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© 2006 Boston Millennia Partners www.bmpvc.com

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  • 1. - - © 1999 Boston Millennia Partners Boston Millennia Partners 30 Rowes Wharf Boston, MA 02110 Tel. 617 428.5150 Fax. 617 428.5160 www.bmpvc.com A. Dana Callow, Jr. Managing General Partner Boston Millennia Partners Harvard Medical School April 4, 2006 Invention to Venture Life Sciences 2006 Validating Your Idea Boston Millennia Partners
  • 2.
    • Boston Millennia Partners was founded by 7 former Boston Capital Ventures investment professionals in 1997
    • $700M+ in assets under management
    • 12 investment professionals
    • BMP team has completed over 125 direct investments and 150 acquisitions
    • Investors and Partners from 15 countries worldwide
    • Invest in early stage companies in Healthcare, Life Sciences, and Information Technology industries
    • Active with early stage companies and “ideas” at various medical/technology centers in the US
      • Tufts
      • MIT
      • Harvard
      • MD Anderson
      • Cleveland Clinic
      • Johns Hopkins
      • UCLA
      • Arizona University
    • Review 2,000 to 3,000 opportunities annually
    • Highly active investment process, return potential of 10-20x on investments selected
    • Expect 5 to 7 year holding period for investments
    • Located at Rowes Wharf, downtown Boston
    Boston Millennia Partners (BMP)
  • 3. (Sold to Oxford Health Plans, 3/02) (Sold to Cedara Software, 10/04) Healthcare Portfolio (IPO: 11/05; NASDAQ: CRXX) (NASDAQ: PRXL) (Sold to Incyte Genomics, 12/00) (IPO: 1/97; Sold to Genzyme 12/04) Millennia Partners’
  • 4.
    • Identify sectors with the following characteristics
      • Large, high-growth market opportunity
      • Competition is made up of many small companies with no dominant market-share leader
      • Undergoing a fundamental shift in the business as a result of economic or technological change
      • Capital efficient business models
    • Identify initial company upon which to grow the business
      • Focus on companies that have meaningful revenues
      • Identify the company best positioned to exploit the market opportunity
      • Select a management team capable of carrying out an aggressive growth plan
    • Accelerate the company’s internal growth through acquisition and consolidation of smaller-sized companies in similar or related market segments
    Core Company Investment Strategy Boston Millennia Partners’ Proprietary, Research-Driven Model With the goal of building a $500-750 million market capitalization company
  • 5.
    • Current Millennia Portfolio Candidates:
    • Greater than $500M Valuation Potential
    • Arthrosurface
    • CardioMEMS
    • Collegium
    • CombinatoRx (NASDAQ:CRXX)
    • GlycoFi
    • Nexidia
    • Optical Solutions
    • Predix Pharmaceuticals
    • Tropos Networks
    Experience Building Large Scale Companies
    • Previous Portfolio Investments:
    • Greater than $500M Valuation
    • PAREXEL International (Mkt. cap: $1.2B)
    • ILEX Oncology (Mkt. cap: $1.5B)
    • Bright Horizons (Mkt. cap: $1.3B)
    • Brooks Fiber (Mkt. cap: $2.4B)
    • Cornerstone Brands (Mkt. cap: $760M)
    • Hotjobs (Mkt. cap: $1.9B)
    • iVillage (Mkt. cap: $6.4B)
    • Verio (Mkt. cap: $6.5B)
  • 6. Historical “Take-off Periods” For Value Creation After initial investment in early stage venture investing 1x 5x 10x 1 2 3 4 5 6 7 8 9 10 11 12 1997-2003 1985-1997 2003-2010 Years Company “Value”
  • 7. From the Investors’ Dictionary
    • val·i·date (văl'ĭ-dāt')
    • tr.v., -dat·ed, -dat·ing, -dates.
      • To declare or make legally valid
      • To mark with an indication of official sanction
      • To establish the soundness of; corroborate.
    Source: Answers.com
  • 8. From the Investors’ Dictionary pre·science (prĕsh'əns, -ē-əns, prē'shəns, -shē-əns ) Knowledge of actions or events before the occur; foresight n. Source: Answers.com
  • 9. Multiple Levels of Validation Required
    • Scientific/Technical – does “it” work and is “it” relevant?
    • Management Resources – can adequate, experienced and committed management resources be attained?
    • Financing – will sufficient capital be available over various stages of company development
    • Market – does adequate demand and sector structure allow a large return?
      • Scalability-Need to build large companies
      • Growth-need competitive dynamics
      • Time to market
    • Liquidity/Exit – will investors be rewarded for their patience and do multiple attractive exits exist?
