CAMBRIDGE, Mass. – MPM Capital closed the largest-ever biotech and health-care-oriented fund, the $600 million MPM BioVentures II in April, after holding an initial close in March on $300 million, said Ansbert Gdicke, a general partner at the firm.
MPM competes with other health-care focused funds, including Versant Ventures, which is investing its $250 million fund, and Domain Associates, which is investing a $235 million vehicle and $5.6 million side fund.
The firm estimates typical portfolio companies in the biotech and health-care space require about $30 million to $40 million in funding to reach the initial public offering stage. With its new fund, MPM is in the position to be the lead investor, providing about half the financing each of its portfolio companies would need to go public, Gdicke said.
“[The size of MPM’s fund] allows us to invest significantly in individual portfolio companies because they don’t have to spend significant time on fundraising,” Gdicke said. “We can provide them [with capital], and they can focus on product development.”
MPM launched the fund in late 1999, with a target of $300 million to $400 million (VCJ, November, page 26). The firm will use the vehicle to back about 40 seed- to mezzanine-stage companies, in addition to a few private investments in public entities, Gdicke said. The firm focuses on health-care companies that produce pharmaceutical and biotechnology products and medical devices, and consumer health and e-health companies.
MPM will invest 60% of the fund in biotech, 30% in medical devices and 10% in e-health companies. Typical deals will range between $5 million and $20 million, but the firm is willing to invest up to $50 million in any one company, Gdicke said. Capital will be split between U.S. and European-based companies, with approximately 80% invested domestically and the remainder abroad, Gdicke said.
MPM’s first vehicle, the $230 million BioVentures I Group of Funds, which closed in 1998, is completely invested in 25 companies. Its portfolio consists of BioMarin Pharmaceutical Inc., which held an initial public offering in July 1999, Caliper Technologies Corp., which went public December 1999, and Sonic Innovations Inc., which went public in May.
Nearly 90% of the firm’s limited partners from the first fund are from Europe and the remaining 10% are from the U.S. While raising its second fund, the partners worked to build a broader investor base in the U.S. and closed the fund with 40% of the capital from domestic investors.
MPM’s investment team consists of five general partners, Luke Evnin, Michael Steinmetz, Kurt Wheeler, Nicholas Galakatos and Gdicke, and Principal Joachim Rothe.
The firm has offices in Munich, Germany, San Francisco and Cambridge, Mass.