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12 Industry-Venture Fund Alliances: 2014 Edition

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Print 01 August 2014
Genetic Engineering & Biotechnology News (GEN)

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

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

#6. GlaxoSmithKline (GSK) + Johnson & Johnson + Index Ventures

 

Total investment size: €150 million ($202.9 million)4 fund, to be named Index Life VI

Purpose: Stimulate promising, early-stage R&D innovation by investing in early-stage, single-asset life sciences companies with assets that have first-in-class or best-in-class mechanisms of action and target areas of unmet medical need. Companies will be in Europe primarily, as well as the U.S. and Israel.

Companies funded include: Egalet (Index led $20 million financing, in which included other unnamed existing investors participated, September 2013); XO1 (Index led $11 million Series A financing, June 2013); GenSight Biologics (participation in €32 million [$43 million] Series A financing, April 2013)5,6

Role of partners: Index will maintain full decision making rights to the portfolio companies. Fund rules and procedures will follow previous Index Ventures funds. All partners agreed to appoint executives to the nine-member Science Advisory Board: five seats for Index, two seats each for GSK and J&J.
Contributions of partners: Half the funding will come from Index, while one-quarter each will be contributed by GSK and J&J.

Rights and/or options: No exclusivity or commitment by GSK and J&J to therapeutics being developed by the startups. Drug companies will need to pursue licensing agreements with Index.

Announced: March 21, 2012

#5. GlaxoSmithKline (GSK) + Sanderling Ventures

 

Total investment size: $250 million

Purpose: Provide seed funding for West Coast biotech startups

Companies funded include: None announced7

Role of partners: GSK will retain a seat on the fund’s advisory committee

Contributions of partners: GSK will contribute $50 million toward the $250 million seventh fund that Sanderling Ventures agreed to assemble and manage, named Sanderling VII, plans for which were first reported in 2011.

Rights and/or options: Not disclosed

Announced: January 9, 2013

#4. Novartis + Amgen Ventures + Atlas Venture

 

Total investment size: $265 million Atlas Venture Fund IX

Purpose: Create and/or fund more than 15 new biotech firms; “Provide Amgen and Novartis with strategic proximity to Atlas Venture’s startup formation activities around innovative, potentially high-impact medicines, and catalyze future collaborations around translational research across Atlas Venture’s early-stage portfolio.”8

Companies funded include: Not disclosed8

Role of partners: Novartis and Amgen Ventures, the venture fund of Amgen, are limited partners in Fund IX. The partners’ roles include co-creation of life sciences startups, formation of asset-centric development projects, and helping translate discoveries from ongoing academic collaborations, among others.

Contributions of partners: Not disclosed

Rights and/or options: No exclusivity or any commitment by Amgen or Novartis to pursue opportunities. Atlas Venture maintains full authority over funding strategy and investment decisions.

Announced: May 16, 2013

#3. Merck Research Laboratories (MRL) + Merck Research Ventures Fund + Flagship Ventures

 

Total investment size: $270 million

Purpose: Launch and back new ventures that apply scientific breakthroughs to the development of new drugs in areas of unmet medical need.

Companies funded include: None announced

Role of partners: MRL-created Merck Research Ventures Fund made an undisclosed investment in Flagship’s fourth VC fund becoming a limited partner in the $270 million Flagship Ventures Fund IV L.P., which closed last year. MRL will gain exposure to Flagship’s investment and venture creation model to successfully translate scientific innovation into medical breakthroughs. The partnership is also designed to provide Flagship direct access to a global pharmaceutical industry leader with deep insight into pharmaceutical development, commercialization, and regulation.

Rights and/or options: Merck will have an opportunity, but no formal option or special rights, to acquire any startups being created through the Flagship-led fund. As a limited partner, neither the Merck fund nor its pharma company Merck & Co. will be able to control Flagship’s investment decisions.

Announced: April 10, 2012

#2. GlaxoSmithKline (GSK) + Avalon Ventures

 

Total investment size: $495 million

Purpose: Launch up to 10 life sciences startups in San Diego over the next three years, based on technologies from anywhere.

