Venture firms have traveled a variety of new routes to limit risks and score returns in biotech, and the Wall Street Journal has covered how Clarus Ventures and OrbiMed Advisors have found potentially lucrative ways of investing in the pipelines of established pharma companies.
This might sound strange because pharma companies have deep pockets and the VC industry has been scrounging for capital to fund biotech investments. As the WSJ points out, however, pharma companies have limited budgets for certain R&D programs, providing an opening for venture outfits to gamble on additional clinical development of the pharma companies' assets without those drugmakers giving up ownership of the programs.
Clarus, for instance, has formed Edev and other vehicles that bet on compounds from drugmakers in exchange for success-based payments from corporate partners. As the article notes, Edev was formed several years ago and invested in a pharma company's development of an approved treatment in a new indication. (Clarus, as previously reported, has also invested in royalties on potential sales of ibrutinib, the breakthrough blood cancer drug from Johnson & Johnson and Pharmacyclics.)
OrbiMed has made a similar gambit to Edev with OxOnc Development, which the venture firm hatched this year to fund development of Pfizer's ($PFE) cancer drug Xalkori in Asia for genetically defined patients with lung cancer. OxOnc/OrbiMed stand to score payments from Pfizer based on the success of the program, the WSJ notes.
These strategies and others show how VC firms have become more creative in recent years, branching off from their traditional roles as startup backers to find ways to make money in the biopharma industry.
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