Madison, Wis., Biotech Raises $12 Million in Venture Capital
By Kathleen Gallagher, Milwaukee Journal Sentinel
Jan. 10–A Madison biotech company said Monday it has raised $12 million from investors, signaling 2006 will likely be a better year for venture capital fundraising in Wisconsin.
EraGen Biosciences Inc., which makes genetic tests, will use the funds to expand its product development capabilities and move toward achieving the manufacturing standards the Food & Drug Administration mandates for molecular diagnostics, said Irene Hrusovsky, the company’s president and chief executive officer.
EraGen’s deal represents the first venture funding this year for a state company and shows out-of state venture investors are interested in investing here.
“Wisconsin, and in particular Madison, has done a very good job of providing a nice breeding ground for early stage companies,” said Tracy Marshbanks, a vice president at First Analysis Corp. in Chicago and one of two new members of EraGen’s board.
First Analysis and Prolog Ventures of St. Louis led the $12 million financing round. Officials from both firms went on EraGen’s board. Other investors include Stonehenge Capital, which is based in Baton Rouge, La., and has an office in Milwaukee; Novartis Venture Fund, based in Switzerland, and Cambridge, Mass.; and a syndicate of Midwestern investors.
“Irene has been very aggressive about promoting her company, which points to the fact that success can come to those who are aggressive and not satisfied that all the answers are in the state,” said James L. Leonhart, executive vice president of the Wisconsin Biotechnology and Medical Devices Association.
EraGen presented its story in 2005 and 2004 at the BIO Mid-America VentureForum, an annual event where venture capitalists get a chance to meet about 80 biotech and medical device start-up companies, Hrusovsky said.
The company has 32 employees and had $4 million of revenue in 2004, she said. The additional $12 million of funding brings the total amount EraGen has raised to about $21 million.
The company is developing molecular tests for early diagnosis of infectious diseases, cancer, several genetic disorders and bioterrorist agents. Its flagship test for cycstic fibrosis will be marketed by Bayer Diagnostics, Hrusovsky said.
The company is among a growing number of Madison molecular diagnostic test makers that includes Third Wave Technologies Inc. and Opgen Inc. NimbleGen Systems Inc. is in a related business involving making a gene chip that is used to identify how genes work.
EraGen’s financing round was nearly as large as the amount of venture money all Wisconsin companies pulled in through the first three months of 2005. State companies raised just $15.3 million of venture funding through Sept. 30, according to the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.
Two state-based venture capital firms — Mason Wells and Venture Investors — do most of the investing in very early stage firms. They will likely get more active this year because trustees for the State of Wisconsin Investment Board last month gave preliminary approval for the pension plan to allocate up to $50 million of venture capital money to them.
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