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F E B R U A R Y  2 0 0 7 Commercializing Science: A Venture Capital Perspective R O B E R T  F.  H I G G I N S H A R V A R...
Overview <ul><li>Background </li></ul><ul><li>VC Investing Environment </li></ul><ul><li>Tech Transfer Environment </li></...
Background
My Background <ul><li>Harvard:  AB History, MBA </li></ul><ul><li>Government:  International Economic Affairs </li></ul><u...
<ul><li>Formed in 1988 </li></ul><ul><li>$2.7 billion under management </li></ul><ul><li>Diversified portfolio strategy </...
Representative Highland Successes
Highland Healthcare / Life Sciences Team <ul><li>Bob Higgins, Managing General Partner </li></ul><ul><li>Corey Mulloy, Gen...
Highland Healthcare Focus Areas 42 <ul><li>------------------ </li></ul><ul><li>Targeted therapeutics </li></ul><ul><li>Pe...
Representative Highland Healthcare Investments 42 HEALTHCARE SERVICES LIFE SCIENCES MEDICAL DEVICES
VC Investing Environment
Deal Flow & Equity into VC-Backed Companies Amount Invested ($B) Number of Deals Source: Dow Jones VentureOne/Ernst &Young...
Where are the VC dollars going? Dollars Invested 2006 IT 54% Other 4% Business & Consumer 10% Healthcare 32% Biopharma 57%...
Tech Transfer Environment
<ul><li>1944 – Vannevar Bush, Head of Office of Scientific Research & Development </li></ul><ul><ul><li>Bush’s report “Sci...
<ul><li>Number of patents filed </li></ul><ul><li>Number of license agreements signed & licensing revenue </li></ul><ul><l...
0 0.5 1.0 10 5 0 1.5 15 US patents (in ‘000s) filed issued Net license income $B US University Patents & Licensing Trends ...
Milken’s “Top Ten” Rankings Source: The Milken Institute Mind to Market: A Global Analysis of University Biotechnology Tra...
Overall “Top Ten” in Tech Transfer Source: The Milken Institute Mind to Market: A Global Analysis of University Biotechnol...
Commercializing Scientific Research: The VC View
Evaluating Opportunities: VC Criteria <ul><li>People </li></ul><ul><li>Market </li></ul><ul><li>Technology / Product </li>...
People (Founders) <ul><li>Leading researchers in their fields of study </li></ul><ul><li>Serial entrepreneurs with success...
Market <ul><li>Potential for $1 billion+ market size </li></ul><ul><li>Customers are quick adopters </li></ul><ul><li>Know...
Technology / Product <ul><li>“ Breakthrough” technologies with clear value propositions </li></ul><ul><li>Platform technol...
Deal <ul><li>Valuation </li></ul><ul><li>Exit potential </li></ul><ul><li>Terms: equity, licensing fees, and royalties </l...
Case Studies
<ul><li>MIT – Equity ownership, license fees, milestone payments, and royalties  </li></ul><ul><li>Pioneering a new combin...
P E R V A S I S  T H E R A P E U T I C S
P E R V A S I S  T H E R A P E U T I C S
P E R V A S I S  T H E R A P E U T I C S Pig
<ul><li>Harvard, Duke, and University of Wisconsin – equity ownership, license fees, and royalties </li></ul><ul><li>MIT –...
C O D O N  D E V I C E S
<ul><li>Spinout of Harvard Medical School & Dana Farber Cancer Institute </li></ul><ul><li>Dana Farber – equity ownership,...
M A G E N  B I O S C I E N C E S
<ul><li>Spinout of the Dana Farber – equity ownership </li></ul><ul><li>Discovery and development of novel cancer therapeu...
A V E O  P H A R M A C E U T I C A L S <ul><li>S C I E N T I F I C  A D V I S OR Y  B O A R D </li></ul><ul><li>Lynda Chin...
<ul><li>Second-generation drug-eluting stents </li></ul><ul><li>Engineer-founder  </li></ul><ul><li>Key contributor: Elaze...
