The life sciences and health sector is facing exponential technological changes on various fronts, in an ever more digitised, automated, data-abundant and data-driven world, which is said to be in the midst of its “fourth industrial revolution”.
A Deloitte report – 2018 Global life sciences outlook – summarised the transformation of the sector, brought about by artificial intelligence (AI), automation and computing power, as follows: “Continuous manufacturing technology and robotic process automation (RPA) are shortening production times and increasing process efficiencies. These technologies are benefiting patients and clinical trial productivity but also lead to increase in data volume, further leading to the need for scale and security in the business.”
The growing data volume in the sector will undoubtedly necessitate the use of big data and cloud technologies. AI algorithms will be used to help analyse vast amounts of data and streamline clinical trials, patient records and drug discovery. Apart from the convergence with digital tech, the report also notes that “3D printing and gene therapy may disrupt the sector by offering customised targeted patient treatment, including newly-approved Car-T therapies.”
The datafication and growing adoption of digital technologies in the life sciences sector will also be accompanied by significant cyberrisks. The Deloitte report highlights that “to mitigate cybersecurity risks, [health] organisations will need to avoid disconnected governance and establish real-time monitoring, cyber-threat modelling and analysis”.
A case in point from 2017 was the ransomware WannaCry, which significantly affected the IT systems of the UK’s National Health Service. The cyberattack reportedly led to temporary chaos with diverted ambulances and even cancelled surgeries. Despite this, so far there have been no indications of interest in cybersecurity applications by corporate venturers from the health sector. However, it is logical to expect to see more such investments in the near future.
Connectedness of health providers and patients, however, does have a significant upside. Mobile devices and widespread internet access enable healthcare providers to enhance patient engagement, clinical outcomes and health literacy. The field of “digital therapeutics” employs such technologies to supplement or replace traditional clinical therapies.
Some mobile applications help patients with dosage and timing of medication, while others offer sensorial stimuli alternative to chemical-based medicinal drugs for conditions such as depression or insomnia. As a McKinsey article – Digital therapeutics: preparing for takeoff – points out, digital therapeutics solutions tend to target chronic diseases or neurological disorders that are “poorly addressed by the healthcare system”.
The reports also notes that there is more emerging evidence on the efficacy of digital therapeutics, citing an example of a US-approved app used to treat alcohol, marijuana, and cocaine addiction. It was found that “40% of patients using the app abstained for a three-month period, compared with 17.6%” of those who did not.
One of the major challenges for digital therapeutics is, however, that it is “often not distinguished from the digital health and well-being market, which includes anything from sleep trackers to fitness apps”. Furthermore, there are at present no incentives for stakeholders like healthcare providers, payors, and pharmaceutical companies to adopt digital therapeutics, despite the potential such applications have for generating valuable data.
Sensors, advances in AI and digital therapeutics are broadening the definition of medtech and medical devices to encompass digital products and data-driven services. According to an EY report – Medical technology report 2017: pulse of the industry – medtech generated $360bn in revenue during 2016, the highest figure since the global financial crisis in 2008. However, the report also explains that the growth was largely due to acquisitions, as “device makers have been under pressure to deploy capital more efficiently, which has resulted in increased inorganic activity.”
If bundled properly with digital therapeutics and healthcare services, medical devices and medtech could contribute to enhancing patient engagement in real time, monitoring, targeted and customised care, along with other advances, such as in genetics and gene therapy. This will ultimately lead to a more patient-centric model of healthcare.
By far the most important subsector in life sciences is pharmaceuticals. The global outlook for the pharmaceutical industry in the near term, according to experts, appears mostly promising. A 2016 market report on the sector by the US Department of Commerce forecast that the global market for pharmaceuticals would grow to $1.3 trillion by 2020, up from an estimated $1 trillion in 2015. The report also identified key demographic and economic drivers behind this growth. On the demographic side, there is an ageing population worldwide, particularly in the developed world, as well as associated chronic diseases. On the economic side, greater disposable incomes, higher urbanisation and hence more access to healthcare, as well as growing demand for effective treatments, foment the growth of pharmaceutical consumption.