      • IPO or M&A
      • Venture firms seek returns with IRR of 25-50%
  • 10. Portfolio Company Directors Customers Investors Search Firms Employees Auditors Attorneys The Portfolio Company Network Multiple Points of Contact
  • 11. Typical Due Diligence Checklist
  • 12. BMP Healthcare Focus
    • Established safety profile
    • Demonstrated efficacy in man
    • Articulated mechanism of action or therapeutic pathway
    • Articulated pathway to regulatory approval
    • Articulated market and value proposition
    • Established reimbursement
    • Multiple “shots on goal” (no binary bets on single drugs or devices)
    • Partnerships or M&A appear to be targeted exit strategy
    • Management team with previous experience working both with start-ups and in particular industry segment
    Characteristics of a BMP Healthcare Investment
  • 13. Life Science Development Road Map – Example
  • 14. Assumptions Each Pre-Money 20% premium to previous Post-Money. Management Ownership starts at 35%, decreases to 25% in second round and decreases to 20% for subsequent rounds. IPO occurs in Year 6 but requires 12 more months due to equity lockup. Assumes same Net Proceeds at liquidation. 6 year-old investment sold for $500M: Life Science Venture Investment Scenario 4x BMP Return Multiple: $18M BMP Total Investment: $73M BMP Proceeds: $500M Market Cap./Exit Value: 37% BMP IRR For Sale In year 6: 15% BMP Ownership at Exit: 30% BMP IRR For IPO-Proceeds in Year 7: $100M Management Proceeds: 20% 20% 25% 35% Mgmt. Ownership: Exit required to attain meaningful venture return: Financing scenario: $139M $83M $44M $20M Post-Money: $3M $4M $5M $6M BMP Investment: 15% 19% 25% 30% BMP Ownership: $40.0M $30M $20M $10M Raise: $99M $53M $24M $10M Pre-Money: Series D Year 4 Series C Year 3 Series B Year 2 Series A Year 0
  • 15. Industry: Healthcare and Life Sciences-Oncology Description: Drug development company focused on anti-cancer agents. The company leverages it expertise to also serve as a value added provider of contract development services. Role: Lead; small co-investor syndicate Financing : Initial financing had a pre-money of $15M; market cap reached $1.5B after IPO; acquired by Genzyme Reasons to Invest
    • Management
      • Already highly skilled scientifically
      • Helped create focus around strategy
      • Augmentation at middle level
    • Business Strategy
      • Executed drug development with outsourced oncology services play
      • Leveraged BMP’s experience in CRO segment
    • Capital structure
      • Small initial round
      • Created manageable syndicate with consistent goals
    • Key Relationships
      • Multiple existing relationships with large pharmaceuticals and selected small biotech companies
    Value Creation Through Millennia Investment Case Study of Completed Investment
    • Lower risk - Phase II and beyond opportunities
    • Exclusive in-sourcing of drug candidates from Texas based health system
    • ILEX one of first movers in cancer therapeutics combined with CRO experience
    • BMP team experienced in CRO field after investment in PAREXEL; considered ILEX to be a “hedged” bet
    • Founder Dan van Hoff and founding team some of key thought leaders in oncology in U.S.
    • CEO experience in drug development
      • Previously developed Betaseron® for multiple sclerosis
  • 16. Oncology Pharmaceuticals Relative Market Share -20% -10% 0% 10% 20% 30% 40% 50% 60% 0.001x 0.01x 0.1x 1x 10x Revenue Growth Rate Amgen Sanofi Aventis Roche Novartis AstraZeneca Genentech Eli Lilly IVAX Biogen IDEC Genzyme Chiron Ligand ILEX (acquird by Genzyme 12/04) Bristol-Myers Squibb Pfizer Millennium (130%) Sector Growth 18% Johnson & Johnson GlaxoSmithKline Relative Market Share, 2003-2004 = $1.8B in 2004 estimated revenue
  • 17. Anti-Inflammatory Drugs Representative Market Share, 2003-2004 Relative Market Share Revenue Growth Rate = $640 million in 2004 revenues *Due to safety concerns Vioxx was removed from production in September 2004 and Bextra sales were suspended in the U.S. in April 2005 -40% -20% 0% 20% 40% 60% 80% 100% 0.01x 0.1x 1x 10x NSAID COX-2 inhibitor TNF blocker Bextra (Pfizer)* Celebrex (Pfizer) Vioxx (Merck)* Voltaren (Novartis) OTC Motrin/Advil Naprosyn (Roche)/Aleve Relafen (GSK) Remicade (J&J/Schering Plough) Mobic (Abbott/Boehringer Ingelheim) Sector Growth = 24% (NASDAQ: CRXX)
  • 18. Medical Devices and Biologics Relative Market Share, 2004-2005 -25% 0% 25% 50% 75% 100% 0.01x 0.1x 1x 10x Relative Market Share Revenue Growth Rate = $2B in 2005 Revenues Private Public Sector Growth = 12% Stryker J&J (DePuy) Smith & Nephew Zimmer Wright Medical Biogen Biomet Gore Medical Arthrocare DJ Orthopedics Genzyme OsteoBiologics Impliant Teknimed Scandius BioMedical Regentis Biomaterials Arthrosurface Histogenics (pre revenue)
  • 19. Venture-backed IPOs vs. M&A Transactions Number of Transactions Source: National Venture Capital Association = Venture-backed M&A = Venture-backed IPOs Liquidity: IPO vs. M&A Exits
  • 20. New England IPOs – Number of Deals
    • In 2005, 6 of the region’s 16 IPOs were from biopharmaceutical or medical device companies.
