The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.

RESEARCH TRIANGLE PARK, N.C. – Rex Health Ventures has made its first “play,” a $500,000 investment in Morrisville-based Aerial BioPharma.

The Skinny asked Bobby Helmedag, director of operations for the new fund, why it chose to back Aerial in a deal that was announced Thursday.

Eyes are wide open, he says.

Life science/pharma/biotech investments can be a very long and expensive payback – why make this deal?

Several reasons:

1. The potential for the compounds they are working on are significant and would represent a major innovation for narcolepsy and pain management. If successful, these drugs would have a huge positive impact on patient care worldwide.

2. Looking at the two companies the management team previously founded (Addrenex and Neuronex), both companies were successfully exited within 3 years or less and raised relatively little (for the pharma / biotech space) outside funding.

Look at what just happened with Biolex (bankrupt) in Pittsboro and Targacept (management changes, falling stock) in Winston-Salem – aren’t drug deals risky? What makes this deal different?

In general, investing in early stage companies is a risky. We went through extensive due diligence involving resources at UNC / Rex as well as outside experts when analyzing the Aerial opportunity.

The management team at Aerial has worked together for years, this is their third start-up in the CNS (central nervous system) space. Their past two companies had successful exits in less than 3 years. The Aerial team has shown the ability to execute on their business strategy very well.

We believe that the potential for the drugs Aerial is working on outweighs the risks inherent in early stage investing.

What is the potential market size for drug(s) being developed?

The market size for the narcolepsy drug is around $2 billion per year, with three currently approved drugs in the market. Provigil is the market leader with annual sales of ~$1.2 billion.

The pain management drug market is huge and represents a tremendous opportunity for Aerial.

Is Rex prepared to be patient?

Yes, we know that early stage VC investing does not usually result in quick exits.