MedImmune starts biotech venture capital fund

As much as $100 million over the next three years

July 20, 2002|By Julie Bell | Julie Bell,SUN STAFF

MedImmune Inc. announced yesterday that it has started a venture fund to invest in biotechnology companies, a move that promises to push as much as $100 million out MedImmune's doors and into cash-strapped young firms over the next three years.

The Gaithersburg biopharmaceutical company has been selectively investing in biotech companies for some time, a practice that gives it an early look at medicines and technologies that could - if successful - become part of its offerings.

But MedImmune Ventures Inc., to be headed by MedImmune founder and Chairman Wayne T. Hockmeyer, will formalize the process for reviewing such investments and is likely to increase the pace at which the company is making them.

MedImmune invested about $25 million in five companies over the past three years. It expects to invest up to $40 million a year, said Lori Weiman, a spokeswoman.

"I think the likelihood is that quite a lot of it is going to be invested in our own back yard," Hockmeyer said, though he noted the fund isn't limited to investing in local companies.

The fund helps fill a gap long lamented by local biotechnology executives, who know that venture capitalists often prefer to invest close to home.

While Maryland boasts several hundred biotech companies, it has only a handful of venture funds focused on investing in them.

The formation of MedImmune Ventures also comes at a time when venture capital firms nationwide have slowed the pace at which they're investing.

Investment in biopharmaceutical firms dropped to $575.3 million in this year's first quarter from $651 million in the fourth quarter, according to VentureOne, the venture capital research company. The stock market's downturn has made it tough for biotechs to raise money by issuing shares.

"They're actually jumping in there at a really good time," said Tom Salemi, editor of Venture Capital Analyst-Health Care, an industry trade publication, noting that MedImmune is unlikely to pay inflated prices for stock in the companies.

Venture capital companies customarily get stock in companies in exchange for their investments.

MedImmune also has acquired rights to the drugs or technologies being developed by the companies in which it has invested. That's the way MedImmune got the rights this spring to cancer technologies being developed by Panacea Pharmaceuticals Inc. of Rockville and A&G Pharmaceutical Inc. of Baltimore.

The new venture fund expects the average size of each investment to be about $6 million. It will consider early and late-stage companies as well as public and private ones. It anticipates investing no more than $15 million in any one company.

Hockmeyer said the state of the markets was one of the reasons the company formed MedImmune Ventures now.

Other factors included the maturity of MedImmune - which now has five marketed drugs - its ample reserves of $1.3 billion and the fact that Hockmeyer has had more time to spend outside the company since his retirement as chief executive officer in 2000.

MedImmune Ventures will evaluate deals using Hockmeyer's expertise as well as that of the company's scientists and product development experts.

Their endorsement of a deal "undoubtedly" will help companies attract venture capital from other firms as well, said Tom Bodnar, director of the Investment Financing Group at the state Department of Business and Economic Development.

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