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Building Value (Entrepreneur Workshop), presented by Gautham Aggarwal
- 1. CED: Entrepreneur Workshop
The Biotech Industry—Building Value
February 15, 2012
Copyright © 2012. All Rights Reserved.
Copyright ©2012. All Rights Reserved.
-1- Confidential Property of Campbell Alliance Group, Inc.
Confidential Property of Campbell Alliance Group, Inc.
- 2. Copyright 2012 Campbell Alliance Group, Inc. All Rights Reserved.
Reproduction, distribution, and use of this report are subject to the terms of your agreement with
Campbell Alliance Group, Inc. (“Campbell”). The report may not be copied or used without the express
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Campbell makes no guarantee, warranty, or assurances concerning the future financial return of an
existing or proposed product or service.
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-2- Confidential Property of Campbell Alliance Group, Inc.
- 3. Introduction
Panel Members
Panelist Title Company
Ken Eheman Partner Wyrick Robbins
Kinney Horn Associate Director in Business Development Genentech
Ajay Rai Director, Business Development and M&A Biogen Idec
Steve E. Hall Venture Partner Lilly Ventures
Bob Schotzinger President and CEO Viamet
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-3- Confidential Property of Campbell Alliance Group, Inc.
- 4. Corporate Value Study
Introduction to Campbell Alliance Corporate Value Study
Campbell Alliance Corporate Value Study VC Funding and “Value Requirements”
Study designed to identify drivers of Overview of the level of VC funding in
value changes for biotech companies biotech
Key issues addressed include: Discussion of VC funding trending for
How do market values vary for different start-ups and within the Southeast
biotech business models? region
What is the range in valuation for
companies with similar business models? Large pharma requirements for value
How do important clinical and licensing
Innovation in deal structuring
events affect valuation?
What drives the value of the biotech
industry in different regions?
Our initial conversation will focus on value drivers for public biotech, but we will attempt to draw
linkages to private biotech and the general value drivers for pharmaceutical companies.
Copyright © 2012. All Rights Reserved.
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- 5. Corporate Value Study
Companies Considered in the Study
The value study focuses on emerging companies.
Cumulative Market Value
$1,200
$67B
$1,000 $133B
$797B
$800 Public companies with
Market market value between
Value ($B) Public companies with $50M and $2B
$600 market value between
$2B and $28B
$400
$200
$0
10 Largest Next 18 Next 186
US-Based US-Based US-Based
Pharmaceutical Pharmaceutical and Pharmaceutical and
Companies Biotech Companies Biotech Companies
Sources: Campbell Alliance Corporate Value Study; Evaluate Pharma (Data as of early Jan. 2012).
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- 6. Corporate Value Study
Market Valuation by Region
We focused our study on public biotech companies (capitalization between $50 million and $2 billion).
There were 24 relevant public biotechs, with a cumulative capitalization of $6 billion within the
Southeast.
Number of Companies Market Value
50 $25
45
45 $21.2B
40 38 $20
Number of Companies
Market Valuation ($B)
35
30 $15
24
25
$10.3B
20 $10
15 $5.9B
10 $5
5
0 $0
Northwest Southwest Southeast Northwest Southwest Southeast
Sources: Campbell Alliance Corporate Value Study; Evaluate Pharma (Data as of early Jan. 2012).
Note: Excludes public companies with less than $50M market capitalization and biotechs in NJ, PA, Midwest, and NY (being processed).
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- 7. Corporate Value Study
Companies Within the Southeast
The 24 companies assessed within the Southeast are detailed below:
Company Market Cap ($M) Company Market Cap ($M)
HGS $1,395 Pozen $121
Inhibitex $741 Cumberland $115
Micromet $678 BioCryst $109
Emergent $610 Provectus $99
Chelsea $332 Nabi $80
GTx $212 Tranzyme $73
Targacept $188 PharmAthene $67
Sucampo $181 BioMimetic $67
Osiris $163 CEL-SCI $67
Novavax $159 Celsion $59
Cornerstone $141 Cytomedix $59
Vanda $128 Biovest $53
Sources: Campbell Alliance Corporate Value Study; Evaluate Pharma (Data as of early Jan. 2012).
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- 8. Corporate Value Study
Business Models Strategic Choices
We will now review the influence of partnering models and operating models on value creation.
