New pharma fund acquires Xenova

Celtic Pharmaceutical Holdings, LP, a newly formed private equity investment fund targeting the pharmaceutical industry, has announced the launch of the fund and its first investment with the agreed takeover of the UK biotechnology company, Xenova Plc, for a total consideration of approximately £20m.

Led by Stephen Evans-Freke and John Mayo, both of whom have outstanding track records of delivering high returns to investors in the pharmaceutical industry, Celtic Pharma has been formed to invest directly in the acquisition of pharmaceutical products which are in the final stages of their development and regulatory approval. It will target small biotechnology companies, public or private, that have commercially attractive, novel drugs in late Phase II or Phase III clinical development, as well as buying Phase III products from pharmaceutical or biotech companies or divisions of such companies. In some cases, Celtic Pharma will buy geographical rights to products (for example, in the US, Europe or Japan) where the rights are not being exploited in these markets.

Acquisitions will be funded through a combination of fund equity, mezzanine financing and the securitisation of royalties on already licensed products. Celtic Pharma’s objective is to assemble a diversified portfolio of 12-18 late stage drug development programmes which it will fund and manage through the final stages of clinical and regulatory approval, including establishing manufacturing arrangements and other preparations for market launch. Products that have been approved, or prior to approval but ready for pre-marketing, will then be auctioned to established pharmaceutical companies.

Celtic Pharma’s management intends to run the fund on a rigorous “virtual” outsourcing model, managing and controlling the various programmes in-house but using outsourced providers in the management of clinical trials, manufacturing, QC/QA and other specialist services where required.

Celtic Pharma has assembled an exceptionally strong in-house team with the requisite skills in both product evaluation and late stage pharmaceutical programme management, as well as in business development, mergers and acquisitions and finance. In addition to the in-house team, Celtic Pharma has also gathered a number of leading experts from the worlds of business and pharmaceutical product development to join its Business Advisory and Medical Advisory Boards.

To date, some $125m has been committed and closed into the Celtic Pharma fund from investors around the world, with significant further indicated amounts to be closed in over the coming months. It is Celtic Pharma’s objective to grow this to $300m by the end of this year and to over $1bn in the 2006/07 timeframe.

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• Early-stage