Foresite Capital, fresh off one of the largest-ever biotech launches, has closed on its sixth fund just 13 years into its life as an incubator and investor in life sciences startups.
At $900 million, the fund is one of the industry’s biggest of 2024 and marks at least the 21st new biotech-focused fund disclosed so far this year, according to data compiled by Endpoints News.
“It for sure was a difficult fundraising environment, but we got the job done,” CEO and founder Jim Tananbaum said in an interview with Endpoints News. “There’s not a lot of money out there, which is great for the people that do have money.”
About 40% of the new fund has already been deployed. The raise comes as a potential second wave of IPOs for the year appears at hand, following Rapport Therapeutics’ debut last week and a group of Nasdaq hopefuls, including Foresite-backed Alumis, a late-stage immunology biotech. Foresite has deep experience with initial public offerings: More than 45 of its portfolio companies have gone that route, including CG Oncology, the bladder cancer biotech that kicked off this year’s IPOs with a bang.
Tananbaum said he thinks now is a ripe time for healthcare investing both on the early stage (seed and Series A) and later stage (close to IPO). Foresite’s strategy is split about evenly between those two.
“If you look at great performing funds over the course of the last 30 years, the three best years for later-stage investing in general in venture capital — not just healthcare, but across the board — was ’10, ’11, ’12. In ’23-’24, we’re in a not dissimilar environment to the financial crisis with interest rates,” Tananbaum said.
On the earlier-stage side, the period of 1995 to 1997 was a great time due to the meteoric rise of the internet, the Foresite CEO said. “The analog now is machine learning,” he said, and Foresite has been an early investor in the healthcare side of the field.
“We recognized AI as being an important part of the whole discussion for the next few decades in healthcare. About five years ago, we started Foresite Labs with an eye towards machine learning incubations in healthcare,” he said.
That includes Xaira Therapeutics, a wildly ambitious biotech aiming to shake up the drug R&D process with machine learning. Foresite Labs helped foster the startup alongside ARCH Venture Partners. With the help of additional investors, they’ve committed more than $1 billion to the bet on AI’s role in creating the next batch of medicines.
Foresite’s sixth fund is backing companies in precision medicine, life sciences and healthcare delivery. About 50% to 75% will go toward drug developers and the remainder toward the infrastructure needed to make and deliver new treatments, Tananbaum said.
It’s Foresite’s largest single fund, about $125 million larger than its fifth fund, Tananbaum said. This time, though, there is no so-called opportunities fund alongside it, he said.
“At the end of the day, we like to keep our funds simple. We tried the opportunities fund with the last one and we just didn’t have as much interest in it as we did in the main fund,” he said. “We decided to just do away with it for this one.”
Foresite also invests up to about 20% of its funds in publicly-traded biotechs, Tananbaum said, including in likely takeover targets.
“We love the current pharma interest in the portfolio and we’ll continue to see that as a liquidity path, as well as the public markets,” Tananbaum said.
