MaRS Innovation Summit
Toronto, Canada
October 28, 2010
Michael S. Perry, DVM, PhD, FRCVS
Venture Partner, Bay City Capita...
2
Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009
Overview:
 Trends in Ph...
3
Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009
Drug Development Trends
...
4
 A plot of twelve independent
estimates of the cost of an NME
spanning 48 years.
Source: Nature Reviews: Drug Discovery...
5
A major development if not the major development:
Industry based upon:
innovation, intellectual property, and improvemen...
Significant Near Term Patent Cliff
• Patent exposure remains one of the most significant risks in the pharmaceutical indus...
26%
21%
10%
10%
9%
7%
6%
4%
3% 3%
1%0%
PartnershipsbyTherapeutic Area
Oncology
CNS
Multiple TherapyAreas / Other
Infectiou...
Healthcare Innovation Unmet Medical Need
8
Deliver to Patient
 The World Health Organization estimates that global incidence of cancer will increase by 50%
from 10 million cases in 20...
enhanced Dx
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
IDEAL Prove IT HPS 4S LIPID CARE CAPRIE
Risk not addressed
Reduction in MACE
L...
Unmet Need: Diabetes
 ~75 million Americans have diabetes or pre-diabetes
 ~9.0 million Canadians have diabetes or pre-d...
FUNDING - Private Equity
Venture Capital – meets healthcare…
14
Brief Overview of Bay City Capital
 Founded in 1997 – Investing ‘exclusively’ in healthcare / life sciences
 $1.6 billion in total capital commitments acro...
OPHTHALMOLOGY
age-related macular degeneration
front of the eye diseases
glaucoma
macular edema
CARDIOVASCULAR
acute MI
at...
Capital commitments of Funds I, II, and III include co-investments by Pritzker family business interests.
Capital commitme...
Birks Family
Bronfman Family
Fain Family
Finch Family
Lurie Family
Pritzker Families
Simon Family
Walton Family
High Quali...
Broad Spectrum of Investments
Types of Transactions
Create
NewCo
Traditional
Venture
Turn-Around /
Restructuring
PIPEs
20
...
Bay City Capital audited results as of December 31, 2009. . Fund IV and Fund V have not yet had enough liquidity events to...
Innovation
Translational
Research
Development
I II III
GOV’T
PHARMA
GOV’T
PHARMA
VENTURE
PHARMA
PUBLIC MKTS
PHARMA
PUBLIC ...
 US healthcare reform:
uncertainty in pricing
and reimbursement
 Pharma blockbusters
facing patent cliffs
 Still many a...
Innovation
Development
I II III
Regulatory
Approval
GOV’T
PHARMA
PHARMA
PUBLIC MKTS
VENTURE
PHARMA
PUBLIC MKTS
PHARMA
PUBL...
For more information contact:
Bay City Capital LLC
Attn: Stacey Leanos
750 Battery Street, Ste 400
San Francisco, CA 94111...
Backup slides
27
Founded by Bay City Capital, Fund II & III
Seed Financing – 1999
Pharmaceuticalcompanywithintegratedsales,marketing,and...
28
Reliant Pharmaceuticals - Overview
 Founded in 1999 as “Bay City Pharmaceuticals”
 Cardiovascular-focused pharmaceuti...
29
 Grew from 2 employees to 1,000
 Hired and trained a sales force of 850
 Received FDA approval for 4 drug products
–...
Israel – Small Country, Big Player
Innovative and Entrepreneurial Workforce
42%
26%
0%
10%
20%
30%
40%
50%
Bachelors degree Graduate degree
Russian Immigrant...
Pharmaceutical Products Originating in Israel
Indication
2008 Rev
($M)
CompanyInventors
Academic
Institute
Generic NameNam...
A Complete Venture Ecosystem
Innovative,
Entrepreneurial
Culture
Top-tierAcademic
Institutions
Immigration
Scientists
Corp...
The Next Phase
Innovative,
Entrepreneurial
Culture
Top-tierAcademic
Institutions
Immigration
Scientists
Corporate
Research...
