The venture capital market appears to be coming back to life — at least when it comes to the life sciences and biopharma sectors.
This is evident from the activity among hedge fund firms that either have separate VC arms or include privates in their long-short and long-only portfolios. In the first quarter, at least four firms that specialize in the life sciences areas saw a burst of activity that puts them on pace to make more new investments in 2024 than they did last year.
In fact, several firms are set to exceed the total in 2021, the last hot year for VC investing. They were led by RA Capital Advisors, which made 25 new investments in the first quarter — nearly double the 13 it made in the fourth quarter and more than half the 46 it made in 2023.
The sharp increase in investment activity in the life sciences sector is in stark contrast to the technology, internet, and consumer areas, where investment activity has all but dried up, with little sign of any meaningful rebound or resurgence. The most glaring examples: Tiger Global Management and Coatue Management. Only a couple of years ago, they were two of the most active firms in the venture capital market in general, but each completed only a handful of deals in the first quarter.
Tiger Global, which until recently was making more than one investment per day — including on weekends — made just five private investments in the first quarter, according to Crunchbase, after making five in the fourth quarter and 33 in all of 2023. Meanwhile, Tiger Global announced late last year that Scott Shleifer, a co-founder of its private equity business, would transition to the role of senior adviser.
Coatue was similarly inactive, making six investments in the first quarter compared with five in fourth-quarter 2023 and 29 all of last year, per the database.
RA Capital’s surge in activity is not surprising.
Institutional Investor reported last September that the firm was raising money for a new venture capital fund and an offshore equivalent, according to regulatory filings. The firm, headed by founder Peter Kolchinsky and managing partner Rajeev Shah, previously launched three VC funds under the name of Nexus. RA Capital is also involved in new-company creation, including building ventures from scratch within its incubator, as detailed on the firm’s website.
Of RA Capital’s 25 first-quarter investments, 16 were either post-IPO equity or debt private placement deals, says Crunchbase. Most recently, RA Capital led the investment in more than 2.5 million units for CervoMed, a clinical-stage company focused on developing treatments for age-related neurologic disorders, per a press release. Each unit comprises one share of common stock or one prefunded warrant to purchase shares of common stock and has a purchase price of either $19.745 or $19.744. Armistice Capital and Soleus Capital also participated in the deal.
Perceptive Advisors was the second-most-active VC investor among firms best known for their hedge funds, completing at least 15 deals in the first quarter. This compares with three in the fourth quarter and 19 all of last year, according to Crunchbase. In July 2022, II reported that Perceptive was raising money for Perceptive Credit Opportunities Fund IV and an offshore equivalent, its fourth dedicated credit fund. The firm was targeting $1.25 billion, said an investor at the time. The new fund was designed to provide loans to public and private health care companies.
Ten of Perceptive’s 15 investments in the first quarter were post-IPO equity private placement deals, Crunchbase said. The firm was the lead investor in just one of the 15 deals — the $136 million in financing for Impulse Dynamics, a medical device company focused on helping people with heart failure. The investment was co-led by three other firms, including Redmile Group.
The third-most-active firm in the VC market in the first quarter was Cormorant Asset Management. It made eight investments during the period after making the same number in the fourth quarter, with a total of 23 deals in all of 2023.
II previously reported that Cormorant was raising money for its fifth private fund, Cormorant Private Healthcare Fund V. The fund will focus on early-stage biotech and medtech companies, according to an investor. In addition, earlier this year Cormorant launched its second special purpose acquisition company, a rare occurrence these days.