Atlas Sells In Secondary Deal

As his punishment for leading the Titans against the Olympians, Atlas held the weight of the sky on his shoulders, keeping the Earth and the heavens separate. Unlike the Greek myth, Atlas Venture can take advantage of the secondary market to seek relief when portfolio companies become burdensome.

The Waltham, Mass.-based firm announced last week that it sold a portfolio of six companies to the Omega Fund, a secondary fund managed by Geneva-based Omega Advisors. It is one of the first transactions in which a combination of public and private assets have been sold by a traditional VC firm from its legacy funds, according to Atlas.

Otello Stampacchia, CEO of Omega Advisors, declined to disclose the price paid for the assets, but says it was “in the high double figures” of millions, and included substantial funds available for follow-on investments and other commitments such as build-on acquisitions. The sale proceeded under an exclusivity agreement.

The six companies in the portfolio are from three older funds that Atlas found it no longer had reserves to support, according to Stampacchia. The companies that Atlas sold to Omega are: Cropdesign, a Gnent, Belgium-based genetic crop developer; DeveloGen, a Goettingen, Germany-based drug discovery company focused on gene therapy that has merged with the Israeli pharmaceutical company Peptor; Illkirch, France-based EntoMed, which develops peptides against bacteria; Micromet, a Munich-based developer of anti-cancer antibodies; NitroMed (Nasdaq: NTMD), a Bedford, Mass.-based provider of cardiovascular-related drugs that went public last year; and Vasca, a Tewksbury, Mass.-based provider of dialysis products.

Vasca has raised more than $70 million in venture funding since 1996, according to the MoneyTree Survey from PricewaterhouseCoopers, Thomson Venture Economics (publisher of PE Week) and the National Venture Capital Association. In addition to Atlas, other investors include the Sprout Group, Lightspeed Venture Partners, The Crossroads Group and Bedrock Capital Partners.

The Omega Fund is a secondary fund focused on buying direct venture portfolios in the health care space. While Omega Advisors is based in Switzerland, the firm is considering opening a Boston office and expects all of their buys will have some U.S. component to them. The Atlas transaction is the fund’s first. Omega’s fund was closed earlier this year and seeks assets between $3 million and $150 million.

Stampacchia says that health care companies are well suited to be bought and sold on the secondary market, given their long product development cycle and capital-intensive nature. He says Omega is looking at a number of portfolios comprised exclusively of U.S.-based companies.

The Atlas sale to Omega marks the further acceptance of the secondary market as a portfolio management tool. Typically, traditional venture investors such as Atlas have not turned to the secondary market to realize an exit from its investments. Sellers of direct venture portfolios have traditionally been such groups as corporate VCs, investment banks and other entities that are increasingly looking to end or sharply reduce their private equity exposure.