Avalon Ventures’ $495M Deal Grew from GSK Quest for Academic Inroads

Xconomy San Diego — 

The partnership between Avalon Ventures and GlaxoSmithKline (NYSE: GSK), which is intended to invest as much as $495 million in 10 early stage life science companies in San Diego was a confluence of many factors, and the culmination of months of negotiation.

A key element of the deal, though, is that the venture firm founded in San Diego 30 years ago has gotten very good at what may be the riskiest stage of VC investing—identifying key breakthroughs in biomedical research and starting new companies to commercialize those technologies.

“What this is about for us is being able to partner more effectively with a broader spectrum of academia,” said Lon Cardon, GSK’s senior vice president for alternative discovery and development. And what Avalon has, Cardon added, is an outstanding network for identifying important scientific discoveries and a demonstrated ability to start new companies.

In what they describe as a “first-of-its-kind collaboration,” Avalon and GSK agreed to form as many as 10 new life sciences companies in San Diego over the next several years. Avalon is contributing $30 million to the effort, and will do the technology prospecting—focusing on early stage drug discovery across a variety of therapeutic areas. GSK, which currently has no presence in San Diego, agreed to put up as much as $465 million for seed funding, R&D support, and milestone payments.

Avalon partner Jay Lichter and GSK’s Cardon will jointly approve the formation of new companies to commercialize the technologies, which could come from anywhere. Avalon will recruit the business and scientific leaders, and GSK will have an exclusive option to acquire each company once it generates a clinical drug candidate.

It will be an active partnership, Avalon’s Lichter said in a phone call yesterday from Chicago, where he and Cardon are … Next Page »

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