Merck KGaA is upping its commitment to corporate venture capital with a 600 million euro ($677 million) investment, positioning its VC arm M Ventures to up the number and size of its bets over the next five years.
The funding continues the growth of M Ventures from its rather humble origins. M Ventures began life in 2009 as a pure-play healthcare fund with 40 million euros to invest. Merck later expanded the fund, extending its remit to cover other parts of its business and upping its allocation to 400 million euros. With Merck now providing 600 million euros, M Ventures is positioned to keep pace with a changing VC scene.
“We hope to be able to match the numbers that we’re seeing in the marketplace, both on pre-money valuations and the amounts needed to ensure we have enough ownership to have a constructive say on how the company develops,” Hakan Goker, Ph.D, managing director of M Ventures, said.
M Ventures remains focused on investing in areas where it sees a common overlap with Merck in the mid- to long term. Informed by frequent meetings within the organization, M Ventures seeks to make investments in companies that fit with where the R&D team at Merck is aiming to get to.
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The model gives M Ventures the flexibility to back platform companies that are active in therapeutic areas outside of Merck’s fields of focus, while also providing its parent company with a front-row seat from which to evaluate business development opportunities.
“We can place calculated bets, smart investments where we can help those companies develop their technologies, which would potentially be either an acquisition target or a partner for the mother organization, in the mid to long term,” Goker said.
Goker cites DNA damage response specialist Artios Pharma as an example of the model in action. M Ventures helped launch the British biotech with a $33 million series A round back in 2016. Four years later, Merck put up $30 million in upfront and near-term payments, plus up to $860 million in milestones per target, to work with Artios on oncology drugs.
M Ventures was an early investor in Artios as well as in Storm Therapeutics, a biotech it seeded back in 2015 in the belief RNA modulation would become an important part of Merck’s R&D strategy. While M Ventures will invest in more advanced companies, it often gets in on the ground floor, as the Artios and Storm examples show.
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“We do see opportunities quite early on and we do have the flexibility, as an evergreen, to be more flexible on timelines. We can actually get our hands a little dirty a little earlier, and help build teams and strategy and syndicate rounds. It’s not easy. It needs quite a bit of time. But from where we stand, it is how we believe that with our fund size and structure we can really be the help to build the ecosystem,” Goker said.
The VC fund has also been on hand to help Merck spinouts such as Prexton Therapeutics take their first steps. That side of the operation is continuing, with Goker teasing an as-yet-undisclosed startup that M Ventures recently created in Boston.
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