Deerfield Management is back with its third healthcare venture fund, this time securing more than $600 million to create new drug development outfits, medical technology startups and adjacent computational software companies.
That’s five years after its
$840 million
venture fund was announced in 2020.
Deerfield Healthcare Innovations Fund III will help support the firm’s in-house drug discovery and medical technology teams in New York City at the 12-story Cure campus. Its sprawling ecosystem encompasses 29 research institution collaborations, including a
10-year deal
with the University of Chicago announced earlier this year.
The fund adds to the pool of capital available to the life sciences community, which is sorely in need of bright spots after a multiyear downturn. Other investment firms have disclosed new funds this year, including
Aditum Bio
,
Curie.Bio
and a16z’s new fund
backed by Eli Lilly
.
Deerfield has about 25 drugs in development and is currently invested in about 150 companies, managing partner James Flynn told
Endpoints News
.
Recently departed Sanofi CSO Frank Nestle is CEO of Deerfield Discovery and Development, which is the internal team that works to take experimental drugs and devices to key inflection points within about three or four years before packaging them into new companies, Flynn said.
Overall, Deerfield has about $15 billion in assets under management, Flynn said. That includes three buckets: a public fund, a fund dedicated to private investing with an emphasis on structured finance, and then the Healthcare Innovations unit, which focuses on launching burgeoning companies, the managing partner added.
The firm’s portfolio includes companies like Nuvalent and Neomorph.
Nuvalent started as an idea out of Harvard University to create drugs for treatment-resistant cancers. Deerfield seeded the company and then wholly contributed to a $50 million Series A in 2021. It quickly went public via an IPO later that year and today is a $5.5 billion drug developer, by market capitalization.
However, the industry is currently weathering one of the longest dry spells for biotech initial public offerings in Flynn’s three-plus-decade career in healthcare investing. That’s pressuring earlier-stage companies, especially private startups looking to pull together syndicates.
Neomorph is an example of one of those companies that is trying to drum up investor support but is finding it difficult, even with broad pipelines and multiple industry partnerships. The fledgling company was born out of Deerfield’s work with Dana-Farber and their
collaboration
on the Center for Protein Degradation. The San Diego biotech has signed pharma tie-ups with AbbVie, Biogen and Novo Nordisk in the past 16 months, but it’s “hard to do a syndicated round right now,” Flynn said.
The firm has also invested in gene therapy outfits, like Chicago-area Jaguar Gene Therapy, which recently
entered
the clinic with an investigational medicine for a genetic form of autism. But Deerfield is taking a “very careful” approach to the field right now because it’s been “exceptionally difficult to get gene therapy companies funded,” Flynn said.
“I do think the new FDA is whispering encouraging things relative to products targeting smaller markets, and they seem to be very open to surrogates, even novel surrogates,” Flynn said. “We do have some rare disease companies right now that are getting that kind of feedback about their products.”
Deerfield’s fund will also place an emphasis on software companies in the healthcare field.
The firm will about double its software team this year, from 15 people to more than 30, Flynn said. It includes a computational chemistry group that has helped form companies like Excelsior Sciences, which is a mixture of medical technology, software and a drug discovery platform that has been in development for nearly three years, he said.