The document discusses four paradoxes of managing high growth biotech ventures: 1) Breakthrough intellectual property often comes from outside the target industry or slow-moving organizations. 2) Entrepreneurship requires individual courage but is also a team sport. 3) Financing covers near-term milestones but companies must plan for the long-term. 4) Plans rarely survive but planning is critical to success.

1. Idea to Venture in Biotechnology: Realizing
the Promise of Life Science Innovation

2. Four
Paradoxes
for
Managing
High
Growth
Biotech
(Ad)ventures
P1:
Breakthrough
IP
o/en
comes
from
outside
the
target
industry
and/or
from
the
slowest
moving
organiza=ons;
P2:
Entrepreneurship
requires
individual
courage
and
is
a
team
sport;
P3:
Financing
covers
near-­‐term
milestones
and
you
need
to
build
for
the
long-­‐term;
P4:
Plans
rarely
survive.
Planning
is
cri=cal
to
success.
buttered cat paradox

3. Venture
Capital
Deals
and
Median
Fund
Raised
by
First
LeIer
of
a
Company’s
Name
Source: www.chubbybrain.com (2011) 3

4. Caselet: I’m ready for my close up!
AsULikeIt, Inc. has developed
a plastic surgery product
prototype to allow patients to
design their body parts with a
3D printer before surgery.
The largest markets are in
North and South America.
You have $5 MM in initial
funding and require $50 MM
to product approval.

5. Case: Kythera Financing History

6. Case: Kythera

7. 140
Years
of
Drug
Discovery
Technology
1st Generation 2nd Generation 3rd Generation
natural products
and derivatives
Psychotropics
Penicillin's
Sulphonamides
aspirin
NSAIDs
cell pharmacology/
molecular biology
Lipid lowerers
ACE-inhibitors
H-2 antagonists
Beta blockers
Biotech
drugs
Chronic
degenerative
disease
associated
with aging,
inflammation,
and cancer
• Drugs against
targets identified
from complex
diseases
• Orphan drugs
• Prevention/chronic
care v. treatment
serendipity
receptors
enzymes
genetic
engineering
Geonomics/proteomics
Adapted: Lehman Brothers
New Therapeutic Cycles
1900 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040
7

8. The cost of sequencing a human
genome has decreased “100 fold”
$1,000 genome
Illumina’s HiSeq X Ten

9. Which Target?
Shc
PI3-K
Raf
Grb2
MEKK-1
MEK
MKK-7
JNK
Sos-1
ERK
Ras
AKT
mTOR
Apoptosis Proliferation Angiogenesis Metastasis
Source: I. Serebriiskii and E. Golemis, Fox Chase Cancer Center. 9

10. Which Target?
Sos-1
PI3-K
Ras
MEKK-1
MEK
Shc
Raf
JNK
MKK-7
Grb2
AKT
ERK
Source: I. Serebriiskii and E. Golemis, Fox Chase Cancer Center.
10

11. ‘Targeted’ Cancer Therapeutics:
Targeting the microenvironment has the potential for broad applicability
Molecular-level
Differences
Cellular-level
Differences
Gleevec
imatinib
Herceptin
trastuzumab
Avastin
bevacizumab
Microenvironment
Differences

12. Observational Prognostic Factors:
Cancer Recurrence Hazard Rates
Prominent early peak of recurrences (~ 3 yrs)
in absence of adjuvant therapy, particularly in ER- disease
25
20
15
10
5
0
0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5
Year
Hazard of recurrence by yearly interval
Total
Node 0
Node 1-3
Node (4+)
Tumour size (<1cm)
Tumour size (1.1-3cm)
Tumour size (>3cm)
ER+
ER-Premen
Postmen
Source: Early Breast Cancer Trialists’ Collaborative Group. Lancet. 1998;351:1451 ; Update of Houghton. J Clin Oncol.
2005; 23(16S):24s. Abstract 582 Saphner et al., J Clin Oncol. 14: 2738-2746, 1996

13. Quantitative Predictive Values: OS of MBC
Patients with <5 or >5 CTC at Baseline
(N=177)
Source: Veridex

14. Treatment Cost and Pharmacoeconomic Benefits
of Early Detection and Adjuvant Treatment
Women without breast cancer metastatic have a 5-year survival rate of 96%,
while those with metastatic breast cancer have a 5-year survival rate of 21%.
Source: US National Cancer Institute’s Surveillance Epidemiology and End Results (SEER) Data base
14

15. Genetic Abnormalities in
Adenocarcinomas of the Lung
Shaw AT et al. N Engl J Med 2011;365:158-167

16. Response to ALK Inhibition
Source: Kwak EL et al. N Engl J Med 2010;363:1693-1703

17. Zelbroraf® (vemurafenib), BRIM3 Progression-
Free Survival
Nearly all patients respond, but nearly all
patients progress (mPFS ~ 6 months)
Source: Chapman et al. NEJM 2011.

