Monetizing Early-Stage R&D Assets. March 18, 2015

Transcription

1 Monetizing Early-Stage R&D Assets March 18, 2015

2 Disclaimer Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited located in the US. This presentation is 2015 Ernst & Young LLP. All rights reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP and its member firms expressly disclaim any liability in connection with use of this presentation or its contents by any third party. The views expressed by panelists are not necessarily those of Ernst & Young LLP. Page 2

3 Agenda I. Funding Early-Stage R&D Assets VCs Corporate VCs M&A IPOs II. Recent Life Sciences M&A Environment III. Transaction Excellence Page 3

4 Confidential Section I Funding Early-Stage R&D Assets

5 Funding Early-Stage R&D Assets Venture Capital Investments Strengthened by a strong IPO market, which provides returns back to VCs Series A biopharma rounds likely to stay at same level as in recent years Series A device rounds may lag biopharma although angel investor syndicates are stepping in to fill the gap 510(k) devices are easier to finance with less funding rather than PMA candidates Page 5

6 Funding Early-Stage R&D Assets Corporate Venture Investments Corporate investments support innovation while allowing an early glimpse at a technology before an exit Large companies are really just outsourcing early-stage R&D by investing heavily in young companies (generally Series A or B rounds) Biopharma: Novartis, Astellas, Pfizer, Amgen, JJDC Devices: Boston Scientific, Medtronic Emergence of IT focused companies with an interest in Life Sciences Google X has been making investments into life sciences technologies Page 6

7 Funding Early-Stage R&D Assets M&A Trends Companies look to buy innovation and growth opportunities Structured deals with higher upfront payments and milestone payments based on development are still the norm Biopharma exits: Phase II most prevalent followed by commercial stage and Phase I Devices: FDA approval not necessary for device exits as CE Mark approval and non-approved technologies are seeing exits as well Activity could slow following Medtronic s merger with Covidien as both companies were active acquirors of younger device companies Big Data will be integral to life sciences M&A and higher innovation opportunities such as mobile health, 3D printing, wearables Pharma remains highly interested in companion diagnostics and personalized medicine Page 7

8 Funding Early-Stage R&D Assets M&A Trends (con t) Partnerships, Joint Ventures & Collaborations will continue Patent expirations drive pharma to increase R&D, make acquisitions or license / collaborate to bolster product pipeline Collaborations and licensing strategies employed to mitigate risk Page 8

9 Funding Early-Stage R&D Assets IPOs as a funding mechanism Public investors continue to remain interested in life sciences opportunities Generally all device IPOs at commercial stage Companies now contemplating whether to pursue an IPO or a sale Device IPOs have rebounded while the biotech IPO market has been quite robust over the past few years Page 9

10 Confidential Section II Recent Life Sciences M&A Environment

11 Scarcity of Quality Assets Driving Up Premium Paid List of Representative Pharma/Biotech M&A Deals involving Early-stage Assets* Announced Date Target Investor Base Buyer Purchase Price ($M) Private Company Metric: TEV/Capital Invested Public Company Metric: 1 Month Stock Price Premium 02/23/2015 Flexus Biosciences VC + Celgene BMS 1, x 1 NA 12/18/2014 Oncoethix SA VC Merck & Co x 1 NA 11/24/2014 Prosensa Public BioMarin NA 47.8% 09/28/2014 Ambit Biosciences Public Daiichi Sankyo NA 98.2% 06/03/2014 Labrys Biologics VC Teva x 2 NA 04/29/2014 ipierian VC + Google Ventures BMS x 2 NA 09/05/2013 Astex Pharma Public Otsuka NA 61.9% 01/24/2013 Inspiration - Hemophilia Compound OBI-1 NA Baxter NA NA 12/12/2012 YM BioSciences Public Gilead NA 71.0% 10/22/2012 NextWave Pharma VC Pfizer x 2 NA 02/14/2012 Stromedix VC Biogen Idec x 2 NA Note: * Transaction size between $90M to $1,500M, Acquired by major companies, Assets in Phase 1/2 (drug) or development stage (device), Worldwide deals Source: Capital IQ, EY analysis, Total capital raised determined via 1 Company press release or 2 Capital IQ Page 11

12 Scarcity of Quality Assets Driving Up Premium Paid List of Representative MedTech/Dx M&A Deals involving Early-stage Assets* Announced Date Target Investor Base Buyer Purchase Price ($M) Private Company Metric: TEV/Capital Invested Public Company Metric: 1 Month Stock Price Premium 08/25/2014 Sapiens Steering Brain Stimulation VC + Philips Ventures Medtronic x 2 NA 07/28/2014 Visualase VC Medtronic x 1 NA 07/14/2014 NeuroTherm VC St. Jude NA NA 06/09/2014 Corventis VC Medtronic x 2 NA 03/28/2014 New Wave Surgical NA Covidien x 1 NA 03/28/2014 CardioMEMS 01/06/2014 TYRX VC + St. Jude, JNJ, Medtronic VC + Boston Scientific St. Jude x 2 NA Medtronic x 2 NA 10/14/2013 Nanostim VC + St. Jude St. Jude x 2 NA 04/29/2013 Nfocus Neuromedical VC Covidien x 2 NA 12/26/2012 CV Ingenuity Corp. VC Covidien x 2 NA 10/23/2012 NeoMend VC CR Bard x 2 NA 10/8/2012 Rhythmia Medical VC 09/17/2012 IRIS International Inc. Public Boston Scientific Beckman Coulter x 2 NA NA 58.2% Note: * Transaction size between $90M to $1,500M, Acquired by major companies, Assets in Phase 1/2 (drug) or development stage (device), Worldwide deals Source: Capital IQ, EY analysis, Total capital raised determined via 1 Company press release or 2 Capital IQ Page 12

