Flagship Pioneering founder and CEO Noubar Afeyan didn’t know a global pandemic was in the cards for 2020 when he and his team laid out three new thematic areas of focus for the company last fall.
One proved eerily prescient: The notion of “health security,” or the development of new products and therapies to treat health concerns before they arise or escalate. On Thursday the Cambridge, MA-based venture capital firm, best known for starting and spinning out biotechs, announced it had added $1.1 billion to its war chest to accelerate discoveries around that theme and two others.
“We have a whole health care system today that, whether you’re diagnosed or whether you’re treated, all is predicated on disease,” Afeyan said, of the origins of the notion of “health security,” in a phone interview. “The question we’ve been asking ourselves for quite a while now, long before this pandemic, is what else can we do in order to improve the delivery of health but also reduce the cost, and my sense is that the only way to do that is to start much earlier with applying the science and tools we have not in treating disease, but in ‘pre-treating’ disease.”
Like law enforcement seeking out developing threats, Afeyan sees opportunity in increasing surveillance and tackling health concerns before they advance to the stage of needing a diagnosis or treatment. Benefits of preventive care aren’t a new notion in health care, of course, but the US regulatory and reimbursement system doesn’t pay for such services like it does for treatment.
“There’s a bit of a fatalism, almost, about how we think about disease: you have to get it in order for the long reach of our health care system to affect you,” he said.
However, in the next five to 10 years, Afeyan says Flagship envisions a “significant shift” in the attention paid to trying to stave off disease in addition to identifying and ameliorating such conditions once symptoms appear.
“The pandemic has brought the world’s attention to this in a pretty acute way, because we’re seeing in front of us the consequence of waiting for sickness to take hold before you can do anything about it, and even then, not being able to do much about it,” he said. “That, we expect, is going to cause people to think more and more about their health security and what modern technology can be directed toward that.”
Afeyan sees ample opportunity for investment between suggestions of behavioral change that don’t fit the venture capital model—think eating well and exercise—and today’s drugs, devices, and diagnostics.
One example? Tests that offer early disease detection.
“Live in front of us, we’re beginning to see the benefit of diagnostic tests that [provide] early detection, so that you can actually catch things very early on,” he said.
Another? Vaccines. Moderna (NASDAQ: MRNA), a Flagship company, started the first US human tests of an experimental COVID-19 vaccine last month.
The other two themes Flagship says it will focus on are what it refers to as pioneering medicines, or the creation of new treatments by single-asset drug development entities, in a place that’s historically pushed out platform companies; and greater use of artificial intelligence and machine learning tools.
“We are finding that machine learning capabilities and AI is enabling us to do science in a completely different way, whether it comes to understanding cell behavior or computationally designing novel proteins or the whole soup-to-nuts drug discovery [and] drug development process, so we foresee in the next wave of companies, over the next three years, a substantial increase in the applicability of AI/machine learning tools for a whole wide variety of applications,” he said.
Flagship’s latest fund, its seventh, brings its total committed capital to $4.4 billion, $1.9 billion of which it has put toward starting and growing new biotechs. Those putting money into the new fund include earlier investors and some new ones.
Afeyan launched Flagship 20 years ago. Last year the 130-person firm deployed $429 million into its existing companies and launched 50 new “explorations,” the firm’s name for the research process that can lead to a new company’s formation.
During the past year Flagship took the wraps off of three new companies—Cellarity, Cygnal Therapeutics, and Ring Therapeutics—and spun out others, including Kintai Therapeutics and Ohana Biosciences. Two companies that started within its labs went public: Kaleido Biosciences (NASDAQ: KLDO) and Axcella Health (NASDAQ: AXLA).
In other life sciences investment news, ARCH Venture Partners announced Thursday that it has raised $1.46 billion for two new funds: ARCH Venture Fund X and ARCH Venture Fund X Overage. Both funds will invest in early-stage biotech startups, and in some cases, both funds will invest in the same companies. But ARCH says Fund X Overage will be used for fewer deals. That fund will also invest in deals that require larger investments.
ARCH’s previous investments include DNA sequencing giant Illumina (NASDAQ: ILMN) and Alynlam Pharmaceuticals (NASDAQ: ALNY), the company that won the first FDA approval for a drug that employs a “gene-silencing” technology called RNA interference. ARCH is also an investor in Vir Biotechnology (NASDAQ: VIR), a San Francisco-based infectious disease biotech that is developing treatments for COVID-19.
According to the National Venture Capital Association (NVCA), US venture funds raised $46.3 billion in last year, down from $58 billion raised in 2018. The number of funds was also down in 2019, but the NVCA says that size of these funds is growing. The median size of a fund in 2019 was $78.5 million.
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