At first glance it looks like something the venture community hasn’t seen since the late 1990s – a $57 million Series A funding for a company with only 22 employees.
But Victoria, B.C.-based Aspreva Pharmaceuticals has something the dot-coms of the last decade didn’t have – a viable pharmaceutical product and the potential to license and acquire more through a risk-averse business model.
The funding on the oversubscribed round consists of $53 million in equity and $4.2 million in converted debt. The Sprout Group led the financing with about half of the $53 million. InterWest Partners was the second-largest investor, putting in about $14 million. Other investors in the round include Axiom Venture Partners, BioAsia Investments, HBM Partners and Thomas Weisel Healthcare Ventures.
While neither Aspreva nor its investors would disclose the valuation of the round, a source familiar with the deal says that the post-money valuation of the transaction is “well north of $100 million.”
Aspreva partners with pharmaceutical developers and finds, develops and brings to market new applications for those developers’ drugs. The company focuses on medicines in areas it considers under-served; it has made autoimmune diseases its initial area of focus.
Aspreva grabbed the attention of investors last October, when the company announced a partnership with Basel, Switzerland-based pharmaceutical company Roche to develop and market new uses for transplant medication CellCept.
“It took a year for us to actually forge the partnership with Roche,” says Richard Glickman, chairman and CEO Aspreva. “Our revenue stream is not linked to regulatory approval milestones. That’s an important part of our business model.”
It was the promise inherent in such a partnership that motivated investors to fund the big round, says Ron Hunt, a partner with the Sprout Group and a member of Aspreva’s board of directors.
“This is a very large and unusual Series A round for the industry for sure,” says Hunt. “But the circumstances in this case certainly justified it.”
“If a company is product-oriented and clinic ready you would put in more,” says Arnold Oronsky, a general partner with InterWest Partners and also a member of Aspreva’s board of directors. InterWest normally puts in between $6 million and $10 million in a Series A, says Oronsky. He adds that the advanced development and business model of the company prompted the positive response from investors.
Aspreva was founded in December of 2002 when it raised, through friends and family, $1.3 million. Last September, the company did an interim financing of about $4 million in debt to carry it through the financing and initiate a clinical program and recruit additional management. Aspreva began fund-raising last November with a goal of $50 million.
There is a consensus among investors and management that Aspreva will not need a Series B, but may raise one to help it make strategic acquisitions in the future.
The Series A was designed to take the company to cash flow positive by the end of 2005, says Glickman.
“Should we decide to accelerate our acquisitions program, then we would raise a Series B,” Glickman says. “We have a very active business development program.”
Aspreva, which recently hired a CFO, expects to announce additions to its international management team either this week or next to expand its operations in Europe and Asia.
Glickman says the company will grow to 55 employees during the next six months and reach 170 by the end of 2005. He adds that the company’s board of director will be expanded to eight, with a significant number of independent members.
Aspreva’s investors are bullish on the company’s future.
“I would think that this is prototypical of a company that should have an IPO,” says Oronsky. He cites several biotechnology companies in InterWest’s portfolio that have gone public within the past six months, such as genetic-based therapies developer Corgentech; therapeutic and prophylactic products developer Dynavax Technologies and Myogen, which provides therapies for the treatment of heart failure.
BMO Nesbitt Burns and Harris Nesbitt, the investment and corporate banking affiliates of the BMO Financial Group, acted as financial advisor and placement agent for the company.