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June 24, 2013

10 Industry-Venture Fund Alliances

Pharma and biotech firms are teaming up with venture capital funds to beef up the industry. Find out which ones invested the most dough.

10 Industry-Venture Fund Alliances

Such alliances could offer a more efficient way of developing new drugs by requiring less than the billions long spent up-front by biopharmas on internal R&D. [© Dmitry - Fotolia.com]

  • Following is a list of 10 alliances announced in recent years, mostly by pharma and biotech giants with venture capital funds, ranked by total size of fund in which the biopharma(s) invested. Alliances are listed by their partners; their purpose; the role of their partners; the financial contributions of their partners, where disclosed; rights and/or options on drugs resulting from alliance activity, again where disclosed; and the date the alliance was announced. An additional two alliances did not disclose size of total investment, and therefore are included in the list without a ranking.

    Significantly, five of the 12 listed alliances were formed during 2013, and another five last year, reflecting the industry’s increasing view that the alliances will offer a more efficient way of developing new drugs by requiring much less than the billions long spent up-front by biopharmas on internal R&D. While the alliances require much less capital from industry, it remains to be seen whether R&D activity will increase, and more new drugs win approval and reach the market, to justify the reduced investment.

    Also notable is the presence of two pharma giants in several alliances: GlaxoSmithKline, listed in four of the listed alliances, and Merck & Co., a partner in three funds, two of them listed in a single entry because the partners are similar and the funds, complementary. Both pharma giants have placed the largest bets on partnerships with venture funds as holding the greatest hope for bringing new drugs through trials and approvals faster. However, the top alliance was not led by a pharma giant but by Russia’s state-owned Rusnano, whose alliance was included because it provides business development as well as investment services for companies in “medicine and pharmacology” in addition to nanotechnology and other tech sectors.

    The list does not include individual corporate venture funds, the topic of last week’s GEN list; or top venture capital firms, the subject of a GEN list published December 17, 2012.

  • #10. GlaxoSmithKline (GSK) + SR One + Canada Life Sciences Innovation Fund

    Total investment size: $50 million

    Purpose: Significantly advance the commercialization of scientific innovation in Canada by investing in early-stage breakthrough research.

    Role of partners: GSK and its corporate venture capital arm SR One will manage the fund, which will identify strategic investment opportunities within Canada's life sciences industry—including academic and health institutions, translational research centers, and startup companies

    Contributions of partners: GSK agreed to contribute all $50 million toward the fund, designed to strengthen GSK's position as a Canadian R&D leader and offers the company a unique opportunity to help close Canada's innovation gap.

    Rights and/or options: Not disclosed

    Announced: November 10, 2011

  • #9. Merck & Co. + Lumira Capital + Teralys Capital

    Total investment size: $101 million Lumira Capital II LP and $50 million Merck Lumira Biosciences Fund

    Purpose: Lumira Capital II is designed to invest in late-stage clinical stage development of medications, diagnostics, and medical devices in North America; Merck Lumira Biosciences Fund was established to invest solely in Québec biotechnology companies before their products have reached proof-of-concept in humans.

    Role of partners: Merck agreed to “screen and select potential partners with which we could form alliances,” in order to “provide a vehicle where Merck scientific expertise could be made available to the general partners of” Lumira and Teralys, which make decisions on investments in early-stage biotechs, Reid J. Leonard, Ph.D., executive director, worldwide licensing for Merck & Co., said at the 2012 Boston Venture Forum

    Contributions of partners: Merck has committed $5 million to $101 million Lumira Capital II, and $35 million toward $43 million first closing of Merck Lumira Biosciences Fund, which has set a closing target of $50 million. The Merck funds are part of a commitment announced in 2010 to invest $100 million through 2015 in biopharmaceutical research and development in Québec. The commitment was made when, as part of a global restructuring, Merck shut down its Merck Frosst Centre for Therapeutic Research in the Montreal suburb of Kirkland, laying off most of its staff of 180. Teralys Capital committed to a total $35 million in both funds.

    Rights and/or options: Unless negotiated separately with the portfolio companies of the Fund, Merck will not have any rights to the fund’s portfolio companies or their products simply by virtue of its role as a limited partner.

    Announced: March 26, 2012

  • #8. Eli Lilly + TVM Capital + Teralys Capital + BDC Venture Capital + Fondaction + Advantus Capital Management

    Total investment size: $150 million

    Purpose: Invest primarily in early-stage drug development and opportunities for life science companies.

    Role of partners: TVM Capital manages the fund, with expertise provided by Chorus Canada, an offshoot of global-early-phase drug development network Chorus, focused on cost-effectively progressing potential medicines from candidate selection to clinical proof-of-concept. Chorus Canada works with development service providers across the province and elsewhere to offer development services to project-focused companies based primarily in Québec. Chorus is an autonomous unit of Eli Lilly.

    Contributions of partners: $65 million from Teralys in $150 million fund, named TVM Life Science Ventures VII. Contributions of other partners not disclosed. BDC Venture Capital is the VC arm of Business Development Bank of Canada.

    Rights and/or options: Not disclosed

    Announced: May 28, 2012

  • #7. Daiichi Sankyo + Kearney Venture Partners

    Total investment size: $180 million

    Purpose: Enhance Daiichi Sankyo research and development activities.

    Role of partners: Kearney Venture Partners, L.P., a limited partnership that invests primarily in U.S. life science companies, agreed to make equity investments in emerging life sciences and medical technology sectors including specialty pharmaceuticals, emerging biopharmaceutical, drug delivery technologies, diagnostics, biotechnology, and medical devices. Daiichi Sankyo may seek to establish research collaborations with companies in the fund.

    Contributions of partners: Daiichi Sankyo agreed to invest $60 million in the $180 million fund.

    Rights and/or options: Daiichi Sankyo retains the right of first refusal to make additional investments in the Fund's portfolio of companies.

    Announced: September 8, 2006

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

    Total investment size: €150 million ($200 million) fund, to be named Index Life VI1

    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.

    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

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