The COVID-19 pandemic may be disrupting clinical trials and drug launches, but it’s not holding up venture firms intent on bankrolling innovative biotech startups. With Arch Venture Partners, Flagship Pioneering and now venBio Partners unveiling their latest efforts, it looks like everyone’s raising a life sciences fund this week.
“I think it shows a lot of strength in this ecosystem that generalist investor funds, endowments, corporate pensions continue to want exposure to the life sciences,” Aaron Royston, M.D., managing partner at venBio, which secured $394 million in capital commitments for its third life sciences fund.
“It’s viewed more of a niche industry that’s not as impacted as others. Obviously, markets have taken a hit, but within life sciences, the drop is much less severe than in other areas … It’s a good sign for the ecosystem, and certainly a good sign for innovation and management teams,” he added.
VenBio will deploy its latest fund, dubbed venBio Global Strategic Fund III, the same way it approached its last two funds. It will invest “primarily in therapeutics companies that are developing biopharmaceuticals for unmet medical needs,” the company said in a statement. These could be very early-stage companies or more mature ones, platform companies with many potential directions or an asset-based company with a clear road map.
“Our investment thesis, regardless of stage of company, remains to look for investment opportunities with a three to five-year time horizon,” Royston said. “We're comfortable putting companies together from scratch, as with Labrys Biology and ALX Oncology, or leading the first institutional investment round, as with Akero Therapeutics, if the company’s development timeline is in line with our investment strategy.”
VenBio’s latest fund eclipses its predecessor, venBio Fund II, by about $80 million. The firm has taken care not to grow too quickly.
“Our motto with Fund III is to continue the same strategy with the same team and a similar fund size as we had with Fund II. It’s important for us to stay disciplined about that as we tend to take the lead on most of our investments,” Royston said. “We take a very active role with each portfolio company, so we need to make sure we have significant bandwidth and resources for each company.”
As for how the current pandemic and its accompanying economic downturn has affected venBio’s work?
“It really hasn’t,” Royston said. After all, the firm came together during a recession, before launching formally in 2011.
“Our strategy is geared toward how to provide a sustainable return regardless of fluctuations that happen around us… Even in the unclear and choppy environment today, pharma and patients desperately need innovation. We’ve seen historically at our firm that if we’re able to advance and develop drugs that have a meaningful impact on patients, we’re going to be rewarded for that, regardless of the macroeconomic climate.”