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Up-Close: Timothy Wollaeger

Risk worth reward for Sanderling's Wollaeger

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Timothy Wollaeger, managing director of Sanderling Ventures, has been around the San Diego biotech block, a community where each firm is but a few degrees of separation from one another. Which is exactly what keeps it thriving.

"The biggest source of growth (in the biotech community) is other companies; people who have either started companies or want to start another one because this one's become successful; or somebody who's on the second level who says, 'Hey, I think I can start a company now that I've seen how other people do it,'" he said.

Sanderling specializes in investing in seed and early stage biotech and health care companies, and to date has supported more than 60 biomedical companies.

"Most of the companies that we invest in, we actually start," said Wollaeger. "The later stage ones that we (invest in) are all companies that we seeded early on."

Although investing in early seed is high-risk, the rewards are worth it for Wollaeger.

"If you're right, you tend to tend to make larger multiples of your money for your investors," he said.

Often, Sanderling will assume managerial duties and select strategies for the first few years of a startup.

Wollaeger began his career in San Diego with Hybritech, San Diego's first biotech company and the seedling for today's critical mass of biotech companies in the county. Hybritech was sold to Eli Lilly & Co. (NYSE: LLY) in 1986.

Wollaeger thinks every investor should have his or her star companies. But those stars don't always shine instantaneously.

"My stars have taken a little bit longer to be stars," he said.

He referred to the most successful company he has started, Amylin Pharmaceuticals (Nasdaq: AMLN), in which he initially invested as founder of Kingsbury Capital Partners.

Amylin went public in 1987, but the pharmaceutical company's first drug was approved only one year ago.

"It took a long time," he said. In fact, when he did get the news of FDA approval for Symlin, an injectable diabetes drug, he began "crying like a baby."

"We were so excited that we had finally broken through and gotten something approved," he said.

"Tim invested in Amylin at the very beginning," said Ginger Graham, CEO of the company. "As a board member, he continued to support Amylin throughout the years."

Favrille (Nasdaq: FVRL) has been in Sanderling's portfolio since 2002, at the company's second round of funding when a small amount of clinical data and promise was all the company had to show. Sanderling helped fund the company's Phase II clinical trial of a non-Hodgkin's lymphoma treatment.

"Sanderling has continued to invest in the company over the years," said John Longenecker, president and CEO of Favrille. "They have been a strong supporter."

Favrille researchers completed the Phase III trial of the treatment this past January.

Sanderling funds companies throughout the United States. The company has had investments in San Diego since 1988, 14 years before they branched south from San Mateo in the San Francisco Bay Area.

"Sanderling, as well as many other firms, has often come to San Diego because of the availability of technology and the entrepreneurial community. I think being on the ground here and having someone makes it a lot easier," Wollaeger said.

So far, the proximity to the local companies Sanderling invests in has proven to be beneficial.

"You get a little more intimate view of what's going on," said Wollaeger.

Personalized medicine, the diagnosis of ailments and treatments based on an individual's genetic makeup, has become a buzzword in biotech lately. While Wollaeger sees a future in this method, the barriers may be more political than scientific.

"It's more complex when you're doing things individualized, you're not trying to get consistently the same product," he said, referring to potential issues the Food and Drug Administration may have with individualized therapies.

"You can't expect someone in a regulatory field to have the breadth of knowledge of all of the medical researchers in the country. There's an educational aspect to what we do in terms of working. We're a long way from that stuff, it just takes a long time."

Wollaeger sees less invasive surgical procedures and smaller, more accurate devices for diagnosing disease as a focus in current biomedical research and development. Digirad (Nasdaq: DRAD), one of Sanderling's investments, has developed a camera imaging device that would change gamma radiation into an electrical symbol, creating a lighter, more mobile detection camera.

"It moves the procedure out of the hospital into a less expensive and more immediately available environment of a doctors office," he said.

To Wollaeger, the motivation to work at Sanderling comes from aiding young industries. "What you do counts. They either make it or don't make it," he said. "There's a much more direct reward, both financial and psychological."

Feedback from patients and medical also drives Wollaeger to continue working to support biotechnology. From a nurse at his high school reunion who insisted on taking her picture with the founder of Pyxis (NYSE: CAH), to his brother, a diabetic who takes Amylin's Byetta, Wollaeger runs into the beneficiaries of his businesses regularly.

"The rewards are financial in our industry, certainly, if you succeed. But man, when you do something like that, that really makes a difference to people."

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