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Merck’s GHI Fund and the Push to Rewire Pharma's Future · Vanguards of Healthcare by Bloomberg Intelligence

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Speaker 1: Welcome to another episode of Bloomberg Intelligence's Vanguards of Healthcare podcast,
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Speaker 1: where we speak with the leaders at the forefront of
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Speaker 1: change in the healthcare industry. My name is Jonathan Palmer,
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Speaker 1: and I'm a healthcare analyst at Bloomberg Intelligence, the in
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Speaker 1: house research arm of Bloomberg. We're very excited to have
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Speaker 1: Bill Toronto, President and General Partner of the Global Health
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Speaker 1: Innovation Fund, joining us today. Bill has been overseeing the
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Speaker 1: fund since it's founding in twenty ten. He previously spent
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Speaker 1: eighteen years at Johnson and Johnson, including time in its
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Speaker 1: venture arm, the J ANDJ Development Corp. And in a
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Speaker 1: previous life, he was also an investment banker. Welcome to
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Speaker 1: the podcast.
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Speaker 2: Bill. Thank you, Johnathan, really appreciate you talking to me today.
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Speaker 2: Look forward to the conversation.
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Speaker 1: Well, why don't we start at a very high level
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Speaker 1: with the background behind GHI and where you kind of
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Speaker 1: sit in the venture community.
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Speaker 2: So the Merkele Health Innovation Fund was established in twenty ten,
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Speaker 2: as you said, when I came over from Johnson and
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Speaker 2: Johnson and brought some colleagues. We founded the fund, and
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Speaker 2: the whole idea for the fund is to really focus
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Speaker 2: on digital and technology. We're a non therapeutic fund today,
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Speaker 2: we're a six hundred million dollar evergreen fund that focuses
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Speaker 2: on what we call pharma services, and I'll get into
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Speaker 2: that more specifically where we invest, but the main idea
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Speaker 2: is that we mostly invest in growth companies that are
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Speaker 2: sort of at the crossroads of biotech and health tech,
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Speaker 2: and our strategy sort of lean towards platform companies with
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Speaker 2: a proven model and ideally ones that can plug into
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Speaker 2: global infrastructure or another pharmaceuticals companies infrastructure. The main thing
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Speaker 2: that we do is we build ecosystems of companies whose
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Speaker 2: combine capabilities solve major operational and patient care problems. So
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Speaker 2: we try to think about use cases that both MIRK
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Speaker 2: and the industry are trying to solve, and then how
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Speaker 2: do we use equity in order to solve those. Above all,
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Speaker 2: our missions to create both strategic and financial returns by
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Speaker 2: backing really scalable technologies that can transform how biofarm operates
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Speaker 2: today and even decades from now. So we're really thinking
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Speaker 2: about what are the needs today, but then how does
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Speaker 2: that translate to where the future of the industry is going,
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Speaker 2: and how do we almost predict where that's going and
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Speaker 2: make investments that can also then provide value, maybe not today,
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Speaker 2: but a couple of years out as well as the
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Speaker 2: industry catches up with these types of technologies. As I
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Speaker 2: said earlier, we focus on what we call pharmer services,
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Speaker 2: and people always wonder specifically what that means when if
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Speaker 2: you think about the pharmaceutical value chain, that's where we focus,
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Speaker 2: and we kind of focus on four big buckets. The
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Speaker 2: first big bucket is discovery and development. It's opportunities to
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Speaker 2: improve rug discovery and accelerate clinical development. This can be
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Speaker 2: assets like AI and mL for drug discovery or target ID.
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Speaker 2: These are novel delivery platforms, things like digital pathology and
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Speaker 2: digital radiology. Biomarkers could be blood based diagnostics. And then,
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Speaker 2: of course, as it relates to the clinical trial space,
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Speaker 2: anything in the sort of eClinical or zero brivity clinical
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Speaker 2: trial space where we're trying to improve how we do
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Speaker 2: critical trials as a company versus the kind of the
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Speaker 2: old fashioned traditional way we do it. The second big
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Speaker 2: bucket we invest in is around supply chain and IT
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Speaker 2: and in IT it's more infrastructure, and so by that
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Speaker 2: I mean data security, privacy, and storage, data aggregation, integration
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Speaker 2: and harmonization and data analytics and informatics, and then on
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Speaker 2: the supply chain side, it's really creating efficiencies on how
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Speaker 2: we do supply chain. Most people don't realize that pharma
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Speaker 2: loses a good percentage of our product to theft, fraud,
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Speaker 2: damage goods, lost goods, we ship it the wrong way.
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Speaker 2: And so how do we create almost like a control
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Speaker 2: tower like you might see at a the airport where
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Speaker 2: we monitor all raw materials coming in and finish goods
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Speaker 2: going out, and that's all data back to you in
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Speaker 2: a way you kind of think about that. The next
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Speaker 2: book that we kind of focus on is Access to
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Speaker 2: Care and patient support. This is a little probably the
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Speaker 2: most difficult place for us to invest only because we're
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Speaker 2: a pharma owned venture capital firm and we're subject to
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Speaker 2: heavy anti kickback statutes as well as sunshine ACCT laws,
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Speaker 2: so we just can't be in the corporate practice of medicine.
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Speaker 2: But there's a lot of things doing this space around
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Speaker 2: enabling access to medicines and delivery to the right patient
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Speaker 2: to ensure optimal outcomes. And these are things like social
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Speaker 2: determinants of health could be sent patient centric care, it
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Speaker 2: can be commercial data analytics, pronic decisions, support tools, remote monitoring,
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Speaker 2: you know, things where we can support the patient but
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Speaker 2: not necessarily in the practice of medicine. And then the
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Speaker 2: last book that we focus on as evidence generation. This
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Speaker 2: is real world evidence in real world data. So how
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Speaker 2: do we give either merk of the community access a
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Speaker 2: globally and then provide informats and analytics on top of that.
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Speaker 2: And if you think about that four buckets, that's really
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Speaker 2: the pharmaceutical value chain of where we're trying to promote.
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Speaker 2: What we do is we work with merk on identifying
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Speaker 2: their use case and what are the big problems you're
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Speaker 2: trying to solve. That's what we mean by a use
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Speaker 2: case as well as the industry, because if it's good
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Speaker 2: for mark, it's good for the industry. If it's good
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Speaker 2: for the industry, it's good for MERK. So we're trying
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Speaker 2: to solve I would say more enterprise solutions than really
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Speaker 2: specific points solutions. As we think about it, that's sort
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Speaker 2: of a sixty thousand foot view of the fund and
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Speaker 2: what we do today. As I said, we're mostly growth
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Speaker 2: equity series here. Later we'll do A and B rounds occasionally,
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Speaker 2: but we do not do startup or seed capital. That's
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Speaker 2: not part of our charter as we think about where
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Speaker 2: we invest in, how we think about the kind of
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Speaker 2: ecosystems that we build going forward.
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Speaker 1: Yeah, that was a great overview, Bill. I mean, I
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Speaker 1: guess if we rewind a little bit to the founding
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Speaker 1: of the fund, you know, how did the pitch go
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Speaker 1: and what was Merk's appetite to actually, you know, create
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Speaker 1: a venture like this, and how is it of I
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Speaker 1: guess maybe evolved that vision over the last fifteen plus years.
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Speaker 2: Well, it was a bit odd, I will say. When
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Speaker 2: I got the call from Merk, it was a call
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Speaker 2: out of the blue, and basically they said that they
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Speaker 2: were very interested in starting a technology or digital It
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Speaker 2: wasn't called digital bi it was called hi T actually
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Speaker 2: back in twenty ten, or technology in health wasn't really
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Speaker 2: called digital at the time, but that's what they were
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Speaker 2: interested in. And it was a bit odd because at
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Speaker 2: the time Mirk hadn't even had they didn't even own
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Speaker 2: a therapeutic fund. In fact, the therapeutic fund that said
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Speaker 2: Merk called the Merk Research Last One didn't start till
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Speaker 2: twenty fifteen, so five years later. And I thought it
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Speaker 2: was kind of odd that a big pharma was interested
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Speaker 2: in doing sort of technology before they did therapeutic. Now,
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Speaker 2: obviously in their business development department they were doing things
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Speaker 2: like therapeutics and investing there, but not in a traditional
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Speaker 2: venture capital sort of way. But when they called, they
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Speaker 2: said that what they really liked what we were doing
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Speaker 2: at Jane Jay, and what they really liked was how
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Speaker 2: we were sort of looking at the future of healthcare,
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Speaker 2: trying to predict where it was going, and then could
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Speaker 2: we enable the company by investing in technology and creating
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Speaker 2: an opportunity for the company to be prepared for that future.
