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Latterell Thinking: Ken Widder, Latterell Venture Partners’ Man in San Diego, on Early Stage Life Sciences Investing

Xconomy San Diego — 

Before he joined San Francisco-based Latterell Venture Partners almost four years ago, Ken Widder says the VC venture firm was trying to recruit a partner willing to work full time in Latterell’s Embarcadero Center headquarters.

“I’ve known Pat for 24 years,” Widder says, referring to Pat Latterell, the namesake founder who started the life sciences VC firm in 2001. “He asked me if I would move to San Francisco, but he knew I was pretty integrated in the community down here.”

As understatements go, saying that Widder is part of San Diego’s life science community must rank right up there with Francis Crick’s dry observation that the structure of DNA is “of considerable biological interest.”

Widder has been ensconced in San Diego since 1981, shortly after finishing his medical residency in pathology at the Duke University Medical Center. With Drew Senyei, his roommate and medical school lab partner at Northwestern University, Widder started Molecular Biosystems in San Diego, took the company public in 1983 (more on that later), and served as MBI’s chairman and CEO for nearly 18 years. The company was initially focused on developing antisense-based drugs, converted the technology to diagnostic probes and sold it to Abbott Labs, and eventually developed the first two ultrasound contrast agents to be approved in the U.S.

The last company he founded, San Diego-based Sytera, merged in 2009 with Sirion Therapeutics of Tampa, FL. Switzerland’s Alcon Laboratories acquired the combined company’s assets earlier this year for an estimated $130 million.

Ken Widder and Susan Golding

Ken Widder and Susan Golding

Altogether, the San Diego resident founded seven life science companies, holds 30 patents or patent applications, and has authored or co-authored 25 scientific papers. Along the way, Widder was involved from the outset in the formation of Biocom (San Diego’s regional nonprofit industry group), and was appointed by San Diego Mayor Susan Golding as chairman of both the San Diego Regional Technology Alliance and San Diego Technology Council.

Since Widder joined Latterell, the VC firm has made investments in San Diego’s Evoke Pharma, Femta Pharmaceuticals, and Meritage Pharma. He also moved onto the board of Luminous Medical, replacing Laterell partner Steve Salmon at the Carlsbad, CA-based company developing continuous blood sugar monitoring technology. He tells me he also discussed Latterell’s decision to invest in Seattle’s HemaQuest and Calistoga Pharmaceuticals, recent deals that were led by Latterell partner Jim Woody, who now sits on those boards.

“It’s been a great deal for the firm,” Widder says. “My office is in San Francisco, and I go up once a week for partner’s meetings. I look for deals whether they are in San Diego or elsewhere.” While there is a West Coast tilt to the firm’s venture investments, Widder says, “We aren’t geographically constrained. It’s just a matter of practicality.”

I met Widder for coffee recently; our discussion was prompted by Latterell’s participation in a $6 million investment round (joined by Domain Associates and Windamere Venture Partners) in Evoke Pharma, which is developing drugs for gastrointestinal diseases. In our wide-ranging conversation, I gleaned these highlights:

—Latterell, which is currently making investments from its third fund, has about $350 million under management. While the firm invests generally in a variety of biotech, biomaterial, diagnostic, and device companies, Widder says about half of each fund gets invested in drug development startups and the other half in medical devices. “We’re early stage investors,” Widder says. “Generally we lead or co-lead our deals. The vast preponderance of our deals are Series A rounds.” Latterell’s investments in Calistoga and HemaQuest, though, were later-stage deals. “We’re looking for exciting technologies that serve unmet medical needs, or that stand out as best-in-class drugs,” Widder says.

—Even though Latterell is focused on making early stage life sciences investments, Widder says the firm follows a traditional venture model. With just five partners, Latterell doesn’t usually take management positions in the companies it helps create. “We’re active board members,” Widder says. “I have extensive operating experience and we bring a lot of practical talent to our companies, but we don’t take active management roles.”

—At a time when many seed-stage biotechs are turning to contract research organizations (CROs) in China or India to carry out pre-clinical research, Widder says that generally hasn’t been necessary at Latterell’s portfolio companies. On the other hand, he says Femta is basically a two-person company developing antibody therapeutics, and Evoke and Meritage are also operating as virtual biotechs. He says the biotechs in Latterell’s portfolio generally had their research data and were ready to move into clinical trials when the firm made its first investment.

—Most of the life sciences companies backed by Latterell are leaving the portfolio through M&A deals. “The landscape for IPOs is very different,” Widder says. “I started my first company when I was 28 with investors from Minnesota, two years after Genentech went public. Investors were wide-eyed with optimism about cloning, and you could go public just by filing an IND [investigational new drug application]. Now you can’t go public unless you’ve got several compounds in phase 3 trials. The bar is much higher, and the sophistication among investors is much greater. There are analysts on Wall Street who totally understand drug development—even marketing and reimbursement.”

As a result, Widder says most life sciences startups are pursuing strategies that lead eventually to a merger or acquisition. “We’re all kind of in the same boat,” he says. “It’s harder work on the VC side. You have to create value… and everybody wants a deal. On the management side, it’s always tough to get good management. But even with good management, there’s a lot of luck that still needs to happen.”