New $300M venture firm sets sights on young biotechs

Dive Brief:

  • A new venture capital firm has raised hundreds of millions of dollars and plans to invest the money in preclinical and early-stage biotechs.
  • Pivotal bioVenture Partners closed its first fund on March 16, securing $300 million. That money came entirely from Chinese property developer Nan Fung Group, which has been wading deeper into pharmaceutical investments in recent months. Tracy Saxton, formerly an investor at Roche Venture Fund and an advisor at the venture firm SV Life Sciences, will head the business.
  • Pivotal will invest in roughly 15 to 18 biotechs that are in discovery through Phase 1 testing, with a focus on private companies and those based in the U.S. The firm's first investment closed earlier this month, an announcement for which is expected next week, according to Saxton.

Dive Insight:

While Saxton couldn't provide the name of that company or any others Pivotal has its eye on, she said it is a poster child for the types of investments the firm plans to make. The biotech in question is research-based and has a "very big idea going after a very big market that could be transformational in a certain space."

The firm will invest in strictly drug development companies, meaning healthcare, medtech and devices providers won't be in its portfolio. Pivotal is also veering away from the hotter, trendier therapeutics — think gene editing, CAR-T, and immune-oncology — in lieu of more mature, ironed-out areas.

"There's a lot of work that needs to go into those sorts of platforms to make them be really generally applicable, so I think we're going to be going back to basics — relatively traditional therapeutic modalities in the sense of biologics, antibodies, small molecules," Saxton said.

"Really my focus is going to be biology, biology, biology. I learned that in spades during the time I was at Genentech Roche, that's what excites the scientists there, excites them to do M&A," she added.

Though not initially putting money in any biotechs whose candidates are further along than Phase 1, the firm expects to follow investments as candidates progress through mid- and late-stage trials.

Pivotal's launch is timely, given how much venture capital is pouring into biotechs. Saxton's former employer SV Life Sciences, for example, set a goal back in 2015 to raise $400 million for its sixth fund. Last summer, pharmaceutical and tech investor Sofinnova Ventures announced it had raised nearly $600 million for its most recent fund. A few months later, Bain Capital revealed it was starting its first life science fund.

Those funds come on the heels of a boom in investment into young drugmakers. In 2015, the industry saw the biggest biotech initial public offering (IPO) to date, when Axovant raked in $315 million. And the year prior, 102 biotechs went public. Public markets have cooled for biotech of late, however.

Aware of the trends, Saxton said the idea for fund really took off around the middle of 2016, when she met Nan Fung's Chief Operating Officer Vincent Chung, who wanted to center investments on innovation rather than companies deep into Phase 2 and Phase 3 testing that required larger amounts of capital.

Chung will serve as a managing partner at the firm. Though unusual for a venture fund to have just one financier, Saxton anticipates certain benefits from the current setup.

"Having a sole [limited partner], we really are going to work together in devising the strategy and deploying capital and it means that I'll spend much more time on my investments and with my portfolio companies and seeking out new opportunities than I will be devising communications with my limited partners and fundraising," she said.

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Filed Under: Drug Discovery Corporate News
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