Sofinnova closes $375M

Sofinnova Ventures of San Francisco has closed $375 million for its seventh fund to invest in life sciences and tech startups. It is the firm’s largest fund to date, topping the initial target of $300 million thanks to the addition of several new limited partners.

Among the new LPs is the Pennsylvania State Employees’ Retirement System, which commited $30 million, the Oregon Public Employees Retirement Fund, University of Texas Investment Management Co., Liberty Mutual Investment Advisors, Adveq, Caisse des Depots et Consignations Paris, the San Francisco City & County Employees’ Retirement System and the Searle Charitable Trusts. Previous LPs to come back for fund VII include Wilshire Associates, the California State Teachers Employees’ Retirement System, Dow Chemical Pension, France Telecom and Silicon Valley Bank.

Sofinnova’s new fund, which closed in late October, throws another log onto the fire over the issue of whether the traditional VC model is dead. In mid-October, Sevin Rosen Funds withdrew a 10th fund on the eve of an anticipated $250 million first close. The firm was targeting up to $350 million. When it pulled the plug on new fund-raising, Sevin Rosen cited the fact that there was too much money chasing too few deals and that the good old fashioned VC model is “severely damaged.” While many in the industry don’t agree with Sevin Rosen’s argument, Sofinnova hasn’t exactly been stellar when it comes to its own performance.

Sofinnova took Novacea (Nasdaq: NOVC) public in May, offering at $6.50 per share after its underwriters cut the spread from the initial $11 to $13 range. The company, which was trading at about $7 per share in mid-November, raised $40 million in its IPO. It was the venture firm’s only exit this year, according to data from Thomson Financial (publisher of VCJ). However, before its IPO, Novacea, a developer of cancer-fighting drugs, raised about $100 million in venture funding from Sofinnova, Apax Partners, Domain Associates, New Enterprise Associates and Versant Ventures, among other investors.

The firm, which invests about two-thirds of its capital in life sciences and the remainder in IT, had more liquidity events in 2005:

  • It sold networking company Salira Optical Network Systems, which raised $41 million, for an undisclosed amount.
  • It sold Discovery Innovations, an Internet-based health care information company which had raised $26 million, for an undisclosed amount.
  • It sold enterprise software company Clariteam, which raised more than $15 million in venture funding, for an undisclosed amount.
  • It sold wireless infrastructure company AirZip, which had raised $10 million, for an undisclosed amount.
  • It sold auto-immune disease drug company Cellective Therapeutics, which had raised nearly $28 million, for an undisclosed amount.
  • It sold pain-drug company AlgoRx Pharmaceuticals, which had raised $97 million, for an undisclosed amount at the end of the year.

The firm also took Threshold Pharmaceuticals (Nasdaq: THLD) public in February 2005, offering at $7 per share after its underwriters cut the spread from the initial $14 to $16 range. The company, which raised more than $37 million in its IPO, was trading at about $3 per share in mid-November. Threshold raised about $50 million in venture funding from Sofinnova, Morgenthaler Ventures, ProQuest Investments and Three Arch Partners, among others.

The firm expects Sofinnova Venture Partners VII to resemble its previous fund of $250 million that it raised in 2002. It will invest about two-thirds in life sciences startups and one-third in information technology companies. About 90% of the firm’s portfolio companies are U.S.-based while the remaining 10% are in Europe. Sofinnova, which is based in San Francisco, is an offshoot of Sofinnova Partners, a Paris-based venture firm. Launched as the U.S. arm in 1986, Sofinnova Ventures gained its independence in 1997, but the two firms have continued to collaborate and share deal flow.

The firm’s five general partners are Alain Azan, Eric Buatois, Nicola Campbell, James Healy and Michael F. Powell. The firm added Brian Wilcove as a venture partner to focus on networking and communications earlier this year.