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Speaker 2: And that was sort of the original idea that they had,
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Speaker 2: but it was based on what we were doing at
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Speaker 2: Johnson and Johnson at the time, So it wasn't really
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Speaker 2: a stretch for us to kind of jump over to
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Speaker 2: murt We were kind of doing that already for the
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Speaker 2: last ten or twelve years at Johnson and Johnson, so
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Speaker 2: it was a pretty easy move to can just kind
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Speaker 2: of bring kind of what we were doing there. Bringing
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Speaker 2: Berg and Murk got the benefit of all those years
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Speaker 2: of sort of expertise we built up in a practice
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Speaker 2: we built up at Changing But that was their original
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Speaker 2: mission what was kind of different at the fund at
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Speaker 2: the very beginning, it was way more broad adjacency than
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Speaker 2: it is today. What they were really interested at that
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Speaker 2: time was having us invest in companies that would be
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Speaker 2: standalone companies ultimately that they could potentially acquire that would
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Speaker 2: drive revenue and EPs. What happened to the fund over time.
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Speaker 2: In twenty sixteen, MERK went through a big evolution. We
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Speaker 2: switched from being a almost a consumer drug company in
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Speaker 2: the farm industry to a biologics company with the launch
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Speaker 2: of Contruder, which is our largest it's the largest psychology
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Speaker 2: drug in the world, supporting many many indications around cancer
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Speaker 2: therapy therapy. But during that switch, MERK came to us
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Speaker 2: and said, look, we're not against you continuing to look
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Speaker 2: at that future and look at sort of adjacency businesses,
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Speaker 2: but could you kind of then focus more on what
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Speaker 2: are the biggest problems that are facing us in the
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Speaker 2: industry and focus just a little more on what we
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Speaker 2: call core sort of investment strategy. And we said, yeah,
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Speaker 2: we can certainly do that. We don't have to change
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Speaker 2: our actual investment strategy or our investment thesis or our
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Speaker 2: execution strategy. We just have to change our focus a
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Speaker 2: little bit, and so that was a big shift for
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Speaker 2: us in twenty sixteen to take a more active approach
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Speaker 2: on solving what we call these use cases for both
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Speaker 2: Mirk and the industry. And that's really much what we've
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Speaker 2: been doing now for the past you know, six or
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Speaker 2: seven years, is really focusing on those type of problems
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Speaker 2: and how do we solve them using equity. The other
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Speaker 2: big transformation that happened during that time was around twenty
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Speaker 2: and thirteen or fourteen, we started a private equity firm
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Speaker 2: to sit on top of the venture capital firm, and
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Speaker 2: the reason for that was that the biggest problem we
9:09
Speaker 2: found that investing in digital and technology, and it was
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Speaker 2: something we actually learned at our time from Johnson and Johnson,
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Speaker 2: is that points solutions really don't work in the digital space.
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Speaker 2: You have to think of a broad, integrated solution that scales,
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Speaker 2: and it's the hardest thing to do investing in this
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Speaker 2: sort of space of scale. So what we wanted to
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Speaker 2: do is create but this private equity fund that then
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Speaker 2: could look at our assets within our portfolio as well
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Speaker 2: as assets out of our portfolio, work with other private
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Speaker 2: equity firms, and then think about how do we scale,
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Speaker 2: how do we bring multiple companies together to form a
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Speaker 2: more integrated solution because any company you invests in, even
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Speaker 2: ones that are these big growth equity firms, have gaps, right,
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Speaker 2: they don't solve one hundred percent of the problem. And
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Speaker 2: the idea is how do you fill those gaps with
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Speaker 2: other companies and then create a single company that provides
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Speaker 2: the scale that farm is looking for. And that was
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Speaker 2: a real big change for us was to have been
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Speaker 2: able to create the private ecuy Wols was the ployboard
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Speaker 2: capital and create the scale we need in the industry.
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Speaker 2: And so that was another big subtle change that happened
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Speaker 2: along the growth of the fund. But today we're very
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Speaker 2: focused on farmer problems, like I said, pharmer services, which
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Speaker 2: is kind of defines where the biggest use cases exist
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Speaker 2: for the industry and instead trying to proace equity in
10:20
Speaker 2: order to solve those problems. And as like any sort
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Speaker 2: of solution, we're one. We're one tool in the toolbox
10:29
Speaker 2: for external innovation. For Murk has BD, they have licensing,
10:32
Speaker 2: they have external partnerships that don't require equity, but we
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Speaker 2: think we're really one of the forefronts of external innovation
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Speaker 2: for MERK. And what's really interesting. The other thing that's evolved,
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Speaker 2: and the final thing I'll say is the integration of
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Speaker 2: Merk into working with our portfolio. In the last five years,
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Speaker 2: Murk has really engaged with our portfolio companies. In fact,
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Speaker 2: over seventy percent of our portfolio companies has some type
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Speaker 2: of commercial engagement with Merk. We have seventy plus agreements
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Speaker 2: valued at over two hundred and twenty five million dollars
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Speaker 2: in contract value. And what's interesting, one of the most
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Speaker 2: fashionting things that happened this year in our AI and
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Speaker 2: mL and drug discovery, Merk licensed the first AI mL
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Speaker 2: created vaccine from one of our portfolio companies to the
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Speaker 2: licensed in to try to you know, create you know,
11:20
Speaker 2: a phase one product going forward. So that was a big,
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Speaker 2: you know, first step even in that space. So the
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Speaker 2: good news is we're providing financial returns for MERK, which
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Speaker 2: which we have to do as an evergreen fund, but
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Speaker 2: we're also providing a strategic return, which is extremely important
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Speaker 2: as well.
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Speaker 1: That's great. There's a there's a lot to umpact there,
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Speaker 1: maybe just rewinding a little bit, you know, when you
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Speaker 1: made that switch around twenty sixteen, was there one investment
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Speaker 1: you made that was a really standout use case that
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Speaker 1: that kind of redefined that strategy. That was a big
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Speaker 1: win early on. And then I guess I would also
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Speaker 1: be curious, you know you talked about the pe overway.
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Speaker 1: Is there an example there that you can give us
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Speaker 1: of how how that that's worked as well?
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Speaker 2: Sure, so in the on the peast side. One of
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Speaker 2: the big things we did. We originally when we started
12:09
Speaker 2: in two thousand, Merk was actually in cardiovascar We ended
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Speaker 2: up leaving, but we're back in cardiovascer today just acially
12:14
Speaker 2: how the evolution of farmworks. But at the time we
12:17
Speaker 2: had invested in a company that was a technology that
12:22
Speaker 2: came out of Mayo, and it was called Preventus Solutions,
12:25
Speaker 2: and it was a company that created a medical device
12:28
Speaker 2: that looked like a band aid that would sit on
12:30
Speaker 2: your chest and it would prevent a fib from happening
12:33
Speaker 2: or a stroke from happening, and a very predictive product
12:37
Speaker 2: that would allow cardiologists to know in advance whether a
12:41
Speaker 2: patient was going into a fib that could then lead
12:43
Speaker 2: to a stroke. And it was really revolutionary because it
12:45
Speaker 2: wasn't a hall ter monitoring more, it was a little
12:48
Speaker 2: mand aid sized paths that would sit on the chest.
