Life Science Trends, presented by Chris Hite on Financing Panel

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  • 1. Life Science Trends February 2012Strictly Private and Confidential
  • 2. Within Healthcare, Slowing Revenue Outlook For Nearly Every Subsector (1) Change in CAGR 22% Generics 19% - 20% Managed Care 5% - 19% Healthcare IT 25% + 18% CROs 4% - 17% Biotech 8% - 16% MedTech 6% - 14%Specialty Pharma 16% + 12% Supply Chain 8% - 11% Facilities 8% - 7%Life Science Tools 4% - 5% Major Pharma 1% - 0% 5% 10% 15% 20% 25% 30% 2004-2008 Revenue CAGR 2008-2012 Revenue CAGR 1 Source: Wall Street Research. (1) Represents growth trend when comparing periods 2004-2008 to 2008-2012.
  • 3. Declining R&D ProductivityNME approval peaked in the mid 1990’s, followed by a period of decline starting around 2000; while R&Dspend continued to grow. $50 60 45 In du stry R & D S pe nd ( $ bn ) 50 40 35 F D A N M E A pp ro va ls 40 30 25 30 20 20 15 (1) 10 10 5 0 0 1970 1975 1980 1985 1990 1995 2000 2005 Number of FDA NME Approvals2 Source: Rodney Zenmmel, PhD., McKinsey & Company, FDA, PhRMA. (1) Includes NCEs and BLAs. BLAs included 1986 onward; biologic approvals in prior years assumed negligible.
  • 4. Life Science IPOs Since 2003The financial crisis clearly impacted the biotech IPO market as volumes are off significantly over the pastfew years. Valuations continue to be challenged as does the short term aftermarket performance. # of Biotech IPOs Per Year Since 2003 Average Performance Offer + 30 Days 8.8% 7.3% 21 19 0.1% N/A 0.8% N/A 14 (5.5%) (4.0%) 10 (9.1%) 9 7 6 1 1 0 (31.5%) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Dealogic. Excludes offerings < $25 mm in proceeds. Source: Dealogic. Excludes offerings < $25 mm in proceeds. Average Market Cap At Pricing Over Last Ten Years Average Offering Size Over Last Ten Years $273 $279 $278 $285 $260 $78 $72 $65 $66 $68 $65 $213 $207 $62 $202 $55 $52 $157 N/A N/A 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Dealogic. Excludes offerings < $25 mm in proceeds. Source: Dealogic. Excludes offerings < $25 mm in proceeds.3
  • 5. Life Science IPOs (Cont’d)The majority of IPOs continue to be priced below the marketing ranges, with particular valuation sensitivityexperienced over the past 2 years. Later stage assets are dominating the IPO landscape currently. Above / Below / Within Range Average File-to-Offer (%) Per Year 10% 10% 5% 14% N/A N/A 16% 19% 36% (8%) (9%) 40% (14%) 100% 100% 100% 100% (19%) 79% 86% 71% 64% (27%) (27%) 50% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (43%) (46%) Below Within Range Above 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Dealogic. Excludes offerings < $25 mm in proceeds. Source: Dealogic. Excludes offerings < $25 mm in proceeds. Clinical Stage at IPO Since 2003 NBI Annual Performance Over Last Ten Years 46% 1 5 12 2 16% 15% 5 12% 1 5 6% 5% 1 3% 4 1 1% 6 2 9 6 8 6 6 2 3 1 1 1 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (13%) 2003 2004 2005 2006 2007 2008 2009 2010 2011 I or Pre-Clinical II III or NDA Filed CommercialSource: SEC filings. Source: Factset.4
