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    PE Week Wire -- Tuesday, December 6

Pursuing Paul

I’ve been chasing Paul Sekhri for nearly a year. Last night I finally found him.

Sekhri is CEO of Cerimon Pharmaceuticals Inc., a Boston-based drug company that recently raised $70 million in Series A funding. He made his mark as head of global search and evaluation with Novartis Pharma AG, before leaving in late 2002 for what would be a short tenure as a partner with Sprout Group. It was during his work with Sprout that I first spoke with him, for a Venture Capital Journal cover story on the VC funding environment for diabetes-related companies. He was one of the most insightful and pragmatic VCs I had spoken with, which is why I continued to bother him after he had left Sprout to become president and chief business officer of publicly-traded ARIAD Pharmaceuticals Inc. in Cambridge, Mass.

Then came a December 17, 2004 mass email in with Sekhri said that he was leaving ARIAD to join something called Cerimon Pharmaceuticals, which was housed within the Boston offices of MPM Capital. I wrote back, asking for info on Cerimon. Paul and I then engaged in nearly a year-long cat and mouse game (I played cat), whereby he would give strategic excuses for why we couldn’t get together for an elusive cup of coffee. Things like “I’m in Hawaii” or “My favorite episode of Laguna Beach is on tonight.” In short, he was smartly maintaining the stealthiness of his startup.

All of that changed in October, however, when Cerimon emerged from the shadows with $70 million in first-round funding from MPM Capital, Nomura Phase4 Ventures and OrbiMed Advisors. The deal caused hyperventilation among other life sciences entrepreneurs, who wondered both if Cerimon had raised too much money and how their companies could also secure such a stash. The press release said that the company would focus on “unmet medical needs” and that it had acquired the rights to sell two topical formulations of a non-steroidal anti-inflammatory drug.

In celebration of this massive fund-raising coup, Cerimon last night hosted a swanky party at Restaurant L in Boston (a few grand of that $70 million is now formally accounted for). Restaurant staff was dressed in hospital scrubs, most of Cerimon’s San Francisco staff was in attendance and the pricey red wine was topped only by the tasty tuna tartare. Oh, and everyone got a long-sleeved Cerimon T-shirt upon exit.

The first person I ran into, of course, was Sekhri himself. He unnecessarily apologized for the past year of strategic avoidance, and then briefly discussed how excited he was by what Cerimon was doing. But it wasn’t the time for in-depth conversation, so I instead tried to judge the level of passion from other company employees (consider it the cocktail party equivalent of cold-calling). This might come off as simplistic – and perhaps obvious in regards to a startup – but the people I spoke to expressed a heartfelt devotion to what Cerimon is creating, particularly in its lead candidate (the aforementioned anti-inflammatory cream). I don’t always see this with non-CEOs/founders of startups, who often express hopeful optimism tempered by the wry understanding that it might all fall apart tomorrow. Maybe it’s the $70 million, but this is a company that is convinced that it could be a $1 billion behemoth. A few other party-related observations:

*** No, I’ve never heard of a major party being thrown to celebrate a Series A funding. Then again, I also haven’t heard of too many Series A rounds that generate $70 million.

*** Cerimon was incubated in Boston, but Cerimon is actually based in San Francisco. The handful of remaining Boston-area staffers are expected to move West shortly.

*** One person I spoke with briefly was Paul Hastings, a Cerimon board member who last week was named CEO of OncoMed Pharmaceuticals. For those who don’t remember, OncoMed is the cancer stem cell company I wrote about in October. Hastings replaces founding CEO Jim Woody, who is a partner with OncoMed backer Latterell Venture Partners. Hastings explained last night that he had five or six CEO offers on the table at similar terms, but took the OncoMed position because he believes it could become the next Genentech. As I’ve said before – and with apologies to Cerimon – OncoMed is probably the single most intriguing company I’ve covered all year, because it is literally looking toward the Holy Grail of treating the root cause of cancer.