12:51
Speaker 2: But we started the company with a two million dollar
12:53
Speaker 2: investment by just licensing it out from Mayo, and over time,
13:00
Speaker 2: what we ended up doing was we ended up buying
13:02
Speaker 2: an infrastructure company out of Texas that had a call center,
13:06
Speaker 2: had electrophysiologists on staff, had the ability from an infrastructure
13:11
Speaker 2: perspective to make the device and actually ship it out
13:14
Speaker 2: to the patient and the cardiologists and have a seamless
13:17
Speaker 2: sort of integrated solution. That started with this large one
13:20
Speaker 2: hundred and forty million dollar purchase that we made of
13:24
Speaker 2: a company called e Cardio down in Texas that we
13:27
Speaker 2: merged and to prevent it, and then over time we
13:29
Speaker 2: added a few more acquisitions went around patient sort of
13:36
Speaker 2: almost patient advocacy or care continuation program, so once the
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Speaker 2: patient was on the device, how do you manage the
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Speaker 2: patient going forward? We kept enhancing the call center where
13:47
Speaker 2: we could take then calls more on a global basis,
13:50
Speaker 2: but we added four or five sort of different acquisitions
13:53
Speaker 2: over time to really build a company. In over ten
13:55
Speaker 2: year period, we built a company from really a small
13:58
Speaker 2: two three million dollar revenue company into almost one hundred
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Speaker 2: and seventy million dollar revenue company. And then in twenty
14:03
Speaker 2: twenty one we went to IPO Company and out of
14:06
Speaker 2: the blue, they were a very small partner of ours
14:09
Speaker 2: in the in the company, but Boston Scientific College said, hey,
14:12
Speaker 2: instead of ipoing, would you consider selling for us? And
14:15
Speaker 2: we said yeah. We ended up selling it for one
14:17
Speaker 2: and a half billion dollars to them, and we had owned,
14:21
Speaker 2: you know, around sixty percent of the company at the
14:24
Speaker 2: time and today prevent us as you know, close to
14:27
Speaker 2: a billion dollar company. It's one of the biggest successes
14:31
Speaker 2: for Boston Scientific today. But it shows you how we
14:34
Speaker 2: used private equity to build a company by adding additional
14:38
Speaker 2: components and the gaps that we had. Back to your
14:41
Speaker 2: first question, some of the you know, different investments that
14:43
Speaker 2: we made that you know came out. Probably one of
14:46
Speaker 2: the first ones we did that was pretty successful was
14:49
Speaker 2: around solving a use case around diabetes management and we
14:53
Speaker 2: invested in a company called Lavongo, which ended up ipoing
14:57
Speaker 2: for three and a half billion. Around being sold to
15:00
Speaker 2: tele Dot was eighteen billion. Yeah, we did that with
15:03
Speaker 2: Glenn Toleman. But that was one of the first big
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Speaker 2: industry sort of use cases around a patient problem that
15:08
Speaker 2: we were trying to solve was how do you manage
15:09
Speaker 2: diabetes on a more global basis and have a fully
15:13
Speaker 2: integrated program. We're again much similar to prevent Us. In
15:16
Speaker 2: fact that what was sort of interesting the ration priems.
15:20
Speaker 2: We actually wanted to merge Lebongo with prevent Us at
15:23
Speaker 2: the time, but Glenn moved a little faster than we did.
15:26
Speaker 2: They actually IPO before we sold prevent Us, because then
15:29
Speaker 2: you could have an entire metabolic company imagine having cardiac
15:34
Speaker 2: at betes all in one company. But nonetheless, we built
15:37
Speaker 2: that company a similar fashion, doing acquisitions as well along
15:40
Speaker 2: with land and building that to a very successful today.
15:43
Speaker 2: And what's interesting, it's actually a benefit for us as
15:45
Speaker 2: part of our merk benefits. If you're a diabetes patient,
15:49
Speaker 2: you have access into Levangos as a as a company benefit.
15:54
Speaker 2: And that company just continued to do really well. And
15:57
Speaker 2: that was kind of the first i would say patient
15:59
Speaker 2: use case cases that we saw that was very successful
16:01
Speaker 2: when we switched over, and then we really started focusing
16:04
Speaker 2: heavily on sort of that I in mL and drug discovery.
16:07
Speaker 2: Data was one of the big areas we created a
16:09
Speaker 2: lot of big data companies Data Van, which was merged
16:13
Speaker 2: with a company called sciox That was another big pay
16:16
Speaker 2: that's today still were of the biggest data companies that
16:18
Speaker 2: are out there. Triinetics is another one we did during
16:21
Speaker 2: that time, another data company that's a big global data
16:25
Speaker 2: company that provides the pharmaceutical industry with access to data
16:28
Speaker 2: and clinical trial information. So a lot of interesting examples
16:31
Speaker 2: that got us started in that space in twenty sixteen.
16:35
Speaker 2: But our property are primary focus at sixteen was really
16:39
Speaker 2: on our merc research labs, sort of use cases and
16:43
Speaker 2: sort of a side That was sort of the first
16:45
Speaker 2: starting of this evolution, and then we've evolved today into
16:48
Speaker 2: really investing heavily into supply chain. Some of the other
16:51
Speaker 2: areas I mentioned in the four quadrants of where we invested.
16:53
Speaker 2: It evolved over time, but the initial starting place was
16:56
Speaker 2: so I would say more in the AI and mL
16:58
Speaker 2: and drug discovery, critical develop and sort of that real
17:01
Speaker 2: world evidence and data were the two big spaces we
17:03
Speaker 2: started in.
17:04
Speaker 1: That's a fantastic, fantastic summary. Maybe just thinking about, you know,
17:08
Speaker 1: the business as a whole. How do you guys work
17:12
Speaker 1: differently from maybe a traditional venture firm. I mean, is
17:15
Speaker 1: there any friction for entrepreneurs or founders you know who
17:19
Speaker 1: come to a corporate venture arm versus a more traditional
17:22
Speaker 1: I mean, I guess, maybe what are some of the
17:23
Speaker 1: pluses or minuses from your model versus maybe the more
17:27
Speaker 1: traditional venture space.
17:28
Speaker 2: Well, what's interesting is the way we structured ourselves is
17:32
Speaker 2: we create ourselves as we're an independent LLC, but we
17:35
Speaker 2: are MERC employees. We work on the Murk umbrella, but
17:38
Speaker 2: our structure allows us to mimic a private firm, so
17:42
Speaker 2: we can move at a speed that doesn't get caught
17:45
Speaker 2: up in the corporate machinations. And so what happens with
17:49
Speaker 2: that structure is one thing is we don't need any
17:51
Speaker 2: champions within Merk to do an investment. All the investment
17:54
Speaker 2: strategy and thesis is done by our team. The other
17:57
Speaker 2: thing is that we're very aligned with not only other corporates,
18:01
Speaker 2: but other independent firms because we're both strategic and financial.
18:05
Speaker 2: We want to big build viable companies that can last.
18:10
Speaker 2: And the whole idea is that you can't bring strategic
18:13
Speaker 2: returns if you don't have a financially viable company, so
18:15
Speaker 2: you actually have to you have to kind of think
18:17
Speaker 2: about investing in both of those kinds of things. I
18:20
Speaker 2: think it also differentiates us as a corporate is we
18:23
Speaker 2: have the Murk umbrella backing us in the sense that
18:26
Speaker 2: we can provide the portfolio company's opportunities to work with us.
18:31
Speaker 2: You know, that can't be done by independent firms at all.
18:33
Speaker 2: So we have that strategic component where we can have
18:36
Speaker 2: both the company learned from a big farmer how to
18:39
Speaker 2: work with them, and then vice versa merk or another
18:42
Speaker 2: farmer learned how to work with some of these kind
18:44
Speaker 2: of technologies which they don't, you know, really know how
18:46
Speaker 2: to do in the past. I think the other evolution
18:50
Speaker 2: for us too is you know, we've always originally invested
18:54
Speaker 2: in platforms. We never invested in sort of these point solutions,
18:58
Speaker 2: these apps. We always thought of out emphasizing, you know,
19:02
Speaker 2: platform development, and if you think about, you know, how
19:05
Speaker 2: we built the company or built the fund, you can
19:08
Speaker 2: see that everything still over time is a big sort
19:11
Speaker 2: of platform type of company. And I think what also
19:15
Speaker 2: differentiates us a little bit is our staff.
19:20
Speaker 1: You know, we're.
19:22
Speaker 2: Stacked with people that have experience across not only venture capital,
19:26
Speaker 2: private equity, but they have pharmaceutical operations, sales and marketing experience.
19:31
Speaker 2: They come from the industry as well, and understanding how
19:35
Speaker 2: that not only pharma works, especially if you're doing pharmer services,
19:39
Speaker 2: I think is a big differentiator. You have to understand
19:41
Speaker 2: the problems that you're trying to solve. The other thing
19:44
Speaker 2: I think that our team offers too, which I find
19:47
Speaker 2: a lot of independent firms struggle with, is understanding how
19:50
Speaker 2: the whole healthcare ecosystem works. We're a very complicated industry.
19:54
Speaker 2: We're the most heavily regulated industry. And understanding all the
19:57
Speaker 2: touch points and how they're all connected. That's important to know.
20:01
Speaker 2: You know, most patients don't understand that even to get
20:03
Speaker 2: your prescription, ten different entities touch It's not just the
20:06
Speaker 2: doctor prescribing you, but the doctor looks at it, it
20:08
Speaker 2: gets adjudicated at typically a third party, you know, and
20:12
Speaker 2: it could be rejected. There's formulary, you know, there's all
20:16
Speaker 2: these different entities that touch your prescription before you actually
20:18
Speaker 2: end up at the pharmacy, and people, most people don't
20:20
Speaker 2: understand that. How you know, and the following how the
20:23
Speaker 2: money flows, is really important. So we call it connecting
20:26
Speaker 2: the dots, and I think one of the things our
20:28
Speaker 2: team does really well is they understand how to connect
20:30
Speaker 2: the dots about all the different pieces of the industry
20:33
Speaker 2: and how it actually works. And I think finally, you know,
20:37
Speaker 2: we're really good investors because we understand all those things.
