How Third Rock Ventures Became the Andreessen Horowitz of Life Sciences

If you don’t invest or work in health care, it’s doubtful you’ve heard of Third Rock Ventures, based in Cambridge, Mass. But it may be one of the hottest young firms on the planet right now.

How hot? It just closed on $426 million for its second life sciences fund, up from the $378 million it raised for its debut fund three years ago. And there were so many LPs that wanted to get into the second fund that Third Rock’s offering was “oversubscribed by a couple of hundred million dollars,” says firm co-founder and Partner Kevin Starr (pictured).

That Starr is the former COO of Millennium Pharmaceuticals and started Third Rock with several of his Millennium colleagues, including former CEO Mark Levin, is part of the firm’s appeal.

Yet the secret behind Third Rock’s success really centers on the story of Alnara Pharmaceuticals.

In July, just two years after Alnara’s founding, the Cambridge-based developer of a drug for cystic fibrosis was acquired by drug giant Eli Lilly for $180 million in cash, with the possibility of getting another $200 million if it meets certain milestones.

Alnara had raised $55 million over two rounds from Third Rock, Bessemer Venture Partners, Frazier Healthcare Ventures, Longwood Founders Fund and MP Capital, providing them a quick, handsome return. Yet it’s the company’s genesis that has made Third Rock so compelling to investors: It was incubated by Third Rock.

About 75 percent of the time, Third Rock brainstorms new ideas with key academics and brings them to life from scratch. Other companies that have been incubated by the firm include Agios Pharmaceuticals, which is working to starve cancer cells of nutrients; Zafgen, whose drugs work to battle obesity; and Constellation Pharmaceuticals, whose ambitious mission is to find a way to turn genes on and off.

In addition to supporting such companies with its own lab facilities and administrative help, Third Rock’s partners and venture partners work for the startups on a nearly full-time basis as chief executives, chief technology officers and chief scientists. “We probably put in 8,000 to 10,000 man hours into a company over a year-and-a-half,” says Starr.

PE Week subscribers can read the longer version of this story here: LPs Love Third Rock’s Hands-On Approach