Rm panel at translational rm forum (washington dc; april 6 8, 2011)v.1
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Rm panel at translational rm forum (washington dc; april 6 8, 2011)v.1

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  • The Current Model For the Developmentof RM Technologies9.15am (45 Minutes)| Gregory A. Bonfiglio A Brief Review of the RM Market- Where Are We and How Did We Get Here?- RM Commercialization Challenge- The IP landscape The RM Funding Environment: New Economic Realties- Public Markets: A World Without Biotech IPOs- Venture Capital: Only “Pristine” Deals Need Apply- Alternate Funding Sources Crossing the Valley Of Death With Friends- The Current Model Is BrokenA New Collaborative, Capital Efficient ModelPublic Markets: A World Without Biotech IPOs The Relay Model Is Broken
  • For 40 years Biotech has depended on easy access to cheap capital; no longer available: Private Equity: VC investments in Early Stage Biotech are down over 40% in last 12 months Public Markets Closed: Only a handful (13) of Biotech IPO in last 24 months Key MetricsAverage Time to Market: 10-15 Years Average Costs: $1B Failure Rate: @90% Under 30% of approved drugs recoup R&D costs
  • Biotech IPO Window is Closed – Only 3 IPOs in 2009: Ironwood seriously overreached on its projected share price; and Anthera raised $42 million in an IPO recently after chopping its share price in half; Aveo Pharmaceuticals (cancer drug developer) withdrew its Offering last week (March 10, 2010) 2010: 10 IPOs – All but Talecris performed poorly – reduced offering prices; reduced capital raised; now trading below intial offering priceThe 2010 IPO figures is distorted by the unique case of TalecrisBiotherapeutics (Research Triangle Park, NC, USA). Thecompany develops nonrecombinant protein therapeutics from plasma and is profitable. It was pegged as an acquisition target by rivalCSL (Victoria, Australia) in 2008 for $3.1 billion, but the US government challenged the purchase as anticompetitive, and the deal fellapart. Talecris instead conducted an IPO in 2009 for a whopping $550 million. Toss aside Talecris, and the figure falls more in line with recent years: $42 million.Aveo Pharmaceuticals (cancer drug developer) was supposed to price its shares for a $105 million IPO on March 10, but reportedly pushed that back to today in the face of shareholder resistance to the share price. The company, which wants to raise as much as $105 million by listing on the Nasdaq under the symbol AVEO, has no approved drugs yet and no product revenue.
  • The picture in 2011 is better than 2009 & 2010 but still down substantially from previous highs. Companies trading with less than six months of cash on hand 2007:12 2008: 120 Change: 90%Companies with less than one year of cash remaining 2007: 26 2008: 180 Change: 65%Companies filing for bankruptcies in 2007: 2 2008: 6 Change: 200%Companies delisted from NASDAQ in 2007: 7 2008: 22 Change: 214%a/o Dec 31, 2008 Biotech Valuations Are Substantially Lower Example: Company in Phase II trials, $400M sales potentialValuation: $5M pre / $20M post for $15M raise
  • Given the current & likely future status of the IPO market, biotech companies should not rely on an IPO as a financing vehicle. This should free companies to pursue a leaner & more focused model. Under either of the old biotech models (Platform vs. Product), companies built toward the IPO key metrics: a strong “lead” program; several follow-on clinical-stage programs (additional shots on goal); and had substantial bricks & mortar infrastructure. In a post-IPO world, companies do not need this infrastructure or expense
  • The Biotech Industry has long had to make do with less—a valuable trait when the tap runs dry. It forces the sector’s executives tolook constantly for new ways to trim expenses and to partner. This can be seen through collaborations by Symphony Capital (New York), which invests in clinical programs rather than a company itself, or the low-infrastructure model espoused by groups such as Talaris Advisors (Hopkinton, MA, USA), or the use of contract research organizations to outsource portions of drug development. Defensible Business Model Capital Efficient Tech Development Application Engines Project Based Models Virtual Operations
  • This is an “Open Innovation” Model. (Open Innovation, by Henry Chesbrough , Harvard Business School Press, 2006 )
  • Cross The Valley Of Death With a Partner
  • RM Translation Centers: Bruce Levine: Clinical Cell and Vaccine Production Facility (CVPF)
