It looks like NovaQuest Capital Management is launching its fourth pharmaceutical fund – set at $850 million now, according to a regulatory filing.
There have been rumors of the North Carolina firm’s fourth fund since 2014, when the target was thought to be $750 million. Recent SEC filings are showing there are already some $150 million on the books, raised in parallel and coinvest funds.
In 2013, NovaQuest raised $459 million in 2013. NovaQuest has yet to return outreach to discuss this latest fundraise.
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The company’s strategy is a bit different than your standard venture firm – providing large infusions of capital to well-established pharmaceutical companies that need a boost in funding to develop new drugs.
The North Carolina firm has had some notable exits of late – including its $150 million investment in Hospira, which was acquired this past year by Pfizer in a deal valued at $17 billion. Another notable exit is Precision Dermatology, which was acquired by Valeant for $475 million. Other investments include Pharmaxis, Revance Therapeutics, California Cryobank and Shionogi.
NovaQuest says it has invested more than $1 billion in the global healthcare industry. It has a pretty consistent investment model, which it outlines here. PeHub wrote last year about NovaQuest’s strategy, speaking with an anonymous source about the firm:
The firm makes its money from getting back its principal plus a profit, along with securing a drug royalty stream, the person said. “There’s a royalty component but returns are not reliant on royalties,” the person said.
“Say you’re Eli Lilly, you have approvals (for a drug), and now you need to launch the product globally. That takes hundreds of millions of dollars. Sometimes this is where NovaQuest steps in and provides that capital,” the person said.
The unlevered strategy offers “significant downside protection” and little or no correlation to the public or private markets, the person said.