Nevertheless, there will also be challenges for pharma. The Great Recession of the late 2000s has resulted in global fiscal austerity, in light of which governments that pay or co-pay for medicines for their citizens are expected to reduce costs by placing limits on drug pricing. On the other hand, health insurers and providers are becoming increasingly demanding with value-based pricing models, where the inclusion or adoption of a new drug requires evidence of effectiveness, cost savings and clinical benefits. These new trends can significantly affect pharmaceuticals’ bottom line and force them to switch business models.
Within the realm of pharmaceuticals and biopharmaceuticals, cancer treatment is among the most important fields to undergo a significant shift in recent years. As the Quintile IMS Institute report – Global Oncology Trends 2017 – notes, 68 novel therapies were launched globally between 2011 and 2016, which have contributed to “improved outcomes for patients, especially for metastatic disease, and have led to an increased number of patients receiving treatment”.
A large part of the biopharmaceutical deals tracked by GCV are directly related to cancer treatment. The dealflow in this category is likely to remain high in the future, as cancer continues to be a modern scourge. According to the World Health Organisation, cancer was responsible for 8.8 million deaths in 2015 – one in every six deaths worldwide.
Immuno-oncology – cancer treatments that boost the immune system – have come to the fore. New therapies include monoclonal antibodies, immune checkpoint inhibitors that overcome a cancer’s defences against the immune system, immune system modulators, which are chemical agents that change the response or functioning of the immune system, and cancer vaccines, among others. A report by Zion Market Research – Global immuno-oncology therapy market report – estimates that the market for such novel therapies will grow from $42.9bn in 2016 to over $97bn by 2022, stating that this paradigm shift from traditional chemotherapies “is propelling overall market growth”.
The aforementioned US Department of Commerce 2016 report on pharmaceuticals also noted that the US “attracts the majority of venture capital investments in startup biopharmaceutical enterprises”, which along with its intellectual property legal framework and its vast research base, keeps the country at the forefront of innovation in this area This statement is consistent with our data findings.
For the period May 2017 to April 2018, we reported 278 venturing rounds involving corporate investors from the health sector. Most (179) took place in the US, while 13 were hosted in China and 16 in the UK.
The vast majority (259) went to emerging enterprises in the health sector, with the remainder going into a few companies developing technologies tangentially related to health – six deals in industrials, mostly advanced materials, robotics and 3D printing with medical applications, and six in IT – software and semiconductor developers – among others.
The network diagram showing co-investments of health corporates illustrates the sector’s incumbents have often co-invested in cancer treatment and detection technologies – companies like Effector Therapeutics and Grail – as well as developers of new molecules, such as Lodo Therapeutics, treatments of chronic and viral diseases – Omada Health and Alios BioPharma – as well as healthcare transport and logistics – Circulation.
On a calendar year-on-year basis, total capital raised in corporate-backed investment rounds went up from $8.09bn in 2016 to $9.17bn in 2017, a 13% increase. The deal count also registered a modest 4% increase from 275 deals in 2016 to 288 in 2017.
As outlined further in this article, the 10 largest investments by corporate venturers from the health sector were concentrated in the life sciences realm.
The leading corporate investors from the health sector were pharmaceutical firms Johnson & Johnson, Novartis, Novo and Eli Lilly. The list of health corporates committing capital in the largest rounds was topped by pharmaceuticals distributor Dexxon, and pharmaceuticals producers Eli Lilly, Celgene and Novartis. The most active corporate venturers in the emerging health companies were diversified internet conglomerate Alphabet along with Johnson & Johnson and real estate firm Alexandria, telecoms conglomerate SoftBank and financial services firm Fidelity. The presence of Alphabet and SoftBank in this list is not surprising, as both aim for diverse holdings in their broader portfolios, including life sciences.
The rising health businesses in the portfolio of these non-traditional investors were varied, encompassing anything from pharmaceuticals and gene therapies through medical devices and diagnostics to healthcare IT.
Overall, corporate investment in emerging health-focused enterprises went up from 2016 to 2017 in terms of both volume and value. According to GCV Analytics data, $13.38bn was invested over 428 rounds in 2017, compared with $9.84bn invested over 383 deals in 2016.
Deals
Health sector corporates invested in a number of large rounds, raised by a range of enterprises, primarily from the same sector, developing treatments for cancer, neurodegenerative diseases, rare and orphan diseases as well as diabetes. Only one of the top rounds was above $1bn.
