Venture Capitalists See OC's Strong Ophthalmology Sector
Friday, May 15, 2020
Despite concerns the coronavirus will bring a slowdown or halt to venture funding, the largest ophthalmic-focused venture capital firms and funds in Orange County are moving ahead with investments.
Bill Link, who runs Flying L Partners’ Newport Beach outpost, and Aliso Viejo-based Visionary Ventures Managing Director Jeff Weinhuff, recently caught up with the Business Journal.
Both investors expressed optimism about their recent investments, not only because of the quality of the companies, but because, they say, their focus on early-stage and generally pre-commercial companies assumes less risk than those in commercial stages.
Last month, Visionary Ventures led and Flying L participated in a $25 million Series B round for TearClear Corp., a developer of preservative-free eye drops, which provides relief for patients with glaucoma and dry eye disease.
Both firms also participated in a $60 million Series B round for Irvine-based Tarsus Pharmaceuticals in January; the company is developing a drug therapy for Demodex blepharitis, a type of inflammation of the eyelids.
Between Link—who also serves as managing director of Versant Ventures and is among OC’s best-known VC executives—and Visionary Ventures, their ophthalmology-related investments run the gamut from pharmaceutical therapies to medical devices, and treat the three main sections of the eye (the back, center and surface areas).
Most area investors trace Orange County’s strong roots in ophthalmology to Allergan and today there are about 80 businesses in SoCal in the industry, which brings about $13 billion a year in economic activity to the state of California alone, said Weinhuff.
In OC specifically, the “access to talent is wonderful, and access to university researchers and collaborators is terrific,” Link said.
With closed rounds for Tarsus and TearClear, and another investment in a non-local drug delivery company that Visionary Ventures plans to announce in the coming weeks, both firms have kicked off the year with high activity levels in and around OC.
“The interesting thing about ophthalmology is all the resources are here in Orange County. Many of the companies start here, and many maintain connections here,” Weinhuff said.
TearClear is one company that fits that description; the firm was previously based in Irvine and participated in Octane’s business accelerator LaunchPad. It is now in the process of moving to Boston.
Link, who serves as board chairman, said TearClear was largely a virtual company in the past and made the decision to relocate to Boston because it’s where new Chief Executive Robert Dempsey hails from.
Dempsey was tapped to accelerate the company’s business and commercial strategy as it begins enrollment in clinical trials, the company said.
Link added, “[The move] wasn’t because of a lack of support or opportunity in OC. It was an important personnel decision.”
Investors are looking to create more funding paths from OC executives and investors to OC firms.
Visionary Ventures, which sources many of its deals through its ties to local industry leaders, including physicians, is currently investing in its second fund.
The firm’s first fund, running some $50 million, took about three years to fully invest and has about a 90% success rate. The second fund, which aims to raise $100 million, is about 30% invested and still has a few years to go, according to Weinhuff.
Weinhuff said the CEO Leadership Alliance of Orange County, a recently unveiled organization whose execs span numerous large local companies and is looking to boost the economic fortunes of the area, has invested in both its fund and Corona del Mar’s Miramar Venture Partners’ Miramar Digital Ventures II fund, which also aims to raise $100 million, with the specific goal of building connections to capital in the area.
Weinhuff believes the best way to do so is to look “at areas of strength, and then see if there is a fund to wrap around [those areas]. That’s what we did with Visionary Ventures.”
He added, Visionary Ventures’ second fund will also invest in medical aesthetics, a market that mimics that of ophthalmology and is “growing aggressively.”
Weinhuff identified several other promising areas for investment in OC on the technology side including cybersecurity, video gaming, and fintech.
Aliso Viejo-based Octane, which spun out Visionary Ventures in 2016, is planning to launch its own industry-specific fund this coming year, Chief Executive Bill Carpou told the Business Journal earlier this year.
“There is always room for improvement, but I think we have a solid, established medical device and biopharma ecosystem especially in ophthalmic inventions,” Link said speaking of OC.
Link pointed to his own professional history as “a positive circle” of innovation. Link founded American Medical Optics, a division of American Hospital Supply Corp., which in 1986 was sold to Allergan, which spun it off in 2002 as Advanced Medical Optics. AMO, which was headed by well-known eye executive Jim Mazzo, was bought by Abbott in 2009. Link went on to launch Chiron Vision, which was acquired by Bausch & Lomb in 1997.
He was also involved in the inception of eye stent maker Glaukos Corp. (Nasdaq: GKOS), which was a Versant Ventures investment from the beginning.
In addition to Flying L, Link co-founded San Francisco-based Versant Ventures in 1999. That firm now focuses its investments on the pharmaceutical side of ophthalmology, Link said.
Link added that $1.5 billion-valued Glaukos “is an OC-based global firm that will continue to be an example of what can be done in a field like ophthalmology, with a geographic center based in OC.”
He serves on the board of Glaukos, Irvine’s Edwards Lifesciences Corp. (NYSE: EW), which continues to sport the biggest market cap of any OC-based company, and Inari Medical Inc., another Versant-backed venture in cardiology that could be the first IPO for an OC healthcare company in more than a year, among others.
Category: Economic Development