their crossover rounds totaled $2.2 billion. That’s an average of $90 million. As noted earlier, that includes Moderna’s $450 million financing, which dwarfs everything else on the list, although Editas Medicine, Adaptive Biotechnologies, and Intarcia all have raised nine-digit sums since the start of 2014.
The median is significantly smaller, $65 million. But by either measure, there are big sums of cash going into private biotechs and often early in the company life span. (Those big rounds are often for Series B.)
One crossover investor with a lot of money deployed right now on the private side of the table says those big totals are often meant as protection against a downturn. “We like larger rounds and deep pockets around the table with us,” says Jim Tananbaum, CEO of Foresite Capital in San Francisco, a four-year-old firm that just raised a $450 million fund, its third. “Windows close at unpredictable times, and it can be a long, cold winter.”
But with what Tananbaum calls “adequate capitalization” of a company—a lot of money in and willingness to put in more—“the music can stop and you won’t get caught without a chair.”
He says that’s a big difference between now and the previous decade: More investors realize that private biotechs can’t be drip-fed and always left scrambling for the next cash infusion.
Some crossover investors are under pressure or even mandated not to hold assets long-term that they can’t cash out. Or they can be waylaid by redemptions—backers who ask for their money back. But Tananbaum, whose fund isn’t at risk of redemptions, says there are enough “steady hands” among his crossover peers to build syndicates with the fuel to circle for a while.
Foresite has at least half a dozen biotechs in its portfolio that might be IPO candidates soon, and it led the crossover round on three of them: 10X Genomics, WaVe Life Sciences, and another that hasn’t been disclosed.
In a downturn, not all biotechs looking for liquidity will find it. But if an IPO squeeze arrives, acquirers who have been paying some outrageous premiums for biotechs the past few years should still have plenty of cash and be on the prowl for new products.
Without the option of going public, a later stage biotech might not have the same negotiating leverage, but those with products that address unmet needs should gin up fierce competition. “Strategics all have good cash flows to support their M&A and partnering, which are options available to innovative companies if they do not like the terms on offer from the public markets,” says Kolchinsky.
There’s another factor that in a downturn could give a leg up to biotechs with crossover backers. Many of those backers are
