"The M&A market has been relatively slow over the past year as pharma executives wait on the sidelines for the valuation correction to play out, but I believe that we will see M&A activities increase in this coming year."

Lori Hu

MANAGING DIRECTOR, VERTEX VENTURES HC

March 29, 2022

How has the pandemic impacted Vertex Venture HC’s operations and how have you responded to navigate the new landscape?

The pandemic has significantly changed our working environment as well as the investment climate. 2020 was significant in terms of investment dollars flowing into the life sciences space, but 2021 has seen significant volatility, especially in the public markets. Vertex Ventures HC remains a science-first, fundamentals-focused company, evaluating early stage companies that we can partner with over the long term. We have focused on remaining disciplined despite the momentum swings in the market.  Over the past year we invested in Sonoma Biotherapeutics, which uses a Treg therapy platform to treat autoimmune diseases; Allay Therapeutics which delivers durable pain relief in an effort to reduce the opioid usage in the US; and Indapta Therapeutics which has developed a natural killer (NK) cell therapy platform to increase access to cell therapies for cancer patients.

How does Vertex select companies to invest in?

We focus on fundamentals – the science, market and team. We are very interested in transformational opportunities for underserved patients and want to partner with teams that we can work with over many years.

How does Vertex differentiate itself in the market and how does the company wish to be perceived?

Vertex is a global investment fund with offices in the US, China, Singapore, India and Israel.  We aim to bring a global reach to our portfolio through global business development, fundraising and operational efforts. At the same time,  we also operate locally within Bay Area and Boston ecosystems with a relationship-orientation and culture of collaboration.  Vertex is a female-led fund and we strive to increase diversity in our boards and at the C-suite level and normalize diverse leadership. We are driven by early stage science and are pragmatists in the way we deploy capital to most effectively drive companies to success.    

How has the M&A and investment landscape evolved over the past two years?

We have seen a huge influx of capital into the life sciences sector during 2020 with generalist funds and public funds investing in early stage healthcare.  The limiting factor has not been capital, but talent in the marketplace. We are now seeing a ‘hangover’ effect in the market with the XBI still down; valuations are starting to return to normal as expectations to finance for the long term are again receiving priority. The M&A market has been relatively slow over the past year as pharma executives wait on the sidelines for the valuation correction to play out, but I believe that we will see M&A activities increase in this coming year.

Where is the influx of investment mostly coming from?

Globally, we see robust investment, partnership and manufacturing activity from the Asia Pacific including China, Japan and Singapore as well as continued investment from clusters in Europe and Israel.

Domestically, outside of the Bay Area and Boston where we currently have offices, we are seeing more of our portfolio companies establish in Seattle, San Diego, Denver and New York. With the onset of the pandemic, many people and companies have spread out geographically and we are seeing a softening of major clusters and an emergence of distributed ecosystems where we can find the best talent.

What is Vertex’s vision and objectives for 2022 and beyond?

Ultimately, we want to develop products that can go to market and deliver a step-change benefit for patients.  It is always gratifying to see our companies develop technologies that progress in the clinic to a stage where they deliver a true survival benefit to patients. The market will always have ups and downs, but we remain optimistic about funding new science and innovation in the life sciences space. We are always excited to invest in and partner with new companies in the life sciences space which is working towards making a difference for patients worldwide.

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