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Biotech Investor Makes San Diego the Center of His Ecosystem

The growth of San Diego’s biotech hub is often credited to a small but active pool of “serial entrepreneurs.” As the historically vibrant ecosystem begins to dim in a down market, a few bold individuals with enough cash or clout to refuel the sector become increasingly valuable.

One such entrepreneur, Kleanthis Xanthopoulos, the former CEO of one of San Diego’s more prominent biotechs, Regulus Therapeutics Inc., is doing his part to attract new business to the city.

“I’m very committed to San Diego, but the ecosystem here has been stagnant for a while,” Xanthopoulos said. “I see that we’re being overtaken by Boston and — to a lesser degree — San Francisco. I hope that some of my colleagues will step up and regenerate the ecosystem.”

Xanthopoulos isn’t just polishing his pulpit speech. He’s taking his own advice and investing in interesting science and tech with one added caveat — the company must start (or move operations to) San Diego.

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Involved Investor

Following his departure from Regulus in 2015, Xanthopoulos become managing partner of European investment firm Vandel Group, bringing its presence to San Diego. The firm has an almost incubatorlike design, mimicking the structure of Boston’s leading VC firm, Third Rock Ventures, in which the investor takes a heavy hand in the formation of the company (and its executive leadership).

“Third Rock was literally the fuel that helped Boston spin out so many successful companies,” Xanthopoulos said.

Although Third Rock can invest a lot more cash into biotech startups (seed rounds average $35 million-$45 million), Xanthopoulos said Vandel Group and Third Rock share a few things in common. “They’ll get their hands dirty,” Xanthopoulos said. “They provide the strategic and operational expertise. They’re not the VC who goes in once a quarter at the board meeting just to check how things are going. They actually sit down and write a business plan, and help the management.”

Focusing on a Few Companies

Unlike traditional VC firms, which typically take on a dozen or so firms with each fund, Vandel Group focuses on only three or four at a time with the goal of starting one new company per year.

“This is not a portfolio strategy,” Xanthopoulos said. “We get involved with a few companies very meaningfully — ones that we believe in strongly. Then we drive them to a significant inflection point. For example, they develop something that could be a strategic asset for a bigger company and the company is then primed for acquisition.”

This strategy is rare among investors, but not completely novel — even in San Diego.

Local venture group Avalon Ventures employs a similar strategy. Together with its partner GlaxoSmithKline, a pharma giant, the VC group takes a heavy hand in the operations and management of its startups. Since 2013, Avalon and GSK have launched eight biotechs in San Diego — all of them housed in Avalon’s incubatorlike hub COI Pharmaceuticals. Here, they share lab equipment, office space, and look to Avalon’s managing director, Jay Lichter, for executive leadership.

“Typically, you hire a CEO for fundraising, which is a full-time job,” Lichter said in an interview last year. “With this model, I don’t need to raise money and I don’t need a partner because I already have one. The burden on me is adult supervision.”

Providing Leadership

Xanthopoulos has similar plans for Vandel Group. He’s taken on leadership roles at the four companies he’s funded so far: Sente Inc., Irras AB, Bioniz Therapeutics Inc., and LDO s.p.a. If the companies were not headquartered in San Diego, Xanthopoulos moved their operations here (except for Bioniz, which is headquartered in Orange County).

“For this concept to work it has to be localized in Southern California,” Xanthopoulos said. “I can’t build a company in Boston or San Francisco. It has to be here. Even Orange County is giving me a headache.”

Vandel Group invests about $10 million per company, per year. If necessary, the firm will partner with one or two additional investors to move the technology along. Xanthopoulos said ideally $20 million in investment dollars would bring a firm from concept to profitability within two or three years.

Mike Krenn, president of San Diego Venture Group, said that serial entrepreneurs like Xanthopoulos are the key to the region’s continued success in biotech.

“San Diego is fortunate to have such an amazingly strong and collegial life sciences community,” Krenn said in an email. “Because of the strength of people like Kleanthis, Faheem Hasnain, Greg Lucier, Pratik Shah, Dan Bradbury, Ted Schroeder, David Hale, Magda Marquet (and I could go on) — not only are investment dollars flowing in, but companies are seeing San Diego as option number one on the relocation map. Not just startups, by the way; it’s existing companies of substance. Our great weather is one attribute, but the access to leadership, to mindshare, to capital, and to research is largely unparalleled…”

Kleanthis G. Xanthopoulos

General managing partner, Vandel Group, a European life sciences investment company

President/CEO, Regulus Therapeutics Inc., 2007-2015.

Managing director, Enterprise Partners Venture Capital

Co-founder, president and CEO of Anadys Pharmaceuticals, 2000-2006; remained director until acquisition by Roche in 2011.

Vice president, Aurora Biosciences (acquired by Vertex Pharmaceuticals), 1997-2000.

Participated in The Human Genome Project, 1995-1997

Associate professor, Karolinska Institute, Stockholm, Sweden

Postdoctoral research fellowship, The Rockefeller University, New York

Onassis Foundation scholar; bachelor’s degree, biology, Aristotle University of Thessaloniki, Greece; master’s degree, microbiology; doctorate, molecular biology, Stockholm University, Sweden.

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