July 2022
Third Rock Ventures Teams Up With American Cancer Society’s Venture Fund
The biotech venture firm will bring the society’s BrightEdge venture arm into cancer startup deals
Written by Brian Gormley at brian.gormley@wsj.com
The American Cancer Society’s venture-investment arm has formed a collaboration with venture firm Third Rock Ventures, as the society expands its use of venture capital to intensify its efforts in cancer research and provide services to patients.
The Atlanta-based society launched its BrightEdge venture arm in 2019 to diversify its income and support innovation that could benefit patients. BrightEdge has backed 15 companies, including molecular-testing company Castle Biosciences Inc., which went public in 2019.
Other nonprofits that advocate for patients also have started venture-investment programs to steer more research toward their causes, including the Multiple Myeloma Research Foundation, which formed its Myeloma Investment Fund in 2019.
Through this collaboration, BrightEdge will have the option to invest in the first and subsequent rounds of venture capital raised by cancer-focused startups that Third Rock launches. That will give BrightEdge access to a steady flow of oncology deals from Boston-based Third Rock, which recently closed a $1.1 billion biotech fund and historically has made about 40% to 60% of its investments in companies involved in oncology, said Partner Reid Huber.
The collaboration will help Third Rock have a broader impact in fighting cancer as companies benefit from resources and the patient-oriented mind-set of BrightEdge, said Dr. Huber.
Early on, biotech startups generally face uncertainty on the trajectory of their initial drugs, Dr. Huber said.
“That uncertainty, coupled with the intense drive to drive the basic science, can create an unwanted gap between an early-stage company and the patient experience,” he added.
This collaboration provides a built-in mechanism for startups to have access to information on the patient experience and issues across the cancer landscape, such as reimbursement challenges, Dr. Huber said. This is the first nonprofit investment collaboration Third Rock has formed, but the firm would consider similar partnerships in the future, he said.
Venture arms of nonprofits also can assist biotechs as they consider which diseases to target. The Myeloma Investment Fund can help startups with broad platform technologies to apply them to research into multiple myeloma, said Peter Kosa, the fund’s managing director. Since failure rates are high in biotech, anything the venture arm can do to increase the odds of success furthers the nonprofit’s mission, he said.
The cancer society has been building up its BrightEdge program. The team has grown to six this year from two last year, and the group will add a seventh member in August, said Alice Pomponio, BrightEdge’s managing director. Its fund, raised from the cancer society and donors, has an evergreen structure, using investment returns to make further investments.
BrightEdge first operated much like a conventional venture firm, investing for financial return in cancer-focused companies, according to Ms. Pomponio, who added that the firm can have more impact on companies by investing as opposed to just making grants.
Last year, BrightEdge retooled the venture program so that startups would also have to meet certain impact criteria in order for it to invest. For example, BrightEdge aims to support companies that can have an impact in areas such as increasing access to cancer care and reducing healthcare inequalities.
That increased focus on impact has helped BrightEdge, which launched with $25 million in funding from the cancer society, attract more donors. BrightEdge’s fund now has a net asset value of $77 million, a figure that includes donations and realized and unrealized gains from portfolio companies, Ms. Pomponio said.
Once the net asset value reaches $100 million, BrightEdge intends to provide a percentage of its annual realized investment gains back to the cancer society, she added.
“This investment model is compelling because of its sustainable nature—returns can be used to both invest in new companies and support ACS’s core programs,” said Anthony Wood, founder and chief executive of Roku Inc., whose WoodNext Foundation donated $1 million to BrightEdge last year.
Write to Brian Gormley at brian.gormley@wsj.com