*** A bunch of MPM Capital folks were obviously in attendance, and tonight there will be a different party for the former MPM folks who recently spun out to form Clarus Capital. The occasion is the closing of Clarus’ inaugural fund with $500 million, and also is sure to feature tasty wine. Perhaps the most noteworthy item about the Clarus fund-raising is that it only took two months to complete. This is quick by any VC standard, and stands in stark contrast to several Boston-area life sciences firms that are having fund-raising difficulties. It also is worth mentioning that the Clarus principals still must finish investing the current MPM Capital fund (a bit of dry powder remains), which means that the first Clarus portfolio company won’t be added until early 2006.


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    Top Three

ChannelSoft Technology Co. Ltd., a Beijing-based provider of a telecom service platform and call-center middleware products in China, has raised $31 million in second-round funding. Backers include Walden International, SAIF and China Science Merchant. The company was founded in October 2000.

Visage Mobile, a San Francisco-based mobile virtual network operator (MVNO) enabler, has raised $30 million in Series D funding. Nomura International led the deal, and was joined by return backers Worldview Technology Partners, Mobius Venture Capital, Advanced Technology Partners, Vesbridge Partners, Emergence Capital Partners, Palisades Ventures and Selby Venture Partners. The company has raised around $82 million in total VC funding since its 2001 inception.

Apax Partners has agreed to sell Zenesus Holdings Ltd. to Cephalon Inc. (Nasdaq: CEPH) for approximately $360 million in cash. The deal is expected to close by the end of Q1 2006. Zenesus is the parent company of Zenesus Pharma Ltd., a UK-based drug company focused on critical care, oncology and pain management.

    VC Deals

JumpTap Inc., a Cambridge, Mass.-based provider of mobile search solutions, has raised $21 million in second-round funding. Redpoint Ventures was joined on the deal by return backers General Catalyst Partners and BCE Capital.

Times Internet Ltd., the digital venture of Indian media house Bennett, Coleman & Co. Ltd., has raised $7 million in VC funding from WestBridge Capital Partners.

Metaboli, a France–based provider of digital distribution for video games via broadband, has raised 6 million euros in second-round funding. New backers include Intel Capital, Innovacom and Alven Capital.

SPI Dynamics Inc., an Atlanta–based provider of Web application security assessment and testing products, has received a strategic investment from Visa International.

Ketera Technologies Inc., a Santa Clara, Calif.-based provider of on-demand spend management solutions, has raised $13 million in fourth-round funding. Emergence Capital and Concentric Equity Partners co-led the deal, and were joined by return backers Kleiner Perkins Caufield & Byers, Integral Capital Partners and Foundation Capital. The company has now raised nearly $70 million in total VC funding since its 2000 inception.

Multispectral Imaging Inc., a Sparta, N.J.–based provider of infrared detectors, has raised $4.65 million in Series B funding. Spencer Trask led the deal, and was joined by fellow return backers SAS Inv*stors and Rho Ventures, plus new backers Battelle Ventures and its Innovation Valley Partners affiliate.

Sionex Inc., a Bedford, Mass.-based developer of chemical sensor chips and systems, has secured $10.08 million of a $12 million Series C round, according to a regulatory filing. Backers include Navigator Technology Ventures, Morgenthaler Ventures, Rho Ventures, TechFarm Ventures and Draper Labs.

Njini Inc., a UK-based developer of data management software solutions, has secured $2.5 million of a $5 million Series B funding, according to a regulatory filing. Backers include Accel Partners and Add Partners.

    Buyout Deals

Nordic Capital has agreed to sell Anticimex Nordic AB to Ratos AB for SEK 1.65 billion (approx. $207 million). Anticimex is a Sweden-based provider of pest control, food safety and building environmental services.

North Castle Partners and J.W. Childs have agreed to sell fitness club operator Equinox Holdings Inc. to company management and real estate development firm The Related Cos. The deal is valued at approximately $505 million, and is expected to close in January.

Trinity Hunt Partners has acquired Lone Star Fasteners LP, a Houston, Texas–based manufacturer of specialty fasteners and gaskets. The deal was valued at approximately $33.5 million, with leverage arranged by Amegy Bank and D.B. Zwirn & Co.

Sun Capital Partners has received European Commission approval to acquire the European apparel division of Sara Lee Corp. (NYSE: SLE). No deal terms have been disclosed, although published reports price the transaction at between $250 million and $350 million.