Conor’s CoStar Stent C O N O R  M E D S Y S T E M S
P R E D I C T I V E  B I O S C I E N C E S <ul><li>Spinout of Harvard Medical School & Children’s Hospital Boston </li></u...
Summary
Rules for Success <ul><li>Stay close to academic entrepreneurial “hotbeds” </li></ul><ul><li>Build deep relationships with...
F E B R U A R Y  2 0 0 7 Commercializing Science: A Venture Capital Perspective R O B E R T  F.  H I G G I N S H A R V A R...
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  • Mention what Kent asked you to speak about what VCs look for when commercializing science Greg Verdine, Eric Lander, etc. have already spoken at seminar
  • Transcript of "HIGGINS COMMERCIALIZING SCIENCE - SOI.ppt"

    1. 1. F E B R U A R Y 2 0 0 7 Commercializing Science: A Venture Capital Perspective R O B E R T F. H I G G I N S H A R V A R D B U S I N E S S S C H O O L S C I E N C E – B A S E D B U S I N E S S S E M I N A R
    2. 2. Overview <ul><li>Background </li></ul><ul><li>VC Investing Environment </li></ul><ul><li>Tech Transfer Environment </li></ul><ul><li>Commercializing Scientific Research: The VC View </li></ul><ul><li>Case Studies </li></ul><ul><li>Summary </li></ul>
    3. 3. Background
    4. 4. My Background <ul><li>Harvard: AB History, MBA </li></ul><ul><li>Government: International Economic Affairs </li></ul><ul><li>Healthcare Private Foundations, CEO </li></ul><ul><li>Charles River Ventures </li></ul><ul><li>Founded Highland Capital Partners, ‘88 – Present </li></ul><ul><li>HBS Faculty, ‘00 – Present </li></ul>
    5. 5. <ul><li>Formed in 1988 </li></ul><ul><li>$2.7 billion under management </li></ul><ul><li>Diversified portfolio strategy </li></ul><ul><ul><li>Life Sciences, IT, and Communications </li></ul></ul><ul><ul><li>Seed, Early, and Late Stage </li></ul></ul><ul><li>30 investment professionals </li></ul><ul><ul><li>Boston, Menlo Park, DC, Geneva, and Shanghai </li></ul></ul>Highland Capital Partners
    6. 6. Representative Highland Successes
    7. 7. Highland Healthcare / Life Sciences Team <ul><li>Bob Higgins, Managing General Partner </li></ul><ul><li>Corey Mulloy, General Partner – Robertson Stephens, Whitman Group, MBA HBS </li></ul><ul><li>Wyc Grousbeck, Venture Partner – Glycomed, Celtics CEO, JD Mich, MBA Stanford </li></ul><ul><li>Bijan Salehizadeh, Partner – Medtronic, HealthCentral, MD Columbia, MBA HBS </li></ul><ul><li>Dean Banks, Vice President – Cytyc, J&J, MBA HBS </li></ul><ul><li>Jay DeCoons, Senior Associate – Medtronic, Summit Partners, MBA HBS </li></ul><ul><li>Sophie LaMontagne, Associate – The Lewin Group, Molecular Biology, Princeton </li></ul><ul><li>Maeve O’Meara, Associate – Bain & Co., Economics, University of Virginia </li></ul><ul><li>New Hire – Boston Scientific, Cardiologist, MD Brown, MBA HBS </li></ul>
    8. 8. Highland Healthcare Focus Areas 42 <ul><li>------------------ </li></ul><ul><li>Targeted therapeutics </li></ul><ul><li>Personalized medicine </li></ul><ul><li>Cancer </li></ul><ul><li>Platform technologies </li></ul><ul><li>Multiple “shots on goal” </li></ul>LIFE SCIENCES <ul><li>------------------ </li></ul><ul><li>Cardiology </li></ul><ul><li>Drug-device convergence </li></ul><ul><li>------------------ </li></ul><ul><li>Consumer-directed </li></ul><ul><li>Aging baby-boomers </li></ul>CURRENT INVESTMENT THEMES MEDICAL DEVICES HEALTHCARE SERVICES <ul><li>Large markets </li></ul><ul><li>Short path to human trials </li></ul><ul><li>Serial entrepreneurs </li></ul><ul><li>Leveraging trends </li></ul>HIGHLAND PHILOSOPHY
