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July 28, 2014

12 Industry-Venture Fund Alliances: 2014 Edition

For companies struggling with R&D costs, VC firms can be saviors.

12 Industry-Venture Fund Alliances: 2014 Edition

When pharma and biotech firms partner with venture capital companies, the industry gets a booster shot. [© Ljupco Smokovski - Fotolia.com]

  • It helps to have a friend. And for several pharma giants scrambling to cut R&D costs, those friends are venture capital firms that co-invest in startups whose new drugs and platform technologies appear attractive. In some cases, these pharma-venture “alliances” launch the startups, using the expertise of VC firm partners and company executives.

    Following is a list of 12 such alliances announced in recent years, mostly by biopharma giants with venture capital firms. The alliances are ranked by total size of funds since those amounts have been disclosed. To the end of the list, we included two additional unranked alliances where partners have not furnished the size of their total investment.

    Alliances are listed by their partners; their purpose; the role of their partners; the financial contributions of their partners, where disclosed; rights and/or options on drugs resulting from alliance activity, again where disclosed; and the date the alliance was announced. All non-U.S. currencies were converted to U.S. dollars on July 21, 2014.

    Most of the 12 listed alliances were formed during the past two years, reflecting the industry’s increasing view that the alliances will offer a more efficient way of developing new drugs by requiring much less than the billions long spent upfront by biopharmas on internal R&D. While the alliances require much less capital from industry, it remains to be seen whether R&D activity will increase, and more new drugs win approval and reach the market, to justify the reduced investment. A key reason why is because only a few of the alliances have disclosed the startups in which they have invested.

    The list does not include individual corporate venture funds, the subject of a GEN List published June 30; or the top 30 venture capital firms for 2013, published in GEN December 9, 2013.

  • #12. GlaxoSmithKline (GSK) + SR One + Canada Life Sciences Innovation Fund

    Total investment size: $50 million

    Purpose: Significantly advance the commercialization of scientific innovation in Canada by investing in early-stage breakthrough research.

    Companies funded include: None announced

    Role of partners: GSK and its corporate venture capital arm SR One will manage the fund, which will identify strategic investment opportunities within Canada's life sciences industry—including academic and health institutions, translational research centers, and start-up companies.

    Contributions of partners: GSK agreed to contribute all $50 million toward the fund, designed to strengthen GSK's position as a Canadian R&D leader and offers the company a unique opportunity to help close Canada's innovation gap.

    Rights and/or options: Not disclosed

    Announced: November 10, 2011

  • #11. GlaxoSmithKline (GSK) + Kurma Life Sciences Partners (KLS Partners) + bpifrance (CDC Entreprises) + Idinvest Partners + New Enterprise Associates (NEA)

    Total investment size: $59.5 million (€44 million)1

    Purpose: First venture capital fund dedicated to financing innovation in the rare diseases space with a network of eminent European research institutes.

    Companies funded include: None announced

    Role of partners: GSK, through its GSK Rare Diseases business, provides industrial expertise, while the other partners are venture capital firms that provide financing and/or entrepreneurial expertise. CDC Enterprises, a wholly owned subsidiary of the French Caisse des Dépôts whose investments range from technology seed funding to small-cap buyouts, and Idinvest, a private equity manager focused on middle market companies, are two historical partners of KLS Partners.

    Contributions of partners: GSK has disclosed its investment of nearly $23.7 million (€17.5 million)

    Rights and/or options: Not disclosed

    Announced: June 20, 2013

  • #10. Merck & Co. + Lumira Capital + Teralys Capital

    Total investment size: $101 million Lumira Capital II LP and $50 million Merck Lumira Biosciences Fund

    Purpose: Lumira Capital II is designed to invest in late-stage clinical stage development of medications, diagnostics, and medical devices in North America; Merck Lumira Biosciences Fund established to invest solely in Québec biotechnology companies before their products have reached proof-of-concept in humans.

