Alta Partners Raises $500M for Eighth Fund

October 09, 2006 - Dow Jones VentureWire Lifescience

by Brian Gormley

Alta Partners has secured $500 million for its eighth venture fund, its largest partnership and one of the biggest health care-only pools ever assembled.

The San Francisco firm closed the fund in mid September after initially raising $440 million in April. In so doing it surpassed the $425 million target it had set for Alta Partners VIII, L.P. Return investors supplied the bulk of the capital. They included California Public Employees' Retirement System, Employees' Retirement System of Rhode Island, TIAA-CREF and Adams Street Partners.

The firm reserved about 10% of the fund for new investors but is not disclosing the new institutions that participated this time.

Limited partners were drawn to the firm's strong track record. Its recent successes include Angiosyn Inc., a developer of drugs for ophthalmic diseases that was acquired by Pfizer Inc. last year in a $527 million deal; and antibody company Cellective Therapeutics Inc., which merged with MedImmune Inc. in October 2005 for up to $160 million in cash and milestones.

Only a handful of health care-only firms manage larger funds. They include Essex Woodlands Health Ventures, which rounded up $600 million for its seventh fund in May, and Domain Associates, which closed on $700 million for its seventh fund in August.

But Alta Partners never considered raising more than $500 million, according to Director Alison de Bord, who said that amount was appropriate given the size of the investment team. In addition to de Bord -- who recently was promoted to director from principal -- the investment team also includes Managing Directors Farah Champsi, Dan Janney and Guy Nohra, and Directors Ed Hurwitz, David Mack and Ed Penhoet.

The firm expects to use the new fund to invest in 25 early- to late-stage biotechnology and medical device companies. Previously, Alta raised separate funds devoted to young and mature companies.

The firm formed in 1996 to invest in health care and technology companies. In the late 1990s it decided to supplement its diversified early-stage funds with late-stage ones devoted to biotechnology. In 2004, however, it dropped its technology practice and raised two health care-only partnerships: the $180 million Alta California Partners IV, an early-stage fund, and the $300 million Alta BioPharma III, a late-stage pool.

This time, it's simplifying things by making all investments from a single fund. The first investment from this pool is expected to come this quarter. While most of its deals will be in private companies, the firm can invest this fund as often as it likes in public equities.

Typically, venture firms can only invest a limited amount of their funds, usually a fifth, in public companies because of their partnership agreements. But Alta Partners has had success with public-market deals in the past, and limited partners apparently didn't mind giving it the flexibility to back public and private companies as it sees fit. One of its most successful public-market plays was a 2001 investment in Esperion Therapeutics Inc., a developer of a drug to raise "good" cholesterol levels that was acquired by Pfizer Inc. in February 2004 for $1.4 billion.

The firm's most recent investment in a public company came in March, when it participated in a $43.7 million financing for cancer-drug maker Sunesis Pharmaceuticals Inc.

Private companies it has funded lately include biotech company Aerovance Inc., a spinout from Bayer Pharmaceuticals' targeting severe respiratory and inflammatory diseases, Metabolex Inc., a diabetes-drug developer, and insulin-pump company Insulet Corp.

Alta Partners' team also includes Principal Robert Alexander, Venture Partner Katya Smirnyagina, and Adam Tomasi, a Kauffman Fellow.