Corrections or additions?
These articles by Barbara Fox were published in U.S. 1 Newspaper
on January 14, 1998. All rights reserved.
@INITIAL CAP+ = Take a look at this track record: Two firsts.
Ventures founded the world’s first human gene therapy company and
the first genomics company.
Even more impressive — at least to the general public — is
its connection to the cloning of Dolly the sheep, acknowledged to
be the most important discovery of the decade, perhaps of the century.
Before Dolly was born last year, few experts were paying attention
to how Scottish scientist Ian Wilmut was cloning farm animals. But
these venture capitalists were talking to Wilmut two years before
Dolly made him famous.
Healthcare Ventures (formerly Healthcare Investment Corporation) has
moved from Edison to Princeton and established a headquarters on the
second floor of 44 Nassau Street. Three of the partners (James H.
Cavanaugh, William W. Crouse, and Harold R. Werner) work here, and
two more partners (Mark Leschly and John W. Littlechild) are based
in Cambridge. "We are very excited about being here on Nassau
Street," says Cavanaugh.
This week Healthcare Ventures is closing on its fifth fund, for $156
million. That brings the total money it has raised to more than $534
million. The partners have formed, virtually from the ground up, 34
companies in the healthcare field. For half of these companies (the
mature ones) they have managed to arrange more than $1 billion dollars
in collaborations with pharmaceutical corporations. Here in Princeton
they have formed Delsys Pharmaceutical Corporation, a privately-held
developer of automated drug manufacturing and drug delivery systems
through electrostatic dry powder, a spinoff of the Sarnoff Corporation
(U.S. 1, April 2 and August 13, 1997).
The formation of Delsys is typical of how Healthcare Ventures works.
"We always pursue major themes in medicine," says Werner.
"We tend to look at major trends, fairly far out. We put
on our advisory board and have a network of 200 people in the United
States and around the world. We meet with them lots of times, and
we bring them in front of lots of interesting researchers."
When they think a research idea has reached a critical mass they begin
to build a company around a core of intellectual property. "We
bring some of the founding scientists out of academia, recruit
put lab skills in place, and move the technology toward the clinic
and toward partnerships," says Werner.
The next such scientific advisory board retreat, set for March 24
to March 29 at the Four Seasons in Palm Beach, California, is their
chance to get together with the Ian Wilmuts of the scientific world
to forecast the Next Big Discoveries. About 180 people are expected
to attend, including the nearly two dozen members of the advisory
board, chief scientists at each of the portfolio companies, and 100
scientists from the network. "They guide us in the changes in
science that are likely to impact the future practice of
says Cavanaugh. "We see if there is a commercial opportunity,
and if there is, we make plans to form a company to capitalize on
Cavanaugh has done everything from teaching graduate school to working
at the White House to heading major pharmaceutical ventures. He
in industrial engineering at Fairleigh Dickinson (Class of 1959) and
has master’s and doctor’s degrees from the University of Iowa, where
he taught medical economics and healthcare administration. He was
a consultant to the Department of Health Education and Welfare during
the Johnson administration and then became an assistant secretary.
In 1971 he joined the White House staff and stayed through the Ford
administration. He eventually became president of SmithKline & French
Laboratories U.S. but when it merged with Beecham he left to join
Werner in the venture capital firm. Cavanaugh lives in Devon but has
a Princeton connection — he met his wife here in 1961 when he
was on a fellowship program at the Medical Center of Princeton.
Werner co-founded what is now Healthcare Ventures in 1984. A resident
of Princeton Borough, he was an engineering major at Princeton (Class
of 1970). He went to Harvard for his MBA, where he switched fields.
"Engineering was heavily influenced by government spending, and
I wanted to work on health rather than military projects," says
Werner. For six years in Belgium he did health consulting for Robert
First Inc. From 1980 to 1984 he worked with venture capital endeavors
at Johnson & Johnson Development Corporation.
Of the other Princeton-based partners, Crouse was most
recently worldwide president of Ortho Diagnostic Systems. A graduate
of Lehigh with an MBA from Pace, he has also been division director
of DuPont Pharmaceuticals, responsible for international operations
and worldwide commercial development, and he has worked for Revlon
Health Care Group and E.R. Squibb & Sons.
The Boston-based partners, Mark Leschly and John Littlechild, work
from a Kendall Square office in Cambridge. Leschly is one of four
sons of Jan Leschly, who moved to Princeton to be at E.R. Squibb and
ended up as president and chief operating officer. Mark Leschly
from Princeton High in 1986, earned his BA with high honors from
(Class of 1990), and has a Stanford MBA. After playing on the Danish
Davis Cup tennis team he worked with McKinsey & Company in New York,
Boston, San Francisco, and Scandinavia. As a partner in Healthcare
Ventures he serves on the board of various portfolio companies and
helps form companies, establish pharmaceutical partnerships, and
a network of relationships.
