Foresite Capital raises $969 million fund to invest in healthcare startups across all stages of growth

Health and life science specialist investment firm Foresite Capital has raised a new fund, its fifth to date, totally $969 million in commitments from LPs. This is the firm’s largest fund to date, and was oversubscribed relative to its original target according to fund CEO and founder Dr. Jim Tananbaum, who told me that while the fundraising process started out slow in the early months of the pandemic, it gained steam quickly starting around last fall and ultimately exceeded expectations.

This latest fund actually makes up two separate investment vehicles, Foresite Capital Fund V, and Foresite Capital Opportunity Fund V, but Tananbaum says that the money will be used to fuel investments in line with its existing approach, which includes companies ranging from early- to late-stage, and everything in between. Foresite’s approach is designed to help it be uniquely positioned to shepherd companies from founding (they also have a company-building incubator) all the way to public market exit – and even beyond. Tananbaum said that they’re also very interested in coming in later to startups they have have missed out on at earlier stages of their growth, however.

Image Credits: Foresite Capital

“We can also come into a later situation that’s competitive with a number of hedge funds, and bring something unique to the table, because we have all these value added resources that we used to start companies,” Tananbaum said. “So we have a competitive advantage for later stage deals, and we have a competitive advantage for early stage deals, by virtue of being able to function at a high level in the capital markets.”

Foresite’s other advantage, according to Tananbaum, is that it has long focused on the intersection of traditional tech business mechanics and biotech. That approach has especially paid off in recent years, he says, since the gap between the two continues to narrow.

“We’ve just had this enormous believe that technology, and tools and data science, machine learning, biotechnology, biology, and genetics – they are going to come together,” he told me. “There hasn’t been an organization out there that really speaks both languages well for entrepreneurs, and knows how to bring that diverse set of people together. So that’s what we specialized i,n and we have a lot of resources and a lot of cross-lingual resources, so that techies that can talk to biotechies, and biotechies can talk to techies.”

Foresite extended this approach to company formation with the creation of Foresite Labs, an incubation platform that it spun up in October 2019 to leverage this experience at the earliest possible stage of startup founding. It’s run by Dr. Vik Bajaj, who was previously co-founder and Chief Science Officer of Alphabet’s Verily health sciences enterprise.

“What’s going on, or last couple decades, is that the innovation cycles are getting faster and faster,” Tananbaum said. “So and then at some point, the people that are having the really big wins on the public side are saying, ‘Well, these really big wins are being driven by innovation, and by quality science, so let’s go a little bit more upstream on the quality science.’”

That has combined with shorter and shorter healthcare product development cycles, he added, aided by general improvements in technology. Tananbaum pointed out that when he began Foresite in 2011, even, the time horizons for returns on healthcare investments were significantly longer, and at the outside edge of the tolerances of venture economics. Now, however, they’re much closer to those found in the general tech startup ecosystem, even in the case of fundamental scientific breakthroughs.

CAMBRIDGE – DECEMBER 1: Stephanie Chandler, Relay Therapeutics Office Manager, demonstrates how she and her fellow co-workers at the company administer their own COVID tests inside the COVID testing room at Relay Therapeutics in Cambridge, MA on Dec. 1, 2021. The cancer treatment development company converted its coat room into a room where employees get tested once a week. All 100+employees have been back in the office as a result of regular testing. Relay is a Foresite portfolio company. (Photo by Jessica Rinaldi/The Boston Globe via Getty Images)

“Basically, you’re seeing people now really look at biotech in general, in the same kind of way that you would look at a tech company,” he said. “There are these tech metrics that now also apply in biotech, about adoption velocity, other other things that may not exactly equate to immediate revenue, but give you all the core material that usually works over time.”

Overall, Foresite’s investment thesis focuses on funding companies in three areas – therapeutics at the clinical stage, infrastructure focused on automation and data generation, and what Tananbaum calls “individualized care.” All three are part of a continuum in the tech-enabled healthcare end state that he envisions, ultimately resulting “a world where we’re able to, at the individual level, help someone understand what their predispositions are to disease development.” That, Tananbaum suggests, will result in a transformation of this kind of targeted care into an everyday consumer experience – in the same way tech in general has taken previously specialist functions and abilities, and made them generally available to the public at large.

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Everlywell raises $175 million to expand virtual care options and scale its at-home health testing

Digital health startup Everlywell has raised a $175 million Series D funding round, following relatively fast on the heels of a $25 million Series C round it closed in February of this year. The Series D included a host of new investors, including BlackRock, The Chernin Group (TCG), Foresite Capital, Greenspring Associates, Morningside Ventures and Portfolio, along with existing investors including Highland Capital Partners, which led the Series C round. The startup has now raised over $250 million to date.

