Patient Capital

baker brothers

In the mid-1990s, Julian and Felix Baker teamed up to invest into biotech companies on behalf of the Tisch family.

  • Felix had a B.S. and Ph.D from Stanford University, and did two years of medical school there

  • Julian graduated from Harvard and did private equity at Credit Suisse. While at Credit Suisse, he began managing investments for the Tisch family

The Tisch family’s empire came from Loew Theatres, which brothers Bob and Laurence built from the ground up, acquiring hotels, insurance companies, and more. The Tisch family owns the New York Giants, which Bob bought for $75M (50% stake) in 1991, now worth ~$7B. More on that here

Now back to the Baker brothers:

After more than five years of making investments for the Tisch bloodline, Julian and Felix decided to branch out, and Baker Bros. Advisors, a biotech hedge fund, was born.

The Longest Term

Seagen, fka Seattle Genetics, hit the public markets around the same time that the biotech investing firm was launched.

The company’s value proposition was a novel approach to chemotherapy, centered around antibody drug conjugates (ADCs).

  • ADCs are a newer class of pharmacological compounds that target tumor sites with specific monoclonal antibodies (mAbs), combining both chemotherapy and immunotherapy

  • This approach retains the effectiveness of chemotherapy without the harsh side effects, due to the tumor site specific target

  • ADCs are made up of a mAb, an organic linker, and a cytotoxic drug

In 2003, after concluding that ADCs were the future of oncology, the Baker Bros bought ~$16M in preferred stock, convertible into 10x as many common shares at $2.50 / share.

As time went on, the fund continued to incrementally increase exposure to Seagen - up to the point of owning 33% of the company.

Felix Baker joined the board of directors.

Fast forward to 2022.

The pain of owning Seagen as the company worked out the infinite roadblocks in ADC engineering began to ease. ADCs were now a buzzword in the biotech world, and big pharma decision makers started to take notice.

After 20 years of being Seagen’s most active investor, the firm got paid.

In December of 2023, Pfizer bought Seagen for $43B:

  • Baker Bros had a 25% in Seagen at time of acquisition, leading to a $10B payout for the firm and their investors.

  • Most of the cash was given back to LPs in one of the hedge fund industry’s largest returns of capital.

  • Baker Bros manage ~$22B in capital with just 18 investment professionals

Next Up

While Pfizer’s takeover of Seagen dominated headlines for the last few months, the race for the perfect ADC solution is not over.

Numerous biotech startups have their eyes on the prize:

  • AdcentrX Therapeutics: Raised $38M in a Series A+ Round led by Eight Road Ventures in 2023. AdcentrX’s star offering in development is ADRX-0706, an ADC that targets Nectin-4, a protein expressed in many forms of human cancer.

  • MBrace Therapeutics: Raised $85M in a Series B financing led by TPG in 2023. Their lead ADC candidate is MBRC-101, which focuses on ephrin type-A receptor 5 (EphA5), a receptor common in breast cancer and small lung cancer.

  • Alentis Therapeutics: Raised $105M in a Series C Round led by Jeito Capital in 2023. Lead products are ALE.F02 and ALE.C04. Recently initiated Phase 2 trials dosing the first patient with ALE.F02 and demonstrated the ADC’s safety.

Headlines:

  • Y-Combinator alum startup, Matterport, is bought by real estate giant CoStar at a large premium. Techcrunch article here

  • CVC’s IPO is expected to mint new billionaires. Forbes article here

  • The NBA could double the value of their last media deal with a estimated media rights package in the ballpark of $50B. Front Office Sports article here

  • Spotify turns a profit with Q1’24 earnings. Yahoo Finance article here

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