Dr. Michael S. Perry - Afternoon Keynote Presentation
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Dr. Michael S. Perry - Afternoon Keynote Presentation

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Afternoon Keynote Presentation

Dr. Michael S. Perry, Venture Partner, Bay City Capital; President and Chief Medical Officer, Poniard Pharmaceuticals (US)

MaRS Innovation Summit
October 28, 2010

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Dr. Michael S. Perry - Afternoon Keynote Presentation

  1. 1. MaRS Innovation Summit Toronto, Canada October 28, 2010 Michael S. Perry, DVM, PhD, FRCVS Venture Partner, Bay City Capital, LLC President and CMO, Poniard Pharmaceuticals
  2. 2. 2 Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009 Overview:  Trends in Pharmaceutical R&D  Driving Innovation  Unmet Medical Needs  Opportunities for Innovation  Venture Capital and Private Equity  Fueling Innovation
  3. 3. 3 Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009 Drug Development Trends Consider what we knew about human biology/pathophysiology in 1950 vs. 2010 Approvals of NMEs and NBEs by the US FDA between 1950 and 2008
  4. 4. 4  A plot of twelve independent estimates of the cost of an NME spanning 48 years. Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009  The same data plotted on a logarithmic scale. The exponent in the line equation in part a and the gradient of the line in part b show : The cost per NME has grown at an annual compound rate of 13.35% since the late 1950s. Cost of Developing New Drugs
  5. 5. 5 A major development if not the major development: Industry based upon: innovation, intellectual property, and improvements to health and well being Very long term decline in R&D productivity, when measured as new molecules per $bn R&D spend Source: Nature Reviews: Drug Discovery, Lessons Learned from the Pharma Industry, December 2009 Decline in R&D Productivity
  6. 6. Significant Near Term Patent Cliff • Patent exposure remains one of the most significant risks in the pharmaceutical industry Significant number of patent expirations between 2011 and 2012 16.0 19.8 11.9 19.0 51.2 42.1 20.1 0.0 10.0 20.0 30.0 40.0 50.0 60.0 2007 2008 2009 2010 2011 2012 2013 Large Cap Pharma Revenue Lost to Patent Expirations by Year (1) $Bn 1. Includes ABT, AZN, BMY, LLY, GSK, JNJ, MRK, NOV, PFE, RHHBY, SNY, SGP and WYE. Revenue lost calculated as last full year of estimated sales prior to scheduled expiration. Source EvaluatePharma 6
  7. 7. 26% 21% 10% 10% 9% 7% 6% 4% 3% 3% 1%0% PartnershipsbyTherapeutic Area Oncology CNS Multiple TherapyAreas / Other Infectious Disease / Vaccines Autoimmune Endocrinology Cardiovascular Respiratory Hematology Gastrointestinal Ophthalmology Dermatology 69 31 49 38 6 0 10 20 30 40 50 60 70 Preclinical Phase 1 Phase 2 Phase 3 Marketed NumerofPartnershipDeals PartnershipsbyStage of Development Recent Partnerships Trends Source EvaluatePharma Multinational Pharma companies are increasing early-stage product licensing  Therapeutic areas: oncology and CNS have been the most popular areas for licensing 7
  8. 8. Healthcare Innovation Unmet Medical Need 8 Deliver to Patient
  9. 9.  The World Health Organization estimates that global incidence of cancer will increase by 50% from 10 million cases in 2000 to 15 million cases by 2020  The 5-year relative survival rate for all cancers diagnosed from 1996-2003 is 66%*, up from 50% for the 1975-1977 period …ONLY16% increase in 5-yr survival (‘75 to ’03)  > 500,000 Americans were expected to die of cancer in 2008 (> 1,500 people per day)  > 70,000 Canadians were expected to die of cancer in 2008  Cancer is the second most common cause of death in the United States and Canada (1 in every 4 deaths, second only to cardiovascular disease) Unmet Need: Oncology 9 *62% for Canada: 12% up 5 yr survival Source – Canadian Cancer Society
  10. 10. enhanced Dx
