When Adam Koppel looped back to Bain Capital last summer, where he had already wired himself into the healthcare finance field, he immediately paired back up with longtime partner-in-arms, Jeff Schwartz, and began to create a new life sciences fund with enough capital on hand to make a deep impact on the biotechs they would choose to back.
Today marks the official end of the fundraising period and the beginning of a 3- to 5-year stint spending all of their time investing the $720 million the two have raised; $600 million of that from external sources with the other $120 million from Bain partners.
Originally they had eyed garnering something more than $500 million in external cash. By the time they hit $600 million and Bain kicked in the rest, it seemed like they had the right amount to do what they wanted to do.
And what do they want to do?
Koppel, Schwartz and their growing team — which includes partner Jeff Green, who only recently joined Bain after a stint at Citadel — have four basic types of companies in which they plan to invest.
1. Inflection capital, not blue sky venture startup capital, they say, focused on companies that have de-risked themselves to some significant extent with late animal or early human data. These would be biotechs looking to gain alternative capital that they may otherwise look to the public markets or a strategic transaction for.
2. Growth capital for companies that are at or near achieving revenue, looking to really accelerate their business at just the right time.
3. Fallen angels, generally public companies looking to access capital but damaged enough that they don’t want to do it through another stock offering at terrible terms.
4. Finally, a few large equity transactions, but only alongside their Bain colleagues contributing a portion of the funds. “You can think larger, mature companies with cash-flow generative properties,” says Schwartz, “that need optimization, anywhere across the life science spectrum.”
Koppel and Schwartz plan to be selective, working 5 to 6 or 7 deals a year in total in a big world of biotechs, device companies and diagnostics groups. But you can rule out services and IT.
Their group has already made a couple of investments that help illustrate its focus. Bain and RA Capital — which shares some, though not all, of the same goals — led a crossover round for Solid Biosciences, founded by Duchenne dad and former JP Morgan investment banker Ilan Ganot. And the Bain guys also backed Dicerna Pharmaceuticals $DRNA with a $70 million preferred stock deal, also alongside RA Capital and some others.
Yes, 2012 to 2016 saw a lot of new biotech IPOs, comments Koppel, “but a number of these companies are going to need to raise capital again, and they’re trading at cash or below.” That’s where they plan to step in.
It’s not a rush deal. Koppel, Schwartz and the group have been steadily building a pipeline of deals. Their role: “Patient, longterm-thinking capital to a small number of management teams we really believe in and want to work with for a few years.”
Working at Biogen was a “terrific experience,” says Koppel, who wrapped a 2-year stint as chief strategy officer. It gave him an inside view not only to the people and companies that dominate this business, but an inside look at the thinking that goes on at the top 15 biopharma companies and how they go about doing their deals, including the way they work with small companies. That’s the kind of insight he can share with the companies they choose to invest in.
It’s a way of being wired in with perspective about all sides of the business. And he plans to build that into a successful strategy for Bain and all his partners.
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