The SoftBank Vision Fund led a $1.1bn round for Switzerland-based drug developer Roivant Sciences that featured existing investors, including Dexxon. Founded in 2014, Roivant pursues a business model whereby it develops therapeutics through a range of subsidiaries, including Myovant, which focuses on endocrine diseases and women’s health in general, Axovant (neurology), Dermavant (dermatology), Enzyvant (rare diseases) and Urovant (urology). The funding will be used to launch additional subsidiaries.
US-based immuno-oncology drug developer Allogene Therapeutics was launched with $300m in series A financing from investors including pharmaceutical firm Pfizer, which also provided assets. The round was also backed by University of California’s Office of the Chief Investment Officer of the Regents, among others. Pfizer will own a 25% equity stake in Allogene following the deal. Allogene was founded to develop 16 preclinical assets and one clinical asset licensed by Pfizer from biopharmaceutical developers Cellectis and Servier for an approach called allogenic Car-T therapy.
US-based biopharmaceutical company Harmony Biosciences closed a $270m funding round that featured Novo and Nan Fung Life Sciences, a subsidiary of property developer Nan Fung. Financial services group Fidelity Management & Research also took part in the round. Harmony is developing drug treatments for rare and orphan diseases, particularly those which affect the central nervous system. It forms part of the Paragon Biosciences group.
US-based biotech startup Celularity secured $250m from investors including pharmaceutical companies Celgene, United Therapeutics and Sorrento Therapeutics, genomic data provider Human Longevity and conglomerate Genting Group. Celularity is developing cell and tissue regenerative therapies derived from the placenta, to address conditions such as autoimmune diseases, diabetes, haematological and solid tumours, and the effects of ageing.
US-based personal genomics marketplace developer Helix closed the first tranche of a $200m series B round featuring genomics technology provider Illumina and medical research firm Mayo Clinic. Helix was launched in 2015 with $100m from Illumina, Mayo Clinic, Warburg Pincus and Sutter Hill, and operates what it refers to as an online store for personal genomics products, offering services such as genetic sample collection, DNA sequencing and secure genetic data storage.
US-based health information platform SomaLogic closed a $200m round following an extension provided by Nan Fung Life Sciences. Digital health technology developer iCarbonX anchored the round, having invested in January last year. Founded in 1999, SomaLogic develops technology that measures changes in thousands of proteins in the body, using the data to provide real-time personalised insights into, and recommendations for, a person’s wellbeing and health.
Johnson & Johnson Innovation–JJDC, the corporate venturing vehicle of Johnson & Johnson, invested in US-based 3D manufacturing technology producer Carbon as part of its $200m series D round. Originally known as Carbon 3D, Carbon is developing an alternative to 3D printing that involves a light and oxygen-based process that can construct items from a resin base. Johnson & Johnson and Carbon have been working together on a process that would apply the latter’s “digital light synthesis” technology to producing medical equipment, including instruments used in orthopaedics surgery.
China-based biopharmaceutical company Innovent Biologics closed a $150m series E round, featuring Lilly Asia Ventures, a corporate venturing subsidiary of Eli Lilly, as well as insurance provider Taikang Insurance and Legend Capital, the venture capital firm formed by conglomerate Legend Holdings. Founded in 2011, Innovent Biologics develops a portfolio of treatments for cancer, ophthalmology, autoimmune disorders and cardiovascular diseases. It currently has 16 candidates in its pipeline including seven in clinical development.
China-based drug developer Hua Medicine secured a total of $117.4m in series D and E funding from investors including Ping An Ventures, the corporate venturing arm of insurer Ping An. Other backers also included WuXi AppTec Corporate Ventures, an investment vehicle of life sciences R&D firm WuXi AppTec, as well as Eight Roads and F-Prime Capital, two investment branches of Fidelity. Hua is working on treatments for type 2 diabetes and levodopa-induced dyskinesia, a condition that causes involuntary movement disorders and which is often the result of long-term dopamine therapy in people with Parkinson’s disease.
US-based diabetes treatment developer Semma Therapeutics closed a $114m series B round that included medical device manufacturer Medtronic and pharmaceutical firms Novartis and SinoPharm. SinoPharm contributed cash through its corporate venturing arm SinoPharm Capital. The round included 6 Dimensions Capital, an investment firm established by WuXi AppTec’s WuXi Healthcare Ventures unit. Founded in 2014, Semma Therapeutics is working on stem cell-derived therapies, with an initial focus on type 1 diabetes mellitus patients dependent on insulin. The drug candidate is reported to have proved itself effective in preclinical studies at controlling diabetes.
