The health sector has been going through various technological shifts in the context of an increasingly digitised, mobile and data-driven world. This trend predates the covid-19 pandemic and the nearly universal lockdowns of last year but it was undoubtedly accelerated by it. It is the life sciences sector that has developed in record time effective vaccines that have given hope that the world will be back to normal soon.
When it comes to innovation in drug discovery, medical devices and the digitisation of health services, the role of general economic conditions and, particularly, low interest rates cannot be overstated. We had been living in a low interest rate environment since the end of the Global Financial Crisis in 2008 and with the shock of the Covid-19 pandemic, rates have hit a new record low. The benefits for life sciences sectors stemming from cheap credit are rather simple to comprehend – abundant cash translate into more capital available for the costly research and development (R&D) activities of the sector.
Inventing new medicinal drugs and devices is an infamously expensive, slow and risky undertaking. According to data of Pharmaceutical Research and Manufacturers of America, it takes at least 10 years, on average, for a new drug to go from initial discovery to the marketplace. The average costs of a successful drug are estimated at $2.6bn. According to a study on clinical trial success rates in the US from 2019, only about seven out of every hundred newly created molecules obtain approval by the Food and Drug Administration. Despite all this, there have been fewer times in the history of modern medicine and pharmacology when it became so apparent how vital the pharmaceutical sector is for normal human existence as it has been since the beginning of the pandemic.
Given the magnitude of business risk involved and cheapness of credit, it is no surprise that many incumbents in the industry have opted to externalise R&D costs and share risks with other co-investors – through licensing, spinouts, mergers and acquisitions, venture investing and joint ventures. As long as there are no drastic changes in the costs of capital, such practices in the industry are unlikely to change.
In parallel, the life sciences sector has also been undergoing digitisation and datafication, like most other sectors of the economy. The “2021 Global life sciences outlook” by auditing and consulting firm Deloitte notes the central role of digital tech in the sector over the past year: “Corporate funding for digital health reached a record $21.6bn globally in 2020—an increase of 103% over 2019. One thing is clear—with the help of digital health tools, virtual care can fundamentally change health care access and deliver an improved care experience. Digitisation in the life sciences sector has also led to an increase in new point of care systems, digital pharmacy setups, and easy and efficient access to health care.”
The report also notes that the accelerated digitisation may bring about a new patient-centric business model, which would enable customers to meet physicians on their terms and from any place. The report, however, notes that remote care provision may change or stay in the post-pandemic world: “Remote selling soared in 2020 as doctors and hospitals resorted to virtual meetings with sales reps. Companies conducted more than 316,900 remote meetings with doctors globally in April 2020. However, in the future, even this change is subject to the post-covid requirements of each country. Companies will also focus on driving value to through digital channels to educate health care providers in the post-pandemic world.”
According to a report entitled ” Global Digital Therapeutics Market (2021 to 2027)”, this world’s digital therapeutics market is expected to reach $8.91bn in size by 2027, up from $2.1bn in 2020, growing at a CAGR of 22.93% during the forecast period. While the report acknowledges the progress that has been made by this emerging field of life sciences over the past decade and its adoption due to the pandemic, it contends that its biggest potential lies in treatment of chronic diseases: “Importantly, digital therapeutics tends to target conditions that are poorly addressed by the healthcare system today, such as chronic diseases or neurological disorders. In addition, they can often deliver treatment more cheaply than traditional therapy by reducing demands on clinicians’ time. And all the while, more evidence is emerging to demonstrate their value in clinical terms.”
In addition to the digitisation of health service, there has been a similar process taking place in pharmaceuticals, specifically in the area of drug discovery. Digital technology has fomented new types of collaborations and it is reshaping clinical trials. The Deloitte report notes: “It is believed that covid-19 accelerated digital transformation of the pharma sector by several years. During the pandemic, life sciences saw agility, increased speed to market, and greater efficiencies. While the sector average for a new drug development and review is 8.2 years, the two novel covid-19 vaccines were developed, tested, and authorised in less than a year. As a result, companies are reassessing and challenging their previous processes to enhance efficiencies. They are also looking at innovative partnerships to excel. Additionally, companies are moving towards virtual trials and remote monitoring to involve more patients into their studies via telemedicine and mobile health care.”
Digitisation is also taking roots in the medical devices and diagnostics space. According to “Pulse of the industry: Medical technology report 2020” by auditing and consulting firm EY, virtualised and digitally-enabled business models for medical care accelerated at an unprecedented pace last year. The global medical technology industry was coming off a record $407bn top line estimated for 2019, with a 5% decline in medtech revenue during the first half of 2020 due to the impact of the pandemic on operations. Though the tone of the report remains cautious and reserved on the assessment of longer-term impact of the pandemic, it did suggest that the presence of strong R&D spending and investor confidence would eventually make innovation and profitability rebound. The report also concluded that building resiliency and transparency into supply chain operations may be key to the industry’s long-term health.
The pharmaceutical subsector is among the most important ones and nothing has made that more evident than the pandemic and the vaccines developed in record time. As we have observed in version of this report from previous years, the global outlook for the pharmaceutical industry appears relatively promising, though with certain concerns on pricing issues. On the one hand, there is pressure on governments that pay or co-pay for medicines of their citizens to reduce costs by placing limits on drug pricing. On the other hand, health insurers and care providers are increasingly more demanding and requiring evidence of effectiveness, cost savings and clinical benefits before including a new drug.
According to the “Pharmaceuticals Global Market Report 2021: Covid-19 Impact and Recovery to 2030” by ResearchAndMarkets.com, the global pharmaceuticals market is set to grow modestly from $1.22 trillion in 2020 to $1.25 trillion by the end of 2021, implying a compound annual growth rate (CAGR) of 1.8%. The report states that the marginal growth is to be attributed mainly to pharmaceutical companies rearranging operations, supply chains and recovering from the pandemic impact. The market is forecast to reach $1.7 trillion in size by 2025 at a CAGR of 8%. The medium and longer terms growth is driven mostly by demographic factors such as ageing population: “This rise in the aging population increased the patient pool of many chronic diseases such as rheumatoid arthritis, hypertension, diabetes and cancer. The increase in the patient pool drove the demand for pharmaceuticals used in the treatment of these diseases, significantly impacting market growth during this period.”
Within the realm of pharmaceuticals and biopharmaceuticals, cancer treatment is a has experienced a significant transformation in recent years. According to a report entitled “Oncology Drugs Market – Opportunities And Strategies – Global Forecast to 2030”, the global cancer treatment market size had reached $167.9bn in 2019, after growing at a CAGR of 9.8% since 2015. In 2020, that market size was expected to go down to $149.9 billion in 2020, representing an 11% decline, due to lockdown and social distancing as well as the economic slowdown. However, the report ventures to forecast a growth from $201.1bn estimated in 2021 up to $284.5bn, implying a CAGR of 9.7%.
Companies in the oncology drugs market are increasing their product innovation through strategic collaborations. To sustain in the increasingly competitive market, organizations are developing innovative products as well as sharing skills and expertise with other such enterprises. While oncology drug companies have long collaborated with each other as well as with academic and research institutions in this market by way of partnerships, in or out licensing deals, this trend has been increasing over the recent years.
The report highlights the important role of new technologies and collaborations in the oncology space: “New technologies are being implemented in the cancer drug market, such as artificial intelligence in the research and development process, as well as 3D printing devices to mimic the human body for trials and testing of the drugs developed. Companies are also investing in technologies to develop next generation biologics such as antibody drug conjugates, bispecifics, fusion proteins, cell and gene therapy that will be more effective as they are expected to have better potency against the target disease as well as have the ability to treat more than one aspect of the disease.”
It also notes that approval of novel treatments has accelerated in recent years, thanks to new technologies that streamline drug development processes: “Over the last few years, there has been a significant rise in accelerated approval of cell and gene therapies for cancer treatment by regulatory bodies across the globe. CRISPR technology can be used to discover the non-coding cancer genome. CRISPR-Cas9 genome editing reduces the processing associated with the generation of cell line and animal models of cancer and complex generations. Thus, it generates a better cancer model for target validation and drug evaluation. CRISPR–Cas9 is accelerating the different stages of oncology drug discovery including target identification, validation and deconvolution, drug synthesis, assessment of drug sensitivity and resistance.”
