Why Katz went medical

After getting trounced last November in his third attempt to become mayor of Philadelphia, Sam Katz decided to strike out in a new direction.

After getting trounced last November in his third attempt to become mayor of Philadelphia, Sam Katz decided to strike out in a new direction. The Republican Katz, a veteran private equity investor and a financial adviser to state and local governments, has started a biotechnology investment firm targeting a rather large market segment: people who want to eradicate disease. WellSpring BioCapital Partners last month began selling five unit trusts investing in companies developing or delivering remedies for specific illnesses: Alzheimer’s disease, breast and ovarian cancers, diabetes, prostate cancer and rheumatoid arthritis. Each trust will invest in 12 to 22 public companies, ranging from small caps to such biotech giants as Amgen.

Instead of reaching out to institutional investors, Katz, 54, is aiming at individuals who are willing to invest a minimum of $1,000 and pay an up-front load of 4.95 percent to the regional and independent brokerages retailing the trusts. Katz, WellSpring’s CEO, says he expects to attract “passionate investors” -- namely, those who have been affected by the diseases. He estimates, for example, that the 4.5 million Alzheimer’s patients in the U.S. have 18 million friends and relatives who might be willing to invest tens of millions of dollars for the cause. Is appealing to such passions -- or raw emotions -- ethical? “It’s fair to say that this is not for everyone,” Katz admits. Jeffrey Feldman, Katz’s partner and WellSpring’s head of product development, calls the level of investor interest “tremendous.” He believes each unit trust will attract $100 million to $200 million over the next six months.

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