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newsletter - second quarter 2005Ventures West News The second quarter was a busy quarter for financings and exits, especially in our biotechnology portfolio. Highlights include Novadaq Technologies going public on the TSX, Celator Technologies raising one of the largest biotech financings in Canada, and Salmedix being acquired by Cephalon for over US$160 million. Additional details are included below. In June 2005, Ventures West was proud to be a founding sponsor of the inaugural AceTech Ontario Symposium, held at Deerhurst Resort. Barry Gekiere and Ted Anderson attended the 3-day event held for CEOs of technology and life sciences companies. With over 75 delegates and world-class speakers such as Tom Jenkins, Chairman & CEO of Open Text Corporation, Bill Tatham, Founder & Past CEO of Janna Systems, Verne Harnish, Author of "Mastering the Rockefeller Habits," and David Yoffie, Intel Director and Harvard Professor, the event was a resounding success. Designed by a group of technology CEOs, the AceTech Symposium is aimed at CEOs of technology and life sciences companies who want to connect with their peers and explore new ways to increase their company's performance under their leadership. CEOs continuously face challenges in growing their companies that cannot be dealt with by seeking counsel from the board or from within the company. Many of these challenges, however, are predictable and have been experienced by other CEOs. AceTech provides an opportunity for CEOs to build their CEO network and gain access to the knowledge and experience of their peers. The next AceTech Whistler Symposium is taking place March 1-3, 2006 at the Fairmont Chateau Whistler and the next Acetech Ontario Symposium is scheduled for June 7-9, 2006 at Deerhurst Resort. Visit www.acetech.org for more information. New Companies Funded In the second quarter of 2005 Ventures West participated in seven financings, both new and follow on, investing a total of $14.6 million. The new portfolio companies are CarboPur Technologies and AudienceView Software.
IPOs, Financings and Acquisitions
INEA Corp. is a provider of enterprise planning, forecasting and reporting software solutions. In June, INEA was acquired by Cartesis Group, a leading supplier of business performance management (BPM) software. To read the press release, click here.
New Realities in Biotech Financing by Maha Katabi The landscape of biotech investing in Canada is in a constant state of flux - new products, new expectations, and new demands. The challenges facing early stage biotech companies are greater than ever today. A substantial amount of cash is needed by biotech companies to support clinical development and products and companies must be much further developed before decent exit valuations can be achieved. To get a sense of current valuations, we can look at the IPOs and acquisitions that have taken place so far this year. The average pre-money valuation of biotech IPOs so far in 2005 is $211 million. This average is actually pushed up by a couple of high priced financings and the bulk of valuations actually range between $100-$150 million. Recent M&A activity includes the acquisition of Glycart by Roche, for $180 million, a company that raised nearly $45 million in private equity since 2001. Idun Pharmaceuticals was acquired by Pfizer in April 2005 for $300 million, after they raised over $95 million and advanced one program to the clinic for liver disease. Peninsula Pharmaceuticals was acquired by Johnson & Johnson in June 2005 for $250 million, as their main product, a new antibiotic, was being tested in 6 phase III clinical trials. The company had raised US$93 million from private investors. During the first half of 2005, M&A in this sector has provided, on average, a return of between two and three times the money invested. Even though the bar has been raised, Canadian biotech companies are well In order to attract investors, particularly from the US, Canadian companies have to be the best in their class. They also need to be more flexible about operating in part outside of Canada, as this facilitates access to senior management expertise, partners and capital. In the second quarter of 2005, four Canadian biotech companies raised substantial rounds of financing and attracted U.S. capital by doing just that. Celator Biopharmaceuticals Inc., a Ventures West portfolio company since 2002, raised $40 million, with participation from US investors Domain Associates, Quaker BioVentures and TL Ventures. Tranzyme Pharma raised $32 million with participation from US investors HIG, Thomas McNearney and Quaker. Zelos Therapeutics raised $42.5 million from such investors as Alta Partners, Prospect Venture Partners, Frazier Healthcare Ventures and Seaflower Ventures, and Gemin X Biotechnologies raised $50 million from Sanderling, HIG, Proquest, Merlin BioMed Group and Pinnacle Biotech Ventures . All of these companies were started in Canada, with Canadian investors taking the lead in earlier rounds. All of them now have products in the clinic or are very close to The biotech sector in Canada needs to create successful companies with over $1 Billion in market capitalization to demonstrate that it is ready to survive and flourish. The new reality is that to create a successful market leader, almost double the amount of capital needs to be invested than just 10 years ago. The Canadian biotech industry and investors alike are well served if more U.S. and European capital is invested in Canadian deals, as the goal is to work together in building bigger and better companies, supporting a vibrant industry and, ultimately, achieving better exits. *all amounts shown in US dollars
Each quarter, the newsletter will feature a member of the Ventures West investment team.
