Merlin Nexus whizzes to close third fund

Merlin Nexus, a New York-based shop that invests in private and public life sciences companies, expects to hold a second close on its third crossover fund in the next few weeks.

Merlin Nexus held its first close on the fund, which has a $125 million target, at $40 million in mid-May, and the firm anticipates a final close will be held in the first half of 2009.

David Gould, a principal with the firm, declined to put a figure on the next close for Merlin Nexus III, saying the details were still being ironed out.

“It’s certainly challenging out there right now, but we’re still finding a receptive audience for our strategy,” Gould says. “Our strong track record with the first two funds helps and we’re a bit unique in that we’re able to take advantage of opportunities on the public side.”

Another differentiating factor, Gould says, is that Merlin Nexus has a shorter investment horizon than most private equity firms.

The firm’s first effort, Merlin Nexus I, closed with $46 million in commitments in October 2001. The follow-up, Merlin Nexus II, garnered $40 million in pledges and held its final close in April 2006. Gould says that fund II is fully invested and it’s already had realizations on 75% of LP commitments.

Merlin Nexus I is ranked first in its vintage year with a net IRR of 17% as of June 30, according to the Cambridge Associates Healthcare Benchmarks. Merlin Nexus II currently ranks fourth with a 13% net IRR.

Merlin Nexus targets late stage private companies, PIPE deals and select long-term open market investments. The first full investment from fund III was a PIPE deal involving Micromet Inc., a Munich, Germany and Bethesda, Md.-based biopharmaceutical company developing antibodies for the treatment of cancer and inflammation.

Merlin Nexus co-invested in the $40 million private placement, which was disclosed in early October, with Index Ventures, Abingworth, DAFNA Capital Management and others. Its portion of the deal was $3 million, according to Thomson Reuters (publisher of PE Week).

Micromet shares have roughly doubled since the start of 2008. The stock was recently trading at about $4 per share. —Michael Baron