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Strategic Venture Investing by Large Pharma: Is “Smart Money” Right for Your Company

June 9, 2016
The strategic venture arms of major biopharma companies like AbbVie, Amgen, Johnson & Johnson and Pfizer offer unique value propositions to early-stage companies and have the flexibility to shape unique deal structures for advancing these partnerships beyond traditional corporate venture capital models. Speakers at a 2016 BIO International Convention panel titled “Strategic Venture Investing by Large Pharma: Is ‘Smart Money’ Right for Your Company?” provided their about how these venture arms fuel innovation in the industry.

“Every large pharma has one, but they’re not all the same,” said Karen Bernstein, chairman and co-founder of BioCentury and moderator of the panel. These investments should align with the company’s therapeutic and strategic priorities, speakers noted. “One size does not fit all,” said Carolyn Green, Pfizer’s executive director of worldwide R&D strategic investments.

Johnson & Johnson’s approach is similar, said Marian Nakada, vice president, venture investments.  “Once we find science we’re interested in, we figure out what kind of deal structure makes sense,” she said.

This flexibility has allowed corporate venture arms to distinguish themselves f from more traditional venture capital. “There’s a tendency to think of your venture arm as a business development arm, but you really should think of it more in the long-term,” said Margarita Chavez, director, ventures & early stage collaboration at AbbVie.  Keeping a long-term perspective with strategic venture investments enables these companies to support an innovative biotech ecosystem, she said.

The panelists agreed that though they need internal R&D champions for their investments, clear separation is needed between the corporate venture arm and the early-stage partner. Sometimes, the partner will want to more closely engage with R&D as they seek advice on how to advance therapeutic candidates. “I advise our executives to approach the company and ask” if they can review the information, said Chavez.

Venture investing requires adopting a method of measuring long-term success, the panelists said. Primarily, success means the full onboarding of the partner after a therapeutic candidate has achieved clinical milestones. Success can also be measured financially if the early-stage partner is acquired. At the end of the day “just try not to lose money,” Janis Naeve, managing partner in Amgen’s strategic venture arm.” Naeve noted that beyond the clinical and financial metrics, Amgen considers “soft metrics,” like whether the investment excites the internal R&D leads or facilitates relationship building with a unique company.

Success, of course, is never guaranteed. “We never want to tell our CFO that we plan to lose this money,” said Pfizer’s Green.We’re making cutting edge investments.” By definition, some venture investment will fail, so these failures should be looked at as learning experiences, Green said.