MPM closes $550m fourth fund(2)

The US-German investment house’s latest life sciences-focused fund will invest principally in US biotechnology companies.

A mix of returning and new limited partners have committed to MPM Capital’s fourth fund, MPM BioVentures IV, which has closed on $550 million (€417 million).

According to MPM, returning LPs account for more than half of the committed capital, and include GE Healthcare Financial Services, the Kauffman Foundation, Itochu and Scottish Widows Investment Partnership. AlpInvest, Dow Employees’ Pension Plan, Skandia and Union Carbide Employees’ Pension Plan are among the new investors.

Placement agent Atlantic-Pacific Capital marketed the fund.

BioVentures IV made its first investment during the second quarter of last year, and since then has built a portfolio of seven companies, according to a statement. The strong performance by two of these companies, Memory Pharmaceuticals and Peplin, has caused the fund to generate a “double digit” internal rate of return thus far, MPM said.

Approximately 85 percent of the fund’s investments will be biotechnology-related, while 15 percent of its investments will focus on medical technology, tools and diagnostics. It may also participate in private investments in publicly traded entities.

MPM plans to create a portfolio with about 20 companies, in each of which it will invest on average $20 million to $30 million, said founding general partner Luke Evnin.

In the past two years, Evnin told PEO, the firm has bolstered its staff with individuals who have strong operational backgrounds in various clinical and biotechnology fields, which better situates the firm to invest in unpolished companies with promising potential.

“It enables us to analyse companies at those [earlier] stages more completely with deeper insight,” Evnin said. “In addition to that, we’re able to jump into companies that we’re calling ‘diamonds in the rough’, where there really are some operational gaps or management gaps which can be filled with MPM personnel on an interim basis.”

Founding managing partner Ansbert Gadicke noted in a statement that the fund anticipates investing about 80 percent of its assets in the US and 20 percent in Europe and Asia.

“True globalisation, beyond the US and Europe, into ROW markets, for example, China and India, is an emerging theme as the pharmaceutical industry expands its bases for research, clinical development and seeks new markets to penetrate,” he said.

Evnin said he would be surprised if the current fund did not invest, to some extent, in such emerging markets.
 
The 10-year old MPM closed its previous fund, BioVentures III, in December 2002 on $900 million, and developed a portfolio of some 37 companies. It currently manages more that $2.5 billion in capital.