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Fund & Investor Interest: Flagship raises $1.1B to create biotechs for post-pandemic world
Flagship Pioneering has raised a $1.1 billion fund to create another batch of biotechs. The timing of the fund has Flagship peering into an uncertain future, trying to discern what opportunities will be attractive and impactful in the world that emerges from the COVID-19 pandemic.
When Flagship began raising its seventh Origination Fund in January, the novel coronavirus outbreak was low on the agenda in the West. By the time Flagship closed the fund late last week, the VC shop, like many employers, had asked office staff to work from home as the fast-rising rate of infections drove companies and governments around the world to take defensive actions.
Having led Flagship through 9/11, the Great Recession and many other volatile periods for biotech, Noubar Afeyan expects the pandemic to affect the kinds of things his VC shop focuses on, setting the stage for the seventh fund to spawn businesses designed to thrive in a changed world.
“We will have the capital, we already have the people and we think we have the ideas to generate a new generation of companies, say maybe 25 of them over the next three years, that will be born out of this next period. Now, how does the pandemic affect what will be attractive in this next period, what will be impactful and how companies can succeed in this coming period? That is something that we are highly attentive to,” Afeyan, the founder and CEO of Flagship, said.
With the world still in a state of flux, the answers to the questions posed by Afeyan are still coming into focus. But Afeyan is already convinced that some of the lasting effects of the pandemic will be in line with thinking Flagship fleshed out well before COVID-19.
Last fall, Flagship revealed Health Security as one of three new focus areas, the others being artificial intelligence and the development of new ideas from its existing companies’ platforms. Flagship made Health Security a priority after identifying an opportunity to use molecular technologies and other tools to delay and prevent disease, rather than just wait until people get sick and then treat them.
In the world envisaged by Afeyan, people won’t think of “vaccines as a money-losing proposition the way they do today, broadly, but rather as an armamentarium that reduces the need for many of the expensive therapies we have.” In that world, a far bigger slice of the healthcare budget will be spent on upstream prevention and detection, creating an $800 billion market.
Flagship is actively building companies in the Health Security area that it thinks have the technology to create the world foreseen by Afeyan. However, the shift from treatment to prevention will need more than technology; it will take a significant change in how healthcare is practiced, regulated and reimbursed. The case for those changes may have been hard to make. Then, as Afeyan sees things, COVID-19 exposed exactly why those changes are needed.
“The reason our healthcare system is being overrun is that it is a sickcare system. There’s nothing we can do before people get sick. And so we’re scrambling to come up with a vaccine or using social isolation, but the reality is we don’t even have treatments for the scale of the problem that we have, and the hospitals cannot cope with the simultaneous needs that we have,” Afeyan said.
Afeyan compared the current healthcare system to a military that fails to try to detect and mitigate threats, choosing instead to wait until enemy combatants are attacking and then bombing them. In the more proactive system Flagship wants to help create, SARS-CoV-2 would have been detected, tracked and neutralized long before the outbreak spiraled out of control. In that way, the pandemic is a global analog for the sort of detection and prevention Afeyan wants to see happen in individuals.
Flagship has secured almost twice as much money for its seventh fund as it raised last time around, giving it the financial firepower to continue creating developers of novel therapeutics while going deeper into Health Security and its two other priority areas. A combination of existing limited partners and “a select group” of new backers powered Flagship to the $1.1 billion close. The startup creation fund will work alongside $1.1 billion Flagship raised last year to support its more established companies.