  11. 11. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% IDEAL Prove IT HPS 4S LIPID CARE CAPRIE Risk not addressed Reduction in MACE Lipitor Zocor Pravachol Published Clinical Trial Results Plavix 70-80% Unaddressed Despite Current Standard of Care RelativeRiskReductionUnmet Need: Cardiovascular Disease 12
  12. 12. Unmet Need: Diabetes  ~75 million Americans have diabetes or pre-diabetes  ~9.0 million Canadians have diabetes or pre-diabetes (1 in 4 Canadians)  80% of Canadians with diabetes die from heart attack or stroke  Total direct and indirect cost in US: $162 billion (2005)  Leading cause of heart disease, stroke, blindness and kidney disease 13 0 50 100 150 200 250 300 350 1985 1995 2005 2015 2025 World Health Organization projections Millions (persons) 30 M 300 M
  13. 13. FUNDING - Private Equity Venture Capital – meets healthcare… 14
  14. 14. Brief Overview of Bay City Capital
  15. 15.  Founded in 1997 – Investing ‘exclusively’ in healthcare / life sciences  $1.6 billion in total capital commitments across seven funds − $1.45 billion across five general life sciences funds − $160 million across two sector funds  History of upper quartile performance − IRR and COC  Broad and deep experience building companies  Lead or co-lead investments  Over 85 companies funded Investing in Life Sciences 16
  16. 16. OPHTHALMOLOGY age-related macular degeneration front of the eye diseases glaucoma macular edema CARDIOVASCULAR acute MI atherosclerosis atrial fibrillation cholesterol reduction coronary artery disease dyslipidemia endothelial dysfunction high triglycerides hypertension peripheral arterial stenosis radiocontrast nephropathy vascular inflammation RESPIRATORY asthma COPD sleep apnea NEUROLOGY acute pain anxiety chronic pain major depressive disorder migraine schizophrenia METABOLIC DISORDERS diabetes hepatic encephalopathy obesity sleep disorders GENETIC DISORDERS cystic fibrosis hemophilia muscular dystrophy urea cycle disorder ONCOLOGY acute leukemia breast cancer colorectal cancer melanoma multiple myeloma myelodysplastic syndrome ovarian cancer prostate cancer small cell lung cancer other solid tumors INFECTIOUS DISEASES hepatitis C HIV influenza community-acquired pneumonia Deep Domain Expertise: Therapeutics, Diagnostics, and Devices PLATFORM TOOLS assays & kits clinical trials testing gene expression modulation genomic sequencing healthcare IT molecular diagnostics point-of-care diagnostics systems biology SURGICAL TOOLS general surgery open hysterectomy 17 Indications pursued by Bay City Capital’s portfolio companies
  17. 17. Capital commitments of Funds I, II, and III include co-investments by Pritzker family business interests. Capital commitments of Funds II, III, IV, V, and BV3 include respective side funds. Capital Commitments 18 Fund Vintage Year Capital Committed Bay City Capital Fund V 2007 $ 500M Bay City Capital Fund IV 2004 351M Bay City Capital Fund III 2001 252M Bay City Capital Fund II 1999 201M Bay City Capital Fund I 1997 148M $1,452M GENERAL LIFE SCIENCES FUNDS Fund Vintage Year Capital Committed Birchmere Ventures III 2005 $ 47M North American Nutrition & Agribusiness Fund (NANAF) 1999 111M $ 158M SECTOR FUNDS
  18. 18. Birks Family Bronfman Family Fain Family Finch Family Lurie Family Pritzker Families Simon Family Walton Family High Quality Limited Partners PROCIFIC LTD Partners Employees Affiliates Fund IV and Fund V Limited Partners 19 Institutional Investors Endowments / Foundations Family Offices Strategic Investors Medical Institutions Bay City Capital
  19. 19. Broad Spectrum of Investments Types of Transactions Create NewCo Traditional Venture Turn-Around / Restructuring PIPEs 20 Sector – By $ Amount Invested Initial Stage – By # of Companies Drug Discovery 11% BioPharma 53% Med Device 13% Med Dx 6% Nutrition/Ag 8% HCIT 5% Tools/Services 3% Seed 10 Early 36 Mid 22 Late 8 Public 10 Fund 2
