realize, “Hey, there aren’t any decent Phase 2 drugs to look at.” So now, he says, the pharmas are “running around, trying to find ersatz solutions” to the dearth of new drug candidates. Kinsella says that’s why Big Pharmas are now organizing new corporate venture funds, creating incubator spaces for biotech startups, and trying to strike new types of partnership deals with venture firms.
To Kinsella, such moves are signs that Big Pharma recognizes there is now a problem in developing new drug candidates and in creating new biotech startups—and is trying to do something about it. Still, he says he’s skeptical about such initiatives. “I consider these all to be artificial solutions, with one exception—and that is backing a venture fund that has an established track record of success.”
Kinsella considers Avalon’s fifth fund, which flourished from 1991 to 1997, as the epitome of success—with an 11x return on venture investments in 13 startups, including Neurocrine Biosciences and Aurora Biosciences. Sandoz, led by CEO Max Link, provided the entire $18 million for that fund—and as Kinsella puts it, “We all got rich.” Three of the companies funded through Avalon V were acquired, and eight went public through IPOs. In addition to its management fees, Avalon got 50 percent of the carry—the fund’s overall investment return.
But Sandoz merged with Ceba-Geigy in 1996 to form Novartis, and Kinsella says he never learned why the combined company never sought to repeat the success of Avalon V. Instead, when Novartis CEO Daniel Vasella created the Novartis BioVenture Fund a few years later, he named former licensing and technology acquisition manager Peter Bissinger to lead the corporate venture fund.
Kinsella concedes that the ‘90s were part of a golden era for biotech investors. As he told an MIT alumni group in the Bay Area earlier this year, “You could take a company public or sell it within three years and you could make 10 to 100 times your money when your molecule, if you even had one, had never even seen the inside of a rodent.”
Now, following a wave of
