Medgenics Scores $3M from Angels

Good news for a new Virginia biotech company...

Va. biotech secures $3M from angels
Washington Business Journal - October 27, 2006
by Vandana Sinha
Staff Reporter

A Virginia biotech is close to securing a $3 million first round of funding before hitting the road in search of more money.

Medgenics, which moved to Vienna from California in March after a struggle to survive, expects to close on nearly $2 million in mostly angel financing in the next month, adding to the $1 million it's already raised.

The company shares an office with one of its investors, venture capital firm Windy City.

After the first round closes, Medgenics will jump back on the circuit hoping to drum up $15 million more to fund Phase I and Phase II trials of its protein injection treatments, one for anemia slated to begin at the end of next year and another for hepatitis C expected to follow in the first quarter of 2008.

This is the second time around for the company, which had shut down for a year.

Medgenics raised $17 million in four rounds of funding during the company's first three years of operation. CEO Andy Pearlman founded the company in Palo Alto, Calif., in 2000 with technology he licensed from Hebrew University in Israel.
After failing to raise an additional

$25 million in a tough climate for biotechs, Pearlman was asked by a divided board to leave in 2003. He was replaced by Menachem Nassi, a CEO from the cardiac-imaging industry who sported an IPO track record and, the board thought, could round up that cash.

The company foundered without funding and closed up in 2004, leaving 32 people in California and Israel to find other jobs.

"Even though the technology succeeded, the CEO was unable to sell it or get people to invest in it," says Pearlman, who had remained on the board. "It just died for all the wrong reasons."

Last year, Windy City spent about $250,000 to buy out two investors, and Pearlman picked up the investment road map again. He's hired eight people, almost all former employees in Israel from Medgenics' previous incarnation, and is already talking up a potential IPO.

The staff has revived its tests on the technology, which turns a patient's toothpick-size tissue sample into its own production plant for disease-fighting proteins within 10 days. Doctors can inject that sample back into the patient's skin to pump those proteins through the body for months, dispelling the need for regular shots.

Once Medgenics is well funded, and well on its way through trials, it will hunt for a new headquarters, perhaps remaining in the Washington area.

"Washington has two great assets going for it. One is that the FDA is located here," says Joel Kanter, president of Windy City, a family-owned investment firm, and also "there is an extensive network of life sciences companies and, therefore, life sciences executives."

E-maiL: Vsinha@bizjournals.coM Phone: 703/258-0838