    9. 9. Representative Highland Healthcare Investments 42 HEALTHCARE SERVICES LIFE SCIENCES MEDICAL DEVICES
    10. 10. VC Investing Environment
    11. 11. Deal Flow & Equity into VC-Backed Companies Amount Invested ($B) Number of Deals Source: Dow Jones VentureOne/Ernst &Young $25.7 2454 2006
    12. 12. Where are the VC dollars going? Dollars Invested 2006 IT 54% Other 4% Business & Consumer 10% Healthcare 32% Biopharma 57% Healthcare IT/IS 5% Healthcare Services 6% Medical Devices 32% Source: Dow Jones VentureOne/Ernst &Young $25.7 Billion $8.2 Billion
    13. 13. Tech Transfer Environment
    14. 14. <ul><li>1944 – Vannevar Bush, Head of Office of Scientific Research & Development </li></ul><ul><ul><li>Bush’s report “Science: The Endless Frontier” </li></ul></ul><ul><ul><li>Urged government to become more involved in funding university research </li></ul></ul><ul><ul><li>Led to creation of National Science Foundation </li></ul></ul><ul><li>1980 Bayh-Dole Act: </li></ul><ul><li>“ Perhaps the most inspired piece of legislation </li></ul><ul><li> to be enacted in America over the past half-century” </li></ul>History
    15. 15. <ul><li>Number of patents filed </li></ul><ul><li>Number of license agreements signed & licensing revenue </li></ul><ul><li>Number of new companies started </li></ul><ul><li>Number of breakthrough technologies launched </li></ul><ul><li>Ability to attract world-class graduate students </li></ul>How Universities Measure Success
    16. 16. 0 0.5 1.0 10 5 0 1.5 15 US patents (in ‘000s) filed issued Net license income $B US University Patents & Licensing Trends 93 94 95 96 97 98 99 00 01 02 03 Source: The Economist & Association of University Technology Managers
    17. 17. Milken’s “Top Ten” Rankings Source: The Milken Institute Mind to Market: A Global Analysis of University Biotechnology Transfer and Commercialization, September 2006 By Number of Publications By Number of Patents Issued By Number of Start-ups UCLA 10 Univ of Wash 9 Wash U, St. Louis 8 Johns Hopkins 7 UCSD 6 UPenn 5 UCSF 4 University of London 3 University of Tokyo 2 Harvard University 1 University Rank Penn State University 10 Harvard University 9 Univ of Michigan 8 Univ of Chicago 7 UCSF 6 Univ of Wisconsin 5 Johns Hopkins 4 Stanford 3 MIT 2 CalTech 1 University Rank Univ of Minnesota 10 UPenn 9 USC 8 Univ of Illinois 7 Univ of Michigan 6 Stanford University 5 Georgia Tech 4 Caltech 3 Univ of CA System 2 MIT 1 University Rank
    18. 18. Overall “Top Ten” in Tech Transfer Source: The Milken Institute Mind to Market: A Global Analysis of University Biotechnology Transfer and Commercialization, September 2006 Milken’s “University Technology Transfer & Commercialization Index” 2000 – 2004 *** Harvard University New York University University of Michigan University of British Columbia Brigham Young University University of Minnesota University of Florida Stanford University Caltech University of CA System MIT University 10 18 9 8 7 6 5 4 3 2 1 Rank
    19. 19. Commercializing Scientific Research: The VC View
    20. 20. Evaluating Opportunities: VC Criteria <ul><li>People </li></ul><ul><li>Market </li></ul><ul><li>Technology / Product </li></ul><ul><li>Deal </li></ul>
