What Function should CVC Perform for its Parent Company?
As a subsidiary of the parent company, Corporate Venture Capital (CVC) is an entity that is bestowed with various key functions. The CVC establishes investment deals such as private equity. It also acquires rights of ownership and shareholding with other companies on behalf of the parent company. It has the mandate to mentor and develops businesses that are in the bud stage by facilitating knowledge-oriented and incorporeal assets.
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When the assets mature, the parent company stands to benefit from either acquisition or collaboration. CVC has the sole responsibility of being at the forefront in terms of expanding the parent business to different areas, either within their mother countries or beyond. For instance, as Blair reveals, “MEVE had made close to 30 investments in the U.S. since its formation in 2002” (1). Furthermore, it investigates, recruits, and maintains excellent workers’ expertise to keep the parent company above the bar compared to competitor companies.
The CVC acts as an entity whose sole purpose is to support parent businesses’ objectives. Blair reveals how CVCs are established “primarily to nurture and develop start-up businesses for their parent company” (2). Unrelentingly, the CVC builds, expands, and deepens its market niche through the establishment of markets and sales opportunities for products that the parent company could not produce as sole operators.
In other words, CVCs “offer start-up more complementary assets—physical, knowledge-based, and intangible” (Blair 2). As an advantage to new companies, CVC provides patronage of dominant companies and large-scale investor advantages. Specifically, CVC guarantees the availability of the best management personnel, access to top-class marketing and product distribution networks, and enhanced new ventures portfolio, reputation, and confidence to acquire successive funding from other interested firms, including the parent companies by either partnership or portfolio possession.
Additionally, the CVC ensures up-to-date knowledge about new products, possibilities of entering new viable deals, winning license contracts to acquire the initial public offers, and/or obtaining processes, innovative components, and intellectual chattels.
What is your Assessment of MedImmune Ventures?
Since its founding in 2002 as a subsidiary of MedImmune, MedImmune Ventures, which is hereby known as MEVE, has had its objectives uniquely developed at a time when its service of producing Synagis, an antibody-drug of monoclonal structure, was great life science breakthrough (Blair 4). The advancement dominated the US medical industry in terms of addressing the issue of syncytial virus that was posing a threat to infants.
Ron Laufer, MEVE’s leading managing instructor was in the dilemma of choosing whether to make Australia’s NeuProtect its initial venture outside the United States (Blair 1). Unlike the Venture Companies (VCs), MEVE had the life science innovative technological advancements as its main objective. Generating income was its main secondary objective. It undoubtedly delivered on its mandate to provide MedImmune with a tactical gap in biotechnological developments. It also diligently assisted in isolating viable product advancements and improvements while at the same time acting as a channel to locating future cooperation partners.
Having received the US $100 as the initial capital, it anticipated investing between $6 million and $15 million and an additional successive $100 million in the 2004-2007 period. MEVE strategically co-invested in 40 VC funds and 28 initial stage companies, Polaris, SV Life Science, and Orbimed among other companies. The aforementioned investments brought enormous returns to the parent company.
Owing to the fact that MEVE had an obligation to help MedImmune in achieving its objectives, it assisted in acquiring competent expertise, besides improving, enhancing, and diversifying production and innovative marketing. The incorporated companies, for instance, the case of Avidia and Amgen, benefited a great deal before MedImmune purchased the former (Avidia) from MEVE’s proceedings. In addition, Vanda Pharmaceuticals managed to see public limelight due to MEVE’s keen interest in investing in its biologics design innovation.
Because of MEVE’s outstanding performance, AstraZeneca developed an interest in purchasing MedImmune. This accomplishment increased its production and marketing masculinity in biologics business and research as MEVE assumed the CVC role of the expanded company. The hiring of more experienced professionals in finance from outside the company as investment strategic managers followed this move.
The situation allowed MEVE to retain all its monetized funds for reinvestment, instead of sending it to its parent company. Thus, it attained an independent status as a chance to make its decisions in line with the parent company’s objectives. MEVE has had an attractive reputation since its inception. Its status even increased further after outsourcing its top management personnel such as Laufer. Its seemingly and relatively simplified negotiation terms made it easy to enter deals with its financial expertise, relative to the case of the VCs.
