Riding a big wave of interest in healthcare due to the covid-19 pandemic, early health technology investor Frazier Life Sciences raised more than $987 million for its fourth fund focused on biopharmaceutical start-ups.
The new fund, named Frazier Life Sciences XI, exceeded its target of $800 million. It will focus on series A and B investments but will have some small crossover to invest in public companies.
Frazier’s third life sciences fund closed on $617 million in January 2020. LPs in that fund included Maryland State Retirement and Pension System, which committed $50 million, and fund of funds Renaissance Venture Capital, according to Venture Capital Journal research.
“In the last five to seven years, our sector has been very strong with a lot of new companies being put together,” Frazier Life Sciences general partner Dan Estes told VCJ. “The pandemic highlighted the value of biotech not just to make money for investors, but also in delivering products such as the Moderna and the BioNTech technology that was a result of 20 to 30 years of investment in those technologies.”
While the sector is currently experiencing a “choppy” period in the public markets, Estes remains confident in the space, noting the progress of companies Frazier works with has been strong.
Venture investment in healthcare has increased year-over-year for at least the past nine years, but it increased dramatically in the past two years. After investing $35.64 billion in healthcare deals in 2019, VCs poured another $60.73 billion into the space in 2020 and $133.5 billion in 2021, PitchBook reports. The median healthcare deal doubled from $3 million in 2019 to $6.1 million last year, while the median post-money valuation of healthcare deals more than doubled from $15 million to $32.7 million during that same period, PitchBook said.
The biotech and pharma sector made up a large chunk of that growth. Deal value in biotech and pharma grew to $37.8 billion in 2021 from $26.8 billion the year prior, according to the PitchBook-National Venture Capital Association Q4 Venture Monitor.
The sector’s strength has attracted LPs to the space, said Estes. The new fund saw 99 percent of previous LPs return.
Estes noted investing in biopharma means venture firms have to be more patient because the sector involves longer-term investing. The fund will be disease agnostic even though Estes pointed out that Frazier Life Sciences tends to invest in more cancer drugs due to its ubiquity in medical research. Frazier Life Sciences does invest in companies working on medicine for rare diseases.
Menlo Park-based Frazier has been investing in healthcare since 1991. It invests in early-stage companies and helps create pharmaceutical businesses. In addition to the new biopharma fund, Frazier last year raised an $830 million fund that invests in late-stage and public pharma companies as part of its long-term exposure to select businesses.
Its portfolio companies include Aspen Neuroscience, which develops cell therapy replacement for Parkinson’s disease, vaccine developer HilleVax and machine learning-based patient care platform Dascena.