There were interesting deals in emerging health-focused business that received financial backing from corporate investors from other sectors.
Ping An Healthcare Management, the medical data collection and analysis subsidiary of Ping An Insurance, raised almost $1bn in funding co-led by the SoftBank Vision Fund, which supplied $400m, alongside fellow lead investor financial services firm SBI Holdings, which provided $450m. The deal valued Ping An Healthcare Management at $8.8bn. Established in 2016, Ping An Healthcare Management has developed a platform for public medical insurance services and hospitals to manage various aspects of healthcare, such as social health insurance, drug distribution and medical treatment.
US-based health intelligence provider Outcome Health raised $600m from a consortium that included CapitalG, the growth-stage corporate venturing division of Alphabet. The round valued Outcome Health at $5bn pre-money. Founded in 2006, Outcome Health has developed a platform to deliver health information and intelligence during critical moments to help both medical professionals and patients make better decisions.
China-based medical imaging equipment developer United Imaging Healthcare closed a RMB3.3bn ($505m) series A round co-led by insurance provider China Life Insurance and SDIC Fund Management, a private equity firm majority-owned by the Chinese government’s State Development & Investment Corporation. Founded in 2011, United Imaging is working on imaging devices that use computerised tomography, magnetic resonance imaging and digital radiography. It has also developed a full-body Pet scanner to track internal metabolic processes.
Moderna Therapeutics, a US-based RNA therapeutics developer backed by pharmaceutical firm AstraZeneca, raised $500m from investors including Alexandria Venture Investments, a branch of life sciences real estate trust Alexandria. The round reportedly valued Moderna at $7.5bn. Investors included Singapore government-owned EDBI and sovereign wealth fund Abu Dhabi Investment Authority. Incubated by venture capital firm Flagship Ventures in 2010, Moderna is working on treatments based on messenger RNA, molecules that transmit genetic information. The company is developing 19 drug candidates for treating infectious, rare or cardiovascular diseases, plus immuno-oncology therapies.
Guardant Health, a US-based developer of a liquid biopsy system for cancer detection, raised $360m in a round led by an unnamed subsidiary of SoftBank. The round also featured Singapore state-owned Temasek. Founded in 2013, Guardant is working on non-invasive cancer diagnostics tests that utilise digital sequencing technology to provide a detailed picture of genomic alterations that cause tumours to grow, evolve or form resistance to treatment. The company’s first product, Guardant360, tests a patient’s blood.
US-based genetic testing and analysis provider 23andMe, backed by corporates such as Alphabet, raised nearly $200m in a series F round. Fidelity Management & Research reportedly invested in the round. Founded in 2006, 23andMe tests customer-supplied saliva for information about ancestry and genetic health issues, including conditions such as lactose intolerance or late-onset Alzheimer’s disease, and whether a customer is a carrier for certain inherited conditions.
Exits
Corporate venturers from the health and life sciences sector -completed 39 exits between May last year and April this year, including 17 acquisitions, 20 initial public offerings (IPOs) and two mergers. On a calendar year-on-year basis, there was a slight drop in 2017 to 32 exits, fewer than the 36 transactions tracked in 2016. The estimated exited capital went down even more drastically to $5.65bn in 2017, compared with $13.19bn in 2016, a 58% decrease.
Pharmaceutical firm Roche agreed to acquire cancer research technology provider and portfolio company Flatiron Health, paying $1.9bn for the remainder of the company’s shares. Roche already owned 12.6%, meaning the acquisition will value the company at approximately $2.15bn. Founded in 2012, Flatiron has developed electronic health record software configured for oncology research as well as technology to manage and develop cancer research data.
Pharmaceutical firm Lundbeck agreed to acquire Netherlands-based central nervous system disorder therapy developer Prexton Therapeutics for up to €905m ($1.11bn), allowing Germany-based pharmaceutical company Merck to exit. Lundbeck will pay €100m up front, with the rest to come in the form of development and sales milestone payments. Founded in 2012, Prexton is developing foliglurax, an oral treatment for Parkinson’s disease.
