Klausner Joins A.M. Pappas

Arthur Klausner has resurfaced with A.M. Pappas & Associates after leaving Domain Associates a year ago in a dispute over investment strategy. Klausner will serve as a venture partner for the Research Triangle Park N.C.-based venture firm, which focuses on the life sciences sector. He is expected to eventually join the general partnership of A.M. Pappas.

“I’ve known these guys for a long time,” says Klausner, who, during his Domain days, crossed paths with A.M. Pappas on deals for Peninsula Pharmaceuticals Inc. (soon to be acquired for $245 million by Johnson & Johnson) and X-Ceptor Therapeutics Inc. (acquired last year for $22.3 million by Exelixis Inc.).

But familiarity is not Klausner’s primary reason for joining A.M. Pappas. Instead, it’s the firm’s willingness to invest in pre-clinical, or science-stage, pharmaceutical companies. He made many such deals during his 14-year run with Domain, but began watching more and more of his proposals get rejected as Domain’s investment strategy moved downstream. He eventually resigned, after several months of having his free time filled by additional administrative responsibilities.

“The common denominator of Arthur’s deals was that they tended to have earlier sciences than we usually invest in,” Domain co-founder Jim Blair told PE Week in March 2004. “I didn’t want Arthur to leave, but I do understand his decision.”

The split was surprising, but not antagonistic. Klausner continued to occasionally work out of his Domain office in Princeton, N.J., while also helping to transition his board seats to remaining Domain professionals. He also began to do some one-off business consulting and investment work, which he will maintain on a part-time basis until all existing obligations are fulfilled.

“I’m in a venture partner role, which will be a majority of my time, but not full time,” Klausner explains. “Assuming that the fund-raising goes well, I’ll move toward a more full-time role as a general partner.”

A.M. Pappas currently is raising its fourth fund with a $120 million target capitalization, and already has held a first close on more than $53 million.