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Merck's Reid Leonard, based in Boston, will oversee new $250 million investment fund

Posted by Scott Kirsner  November 21, 2011 09:15 AM

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I caught up Friday afternoon with Reid Leonard, the Merck executive who will head up the new $250 million Merck Research Venture Fund. While the New Jersey pharmaceutical company still hasn't made an official announcement about Leonard's new gig, word started leaking out earlier this month on Twitter.

Leonard, who began working at Merck in 1989 and rose to be a top licensing exec at the company, told me a bit about the fund's strategy and origins:

The initiative to get it established was the work of David Nicholson, who is head of worldwide licensing for the company. Several of us had been pushing the notion for a few years that, given the overall reduction in the amount of venture capital available to early-stage life sciences companies, and the increasing role of corporate venturing, it was really a good time for Merck to consider stepping up in this way. Our future pipeline depends on accessing innovation from outside.

Nicholson pitched the idea late last year to Merck's CEO, Kenneth Frazier, and eventually got the green light. The fund will primarily make investments in established life sciences venture capital funds as a "limited partner," but will also be able to make direct investments in biotech companies. Managing the new fund along with Leonard are four other Merck executives from functions like licensing, finance, and corporate development. There's no plan to bring on any investment professionals from outside the company. "The decision was not to try to stand up something that looked like a completely independent venture fund," Leonard explains. "We're setting up so we can partner with the venture industry, and place some bets on the side with the direct [company] investment pool."

The new Merck Research Venture Fund will be focused on promising new drugs — not medical devices, healthcare IT, or intelligent pill bottles. (That's the focus of another $250 million Merck fund, the Global Health Innovation Fund.) Leonard says:

The overall strategic intent of the fund is unabashedly that. It's strategic. It's directed toward increasing the quality and diversity of opportunities we can harvest downstream, through product partnerships or acquisitions. It's a substantial statement about our desire to help shape the landscape that we're part of, instead of just being there at the end with a catcher's mitt.

Merck hopes that venture capital investors will appreciate getting access to Merck scientists, who will be available to consult with them and their companies. And for Merck, the new relationships with VC firms will "give our scientists line-of-sight into the work that's happening in these early-stage companies," Leonard says, "which may enable us to execute partnerships at an earlier stage."

Leonard (who is on Twitter as @rjlflyingguy) will work out of the offices of the Merck Research Labs facility in Boston's Longwood Medical Area. He says the new fund has already made one investment in a venture capital fund, adding, "We hope to close a couple more by the end of the year." They haven't yet invested in any individual companies.

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Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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