For Some Hedge Funds, Venture Capital Is Back

Several life sciences and biopharma hedge funds are on pace to do more deals than they did in each of the three previous years.

(Paul Yeung/Bloomberg)

Credit: Paul Yeung/Bloomberg

The venture capital market has turned around, at least for several hedge fund firms that specialize in life sciences and biopharma investments.

At the same time, many firms completed fewer deals in the second quarter than they did in the first quarter.

Yet, at this year’s half-way mark, several firms remain on pace to exceed the total number of deals completed in each of the three previous years, which include the peak years of VC activity.

Almost all of these firms have separate VC funds in addition to hedge funds, which mostly invest in public companies.

Many of this year’s deals are private placements of companies that are already public.

RA Capital Management remains by far the most active biopharma hedge fund firm in the VC market.

It made 21 new investments in the second quarter after making 25 the prior three-month period, according to The 46 deals in the first half equals the total number the firm completed last year and exceeds the total in 2022. It is also on pace to exceed the 82 private investments made in 2021, according to the scorekeeper.

Most recently, the firm participated in the $90 million Series C financing of Bright Peak Therapeutics, which is developing what it calls next-generation, multifunctional immunotherapies. This was the second financing round in which RA Capital participated. The round was led by Johnson & Johnson Innovation.

RA Capital’s most recent lead investment took place in late May when the firm and Two Sigma Ventures co-led an oversubscribed $33 million Series B financing round of Gameto, a biotechnology company seeking to advance treatment options in women’s health.

Perceptive Advisors made 16 private investments in the second quarter and 31 in the first half of the year. This compares with 19 for all of 2023 and 21 in 2022. It is also on pace to exceed the 50 it made in 2021.

About two weeks ago Marea Therapeutics launched with $190 million in combined Series A and B financings. The Series B round was co-led by Perceptive Xontogeny Venture Fund and included a number of other investors, including Surveyor Capital, a Citadel company, according to a press release.

“Marea aims to transform the way cardiometabolic diseases are treated by leveraging large-scale human genetics and expertise in adipose function and biology to pursue genetically validated targets focusing on central - but unaddressed - drivers of cardiometabolic disease risk,” said Josh Lehrer, chief executive officer, in a statement.

Other biopharma funds made fewer investments in the second quarter, but are on pace to exceed prior years’ pace.

For example, Cormorant Asset Management made five private investments in the second quarter and 13 in the first half. It completed 23 and 20 deals in 2023 and 2022, respectively.

RTW Investments made five VC investments in the second quarter and 14 in the first half. It completed 10 deals in 2023, 13 in 2022 and 27 in 2021.

Meanwhile, several hedge fund firms recently participated in a private investment in public equity (PIPE) financing of Bicycle Therapeutics, a drug company developing therapeutics based on its bicyclic peptide technology. The hedge fund investors included Deep Track Capital, EcoR1 Capital, Perceptive Advisors, and RA Capital Management. Each participant paid $21.42 per share. The stock closed Monday at $20.29 per share.

A slew of firms also recently participated in the $110 million PIPE financing of CARGO Therapeutics, a clinical-stage biotech company aiming to advance next generation, potentially curative cell therapies for cancer patients.

Hedge fund participants in that deal included EcoR1 Capital, Woodline Partners, and funds and accounts advised by Perceptive and RTW Investments. They paid $17 per share. The stock closed Monday at $16.