active role in the management of its portfolio companies. Yet the firm's definition of "early stage" doesn't usually refer to a platform technology or promising lead with years of preclinical work ahead. Sofinnova prefers early stage companies with products at least near the clinic if not well on their way through it.
Healy said the firm is particularly interested in situations in which initial clinical development has been performed at an academic or research institution, or in a large biotech or pharmaceutical company, and then the product is spun out or licensed to a start-up.
Several of Sofinnova's recent investments fit the strategy. In September, the firm teamed up with VantagePoint Venture Partners to co-lead the Series A financing of Anthera Pharmaceuticals Inc., which had in-licensed two clinical stage anti-inflammatory compounds from Eli Lilly and Co. just a week before. And in July, Sofinnova led the Series B financing of Ocera Therapeutics Inc., which is conducting Phase III trials with a product for fistulizing Crohn's disease that it licensed from Kureha Corp., which markets the product in Japan. (See BioWorld Today, July 11, 2006, and Sep. 14, 2006.)
Yet not all Sofinnova investments are spinouts. In September, the firm played the lead in a Series A round for Alvine Pharmaceuticals Inc., which is gearing up to start clinical trials with a drug for celiac disease. The firm also continues to invest in subsequent rounds for existing portfolio companies such as Series C rounds for Prestwick Pharmaceuticals Inc. and Novacea Inc., and a Series B for Catalyst Biosciences Inc., all earlier this year. (See BioWorld Today, Sept. 29, 2006.)
Overall, the main factors Sofinnova portfolio companies have in common are significant size and demand of the market, a top-quality management team and strong technology behind the company, the firm said.
Founded 30 years ago in France, Sofinnova SA was the first "American-style" venture capital firm in its home country. In 1974, it became the first European venture group to enter the U.S. market and took early positions in the budding biotech industry through companies like Genentech. In 1984, San Francisco-based Sofinnova Ventures established itself, eventually becoming an independent firm after a buyout and restructuring in 1997.
Sofinnova Ventures has raised $982 million in its seven funds to date. It plans to invest the $375 million from SVP VII in about 25 companies, a process which Healy said has taken about three years to complete in the past.
Although he declined to comment on the return Sofinnova anticipates from the fund, Healy said the average time from first financing to liquidity in the past has been about three years.