Third Rock Ventures

Third Rock Ventures

Dollars: $112.76 million
Deals: 28
Based: Boston, MA
Founded: 2007

Third Rock Ventures hauled in $516 million for a new fund announced in March, providing financial fuel to craft a fleet of biotech startups and sustain a venture operation that demands attention. The top partners' flashy sports cars, bedazzled clothing and fluorescent-colored sneakers alone turn heads.

Bob Tepper

Big pharma has failed to find a winning formula for innovation despite the tens of billions of dollars it's plowed into R&D annually for a long time. And many of Third Rock's predecessors and peers in the VC game got out of biotech investing because of the heavy capital requirements and other challenges such as picking winners. Mark Levin, Kevin Starr and Bob Tepper ran Millennium Pharmaceuticals before they and other alums of the company formed Third Rock in 2007 to do biotech VC their way.

Third Rock prefers to build winning biotech startups from scratch rather than gamble passively. With offices in Boston and San Francisco, the firm evaluates more than 1,000 biotech plans annually, Tepper said at an event in Cambridge, MA, last week. Few of those bright ideas make the cut, yet Third Rock's dealmakers go all in once they have found a potential hit. Partners typically take on executive duties at the startups and the firm often commits roughly $30 million to the young companies' first-round financings.

Kevin Starr

Of course, Third Rock has experimented with several different investment formulas. Take Warp Drive Bio. When the partners wanted to launch the risky venture dedicated to mining microbial genomes for drug-like compounds, they partnered with French drug giant Sanofi ($SNY) early on to share the risks inherent in the bold new drug-discovery effort. And the partnership includes clauses for Sanofi to acquire the startup.

Six years in, the firm has now minted or invested in more than 30 life sciences startups via its first two funds that totaled about $800 million. Eli Lilly ($LLY) scooped up one of the firm's portfolio companies, Alnara Pharmaceuticals, for $180 million in 2010. And early this year Shire ($SHPG) bought a Third Rock creation called Lotus Tissue Repair for $49.3 million upfront with $275 million in potential milestones. Obviously, Third Rock needs more winners for those funds to be successful.

Mark Levin

Those prospects certainly exist in companies such as Agios Pharmaceuticals, Foundation Medicine and bluebird bio. Agios Pharmaceuticals presents multiple exit avenues. Celgene ($CELG) has dibs on licensing the cancer metabolism programs under way at Agios, has provided more than half of the $261 million the biotech startup has raised, and could potentially decide to acquire Agios down the road. In Agios's $78 million Series C round, investments from Fidelity and large public funds seemed to align the startup for a future IPO.

With the firm's $516 million Fund III, Third Rock plans to build another 16 or so life sciences startups. Yet the firm needs some high-powered investment exits over the next several years for the party to continue.

For more:
Editor's Corner: Third Rock's $325M Shire deal was a big win for early-stage investors
Third Rock remains undaunted by early-stage med tech investing
Third Rock Ventures adds $516M fund to back new portfolio of biotechs
Third Rock bankrolls cancer immunotherapy upstart with $47M A round

-- Ryan McBride (email | Twitter)

Third Rock Ventures

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