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Third Rock Ventures Raises $770 Million as Biotech Funds Thrive

Third Rock Ventures Raises $770 Million as Biotech Funds Thrive

(Bloomberg) -- Biotechnology venture capital firm Third Rock Ventures has raised the largest fund in its 12-year history, a sign that investor interest in funding early-stage science continues unabated despite volatile public markets.

Third Rock said Thursday that investors poured $770 million into its fifth fund, which will seed a crop of 10 to 12 life-science companies. The firm has previously backed companies such as Agios Pharmaceuticals Inc., Foundation Medicine and Bluebird Bio Inc., which this week won approval in Europe for the first gene therapy to treat the blood disorder beta thalassemia.

Third Rock is one of a handful of venture capital firms that create and invest in companies working on early-stage science, which has traditionally been considered more risky. Its model of building companies around research has proved successful, yielding 10 marketed products and 19 public companies, many with market values of several billion dollars.

The Boston-based firm wouldn’t disclose its returns, but Robert Tepper, one of the founders, said Third Rock expects to invest more money upfront in its portfolio companies and retain a greater share.

“If we can hold on to those companies as the sole investor or the predominant investor, we think we can get much higher up on the value-creation curve,” Tepper said in an interview.

Public data on the website of the California Public Employee Retirement System, the biggest U.S. pension fund, suggest that Third Rock’s first fund, formed in 2007, has returned about 32%. That makes it the fifth-best performing fund among 116 listed in the pension’s California Emerging Ventures program.

Tepper said Third Rock will also invest more in its companies to keep pace with increasing operating costs in the Cambridge, Massachusetts, and San Francisco markets, where it’s most active. A boom in scientific breakthroughs paired with a rush of global capital have turned once-sleepy Cambridge, the home of Harvard University, into one of the hottest commercial real estate markets in the U.S.

In May, the Boston Globe reported that two real estate developers paid the Massachusetts Institute of Technology more than $1 billion for a group of buildings in Kendall Square, the epicenter of the industry. Salaries have also increased across the sector as new companies spun out of Third Rock and its peers compete for the best talent.

Recent Third Rock launches include Thrive Earlier Detection, a company working on cancer screening through a blood draw, and Maze Therapeutics, which researches how genetic modifiers affect disease. Relay Therapeutics, a Third Rock company that was co-founded by hedge fund titan and computational biologist David Elliot Shaw, said in December it has raised a $400 million private financing round, one of the largest ever in biotech.

The newest Third Rock fund was oversubscribed and investors included university endowments, family offices and foundations, including London-based biomedical research charity the Wellcome Trust, which Tepper said has been an investor in all of its funds.

To contact the reporters on this story: Rebecca Spalding in Boston at rspalding@bloomberg.net;Michael McDonald in Boston at mmcdonald10@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Mark Schoifet, Timothy Annett

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