Takeda Research Investment: How Investments are Chosen

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Video title: Takeda Research Investment: How Investments are Chosen
Released on: June 09, 2010. © PharmaVentures Ltd
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In this episode of PharmaTelevision News Review, Fintan Walton talks with Graeme Martin, President & CEO at Takeda Research Investment. Filmed at BioTrinity 2010 in Newbury, UK, they discuss:

• TRI's role as an arm of Takeda

• Takeda's types of investments

• The impact of the financial climate on investments

• The investment in Domainex

• How TRI measure success

• Future goals
Functions of TRI as strategic investment arm of Takeda
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here at BioTrinity New Bury Berkshire here in the UK. On this show I have Graeme Martin who is President and CEO of Takeda Research Investment which is based in Palo Alto California Welcome to the show.
Graeme Martin :
Thank you Fintan Walton.
Fintan Walton:
Graeme Martin Takeda Research Investment is an arm of Takeda Pharmaceutical company and its function is to do specific investments it's the strategic investment arm of Takeda, remind us what your function is within the organization.
Graeme Martin :
We were setup actually in way back in 2001 as the corporate venture arm of Takeda Pharmaceutical company . Initially as strategic eyes and ears for research division outside of Japan so we were the first foot print of discovery division outside of Japan and as you may know Takeda has changed quite radically in its globalization process since that time so now we are joined by a number of research affiliates worldwide here in the UK as well as mainland USA and we continue now to function as a corporate venture group to bring strategic value in the bigger sense of the word back to research division.
Fintan Walton:
Right so the important point here is the strategic component and as you've said Takeda has not only expanded its operations from organic growth but also from acquisitions itself so how did you actually function then in relation to the rest of these various component parts particularly the research division within Takeda? How do you actually function alongside those research arms?
Graeme Martin :
Initially we played something of a hybrid role as I said earlier we have served as eyes and ears for research division and so brought a lot of intelligence back to the senior management in Takeda with respect to potential acquisition opportunities. One of the first investment proposals we made for example is a company called Syrrx Inc [PharmaDeals ID = 19261] in San Diego California and that is now Takeda San Diego. So we have helped both with strategic intelligence to enable the company to position acquisitions but at the same time have served predominantly to bring value through enabling relationships which we have done through investment and those relationships have both been technology enablements as well as product enablement.
Types of investments complimenting Takeda's R&D capabilities and participation in sydicated fundings
Fintan Walton:
So when Takeda Research Investment makes an equity stake takes an equity stakes in a company as you've just said I mean there are two potential reasons for that one is the result ultimately you may want to acquire that company or its alongside another type of deal that the company has done so is that the case is that the duality of your intent?
Graeme Martin :
Typically we act in isolation actually from typical business development deals so our equity investments are made purely to expand the capabilities of research division, if you look at the portfolio of investments we have made you'll see a mix of fairly early stage companies that we have invested into but what differentiates those companies is that they have developed technologies or a pipeline of products that clearly compliments and expands Takeda's own R&D capabilities. So we are looking for opportunities where we can bring depth in science and knowhow into our organization without having to build that infrastructure internally.
Fintan Walton:
Some of the venture arms of the pharmaceutical companies in effect you are a venture arm in some ways work alongside and syndicate alongside other VC's is that what you do? Do you participate in a syndicated funding of biotech companies?
Graeme Martin :
Yes we have done a mix of investments if we are looking at very early stage opportunities which could include startup companies then we are very happy to seed fund those companies. That's been a difficult proposition in the last two years simply because of the paucity of funding from more traditional VC sources but we are very happy to enter into syndicates and in fact through 2009 we have done both of those types of investments.
The influence of financing climate on types of choices in investments
Fintan Walton:
Right so you mentioned the economic climate or particularly the financing climate for biotech how much has that altered the way in which you've behaved in the last couple of years? How much of an influence has that had on the type of choices that you had in terms of investment options?
Graeme Martin :
Yes it had a significant impact. Through 2008 we found it very tough going because we could not interest syndication partners particularly in early stage deals and it's taken I think the venture capital a while to work out for itself how to move forward with supporting the biotech industry more generally, 2009 we have seen quite a turnaround and we actually completed three transactions in 2009 all of which were syndicated either with other corporate venture groups or with venture capital groups so we are seeing a turnaround in the market all be at I have to say at more mid stage financing than early stage.
Investment in Domainex
Fintan Walton:
A company that you have just invested recently is Domainex [PharmaDeals ID = 36128] which is based here in the UK, just give us some sort of feel why you wished to invest in a company like Domainex.
Graeme Martin :
Yes Domainex was one of the UK investments that we have made in the last few years and what interested us about that company is its technology base which is quite unique but importantly for us very very complimentary to our high throughput structural biology facility in San Diego. So we view the technology that they have as potentially again expanding capabilities of an internal infrastructure and what we have done in working with Domainex as investors is really facilitated a technology evaluation with them and we will see what the results of that interaction are as the collaboration component completes.
