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Prospect Venture Partners III

Prospect Venture Partners Rounds Up $500M for Third Life Sciences Fund

Private equity interactive, Dow Jones

Flush with a handful of exits this year, Prospect Venture Partners has raised $500 million for its third life sciences-focused fund, ahead of its $400 million goal.

The new fund--which is the same size as its 2001 predecessor--would follow a similar strategy of investing in mainly early-stage biotechnology, biopharmaceutical and medical devices companies, according to Prospect Venture Partners Co-founder and Managing Director Alex Barkas. To a lesser extent, the Palo Alto-based venture firm also plans to back health-care services companies, Mr. Barkas said.

More than 90 percent of the investors in the firm’s previous funds returned for Prospect Venture Partners III, including one core public pension fund, Mr. Barkas said. He declined to disclose investor names.

Prospect Venture Partners believes that investments in biotechnology and biopharmaceutical companies will produce superior long-term returns, in part because of the pace of innovation in these fields. Mr. Barkas also said that the IPO market and sales to strategic buyers have provided a strong exit environment for life sciences and medical devices companies of late.

In September, for example, Prospect Venture Partners agreed to sell Opus Medical, a maker of soft tissue repair systems, to publicly traded company ArthoCare Corp. for $130 million. In March, portfolio company Tercica raised just under $50 million in an initial public offering. Tercica develops therapeutics for endocrine system disorders, such as diabetes. Also in March, Prospect Venture Partners sold NovaCept, a developer of medical devices focused on women’s health, to Cytyc Corp.

Prospect Venture Partners plans to invest its new fund in $10 million to $15 million slugs across more than 30 companies. The previous fund has so far been invested in some 25 companies, including Opus Medical and Tercica. Other companies in that portfolio include biopharmaceutical companies Archemix and Jazz Pharmaceuticals.

Mr. Barkas and David Schnell, who used to be health care partners at Silicon Valley firm Kleiner, Perkins, Caufield & Byers, formed Prospect Venture Partners in 1997. They were later joined by Russell Hirsch, a former managing directors at venture firm Mayfield, and James B. Tananbaum, an entrepreneur who formed two biotech companies.

Prospect Venture Partners Closes $500M Fund

Third Fund Dedicated to Life Science Investing

PALO ALTO, CA - Prospect Venture Partners, a venture capital firm dedicated to investing in medical technology and life science companies, today announced the closing of its third fund, Prospect Venture Partners III. The oversubscribed fund was closed at $500 million. The majority of investors represented returning Limited Partners from the firm’s previous funds, Prospect Venture Partners I and II.

The fund’s four Managing Partners are Alex Barkas, Ph.D., Russell Hirsch, M.S., Ph.D., David Schnell, M.D. and Jim Tananbaum, M.D., who collectively bring over 40 years of previous venture capital experience to Prospect Venture Partners. The partners have strong investment track records, having led investments in over 70 health care and biomedical companies from 1992 to 2004. In addition, the partners have significant biomedical industry operating experience, successful entrepreneurial track records, and extensive biomedical research training from leading institutions including Harvard Medical School, Memorial Sloan Kettering Cancer Center, UCSF Medical School and the Whitehead Institute/MIT.

The prior fund, Prospect Venture Partners II was a $500 million fund raised in 2001 which has invested in over 25 life science companies including Archemix, Gloucester Pharmaceuticals, Jazz Pharmaceuticals, Infinity Pharmaceuticals, Portola Pharmaceuticals, Rinat Neurosciences, Tercica (NASDAQ: TRCA), and medical device companies Opus Medical (NASDAQ: ARTC) and Visiogen.

“We are very pleased with the enthusiastic support that we received from our Limited Partners in this fundraising process. We share the belief that the life sciences industry represents a very promising arena for innovative companies and entrepreneurs to create important new products that serve critical and medical needs,” said a spokesperson for Prospect Venture Partners. investing environment,” said Managing Partner David Schnell, M.D. of Prospect [Venture Partners]. “The pace of innovation in biomedicine is unprecedented, and we are very excited about the opportunity to support breakthrough medical technologies while creating value for both patients and shareholders in emerging growth companies.”