Heidi Mason, managing partner of advisory service Bell Mason Group, spoke to Bill Taranto, president of Merck Global Health Innovation Fund, about his strategy-driven approach to corporate investment, together with Donato Tramuto, entrepreneur and founder of Physicians Interactive, the healthcare marketing company acquired by Merck.
Merck GHI Fund, a subsidiary of pharmaceutical company Merck, has grown in size from $125m to $500m in the past four years, has 28 portfolio companies and has completed four exits and three acquisitions. It won Unit of the Year at the GCV Awards last night.
The unit is described as having a “strategy-driven approach” which includes “combining emerging informational tools with existing health data, while leveraging health IT platforms.”
“We wanted to aggregate assets into a roll-up and learnt that we couldn’t get there with venture capital alone,” explained Taranto. In addition to venture capital, Merck GHI now deploys growth equity and M&A as additional financial tools, and, said Taranto: “we may yet add incubation.”
Physicians Interactive, Taranto said, was taken through the stages of growth equity and M&A following a strict strategy.
The acquired business, which has retained its independence with a separate board, was then combined with a similar but geographically diverse asset from within Merck, doubling Physicians Interactive’s topline revenue. Merck also financed the company’s acquisition of online health community platform MedHelp in July 2014.
“We mapped this out,” Taranto said, adding that there are still some stages to go. “We have the power to aggregate, but are essentially a pharmaceutical company and cannot go it alone. One of the next steps is to spin out a portion of Physicians Interactive to a partner.”
Tramuto commented that while it had been successful in moving the Merck asset over to Physicians Interactive, it had taken a year and a half. He described it as: “like moving Cleopatra down the Nile.”
“When you are looking for a corporate partner it is not a question of what they are doing in corporate venturing, but why,” Tramuto advised. “Merck were fundamentally committed to the ecosystem.”