The sector in charts
For the period between May 2020 and April 2021, we reported 503 venturing rounds involving corporate investors from the life sciences sector. A considerable number of them (300) took place in the US, while 61 were hosted in China and 36 in Japan.
The majority of those commitments (445) went to emerging enterprises from the same sector (mostly pharmaceuticals, medical devices and healthcare IT) but also with the remainder going into companies developing other technologies in synergies with the sector: 18 deals in the IT sector (cybersecurity, big data, artificial intelligence and other), 16 in consumer (primarily food and beverages and hygiene and beauty), 10 in industrial (mostly agtech and industrial chemicals)
The network diagram, illustrating co-investments of life sciences corporates, shows the range of investment interests of the sector’s incumbents. The commitments ranged widely from genetics and gene therapeutics (4d Molecular, Caribou, Vineti, Entrada) through cancer treatment (A2i, Palleon, Fate, Orna, Xilio), telehealth and digital health (Buoy Health, Science 37) to neurodegenerative disease treatments (E-Scape Bio) to diagnostics and monitoring (Enterome Biosciences, Glooko).
The emerging health businesses in the portfolios of corporate venturers came from a range of innovation applications ranging from genetics and gene therapeutics (Sophia Genetics, Caribou, Verve, Freenome) through cancer drugs and treatments ( Bolt, Boundles, Xilio), medical equipment makers (Microtech Medical), hearing loss treatments (Decibel) and antivirals (Adagio) to healthcare IT and digital health application (Cityblock Health, HaloDoc, Practo).
On a calendar year-on-year basis, total capital raised in corporate-backed rounds went up from $12.7bn in 2019 to $19.32bn in 2020, suggesting a 52% increase. The deal count also increased considerably by 36% from 343 deals in 2019 up to 465 tracked by the end of last year. As outlined further in this article, the ten largest investments by corporate venturers from the health sector were concentrated all in the same industry.
The leading corporate investors from the health sector in terms of largest number of deals were pharmaceuticals Eli Lilly, Novo and Johnson & Johnson. The list of life sciences corporates committing capital in the largest rounds was headed by Eli Lilly, Novo and Novartis.
The most active corporate venture investors in the emerging life sciences companies were diversified internet conglomerate Alphabet, financial services firm Fidelity and Eli Lilly.
Overall, corporate investments in emerging health-focused enterprises went up from 548 rounds in 2019 to 716 by the end of 2020, suggesting a 31% increase. Estimated total dollars in those rounds nearly doubled from $18.79bn in 2019 to $32.75bn in 2020. Overall, the pandemic shock did not affect much deal making and flow of capital into such emerging businesses.
Deals
Corporates from the health sector invested in large multimillion-dollar rounds, raised mostly by enterprises from the same sector.
US-based cancer diagnostics technology developer Grail received $390m in a series D round backed by genomics company Illumina. Public Sector Pension Investment Board and Canada Pension Plan Investment Board also took part in the round, as did several unnamed new and existing backers. Spun out of Illumina in 2016, Grail has created an early detection blood test for more than 50 cancer indications with a false positive rate of less than 1%. The test uses a proprietary database and machine learning algorithms to detect the presence of cancer and identify where in the body it is located. This series D funding will go towards the continued development of Grail’s test.
US-headquartered, crypto-focused financial services provider BlockFi closed a $350m series D round featuring quantitative trading firms Hudson River Trading and Susquehanna International Group (SIG). The round was co-led by Bain Capital Ventures, the venture capital arm of private equity firm Bain Capital, with Pomp Investments, Tiger Global Management and partners of DST Global, while SIG invested through its Susquehanna Government Products subsidiary. BlockFi’s online platform manages crypto assets on behalf of financial services providers and wealth managers. It will put the funding into product development and an expansion into new markets that may be supported by strategic acquisitions.
China-based, Asia focused drug developer LianBio secured $310m in crossover financing from investors including pharmaceutical firm Pfizer. Investment management firm RA Capital co-led the oversubscribed round with investment firm CMG-SDIC Capital and Venrock Healthcare Capital Partners, a branch of venture capital firm Venock. LianBio is developing therapeutics licensed from pharmaceutical partners including MyoKardia and BridgeBio for conditions such as cancer and cardiorenal diseases which affect the heart and kidneys, with a focus on the Asian market, particularly China. The company was launched in August 2020 with an undisclosed amount of funding from life sciences investment firm Perceptive Advisors.
Biopharmaceutical firm Gilead Sciences agreed to pay $275m for a 49.9% stake in US-based immuno-oncology therapy developer Pionyr Immunotherapies as part of a wider agreement. The deal gives Gilead the option to fully acquire Pionyr for a further $315m, and the latter’s shareholders could eventually earn a total of $1.47bn in option exercise fees and milestone payments. Gilead can exercise its option at any point up to the completion of phase 1b clinical trials for Pionyr’s two lead assets. Founded in 2015, Pionyr is working on cancer treatments that are intended to promote anti-tumour immunity in patients who do not benefit from checkpoint inhibitor therapies. Its lead candidates, PY314 and PY159, are aimed at solid tumours and have shown promise in preclinical studies.
US-based oncology diagnostics technology developer Freenome completed a $270m series C round, featuring pharmaceutical firms Roche and Novartis, healthcare provider Kaiser Permanente and Alphabet. The three corporates Alphabet, Kaiser Permanente and Roche participated through respective corporate venturing units GV, Kaiser Permanente Ventures and Roche Venture Fund. Bain Capital Life Sciences and Perceptive Advisors co-led the round, which included investment and financial services group Fidelity, American Cancer Society’s BrightEdge Ventures fund, Janus Henderson Investors, Farallon Capital Management and Rock Springs Capital, among other investors. Freenome has developed a system that can detect cancer with a single blood draw using multiomics technology that combines multiple forms of biological analysis. It has a screening test for colorectal cancer in clinical trials along with one that will detect precancerous lesions.
Pharmacy operator Walgreens Boots Alliance (WBA) formed a $1bn strategic partnership agreement with US-based primary care provider VillageMD that included an initial investment of $250m. The $1bn figure will consist of an undisclosed mix of equity and convertible debt financing that will be provided over the next three years. The $250m equity investment represented the first instalment and WBA will own a 30% stake in VillageMD once the debt has been converted into equity. Founded in 2013, VillageMD runs a nationwide network of primary care services providers called Village Medical. It has partnered more than 2,800 physicians to date, with some 600,000 patients under their care. The partnership will enable WBA to offer full-service doctor offices at its pharmacies. It plans to launch them in 500 to 700 facilities across more than 30 markets over the next five years, before adding hundreds more in the years afterwards. VillageMD will be responsible for recruiting more than 3,600 physicians to operate the outlets and will integrate Walgreens into its healthcare service.
Pharmaceutical and agricultural product manufacturer Bayer invested $50m to lead a $239m series D round for US-based drug discovery technology provider Recursion through its Leaps by Bayer subsidiary. Fellow new investors Casdin Capital, Catalio Capital Management, Laurion Capital Management and Samsara BioCapital also took part in the round, which valued Recursion just below $1bn pre-money, a person with knowledge of the matter told The Information. The round was filled out by existing backers including Intermountain Ventures, care provider Intermountain Healthcare’s corporate venturing unit, as well as Baillie Gifford, Mubadala Investment and other investors. Recursion is combining automation and machine learning technology with what it claims is the largest biological image dataset in the world to discover drug treatments for a range of conditions including cancer and genetic disorders such as neurofibromatosis or GM2 gangliosidosis.
