A venture capitalist whose firm was the majority investor in Irvine-based eye device maker Visiogen Inc. said the time was right to sell the company to Abbott Laboratories.
Abbott bought Visiogen, a maker of replacement lenses used in cataract surgeries, for $400 million at the start of September.
“If we got the right price, it probably made more sense to put it in the hands of somebody who already has established distribution,” said Jeani Delagardelle, a managing partner at New Leaf Venture Partners, a firm with offices in Menlo Park and New York. “You need some muscle behind it.”
New Leaf and its precursor, the Sprout Group—the venture capital arm of Credit Suisse First Boston, now Credit Suisse Group AG—had invested in Visiogen since its inception in 2001.
The firm didn’t disclose the exact amount it’s put into the company.
Overall, Visiogen raised about $80 million in venture funds.
Abbott, a diversified maker of drugs, medical devices and consumer products with yearly sales of about $30 billion and a recent market value of $73 billion, gained a big foothold in the $22 billion eye surgery products market through its $2.8 billion buy of Santa Ana-based Advanced Medical Optics Inc. earlier this year.
Advanced Medical, now known as Abbott Medical Optics, is set to absorb Visiogen.
Abbott, which is based in the Chicago area, beat out several unnamed companies for Visiogen, according to Delagar-delle.
“At the end of the day, we thought the Abbott proposal was the least risky, at a fair valuation,” Delagardelle said. “They’re one of the market leaders since they bought AMO.”
AMO had kept its eye on Visiogen well before the Abbott deal, she said.
“AMO had a relationship with the CEO (Reza Zadno) and some of the management team,” she said. “They have the same physician customers.”
New Leaf did believe Visiogen could go public, once it got Food and Drug Administration approval for its Synchrony accommodating intraocular lens, Delagardelle said.
Synchrony is under review at the FDA with an expected approval date in 2010.
Delagardelle, who received her master’s in business administration from the Uni-versity of California, Irvine, said deals remain the exit choice for venture capitalists.
“For medical devices, I would say that 80% of the (venture-backed) companies are sold,” she said.
Cashing out for venture investors, Delagardelle said, is taking longer now—about eight years, as opposed to a traditional “five-ish” frame.
That’s because portfolio companies are requiring more funding and buyers want companies “to be more de-risked and make more progress,” Delagardelle said.
Separately, Abbott’s buy of Visiogen got a nod on the Motley Fool investor Web site.
Contributor Brian Orelli wrote that drug giants Pfizer Inc. and Merck & Co. should take a note from Abbott and how it’s used smaller deals for long-term growth, rather than large deals such as Merck’s recent buy of Schering-Plough Corp.
“Sure, Abbott’s acquisition of privately held Visiogen for $400 million didn’t get the same fanfare as your acquisitions that topped $40 billion, but if you do enough of those deals, it seems likely that you’ll get more bang for your buck,” Orelli said.
Allergan’s Lobbying
Allergan Inc., an Irvine-based drug maker, got itself involved in the healthcare reform debate by spending $300,000 on lobbying Congress in the second quarter, according to a disclosure filed with the U.S. House of Representatives.
Allergan lobbied on a proposed bill designed to give the FDA the authority to approve generic versions of biotechnology drugs. Allergan and others argue that biotech drugs should have patent protection for 12 to 14 years before competing with cheaper generic copies because they need more time to recoup the costs of development.
Biotech drugs generally cost about $1 billion, or about twice as much as conventional drugs, and take some 10 to 15 years to develop, according to figures from Biocom, a San Diego-based trade group with an Irvine office.
Biotech drugs haven’t faced generic competition because the FDA doesn’t have the authority to approve generic versions.
The generic biotech bill’s expected to be included in larger healthcare reform legislation now moving through Congress.
Bits and Pieces:
Quality Systems Inc., an Irvine-based medical software maker, said it hired PricewaterhouseCoopers LLP as its new auditor. Quality said it hired PricewaterhouseCoopers after Grant Thornton LLP, its previous firm, resigned because it became a “material customer” of an unnamed company that is majority owned and controlled by Quality Chairman Sheldon Razin … Peregrine Pharmaceuticals Inc., a Tustin drug developer, said results from a second-phase clinical trial supported its Cotara drug candidate for treating glioblastoma multiforme, which is considered the deadliest form of brain cancer. The study showed that Cotara increased survival rates in patients who had recurrent cancer … Patient Care Technology Systems, a Mission Viejo-based subsidiary of Florida’s Consulier Engineering Inc., said its Amelior Tracker emergency room software is being used by Christiana Care Health System of Wilmington, Del.
