Torrey Pines Investment director Nikolay Savchuk speaks on company's Investment Strategy.

Full text of the article "Torrey Pines Investment Raises $30M To Launch Virtual Biotech Cos." written by Brian Gormley, March 22, 2010, is offered below.

TORREY PINES INVESTMENT RAISES $30M TO LAUNCH VIRTUAL BIOTECH COS.
Brian Gormley
March 22, 2010

Torrey Pines Investment Inc., which launches and invests in biotech start-ups in the U.S. and Russia, has raised $30 million toward a second venture fund slated to reach $150 million.

The firm secured the initial $30 million late last year and intends to hold a final closing in 2011, said Nikolay Savchuk, a director of the San Diego-based firm. Limited partners include individuals and undisclosed private equity firms, he said.

The fund is already larger than its firm's first effort, closed in 2006, according to Savchuk, who declined to disclose the exact amount that partnership raised.

News about Torrey Pines' latest fund was reported earlier by Mergermarket.

Torrey Pines Investment formed in 2002 to launch biotech start-ups around drugs spun out of pharmaceutical companies and research centers. Part of its strategy is to use the opportunities of an emerging pharmaceutical market in Russia to bridge developments in Russia and the U.S.

This approach was enabled by the firm's earlier investment in the ChemRar High Tech Center in Moscow, a "bio cluster" that played a big role in Russian Pharma 2020, a government-industry partnership that developed a roadmap to modernize the nation's pharmaceutical industry, according to Savchuk.

The firm used its first fund to help launch start-ups such as Avineuro Pharmaceuticals Inc., a San Diego company that develops drugs for anxiety, schizophrenia and Alzheimer's disease.

Another holding, Viriom Ltd., spun out of Roche Holding Ltd. last year to develop and sell therapies for HIV in Russia, the Ukraine, Belarus and Kazakhstan. Viriom operates out of the ChemRar High Tech Center, which also houses iDialog, a Torrey Pines-backed biotech company that aims to discover drugs for hepatitis C, tuberculosis and other infectious diseases, and ChemRar Pharma, whose anti-cancer treatments are designed to block hedgehog signaling pathways.

While Torrey Pines plans to continue financing its earlier portfolio, it will also use the second fund to back other firms' companies. Its initial second-fund investment is Afraxis Inc., a start-up developing drugs to treat Fragile X syndrome and autism, which was seeded by another San Diego firm, Avalon Ventures.

While Torrey Pines and Avalon are geographic neighbors, they also have similar ideas about how their portfolio companies should be run. Both aim to trim the costs of biotech investing by running start-ups virtually. That means contracting out many tasks and keeping headcount down to three to seven people early on. ChemRar Pharma, for instance, has three employees.

And instead of building or leasing their own lab space, Avineuro, iDialog and Viriom have hired ChemDiv Inc., a San Diego contract research organization, for their preclinical work.

One of the challenges for early-stage biotech investors is to maintain their pro-rata stakes through the many financing rounds that companies often need before they can go public or be acquired. A larger fund will give Torrey Pines greater ability to participate in later financing rounds if it chooses and maintain its stake. But the firm is also considering other exit options for companies backed through its first fund, including selling shares to venture investors coming in at later rounds.

Unlike most venture firms, which manage 10-year funds, Torrey Pines now raises four-year partnerships. The investment period for its new fund, for example, is late 2009 to 2013. While the firm is not required to make distributions within four years, the aim is to generate returns for limited partners sooner than a traditional venture firm would.

With Fund I, which was invested from 2006 to 2009, the firm expects to begin generating returns this year and in 2011, Savchuk said.

Torrey Pines Investment is not to be confused with TorreyPines Therapeutics Inc., a biotech company that merged with Raptor Pharmaceuticals Corp. last year.