SF Biotech Hedge Funds
Anyone have any updated info on these funds? I'm thinking Redmile Group, BVF, Ecor1, Farallon's HC book, and any other SF Biotech fund I'm forgetting here.
I'm very interested in learning more about these funds in general but specifically interested in more info about nuances in strategy, and interview processes. Also would be great to know what head hunters could put me in touch with any of these funds.
I'm currently an analyst at a top five biopharma coverage group and would love to work at one of these funds eventually.
also interested. Would also be keen to hear thoughts on how they would differ from healthcare groups at MM other than the more obvious short-term focus. I know some of the east cost HC focused funds have been doing great (perceptive, RA, RTW) but their style is very different from what is normally considered public equity investing.
I'd be also interested in general if people know which PM groups at MM are outperformers? How would you be able to sound this out?
Yeah personally I’m much more interested in the value-oriented, long term HC investing that does both public and private deals - like the funds you just listed.
fair enough, but I don't really think of them as L/S hedge funds. They have a strong long bias and do substantial financial engineering and privates.
I think that's definitely fair. "Investment firm" is almost a better categorization for these funds I guess.
By financial engineering what are you referring to? Do you mean how they structure their term sheets on privates? Like maximizing liquidation preference, accrued dividends, etc?
Yea I will be super curious to see how these guys perform in a prolonged bear market given the increasing exposure to private investments they’ve amassed over time.
The “cross over” pre-IPO private round IMO is an example of a financial engineering scheme that’s been developed somewhat recently (5-10yrs?) - I haven’t been able to figure out if people don’t get it or they just don’t care because market has been so strong. Basically these types of funds sell the idea of a “cross over” round to companies before going public where they raise a reasonably sized private round just months before the IPO on the promise that the cross over investors will “support” and participate in the subsequent IPO, thereby derisking the IPO process. That all sounds nice, but in reality what’s really happening is these funds are able to front-run the traditional big 5 mutual fund IPO anchor investors by having the company then raise the IPO at a 20-30% valuation step up from the cross over round, even though the cross over happened just ~3 months ago and no tangible development progress has been made since. Quick way to book some paper gains. People buy into the idea that these cross over rounds make an IPO “less risky”, but that’s just BS in my opinion - if you are able to raise a reasonable cross over round then there’s no reason you wouldn’t have been able to raise a decent IPO without a cross over. Basically looks like a fund structure flexibility arbitrage scheme that has worked quite well over the years.
SPACs and the RA “Series I” are the latest financial engineering schemes, time will tell how they work out.
RTW definitely has some kind of West coast presence based on my conversations with a couple of people.
I'd avoid limiting yourself to biotech funds - tiger cubs and long-only funds are getting pretty deep into this stuff and many of them are the ones that have the west-coast footprint. Just pay attention to whether there is a road to investing in public AND private cos - often you'll start off just doing one or the other but the senior guys are all doing both.
Not sure I agree with some of what's being said about the "crossover" rounds. I'd definitely agree that you see Perceptive and RA doing some really weird/arcane stuff that is probably financial engineering to some degree, but at the end of the day if you consider the fact that you're often talking about pre-commercial stage drug assets, staying private longer is desirable, as is having a clear indication of interest from some of the specialist & mutual funds. These aren't technology businesses where you've been able to track unit economics since 2017 and earlier. Drug candidates require financing of some kind to get past the finish line/commercialize & can't afford to be dealing with public market bs. The "crossover" or w/e is really just another late-stage growth round with a better holder than the late-stage PE funds that just dump the stock anyway. The dilution and total capital raised aren't THAT variable - might as well try to stack the deck in your favor so you don't have to explain to employees why their SBC is so volatile (as often).
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