China-based medical test developer 3DMed Diagnostic closed a RMB1.5bn ($224m) funding round featuring pharmaceutical firm Jemincare and biomedical cold chain storage provider Haier Biomedical. The round was led by CPE, the alternative asset management arm of state-owned investment firm Citic Group, and included CICC Capital, a private equity arm of investment bank China International Capital Corporation.Spun off by precision cancer drug developer 3D Medicines in 2018, 3DMed Diagnostic focuses on diagnostic tools, including a test for covid-19, based on technology developed at its parent company. Proceeds from the round will support research and recruitment activities as 3DMed Diagnostic targets international growth.
US-based home healthcare service DispatchHealth secured $200m in series D funding from investors including health insurance provider Humana at a $1.7bn valuation. Investment firm Tiger Global Management led the round, which included Echo Health Ventures, the partnership between healthcare provider Cambia Health Solutions and investment firm Mosaic Health Solutions, as well as Alta Partners, Oak HC/FT and Questa Capital. Founded in 2013 as True North Health Navigation, DispatchHealth provides a home care platform that delivers on-demand emergency medical services encompassing treatments for common injuries and complex diseases. The proceeds from the round will be used to increase its presence in 100 markets and further promote its Advanced Care programme, an in-home clinical service that functions as an alternative to hospitalisation.
US-based precision therapeutics developer Tempus raised $200m in a series G2 round featuring Alphabet and Novo, at an $8.1bn post-money valuation. The corporates joined investment management firms Baillie Gifford and Franklin Templeton in the round along with funds and accounts managed by investment manager T. Rowe Price. Tempus applies artificial intelligence to large volumes of clinical and molecular data to develop precision medicine products for cancer, infectious and neurological diseases. The capital will help it expand into new areas such as depression and cardiology.
There were other interesting deals in emerging health-focused businesses that received financial backing from corporate investors from the same and other sectors.
Spun off by China-based genomics services provider BGI, gene sequencing technology developer MGI Tech raised a $1bn series B round. Venture capital firm IDG Capital and private equity fund CPE Capital co-led the round, which featured also investment bank China Renaissance’s New Economy Fund and Goldstone Investment, among many other investors. Founded in 2016, MGI develops gene sequencing systems for use in life sciences research, drug development, precision medicine and agriculture. The applications of the company’s systems range from mass spectrometry and medical imaging to laboratory automation. Its technology has been used for the rapid detection of Covid-19 and its equipment has been sold internationally. MGI products cover genetic testing, gene editing and synthesis, and include sequencing reagents, materials and biochemical reaction systems.
Resilience, a US-based developer of medical manufacturing technology, emerged from stealth with over $800m in funding from investors including GV, a subsidiary of Alphabet. GV participated in a recently closed $750m series B round co-led by Arch Venture Partners and 8VC and also backed by fellow venture capital firm New Enterprise Associates and unnamed pharmaceutical companies, public mutual funds, foundations, family offices and pension funds. Founded in 2020 and also known as National Resilience, Resilience is developing technologically advanced pharmaceutical manufacturing facilities that will help therapeutics developers concentrate more capital on drug discovery activities. The technology is intended to allow gene and cell therapies, vaccines, proteins and viral vectors to be produced quickly and safely at scale. The startup intends to bring more than 750,000 square feet of operating space online over the next year and will also offer drug chain development and supply chain management services.
US-based stem cell medicine developer Sana Biotechnology closed its inaugural funding round, having raised more than $700m from investors including GV. The round also featured F-Prime Capital, a fund owned by investment and financial services group Fidelity, as well as Canada Pension Plan Investment Board, Alaska Permanent Fund and the Public Sector Pension Investment Board. Sana is working on technology intended to repair and control genes in cells and replace missing or damaged cells in order to tackle the underlying causes of serious diseases, ranging from cancer and central nervous system conditions to heart disease and various genetic disorders. The funding has been allocated to advancing the startup’s core platforms, including those focusing on gene delivery, immunology, stem cell biology and gene modification and control.
Verily, a US-headquartered developer of data-focused life sciences technology, received $700m in funding from investors including its parent company Alphabet. The company said the funding was provided by its current investors and named private equity firm Silver Lake, Singaporean state-owned investment firm Temasek and pension fund manager Ontario Teachers’ Pension Plan alongside Alphabet. The cash will go to commercialising Verily’s product range, which includes Verily Health Platforms, an umbrella that oversees covid-19 testing service Healthy at Work, diabetes management platform OnDuo and Coefficient, the health insurance product. Launched in 2015 after being incubated within Alphabet’s Google X division, Verily is working on hardware and software products in partnership with other companies in order to utilise data in drug development and disease management.
US-based gene therapy developer ElevateBio secured $525m in a series C round that included telecoms and internet group SoftBank’s Vision Fund 2 and diversified trading firm Itochu. The round was led by investment manager Matrix Capital Management and also featured investment and financial services group Fidelity Management & Research Company in addition to a large undisclosed insurance firm. ElevateBio is working on cell, gene and regenerative therapies which are being developed by its research and development and manufacturing unit, ElevateBio BaseCamp, for a wide range of potential illnesses. The company launched in May 2019 with $150m from a series A round featuring investment bank UBS’s Oncology Impact Fund, among other investors.
China-based online medial community operator DXY closed a $500m financing round that included Tencent Investment, the corporate venturing subsidiary of internet group Tencent. Growth equity firm Trustbridge Partners led the round, which also featured hedge fund manager Hillhouse Capital’s venture capital arm, GL Ventures. Founded in 2000, DXY operates an online platform where physicians can share expertise, and has expanded into consumer-facing medical advice, medical staff recruitment and online consultations. It has some 5.5 million professionals on its platform including 2 million doctors. The company has also established a real-time information service on the covid-19 pandemic along with a service that refutes rumours about the disease.
US-based affordable medicine developer EQRx secured $500m in a series B round featuring healthcare software producer Nextech and GV. The round included all the participants in the $200m series A round EQRx disclosed when it emerged from stealth in January 2020, including Andreessen Horowitz, Section 32, Casdin Capital, Arch Venture Partners and Arboretum Ventures. The series A investors were joined by undisclosed payers and health systems, life science specialists, family offices and mutual, sovereign wealth and private equity funds. EQRx is looking to utilise advanced technology to develop more affordable monotherapies and drug combinations in partnership with biopharmaceutical companies. The company has identified late-stage liver, breast and on-small cell lung cancer medication and drugs for inflammatory conditions as areas it is pursuing.
Yuanxin Technology, the China-based developer of a telemedicine platform, closed a RMB$3bn ($466m) series E round co-led by Tencent. Venture capital firm Sequoia China co-led the round, which also featured VC firm Qiming Venture Partners, investment bank Citic Securities and CICC Capital, a subsidiary of investment banking firm China International Capital Corporation. Founded in 2015, Yuanxin has created a mobile app called Miaoshou Doctor that enables users to access a network of 1.3 million doctors for online consultations outside of normal work hours, in addition to paying for prescription medicine and buying health insurance. The company has about 7 million daily active users and also manages online portals for some 200 Chinese hospitals across 80 cities.
US-headquartered drug discovery technology provider Insitro received $400m in a series C round featuring GV and Softbank Investment Advisors, on behalf of Alphabet and SoftBank. Canada Pension Plan Investment Board (CPP Investments) led the round, which included Alexandria Venture Investments, the venture capital arm of life sciences real estate investment trust Alexandria Real Estate Equities, as well as an unnamed healthcare provider and undisclosed investment group. Insitro uses machine learning technology to support drug development through enhanced medicine design, the creation of predictive cell-based disease models and the deployment of statistical genetics in locating druggable targets.
Exits
Corporate venturers from the health sector completed 97 exits between May 2020 and April 2021 – 54 initial public offerings (IPOs), 35 acquisitions and eight other transactions. As for year-on-year, the transaction volume went up from 54 to 73 between 2019 and 2020, while the estimated dollar value increased almost three-fold from $8.69bn down to $24.99bn.
US-based medical diagnostics technology Grail agreed to an $8bn acquisition by genomics technology producer Illumina, which was originally spun out the former. With this transaction, Grail received $3.5bn in cash and another $4.5bn in stock. Grail and Illumina had also signed a $315m merger termination agreement. Spun off from Illumina in 2015, Grail is developing technology that combines gene sequencing with population-level clinical studies to detect cancer at an earlier stage, thereby increasing a patient’s odds of survival.
