CalPERS to Put $285 Million Into 5 Biotech Funds

The Sacramento Bee


CalPERS is revving up its biotechnology strategy.


Seizing on what it called “compelling investment opportunities,” the California Public Employees’ Retirement System said Thursday it has approved placing $285 million with five biotech funds.


The investments represent the first chunk of dollars spent from a $500 million fund set up two months ago by Sacramento-based CalPERS, the nation’s largest public pension fund.


Rick Hayes, senior principal investment officer with CalPERS, siad the investments are well timed given that the public stock markets have pretty well shut down for technology companies.


“Companies with excellent science continue to need financing,” he said. “Our goal is to become the long-term investor of choice for biotechnology companies.”


Although biotech can be a high-risk investment, Hayes said it’s worthwhile for CalPERS.


“Biotech has had its ups and downs. But CalPERS is the ultimate long-term investor. We invest for 20, 30, 40 years.”


Hayes sid the investment could eventually yield economic development benefits for greater Sacramento, which is trying to grow its small biotech industry. Although much of the biotech industry is clustered around the Bay Area, “a lot of these companies are going to be coming out here,” he said.


Hayes said CalPERS has invested in biotech and its related field, life sciences, for about five years and had already poured about $500 million into the industry.


In addition, two months ago CalPERS launched a formal biotech investment vehicle, the $500 million CalPERS California Biotechnology Program, and the $285 million represents the first commitments from that program.


The fund bears California’s  name because, while the dollars aren’t limited to the state, as a practical matter “most of the investments will be in California given the prominence of biotech,” said CalPERS spokesman Brad Pacheco.


The first $285 million will be invested with four California funds and one New York fund.


Prospect Venture Partners II, a Palo Alto venture capital fund devoted to biotech, will get $100 million, as well the MPM Biotech Crossover Fund of South San Francisco. Some $25 million will be invested in a biotech fund run by Burrill & Co., a well-known investment bank in San Francisco. Another $10 million will go to a seed capital fund that’s developing a biotech incubator at the University of California, San Francisco, Mission Bay campus.


The lone out-of-state investment: $50 million to EuclidSR, a New York fund that invests in companies involved in pharmaceuticals, genetics and information technology.


CalPERS said it plans to make biotech investments early next year in private and public entities and is in discussions with some biotech companies, the UC system, Caltech and the Novartis Institute of Functional Genomics, a La Jolla institute founded by Swiss biotech giant Novartis.


Hayes said it’s likely the fund will grow beyond the initial $500 million.

Prospect Bio Ventures