  • Dendreon’sProvenge was approved for Prostate Cancer in April 2010$97K – approved reimbursementProjected Revenues: $1-3B DNDN Market Cap: $5B+Cephalon & Mesoblast: $2B Deal in December 2010Cephalon buying 19.99% of Mesoblastfor $223 millionCephalon paying $130 million upfront fee $1.7 billion in milestone payments: RE MSC therapies for congestive heart failure, acute myocardial infarction, Parkinson's disease, and Alzheimer‘s
  • Dendreon: $5.7B Market CapDr. Alain Vertes (Roche) RM Market: $410M (2008); $2.6B (2012); $5.0B (2014) [51.7% CAGR]Chris Mason Cell Therapy Market: $200M (2009); 323,000 Patients treated with Cell Therapies FDA Website (July 2010): 3100+ trials involving “stem cells” Vast majority are in cancer: 2270 lukemia (1129) + lymphoma (1149) 150+ studies in Cardio 2121 involve hematopoietic stem cell transplant
  • July 2010: JDRF and Sanofi announced a partnership to co-fund diabetes researchCytori & GE Healthcare: Partnership to distribute Cytori’s devices, and Stem Cell Banking Novo Nordisk: pursuing both Adult (Allocure – Acute Kidney Injury) & hESC (Cellartis - Diabetes)July 1, 2010 – Sanofi-aventis (EURONEXT: SAN and NYSE: SNY ) and the Juvenile Diabetes Research Foundation (JDRF) announced today a unique partnership to develop therapeutic treatments for people with type 1 diabetes at different stages of the disease – both those living with the disease and the newly diagnosed – as well as preventing diabetes in those at risk.  Toward those goals, the partnership will focus on therapeutics such as immune therapies and beta cell regeneration. Under the newly announced partnership, sanofi-aventis and JDRF will jointly provide academic investigators and non-profit medical research organizations with funding to conduct research projects in regeneration and immune therapy. This partnership will provide sanofi-aventis with options to the intellectual property developed by researchers who receive funding through the program.
  • Reliable preservation methodsDevelopment Of Scaffolds & Matrices For Tissue Engineering
  • Patent filing activity in stem cells has been growing steadily since the late 1990s. Given the particular characteristics of stem cells as a broadly enabling technology, many expect the field to be particularly susceptible to the emergence of a patent thicket8–13, alsoknown in property rights theory as an ‘anticommons’ . In a patent thicket, the existence of many overlapping patent claims can cause uncertainty about freedom to operate, impose multiple layers of transaction costs and stack royalty payments beyond levels that can be supported by the value of single innovations. By blocking pathways to market and dampening investor interest in commercialization, a patent thicket has the potential to slow andskew the overall development of new technical applications.The Biotech Industry has long had to make do with less—a valuable trait when the tap runs dry. It forces the sector’s executives tolook constantly for new ways to trim expenses and to partner. This can be seen through collaborations by Symphony Capital (New York), which invests in clinical programs rather than a company itself, or the low-infrastructure model espoused by groups such as Talaris Advisors (Hopkinton, MA, USA), or the use of contract research organizations to outsource portions of drug development.
  • The numbers for Average Amount Raised in 2009 are skewed by a single deal: Talceris Biotherapeutics - they raised $550M. When the Talceris IPO is removed, the 2009 Average Amount Raised is $42M - consistent with previous years
  • DoD RM Initiate: AFIRM (Armed Forces Institute of Regenerative Medicine) $50M Collaboration between Universities & Commercialization Partners dedicated to repairing battlefield injuries thru RM technologies. HHS Initiative: BARDA (Biomedical Advanced Research and Development Authority)$MMs for countermeasures for chemical, biological, radiological, and nuclear agents (Cellerant Funding)The Biomedical Advanced Research and Development Authority (BARDA), within the Office of the Assistant Secretary for Preparedness and Response in the U.S. Department of Health and Human Services, provides an integrated, systematic approach to the development and purchase of the necessary vaccines, drugs, therapies, and diagnostic tools for public health medical emergencies.BARDA manages Project BioShield, which includes the procurement and advanced development of medical countermeasures for chemical, biological, radiological, and nuclear agents, as well as the advanced development and procurement of medical countermeasures for pandemic influenza and other emerging infectious diseases that fall outside the auspices of Project BioShield.  In addition, BARDA manages the Public Health Emergency Medical Countermeasures Enterprise (PHEMCE).
