News: Portfolio

Partners Innovation Fund Grows to $100 Million

Nine years ago, a grand Partners HealthCare experiment was launched. Not on a laboratory bench or in an exam room but on an organization-wide scale.

With $35 million at stake, the concept was to run a venture model from within Partners with ready capital and experienced internal venture investors who could steward the creation of early-stage discoveries by Partners’ researchers into new companies built around the innovation. This in house approach was designed to speed and increase commercialization by establishing a direct path from laboratories in the hospitals to the entrepreneurial world. Its strategic objectives were to enhance patient care and achieve a financial return.

“Fast forward to today and I think the experiment has been a success,” says Roger Kitterman, managing partner of the Partners Innovation Fund, who has been with the Fund since its establishment and led it since 2011.

The initial $35 million investment from the Brigham and Women’s Hospital and the Massachusetts General Hospital has been used to purchase a stake in 25 companies based on technology from Partners’ hospitals. Kitterman and three partners combine decades of venture experience and a deep knowledge of the expanse of the Partners research and clinical enterprise.

The experiment has yielded three portfolio company monetizations – Adheron, Annovation and CoStim-- with others pending. The total enterprise value of the three companies at the time of acquisition exceeded a billion dollars producing a Fund internal rate of return exceeding 30%.

On the heels of that extraordinary success, Brigham and Women’s Hospital and Massachusetts General Hospital have committed to Partners Innovation Fund II which will increase the total assets under management to $100 million and significantly expand the ability to bring the game changing breakthroughs of Partners faculty to patients.
The additional capital will allow the Fund to accelerate the earliest Partners technologies, provide a magnet to more rapidly draw in other investors and enable a greater level of ownership throughout every stage of the company’s growth. The new capital is especially timely given substantial market opportunities.

“The therapeutics market is particularly strong right now,” Kitterman notes. Thanks to early-stage investments by the Fund, multiple new innovators from the MGH and BWH are poised to enter this market with a splash. “We’re seeing a lot of interesting technologies emerge in important disease areas, and we’re in a position to help these technologies take off by providing early seed investments,” Kitterman says.

The returns of the Fund put it in the highest strata of the corporate venture community. “The success of the Partners Innovation Fund is a tribute to the exceptional investigators at BWH and MGH, the outstanding management of the Innovation Fund team and the long standing assistance of top venture advisors. Its strategic and financial outcomes are singular in the academic community,” said Chris Coburn, Vice President, Innovation.

New Policies, New Models, New Capital

The creation of PIF II coincides with other new capital focused initiatives supporting the commercialization of Partners discoveries and also an important shift in the Harvard conflict of interest policies. The capital initiatives in part reflect a new trend of organized international capital supporting the commercialization of the discoveries of Partners faculty.

As an early example, a new Partners spinoff was created to extend the clinical impact of technology discovered by legendary MGH researcher Mehmet Toner, PhD, and colleagues. Toner devised a system for cell separation that was swiftly picked up by commercial partners focused on cancer therapies and is advancing rapidly to the market.

But the potential applications of the Toner system extend far beyond cancer. Those non-cancer applications are the basis of a new company, Boston Nano, that will itself gestate additional companies. The first of these spinoffs, MicroMedicine, will pursue the system’s use in leukocyte-based therapies. MicroMedicine just closed an initial $35 million financing with all the capital coming from central Europe.

Following the trend of international support, a new fund principally targeting innovations developed by the world renowned MGH Wellman Center for Photomedicine. The Fund has attracted strong interest from OUS investors and is expected to soon announce a first close.

Closer to home, the Partners Impact Investing Fund (PIIF) will allow individual investors to directly participate in all Partners Innovation Fund investments. Once fundraising is completed, the PIIF will match all individual Innovation Fund investments by formula. PIIF investors are expected to be Boston based individuals and institutions.

In parallel to the new financing strategies are refinements in the Harvard Medical School conflict of interest policies. Faculty at the Partners hospitals are appointed at Harvard Medical School and subject to the Harvard conflict of interest policies. Under the updated COI policy, Harvard faculty who hold equity in privately held or publicly traded businesses may face fewer restrictions.

Specific changes include:

  • Faculty members who hold equity in a privately held business can now request a standard exception that will allow them to receive sponsored research support from that business assuming an appropriate conflict management plan can be put in place.
  • A faculty member who holds no more than 1% of the equity in a publicly traded business can receive sponsored research support from that business. If the faculty member owns more than 1% of the total equity of the business they can request an exception to allow the support.