CM Capital fund gets set to invest

A new Australian $54 million venture fund is ready to invest in promising young biotechs even though it is far short of its intended goal of raising $100 to $150 million.

The fund, assembled by venture capital company CM Capital Investments, has already made its first investment, a $3 million injection in Canberra drug developer Pharmaxis.

CM Capital is still seeking further investors and will keep the fund open for another six months in hopes of doubling or trebling its current size.

However, it has taken nearly 18 months to raise the initial $54 million and CM Capital has decided to put it into play without waiting for the fund to be fully invested.

CM Capital managing partner Michael Begun characterised the current venture capital environment as "very difficult... investors are looking for concrete comfort levels with the (fund) managers they choose."

CM Capital has earmarked approximately 70 per cent of its new fund for biotechnology companies with platforms that support multiple products and for companies in the convergence zone of life science and informatics.

It has set up the fund in the form of parallel investment vehicles - one for Australian investors and the other structured for North American investors.

The first group of Australian investors is dominated by institutional investors including Development Australia Fund II (DAF II), (a fund of funds) ING, Westscheme, Motor Traders Association of Australia Superannuation Fund, Sunsuper, CM Abbott and CM Capital's partners.

To harness North American funding, CM Capital has teamed with CIBC World Markets, the investment and merchant banking arm of the Canadian Imperial Bank of Commerce.

CIBC has contributed $13 million of the $54 million presently available and will sponsor up to $40 million of the final amount via a US-based parallel fund.

The first investee company, Pharmaxis, has a drug development pipeline which targets diseases such as multiple sclerosis, psoriasis, irritable bowel disease, cystic fibrosis and a number of respiratory disorders.

The $3 million invested by CM Capital makes it the lead investor in an $8.5 million second round of financing for Pharmaxis.

The new fund is the second raised by CM Capital, a venture fund manager focused on biotech, life sciences, telecommunications and information technology.

Its first fund, a $42 million government-sponsored Innovation Investment Fund, became fully committed earlier this year, with a portfolio of eight early stage Australian companies.