Wednesday, March 02, 2011

Cephalon Joins The Corporate Venture Party

For the start-up community --and increasingly certain distressed VCs -- the birth of a new fund devoted to early stage biopharma investing is an event to be celebrated. And, as we've noted before, pharma, through so-called corporate venture divisions, is increasingly the cause for the celebration.

With deep-pocketed parents to ensure available follow-on funding, these groups can invest where traditional VCs have curtailed their efforts, while simultaneously giving pharmas an inside track on pipeline programs of interest as the competition for outside innovation increases. It's the perfect alignment of strategic intent and financial return, and the impetus for a wave of new CVC starts from the likes of Shire to Merck Serono to Abbott (though that's mostly device-oriented.)

The latest pharma to join the corporate venture party appears to be Cephalon, a one-time specialist in neurodegenerative diseases that’s diversified considerably over the years. In a regulatory document filed last month, Cephalon announced the retirement of executive vice president of technical operations Peter Grebow, but indicated he would continue to work for the specialty pharma as a consultant, during which time he would “assist with the establishment of Cephalon Ventures.” (Bolding courtesy of IN VIVO Blog.)

Grebow's "retirement" -- hey, it's kind of like a staged acquisition-- kicked off yesterday. And, according to the SEC docs, his consulting career -- with the ability to bill $750 per hour, with a maximum of 1,000 hours over the course of a year! – began today. (Like many contractors, he doesn't get benefits--and healthcare is expensive.)

This is the first concrete reference to Cephalon Ventures, but it's likely the division has been in existence for for several months. Grebow’s online bio lists him as EVP of Cephalon Ventures, although a previous reference to the organization’s existence beginning in April 2010 in an older bio has been stricken from the official version. An attachment to the filing adds that Grebow “shall make himself available to the Company to assist with respect to Cephalon Ventures, including advice with respect to the formation of N-Versx Pharmaceuticals and the review and selection of Cephalon and third party compounds for licensing.”

Cephalon’s 10-K, also released last month, doesn’t mention N-Versx, and an afternoon of intrepid reporting (including the requisite Google search) turns up nothing linked to the start-up beyond the filing.

Adding to the intrigue, Cephalon is also listed (pdf) as one of the lead investors in SymBio Pharmaceuticals' new $24 million Series E funding, although nothing in SymBio's announcement suggests that the investment came from Cephalon Ventures versus the corporate parent. Moreover, the company already held a stake in SymBio based on an existing licensing agreement for oncology drug bendamustine hydrochloride.

We’ve reached out to Cephalon for clarification, seeking not just confirmation of the venture group's existence but additional information regarding important details like the size of the fund, its investment thesis (a strategic imperative or a financial return--or both?), and whether the unit will also be creating newcos with existing Cephalon assets. We haven't yet received a definitive response, but we promise to report back when we do.

In the interim, it seems like a bit of good news for early stage biotechs --especially those developing therapies in areas of strategic interest to Cephalon. It's also potentially good news for Cephalon, a company that's logged a strong 2010 with $2.8 billion in sales, but nevertheless faces challenges.

CEO Frank Baldino passed away in December, leading to a management transition, and the company is set to lose patent protection for sleep disorder drug Provigil (modafinil), its top seller. Since the beginning of 2010, Cephalon has inked a number of acquisitions and alliances, giving it rights to branded generics (Mepha), a stem cell therapeutics program (Mesoblast) , and pipeline drugs for leukemia, asthma and back pain.

At the risk of being a bit premature, IVB offers its official welcome to Cephalon Ventures. May your party be just beginning.

Image courtesy of flickrer calsidyrose via a creative commons license.

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