Health funds raise capital

Information technology may be what everyone is talking about, thanks to a resurgence in consumer Internet plays, but investments in health care startups during the first quarter shot up 35% over last year.

It should come as no surprise, then, that health care-oriented venture capital firms are on the fund-raising trail.

Health care investment firm OrbiMed Advisors announced last week that it raised its third venture fund. It closed Caduceus Private Investments III at $500 million.

The fund will invest in mid and later stage private life sciences companies over four to six years and will focus on biopharmaceuticals, medical devices, diagnostics and discovery tools. The managers are also authorized to make opportunistic investments in small public companies.

CPI III is bigger than the $300 million CPI II raised in 2002, which has funded 11 companies to date and regularly contributes to the largest financings in health care. Last year, for example, the firm funded drug development startup Cerimon Pharmaceuticals, which raised $70 million in its first round.

Investors Samuel Isaly, Sven Borho, Carl Gordon, Michael Sheffery and Jonathan Silverstein will invest the fund.

OrbiMed is not alone, as smaller funds have been launched in the last week, as well.

Louisiana Ventures has started a $30 million fund targeted at commercializing technology from the Pennington Biomedical Research Center in Baton Rouge. The center focuses on the effects food has on the human body and is working on solving problems such as diabetes and obesity.

The fund, called Themelios Venture Partners, has closed $11 million and will be spearheaded by Ross Barrett, a lawyer who helped co-found Louisiana Ventures in 2004.

Venture capitalists put $1.6 billion to work in health care during the first quarter, up from $1.2 billion during the same quarter last year, according to The MoneyTree Survey by PricewaterhouseCoopers, Thomson Financial (publisher of PE Week) and the National Venture Capital Association. Investment in information technology rose only 5% to $3.06 billion during the first quarter, up from $2.93 billion in the first three months of 2005.