  • Companies trading with less than six months of cash on hand 2007:12 2008: 120 Change: 90% Companies with less than one year of cash remaining 2007: 26 2008: 180 Change: 65%Companies filing for bankruptcies in 2007: 2 2008: 6 Change: 200%Companies delisted from NASDAQ in 2007: 7 2008: 22 Change: 214%a/o Dec 31, 2008 Biotech Valuations Are Substantially Lower Example: Company in Phase II trials, $400M sales potentialValuation: $5M pre / $20M post for $15M raise

Rm panel at translational rm forum (washington dc; april 6 8, 2011)v.1 Rm panel at translational rm forum (washington dc; april 6 8, 2011)v.1 Presentation Transcript

  • Regenerative Medicine Coalition:An International Coalition of RM Translation Centers Gregory A. Bonfiglio Proteus Venture Partners April 8, 2011
  • AgendaI. New Economic Realties  A Fundamental Shift in Biotech Economics  The Valley of Death Is Expanding  A New Capital Efficient Model Is RequiredII. The Role of RM Translation Centers  Enabling Capital Efficient RM Technology Development  Facilitating Collaborations in RM Technology DevelopmentIII. The RMC: An International Coalition of RMTCs CONFIDENTIAL 2
  • New Economic RealityComing Out of the Worst Financial Crisis in 75+ Years CONFIDENTIAL 3
  • Biotech Product Development Is Dependent on External Funding Probability: Probability: Probability: Probability 66% 70% 40% of success Steps Basic & Discovery Preclinical Preclinical Clinical Clinical Clinical Market Research Research Development Phase I Phase II Phase III 1-3 years 1.4-1.8 year 2.5-3.8 years Outcome Proof of Concept. Therapeutic IND Safety Efficacy Product Candidate ReleaseInvestment PI PII PIII $75=100MM Amount $5-10MM $10-15MM $20-25MM $50-75MM Actors Grants to Universities & Venture Investments IPO & Partnering Deals Research Institutes, • Average Time to Market: 10-15 Years • Average Costs: $1B Key Metrics: • Failure Rate: @90% • Less than 30% of approved drugs recoup development costs CONFIDENTIAL 4
  • The New Economic Reality Traditional Capital Sources Are UnavailablePublic Markets: Closed? • Biotech IPO Performance: Very Poor • 2003-2007 Window: 77 Companies • Average VC Return = 1.9X • Oct 2007 (Market Peak): 59% trading below initial PPS • June 2009: 79% trading below initial PPS • 69% Trading Below Total Invested Capital • Only 13 Biotech IPOs in the last 24 months; All Performed Poorly* (Reduced Capital Raised; Reduced Offering Price; Trading Below IPO price)Private Equity: Dramatically Reduced • Venture Investments in Biotech are Down 45+% • Back to pre=1990s level of capital (PWC Survey) • VCs have fled Early Stage investments • First-Time financings at lowest level in history (down 95%; 3 deals; $1M)CONFIDENTIAL 5
  • The Valley of Death Is Expanding Institutional Funding Is Not Readily Available Until Phase 2 Trials 2-3 years 2-3 years 3-4 yearsRESEARCH DEVELOPMENT CLINICAL TRIALS (Phase 1 and 2) “Valley of Death” VC Investments Grants & Seed Available Money CONFIDENTIAL 6
  • “It’s a Very Tough Environment” Many Biotech Companies in Peril25% of All Biotech Companies have Failed since 2007Delistings & Bankruptcies in 2008 • 22 Public Companies were Delisted from NASDAQ • 214% increase over 2007 (7 Companies) • 6 Public Companies filed for Bankruptcy Future Losses: • 200% increase over 2007 ( 2) @5% will Fail in Next 12-18 monthsBiotech Casualties in 2009: • 44 Public Companies Lost (Delistings; M&A; BKs)Cash Shortfalls (Oct 2010) • 25% (73) Public Companies have less than 6 months cash • Better than Dec 2008: 45% of Public Co’s Had Cash ShortfallCONFIDENTIAL 7