Everlywell, which launched to the public at TechCrunch Disrupt SF 2016 as a participant in Startup Battlefield, specializes in home health care, and specifically on home health care tests supported by their digital platform for providing customers with their results and helping them understand the diagnostics, and how to seek the right follow-on care and expert medical advice.

Earlier this year, Everlywell launched an at-home COVID-19 test collection kit – the first of this type of test to receive an emergency authorization from the U.S. Food and Drug Administration (FDA) for its use that allowed cooperation with multiple lab service providers over time. The COVID-19 test kit joins its many other offerings, which include tests for thyroid hormone levels, food and allergen sensitivity, women’s health and fertility, vitamin D deficiency and more. I spoke to Everlywell CEO and founder Julia Cheek about the raise, and she acknowledged that the COVID-19 pandemic was definitely behind the decision to raise such a large amount so quickly again after the close of the Series C, since the company saw a sharp increase in demand coming out of the coronavirus crisis – not only for its COVID-19 test kit, but for at-home digital health care options in general.

“We obviously have a very successful COVID-19 test,” she said. “But we’ve also seen three-fourths of our test menu just explode at well over 100% year-over-year growth, and several of our tests are at 4x or 5x growth. That is really representative of this shift in consumer health behavior that will continue in a big way in many different verticals that include testing, and making things more convenient, digitally-enabled, and in the home.”

Like other companies built on solving for a shift to more remote and virtual care options, Cheek said that Everlywell had already anticipated this kind of consumer demand – but COVID-19 has dramatically accelerated the pace of change, which is why the startup put together this round, at this size, this quickly (she says they started the process of putting together the Series D just in September).

“We’ve been talking about the digital health movement, and the consumer-directed movement probably for a decade now,” she told me. “I do believe that this will be the watershed moment, unfortunately. But hopefully, we will come out on the other side of the pandemic and say, ‘There are some good things that happened broadly for healthcare.’ That is the hope of what we lean into everyday, and  fundamentally, why we went out and raised this amount of capital in this tremendous growth year.”

Image Credits: Everlywell

Everlywell has also expanded availability of its products this year, with distribution in over 10,000 retail locations across Target, Walgreens, CVS and Kroger stores across the U.S. The company also landed a number of new partnerships on the diagnostic lab and insurance payer side, as well as with major employers – a key customer group since employers shoulder the largest share of healthcare spending in the U.S. due to employee benefit plans. Cheek says that despite their commercial and enterprise customer wins, the focus remains squarely on consumer satisfaction, which is what distinguishes their offering.

“Our COVID-19 test is 75% new people buying our product, and it has an NPS [net promoter score] of 75,” she said. “And then it’s the most highly-referred product, and also one of our top tests where people buy other tests. Experience matters here – we know that if someone is a promoter of Everlywell, if they rate us a nine or a 10, on NPS, they are five times more likely to purchase again on the platform.”

That’s not new for Everlywell, according to Cheek – customers have always had a high degree of satisfaction with the company’s products. But what is new is the expanded reach, and the realization among many Americans that virtual care and at-home options are available, and are effective.

“What you have is this lightbulb moment for Americans in a new way that care can be delivered where then they definitely don’t want to go back,” she said. “It’s not just for Everlywell. This is all of these verticals, that have really shifted consumer behavior around healthcare in the home, and I think that will be somewhat permanent. That is the main driver here, and is what we’re seeing, and it’s why Everlywell has resonated so well with so many Americans.”

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Bit Bio’s “enter button for the keyboard to the software of life” nabs the company $41.5 million

Bit Bio, the new startup which pitches itself as the “enter button for the keyboard to the software of life” only needed three weeks to raise its latest $41.5 million round of funding.

Originally known as Elpis Biotechnology and named for the Greek goddess of hope, the Cambridge, England-based company was founded by Mark Kotter in 2016 to commercialize technology that can reduce the cost and increase the production capacity for human cell lines. These cells can be used in targeted gene therapies and as a method to accelerate drug discovery at pharmaceutical companies.

The company’s goal is to be able to reproduce every human cell type.

“We’re just at a very crucial time in biology and medicine and the bottleneck that has become really clear is a scalable source of robust human cells,” said Kotter. “For drug discovery this is important. When you look at failure rates in clinical trials they’re at an all time high… that’s in direct contradiction to the massive advancements in biotechnology in research and the field.”

In the seventeen years since scientists completely mapped the human genome, and eight years since scientists began using the gene editing technology known as CRISPR to edit genetic material, there’s been an explosion of treatments based on individual patient’s genetic material and new drugs developed to more precisely target the mechanisms that pathogens use to spread through organisms.