20:41
Speaker 2: If you look at the history of the fund, it's
20:43
Speaker 2: been really successful. You know, we've done seventy plus goes
20:46
Speaker 2: to eighty investments. You know, over the time, we've actually
20:49
Speaker 2: only had six complete you know, losses, and we've excessed
20:54
Speaker 2: forty some odd companies and you know we're sitting on
20:55
Speaker 2: another forty some our companies, so you can see that
20:58
Speaker 2: we're actually not that one in ten investor. We actually
21:00
Speaker 2: have a really good history and track work or making
21:03
Speaker 2: good investments. As I said earlier, the fact that we
21:06
Speaker 2: now have a lot of commercial agreements, we've shown that
21:08
Speaker 2: we also could be very strategic not only the mark
21:10
Speaker 2: but the industry. So I think there's a lot of
21:12
Speaker 2: different things that differentiate us as we think about how
21:14
Speaker 2: we are you know, sort of you know, different than
21:18
Speaker 2: an indefend. I think the last thing too that I'll
21:20
Speaker 2: say is, you know, we don't struggle with fundraising. You know,
21:23
Speaker 2: we have a single LP that is MERK and we're
21:25
Speaker 2: six hundred million dollars Evergreen Access Believe or not to
21:28
Speaker 2: another one hundred and fifty million dollars should we need it.
21:31
Speaker 2: And one of the things that we never struggle with
21:34
Speaker 2: is trying to have to fundraise all the time. And
21:36
Speaker 2: that's actually a pretty good comfort where we're not always
21:40
Speaker 2: you know, our LP isn't demanding that we have to
21:43
Speaker 2: be evergreen in return financial returns. It's not like Mark's
21:46
Speaker 2: a sixty billion dollar company. Even if I returned you know,
21:49
Speaker 2: a million dollars in the year, that money is rather
21:53
Speaker 2: insignificant on the broader p and l of a merk
21:56
Speaker 2: where private companies, you know, venture firms have to return
21:59
Speaker 2: that back to their l on a continuous basis. So
22:02
Speaker 2: I think that takes some pressure off of us to
22:04
Speaker 2: think more strategically and make smarter investments because we're not
22:09
Speaker 2: under that sort of pressure constantly to return to our LP. Though,
22:13
Speaker 2: as I said, you know, let's not fool ourselves. We
22:15
Speaker 2: have to make returns. And there's no I've always told
22:17
Speaker 2: everybody to corporate. There's no CFO that says it's okay
22:19
Speaker 2: to lose money. We all coroporate.
22:22
Speaker 1: Venture firms need to make you know under capital now
22:26
Speaker 1: well said, you know, maybe just thinking about it, you know,
22:28
Speaker 1: you've been at the helm for for you know, well
22:30
Speaker 1: over a decade, I'm sure you've seen a changing of
22:34
Speaker 1: the guard in Burke leadership. How do you how do
22:37
Speaker 1: you manage that those transitions, because I imagine that's that's
22:41
Speaker 1: something that must come up every once in a while.
22:43
Speaker 2: Yeah, So I've had I'm on my third CEO, and
22:45
Speaker 2: I've actually had ten different direct bosses in my sixteen years.
22:51
Speaker 2: And the reason that's never affected us is because we
22:54
Speaker 2: have a very solid investment thesis and execution thesis that's
22:58
Speaker 2: not changed in the entire time where they're Our investment
23:01
Speaker 2: thesis is based on two different things. It's based on
23:05
Speaker 2: the fact that we use this term data is the
23:07
Speaker 2: currency that we're going to use to transact in the
23:09
Speaker 2: future healthcare market, which if you actually look at our
23:11
Speaker 2: entire portfolio, they're all data companies and data is that
23:14
Speaker 2: currency which drives healthcare. The other thing, and we mentioned
23:17
Speaker 2: a little bit earlier, is that we don't believe point
23:19
Speaker 2: solutions work. We need to work in an integrated ecosystem.
23:22
Speaker 2: So we invest by doing ecosystem investing it, which leads
23:25
Speaker 2: into our tactical strategy is we execute by doing this
23:31
Speaker 2: sort of ecosism investing where we try to find an
23:33
Speaker 2: anchor tenant that can solve most of the problem we're
23:35
Speaker 2: trying to solve or the use case, and then we
23:37
Speaker 2: invest around it in smaller companies that can fill the gaps,
23:40
Speaker 2: and over time, if we can use our private equity,
23:42
Speaker 2: can buy then and build scale. You know, that's what
23:45
Speaker 2: we do, and I think that's an important piece that
23:47
Speaker 2: we communicate back to the organization that no matter the
23:51
Speaker 2: change and mirk you know, you change in twenty sixteen
23:55
Speaker 2: from being a consumer based pharma company to a biologics company,
23:58
Speaker 2: that didn't change us. All we did was shift our
24:01
Speaker 2: focus about our strategy didn't change. We never have changed
24:04
Speaker 2: the way we execute or the way we think about investing.
24:07
Speaker 2: That has remained constant. And then being able to communicate
24:10
Speaker 2: that to the change in leadership, you know, makes us
24:13
Speaker 2: a constant. I think being successful early on helped quite
24:16
Speaker 2: a bit. You know, we prove that we're good stewards
24:19
Speaker 2: of the money, that we know how to make a
24:20
Speaker 2: financial return, and then of course, over time that leads
24:23
Speaker 2: to strategic returns. You don't usually get strategic returns right
24:26
Speaker 2: away when you start the fund, because you're just a
24:28
Speaker 2: vault you're here just building these companies in the portfolio. Obviously,
24:32
Speaker 2: now that we're in our sixteenth year, we have a
24:33
Speaker 2: nice sort of rolling system where we're you know, we're
24:36
Speaker 2: investing one hundred millionaire, we're exiting over one hundred may
24:39
Speaker 2: so you know, we're bringing in money, but we're investing money.
24:42
Speaker 2: And that gives MRK a tremendous amount of comfort that
24:45
Speaker 2: the fund itself is a well oiled machine net runs
24:48
Speaker 2: you know, very systematically and very efficiently, and I think
24:52
Speaker 2: that in itself gives management, you know, great comfort. But
24:56
Speaker 2: ultimately the end, we are a venture fund and we
24:58
Speaker 2: have to do two things. You know, we have to
25:00
Speaker 2: financial returns and we have to provide strategic value. And
25:02
Speaker 2: as long as we're showing that every year and then
25:04
Speaker 2: communicating in the proper way that we're executing on a
25:08
Speaker 2: strategy that solves their problems, then you can survive in
25:12
Speaker 2: a corporate And we've been able to do that for
25:13
Speaker 2: sixteen years, even with all those leadership changes not affected
25:16
Speaker 2: us in one one bit.
25:18
Speaker 1: Well said, maybe just switching gears here. You know, if
25:21
Speaker 1: we think about the last couple of years, uh, you know,
25:24
Speaker 1: we had a we had a very interesting cycle of
25:27
Speaker 1: investments during the pandemic. You know, I think then we
25:29
Speaker 1: saw some down rounds in the venture community. You know,
25:33
Speaker 1: we've returned to I think a more normalized environment in
25:36
Speaker 1: the last year or two. We've seen we saw some
25:38
Speaker 1: I don't know if I would call them digital health,
25:40
Speaker 1: but some platform companies go public this year. What have
25:43
Speaker 1: been some of the key learnings from your perspective, you know,
25:46
Speaker 1: through that cycle.
