Bain Capital targets $2bn for next life sciences fund

Bain Capital set a $2 billion target for its fourth fund targeting life sciences companies, in line with what it raised for its predecessor.

LP interest in specialized funds has grown over the years as LPs seeks to place capital with dealmakers that are experts in specific industries or strategies.

Bain Capital Life Sciences Fund IV set a $2 billion target with a $2.5 billion hard cap, according to documents from the New Jersey Division of Investment. According to a press release from Bain Capital, Fund III closed in 2021 after raising $1.9 billion.

New Jersey approved a $150 million commitment to Fund IV at the system’s April 24 board meeting, which was viewed by Buyouts. The system will be a member of the fund’s limited partner advisory committee. New Mexico State Investment Council committed $75 million to the fund earlier this year.

Fund IV has a 7 percent hurdle rate, according to New Jersey’s documents.

The pool will charge a 20 percent carried interest rate; however, if the fund returns 250 percent of LPs’ contributed capital, carry will jump to 25 percent, the documents said.

The fund represents a new relationship for New Jersey, the system’s PE chief Dana Johns said. Her previous employer, Maryland State Retirement and Pension System, committed to Fund III.

“This will help with the diversification of our portfolio by adding in sector-focused healthcare,” Johns said at the meeting.

Recent fund performance

• Fund II (2019 vintage) Net IRR: 16.1% Net TVPI 1.25x Net DPI 0.57x
• Fund I (2017 vintage) Net IRR 24.72% Net TVPI 1.81x Net DPI 0.96x

Source: Buyouts data as of June 30, 2023, citing various public pension systems. Subscribers can view here.

Bain’s Strategy

Bain’s life science funds follow a growth equity strategy that target biotech, biopharma, medical device and diagnostics companies, according to board documents. Fund IV will target minority acquisitions in 20 to 25 companies, according to Robin Clifford, a senior investment officer at the pension.

Bain Capital’s previous life sciences funds have shown success in creating spin-out companies from large pharmaceutical companies, Johns said.

Johns cited SpringWorks Therapeutics as a successful example of Bain Capital’s spin-out strategy. SpringWorks develops drugs to treat rare diseases and cancer and currently trades on NASDAQ.

“A lot of Bain Capital’s outperformance come via the companies they’ve created. They really do interesting things,” Johns said.

Bain Capital also targets “fallen angel” publicly traded companies in the space, according to New Jersey’s investment staff.

“Because of the challenges in biotech, Bain Capital can really take advantage. These are great companies but they face some sort of broader market issues. The capital intensity in life sciences tends to make those companies go public quickly,” Johns said.

New Jersey deputy CIO Bill Connors said Bain Capital also relies not just on exits to the public market but also to strategic pharmaceutical investors.

Bain Capital declined to comment for this story.