+Timos Papagatsias

Monday 2 September 2013

Venturing Pharma

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Maintaining a healthy pipeline and a steady revenue stream are on the top of the priority list for pharma and biotech companies. 2013 has been a interesting year so far, with most companies finishing off making their moves in order to defend against the patent cliff, cut costs, or even "redefine" themselves (Pfizer had begun the cost-cutting exercise in 2010-2011, AstraZeneca continues to buy early and late-stage pipeline assets in an attempt to survive and establish the promise of long-term growth).

The type of activities that typically gets noticed by the industry revolves around mergers, acquisitions, in- and out-licensing agreements and other late stage commercial deals. I thought of looking a little bit earlier than this and more specifically on what the venture capital (VC) subsidiaries of some large pharma and biotech companies are investing in (and in the process I threw Google Ventures into the mix as well). All data were gathered from the public domain, i.e. company websites and other online publications. Although the individual VC company's preferences probably do not align completely with the interests of the parent company, some interesting findings came up...

So, let's begin...The graph and table below contain the different VC companies that were analyzed, listed in order of number of ventures per company. The graph is an interactive one, so you can hover over its different parts for more information.

Venture Fund# of Ventures% of Total Ventures
Novartis Venture Funds5020.49%
Novo Ventures4116.80%
SR One (GSK)3112.70%
Roche Venture Fund249.84%
Pfizer Venture Investments239.43%
Astellas Venture Mgt197.79%
J&J Devt Corp197.79%
Lilly Ventures187.38%
MedImmune Ventures156.15%
Takeda Ventures135.33%
Amgen Ventures124.92%
MS Ventures (Merck)124.92%
Sanofi-Genzyme BioVentures93.69%
Google Ventures93.69%
MP Healthcare Venture Mgt (Mitsubishi Tanabe)83.28%
Boehringer Ingelheim Venture Fund52.05%
Total Unique Ventures244

As you can see above, Novartis Venture Funds leads the pack with 50 ventures, accounting for ~20% of the total number of ventures identified for the analyzed companies. Novo Ventures and SR One (belonging to Novo Nordisk and GSK respectively) have 41 and 31 ventures respectively and are closely followed by the Roche and Pfizer venture companies. The VC arms of companies like Amgen, Eli Lilly, MedImmune (AZ) and Sanofi are in the lower half of the table. Not a very surprising result given that Novartis is known as an outward looking company, GSK likes to be involved in pretty much everything (and has the reach and means to do so) and Novo is a very innovative company throughout. 

But what do the pharma and biotech companies invest in at VC stage? I took a look at what the individual ventures bring to the table in terms of technology and therapy area or specialization focus. You can see the results on the graphs below (again, please get in touch at timos@biohive.net for a spreadsheet version of the data).

Development of small molecule (SM) candidates seems to attract the highest VC interest (~40% of the ventures develop assets using this technology), followed by monoclonal antibody (mAb) candidates (~11% of ventures). Companies that are involved in development of new diagnostic tools (Dx) also seem to interest big/medium sized pharma and biotech companies and the same stands for novel concepts in the medical devices (MD) field (8.6% of ventures for each type of tech). The list goes on further to include protein- and RNA-based therapeutics under development as well as stem cell, vaccine and Gene Therapy candidates (currently at ~2% of ventures identified). 

Considering the high drug development costs, difficulties in acquiring sufficient funding and the higher level of familiarity with the technology, it is not surprising that assets based on SM technology still dominate early stage ventures. In a similar manner, pharma and biotech companies are more accustomed with mAb vs viral vector technology, something that works against Gene Therapy companies in their efforts to attract venture funding.

No real surprises then, based on the technology focus analysis, with pharma and biotech companies sticking to what they feel more comfortable and have more experience with. Perhaps one trend that could be identified is the high level of interest in medical devices and diagnostics as well the apparent interest (~4% of total ventures) in companies that focus on data management applications, a fact which most likely reflects the emerging need for such applications.

Taking a look at which therapy areas VC firms have an interest in, we see a familiar pattern emerging...

