Third Rock Ventures, a prolific backer of biotechnology startups, announced Wednesday the closing of a billion-dollar fund that will be used to launch and build new life sciences companies.
The fund, Third Rock’s sixth, comes amid a significant downturn in the biotech stock market, which has raised questions about the ability of venture firms to secure additional capital as well as returns on their investments. Indeed, the last year or so has seen declines in the two main ways early biotech investors earn returns: initial public offerings and acquisitions.
Yet, the market slump hasn’t stopped some venture firms from bringing in record hauls for further life sciences investing. Atlas Ventures, which backed companies like Actelion and Alnylam Pharmaceuticals, closed its largest-ever biotech fund of $450 million in March. Three months later, the Third Rock team has done the same with a $1.1 billion fund that it expects to support the creation of roughly 10 startups.
“It’s been a challenging environment in the last few months,” said Jeffrey Tong, one of Third Rock’s partners. “But on the company creation side … we just have a very loyal base of [limited partners] who are investing across a long-term time horizon.”
Founded in 2007, Third Rock says that, to date, it’s raised close to $4 billion and invested in 60 companies. The firm has maintained a three-year fundraising cycle, previously securing $770 million in 2019, $616 million in 2016 and $516 million in 2013. With each cycle, the aim has been to support around 10 startups.
Third Rock raised the latest fund between March and May, after officially deciding to pursue it last fall, according to Kevin Gillis, partner and chief operating officer at the firm. At that time, the biotech stock market was only just beginning to dip after having reached new heights when the COVID-19 pandemic put a spotlight on healthcare.
But in the months since, the downturn has become much more drastic. A well-known biotech stock index called the XBI has lost more than half its value since November. And many smaller drug developers, fearful that fresh funding will be harder to come by, are now turning to cost-saving measures.