While a substantial portion of pipeline assets are externally sourced, many Big Pharmas are tapping into incubators and venture funds to uncover cutting-edge scientific trends, determine their future focus points and even carve out a niche in an emerging geographical hotspot.
In the dog days of summer, many baseball fans are thinking about the depth of their team’s farm system, whether they have what it takes to win it all this season, and in seasons to come. Biopharma companies aren’t much different—they have farm systems too, in the form of incubators and venture arms, where they strive to uncover exciting science and suss out where the therapeutic puck—if you’ll allow the mixed sports metaphor—is going next.
While a recent study by McKinsey & Company found that 45% of drugs in the pipelines of 20 large pharmaceutical companies were externally sourced in 2020 and M&A action ticked up late this spring, several pharmas are also tapping this incubator model—and helping to support fledgling, like-minded startups at the same time.
At Eli Lilly’s Lilly Gateway Labs, “at least half of our companies are doing things outside of our core strategy,” Julie Gilmore, vice president and global head of Lilly Gateway Labs and Catalyze360 Portfolio Management, told BioSpace on the sidelines of the BIO 2025 conference in June.
The same is true at Boehringer Ingelheim, where the German pharma’s venture fund “tend[s] to enlarge the scope, invest into areas where the Boehringer Ingelheim Corporation is not active, or . . . not active yet,” Detlev Mennerich, global head of the BI Venture Fund, told BioSpace at BIO.
Boehringer’s development arm attempts to forecast its disease areas of interest five to 10 years out, DeWire said, “and a lot of times, the leading edge of that is things that the Venture Fund has already anticipated.”
And Lilly and Boehringer are hardly alone. Pfizer, Johnson & Johnson, Roche, Novartis and AstraZeneca all also have extensive incubator programs, comprising startups focused on therapeutics, medtech and consumer products.
Neuro Ahead for Boehringer
Since its creation in 2010, the BI Venture Fund has invested in over 70 companies. The fund spearheads the innovation, invests in the concepts “to mature them into prototypes” and then Scott DeWire, Boehringer’s global head of business development and licensing, steps in and connects with the companies, Mennerich explained. “Some of these companies end up in the BI family and some have been sold to the market.”
To date, the fund has exited 13 companies—about half going to Boehringer and half to other pharmas or healthcare firms. Currently, the portfolio includes more than 40 companies working in autoimmunity, oncology, regenerative medicine, digital health and more.
Mennerich sits on the boards of three companies, each focused on a different modality. Aurobac is tackling antimicrobial resistance and bacterial infections, while RiboX Therapeutics is developing circular RNA therapeutics and Tacalyx is exploring tumor-associated carbohydrate antigens (TACAs) for cancer. The latter two, Mennerich said, are platform companies.
“We historically invest in a lot of platform companies, but we don’t invest for the sake of platform technology,” he explained. “The front runner project in this company needs to stand on their own legs, must be the value driver, because we do not want to entertain a clinical trial with venture money [if it] has no commercial value.”
While DeWire said Boehringer recently rebranded its CNS division to focus on mental health, neurodegenerative diseases are still a key investment area at the BI Venture Fund. Boston-based Rgenta Therapeutics and San Diego–headquartered Libra Therapeutics aim to treat amyotrophic lateral sclerosis (ALS) by focusing on “completely new targets,” Mennerich said—a quality that partly represents the fund’s overall strategy. “We take the higher risk.”
As to whether Boehringer will ultimately acquire Rgenta and Libra, Mennerich said, “that’s the hope, but Boehringer’s not alone. At the end of the day, Boehringer’s supposed to make a competitive offer.”
For Boehringer’s part, DeWire said the company is “starting to get active in neurodegeneration . . . maybe this is a way that we enter that space.”
Lilly’s ‘Keeping an Eye on’ Healthspan
Over at Lilly Gateway Labs, about half of the startups are focused on Lilly’s core therapeutic areas: neuroscience, oncology, immunology, cardiometabolic health and, to a lesser extent, genetic medicine, Gilmore said. As for the rest, she continued, “they may be pursuing different therapeutic areas, different targets, different disease states, different modalities.”
One of these areas is healthspan and longevity, which Gilmore said is “kind of adjacent” to the company’s current internal efforts. “We do see it playing out in each of our areas of interest, and maybe even beyond our core therapeutic areas,” she said. “It’s something we’re definitely keeping an eye on.”
With locations in Boston, San Diego, South San Francisco, China and soon the U.K., Lilly Gateway Labs looks for companies with “novel, cutting-edge science” of interest to the parent organization, Gilmore said. The relationship must also be symbiotic. “Does Lilly have something we can offer them? Do we have history, expertise, capabilities that we could apply to help them move forward?”
A Cash Infusion
While Lilly Gateway Labs is a hands-on program where startups remain for around four years, other Big Pharmas emphasize capital investment, with a side helping of advice. Pfizer Ventures has a $900 million capital commitment for investment in private companies at all stages of development with a “strong focus on early-stage opportunities.” The Novartis Venture Fund (NVF) currently invests in over 40 life science companies across North America and Europe with around $750 million under management. Both companies also offer their extensive industry experience. Pfizer Ventures proposes the potential for a “business relationship” and “scientific advisory board participation when appropriate,” while NVF states that they “prefer to play an active role by taking a seat on the board.”
For other companies, incubators and accelerators are an opportunity to invest in emerging geographic hotspots. The Roche Accelerator, established in May 2021, reflects the Swiss pharma’s mission to “become a leading healthcare company in China,” according to its website.
“Over the past 20 years, Roche has continuously invested in research and development in China,” a company spokesperson told BioSpace in an email. “We’ve been recognizing the country’s rise for its scientific innovation and vibrant biotech ecosystem, and strengthening the partnerships with local biotech companies.”
In terms of focus, the Roche Accelerator “aims to attract entrepreneurs in the areas of therapeutics, diagnostics, and AI/ML solutions,” according to the spokesperson. To-date, nearly 20 local startups have been selected from over 500 applicants to join the accelerator. “These innovative companies are driving the exploration of novel biological mechanisms and developing cutting-edge technologies including molecular glues, cyclic peptides, novel drug conjugates, RNA, cell therapies, and those leveraging AI/ML to transform drug discovery processes,” they said.