Pharmaceutical firm Merck & Co agreed to acquire oncology therapy developer VelosBio for $2.75bn in cash, enabling pharmaceutical companies Chiesi and Takeda, to exit. Founded in 2017, VelosBio is working on cancer drugs targeted at a type of protein known as the tyrosine kinase-like orphan receptor 1. The company’s lead product candidate, VLS-101, is an antibody-drug conjugate in a phase 1 clinical trial for haematologic malignancies and a phase 2 trial for solid tumours. It had secured $202m in funding prior to the acquisition agreement.
Pharmaceutical firm Sanofi agreed to acquire UK-based monoclonal antibody therapy developer Kymab in a deal sized at up to $1.45bn that will enable pharmaceutical manufacturer Shenzhen Hepalink to exit. The transaction consisted of $1.1bn in cash and up to $350m in milestone payments. It comes after approximately $220m in funding for the company. Founded in 2010, Kymab is developing treatments for cancer and immune-mediated diseases. Its lead product candidate, KY1005, is a monoclonal antibody that could potentially treat a range of immune-mediated diseases and inflammatory disorders.
Genetic information provider Invitae agreed to acquire US-based genetic testing technology developer ArcherDX in a deal valued at about $1.4bn that will allow medical researcher Qiagen to exit. The transaction will consist of $325m in cash and 30 million shares of Invitae stock, in addition to 27 million more shares dependent on certain milestones being met. ArcherDX has created a range of precision oncology products informed by genetic sequencing technology and bioinformatics software to assist in cancer research. It had been preparing a regulatory submission for its debut in-vitro diagnostics product in late 2020. The company was formed in 2015 when Qiagen bought the Enzyme Solutions division of biological research technology provider Enzymatics. It had filed for a $100m initial public offering earlier.
Pharmaceutical firm AstraZeneca divested its stake in US-listed RNA therapeutics and vaccine developer Moderna for an amount likely to be above $1bn. Moderna specialises in drugs and vaccines that inject messenger RNA into human cells to spur production of certain proteins. In the past year its share price has soared multifold, mainly due to it being one of the first to successfully produce a vaccine for covid-19. The company had floated in a $604m initial public offering in 2018 following nearly $1.75bn in funding. AstraZeneca then held a 7.8% stake worth approximately $587m.
23andMe, the US-based genetic testing service backed by corporates Alphabet, WuXi AppTec, Johnson & Johnson, GlaxoSmithKline (GSK), Roche and Illumina, agreed a reverse merger with a special purpose acquisition company (SPAC). VG Acquisition Corp, which is sponsored by conglomerate Virgin Group, floated on the New York Stock Exchange in a $480m initial public offering in October 2020, and the merged business will take its listing on the exchange. The transaction valued the company at $3.5bn and was supported by $500m in financing from Virgin founder Richard Branson, 23andMe co-founder and CEO Anne Wojcicki, funds managed by investment and financial services group Fidelity, Altimeter Capital, Casdin Capital and Foresite Capital. Founded in 2006, 23andme provides home testing kits that customers send back in order to get information on genealogy and/or their potential genetic susceptibility to certain diseases. The information also supports genetic research carried out by the company.
Women-focused medical technology producer Hologic agreed to acquire Mobidiag, a Finland-headquartered molecular diagnostics technology developer backed by clinical diagnostics product maker Autobio Diagnostics, for €668m ($795m). The deal involves a cash payment of $714m combined with $81m of net debt financing. Founded in 2000, Mobidiag produces polymerase chain reaction-based tests and equipment for acute care conditions including gastrointestinal and respiratory infections. The company’s offering includes the Amplidiag range, for high-throughput molecular diagnostics, and the Novodiag platform for fast on-demand molecular diagnostics. It generated approximately $42m of revenue during 2020. The acquisition will strengthen Hologic’s portfolio of diagnostics businesses and enable it to enter the acute care market.
Amwell, a US-based telehealth technology provider backed by electronics and medical technology producer Philips, insurance group Allianz and pharmaceutical firms Teva and Takeda, raised $742m in its IPO. The company has increased the number of shares in the offering from 35 million to 41.2 million and priced them at $18.00, above the $14 to $16 range it had set initially. Internet technology provider Google invested $100m in a separate private placement. Formally known as American Well, Amwell has built a telehealth technology platform that links patients with healthcare providers and health insurers. It manages telehealth operations for 55 health insurance plans and 150 healthcare systems. The company increased revenue 77% year on year to $122m in the first half of 2020, though net losses near tripled to $113m in the same period.
US-listed drugs group Amgen agreed to acquire Rodeo Therapeutics, a US-based small-molecule therapy developer for tissue, for up to $721m. Amgen will pay an initial $55m and up to $666m in cash subject to milestones. In July 2017, Rodeo raised $5.9m in series A financing from investors including pharmaceutical firms AbbVie, Eli Lilly, Johnson & Johnson and WuXi AppTec. AbbVie and Johnson & Johnson had invested through their respective corporate venturing units: AbbVie Ventures and Johnson & Johnson Innovation – JJDC. Previous backers also include Alexandria Venture Investments, among others. Rodeo is developing small-molecule therapies, including its lead 15-prostaglandin dehydrogenase (15-PGDH) modulators, that will help regenerate and repair various types of tissue, for use in dealing with conditions such as ulcerative colitis and, for haemopoietic recovery after bone marrow transplants.
SomaLogic, the US-based healthcare management software provider backed by Novartis, Nan Fung, iCarbonX, Otsuka and Quest Diagnostics, agreed a reverse takeover with special purpose acquisition company CM Life Sciences II. The deal gave SomaLogic a pre-transaction enterprise value of approximately $1.23bn and will involve it acquiring the spot on the Nasdaq Capital Market taken by CM Life Sciences II – sponsored by Casdin Capital and Corvex Management – in a $240m IPO. SoftBank’s SB Management unit, Novartis and genomics technology provider Illumina were among the participants in a $375m private investment in public equity (PIPE) financing supporting the transaction. SomaLogic pools data from users and its partner network to provide detailed health data that helps users manage their personal health more effectively. It specialises in proteomics, the science of proteins.
Global Corporate Venturing also reported several exits of emerging life sciences-related enterprises that involved corporate investors from the same as well as other sectors.
China-headquartered e-commerce group JD.com’s medical and healthcare-focused spinoff, JD Health, floated on the Hong Kong Stock Exchange in a HK$27bn ($3.48bn) IPO. The offering involved JD Health issuing approximately 382 million shares priced at HK$70.58 each, at the top of the HK$62.80 to HK$70.58 range set by the company, valuing it at almost $29bn. JD Health’s online platform sells prescription medication in addition to a range of products including health supplements, medical supplies and contact lenses. It also manages a telemedicine service that allows users to book online consultations with qualified doctors.
Angelini Pharma, a subsidiary of conglomerate Angelini, agreed to buy Arvelle Therapeutics, a central nervous system (CNS) disorder drug developer spun off by pharmaceutical company Axovant, for up to $960m. The deal involved a $610m upfront payment, with up to $350m in additional capital to be paid should Arvelle’s epilepsy drug, cenobamate, achieve certain revenue targets. Arvelle was formed in 2019 to commercialise cenobamate to treat drug-resistant focal-onset seizures. The company expects to secure approval from the European Medicines Agency for the drug, and it has received Promising Innovative Medicine designation by the UK’s MHRA. Cenobamate was originally licensed from pharmaceutical firm SK Biopharmaceuticals, which will sell its 12% stake in Arvelle to Angelini as part of the transaction.
Funds
For the period between May 2020 and April 2021, corporate venturers and corporate-backed VC firms investing in the health sector secured $11.25bn in capital via 91 funding initiatives, which included 63 VC funds, 14 newly-launched or refunded venturing units, seven accelerators and two incubators and five other initiatives.
On a calendar year-to-year basis, the number of funding initiatives in the health sector went up by 26% from 58 in 2019 to 73 registered by the end of last year. Total estimated capital, however, drastically decreased from $19.24bn in 2019 down to $11.77bn in 2020.