It has enjoyed diverse professional, ethical, and cultural dynamicity. Thus, it has had its top management experts who enjoy their work while keeping the interest of MEVE at heart. The owners of the company also demonstrated a unique quality of having an indisputable belief in Laufer’s team to the extent that they were asked to do everything they deemed necessary to outlive the company.
The question of management emerged when the company’s top management had to make hard decisions, especially when it came to supporting a business, which the officials did not believe in. It could withdraw its support or do the necessary adjustments while safeguarding its profitability, reputation, and relevance. In the end, the company realized more deals, supplementary initial public offers (IPOs), and additional acquisition and investment opportunities.
Unlike the traditional biotechnology industry that was accustomed by smaller players and vested continuum, amid tactical and monetary returns, MEVE focused on its investment portfolio, which could create business development goals that could attain pure monetary returns. It effectively made equity agreements on its own without involving its parent company, hence eliminating the need to append to the parent company’s conduit of products.
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MEVE observed that even when its strategy overlapped with that of its parent, the likelihood of plunging into scenarios conflict of interest was minimal. As time passed by, the portfolio of the company’s dynamic nature changed. MEVE realized that turning the flow of ideas into tactical value and interactions was a challenge, especially in areas of the external strategic focus of the parent company, with the aim of effecting its business profoundly.
As a result, MEVE resolution to focus on tactical and financial options was strategic. The company decided to direct its investments into deals that could maximize financial returns in line with the objectives of other private funds. Therefore, the resolution was to quartile all capital undertaking funds.
Additionally, the company trained its attention into future long-term strategic prospects in innovation that could connect and retain more customers. As the leader in the industry, the company reiterated the tenacity of enhancing and expediting communication between groups of venture investors entrepreneurs, start-ups, and the AstraZeneca. This idea could be attained by the provision of involvement and perspective of AstraZeneca to other stakeholders, followed by capacity building for entrepreneurs and new companies in the industry.
To land on qualitative deals from complementary players in the field, the company decided to put investment as a goal to profit maximization as its primary objective. The benefits strategically emanated from portfolio companies’ industry relationships and deal flow. It synthesized the correlation between tactical and financial proceeds. Hence, based on the above assessment observations, MEVE seems to have succeeded in its business agenda.
Should MedImmune Ventures enter Australia?
It is crucial to determine whether Ron Laufer, MEVE’s administration boss could go ahead and make Australia’s NeuProtect its initial investment outside the American soil. The MEVE Company stands out a risk taker that decided to try its hand in a 2011 comprehensive and uncertain investment in Australia using its $400 million in assets accumulation. It wanted to invest in companies that were undertaking the industrialization of gene therapy, vaccines, small and large molecules, and pharmaceutical podia.
Nonetheless, the company risked its investment in the diagnostic, medical device, and healthcare IT companies for purposes of discovery, pharmaceutical products commercialization, and growth. In addition, the company was richly equipped in the field of therapeutics such as gastroenterology, cardiology, and oncology among other areas that had proved viable.
With the unquenchable thrust for expansion, MEVE realized the need to extrapolate its antennae to locate interesting start-ups in other areas of the globe such as Israel, Canada, Europe, and Australia. The plan was promising huge returns. Pushed by the notion that untapped innovations could be found from faraway places crowned by its challenges from home, MEVE had already established a partnership with a mainstream pharmaceutical entity headquartered in London.
Interestingly, most of the company’s staff members had come from the respective VCs from other places. Therefore, the management had a cognitive surety of potential success in resolving to venture into these places. Furthermore, its established networks and relationships with counterpart VC associates abroad necessitated the possibility to uncover the most beneficial ventures in foreign states such as Australia. As a universal company in a diverse life sciences industry, MEVE had embraced the initial stage and late-stage strategies of investment.
