Pfizer’s Investment Strategy




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Video title: Pfizer’s Investment Strategy
Released on: December 02, 2008. © PharmaVentures Ltd
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Pfizer recognises the importance of biotechnology and the need for good science. Barbara Dalton and Daniel Grant explain their different roles in Pfizer and the ways in which the company can invest to help nurture new technologies and early-stage companies. With a look at Australia’s biotechnology industry they discuss how they see the financial crisis affecting the investment cycles, deal-making and the variety of opportunities Pfizer is looking for.
Pfizer's investment model.
Fintan Walton:
Hello and welcome to pharmaventures business review here in Melbourne Australia. On this show I have Barbara Dalton who is vice president of venture capital at Pfizer and Daniel Grant who is the head of strategic in Australia. Welcome to the show both of you.
Barbara Dalton:
Thank you for the invite.
Fintan Walton:
Barbara Dalton I want to turn to you first. You play a very important role within the business development group within Pfizer in Europe and that role obviously is the role of venture capital and what I would like to start with you is to understand what your particular role does in relation to investing in biotechnology?
Barbara Dalton:
Okay on behalf of the corporation we invest for financial return in areas that could be a future or current interest to the corporation. The corporation has diverse areas of interest and we have the ability to work with small entrepreneural companies innovative companies at their early stages of development. in a typical venture capital role the same way your private venture capitalists do in terms of supporting the growth and development, helping them channel their programs towards their customer and that's one of the things that we bring to the table as a corporate venture group as we bring the perspective of the customer to the table since most biotechnology companies will have to, to be successful to deal with the pharmaceutical industry.
Fintan Walton:
So clearly there is this the traditional strategic alliances, the licensing and collaborative arrangements that Pfizer will enter into with the biotechnology companies so would your investments follow that or the other way around?
Barbara Dalton:
The other way around because I think venture capitalists should be out and front of the corporation in terms of exploring areas that may be haven't hit front and center in terms of things that the research organization is interested in. new technologies are not necessarily automatically part and parts up to the research end of the business. So those are the sorts of the things that we can foster the development up until they are what I call ready for primetime when they are ready for a partnership or a relationship with the pharmaceutical company.
Fintan Walton:
And work obviously with the other venture capital groups?
Barbara Dalton:
Definitely.
Fintan Walton:
Across the world?
Barbara Dalton:
Across the globe. Venture capital backing of primarily biotechnology companies is what we call syndicated investments there are very few successful biotechnology companies that haven't had four or five, six different venture capital groups associated with them, that's a good way to multiple brains to the table, multiple strengths to help support that company. So we are syndicated investor in our business.
Fintan Walton:
And how often do you lead an investment?
Barbara Dalton:
We can lead an investment. Historically we probably haven't lead that many investments I have only been at Pfizer for the past year. Currently we are actually performing a lead role in a small startup company that we are working with. It would depend upon the circumstances going forward. We are not inhibited from leaving the transaction. We are a small group. At the end of the show we will have five people and so we don't have the capacity to you know do a lot of the heavy lifting all the time but we can do it if necessary under the right circumstances.
Fintan Walton:
Right.
Barbara Dalton:
We are not prohibited from leading.
Fintan Walton:
Ok and the type of investments you are putting in what sort of level of funding would you normally put into a typical round?
Barbara Dalton:
Well you know no rounds are really typical because you know depending upon what type of business model the company has and the stage of the developments so we like to say that we right size that we can put as much as $5 million into any tranche. There are circumstances where that may not be sufficient and we could do also more than that. We will deploy about $50 million dollars a year into our investment portfolio going forward and so we have flexibility. I would like to say that the investment should be right sized to the deal, the stage of development of the company and the participation of our other co- investors too.
Fintan Walton:
And typically would you have a presence on the board or is that depended on the level of investments you put in?
