In the Midst of Pandemic, Flagship Pioneering Raises $1.1 Billion for Biotech Startups
Although the economy is being disrupted by the COVID-19 pandemic, Cambridge, Massachusetts-based venture capital firm Flagship Pioneering managed to raise $1.1 billion for its seventh “origination fund” to support biotech startups. Flagship began raising the funds in January, and closed on it late last week.
Noubar Afeyan, founder and chief executive officer of Flagship, admits that the pandemic will probably affect what types of companies they invest in. “We will have the capital, we already have the people and we think we have the ideas to generate a new generation of companies, say maybe 25 of them over the next three years, that will be born out of this next period. Now, how does the pandemic affect what will be attractive in this next period, what will be impactful and how companies can succeed in this coming period? That is something that we are highly attentive to.”
Since being founded in 2000, Flagship has created 41 companies, all except one in Massachusetts. Those include Moderna, which has been in the news recently because of its COVID-19 vaccine that began clinical trials early last month. Moderna is also notable for its market value, especially considering it does not have a single commercial product. In December 2018, the company’s initial public offering (IPO) raised about $604 million and had a market value of about $7.5 billion. It’s current market cap is $9.76 billion.
Other Flagship companies include Denali Therapeutics, Cellarity, Sigilon Therapeutics, Kaleido Biosciences, Rubius Therapeutics, Codiak Biosciences and numerous others.
Afeyan points out that the pandemic also highlights the importance of discovering and creating new drugs and vaccines, telling The Boston Globe, “The only time I remember people in the White House talking about anything having to do with biotechnology was when the human genome was sequenced, and that was because it was a milestone. Now we’re talking about the impact” of biotechnology on millions, possibly billions, of people worldwide.
Since it was founded, Flagship has raised $4.4 billion, with more than $1.9 billion used to start and expand companies. Although things may change in light of the pandemic, Afeyan plans to use the $1.1 billion raised in the new fund to launch companies with an emphasis on scientific discovery via artificial intelligence and developing drugs for health problems before they escalate.
“The current COVID-19 crisis deeply underscores the essential need for a comprehensive health security initiative to complement our current health care system,” Afeyan told the Globe.
Health Security was one of three new areas of focus for Flagship, which it announced in the fall of 2019. Others were artificial intelligence and spinning off new ideas from existing company platforms.
The pandemic has reinforced the idea of Health Security, certainly, and Afeyan notes that people won’t think of “vaccines as a money-losing proposition the way they do today, broadly, but rather as an armamentarium that reduces the need for many of the expensive therapies we have.”
As such, he expects healthcare budgets in the future will have higher proportions invested in upstream prevention and detection, which could create a $800 billion market.
“The reason our healthcare system is being overrun is that it is a sickcare system,” Afeyan said. “There’s nothing we can do before people get sick. And so we’re scrambling to come up with a vaccine or using social isolation, but the reality is we don’t even have treatments for the scale of the problem that we have, and the hospitals cannot cope with the simultaneous needs that we have.”
That does suggest that Flagship may be investing in healthcare-related companies, as well as the more traditional biopharma companies.