by Stephanie Adams
Executive Director, Southeast BIO

Large and impressive displays by Southeastern states at last week’s BIO International Convention in Boston are evidence of the importance of the biotech industry to the economic growth of the individual states and the region as a whole.

Yet, the Southeast is not alone in its biotech ambitions. Indeed, the “quest for biotech” has grown more competitive over the last several years, as newcomers have entered the race and older, more established players have upped the ante to remain competitive. For example, at the BIO meeting, the state of Massachusetts - a well-established center for the industry - announced a $1 billion dollar Massachusetts Life Science Initiative.

Yet, in the quest for biotech, not every state or region will be a winner. So how is the Southeast faring? At least with respect to the growth of the industry from the ground up, the Southeast seems to be making considerable progress.

Historically, the Southeast has been undercapitalized, making it difficult for companies to get off the ground with local capital. That seems to be changing as the Southeast witnesses an influx of out-of-region venture capital.

Venture capital funds based in the Northeast and elsewhere are increasingly involved in the region, such as Domain Associates (Princeton, NJ), Quaker BioVentures (Philadelphia, PA), New Enterprise Associates (Baltimore, MD) and MedImmune Ventures (the corporate venture capital arm of MedImmune, Inc, headquartered in Gaithersburg, MD), to name a few. Often, these groups invest alongside venture funds based in the Southeast, such as H.I.G Ventures, Intersouth Partners and the Aurora Funds, but in other cases, source and fund deals independently.

What makes a venture capitalist willing to fly to the Southeast? In short, the region’s world-renowned research institutions are producing strong deal flow at reasonable valuations in an increasingly competitive investment marketplace.

Quaker BioVentures has invested in four Southeastern life sciences deals, including Regado Biosciences, Biolex Therapeutics, Kolis, Inc. and Tranzyme Pharma, Inc., which are all located in North Carolina. According to Dr. Geeta Vemuri, a Principal with Quaker, the Southeast presents many great investment opportunities that may permit Quaker to continue to expand its Southeastern portfolio.

“Certainly we have been actively looking for deals in the region over the last few months, with a particular emphasis on deals in Georgia, North Carolina and Florida,” notes Vemuri. “Our experience here has been very positive, and we remain optimistic that any number of deals in our new fund will be done in the Southeast.”

Domain Associates is also very active in the Southeast. Regional investments include Altea Therapeutics (GA), Regado Biosciences (NC), Alimera Sciences (GA), and ParinGenix (NC). These investments follow much earlier successes for Domain with companies like Trimeris, Inc. (Nasdaq: TRMS) (NC) and Inspire Pharmaceuticals, Inc. (Nasdaq: ISPH) (NC).

Domain was also an investor in Proxima Therapeutics, Inc. (GA), a radiation delivery system company acquired by Cytyc Corporation (Nasdaq: CYTC) in March 2005. Domain recently invested in former Proxima CEO Tim Patrick’s next company, Carticept Medical, Inc. (GA).

Notes Dr. Todd Brady, a Principal with Domain, “We’ve had a lot of success in the Southeast, both in terms of solid exits and current investments for which we have great expectations. Our investment in Carticept is good evidence that the region is maturing, and we are going to see further attractive investment opportunities from second and third generation efforts from serial entrepreneurs like Tim.”

Venture funds based in the Southeast appear to welcome the influx of capital. “Building biotech companies takes a lot of capital, generally more than what the Southeastern firms alone can syndicate. We often syndicate the deals we lead in the Southeast with funds from outside the region and are encouraged by the trend of more firms willing to invest here,” said Bruce Robertson, Managing Director based in H.I.G. Venture’s Atlanta office. Robertson recently led a round in Atlanta-based Metastatix, Inc. and syndicated with the Aurora Funds and three out-of region groups.

The growth of the Southeastern life sciences economy is dependent upon the efforts of both the Southeastern funds and the out of region funds, notes Rebecca Kaufman, Counsel with King & Spalding and Chairman of Southeast BIO, a non-profit organization devoted to the growth of the industry in the region. Southeast BIO hosts an annual life sciences venture capital forum, now in its 9th year, which attracts venture capital investors from the region and across the country. “Each year,” she observes “we find that a growing percentage of our venture audience is from outside of the region, most notably, from the mid-Atlantic and Boston area. Obviously, something is happening here which has captured the imagination of the larger venture capital community and is drawing them here to learn more.”

To underscore her point, Kaufman cites the involvement of CM Capital Investments, an Australian fund, in the recent Metastatix deal, declaring “now that’s a really long way to fly!”

Stephanie D. Adams, Ph.D., is Executive Director of Southeast BIO. SEBIO’s mission is to foster the growth of the life sciences industry in the Southeastern United States. For more information visit www.sebio.org.
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