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Biotech Backer



Firm Pegs $100 Million for San Diego-Area Startups

Venture capital firm Forward Ventures said it plans to funnel more than $100 million into life sciences companies, despite the weakened national economy.

Dr. Ivor Royston, founder and managing partner at San Diego-based Forward Ventures, which focuses on seed and early-stage life sciences firms, said the firm recently opened a new $256 million fund.

About $100 million of that money will be put into local biotechs; the remainder will be invested in the Bay area’s biotech cluster, he said.

Royston, who pioneered the local industry by co-founding San Diego’s first biotech firm, Hybritech, said he always is looking for technology that has the promise to change the way medicine is done today.

“We always look for the next Hybritech. We don’t want to do what everyone else is doing,” Royston said.

In San Diego, there are ample biotech seeds that may grow up to become industry leaders.


Reluctant Researcher

CancerVax, led by Royston’s longtime friend David Hale, former head of what now is Irvine-based Sicor Inc., could well be among them, he said.

The firm is developing a cancer vaccine created by Dr. Donald Morton of the John Wayne Cancer Institute in Santa Monica.

Royston said he was enthusiastic about Morton’s data from the start. To get Morton to hand the technology over was another matter.

“I never had such difficulty negotiating,” Royston recalled. It was Morton’s life work and he wasn’t going to give it away easily.

Royston declined to say how much of a stake Forward has in CancerVax, but said Morton retained a “significant ownership.”

CancerVax is hardly an average startup. Its product is already in two Phase III trials.

Last month, the firm announced it would file for marketing approval of its vaccine with Canadian regulatory officials during the third quarter of 2002.

Royston stressed the Canadian officials actually encouraged CancerVax to seek approval after reviewing the firm’s Phase II data in patients with advanced melanoma.

Royston invested $6 million from Forward’s latest fund in CancerVax. He believes investors will be eager to get their hands on CancerVax once the IPO market opens again.

But that may take a while.

Next month, Forward will join three infant biotechs in their incubator space at 9393 Towne Centre Drive.

Forward invested more than $3 million each in Arizeke Pharmaceuticals, Inc., Conforma Therapeutics Corp., and Nereus Pharmaceuticals, Inc.

Lawrence Fritz, chief executive of Conforma, said having an investment group nearby is positive.

“I am looking forward to Forward moving in,” Fritz said. “My feeling is the more attention you can get (from investors), the better.”

When asked if Forward’s in-house presence adds pressure to perform, Fritz said no, but added jokingly to check back in six months.

Royston said Conforma provides a good example of a technology transfer from an institution,the Memorial Sloan-Kettering Institute for Cancer Research in New York into private hands.

Twenty employees are searching for that one prized compound that can degrade cancer-causing proteins and stop cancer growth.

Arizeke is also involved in small molecule research, but has a different agenda.

Royston seems particularly excited about their technology, which aims to solve the “protein problem.”

This is tricky, because taken by mouth, proteins tend to be broken down by the stomach before they can travel through the body. Royston believes the firm will be key in doing away with injections, used to deliver proteins now.


New Breed

The third firm, Nereus Pharmaceuticals is among a new breed of biotechs.

Another example of a technology transfer,this time from University of California, San Diego’s Nereus’ work is based on microbes derived from the sea.

Kobi Sethna, Nereus’ chief executive, said the firm licensed the technology in 1998.

So far, 14 groups have devoted $32 million to Nereus in the hope that these microbes will translate into treatments for rheumatoid arthritis and cancer one day.

Favrille Inc. is also among Royston’s favorites. The firm has been working quietly on a “personalized cancer treatment.”

Favrille’s product is already in Phase II trials, the second of three testing phases required by the Food and Drug Administration before a drug can be approved.

But this is not a one-for-all treatment. If approved, the drug will be costly initially.

Royston estimated each patient will pay between $10,000 and $25,000 for the first dose to cover the high production costs.

The good news is that pricing for follow-up treatments should go down paralleling subsequently lower manufacturing costs.

But whether the Food and Drug Administration will look favorably on Fevrille’s product remains to be seen.

Meanwhile, Royston will go on scouting biotechs. As an oncologist, Royston said he eyes mostly cancer studies that are backed by top scientists and managers. n

Webb is a staff writer with the San Diego Business Journal.

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