Switzerland-based investment fund Antimicrobial Resistance (AMR) Action Fund launched with almost $1bn in capital from biopharmaceutical companies to invest in developers of new antibiotics. AMR Action Fund is intended to operate as a partnership between 23 biopharmaceutical companies with the aim of bringing two to four new antibiotics to market by 2030. Pfizer, Merck & Co and Johnson & Johnson have each pledged $100m in capital for the initiative while Boehringer Ingelheim is providing $50m and Daiichi Sankyo and Shiniogi put up $20m each. Novo Nordisk, Leo Pharma, Lundbeck and Novo Nordisk Foundation are combining to jointly invest about $76m. Novartis, Almirall, Bayer, Roche, Amgen, GlaxoSmithKline, Eli Lilly, Merck Group, Takeda, Eisei, Chugai, Menarini, Teva and UCB also backed the fund. The initiative is being launched as increased AMR among viruses and bacteria is reducing the effectiveness of existing antibiotics. Some 700,000 patients die from AMR each year, a figure expected to rise to up to 10 million by 2050.
B Capital Group, the US-based venture capital firm affiliated with consulting firm Boston Consulting Group (BCG), closed its second fund at $820m. Founded in 2014, B Capital targets growth-stage deals and pursues a portfolio management strategy that involves connecting its companies to corporates which can help them scale, through a network provided by BCG. The firm invests between $10m and $60m per round, at series B to D stage, and its areas of interest include healthcare, enterprise software as well as financial, consumer, transportation and logistics technology.
GlaxoSmithKline (GSK) spun off its corporate venturing unit, SR One, into an independent venture capital firm. GSK remains the largest investor in newly rebranded SR One Capital Management’s latest fund, an oversubscribed $500m vehicle also backed by undisclosed asset managers, pension funds, family offices, endowments and foundations. Founded in 1985, SR One has made strategic investments in innovative drug developers on behalf of GSK. Its portfolio currently includes Palleon Pharmaceuticals, an immunotherapy developer that raised $100m in 2020, and oncology drug developer Arcellx, which secured $85m in late 2019.
Pfizer pledged to invest up to $500m in biotech companies while also providing expertise, through a scheme dubbed Pfizer Breakthrough Growth Initiative. Pfizer intends to acquire minority stakes in publicly listed companies with small to medium-sized market caps that are developing internal medicine, inflammation, immunology cancer and rare disease drugs, vaccines and hospital-related products, that are at the clinical stage. The company is already an active investor in the healthcare venture capital space, both off its own balance sheet and through Pfizer Ventures, the corporate venture capital subsidiary it established in 2004.
Germany-headquartered venture capital firm TVM Capital Life Science closed its latest vehicle, TVM Life Science Innovation II, at $478m, with Eli Lilly among the LPs. The list of backers included undisclosed strategic investors in addition to US-based banks, fund-of-funds, endowments, foundations, pension funds, wealth managers and family offices. TVM Capital Life Science makes early and late-stage investments in companies developing medical products, diagnostic technology and biopharmaceuticals, in the European Union and North America. This latest fund will allocate between 50% and 60% of its cash to what TVM Capital refers to as project-focused companies (PFCs) that it will hold a majority stake in, and is focusing its investments on assets expected to provide a clear route to an early exit.
China-based venture capital firm Qiming Venture Partners raised RMB 2.9bn ($441m) for the final close of its RMB Fund VI, with backing from state-backed conglomerate Xiamen C&D. Existing LPs for the firm’s previous funds also made capital commitments to RMB Fund VI, including China-headquartered insurance companies, fund-of-funds manager Oriza FOFs Investment Management and science and technology-focused fund of funds. Founded in 2006, Qiming manages nine US-dollar and six renminbi-denominated funds, boasting $5.9bn of assets under management. It currently has investments in more than 380 companies, 40 of which have achieved a valuation of over $1bn. The firm typically targets early and growth-stage companies in the healthcare, technology, telecoms and media sectors.
AstraZeneca launched a RMB2.2bn ($338m) healthcare investment fund with investment banking firm China International Capital Corporation’s private equity vehicle, CICC Capital. Wuxi AstraZeneca will be targeting developers of innovative therapeutics, medical devices, diagnostics technology and artificial intelligence-equipped healthcare technology. In addition to technology, the fund will back the development of innovative supply chain solutions for pharmaceutical companies. AstraZeneca had previously partnered China International Capital Corporation to establish a vehicle called Healthcare Industrial Fund in late 2019 with $1bn in capital. The drug producer already maintains a life science incubator in the Chinese city of Wuxi dubbed the Wuxi International Life Science Innovation Campus. It also teamed up with Chinese Future Industry Investment Fund to launch a drug commercialisation company called Dizal Pharmaceutical in 2017.
Heritage Group, a US-based venture capital firm backed by 15 strategic LPs in healthcare, raised $317m for its third fund. Heritage Healthcare Innovation Fund III has about 50 investors and the firm references AdventHealth, Amedisys, Blue Cross Blue Shield of Tennessee, CardinalHealth, Cerner, Community Health Systems, Health Care Service Corporation, Horizon Blue Cross Blue Shield of New Jersey, Intermountain Healthcare, LifePoint Health, Memorial Hermann, Sutter Health, Tenet Health, Trinity Health and UnityPoint Health as strategic partners. Heritage had previously raised $220m for its second fund in 2016 and has invested in companies including Medical Solutions, Sharecare, HealthChannels, Abode Healthcare, MDLive, Lumere and Spero Health.
US-based life sciences investment firm Adjuvant Capital raised $300m for an oversubscribed fund from investors including pharmaceutical firms Merck and Novartis. LPs also include Bill and Melinda Gates Foundation, Anthos Fund and Asset Management, Beacon Pointe Advisors, CDC Group, Children’s Investment Fund Foundation, Dalio Philanthropies, Doris Duke Charitable Foundation and Elma Investments. Ford Foundation, International Finance Corporation, John D and Catherine T MacArthur Foundation, Global Health Investment Corporation – with funding from KfW –, Laerdal Million Lives Fund, RockCreek, Sonanz and Sorenson Impact Foundation have also invested. The fund has also welcomed unnamed LPs. Launched in 2019, Adjuvant Capital’s fund is focusing on medical technologies aimed at public health issues that have traditionally struggled to attract venture capital funding. Areas of interest include malaria, tuberculosis and Lassa fever. The fund has already backed 14 companies, such as US-based herpes vaccine developer X-Vax Technology, Austria-based vaccine developer Themis Bioscience and Denmark-based vaccine developer MinervaX.
Ascension Ventures (AV), the venture capital firm formed by health system Ascension, closed its fifth fund with $285m in capital supplied by 13 healthcare providers. LPs included Ascension, as well as AdventHealth, Carle Foundation, CentraCare, Children’s Medical Center of Dallas, Intermountain Healthcare, Novant Health, OhioHealth, OSF HealthCare, Luminis Health, Sentara Healthcare and Texas Health Resources. One unnamed health system has also joined the roster of investors. Ascension Ventures was launched in 2001 and now has more than $1bn under management. The firm has backed approximately 80 companies in the software, services, medical device and diagnostic sectors. It operates as a stage-agnostic investor with a strategic focus on the needs of its limited partners.
University and government backing for life sciences companies
Over the past few years, we reported various commitments to university spinouts in the health sector through our sister publication, Global University Venturing. By the end of 2020, there were 464 rounds raised by university spinouts, slightly down from the 491 registered in the previous year. The level of estimated total capital deployed last year stood at $12.9bn, up 31% from $9.82bn in 2019.
German government-owned development bank KfW agreed to invest €300m ($339m) in CureVac, a Germany-based RNA therapy developer spun out of Eberhard Karls University of Tübingen. The transaction gave KfW a stake sized at about 23% and it came after the company agreed a $90m loan from the European Investment Bank, when it announced it would concentrate efforts on developing a coronavirus vaccine. CureVac is working on messenger RNA (mRNA)-based drugs but its technology could also influence development of a vaccine for Covid-19. It has two drug candidates in phase 1 clinical trials, each of which are targeted at forms of cancer.
