3:41 PM
Feb 07, 2019
 |  BC Innovations  |  Finance

Pharma ventures earlier

Why AbbVie, Pfizer and Novartis are expanding their Corp VC operations

Facing the squeeze from inside and out, at least three corporate venture arms are revamping operations to increase their foothold in earlier and riskier investment opportunities. From one side, the move reflects the growing reliance by pharmas on their corporate VCs to stay on top of new science. From the other, it’s a response to being left in the cold by the large private funds dominating late-stage investments.

In the last 12-24 months, Novartis Venture Fund (NVF), Pfizer Ventures and AbbVie Ventures have expanded their activities through increased funding or investments, and reshaped or grown their teams.

Investors from these and other firms told BioCentury that the emergence of larger funds has put pressure on many corporate VCs to rethink their strategies.

“Most corporate ventures are mid-sized funds, and like other mid-sized funds don’t have the scale to compete in the same pool,” said Anja König, global head of NVF. For that reason, she said, “mid-sized funds including corporate ventures just aren’t very active in driving crossover, series C or even sometimes series B now.”

The large rounds have also penetrated series A rounds, causing some pharmas to arm their venture teams with more cash, and to push for more investments in younger companies.

“Most corporate ventures are mid-sized funds, and like other mid-sized funds don’t have the scale to compete in the same pool.”

Anja König, Novartis Venture Fund

Investment by corporate venture funds in seed and series A rounds has been on the rise since about 2014, driven in large part by pharmas seeking to gain ground in immuno-oncology (see “Pharmas Learn Their A, B, Seeds”).

Overall, corporate VCs have been a growing part of the investment landscape since 2008 when they stepped in to fill a void created by the financial crisis. According to BioCentury’s BCIQ database, venture financings involving corporate venture funds rose from 35 in 2009 to 87 in 2018, representing a 149% increase. During the same period, the total number of venture rounds increased by 63% (see Figure: “Corporate Venture on the Rise”).

Figure: Corporate venture on the rise

Investment activity from corporate venture is still on the rise despite ever-growing venture rounds making it difficult for some smaller corporate venture funds to participate. The number of biotech offerings with participation from the 34 pharma and biotech-backed corporate venture funds indentified by BioCentury hit a new high in 2018, at 87, more than double the level 10...

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