NeoTract, a US-based medical device manufacturer backed by Johnson & Johnson, agreed to an acquisition by medical device maker Teleflex for $1.1bn. Teleflex will pay $725m in cash on closing the deal. The remaining $375m is dependent on commercial milestones. Founded in 2004, NeoTract has developed a minimally invasive device, UroLift, to treat lower urinary tract symptoms caused by an enlarged prostate gland.
Celgene agreed to acquire US-based cancer treatment developer Impact Biomedicines for $1.1bn, giving an exit to pharmaceutical company Sanofi. Celgene is paying $1.1bn up front, but up to $1.4bn more could come from milestones linked to regulatory approvals. Founded in 2016, Impact Biomedicines develops therapies for complex cancers based on fedratinib, an oral small-molecule inhibitor, which will address bone marrow disorders.
Biotechnology producer Bioverativ agreed to acquire True North Therapeutics, a US-based rare disease therapy developer backed by pharmaceutical firm GlaxoSmithKline, in a deal that could reach $825m. Bioverativ will pay $400m up front plus up to $425m in milestone payments contingent on development, regulatory and sales achievements. True North was spun out of pharmaceutical company iPierian in 2013. Its lead drug candidate is a monoclonal antibody being developed to combat a rare haemolytic disease.
Pharmaceutical producer Gilead Sciences agreed to acquire US-based cell therapy developer Cell Design Labs in a deal worth up to $567m to help in the development of cancer drugs. The transaction includes a 12.2% stake in Cell Design held by Kite Pharma, which Gilead bought for $11.9bn in October 2017. Both Kite and Cell Design focus on chimeric antigen receptors to reprogram a patient’s T-cells to fight cancer, also known as Car-T immunotherapies. Cell Design’s pipeline includes early-stage treatments for prostate cancer and a type of blood cancer.
Rigontec, a Germany-based RNA therapeutics developer backed by pharmaceutical firm Boehringer Ingelheim, agreed to an acquisition by US-based pharmaceutical company Merck & Co for up to €464m. Merck, will pay €115m up front, with the remaining €349m dependent on clinical, development, regulatory and commercial milestones. Rigontec, spun out from University of Bonn’s Institute for Clinical Chemistry and Clinical Pharmacology in 2014, is developing an immuno-oncology treatment that exploits a mechanism of the body’s immune system.
Apama Health, a US-based catheter developer backed by healthcare provider Ascension Health, agreed to an acquisition by medical device manufacturer Boston Scientific for up to $300m. Boston Scientific will pay $175m upfront, with the remaining $125m dependent on clinical and regulatory milestones. Founded in 2009, Apama has been developing a radiofrequency balloon catheter system to treat atrial fibrillation, a condition that affects about 33 million worldwide.
Medical technology producer LivaNova agreed to pay up to $225m to acquire the outstanding shares of US-based sleep apnoea device maker and portfolio company ImThera Medical. The acquisition will consist of $78m up front, with the full amount dependent on regulatory and sales milestones. ImThera produces neurostimulation devices to treat obstructive sleep apnoea by stimulating the tongue muscles to keep a patient’s airway open while asleep.
Homology Medicines, a US-based rare disease treatment developer backed by Novartis, raised $165.6m from its IPO on the Nasdaq Global Select Market. The company, which originally targeted $100m, priced shares at $16, offering a total of 9 million. Founded in 2015, Homology Medicines is working on gene therapies that target the underlying causes of rare diseases. The company will use $18m to $20m to advance its lead candidate, HMI-102, through preclinical studies and a phase 1 and 2 trials.
Global Corporate Venturing also reported exits from emerging health-related enterprises that involved corporate investors from other sectors.
Berry Genomics, a China-based prenatal genetic testing company backed by Legend Holdings, completed a merger with Shenzhen-listed automotive parts manufacturer Chengdu Tianxing Instrument and Meter. The transaction valued Berry Genomics at RMB4.3bn, down from its 2015 valuation of RMB10bn. Tianxing issued approximately 203 million shares at RMB21. Founded in 2010, Berry Genomics offers non-invasive prenatal genetic testing and diagnostics, such as DNA sequencing for disease screening.
US-based neurodegenerative therapies developer Denali Therapeutics raised $250m in its IPO, which was reported to be the biggest biotech listing of 2017. Denali priced its stock at $18 a share, in the middle of the range it had set, giving the company a market capitalisation of $1.58bn. The flotation reportedly allowed Alphabet to exit. Formed in 2015, Denali Therapeutics develops treatments for diseases such as Alzheimer’s, motor neurone and Parkinson’s.