Hinge Health, a US-based digital therapeutics company backed by commercialisation firm IP Group, closed a $300m series D round co-led by Coatue Management and Tiger Global. Atomico, Insight Partners, Quadrille, 11.2 Capital, Lead Edge Capital, Bessemer Venture Partners and Heuristic Capital also took part in the round, which valued Hinge at $3bn post-money. Founded in 2014, Hinge Health has built a digital healthcare platform for people living with chronic musculoskeletal conditions, such as back and joint pain. The offering consists of an app, wearable sensors and access to remote health coaching to deliver physical and behavioural health therapy. Hinge Health was co-founded by chief executive Daniel Perez, who gained a PhD in medical sciences from University of Oxford in 2013, and president Gabriel Mecklenburg, who obtained an MPhil in bioengineering from Imperial College London in 2014.
Thrive Earlier Detection, a US-based cancer screening technology spinout of Johns Hopkins University, collected $257m in a series B round co-led by Casdin Capital and Section 32. Thrive Earlier Detection is commercialising a blood test called CancerSeek that detects multiple forms of the disease at early stages of progression by distinguishing biomarkers such as circulating tumour DNA – fragments from cancerous cells which roam freely in the patient’s bloodstream. The hope is that CancerSeek could be combined with existing tests to diagnose most cancer subtypes effectively and in asymptomatic patients, enabling treatment before disease progression becomes severe.
People
We reported people moves in the health sector over the past year.
Jieyu Zou was promoted to managing director at Lilly Asia Ventures (LAV), the venture capital firm spun out of Eli Lilly. Based in Shanghai, China, Zou has worked her way up from investment manager since joining LAV in May 2015. She is currently on the boards of portfolio companies Gracell, Transcenta and Virtue DX. Her earlier deals have included Geneception, CARsgen, Edigene, Tmunity and Passage Bio in new modality therapeutics, Sansure in molecular diagnostics/genomics and Avedro, which was acquired in November 2019 for about $500m by Glaukos after an earlier flotation.
US-based healthcare product supplier McKesson Corporation promoted Dave Schulte to senior vice-president and head of its corporate venturing arm, McKesson Ventures. McKesson Ventures had hired Schulte in 2015 as managing director under former unit head Tom Rodgers, who has since been appointed executive vice-president and chief strategy officer at McKesson. Global Corporate Venturing had selected Schulte as a Rising Star in 2016 and 2017. Schulte has nearly two decades of healthtech investment experience, having spent 12 years from 2003 at Kaiser Permanente’s corporate venturing arm, Kaiser Permanente Ventures. He had run the unit for four years prior to his departure, helping it grow its resources from $20m under management to $400m.
Schulte’s investments at McKesson Ventures included healthcare provision network Aledade, healthcare plan manager AllyAlign Health, healthcare macrodata platform provider Komodo Health, infusion centre operator IVX Health, clinical trial services provider Lightship and Oncology Analytics, the developer of a cancer treatments analytics tool. Two of his portfolio companies have also led to exits. Biotechnology analytics platform developer Shyft Analytics was acquired by medical research firm Medidata for $195m while growth equity firm General Atlantic purchased a majority stake in telecare service provider Landmark Health.
Ben Luckett, head of Aviva Ventures, the corporate venture capital arm of UK-listed insurance firm, Aviva, was promoted to chief innovation officer of the company. Luckett set up Aviva Ventures in 2015 and its deals have included home security system developer Cocoon and DIY services marketplace Opun, which were later acquired by Ecobee and John Lewis respectively. Ant Barker was promoted from senior manager at Aviva Ventures to head the unit. It has also formed an external collaboration agreement with venture capital firm Anthemis Group, which will deploy capital on behalf of Aviva through funds focused on early and growth-stage financial and insurance technology deals.
McKesson Ventures appointed Lizzie Lee as its newest senior director. In her new position, Lee will oversee portfolio development and help foster collaboration between McKesson’s business units, portfolio companies and customers. She will also lead the firm’s market research, including the development of thought leadership content on emerging trends. Lee joined McKesson in 2017 and was previously a director on its enterprise strategy team. She has a decade of healthcare experience, part of which was spent as a consultant at professional services firm, ZS Associates. At ZS, Lee helped pharmaceutical companies shape their go-to-market strategy and launch planning activities as well as with market access.
US-based medical care provider Tampa General Hospital (TGH) launched a corporate venturing unit led by Rachel Feinman. Feinman joined TGH in the newly created role of vice-president for innovation and now heads TGH InnoVentures from her current position as executive director of the Florida-Israel Business Accelerator. TGH InnoVentures will be comprised of three primary vehicles and act as the healthcare partner for educational innovation hub Embarc Collective, taking up residence in its 32,000 square foot facility alongside more than 50 early-stage startups. The TGH Innovation Lab will meanwhile look for operational efficiencies and methods of solving problems within the organisation, while TGH Accelerator will use the hospital to develop ideas by physician-scientists as well as emerging companies, providing space, expertise and capital.
Ilka Wicke was appointed head of Making More Health (MMH), an impact investment partnership between Germany-based pharmaceutical firm Boehringer Ingelheim and non-government organisation Ashoka. Wicke had been an investment director at Boehringer Ingelheim’s corporate venture capital unit, Boehringer Ingelheim Venture Fund (BIVF), and was a 2018 GCV Rising Stars award winner. Wicke had spent the past decade at BIVF and her deals included Promethera Bioscience, Pcovery, MetaboMed, Anagenesis and Cardior. She has also been on the investment committee of state and corporate-backed VC fund High-Tech Gründerfonds (HTGF).
US-based oncology research centre and hospital Dana-Farber Cancer Institute launched a corporate venturing unit. Binney Street Capital (BSC), as the unit is dubbed, will invest between $250,000 and $2m over the next three years in eight to 10 companies developing research and technologies to treat incurable cancers. Luba Greenwood was appointed managing partner at BSC, after having left US-listed Alphabet’s healthcare subsidiary, Verily, in 2019 to teach at Harvard University and advise Dana-Farber. Greenwood said: “Excited to be leading Dana-Farber Cancer Institute’s first venture capital fund, Binney Street Capital. Honoured to have the opportunity to invest in the breakthrough innovation coming out of the Dana-Farber Cancer Institute and support its mission to cure cancer.”
Reza Halse, president of US-listed pharmaceutical firm Merck & Co’s MRL Ventures investment vehicle, joined healthcare-focused investment manager RA Capital Management. Halse reconnected with Joshua Resnick, an inaugural managing partner at MRL Ventures, who joined RA Capital in 2018 to set up its venture funds after a few years in the interim as a partner at venture capital firm SV Life Sciences. RA Capital hired Halse as a partner, having closed its second venture fund, RA Capital Nexus Fund II, at $461m in October 2020. Its first fund closed in July 2019 with about $300m and funded 59 companies, 15 of which have since floated or been acquired. Halse joined Merck’s MSD London Innovation Hub in 2015, also becoming a partner at MRL Ventures, which targets startups in therapeutics and complements Merck’s other main corporate VC unit, Global Health Innovation fund, which is run by William Taranto.
Jack Miner, former managing director at Cleveland Clinic Ventures, the corporate venturing arm of US-based healthcare system Cleveland Clinic, joined the US State of Maryland’s venture investment unit. Miner will serve as chief investment officer at Tedco, which runs the Builder, Seed and Maryland Venture Funds backing more than 400 investments. He has replaced Tedco’s interim managing director, Elizabeth Good Mazhari. At Cleveland Clinic Ventures until April 2020, Miner oversaw a team focused on its portfolio companies and led efforts to spin off new companies. Previously, Miner was the director of the Venture Center at University of Michigan (UM) Tech Transfer where he launched more than 50 startup companies and worked with a portfolio of more than 300 emerging technologies spanning all industries.
