Ebb & Flow

Investors who have followed Mark Levin's lead have rarely been disappointed. Thus it's no surprise that his new venture fund, Third Rock Ventures, raised $378 million in only 10 weeks on the road.

Founded by former executives from Millennium (MLNM), Third Rock's selling point is hands-on company management, founding partner Kevin Starr told Ebb & Flow. What resonated with investors is "how we think about building great companies from an operating perspective."

Levin goes way back in the industry, starting at Eli Lilly (LLY) and Genentech (DNA), after which he became co-founder of Mayfield Life Sciences Fund, one of the industry's early VCs. From there, he founded MLNM, where he served as CEO for 12 years.

Starr was formerly COO and CFO at MLNM and Robert Tepper was head of R&D and CSO. Other partners are Lou Tartaglia, former VP of metabolic diseases at MLNM; Nick Leschly, previously the Velcade project leader; and Anne-Mari Paster, formerly CFO at MPM Capital.

Third Rock's partners plan to serve as executives in portfolio companies until they can find more permanent teams. "We're going to focus disproportionately on personal involvement and with active recruiting, really making sure we have the right team in place over the first year and a half," Starr said.

To maintain that hands-on approach, the firm plans to invest in only two or three companies a year. Thus the fund will finance 12-15 companies, exclusively in therapeutics and medical devices.

Starr estimates three-quarters of the investments will be in "product engine" companies with a platform capable of delivering innovative candidates in multiple indications. The remainder will be split evenly between companies with individual therapeutic products and device plays, he said. The firm is also intrigued by the convergence of drugs with devices as delivery mechanisms.

Starr said that Third Rock considers metabolic syndrome and obesity as well as oncology, inflammation and CNS disorders to be particularly attractive opportunities.

Although not ruling out IPOs, Starr observed that "70% of the exits right now are trending toward M&A rather than an IPO." Thus, he expects Third Rock will be "working very closely with pharma on alliances, and that may lead to acquisitions."

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