Atlas Venture Raises $400M Fund to Seed Another New Set of Biotechs

Xconomy Boston — 

Another venture capital firm that backs biotechs has raised a multimillion-dollar fund—money the firm, Cambridge, MA-based Atlas Venture, says it will use to continue creating and funding companies that are creating new medicines.

Atlas revealed Friday that it closed its 12th fund after raising $400 million, a total that pushes the amount the company has raised in recent years to $1 billion. In addition to Fund XXII and its previous fund, for which it raised $350 million in 2017, Atlas last year put together what it calls Opportunity Fund I, a $250 million pot of money intended as growth capital for its most mature portfolio companies.

Atlas isn’t alone in locking down piles of cash to put back into the biotech ecosystem, even amid the economic fallout from the coronavirus pandemic. Life science VC firms that have closed new funds in recent months include Flagship Pioneering, Arch Venture Partners, and venBio Partners.

Atlas concurrently promoted Michael Gladstone, who joined Atlas in 2012, to partner; he becomes one of six investing partners in Fund XII. Atlas portfolio companies in which Gladstone has played a role include IFM Therapeutics, Delinia, Akero Therapeutics, and Avrobio. IFM was acquired by Bristol Myers Squibb (NYSE: BMY), and its spinout, IFM Tre, by Novartis (NYSE: NVS); Delinia, by Celgene, which is now part of Bristol Myers.

Gladstone says the firm doesn’t intend to make any major changes in how it invests these funds compared with how it deployed money it raised previously.

“We expect to do, frankly, more of the same: Building groundbreaking biotech companies, 100 percent focused on therapeutics for major unmet medical needs,” he said in an interview. “A big part of our model is, and will continue to be, focusing on company creation, including co-founding, seeding, and incubating new companies—in many cases directly in our offices.”

Gladstone said the COVID-19 pandemic prompted the firm to move its discussions with limited partners online, but that even in an uncertain economy, investors were ready to back biotech.

“I think, if anything, COVID-19 helped underline the focus and necessity of scientific innovation and turning scientific innovation in a very urgent and focused way against an unmet medical need,” he said.

The Atlas team, which operates an incubator in Kendall Square, has been working remotely since early March. However, some of its early-stage portfolio companies that partner with contract research collaborators and run distributed companies have been able to continue operations, Gladstone said.

“In some ways the inherent flexibility those companies have built into their operating models has made them best able to adapt to the virtual working system we’ve all been required to adopt in this period of time,” he said.

With the new fund Atlas intends to continue backing potential new therapies without preference for particular clinical disease areas, drug modalities, or corporate structures, Gladstone said.

One aspect of drug development in which Gladstone says he has witnessed a sea change during his investing career has been researchers understanding of the genetic underpinnings of many prevalent diseases.

Thanks to those learnings, “I think we have a much better way to essentially stratify and enrich patients in an otherwise fairly heterogeneous patient population so we can really focus the right therapy and the right intervention for the right subset of patients to be able to streamline product development and really personalize treatment,” he said.

Broadly, Atlas prefers to chase scientific developments that it considers “on the cusp of translation” rather than try and divine the next hot area, he added.

“It’s really hard to necessarily predict more than 10 steps ahead where the next innovation will be because obsolescence or improvement in these different areas is happening so quickly,” he said.

The firm typically invests $15 million to $30 million over a startup’s “life cycle”; once a portfolio company is ready to raise a Series B or later-stage round, it becomes eligible for investment from the Opportunity Fund.

Image: iStock/RomoloTavani