    Source: WilmerHale 2005 IPO Report
  • 21. Guidelines for Validating Your Ideas
    • Think Big – “don’t move the deck chairs on the Titanic”
    • Find a passion and focus
      • If one idea and approach doesn’t work then find another
    • Assemble a team
      • Find constituencies who share goals and values
    • “ 21 No’s” – then move on
    • Listen and hear what others are really saying
    • Replace the subjective with the objective
    • Assess and re-assess your skills and identity
      • “ Be careful what you wish for, it may come true”
  • 22. Conclusions
    • Time to build successful companies has been extended – patience and capital efficiency is necessary
    • Multiple levels of validation are required to build relevant and financially rewarding companies for both the entrepreneur and venture firm
      • Scientific, management, financial, market and liquidity
      • Must address market that is pertinent and large
    • Entrepreneurs need to utilize the full network of resources around an idea
    • Venture firms require significant investment returns – we seek IRRs of 25-50%
      • Must create companies with a market cap of over $500M
      • Equal partnership between entrepreneur and venture firm
  • 23. Appendix
  • 24. Commitments to U.S. VC Funds Source: VentureSource/Venture One
  • 25. New England Investment Activity Source: VentureSource/Venture One
  • 26. Valuation Movement Recent Increase in Private Company Valuations Source: VentureOne
  • 27. Millennia Team Experience
    • Founding Partner, Boston Millennia Partners
    • Founding Partner, Boston Capital Ventures
    • Consultant, Braxton Associates (Bain/BCG
    • heritage)
    • Software Engineer, Tymshare/McDonnell Douglas
    • Dartmouth College (Tuck School), MBA
    • Tufts University, AB in Economics
    • Board of Trustees and Investment Committee, Tufts
    • University
    • Advisory Board, Private Equity Center at Dartmouth
    • College
    • Board of Overseers, Tufts University Medical School
    • Founding Partner, Boston Millennia Partners
    • Principal, Boston Capital Ventures
    • Assistant General Counsel, Lifetime Corporation
    • Attorney, Warner & Stackpole/Kirkpatrick & Lockhart
    • Georgetown University, JD
    • University of Maryland, MA in Economics
    • Boston College, BA in Economics
    Robert S. Sherman, Partner A. Dana Callow, Jr., Managing Partner Martin J. Hernon, Partner Patrick J. Fortune, Ph.D., Partner
    • President & COO, New Era for Networks
    • (Nasdaq: NEON)
    • CIO, Monsanto Corporation
    • CIO, Bristol-Myers Squibb
    • President & COO, Coram Healthcare
    • Northwestern University, MBA
    • University of Wisconsin, Ph.D. in
    • Physical Chemistry
    • University of Wisconsin, BA in Chemistry
    • Founding Partner, Boston Millennia Partners
    • Partner, Boston Capital Ventures
    • General Partner, Hambro International Venture Fund
    • Assistant Vice President, Bank of Boston
    • Harvard Business School, MBA
    • Amherst College, AB in Economics
  • 28.
    • Regional Market Manager, Corning, Inc.
    • Senior Analyst, Corning Communications
    • Project Leader, TotalElfFina
    • Engineer, Saint Gobain
    • Dartmouth College (Tuck School), MBA
    • Institut National Polytechnique, MS in Engineering
    • Lycée Pierre de Fermat, BS in Math & Physics
    • Principal, Boston Capital Ventures
    • Managing Director, Watch Hill Corporation
    • Finance Director, BBN Communications As
    • (Copenhagen)
    • Controller, Bolt Beranek & Newman, Inc.
    • Financial Analyst, General Electric Corporation
    • Dartmouth College (Tuck School), MBA
    • Haverford College, AB in Economics
    Robert W. Jevon, Jr., Partner Jean-Yves Lagarde, Partner Millennia Team Experience
    • President, Tiedemann & Company
    • CFO positions at early stage companies (e.g.
    • PAREXEL, HPR)
    • Certified Public Accountant
    • Bentley College, BS in Accountancy
    Bruce R. Tiedemann, CFO Paul McManus, Executive Search
    • Entrepreneur in Residence/Lecturer in Strategy &
    • Policy, Boston University
    • President, The McManus Group
    • Vice President, Aubin International
    • Managing Director and Co-Founder, The Bell
    • Mason Group
    • Manager, Digital Equipment Corporation
    • Boston University, MBA
    • Wentworth Institute of Technology, BS in
    • Mechanical Engineering
  • 29. www.bmpvc.com Boston Millennia Partners Healthcare Portfolio, Additional Information Available on the Internet: Other resources on Angel Investors and Venture Capital: