Private Bets on Public Biotech

Investment veteran Harlan Kleiman and pharmacology guru Kate Winkler team up at a new, specialized fund. The results promise to be impressive.

PETER HENIG

Pro-Pharmaceuticals is one of those “off the radar” biotech stocks. So far off the radar, in fact, that the company trades as a bulletin board stock (OTCBB: PROH.OB). It�s a development-stage company in cancer therapeutics that, like many promising micro-cap biotech companies, went public as an over-the-counter stock because that was its only feasible liquidity option. Total number of employees? Six. Revenue? None. Cash? All of $2 million. Profits? Zip.

But ask Kate Winkler, Ph.D., comanager of the new Shoreline Pacific Biotech PIPEs Fund 1 what her favorite stocks are, and Pro-Pharmaceuticals tops her list. Dr. Winkler�s fund provides public investment in private equity, more commonly known as a PIPE. It�s the company�s drug-delivery technology that has her excited. Once fully developed, Pro-Pharmaceuticals� cancer therapeutics may reduce the toxicity and improve the efficiency of existing chemotherapy drugs by attaching them to carbohydrates, which seems to make the drug more attractive to cancer cells.

But promising technology is only half the equation. The other half is capital. Pro-Pharmaceuticals had enough money to get its cancer therapeutics into Phase I trials, where it is now being fast-tracked, but not enough to get to Phase II.

Enter PIPEs, and the new Shoreline Pacific Biotech Fund. For those looking to potentially make real money—venture capital�type returns of five times an investment or more—investing in public microcap biotech stocks is the only way to go, say Dr. Winkler and the fund�s other comanager Harlan Kleiman. And doing so through a PIPE is even better, because in this type of investment, shares are purchased directly from a company, so its common stock is often discounted 15% or more, in effect. “I know that looking at biotech PIPEs the way we do can make money for investors,” Mr. Kleiman says confidently.