Frazier boosts next pure-play biotech fund to $419M, readies new bets for a practiced strategy

Jamie Topper Frazier Healthcare Partners

The money in biotech keeps getting bigger.

After Frazier Healthcare Partners closed its first dedicated biotech fund with $262 million almost exactly two years ago, managing general partner Jamie Topper and his crew of VC specialists went after some 16 to 18 new biotech investments, hewing to the startup rounds that are their sweet spot — and which accounts for the bulk of the cash.

Now, they’re getting started on their next pure-play fund with $419 million, giving them substantially more money to bet on about the same number of biotechs as before.

“It’s our position that the smaller funds tend to do better and I think historically that is true,” Topper tells me. He thinks $400 million or so will do nicely at staying manageable. But they also want to stack up well against the competition, and these days that calls for taking a bigger share of the equity in the portfolio companies they’re backing.

In Topper’s view there are three key trends that drive their investment strategy.

1. Regulatory issues are big, and while biotech remains one of the most heavily regulated industries in the world, the environment now — especially for oncology and antibiotics — is “in one of the most favorable spots it’s ever been in.”
2. Pharma has just as big an appetite as ever for truly novel meds, so the focus remains on those companies looking to break new ground and get into the hands of the commercial groups that need them the most.
3. Drug pricing pressures continue to grow, which is just another reason to stick with the game changers out there, where payers are going to be less likely to experience sticker shock.

It’s no surprise, then, to find Frazier partners leaning toward new drugs for cancer and rare diseases, which figure prominently at the front of the food chain in biotech. They’re active in GI diseases and the liver, looking to score on the bets being made on new NASH drugs. And when they can find the right experienced players in CNS — as they did with the crew at Naurex spin-out Aptinyx — they’ll tread in that high-risk arena as well.

Dan Estes

For Frazier, a good relationship can be the key to a happy investment. And they’re able to reach out from offices in the Bay Area, Boston and San Diego to make that happen with some of the most experienced players in drug development.

“Half of what we do as a healthcare VC is talent recruitment,” he says. “Talent is key.”

It’s also key in the VC. Dan Estes has been promoted to full partner at Frazier to shoulder a bigger part of the load this time, and Topper says he’ll make a couple of new hires to broaden the dedicated biotech group a little more.

After raising more than $3 billion in venture money over the years, Frazier’s VCs have the luxury of working with many of the repeat entrepreneurs in the pack who have already made money for the group. And they’re not too concerned about location — they’ve gone to the Midwest and Europe when the company is right.

If it all lines up, Frazier will come to you.