Deerfield launches $550M healthcare VC fund

NEW YORK—Less than a month after its formation, Deerfield Management Co. L.P. announced its first investment—$20 million worth of financing to Editas Medicine, a company in early-stage development of a technology to edit disease-causing genes, potentially leading to a cure. This technology has the potential to target a number of important diseases.

The Deerfield Healthcare Innovations Fund, which closed in July, includes external commitments of $550 million. Investors consist of prominent healthcare institutions such as New York-Presbyterian Hospital, Memorial Sloan Kettering and Seattle Children’s Hospital, and philanthropies such as the Robert Wood Johnson Foundation. Leading universities with cutting-edge research, including as Princeton University and Northwestern University, are also among the investor group.

The Deerfield Fund will invest in groundbreaking advancements in science that may lead to therapeutic interventions in genetic diseases, cancer and orphan diseases. The venture capital fund will also back new technologies that can transform how therapeutics are developed and improve the way healthcare is delivered to patients.

President and Managing Partner Jim Flynn notes that there has been a disparity between interest and investment in the biotech space. “We decided we didn’t have enough capital invested,” he tells DDNews. “NIH funding is down 30 percent over the past decade on an inflation-adjusted basis, and the average grant size is down. We’re excited about the next five years and the opportunity to affect real cures versus modest efforts.”

The venture capital fund, one of the largest healthcare-focused venture funds in the sector, will donate all profits not allocated to investors to the Deerfield Partnership Foundation to support its charitable purposes to improve the provision of healthcare services to underserved children and investment in healthcare research, including orphan diseases, age-related conditions such as Alzheimer’s disease and other therapeutic, diagnostic and healthcare service delivery breakthroughs. The Deerfield Foundation is employee-funded and -managed and has raised more than $25 million to advance children’s health in New York City, where the company is headquartered, as well as projects worldwide.

“The unprecedented advances in our understanding of the biology of disease combined with the application of new technologies allow for life-altering changes in medical practice. The pullback in funding that has occurred for these innovations over the last decade could not have happened at a worse time,” Flynn emphasizes. “Our unique model of producing research through the Deerfield Institute and our philanthropic endeavors through the Deerfield Foundation allow us to provide value to innovative institutions, companies and patients that goes well beyond capital.”

The Deerfield Institute, a team of about 40 healthcare experts, in partnership with other leading healthcare organizations, will author at least 10 original peer-reviewed articles in 2015. Publishing these proprietary findings is aimed at sharing knowledge with healthcare researchers and providers in addition to helping inform healthcare policy.

“Research funding in health and life-science innovation has decreased in recent years, which unfortunately leaves many areas of important research unsupported,” said Deerfield partner William Slattery. “This fund provides a significant opportunity for greater innovation in the healthcare and life-science sectors, which hold not only substantial opportunities for advancement, but also have the greatest financing needs.”

Founded in 1994, Deerfield Management is an investment firm that seeks to advance healthcare through investment, information and philanthropy.