Concept/Pipeline First Application
Post POC Developer Commercializer
Refiner Developer
Independent Independent Single Region
Partner Partner Regional Partner Multi-Region
Model
Global Partner
Multi-Partner
FIPCO Model
Operating
Outsource Model
Model
Co-Pro Model
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- 9. Corporate Value Study
Average Market Value
For today’s discussion, we turn our attention to ask how licensing strategies are reflected in the
market values of pre-commercial companies.
Average Market Value
First Application
Concept/Pipeline Post POC Developer Commercializer
Developer
Refiner (n=55) (n=28)
(n=20)
$145M $295M $605M
How have licensing decisions affected the value of these companies?
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- 10. Corporate Value Study
Average Market Value (Continued)
Even within models, there is a wide spread in valuations. In today’s discussion, we will explore factors
that distinguish the winners.
Distribution Across First Product Technology Models
$1,800
$1,600
Company Market Cap ($M)
$1,400
$1,200
$1,000
$800
$600
$400
$200
$-
Independent Regional Global Multiple
Independent Partner
Model Partner Partner Partners
First Application Developer Post POC Developer
$154M $189M $230M $130M $338M $545M
(n=17) (n=3) (n=24) (n=8) (n=14) (n=9)
Sources: Campbell Alliance Corporate Value Study; Evaluate Pharma (Data as of early Jan. 2012).
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- 11. Corporate Value Study
Events Driving Value
Among these companies, there is seldom a slow steady growth in value—instead, key events trigger
step changes in market value.
Examples of Recent Event Based Step Changes in Value
$1,800
Company Market Cap ($M, as of Jan. 5, 2012)
Idenix adds $0.5B following P2.
$1,600
(January 9/10, 2012) Medivation
$1,400
$1,200 BMS buys Inhibitex.
Amgen buys Micromet.
(January 7, 2012)
$1,000 (January 26, 2012)
$800 Inhibitex Idenix
$600 Micromet Threshold gains $80M (Serono).
Sangamo gains $40M (Shire).
(February 3, 2012)
$400 (February 1, 2012)
$200
$-
Independent Regional Global Multiple
Independent Partner
Model Partner Partner Partners
First Application Developer Post POC Developer
Sources: Campbell Alliance Corporate Value Study; Evaluate Pharma (Data as of early Jan. 2012). Includes companies in US (NW, SW, NE, SE)
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- 12. Corporate Value Study
Pathways to Billion-Dollar Valuations
It remains difficult to reach a $1 billion valuation without forward integrating to a commercial model.
Distribution Across First Product Technology Models
$2,000
Company Market Cap ($M, as of Jan. 5, 2012)
Theravance Sea. Gen.
$1,800
Jazz
$1,600 Amylin
$1,400
$1,200
$1,000
Vivus Intermune
$800 Spectrum
$600 Emergent
Optimer
$400 MAP
Chelsea Cadence
Mannkind
$200
$-
Independent Regional Global Multiple
Independent Partner Commercial
Model Partner Partner Partners
First Application Developer Post POC Developer Commercial
Sources: Campbell Alliance Corporate Value Study; Evaluate Pharma (Data as of early Jan. 2012). Includes companies in US (NW, SW, NE, SE)
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- 13. VC Funding and “Value Requirements”
Public Company Performance
Public biotech performance, benchmarked to the S&P 500, has been sub-par.
Pharmaceutical Index and S&P 500 Performance Comparison
160
144
140
120 120
100
Index
80
60
40
20
0
NYSE Pharma Index S&P 500 Index
Sources: Campbell Alliance Corporate Value Study; Yahoo Finance (Data as of Jan. 2012).
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-13- Confidential Property of Campbell Alliance Group, Inc.
- 14. VC Funding and “Value Requirements”
VC Investment
Cumulative VC investment within biotech has remained essentially flat over the last decade.
Biotech Venture Capital Investment
6,000
5,000
4,000
Total Spend ($M)
3,000
2,000
1,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Later-Stage $ Expansion $ Early-Stage $ Start-Up $
Source: National Venture Capital Associate. All biotech (definition excludes healthcare services and medical devices/equipment).
