Healthcare corporate venturing is becoming a game of two parts – having long been totally dominated by investment in life sciences, a new form of health-related information technology investing is emerging.
There is increased concern about how difficult it is to secure a blockbuster drug for pharmaceutical companies, which has traditionally been, and remains by far, the biggest area of investment in corporate venturing by healthcare companies.
Jens Eckstein, chief executive of SR One, the corporate venturing unit of GlaxoSmithKline, said in a keynote speech at the Global Corporate Venturing Symposium last month: “I think healthcare is a moon-shot these days, because if you want to have successful drugs and you want to really change something dramatically you have to shoot very high, and you have to set the hurdle very high.”
Eckstein added in the speech transcribed overleaf, this meant there was a need for significant reform of the practice of life sciences. “If you think about disease and health as the earth, then you have to figure out a way to reach the moon. You can try it in an incremental way, and use a ladder and make progress in reaching the moon, but that is not really what we are looking for. The biggest thing if you try this ladder approach, it is very, very hard to be reimbursed. So you have to build rockets. That is really the challenge in healthcare these days. But rocket ships – as everybody knows – are pretty complex and expensive. If you look at the attrition rate right now in clinical trials, the number is around 3% success.”
Yet there is also increased excitement about the convergence of IT and healthcare. Martin Kelly, chief executive of HealthXL, a strategic partnership linking corporates to startups, which he helped to set up while part of IBM Venture Capital, said: “Traditionally venture arms were more on the life sciences side. Yet digital health is just exploding in terms of investment and you will start to see healthcare corporations become more and more important in this.” HealthXL is calling for submissions by July 15th using a 60 second video, see link here.
The biggest healthcare corporate venturing player in this non-traditional healthcare sector is Merck, which has a $500m fund. Merck Global Health Innovation Fund’s head William Taranto said, in a fireside chat at our symposium: “If you look at the continuum of healthcare, from pre-diagnosis to death, the question for Merck was how do we participate in that continuum where the pill or the vaccine makes up only one piece of healthcare. There is a great deal of stuff beyond what we do as a core business that happens in healthcare, and can we actually have an impact broadly around healthcare where, again, the pill only supplies one piece of it?”
Healthcare is moving beyond the pill, and while many pharmaceutical corporations still focus solely on life sciences investing, it seems likely this will change quickly.