It has been another busy year for corporate venturing in the healthcare sector, with several big exits, new corporate venturing subsidiaries and a range of new funds backed by corporates. Investments in the healthcare sector were not made solely by corporates in that industry, with internet company Google’s unit Google Ventures recognising the high potential and committing more than a third, 36%, of its investments last year to health and life sciences companies. Google is set on pursuing the strategy throughout 2015, and last month backed a series C round for Rani Therapeutics, which turns injectable drugs into pills, alongside pharmaceutical company Novartis and pharmaceutical packaging producer Stevanato.
The healthcare sector’s investment arms appear to be generally in good spirits about the past 12 months, and the year ahead.
Christopher Coburn, vice-president of Partners HealthCare, a non-profit organisation operating several hospitals in Massachusetts, told Global Corporate Venturing: “This has been another remarkable year for us. We had significant monetisation in January and are now raising two external funds with an aggregate target of $200m as well as a second internal fund.
“We commissioned an external assessment of internal rate of return to date on our original fund and, driven by recent acquisitions by Novartis and the Medicines Company, it was calculated greater than 20% – quite an achievement for a seed fund created to exclusively invest in the innovation of our Harvard-affiliated hospitals.”
Overall, corporate venturing efforts in the industry have become an essential part of staying innovative. Coburn noted: “Corporate venturing in the healthcare sector long ago passed from being a novelty to being core to virtually every new development in healthcare investing.”
Here, we take a look at the people, funds and deals of the past year, which saw more than 500 deals – including the industry’s largest investment round ever – and close to 40 new funds.
People
Eli Lilly promoted Darren Carroll to senior vice-president of corporate business. Carroll originally joined Eli Lilly as a lawyer in 1996 before being appointed vice-president of new ventures in 2005 and managing investments for the corporate venturing arms Lilly Ventures and Lilly Asia Ventures. He was promoted to vice-president of corporate business in 2010.
In his new position, he is in charge of mergers and acquisitions, joint ventures, business collaborations, private equity investments and out-partnering. Carroll was included in Global Corporate Venturing’s Powerlist in 2012, 2013 and 2014.
Anthony Rosenberg, previously in charge of mergers and acquisitions and licensing at pharmaceutical company Novartis, switched to venture capital (VC) firm MPM Capital as managing director. He joined the firm as it announced a $400m fund backed by Novartis, among others.
Tom Rodgers joined the new McKesson Ventures, corporate venturing unit of healthcare and IT services provider McKesson, as the division’s senior vice-president and managing director. He previously served as director of strategic investments at health services provider Cambia Health Solutions.
Meanwhile EyeNetra, which develops eye diagnostics add-ons for mobile phones, welcomed Rob Rosenberg as head of business and corporate development. Rosenberg previously worked for lifestyle consumer product and real estate holdings company Fast Forward Ventures.
EyeNetra was spun out of Massachusetts Institute of Technology’s Media Lab in 2011 and has raised $7m from investors including Khosla Ventures and Khosla Impact.
Corina Kuiper co-founded venture capital support organisation Innovation Family. Kuiper was the senior director of new business development and venturing for health and consumer products maker Philips from 2006 to 2012. Her new organisation provides interim management, hands-on support, coaching and training workshops to corporates and startups.
Dan Cherian, who was the lead for strategic planning and global operations for pharmaceutical company Pfizer before joining footwear and apparel producer Nike in 2008, is feeling at home in that sector. He joined footwear and apparel producer VF Corporation and became the company’s vice-president of global innovation, performance apparel and footwear.
Funds
Global Corporate Venturing tracked close to 40 new funds over the course of the past year, ranging from as high as healthcare investment firm Vivo Capital’s $750m fund backed by healthcare product manufacturer Johnson & Johnson to smaller ones such as a $25m fund set up by Mission Bay Capital and backed by healthcare company Novozymes. Johnson & Johnson Development Corporation (JJDC), the corporate venturing subsidiary of pharmaceutical company Johnson & Johnson, invested $15m in Vivo Capital Fund VIII. JJDC was the first healthcare corporate to back the fund, which is set to invest in the US and China and help startups tap into these markets.
Pharmaceutical company AstraZeneca, nutritional therapy developer Nestlé Health Science and agribusiness Bayer CropScience contributed to VC firm Flagship Ventures’ oversubscribed $537m Flagship Ventures Fund V and signed a partnership agreement to support the firm’s incubator.
Pharmaceutical companies Novartis and Astellas backed an oversubscribed $400m fund set up by VC firm MPM Capital. Dubbed MPM BioVentures 2014, the fund is the firm’s sixth and will invest in life sciences companies. VC firm TVM Capital Life Science closed a $201.6m life sciences fund, backed by pharmaceutical company Eli Lilly and also featuring fund-of-funds Teralys Capital as well as pharmaceutical company Bukwang Pharma, Minnesota Life Insurance Company, Business Development Bank of Canada, CD Venture and FondAction.
The private equity division of biotechnology holding company Institut Mérieux, Mérieux Développement, closed a $187m fund backed by Sienna Capital, an affiliate of industrial holding company Groupe Bruxelles Lambert. Sienna contributed $93.6m.
Eli Lilly also supported a $150m Early-Stage Life Sciences Funding Initiative alongside pharmaceutical company Celgene. The fund is co-managed by Flagship Ventures and Arch Venture Partners. Celgene and Eli Lilly provided $140m, while New York City’s Economic Development Corporation invested $10m.
