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GEN Exclusives provide you with unique, in-depth, and critical coverage of key industry developments, market moving events, and scientific advances, as well as interviews with life science thought leaders. Also included are feature articles from GEN’s print edition.

Insight & Intelligence™: Jul 28, 2014

12 Industry-Venture Fund Alliances: 2014 Edition

For companies struggling with R&D costs, VC firms can be saviors.

12 Industry-Venture Fund Alliances: 2014 Edition

When pharma and biotech firms partner with venture capital companies, the industry gets a booster shot. [© Ljupco Smokovski - Fotolia.com]

    #6. GlaxoSmithKline (GSK) + Johnson & Johnson + Index Ventures

    Total investment size: €150 million ($202.9 million)4 fund, to be named Index Life VI

    Purpose: Stimulate promising, early-stage R&D innovation by investing in early-stage, single-asset life sciences companies with assets that have first-in-class or best-in-class mechanisms of action and target areas of unmet medical need. Companies will be in Europe primarily, as well as the U.S. and Israel.

    Companies funded include: Egalet (Index led $20 million financing, in which included other unnamed existing investors participated, September 2013); XO1 (Index led $11 million Series A financing, June 2013); GenSight Biologics (participation in €32 million [$43 million] Series A financing, April 2013)5,6

    Role of partners: Index will maintain full decision making rights to the portfolio companies. Fund rules and procedures will follow previous Index Ventures funds. All partners agreed to appoint executives to the nine-member Science Advisory Board: five seats for Index, two seats each for GSK and J&J.
    Contributions of partners: Half the funding will come from Index, while one-quarter each will be contributed by GSK and J&J.

    Rights and/or options: No exclusivity or commitment by GSK and J&J to therapeutics being developed by the startups. Drug companies will need to pursue licensing agreements with Index.

    Announced: March 21, 2012

    #5. GlaxoSmithKline (GSK) + Sanderling Ventures

    Total investment size: $250 million

    Purpose: Provide seed funding for West Coast biotech startups

    Companies funded include: None announced7

    Role of partners: GSK will retain a seat on the fund’s advisory committee

    Contributions of partners: GSK will contribute $50 million toward the $250 million seventh fund that Sanderling Ventures agreed to assemble and manage, named Sanderling VII, plans for which were first reported in 2011.

    Rights and/or options: Not disclosed

    Announced: January 9, 2013

    #4. Novartis + Amgen Ventures + Atlas Venture

    Total investment size: $265 million Atlas Venture Fund IX

    Purpose: Create and/or fund more than 15 new biotech firms; “Provide Amgen and Novartis with strategic proximity to Atlas Venture’s startup formation activities around innovative, potentially high-impact medicines, and catalyze future collaborations around translational research across Atlas Venture’s early-stage portfolio.”8

    Companies funded include: Not disclosed8

    Role of partners: Novartis and Amgen Ventures, the venture fund of Amgen, are limited partners in Fund IX. The partners’ roles include co-creation of life sciences startups, formation of asset-centric development projects, and helping translate discoveries from ongoing academic collaborations, among others.

    Contributions of partners: Not disclosed

    Rights and/or options: No exclusivity or any commitment by Amgen or Novartis to pursue opportunities. Atlas Venture maintains full authority over funding strategy and investment decisions.

    Announced: May 16, 2013

    #3. Merck Research Laboratories (MRL) + Merck Research Ventures Fund + Flagship Ventures

    Total investment size: $270 million

    Purpose: Launch and back new ventures that apply scientific breakthroughs to the development of new drugs in areas of unmet medical need.

    Companies funded include: None announced

    Role of partners: MRL-created Merck Research Ventures Fund made an undisclosed investment in Flagship’s fourth VC fund becoming a limited partner in the $270 million Flagship Ventures Fund IV L.P., which closed last year. MRL will gain exposure to Flagship’s investment and venture creation model to successfully translate scientific innovation into medical breakthroughs. The partnership is also designed to provide Flagship direct access to a global pharmaceutical industry leader with deep insight into pharmaceutical development, commercialization, and regulation.

    Rights and/or options: Merck will have an opportunity, but no formal option or special rights, to acquire any startups being created through the Flagship-led fund. As a limited partner, neither the Merck fund nor its pharma company Merck & Co. will be able to control Flagship’s investment decisions.

    Announced: April 10, 2012

    #2. GlaxoSmithKline (GSK) + Avalon Ventures

    Total investment size: $495 million

    Purpose: Launch up to 10 life sciences startups in San Diego over the next three years, based on technologies from anywhere.