Companies funded include: Sitari Pharmaceuticals ($10 million Series A financing, November 2013)
Role of partners: Avalon will identify promising technologies focusing on early-stage discovery across various therapy areas. Avalon and GSK will jointly approve the formation of new companies based on the technologies and finance the startups together.9,10

Contributions of partners: Avalon will contribute $30 million from its $200 million Fund X, and provide executive leadership and operational management consistent with its current portfolio strategy. GSK will provide up to $465 million in company seed funding, R&D support, and payments tied to preclinical and clinical milestones toward the 10 startups, each focused on discovery of drugs against disease targets.

Rights and/or options: GSK will retain the option to acquire each company upon the generation of a clinical candidate. Should GSK elect not to exercise its option, company ownership will remain with Avalon, which will be free to enter into other strategic transactions.

Announced: April 22, 2013

#1. Rusnano + Domain Associates

 

Total investment size: $760 million

Purpose: Co-invest in about 20 U.S.-based life sciences companies, including pharmaceutical and biotechnology companies, developing innovative products “that have significant applications for patient populations in Russia, and that complement Rusnano’s focus on nanotechnology-based innovation.”11 The partners also agreed to foster technology transfer into Russia, and establish a pharmaceutical and medical device cGMP manufacturing facility in Russia.12

Companies funded include: ReVision Optics (participation in $55 million in Series E financing, July 2013); Regado Biosciences (participation in $51 million Series E financing led by RMI, December 2012); CoDa Therapeutics ($20 million toward $40 million in Series B financing round, July 2012); Marinus Pharmaceuticals (participation in $21 million in Series C financing, December 2012); Lithera (participation in $20.6 million in preferred stock equity financing, December 2012)13

Role of partners: The subsidiary of Russia’s $10 billion state-owned technology fund and the U.S.-based VC firm will jointly invest in emerging life sciences technology companies. The joint venture will manage advanced-stage clinical trials in Russia of new pharmaceuticals and other products that will support regulatory approval of these products in Russia, the U.S. and other markets.

Contributions of partners: Rusnano and Domain Associates each agreed to contribute $330 million toward the joint co-investments in companies. Partners have also engaged Team Drive, a management company led by former Sistema and MTS CEO Leonid Melamed, to develop the project.

Rights and/or options: Not disclosed 

Announced: March 6, 2012

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Honorable Mentions

The following two alliances we've left unranked simply because we weren't able to ascertain how much they invested. Still, we mustn't overlook....

QB3 Collaborative Startups / California Institute for Quantitative Biosciences (QB3) + Mission Bay Capital + 6 participating pharmas: Bayer HealthCare, J&J Innovation, Novartis, Pfizer, Roche, and Takeda Pharmaceuticals USA14

 

Total investment size: Not disclosed

Purpose: Identify, fund and support early stage life science startup companies in the San Francisco Bay Area. Plan is to launch one to two companies annually.

Companies funded include: None announced

Role of partners: QB3 will identify Collaborative Startups from sources that include the institute’s five-site incubator network in the Bay Area; QB3 Startup in a Box, a program to incorporate and structure new companies; the annual Bridging the Gap award program, which provides proof-of-concept support to academic scientists; or directly from university laboratories. After due diligence, participating pharmas and QB3, through its venture arm Mission Bay Capital, will co-invest in candidate startups at the seed stage. Participating pharmas may also contribute support in the form of scientific expertise or resources; and may also invest in a Series A funding round for candidate startups.15

Contributions of partners: Mission Bay Capital will award an undisclosed amount in seed-stage funding to qualified startups. No other financial details disclosed. QB3 consists of UC’s San Francisco (UCSF), Santa Cruz, and Berkeley campuses.

Rights and/or options: Decided case-by-case

Announced: May 15, 201314

Bayer HealthCare + Versant Ventures

 

Total investment size: Not disclosed

Purpose: Develop treatment options, focused on a novel target and pathway, for patients with eye diseases, such as wet age-related macular degeneration and geographic atrophy.