Funds
Between May 2017 and April 2018, corporate venturers and corporate-backed VC firms investing in the health sector secured over $7.9bn in capital via 47 funding initiatives, which included 38 corporate-backed VC funds, four new venturing units, four accelerators and one other initiative. On a calendar year-to-year basis, funding initiatives decreased sharply, from 74 in 2016 to 43 last year. Total estimated capital also went slightly down from $5.94bn to $5.67bn.
China-based venture capital firm Qiming Venture Partners closed a $935m fund, securing capital from limited partners including Mayo Clinic. Other investors included Princeton University, Massachusetts Institute of Technology and Duke University, among others. The vehicle was announced alongside two other funds – the Chinese renminbi-denominated Qiming Venture RMB Fund V, which attracted RMB2.1bn in commitments as well as Qiming US Healthcare Fund I, which secured $120m. This last fund will invest in early-stage healthcare startups in the US.
WuXi Healthcare Ventures, the strategic investment arm of WuXi PharmaTech, agreed to merge with venture capital firm Frontline BioVentures. The merger created a new entity – 6 Dimensions Capital – which has approximately RMB5.5bn of assets under management. WuXi Healthcare Ventures was launched in 2011 as a VC firm affiliated with WuXi PharmaTech, which is also known as WuXi AppTec. It had more than $350m under management in December 2015 when it closed its second fund at $290m.
UK-based life sciences-focused investment firm Medicxi closed a late-stage fund at $300m with contributions from Novartis and Verily, a life sciences subsidiary of Alphabet. Medicxi Growth 1’s limited partners include the multilateral European Investment Fund and undisclosed investors and backers from its first fund, which included GlaxoSmithKline and Johnson & Johnson. The fund will aim to provide growth-stage funding to biotech companies in Europe that are looking to expand but lack access to the same level of late-stage funds as their US counterparts.
US-based healthcare system Partners HealthCare closed approximately $171m in financing that will be put into two corporate venturing funds. The overall amount consists of a $105m investment by institutions in the group’s Partners Innovation Fund, which invests in early-stage healthcare companies, and $66.1m in capital raised from external investors that will go to its Partners Innovation Fund II. Partners Innovation Fund was launched in 2008 with a $35m investment by Partners Healthcare. It focuses on seed and follow-on investments in developers of technology based on intellectual property at least partly owned by its hospitals.
US-based health services provider Optum launched a $250m corporate venturing fund – Optum Ventures – to focus on the healthcare sector. The fund will be led by partners AG Breitenstein and Virginia McFerran, who will report to Larry Renfro, chief executive of Optum and managing partner of Optum Ventures. It will operate out of offices in Boston and Menlo Park. The fund will particularly seek out early-stage companies working on technologies to deliver better healthcare, such as digital health startups that aim to improve access to services and businesses that enhance the healthcare system.
GE Healthcare, the health technology division of diversified conglomerate General Electric, agreed to be the anchor investor in a $200m healthcare-focused fund formed by investment bank EFG Hermes. Multilateral development finance provider African Development Bank was also a limited partner in the fund, though neither revealed the size of their commitments. The Rx Healthcare Fund, as it was dubbed, has a target size of $200m and will focus on companies that can help meet the demand for high-quality and affordable healthcare across Africa. It will scout for opportunities in specialised hospitals, medical diagnostics and pharmaceutical sectors across Kenya, Nigeria, Ethiopia, Egypt, Tunisia and Morocco.
Netherlands-based venture capital firm BioGeneration Ventures (BGV) closed its third fund at €82m, having secured capital from limited partners including pharmaceutical firms Bristol-Myers Squibb and Johnson & Johnson. The fund’s investors include the European Investment Fund among others. BGV III seeks to identify early-stage opportunities in the biotechnology sector, particularly in therapeutics, medical devices and diagnostics. It will invest across Europe, with a focus on Benelux and Germany.