18. Mechanism of Action of PLX4032 in Melanoma
Chabner BA. N Engl J Med 2011;364:1087-1089.

19. Combined BRAF and MEK Inhibition
• 51-year-old female with BRAF V600E mutation-positive melanoma
• Received 6 prior treatments (including interferon, IL-2 and ipilimumab)
Baseline Cycle 5 Day 1
Source: Infante et al. ASCO 2011.

20. Combined BRAF and MEK Inhibition
• 51-year-old female with BRAF V600E mutation-positive melanoma
• Received 6 prior treatments (including interferon, IL-2 and ipilimumab)
Baseline Cycle 5 Day 1
Source: Infante et al. ASCO 2011.

21. Do accelerated FDA development pathways
work?
Sources: FDA; ASCO Post (2014)

22. Targeted Therapies Drive Orphan Drug Development
400"
350"
300"
250"
200"
150"
100"
50"
0"
1985"
1986"
1983"
1984"
1987"
1988"
1989"
1991"
1992"
1993"
1994"
1990"
1995"
1996"
1997"
1998"
1999"
2001"
2002"
2003"
2004"
2000"
2005"
2006"
2007"
2008"
2009"
2011"
2012"
2013"
2010"
No."Orphan"Drugs"Approved"
No."Orphan"Drugs"Designated"
No."Designa?on"Apps"
Source: FDA OOP (2014)

23. T-Cell Killing a Tumor Cell
Source: P Greenberg (2012)

24. Start-­‐Up
Biofinancing
ConTnuum
24
Public
Number of Investors
per Financing
Venture Capital
Capital
Requirements
Angels
Bootstrapping
IPO
SPO
PIPE
Reverse Merger
Private
Low High

25. Biotech Venture Financings 1995-2014
$
$ 200,000,000
$ 400,000,000
No of Financings
60
$ 600,000,000
$ 800,000,000
$ 1,000,000,000
$ 1,200,000,000
120
$ 1,400,000,000
140
$ 1,600,000,000
160
$ 1,800,000,000
180
$ 2,000,000,000
20
40
80
100
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1 2011
Q3 2011
Q1
Q3
Q1
Q3
Q1
Financing $
No of
Financings
Source: PWC Money Tress (2014)

26. Exits are Not Existential
Exercises for Entrepreneurs
* Please say 3 times quickly

27. Biotech IPOs

28. Biotechnology Index vs. S&P 500 and
NASDAQ Indices 1989-2014
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
Nov-89
Nov-90
Nov-91
Nov-92
Nov-93
Nov-94
Nov-95
Nov-96
Nov-97
Nov-98
Nov-99
Nov-00
Nov-01
Nov-02
Nov-03
Nov-04
Nov-05
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-12
Nov-13
Index 100=Nov 1989-Mar 2014
S&P 500
Biotechnology (BTK)
Nasdaq

29. External Products Comprise 34% of Top 10
Biopharma Companies Pipeline (2013)
Source: Biocentury (2013)

30. Types of Strategic Alliances
Co-Promotion/
Co-Marketing
Franchise
Import/Export
In/Out/Cross-License
Mergers &
Acquisitions
Joint-Ventures
Level of Commitment
High
Potential/Risk
Low
Low High

31. Mergers and Marriages:
Do We Want Either?
• Marriages: Divorce rate in
America for first marriage is
41%; second marriage is 60%;
and third marriage is 73%
• M&A: 67% of mergers and
acquisitions fail to increase
value
• JVs: 80% of joint ventures last
less than 4 years

32. First half 2014 biopharma M&A
is off to a good start
1H13
35 Deals
$669M
Average
Total Value
1H14
40 Deals
$825M
Average
Total Value
2H13
45 Deals
$927M
Average
Total Value
23 Deals
Proposed
80
70
60
50
40
30
20
10
0
2013 1H14
No. of deals
Completed M&A Deals for
Biopharma Cos. (2013 vs. 1H14)
Biopharma Therapeutic Product and
Technology Platform Co. M&A
Private
Biopharma
70%
Small-Cap
Biopharma
(<$1B)
17%
(1H14)
Mid-Cap
Biopharma
($1-$50B)
13%
40
Completed
Biopharma
M&As
(1H14)
Source: BCIQ: BioCentury Online Intelligence

33. Four
Paradoxes
for
Managing
High
Growth
Biotech
(Ad)ventures
P1:
Breakthrough
IP
o/en
comes
from
outside
the
target
industry
and/or
from
the
slowest
moving
organiza=ons;
P2:
Entrepreneurship
requires
individual
courage
and
is
a
team
sport;
P3:
Financing
covers
near-­‐term
milestones
and
you
need
to
build
for
the
long-­‐term;
P4:
Plans
rarely
survive.
Planning
is
cri=cal
to
success.
buttered cat paradox

34. www.pukanapartners.com