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Pfizer's Middle Way in VC

This article was originally published in Start Up

Executive Summary

Pfizer's venture fund, Strategic Investment Group, focuses on commercial "enablers," technologies or services that can give Pfizer new ways of doing business, rather than at new molecules or drug delivery mechanisms. It leaves its drug-focused investments to its business development group.

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Nearly all the meters on pharma's pipeline are reading critical. With licensing and M&A increasingly a series of high-priced auctions, Big Pharma is casting about, often desperately, for new business-development strategies. And one place they're beginning to look is corporate venture capital, traditionally a way to provide drug companies with a window on new technologies. But that means finding a way to break through the seemingly impenetrable wall between corporate venture investing and other corporate and research activities. Thus, companies have embarked on a number of different strategies, ranging from the traditional to the radically new and aggressive. Getting the equity investor and the asset-hungry pharma partner to co-exist peacefully has aroused plenty of both skepticism and confusion Nevertheless, there's still a promising way for drug companies to get value from start-ups beyond mere equity appreciation--investing de-prioritized drug candidates, not merely capital.

Corporate VC Adds a Business Development Flavor

Nearly all the meters on pharma's pipeline are reading critical. With licensing and M&A increasingly a series of high-priced auctions, Big Pharma is casting about, often desperately, for new business-development strategies. And one place they're beginning to look is corporate venture capital, traditionally a way to provide drug companies with a window on new technologies. But that means finding a way to break through the seemingly impenetrable wall between corporate venture investing and other corporate and research activities. Thus, companies have embarked on a number of different strategies, ranging from the traditional to the radically new and aggressive. Getting the equity investor and the asset-hungry pharma partner to co-exist peacefully has aroused plenty of both skepticism and confusion Nevertheless, there's still a promising way for drug companies to get value from start-ups beyond mere equity appreciation--investing de-prioritized drug candidates, not merely capital.

Corporate Venture Capital's Complex Agenda

Several forces--rapid technological obsolescence, the impact of information technology on health care, merger integrations, and the need for double digit revenue growth--have caused increasing numbers of large pharmaceutical and medical device companies to create new corporate venture capital groups. But compared to traditional VC firms, whose only goal is to make money for limited partners, corporate VCs have a heavy agenda. They must choose portfolio companies while balancing often-competing goals of strategic benefit and financial return.

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