The efforts of Healthcare Ventures resemble those of many other VC
firms, but it is distinguished by its singular focus on "high
science" companies in the medical field. "Other firms do what
we do and very well," says Cavanaugh. He cites Princeton’s Domain,
Kleiner Perkins on the West Coast, and Venrock in New York. "But
they’re involved in a lot of things outside of health care. No one
else has the scale of what we do and does it exclusively."
Where does all this money come from? Investors include four state
public pension funds, four insurance companies, several foundations
and corporate pension plans, plus a dozen major pharmaceutical firms
in the United States and Europe, including SmithKline Beecham and
Bristol-Myers Squibb. Initial investments pave the way for later
for instance, Delsys has already announced agreements with both Glaxo
Wellcome and SmithKline (U.S. 1, September 17 and December 10, 1997).
Werner is the Healthcare Ventures partner who is working with this
Sarnoff spinoff, and he says it takes a hefty investment of time to
make it work. "You spend time understanding the technology and
developing relationships," says Werner. "For Delsys, we have
developed a good relationship with Sarnoff. They have a potent
asset but are coming from a different field and are learning how to
apply it. That makes for a great commonality of interest."
Why so much investor confidence in what these partners choose? Look
at the returns: An investment of $6.1 million in Human Genome Sciences
(the pioneering genomics firm based in Rockville, Maryland) has
$202 million in cash or freely tradable stock. An investment of $5.3
million in the gene therapy firm (Genetic Therapy, based in
Maryland) resulted, eight years later, in the sale of the company
to Sandoz (now Novartis), with a net profit to the venture capital
firm of $50 million. Numbers speak.
— Barbara Fox
08542. Harold R. Werner, general partner. 609-430-3900; fax,
Add two more to Princeton’s list of hungry drug
with name brand connections — Aesgen and MDS Pharmaceutical
— both moving to 2,000 square foot spaces on the third floor at
2 Research Way. MDS, Canada’s largest health and life sciences
is expected to move its pharmaceutical services division in January.
With operations on four continents and market capitalization of $7
billion, MDS is sometimes thought of as Canada’s Johnson & Johnson,
and its pharmaceutical services division is the seventh largest
research organization in the world (see story below).
Aesgen is a pharmaceutical firm that moved in early November from
Wilmington, North Carolina. The magic name which Aesgen’s president,
Paul McGarty, can brandish is none other than the Mayo Clinic.
Aesgen is launching a three-tiered effort: to identify, develop, and
market pharmaceutical products generated largely by Mayo Clinic
In other words, it will develop generic and niche drugs and screen
new pharmaceutical products.
Though the Mayo Foundation for Education and Research (the Mayo
is a major investor, and Mayo’s representative, John H. Herrell, is
board chairman, McGarty insists that Aesgen maintains an "arm’s
length" relationship with the clinic.
Mayo’s medical venture division handles technology transfer by taking
some of the technologies to suitable entities such as Aesgen, says
McGarty: "We have a series of multisource projects in the line,
and rights to technologies that we have located in the Mayo Clinic.
Mayo is an investor in our company, and we have an arm’s length
"We utilize a medical advisory board — 10 top Mayo physicians
in various therapeutic categories — to select targets and programs
from a wide array of clinical leads developed by Mayo’s internal
says McGarty. "We are focusing on oncology and central nervous
Along with the Mayo investment, two other companies are co-founders:
a contract research and development organization (a CRO), and a
manufacturer. Applied Analytical Industries, a public company listed
on Nasdaq as AAII, remains in Wilmington, North Carolina
This CRO provides product development and support services to the
pharmaceutical and biotechnology industries. It also licenses its
own drug and drug technologies to global clients.
The other co-founder, Mova Pharmaceutical Corporation, opened an
of Mova Laboratories Inc. at 214 Carnegie Center last year. Based
in Caguas, Puerto Rico Mova manufactures generic over-the-counter
liquids and prescription products for companies such as Ciba Geigy
Last summer McGarty succeeded David R. Bethune as
of Aesgen and now faces the challenge of coordinating all the
held firm’s different entities and efforts. He grew up in New York
as the fourth of five boys, majored in chemical engineering at the
University of Rhode Island, Class of 1982, and has an MBA from Pace.
He has worked at American Cyanamid’s Lederle Laboratories (now
Home Products) and at Bristol-Myers Squibb, where he was director
of central nervous system franchise management. Last year he was
in the worldwide launch of the anti-anxiety drug BuSpar and the
Cerzone. He and his wife, Christine, live in Hopewell with their five
year old son, Steven.
McGarty’s father worked for the Shubert organization as a carpenter
— setting up shows and running them. "In the theater you
are an entrepreneur trying to find the next business opportunity,"
says McGarty, comparing his father’s work to his own. "Shows open
and close and theater companies come and go. Your relationships with
people, your knowledge of the industry, and how well you do what your
are responsible for doing — they guide you through that maze."
