Venture capitalist Kevin Kinsella invested in Sequana Therapeutics hoping
the biotech company's gene-hunting technology would reap big profits. It
didn't. The company failed to make a profit, turning out to be one of man=
y
biotechs that failed to produce what investors hoped. But Kinsella didn't
give up. After Sequana merged with a larger biotech, Kinsella helped foun=
d a
new biotech. He's one of many venture capitalists who have quietly contin=
ued
started new biotech companies at a rate that has reached the highest in t=
wo
years, offering a glimmer of hope for long-term survival of the relativel=
y
new industry that has been plagued with cash shortages.
``The time to make money in a market is when things look the worst and wh=
en
everybody else is not making investments in that space,'' said Standish
Fleming, a partner in Forward Ventures of San Diego. Biotech venture capi=
tal
funding was $360 million in the second quarter of 1999, the first time it
has topped $300 million for at least two years, according to the investme=
nt
firm Burrill and Co. Venture capitalists have devised new strategies for
investing in biotechs using lessons gleaned from failed biotechs. Investo=
rs
are now targeting biotechs that can result in financial returns within fi=
ve
years, a sharp reversal of past investment in companies focused on
discovering the next billion-dollar drug, an expensive process that usual=
ly
takes at least a decade.
``I'm like `I'm almost 50. This has to happen in my lifetime,''' said Cra=
ig
C. Taylor, a venture capitalist with Alloy Ventures in Palo Alto.
Kinsella and his partner Ming-Wei Wang founded Ancile Pharmaceuticals las=
t
year, figuring they could speed up the process of developing a new drug b=
y
finding and studying herbal medicines that are already being used in remo=
te
areas of the world. They are banking on the Food and Drug Administration
requiring less testing than with drugs developed from scratch. ``Our view=
is
that if the product is not already in a pill and used as a medication
somewhere in the world, then we're not going to pursue it,'' said Kinsell=
a.
Ancile, which hopes to have a product on the market in four years, has
raised more than $10 million and hired about 50 people. It already has it=
s
first drug in clinical trials, a point which takes most biotechs about th=
ree
or more years to reach. Other biotech companies have different strategies
for producing quicker profits.
Discovery Partners, another new San Diego biotech company, plans to sell =
its
research services instead of drugs and to charge drug companies a fixed
price instead of relying on royalties that could take years to materializ=
e.
The company also plans to merge several small biotechs into one large par=
ent
company, offering a more substantial and diverse risk to investors.
"Consolidating two weak companies doesn't necessarily make a strong
company,'' said Andrew Senyei, a venture capitalist who helped found
Discovery. ``But if you merge into an entity that's substantial, you will
have solved one of the problems, which is size.''
Venture capitalists who have not given up on biotechs believe the industr=
y
will survive because there is always a market for companies that can impr=
ove
medical care. ``My personal bet,'' Senyei said, ``is that after we have a=
ll
the bandwidth we want and all the real-time video conferencing, we'll sti=
ll
have needs for new products and therapies in health care.''
Tushar J. Mehta
email: [email protected]
voicemail: (206) 405-2335