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Friday, December 4, 2009
East Coast VCs, innovators attract California biotech execs
By Julie M. Donnelly
MHT's Galen Moore: Honoring innovation in New England
Companies born in the recession
MHT's Julie Donnelly: Life science startups finding investments
In the bicoastal battle for biotechnology executive talent, score three for the Bay State.
The region has picked up at least three new biotech CEOs from the San Francisco Bay Area in the past few months. All are the first full-time CEOs for their startups, and all said they were looking for companies with game-changing new technologies.
Two companies that have recently recruited CEOs from the West Coast were launched by Third Rock Ventures: Constellation Pharmaceuticals Inc. of Cambridge, which brought on new CEO Mark Goldsmith in August from Prospect Venture Partners, a health-care VC firm in Palo Alto, Calif.; and Cambridge-based Agios Pharmaceuticals Inc., which in May brought on David Schenkein from California’s largest biotech company, San Francisco-based Genentech.
Martin Tolar, the newly minted CEO of Wellesley-based NormOxys Inc., was brought on by the scientific founders in June to be the first official CEO of the company.
Goldsmith’s Constellation has raised $32 million in its first round of funding in the spring of 2008. Constellation currently has 41 employees and plans to grow by 10 in the next year. The company’s early-stage technology is designed to regulate chromatin, the packaging of DNA, to turn genes off and on. The company will initially focus in oncology, and Goldsmith expects to announce a partnership deal in the next six months.
“It’s a very attractive place because of the high density of investors and company-builders that make it easy to pull a startup together. In California, everyone is more spread out,” Goldsmith said.
The only downside for doing business here, Goldsmith said, has been that while space has been more readily available in the Bay Area since the downturn, he is not finding that phenomenon in Cambridge, where he hopes to expand the headquarters.
For Schenkein, the Bay State had an opportunity he could not find on the Left Coast.
After Genentech’s acquisition by Switzerland-based Hoffman-LaRoche Ltd., Schenkein was asked to stay on as the global head of oncology.
“The only thing that would have prevented me from taking the job was to find a bold new technology that was trying to do something big,” he said.
Schenkein said he found that at Agios, which is an early-stage company exploring cancer metabolism, looking to starve cancer cells of their nutrient supply. Agios has raised a total of $33 million since its launch in July 2008. The company has 28 employees in Cambridge and 35 contractors in India and China.
Insiders suspect younger venture capital funds are more willing to invest in riskier technologies because there are several years left before investors are looking for an exit. And some of those younger funds, right now, are located here. Third Rock Ventures, for instance, which is less than three years old, has not changed its funding strategy during the downturn, officials there have said.
“I was looking at about 30 opportunities, and two-thirds of them were in the Boston area,” NormOxys’ Tolar said. Tolar found himself in demand after completing a $1 billion deal between San Francisco-based Comentis Inc. — where he served as the chief business officer — and Japanese drugmaker Astellas Pharma Inc. He said he was drawn to what he calls NormOxys’ breakthrough technology based on delivering oxygen to cells that are starved for it, also known as hypoxic. The company is developing drug targets for cardiovascular disease and cancer.
In some ways, the reports of open CEO jobs here seem to defy logic. After all, California is the clear winner over Massachusetts when it comes to the number of venture capital deals every year. The number of deals in California grew to 25 from 22 for the third quarter of 2009 versus the year-ago period, while the number of deals in Massachusetts remained steady at 14, according to Dow Jones VentureSource. But interestingly, the number of dollars invested in California biotechs dropped by $116 million, to $409.9 million from $525.32 million in 2008. The number of newly invested dollars in Massachusetts dropped by a much smaller amount — $34 million — to $224.33 million from $258.92 million.
Tolar said that one difference between the two coasts is that some local VCs have been quicker to adapt to the new reality of biotech financing since the downturn.
He said that means creating companies, based on one technology or drug target, that outsource much of the work and have a shorter path to an exit — most likely through an acquisition.
“We’re not building another Genentech. It doesn’t make sense to create that kind of infrastructure anymore,” he said.
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