~19.5% of ventures have oncology, either as single focus or as part of their portfolio. This is followed by companies who focus on multiple therapy areas (12.5%), typically through their technology platforms. The usual suspects' list is further complemented by companies with neurology (10.5%), inflammation (~9%), infectious diseases (ID) (~7%) and respiratory (~6%) focus, therapy areas which attract both VC funding as well as commercial interest.

In the following tabe, I have broken down the top 3 choices for each VC fund, in terms of technology and therapy area focus. % values refer to the relative focus within each VC fund's portfolio companies).

Tech Focus #1Tech Focus #2Tech Focus #3Therapy Area #1Therapy Area #2Therapy Area #3
Amgen VenturesSM (41.7%)mAb (33.3%)RNA (16.7%)Onco (30%)ID (15%)Fibrosis (15%)
Astellas Venture MgtSM (52.6%)Protein (10.5%)DD (10.5%)Onco (23.1%)Inflamm (15.4%)Multiple (7.7%)
MedImmune VenturesSM (66.7%)mAb (13.3.%)Gene Therapy / Vax / Peptide (6.7% each)Inflamm (20%)Onco (16.7%)Resp (16.7%)
Boehringer Ingelheim Venture FundSM (20%)Vax / Protein (20%)Stem Cell (20%)ID (33.3%)Onco / Neuro (16.7%)Liver (16.7%)
Lilly VenturesSM (33.3%)mAb (11.1%)Protein (11.1%)Multiple (28%)Onco (24%)Inflamm (16%)
SR One (GSK)SM (41.9%)mAb / Peptide / Dx (6.5% each)Vax / Implant / RNA (6.5% each)Onco (20%)Multiple (15.5%)Neuro (15.5.%)
J&J Devt CorpMD (36.8%)Dx (21.1%)Protein / SM (10.5%)Neuro (15.4%)Heart (15.4%)Diabetes (11.5%)
MS Ventures (Merck)SM (41.7%)mAb (25%)Dx (16.7%)Onco (23.5%)Neuro (23.5%)Multiple / Autoim (11.8%)
MP Healthcare Venture Mgt (Mitsubishi Tanabe)SM (50%)mAb / Dx (12.5%)Vax / Protein (12.5%)Neuro (23.1%)Inflamm (15.4%)Multiple (7.7%)
Novartis Venture FundsSM (44.9%)MD (12.2%)mAb (10.2%)Onco (26.4%)ID (12.5%)Multiple (6.9%)
Novo VenturesSM (51.2%)MD (12.2%)mAb (9.8%)Inflamm (11.3%)Neuro / Onco (9.7%)ID / Resp / Multiple (8.1%)
Pfizer Venture InvestmentsSM (26.1%)Dx (21.7%)Data (17.4%)Multiple (41.7%)Onco (29.2%)Heart / Neuro (8.3% each)
Roche Venture FundDx (32%)SM (28%)mAb (16%)Onco (21.1%)Multiple (15.8%)Neuro / Metabo / Inflamm (7.9% each)
Sanofi-Genzyme BioVenturesSM (33.3%)mAb (22.2%)Protein (22.2%)Onco (20%)Neuro (13.3%)Muscle / Hemo (13.3% each)
Takeda VenturesSM (30.8%)mAb (23.1%)Protein / Stem Cell / DD (15.4%)Neuro (25%)Onco (20%)Hemo / Muscle (10% each)
Google VenturesData (36.4%)Dx (27.3%)mAb (18.2%)Multiple (54.5%)Neuro (18.2%)Genetics (18.2%)

Small molecule development comes up as the #1 technology of interest with mAbs, medical devices (MD) and Dx competing for second place. Interestingly, Roche Venture Fund seems to focus slightly more on Dx than SM. On the other hand, JnJ Devt Corp primarily focuses on medical devices and Dx as first and second choices of technology focus. Finally, as somewhat expected, Google Ventures chooses to focus on data- and Dx-related technologies. In terms of therapy areas of interest, oncology seems to win top prize, with neurology and inflammation in second place.

The table below shows the top eight ventures that appear to receive the highest interest from pharma companies.

