DRX Capital, a $100m digital health convergence fund devised “over lunch” between fellow corporate investors – Qualcomm Ventures, the corporate venturing unit of US-based technology company Qualcomm, and Switzerland-based pharmaceutical company Novartis – is joining the likes of other digital health heavyweights, such as SR One, the corporate venturing unit of GlaxoSmithKline, and Merck Global Health Innovation Fund.
Digital health investment is helping both IT and healthcare corporate venturing firms to invest capital more effectively and find a clearer path to a return on their investments, something that cannot always be said for blockbuster drug trials.
Funding for digital health companies continued to far exceed investments in traditional healthcare sectors in 2013 and 2014. Venture funding in digital health exceeded $4bn in 2014. The figure is staggering in many contexts – 125% growth over 2013, four times the total of just three years ago, according to research from accelerator Rock Health.
The DRX Capital convergence partnership was initiated in 2015 by Marc Ceulemans, head of the strategic venture capital fund at Novartis, and Nagraj Kashyap, head of Qualcomm Ventures. The two firms were already working together on the corporate level, so the next step to converge their investment interests in digital health was logical, and strategic to both funds’ portfolio interests.
According to Ceulemans, the fund was actually an idea, which came “over lunch,” adding: “We were working together at the corporate level and the idea of the fund came up.”
In an interview with GCV earlier this year, Kashyap said the fund was an extension of Qualcomm’s activities in healthcare through the $100m Qualcomm Life Fund. The corporate venturing unit had invested in more than 18 companies over the past four years, he said, making it a credible investor in the space.
The pair will still make investments in healthcare or IT through their own venture funds, but the DRX Capital structure provides a way for both corporates to back companies in which they have a mutual interest.
Kashyap told Global Corporate Venturing: “We also have our own venture funds, and for some companies both would add value.”
Deals for Novartis in 2015 include a collaboration agreement with Aduro Biotech, a US-based developer of treatments for pancreatic cancer, to develop a range of immuno-oncology products based on Aduro’s technology, with Novartis providing equity funding.
As part of the agreement, Novartis has acquired a 2.7% equity stake in Aduro in return for a $25m equity investment. Novartis has committed to a further $50m investment in the future. Notably, Aduro is also set to receive an upfront payment of $200m and eligible for a further $500m if all development milestones are met.
Aduro filed for a $86m initial public offering earlier in March 2015, and has now raised $185m in equity funding. Aduro will retain all rights to its technology and products for other therapeutic applications such as infectious and auto-immune diseases.
Recent co-investments for Qualcomm Life include US-based medical testing software developer GoBalto, which raised $12m in a January 2015 series C round.
GoBalto produces software that can assist in clinical studies for pharmaceutical, biotechnology and medical device products. and has now raised $38m in total.
Entrant of the Year Shortlist
American Family Ventures
Axa Strategic Ventures
American Family Ventures
Deutsche Telekom Capital Partners
DRX Capital (Qualcomm Ventures and Novartis)
Line
Mediatek Ventures
Orange Digital Ventures
Santander Innoventures
Fund of the Year Shortlist
Axa Strategic Ventures – $226m
Deutsche Telekom Capital Partners –$620m
Google Ventures Europe – $100m
IDG Capital Partners – IDG China Venture Capital Fund IV – $586m
Infosys – Innovate in India fund – $250m
Mediatek Ventures – $300m
Norwest Venture Partners – Norwest Venture Partners XII – $1.2bn
Nokia Capital Partners – Connected Car Fund – $100m