New Enterprise Associates packs financial firepower like few other venture capital outfits today, particularly those investing in biotech. Fresh off closing a diversified venture fund of $2.6 billion revealed in July, NEA is expected to spend roughly a third of its capital from the fund on healthcare investments primarily in the biopharma industry, General Partner David Mott (who sold MedImmune to AstraZeneca ($AZN) for $15.6 billion in 2007), told FierceBiotech.
Venture firms have traditionally served a key role in backing big ideas in bioscience out of academia or elsewhere, but lean times in the VC industry over the past several years have left capital-intensive biotech businesses starving for dollars. Amid austerity for lots of biotech VC players, NEA seems to have survived the collapse unscathed--it's latest fund of $2.6 billion is one of the largest hauls in history and follows its $2.5 billion fund closed in 2009.
Historically, NEA has pumped 30% to 40% of its total funds into healthcare companies, Mott says, with about two-thirds to three-quarters of the healthcare pot dedicated to biopharma. (Mott says that the firm has no fixed numbers for investing in any of its asset classes, but he expects the latest fund's allocations to be consistent with past percentages.) When you do the math, those historic numbers applied to this latest $2.6 billion fund mean NEA could funnel as much as $780 million into biotech/therapeutic bets.
No new healthcare VC funds this year can match those totals, and only a handful of firms such as OrbiMed Advisors, Burrill & Company, Sofinnova Ventures and Third Rock Ventures--all of which have closed healthcare-focused funds between $400 million and $600 million over the past two years--come close. Mott and his partners are on the winning end of a consolidation of money flowing to fewer VC firms, empowering them to pick and choose juicy deals and terms to suit their profit goals.
"I think it's a fabulous time to be investing in biotech because we're in the enviable position of having so much capital and staying power as an organization," says Mott, whose firm has offices in the U.S., India and China. "I think that's a huge competitive advantage in biopharma investing."
To be clear, VC isn't the only game in town for funding biotech outfits. In some cases, Big Pharma companies have made early bets on seedling startups and other newly hatched companies have managed to tap angel backers, foundations, and government grants to advance research. Still, the scarcity of venture money in biotech is unwelcome. And according to PricewaterhouseCoopers and the National Venture Capital Association's report in July, venture investment in biotech slid 42% in the second quarter of 2012 compared to the same three months of last year and hit the lowest quarterly sum since 2003.
For those that are interested in reaching into NEA's deep pockets, Mott says that his group hunts for opportunities to invest in top-flight management teams working on treatments that offer major improvements in healthcare. (The firm invests in public and private companies.) It's a tried-and-true recipe for making money in the risky biotech field. The firm has 16 members on its healthcare investment team and Mott is one of four general partners, according to its website. Lots of due diligence and industry knowhow from partners go into biotech deals.
Take Mersana Therapeutics, which became the first biotech to reap dollars from NEA's new multibillion-dollar fund. The firm worked for more than a year to scout and evaluate companies with new approaches to creating therapeutics known as antibody-drug conjugate (ADC) treatments, Mott says. He adds that NEA is an investor in a first-generation player in the ADC arena, Seattle Genetics ($SGEN), which sells the FDA-approved ADC called Adcetris for two types of lymphoma. Mott, who was CEO of the biotech heavyweight MedImmune before joining NEA in 2008, knew the promise and the limitations of early ADC platforms from his former company's past alliance with Seattle Genetics.
Mott became chairman of Mersana through the $27 million Series A-1 round his firm led in July. Few biotech chiefs would miss the opportunity to praise a new investor, yet Mersana CEO Nicholas Bacopoulos made it clear that he was thankful for more than NEA's deep pockets. "We will need the financial and intellectual resources of NEA to succeed," Bacopoulos said in an interview about the deal in July.
Besides NEA, the only other well-heeled new investor in Mersana's latest round was the VC unit of drug giant Pfizer ($PFE). Mott says that his group pays close attention to the fortunes of other venture firms as he and his colleagues seek syndicate partners for their investments. Sadly, many syndicate partners of years past have come up short in their latest efforts to raise new funds.
"Unfortunately, healthcare investing and biopharma investing have seen a real decrease overall capital availability over the past three to 5 years," he says. "The good news from NEA's perspective is we have the same amount available as we did 5 years ago." -- Ryan McBride (Email | Twitter)
Editor's note: NEA was not an investor in Seattle Genetics' rounds of venture capital financing before it became a publicly traded company, Seattle Genetics CEO Clay Siegall told FierceBiotech in response to this column. NEA's Mott said during an interview on Sept. 12 that his firm is an investor in the publicly traded biotech company. NEA makes investments in both privately held and publicly traded companies.