Money’s flowing into Orange County’s healthcare startups.
Investors sunk $127 million,or two-thirds of all OC venture funding,into healthcare companies in the second quarter, according to the MoneyTree survey from Pricewaterhouse Coopers LLP, Thomson Venture Economics and the National Venture Capital Association.
The number surpasses a high reached in the second quarter of 2005, when local biotechnology, medical device and other companies raised $108 million worth of funding.
The second quarter’s tally far outstripped that of the first quarter. Only about $1.7 million in healthcare funding took place in the first three months at one company, Irvine biotech Coda Genomics Inc.
In last year’s fourth quarter, healthcare made up $77 million of a quarterly total of $95 million. One fourth-quarter funding, $32 million for Irvine heart device maker Devax Inc., dominated.
In the second quarter, the biggest investment went to Cameron Health Inc. of San Clemente, which got $31.2 million.
Cameron, which is partly owned by Natick, Mass.-based Boston Scientific Inc., is developing an implantable defibrillator that delivers electric shocks to a patient’s heart when it beats in a rapid, uncontrolled fashion.
MoneyTree’s second-quarter report includes $25 million raised at Alteer Corp., an Irvine maker of medical practice management software. Alteer says it expects to actually close the funding this quarter.
USGI Medical Inc., a San Clemente company, got $21 million in a third round of funding during the second quarter, according to MoneyTree.
The company’s investors include InterWest Partners, based in Menlo Park, and San Francisco’s Alta Ventures, which provided USGI’s initial funding. USGI Chief Executive Eugene Chen is a former Alta entrepreneur-in-residence.
USGI’s lead product is the SG-1 Endoluminal Shape-Locking Guide, which is inserted in a patient’s gastrointestinal tract to help doctors perform colonoscopies and other procedures more efficiently.
The second quarter’s fundings even touched on the emerging field of stem cells.
Novocell Inc. of Irvine picked up just more than $14 million in an investment round led by Johnson & Johnson Development Corp., the venture investment arm of Johnson & Johnson.
Novocell hopes to free diabetics from lifelong insulin shots and is using its funding to develop “islet cells” derived from embryonic stem cells. The islet cells can be transplanted into diabetics.
J & J; invested in Novocell because “it sees the concept of diabetes cell therapy as being potentially a very important opportunity,” Novocell Chief Executive Alan Lewis said earlier this year.
Lewis said he plans to raise more money.
“This is an expensive business,” he said.
Windy Hill Medical Inc., a Laguna Hills company, raised $9.6 million to develop drugs for reducing the risk of breast cancer.
Windy Hill’s investors include Fjord Ventures, which is in Laguna Hills and run by Olav Bergheim, a fixture in local healthcare investing, as well as Menlo Park-based Montreux Equity Partners.
The second-quarter venture capital roster includes a device maker that’s planning to go public. SenoRx Inc. out of Aliso Viejo said it raised $8 million worth of funding.
SenoRx, a maker of a breast biopsy device, filed to go public in late May and is seeking to raise up to $86 million in its stock offering. An offering date hasn’t been set.
The company’s venture investors include Domain Associates, which was based in OC and now is out of San Diego; De Novo Ventures of Menlo Park and MPM Capital, which has offices in South San Francisco, Cambridge, Mass., and Germany.
Observers say SenoRx, which has more than 1,000 customers and 37 patents, could be an attractive draw because it’s going after a large market, breast cancer screening.
Down in Costa Mesa, TC3 Health Inc., which works to electronically integrate healthcare claims systems with external loss control programs, received $7.6 million in funding during the quarter.
Global Care Quest Inc., a newcomer to the Orange County healthcare scene, raised $5 million in a first round of financing in May.
Global Care Quest’s main product is an “integrated care information system” that sends patient data to portable computers or phones carried by doctors.
Lexington Ventures LLC, a Beverly Hills-based private equity firm, led Global Care’s investment. Global Care relocated to Aliso Viejo from Beverly Hills in the spring.
Rounding out the quarter’s fundings: ReVision Optics Inc., a Lake Forest-based maker of intracorneal replacement lenses, raised $3 million; and WorkWell Systems Inc., an Aliso Viejo medical information technology company, which got $2.25 million.
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Sun Healthcare Dips on Stock Downgrade
Irvine-based Sun Healthcare Group Inc. saw its summer rally stunted last week after an analyst downgraded the nursing home operator.
Sun Healthcare’s shares fell about 10% last week.
The company, which worked its way through bankruptcy in the late 1990s, counts a market value of about $325 million and yearly sales of about $900 million.
UBS Investment Research analyst Donald H. Hooker downgraded Sun to “neutral” from “buy.”
Hooker cited a recent run-up in Sun’s shares for the downgrade. The stock is up about 10% in recent weeks, spurred by a strong quarterly report on Aug. 2. For the year, the shares are up about 40%.
Sun could bolster operations by offering more care for Alzhei-mer’s patients and installing new computers and software to manage costs, according to Hooker.
Recent increases in Medicaid reimbursement could help Sun in the fourth quarter, he said.
Sun runs about 100 nursing home facilities in 13 states.
,Michael Lyster
