If anything, the recent news of Novartis agreeing to sell
its vaccine & veterinary businesses while simultaneously acquiring oncology
assets from GSK consolidates my earlier view/ observation that the investment
philosophy of a corporate’s venture arm seldom reflects the strategic goals
pursued by the corporation itself - effectively meaning that there’s hardly any
difference between a CVC and a VC as far as the ‘intention behind the
investment’ goes – the intent in this context being a tangible ROI.
There is albeit a definitive difference between a CVC &
VC as far as the ‘intelligence behind the investment’ goes – the intelligence
in this context being the insider-edge the CVC enjoys when it comes to
identifying, qualifying and investing in a promising enterprise, an edge seemingly
acknowledged by the VC & angel community given the sheer number of
fundraising rounds led by the likes of Google, Intel & Novartis compared to
than those led by non-CVC brave-hearts – This propensity of the investing junta
to look up to the CVCs to take lead is demonstrated once again by the quantum
of followers the likes of Kevin Rose (Google Ventures) & Jerry Yang (Yahoo)
command on AngelList, the new age pit-stop of investors & enterprises
alike.
I realize though that compared to the regular VC, an average
CVC can afford to be lot more adventurous/ less-conservative since the LP,
which is the corporate itself, has a far less looming presence given the non-financial
nature of the corporation. This context
of less-intense LP scrutiny thus affords a CVC greater liberty & hence
their investment strategy may not be that de-risked after all & this isn’t
saying anything.
With no prejudice whatsoever on the relative merits of a CVC
vis-à-vis a VC & going merely by the data, I think Novartis Venture Funds
(NVF) is what one could refer as the ‘Google Ventures of pharmaceutical
innovation’, a yard-stick, if not a bench-mark other VCs could use within the
pharmaceutical domain. With this premise, I went about analyzing the NVF’s investments
data, of both current & exited portfolio, the key takeaways of which I have
discussed below;
DUALITY OF VISION
A quick comparison of NVF
investment focus & Novartis business focus;
INVEST SMALL – EXIST FAST
When it comes to making small molecule therapeutics work
both as a business strategy & investment focus, few seem to be able to bend
it like Novartis. Despite Small molecule therapeutics being a mere 20% of the total
invested value, this segment is a star performer at 63% when it comes to exits.
This performance is consistent in both the major exit types of IPO (69%) and
Acquisition (59%) – the relatively higher contribution of IPO as an exit also seems
to suggest that the chances of an IPO are higher for an enterprise developing small
molecules & that going public isn’t an easy game for a company developing
biologicals.
No wonder then that the current portfolio of NVF once again
is dominated by enterprises pursuing small molecule
therapeutic dreams (53%). However the marginally higher percentage share
of biologic therapeutics in the current investments indicates NVF is cautiously
optimistic about these living herbs!
ATTITUDE, IT’S THERAPEUTIC
The NVF investment spread across therapeutics is nothing counter
intuitive & is expectedly skewed towards oncology. What’s interesting is
the sentiment/ attitude driving these investments in different disease segments.
Looking at the interplay of number v/s value of investments,
NVF’s investor attitude can be summarised as follows for a few key segments;
Oncology --> Casting the net far & wide
Hematology --> Betting
high
Cardiology --> Upping
the stakes
Allergy --> Risking it big
Infection --> Seeding a promise
EXIT THROUGH ACQUISITION
THAN IPO
With companies having FIC assets making up 60% of the total current
investments & since FIC assets are typically more attractive acquisition
targets, it can be surmised that NVF is not counting on IPO as the primary exit
path.
BULLISH ON EARLY
& BEARISH ABOUT LATE-PHASE ASSETS
Perhaps this is more of an alert to enterprises seeking
venture funding than other VCs – the date clearly shows NVFs reluctance to risk
its green-backs on the very volatile PIII assets – this once again underscores
the primal premise that for NVF’s vision is limited to supporting viable
clinical assets and NOT in seeing them through to the market.
The message hence for the biotech is - knock at the doors of
NVF after your IND is filed & count on their support till end of Phase II & showcase the potential of your clinical asset to get acquired even as it
is still in PI or PII.
SLOWER, LONGER &
BIGGER – NVF’s NEW MOTTO?
VC is more a patient fund than earlier & NVF seemingly
realizes that – that’s what the numbers say at least
Despite the now apparent & clear segregation of objectives
of a corporate & of its venture fund, a CVC seemingly still employs the
insider-edge in making its investment & exit decisions.
Meray Chaaraaney.