Barbara Dalton:
It does. So that if we are significant owner in that participating or if we may be we are a co-lead in the transaction so I would like to say the circumstances dictate whether it is appropriate for us to have a board seat in any event we'll always be an observer because that's when we believe we can truly add value to the company by helping them in their growth and development and without that without that position you know it's not as worthwhile on investing from our perspective and I think on behalf of a small company they will benefit from having our side.
Focus on Australian biotech environment.
Fintan Walton:
Right okay that's good. So turning to you Daniel Grant and looking at the strategic alliances, activities of Pfizer in general I know you are specifically focused here in Australia, is there a benefit in what Barbara Dalton does for you?
Daniel Grant:
Yeah absolutely. I am inspired by mention when she said at the front end if you like. So the things that she will be investing in will be the things that we look to later on that actually support our pipeline to support the groups that are actually delivering on our pipeline. Most of the collaborations that I manage in Australia at the moment are really enabling technologies that help to fill the gaps you know our capabilities our internal research capabilities.
Fintan Walton:
Right so focusing on the type of alliances that you are setting up here in Australia it are clearly when we look at the Australian biotech environment they tend to be smaller companies, earlier stage companies not of the size that you find in the United States, so your alliances tend to be very early stage or can they be later on that?
Daniel Grant:
They can be everything. So just like the investment arm we will look at anything. So we have alliances with universities, research groups in Australia looking at platform technologies, unvalidated targets all the way up through to early or late stage clinical assets. So we look at the whole range of the drug development spectrum.
Fintan Walton:
And how is going back to Barbara Dalton has Pfizer invested in any of the companies here in Australia yet?
Barbara Dalton:
None at this point. We haven't invested in anything here in Australia.
Fintan Walton:
Right.
Barbara Dalton:
But I will say based upon my limited time here at the conference that there is some exciting and interesting work going on in Australia . I think that Australia disproportionately has a very level of science based research at the academic institutes and research institutes here disproportionate to the size of the population in Australia and
Fintan Walton:
Sure.
Barbara Dalton:
You know does represent an opportunity for us going forward. One of things we will also do to extend our reach into further geographic areas is to participate alongside some of the funds that are regionally here and become a fund investor you know outside of say the United States.
Fintan Walton:
Sure.
Barbara Dalton:
So that's an opportunity for us also in Australia.
Recent alliances and Pfizer's corporate strategy...
Fintan Walton:
Okay that's good and sounds good. So going back to Daniel Grant we talked about in general the types of alliances that you have entered into, could you be more specific because I know that recently you have entered into some interesting alliances do you want to tell us about that a few of those?
Daniel Grant:
So just this sort of set the scene for the level of investment we have in Australia. This year we have invested $50 million in R&D in Australia about half of that is through clinical trials in more than 300 sites around Australia. The other half of that is part evenly split between manufacturing R&D capabilities. A big collaboration with the IDT here in Melbourne looking at the development of one of our (indiscernable) based antibiotics programs. The remainder of that is spread out across Australia. We announced the collaboration this week with Griffith University and the Eskitis Institute accessing their natural product library and spring that against anti bacterial targets. So even in this climate of difficult times we are still looking very much to the Australian sector for good science.
Fintan Walton:
So how is that actually work Daniel Grant because clearly there is the corporate direction, the corporate strategy for Pfizer itself so how does dovetail into your own activities? Obviously you have to pretty well communicated back into the corporate in New York?
Daniel Grant:
Absolutely. So all of the work we do in Australia is directly in alignment with our corporate strategy and my clients my internal clients are scientists and business people in the US who are actively looking for assets to fill holes or capabilities to help with difficulties that we have within our own research programs.
Current financial market and Pfizer's changes on investments in the future.
Fintan Walton:
Sure, can I go back to you Barbara Dalton and ask you another question I mean clearly you have a lot of experience beyond before Pfizer working for SR-one but also for other independent venture capital groups and you have obviously seen the biotech industry go through its various stages and so forth. Clearly the biotech industry is had a tough time even before this October 2008 situation where we got financial markets what we see the financial market is probably getting a little bit tougher and that may have an another level of impact on biotech and biotech funding. Will that change the way in which Pfizerlooks at its investments in the future?