25:47
Speaker 2: Yeah, that's a great question. You know, I think one
25:49
Speaker 2: of the biggest things for a venture capital from, especially
25:53
Speaker 2: in healthcare, because as I said, it's one of the
25:54
Speaker 2: most complicated industries the most regulators, is discipline. There was
25:59
Speaker 2: a lot of money that came into the system in
26:01
Speaker 2: twenty twenty one, and to your point, that's where we
26:04
Speaker 2: saw the valuations that we're out of control. We never
26:06
Speaker 2: participate in that. We we didn't invest in things that
26:10
Speaker 2: we felt where the valuations were out of control, and
26:13
Speaker 2: we were able to manage our portfolio in the downtime
26:15
Speaker 2: it was okay, did we take some downrounds yet, but
26:17
Speaker 2: at least the company's still alive, right. We didn't take
26:21
Speaker 2: those round where the company was totally recapped and nothing left,
26:26
Speaker 2: or you're wiping everybody out or we did flat rounds,
26:30
Speaker 2: you know, and we were able to manage debt very
26:31
Speaker 2: well and probably because we were very disciplined around how
26:35
Speaker 2: we invest And again that's sort of the idea of
26:37
Speaker 2: being good stewards of the money and not overpricing and
26:40
Speaker 2: overpaying valuations. So I think that was one of the
26:42
Speaker 2: biggest lessons learned. I think the other and you mentioned
26:45
Speaker 2: it at the beginning of the question, is is to
26:47
Speaker 2: move from these points there's some more platform and you
26:49
Speaker 2: really have to think about how these platforms drive what
26:53
Speaker 2: the future of where healthcare is going right, it's not
26:58
Speaker 2: these small points solutions. I think people have started to
27:00
Speaker 2: realize that you're not going to survive as either an
27:05
Speaker 2: entrepreneur or even investor if you're only thinking about this
27:08
Speaker 2: one point solution that you're going to exit in some
27:10
Speaker 2: amount of time. What you have to figure out is
27:13
Speaker 2: where does it fit in the broader ecosystem, where does
27:15
Speaker 2: it fit with maybe another company, and how does it
27:18
Speaker 2: solve a broader problem than the one off problem that
27:20
Speaker 2: you started with solving. And I think that was the
27:23
Speaker 2: other big lesson everybody learned. The one good thing that
27:26
Speaker 2: came out of all this though, every market needs a recalibration,
27:29
Speaker 2: and I think it was good that we had a
27:31
Speaker 2: recalibration and resetting. We're starting to see now as we
27:34
Speaker 2: move into the end of this year into next year,
27:36
Speaker 2: markets are opening up. As you said, the growth rounds,
27:39
Speaker 2: we're seeing lots of capital coming back, and we're seeing
27:41
Speaker 2: lots of capital coming back in the startup. The NB
27:43
Speaker 2: rounds are still struggling a little bit, but I still
27:46
Speaker 2: think a byproduct of the overpricing. But we're seeing a
27:49
Speaker 2: lot of consolidation. The private equity firms have a lot
27:52
Speaker 2: of money and they see the value of what we
27:54
Speaker 2: were doing in consolvating all these assets. We're seeing a
27:58
Speaker 2: lot of discussions, outreach and a lot of just consolidation
28:04
Speaker 2: and holding up assets. And the public markets are starting
28:07
Speaker 2: to open up a little bit, you know. So if
28:08
Speaker 2: you want to IPO, I think that will come back
28:10
Speaker 2: a little bit. But I've seen a bigger plane a
28:12
Speaker 2: consolidation market of these platforms because people see that if
28:16
Speaker 2: you can build that scale, that's what then drives the
28:19
Speaker 2: ultimate value of the company and the revenue because then
28:21
Speaker 2: you get more clients, you know, and certainly if you're
28:24
Speaker 2: if you're focusing on pharma as a you know, you
28:29
Speaker 2: as an end client that that group wants scale in
28:32
Speaker 2: order to work with companies. So I think some good
28:34
Speaker 2: lessons learned. But you know, there's certainly nothing wrong with
28:37
Speaker 2: the market recalibration and when we needed it in the
28:39
Speaker 2: digital market and it happened, and I think some good
28:42
Speaker 2: has come out of it.
28:43
Speaker 1: You made an interesting point right there about pharma wanting scale.
28:46
Speaker 1: You know, as as we think about that and you
28:48
Speaker 1: think about those four quadrants that you guys are really
28:50
Speaker 1: focused on, you know where where is that easiest and
28:54
Speaker 1: where is the hardest to drive scale for pharma?
28:57
Speaker 2: I think the biggest areas it's fun. The most interesting
29:01
Speaker 2: area where farma is focusing is that AI and mL
29:05
Speaker 2: and drug discovery. And the reason that's hard to scale
29:08
Speaker 2: is all these companies do it differently. They all have
29:10
Speaker 2: their secret sauce and just do it slightly differently, and
29:13
Speaker 2: it's sort of hard to think about how would you
29:16
Speaker 2: merge us together because they'll do it different. The other
29:18
Speaker 2: thing that makes that market a little different, it's the
29:20
Speaker 2: one market where if if the AI and m L
29:27
Speaker 2: drug company comes, you know, develops a target, it's either
29:30
Speaker 2: going to be acquired by another farmer that was you know,
29:33
Speaker 2: licensing that, or they're going to license that target out
29:35
Speaker 2: for their own good, and then that that company has
29:38
Speaker 2: to redevelop another target for someone else's license or build.
29:42
Speaker 2: It's interesting if you look at arms services, most of
29:44
Speaker 2: the companies in here, farmer doesn't need to own, they
29:46
Speaker 2: just need to exist in the world, and we kind
29:48
Speaker 2: of come together as an industry saying, yeah, that's good
29:50
Speaker 2: at these things against and we'll just be clients of
29:52
Speaker 2: all of them. The one area that's proprietary there was
29:54
Speaker 2: this AI, m L and drug discovery. That's where the
29:57
Speaker 2: where farmer will buy these companies because is because the
30:01
Speaker 2: reality is if they create a target for you, you're
30:03
Speaker 2: going to want to acquire it or you're going to
30:05
Speaker 2: definitely license it in So it's probably the one area
30:08
Speaker 2: that really is going to be almost impossible to scale
30:12
Speaker 2: that We've had some ideas around it, but I would
30:14
Speaker 2: say mostly speaking, those will remain almost independent points solution
30:18
Speaker 2: companies because they kind of in one area that works
30:20
Speaker 2: as a point solution per anywhere else. The areas that
30:23
Speaker 2: we see tons of solidation happening is supply chain is
30:27
Speaker 2: a wonderful area of manufacturing as well. The data space
30:31
Speaker 2: is still you know, world evers data is still a
30:33
Speaker 2: consolidating play. And even in the patient access, all those
30:36
Speaker 2: other areas that I talked about are all right for consolidation.
30:40
Speaker 2: And even in the clinical development that the e clinical
30:42
Speaker 2: trial space that will be a consolida mean. The only
30:45
Speaker 2: thing I'll just say is probably that won't consolidate is
30:47
Speaker 2: that AI in mL for drug discovery, very very specific
30:50
Speaker 2: around targets, but a great area to invest. You know,
30:53
Speaker 2: it's probably the biggest area, one of the biggest area
30:55
Speaker 2: where we probably over fifteen portfolio companies in AI mL
30:58
Speaker 2: and drug discovery, and we're going to continue investing that
31:02
Speaker 2: in the future as we look forward.
31:04
Speaker 1: So that's that's an interesting point, you know, as I
31:06
Speaker 1: think about AI, that's been the topic TOJR for the
31:10
Speaker 1: last year plus here, how do you guys think about
31:13
Speaker 1: it and how do you how do you I guess
31:15
Speaker 1: maybe cut through some of the hype that we see
31:17
Speaker 1: in the marketplace.
31:18
Speaker 2: Yeah, that's a great question. You know, an AI isn't
31:22
Speaker 2: isn't not necessarilything new If you look at prevent this
31:23
Speaker 2: origin it was using you know early you know, early
31:26
Speaker 2: sort of technology of AI to identify a fib and stroke.
31:29
Speaker 2: So it's it's been around, but we we kind of
31:32
Speaker 2: think of, you know, agendic AI for biopharma operations. It's
31:36
Speaker 2: probably the most underestimated opportunity in the market today. It's
31:40
Speaker 2: the largest white space that we have in digital health
31:42
Speaker 2: over the next decade, and certainly every raised chasing AI
31:46
Speaker 2: for discovery. But the real value and the value of
31:48
Speaker 2: the market that hasn't priced yet is this whole idea
31:52
Speaker 2: of how AI runs supply chain, clinical execution, regulatory quality,
31:59
Speaker 2: and even basic things around you know, operations, how we
32:01
Speaker 2: do medical writing, you know, how do we how do
32:05
Speaker 2: we improve operations with basic AI? All those things are
32:12
Speaker 2: going to be really important to our industry going forward.
32:15
Speaker 2: And it's really, i would say, in this infancy. If
32:18
Speaker 2: you look back when we did prevent us in twenty ten,
32:21
Speaker 2: when we think about monitoring, monitoring was in its infancy
32:24
Speaker 2: in twenty ten. If you look today, we can monitor anything.
