The Big One

I have a biotech bias. If given the opportunity to cover one of two startups of equal financial wherewithal and innovation, I'll typically choose the one trying to cure cancer over the one trying to speed up my Internet connection. Of course, I've never actually written about a company trying to cure cancer… until today.

That company is OncoMed Pharmaceuticals Inc., which yesterday announced that it had raised $13.9 million in Series A funding from Laterell Venture Partners (lead), U.S. Venture Partners, Morgenthaler Ventures and The Vertical Group. It actually secured around $18 million in Series A commitments last year, held an initial close on $5.88 million and called down about $8 million more in the past couple of weeks. But back to the matter of curing cancer…

For decades, oncologists have hypothesized that cancer contained some sort of cellular growth mechanism (a.k.a. “germ cell”), but it had never been identified until some Stanford University researchers discovered some self-renewing cells in leukemia a few years back. They called them “cancer stem cells,” because a very small number can renew indefinitely in order to create something new (albeit cancer instead of blood or an organ). This research was followed up by a pair of University of Michigan scientists who also found cancer stem cells in solid tumors, and learned that they were largely resistant to traditional chemotherapy. In other words, they figured out why someone can have breast cancer, get chemo, seem cancer-free and then have the same cancer again two years later.

OncoMed is based on the University of Michigan research, which also includes proprietary technology has helped identify that could let it identify and target the actual cancer stem cells. To date, the company has identified 50 cell surface antigens over-expressed on the cancer stem cells, and soon will begin work on both antibodies and small molecule drugs to target/kill the cells. If successful, you might literally be able to take a pill to stop the growth of breast cancer or brain cancer (with corresponding chemotherapy or surgery to remove the existing tumor). It won't quite be like picking up some Tylenol Stomach Cancer at Walgreens, but nonetheless could be an enormous therapeutic breakthrough in oncology.

There are, however, some caveats. First, the company would likely be horrified to hear me publicly suggest that it could cure cancer (such big expectations come with that Holy Grail sort of phrase). Moreover, this is a very long-term process. An oncologist working with stem cells tells me that a best-case scenario for R&D and commercialization of such a drug would be at least five years, and that the drug would only target one type of cancer. Jim Woody, CEO of OncoMed, seems to concur, suggesting that the company's lead candidates wouldn't be ready to enter Phase II clinical trials for at least two years, after which there would be Phase III trials, FDA approvals, etc. And, again, this is best-case scenario, which would have to include a big pharma partner.

The main problems with such waiting are (A) Could someone else beat them to the punch; and (B) How long can VC backers afford to stick around? I'm not so concerned about A, since any big pharma very interested in this technology likely would just try to buy OncoMed. Question B, however, could be a bit dicier if the best-case scenario doesn't work out. All of the VCs currently are gung-ho and very excited, but there obviously are huge timing risks with an early-stage drug discovery company, based on the 10-year lifecycle of most VC funds. If a fund comes up on year nine and there still isn't a product…

Nonetheless, this may just be the most exciting company I've come across in five years of covering startups and the investors who love them. And, if it's successful, it will be the most important as well.

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Top Three

 

News Corp. (NYSE: NWS) has agreed to acquire IGN Entertainment Inc., a Brisbane, Calif.-based provider of community-based Internet media and services for video gaming, for approximately $650 million in cash. IGN currently is in registration for a $200 million IPO, and had been a public company until it was taken private in a 2003 buyout led by Great Hill Partners. Great Hill holds a 40.3% pre-IPO stake, while other significant shareholders include Liberty Mutual Insurance Co. (23.8%) and Banc of America Capital Inv*stors (10.3%). www.newscorp.com www.ign.com

Epsilon, a business unit of Alliance Data Systems Corp. (NYSE: ADS) has agreed to acquire Bigfoot Interactive Inc., a New York-based provider of email communications and marketing automation solutions, for $120 million. Bigfoot has raised over $40 million in VC funding since its 1997 inception, from firms like JPMorgan Partners, Mitsui & Co., Constellation Ventures and Hudson Venture Partners. www.epsilon.com www.bigfoot.com

EBay Inc. (Nasdaq: EBAY) is in talks to acquire Luxembourg-based P2P telephony company Skype Technologies SA for between $2 billion to $3 billion, according to The Wall Street Journal. Earlier reports focused on Yahoo or Microsoft as a possible buyers for Skype, which has raised VC funding from Draper Fisher Jurvetson, Bessemer Venture Partners and Index Ventures.

VC Deals

Direct Flow Medical Inc., a Santa Rosa, Calif.-based developer of an aortic tissue valve prosthesis, has raised $8.45 million in Series A funding. New Leaf Venture Partners and Spray Venture Partners co-led the deal, and were joined by existing shareholder EDF Ventures. www.directflowmedical.com

Kotura Inc., a Monterey Park, Calif.-based provider of silicon photonic products, has raised $13 million in Series 2 funding. GF Private Equity Group led the deal, and was joined by Viterbi Group and return backers ComVentures and ARCH Venture Partners. Kotura has raised $24 million in total VC funding since being formed out of the 2003 merger of Arroyo Optics and LightCross. www.kotura.com

Partech International and Canaan Partners have sponsored a spinout of Aliso Viejo, Calif.-based Vue Technology Inc. (f.k.a. Intelligent Systems) from MeadWestvaco’s New Ventures Group. The deal results in Partech, Canaan and MeadWestvaco all holding board seats with Vue, which focuses on RF networking and item-level RFID solutions. www.vuetechnology.com

Buyout Deals

J.C. Flowers & Co. LLC has agreed to buy Crump Group Inc., the U.S.-based wholesale broking operation of Marsh Inc., a unit of Marsh & McLennan Cos. (NYSE: MMC). No financial terms were disclosed. Banc of America Securities served as financial advisor to Marsh, while Lazard served in a similar capacity for J.C. Flowers. www.marsh.com

Ford Motor Co. is leaning toward selling its Hertz Corp. car rental business to a private equity group that includes Clayton Dubilier & Rice, Carlyle Group and Merrill Lynch Global Private Equity, according to The Wall Street Journal. A decision could be made within the next day, with the sale expected to be valued at between $5.5 billion and $6 billion (plus the assumption of more than $10 billion in debt). An alternate bid reportedly has been submitted by a consortium that includes Bain Capital, Blackstone Group, Texas Pacific Group and Thomas H. Lee Partners. www.hertz.com

Permira, CVC Capital Partners and PAI Partners have received the 75% shareholder approval they needed for their acquisition of Spain-based clothing retailer Cortefiel SA.

Bob Guccione Jr., founder of Spin and Gear magazines, has teamed with two unnamed private equity firms to buy Discover magazine from The Walt Disney Co. for an undisclosed amount. www.discover.com

AmeriCast Technologies Inc., a maker of steel and iron sand castings, machined components and assemblies, has completed a $95 million recapitalization. Proceeds went to refinance the company’s debt, fund a $26.1 million distribution to shareholders and provide $25 million to fund future acquisitions. AmeriCast was formed in December 2003 by KPS Special Situations Fund, in order to purchase certain assets of Atchison Casting Corp. out of Chapter 11 bankruptcy for approximately $40 million (plus $15 million of new equity capital). www.americasttech.com

First Atlantic Capital has agreed to buy Precision Parts International from Morgenthaler Partners. No financial terms were disclosed. Precision Parts is a Rochester Hills, Mich.-based manufacturer of high-precision metal components and subassemblies, and was originally formed as an acquisition platform by Morgenthaler. www.firstatlanticcapital.com www.morgenthaler.com

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