McGarty’s plan for Aesgen’s three-stage growth:
multisource products (generic products or branded products that have
been improved) are fully funded and nearly on the market. They will
compete with branded products worth more than $1.5 billion. Of
eight abbreviated new drug applications (for generics) filed so far,
three have been approved, and two approvals are expected within six
months. On the market now are two forms of acyclovire — capsules
and tablet equivalent to Zovirax, originally developed by Glaxo
Also recently approved are atodolac tablets, nonsteroidal
product equivalent to Lodine developed by American Home Products.
the next three years Aesgen expects to take five products — whose
original patents have now expired — through clinical trials. These
"niche" products, identified through Mayo, will improve
therapies or establish new uses.
Focusing on "unmet needs" in oncology and diseases of the
central nervous system, Aesgen will invest in new technologies aligned
with the therapeutic strengths of Mayo, using animal models and
drug design tools.
085403. Paul McGarty, president. 609-419-1090; fax, 609-419-1092.
As Canada’s largest health and life sciences company,
Research Way’s newest tenant is sometimes compared to Johnson &
"MDS is similar to J&J in revenue streams, customer base, and
organization," says spokesperson Wilma Jacobs. MDS began 25 years
ago as a laboratory service company in the west end of Toronto and
is now so widespread that 45 percent of the revenues come from
markets. Headquartered in Etobicoke, Ontario, it targets $1 billion
revenues by 2000.
Pharmaceutical Services, with revenues of more than $100 million in
the last fiscal year, was recently added to the MDS roster. "We
saw a wealth of research that was dying on the vine or going off
says spokesperson Wilma Jacobs. "We believed we could
that research in North America and create the high tech jobs that
North America needs, sell products internationally and bring revenue
back to North America."
MDS Pharmaceutical Services provides contract research services to
help pharmaceutical companies lower their drug discovery and
costs and shorten the process to bring new drugs to market. It will
move into 2 Research Way, to be an eight-person head office for the
Henry Pan, president of MDS Pharmaceutical Services, "is
internationally for his expertise and his successful track record
in accelerating drug research and development," says John Rogers,
MDS president and CEO.
Pan majored in genetics at Montreal’s McGill University, Class of
1969, and has a pharmacology PhD from the University of Hawaii and
an MD from the University of Hong Kong. He had worked at Bristol-Myers
Squibb in Princeton from 1985 to 1992. At DuPont Merck in Wilmington
he was most recently executive vice president of drug development.
"The world market for contract drug research and development is
growing at about 20 to 30 percent a year, and MDS is committed to
being a leader," says Pan.
08540. URL: http://www.mds.com.
Today’s entrepreneurs, James Pachence believes,
with two factors — people who come from families of entrepreneurs
and people who had paper routes. He qualifies on both counts. He grew
up in coal mining country in Hazleton, Pennsylvania, where his father
and his brothers "had a number of different companies — dry
cleaning, tuxedo rental, dress manufacturing, whatever made money.
They were bright, ambitious people with very little education. I had
to work in the dry cleaning plant, and that gave me an incentive to
do well in school."
Now he heads Veritas Medical Technologies Inc., a Forrestal
firm engaged in research and development of pharmaceutical compounds
for sustained drug release. It has received two Small Business
Research contracts from the National Institutes of Health.
Both SBIR contracts involve sustained biopolymers developed at Rutgers
in the laboratory of Joachim Kohn. A paper on "Novel Therapies
for Pulmonary Hypertension" will be presented in February by David
Riley and George Poiani, both of Robert Wood Johnson Medical School.
The second is "New Materials for Prevention of Post-Surgical
The technology has been licensed from Rutgers.
"Many drugs have problems not getting to the site of action before
they exit from the body, or the toxicity is so high that they can’t
be used effectively," says Pachence. "The strategy we have
is to bring the drug as close as possible to the site of
For instance, to deliver a pharmaceutical to the lung, the ideal mode
for site-directed delivery would be a spray aerosol.
Pachence left the family business environment to earn his
degree (Class of 1974) and his PhD in biophysics, both from the
of Pennsylvania. There he also met his wife, who had left her studies
of oboe and piano at Peabody Conservatory in Baltimore to learn to
be a pathologist. They have a 14-year-old son at Hun and a 12-year-old
daughter in public schools.
After a stint as associate professor at Columbia Presbyterian,
worked with a small company, Helitrex, in Princeton, which later
American Biomaterials. Then he helped put together Medi-Matrix, which
then became Integra Life Sciences. He left that firm in 1994.
"The market is very large," says Pachence, "and the
areas we are focusing on have billion dollar competitors." Alkerme
in Boston, he says, is probably the major competition. "They have
some revenues based on corporate partner relationships and lots of
money in the bank. We are neophytes in comparison."
Eighteen months after its founding, there are five employees including
two at this address. "I am doing some lab work," says
"but my major job is to knock on doors to get the money. We are
dependent on private financing and grants and are not even looking
towards commercial funding." He has had some success with
from a group of New Jersey individuals. "Our goal is to bring
in enough data to attract a corporate partner." Which one?
standard cast of characters in the pharmaceutical industry — go
up and down Route 1."
The name may change. "We were trying to look for something pretty
open ended, but now the name will probably be something more
Boulevard, Princeton 08540. James Pachence, president. 609-466-8712;
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