As Vida Ventures prepares to deploy its $600 million second fund, the firm believes its larger investments in biotech megarounds can continue to be good bets.
Vida, whose team includes several former members of Kite Pharma Inc.'s management team, has already realized four liquidity events from its $255 million first fund, which closed in November 2017. One, the $372.6 million IPO of Allogene Inc. (NASDAQ:ALLO) in October 2018, followed a $300 million series A round announced just six months prior, and was the second-largest biotech listing on NASDAQ in 2018.
With returns like those in mind, Vida plans to invest the second fund in about 15 companies, the same number as the first fund despite having more than twice as much capital to disburse this time around. That will allow it to invest $35-$40 million per company, with half to two-thirds coming in its initial investment and the balance in future rounds, Vida's Arjun Goyal told BioCentury.
"What excites us is developing potentially transformative therapies, and by that we generally mean curative ones."
The firm set an initial target of $450 million, and closed the fund within four months at its $600 million hard cap. About 30% of the combined money in both funds comes from its own staff, which includes co-founder Arie Belldegrun, who was Kite's chairman and CEO, and TPG Biotech founder Fred Cohen. Gilead Sciences Inc. (NASDAQ:GILD) acquired Kite for $11.9 billion in 2017.
Some VCs have argued that large series A megarounds can constrain exit options, or erode financial discipline (see "Sitting it Out").
But certain types of companies remain well-suited to large, early investments, Goyal said. "Areas of science like gene and cell therapy are capital intensive, and we believe it's best to get manufacturing right from the get-go" (see "Gene Therapy's Make or Buy Choice").
That was the case in April, when Vida co-led with TPG Capital a $225 million series A round for 18-year-old gene therapy company Asklepios BioPharmaceutical Inc. That company, known informally as AskBio, chose to own rather than outsource its manufacturing (see "AskBio Answers Investors' Call").
"Fundamentally, what excites us is developing potentially transformative therapies, and by that we generally mean curative ones," Goyal said.
Vida's Stefan Vitorovic added that larger rounds allow management teams to focus on execution rather than repeatedly raising funds.
Still, the firm will seek to balance those higher-risk investments with deals for differentiated programs that improve on standard-of-care treatments.
For example, another of its exits came from the sale of Peloton Therapeutics Inc. in May to Merck & Co. Inc. (NASDAQ:MRK) for more than $1 billion up front. A few months prior, Vida had joined Peloton's series E syndicate as the company prepared to start Phase III testing of its lead HIF2A inhibitor for kidney cancer (see "Merck Bets on HIF2As with Peloton Takeout").
"We share the same caution as many investors that some series As are too large, and that we may be approaching the top of the market," Goyal said.
Other liquidity events from the first fund include IPOs for gene therapy and gene editing play Homology Inc. (NASDAQ:FIXX) and Sutro Biopharma Inc. (NASDAQ:STRO), which uses cell-free protein synthesis and site-specific conjugation technology to develop immuno-oncology therapies, bispecific antibodies and antibody-drug conjugates (ADCs). Vitorovic said one more company has filed confidentially for a listing.
The firm believes it has room for one more investment from the first fund, adding to 14 thus far. Vida has not yet invested from the second.
Platform plays in Vida's portfolio also include Kronos Bio Inc. and Pionyr Immunotherapeutics Inc. (see "Kronos Plays Pipeline Into $105M").
Goyal named Oyster Point Pharma Inc. as another example of a relatively de-risked, product-focused investment. It is developing two potential first-in-class agonists of nAchR as nasal sprays to treat dry eye disease.
Vida has also hired Helen Kim, formerly partner at The Column Group and Kite’s EVP of business development, as its newest managing director. Kim will operate out of Vida’s Los Angeles office; the firm’s headquarters are in Boston, and it has another office in San Francisco.
LPs in the new fund include family offices, endowments, foundations and strategic investors, Vitorovic said.
Targets: HIF2A (HIF-2α; EPAS1) - Endothelial PAS domain protein 1; nAchR - Nicotinic acetylcholine receptor