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- 15. VC Funding and “Value Requirements”
VC Investment (Start-Up/Seed Only)
VC investment in start-up biotechs surged in 2006 but is now stagnating…
Start-Up Venture Capital Investment
800 50%
700
40%
600
Share of Total Spend
Total Spend ($M)
500
30%
400
20%
300
200
10%
100
345
510
609
761
558
369
67
75
58
61
74
86
0 0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Start-Up $ Share
Source: National Venture Capital Associate. All biotech (definition excludes healthcare services and medical devices/equipment).
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- 16. VC Funding and “Value Requirements”
VC Investment (Early-Stage Only)
…on the other hand, early-stage biotech investments are growing significantly.
Early Stage Venture Capital Investment
2,500 50%
2,000 40%
Share of Total Spend
Total Spend ($M)
1,500 30%
1,000 20%
500 10%
1,543
1,585
2,056
1,321
1,405
732
825
667
532
773
784
796
0 0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Early-Stage $ Share
Source: National Venture Capital Associate. All biotech (definition excludes healthcare services and medical devices/equipment).
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- 17. VC Funding and “Value Requirements”
VC Investment (Southeast)
Investment within the Southeast moderated …. but saw an uptick in 2011.
South-East Venture Capital Investment
600 50%
500
40%
Share of Total Spend
400
Total Spend ($M)
30%
300
20%
200
10%
100
375
329
503
311
494
348
459
480
438
279
281
374
0 0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Spend Share
Source: National Venture Capital Associate. All biotech (definition excludes healthcare services and medical devices/equipment).
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- 18. VC Funding and “Value Requirements”
Future Requirements for Value (Therapeutic Area)
Future areas of therapeutic focus are anticipated to align with deals over the last ~3 years ….
Areas of Recent Deal Activity and Future Interest
100% Vaccines Vaccines
GI GI
90% Dermatology
Women's Health Dermatology
ID (all) Women's Health
80% ID Antiviral
Respiratory
ID Antibiotic
Share of Responses
70% Pain Respiratory
60% Metabolic Pain
Cardiovascular Metabolic
50%
Immunology Cardiovascular
40%
Immunology
30% CNS
CNS
20%
10% Oncology Oncology
0%
2008-2010 Deals (n=178) 2011 Dealmakers' Intentions (n=124)
Sources: Campbell Alliance Dealmakers’ Intentions Survey 2011; Elsevier Strategic Insights database; Campbell Alliance analysis
Note: 2008-2010 deals included if a lead asset could be identified in these categories and the upfront payment was at least $10 million.
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- 19. VC Funding and “Value Requirements”
Future Requirements for Value
… we do see an increased trend towards prioritizing mechanisms (rather than just disease states
alone) … but the overwhelming perspective is to focus on “areas of unmet need”.
Large Company Priorities Questions Testing Priorities
Level of Agreement
100% Disease State: My organization has identified
90% particular disease states that are high
80% priorities for in-licensing.
70%
60% Mechanism: My organization has identified
50% particular mechanisms of action or targets
40% that are high priorities for in-licensing.
30%
20%
10%
0%
Disease State Mechanism
Completely Mostly Somewhat Other
Responses from (n=38 to 42) individuals who work for companies with revenue
greater than $1 billion. The individuals reported their roles as exclusively in-
licensing, mostly in-licensing, or equally in- and out- licensing.
Source: Campbell Alliance Dealmakers’ Intentions Survey 2011.
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- 20. VC Funding and “Value Requirements”
Future Requirements for Value (Innovation in Structuring Deals)
Finally, we observe a range of innovative structures and deal-making approaches that are interesting to consider for
entrepreneurs:
Option to License Contingent Value Rights
and/or Acquire (Structured Deals)
Sanofi & Warp Drive Bio: Product-level commercial milestones have been the
Call option: sanofi has non-exclusive option to acquire norm but are now also being employed for acquisitions
Warp Drive
Genzyme & sanofi-aventis:
Put option: Warp Drive can force sale (pre-defined terms)
Heated negotiations resulted in $74/share acquisition
and $14/share in CVR
CVR tied to production clean-up ($1), MS drug approval
($1), and sales-milestones on MS drug ($12)
Forest & Clinical Data:
$30/share acquisition and $6/share in CVR
CVR tied to cumulative commercial milestones for Viibryd
Company Structures
Packaging of products into separate operating companies
Nimbus: LLC structure retains drug discovery with separate C-corp subsidiaries that focus on development
Karo-Bio
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