In Conversation: Sketching The Future Of Biotech Investment With Lilly Ventures

We're very much a strategic investor. At Lilly Ventures, we have a team of about 20 investment professionals based in scientific hotspots around the globe, San Francisco, Boston, Europe, and at Lilly headquarters in Indianapolis.

What we're really trying to do is think about what's next. We're privileged at Lilly to have fantastic experts leading our therapeutic areas in immunology, oncology, cardio-metabolic and neuroscience. But we're also trying to bridge to new places and spaces. The term we often use is ‘investing in the tip of the sphere of emerging science’. That emerging science, with the right support, teams, coaching, mentorship and investors can become the products of tomorrow.

As an investor, we're typically a seed or Series A investor, though we do participate in other rounds as well. On average, we make about 10-15 new investments per year. We're predominantly always investing in syndicated rounds. We typically don't lead investments, but we try to create incredibly strong syndicates to support companies reaching their next milestones.

We think very carefully about whether a funding round is right for us, ensuring there are key milestones that will help the company progress. In some instances, that might mean exploring collaborations with Lilly or with our peer pharma companies. When you're working with new modalities, targets or disease areas, you don't always know where the final home will be. As a biotech, you're the current custodian of that technology and science, and at some point, there's likely to be a big pharma partner who helps take it forward.

We have about 40 portfolio companies that we've directly invested in over the last four to five years. We also invest quite significantly in the life science fund ecosystem because we want to ensure a broader number of biotechs are getting backed. This results in having indirect investments in around 1000 different companies, which helps us understand what's evolving and progressing in the industry.

External partnerships are incredibly important. Like many pharma companies, about 50% of approved products come from external sources. For Lilly, the statistic is actually about 60% of the 23 medicines launched over the last 10 years originated from external partnerships.

Over the last 10 years, we've signed about 100 discovery or molecule deals, with about 80 active partnerships at the moment. That's a huge amount of collaboration, and it's something we're looking to do more of because the external piece is incredibly important.

While our business development teams typically think very strategically within our established therapeutic areas, what we're also trying to do in ventures, particularly with our newer division called Catalyze 360, is focus even earlier in the biotech lifecycle to help companies reach the value inflections and milestones that will benefit them and interest the industry in general.

Catalyze360 is like a sister or cousin organization to our traditional search and evaluation work. While search and evaluation is a mainstay of what we do, we're also thinking about other ways we could work with biotechs beyond traditional approaches, challenging ourselves to meet companies where they need us.

Historically, business development has largely focused on our established therapeutic areas. With Catalyze 360, we want to push well beyond that. Companies we want to work with are often at the cutting edge of science, doing things that haven't been done before while also learning from what's gone before.

Catalyze 360 is based on three pillars that we've heard the industry needs:

First is capital, without capital, you can't run experiments or hire teams. This is where our ventures piece comes in, investing in syndicated rounds to drive forward particular programs, platforms, and companies.

The second piece is our approach to incubators and accelerators, which we call Gateway Labs. We opened our first sites in San Francisco about five years ago, and more recently in Boston and San Diego. Last year, we announced our first international sites in the UK and Shanghai. The Gateway Labs model creates a curated community of biotechs. About 50% of these companies are strategically aligned with our interests, but 50% are not, because we want to be exposed to new science. When you're alongside people, meeting in cafes and attending the same seminars, you can really learn from each other.

The third part of Catalyze 360 is our capabilities piece, called Explore R&D. This leverages what I call the three T's of Lilly; tools, technologies, and talent. We have thousands of scientists who've worked in drug development their entire careers. This can help with anything from making a primetime antibody to solving formulation issues or running early-stage clinical studies. It's about leveraging what we've learned over our 100+ year history in developing drugs and making that available to biotechs.

Catalyze 360 was announced just over a year ago, and the team has been growing. What companies need changes over time, so we want to offer this selection of resources so we can meet biotechs with what they need when they need it.

As a global team, we're looking for the best innovation around the globe. We have a dedicated team of five professionals here in Europe focused on early-stage biotech.

In terms of broader investments, over the last two years, there have been several announcements in Europe. In November 2023, there was about $2.5m invested in Germany. At the end of last year, there were announcements in Ireland totalling about $1.8bn for manufacturing. Then, there was the UK announcement with almost £300m for various initiatives, including the Gateway Labs piece.