    Companies funded include: None announced

    Role of partners: Merck agreed to “screen and select potential partners with which we could form alliances,” in order to “provide a vehicle where Merck scientific expertise could be made available to the general partners of” Lumira and Teralys, which make decisions on investments in early-stage biotechs, Reid J. Leonard, Ph.D., executive director, worldwide licensing for Merck & Co., said at the 2012 Boston Venture Forum.

    Contributions of partners: Merck has committed $5 million toward the $101 million Lumira Capital II, and $35 million toward $43 million first closing of Merck Lumira Biosciences Fund, which has set a closing target of $50 million. The Merck funds are part of a commitment announced in 2010 to invest $100 million through 2015 in biopharmaceutical research and development in Québec. The commitment was made when, as part of a global restructuring, Merck shut down its Merck Frosst Centre for Therapeutic Research in the Montreal suburb of Kirkland, laying off most of its staff of 180. Teralys Capital committed to a total $35 million in both funds.

    Rights and/or options: Unless negotiated separately with the portfolio companies of the Fund, Merck will not have any rights to the fund’s portfolio companies or their products simply by virtue of its role as a limited partner.

    Announced: March 26, 2012 

  • #9. Eli Lilly + TVM Capital + Teralys Capital + BDC Venture Capital + Fondaction + Advantus Capital Management

    Total investment size: $150 million

    Purpose: Invest primarily in early-stage drug development and opportunities for life science companies.

    Companies funded include: None announced

    Role of partners: TVM Capital manages the fund, with expertise provided by Chorus Canada, an offshoot of global-early-phase drug development network Chorus, focused on cost-effectively progressing potential medicines from candidate selection to clinical proof-of-concept. Chorus Canada works with development service providers across the province and elsewhere to offer development services to project-focused companies based primarily in Québec. Chorus is an autonomous unit of Eli Lilly.

    Contributions of partners: $65 million from Teralys in $150 million fund, named TVM Life Science Ventures VII. Contributions of other partners not disclosed. BDC Venture Capital is the VC arm of Business Development Bank of Canada.

    Rights and/or options: Not disclosed

    Announced: May 28, 2012 

  • #8. Daiichi Sankyo + Kearny Venture Partners

    Total investment size: $180 million

    Purpose: Enhance Daiichi Sankyo research and development activities.

    Companies funded include: None announced

    Role of partners: Kearny Venture Partners, L.P., a limited partnership that invests primarily in U.S. life science companies, agreed to make equity investments in emerging life sciences and medical technology sectors, including specialty pharmaceuticals, emerging biopharmaceutical, drug delivery technologies, diagnostics, biotechnology, and medical devices. Daiichi Sankyo may seek to establish research collaborations with companies in the fund.

    Contributions of partners: Daiichi Sankyo agreed to invest $60 million in $180 million fund.

    Rights and/or options: Daiichi Sankyo retains the right of first refusal to make additional investments in the Fund's portfolio of companies.

    Announced: September 8, 2006

  • #7. venBio (Amgen + Baxter International + PPD + Alexandria Real Estate Equities)

    Total investment size: $180 million2

    Purpose: Investment in developers of clinical-phase drug candidates, with the goal of exit via merger or acquisition by biopharma giants.

    Companies funded include: Aurinia Pharmaceuticals; Heart Metabolics (alliance participated in $20 million Series A financing, the company said April 17); Solstice Biologics; Aragon Pharmaceuticals (acquired 2013 by Johnson & Johnson for up-to-$1 billion); Cytos Biotechnology (“to wind down key operational activities,” the company said May 5); Labrys Biologics (to be acquired by Teva Pharmaceutical Industries for up-to-$825 million, the companies said June 3) (3)

    Role of partners: Limited partners contributing financing plus expertise.

    Contributions of partners: Not disclosed

    Rights and/or options: Not disclosed

    Formed June 2009; launched January 1, 2010; inaugural fund closed in 2011

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