Paris-based biopharmaceutical data provider Aureus Pharma raised €3 million ($3.8 million) in private-equity financing, the company said last week.
The funding comes from new investors OTC Asset Management and AXA Private Equity, and from existing investors Bioam and CED Enterprises-FP Gestion.
This news followes on the heels of a similar announcement from Germany’s Biomax, which raised €2.3 million from a group of venture capital firms the week before.
And it’s not just European investors who seem to have rediscovered the bioinformatics sector after a long hiatus. In August, Seattle-based Teranode said it had raised $2.6 million in a Series A round of financing led by Ignition Partners; and in May, Integrated Genomics said it raised more than $1 million in a venture capital financing round led by an undisclosed investor.
To be sure, private funding for the entire biotech industry is on the rise, according to Burrill & Company. After hitting a peak of more than $3 billion in 2000, private biotech fundraising dropped 20 percent to $2.4 billion in 2001, according to the life science merchant bank, with a slight increase in 2002 and 2003. But 2004 may be a breakthrough year, according to Burrill’s figures: For the first two quarters of the year, biotech companies have raised more than $2.3 billion in VC and other private funding so far.
But since bioinformatics was hit harder than some other segments of the biotech market during the economic downturn, its recovery has been slower. Many VCs who placed their bets on informatics firms in the late ‘90s were the victims of hype and unrealistic expectations: Promised a combination of the consumer software sector’s rapid growth and the drug discovery sector’s long-term profitability, investors got neither and quickly bolted.
VCs putting their money on the table this time around seem to know what they’re getting into.
Paul-Henri Schmelck, associate manager of OTC Asset Management, acknowledged that Aureus is a “service company” that provides a technology with a market value of only around half a million dollars per year.
“This technology is for the discovery phase, so it shows at a very early stage. It’s not [like] the market for a CRO,” he said. Nevertheless, he added, “this company is unique in the healthcare sector.” With no clear competitors, and “databases that haven’t been developed in the pharmaceutical industry,” Schmelck told BioInform that Aureus seems a safe investment.
Indeed, investment in informatics firms during 2004 remains conservative — none of the companies who have raised VC funding this year have broken the $5 million mark, even with multiple investors.
Plus, VCs are looking for a proven record of technology development and sales — particularly sales to pharmaceutical firms. In the case of Aureus, the company has signed licensing agreements with Roche, Servier, Aventis, Pfizer, and Bristol-Myers Squibb.
Biomax, which claims Millennium, Roche, and Schering among its customers, also demonstrated the ability to grow organically, according to Wolf R diger Willig, executive officer of BayBG, who participated in Biomax’s recent financing, as well as a prior round in 2002. With the exception of that previous round, Willig said, “Biomax is one of the few bioinformatics companies that has financed its growth … entirely with its realized net profit.” The company said its current annual sales are “approaching the ten million [euro] range.”
For Aureus, the new funding serves as validation of its technology and business model, but according to CEO Andre Michel, the company wouldn’t have gotten to this point without first getting validation from its pharmaceutical customers.
“Our strategy was to start with big pharma,” he said, “because that is the proof of concept for our technology.” In addition to the company’s current pharmaceutical clients, Michel said that Aureus is currently in discussions with 15 other drug discovery firms.
Michel said that the funding will help increase Aureus’s headcount from a current level of 27 to 35. The company plans to expand both its marketing and its product development efforts, he said.
Aureus was founded in 2000 by a team of former pharmaceutical executives. Michel, who was director of discovery at Servier before joining Aureus, said that the company’s founders set out to create a series of databases “that we would have been happy with as pharmaceutical researchers.” The result is the company’s AurScope databases, which contain biological and chemical information mined from the scientific literature and patents.
Each database relates to a specific class of drug targets or a pharma topic of interest. The company currently offers AurScope GPCR, which contains data on 1,800 target proteins, 100,000 ligands, and 450,000 biological activities from more than 13,000 publications and 3,000 patents; and AurScope ADME/Drug-Drug Interactions, which contains data on 400 target proteins, 3,500 molecules, 1,400 metabolites, and 70,000 activities.
According to Michel, these databases “marry genotype and phenotype” in the same way that a pharmacologist, medicinal chemist, or other scientist within a pharmaceutical R&D group would do on his or her own. “It’s the same presentation of biological results from literature that would come from internally generated data,” he said. The company’s tools provide a ready-made framework for those scientists to add their own experimental results, he said.
While this platform was developed with the needs of large pharmas in mind, Michel said that the new funding will now allow the company to “configure and package” its products for medium-sized pharmas and small biotechs. He said the company will also offer databases on kinase nuclear receptors and proteases.
Michel said his company’s new financing is proof that there is a solid market for biological and chemical databases. For companies like Celera and Incyte, “the information was based on genomic discoveries … and the phenomenological information was missing,” he said.
But this information was essentially waiting to be discovered in the scientific literature. “It was there, but it was underexploited,” he said. “We have balanced the phenomenology with genotypic information.”