Life-sciences companies tap a rich vein
BYLINE: By DOUGLASS CROUSE, STAFF WRITER, North Jersey Media Group
As an executive at large life-sciences companies, Paul Southworth once evaluated the potential worth of smaller businesses. These days he finds himself on the other end of that equation.
So far this year, CircuLite Inc., the Hackensack business that Southworth heads as president and chief executive officer, has attracted $25 million in venture capital funding - money that will help finance testing of the 3-year-old company's device to treat heart failure.
"There's a lot going on with medical devices," Southworth said, "and there seems to be money around to be had."
CircuLite is one of four medical device and drug businesses in Bergen County that, together, snatched up more than half of the first-quarter venture-capital investments in New Jersey companies - $108 million in all. CircuLite received a $20 million commitment in March and another for $5 million last month.
Venture-capital funding is an investment in a start-up business that is considered to have strong growth prospects but does not have access to capital markets. This type of financing is sought by early-stage companies seeking to grow quickly.
There were 18 such deals in the first quarter in New Jersey, compared with 15 from the same period a year ago. Overall, investments were down in New Jersey for the third straight quarter. The national news was cheerier, as funding exceeded the $7 billion level for the first time since late 2001, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data by Thomson Financial.
Nationally, life-science companies - which include biotechnology and medical-device makers - also led the charge, with late-stage companies doing particularly well.
One North Jersey company that struck gold is Cadent Holdings Inc. in Carlstadt, which was awarded $10 million as part of a $25 million fund-raising effort.
The company, which makes 3-D imaging devices for the dentistry and orthodontic industries, is in talks with hedge funds and hopes to complete an initial public offering within the next 18 months.
"Our process to date has gone very well," said Ed Sitar, executive vice president and chief financial officer. "The people we're meeting with were very quick to do due diligence on the company."
Driving the heavy investment in life-sciences companies are the diversity of their products and limited overlap of target markets, said Emily Mendell, vice president-strategic affairs and public outreach at the National Venture Capital Association.
"Venture capitalists are looking for firms that will be number one in their sector," she said. "The market is greatly diversified. It's drugs that cure cancer or cure diabetes; orthopedics or stents."
Investment amounts tend to be higher because of the lengthy processes of research and approvals from the Food and Drug Administration. Life-sciences investments usually make up about a third of the total venture-capital pie, but approached 40 percent in the latest quarter, Mendell said.
In New Jersey, the drug industry's large presence also contributes to the growth in life-sciences companies.
"A lot of pharmaceutical companies are looking to these small biotech companies as their de facto R&D pipeline," Mendell said.
Southworth once eyed start-ups as potential acquisitions for former employers, which included Montvale-based Datascope Corp. and Boston Scientific Corp. in Massachusetts. At times, though, the ultimate decisions were based more on competitive strategy than medical science, he said.
"I just found that the big companies are not purely technologically focused and clinically focused," he said. "They're also focused on the battle of the titans ... and make acquisitions that are not always for clinical benefit."
With CircuLite, he sought to zero in on patient needs. The company's Synergy device - a small, minimally invasive technology designed to improve blood flow - is set to enter human trials within a few months.
"When you're in a start-up it's pretty pure, with people who don't have mixed objectives," he said.
That single-minded passion for the product should be a central part of every appeal to venture-capital funds, Southworth said. "I always wanted to make sure that everything that excited us was in the presentation," he said.
E-mail: crouse@northjersey.com
(SIDEBAR, page B02)
Venture-capital funding for North Jersey firms in first quarter 2007
Eagle Pharmaceutical Inc., Upper Saddle River
Generic pharmaceutical
Investment: $22 million
CircuLite Inc., Hackensack
Devices for heart failure
Investment: $20 million
Cadent Holdings Inc., Carlstadt
3-D modeling for orthodontics and dentistry
Investment: $10 million
EluSys Therapeutics Inc., Montville
Biopharmaceutical
Investment: $5 million
ReGen Biologics Inc., Franklin Lakes
Orthopedic implants and devices
Investment: $3 million
MedPage Today LLC, Little Falls
Medical news service
Investment: $2.1 million
Multispectral Imaging Inc., Parsippany
Infrared sensor device maker
Investment: $600,000
First Index Group Inc., Parsippany
Matches buyers and suppliers of custom-manufactured parts
Investment: $250,000