SummaryAs technology comes to the forefront in healthcare innovation, the venture capital arms of many pharmaceutical companies are solidifying their presence as key investors.
The role of technology in healthcare continues to grow, with digital health interventions emerging as a promising tool for care transformation. In this climate, a variety of healthcare organizations are defining their role in supporting the growth of digital health. While some organizations are launching accelerators or partnering with third party organizations to launch new digital health solutions, a growing number of healthcare companies are developing venture capital capabilities. A corporate venture capital (CVC) firm is a corporate company that uses its funds to directly invest in external companies, allowing firms to finance novel and groundbreaking opportunities. The 15 large pharmaceutical-backed CVCs1 that we examined have invested almost $4 billion* in 443 portfolio companies. Over the past 5 years, we have seen the growth of pharmaceutical-backed CVCs in the ongoing push towards healthcare innovation.
In light of this trend, Avalere sought to understand the landscape of leading pharmaceutical-backed CVCs and the breadth of their investments. Through an analysis of data from PitchBook, we were able to understand the current industry areas of interest to these CVCs by gaining access to both their active and past portfolio investments.
Areas of Investments: Where Are Pharmaceutical-backed CVCs Placing their Bets?
Our analysis suggests that of investments made by leading pharmaceutical-backed CVCs, the majority these investments are taking place within the specific healthcare devices and supplies industry group (i.e., diagnostic equipment, medical supplies, monitoring equipment, surgical devices, therapeutic devices), as shown in seen in Figure 1. This category includes investments in companies such as Syapse, a cloud-based learning design platform, CVRx, the developer of implantable technology designed to treat high blood pressure, and AMRA, an international digital health company offering quantitative MR imaging.
The figure above shows that the majority of investments by CVCs in the digital health space are taking place within the healthcare devices and supplies industry.
Leading Pharmaceutical-Backed CVCs: Who is driving the investments?
To better understand the landscape of key pharmaceutical-backed CVCs, we focused on 2 indicators. First, we reviewed 15 large pharmaceutical-backed CVCs and stratified them by the number of active investments in digital health, which we defined as investments in companies that met one of the following categories: healthcare devices and supplies, media, software, healthcare technology systems, and other technology systems. We found that fifteen pharmaceutical-backed CVCs have made over 100 investments in the digital health space. According to our analysis, the leading pharmaceutical-backed CVCs by number of active investments in the digital health space are Johnson & Johnson Innovation with 42 active investments, Global Health Innovation with 22 active investments in the digital health space, Novartis Venture Fund with 12 active investments, Sanofi-Genzyme Bioventures with 8 active investments, and Amgen Ventures with 6 active investments. We found that the investments made by these 5 pharmaceutical-backed CVCs accounted for 76% of the total investments in digital health made by CVC arms of the previously mentioned 15 pharmaceutical-backed CVCs, signaling the relative footprint that they have established in this market.
Second, we examined the top 15 grossing pharmaceutical companies that also have a CVC arm and explored their respective assets under management (AUM). Noting that not all entities provide these data, the CVC firms with the highest AUM are Novartis Venture Fund, $932 million; Roche Venture Fund, $516 million; and Global Health Innovation Fund, $500 million.
Digital health can enhance patient care, increase patient healthcare access through telehealth services, and improve patient adherence with accessible health-centered platforms, including applications. The healthcare system is continuing to move toward prioritizing value-based care, pharmaceutical companies are increasingly exploring emerging digital health technologies to add value to their existing treatments and improve how they engage patients. As the potential for digital health to differentiate pharmaceutical products grows, pharmaceutical-backed CVCs are emerging as a powerful investor presence in the digital health sector.
While CVCs offer one way for pharmaceutical companies to engage in the digital health marketplace, pharmaceutical companies are also pursuing additional functional areas and activities beyond investing, such as partnering with digital health companies, co-developing digital health solutions, or developing their digital health platforms. In light of the many different ways in which pharmaceutical companies can deploy efforts towards a digital health strategy, it remains critical to ensure alignment between strategic investments and other activities.
Avalere will continue to monitor and evaluate the activities and development of pharmaceutical-backed CVCs, as well as other opportunities for pharmaceutical companies to strengthen their involvement in advancing digital health.
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- The fifteen companies included are Johnson & Johnson Innovation, Novartis Venture Fund, SR One, Pfizer Ventures, Roche Venture Fund, Lilly Ventures, Amgen Ventures, Merck Ventures, Takeda Ventures, Global Health Innovation Fund, Sanofi-Genzyme BioVentures, AbbVie Ventures, Boehringer Ingelheim Venture Fund, Astellas Venture Management, and Merck Capital Ventures.
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