Healthcare services provider Cardinal Health and medical device maker Medtronic inked a deal for a $140m, four-year initiative that will focus on treatments for neurological disorders and aim to spin out several startups.
Pharmaceutical company Shenzhen Hapalink contributed $22m to private equity firm TPG’s biotech fund, boosting it to $111.6m.
A non-healthcare corporate trying to make its mark on the sector is semiconductor maker Qualcomm’s corporate venturing arm Qualcomm Ventures, which formed a joint investment company with Novartis to invest up to $100m in digital medicine startups working on technologies such as wearable devices or smartphone-enabled devices.
VC firm Fountain Healthcare Partners, spun out of biotechnology company Elan Corporation, meanwhile secured $98.5m for its second fund.
Eli Lilly also backed a $79.5m life sciences fund set up by VC firm Epidarex Capital. The fund will focus on early-stage science and health technology companies in the UK and marked Eli Lilly’s first investment in a UK-based fund.
Pharmaceutical companies Sumitomo Dainippon Pharma and Taiho Pharmaceutical, a subsidiary of Otsuka Holdings, each invested $30m in Remiges Ventures, a new VC firm aiming to back drug developers. The firm hopes to raise $150m for its first fund.
Apart from the previously mentioned McKesson Ventures, several other pharmaceutical companies also set up corporate venturing units over the past twelve months.
Non-profit healthcare provider Providence Health & Services established a $150m corporate venturing fund to invest over the next five to seven years, while Cadila Pharmaceuticals is in the process of setting up a fund with $8m to $16m in capital.
Life sciences tool and medical device producer Esco launched its investment vehicle Esco Ventures with $8m in funding. Pharmaceutical company Chiesi Group created Chiesi Ventures with an undisclosed amount of funding, though the new unit will contribute up to $5m to seed and series A rounds.
Deals
We have tracked more than 500 deals in the healthcare sector over the past year, from seed rounds to initial public offerings (IPOs) and acquisitions.
Towering above all the other deals is the acquisition of Alios BioPharma, a drug developer focused on viral diseases, by Johnson & Johnson for $1.75bn in cash. The deal provided an exit to Novo Ventures, SR One, Roche Venture Fund and Novartis Ventures, the corporate venturing units of pharmaceutical companies Novo Nordisk, GlaxoSmithKline, Roche and Novartis respectively.
Biopharmaceutical company Bristol-Myers Squibb meanwhile purchased cancer treatment developer Flexus Biosciences in a deal that could be worth up to $1.25bn. The corporate paid $800m up front, and has committed another $450m if certain milestones are reached. Flexus’s acquisition provided an exit to Celgene, as well as Kleiner Perkins Caufield & Byers and Column Group.
Bristol-Myers Squibb also acquired Galecto Biotech, a developer of treatments for respiratory diseases, for $444m. The company had been backed by pharmaceutical company Merck Serono, which contributed to a $4m round through its investment subsidiary MS Ventures, alongside Novo Seeds, the seed-stage corporate venturing division of Novo, Seed Capital, and Sunstone Capital.
Elsewhere, pharmaceutical company Acorda Therapeutics swept in and acquired Civitas Therapeutics, which has developed treatments for Parkinson’s disease, for $525m shortly after Civitas raised a $55m series C round and filed for an IPO. The acquisition provided an exit to pharmaceutical company Alkermes.
Celgene acquired cancer drug developer Quanticel Pharmaceuticals for $100m, with another $385m to be paid if Quanticel reaches a set of milestones. Celgene had invested $45m in 2011, securing the right to buy the company at the same time.
Novo exited pharmaceutical company Santaris Pharma, when the latter was purchased by Roche in a deal that could reach $450m. Roche paid $250m upfront and will pay another $200m dependent on milestones.
Novartis and fellow pharmaceutical firm Takeda both exited Heptares Therapeutics, a drug developer focused on Alzheimer’s disease, when it was acquired by Sosei Group. Sosei paid $180m upfront, and may pay another $220m dependent on milestones.
Medical device maker St Jude Medical used its exclusive option to acquire medical device producer CardioMems. The two companies had signed an agreement in 2010 that gave St Jude the right to acquire CardioMems for $375m if certain milestones are reached. CardioMems’s backers included healthcare company Medtronic.
Meanwhile, the biggest investment round was secured by biopharmaceutical company Moderna Therapeutics, which closed a $450m round featuring pharmaceutical companies AstraZeneca, Alexion Pharmaceuticals, a range of VC firms and undisclosed investors. The round is the sector’s largest raised by a private company. AstraZeneca’s investment included a $240m upfront payment for a partnership agreement.
NantHealth, a healthcare subsidiary of computing technology developer NantWorks, closed a $320m series B round led by sovereign wealth fund Kuwait Investment Authority with $250m. Celgene invested $25m four months earlier, but it is not clear whether that amount was part of the series B round.
Although not one of the year’s biggest deals, Novo celebrated one of the sector’s quickest exits when it backed biotechnology company Adaptimmune’s $104m series A round in September only to see the company gain $191.3m in an IPO in May. The IPO also provided an exit to biotechnology company Immunocore, as well as a range of VC firms including New Enterprise Associates, which led the series A round and held a 14% stake after the IPO.