Fintan Walton:
So have you actually got a collaboration with them as well so not just not in equity stake but you've got some sort of research collaboration?
Graeme Martin :
Yes indeed in this case and I have to say its little bit of an unusual case but we felt that working with the company as investors would give us a much better insight into not only the company operations but also whether or not that technology might be a future benefit for a longer range interaction with that company.
What is the key criteria for investments?
Fintan Walton:
Now as you said Domainex is a company it's got a platform technology effectively which is of interest, is that the type of company you wish to invest in? Are you looking for platform technology companies or would you invest in a product only company? What is the key criteria for you to invest other than obviously the fact that's strategically important?
Graeme Martin :
Yes I mean currently our focus would be on enabling technologies and we have gravitated towards technology platform type of companies in general these will have as I mentioned earlier technologies that are highly specialized probably evolved unique intellectual property and not a sort of technology that we would necessarily want to build internally so we found that these investments are especially helpful for research division and more than that what we have been doing is looking at investments in (indiscernable) companies with (indiscernable) technologies that together can bring real synergies for Takeda's discovery capabilities. So I am very hopeful that some of these investments that we have made will actually create opportunities that will truly position Takeda's discovery pipeline at real competitive advantage and having said that we will be also very interested I think in expanding our remit towards the development pipeline and looking at clinical stage opportunities as well. We view I think our role is one of risk mitigation for the company and I think we can apply that value not only in the discovery area but also of course at the development stage.
How does TRI measure success?
Fintan Walton:
So you've described there are number of key benefits from the activities that you pursue but in the end how do you actually measure your success? What is criteria how could you say well we have had a successful year is it because of number of investments you've made or is it because the company moves ultimately acquired or by yourselves hopefully or by products that are coming through the pipeline? How do you measure your success?
Graeme Martin :
Its always a tough question for strategic investors because ultimately the strategic value you bring back to the company can only be measured in commercial terms and the runway between our investment and commercial realization of return is a quite a long way.
Fintan Walton:
So you can't just say you are worth for five times return on investments?
Graeme Martin :
No and that's an ongoing sort of topic discussion in the company but I firmly believe we have delivered value some of it is soft strategic intelligence cannot be quantified but has been very important for research colleagues there no doubt what I want to see know is some of the investments materialize into real tangible strategic gain for the company. That's starting to happen one of our other UK investment CellCentric [PharmaDeals ID = 35427] [PharmaDeals ID = 32088] resulted in a licensing deal at the end of last year and that followed an investment in that company about two years ago. So we are starting to see now our initial investments mature and yield these tangible strategic returns.
Challenges over the next few years
Fintan Walton:
So Graeme Martin looking at you activities like to say this has been an activity since 2001 you have been leading the company from 2003 how do see the next few years what are the challenges for you and what are you particularly looking for?
Graeme Martin :
I think the next few years and may be the next two or three years in particular are going to be interesting. I see them as highly valuable potential opportunities for corporate venture valuations of companies because of the financing circumstances are very suitable for us so I think there are lot of good opportunities for us to identify and then work with. I think what we will have to do is work out where our real sweet spots for investments are we cannot obviously fund early stage ventures for the long haul we do need to share both the risk and the cost of those early stage interactions. We are finding that we can do that working with other corporate venture groups increasingly so we now have I think three out of our portfolio companies where we have co-invested with other corporate and I am delighted to see that I think in general the corporate venture community is pretty relaxed about those interactions. So for us I think one of the biggest challenges will be to work out how it can work more effectively with the venture capital community to continue to bring the value that they are looking for in may be the mid to later stage transactions.
Fintan Walton:
Graeme Martin thank you very much indeed for coming on the show.
Graeme Martin :
That's a pleasure.
Fintan Walton
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
Graeme Martin
President & CEO
Dr. Graeme Martin is President and CEO of Takeda Research Investment , Inc, with day-to-day responsibility for operations. He brings more than 30 years R&D experience in large Pharma as well as Biotech, and was responsible for three IND submissions one of which led to the launch of Zomig now marketed worldwide for the acute treatment of migraine. Dr Graeme Martin joined TRI in 2003, and has been responsible for building a portfolio of strategic investments representing more than US$30M under management. He received his Bachelor of Science degree in Pharmacology from the University of Bath, UK and his doctorate from University College, London, UK.
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
Takeda Research Investment
Takeda Research Investment , Inc.(TRI) is the corporate venture arm of Takeda Pharmaceutical Company Limited (TPC) a world-class pharmaceutical company and the largest in Japan. A wholly-owned subsidiary of Takeda America Holdings, Inc., TRI started operations in November 2001. Our aim is to encourage and support therapeutic innovation in biopharmaceutical companies and academic centers of excellence, through early stage capital investment and provision of access to the resources of a multinational pharmaceutical company.