Barbara Dalton:
I think that it represents opportunities for Pfizer looking at investments going forward. Yes it will be difficult time for the next couple of years I would guess. Actually it had we had seen the decline not only for biotechnology but for venture backed companies in general over the last year in terms of the access to the public markets has totally dried up for those companies and I think that that's a big issue that has to be faced but that's outside of the financial crisis that the globe is experiencing now too. But the other thing is this that venture capital investment cycles are very long. Obviously this has cycles but our investments cycles for venture capital are very long and particularly in the biotech space we are talking a year type investments and one would hope that the immediate crisis that is facing the globe has a sort of occurs during one of the long term investment cycles. Now two ways that I can see this impacting the venture capital community, one has to do with the people who do fund the venture capital you know in venture capitalists in general in that their commitments to new venture capital funds will probably be diminished over the time because their allocations to alternative investments have become unbalanced with their public portfolios for example and the second thing Is this that those companies who are trying to go into a market place there is going to be lot of support systems which are going to be stressed under the current financial situation. So you have to be well capital based company, you have to be backed by venture capitalists that are probably have fresh money and so I am working to partner as a syndicated investor with good venture capitalists who are going to be there for the long term. I have never viewed our investing as very short term and well biotech use to have cycles for about a 18 months to 3 year basis since the burst of the internet bubble that has extended you know tremendously. I assume we will have cycles going forward but the one thing about the biotech as well as the pharma industry is we create medicines you know that really help you know sick people and the reality of it is I don't see that need going away
Fintan Walton:
Sure.
Barbara Dalton:
So that need will continue to be there no matter where the financial cycles are and the ability to continue that work during the tough times is critical. It does represent an investment opportunity because prices will be depressed during that time frame and so we should be able to take advantage of that situation and basically help support the industry that pharma has become very dependent upon biotechnology. It is a symbiotic relationship biotechnology needs pharma, pharma needs biotechnology and Pfizer would like to ensure the continued success of the biotechnology community and will continue to support it during this tough times.
Fintan Walton:
Sure and clearly once you have an equity stake in a company found a part of that company the other extreme of that of course is when a company like Pfizer makes an acquisition is there are your investments with that in mind that ultimately you will end up with a providing an exit for the other share holders by making an acquisition of the company itself?
Barbara Dalton:
That would be on a case by case basis and you know venture investor only has two possible exits they can sell to the public markets or they can sell to an acquirer and that has not changed and so that will represent that opportunity going forward. I think that a small company the reason for doing venture capital on behalf of Pfizer is not just to create companies so they can acquire you know it is more it is interested in the technologies that these companies are developing, acquisition decisions are made a bit differently than venture capital investments and that will be on a case by case basis.
Fintan Walton:
And where does the fund actually come from within the Pfizer organization? Is that it is obviously separate from the research and development fund?
Barbara Dalton:
It is not a research and development budget right. It is separate budget from treasury the allocation to venture capital is above about $50 million dollars a year is different than the research and development fund.
Fintan Walton:
And there is an expected return on that from that fund?
Barbara Dalton:
Yes in the long term. Hopefully not in two year time frame you know but over a typical long term cycle of 8 to 10 years that there should be a return on capital to the organization. There should be a strategic and operational return based upon the companies that we do invest in. they should have some alignment some business relationships some collaboration may be even acquired by Pfizer in the long term but yes there is an expectation that this is going to be a positive financial instrument for the corporation too and I think that helps discipline your investments.
Fintan Walton:
Sure.
Barbara Dalton:
You know if you have been held to a financial as well as a strategic objective too and I do not feel that the two are different and separate particularly there are good companies that you can choose for strategic reasons that should be able to make a money financially.
Future of biotech in Australia.
Fintan Walton:
Sure okay Daniel Grant can I just ask you clearly you've lived in from Australia and you've been involved in the universities here before you joined Pfizer so you know obviously the biotech scene here very long with today as we sit here at Ausbiotech 2008 what is the future for biotech in Australia ?
