Sofinnova Ventures Defies the Grim Mood, Raises $440M For Biotech-Only VC Fund

10/17/11Follow @xconomy

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investing in different therapeutic areas, which can fall in and out of favor over time, Powell says. Right now, the firm likes ophthalmology companies, dermatology, oncology, and drugs for rare diseases. Sofinnova is steering clear of diabetes drugs at the moment because of the high hurdles at the FDA, and it’s avoiding certain neurological disorders, like Alzheimer’s, which require too much time and capital to address, Powell says.

Like any successful investor, Sofinnova has had to be nimble about its market timing. Sofinnova made sure to liquidate its entire holdings in San Diego-based Orexigen Therapeutics (NASDAQ: OREX) during a window of opportunity about 10 months ago, when the company got a positive recommendation from an FDA advisory panel for its obesity drug. The stock soared for a while, but crashed back to earth when the FDA rejected the compound and asked the company to run another long, expensive clinical trial to prove it doesn’t raise the risk of heart attacks and strokes. Sofinnova, like a lot of investors, had a feeling the FDA might do that to Orexigen, after it rejected a couple other obesity drugmakers. “We were nervous,” Powell says.

At least for this new fund, which will take three to five years to dole out in new investments, Sofinnova isn’t that concerned about the other major boogeyman in life sciences—reimbursement. Healthcare reform passed in 2010, removing some of the uncertainty about drug price controls, Powell says.

“Reimbursement has been an issue for 40 years, and there will always be reimbursement issues,” Powell says. “If you go after indications where you save someone’s life and have a huge impact in their outcome, like you reduce their time in the hospital, reimbursement still takes time to get, but you will absolutely get it. It may not go as fast as you like, but if you have a drug that actually works, you’re fine. If you have a me-too drug, or that is taken twice a day instead of an existing drug that’s three times a day, and isn’t really differentiated, that’s another thing.”

Still, the issue of future price controls is bound to rear its head in life sciences investing at some point, Powell says. Just not in the next 10-year return cycle for this fund. “Another 10 to 20 years from now, that issue could be front and center,” Powell says.

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