MedImmune Starts Biotech Venture Fund
$100 Million Earmarked for Start-Ups
By Nicholas Johnston
Washington Post Staff Writer
Friday, July 19, 2002; Page E05
Gaithersburg biotech company MedImmune Inc. said it
will launch a $100 million corporate venture fund today,
joining the ranks of tech superstar companies that seek
out investment opportunities in cash-starved start-ups.
"I think there's a significant need for biotech
investment," said Dr. Wayne T. Hockmeyer,
MedImmune's founder and former chief executive, who
will head the fund. "This area has a lot of good
opportunities."
Like many corporate venture funds, MedImmune
Ventures Inc. will make investments for financial gain
and also to foster products that could be useful to the
firm's main business of developing treatments for cancer
and infectious diseases.
Those kinds of strategic investments have already
begun. MedImmune has committed more than $20
million in the past three years, at about $5 million per
investment.
"This really is the formalization of an activity that has
been going on for a long time," said MedImmune chief
executive David M. Mott.
For Washington area biotech start-ups, finding venture
capital has always been a struggle. With a wealth of
firms scouring the region for the next big telecom or
software deal, biotech companies have been left by the
wayside or forced to leave the area to raise capital.
"There aren't very many venture capitalists who invest in
biotech," said Mary MacPherson, executive director of
Netpreneur, a program that assists start-ups. A common
lament at Netpreneur events is how hard it is now to
raise venture capital funding, she said, and it is even
harder for local biotech start-ups, in part because only
biotech investors seem to understand the business. The
funding levels, though, have begun to increase.
In the first three months of 2002, $19.1 million was
invested in local biotech and related start-ups. That was
just 8 percent of the total amount invested, twice as much
money as was invested in the year-earlier quarter.
Biotech investing is also starting to gain on other sectors
seeking such funding. In the past year, according to one
survey, 30 local biotech or health-care companies have
received venture backing.
"As the number of these companies reaches critical
mass, they will begin to attract venture capital from
outside the region," MacPherson said. "And eventually
those guys will come into the region."
Some local funds are already forming. Two months ago,
the University Biomedical Fund I LP was launched in
the District to capitalize on investment opportunities at
area universities. The advisory board of the $50 million
fund is staffed with faculty from Johns Hopkins
University in Baltimore as well as the University of
Virginia medical school.
Arlington investment bank Friedman Billings Ramsey
Group Inc., a prominent technology investor in recent
years, has plans to expand its biotechnology venture
capital practice, a company official said.
Along with these funds, Baltimore is home to venture
capital giant New Enterprise Associates, which has said
it plans to place up to 30 percent of its current $2.3
billion fund in health-care and biotech investments,
much of it locally.
Corporate venture funds were extremely popular during
the technology boom of the 1990s, when companies
rushed to cash in on huge financial returns. Most of
them, however, closed after sustaining huge losses.
Some technology and health-care companies still make
much investments. Microsoft Corp. and Johnson &
Johnson, for instance, have active programs, and Intel
Corp. has been making venture investments for nearly a
decade.
Although the MedImmune fund is not restricted to the
D.C. area, its managers expect most of their investments
to be local, just as the company's previous investing
activity has centered in this region. Of the company's
five investments, one is in Philadelphia and the two most
recent are near Washington: Panacea Pharmaceuticals
Inc. in Rockville and A&G Pharmaceutical Inc. in
Baltimore.
"We've grown up here in this area," Hockmeyer said,
"and this is a chance to take some of that success and
help some of the start-ups here."
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