This article is part of a new series, CVCA Quarterly Exclusive, written and published by the Canadian Venture Capital and Private Equity Association. This series provides an analysis of the CVCA’s most recently published VC & PE Canadian Market Overview through expert commentary and perspectives.
Versant Ventures Goes Behind-the-Scenes on the Second Largest VC Deal in H1 2017
When healthcare venture capital investment firm Versant Ventures went looking for its next major biotech investment it wanted a company that was doing more than just addressing symptoms of a disease, but preparing for all out war against it.
“A big part of our model is to invest in breakthrough, disruptive therapeutics companies, new frontiers of innovation, and first-in-class therapies that fundamentally alter how patients are treated,” says Jerel Davis, the Vancouver-based managing director of Versant.
Versant also likes to build companies from scratch.
It was through that lens that Versant came across work being done on a process known as “synthetic lethality,” which, in simple terms, is where multiple mutations can potentially lead to the destruction of cancerous tumours. Versant incubated the program in two labs in Toronto and New York over 18 months, added resources and brought in a veteran biotech executive Lloyd Segal to create a new company, Montreal-based Repare Therapeutics Inc.
The results “exceeded all of our expectations” Davis says and, in June, so too did the Series A financing to advance Repare’s platform and pipeline of medicines targeting genetically defined weaknesses of cancers.
On June 22, Repare announced it had raised USD $68M (CAD $91M based on the exchange rate at the time) in a deal co-led by San Francisco-based Versant and Boston’s MPM Capital and backed by drug giant Celgene Corp., Fonds de solidarité FTQ and BDC Capital Healthcare Venture Fund. It had set out to raise between about USD $35M to $45M.
The Repare financing was the second-largest venture capital (VC) deal in the first half of 2017, according to CVCA InfoBase, behind the CAD $141M Series A investment in Quebec-based Element AI.
The Repare deal highlights the continued growth in VC investments in Canada, in particular in the life sciences sector, which received the second-highest level of investment (behind information and communications technologies), with $344M across 52 deals in the first half of 2017. Life sciences are on pace to meet numbers from 2016, the second-biggest year for VC investment dollars in the sector, when $736M was invested over 106 deals.
Versant was attracted to the science behind what became Repare, in part because it saw a different type of synthetic lethality play out over the past eight years with another one of its investments, Clovis Oncology. (Clovis has since gone public and is now valued at about USD $3B).
“We saw an opportunity to take the field even further with advanced therapies and this field of synthetic lethality and other personalized therapies,” says Davis.
Versant had a vision of the science it wanted to get behind, says Segal, who came to Versant as an entrepreneur-in-residence last year and was quickly tapped to be Repare’s CEO.
While Repare’s science speaks for itself, Segal says they went looking for funding at a fortuitous time. “No matter how smart and quick you are, there’s nothing like good timing,” he says.
Just before they started looking for the funds, larger drug companies developing different compounds had just published game-changing data that validated the approach that Versant was drawn to with Repare.
“We went out with what we consider a dream team of scientists that we had assembled under the Repare umbrella,” says Segal. “There was a critical mass of global investors who realized this was the right scientific approach at the right time.”
That drove a lot of demand, which in the end forced Versant to actually turn away investors. “It was probably the easiest syndication I’ve ever done,” says Segal. “There was a lot of comfort with the science, the approach and the founders as great scientists.”
Today, Repare has enough capital to not only build out its team and complete its infrastructure, but also to put several of its compounds in or close to the clinic where they can be validated.
“We don’t have to worry about fundraising every 18 months or two years, which is typical for a biotech company,” Segal says. “We really ticked all of the boxes for this type of early-stage startup. Our scientists are regarded as leaders and cutting-edge thinkers in their field. The fact that we were backed by Versant gave us an enormous amount of credibility and opened doors…. We also had a plan and a focus and a strategy that resonated with virtually everyone we talked to.”
Repare’s next move is to create a pipeline of new drugs, with the first in clinical trial expected in 2019 and the second one by about 2021.
“The metric that matters most to us is the number of great new compounds in the pipeline,” says Segal. “Building that pipeline is now our day, night and weekend job. That’s our singular focus.”
To read more about venture capital activity in the first half of 2017, read the full CVCA H1 2017 VC & PE Canadian Market Overview here.