These treatments and the small molecule drugs being created to stop the spread of pathogens or reduce the effects of disease require significant testing before coming to market — and Bit Bio’s founder thinks his company can both reduce the time to market and offer new treatments for patients.

It’s a thesis that had investors like the famous serial biotech entrepreneur, Richard Klausner, who served as the former director of the National Cancer Institute and founder of revolutionary biotech companies like Lyell Immunopharma, Juno, and Grail, leaping at the chance to invest in Bit Bio’s business, according to Kotter.

Joining Klausner are the famous biotech investment firms Foresite Capital, Blueyard Capital and Arch Venture Partners.

“Bit Bio is based on beautiful science. The company’s technology has the potential to bring the long-awaited precision and reliability of engineering to the application of stem cells,” said Klausner in a statement. “Bit Bio’s approach represents a paradigm shift in biology that will enable a new generation of cell therapies, improving the lives of millions.”

Photo: Andrew Brookes/Getty Images

Kotter’s own path to develop the technology which lies at the heart of Bit Bio’s business began a decade ago in a laboratory in Cambridge University. It was there that he began research building on the revolutionary discoveries of Shinya Yamanaka, which enabled scientists to transform human adult cells into embryonic stem cells.

“What we did is what Yamanaka did. We turned everything upside down. We want to know how each cell is defined… and once we know that we can flip the switch,” said Kotter. “We find out which transcription factors code for a single cell and we turn it on.”

Kotter said the technology is like uploading a new program into the embryonic stem cell.

Although the company is still in its early days, it has managed to attract a few key customers and launch a sister company based on the technology. That company, Meatable, is using the same process to make lab-grown pork.

Meatable is the earliest claimant to a commercially viable, patented process for manufacturing meat cells without the need to kill an animal as a prerequisite for cell differentiation and growth.

Other companies have relied on fetal bovine serum or Chinese hamster ovaries to stimulate cell division and production, but Meatable says it has developed a process where it can sample tissue from an animal, revert that tissue to a pluripotent stem cell, then culture that cell sample into muscle and fat to produce the pork products that palates around the world crave.

“We know which DNA sequence is responsible for moving an early-stage cell to a muscle cell,” says Meatable chief executive Krijn De Nood.

If that sounds similar to Bit Bio, that’s because it’s the same tech — just used to make animal instead of human cells.

Image: PASIEKA/SCIENCE PHOTO LIBRARY/Getty Images

If Meatable is one way to commercialize the cell differentiation technology, Bit Bio’s partnership with the drug development company Charles River Laboratories is another.

“We actually do have a revenue generating business side using human cells for research and drug discovery. We have a partnership with Charles River Laboratories the large preclinical contract research organization,” Kotter said. “That partnership is where we have given early access to our technology to Charles River… They have their own usual business clients who want them to help with their drug discovery. The big bottleneck at the moment is access to human cells.”

Drug trials fail because the treatments developed either are toxic or don’t work in humans. The difference is that most experiments to prove how effective the treatments are rely on animal testing before making the leap to human trials, Kotter said.

The company is also preparing to develop its own cell therapies, according to Kotter. There, the biggest selling point is the increased precision that  Bit Bio can bring to precision medicine, said Kotter. “If you look at these cell therapies at the moment you get mixed bags of cells. There are some that work and some that have dangerous side effects. We think we can be precise [and] safety is the biggest thing at this point.”

The company claims that it can produce cell lines in less than a week with 100 percent purity, versus the mixed bags from other companies cell cultures.

“Our moonshot goal is to develop a platform capable of producing every human cell type. This is possible once we understand the genes governing human cell behaviour, which ultimately form the ‘operating system of life’,” Kotter said in a statement. “This will unlock a new generation of cell and tissue therapies for tackling cancer, neurodegenerative disorders and autoimmune diseases and accelerate the development of effective drugs for a range of conditions. The support of leading deep tech and biotech investors will catalyse this unique convergence of biology and engineering.”

 

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Cue Health raises $100 million to speed development of rapid, portable COVID-19 diagnostics

San Diego-based startup Cue Health has closed a $100 million Series C funding round, including participation from Decheng Capital, Foresite Capital, Madrone Capital Partners, Johnson & Johnson Innovation, ACME Capital and others. The funding will be used to help Cue finish up development, validate and scale production of its Cue Health Monitoring System and test cartridges, including test kits designed to diagnose COVID-19, which are currently being reviewed by the U.S. Food and Drug Administration (FDA) for emergency use authorization.

Cue has been developing its connected, portable lab to provide on-site care including molecular diagnostic tests since its founding a decade ago. The company also secured a $13 million contract in March specifically targeted towards development of a portable point-of-care COVID-19 test. Cue co-founder and CEO Ayub Khattak says that this pandemic has only re-emphasized the need for its product, which is primarily aimed at providing rapid, simple-to-use diagnostics that can be implemented quickly by a wide range of frontline workers in a variety of settings.

