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1 April 2012

Healthcare becomes testing ground

The past few weeks has seen indications for how corporations will work with venture capital peers, charities and endowments, government-sponsored funds and others, including secodnaries and family offices, to create syndicates that can support the next generation of entrepreneurial ideas, academics and companies.

Author: James Mawson

Healthcare has shown some of the most sophisticated corporate venturing practices over the past decade and is becoming a testing ground for the next generation of venture connectivity.

The past few weeks has seen indications for how corporations will work with venture capital peers, charities and endowments, government-sponsored funds and others, including secodnaries and family offices, to create syndicates that can support the next generation of entrepreneurial ideas and companies.

Europe has been a testing ground for many of these diverse syndicates needed to fund healthcare entrepreneurs - click here for a nice slideshow of some of the biggest by news provider PEHub.

And the diversity is increasing. Cancer Research Technology (CRT), charity Cancer Research UK's subsidiary to commercialise academic research into oncology treatments, has set up a £50m ($80m) fund in partnership with the European Investment Fund (EIF), a state-backed organisation that is the largest investor - called limited partner - in European venture capital funds.

The fund aims to fill a gap as Keith Blundy, chief executive (CEO) of CRT, said there was less funding for small biotechnology firms, which previously helped bridge the gap between academia and pharmaceutical companies.

The CRT Pioneer fund will join UK-based medical endowment Wellcome Trust £200m investment company for healthcare, as well as the Index Ventures-managed fund half-sponsored by drugs companies GlaxoSmithKline and Johnson & Johnson and modeled on a plan devised by the EIF last year revealed at the Global Corporate Venturing Symposium in May.

But the trend is not confined to Europe. As Cyril Schiever, president and managing director of Merck in Canada, said when the US-based drugs company committed to a new fund:  "The Merck Lumira Biosciences Fund represents a collaborative approach to research between government, academia and industry."

Also in North America, elderly association Linkage Ventures started a fund to invest in early stage technologies and Cleveland Clinic continued building its innovation alliance with a partnership with North Shore-LIJ's clinical facilities. (Cleveland Clinic and Merck will be discussing these trends at the annual Global Corporate Venturing Symposium on May 15.)

But Asia could see some of the biggest changes as governments, particular in China, Korea, Singapore and Japan, suport healthcare industries for their ageing populations. China's RMB856.7bn ($136bn) National Council for Social Security Fund, China's largest limited partner, has only invested 2.2% of its money into the venture capital and private equity sectors but has an allocation of up to 10%, according to news provider China Daily.

Healthcare also represents an industry experiencing rapid cross-sectoral and regional innovation and partnerships. Technology company Qualcomm set up an advisory council for its Life division, Japan-based electronics group Sony is reportedly setting up a team to review the Israeli market to seek out healthcare companies for investment or acquisition and Netherlands-based industrials group DSM has invested again in "super-bug" treatment company IQ Therapeutics, chocolate company Nestle's Inventages unit has based Phosphate Therapeutcis and Germany's Siemens joined America's ViewRay's third round.

The attraction for all groups is the chance to heal people or keep them well as well as reap some of the enormous profits the healthcare industry throws up. But given the pluarality of syndicates being formed by investor objectives, managing the consortia so the entrepreneur can actually deliver on the potential discovery will be challenging.

As Blundy said, only one in 20 discoveries become an accepted drug but managing a mix of investors that potentially joined at different times and enterprise valuations and with difering societal, financial and strategic aims will be a headache. These challenges are starting to creep out into other areas, such as education/media and clean-tech, where the line between society good and profit maximisation are also blurred but will affect all parts of the economy - companies and the profits they return to managers and shareholders are only tolerated by people as long as the trade-off in terms of there being an efficient allocation of resources to productive areas and benefits to countries and their inhabitants.

The growth in social enterprises, venture philanthropy and impact investing show the corporation share value-only model is not the only one people can choose to work in or support.

Supporting articles: EIF and CRT to support academia

Copyright Mawsonia Limited 2010. Please don´t cut articles from www.globaluniversityventuring.com or the PDF and redistribute by email or post to the web without written permission.

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