AstraZeneca Commits $100 Million To MedImmune Ventures

The UK-based pharma’s corporate venture arm now has $400 million under management in an evergreen fund, with an expanded global focus that includes health care information technology.

For the first time since it acquired MedImmune Inc. in 2007, AstraZeneca PLC has refilled the coffers of its corporate venture arm, MedImmune Ventures Inc., with a $100 million capital commitment.

The British pharma said Nov. 24 that its new contribution would raise MedImmune Ventures’ total capital under management to $400 million. The firm’s evergreen fund relies on its corporate parent as its sole source of capital and is structured as a corporate subsidiary of AstraZeneca. AstraZeneca acquired MedImmune for about $15.6 billion in 2007 to enhance its biologic drug and vaccine product portfolios (Also see "AstraZeneca Accelerates Biologics Strategy With Acquisition Of MedImmune" - Pink Sheet, 23 Apr, 2007.).

Gaithersburg, Md.-based MedImmune supplied the first $300 million in three installments during the first five years of the firm’s existence. In an evergreen fund, the pool of investment capital is replenished partially by returns from existing investments via public offerings or trade sales, although a corporate parent may commit more capital as well. MedImmune Ventures has backed about 30 start-ups since its origin in 2002, making roughly three or four investments per year.

Senior Managing Director Ron Laufer said that pace would continue, but the firm is making adjustments to its strategy in response to the evolving climate for venture investing. MedImmune Ventures is among several corporate venture groups that have stepped in to fill gaps left by traditional VCs, many of which have abandoned early-stage investing (Also see "Corporate Venture Takes Center Stage " - Scrip, 1 May, 2009.). The increased commitment of strategic investors has delivered ample returns thus far, driving up valuations when exits are eventually achieved. A summer 2011 analysis by Elsevier Business Intelligence revealed that for private biotechs with at least one strategic backer prior to a sale, step-up valuations were 3.6 times the money originally invested, compared to 2.2 times investment for those without strategic backers (Also see "Corporate VC Backing Influences Private M&A Step-Ups" - Scrip, 1 Jun, 2011.).

With the new cash infusion from parent AstraZeneca, MedImmune Ventures now intends to commit more money to each portfolio company than it did in previous years, with the expectation that fewer investors will be vying to participate in startups’ later-stage rounds. Moreover, Laufer said larger allocations will be necessary for the companies in which the firm has taken early-stage stakes, as both public listings and trade sales have become more rare, requiring startups to rely on private capital for longer periods. “We will allocate more and be patient,” Laufer said.

Like other evergreen funds, MedImmune Ventures has the luxury of waiting longer for returns than traditional VC firms, whose limited partners such as pension funds or university endowments seek returns within a decade of investing in closed-end funds. Evergreen funds also avoid the periodic hassle of raising new funds and don’t compete with other VCs for LPs’ money, affording them status as a syndicate partner of choice (Also see "Novo Ventures' Hot Streak Of Exits" - Scrip, 1 Nov, 2010.). “We’re fortunate in that our structure makes it easier to increase our capital under management,” Laufer said.

Although he declined to discuss MedImmune Ventures' overall returns thus far, Laufer said it would likely be a top-quartile firm if its returns were measured like a closed-end fund’s.

One investment that could soon bring returns is Melinta Therapeutics Inc., an antibiotic developer in which MedImmune invested in 2006. Rib-X filed Monday Nov. 28, for an initial public offering, although it hasn’t yet determined how many shares will be offered. MedImmune owns 6% of Rib-X, according to regulatory filings.

At least three investments have provided liquidity already. Amgen Inc. paid $290 million up-front to acquire autoimmune and inflammatory disease drug developer Avidia Inc. in 2006 (Also see "Amgen Expands Inflammation Pipeline With Avidia Purchase" - Pink Sheet, 29 Sep, 2006.). CNS drug maker Vanda Pharmaceuticals Inc. went public in 2006, netting $55.4 million [See Deal]. And MedImmune itself bought antibody developer Cellective Therapeuticsfor an undisclosed amount in 2005 [See Deal].

Investing Worldwide, With An Eye On Health Care IT

Under AstraZeneca, MedImmune Ventures has expanded its investment scope. Where the firm once targeted U.S.-based biopharmas developing vaccines and small and large-molecule therapies, it will now invest in startups worldwide, including medical technology and health care information technology companies. Health care IT has sparked increasing interest in recent years, especially as returns have been difficult to realize in drug development (Also see "Health Care Information Technology: Venture's New Darling?" - Scrip, 1 Jun, 2011.).

Its first international investment is NeuProtect Pty Ltd., an Australian startup that addresses cardiac remodeling following heart attacks. MedImmune Ventures invested alongside original backer Starfish Ventures in a new Series B round of undisclosed size, which will allow NeuProtect to put its first product candidate into clinical trials.

MedImmune Ventures plans to invest internationally only when it has strong local relationships. Laufer noted that he invested alongside Starfish in another company, Protagonist Therapeutics Inc., when he worked for Lilly Ventures in 2006.

Since Laufer joined MedImmune Ventures in April 2010, at least three other key personnel have been added to the staff. Most recently, the firm added Michael Gutch as its newest managing director, after three years at H.I.G. BioVentures. Former SV Life Sciences principal Samuel Wu was named managing director in September 2010, and onetime VC and AllianceBernstein analyst Isai Peimer signed on as a MedImmune Ventures principal in August 2010.

Like many of its Big Pharma peers, AstraZeneca's in-house R&D budget is shrinking, but in comparison the new venture commitment is still a small fraction. AstraZeneca spent $4.2 billion on R&D in 2010, down from $4.3 billion in 2009 and $5 billion in 2008.