Nicola Broughton and Alexandre Ouimet-Storrs co-founded and serve as managing partners at Óskare Capital, a firm targeting medical cannabis product developers from seed to patient stage. Their first investment was in Octarine Bio, a developer of cannabinoid and psilocybin derivatives. Ouimet-Storrs was previously managing director for Europe at Solvay Ventures, the $100m evergreen corporate venturing unit for France-based chemicals and materials producer Solvay. In November 2019, he backed a University of Edinburgh spinout called Invizius in a round led by asset manager Mercia Asset Management. Broughton was previously principal and head of universities at Mercia. Broughton and Ouimet-Storrs said in a joint statement: “Our goal is to help bring technologies in Europe to other geographies as well as be a founding member of the medical cannabinoid ecosystem in Europe. We are raising and advising a €150m ($170m) fund based in Ireland.”
Søren Thinggaard Hansen joined Denmark-based pharmaceutical firm Novo as a senior partner to set up a private equity initiative to complement its existing corporate venturing strategy. Hansen had previously spent more than 17 years at local pension fund Industriens Pension, mainly as head of private equity. Novo already provides seed and venture capital to development stage companies and takes significant ownership positions in well-established companies within life science through a public corporate venturing strategy. The Novo Holdings Repair Impact Fund also has an investment proposal to life sciences companies developing new treatments to combat anti-microbial resistance.
Blake Byers has stepped down as a general partner at GV, a corporate venturing arm of US-headquartered internet and technology group Alphabet, to launch what appears to be his own firm, dubbed Byers Capital. The firm will reportedly invest evenly between technology and biotech companies at series A and B stage, and opportunistically in growth equity deals. GV confirmed that other investors at the firm would take up some of Byers’ board seats at its portfolio companies.
GV has hired Daniel Lynch as an executive venture partner and appointed Mojca Skoberne to an entrepreneur-in-residence position. Lynch is curently serving as chairman of five biopharmaceutical companies: Xilio Therapeutics, SpringWorks Therapeutics, Blueprint Medicines, Translate Bio and BlueBirdBio, having previously held sim ilar positions at peers including Surface Oncology, Bind Therapeutics and Nimbus Discovery. Skoberne on the other hand had been a senior vice-president for gene therapy developer Repertoire Immune Medicines, where she offered her expertise in immunology, cancer and infectious diseases. Her role at GV will involve her mentoring entrepreneurs building immunotherapy-themed companies.
McKesson Ventures promoted Jennifer Carter and Carrie Hurwitz Williams to partner positions in the unit. Carter had been McKesson’s director of marketing communications before she joined the unit in 2015 as vice-president of portfolio development and marketing, helping to find synergy between the corporate and its portfolio companies. She added the role of vice-president of venture operations in September 2019. Williams had a five-year stint at McKesson that ended when she moved to digital care provider Omada Health in 2014. She rose to vice-president of strategy and business development before she was hired by McKesson Ventures as a principal in 2017.
SR One, the venture capital firm spun off by GSK, recruited Chris Chai and Peter Van Vlasselaer as venture partners. GSK spun off the unit into an independent firm in November 2020 with $500m in funding and operates out of offices in London in the UK, as well as San Francisco and Philadelphia in the United States. Chai had been chief financial officer of Principia Biopharma, the biopharmaceutical company that floated in 2018 having raised $127m in funding from investors including SR One, since 2013. Van Vlasselaer was a pharmaceutical executive for two other SR One portfolio companies. He had been CEO and president of iPierian, which was bought for $725m in 2014, as well as co-founder and chairman of True North Therapeutics, which was acquired for $825m in 2017.
Japan-headquartered biotechnology producer Eisai appointed Manabu Aruga, formerly China-based business development director, as strategic investment officer covering Japan and Asia for its Corporate Venture Investment (CVI) division. His new role involves Aruga relocating to Eisai’s headquarters in Tokyo and leading CVI investment initiatives. He will collaborate with chief strategy officer Kazumasa Nagayama and chief financial officer Ryohei Yanagi to strengthen the unit’s corporate venturing strategies. Formed in May 2019, CVI is armed with approximately $137m in capital and partners innovative technology developers in a bid to accelerate Eisai’s drug discovery activities and build an ecosystem around its strategic areas of nervous system disorder and cancer treatments.
Edward Kliphuis departed from his position as an investment director at M Ventures, the investment arm of Germany-headquartered pharmaceutical company Merck Group. Venture capital firm Amadeus Capital Partners has hired Kliphuis as a partner, and he will help lead its scale investment activities under the firm’s managing partner, Andrea Traversone. Investments led by Kliphuis during his time at M Ventures included Akili Interactive Labs, the developer of the first prescription video game to get approval from the Food and Drug Administration, as well as battery-free Bluetooth tag provider Wiliot and voice analysis technology developer Sonde Health. Prior to M Ventures, Kliphuis was a life sciences market analyst at investment bank Kempen, covering listed small and mid-cap life sciences equities, having originally begun his career as an analyst in M Ventures’ biopharma investment team in 2009.
Illumina’s corporate venturing subsidiary, Illumina Ventures, promoted Wouter Meuleman from principal to partner. Part of the initial Illumina Ventures team when the unit was formed in 2016, Meuleman had been director of corporate and business development for Illumina since the previous year, a post he held until March 2019. In his time at the unit, Meuleman led investments in Biota Technology and Fluent Biosciences, where he also holds board seats, in addition to Delfi Genomics and Ribometrix.
Binoy Bhansali, former managing director at Sandbox Industries, provider of fund management services for more than 30 Blue Cross Blue Shield health insurers, joined US-based healthcare provider Scan Group. Scan provides healthcare for patients on Medicare Advantage health insurance plans. As vice-president of corporate development, Bhansali will be responsible for identifying opportunities for strategic partnerships, external investments and acquisitions. While at Sandbox, Bhansali sourced more than 1,000 healthcare technology and services companies from seed to growth equity-stage, led diligence efforts for hundreds of them and completed investments in eight companies.
Key sub-sectors
Healthcare IT and administration
A decade or more after corporate venturing units that were set up with a focus on life sciences and healthcare, such as US-listed conglomerate Alphabet’s GV (formerly known as Google Ventures) and US-listed drugs company Merck’s Global Health Innovation Fund (GHIF), and the returns have surpassed many expectations.
GHIF has seen $6.2bn of exits in the past 18 months as the covid-19 pandemic has increased attention on the sector, according to Venture Capital Journal (VCJ).
William Taranto, president of GHIF, told VCJ he expected to see six more exits this year following on from Livongo’s exit to Teladoc for $18.5bn, Preventice Solutions’ acquisition by Boston Scientific for $1bn, the sale of Asuragen to Bio-Techne for $215m and Exostar’s private equity purchase by Thoma Bravo for $100m.
These exits, among others, have seen GHIF’s $500m evergreen fund repaid more than twice, Taranto, who is also co-chairman of the Global Healthcare Council, told VCJ in its latest issue.
He added telemedicine, remote monitoring and clinical trials as well as AI and therapeutics were important.
Originally founded by Bill Maris in 2009, GV’s life sciences and healthcare deals cover care delivery, health IT, devices, diagnostics and therapeutics investments and made up more than a third of its portfolio. This means more than 80 portfolio companies with home runs including Clover Health, which agreed a $3.7bn reverse merger with a special purpose acquisition company in October, and Oscar, which had a blow-out flotation in March to raise $1.44bn.
All investors in healthcare have seemingly reaped the rewards, as GCV’s Kaloyan Andonov and Rob Lavine noted on healthcare sector exits after Oscar’s initial public offering. And more seem to be on the way, which will encourage further dealmaking and investments.
Biotechnology and pharmaceuticals
The covid-19 pandemic has been regarded as the long-awaited start of the “biological century”. The rapid development of vaccines and the use of novel methods, such as messenger RNA, to do so has created optimism that the same speed and execution is possible for a host of other viruses and more broadly to effectively create the longevity escape velocity – where people’s life expectancy increases by more than a year for each year they live.
But research and startups is just part of the challenge in a geopolitical world with concern about sovereignty of supply and requirements for manufacturing bases as well as requirements to carry out large-scale trials.
