May Financial Focus: Boston Area a Hot-Bed for Biopharma Startups

By Marie Daghlian

VC funding for Boston area biotech companies is on fire and its momentum shows no signs of slowing up.

Boston area biotech and health-related companies raised $1.58 billion in 32 deals in the first quarter of 2018. That compares favorably with the $1.59 billion raised in Q4 2017 in 42 deals, and is more than double the $695 million invested in Q1 2017 in 34 deals. The majority of the money went into expansion stage and later stage rounds, according to data from PwC Moneytree/CB Insights, and more money chased fewer deals with the top ten financings accounting for 75 percent of the total raised in the quarter.

Boston Area Biotech and Health-Related Venture Capital Funding by Quarter

The Boston area is known for its strong biomedical institutions, and this was reflected in the types of companies that got funded, most of which focused on biological insights to develop innovative therapies for unmet needs. Whereas Boston’s rival biotech hub in the San Francisco Bay Area saw a larger preponderance of AI-enabled technologies, genomic technologies, and digital health financings.

Top Ten Boston Area Biotech Financings in Q1 2018

Moderna Therapeutics’ $500 million series G round, completed on February 1, raked in one third of the overall private biotech funding in the quarter. New investors included the Abu Dhabi Investment Authority, BB Biotech, Julius Baer, Singapore-based EDBI, and Sequoia Capital China. They joined existing investors Fidelity Management & Research, Viking Global Investors, and Alexandria Venture Investments. The secretive biotech unicorn’s valuation now stands at $7.5 billion and has about $1.4 billion in cash on hand.  Moderna is developing mRNA-based therapies and vaccines and has 10 programs in infectious disease vaccines, immuno-oncology, and cardiovascular disease in early stage studies.

The Boston area biotech hub is known for funding early-stage companies and launching startups, and that was evidenced in the first quarter of 2018 as $335 million was poured into ten deals, including four launches. While this paled compared to the fourth quarter of 2017 when $675 million was invested in 18 deals, it was significantly more than the $204 invested in 13 deals in the first quarter of 2017.

Boston Area Early Stage Biotech and Health-Related Venture Capital Funding by Quarter

Top Early Stage Boston Area Venture Financings in Q1 2018

Partner Therapeutics (PTx) launched at the end of January with $60 million in a series A financing from Perceptive Advisors, Adams St. Partners, and MidCap Financial. The company’s founders—Robert Mulroy and Debasish Roychowdhury–are biotech veterans who have deep expertise in the oncology space, having overseen the approval and launch of a dozen products and the development of more than 50 novel cancer programs. Their strategy is to develop and commercialize approved and late-stage therapies.

Following that strategy, PTx acquired global rights to develop, manufacture, and commercialize Leukine (sargramostim) from Sanofi. Leukine, the only FDA-approved recombinant human granulocyte-macrophage colony stimulating factor (GM-CSF), is an immuno-stimulant that promotes the growth and activation of a broad range of white blood cells important in activating the body’s immune response to fight infections. Besides treating life threatening infections, it is the only immune modulator approved by the FDA for the treatment of acute myelogenous leukemia (AML) in older patients and for use in both allogeneic and autologous bone marrow transplantation. The deal also included a dedicated manufacturing facility in Washington State. PTx plans to develop Leukine for new indications.

In mid-March, Flagship Pioneering launched Foghorn Therapeutics with $50 million in committed capital to discover and develop drugs based on novel insights into the chromatin regulatory system, which directs gene expression in cells. Cigall Kadoch, of the Dana-Farber Cancer Institute, Harvard Medical School, and the Broad Institute; Douglas Cole, of Flagship Pioneering; and Gerald Crabtree, of the Howard Hughes Medical Institute and Stanford University founded Foghorn to develop treatments for cancer and other serious diseases. Adrian Gottschalk, formerly senior vice president and neurodegeneration therapeutic area head at Biogen, is the company’s CEO.

The biotech spent its first two years in Flagship’s VentureLabs where it developed a product platform and discovery engine that it calls “Gene Traffic Control.” Oncology is the biotech’s initial focus and it is also exploring applications in neurology and immunology.

Also in March, Third Rock Ventures launched Rheos Medicines with $60 million in funding to discover and develop precision medicines for immune-mediated diseases. Based on new understandings of immune cell physiology, Rheos’s product engine takes a novel approach to immune-mediated diseases by encompassing the full range of immune cells and their functions, and how they are regulated by cellular metabolism. In addition, by identifying new therapeutic targets and related biomarkers, the Rheos engine will address patient heterogeneity inherent to many immune-mediated diseases. Abbie Celniker is the interim CEO and Laurence Turka is the chief scientific officer.