32:27
Speaker 2: The devices are small, there's nothing we can't monitor. The
32:30
Speaker 2: technologies unbelievable. That's where AI is today. We're in the
32:32
Speaker 2: infancy of AI as it relates to the farm industry
32:35
Speaker 2: and healthcare industry. It's going to do wonderful things. I
32:39
Speaker 2: think in some areas we just have to be very
32:41
Speaker 2: careful as it relates to the patient. We certainly don't
32:44
Speaker 2: want to find out things about the patient we weren't
32:46
Speaker 2: supposed to find out. So I think we did need
32:48
Speaker 2: some regulatory oversight on some of the areas. But it
32:52
Speaker 2: will have a massive impact on the broader industry, as
32:55
Speaker 2: I said, around things like supply chain, clinical execution, reglatory quality,
32:59
Speaker 2: all things that at least for farm and make a
33:01
Speaker 2: farmer run. And that's of course for us as a
33:03
Speaker 2: farmer investor where we're focused going forward.
33:06
Speaker 1: All that all makes sense. I'd be curious to know
33:08
Speaker 1: do you have a view in terms of how AI
33:11
Speaker 1: might speed up clinical trials? And this is I guess
33:14
Speaker 1: maybe one of the areas and debates that we have
33:16
Speaker 1: with a lot of our clients is, you know, can
33:19
Speaker 1: we speed up trials from I don't know, seven years
33:22
Speaker 1: to five years, five years to four years? You know,
33:24
Speaker 1: what's your view on the ability of AI to to
33:27
Speaker 1: really improve the timelines for clinical trials?
33:30
Speaker 2: You know, that's certainly the hope, you know, as if
33:33
Speaker 2: you think about the A and M on drug discover.
33:34
Speaker 2: You know, the whole ideas if you can speed up,
33:36
Speaker 2: you know, get it an asset five years sooner than
33:39
Speaker 2: you did, that's the value. And so if you think
33:41
Speaker 2: about AI in clinical trial, this holds zero gravity clinical
33:45
Speaker 2: trial or technology and clinical trial if you can do
33:49
Speaker 2: things like recruiting. The biggest issue for the farm of
33:52
Speaker 2: companies is recruiting for drug discovery right and recruitment and
33:57
Speaker 2: clinical trial is really difficult. And now that the DAS
34:00
Speaker 2: mandate that we have to have diversity in critical trial recruiting,
34:03
Speaker 2: you can't be you know, a white male over fifty.
34:07
Speaker 2: AI is going to help us do that. We actually
34:10
Speaker 2: invested in a coman called Endpower recently that does clinical
34:12
Speaker 2: trial diversity recruiting, and the whole background is an AI
34:16
Speaker 2: backbone that looks at the community level and tries to
34:19
Speaker 2: help identify patients. So one of the things we're going
34:21
Speaker 2: to see is it's going to speed up clinical trial recruiting,
34:23
Speaker 2: which will speed up clinical trials. AI is going to
34:26
Speaker 2: also help with site management tremendously, making sure that patients
34:30
Speaker 2: stay within the clinical trial. I think it's going to
34:33
Speaker 2: have a pretty large impact going forward. If you think
34:36
Speaker 2: about where it can be used and you know, maybe
34:38
Speaker 2: not all facets of clinical trail, but certainly in certain areas,
34:42
Speaker 2: Like I said around recruitment, I think site management, patient management,
34:47
Speaker 2: I think those three areas are really right for AI
34:50
Speaker 2: to have an impact. But I said the product that
34:52
Speaker 2: you know, the biggest problem for US is trying to
34:54
Speaker 2: get enough patients into a trial, and every pharma company
34:57
Speaker 2: is doing hundreds and hundreds of trials, and I think
35:00
Speaker 2: AI is going to help us identify those patients on
35:02
Speaker 2: a more global basis as well. And the data component
35:06
Speaker 2: around that, you know, as we now then get access
35:08
Speaker 2: to more data on a global basis, you know, combining
35:11
Speaker 2: that in the use of AI on the data side
35:14
Speaker 2: with AI and the clones US is going to help dramatically,
35:17
Speaker 2: which we're seeing in AI in drug development side, right,
35:20
Speaker 2: you know, the use of broad data sets in discovery
35:25
Speaker 2: and development is what's going to change the industry. So
35:28
Speaker 2: it's both those kinds of areas will work together, I
35:31
Speaker 2: think to provide the value. The AI is going to
35:32
Speaker 2: bring Kain of sentence or infancy though well, you know,
35:35
Speaker 2: we'll see, but we're big believers in it. We're investing in.
35:37
Speaker 1: It great to hear. So, I when I think about
35:41
Speaker 1: the industry at large and some of the challenges that
35:44
Speaker 1: I think Farmer has faced over the last couple of years,
35:46
Speaker 1: the uncertainty coming out of Washington, you know, whether it's
35:48
Speaker 1: on the regulatory front or executive orders, these sorts of things.
35:52
Speaker 1: How do you think about where to push your chips in,
35:56
Speaker 1: you know, through that lens of some of this uncertainty
35:58
Speaker 1: that's coming around, you know, whether it's most favored dess
36:01
Speaker 1: price saying terraffs, these sorts of things. I mean, does
36:04
Speaker 1: that factor into your investment process at all?
36:07
Speaker 2: Not really, because it's not you know, those are all
36:10
Speaker 2: corporate things that merk will figure out what they want
36:13
Speaker 2: to do, but they don't really affect the areas that
36:17
Speaker 2: we focus on in those sort of four buckets going forward.
36:22
Speaker 2: You know, I think more around the things that are
36:26
Speaker 2: importing to us as an investor is how does the
36:27
Speaker 2: industry think about approving and adopting technologies from an FDA
36:32
Speaker 2: perspective faster? You know, that would be a great thing
36:36
Speaker 2: loosening some of the regulations on pharma. You know, for example,
36:41
Speaker 2: we have a company called well Doc which is sort
36:43
Speaker 2: of in the Levango realm around diabetes management, and it's
36:47
Speaker 2: just it's a really fascinating app that helps you manage
36:50
Speaker 2: your diabetes with tons of clinical data to support that
36:54
Speaker 2: it works. We actually can't give that out to the patient.
36:58
Speaker 2: Everybody knows that if you're on a diabetes drug, having
37:01
Speaker 2: this app is the right thing to do, Like there's
37:03
Speaker 2: nobody would question it. But due to regulatory rules around
37:06
Speaker 2: anty kickback statutes and sunshine laws, we can't give that
37:09
Speaker 2: app out for free, even though one would say that
37:12
Speaker 2: is the best interest of the patient. So how do
37:14
Speaker 2: we loosen some of the regulatory environment around how patients
37:19
Speaker 2: use some of the tools that are out there, not
37:21
Speaker 2: this we're investing, but what everybody's investing in, and give
37:24
Speaker 2: them better access. I think those kind of things would
37:26
Speaker 2: help us more. And that's kind of what we think
37:29
Speaker 2: about is, you know, how how do some of the
37:31
Speaker 2: lobbying groups help push forward digital and technology faster approving
37:37
Speaker 2: of medical device technologies. And I don't invest in app
37:40
Speaker 2: but that would help quite a bit. Monitoring divide, you know,
37:44
Speaker 2: all these things that get coded properly and can get reimbursed.
37:47
Speaker 2: All those type of things would then help our investment community.
37:49
Speaker 2: I think much better. But we don't spend much time
37:52
Speaker 2: on those broader problems at pharmers trying to us all
37:54
Speaker 2: me that's for MERK to think about and how they
37:57
Speaker 2: want to solve those things. We don't really get involve
38:00
Speaker 2: in those kinds of areas or think about them much
38:02
Speaker 2: because it doesn't really have a direct impact, you know,
38:05
Speaker 2: on us and where we're investing.
38:07
Speaker 1: No, that makes sense. I was curious at a high
38:09
Speaker 1: level if that impacted you guys at all, you know,
38:12
Speaker 1: as we as we think about the next I don't know,
38:14
Speaker 1: maybe five to ten years, whatever timeframe you think is appropriate,
38:18
Speaker 1: you know what technologies. I mean, we've talked a lot
38:20
Speaker 1: about the AI piece, but what are you really excited
38:22
Speaker 1: about that's emerging in you know, your four quadrants that's
38:26
Speaker 1: really going to change the world for your pharma base
38:29
Speaker 1: over the next you know, the long term horizon.