    21. 21. People (Founders) <ul><li>Leading researchers in their fields of study </li></ul><ul><li>Serial entrepreneurs with successful track records </li></ul><ul><li>Ability to attract a world-class CEO, Board of Directors, SAB, and investors </li></ul><ul><li>Understand their optimal role in the company </li></ul>
    22. 22. Market <ul><li>Potential for $1 billion+ market size </li></ul><ul><li>Customers are quick adopters </li></ul><ul><li>Known acquirers in the space </li></ul><ul><li>Wall Street following </li></ul><ul><li>Ease of regulatory approval (FDA) </li></ul><ul><li>Coverage / Reimbursement (CMS) </li></ul>
    23. 23. Technology / Product <ul><li>“ Breakthrough” technologies with clear value propositions </li></ul><ul><li>Platform technologies </li></ul><ul><li>Strong IP position </li></ul><ul><li>Follow-on potential </li></ul>
    24. 24. Deal <ul><li>Valuation </li></ul><ul><li>Exit potential </li></ul><ul><li>Terms: equity, licensing fees, and royalties </li></ul><ul><li>Option pool </li></ul><ul><li>Financing structure (current and future rounds) </li></ul><ul><li>Co-investors </li></ul>
    25. 25. Case Studies
    26. 26. <ul><li>MIT – Equity ownership, license fees, milestone payments, and royalties </li></ul><ul><li>Pioneering a new combination therapy – “Biologically-active devices” </li></ul><ul><li>World-class academic founders with successful entrepreneurial track records </li></ul><ul><li>Lead program Vascugel could transform major cardiovascular markets </li></ul><ul><li>2 clinical trials underway in 2006 </li></ul>P E R V A S I S T H E R A P E U T I C S $19.9 million A M O U N T R A I S E D Highland Capital Partners Flagship Ventures Polaris Ventures V C I N V E S T O R S Bob Langer, MIT Elazer Edelman, Harvard/MIT Jay Vacanti, Harvard/MGH F O U N D E R S
    27. 27. P E R V A S I S T H E R A P E U T I C S
    28. 28. P E R V A S I S T H E R A P E U T I C S
    29. 29. P E R V A S I S T H E R A P E U T I C S Pig
    30. 30. <ul><li>Harvard, Duke, and University of Wisconsin – equity ownership, license fees, and royalties </li></ul><ul><li>MIT – annual license fees and royalties </li></ul><ul><li>Platform using sophisticated informatics and robotics to synthesize DNA more rapidly and cost-effectively than current technology </li></ul><ul><li>Creating a paradigm shift in “constructive biology” </li></ul><ul><li>Founders are leaders of the synthetic biology field </li></ul>C O D O N D E V I C E S $33 million A M O U N T R A I S E D Highland Capital, Flagship Ventures, Khosla Ventures, Kleiner Perkins, Alloy Ventures V C I N V E S T O R S George Church, HMS Joe Jacobson & Drew Endy, MIT Jay Keasling, UC Berkeley F O U N D E R S
    31. 31. C O D O N D E V I C E S
    32. 32. <ul><li>Spinout of Harvard Medical School & Dana Farber Cancer Institute </li></ul><ul><li>Dana Farber – equity ownership, license fees, and royalties </li></ul><ul><li>Specialty pharma company focused on the dermatology market </li></ul><ul><li>Developing next generation of safer and more effective treatments for skin pigmentation disorders </li></ul><ul><li>Team includes co-founders of Idexx, Immunex, Alnylam, Momenta, Vertex, Biogen and Genzyme </li></ul>M A G E N B I O S C I E N C E S $17.2 million A M O U N T R A I S E D Highland Capital Partners Venrock Associates TVM Capital V C I N V E S T O R S David Fisher, Harvard, DFCI Bob Langer, MIT Phil Sharp, MIT, Nobel Laureate F O U N D E R S
    33. 33. M A G E N B I O S C I E N C E S
