MPM rounds up $400M for biotech VC with Novartis and Astellas on board

Biotech investor MPM Capital has put together a $400 million new fund with help from Big Pharma, scouting for innovative startups with an eye on build-to-buy deals.

The firm, based in Cambridge, MA, and San Francisco, recruited Novartis ($NVS) and Astellas to join its syndicate of limited partners for the latest fund, a purse that came in about $20 million larger than MPM had first planned. The latest fund comes on the heels of a $275 million sum closed in 2010 and should bankroll about 20 individual investments, MPM told Dow Jones.

With the latest cash, MPM plans to extend its penchant for early-stage life sciences investments, paying particular attention to emerging biotechs with a clear path to acquisition. So-called build-to-buy investments, in which VCs collaborate with big drugmakers from the outset to seed to hyper-focused startups, have become increasingly popular, led by the likes of Versant Ventures and Atlas Venture.

And MPM, with Novartis and Astellas in tow, sees the value of that model. The firm helped Selexys Pharmaceuticals get off the ground with a $23 million round in 2012, coupling it with a buyout option for Novartis. And the same goes for MPM portfolio outfit Potenza Therapeutics, which followed its $38 million A round with an Astellas partnership that gives the Japanese drugmaker a right to acquire it.

Like many well-heeled biotech VC firms, MPM is benefiting from biotech's current virtuous cycle. As ever, Big Pharma has wide gaps in its pipeline and needs biotech's help, but the enthusiastic reception for drug developers on Wall Street has provided both a near-term liquidity option for investors and a lever for boosting the valuations of startups and their assets. That has allowed stalwarts like MPM to quickly return cash to their limited partners, easing the process of amassing new war chests.

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