Broad umbrella

Why elite investment firms and institutes could replicate Deerfield, Broad pact

In its $50 million tie-up with the Broad Institute of MIT and Harvard, Deerfield Management is looking to forge a new mold of partnership with an academic organization that allows it to efficiently survey early discovery research and form newcos around promising therapeutic candidates with clinical potential.

The deal, announced Oct. 10, gives Deerfield overarching access to invest in any of the technologies being developed at the Broad, while the institute receives funding for five years to allocate to early stage therapeutics research, a strategic partner with operational and financial expertise across the healthcare ecosystem, and an equity stake in any newcos formed via the collaboration.

The firm is taking a leaf from the playbook of pharmas by creating an umbrella agreement with the institute, a deal structure not previously adopted by investment firms.

For pharmas, umbrella agreements are part of the trend toward external innovation that gives companies a closer look at technologies in development, and in some cases the chance to fund multiple projects without the need to renegotiate each time. For example, Stanford University has umbrella agreements with at least nine biopharmaceutical companies, according to its website.

According to investors and university representatives polled by BioCentury, VCs and other investors traditionally spin out assets one by one, or foster them in their own venture incubators, rather than funding programs while still housed at a university.

Deerfield’s stature and the scope of its investments put this deal in a new class. The organization manages about $8 billion in assets and

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