    34. 34. <ul><li>Spinout of the Dana Farber – equity ownership </li></ul><ul><li>Discovery and development of novel cancer therapeutics </li></ul><ul><li>Proprietary in vivo cancer models for identification and validation of novel drug targets </li></ul><ul><li>Collaboration with Merck </li></ul><ul><li>2 compounds in clinical trials </li></ul><ul><li>World-renowned Scientific Advisory Board </li></ul>A V E O P H A R M A C E U T I C A L S $58 million A M O U N T R A I S E D Highland, MPM, Flagship, Oxford, Prospect, Venrock, and Greylock, and Merck V C I N V E S T O R S Ron DiPinho, HMS, DFCI Lynda Chin, HMS, DFCI F O U N D E R S
    35. 35. A V E O P H A R M A C E U T I C A L S <ul><li>S C I E N T I F I C A D V I S OR Y B O A R D </li></ul><ul><li>Lynda Chin, MD, Dana Farber Cancer Institute </li></ul><ul><li>Ronald DiPinho, MD, Dana Farber Cancer Institute </li></ul><ul><li>Lewis Cantley, PhD, Harvard Medical School </li></ul><ul><li>Tyler Jacks, PhD, MIT Center for Cancer Research </li></ul><ul><li>Robert Horvitz, PhD, Professor of Biology, MIT, Nobel Laureate </li></ul><ul><li>Richard Klausner, MD, Former Director of National Cancer Institute </li></ul><ul><li>Raju Kucherlapati, PhD, Harvard Center for Genetics & Genomics </li></ul><ul><li>David Livingston, MD, Dana Farber Cancer Institute </li></ul><ul><li>Edward Scolnick, MD, Former President, Merck Research Labs </li></ul><ul><li>Doug Hanahan, PhD, Professor of Biochemistry, UCSF </li></ul>
    36. 36. <ul><li>Second-generation drug-eluting stents </li></ul><ul><li>Engineer-founder </li></ul><ul><li>Key contributor: Elazer Edelman (Brigham/MIT) </li></ul><ul><li>Serial medical device entrepreneur as CEO (interventional cardiologist) </li></ul><ul><li>Highland investment: $17M for 21% of company </li></ul><ul><li>IPO in December 2004 (NASDAQ: CONR) </li></ul><ul><li>Acquired by J&J for $1.4B </li></ul>C O N O R M E D S Y S T E M S $84 million (pre-IPO) A M O U N T R A I S E D Highland Capital Partners Easton Hunt Capital, Maverick, Radius Ventures V C I N V E S T O R S Jeff Shanley, VP Engineering for Purus, Inc. F O U N D E R
    37. 37. Conor’s CoStar Stent C O N O R M E D S Y S T E M S
    38. 38. P R E D I C T I V E B I O S C I E N C E S <ul><li>Spinout of Harvard Medical School & Children’s Hospital Boston </li></ul><ul><li>Novel diagnostic assays for informed cancer management </li></ul><ul><li>Proprietary urinary protein biomarkers </li></ul><ul><li>Potential for personalized treatment plans </li></ul>$10 million A M O U N T R A I S E D Highland Capital Partners IDG Ventures V C I N V E S T O R S Marsha Moses and Bruce Zetter, Harvard Medical School & Children’s Hospital F O U N D E R S
    39. 39. Summary
    40. 40. Rules for Success <ul><li>Stay close to academic entrepreneurial “hotbeds” </li></ul><ul><li>Build deep relationships with key university research centers and tech transfer offices </li></ul><ul><li>Maintain stable of entrepreneurial managers </li></ul><ul><li>Keep on top of cutting-edge science </li></ul><ul><li>Key Takeaway: </li></ul><ul><li>Most importantly, back exceptional people </li></ul>
    41. 41. F E B R U A R Y 2 0 0 7 Commercializing Science: A Venture Capital Perspective R O B E R T F. H I G G I N S H A R V A R D B U S I N E S S S C H O O L S C I E N C E – B A S E D B U S I N E S S S E M I N A R
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