A new $50 million investment fund will back Penn life sciences start-ups

The University of Pennsylvania, German biotech firm BioNTech, and Osage University Partners, a Bala Cynwyd venture capital firm, have formed a $50 million fund to back early-stage life sciences start-ups at Penn, the partners announced Friday.

The announcement came on the eve of the much-hyped annual J.P. Morgan Healthcare Conference in San Francisco, which starts Monday. The conference has become a way to measure the mood of the biotech sector, which has slumped after investment peaked in 2021. It’s been particularly difficult for early-stage biotech companies to raise money in recent years, according to a recent J.P. Morgan report.

For Penn scientists and company founders, the so-called Penn-BioNTech Innovative Therapeutics Seed Fund, or PxB Fund for short, will step into that gap. It is designed to invest in companies that are developing new therapeutics, diagnostics, and research tools.

The announcement did not include a breakdown of how much money each of the three backers provided. Osage University Partners, which has $800 million under management and had previously invested in at least 10 Penn spinouts, will run the fund.

“Penn has a remarkable track record of creating cutting-edge startups,” Marc Singer, an Osage managing partner, said in a statement.

He cited two deals for Penn spinouts last year: AbbVie acquired San Diego-based Capstan Therapeutics for up to $2.1 billion, and Kite paid $350 million for Interius BioTherapeutics, which was based at Pennovation Works in the Grays Ferry section of Philadelphia.

Penn was among the first six universities Osage partnered with 15 years ago when it started investing in spinouts from research universities, while allowing the institutions to share in some of the profits. This was at a time when few universities were investing in their own start-ups.

For Penn, that began changing about a decade ago. The university’s first investment in one of its own faculty-member spinouts came in 2016, when it invested $5 million in Carl June’s Tmunity Therapeutics. In 2018, Penn Medicine agreed to invest an additional $45 million in Penn biotech companies over three years in conjunction with outside funds.

In December, Penn announced a $10 million fund that will make seed investments of up to $250,000 in companies that have at least one founder affiliated with the University of Pennsylvania. That fund is for the entire university, not just life sciences.

PxB is another part of what John Swartley, Penn’s chief innovation officer, called in an interview Friday a “constellation of different support structures and funding sources that our companies can draw upon in order to advance their opportunities and agenda.”

Anna Turetsky, a biotech investor in New York who received her undergraduate degree at Penn and has a doctorate in biophysics from Harvard University, has joined Osage and will serve as PxB’s general partner. She said PxB is a 10-year fund and is expected to build a portfolio of around 15 companies in the early years.

“Part of why this is a fantastic time to start this fund is that there has been a gap in venture funding for early-stage start-ups over the last few years. Everyone wants to see clinical data these days,“ Turetsky said. If that continues, ”then in a few years, there will be no early-stage clinical companies," she said.

Germany’s BioNTech, which partnered with Pfizer on one of the COVID-19 vaccines that used mRNA technology developed at Penn, will use the fund to deepen its longstanding ties to Penn researchers.

Some observers of Philadelphia’s biotech sector have lamented the relative lack of local investors, which are abundant in places like Boston and San Francisco and have helped turn those metro areas into leading innovation centers.

Quaker BioVentures was a local investment fund that raised $700 million in the early 2000s to buy into biotech firms in Philadelphia and elsewhere, but was not successful for its investors, which included Pennsylvania state pension funds.

Others, when asked why the Philadelphia region trails Boston, San Francisco, and San Diego as a biotech hub, point to the need for a deeper pool of management talent.

» READ MORE: Why Philadelphia loses promising biotech firms to Boston, San Francisco, and San Diego

PxB could help change that, Singer said.

“Part of our hope with the fund is to create some companies, start from scratch, take technology, find management teams, start them in Philadelphia. Hopefully, that will create a new crop of managers,” he said.