The top 25: William Taranto, Merck Global Health Innovation Fund

William Taranto has been one of the great exponents of ecosystem investing since he moved to US-based pharmaceutical group Merck & Co eight years ago as the group made a push into non-pharmaceutical healthcare.

The Global Health Innovation Fund (GHI) under his leadership grew quickly to a $500m pool and in 2014 added a $700m private equity fund to help support roll-ups and later-stage deals.

Last year for his Powerlist profile, Taranto said more could be expected. “We remain focused in 2017 on using our growth equity firm to consolidate and build ecosystems around patient monitoring, oncology, infectious disease and healthcare information technology infrastructure. In addition, we will continue to invest out of our fund in the spaces listed above as well as in care coordination, population health and clinical trial management.”

For example, his nomination of Francesca Wuttke for GCV Rising Stars award 2018 was in part for her development of a thesis around digital clinical trial management, a new one for the fund. She told GCV in an April 2017 interview: “Efficiency in clinical trial management, both from the perspective of cost and time, can be a valuable competitive asset for the pharmaceutical industry. Clinical trial delays can cost pharma companies up to $8m per day. Digital clinical trial management can enable trials that are smaller, shorter, less expensive and more powerful.

“The clinical trial management ecosystem in Europe is undergoing change, resulting from demands for increased relevance and transparency of results, requiring better data quality and study efficiency from contract research organisations.

“Digital technology has the potential to help us meet these demands and create new disruptive opportunities. Clinical trial processes are not yet fully leveraging advances in technology and the increasing democratisation of clinical trials.”

Regulatory change also played a role in the choice to focus on this area as the European Medicines Agency has made it a requirement that clinical trials are digitised. Wuttke said this had created an environment ripe for growth.

“Companies that capitalise on these trends and anticipate future changes by improving subject recruitment and retention, and making data capture, integration and analysis more accurate and robust, will present attractive investment opportunities,” she said.

Wuttke’s first investment for the fund targeted this new area. In September, GHI led an $11m round for UK-based Antidote Technologies, which has created a clinical trial matching platform to reduce the number of trials that are closed or suspended because of a lack of suitable patients.

Overall, Taranto was cautious about some valuations. For the GCV Oultlook survey, he said: “In digital healthcare, it remains to be seen if the IPO and M&A market will open up. My guess is more M&A than IPO. We have seen some inflated values for healthcare IT companies which I think will fail and come down rapidly.”

This concern has yet to stop Merck following on to its winners. Last month, Livongo Health, the US-based developer of an assistance platform for chronic health conditions, raised $105m that included software provider Microsoft, pharmaceutical firm Merck and health insurer Blue Cross Blue Shield of Massachusetts.

The round valued Livongo at $800m according to the Wall Street Journal.

Founded in 2014, Livongo has created a data science-equipped platform that helps users cope with conditions such as diabetes and hypertension through a blend of consumer health technology, real-time support and coaching, and personalised recommendations for healthy living.

Merck was also part of Grail’s first close of its series B round at $900m. Grail is a US-based oncology diagnostics spinout of genomics technology producer Illumina and reportedly plans to raise up to $1bn in new funding.

Reports in February this year suggested it was preparing for a $500m initial public offering in Hong Kong, and the funding would be raised in advance of the flotation.

But a lot of interest followed its roll-up strategy, with the closure of a partnership involving its MedCPU portfolio company. This was a deal struck by Joel Krikston, a GCV Rising Star 2017. In his profile, Krikston described this large private equity deal for GHI in creating a joint venture with University of Pittsburgh Medical Centre (UPMC) and MedCPU, a company that improves point-of-care delivery to hospitals through technology, along with an internal startup.

Krikston said: “Ilum is focused on combining a suite of solutions – clinical decision support, rapid diagnosis, real-time antibiograms [an antibiotic sensitivity test], predictive analytics – to help hospitals fight the epidemic of hospital-acquired infections. One of my first investments, MedCPU, has become a key foundational component of the Ilum offering and we are already in several pilots at hospitals across the country in a relatively short period of time.

“Moreover, we were able to attract UPMC as a development partner and investor in MedCPU, which really embodies one of my key philosophies in terms of finding highly capable and respected strategic partners to build businesses with.”

Taranto came to Merck from a similar role at Johnson & Johnson and quickly applied the insights from the sector’s oldest CVC unit, JJDC.

As Taranto said at the 2014 GCV Symposium: “In the context of what I do for a living, if you look at the continuum of healthcare from pre-diagnosis to death, the question for Merck was: How do we participate in that continuum where the pill or the vaccine makes up only one piece of healthcare?

“We then decided that venture capital was the best way for Merck to do that. It allows them to look at the future of healthcare, take bets on a number of different areas and then, if it fits strategically and financially, it becomes an option for them to acquire those companies.”