13 List of Premier M&A deals Pharma/Biotech 1 Announced Date Target Buyer Purchase Price ($M) TEV / LTM Revenues TEV / LTM EBITDA 1 Month Stock Price Premium Mar Pharmacyclics AbbVie 19, x 146.2x 56.5% Feb Salix Valeant 13, x 80.7x 28.1% Feb Hospira Pfizer 17, x 21.5x 48.4% Nov Allergan Actavis 72, x 27.2x 23.4% Feb Forest Lab. Actavis 25, x 56.3x 30.2% Aug Onyx Pharma Amgen 10, x NM (5.1%) Jun Amylin BMS 6, x NM 13.0% MedTech/Dx 2 Announced Date Target Buyer Purchase Price ($M) TEV / LTM Revenues TEV / LTM EBITDA 1 Month Stock Price Premium 10/05/2014 CareFusion Becton, Dickinson 13, x 13.3x 29.9% 06/15/2014 Covidien plc Medtronic 48, x 16.8x 30.2% 04/24/2014 Biomet (LVB) Zimmer 13,926.0 ~4.3x ~13.0x NA 01/16/2014 Ortho-Clinical Dx The Carlyle Group 4, x NA NA 02/28/2013 Life Technologies Thermo Fisher Scientific 16, x 13.1x 22.2% 12/04/2012 Gambro Baxter 4, x NA NA 04/30/2012 Gen-Probe Hologic 4, x 21.2x 24.6% Note: Worldwide deals, 1 Transaction size above $5Bn, 2 Transaction size above $4Bn Source: Capital IQ, EY analysis Page 13

14 Confidential Section III Transaction Excellence

15 Strategic Review of Recent Transactions Results in Transaction Excellence An increasing percentage of drugs are now originating outside of big Pharma R&D labs M&A has become a significant component of pharma company strategy. With numerous bidders eager to replenish their pipeline and few quality assets available, a disciplined M&A approach is key to success. Best in class acquirers have developed M&A playbooks to (i) screen acquisition targets early, (ii) bridge value gaps and (iii) protect shareholder value. J&J was recently featured in the Wall Street Journal (3/09/14) as one of the leading pharma companies having developed a deal playbook. M&A playbooks typically originate from retrospective reviews of closed deals and postmortem assessment of failed transactions and are a perpetual re-assessment of best practices, including: Adjustments to due diligence process to mitigate risk and apply findings for ongoing improvement. Improved communication/collaboration between diligence and integration teams (e.g., Sanofi/Genzyme earned accolades due to its constructive dialogue and smooth integration process). Dealing with issues of friction when merging two different corporate cultures and work to retain talent (e.g., Takeda s acquisition of Millennium was featured in a HBR case study) Identify any issues post-close, and whether these could have been detected during diligence process. Source: Capital IQ, Wall Street Equity Research Page 15

16 Example of Creative Externalization: J&J/Janssen Partnership with Affimed Transaction Overview Signs agreement with for an exclusive option to acquire Amphivena a subsidiary of Affimed, following the approval of an IND application with undisclosed pre-negotiated terms and conditions On July 15, 2013 Affimed, announced that its subsidiary Amphivena, a drug discovery company developing antibodies to treat hematological tumors, successfully completed a $14m Series A equity financing Separately, it announced an agreement with Janssen Commentary Amphivena in collaboration with Affimed AG will develop novel bi-specific TandAb antibodies to improve the existing therapy for a specific hematological malignancy. We are excited that MPM and Aeris Capital have partnered with us to support the development of a novel agent and are pleased to enter into this relationship with Janssen. Adi Hoess, CEO of Affimed AG, 7/15/2013 Affimed s TandAb platform shows significant promise in addressing this critical patient need. We are excited to partner with antibody cancer experts of such caliber. Dr. Luke Evrin, MPM Capital, 7/15/2013 Deal Structure Deal Structure Affimed set up a virtual company, Amphivena Therapeutics, which raised $14m Series A financing Most of the cash came from MPM Capital, who, themselves, received the money from J&J Amphivena will use the cash for preclinical development of a novel therapy, target chosen by Janssen/J&J, using Affimed s technology platform Amphivena and J&J have agreement granting Janssen exclusive right to acquire Amphivena following IND approval of the therapy Janssen will provide Amphivena additional contingent payments based on reaching milestones Points of Interest Affimed received cash for an early-stage discovery program J&J was able to fund research directly from its balance sheet It was able to do this because it invested in Amphivena rather than funding a collaboration, and thus the cash does not come from its P&L and does not affect its earnings Source: Company filings, Press Releases and Capital IQ Page 16

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