Magen BioSciences Sold for $14.5M, Codon Devices Closing Doors

Xconomy Boston — 

These probably aren’t the rosy endings that VC backers had in mind when the promising Boston-area life sciences startups Magen BioSciences and Codon Devices were launched in recent years. But the news today is that Waltham-based Magen has been sold for less than it raised in its first round of financing, and the Boston Globe reports that Codon Devices is quietly shuttering its operations in Cambridge.

Magen, formed in 2006 to develop superior treatments for skin disorders, had all the makings of a future success story, with support from top Boston-area venture firms and scientific luminaries. Yet Wilmington, N.C.-based contract research firm PPD (NASDAQ:PPDI) says today that it has bought Magen for $14.5 million. That falls short of the $15.4 million that Magen tied down in its Series A round of financing. Lexington, MA-based Highland Capital led that maiden round, which included contributions from Flybridge Venture Partners in Boston and Lux Capital in New York, among other firms. Magen’s board of directors boasts some heavy hitters in the local biotech scene: Christoph Westphal, CEO of Cambridge biotech Sirtris; Rich Aldrich, founder of biotech hedge fund RA Capital in Boston; Phillip Sharp, a Nobel Laureate in physiology and medicine and a co-founder of Cambridge-based biotech Biogen Idec (NASDAQ:BIIB).

Codon, a maker of synthetic DNA fragments and other genetic materials, was similarly well-pedigreed. The firm’s scientific founders include Harvard Medical School sequencing guru George Church, MIT’s Drew Endy and Joseph Jacobson, and the University of California, Berkeley’s Jay Keasling. Codon’s venture backers included top names in life sciences investing such as Flagship Ventures, Highland Capital Partners, Khosla Ventures, and Kleiner Perkins Caufield & Byers. But lots of financial support, including a $31 million Series B financing wrapped up last year, apparently wasn’t enough to advance Codon into profitability—nor, evidently, were Codon’s efforts last June to reorganize and cut staff levels to focus resources on product development partnerships. In the end, it’s unclear how much of the money invested in Codon Devices was recouped.

Of course, the closing of Codon and the lackluster sale of Magen aren’t isolated incidents. In recent months, Waltham-based Dynogen Pharmaceuticals filed for bankruptcy protection after running short on the cash needed to develop drugs for gastrointestinal disorders like irritable bowel syndrome. And Foxborough, MA-based Cyberkinetics Neurotechnology Systems called it quits after its coffers ran dry while the company was developing a device to regenerate nerve cells in patients with severe spinal cord injuries.

At least for Magen, there’s still a pulse. Magen board members and investors did not reply to my requests for comment about the company sale this morning, but a spokeswoman from PPD says the research firm intends to keep the Magen operation and most of its workers in Waltham. Magen scientist Sandra Luikenhuis has joined PPD as executive director of dermatology, and is expected to lead development of the drug compounds that PPD is acquiring in its buyout of Magen. Magen licensed the compounds from drug giant Eli Lilly in 2007.

In a related development, PPD is selling its Piedmont Research Center business in North Carolina to Wilmington, MA-based contract research firm Charles River Laboratories International (NYSE:CRL) for $46 million in cash. PPD says that the sale is expected to offset the impact of its purchase of Magen.

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2 responses to “Magen BioSciences Sold for $14.5M, Codon Devices Closing Doors”

  1. vcdetractor says:

    Do we need more proof that the VC model is broken?
    A 90% failure rate just doesn’t cut it anymore.