Francesca Wuttke joined Merck Global Health Innovation Fund (Merck GHI), the corporate venturing arm of US-based pharmaceutical firm Merck & Co, as managing director in May 2016. Tasked with identifying new opportunities in Europe, Wuttke, based in Barcelona, leads the fund’s European investments in digital healthcare technology. She spoke to features editor Nicole Idar Lee
Why is Merck GHI turning its attention to the European digital health sector now – what is the investment outlook?
The European digital health landscape is at an exciting point in its trajectory, with more and more companies entering their growth phase with increasingly interesting partnerships and consolidation in the space. As a global company, we endeavoured to expand our investment reach through the MSD Global Health Innovation Fund to establish a presence in Europe.
Bill Taranto, president of Merck GHI, said in 2016 that while the fund has been active in Europe in the past, the current rate of innovation across the continent merits a deeper, more strategic focus. How have you sought to implement a more strategic focus in Merck GHI’s European investments?
Our investment thesis is two-pronged. First we aim to find complementary investment opportunities that can augment our North American portfolio companies, and we see many interesting companies and opportunities emerging in Europe. At the same time, we are looking into investing in a new area for the fund – the digital clinical trial management ecosystem.
Efficiency in clinical trial management, both from the perspective of cost and time, can be a valuable competitive asset for the pharmaceutical industry. Clinical trial delays can cost pharma companies up to $8m per day. Digital clinical trial management can enable trials that are smaller, shorter, less expensive and more powerful.
The clinical trial management ecosystem in Europe is undergoing change, resulting from demands for increased relevance and transparency of results, requiring better data quality and study efficiency from contract research organisations (CROs). Digital technology has the potential to help us meet these demands and create new disruptive opportunities. Clinical trial processes are not yet fully leveraging advances in technology and the increasing democratisation of clinical trials.
Is regulatory change also a factor?
Recent regulatory changes within the European Medicines Agency (EMA) requiring digitisation of clinical trials are also providing an environment ripe for growth of digital health companies focused on clinical trial management. Companies that capitalise on these trends and anticipate future changes by improving subject recruitment and retention, and making data capture, integration and analysis more accurate and robust, will present attractive investment opportunities.
You were a keynote speaker at the Health Tech Showcase, organised by the UK Department for International Trade and held at Silicon Valley Bank’s London office, in March. How important are such events for corporate venturers like Merck, and why?
These venues provide an excellent opportunity to interact with interested companies and likeminded investors in an intimate setting. The digital healthcare technology coming out of the UK is rich and worthy of international attention and events like these allow for a forum for the exchange of ideas to take place.
Based on the pipeline of potential portfolio companies you are seeing, how does the UK compare with other European economies when it comes to nurturing digital healthcare startups? Is there anything more the UK government can do to foster such startups?
There are many strong digital health companies with UK roots. The ability to pilot programs within the National Health Service provides a fertile testing ground for demonstrating value and clinical efficacy. Perhaps, more could be done to transition companies and digital health initiatives from pilots to full implementation.
My understanding is there is currently legislation under way to enhance policy to that effect. We applaud the UK for taking a leadership role in propagating digital health; however, the scaling challenge is a universal one, which the UK and others need to find incentives or mechanisms to help scale solutions.
Having spent more than 20 years working in the healthcare field in the US and Europe, most recently as head of strategic market intelligence at Spain-based pharmaceutical company Almirall, what similarities and differences have you noticed across the two markets?
The most obvious difference is the financing gap in Europe compared to the US, but with European companies increasingly receiving international attention, that chasm is narrowing. The biggest difference is perhaps the disconnect between strong early companies making the leap to mid-sized companies with international reach.
Few EU-based companies have been successful doing so, except perhaps those that are family owned, which are a bit more patient and interested in having the company serve as an investment tool where the company growth is used to pass wealth on to future generations. Perhaps it is a lack of patient capital as the pharma timelines are long, and investors new to the space may tire during that interval.
Tell us about the fund’s relationship with Merck, the parent company – how are strategic priorities determined, and how important are financial returns?
We are set up to operate like an independent fund, which allows us to operate at venture speed. Our investments need to be both financial and strategic.
A recent Merck GHI investment is in US-based healthcare data aggregation and analytics company Arcadia Healthcare Solutions, which raised $30m of growth capital. Why is data aggregation an attractive area? How much scope is there for further investments in this sector?
We are really excited about the population health space and our investment in Arcadia. With so much unmet need, population health offers the opportunity to close care gaps and improve outcomes.
Given that pharmaceutical companies typically have a longer time-to-market, what is the average amount of time Merck GHI invests for before exiting? How important is it to have an exit strategy from the start?
While we look to what the exit possibilities could be, the stage in which we will be investing in Europe is still quite early in the initial stage of revenue generation. As active investors we look to shepherd the companies in which we invest and help steer them to success and eventual acquisition or IPO. That being said, we typically invest for a 3-5 year timeframe, but as we don’t have a fund life to worry about we have a great deal of flexibility.
See Gaule’s Question Time with Bill Maris, president of Merck GHI