Life Science Investor Merlin Nexus Seeks $100 million Fund IV – Filing – Corrected

Merlin Nexus, a New York firm which invests in later stage private and publicly-traded life science companies, has raised $27.8 million for a planned $100 million fourth fund, according to a securities filing.

Founded in 2001, the firm raised its last fund, a $43 33 million vehicle called Merlin Nexus III, in 2008, according to Thomson Reuters. To date, the firm has had a total of approximately $175 million under management, not including the new commitments.

Merlin Nexus has had seen some strong returns in recent years with its crossover strategy of public and private later stage investing. The firm says the approach enables it to take advantage of valuation disparities between the private and public markets, as well as shorten timelines to liquidity.

The firm is one of several life science funds with portfolio of private and public companies. Another, Valence Life Sciences, a new firm run by the partners at another crossover life sciences fund, Caxton Advantage, is also in fundraising mode. Essex Woodlands Health Ventures, which closed its last $900 million fund in 2008, is also a big player in the space, with several recent exits.

Part of the reason the crossover strategy seems to be working well is that public valuations fell so low in 2008 and 2009 that PIPE investors could scoop up shares of promising companies at unusually low prices. Many of those have since recovered, particularly for drug development companies that have posted positive clinical trial results.

It’s hard to track the Merlin Nexus portfolio with exactitude, as its smaller-stake investments in public companies are not necessarily disclosed. However, it’s clear a number of portfolio companies have performed well in the past couple of years, based on portfolio information in the Thomson Reuters private equity database.

Some of those investments include:

Salient Surgical Technologies, which develops products for sealing tissue and bone in surgical procedures, sold to Medtronic last year in a transaction valued at $525 million.

GeminX, a developer of oncology therapies, sold to Cephalon (now Teva) last year in a transaction valued around $225 million up front plus up to $300 million in milestone payments.

Cougar Biotechnology, a developer of cancer drugs, which Merlin Nexus backed out of Fund II, sold to Johnson & Johnson in 2009 in a transaction valued at close to $1 billion.

Micromet, a developer of antibody-based treatments for cancer, inflammatory and autoimmune diseases, raised $65 million from Merlin Nexus and other backers through PIPE transactions in 2007 and 2008, according to Thomson Reuters. Shares are up close to 400% from their 2007 lows. (Additional: Micromet is being sold to Amgen in a transaction valued at $1.16 billion and approved on March 7, 2012.)

Achillion, a developer of treatments for hepatitis C and other infectious diseases, is also up. Merlin Nexus invested when the company was trading below $3 a share, according Thomson Reuters, and it’s now around $10. In January, Achillion said U.S. health regulators granted a fast-track designation to its experimental hepatitis C drug.

Arrow Therapeutics, a UK-based developer of anti-viral therapies, sold to AstraZeneca in 2007 in a transaction valued around $150 million.

The firm’ s investment team includes Dominque Semon, David Gould, Christian Richard and Alberto Bianchinotti.