  • 6. Life Science FOs Since 2003Although the biotech follow-on market has experienced strong volume, deal size has declined in recentyears as has the market cap of the average issuer. Follow-ons have tended to perform well in aftermarket. # of Biotech Follow-Ons Per Year Since 2003 Average Performance Offer + 30 Days 17.7% 49 49 45 43 42 40 36 33 8.6% 5.6% 6.1% 14 4.3% 4.4% 3.9% 7 2.2% 2.6% N/A 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Dealogic. Excludes offerings < $25 mm in proceeds. Source: Dealogic. Excludes offerings < $25 mm in proceeds. Average Market Cap At Pricing Over Last Ten Years Average Offering Size Over Last Ten Years $1852 $156 $154 $158 $1466 $1500 $130 $94 $94 $95 $94 $837 $879 $74 $582 $641 $610 $60 $559 $353 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: Dealogic. Excludes offerings < $25 mm in proceeds. Source: Dealogic. Excludes offerings < $25 mm in proceeds.5
  • 7. Life Science M&A Transactions: 2007 – 2012 YTDM&A over the past 5 years highlighted important trends, including pharma’s need for greater access toantibody platforms, larger biopharmas buying their partners, and pharma’s need for enhanced pipelines.Public and Private Life Science Acquisitions, 2007-2012 YTD(total transaction value in billions of USD, # of transactions) $300 40 35 250 $228 8 30Transaction Value ($bn) 200 25 # Transactions 150 20 220 15 100 $83 $71 10 11 31 $48 $47 50 2 12 5 59 52 36 45 0 0 - 2007 - 2008 - 2009 - 2010 2011-- YTD Public Acquisitions Private Acquisitions Total # Acquisitions # Public Acquisitions # Private Acquisitions6 Source: MergerMarket, EvaluatePharma, Company information. Note: Public and Private transaction values include earn-outs and CVRs.
  • 8. Private Biotech M&A Transactions Private biotech M&A transactions have increasingly been structured with significant earn-out components. The earn-out components have been reaching up to 50% or more of the total deal value. ($ in millions) 2011 Avg: $335mm (1) 2010 Avg: $128mm (1) 2009 Avg: $193mm (1) 2008 Avg: $161mm (1) 2007 Avg: $279mm (1) 2006 Avg: $339mm (1)$1,000 $ 1,080 $ 1,000 1,000 $935 $900 (2) 900 $ 130 $851 $470 $800 800 $ 700 $ 575 700 $ 75 $ 640 $ 620 $600 $594 600 $560 $537 $575 $ 528 $537 $525 $ 500 $ 515 $100 $500 $500 $500 500 $475 $ 225 $ 461 $300 $454 $425 $ 150 $430 $420 $ 900 $ 403 $ 400$ 400 $ 400 $ 390 $250 $ 380 $ 380 400 $805 $ 150 $75 $366 $ 300 $ 250 $350 $ 25 $ 338 $500 $ 325 $ 315 $ 310 $ 300 $400 $ 300 $300 $ 90 $ 625 $485 $ 292 300 $ 610 $ 275 $305 $415 $263 $255 $200 $250 $225 $ 235 $168 $120 $500 $ 310 $300 $494 $500 $ 250 $454 Baxter / Prism Richter / PregLem P Alexion/ Enobia Daiichi / Plexxikon Valeant / iNova Gilead / Calistoga ira Takeda/ Intellikine Salix / Oceana Biotie/ Synosia Alexion/ Taligen a Sanofi / TargeGen Roche/ Marcadia Eli Lilly / Alnara Cadence/ Incline Novartis / Corthera Sanofi / Fovea Cubist / Calixa Cephalon/ Ception a gen/ Ilypsa Merck / NovaCardia