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Looking at this year's boom in high-dollar biotech IPOs, you can't miss the fingerprints of Third Rock Ventures, with three of the hottest market debuts coming straight from the fund's portfolio. That success is no coincidence, the group says, and its founders gave Nature an inside look at its painstaking process of choosing which companies to bankroll and which to let slide.
Third Rock cofounder Mark Levin-Courtesy of Third Rock Ventures
Despite their laid-back demeanors and T-shirt-clad appearances, founders Mark Levin and Kevin Starr have a borderline Draconian rubric for potential portfolio companies, Nature reports, known internally as Third Rock Ultra Killer Kriteria, or TRUKK. Projects must be no more than three years away from clinical trials; companies must be able to replicate their key findings without spikes in toxicity; and Third Rock doesn't pull the trigger unless it's sure Big Pharma isn't going to step in and compete.
That's a tall order, but you can't argue with results. This year alone, Third Rock progeny Foundation Medicine ($FMI), bluebird bio ($BLUE) and Agios Pharmaceuticals ($AGIO) have hauled in more than $300 million in above-range IPOs, and the fund flipped portfolio outfit Lotus Tissue Repair to Shire ($SHPG) in deal valued at nearly $325 million.
There's no complicated secret behind Third Rock's track record, the founders tell Nature, just a commitment to detail and diligence you might not find at other VCs. Instead of listening to endless external proposals, Third Rock prefers to focus on ideas generated by its staff of 40 top-tier scientists, and the company takes its sweet time before getting third-party management involved, often waiting 18 months or longer before picking an outside CEO.
That helps Third Rock attract top management talent to lead its companies, MIT professor and biotech luminary Robert Langer told Nature, and goes a long way toward explaining their success.
"A lot of good chief executives are not willing to take the risk with a new company, " Langer said. "With Third Rock, rather than getting the company when it's a newborn baby, a new executive is getting a pretty active 2-year-old."
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