MONTVALE, N.J. – In November, Merck & Co. began assembling its venture capital subsidiary, Merck Capital Ventures. The new division is lead by Per Lofberg, former chairman of Merck-Medco Managed Care LLC.
Merck has earmarked an initial $100 million for the VC wing to deploy into communication and information technology companies related to the health-care and pharmaceutical industries. Lofberg said his operation will not be funding science-based start-ups.
Merck Capital will seek portfolio companies whose businesses can directly benefit Merck’s operations. The fund will focus on companies that develop products and services that improve communication among Merck’s constituent groups – doctors, patients and insurers.
Lofberg said he sees opportunities that could benefit Merck in the wireless technologies, large database IT and through the Internet. The company wants to be involved in the businesses creating innovations in its industry and have the opportunity to “draw the businesses closer” to Merck.
Lofberg joined Medco six years before its merger with Merck and has been in charge of the resulting pharmacy-benefit unit for most of the subsequent 13 years. He says about five people will join him in the VC arm, including James Cooper who will be vice-president.
In a prepared statement, Raymond Gilmartin, chairman of Merck, claimed that Merck-Medco is the largest online pharmacy and credited Lofberg with that accomplishment among other things.
“This is the creative side of the industry,” Lofberg said. “Merck-Medco is a great company with a good leadership team. I thought it would be interesting to give up the day-to-day activities and focus on creative investment strategies.”
Instead of direct VC experience, Lofberg said his team had business experience in identifying trends and understanding potentially successful enterprises.
Lofberg said the firm plans to invest in the range of $5 million per portfolio company and expects to get in on mid-to-late-stage rounds. Merck Capital will probably invest as part of a syndicate and will likely avoid the earliest investment stages.
Lofberg said he has some investments in the pipeline, and he expects a two-year time frame to fully invest his first bundle of capital.