GSK Partners with Avalon Ventures to Back Drug-Discovery Startups

(Reuters) – GlaxoSmithKline said on Monday it will partner with venture capital firm Avalon Ventures in a deal worth up to $495 million to fund as many as 10 drug-discovery startups over the next three years.

GSK will provide financing and technical support to startups established by Avalon Ventures and will have first rights on buying each new company, GSK spokeswoman Melinda Stubbee said.

Avalon will contribute up to $30 million to the collaboration, and Glaxo will provide as much as $465 million in initial funding and development milestone payments, Stubbee said.

Big drugmakers see early stage venture investing as a proxy for expensive in-house drug development, and some have set up their own venture funds.

Stubbee said each startup would have just a few employees, focusing on a single compound to develop treatments for conditions ranging from cancer to infectious diseases.

Avalon Ventures, based in La Jolla, Calif., held a first close on $202 million for Avalon Ventures X in August 2012, peHUB previously reportedThe fund, which has a target of $250 million, is still being raised, according to Thomson Reuters (publisher of peHUB). Avalon previously raised $200 million for fund IX in 2010. 

Founded in 1983, Avalon invests in life sciences, Internet and technology companies. It has co-invested most frequently with Kleiner Perkins Caufield & Byers (they jointly backed 12 companies), Institutional Venture Partners (10 companies) and Venrock (six companies), according to Thomson Reuters.

Avalon lists six managing directors on its websiteBrady Bohrmann, Doug Downs, Kevin Kinsella, Rich Levandov, Jay Lichter and Steve Tomlin.

Reporting by Susan Kelly in Chicago; Editing by Phil Berlowitz. Additional reporting about Avalon Ventures by Lawrence Aragon for peHUB.)

Photo courtesy of ShutterStock

1 Comment

  • I wonder if we’ll see more of these sorts of deals from VC firms that are long on talent but short on capital. Avalon clearly isn’t hurting for cash, but I could see this sort of model working for other VCs that aren’t so flush. Thoughts?

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