James Farrington quoted in The Daily Deal on biotech funding

May 27, 2004
The Daily Deal, May 27, 2004
Two Swedish biotechs land funding
by Valerie Thompson
InDex Pharmaceuticals and Cellectricon raised $4.7 million and $7 million, respectively.
Two venture capital financings announced Wednesday, May 26, in Sweden underscore the continuing role of local VCs in developing the country's relatively strong biotechnology sector.
Stockholm-basedInDex Pharmaceuticals ABraised €3.9 million ($4.7 million) in a third round from Finnish venture capital firm CapMan Capital Management Oy, investing from its Swedestart Life Science KB fund, while Cellectricon AB, based in Göteborg, completed a 53 million Swedish kronor ($7 million) Series B financing round from existing Swedish investors InnovationsKapital, Investor AB's Investor Growth Capital unit and Karolinska Investment Fund.
InDex attracted CapMan, which has an option to invest a further Skr15 million upon the company meeting certain milestones, because it is a later-stage company, according to new investor Björn Nordenvall, the investment director at CapMan in Stockholm. The startup recently signed a licensing agreement with Geneva-based Serono SA, which should bring the company milestone payments of up to $35 million.
InDex will also receive undisclosed royalties on sales of the licensed drug candidate. Consequently, the InDex financing was an up round, according to Nordenvall. But he would not give the company's valuation.
Maturity, or at least revenue generation, was also the reason Cellectricon attracted new funding. The new round came on the back of its shipping its flagship product, a miniaturized chip for performing drug discovery and research in biotechnology labs, as well as several research projects recently signed with AstraZeneca plc. The 3-1/2-year-old company is on track to generate some $2 million in sales this year, according to Fredrik Lindgren, vice president of corporate communications for Investor Growth Capital, an early investor.
Andrén Bratt Isacsson Advokatbyrå AB of Stockholm provided legal advice on CapMan's InDex financing. Cellectricon's investors turned to Vinge KB of Stockholm for counsel.
It's unusual to see two biotech financings in Sweden in one day despite its biotech industry rankings of fourth in Europe and seventh globally, according to Ernst & Young LLC. There are more than 100 drug discovery and development startups in the country, as well as several manufacturers of advanced biotech research equipment and medical devices.
But the drug pipeline overall is at a preliminary stage. That means there are a lot of preclinical trial companies looking for finances, and Sweden's venture capital investors are not necessarily backing early-stage startups these days.
"The VCs are seeing exits moving further and further away and are making sure they have the capital to back existing portfolio firms," said Jim Farrington Jr. of Wiggin & Dana LLP in Stamford, Conn., many of whose clients are Scandinavian biotech companies.
Farrington forecasts consolidation in the market driven by venture capital investors seeking to build more viable, close to market companies and to concentrate where capital is flowing.