News Article

Only Xanthon's technology left
Date: Sep 20, 2002
Author: Sabine Vollmer
Source: bizjournals ( click here to go to the source)

Featured firm in this article: Xanthon Inc of Durham, NC

RESEARCH TRIANGLE PARK -- A spinoff of Schaum-burg, Ill.-based Motorola is interested in buying the technology of shuttered Xanthon for an estimated $1.2 million to $1.5 million, sources say.

Sitting on the sidelines of the fire sale are venture capital firms that jointly had invested $25 million in the Research Triangle Park biotechnology company since its 1996 inception.

The firms include Intersouth Partners in Durham, which has the most money in Xanthon, the Aurora Funds, also in Durham, Franklin Street Partners in Chapel Hill, and Cordova Ventures and Noro-Moseley Partners, both of Atlanta.

Dennis Dougherty, a founder of Intersouth and a Xanthon director, was not available for comment.

But sources close to the deal say that San Francisco-based Gatx Ventures has foreclosed on Xanthon's assets, which basically consist of the licensing rights to a gene-based screening technology developed at the University of North Carolina at Chapel Hill. And now the group is ready to sell it.

Xanthon used its technology as collateral for a loan it received from Gatx. Unlike its venture capital colleagues, Gatx is a lender rather than an investor. As such, the company doesn't show up in Xanthon filings with the North Carolina Secretary of State's Securities Division.

Included in the deal that Gatx is shopping to the unidentified Motorola spinoff are consulting services from the technology's inventor, UNC chemistry Professor Holden Thorp. If the deal goes through, Thorp would not leave UNC, sources say.

Putting the assets of a company up for sale generally is a sign that the company has come up dry in its efforts to land new funding, says Ken Shelton, a business lawyer at Womble Carlyle's RTP office. Shelton is not involved in the Xanthon deal.

Just two years ago, Xanthon had big plans.

The company had hired Perkins & Will, a Chicago-based architectural firm, to design a state-of-the-art, 80,000-square-foot facility. The blueprints were drawn for the facility, and the employee count was expected to double from 50 to 100 by this year.

But technical glitches intervened, more than once delaying the rollout of Xanthon's first product, a drug discovery tool. Instead of hiring employees, the company laid off 10. By late 2001, a $15 million fundraiser fizzled. In January, Jim Skinner, Xanthon's chief executive officer and co-founder, quit. By March, another 18 positions had been cut.

Unable to raise cash, Xanthon cobbled together about $5.7 million in bridge loans from existing investors. The company subsisted on the loans for several months. But on June 21, all but three of the remaining 21 employees were laid off.

One of the three remaining was Peter Heath, chief financial officer. He and his two colleagues shut down the business. Heath did not return phone calls.