The money is not limitless, but the $70 million raised by Boston-based Infinity Pharmaceuticals ranks as the largest private company biotech deal so far this year. “You can’t overlook that there are still people that are going to get sick and need new medicines,” says Infinity CEO Steven Holtzman.
The Series B round was led by U K-based Advent Venture Partners, and included both Series A investors Venrock Associates and Prospect Venture Partners. New Infinity investors include Paul Allen’s Vulcan Ventures, HBM Bioventure, Novartis Bioventure Fund, Wellcome Trust, Tallwood, Lotus BioScience Investment Holding and Alexandria Equities SG Cowan Managing Director Stelios Papadopoulos and two Infinity founders Holtzman and Frank Moss also contributed to the round as private investors. Infinity has raised $82 million in venture funding since being founded in February 2001.
A year after the company was launched, Holtzman and the Infinity team started thinking about going out for more funding to develop their chemical genomics approach to drug discovery. Chemical genomics is a new method of finding drugs that starts with small drug-like molecules to screen protein targets and unravel their role in disease. The claim of the small molecule approach is that it allows Infinity researchers to skip several steps required in conventional drug discovery and get candidate drugs into their pipelines faster. Other companies are pursuing a similar path in drug discovery including Graffinity, Ambit and Amphora.
Holtzman and his colleagues figured they would need $45 million to get to the next stage as a biotech company, their technology dialed-in and drug candidates started to flow. To raise that amount, they knew they would be forced to look beyond their two original VC firms. But Holtzman didn’t want to go through the typical road show, where company executives get dragged from “pillar to post,” Holtzman says. Instead, he decided to target just six to eight potential investors.
When you go through the list of new investors, the majority – four of seven – are from outside the United States. Of those, three are from Europe: Advent and Wellcome are from the UK, HBM is Swiss and Lotus is Hong Kong-based.
The Infinity strategy, Holtzman says, was to avoid classic early stage biotech and venture investors, but rather focus on European crossover firms – large firms used to funding health science companies in both the public and private sector. These foreign firms didn’t get the deal flow that a U.S. firm might get, and were eager to listen to the Infinity story. The final part of the strategy was to not dicker over valuation.
“We said, this is the price we want; these are the terms,” Holtzman says. “We told them we are not going to bring this to a lot of people, and we are interested in doing this quickly.” The plan worked brilliantly, so well that instead of raising the planned $45 million the company pulled in $70 million.
With that money stashed away, Infinity now has an advantage few biotech companies do – it can take financial risks.
Drug discovery is a very expensive undertaking. Many early stage biotech companies focus on the overall risk of finding a drug that works, and typically let a large pharma shoulder the financial risk of paying for the drug development process. The pharma usually walks away with all the revenue from the sales of the drugs it paid to develop. Infinity’s windfall does not decrease the overall risk it faces, but it does allow it to take more of a financial risk in the development process – and keep more of the upside.
Contact Michael Copeland