25 Oct Caden Biosciences may signal critical mass
Madison, Wis. – Some observers speculate that the Greater Madison area, while a key U.S. life science business community, has not yet reached the “critical mass” of talent, innovation, and specialization necessary to attract big investments and achieve a state of sustained growth.
But as area biotech leaders and venture capitalists convened Tuesday to welcome an emerging drug discovery tool provider, Caden Biosciences, to a southern suburb of Madison, a different message emerged.
Pete Shagory is a partner with Baird Venture Partners, which collaborated with Caden in a $5.85 million venture deal to relocate the company from its original home in Northwestern University‘s research labs. He said Madison offers “huge competitive advantages” for companies like Caden.
“Bringing this company to Madison was absolutely key,” Shagory said. “We wouldn’t have made this investment in Chicago.”
Shagory, who heads Baird’s life sciences and biotechnology team and serves on the board of directors for microarray producer NimbleGen, invests in early-stage companies with proof-of-concept and plans to market drug discovery and diagnostic tools and services.
“I’m really bullish on the Madison community,” Shagory said. “There is a density of technology and people, and the reality is that Madison is head and shoulders above other Midwest regions. I think it’s really, really impressive.”
Seizing the GPCR market
Bill Checovich, Caden’s new president and COO, discussed the market potential for the company’s chosen drug discovery target, “G-protein coupled receptors” or GPCRs. These cell components basically take signals from outside the cell and mediate a response inside the cell.
“The most highly profitable targets in the drug discovery business are GPCRs because not only have most drugs been developed against these targets but it is probably also where almost all the new drugs are going to come from in the next 20 to 30 years,” Checovich said.
He said the resulting $1.5 billion market is highly fragmented with many players and technologies, which opens the door for Caden’s technology to stake out a dominant position. “There is a lot of market potential here,” Checovich said.
Checovich, former director of operations for Carlsbad, Calif.-based Invitrogen Corp., also was one of the first employees of PanVera Corp., a biological research tool producer founded in Madison in 1993.
Investment strategy and timing
In explaining Baird’s investment thesis, Shagory recommended that small companies do their own due diligence in researching potential venture partners by carefully weighing the networking resources different venture firms offer.
To illustrate that companies must be patient in validating the commercial potential of a new technology, Shagory pointed out that his relationship with Caden’s scientists was four years old before any deals were made.
“Know the fund and recognize that these things can take years,” Shagory said. “If a fund says `no’ it doesn’t always mean `no,’ it just means that maybe they want to see the technology developed, and there may be another time when it’ll be appropriate for that investor to jump on board.”
Shagory also noted that in looking at Baird’s long-term biotech investment portfolio, some “ideal” companies are emerging for consideration in the not-too-distant future.
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WARF’s Investment and Portfolio Strategy