Forward Collects $200 Million For Biotech –

SAN DIEGO – Forward Ventures eclipsed previous fund-raising efforts by marketing its newest fund specifically to institutions.

“The institutions are just much larger players,” said Julia Reynolds, director of research at the medically-focused firm.

In late February, Forward Ventures IV LP closed on $208.5 million and expected to hold a final close in late March on $225 million to $250 million, according to Reynolds and Maria Walker, chief financial officer.

The newest vehicle’s predecessor, 1997’s Forward Ventures III LP included a larger proportion of individual investors but only reached $42.5 million. FV IV will also be subscribed by individuals, most of whom have invested in a side fund (included in the fund-raising metrics).

The firm has marketed the fund for about a year, and held a first close in June on $77 million. Between the June and February closes, the firm held three other closes: $85 million in August, $130.5 million in October and $155.2 million in December.

“The interest level was so high,” Reynolds said. “We will be able to put a lot more money to work in the same deals.” With the previous funds, she said they were not able to follow-on investments as often as they would have liked.

FV III had focused on early-stage deals, while another recent fund, the $34 million Biotechvest, invested in late-stage companies.

FV IV will combine strategies, investing two-thirds of its capital in seed-stage or early-stage companies and investing one-third of its capital in late-stage companies.

FV IV will invest 60% of its portfolio in biotech companies, 20% in medical devices and 20% in bioinformatics. Reynolds said the firm invests in companies investigating novel treatments for cancer, neurodegenerative diseases and other neurological disorders. The firm also invests in companies that produce disease treatment devices, write software accelerating a drug’s pace to market or provide other research products.

To mitigate risk, Forward Ventures prefers to invest in companies with management teams in place, several different products and a short runway to market. The firm also looks for companies with more than one revenue stream, such as developing a new drug and providing a service to other companies.

The fund has already invested about $32 million in seven companies, including San-Diego-based CancerVax Corp. which develops vaccines for melanoma and is the closest of the portfolio companies to getting a drug to market. The fund has also invested in Conforma Therapeutics, a developer of less-toxic cancer treatments; MitoKor, a late-stage company seeking treatment for mitochondrial disorders; and Acorda Therapeutics Inc., a New York company investigating treatments for multiple sclerosis and spinal cord injuries.

Reynolds anticipated that a majority of the deals, particularly the early-stage deals, would come from the San Diego area, because of the area’s research facilities, such as the University of California, San Diego; the Scripps Research Institute; and the Salk Institute for Biological Studies.

The firm is led by three managing members: Standish Fleming, Jeffrey Sollender and Ivor Royston M.D., and most of its employees come from scientific medical backgrounds.

The fund tapped all the varieties of investors, including international institutions. Some examples are the San Diego County Employees’ Retirement System, Yasuda Mutual Life Insurance Co., CDP Sofinov, the University of North Carolina and First Chicago Investment Corp.

The firm would not comment on return rates from its previous funds and only described their management fee and carried interest structure as standard. Walker said the general partners were investing the standard 1% in the firm.