Companies funded include: None announced

Role of partners: Bayer and Inception Sciences, a drug discovery incubator exclusively backed by Versant, jointly conduct early research in ophthalmology in a newly created company called “Inception 4.”

Contributions of partners: Versant agreed to provide equity funding to Inception 4, while Bayer committed to support the collaborative project through payments tied to undisclosed milestones.

Rights and/or options: Bayer will have an exclusive option to acquire Inception 4 under certain conditions, using a Build-to-Buy model.

Announced: November 18, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes:
1 Size of first close. Partners have said their ultimate fund size objective is $101.4 million (€75 million).
2 venBio partner and cofounder Corey Goodman told Xconomy last month that the group was looking at trying to put together a larger second fund of up to $300 million.
3 venBio participated along with Seroba Kernel Life Sciences, Brandon Capital Partners (on behalf of AustralianSuper), and AshHill.
4 Reflects currency fluctuation since last year’s GEN List of industry-venture alliances, published June 20, 2013, which reported the fund’s value in U.S. dollars at $200 million.
5 GenSight: Index announced as a co-leader of the financing round, along with Abingworth, Novartis Venture Fund, and Versant Ventures.
6 Alliance information verified by a J&J spokesperson. Another startup assisted by the fund is Levicept, an Index Ventures portfolio company that discovered and is developing a novel first-in-class and safe biological agent (p75NTR-Fc) for the treatment of chronic pain.
7 Information disclosed by GSK last year; a spokesperson for the company at deadline had not responded to a GEN email seeking to re-confirm the information.
8 Information disclosed by alliance partners last year; spokespeople for Novartis and Amgen at deadline had not responded to GEN emails seeking to update the information.
9 Separately, Avalon established COI Pharmaceuticals (COI), a venture-pharma entity formed to provide operational support, a fully equipped R&D facility and an experienced leadership team to Sitari and future companies that may be created from the Avalon-GSK collaboration.
10 Information disclosed by alliance partners last year and confirmed earlier this year via interview with Jay Lichter, Ph.D., managing partner with Avalon Ventures.
11 From a press release announcing the investment partnership; see: http://en.rusnano.com/press-centre/news/88612
12 A new pharmaceutical company, called NovaMedica, was established in 2012 as part of the collaboration between Domain and Rusnano. NovaMedica was formed specifically to develop, market, and commercialize the innovative next-generation products from the collaboration in Russia and the Commonwealth of Independent States (CIS).
13 ReVision: Rusnano subsidiary RusnanoMedInvest (RMI) joined Johnson & Johnson Development Corp. (JJDC) as new investors alongside Domain and three other existing investors, Canaan Partners, InterWest Partners, and ProQuest. Regado: Financing led by new investor RMI, with participation from new investor Baxter Ventures and existing investors Domain, Edmond de Rothschild Investment Partners, Quaker Partners, Aurora Funds and Caxton Advantage Life Sciences Fund. CoDa: Alliance’s $20 million came from RMI, which joined existing investors Domain, GBS Ventures and BioPacificVentures. Marinus: Domain and RMI joined Canaan Partners, Sofinnova Ventures and Foundation Medical Partners. Lithera: RMI led financing through alliance, while Domain joined Alta Partners as existing investors along with new investors AMOREPACIFIC Ventures and Numoda Capital Innovations.
14 Bayer’s participation was the first of several announcements by QB3 about participation in the program by pharma companies. Bayer noted that QB3 and Mission Bay Capital would work with startups in the company’s areas of interest, which include cardiology, hematology, oncology, ophthalmology, and women’s health, as well as in emerging technologies that include gene therapy and synthetic biology. The startups draw on resources at Bayer’s U.S. Science Hub and CoLaborator incubator, located across from UCSF’s Mission Bay campus.
15 QB3 does not disclose the amount of seed funding invested. Bayer said last year that Mission Bay Capital had committed to fund up to $500,000 per startup. The company on July 21 confirmed the accuracy of that figure and other information published last year by GEN. 

Source

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