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Marcus evans 2011_commercial_translation_of_regenerative_medicine__funding_strategies_for_rm_companies
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Marcus evans 2011_commercial_translation_of_regenerative_medicine__funding_strategies_for_rm_companies
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Marcus evans 2011_commercial_translation_of_regenerative_medicine__funding_strategies_for_rm_companies

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Overview of the commercial translation of cell therapies and regenerative medicine by Greg Bonfiglio, Proteus Venture Partners

Overview of the commercial translation of cell therapies and regenerative medicine by Greg Bonfiglio, Proteus Venture Partners

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  • 1. Funding & Commercialization Strategies forRegenerative Medicine CompaniesGregory A. Bonfiglio
Proteus Venture Partners"November 15, 2011 "
  • 2. AgendaI.  The RM Market Is Entering A New Era §  RM Has Made Great Progress §  But Serious Commercialization Challenges RemainII.  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 Development §  The RMC: An International Coalition of RMTCs CONFIDENTIAL 2
  • 3. Gartner’s Hype Cycle of Emerging TechnologiesVisibility" Technology Peak of Inflated Trough of Slope of Plateau of Productivity Trigger Expectations Disillusionment Enlightment Time" CONFIDENTIAL 3
  • 4. 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" 2011 Shire Acquires ABH -$750M " 2001 Ortec FDA approved" 2000 Time Magazine:
 2010 Cephalon & Mesoblast $2B Deal" TE No. 1 job" 2001 Dermagraft FDA approved" 2010 Dendreon’s Provenge Approved" 1999 TE bladders in clinic" 2001 Bush “partial ban” on HESCs" 1999 First FDA approved 2009 Obama Ends Ban on hESCs" TE product (Apligraf)" 1998 Human ESCs first derived" Nov 2008 Genzyme-Osiris $1.25B Deal" 1997 Dolly the sheep" 2007 iPS Technology Developed " 1997 First FDA approved cell therapy (Carticel)" 2007 Apligraf - 200,000 Patients Treated" 2006 Carticel - 10,000 Patients Treated" 2002 ISSCR Founded" 1992 Geron founded" 2005 CIRM Founded" 1988 SyStemix founded" 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 4
  • 5. RM Is Entering A New ERA RM Market is Maturing: Key Metrics Rapidly Expanding Market: Commercial Products •  $1.6B in 2010 •  400 on Market (Mostly Skin, Tools Media, & Devices); •  $20.0B in 2025 –  900+ in Development •  CAGR of 18.34% •  44 Cell Therapies on Market –  $1B Revenues Dramatic Revenue Growth –  400 in Development •  $130M in 2001 –  28 in PIII/Pivotal Trials •  $1.6B+ in 2010 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 •  600+ Co’s involved in RM •  50+ Public Co’s; Clinical Programs •  Over 3600 Clinical Trials –  $8.7B Total Market Cap •  Over 400 ex-Oncology •  225+ Private Co’s CONFIDENTIAL 5
  • 6. RM Market: Expanding Rapidly Dramatic Cell Therapy Revenue Growth CTI Revenues: $410M (2008) - $5.1B (2014)" Cell Therapy Industry: Billion Dollar Global Business With Unlimited Potential; " Regenerative Medicine; Chris Mason, David Brindley, Emily J Culme-Seymour & Natasha L Davie" CONFIDENTIAL 6
  • 7. Global Company DistributionCanada UK24 firms 133 firms Europe (ex. UK) 3% 19% 14% 93 firms Asia 56% 2% 32 firms 5% Middle East 17 firms USA 386 firms 600+ RM companies worldwide!" CONFIDENTIAL 7
  • 8. 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? …or MSC? 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 8
  • 9. …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 9
  • 10. RM Business Models: Autologous v. Allogeneic Autologous Model Allogeneic Model Patients Own Cells/Tissue Universal Cells in a Bottle •  Personalized Medicine •  Big Pharma “Drug Model” Advantages: •  Autologous Treatment for Prostate Advantages: Cancer Using Dendritic Cells •  Easier Regulatory Path •  Scalable (GTP) -Centralized Processing •  Low COGS •  No Immune Response •  $93K per Treatment Challenges: Challenges: -$1B+ Projected Revenues Regulatory •  More Difficult •  Difficult to Scale Path •  High COGS•  $5.0B Market Cap (Until Aug 3,Response •  Immune 2011) Service vs. Product" CONFIDENTIAL 10
  • 11. AgendaI.  The RM Market Is Entering A New Era §  RM Has Made Great Progress §  But Serious Commercialization Challenges RemainII.  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 Development §  The RMC: An International Coalition of RMTCs CONFIDENTIAL 11
  • 12. New Economic Reality"Coming Out (?) of the Worst Financial Crisis in 75+ Years CONFIDENTIAL 12
  • 13. Dendreon is a Success Story, But…. …Also a Cautionary Tale August 3, 2011 " " " Dendreon plunges 67% on slow sales, plans across the board layoffs" " Dendreon slashed its sales forecast for 2011 Wednesday " after reporting lower than expected second-quarter net revenue of $49.6 million." August 18, 2011 " " " Biotech Stocks Battle The ‘Dendreon Effect’" Company’s Troubles With Provenge Chill Fellow Drug Makers" " CONFIDENTIAL 13
  • 14. 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" Release" Investment" 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 14
  • 15. Venture Capital: 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 15
