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Avalon's Lichter: 'Laid-Back' Savvy Keeps Deal Flow Strong


By Randy Osborne
Staff Writer

When it comes to getting venture capital (VC) deals done, the science and the financial terms naturally take center stage, but the personalities of the players need to mesh, too, for the best outcomes.

"I'm an investor, and I'm judged solely by financial returns, but there are a lot of ways to [get those]," said Jay Lichter, managing partner with Avalon Ventures in San Diego. "Screwing entrepreneurs and screwing founders because you can, because you have the money, is not the way to be successful in the long run."

Midwest-raised Lichter, 51, has gained respect during his 20 years with Avalon not only for his plainspoken geniality but also for his solid background in science and keen grasp of money matters.

"He's a pretty laid-back guy," said Carmine Stengone, vice president of corporate development for Afraxis Inc., also of San Diego. "I had the stereotype in my head for what a VC would be like – generally intense, at times abrupt."

Afraxis, an early stage Avalon-backed concern for which Lichter serves as CEO, scored a potential $187.5 million licensing deal with Genentech, a member of the Roche Group, near the start of this year. (See BioWorld Today, Jan. 29, 2013.)

Lichter "doesn't take himself too seriously, [in] his successes or his failures," said Heidi Chokeir of the public relations firm Canale Communications. "There's not a pretentious bone in his body."

Chokeir has lost count of how many projects she has helped Lichter introduce to the world. "I work with him as a vendor, and he's always shown me respect," she said. "He's never treated me like a 'vendor,' he's treated me like a person – a peer, someone he respects and values. He's a good listener. He hears what people have to say."

Because of his humility, "people aren't turned off by his persona, they're not intimidated by him," she said. "But he also exudes confidence, and has the track record to back it up."

The only Avalon partner focused solely on life sciences, Lichter has been involved in several success stories so far this year: the Afraxis deal, the buyout by BioMarin Pharmaceutical Inc. of Zacharon Pharmaceuticals Inc. for $10 million up front, and antibiotics firm RQx Pharmaceuticals Inc.'s potential $111 million agreement, also with Genentech. (See BioWorld Today, Feb. 12, 2013.)

Born in Washington, D.C., Lichter moved with his parents and brother to Evanston, Ill., when very young. He graduated in biochemistry from the University of Illinois (UI) at Champaign-Urbana, attended grad school at the UI's Chicago campus, where he finished his PhD in biochemistry and molecular biology. His post-doctorate work at Yale University "crystallized my path in this industry," he said, as he trudged in "the foothills of the genomics era."

Lichter published more than 20 papers in two years, earned a certificate in DNA diagnostics that allowed him to perform tests and counsel patients, and pulled down a fellowship in informatics. "I was in the right place at the right time," he said.

In the early 1990s, Lichter recalled, he was doing pharmacogenetics research at DuPont Merck Pharmaceutical Co. when Kevin Kinsella phoned. "He wanted to know if I wanted to start a company in genomics. I said, 'Where's it going to be?' He said, 'I don't know.' I said, 'Who else is involved? He said, 'Nobody.' I said, 'What's it going to do?' He said, 'I don't know.' I said, 'How much money do you have?' He said, 'Not much.'"

Lichter laughs about it now. "An offer I couldn't refuse, right?

'You Can't Go in Like a Banker'

He started with Avalon as co-founder of Sequana Therapeutics Inc., which later merged with Arris Pharmaceutical Corp. and became Axys Pharmaceuticals Inc., eventually bought by Celera Corp. for $173 million. (See BioWorld Today, June 14, 2001.)

"We just kept investing through the down days in our core business," Lichter said. "The notion was that eventually the available Phase II and Phase III assets that are out there, that are good, would be soaked up. It was nothing more than that."

An element of luck figured in, too, he said. "Our historical track record through our first six funds was very good," Lichter said. "In the later funds, when we were more mixed, between tech and biotech, we got a lot of patience from our investors because the tech returns were pretty good. Now, the market is changing again a little bit, and tech is maybe a little over-bought, and life sciences is under-bought. So we're getting some good deals."

High among them is Afraxis, which began with Lichter perusing scientific journals and finding the work of Nobel Prize winner Susumu Tonegawa, of the Massachusetts Institute of Technology in the Proceedings of the National Academy of Sciences.

"I called him up, and he was skeptical," Lichter said. "I called him again, and he was less skeptical. I went out and visited with him, spent an hour with him at his office. He got comfortable, and we talked about things, and laughed. He made a few phone calls about me, and checked our track record. And then we started the company. Five years later, we got the Genentech deal."

Lichter is anything but oblivious to the "very personal aspect" of deal making, he said. "I understand living at the [lab] bench. When you go to an investigator who has spent his career working his tail off on a piece of science he's very passionate about, you can't go in like a banker and start trying to purchase it," Lichter said. "You have to understand that this project is their child, and you're asking them to give their child to you and help it grow up."

He has two daughters of his own. "They're not really into science in the slightest," Lichter said. The older one, a freshman at Colgate University, is "interested in economics and finance, so I guess in some ways she's following in my footsteps," he said, while the younger daughter, a senior at Carlsbad, Calif.'s independent high school Pacific Ridge, is "more of an artist type, a free spirit."

His business, Lichter said, is "a universe of how to treat people. There are some who say, 'Forget you, entrepreneur. I've got to get my return, and I'll do it at your expense.' To our own detriment, we [at Avalon] are probably more generous than we need to be in any particular deal. But what that means is that, across the board, we see a lot more deals from people who trust us. We get entrepreneurs and technology managers who go the extra yard because they know that we're going to protect them if they take that risk and push the company to the edge to get the better outcome. There's a lot of pain the entrepreneur goes through to make [their companies] successful. I've lived the pain."