The Gateway Labs piece is particularly close to our work, as we source and find companies to bring into that community and work with them.

We're very excited about the UK site. While I can't say precisely where it is just yet, I work closely with the teams on this project. Julie Gill, our global head of Gateway Labs, and her team have been working incredibly hard to identify the site. Hopefully in the next couple of months, we'll be able to provide more clarity.

Once everything is signed, things will progress quickly. We're already getting inquiries from companies about it. If you're looking for space and like the idea of Gateway Labs in the UK, it's worth having a conversation with us.

I think everyone acknowledges that fundraising is never straightforward, it's always difficult. We're quite fortunate in Europe that in the last few years, there has been an evolution of funds with more growth and scale capital available. Funds like Sofinnova or Eurazeo now have much larger capital pools they can deploy into later-stage biotechs to support them throughout their journey.

That said, it's still not easy. It's been tough for a few years. Despite seeing growth in studios or venture builders, which we enjoy working with, raising your first syndicated round can be really difficult. You need to have data beyond just the idea, to have reduced some risk, while also telling a strong story about your long-term vision.

One of the things we do is act as a very supportive syndicate investor. We've made several investments in Europe recently, including companies like Mano Therapeutics, a UK-based delivery company; Augustine Therapeutics, a small molecule company we invested in last year; and more recently, TRIMTech Therapeutics in the UK and Maxion Therapeutics, which just announced a €72m raise with a syndicate of international investors.

Like many corporate investors, we bring money although we don't write these checks alone. But we also provide easy access to subject matter experts or independent perspectives when companies are struggling with development challenges. We tend to be quite collaborative and can recommend approaches that might lead to full collaborations. But it starts with conversations and scientific meetings of minds.

We really want to help these companies, whether it's at the board level or scientific development level. This might include joining Gateway Labs, accessing Explore R&D resources, or introductions to our search and evaluation colleagues because their platform might address a target we're interested in.

Absolutely, 100%. I just listed four companies we've invested in recently, plus Antios Therapeutics out of Copenhagen last year. We also have US colleagues leading investments into Europe as well.

I have a good phrase for it: we need to look after our local galaxy in Europe, and my team has probably led most of the European deals. But that doesn't mean we can't operate in other parts of the universe. At the end of the day, we're all scientists with particular expertise or interests in specific modalities or areas of science that excite us, so those are the things we want to work with. We're not territorial.

If we're not taking risks, then we aren't going to have the next generation of modalities. We have a higher threshold for risk than many, but that's venture capital, there's risk and reward, and that's what makes it exciting.

You're not taking risk without mitigation or without thinking through things you can control. If you don't have a good handle on your mechanism of action, maybe it's time for more work on that, or ensuring you've done extra experiments to confirm you're hitting the target you want.

When investing at the beginning of a seed round or Series A, part of the diligence is making sure you're using the collective wisdom of the entrepreneurs, existing investors, and advisors to identify any gaps that should be filled. This ensures that when you reach the end of the funding period, you have the most robust package with the highest quality molecule.

At the end of the day, that serves the biotech best and serves the industry best. We want high-quality assets and platforms to explore partnership opportunities with. The strongest molecules with the strongest data packages will have the most impactful effect on patients, those things are all aligned.

We love seeing things early. It may not be the exact moment we engage on something transaction-focused, but with new science, it takes time to learn that area and become socialized to it. That's true whether it's us or our colleagues in more traditional areas of business development.

Our search and evaluation colleagues and therapeutic area teams cover everything from early-stage research work with academics and biotechs all the way through to M&A and late-stage clinical development. Every stage is covered, but the ventures piece is more skewed to the early stage because we're at the beginning of that pipeline of new things that will hopefully be exciting for the industry.

I hope it's not difficult! I would recommend reaching out and finding us, but it's important to address the right person. If you're an immunology company or a metabolic company, it's worthwhile figuring out who the right contact is. LinkedIn will tell you people's roles, so you can be direct and reach the right person.

We also have a website that comprehensively covers our areas of interest, including specifics within particular therapeutic areas. It's updated every six months and is a valuable resource. I use it myself to check in periodically. It may not cover absolutely everything, and things do change, but it's a good starting point to understand the diseases we're looking to address.