Frazier closes 12th fund in 30 years, with $617M to bet on cell/gene therapy, Big Pharma spinoffs and more
The team at Frazier Healthcare did a number of deals that exemplified its wide-ranging strategy in 2019: Tachi Yamada worked with gene therapy pioneer Jim Wilson to launch Passage Bio; Mike Gallatin sold Mavupharma and its STING-targeted small molecule to AbbVie; and Bhaskar Chaudhuri flipped Arcutis to an IPO just months after introducing it to the world via a crossover round close to $100 million. They’re now kicking off 2020 with a new, bigger fund that will give them firepower to do more.
At $617 million, Fund X is “fairly dramatically” bigger than their last fund, said managing partner Patrick Heron.
“We’re increasingly going after new therapeutic modalities like gene therapy, cell therapy, neoantigens and because those need significant manufacturing and CMC investment or investing more dollars per company,” he told Endpoints News.
He sees Frazier pouring around $40 million into each company — supporting them through every stage, whether it’s helped with the launch or joined through a later syndicate — though that could vary if, say, they sell a company right after Series A. By that estimate, the new fund could touch anywhere from 15 to 25 biotechs.
About a third of the portfolio is reserved for homegrown startups, another 15% to 25% for public securities, and the rest is in-between.
Heron is one of three leading the fund; he’s joined by managing partner James Topper and Dan Estes, who’s just been promoted to general partner. Also involved will be Jamie Brush, newly made partner after spearheading investments in public securities for the past three years.
Frazier is happy to both create and syndicate with its “venture brethren,” Heron added, citing OrbiMed as a friend.
The congregation has grown exponentially since Frazier first put its feet down three decades ago.
“When I started at Frazier, there were probably 10 to 15 life sciences focused VC funds,” said Heron, who’s just celebrated his 20th year at the firm, “and now there’s probably 100.”
It gives Frazier a lengthy track record to boast — which can be particularly helpful when they pitch bigger players on biotech spinoffs such as Phathom Pharmaceuticals, now developing one of Takeda’s GI drugs.
“Pharma companies have become more receptive to that when they see substantial value accrual to them,” Heron said. “And it’s public now: Takeda owns probably about $200 million worth of stock in Phathom, and so they are basically deriving a lot of economic value from the partnership, and what they’re also focused on is the quality of teams we can put around their asset such that the program will reach the clinic and benefit patients.”
Two former Celgene execs from the global inflammation and immunology franchise have been recruited to the C-suite at Phathom, including CEO Terrie Curran and CCO Martin Gilligan.
Despite the lack of big check M&A at the beginning of the year and an election looming in November, Heron remains optimistic as their deal flow has been in line with the expectation of 2 to 3 sales per year. And the same goes for IPO.
“I think you will see a lot of companies sort of backing up the truck and loading up with as much capital as they can, with probably less robust activity in the second half of the year,” he said.