Lincolnshire Management has acquired Dalbo Cos., a Vernal, Utah–based provider of services and materials for the extraction of natural gas. No financial terms were disclosed.

Cinven has received European Commission approval to buy Frans Bonhomme SAS from Apax Partners for approximately 900 million euros. Frans Bohomme is a France-based plumbing supply company which Cinven had originally sold to Apax three years ago for 520 million euros.

Texas Pacific Group has agreed to sell its 35% stake in Italian motorcycle company Ducati Motor Holding SpA to Investindustrial Holdings for an undisclosed amount.

PD Ports PLC, a UK-based port operator, reportedly has received a second takeover bid from Northern Echo of Australia. The news comes just one week after PD Ports agreed to be acquired for Gbp246 million from Endeavour Ports Ltd., which is backed by Industry Funds Management owns approximately half of Endeavour Ports, with other significant shareholders including 3i Group and Challenger Financial Services Group. No specific information was disclosed about the Northern Echo bid, except that it believed to be higher than the Endeavour bid.

    Bad News

Nobex Corp., a Durham, N.C.-based drug discovery and development company, has filed for bankruptcy and put its remaining assets up for sale. India-based research partner Biocon has offered to acquire Nobex’s intellectual property for around $3.5 million. Nobex had raised nearly $90 million in VC funding since 1996, from firms like Crescendo Venture Management, The Aurora Funds, A.M. Pappas & Associates, American Express, Hotung International, AEA Inv*stors and Odlander, Fredrikson & Co.

    PE-Backed M&A

Cooper-Standard Automotive, a Novi, Mich.-based automotive supplier, has agreed to acquire the Fluid Handling Systems business of ITT Industries Inc. (NYSE: ITT) for approximately $205 million. The deal is expected to close in Q1 2006. Cooper-Standard is a portfolio company of The Cypress Group and Goldman Sachs Capital Partners.

Financial Dynamics, a UK-based business communications firm controlled by Advent International, has acquired Dittus Communications, a Washington, D.C.-based public affairs firm. No financial terms were disclosed.

Ramesys Holding Ltd., a UK-based IT provider, has sold its education business to LDC for an undisclosed amount. The company also says that it plans to integrate its application business and re-brand its consolidation group as RedSky IT. Ramesys is a portfolio company of Kleinwort Capital Ltd.

Chef Solutions, a Schaumburg, Ill.-based provider of refrigerated prepared foods and specialty bakery products, has acquired Fish House Foods Inc., a Vista, Calif.-based provider of refrigerated prepared foods to the retail food industry. No financial terms were disclosed. Chef Solutions is owned by Questor Partners.

Axeda Corp., a provider of device relationship management software and services, has acquired the DRM business and related holdings of ITA Holdings Inc. for $7 million. JMI Equity provided financing for the acquisition, and also provided an undisclosed amount of working capital for ongoing Axeda operations.

    Firm & Fund News

Clarus Ventures has closed its inaugural fund with $500 million in capital commitments.

Verge, a New Mexico-focused seed-stage venture firm, has closed its inaugural fund with $15 million in capital commitments.

    Human Resources

Paul, Weiss, Rifkind, Wharton & Garrison LLP has elected six new partners, including: Angelo Bonvino (corporate, focused on M&A), Thomas de la Bastide (corporate, financing practice), Kaye Yoshino (Tokyo-based corporate, focused on cross-border transactions), James Brochin (litigation), Catherine Nyarady (litigation) and Eric Stone (litigation).

Harkit Bhatia has been named CEO of Ritchie Capital Advisors Asia-Pacific. He has spent the past 11 years in various Asian assignments for GE, including his most recent role as president of Asia-Pacific corporate financial services.

Roland Van der Meer, a general partner with ComVentures, has joined the board of Axesstel Inc. (AMEX: AFT), a provider of fixed wireless voice and broadband data products.

Corrections: Highroads is a provider of benefits lifecycle management solutions. Also, NexTest Systems Corp. was incorrectly identified as NextTest Systems Inc.

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December 6, 2005

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