Venture firms vied for the attention of big drugmakers this week at J.P. Morgan healthcare conference, not just to promote the existing companies in their portfolios, but also to talk about joining forces to create new biotech outfits. Bruce Booth, a partner focused on early-stage biotech investing at Atlas Venture, writes about the trend on his blog this morning.
Big Pharma's growing role in launching new startups made big news this week, as Sanofi ($SNY) led the charge with its part in financing newly hatched Warp Drive Bio with founding venture backer Third Rock Ventures and Greylock Partners. Alexis Borisy, Warp Drive's interim chief executive, told FierceBiotech that Sanofi's part in the financing made it possible to get the risky drug-discovery operation off the ground. Booth, in his own meetings with pharma groups, found they wanted to go beyond funding startups.
"When we discussed our venture formation activities, many pharma groups raised their hand as wanting to help catalyze the early momentum of these startups," Booth wrote in his blog, citing the Warp Drive/Sanofi pact and Celgene's ($CELG) deal last year with startup Quanticell as examples of such activities. He added: "These efforts go beyond the key role of corporate venture as valuable syndicate partners; they are really commitments from corporate R&D to helping shape the DNA of new startups."
Flagship Ventures and Canaan Partners both announced new funds for biotech investing this week, but the general feeling among some young companies at J.P. Morgan was that the venture community lacks the wherewithal it had prior to the financial meltdown in 2008. "The ecosystem is shrinking," Roger Tung, CEO of Concert Pharmaceuticals, a venture-backed group based in Lexington, MA, told FierceBiotech during the conference. "VCs don't have the same firepower that they did 5 years ago. I think pharma is going to have to step up to feed their own ecosystem where they get a lot of their products from."
Booth's Cambridge, MA-based firm formed an alliance with Shire's ($SHPGY) Human Genetic Therapies unit last year to fund new companies in the rare diseases field and provide Shire with options to gain access to the assets. In fact, pharma groups appear to want more for their money than just an ownership stake in young companies, aiming to use their financial clout to get dibs on the startups' assets early on.
Biogen Idec ($BIIB), for instance, has scrapped its former strategy of backing startups purely as a financial investor, the company's chief dealmaker, Steven Holtzman, said in an interview. The company's new strategy involves investing in young companies as part of deals to gain licenses to those companies' products.
- read Booth's blog