  20. 20. Bay City Capital audited results as of December 31, 2009. . Fund IV and Fund V have not yet had enough liquidity events to provide meaningful returns data. The North American Nutrition and Agribusiness Fund (NANAF), a 1999 fund, did not outperform the VC Industry benchmarks Upper Quartile Performance 21 Bay City Capital funds have outperformed the broad VC benchmarks 0 500 1000 1500 2000 2500 3000 Fund I (1997 vintage) Fund II (1999 vintage) Fund III (2001 vintage) BVIII (2005 vintage) basispoints Net IRR basis pts above upper quartile basis pts above average Venture Capital Benchmark Statistics from Cambridge Associates as of December 31, 2009
  21. 21. Innovation Translational Research Development I II III GOV’T PHARMA GOV’T PHARMA VENTURE PHARMA PUBLIC MKTS PHARMA PUBLIC MKTS VENTURE PHARMA PUBLIC MKTS  Due to significant unmet medical needs, most drugs that received approval yielded substantial profits to justify the risk of investment  Life sciences innovation primarily originated from basic research conducted in university and government institutions  Translating innovation from basic research into drug candidates was for the most part funded by the venture capital industry  As development progressed, risk was reduced and expenses increased  A funding shift occurred from venture capital to public investors and large pharma PHARMA PUBLIC MKTS VENTURE GOV’T ACADEMIA VENTURE VENTURE VENTURE ACADEMIA Regulatory Approval ACADEMIA 22 Marketed Drugs VCs served as an engine for translating research into pharma projects The Old* Healthcare Paradigm Old* Healthcare Paradigm – prior to financial crisis
  22. 22.  US healthcare reform: uncertainty in pricing and reimbursement  Pharma blockbusters facing patent cliffs  Still many areas of unmet medical need  Aging population requiring more medical care Innovation Development I II III Regulatory Approval GOV’T PHARMA PHARMA PUBLIC MKTS VENTURE PHARMA PUBLIC MKTS PHARMA PUBLIC MKTS GOV’T ACADEMIA VENTURE VENTURE ACADEMIA VENTURE 23  More complicated and conservative regulatory environment  Larger size, complexity, and cost of clinical trials  Pharma, public investors, VC are increasingly risk averse and highly selective  Pharma R&D budget reductions  Outsourcing is increasing Translational Research VENTURE GOV’T ACADEMIA Marketed Drugs “Valley of Death” Fewer innovative projects are emerging from Pharma companies The Current State of the Healthcare Industry  Innovation is generated by universities and government  Growing cache of innovative discoveries  Pharma research funding decreased  Pharma R&D staff reductions  Venture more selective
  23. 23. Innovation Development I II III Regulatory Approval GOV’T PHARMA PHARMA PUBLIC MKTS VENTURE PHARMA PUBLIC MKTS PHARMA PUBLIC MKTS GOV’T ACADEMIA VENTURE VENTURE ACADEMIA VENTURE 24 Translational Research INNOVATION  The Pharma Innovation Fund will: 1) Unite academia, pharma partners, and venture funding 2) Transform innovation into commercial opportunities that are pre-vetted by the pharma industry 3) Leverage a capital efficient model with operational and strategic advantages from offshore operations Bay City Capital Innovation Strategy Marketed Drugs VENTURE GOV’T ACADEMIA  The Israel Fund will: 1) Leverage government financial and political commitment 2) Focus on investments in healthcare companies with operations in Israel 3) Capitalize on the government’s $24 million anchor investment PHARMA INNOVATION FUND ISRAEL INNOVATION FUND  The China Fund will: 1) Target companies with significant operations in China 2) Utilize strategic relationships in China and provide local presence 3) Offer a broader range of liquidity options CHINA FUND
  24. 24. For more information contact: Bay City Capital LLC Attn: Stacey Leanos 750 Battery Street, Ste 400 San Francisco, CA 94111 (415) 835-9394 phone (415) 837-0303 fax stacey@baycitycapital.com www.baycitycapital.com
  25. 25. Backup slides
  26. 26. 27 Founded by Bay City Capital, Fund II & III Seed Financing – 1999 Pharmaceuticalcompanywithintegratedsales,marketing,anddevelopmentexpertise withaportfolioofbrandedcardiovascularpharmaceuticalproducts.
