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Third Rock Raises $516M, Seeks Disruptive Early Stage Firms

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By Catherine Shaffer
Staff Writer

Third Rock Ventures raised its third fund of $516 million, continuing with its mission to launch and invest in companies developing disruptive technologies in the field of health care. "We look for areas of science and translational medicine that have become ripe for a breakthrough fundamental advance," Third Rock partner Alexis Borisy told BioWorld Today.

The Boston-based venture firm debuted in 2007 with a $386 million inaugural fund. It followed up with a $426 million second fund in 2010. (See BioWorld Today, Sept. 18, 2007, and April 19, 2010.)

With its largest and most ambitious fund to date, Borisy said that the group will continue "steady on with its mission and vision," investing in "great breakthrough companies that are going to make a big difference."

The group's "sweet spot," Borisy said, is in areas of science and translational medicine that it believes are ripe for a breakthrough. Within those areas, it looks for "product engines," or technologies within biological science that have the potential to produce "multiple significant product opportunities."

With its coffers fully loaded, Third Rock will be seeking opportunities similar to its portfolio company Agios Pharmaceuticals Inc., which landed a cancer partnership with Celgene Corp. in 2010 for $130 million up front.

"Agios with that critical mass did a tremendous partnership with Celgene," Borisy said, describing it as a company with "substantial depth" and a large pipeline nearly ready to enter the clinic.

Third Rock's portfolio also includes companies such as bluebird bio, Sage Therapeutics Inc., Zafgen Inc., Kala Pharmaceuticals and Rhythm Pharmaceuticals Inc.

Bluebird bio recently sealed a gene therapy deal with Celgene for an undisclosed up-front payment plus the potential for up to $225 million in option fees and regulatory milestones per product. That collaboration centers on modification of a patient's own T cells to target and destroy cancer cells. (See BioWorld Today, March 22, 2013.)

Zafgen Inc. recently raised $21 million in its Series D financing round to move its obesity candidate beloranib (ZGN-440) ahead following a Phase IIa trial. Kala just completed a Series A for $11.5 million through a consortium including Crown Venture Fund LLC, Lux Capital Management and Polaris Venture Partners in addition to Third Rock Ventures to advance its ophthalmic programs through clinical proof of concept.

Third Rock also invests in medical device companies, among them DC Devices, NinePoint Medical Inc. and Seventh Sense Biosystems.

When asked why Third Rock is investing in the risky biotech sector at all, particularly in early stage companies, Borisy said, "We think this is a new golden age," citing innovation in science and translational medicine that is poised to "create really meaningful breakthrough products," that will create value.

"Most people have stopped investing here. We think it is a fantastic time," Borisy said, with the caveat that investment in the volatile health care sector requires a dedicated, focused approach.

"As well, we just have a passionate commitment to the space," Borisy said. "We're motivated to create product that make a difference in people's lives."

Unlike other investors in the space, Third Rock becomes involved very early in a company's life cycle, often involving itself in company creation and participating as interim leadership during those early business transitions.

Third Rock plans to use its third fund to build "another 15 or 16 breakthrough, transformative companies," Borisy said.

Third Rock has raised more than $1.3 billion, including Third Rock III, since its inception in 2007. It has launched more than 31 companies, many of them developed out of collaborations with industry partners.