Germany's Merck Launches Venture Fund

Joining its larger pharmaceutical industry compatriots, Germany's Merck Serono has established a venture capital fund to invest in biotechnology start-up companies.

Called Merck Serono Ventures, the $55 million corporate fund will look to support companies working in Merck's core R&D areas such as oncology and autoimmune and neurodegenerative diseases. It also will look for technologies that could enable drug discovery and development in these same areas.

"Biotech start-up companies are an important element in scientific innovation," says Bernhard Kirschbaum, executive vice president for R&D at Merck Serono. With a goal of bringing new product candidates into the company, the venture fund is part of Merck's portfolio development efforts and is closely linked to its R&D organization.

Merck is launching the fund in a buyer's market. Crimped by the credit crisis, small biotechnology companies have become starved for cash (C&EN, Jan. 19, page 32). According to the National Venture Capital Association, investments in the life sciences sector fell 33% to $1.6 billion in the fourth quarter of 2008 while the number of deals dropped 22% to 185.

But Merck still will have plenty of competition from other drug companies. Since 1985, GlaxoSmithKline has run an independent venture capital fund called SROne that has invested more than $560 million in biotech firms.

Similarly, the Roche Venture Fund invests in early-stage biotech and diagnostics companies with a portfolio of more than 25 firms. Its last major public investment was the purchase of a nearly 5% stake in Alnylam for $42.5 million in 2007 as part of a larger collaboration valued potentially at $1 billion.

Meanwhile, Pfizer Venture Investments looks for new technology aligned with Pfizer's strategic interests. And the Novartis Venture Fund manages $650 million worth of investments, making it what Novartis claims to be one of the world's largest corporate biotech venture funds.