  27. 27. 28 Reliant Pharmaceuticals - Overview  Founded in 1999 as “Bay City Pharmaceuticals”  Cardiovascular-focused pharmaceutical company – In-licensed and developed new products – Developed follow-on products – Managed lifecycle of those products  Bay City Capital was instrumental in the creation of Reliant. Initial business development activities included: – Drafting the business plan – Recruiting pharmaceutical executives – Reviewing 150 potential product candidates – Negotiating an initial licensing deal with Novartis
  28. 28. 29  Grew from 2 employees to 1,000  Hired and trained a sales force of 850  Received FDA approval for 4 drug products – (InnoPran XL, Axid OS, Omacor, Antara 130 mg)  Acquired the rights to 3 brands – (DynaCirc, Rythmol, Omacor)  Divested 2 products – (Axid OS, Antara 130 mg)  Net sales grew from $29 million in 2003 to $337 million in 2006  Acquired by GlaxoSmithKline in December 2007 for $1.65 billion – Largest all-cash transaction for a venture-backed company to date Reliant Pharmaceuticals - Overview
  29. 29. Israel – Small Country, Big Player
  30. 30. Innovative and Entrepreneurial Workforce 42% 26% 0% 10% 20% 30% 40% 50% Bachelors degree Graduate degree Russian Immigrants w/ university degrees  Within an area roughly the same as the San Francisco Bay Area, Israel has seven major universities ranked in the top 100 globally in at least one major scientific field  With135 scientists for every 100,000 workers, the highest proportion in the world, Israel leads the world in the quality of its work force  Like the US, Israel benefits from an influx of well-educated immigrants seeking new opportunity Source: WEF Global Competitiveness Report 2009-2010 5.0 5.5 6.0 6.5 Sweden Netherlands Belgium Denmark Australia Canada Germany UK Israel Switzerland US WEF Score Quality of scientific research institutions Source: Israeli Central Bureau of Statistics CONFIDENTIAL 31
  31. 31. Pharmaceutical Products Originating in Israel Indication 2008 Rev ($M) CompanyInventors Academic Institute Generic NameName Multiple Sclerosis $2,260 Teva / Sanofi-Aventis Sela / Arnon / Teitelbaum Weizmann Institute GlatiramerCopaxone Multiple Sclerosis €1,331Merck SeronoRevel Weizmann Institute Interferon beta-1aRebif Alzheimer's$815NovartisRosin Hebrew University Rivastigmine tartrate Exelon Cancer $749/ €565 BMS (ImClone) / Merck Serono Sela Weizmann Institute CetuximabErbitux Cancer$430 J&J / Shering - Plough Gabizon Hebrew University Doxorubicin liposome Doxil / Caelyx Source: State of Israel Ministry of Industry, Trade, & Labor Investment Promotion Center – Invest in Israel presentation, www.investinisrael.gov.il  Innovation in Israel has already led to several major biopharmaceutical products  Lacking local development options, Israeli scientists have typically out-licensed their inventions to multinational companies relatively early CONFIDENTIAL 32
  32. 32. A Complete Venture Ecosystem Innovative, Entrepreneurial Culture Top-tierAcademic Institutions Immigration Scientists Corporate Research Government initiatives MatureVC Community Industry Veterans Accesstoglobal R&Dnetworks M&A/IPO opportunities Information Technology Industry           Medical Device Industry           INNOVATION FINANCING DEVELOPMENT LIQUIDITY  1977: BIRD established to fund development and commercialization and promote partnering between Israeli and US companies.  1993: YOZMA program catalyzed the formation of a domestic venture capital industry, seeding ten (10) VC funds over 10 years.  The Israeli medical device industry emerged from the confluence of high-tech and med-tech innovation centers, and a maturing VC community.  Israeli medical device companies have produced over $4 Billion in value on about $1 Billion invested  There is significant liquidity for Israel-based companies: nearly 200 Israeli companies have gone public on NASDAQ since the 1980s - more than the number from all of Europe combined BIRD / YOZMA BIRD / YOZMA CONFIDENTIAL 33
  33. 33. The Next Phase Innovative, Entrepreneurial Culture Top-tierAcademic Institutions Immigration Scientists Corporate Research Government initiatives MatureVC Community Industry Veterans Accesstoglobal R&Dnetworks M&A/IPO opportunities Information Technology Industry           Medical Device Industry           BioPharma Industry           INNOVATION FINANCING DEVELOPMENT LIQUIDITY  2010: Israel BioFund Initiative intended to catalyze the biopharmaceutical industry by attracting additional financing, experienced VCs, and industry veterans with product development expertise − Dr. A.I. (Ed) Mlavsky, head of BIRD (1979-1992) and founder of Gemini (first VC fund seeded by YOZMA and to date one of the most successful): one of the Venture Advisors to Bay City Capital Israel Fund I  Bay City Capital Israel Fund I will be able to mine the value of Israeli life sciences innovation and generate attractive returns by helping complete the various biopharmaceutical ecosystem, BIRD / YOZMA BioFund BIRD / YOZMA CONFIDENTIAL 34

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