Wednesday, November 28, 2007

Frazier Joins $600m Club

As we reported two weeks ago, Frazier Healthcare Ventures wrapped up $600 million for its sixth and largest health care fund to date.

The new partnership maintains Frazier’s place near the top of the venture peak. Only Domain Associates manages a larger fund. Essex Woodlands Healthcare Ventures closed on $600 million last year.

Managing Partner Alan Frazier says the strategy behind the new fund won’t be significantly different than the one used to deploy the $475 million from its fifth fund. “The increase of the fund is really being devoted primarily to growth equity,” Frazier says. “I continue to believe that venture capital itself is not something that scales terribly well. “

Frazier says the larger fund won’t prohibit the firm from investing in start-ups. In fact, the majority of new investments made by the firm likely will be in early-stage companies. Frazier suggested most later-stage commitments will go to the firm's own portfolio companies.

“We have as of late put in a little more money into our own companies,” Frazier says. “I think that is reflective of the fact that the IPO market for biotechs requires a little bit further development. It’s a rather unpredictable market so you want to make sure you have enough capital.”

Over the last 14 months, nine of Frazier’s portfolio companies have gone public or been acquired including three biopharmaceutical companies Cadence Pharmaceuticals Inc., Trubion Pharmaceuticals Inc. and Amicus Therapeutics Inc. Frazier says the firm has maintained its position in each company.

Frazier has benefited from the rush to acquire venture-backed biopharmaceutical companies as well. On the acquisition front, two biopharma companies from Frazier’s portfolio—CoTherix Inc. and Cerexa Inc.—were acquired earlier this year. Four portfolio companies that had drawn growth equity investments from Frazier—CHG Healthcare Services Inc., Aspen Education Group, Priority Solutions Inc. and MedPointe Inc.—also were acquired.

Biopharmaceutical investments will account for roughly half of the new fund, Frazier said, while medical device investments will draw anywhere between 20% to 30% of the capital. Growth equity opportunities—established companies with products and revenue—will draw roughly the same amount of capital, he said.

Frazier says the final total matches the hard cap the firm had set when it began raising the fund. The capital principally came from investors in Frazier’s previous funds, but the new partnership brought in some additional LPs.

With the new fund, Frazier will maintain its team of general partners: Frazier, Dr. Nathan R. Every, Patrick Heron, Trevor J. Moody, Nader J. Naini, and Dr. James N. Topper as well as Thomas S. Hodge, the firm's chief operating officer.

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