Ebb & Flow

Watchers of Warburg Pincus investments in public biotech companies might think they are seeing a pattern: large stakes, two board seats and an M&A deal on the horizon. Thus, if coincidence isn't at work, it might be reasonable to wonder if Neurogen (NRGN) might have suitors in its future. The company last week raised $100 million in a private placement led by Pincus and Baker Brothers.

Warburg's two most recent investments in public biotechs came in 2001. The firm took a 35% stake in Synaptic when the GPCR play was valued at $60 million, and put $60 million into Triangle when it was valued at $130 million. In both cases, managing directors Jonathan Leff and Stewart Hen took board seats (see "Warburg's Plays").

The firm made tidy profits on both. In late 2002, Lundbeck (CSE:LUN) announced plans to acquire Synaptic for $122.5 million in cash and Gilead (GILD) announced that it was acquiring Triangle for $464 million in cash.

In the NRGN financing, the investor group gained a 42% stake in the company, while Leff and Hen joined the board. The financing more than doubles NRGN's cash - the company had $45.9 million at year end and posted a 2003 operating loss of $32.9 million.

NRGN is using its Accelerated Intelligent Drug Discovery system to design, model, synthesize and screen compounds. The company's lead compound is NGD 2000-1, an oral C5a antagonist in Phase II testing for rheumatoid arthritis (RA). NRGN, which was founded in 1987, also has multiple deals with pharma: an insomnia collaboration with Pfizer (PFE), a depression/anxiety deal with Aventis (AVE), and a pain partnership with Merck (MRK).

A not-so-new order

The management changes announced last week at Pacific Growth Equities simply formalize how the organization has been run for the past several years. Thomas

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