ypnion Forest / Cerexa gen/ Avidia a AZN / Arrow gen/ BioVex Pfizer / FoldRx artCells Actelion/ Trophos Onyx / Proteolix Eisai / akaRx uxley is Novartis / Protez Teva/ CoGenesys Wyeth/ Thiakis Biovail / Prestwick Astellas / Agensys BMS/ Adnexus Eisai / Morphotek MGI / AkaRx gen/ Alantos antis Gilead / Corus ion/ Cabrellis Gilead / CGI Cephalon/ Gem X Gilead / Arresto BioMarin/ Lead ed BioMarin/ ZyStor Celgene/ Gloucester Sanofi / BiPar $425 AstraZeneca/ Novexel $430 $420 Merck / GlycoFi Allergan/ Vicept Pfizer / Rinat Lilly / Avid Radiopharm Daiichi / U3 Pharm BiogenIdec / Conform 200 $ 175 Roche/ TH Boehringer Ingelheim/ Actim $ 400 $ 400 $ 100 in Roche/ Piram $387 BMS/ Am $375 $ 150 $366 $150 $ 365 $ 200 $ 340 $350 $ 325 $ 315$255 $300 GSK/ Dom $ 15 BioMarin/ H $325 $ 300 $ 121 $ 111 $300 $285 $ 250 $120 $115 Lilly / H $287 $ 290 $ 97 $276 Merck / Sm $250 $255 $ 235 $100 $ 100 $225 $225 100 Am $ 170 $ 190 Am $ 180 $ 59 $ 160$120 $150 $57 Am Am $ 156 $150 $ 45 Pharm $ 121 $ 111 $ 120 $93 $79 $ 120 $ 128 $75 $ 75 $93 $100 $44 $ 100$ 100 $100 $30 $45 $57 $55 0 $ 7 $13 $0 $ 22 $ 18 $ 15 Total transaction ($inmillions) value Max $1,080 Milestones Upfront Min $57 Average $408 Median $390 Note: Values includemilestones Source: Company Press Releases and VentureSource. 7 (1) Average upfront payments. (2) Upfront not disclosed.
  • 9. Life Science M&A Transactions: 2007 – 2011The key theme throughout this period has been a focus on late stage development assets and marketedproducts. 62% of public acquisition targets belonged to this category.Public and Private Life Science Acquisitions, by Phase, 2007-2011(# transactions) 16 15 14 14 13 12 3 10 7 10 9 1 9 9 8 8 15 3 7 6 6 5 5 5 7 5 8 10 9 7 4 2 2 5 3 7 3 3 7 6 5 2 2 2 2 1 1 3 3 3 2 2 2 1 1 1 1 1 1 0 I II III Mkt I II III Mkt I II III Mkt I II III Mkt I II III Mkt 2007 2008 2009 2010 2011 $48bn $47bn $228bn $71bn $75bn Public companies Private companies8 Source: MergerMarket, EvaluatePharma, Company information.
  • 10. Life Science Landscape ($2bn to $20bn) 33% of the public Life Science companies illustrated below (in 2007) have been acquired over the past 5 years. The number of attractive Life Science assets continues to decline. Biopharma Companies with Market Cap Between $2bn to $20bn – 5 Years Ago ($ in billions) $20 $17.5 $16.8 $15.9 15 $12.1 $10.9 10 $8.2 $6.8 $6.4 $5.8 - Acquired $5.4 $5.0 $4.9 $4.8 $4.5 $4.3 $4.3 5 $3.9 $3.9 $3.8 $3.6 $3.4 $3.3 $2.7 $2.5 $2.5 $2.1 $2.0 $2.0 0 Biopharma Companies with Market Cap Between $2bn to $20bn – Today ($ in billions) $20 $18.6 $15.1 $14.6 15 $9.6 10 $8.8 $8.5 $8.2 $7.7 $7.4 $7.4 $5.2 5 $4.3 $4.3 $4.2 $3.9 $2.9 $2.7 $2.7 $2.6 $2.6 $2.5 $2.5 $2.4 $2.4 $2.3 $2.2 $2.2 $2.2 0Inc / Dec 71% 337% 941% 123% 572% (46%) 29% 71% (39%) 174% 8% 184% 12% 26% (33%) 138% 416% 520% 174% 565% (49%) 82% (37%) 608% 2,256% 732% 340% 110%Since 2007 9 Source: FactSet, Wall Street research, Company filings. Note: Market data as of 2/3/2007 and 2/3/2012.
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