  • A New Model Is Required: Capital Efficiency Is Critical CAPITAL EFFICIENCY: DO MORE WITH LESS Extend Technology Development In Academic Setting • Thru Phase II Pursue Alternate Funding Sources • Government Grants (NIH, DARPA, BARDA; Regional Development Funds; Foundations & Disease Advocacy Groups; Partner with Pharma/Big Bio Focus & Conserve Resources • Focus On Core Business & Projects • Reduce Infrastructure & Staffing • Outsource Clinical Development (CRO; RMTs) & Manufacturing (CMO ) Collaborate & Share Resources • Open Innovation Model • Share Facilities, Technologies, Staff & IP Resources CONFIDENTIAL 8
  • A New Model Is Required: Capital Efficiency Is Critical CAPITAL EFFICIENT BUSINESS MODELS Virtual Company • Outsource Clinical Development To RMTC or CRO • Outsource Manufacturing To CMO • Reduce Infrastructure & Staffing • Project Based - POC Model • Fund Specific Projects/Clinical Programs - Focus On Most Compelling Therapeutic Application • Create & Fund Company Post-POC Data • Partnering Model • Collaborative R&D • Shared Facilities, Staff, IP, and Other Resources CONFIDENTIAL 9
  • The Role of RM Translation Centers:Enabling Capital Efficient Technology Development RM Translation Centers Offer • State of the Art Facilities - cGLP & cGMP Compliant - Focused on Specific RM Technologies • Access Deep Domain Knowledge in RM – Core Expertise in Associated Academic Institution – History of Collaboration • Clinical Development Expertise – Preclinical Thru Phase II • Experienced Support Services – Incubator/Accelerator CONFIDENTIAL 10
  • The Role of RM Translation Centers:Enabling Capital Efficient Technology Development Collaborative Research Leveraging Shared Resources RM Translation Centers • GLP/GMP Facilities • RM Expertise • Clinical Development Experience Pharma Funding Sources New RM Venture • Clinical • Profit Development - Virtual Co • Non-Profit • Manufacturing - POC Project • Marketing • Government - Application Engine • Reimbursement Open Innovation, Henry Chesbrough , CONFIDENTIAL 11 Harvard Business School Press, 2006
  • The Role of RM Translation Centers:Enabling Capital Efficient Technology Development RM Translation Centers CONFIDENTIAL 12
  • The Role of RM Translation Centers:Enabling Capital Efficient Technology Development RM Translation Centers UCI Stem Cell Research Center Clinical Cell and Vaccine Production Facility USC & UCSF RM Centers CONFIDENTIAL 13
  • Regenerative Medicine Coalition: A Coalition of RM Translation Centers Mission of the RMC • Accelerate The Commercialization of Regenerative Medicine Technologies • Enable the Capital Efficient Development of RM Technologies • Facilitate Collaborative Development Projects • Reduce by the Costs and Time Involved in Early Stage Clinical Development of RM Technologies • Share Advances in Enabling/“Platform Technologies”: o Scale-Up, Controlling Lot-Lot Variations; Safety & Efficacy Standards; Delivery Mechanisms; etc CONFIDENTIAL 14
  • Regenerative Medicine Coalition: A Coalition of RM Translation Centers RMC Core Members: RM Translation Centers Associate Members: -Pharma -Biotech -Emerging RM Companies -Funding AgenciesCONFIDENTIAL 15
  • Regenerative Medicine Coalition: Charter MembersCONFIDENTIAL 16
