Biogen Idec VC Group Sees Opportunity in Tough Market, Has $100M New Allocation to Invest in Biotech Firms

It’s tough times for biotech entrepreneurs in search of new funds to launch startups, with early-stage investors conserving capital for their existing portfolio companies. Yet one venture group that isn’t hurting for capital nowadays is Biogen Idec New Ventures, the San Diego-based VC arm of big biotech company Biogen Idec (NASDAQ:BIIB).

Biogen this year committed an additional $100 million to its VC outfit, adding to the initial $100 million allocated to the group when it was formed in 2004, says John Dunn, executive vice president of New Ventures. The Biogen venture group also operates in Cambridge, MA, where Biogen is headquartered.

Dunn says the tough economic climate creates opportunities for New Ventures. “It would just seem obvious that because of the economic climate, traditional venture is pulling back a little bit, but companies still need the capital,” he told me . “The deal flow has never been a problem, but we see [inquiries from startups] increasing a little bit.”

While many traditional venture firms scale back on investment activities, New Ventures plans to invest at about the same pace as it has since 2004. Dunn says he expects to invest the new $100 million allocation from Biogen over a four-year period, give or take six months.

Dunn says his group, governed by a board of top Biogen executives, is authorized to invest up to $7.5 million in a single financing round and a total of $10 million in each portfolio company. He doesn’t like to talk about the 13 companies in his portfolio, keeping Biogen’s investment strategy close to the vest. But here are our descriptions of several of them in the Boston area and San Diego:

Hydra Biosciences — Cambridge, MA

Hydra aims to develop new drugs to home in on cellular signaling proteins that regulate information flowing into and out of cells. The company believes that modulating these proteins could provide new treatments for pain, inflammation, and other conditions.

Resolvyx Pharmaceuticals — Bedford, MA

Fish oil is healthful, right? Resolvyx is developing compounds called resolvins, which occur naturally in some fish oils, to treat inflammation and other diseases. The company has chosen to enter its first resolvin compound into clinical trials for treating dry eye, in a rather large initial study I covered last month.

Lpath — San Diego

Lpath (OTC:LPTN) is developing monoclonal antibody drugs that target signaling lipids in order to cut off the blood supply to cancer cells and treat eye diseases. The firm says it has a partnership with Merck Serono for its lead antibody drug, which is in early clinical trials for treating cancer.

Virdante Pharmaceuticals — Cambridge

Virdante is operating quite quietly right now. But I was able to dig up some information on the company and its science in its Massachusetts Biotechnology Council profile. According to the profile, the startup is developing technology that boosts the ability of antibodies to treat inflammation.

I saw a bit of an inflammation theme among at least three of New Venture’s portfolio companies. And Dunn confirms that the Biogen VC group makes investments that complement Biogen’s existing franchise of treatments—which include such drugs for neurological disorder multiple sclerosis as interferon beta-1a (Avonex) and natalizumab (Tysabri), as well as cancer drug rituxumab (Rituxan) for patients with certain forms of non-Hodgkin’s lymphoma—and the big biotech’s interests in rheumatology, cardiovascular conditions and, yes, inflammation. But he says that his investment team will also consider backing companies outside of these core areas if the firms fit Biogen’s long-term strategy.

On top of investing in companies, New Ventures has also done the groundwork that has led to Biogen acquisitions, Dunn says. The group’s efforts helped pave the way to Biogen’s 2006 buyout of San Diego-based Conforma Therapeutics, which brought the big biotech its pipeline of drugs that target cancer cell proteins that are key to tumor survival. In another deal involving New Ventures, Biogen last year acquired Waltham, MA-based Syntonix Pharmaceuticals and its technology designed to guard antibodies and deliver them into cells.

Another product of New Ventures is the Biogen Idec Innovation Incubator, a Cambridge operation that provides financing, lab space and other support to newly hatched biotech firms in return for pre-negotiated rights to acquire their drug candidates. Dunn says that the investments made in the incubator companies—which include startups Provasculon, a developer of modified proteins that recruit stem cells to damaged tissues for regeneration and vascular repair, and Escoublac, which is focused on therapeutic uses of a protein found in bones and other tissues that can regulate fat storage and other metabolic functions—came from a different pool of funds than those in New Venture’s regular portfolio. Yet the incubator does fall under the overall management of New Ventures.

Interestingly, Dunn says that there is another biotech startup operating at Biogen’s San Diego campus under similar terms as the two firms in the Cambridge incubator. But he’s keeping the details and name of that company under wraps, too.

Trending on Xconomy