DigiTx Partners, the digital healthcare venture capital fund recently formed by pharmaceutical company Astellas Pharma and MPM Capital, will invest up to $6m in each deal but plans to start small, according to chief executive David Kim.
DigiTx was launched by the firms in late July, and will target early-stage digital health companies, with a particular focus on technologies where care can be improved in conjunction with pharmaceuticals. Kim identified patient compliance technology, data-assisted disease risk analysis and clinical trial candidate selection as potential areas of interest.
“We are looking to invest anywhere between $2m an $6m in a company during the life of the deal. There is also some money carved out for really early-stage stuff where we can invest something less than $1m,” Kim told Global Corporate Venturing.
“The emphasis is really on early-stage companies going from seed to series A, perhaps early series B. If we do a deal with a later stage company it will be a small part of a large syndicate.”
Kim was not at liberty to reveal the amount of capital DigiTx will be working with initially, but said the investment “was mostly Astellas and a little less from MPM”. The fund will start out slowly, funding two or three startups per year before potentially expanding that activity down the road.
“Another thing we are probably going to be doing is adding to the overall amount of money we want to invest,” he added. “We want to start the process and look to definitely do two to three deals for the next couple of years, but our plans is to add additional capital so we can increase that.”
Astellas already runs a corporate venturing unit, Astellas Venture Management, which invests primarily in therapeutics developers, but Kim said the impetus behind its participation in DigiTx was that it had some interest in where digital health technology is going, but that the profile and investment process for a life sciences deal is different to digital health and so it made sense to bring some experience in that area on board (Kim was until recently COO of healthcare data analytics company Lumiata).
“Literally every pharma [company] is looking to do something with digital health, but different companies are doing it in different ways,” Kim said. “Novartis did DRX (Capital) and there are a lot of internal venture funds looking to incorporate digital health into their overall investment strategy.
“Astellas has Astellas Venture Management already, but they felt they needed extra for the digital health area because it is an area they are not very familiar with, so in partnership with MPM they decided to create an investment company. It functions very much like a venture fund but the main difference is we have the money in the bank already to out into action, and I would say the decision process is even more efficient than a venture fund.”
Although Kim logged some time at MPM Capital prior to 2007, he is acting independently as CEO, and will decide on investments in partnership with a representative each from Astellas and MPM.
Portfolio companies will not need to form any kind of strategic link with Astellas. Instead, the company wants to get an early look into where digital health is going and could potentially be an early customer. But what are its long term plans for how the technology will fit into its business?
“I don’t think they know,” Kim said. “And that is the reason why this is a really interesting way to explore all the opportunities out there. They are basically going to be learning about digital health and how it can be applied. There are very few people who have defined specifics of how they want to apply all the various technologies populated in other sectors, and how they are going to be used in their business.
“It is not a strategic mandate they have put forward for this particular opportunity, it is an opportunity for them to get really broad exposure to what is out there, and from there, we will make some decisions. One of the things we are going to have as part of the investment company is that Astellas is going to be having some of their internal folks working very closely with [DigitTx] so they will be part of the due diligence process and will get first hand exposure to what is available.”