  • Regenerative Medicine Coalition: Finance & Industry SupportCONFIDENTIAL 17
  • Regenerative Medicine Coalition: A Coalition of RM Translation Centers RMC Panelist • Tony Atala (WFIRM) • Arnie Caplan (NCRM) • John Murphy (McGowan/UPMC) • Michael May (CCRM) • Frank Roman-Lauter (BCRT) CONFIDENTIAL 18
  • The Final Word CONFIDENTIAL 19
  • APPENDIXCONFIDENTIAL 20
  • Proteus: An Investment and AdvisoryFirm Focused on RM Proteus, Inc. Proteus Proteus Proteus Management, LLC Insights, LLC Advisors, LLC (Fund Management) (Consulting Services) (Investment Banking Services)CONFIDENTIAL 21
  • RM Market: On 2nd Half of the Gartner CurveVisibility Peak of Inflated Trough of Slope of Plateau of Expectations Disillusionment Enlightment Productivity 2001: 3300 jobs, 73 firms, mkt cap > $2.5B 2010 Cephalon & Mesoblast: $2B Deal Re MSC Technologies 2001 Ortec FDA approved 2000 Time Magazine: TE No. 1 job 2010 Dendreon’s Provenge 2001 Dermagraft FDA approved Approved for Prostate Cancer 1999 TE bladders in clinic 2001 Bush “partial ban” on HESCs 1999 First FDA approved TE product (Apligraf) 2009 Obama Ends Ban on hESCs 1998 Human ESCs first derived 2007 iPS Technology Developed 1997 Dolly the sheep 2007 40 Public Companies: $4.7B Mrkt Cap 1997 First FDA approved cell 2007 800 FDA Clinical Trials Ongoing therapy (Carticel) 2007 $1.5B RM Product Revenues 2002 ISSCR Founded 2007 1.2M+ Patients Treated 1992 Geron founded 2007 Apligraf - 200,000 Patients Treated 1988 SyStemix founded 2005 CIRM Founded 2006 Carticel - 10,000 Patients Treated 2006 hESl s Derived From Blastomeres 1986 ATS and Organogenesis founded 2003 UK Stem Cell Bank Formed 1980 Early TE research (MIT) 2002 ATS + Organogenesis file Chapter 11 Technology Trigger Stage of Development Time CONFIDENTIAL 22
  • RM Is Entering A New ERA RM Market is Maturing: Key Metrics Rapidly Expanding Market: Commercial Products • $1.6B in 2009 • 400 on Market (Mostly Skin, • $20.0B in 2014 Tools Media, & Devices); – 900+ in Development • CAGR of 18.34% • 44 Cell Therapies on Market Dramatic Revenue Growth – 400 in Development • $130M in 2001 – 28 in PIII/Pivotal Trials • $1.6B+ in 2009 1.2M+ Patients Treated with RM Products. Worldwide funding for research Increasing • 320K+ Cell Therapy Patients • $2.5B Now RM Companies • $14B in 10 Years • 700+ Co’s involved in RM • 50+ Public Co’s; Clinical Programs – $10.0+B Total Market Cap • Over 3200 Clinical Trials • 250+ Private Co’s • Over 400 ex-Oncology CONFIDENTIAL 23
  • Big Pharma is Actively EngagedGSK & HSCI: $25M Deal Merck, Pfizer & Lily Launch EnlightPfizer Forms $100M RM Division; GSK, AZN & Roche Help LaunchDeals: Athersys (IBD); UCL Stem Cells for Safer Medicine in UK(RPE); ViaCyte (Diabetes) Johnson & Johnson Invests in TengionGenzyme & Osiris: $1.25B Deal & ViaCyte (NovoCell)GE & Cytori: StemSource Cephalon & Mesoblast: $2.0B Deal CONFIDENTIAL 24
  • RM Has Made Great Progress, but… ….Challenges Remain R&D Manufacturing  Creation And Characterization Of  Technologies For Scale-up Optimal Cells For Therapy Safe & Reliable Expansion – Controlling Differentiation Pathways Sterility Testing & Validation  Standards For The Field Process Control & Reproducibility; – What is an iPS Cell? Consistent Lots Closed Systems  Contaminant Free Cell Lines  Product Characterization  Safe & Reliable Expansion – Safety; Identify; Potency  Track Cell Migration & Engraftment  Process Control : Process Is The Imaging Technology And Product Biological Markers – COGS; QC; & cGMP  Immune Modulation  Centralized Vs. Point Of Care CONFIDENTIAL 25
