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CD&R-led investor group injects $100m into M2GEN, looking to transform cancer care with data

A crucial component of the transaction, CD&R's Sarah Kim says, was helping to reawaken the commercial relationship between pharmaceutical giant Merck and the data and informatics business. 

M2GEN, a company using real world data to help find cures for cancer, has attracted a $100 million equity check from a Clayton, Dubilier & Rice-led investor group, according to people familiar with the matter.

The Merck Global Innovation Fund and McKesson Ventures also participated in the recapitalization, a Wednesday announcement said. Existing shareholders Moffitt Cancer Center, Hearst Healthcare and The Ohio State University Foundation will remain significant minority investors in the Tampa-based business.

For CD&R, the deal comes more than a year after launching a dedicated search focused on data and informatics businesses helping the pharma industry across the continuum – from the discovery stages to clinical development all the way through commercialization, Sarah Kim, partner at CD&R, told PE Hub.

Sarah Kim, CD&R
Sarah Kim: Merck ‘allows us to go out and really invest and continue to build out those data capabilities’

Although on the smaller side for CD&R, the firm found its marketplace approach particularly appealing. M2GEN’s clinical and molecular data already has multiple use cases, and those can be both improved upon or added to, Kim explained.

“The company collects, sequences, cleanses and curates the data in a high-quality way,” Kim said, explaining that the oncologists benefit from the aggregation of the patient data that enables cutting edge research and ultimately improves patient care.

“On the other hand, [M2GEN is] basically funding that by bringing that data, packaging it, de-identifying it and selling it to pharma – where pharma is really using it for drug discovery and research in clinical trial use cases,” Kim continued. “Ultimately, pharma is using it to advance oncology therapies and accelerate clinical trials.”

For example, in partnering with M2GEN, biopharma companies can improve clinical trial design, the patient recruiting process and the efficiency of developing new therapies.

M2GEN had originally gone to market in summer 2020 seeking a financing, however a deal was not produced; when that process went a bit sideways, CD&R had the opportunity to come in with a different perspective and build a consortium, Kim said.

A crucial component of the deal, she said, was helping to reawaken the commercial relationship between pharmaceutical giant Merck and the company.

As part of the recapitalization, M2GEN simultaneously announced it has reached a five-year agreement with Merck through which it will provide valuable patient-consented, de-identified, linked clinical and genomic data in support of Merck’s oncology efforts.

This partnership effectively kicks off the CD&R playbook, which involves bringing its resources to bear in terms of infrastructure investment, while really amplifying the commercial orientation of the business. Merck “allows us to go out and really invest and continue to build out those data capabilities,” Kim said.

Although the organic growth opportunity is massive, Kim said, acquisitions are not off the table. “Ultimately we will be on the lookout for interesting M&A opportunities that could accelerate the capabilities or expand its reach from a data access perspective.”

Besides investing alongside a shareholder base that is particularly experienced in data and informatics, the additions to the C-suite brought more affirmation when considering the opportunity, Kim said.

Of particular note, Sandra Peterson, CD&R operating partner and former group worldwide chairman of Johnson & Johnson, has assumed the role of chair of the M2GEN board.

Led by CEO Helge Bastian, M2GEN will also add to its leadership team two additional executives: Todd Johnson, most recently senior vice-president of life sciences commercialization and clinical research groups at Optum, as chief growth officer, and Wilf Russell, a seasoned technology leader with experience from companies including Volvo, Nike and Microsoft, as chief technology officer.

Founded in 2006, M2GEN runs one the world’s largest observational research studies in cancer, which tracks patients throughout their lifetime, links longitudinal clinical data with molecular information and enables a deeper understanding of a patient’s disease. Its data platform encompasses more than 300,000 patients across its cancer centers, which operate as part of the Oncology Research Information Exchange Network.

Although data has been front and center for the healthcare platform at CD&R – a broader area the firm will continue to seek investment opportunity – the team has also been spending time examining provider-centric businesses, outsourced pharmaceutical services and pharmaceutical products, Kim said.

In recent notable activity for CD&R, the firm in May 2020 sold naviHealth to Optum, receiving approximately $1.1 billion in cash proceeds, generating a 2.5x multiple of invested capital, a source told PE Hub at that time. 

CD&R’s current healthcare portfolio includes Huntsworth, a pharma services company; Covetrus, a publicly traded animal health-technology business; and Agilon, a value-based healthcare platform.