GlaxoSmithKline and Avalon Ventures Agree to Startup Collaboration

4/22/13Follow @bvbigelow

Avalon Ventures founder Kevin Kinsella has been saying for some time that pharmaceutical companies should be striking deals with VC firms that know how to organize biotech startups—and it now appears a Big Pharma was listening.

The Wall Street Journal reports this afternoon on its (subscription-based) website that GlaxoSmithKline (NYSE: GSK) has agreed to provide as much as $465 million in startup funding for promising drug-discovery companies to be established by Avalon over the next three years. Avalon, which has offices in San Diego and Boston, will contribute as much as $30 million under their unusual partnership, creating a $495-million life sciences venture fund.

The terms conform to sentiments that Kinsella has expressed on several occasions, that “the companies that get the most benefit from billion-dollar drugs shoulder the most risk.” I hope to glean more details in a telephone interview scheduled tomorrow with Jay Lichter, an Avalon partner in San Diego who specializes in life sciences deals.

The Glaxo-Avalon collaboration might also serve as a variation on the concept of creating an “innovation supply chain” for life sciences startups, which Xconomy’s Luke Timmerman outlined in his BioBeat column earlier today. He reports that Cambridge, MA-based Flagship Ventures is doing something like this with Merck.

Flagship’s managing partner, Noubar Afeyan, tells Luke that establishing a supply chain for the pharmaceutical industry would not be that different from the way U.S. automakers work with their suppliers, or the way Boeing sources parts for its planes.

If nothing else, it’s clear that big drugmakers are willing to experiment when it comes to finding new ways to develop new drugs.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • Lah99

    Curious why GSK did not do something like this with SROne their own venture arm or did that not look like a good option?

  • BVBigelow

    I’m told that in general, SROne is focused on investing in later stage drug deals and does not make investments in this early stage. The Avalon-GSK deal is focused on getting drugs from Eureka! to beginning of product development plan for clinical candidate.