  • 16. Public Capital Markets: Financing Alternatives Key Strategies: IPO - 2ndary - Shelf Registration - PIPE Company sells registered shares under an effective shelf registration statement (or a Follow-On specific registration statement) to public investors after a traditional 2 to 5 day (Fully Marketed) roadshow At-the-Market Company sells registered shares under an effective shelf registration statement to (ATM) investors into the general trading market over an extended period of time SEC Registration Required Upfront Underwritten Company sells registered shares under an effective shelf registration statement to Equity Registered Direct public investors after a 1 to 3 day confidential roadshow (URD) Registered Direct Company sells registered securities under an effective shelf registration statement to (RD) a targeted group of institutional investors on a confidential basis Company sells unregistered shares to a targeted group of institutional investors in a Common Stock private placement and files to register the securities typically within 30 days after the PIPE offering No Upfront SEC Company sells unregistered convertible preferred stock/convertible debt to a Convertible Registration targeted group of institutional investors in a private placement and files to register PIPE Required the securities typically within 30 days after the offering Convertible Preferred/Debt Company sells unregistered convertible debt securities to institutional investors in a Rule 144A Rule 144A offering and files to register the securities typically within 90 days after the Convertible Debt offering (public style execution) [Source: Robin Smith – NeoStem]" Public Transactions Private/Quasi-Public Transactions 8 CONFIDENTIAL 16
  • 17. 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 17
  • 18. 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 Some of the Lowest Levels in 40 YearsCONFIDENTIAL 18
  • 19. Global Biotech IPOs: 2002 - 2010 Source: Nature Biotechnology 29, 585–591 (2011)"CONFIDENTIAL 19
  • 20. GLOBAL BIOTECH FINANCING Source: Nature Biotechnology 29, 585–591 (2011)"CONFIDENTIAL 20
  • 21. 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 21
  • 22. 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 22
  • 23. “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 months "Biotech 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 23
  • 24. “It’s a Very Tough Environment” " " " " " " November 14, 2011!" " Geron Halting Stem Cell Research, Laying Off" Staff, Stem Cell Pioneer Exits Field Geron exiting such research, laying off staff, to focus on cancer drug tests! ! MENLO PARK, Calif. (AP) -- Money troubles have forced the first company doing a government- approved test of embryonic stem cell therapy to discontinue further stem cell programs and lay off much of its staff. " " " " ">>>>>>>" In a statement, the company said the decision to narrow its focus "was made after a strategic review of the costs, ... timelines and clinical, manufacturing and regulatory complexities associated with the companys research and clinical-stage assets.". " ! " CONFIDENTIAL 24
  • 25. GERON hESC Program: “POST-MORTUM”
  • 26. WHAT CAN WE LEARN FROM GERON?
  • 27. 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 27
  • 28. 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 28
  • 29. AgendaI.  The RM Market Is Entering A New Era §  RM Has Made Great Progress §  But Serious Commercialization Challenges RemainII.  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 Development §  The RMC: An International Coalition of RMTCs CONFIDENTIAL 29
  • 30. 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 30
  • 31. 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 - Virtual Co Development •  Non-Profit •  Manufacturing - POC Project •  Marketing •  Government - Application Engine •  Reimbursement Open Innovation, Henry Chesbrough , CONFIDENTIAL 31 Harvard Business School Press, 2006 "
  • 32. The Role of RM Translation Centers:Enabling Capital Efficient Technology Development RM Translation Centers CONFIDENTIAL 32
  • 33. 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 33
  • 34. Regenerative Medicine Coalition: A Coalition of RM Translation Centers Mission of the RMC
  • 35. Regenerative Medicine Coalition: A Coalition of RM Translation Centers RMC Core Members: RM Translation Centers Associate Members: -Pharma -Biotech -Emerging RM Companies -Funding AgenciesCONFIDENTIAL 35
  • 36. Regenerative Medicine Coalition: Charter MembersCONFIDENTIAL 36
  • 37. Regenerative Medicine Coalition: Finance & Industry SupportCONFIDENTIAL 37
  • 38. The Final Word CONFIDENTIAL 38
  • 39. APPENDIXCONFIDENTIAL 39
  • 40. 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 40
  • 41. 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 41
  • 42. RM IP Landscape: A Patent Thicket Key Patent Metrics (1980-2005) Substantial Activity RM  Patents  Granted   •  Patent Applications: 10,000+ •  Patents Granted: 2,200+ US:  51% Dramatic Increase in Filings Since 2000 •  Over 25% Annual Growth Rate UK:  4%   Geographic Patent Distribution: US Dominates Canada:  4% •  US: Over 50% of Patents •  UK, Canada, Germany: @4% Each Germany:   •  Australia, Japan, China, Israel: @3% 4% Each Australia:   3% Top 50 Patents Cover Core Technologies •  Cell Lines; Media; Differentiation CONFIDENTIAL 42
  • 43. RM IP Landscape: A Patent Thicket Key US RM Patent Metrics " §  Unusual Patent Distribution" -  44% Public Sector Entities " -  56% Private Sector" " §  Fragmented Ownership" -  No Company Owns More Than 3% of Granted Patents " §  Pharma & Big Bio Are Key Holders " -  Amgen, Novartis, Pfizer & GSK " §  Osiris, STEM, & Geron Have Large Estates" *Only 3% of All USPTO Patents " Are Held By Public Entities" " CONFIDENTIAL 43
  • 44. Funding & Commercialization Strategies forRegenerative Medicine CompaniesGregory A. Bonfiglio
Proteus Venture Partners"November 15, 2011 "

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