Tidewater Equity Ventures cashes in on an investment in a Pennsylvania pharmaceutical startup that is being acquired by Mallinckrodt Pharmaceuticals in a deal that could be worth as much as $425 million.

The exit for Tidewater will come from its investment in InfaCare Pharmaceuticals, which focuses on neonatal and pediatric patient care. (See more information about the deal below.)

Mallinckrodt is paying $80 million up front plus as much as $345 million in milestone payments.

Tidewater recently launched with offices in Wilmington and Raleigh. In March the firm reported raising more than $6 million.

Veteran investor Merrette Moore is the founder and managing partner of the fund, which he launched after  forming Lookout Capital in Raleigh.

“It will be a pretty good exit for us,” Moore wrote in an email..

The investment in InfaCare by Tidewater was preceded by an investment made in the same firm by Lookout.

“We are excited about InfaCare being our first exit,”Moore said in a statement.

“We are happy for our investors and are grateful for their participation in the investment.”

Lookout had investment in InfaCare three years ago, and “investment continued: as Tidewater was formed, Moore noted.

“Through our great connections in the healthcare industry, we were availed the opportunity to invest in InfaCare,” Moore explained in the announcement.

“This deal checked virtually all the boxes of what we look for in a later stage healthcare venture capital opportunity: an experienced management team with a track of success, a syndicate of blue chip investors, a product with a demonstrative competitive advantage, and a strong intellectual property position.”

Why Mallinckrodt did the deal

The acquisition was announced Friday. Here’s why Mallinckrodt said it made the deal:

“In July 2016 InfaCare and the U.S. Food and Drug Administration (FDA) reached agreement that a New Drug Application (NDA) could be filed for stannsoporfin using the totality of the drug’s data package, including:

  • a positive Phase 2(b) trial as its pivotal study, and
  • data from a second positive Phase 2(b) trial, with
  • no additional studies required pre-approval.

“This allowance reflects the medical need in infants at risk of developing severe jaundice. There are also challenges in conducting controlled trials in this fragile population.

“In December 2016 the FDA also granted stannsoporfin its Fast Track designation, a process designed to facilitate development and expedite the review of drugs to treat serious conditions and fill an unmet medical need1. Fast Track status allows for a “rolling” NDA data submission that has recently begun, and approval is anticipated in the first half of 2018. Post-approval commitments required by the FDA would include conducting trials in pre-term infants less than 35 weeks gestational age as part of the pediatric requirements. If approved, the drug will have substantial durability both as a new chemical entity2 and through its intellectual property which is valid until 20323.

“Severe hyperbilirubinemia can result in serious complications in infants, including brain damage and, rarely, death,” said Steven Romano, MD, Chief Scientific Officer and Executive Vice President of Mallinckrodt. “We look forward to bringing this much-needed treatment option to babies at greatest risk for the consequences of this condition.”