38:33
Speaker 2: Yeah, I think if you think of the large potential
38:37
Speaker 2: areas in the future, infrastructure platforms, you know, at a
38:40
Speaker 2: high level, systems that serve large scale clinical R and
38:43
Speaker 2: B supply chain and patient access needs. And I think
38:47
Speaker 2: more specifically, we're still very bullish because there's still again
38:52
Speaker 2: very early is the drug discovery development, the AI and
38:55
Speaker 2: mL or drug discovery. I think you mentioned it. The
38:58
Speaker 2: clinical trial development is going to be big for us
39:01
Speaker 2: as well as we think about management, patient recruitment, decentralized trials,
39:07
Speaker 2: retention even after recruitment. Supply chain is I think it's
39:13
Speaker 2: one of again one of the most underlooked at areas
39:16
Speaker 2: of pharmac services. But every pharma has the same issues
39:19
Speaker 2: and are struggling with it. So I think around supply
39:22
Speaker 2: chaining logistics and that control tower idea where we have
39:25
Speaker 2: real time supply chain intelligence, coal chain delivery distribution, global
39:32
Speaker 2: medicine logistics. I think that's can be really important as
39:35
Speaker 2: we try to give access on a more global basis.
39:38
Speaker 2: And I think patient access, you know, I think you
39:40
Speaker 2: saw really direct. You know, MERK doesn't have any really
39:44
Speaker 2: of those consumer type drugs that we can go direct,
39:46
Speaker 2: but I think that showed you in the GLP one
39:49
Speaker 2: space around oxempics of the world that you can go
39:52
Speaker 2: directly to the patient. I think that's going to change.
39:55
Speaker 2: So around patient access support, how does the care delivery
39:58
Speaker 2: infrastructure change? How do things like like that literally director,
40:03
Speaker 2: how do you go more direct to the patient? Are
40:05
Speaker 2: there ways for us to potentially bypass the traditional chain,
40:09
Speaker 2: whether it's you know, PBMs or however, you know, we
40:13
Speaker 2: get things out there, you know, more direct to the patient.
40:16
Speaker 2: Has the patient have more control over their medicines.
40:18
Speaker 1: You know.
40:18
Speaker 2: We have another company called that we did with Glenn
40:23
Speaker 2: as well Tolman, called Transparent that helps you identify the
40:28
Speaker 2: right physician for the right product. You know, if you're
40:30
Speaker 2: getting surgery, you know who's the right physition for you,
40:33
Speaker 2: in the right area, for the right price. So Transparency,
40:37
Speaker 2: I think it will be big value based care, post
40:41
Speaker 2: sort of market patient support. All these types of areas
40:44
Speaker 2: aren't going anywhere. So the way we've structured those four quadrants,
40:48
Speaker 2: it's funny, even though we've been investing in the last
40:50
Speaker 2: five or six years, those are still the future of
40:53
Speaker 2: where we think healthcare is going. But as you said,
40:57
Speaker 2: AI is going to change the way we think about
40:59
Speaker 2: those investments. New technologies will cover that we don't know
41:02
Speaker 2: about yet, but we've got to be prepared to think about,
41:04
Speaker 2: you know, quantum computing. How's that going to change. We
41:08
Speaker 2: think it's going to have a big impact on supply chaining, logistics,
41:11
Speaker 2: what have an impacted elsewhere? So all these technologies continue
41:14
Speaker 2: to evolve and grow, and the whole idea for us
41:17
Speaker 2: is to keep looking at them, to keep trying to predict.
41:20
Speaker 2: But I think for us, what's fascinating is those four
41:22
Speaker 2: quadrants don't necessarily change. For us, it's the evolution of
41:26
Speaker 2: four quadrants, and how do we think about where that
41:29
Speaker 2: evolution is going and making sure we're making the right
41:31
Speaker 2: investments in those But we're pretty bullsh on all four
41:33
Speaker 2: of those.
41:34
Speaker 1: Well said, it's it's great that you brought up Glenn
41:37
Speaker 1: a couple of times, because we're hosting him again in
41:38
Speaker 1: a couple of weeks here. His episode is going to
41:40
Speaker 1: follow yours not long afterwards, so this is a good
41:43
Speaker 1: preview on what's going on at Transcarent. One of the
41:47
Speaker 1: things you touched on in that last discussion, you know,
41:51
Speaker 1: was the global access and I guess maybe through the
41:53
Speaker 1: lens of international, you know, how are you thinking about
41:58
Speaker 1: the international opportunity? You know, obviously the US is the
42:01
Speaker 1: biggest healthcare market in the world, but how do you
42:04
Speaker 1: how do you guys think about international and you know
42:07
Speaker 1: where you want to place your bets, you know, through
42:10
Speaker 1: that framework, whether it's access or you know, the logistics.
42:15
Speaker 2: Yeah, I would say, the majorities around access. But it's
42:17
Speaker 2: a really timely question because you know, merk is a
42:19
Speaker 2: global healthcare company and the fun traditionally is focused mostly
42:24
Speaker 2: on the US. But in the last eighteen months we've
42:27
Speaker 2: made a concerted effort to focus a lot of our
42:30
Speaker 2: investing outside the US, and we did that by starting
42:34
Speaker 2: two things. We started something called our Idea Labs in
42:38
Speaker 2: one base in Singapore and one base in Berlin. And
42:41
Speaker 2: the idea behind that was how do we solve local
42:44
Speaker 2: problems in local markets for our local MSD organizations that
42:49
Speaker 2: are struggling to do things like around access, you know,
42:52
Speaker 2: especially around vaccines. And what we did was we made
42:55
Speaker 2: an agreement with our local MSc organization. So what we
42:58
Speaker 2: did was in ten markets within Asia, we said we'll
43:03
Speaker 2: invest up to fifteen million in equity if you invest
43:05
Speaker 2: up to five to seven million dollars in commercial agreements
43:09
Speaker 2: to build out these use cases that are most important
43:12
Speaker 2: for the local businesses. So it could be anywhere from India, Vietnam, Philippines,
43:17
Speaker 2: Taiwan and roots alving knows, but allowing us into deploy
43:22
Speaker 2: capital outside the US and ways we had because now
43:24
Speaker 2: we have a local MSD support with those companies and
43:28
Speaker 2: because I don't have a staff and know locally in
43:30
Speaker 2: those areas. And then then one in Berlin is more
43:33
Speaker 2: of the five larger markets, the G five sort of markets,
43:37
Speaker 2: but again doing exact same things, solving local MSD problems
43:41
Speaker 2: in those markets around you know, Europe, and so we
43:47
Speaker 2: did the same thing with them. There was a little
43:49
Speaker 2: bigger where we committed a lot more equity and they
43:51
Speaker 2: committed a lot more commercial dollars because is just a
43:54
Speaker 2: bigger market than the Asian markets. But the same idea
43:57
Speaker 2: was how do we how do we then be able
43:58
Speaker 2: to deploy capital in those markets, So now we're not
44:02
Speaker 2: only the US we're deploying. I think we have five
44:05
Speaker 2: investments now in the Asia Pacific mark. We have three
44:07
Speaker 2: in the year market. We want to launch this in
44:10
Speaker 2: the Latin American market in the next year to eighteen months.
44:14
Speaker 2: As we built out those two markets, so keep expanding,
44:17
Speaker 2: which then gives us a bigger footprint. And then over
44:19
Speaker 2: time I think the goal would be if these grow
44:22
Speaker 2: to a certain size, we would like to have personnel
44:25
Speaker 2: sitting in those markets, expand GHI to have a local
44:28
Speaker 2: staff in the Asia market, local staff and Europe and
44:31
Speaker 2: a local staff in Latin America and then that would
44:34
Speaker 2: truly make us a global investing arm. But we're doing
44:37
Speaker 2: the best we can with the resources we have. In
44:39
Speaker 2: a way, we're structured as a kind of a US
44:41
Speaker 2: focused arm. But the really is we have to pay
44:43
Speaker 2: attention globally and it's allowed us to do that without
44:49
Speaker 2: doing too much infrastructure costs of putting people in place
44:52
Speaker 2: yet but allowing us to use the infrastructure of mark
44:56
Speaker 2: with our MSD organizations to build these out. But this
44:58
Speaker 2: has been really successful for the last eighteen months and
45:01
Speaker 2: gentlemen of my septral Crickson has been leading that and
45:03
Speaker 2: it's been one of our very successful venture ideas that
45:07
Speaker 2: we've had in the last eighteen months.
45:09
Speaker 1: That's fantastic. It definitely sounds like a very differentiated approach
45:13
Speaker 1: compared to maybe what some others are doing. You know,
45:16
Speaker 1: as we as we sit here, you know, at near
45:17
Speaker 1: the end of our time and we're recording this in December,
45:20
Speaker 1: I was wondering, you know, any predictions on what we're
45:23
Speaker 1: going to see in twenty twenty six from a market perspective,
45:27
Speaker 1: technology perspective, anything you're really excited about over the next
45:30
Speaker 1: twelve months.