It had moved from semi-virtual single-asset developments to a company that operated on its full status, thus leading all the VCs and its portfolios in decision-making and technical assistance. MEVE officials had in mind the concept of positive interdependence whereby the success and/or failure of one expert in his or her particular portfolio could bring a direct effect to its general performance and comfort as a team. To counter this issue, MEVE worked as one team that was dedicated to mutual growth and benefit to the company and the entire corporate advancement.
Therefore, MEVE’s great objective of expanding and being rooted in countries other than the US is well calculated. Reassuringly, the movie has the advantage of economies of scale, the advantage of hiring highly competent staff, a good reputation for every small and new business to come by, and financial muscle to enable it to tap any potentiality it deems palatably profitable. Upon entering Australia, it will avail the funding that NeuProtect is in need of to kick-start its neuro and cardio protectant molecules project experiments in pigs, a move that will see it propagated in real-time trials on humans. MEVE has solved the issue of the syncytial virus in the US.
The virus was reportedly the number one human killer in the US by being “the leading cause of U.S. hospital admissions for infants who suffered from respiratory problems” (Blair 4). Therefore, due to the lack of proper diagnosis and treatment, its entry into Australia will capacitate the NeuProtect in finalizing its clinical tests and eventually attaining viability. The company will have played a great deal in bailing the US colossal amounts of dollars it spends on patients of heart arrests.
The US will also be relieved of workforce losses that it has incurred due to related deaths since approximately all heart failure patients will possibly get assistance by using the drug. As a measure of initial attempt, MEVE has prior information from one of its friendly VC, the Starfish-based in Australia. MEVE is aware of NeuProtect’s potential breakthrough in not only neuro and cardio protect but also in modifying the same concept to developing the molecule that could reduce stroke-related damages by reducing blood flow blockages around the brain, thus reducing the intensity of tissue death that could lead to unending brain injury.
What should MedImmune Ventures do if it cannot find a US Investment Partner?
After MEVE’s Laufer ponders on the way forward concerning the potential companies’ perennial shortcomings in getting its hand in NeuProtect investment, the main problem emerges after an unsuccessful search to getting onboard a second investor from the US. Therefore, MEVE is left with four main options. First, it can abandon its prospects of getting involved in funding NeuProtect as a US-based business. This move will mean a forfeited opportunity, a decision that will eventually haunt MEVE in the future.
Second, MEVE may consider fragmenting the investment is two-fold with Starfish Ventures and become the only duo investors in the project. Thirdly, MEVE can decide together with the Starfish Ventures to solicit for a third investor VC from Australia. As its fourth preference, MEVE and Starfish Ventures may raise the first batch of $6 million and give room for a third funder that would emerge in the future from either US or Australia. Alternatively, it should ask Starfish Ventures to share equally the $9 million needed for the venture, thus forgetting about the third investor, in case it does not show up.
What should MedImmune Ventures do concerning NeuProtect?
Considering the accruing three-fold benefits of the NeuProtect venture, MEVE should consider investing in it. The medical breakthrough will save, prolong, and improve millions of lives of the US and Australian adults who have developed heart-related complications. Second, the drug will be bestseller due to its ready acceptance in the market. Hence, the investment move will generate substantial revenues for MEVE and its parent company.
Moreover, the drug breakthrough will add to MEVE’s reputation for unfathomable success in biotechnological ventures. The advantage here is that MEVE will benefit 45 cents on every dollar that will be invested. Besides, the experiments will be carried out in the US University Laboratory facilities. Hence, MEVE should consider assigning Starfish Ventures the managerial role while in Australia.
The current sophisticated high-tech interaction channels should solve the issue of communication and feedback. Afterward, MEVE will concentrate its efforts on overseeing drug development. Despite all the constricting uncertainty obstacles that inhibit MEVE to invest in the NeuProtect project, the value attached to this breakthrough is of immeasurable long-term inclination. Attaining the unmet basics of acquiring better therapy for suffering patients in the US should compel MEVE to consider making its lifetime risk to remedy the pandemic in the US.
Blair, Martin. MedImmune Ventures, 2013. London: Routledge.