Peninsula Pharmaceuticals Inc., a company specializing in the development and licensing of clinical stage anti-infection pharmaceuticals, has secured $22.1 million in a Series B round of venture financing. Domain Associates led the deal, which also included participation from Canaan Partners, A.M. Pappas, Montreux Equity Partners, Mitsubishi International Corp. and Sears Capital Management. Ekard Weber of Domain and Brent Ahrens of Canaan Partners have joined Peninsula’s board of directors. They join Lowell Sears of Sears Capital Management, a board member since the company’s inception in February.
The deal represents the first large-scale investment in the Fremont, Calif.,-based company, dwarfing the $495,000 that Peninsula picked up during its Series A round in February. The round also closed slightly above the $20 million that the Peninsula was seeking.
Peninsula’s business model is based on forming development teams with large pharmaceutical firms to develop anti-infection drugs. Although Peninsula has yet to partner with any pharmaceutical companies, under a typical agreement, Peninsula would provide clinical coaching and expertise, while the pharmaceutical company would develop the product and retain the manufacturing rights.
“The management team at Peninsula is strong, with people who have the skill to negotiate with large pharmaceutical firms for terms that are favorable to both parties,” says Arthur Klausner, a partner at Domain. For Klausner, part of the attractiveness of investing in anti-infection technology, particularly at the late clinical trial stage, is the expediency of the clinical results. “You know right away whether the product kills the germ or it doesn’t. With, say, a cancer drug, you don’t have the same quick recognition of effectiveness,” he says.
Peninsula will use the money from the offering to expand its staff and to further build its clinical testing practice. “We expect the money we raised to last us through late 2004,” says Paul Truex, the company’s president. “But if we gain product licenses relatively quickly, we could look for another financing round sooner, perhaps in 16 to18 months.” Truex, a former marketing and business development executive at Eli Lily, says that the company is probably a few years away from seeing revenue, as it concentrates on adding experienced clinical people and exploring business development partnerships. “We are looking for a true partnership with the big pharmaceutical firms, that is our current focus.”
Peninsula’s biggest challenge lies in building the right clinical testing infrastructure. “You need the right human resources to manage the process of a major clinical testing company. As you take the company from its current level of 11 employees, and you begin to build it into a large organization, you have to be sure to have a plan that puts the people with the right skills into the right jobs,” Klausner says.
As for an exit strategy, Klausner sees Peninsula as an IPO candidate in the near future, provided the market comes back. “When you have a portfolio of clinical stage products, you are a viable candidate to go public,” he says. “We are hopeful of achieving that pretty soon.”
Contact Thomas Van Riper