    Companies funded include: Sitari Pharmaceuticals ($10 million Series A financing, November 2013)
    Role of partners: Avalon will identify promising technologies focusing on early-stage discovery across various therapy areas. Avalon and GSK will jointly approve the formation of new companies based on the technologies and finance the startups together.9,10

    Contributions of partners: Avalon will contribute $30 million from its $200 million Fund X, and provide executive leadership and operational management consistent with its current portfolio strategy. GSK will provide up to $465 million in company seed funding, R&D support, and payments tied to preclinical and clinical milestones toward the 10 startups, each focused on discovery of drugs against disease targets.

    Rights and/or options: GSK will retain the option to acquire each company upon the generation of a clinical candidate. Should GSK elect not to exercise its option, company ownership will remain with Avalon, which will be free to enter into other strategic transactions.

    Announced: April 22, 2013

    #1. Rusnano + Domain Associates

    Total investment size: $760 million

    Purpose: Co-invest in about 20 U.S.-based life sciences companies, including pharmaceutical and biotechnology companies, developing innovative products “that have significant applications for patient populations in Russia, and that complement Rusnano’s focus on nanotechnology-based innovation.”11 The partners also agreed to foster technology transfer into Russia, and establish a pharmaceutical and medical device cGMP manufacturing facility in Russia.12

    Companies funded include: ReVision Optics (participation in $55 million in Series E financing, July 2013); Regado Biosciences (participation in $51 million Series E financing led by RMI, December 2012); CoDa Therapeutics ($20 million toward $40 million in Series B financing round, July 2012); Marinus Pharmaceuticals (participation in $21 million in Series C financing, December 2012); Lithera (participation in $20.6 million in preferred stock equity financing, December 2012)13

    Role of partners: The subsidiary of Russia’s $10 billion state-owned technology fund and the U.S.-based VC firm will jointly invest in emerging life sciences technology companies. The joint venture will manage advanced-stage clinical trials in Russia of new pharmaceuticals and other products that will support regulatory approval of these products in Russia, the U.S. and other markets.

    Contributions of partners: Rusnano and Domain Associates each agreed to contribute $330 million toward the joint co-investments in companies. Partners have also engaged Team Drive, a management company led by former Sistema and MTS CEO Leonid Melamed, to develop the project.

    Rights and/or options: Not disclosed

    Announced: March 6, 2012

    Honorable Mentions

    The following two alliances we've left unranked simply because we weren't able to ascertain how much they invested. Still, we mustn't overlook....

    QB3 Collaborative Startups / California Institute for Quantitative Biosciences (QB3) + Mission Bay Capital + 6 participating pharmas: Bayer HealthCare, J&J Innovation, Novartis, Pfizer, Roche, and Takeda Pharmaceuticals USA14

    Total investment size: Not disclosed

    Purpose: Identify, fund and support early stage life science startup companies in the San Francisco Bay Area. Plan is to launch one to two companies annually.

    Companies funded include: None announced

    Role of partners: QB3 will identify Collaborative Startups from sources that include the institute’s five-site incubator network in the Bay Area; QB3 Startup in a Box, a program to incorporate and structure new companies; the annual Bridging the Gap award program, which provides proof-of-concept support to academic scientists; or directly from university laboratories. After due diligence, participating pharmas and QB3, through its venture arm Mission Bay Capital, will co-invest in candidate startups at the seed stage. Participating pharmas may also contribute support in the form of scientific expertise or resources; and may also invest in a Series A funding round for candidate startups.15

    Contributions of partners: Mission Bay Capital will award an undisclosed amount in seed-stage funding to qualified startups. No other financial details disclosed. QB3 consists of UC’s San Francisco (UCSF), Santa Cruz, and Berkeley campuses.

    Rights and/or options: Decided case-by-case

    Announced: May 15, 201314

    Bayer HealthCare + Versant Ventures

    Total investment size: Not disclosed

    Purpose: Develop treatment options, focused on a novel target and pathway, for patients with eye diseases, such as wet age-related macular degeneration and geographic atrophy.

    Companies funded include: None announced

    Role of partners: Bayer and Inception Sciences, a drug discovery incubator exclusively backed by Versant, jointly conduct early research in ophthalmology in a newly created company called “Inception 4.”

    Contributions of partners: Versant agreed to provide equity funding to Inception 4, while Bayer committed to support the collaborative project through payments tied to undisclosed milestones.

    Rights and/or options: Bayer will have an exclusive option to acquire Inception 4 under certain conditions, using a Build-to-Buy model.

    Announced: November 18, 2013

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