Perceptive Advisors, an investment firm with a long track record of life science investing across all points of development, is now stepping up to pump money into companies at the earliest stages with a new $210 million venture capital fund.
The Perceptive Xontogeny Venture Fund (PXV) is led by Chris Garabedian (pictured above, center), a veteran biotech executive whose experience includes stops at Gilead Sciences (NASDAQ: [[ticker:GILD]]), Celgene, and Sarepta Therapeutics (NASDAQ: [[ticker:SRPT]]). He’s currently the chairman and CEO of Xontogeny, a Boston-based life sciences accelerator.
PXV will favor investments in companies emerging from Xontogeny, which already has a relationship with Perceptive. When the accelerator launched in 2017 with Garabedian at the helm, New York-based Perceptive was its only investor. The idea behind Xontogeny is to find promising technologies, some that do not yet have a company formed around them, and build those startups. Xontogeny provides seed financing and other support to these new businesses, some of which are led by scientific founders who are first-time CEOs. By helping these companies advance technology through preclinical and early clinical development, the goal is to reduce the investment risk associated with a technology so that it can secure additional financing.
Much of Perceptive’s cash is in life science companies that are further along in development. Its financings include crossover investments, the kind of deals that bring together financial backers for companies preparing to go public. Garabedian says the PXV fund’s roots were planted in the early discussions that brought Perceptive on board as a Xontogeny investor. The talks led to plans for a venture fund, which Perceptive asked Garabedian to lead.
Adam Stone (pictured above, left), Perceptive’s chief investment officer, says there’s a funding gap for early-stage companies. The largest venture capital funds are getting larger, and they’re putting their money behind ambitious ideas that require a lot of money. That leads to Series A rounds totaling $50 million or more. Stone says he’s not criticizing those technologies and the large investments that support them, but he adds that other technologies are getting overlooked.
“There is a need for fundamentally focused investors to invest in projects like the ones we’re looking at that don’t need $50 to $60 million, and don’t need 50 to 60 people,” he says.
Investors in PXV include endowments, foundations, family offices, and institutional investors. PXV will invest in eight to 10 companies. While the fund will favor startups that come out of Xontogeny, Garabedian says the fund will consider investments in other companies. The new fund aims to be the sole or lead investor in Series A rounds in the range of $10 million to $20 million. PXV will also to invest in Series B financings for these new companies.
Garabedian says the fund will invest primarily in startups focused on developing new drugs, though it could also put some of that money into new kinds of medical technologies and diagnostics tools. Like many funds, PXV is evaluating potential cancer investments, though Garabedian says the abundance of companies in that space means that the bar is set high for those investments. Other therapeutic areas where the fund could invest include immune disorders and inflammation, central nervous system disorders, rare diseases, cardio metabolic diseases, and eye diseases.
“The guiding principle is to be product and technology focused, and betting on what we think will work in the clinic,” he says.
Garabeidan points to Xontogeny portfolio company Landos Biopharma as an example of the kind of company that could secure investment from PXV. The Blacksburg, VA, startup’s lead drug is an experimental treatment for inflammatory bowel disease. In a space that’s dominated by biologic drugs, the Landos compound is a small molecule that could potentially offer an equivalent benefit with fewer side effects. Last August, nearly two years since its $10 million Series A round (in which Perceptive was the sole investor), Landos closed $60 million in Series B funding to advance its lead drug to Phase 2 testing.
With the exception of Landos, Xontogeny has kept quiet about its portfolio and Garabedian won’t disclose how many startups are in the accelerator. At this stage, he says it’s too early to say which technologies will work and which ones could land investment from PXV. But he says one of the technologies incubating at Xontogeny that could go on to receive additional financing is a company developing a potential fibrosis treatment.
Xontogeny is also now revealing some details about another portfolio company, Quellis Biosciences. The rare disease drug developer is coming out of stealth Tuesday with a $17 million Series A investment led by PXV. Quellis was founded two years ago and received seed financing from Xontogeny.
Though Quellis is announcing its new capital Tuesday, it’s still keeping mum about its work. The Boston company says it is developing antibody drugs that target an undisclosed but validated mechanism of action addressing a rare disease that the company also declines to disclose. But Quellis does say that it is developing its compounds using technology licensed from antibody drug developer Xencor (NASDAQ: [[ticker:XNCOR]]).