45:31
Speaker 2: Yeah, well, certainly, Look, AI is going to dominate the conversation,
45:34
Speaker 2: right and that's going to be the driver of a
45:37
Speaker 2: lot of investment in healthcare, and that's not going away
45:40
Speaker 2: anytime soon, and so we have to be prepared for
45:42
Speaker 2: if it's exciting but challenging because it's new and we're
45:46
Speaker 2: not sure all the areas that's going to impact are
45:48
Speaker 2: how well it's going to impact. What we just know
45:50
Speaker 2: there's going to be an impact. I'm excited also that
45:53
Speaker 2: the marks are finally starting to open up. I think
45:56
Speaker 2: we probably have a lot more clarity around teariffs, we
46:01
Speaker 2: have a lot more clarity around investment capital coming into
46:07
Speaker 2: the market. The debt market starting to slowly loosen up again,
46:10
Speaker 2: so it provides you know, capital and access to the
46:13
Speaker 2: capital that wasn't quite there. You know, it was there
46:16
Speaker 2: at the beginning of twenty five that kind of disappeared.
46:19
Speaker 2: It's all coming back again. And I certainly think the
46:22
Speaker 2: public markets will open up. I think, you know, as
46:25
Speaker 2: we move into the year, by the third and fourth quarter,
46:28
Speaker 2: we should be back to being robust. We'll never see
46:31
Speaker 2: the valuations we saw before. There's gonna be a lot
46:33
Speaker 2: more There's a lot more discipline now around the market.
46:36
Speaker 2: So that has passed and I think that's a good thing.
46:39
Speaker 2: But we're going to see I think large work out.
46:41
Speaker 2: But I think the consolidation piece is going to be
46:44
Speaker 2: one of the big themes as well next year. I
46:46
Speaker 2: think you're going to see Private Deck we play a
46:47
Speaker 2: larger role we hope to as well. But I think
46:51
Speaker 2: the consolidation play and building scale is going to be
46:55
Speaker 2: the other probably big sort of storyline for next year.
46:58
Speaker 2: And that's for us very exciting because we like to
46:59
Speaker 2: do there as an investor.
47:02
Speaker 1: Well, it's an interesting point, you know, when I think
47:04
Speaker 1: about some of your partners competitors on the PE side,
47:07
Speaker 1: whether it's New Mountain or Blackstone Carlisle, some of the
47:11
Speaker 1: assets that they've been acquiring are are pretty sizable. Do
47:15
Speaker 1: you think these ultimately come to market or do they
47:17
Speaker 1: just continue to trade hands among the PE players.
47:21
Speaker 2: That's a great question. You know, ultimately, you know, ultimately
47:25
Speaker 2: these firms want to either go to the puppet market
47:31
Speaker 2: area and and and and launch them that way or
47:34
Speaker 2: sell them as a larger entity to someone else that's
47:37
Speaker 2: building you know, larger scale. We've partnered with all those
47:41
Speaker 2: ones you've named and we're in those right now. You know,
47:43
Speaker 2: we're certainly we're still an investor in data and we're
47:45
Speaker 2: still investor in trainetics. You know, two interesting sort of
47:49
Speaker 2: assets that continue to acquire assets, but at some point
47:53
Speaker 2: we'll have to exit, so they will come to market
47:56
Speaker 2: at some point and again either through a private So
47:59
Speaker 2: you know, what we're starting to see now, which is
48:01
Speaker 2: sort of fascinating. The larger like the Blackstones of the
48:03
Speaker 2: world that sit on billions and billions and billions of
48:06
Speaker 2: cap are entering the healthcare market and they buy those
48:10
Speaker 2: kind of a you know, larger built pe assets as well.
48:13
Speaker 2: So that's I think good for the industry. So I
48:16
Speaker 2: do think there's going to be momentum around that as well,
48:20
Speaker 2: you know, but ultimately they will have to exit over time.
48:23
Speaker 2: That's within you know, there are investors that you know,
48:26
Speaker 2: want to see a return, but I think they're doing
48:28
Speaker 2: the smart thing. Assets are pretty well priced right now
48:31
Speaker 2: that you can buy. They're continuing to think about strategically
48:34
Speaker 2: how they continue to build out their platforms. I think
48:37
Speaker 2: that'll you know, probably can occur for most of twenty six.
48:41
Speaker 2: We might see some excess at the end of twenty six,
48:43
Speaker 2: but certainly in twenty seven, I think some of those
48:45
Speaker 2: will start to move on, which is good.
48:47
Speaker 1: That's great. Well, Bill, I want to thank you for
48:49
Speaker 1: all your insights and giving us an overview of g HI.
48:53
Speaker 1: It's been fantastic to see your progress. And you know,
48:57
Speaker 1: I've spoken to a lot of the leaders of some
48:59
Speaker 1: of the companies you've been vested in, and they're really
49:01
Speaker 1: fantastic people and companies that are changing the way healthcare
49:05
Speaker 1: has done in this world. So congratulations on all your success.
49:08
Speaker 1: The way I like to wrap up these conversations is
49:11
Speaker 1: to really talk about or ask about maybe something from
49:14
Speaker 1: either your personal life or your professional life, a lesson
49:17
Speaker 1: that maybe defines you. You know, what do you see
49:19
Speaker 1: as your mission at the end of the day.
49:21
Speaker 2: You know, ultimately you know we're Yes, we're a venture
49:25
Speaker 2: capital firm and we're a corporate firm, and we had
49:27
Speaker 2: talked about strategic returns, and but ultimately the main mission
49:31
Speaker 2: that drives myself and our staff is we're here to
49:35
Speaker 2: help patients. We may not ultimately save lives, but we're
49:39
Speaker 2: hoping the assets that we're investing in improves patient outcomes,
49:43
Speaker 2: hopefully saves lives, reduces costs, create sufficiencies and provides a
49:49
Speaker 2: better health care environment for everyone. And that's everyone on
49:52
Speaker 2: the global basis. Everyone has a right and should have
49:55
Speaker 2: access to healthcare. And that's ultimately what our mission is.
50:00
Speaker 2: And if we can do that, things like strategic returns
50:04
Speaker 2: and profits for Merke will come. And that's an old
50:07
Speaker 2: gee George Mert quote. You know, patients come first, and
50:10
Speaker 2: if we do the right you know, the right thing
50:12
Speaker 2: by the patient, then everything else follows. And that's ultimately
50:15
Speaker 2: our mission. And that's why I've been in for so
50:18
Speaker 2: long is I feel like I've had some small impact
50:22
Speaker 2: on helping patients. And you know, when I retire at
50:24
Speaker 2: some point and look back, you know, a I want
50:26
Speaker 2: to see obviously the fund and continue, but I'll look
50:29
Speaker 2: back at companies we created the transcarence of the preventanes
50:32
Speaker 2: of the world, the lebangs, and say, you know, I
50:35
Speaker 2: was part of that, and that's helping patients and it
50:39
Speaker 2: still exists in the world, and that gives you a
50:41
Speaker 2: good feeling. Right, It's not it's not really the end
50:45
Speaker 2: about the money. It's not really about the strut. It's
50:47
Speaker 2: helping patients. And we operate in a place as a
50:52
Speaker 2: venture Capra firm that gets to do that. Not all
50:54
Speaker 2: industries get to do something that maybe is impactful like that,
51:00
Speaker 2: and that's you know, kind of different, I think, and
51:04
Speaker 2: I think it makes it fun and makes us want
51:06
Speaker 2: to come in every day and try to solve those problems.
51:09
Speaker 2: But really, Neian, that's what it's about the patient.
51:12
Speaker 1: I couldn't agree more. Thank you so much for sharing that,
51:16
Speaker 1: and with that we'll wrap up. That's Buill, Toronto, President
51:20
Speaker 1: and general partner of the MRK Global Health Innovation Fund.
51:24
Speaker 1: Thank you so much for joining us for our latest episodes,
51:27
Speaker 1: and please make sure to click the follow button on
51:29
Speaker 1: your favorite podcast app or site so you never miss
51:31
Speaker 1: a discussion with leaders in healthcare innovation. I'm Jonathan Palmer,
51:35
Speaker 1: and you've been listening to the Vanguards of Healthcare podcast
51:38
Speaker 1: by Bloomberg Intelligence. Until next time, take Care.
52:04
Speaker 2: Uses US
52:12
Speaker 1: Bases.