  • …A Few More Challenges Regulatory& IP Landscape Business Issues  Regulatory Environment Needs  Business Model Questions Clarity Capital Efficient R&D Standards & Guidelines Are Evolving Product V. Service Models Characterization Autologous V. Allogeneic Safety / Efficacy / Consistency Cross Border Inconsistencies  Reimbursement Issues Cost Savings Justification  IP Landscape Is Treacherous : “Patent Thicket”  Sales & Marketing Fragmented Ownership; Complex Channel Arrangements Patents Proliferating Rapidly : 25% GAGR Define Marketable “Product” Inconsistent & Competing Patents: Invites Litigation Educate Consumers Re: New Treatment Paradigms Need “Freedom To Operate” Opinions CONFIDENTIAL 26
  • Global Biotech IPOs: 2002 - 2009 Source: Nature Biotechnology Volume 28, Number 8; August 2010CONFIDENTIAL 27
  • What Do VCs Want? “Pristine Deals” Proprietary Commercial Technology Defensible Business Model  Great Science ≠ Great Business  Capital Efficient Tech Development  Proof Of Concept Established  Application Engines  Phase II Clinical Data  Project Based Models  Virtual Operations Strong Management Team  Board Differentiation  SAB  How Is Your Approach Different?  Why Is It Better? Solid Intellectual Property Position  Freedom To Operate Exit Strategy  Defensible IP (Patents & Trade  M&A: Attractive Products For Acquirer Secrets)  Realistic Timeframe Large Market Opportunity Acceptable Risk/Return Profile  Target markets > $1B/year  Multiple Chances To Win CONFIDENTIAL 28
  • Funding Sources: Government Funds UK & EU Development Funds: MRC; Framework 7; European Research Council Traditional US Government Funding Increasing  NIH Funding & DARPA Non-Traditional US Government Funding Is Available  DoD RM Initiate: AFIRM (Armed Forces Institute of Regenerative Medicine)  HHS Initiative: BARDA (Biomedical Advanced Research and Development Authority) State RM Funds: CIRM Actively Funding ($1.2BM); Many Other US States Other Regional Development Funds: Singapore EDB/Bio*One Fund; UK Matching Grants; Gulf; India  Tech Transfer; Develop Biotech Industry CONFIDENTIAL 29
  • Funding Sources: Corporate & Non-Profit Philanthropic Foundations & Disease Advocacy Groups Provide Funding  JDRF; Michael J. Fox Foundation, CNS Foundation  Stowers Institute Corporate Venture Groups  JJDC (Tengion; NovoCell)  Pfizer; NovoNordisk; GE Healthcare; Genzyme Creative Sources of Funds:  Out license non-core technology  Provide consulting or lab services to generate cash flow  Work with a strategic partner  Biotech, Pharma & Device Companies  Merge with a cash rich company that is tech poor CONFIDENTIAL 30
  • The Old “Relay” Model Is Very CapitalIntensive Strategy: Build Company Toward An IPO Business Models: • “Platform” Company • Develop technology horizontally across many therapeutic applications • High research cash burn • Large R&D staff • “Product” Company (Specialty Pharma) • Apply technology to specific therapeutic applications • Multiple clinical programs • Large clinical trial burn rate Pre-IPO Capital: @$90M IPO Metrics: • Lead Program in late stage development • Additional “shots on goal” (earlier clinical programs, or platform technologies) • Substantial infrastructure (“bricks & mortar” & staff) CONFIDENTIAL 31