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Making Sense and Cents Out of Pharma Strategic Venture Investing

June 22, 2017

For most large pharmaceutical companies, strategic venture arms are no longer a “nice to have,” but a must. Strategic investments allow these companies to access inventions and resources they don’t have in-house, while fueling the biotech innovation ecosystem.

During a BIO 2017 panel (Strategic Venture Investing by Large Pharma: Is “Smart Money” Right for Your Company?) leaders from AbbVie, Johnson & Johnson and Pfizer’s addressed how their companies’ strategic venture arms offer unique advantages over traditional corporate VC arrangements.

These companies have different investment philosophies, but they agreed flexibility is key. While they want to see clinical and economic validation in potential investments, they also want access to promising therapies and technologies as early as possible. 

“For some candidates, the timing is right for a research collaboration. For others, an incubator program is best. That’s why we built JLABS. Or, maybe they need more financial investment. The most effective approach really depends on the investment opportunity,” said Marianne De Backer MSc, PhD, MBA, vice president, Johnson & Johnson Innovation.

Ms. De Backer, joined by Margarita Chavez, senior director, AbbVie Ventures, and Elaine Jones, PhD,

executive director, Pfizer Ventures, gave biotech entrepreneurs advice to determine whether “smart money” is right for them.

  • It sounds obvious, but do your homework on the company’s pipeline

If the disease isn’t a priority for Pfizer, it’s going to be a tough sell. We’re trying to advance assets that map back to our portfolio ambitious,” said Dr. Jones.

Then again, there is such thing as over-customizing. If you’re just designing a program for AbbVie, for example, that’s risky. Instead, understand what dataset might be compelling to a number of companies and likeminded investors. “I would say, the most exciting deals we’ve done lately have been in collaboration with other corporate investors who are going early,” Dr. Jones added.

  • There’s separation between church and state (aka, between parent company and venture arm).

Dr. Jones assured entrepreneurs that while she has to engage her R&D colleagues at some point when evaluating investment opportunities, “if that makes you uncomfortable, we’ll find an external consultant. We don’t want to contaminate information.” Ms. Chavez also noted that she wants to ensure entrepreneurs are getting access to the right people from AbbVie corporate. Large pharma companies tend to be well-connected with academic institutions, strengthening their ability to license therapies. Simply put, “we’re good at spinning stuff out,” she said.

  • Large pharmas aren’t as risk-averse as you think.

Ms. De Backer reinforced that the more transformational an opportunity is, the earlier J&J wants to be involved. Cancer prevention is one such area. “If you’re able to tell a patient, ‘you’ll develop this cancer, here’s what you can do to prevent it’ – we want to be part of that.”  Dr. Jones added, “in areas like neurodegeneration, for compelling hypotheses, we’re willing to take risks.”

  • The company is your advocate.

“Once we become an equity holder in your company, I’m pretty confident that mother Pfizer can take care of herself,” said Dr. Jones. “We want to see you succeed because we want the return on our investment.”  It’s all about finding the right partner with the right deal structure at the right time.

Concluding the session, Ms. Chavez reminded attendees that corporate venture arms must also recognize when they’re not the best partner. “Our mindset is, ‘may the best pharma win.’ Pharma venture has been around long enough that we’ve figured out ways to play together,” she concluded.