Venture capitalists have been unfairly maligned by those who oppose federal funding for embryonic stem cell research. Such criticism was particularly harsh in California, where many notable VCs helped lead passage of a $3 billion bond bill that will provide around $300 million per year for in-state stem cell research. The basic whine goes like this: “If VCs see so much promise in embryonic stem cell research, why don’t they just fund it themselves?”
The smart response is that VCs must exit an investment within 10 years, and embryonic stem cell technology remains too embryonic (pardon the pun) to make such a timeline plausible. Someone else needs to do the blueprint R&D – just as many VC-backed pharma companies are rooted in existing institutional research from either academia or big pharma.
But there is one embryonic stem cell company just screaming out for buyout firm investment, if not venture capital: Advanced Cell Technology, which last week said that it had found a way to form new embryonic stem cells without destroying the original embryo (via a biopsy process). Yes, I know ACT is publicly-traded on the OCT Bulletin Board, and that it already has lost the price surge generated by its breakthrough news (thanks, in part, to a blasé White House reaction). I also know that it continues to raise generous PIPE funding from investors like Anthem Venture Partners. So why the screaming out?
ACT is not primarily focused on creating a cure for Parkinson’s disease, which would well exceed the aforementioned 10-year timeline. Instead, it wants to commercialize new embryonic stem cell lines that would be sold to both small and large drug development companies. The current holdup, of course, is the federal ban on all but a handful of existing lines, but successful reproduction of ACT’s results could – and likely would — produce new legislation that allows for funding of new lines that don’t destroy the original embryo.
So back to private equity: This is a buyout opportunity with huge potential upside and relatively little capital risk (ACT’s market cap is below $23 million). It also has knowledgeable private equity folks already on board, including director Alan Walton, a general partner with Oxford Bioscience Partners.
Private equity investors have precious few chances to put their money where their mouth is on embryonic stem cell research. ACT is one of them.
*** Speaking of stem cells, OncoMed Pharmaceuticals Inc. has raised $33.12 million in Series B funding, according to a regulatory filing. Adams Street Partners was joined by return backers like Latterell Venture Partners, Morgenthaler Ventures, U.S. Venture Partners and The Vertical Group. OncoMed focuses on something called “cancer stem cells,” which aren’t really stem cells, but are called that because of their ability to replicate within solid tumors. The company isn’t talking about this deal yet, but here’s a piece I wrote on OncoMed last year. Still one of the most exciting companies I’ve ever covered.
*** Lots of West Coast blog buzz last week, about Mark Pincus’ decision to retake control of social networking company Tribe Networks. The relevant news here is that Tribe investors Mayfield Fund, Knight-Ridder and The Washington Post are in the process of being washed out, and no longer have board representation. Pincus and existing company lenders are now in search of recap funding.
*** We see lots of public pension fund managers go private, due to both increased salaries and support staff. But the reverse trip is much rarer, which is why the following move deserves note: Steve Reynard has left Nationwide Mutual Insurance Co., in order to join the State Teachers Retirement System of Ohio.
*** Both Venture Capital Journal and Buyouts Magazine are looking for some new reporters. If you’re interested, please email me some info.
*** Finally, some of you have asked for a heads-up when I’m going to be on television. Ok, I’ll be on CNBC today at 1:20pm ET. The topic is whether or not there is a private equity bubble. My answer will not surprise you…