US-based medical devices manufacturer Sanovas signed a deal with the government of the Chinese city of Suzhou to create a venture capital fund and establish an innovation centre. The Sanovas Suzhou Venture Capital Fund is equipped with $75m and will focus on areas relevant to the company’s operations, including surgical imaging, thoracic oncology, interventional pulmonology, ear, nose and throat treatments, ophthalmology and bioscience. The innovation centre will be located at the Chinese Academy of Sciences’ Suzhou Institute of Nanotechnology and Nanobionics. The hub’s aim is to help drive the company’s product development and sales in China.
Healthcare technology services provider Sprim launched a Singapore-based venture capital initiative in partnership with asset management firm Tikehau Capital with $50m. Sprim’s participation in the fund – TKS1 – will be conducted by its local corporate venturing unit, Sprim Ventures. The $50m figure represents its initial close. TKS1 aims to provide between $500,000 and $5m for early-stage life sciences and medical technology developers.
Canada-based venture capital fund manager AmorChem Group launched a seed-stage life sciences fund with $44.2m of capital from limited partners including US-based Merck & Co. AmorChem II’s other limited partners include the Quebec government and its capital development organisation, Fonds de solidarité FTQ. The fund will focus on investments in life sciences projects at universities and research centres in Quebec. AmorChem has managed biotech-focused VC funds since 1997 and has more than $350m in assets across five funds. It launched AmorChem I in 2011 with approximately $41.3m in capital, $6.9m of which came from Merck.
People
Bill Maris, former CEO of corporate venturing unit GV, formally closed the first fund for his new venture capital firm, Section 32, at $150m. Maris was the first chief executive of GV, a subsidiary of Alphabet then known as Google Ventures, when it was launched in 2009. He left in August 2016. Section 32 will invest in healthcare technology as part of a wider mandate that will also include agriculture technology.
Ilan Zipkin, senior investment director at Takeda Ventures, Japan-based pharmaceutical company Takeda’s corporate venturing unit, left after five years to become vice-president of business development at the Parker Institute for Cancer Immunotherapy. Zipkin’s departure from Takeda came after 17 years in the venture industry. He has previously been a partner at venture capital firm Prospect Venture Partners and an associate at investment firm MPM. Zipkin told Global Corporate Venturing: “It is a slight departure from the more focused institutional or corporate venture capital work I have done for the past 17 years”.
Ajay Khatri took an investor role at Johnson and Johnson Innovation–JJDC. Khatri was previously a senior finance manager in Johnson & Johnson’s oncology business development team as well as a senior finance manager for venture deals and analysis.
McKesson Ventures, the corporate venturing arm of US-based healthcare services and IT provider McKesson Corporation, hired Carrie Hurwitz Williams as principal and Irem Mertol as a director. After 15 years in the healthcare industry, Hurwitz Williams will concentrate on strategic investments in companies developing technology or services covering consumerism, channel development or retail transformation. Mertol will be tasked with sourcing and planning investments and supporting portfolio management. She has spent her career as an investment banker, investor and operator in technology and healthcare services.
Jayson Punwani became an investment director at Takeda Ventures. Punwani came from life sciences-focused VC firm Pappas Ventures, where he was principal, having been promoted in mid-2015. He initially interned at the firm in 2011 before taking on associate and senior associate roles in 2012 and 2014 respectively.
Mark Barrett, formerly global head of strategy and business development at pharmaceutical firm Sanofi Genzyme, joined the life sciences team of investment firm Frazier Healthcare Partners as entrepreneur-in-residence. Barrett was responsible for Sanofi’s global rare diseases, immunology, multiple sclerosis and oncology businesses. Before joining the company in 2013, he was director of business development for pharmaceutical group Johnson & Johnson between 2002 and 2009.
Laura Bond left her role as senior innovation partnerships manager at UK-based pharmacy and retailer Alliance Boots to join UK-based funding platform Accelerated Digital Ventures (ADV). Bond will be investment lead for venture partnerships at ADV, which was founded in 2016 by CEO Lee Stafford, co-founder of telecoms operator PlusNet. ADV invests in digital tech companies at seed, venture and growth stage.
Jody Holtzman, former senior vice-president for market innovation at US-based age-related network AARP, left to become senior managing partner at Longevity Venture Advisors. The advisory firm looks to identify and leverage business and investment opportunities presented by what Holtzman calls the “$7.6 trillion longevity economy”. In 2015, AARP and bank JPMorgan set up the AARP Innovation Fund to target startups developing technologies and services for customers aged 50 and above.
