Corporate VCs Have Deployed New Business Models to Reinvigorate Venture Investments in Life Sciences, Says MGCS Keynote Ed Torres

In opening remarks at this year’s Michigan Growth Capital Symposium, S. Edward Torres, co-founder and managing director of Lilly Ventures, said corporate venture-capital investors focused on the life sciences have spearheaded the evolution of new, more sophisticated and flexible business models in response to the “dramatic pullback” in U.S. venture-capital fundraising  in the life-science sector.

“We saw a decline in venture-capital funds and dollars raised during the period from 2005 to 2013,” he told his audience of more than 400 entrepreneurs, company founders, angels and venture-capital investors, who attended the symposium, now in its 33rd year. “The recovery being experienced by the broader VC market is not being shared by life sciences.”

The life-science market reaction to the prolonged downturn, according to Torres, has helped to drive innovative alternatives to more-traditional venture-investing approaches. These include:

  • Gradual changes in the LP-VC relationship
  • The development of fund variants
  • An explosion of accelerators and incubators
  • Structured exits

Torres co-founded Lilly Ventures in late 2001 and reconstituted the group after it was spun out of Eli Lilly and Company in 2009. Today Lilly Ventures has $200 million under management, with a focus on the North American and European regions. Target investments include biotechnology companies that leverage proprietary drug discoveries or develop technologies to build multiproduct pipelines; and medical technology firms focused on the convergence of devices with pharmaceuticals or diagnostics.

“We are financial investors in strategic areas of interest and seek great companies with compelling life-science innovations,” explained Torres, who received his MBA from the University of Michigan in 1989. “Eli Lilly is my only LP.” He said Lilly Ventures invests both in core and non-core areas that are not within Eli Lily’s immediate scope in order to jump ahead of the innovation curve. His team focuses primarily on the early to mid-stage investment space and provides both financial and intellectual resources to accelerate the management teams’ path to success. “We’re very active on the boards of all our companies,” Torres continued. “Our scope is wider [than that of other VCs], and we will wait five to eight years for a company to mature. Financial discipline is the order of the day.”

Recently, Lilly Ventures launched a new concept ― Promise Animal Health Development Co. ― in collaboration with Elanco Research and Development. The joint efforts center on licensing human health technology for veterinary use.  “Elanco is our first major partnership, and we want to develop the relationship correctly,” Torres said. “Once we get a template, we can replicate it with other institutions and animal health companies.”

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