Concurrently with its EUA process for the Cue COVID-19 test, the company is also finishing up validation of the results for its influenza A and B tests, which will be used to submit to the agency for final approval of those tests as well. Its tests would provide at-home molecular based testing, with a connected results platform that can immediately provide diagnostics to certified healthcare providers within 20 minutes, unlocking a new level of remote care.

In total, Cue has $30 million in contract from the U.S. HHS’ Biomedical Advanced Research and Development Authority (BARDA) across its efforts both for flu testing and for COVID-19 diagnostics.

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With an ex-Uber exec as its new CEO, digital mental health service Mindstrong raises $100 million

Daniel Graf has had a long career in the tech industry. From founding his own startup in the mid-2000s to working at Google, then Twitter, and finally Uber, the tech business has made him extremely wealthy.

But after leaving Uber, he wasn’t necessarily interested in working at another business… at least, not until he spent an afternoon in the spring of 2019 with an old friend, General Catalyst managing director Hemant Taneja, walking in San Francisco’s South Park neighborhood and hearing Taneja talk about a new startup called Mindstrong Health.

Taneja told Graf that by the fall of that year, he’d be working at Mindstrong… and Taneja was right.

“I was intrigued by healthtech previously,” said Graf. “The problem always was… and it sounds a little too money-oriented… but if there’s no clear visibility around who pays who in a startup, the startup isn’t going to work,” and that was always his issue with healthcare businesses. 

NEW YORK, NY – MAY 21: Daniel Graf accepts a Webby award for Google Maps for iPhone at the 17th Annual Webby Awards at Cipriani Wall Street on May 21, 2013 in New York City. (Photo by Bryan Bedder/Getty Images for The Webby Awards)

With Mindstrong, which announced today that it has raised $100 million in new financing, the issue of who pays is clear.

So Graf joined the company in November as chief executive, taking over from Paul Dagum, who remains with Mindstrong as its chief scientific officer.

“Daniel joined the company as it was moving from pure R&D into being something commercially available,” said Taneja, in an email. “In healthcare, it’s increasingly important to understand how to build for the consumer and that’s where Daniel’s experience and background comes in. Paul remains a core part of the team because none of this happens without the science.”

The company, which has developed a digital platform for providing therapy to patients with severe mental illnesses ranging from schizophrenia to obsessive compulsive disorders, is looking to tackle a problem that costs the American healthcare system $20 billion per month, Graf said.

Unlike companies like Headspace and Calm, which have focused on the mental wellness market for the mass consumer, Mindstrong is focused on people with severe mental health conditions, said Graf. That means people who are either bipolar, schizophrenic or have major depressive disorder.

It’s a much larger population than most Americans think, and they face a critical problem in their ability to receive adequate care, Graf said.

“1 in 5 adults experience mental illness, 1 in 25 experience serious mental illness, and the pandemic is making these numbers worse. Meanwhile, more than 60% of US counties don’t have a single practicing psychiatrist,” said Joe Lonsdale, the founder of 8VC, and an investor in the latest Mindstrong Health round, in a statement.  

Dagum, Mindstrong Health’s founder, has been working on the issue of how to provide better access and monitoring for indications of potential episodes of distress since 2013. The company’s technology provides a range of monitoring and measurement tools using digital biomarkers that are currently being validated through clinical trials, according to Graf.

“We’re passively measuring the usage of the phone and the timing of the keyboard strokes to measure how [a patient] is doing,” Graf said. These smartphone interactions can provide data around mental acuity and emotional valence, according to Graf — and can provide signs that someone might be having problems.

The company also provides access to therapists via phone and video consultations or text-based asynchronous communications, based on user preference.

“Think of us more as a virtual hospital… our care pathways are super complex for this population,” said Graf. “We’re not aware of other startups working with this population. These folks, the best you get right now is the county mental health.”

Mindstrong’s Series C raise included participation from new and existing investors, including General Catalyst, ARCH Ventures, Optum Ventures, Foresite Capital, 8VC, What If Ventures and Bezos Expeditions, along with other, undisclosed investors.  

And while mental health is the company’s current focus, the platform for care delivery that the company is building has broader implications for the industry, especially in the wake of the COVID-19 epidemic, according to Taneja.

“I expect that we’ll see discoveries in biomarker tech like Mindstrong’s that could be applied horizontally across almost any area of healthcare,” Taneja said in an email. “Because healthcare is so broad and varied, going vertical like Mindstrong is makes a lot of sense. There’s opportunity to become a successful and very impactful company by staying narrowly focused and solving some really hard problems for even a smaller part of the overall population.”

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