The pharmaceuticals industry is changing rapidly as drug profit margins are squeezed and revenue growth slows, which has led many pharma giants to look to private markets.
Many pharma companies are effectively outsourcing the R&D of some newer and experimental drugs to smaller, more nimble private companies by investing in them. Some are also looking at digital health solutions to streamline processes and use data to identify potential relevant patients.
These large corporations’ investments provide crucial resources for innovation across healthcare. We decided to use CB Insights’ Business Social Graph, which shows how top investors and target companies are related, in order to analyze where some of the top pharma companies are making their private market deals.
We used CB Insights’ database to identify the top publicly-traded pharma companies by market capitalization that are active in private markets, and analyzed the investment activity of:
- Abbott Laboratories
- AbbVie Biotech Ventures
- Amgen Ventures
- Eli Lilly & Co.
- Johnson & Johnson
- Johnson & Johnson Innovation
- MedImmune Ventures
- Merck Capital Ventures
- Merck & Co.
- Merck Global Health Innovation Fund
- Merck KGaA
- Novartis Venture Funds
- Pfizer Venture Investments
- Roche Holding
- Roche Venture Fund
- Sanofi-Genzyme BioVentures
- Takeda Pharmaceutical
- Takeda Ventures
Some interesting takeaways from analyzing the graph above, which encompasses over 325 deals:
- Most of these pharma giants have made at least one bet on a company focusing on orphan diseases (conditions that affect a relatively small portion of the population, usually defined as less than 200,000 people). Some examples include Ovid Therapeutics, Minoryx Therapeutics, Mereo, and Vtesse.
- Oncology has been a particularly hot area for investment. Some of the larger deals into cancer companies include an $80M financing into ADC Therapeutics, a $75M deal into Corvus Pharmaceuticals, and a $65M deal into Unum Therapeutics. These investors have collectively been involved in over 40 financings in the oncology space since 2014.
- 2 of the top 3 largest VC-backed M&A deals were done by pharma giants. Abbvie bought Stemcentrx for $10B+ and AstraZeneca — one of the largest VC-backed M&A deals ever — and bought Acerta Pharma for $10B+ in December 2015, both deals happening within 5 months of each other.
Data points on active corporates:
- These investors were involved in more than 74 private market deals in 2016 year-to-date, and 140 private market deals in 2015, and have been ramping up their activity since 2012, which saw under 100 deals.
- The number of digital health investments in total was small, with only 25 deals to digital health companies (23 financings and 2 exits) involving pharma corps since 2014.
- Merck is particularly active in digital health, investing largely through their venture arm in companies including WellDoc, Healthsense, and Navigating Cancer.
- Roche also has some activity in the digital health space, investing in diabetes management app mySugr and acquiring both Genia Technologies and Bina Technologies (both working in the genomic data/processing space). One of the largest equity financings to digital health including a pharma corporate was the $175M financing into Flatiron Health that Roche participated in.
- Novartis is the most active investor among pharma corporates, investing in or acquiring 60 unique companies since 2014.
- Pfizer recently announced a partnership with Indiegogo to find innovations in aging.
Overlapping investments and distribution by stage:
- A handful of companies saw investment activity from mulitple pharma corporates. Some notable ones include Alios Biopharma (invested in by the venture arms of Roche and Novartis, before being acquired by Johnson & Johnson for $1.75B), Moderna (Merck and AstraZeneca investing at a $3B valuation), and Aduro BioTech (invested in by both Novartis and Johnson & Johnson Innovation, before going public at a valuation of $1B). Alector, a neurodegenerative therapies company, had the most investors from our list with Merck, Abbvie, Amgen, and J&J investing in the Series D.
- Out of the investments, the majority of pharma corporations’s deals were to companies in the Series A or B stages (45% of their deals since 2014).
Want more data on where pharmaceutical companies are investing? Check out our private market database below.