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Third Rock raises $1.1 billion for its largest fund yet

The Boston venture capital firm plans to use the money to launch more biotechs, despite the sector’s recent downturn.

Abbie Celniker and Reid Huber, partners at the life sciences venture capital firm Third Rock Ventures.Third Rock Ventures

Third Rock Ventures has raised $1.1 billion in its sixth and largest fund to date. The Boston venture capital firm, which focuses on biotech, has invested in 60 companies across its 15-year history. It will use the fund to help launch new startups and support growing ones.

The firm tends to raise a new fund every three years, each of which helps Third Rock create, launch, and finance about 10 startups, said partner Abbie Celniker. Third Rock has now raised $3.8 billion across six funds, which have grown increasingly large over the past decade: $516 million in 2013, $616 million, and $770 million in 2019.

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Third Rock’s largest funding round yet comes amid turmoil in the biotech markets that has caused many early-stage firms to lose the majority of their value over the past year or two, making it impossible or painful for them to raise money to cover the costs of drug development. Some biotech leaders have warned that it may become harder for private biotech companies to raise money, too.

The large size of Third Rock’s new fund was planned before the current biotech market downturn began last year, Celniker said.

One problem that investors point to is the record number of biotech firms that went public in the past few years without any drugs ready for testing in clinical trials. These early-stage companies are years away from the clinical data that investors analyze to evaluate a company’s worth, and they are even further away from having an actual product and turning a profit.

That has led some biotech experts to speculate that venture capital firms could start shifting their bets from startups doing exploratory research to ones with more mature programs.

Reid Huber, a partner at Third Rock, said the firm wants to launch companies that are closer to starting clinical trials. That may mean keeping the startups in stealth mode for longer, until they are only about a year or two away from testing a drug in humans. “That doesn’t mean we will change the kind of companies we build,” he said.

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Third Rock is still interested in creating startups based on technologies or biological concepts that could eventually lead to multiple drugs. “We don’t want to [create] a single asset company,” Celniker said.

The firm is also interested in extending the amount of private capital its startups get before going public. While most of Third Rock’s funds have traditionally gone toward initial series A financings used to launch a company, it plans to start making more follow-on investments in series B financings or beyond, including in startups that were not created by Third Rock. “That is a little bit of a twist for us,” Celniker said.

The vast majority of Third Rock’s companies are focused on making drugs, although it has occasionally invested in other aspects of health care, including diagnostics. “Our primary interests are oncology, immunology, neuroscience, and rare genetic disease,” Huber said. Third Rock is also closely following advancements in data science and machine learning, he added.

Third Rock said that its investments have led to 18 products so far, including drugs for cancer, cardiovascular disease, depression, and rare genetic diseases. More than a dozen of its companies have been acquired, including the cancer-testing startup Thrive Earlier Detection, which Exact Sciences bought for $2.1 billion in 2020.

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Ryan Cross can be reached at ryan.cross@globe.com. Follow him on Twitter @RLCscienceboss.