For Immediate Release
BioCentury, The Bernstein Report on BioBusiness
Bigger footprint
December 10, 2007
Even though it’s opening a new office in Zurich, don’t expect life sciences venture firm Bay City Capital to become a heavy investor in European biotech. Founder, Partner and Managing Director Fred Craves told Ebb & Flow the firm expects to continue making a few small investments in Europe. But the main reason for the new digs is to ensure that “we are in very regular conversation with the pharmaceutical and diagnostic community in Europe.”
Bay City has a similar approach to its Tokyo office, which helps the partners stay in touch with Japanese pharma.
Beyond diversifying its locations, Bay City has expended its investor base. With its first three funds, about 90% came from the Pritzker family, owners of Hyatt Hotels among other businesses.
But in the fifth fund that closed in October, the largest LP is AlpInvest, an Amsterdam private equity firm with €40 billion ($58.5 billion) under management. It initially invested in 2004 in Bay City’s $350 million fourth fund.
The Pritzker family continued to invest, with additional participation from other family offices, institutions, and strategic investors, such as the University of Pittsburgh Medical Center and the Mayo Clinic.
The fund closed at $500 million, up from its initial target of $425 million, and bringing total funds under management to $1.5 billion.
Craves said the investment strategy will remain consistent, with about 70% going into therapeutics and the remainder into medical devices and diagnostics.
One average, he said Bay City will put $30-$35 million into a therapeutics company and $15-$20 million into a device or diagnostics play. Craves expects this fund will go to a total of 15-17 companies, similar to its prior funds.
“Each fund has been progressively larger and we have invested more funds per company,” he noted.
Risk adjusting
Bay City hasn’t yet made its first investment out of the new fund, but it recently started putting together the syndicate for a company it helped create, influenza vaccine play Vivaldi. So far, Bay City has fully funded the company, which is based on the work of Peter Palese, chair of microbiology at Mount Sinai School of Medicine.
If there is any change in the firm’s therapeutics strategy, Craves said it would be in response to FDA’s intense focus on safety, which is “making it more difficult for even the largest multinationals to get products approved.”
He noted the stakes are higher for clinical trials, particularly for primary care products where the risk-benefit standards are changing. Additional studies that would not have been required a few years ago have in turn inflated the required venture investment.
Craves said Bay City may focus more on acute care than chronic care, because it “may not have the same kinds of hurdles.” He also noted that biomarkers and diagnostics that identify the appropriate patient for a given treatment are attractive.
This year Bay City had two IPOs, including inhalation drug delivery company Map (MAPP), and a reverse merger for cardiovascular company Via (VIAP). Craves said Bay City has not yet distributed proceeds from these and that it wouldn’t for some time.
The firm was also an investor in specialty pharma play reliant, which sold for $1.7 billion last month to GlaxoSmithKline (LSE:GSK; GSK). According to the company’s S-1, Bay City held almost 20% pre-IPO.
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