University and government backing for health businesses
Over the past 12 months, there were many commitments to university spinouts in the health and life sciences sector reported by our sister publication, Global University Venturing. In 2017, we reported 240 such deals, up from the 178 in 2016. The estimated total capital employed in such rounds, however, dropped to $2.82bn, down from $3.09bn in 2016.
Research-oriented academic institutions back promising companies from the broader health realm – mostly in genetics and oncology-related therapies – that often manage to raise sizeable rounds featuring a variety of co-investors, including corporate venturers and government-backed funds. In the ever more interconnected and data-drive life sciences, we expect to see more partnerships between corporate players – whether providers or pharmaceuticals – and academia in terms of harnessing research.
A good example is Orchard Therapeutics, a UK-based genetics spinout from University College London (UCL), which closed an oversubscribed $110m series B round with contributions from UCL and Temasek. UCL took part in the round through the UCL Technology Fund, which was established to invest in commercial opportunities derived from the university’s research. Orchard is working on gene therapies for diseases such as adenosine deaminase severe combined immunodeficiency, an inherited disorder that compromises the immune system.
Arcus Biosciences, a US-based cancer-focused biotechnology producer backed by Stanford University, raised $107m in series D capital from investors led by GV, the early-stage investment arm of Alphabet. The round, which took the company’s overall funding to $227m, also featured pharmaceutical firms Celgene and Taiho, the latter participating through its Taiho Ventures unit. Founded in 2015, Arcus is working on cancer immunotherapies. It has two lead drug candidates in phase 1 clinical trials and another two antibodies are undergoing investigation.
Autolus, a UK-based biopharmaceutical spinout from University College London (UCL), raised $80m in a series C round that included investment firm Woodford Investment Management. Syncona, backed by medical charities Wellcome Trust and Cancer Research UK, also participated. Founded in 2014, Autolus was spun out from UCL to develop and commercialise immunotherapies – cancer treatment that exploits engineered T-cells, a natural part of the body’s immune system.
Codiak BioSciences, a US-based therapeutics company, closed a $76.5m series C round backed by sovereign wealth fund Qatar Investment Authority. Alexandria Venture Investments also contributed. Founded in 2015, Codiak Biosciences is working on therapies exploiting exosomes – tiny vesicles transmitted between cells that can change cell function.
Government investments in health and life sciences, reported by our sister publication Global Government Venturing, followed a similar trail. Last year, governments and government-backed investors participated in 141 rounds, up from the 90 tracked in 2016. The total estimated capital deployed was $3.97bn, more than double the $1.55bn recorded in 2016.
Governments and government-backed investors are interested in enhancing the health and wellbeing of citizens. Given issues such as ageing and increasingly more vulnerable populations in the developed world, it is not surprising they are backing promising therapies for a wide range of maladies as well as providers of healthcare services. Technologies that streamline care provision and efficiency – from medical devices and diagnostics to health IT applications – are also alluring to such investors.
US-based genomics services provider Wuxi NextCode closed its series B round, already backed by pharmaceutical firm Amgen, at $240m, following a $165m extension led by Sequoia China. The extension also featured Temasek. Founded as NextCode Health in 2013, Wuxi NextCode operates a contract genomics platform that offers features such as sequencing, secondary analysis, storage, interpretation and scalable analytics. Wuxi NextCode rebranded when China-headquartered Wuxi AppTec bought a majority stake.
Radiology Partners, a US-based physician-led radiology practice, closed a $200m funding round co-led by Australia sovereign wealth fund the Future Fund and VC firm New Enterprise Associates. Founded in 2012, Radiology Partners operates an on-site radiology practice that spans some 280 hospitals and other healthcare facilities in nine US states – Georgia, Illinois, Indiana, Iowa, Kentucky, North Carolina, Ohio, Oklahoma and Texas.
China-based medicine clinic operator Gu Sheng Tang secured RMB1.01bn n a series D round that included two undisclosed government guidance funds. The round, which consisted of RMB510m in equity and RMB500m in debt, also featured China Life, financial services firm China Merchants Bank and state-owned entities iCapital Risk Investment Fund and China Orient Asset Management. Gu Sheng Tang runs 31 clinics in 13 Chinese cities which operate through a partnership franchise model. The company owns a 70% stake in each branch while the remaining 30% is held by local doctors.
