Big leap from lab staff to real-world investors

Local biotech startups have been rolling in the money this month.

Three early-stage companies have scored a total $76.6 million, providing a good-news backdrop for this week's Invest Northwest, a regional showcase of biotech companies in the hunt for financing.

What do Seattle biotechs Calistoga Pharmaceuticals, VentiRx Pharmaceuticals and Spaltudaq have in common?

Innovative science balanced with a management team that's attractive to investors because of deep industry experience, said Robert Nelsen, managing director and co-founder of Arch Venture Partners, one of the larger backers of biotech in Seattle.

Arch estimates it typically funds between three and four biotech companies a year. It led the recent financing of Spaltudaq and was an initial investor in Seattle-based Ikaria, founded in 2005.

Many investors are hesitant about taking risks on companies that likely won't be profitable for upward of 10 years, so the threshold for financing is high.

Invest Northwest

What: A two-day conference with about 50 biotech companies showcasing their work.

When: Today and Wednesday; registration opens at 7 a.m. today.

Where: Bell Harbor International Conference Center, 2211 Alaskan Way, Pier 66, Seattle.

Web site www.washbio.org

Source: Washington Biotechnology and Biomedical Association

"It has to be something that matters and something that's different," said Nelsen.

VCs aren't eager to fund biotech companies just in the discovery phase; they're looking for more advanced startups that have licensed some already developed technology or have pushed their way through a clinical trial, said David Miller president of Seattle-based Biotech Stock Research.

Calistoga, for example, has a head start in the development process because it is using technology from Icos, the former Bothell company recently acquired by Eli Lilly and largely shut down.

VentiRx and Spaltudaq are more like conventional start-ups. But they already had been through their initial round of financing, making it easier for each one to attract round two.

Here's how March treated these three companies:

• Newly formed Calistoga raised $21 million in an initial financing round. The privately held company is making products for the treatment of cancer and inflammatory diseases.

• Startup VentiRx scored $26.6 million, bringing its total funding to $28.9 million. The company is focused on the treatment of cancer and infectious, respiratory and autoimmune diseases.

• Only last week Spaltudaq raised $29 million in its second round of financing, far more than is typical for an early-stage company. Founded two years ago, it focuses on identifying tumor-fighting antibodies in cancer patients, making copies of them, then turning them into drugs.

For the last six years, biotech venture capital has been on a tumultuous ride, with a relative handful of local companies receiving financing, but the amounts increasing each year.

According to Dow Jones VentureOne and Ernst & Young, nine biotech companies were financed in Washington state in 2002 for a total $49.2 million. Two years later, the total amount had increased 186 percent to $141 million, again for nine companies.

Last year, 11 biotech companies snared a total $186.6 million.

Miller said the last several years were no different than the industry's usual ups and downs, particularly in the realm of financing.

"It is difficult for very early-stage companies, the guys who have a gleam in their eyes," said Miller.

Johnny Stine, founder of Spaltudaq, said it's challenging for scientists with little experience in fundraising to figure out how to grab the venture capital that is available.

Spaltudaq grew because it attracted the attention of Seattle-based Accelerator, which works with early-stage companies to secure funding. Accelerator acts as a business manager to startups, providing initial work space and looking for investors.

David Fanning, president and CEO of Spaltudaq, said Seattle could also use more venture-capital funds to help businesses get off the ground.

"The stakes are much higher now in getting financed," Fanning said.

Funding is one of the big reasons why the Washington Biotechnology and Biomedical Association holds the annual Invest Northwest conference.

The two-day conference starts today and features about 50 biotech companies.

Many are startups that hope to attract venture financing. Others are already public and hope to catch the eye of analysts, investors and the media.

In the past, startups have walked away from the conference with contacts that eventually led to funding, said Jack Faris, the association's president.

"You don't expect marriages to take place at a high-school mixer but maybe you can find someone you'd like to date."

Kirsten Orsini-Meinhard: 206-464-2391 or kmeinhard@seattletimes.com