With capital continuing to pour into the biopharmaceutical industry, Clarus Ventures has closed a $500 million fund that drew greater investor interest than anticipated, the firm said Tuesday.
Clarus, based jointly in Cambridge and South San Francisco, Calif., is the latest venture capital firm to raise more money than it sought from limited partners looking to profit from startups developing a new generation of therapies. The firm, which previously raised two funds totaling $1.2 billion, initially targeted its Clarus Lifesciences III fund at $375 million.
"We were very significantly oversubscribed," said Nicholas Galakatos, the Cambridge-based managing director of Clarus, who said the firm ultimately turned away some money because it wanted to be able to invest selectively.
The closing comes less than three months after another Cambridge venture capital firm, Flagship Ventures, raised a $537 million fund — its largest ever — to finance new life sciences companies, boosting its total assets under management to $1.4 billion.
Boston's Third Rock Ventures, an active bankroller of biopharma startups, closed on a $516 million fund in 2013, bringing its total to $1.3 billion under management.
Venture capital firms don't disclose their investors, but they are typically institutions such as pension funds, endowments, and wealthy individuals.
As it did with its second fund, Clarus plans to commit an average of $15 million to $50 million in each startup it funds from the new capital pool, limiting each of its partners to one investment per year. Clarus also will try to invest the new fund over the next three years, faster than the five-year period in which the firm invested its previous fund.
"We set out to execute on a very disciplined plan as to how many investments we wanted to make and over what period of time," Galakatos said.
Galakatos said limited partners have been drawn to Clarus partly because its strategy combines traditional venture investments into startups that go public or are sold with innovative "risk-sharing" investments into drug programs in the pipelines of pharmaceutical companies.
As an example, he cited an investment in a leukemia medicine developed by Pharmacyclics Inc. Clarus profited from royalties when the drug was approved by regulators and profited again when drug maker AbbVie Inc. agreed to buy Pharmacyclics for $21 billion.
Asked about fears the life sciences market may be overheating, Galakatos said, "I've been doing this for 25 years. These markets come and go. It's very hard to predict when they're going to come and it's very hard to predict when they're going to go."
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