Just a year after plunging $100 million into a plan to back established biotechs and other healthcare companies, rather than bet on risker, nascent ones, Foresite Capital Management is back for seconds, announcing today that it’s closed a new $300 million fund to continue the same investment plan.
The San Francisco, CA and New York-based firm, founded and headed by biotech veteran and Theravance (NASDAQ: THRX) co-founder Jim Tananbaum, has formed Foreside Capital II and immediately put some of the $300 million its funded with to use. For one, the firm has invested $57 million in a big $200 million equity financing round for Hayward, CA and Boston-based Intarcia Therapeutics, which is developing treatments for type 2 diabetes and obesity. It’s also put $18 million into Universal American (NYSE: UAM), which provides health benefits to people with Medicare.
Foresite raised $100 million for Foresite Capital Fund I in January 2013 as part of a plan to put money behind “disruptive, late-stage products and services” in several areas of healthcare—biotech, genomics, diagnostics and more. Accordingly, the firm’s portfolio companies are all well along in their development. Some of those investments include Epizyme (NASDAQ: EPZM), Ambit Biosciences (NASDAQ: AMBI) and Karyopharm (NASDAQ: KPTI), for instance, which, while far away from marketed products, all went public over the past year. Others like Keryx Biopharmaceuticals (NASDAQ: KERX) and Orexigen Therapeutics (NASDAQ: OREX) have drug candidates that have already completed late-stage clinical trials.
Intarcia’s prospective diabetes treatment is a drug-device combination called ITCA 650, an implantable, matchstick-sized pump that is designed to control blood sugar by steadily secreting a specific amount of the diabetes drug exenatide. The company is run by Kurt Graves, a former commercial executive at Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: VRTX).
“Intarcia is a perfect example of what we look for; the management team led by Kurt Graves is exceptional, it has a Phase III asset that is revolutionary and it has the potential to dramatically reshape the treatment of Type II diabetes,” Tananbaum said in a statement. “Universal American is another example of a classic Foresite investment with strong leadership, significant existing value and validation, and a prime position to lead the transition of care in the Medicare population.”
The shrinkage of biotech venture capital has been well documented, but the few firms that have survived the storm have been able to put new funds together of late. VC investors like Third Rock Ventures ($516 million), Atlas Venture ($265 million), and 5AM Ventures ($250 million)—all of which place bets on risky, early-stage biotechs—each raised new funds last year. Foresite doesn’t make the same type of investments, of course, but said its latest $300 million fund was oversubscribed. The firm now has a total of $650 million under management, and typically pours anywhere from $10 million and $100 million into each investment. There are 17 companies currently in its portfolio.
“Since founding Foresite Capital in 2011, we have seen several portfolio companies grow into billion dollar plus businesses,” Tananbaum said in the statement. “Healthcare is an enormous segment of the US economy and we are grateful for the strong interest from our existing and new investors who value our investment strategy.”