Prior to joining Ventures West, Pardeep gained several years of operations and engineering experience in telecommunications at a major telecommunications utility, BCTEL (now Telus). While there, he was a key member of the team that set up the company’s Internet Service Provider and was later responsible for the network and server infrastructure as the Engineering Manager for British Columbia’s largest Internet Service Provider. Pardeep is an active supporter of entrepreneurship and is deeply involved in organizations that mentor and promote entrepreneurs. He participates on the Boards and committees of such organizations as TiE-Vancouver, Venture Capital Association of Alberta, and the Banff Venture Forum. Pardeep also teaches a course on technology entrepreneurship at the University of British Columbia. Pardeep earned his B.A.Sc in Electrical Engineering and MBA, both from the University of British Columbia. Location: Vancouver, BC |
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CarboPur Technologies designs and manufactures high-performance advanced activated carbon materials and solutions for filtration applications, such as air and water purification, and non-filtration applications, such as fuel cells, ultracapacitors and hydrogen storage. 
AudienceView provides a fully integrated Ticketing, Customer Relationship Management, and Fundraising software system for the sports, arts, theatre and live event industry. 
May, 2005 - Celator Pharmaceuticals, Inc. closed a US$40 million round of private equity financing with participation from several leading venture capital firms. The financing was one of the largest venture capital investments in biotechnology in both Canada and the United States during the past 12 months. To read the press release, 
Novadaq Technologies (TSX:NDQ), a Ventures West 8 portfolio company, began trading on the Toronto Stock Exchange in June 2005. The company issued 2,650,000 units priced at $9.50 per unit, for gross proceeds of $25,175,000. Novadaq develops and commercializes medical devices based on its proprietary imaging platform for the diagnosis and treatment of human vascular and ophthalmic diseases and conditions.
In May 2005, Cephalon, Inc. (Nasdaq: CEPH) announced that it had signed a definitive merger agreement under which it will acquire all of the outstanding capital stock of Salmedix, Inc. for approximately US$160 million cash; the company is required to pay an additional US$40 million of cash payments upon the achievement of certain regulatory milestones. Salmedix will become a wholly-owned subsidiary of Cephalon. 
Today the average profile of a company going public is one with at least one product showing good phase II results in a large underserved market, a pipeline of additional products in early clinical development and the right strategic partnerships to make commercialization a tangible outcome. The amount of venture financing companies need to raise to achieve this has more than doubled in the last 10 years, to a minimum of $40-$50 million*. And even though companies may have raised this capital and achieved these milestones, there is still downward pressure on company valuations when they decide to make their public debut. The bottom line is that companies with Phase II data are earning the same valuations that pre-clinical or early clinical companies were garnering in the late 1990s. 
positioned to thrive in this industry context. Canada has a well developed R&D base, low development costs and a capital efficient environment. However, in order to grow to a stage that attracts high valuation, Canadian companies must also maintain strict product focus and low cash burn. Because of the substantial amount of cash required today, companies run the risk of running out of financing options as the company grows. One of the ways to reduce this risk is for companies to turn to global capital markets earlier on in their development plan. 
initiating well defined clinical plans, and have established some of their operations in the United States. One of the key criteria for a Canadian company raising early venture capital money, such as the companies mentioned above, is to engage Canadian investors that have established connections to larger pools of capital, whether in the US or globally, through their own investor group or existing relationships. 
Pardeep joined Ventures West in 1999 and is responsible for deal generation and portfolio management in the telecommunications, wireless, and IT sectors.