"Corporate Venture Capital In The Healthcare Industry"

*  Introduction :-

                      This section discusses venture capital activities of healthcare providers such as Ascension Health, biotech firms such as Biogen Idec,

and pharmaceutical companies such as GlaxoSmithKline, all of which are healthcare-related companies and have internal venture capital units or wholly owned subsidiaries focused on venture capital. The structure of corporate venture capital within the healthcare arena; the most common types of investments made; and the main reasons for which healthcare companies invest will be addressed, as well as the current trends and some future predictions for the industry.

*  Structure of Healthcare CVCs :-

                  By definition, the corporate venture capital field is made up of organizations whose primary activities are not investing in other firms (see above). Since that definition rules out freestanding healthcare venture capital firms such as De Novo Ventures, as well as publicly traded firms, what remains are a limited number of organizational structure types used by healthcare corporate venture capital.  The two main types are:

 1)  Divisions within a larger healthcare company; and

2)  Wholly owned subsidiaries of larger healthcare companies.

                   CVC units of both of these types often engage in partnerships with other firms. In most cases the other firms are limited partners and the primary company manages the fund and is the only general partner.

*  Types of investments :-

                       The largest segment of healthcare-related venture capital investments are made by the venture arms of firms who focus on biotechnology and pharmaceutical products, such as Eli Lilly and Company, GlaxoSmithKline, Takeda Pharmaceutical Company (TCP), Biogen Idec, and Roche. Because the top priority of many of these venture capital units or divisions is to fund ventures that may result in scientific and technological discoveries and advancements that may benefit their parent companies, most tend to invest in companies whose products or proposed products are similar to their own. For example, the portfolio of Takeda Research Investment (the venture capital arm of TCP), includes such companies as:

a)   Lectus Therapeutics, a biotech company based in the UK that employs a proprietary process that has enabled them to discover and develop unique, small molecules that modulate ion channels;

b)   Adamas Pharmaceuticals, a California specialty pharmaceutical company whose primary focus is on novel approaches to treating neurological disorders; and

c)   Xenon, a leading Canadian biopharmaceutical company that aims to treat a broad range of major human diseases by isolating the genes that underlie these disorders and identifying drugs that target these genes.

                    Many of these venture arms of larger organizations thus consider themselves financial investors in strategic areas of interest. These areas nearly always include the focus of their parent companies, but often are much broader than just the parent organization’s specific focus.

*  Sectors with CVC Investments :-

                                          Investments from venture capital firms and CVC in 1998 were mostly in software and telecommunications sectors. By 2006 the biotechnology and medical devices became the sectors with the most investments from both, venture capital firms and CVC. However, there has not been significant investments in health services and have actually decreased through these periods. Biotechnology CVC’s investments in biotechnology are higher than those from VC firms. However, medical devices and health services had a is not a top sector for CVC investments as it is for VC firms. Other top sectors for CVC investments are software, telecommunications, semiconductors, and media/entertainment.

Top Sectors for VC Investment:

1. Software,
2. Biotechnology,
3. Medical devices, and
4. Telecommunications.

Top Sectors for CVC Investment:

1. Biotechnology,
2. Software,
3. Telecommunications,
4. Semiconductors, and
5. Media/entertainment.

*  Venture Capital Company Products in the Life Sciences :-

                                      Many of today's well known companies in life sciences have been backed with billions of dollars by venture capital investments. Some of these are: Boston Scientific, Amgen, Genentech, Genzyme, Gilead Sciences, Kyphon, Intuitive Surgical, and Scimed Life Systems. From the $25.5 billion in total venture capital investments, there were $7.2 billion targeted to the life sciences industry. The life sciences include sectors in biotechnology and medical devices and equipment. Venture capital investments within biotechnology accounted for $4.5 billion and within medical devices and equipment for $2.7 billion.

                               Venture capital investments have gone toward specific disease. For example, there were venture capital support during the past 20 years of $14.9 billion in cardiovascular/heart diseases, $14.7 billion in cancer, and $4.9 billion in diabetes..