August 12, 2024
Article by Robert J. Bowman, Editor-in-Chief, SupplyChainBrain
If you’re looking to get a glimpse into the future of technology for managing the pharmaceutical cold chain, pay attention to where investors are placing their bets.
And not the generalist investor who amasses a portfolio of startups from multiple industries, seeking the fastest path to a payoff. This initiative was created by a company that is itself a global leader in biopharmaceutical research and production.
The company is Merck, and its stake in the future of pharma technology takes the form of the Merck Global Health Innovation Fund (MGHIF).
Founded in 2010, the $600 million “evergreen” fund supports entrepreneurs through multiple phases, investing up to $5 million in equity for early-stage technologies “that could be highly disruptive,” up to $10 million “in areas aligned with business needs,” and more than $10 million when a fledgling business is ready to sign large multiyear contracts. Together they make up more than 60 investments — approximately 45 of which remain active today — over the fund’s 14 years of operation.
The fund’s initial areas of investment included drug discovery and clinical development, medicine and patient support, and the development of data analytics to create “real-world evidence and insights.”
But something was missing. In 2021, the fund filled a critical gap in its portfolio by pursuing pharma startups in supply chain, manufacturing and IT.
Leading the effort was Joe Volpe, a former executive with Johnson & Johnson who is now a managing director with MGHIF. With the COVID-19 pandemic still raging, it was a tough time to venture into a new area of investment, he says. Nevertheless, he argued to the board that there was a pressing need for paying attention to the pharma supply chain. And his message was heard: The pandemic had awakened executives throughout the industry to the need for a more efficient, resilient and sustainable way to move products in the cold chain.
“I was asked to look end-to-end through the whole value chain,” Volpe says, with attention to such critical elements such as data connectivity, real-time tracking of products and their condition in transit, alerting, sustainability, and digital-twin technology.
Today, under Volpe’s guidance, the fund supports four startups specifically targeting supply chain innovation — companies that he refers to as “my proud kids.” They include:
- CargoSense, an analytics venture based in Reston, Virginia using measurement and automation to create both predictive and prescriptive insights;
- Tag-N-Trac, a San Diego, California-based provider of tracking technology for pharma, third-party logistics providers and distributors of high-value goods;
- TransVoyant, an Alexandria, Virginia company providing real-time visibility and predictive insights driven by artificial intelligence, and
- AeroSafe Global of Rochester, New York, a provider of cold-chain distribution services for pharma.
Volpe says the four weren’t selected randomly. First came TransVoyant, with its “control tower” that merges internal corporate data with information on weather and other geographical conditions to monitor distribution and shipping lanes. “It’s like the window to everything that’s going on,” he says.
Next was AeroSafe Global, maker of a returnable shipping box for products in the cold chain. Tag-N-Trac was then selected for its lightweight tracking device that monitors the AeroSafe boxes with cellular, Bluetooth or radio frequency identification technology.
Finally, CargoSense was brought into the fold to “make sense of all the data” and apply AI to generate prescriptive insights for ensuring the safe and efficient movement of delicate pharma products.
From the start, the four individual ventures were seen as pieces of one big puzzle. MGHIF played matchmaker, inviting all of the executives to a meeting in Florida, along with industry consultants, to examine how they could work together and benefit from one another’s roles in the pharma supply chain.
Despite have taken a substantial stake in the four companies, Merck doesn’t insist that they serve only its interests. “Merck can be a first user,” Volpe says, “but most of them have another pharma customer. We’re OK with co-investing.”
As with any fund aimed at entrepreneurs, the ultimate goal is a thriving business, whether that means pursuing an initial public offering, merger or standalone enterprise. Volpe says the pace of progress toward that end might vary among the four. “They will continue to talk. Maybe they’re one company altogether. Maybe two go off as a larger company. All of those [possibilities] are on the table.”
Volpe is now on the lookout for additions to the supply chain investment portfolio. So far, Merck has focused its support on producers of finished goods. Now, he hopes to target ventures offering manufacturing planning, Tier 2 supplier visibility, and other essential services performed further up the supply chain.
“It’s complex,” he says. “It’s not something we’re going to do overnight, but we got a good start. I think we’re a forerunner in pharma.”
About WAVE Equity Partners
WAVE Equity Partners (WAVE) is an independent sustainability-focused investment firm. We partner with early-growth companies whose proven clean technologies drive meaningful bottom-line impact and environmental benefits for large industrial manufacturers. Our industry knowledge and dedication to true partnership allow us to identify and support leaders whose innovative solutions are commercially accepted, deliver immediate impact and are poised to scale. WAVE is currently investing out of its third institutional fund and has approximately $440 million under management (AUM) as of June 30, 2023. For more information please visit https://waveep.com/ or by following the company on Twitter/X and LinkedIn.