Venture# of Pharma Fund investedPharma Fund
Aileron Therapeutics4Eli LillyGSKNovartisRoche
Alios Biopharma4GSKNovartisNovo NordiskRoche
F-Star4GSKMerckMitsubishi TanabeNovo Nordisk
Fate Therapeutics3AstellasSanofiTakeda
Genocea Biosciences3GSKJnJMitsubishi Tanabe
NeuroTherapeutics Pharma3GSKNovo NordiskPfizer

Aileron Therapeutics, Alios Biopharma and F-Star appear to be the most popular ventures with GSK's SR One having invested in all of them; SR One has a stake in six out of the listed top eight ventures by the way. Novartis Venture Funds is currently only focusing on Aileron and Alios (from this top eight list) with Roche Venture Fund following its example but with the addition of 23andMe (which it shares with Google and J&J). Novo Ventures is looking into Alios and Aileron as well and complements its choice from this list with NeuroTherapeutics.

The interest in Aileron is not surprising. The company has developed a technology for "locking" peptides in specific conformation, leading to resistance to protease degradation and enabling targeting of large numbers of therapeutic targets typically difficult to "hit" with SM and current peptide-based drugs. Aileron's moto is "drugging the undruggable"; the company has recently completed a Phase I trial with ALRN-5281, a long-acting growth hormone-releasing hormone agonist, which could potentially be used to treat growth hormone deficiency and HIV lipodystrophy.

Alios Biopharma has a different offering for investors. The company focuses on development of nucleoside analogs for HCV, RSV and picornaviruses (entero- and rhinoviruses). Alios also has strong ties and an ongoing collaboration with Vertex in the HCV treatment field. A dose-ranging Phase IIa in treatment-naive HCV patients is currently ongoing, a first-in-human Phase I with another HCV drug candidate has finished recruiting and a Phase I with an RSV inhibitor is due to have its primary outcome in September 2013.

F-Star is becoming known for development of bi-specific antibodies, using its Modular Antibody Tech platform. According to the company's website, F-Star's IP allows it to be the only company that can create bi-specific mAbs through adding additional binding sites to the antibody's constant region. Given the interest in antibody therapeutics that is by no means going to diminish anytime soon, should F-Star's technology delivers, the company and its backers will be in a good position. 

Synovex tries to tackle rheumatoid arthritis and fibrosis (pulmonary, skin) through inhibition of cadherin-11, a key protein in both diseases; needless to say that both markets have large potential for solid revenues, hence the interest from the venture funds of AZ, Amgen and GSK.

Fate Therapeutics focuses on adult stem cells and makes use of hematopoietic stem cell (HSC) and satellite stem cell (SSC) modulation, as well as its induced pluripotent stem cell (iPSC) technology. The company has two active programs: ProHema, an HSC therapeutic derived from umbilical cord blood and a program looking into developing Wnt7a protein analogs (Wnt7a promotes SSC-driven muscle regeneration).

23andMe is perhaps the most well known company of this top 8 list, providing genetic testing on health and ancestry issues. The company has famously been backed up by Google Ventures, who has now been joined by JnJ and Roche.

Genocea is a T-cell vaccine company who makes use of its proprietary ATLAS system which enables mimicking of the human immune system in the laboratory, at least to a certain extent that allows rapid and more accurate T-cell antigen identification. The company has interest in HSV (Phase I/IIa), chlamydia, pneumococcus and malaria treatments.

NeuroTherapeutics focuses on development of CNS therapies, with a primary interest in epilepsy. An IND was expected to be filed for the company's lead candidate, NTP-2014, back in 2011 but there is no clear evidence of what its status currently is. 

Below you can see two interactive network graphs showing which company each VC fund has invested in and also the ventures that are common to more than one VC fund. You can play around with these interactive graphs by hovering over and clicking on the nodes; by increasing the number of nodes you will also be able to see all interactions. If you would like to view these data in table format please do get in touch (timos@biohive.net) and I will provide the relevant spreadsheet(s).

Total Ventures and VC funds

Common Ventures and VC funds

So, here it is, what large pharma and biotech companies invest in at VC level. Again, I have to highlight that information was obtained from the individual websites of the VC companies and other online sources and should not be considered totally comprehensive. However, I believe it gives an indication of the basic ongoing and upcoming trends in VC activity by pharma.