Foundation Medical Nears Goal

Foundation Medical Partners, a venture firm focused on medical device, biopharmaceutical and predictive medicine companies, has now raised $63 million since it launched fund-raising for its third vehicle in 2008, according to a regulatory filing.

The firm hopes to hold a final close by the end of the first quarter.

The target for the fund is $150 million. It had raised close to $59 million as of June, according to a regulatory filing.

The fund, Foundation Medical Partners 3, has secured $5 million from the firm’s general partnership. The firm stands to nearly double its capital under management with the new fund, surpassing the $61 million it raised for its first fund, which closed in 2001, and its $95 million second fund, raised in 2005.

Limited partners include the Cleveland Clinic, with Mallory Capital serving as placement agent.

Strategic Advice

The Cleveland Clinic acts as a strategic investor. The $5 billion non-profit hospital helps the firm with deal flow and due diligence on investment ideas. Senior Cleveland Clinic personnel typically sit in on Foundation Medical’s investment meetings and actively work with portfolio companies to develop products.

The hospital, which President Obama often cites as an example of health care industry best practices, has now invested $65 million across Foundation Medical’s three funds.

Foundation Medical, which focuses on late stage and expansion stage deals, has already backed two companies from its third fund: Vertos Medical, a maker of devices for spinal disease treatment, and Smithtown Medical, a medical startup.

Foundation Medical has had several successful exits, as five of its portfolio companies have gone public, according to data from Thomson Reuters (publisher of VCJ), including AtriCure (Nasdaq: ATRC), CardioNet (Nasdaq: BEAT), CombinatoRx (Nasdaq: CRXX), Northstar Neuroscience and Immunicon Corp., which has since been acquired.

The firm’s other notable exits include the sale of Visiogen Inc., an Irvine, Calif.-based provider of age-related vision loss technology. The company raised more than $77 million in VC funding from Foundation Medical, Three Arch Partners and Prospect Venture Partners, among others, prior to Abbott Laboratories buying it in the fall for $400 million. The acquisition returned $20 million to Foundation Medical’s second fund, posting an IRR of 65% and a 3.5x cash-on-cash return, according to a source familiar with the situation.

Foundation Medical had its busiest year in 2007, investing more than $65 million in 12 companies, according to Thomson Reuters, which sometimes estimates the amount a venture firm invests in a shared financing round. The firm’s pace slowed some in 2008, but it has picked up in 2009, with 11 companies financed last year, according to Thomson Reuters.

The Foundation Medical team includes General Partners Andrew Firlik, A. Marc Gillinov, Harry Rein, Lee Wrubel and Associate John Sullivan. Firlik did not respond to requests for comment. —Erin Griffith and Alexander Haislip

DEALWATCH: Five recent investments by Foundation Medical PartnersBridgePoint Medical Inc._Devices for crossing coronary and peripheral chronic total occlusions.

Direct Flow Medical Inc._Devices for interventional cardiology.

EndoGastric Solutions Inc._Endoscopic devices for gastro esophageal reflux disease.

Histogenics Corp._Products for cartilage repair.

Vertos Medical Inc._Devices used in the treatment of common spinal diseases.

Note: Investments made between August and October 2009. Source: Thomson Reuters