UPDATED: Third Rock unveils $516M VC fund

Investors will target early-stage device, Dx and biotech startups
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Third Rock Ventures is jumping into the early-stage venture investment void with a new $516 million fund that will launch up to 16 new medical device, diagnostic and drug companies that bring something new and disruptive to the marketplace.

This is the Boston and San Francisco operation's third life sciences fund since launching back in 2007 and is dubbed: "Fund III."

Bob Tepper, partner--Courtesy of Third Rock

While no money from the new fund is committed yet, a number of device and diagnostic "opportunities" are already in the pipeline and under consideration, Third Rock partner Bob Tepper told FierceMedicalDevices. The investment outfit launches companies "from scratch," he said, and between 1-3 years of lead time is often necessary before those initiatives are ready for announcement.

Tepper wouldn't confirm how many device and diagnostic startups are among the new fund's proposed investments, though he said that the investments will target many drug developers as well as diagnostic and device opportunities. And the goal, he said, will be to launch "game-changers" rather than startups that offer incremental improvements to medical care.

Third Rock has developed a robust portfolio of more than 30 companies since it launched in 2007. While many are in the biopharmaceutical space, there are noteworthy diagnostic and medical device startups in the mix. Among them: Cibiem, a company that raised a $10 million Series A last fall toward creation of devices to ablate the carotid body to treat heart failure and diabetes; 2012 Fierce 15 company NinePoint Medical, developer of an ultra-high-resolution organ imaging device; and Foundation Medicine, maker of a high-quality diagnostics test designed to evaluate solid tumors and their mutations and then match a patient to the best possible treatment.

Crucially, Third Rock remains focused on early-stage investing, even as many of its peers have backed away from companies at that vulnerable stage with an emphasis instead on later-stage development companies with more viable products and services. Venture capital investment in medical devices has plunged overall, dropping by double digits in both dollar value and deal number in 2012, according to PricewaterhouseCoopers and the National Venture Capital Association.

That reality makes Third Rock's new, oversubscribed round an even bigger standout, a major accomplishment from the former Millennium Pharmaceuticals executives who launched the operation.

"We are grateful for the strong support for our model and significant interest from our existing and new investors," Third Rock partner Kevin Starr said in a statement. "Our funding to date has enabled us to successfully seed, support or launch more than 31 important healthcare companies. With Fund III we will continue on our mission, launching up to 16 new companies focused on disruptive areas of science and medicine."

- read the release
- here's FierceBiotech's take

Special Reports: Top medical device VC investments of 2012 | NinePoint Medical – 2012 Fierce 15

Related Articles:
Third Rock's $325M Shire deal was a big win for early-stage investors
Cibiem raises $10M Series A for carotid body ablation device
Foundation Medicine's $42.5 million round to juice Dx commercialization

Editor's note: This story has been updated to include comments from Third Rock partner Bob Tepper.