Daniel Grant:
You know that's really difficult question but I think it's pretty positive. We got great science in Australia. Times are difficult for the small companies they need to find ways to keep operating until they can raise more capital. As Barbara Dalton mentioned you know we are supporting the biotech sector as much as we can and collaborate with them. We provide a unique set of grants and fellowships to up and coming researchers that are linked to our commercial activities that we are trying to really help foster the development of the future leaders in biotechnology and science industry. So we are working very hard with them but I think we got great science and where there is great science there will be investments and the opportunities
Fintan Walton:
Well I like to thank you both Barbara Dalton and Daniel Grant for coming on to the show. Thank you very much indeed.
Barbara Dalton:
Thanks for having us.
Daniel Grant:
thank you.
Daniel Grant
Head of Strategic Alliances
Barbara Dalton is a Pharmaceutical executive who has spent over 20 years in the industry - most of that time as a corporate venture capitalist. At Pfizer she is responsible for growing their corporate venture activities, managing the current equity portfolio and advising on structured equity transactions. She was trained as a research scientist in a virology and immunology laboratory at The Medical College of Pennsylvania where she received her Ph.D. She pursued inflammation drug discovery research at SmithKline's research laboratories and joined their venture capital group, S.R. One, Limited in the early 1990's. While there Barbara Dalton was a founding member of Euclid SR Partners, a private New York based venture capital firm where SmithKline (now GSK) was a leading limited partner. She joined that firm full time in 2003. Last year she moved to her current position at Pfizer. Barbara Dalton has managed over 20 fund investments and 60 diverse company investments in the US and Europe and has had direct investing responsibility for biotechnology therapeutic and platform technology companies, as well as some healthcare IT and service businesses. In the community she has been active in her regional venture investors association, the MAC Alliance, serving most recently as Chairman, and supported the venture philanthropy efforts of the Institute for the Study of Ageing as a board member. She is an advisor to the Dean of the Eberly College of Science, where she received her undergraduate degree, and a new member of The Penn State Research Foundation Board of Directors. She is also a member of the board of the New York Biotech Association and the National Venture Capital Association. Dr. Daniel Grant is the Head of Strategic Alliances for PfizerAustralia. In collaboration with colleagues in Pfizer's Worldwide Business Development team, he is responsible for identifying and managing collaborative opportunities that arise from Australia's research landscape that align with Pfizer's strategic direction. Prior to joining Pfizer, Dr Daniel Grant was a Senior Business Development Manager at Melbourne Ventures Pty Ltd, the commercialisation arm of the University of Melbourne, and the University of Melbourne's representative on the Investment Committee of Uniseed Pty Ltd, a pre-seed investment company for the Universities of Queensland, NSW and Melbourne. Dr Daniel Grant has sat on the board of a number of biotechnology spin-out companies and was the Commercialisation Manager at Biocomm Services Pty Ltd, a company established by the Victorian State Government to bridge the gap between research, academia and the commercial world. Dr Daniel Grant has M.Sc. in Respiratory Physiology, a Ph.D. in Cardiovascular Physiology and an MBA. He has more than 15 years experience in applied biomedical research in Canada and Australia.
Pfizer
Pfizer is the world's largest research based biomedical and pharmaceutical company, in 2007 the company earned $448.4 billion in revenues and invested $8.1 billion in research and development. Its headquarters are located in New York with research and development faculties based in the US and in the UK. Pfizer produces the number-one selling drug Lipitor; the neuropathic pain, fibromyalgia drug Lyrica; the oral antifungal medication Diflucan, the long-acting antibiotic Zithromax, the well-known erectile dysfunction drug Viagra, and the anti inflammatoryCelebrex. Recent innovations include Sutent �a novel cancer medicine that both cuts off the blood supply that feeds tumors and destroys cellular reproduction, and Chantix �a new prescription medicine and accompanying support plan designed specifically to help smokers quit.