Ebb & Flow

When New Leaf (then Sprout), Venrock and Oxford BioScience first looked into Ribozyme Pharmaceuticals in late 2002, the eponymous biotech was on the ropes. It had a market cap of just over $5 million and had recently stopped developing its two most advanced clinical compounds. The VCs breathed new life into Ribozyme via a $48 million PIPE, which was sold at a reverse split-adjusted price of $1.98. The company was renamed Sirna (RNAI) and its new focus was RNAi therapeutics.

The VCs received their reward last Monday with the announcement that Merck would acquire RNAI for $13 per share in cash, or about $1.1 billion. With the takeout at a 100% premium to the trading price on the Friday before the deal was announced, the trio are looking at an 8X multiple on their investments.

The VCs viewed the company as a public startup, with the PIPE essentially serving as a series A financing. From that perspective, Venrock's Bryan Roberts said the MRK takeout was "favorable in terms of both returns and time." Venrock owns about 10% of RNAI.

"We said it would be a three-to-five year investment and that we would view Sirna as a private company," said Jim Niedel of New Leaf, which spun out of Sprout in 2005 and manages Sprout's healthcare technology portfolio.

New Leaf is RNAI's largest shareholder and owns just over 25% of the company. New Leaf/Sprout has invested a total of $29 million in RNAI.

"Sirna had a startup valuation when we first invested, and we inherited a manufacturing facility and other capital efficiencies that startups normally don't have," said Douglas Fambrough of Oxford, which owns 8-9% of RNAI's fully diluted shares outstanding. "If every deal ended up like this one, it would be gravy, but in general the math has gotten pretty challenging in this business for VCs."

In fact, according to the VCs who sit on RNAI's

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