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Orbimed closes $500m venture fund

The New York-based firm says investors flocked to its third fund to focus on late-stage life science companies.

Orbimed Advisors, a healthcare-focused investment management firm, has closed Cadeus Private Investments III on $500 million.

CPI III will invest in US late-stage private life science companies researching and developing biopharmaceutical products and medical technologies including medical devices, diagnostics and delivery tools. Individual investments will range from $12 million to $50 million.

CPI III is much larger than its two predecessors. CPI II, the firm’s second fund that focused on the same area, was $300 million. Orbimed managing director Carter Neild says the fund size was increased because the firm’s VC team has been growing, and they hope to stretch the life of the fund out longer than its predecessor.

“The amount of time it took for us to put [CPI II] to work was about two years,” he said. “Ideally this will be over more like a four year period.”

Since the inception of its private equity activities in 1997, Orbimed has had a unique strategy for investing in the healthcare sector. While most of their colleagues chose to invest in early-stage or seed companies, Orbimed has chosen to invest in late-stage companies that have already entered human clinical trials.

“In the life sciences sector, timelines are so long and costs to get the product to market are so high, and there is a high failure rate,” Neild said. “We would rather wait until a company has at least some human clinical data, and then we can make an informed decision about the likelihood of that product getting to market.”

“A seed stage investment in a company that has no products in clinical trials is no the optimal risk return place to be in this sector,” he added.

Neild said this strategy has led to high returns, including an 8x return in the exit of Given Imaging, a company that produces a swallowable pill-camera that takes pictures of gastrointestinal tracts for doctors. Other investments include the drug companies Auxiulium and Cermon and medical technology companies Emphasys and Volcano. Neild said that success has attracted new investors.

“The results we’ve had on the previous two funds have been very good, and we’re now recognized as one of the leaders in this space,” said Neild. “We finished fundraising in something like six weeks. We really didn’t market this fund, we didn’t take any trips or do anything. We just had a lot of people coming to us.”