The UK plans to build on the recovery trial, which uncovered two treatments for covid-19, by streamlining research and embedding it in the health service, and through fast regulation.
UK-based venture capital firm Abingworth raised $582m for its second clinical co-development fund in May.
Abingworth has previously invested through its co-development portfolio companies, Avillion and SFJ Pharmaceuticals, which finance and facilitate clinical trials, taking on all of the clinical and regulatory risk in return for a pre-agreed return if the drug is approved.
When Abingworth first got into clinical co-development back in 2009, it primarily worked with pharma companies who only paid out if the project was successful, by which time the cost of the deal could be amortised over the sales of the product.
The market has since expanded to cover biotechs, which want to reduce the dilutive impact that raising the money on the public market would have. And there are plenty more of them.
The Financial Times noted Magdalen College was selling a 40% stake in the Oxford Science Park “after a surge of investor interest in the fast-growing life sciences sector increased the site’s value almost sevenfold in five years”.
As sole owner of the park since 2016, Magdalen has invested in new labs and research space on the site and gained planning consent for a new 165,000 square foot development to support its more than 100 businesses based there, including Vaccitech, which raised $111m from an initial public offering on the Nasdaq stock exchange in April.
Last year British firms raised £1.4bn ($2bn) of venture capital, The Economist said, which was more than anywhere else in Europe but less than the American hubs, Massachusetts (£4.7bn) and San Francisco (£4.5bn).
But the parallels between the UK and US are growing.
A few years ago, Seth Harrison, an American venture capitalist at Apple Tree Partners, was looking to open an office in Europe. The choice came down to Britain or Switzerland, he told The Economist. “I got quite acquainted with the whole UK biotech scene.
“The fantastic research ferment that occurs in the Golden Triangle. You know, the London, Cambridge, Oxford area… And I just said: ‘Wow, this reminds me of Cambridge, Massachusetts, 25 years ago.’”
Medical devices and diagnostics
Medical devices and diagnostics has often been regarded as the underloved part of the healthcare venture market compared with biotech and pharma, with relatively few deals and limited exit options.
This has changed. Last year’s near-doubling in corporate venturing deal values to more than $5bn has continued this year. Most recently, in late May, Germany-based Smart4Diagnostics (S4DX) raised €5m ($6m) in its series A round, including local medical technology manufacturer Sarstedt and the EIC Fund, established in 2020 by the European Commission for direct equity investment in breakthrough technologies.
The startup has developed the “digital human blood sample fingerprint”, a data picture of all quality aspects for blood samples from collection to arrival in the lab.
As Hans Maria Heyn, chief executive and co-founder of S4DX, said: “As many as three in four medical decisions are based on diagnostic results – often blood samples. Currently, this process is being managed manually which can lead to errors and can cause many issues including slow diagnosis, repeated tests on the patient, and wasted resources.”
The covid-19 disease has focused more attention on diagnosis and whether treatment can be done remotely from hospitals. But the take-off in attention to medical devices and diagnostics started with the flotation, then purchase, of Merck-backed Livongo, a digital diabetes management platform, which had its initial public offering in 2019 and was acquired by Teladoc for $18.5bn last year.
Livongo had been incubated by VC firm 7wireVentures, which has recently closed its second venture fund at $150m with limited partners including health plans Florida Blue and Cigna, hospitals and health systems Atlantic Health, Wellforce, Rush University Medical Center, Memorial Hermann Health System and Spectrum Health and large employer Boeing, according to Fierce Biotech.
Similarly, E-merge Capital Partners is raising its debut fund focused on early-stage medical device companies and technologies coming out the Evolve MedTech Venture Studio.
The fund, led by managing partners Brad Klos and John Xitco, is focused primarily on class II medical devices in cardiovascular and orthopedics.
Others are also trying to use strategic ties to add value. Private equity firm Revival Healthcare Capital closed its second fund at $500m. It said it will invest where a corporate strategic partner will have a structural option or right to acquire the company in the future.
Rick Anderson, who is chairman and managing director (MD) at Revival, said: “Consolidation has made it increasingly difficult for medtech leaders to move the needle on growth.”
Lauren Forshey, Revival president and MD, added: “By removing the guesswork and gamesmanship that often defines the relationship and instead aligning goals at the outset, target companies benefit from increased focus, speed, and capital efficiency in driving towards milestones they know they will get rewarded for.”
And the goal remains to gain scale. Venture-backed digital health company Ro has agreed to acquire Modern Fertility, a US-based provider of at-home fertility tests for women, for at least $225m according to Fierce Biotech.
Ro started out four years ago selling erectile dysfunction medication and hair loss supplements to men but after raising $876m has started to acquire other startups, including Workpath, to move into the
home-based healthcare market.
Care provision and on-demand services
The gamification of life continues, just updated for the modern world, it seems.
Akili Interactive, a US-based company that has raised $110m in its series D round from Japan-based pharma group Shionogi, has taken it further than most by developing video games approved by the US Food and Drug Administration to tackle attention-deficit hyperactivity disorder and major depressive disorder.
Akili Interactive is clinically proven to improve cognitive function, something so-called brain-training games have touted for years.
In this case Akili is tackling neurodivergent issues and fits squarely into the wellness trends to tackle people without medical procedures.
Likewise, Germany-based Ada Health, which uses AI to try to diagnose symptoms and in a peer-reviewed study was found to be the most accurate on the market, has been backed by the corporate venturing units of local pharmaceutical company Bayer and South Korea’s Samsung’s Catalyst Fund.
Both CVC units, along with peers from Hitachi, Sony and Unilever backed UK-based diagnosis firm Huma’s $130m round. Huma’s software lets clinicians monitor patients remotely through a mobile app. Huma, like Ada, also uses a range of wearables and other devices to gather data on things like heart rate and oxygen saturation.
Effectively, taking people out of the doctor’s surgery or hospital visit for routine checks and earlier monitoring of symptoms should limit expensive, time-consuming checks at a time when medical services risk being overwhelmed by covid-19.
Sector specialist: Anja König, global head, Novartis Venture Fund
Anja König is the global head of Novartis Venture Fund (NVF), the corporate venturing arm of Switzerland-based pharmaceutical company Novartis. She focused on the European and Asia-Pacific ecosystems as a managing director before stepping into the top role.
NVF has most recently participated in the financing rounds raised by biotechnology startups including Amphista Therapeutics, TScan Therapeutics, Exo Therapeutics and Faze Medicines. The corporate has also exited Renovacor, Inflazome, Zikani Therapeutics, Annexon Biosciences and Forma Therapeutics in the past year.
Before joining NVF in 2006, König was a US-based associate partner at management consultancy firm McKinsey for six years , where she worked with healthcare, pharmaceutical and biotech firms on both sides of the Atlantic.
König studied physics throughout her academic career – she holds a bachelor’s degree from University of Oxford, a master’s degree from Ludwig Maximilian University of Munich and a PhD from Cornell University.
Sector specialist: Christopher Picariello, president, Johnson & Johnson Innovation – JJDC
Pharmaceutical firm Johnson & Johnson has the longest surviving corporate venturing programme in the world. After carrying out direct investments in the 1960s, the corporate established Johnson & Johnson Development Corporation (JJDC) in 1973.
As president of Johnson & Johnson Innovation – JJDC, Chris Picariello oversees a global team of investment professionals based at J&J Innovation Centres spread across the world including San Francisco, Boston, London and Shanghai.
The unit, rebranded Johnson & Johnson Innovation – JJDC in 2013, focuses on areas of strategic significance including medical devices, diagnostics, pharmaceuticals, biotechnology and consumer products.
JJDC invests at all stages, having most recently backed rounds raised by fibroblast technology developer Mestag Therapeutics, textured hair care provider Sunday2Sunday, near vision loss treatment startup Visus Therapeutics, tissue imaging technology producer TechsoMed and diagnostics software company Paige.
The GCV Analytics’ definition of the health sector encompasses pharmaceuticals, medical devices and diagnostics, healthcare IT services and administration, care provision and on-demand services and other life sciences products and services.