With some exceptions, venture funds focused on one particular industry such as life sciences have been popular sells in the struggling VC industry. Now partners from two of the usual suspects in major biotech venture rounds, Advanced Technology Ventures and Morgenthaler Ventures, plan to break away from their IT counterparts and unite under one healthcare-focused VC outfit, Fortune's Dan Primack reported.
Many questions about the new firm remain. Yet the ATV partners involved in the merger include Mike Carusi and Jean George, and "at least" 5 members of the life sciences team from Morgenthaler are said to be in on it, too, according to the piece in Fortune. After saying goodbye to their IT counterparts at their respective firms, the healthcare-focused group members will go out and try to raise a new fund next year, Primack reported.
The partners' new venture group would follow other life science-specialty funds that have formed in recent years. For example, Sirtris Pharmaceuticals ($SIRT) vets joined forces to form Longwood Founders Fund and raised more than $80 million from sources such as GlaxoSmithKline ($GSK) and Genzyme ($GENZ) for biotech startups. Perhaps most notably, Third Rock Ventures has stuck exclusively to life sciences investing since founding partners such as Mark Levin, Kevin Starr and Bob Tepper formed the firm in 2007 after helming Millennium Pharmaceuticals. Third Rock has raised two funds totaling more than $800 million, and has expanded from Boston to San Francisco.
ATV and Morgenthaler's life sciences partners involved in the merged group can claim some recent wins while soliciting money for their new fund. Carusi, for instance, led ATV's successful investment in cancer drug developer Plexxikon, which was gobbled up by Japan-based Daiichi Sankyo in a deal worth $935 million, Xconomy reported. Both Morgethaler and ATV backed another West Coast company, Ardian, which developed a catheter-based treatment for high blood pressure. Investors made out well; Medtronic snapped up Ardian last year for $800 million upfront.
Yet these are the wins. Of course, many VCs have been moving away from the biotech field in recent years due to such inherent challenges of pricey drug discovery and development efforts amid a dismal IPO market and heavy regulatory scrutiny of new products. Without diversifying funds with investments in IT and energy firms, biotech-focused groups must navigate such high risks and deliver results based on the successes of a narrower field of companies.