Molecular Detectives: Biomarkers Could Save Your Life Diagnostics Financing Discussion Material Dave Raksin Director Burrill Merchant Banking December 7, 2010 1 1
Burrill & Company Business Overview Exclusively Focused on Life Sciences Human Healthcare (Rx, Dx, devices, services, consumer digital health, informatics) from innovation to delivery Nutraceuticals/Wellness Agbio/Food Industrial/Bioenergy (biofuels) Enabling Technologies, including bionanotechnology Venture Capital/Private Equity Fund Management The Burrill family of venture capital funds has over $1 billion under management Exclusively invested in life science-based companies with breakthrough technologies and business models to meet the world s need for better healthcare, food and energy sources Merchant Banking Burrill Merchant Banking provides life science companies with access to financial resources through proprietary sources of global capital and also in identifying, negotiating, and closing strategic transactions (M&A and partnering) Media Burrill Media provides insight, intelligence, and information on life sciences that are unmatched in the industry in print and digital media, and is the publisher/editor/writer of the Burrill Annual Report of the industry (25 years). Burrill organizes leading industry conferences and webinars globally and also is a leading co-sponsor of life science events worldwide Global Presence USA Santiago, Chile Rio De Janeiro, Brazil Buenos Aires, Argentina London Abu Dhabi/Dubai Mumbai, India Moscow Kazan, Tatarstan Nordic region (Norway, Sweden, Finland, Denmark) Kuala Lumpur Seoul Tokyo Hong Kong/Taipei 2
Burrill Financing & Advisory Capabilities Global Financing & Advisory Capabilities Plus Merchant Banking Funds MEDIA Over 20 industry conferences including Laguna CEO Books Publications M&A Divestments / Spinouts Private Placements / PIPEs IPO / FO Underwriting MERCHANT BANKING Strategic Partnerships Project Financings Strategic Advisory Principal Investing Public and Private Financing Sales and Trading Equity Research VENTURE CAPITAL ~ $1 billion under management Over 50 Board Seats Healthcare & Clean Tech CELoC Structured Debt Today Full range of financing & advisory services, acting as agent, dedicated to Life Sciences industry Growth Growth Capital Addition of capabilities to act as principal investor in Life Sciences companies, in conjunction with agent activities 3
Financing for Dx Companies in U.S. - Trends $600 $500 $400 $300 $200 $100 $0 $40 $336 $40 $414 $170 $77 $85 2008 2009 2010YTD IPO FO PIPES VC $504 Through Q3 (before GNOM, PACB IPOs) Hot VC areas: Robust POC/benchtop analyzers (BioCartis, Curetis, Oxford Nanopore, Celula, T2 Bio), Novel Oncology (mtm, Pathwork, Veracyte, Predictive, Metamark), HTsequencing (OpGen) Prenatal (Good Start, Gene Security) Sequencing IPOs performance so-so GNOM $54M/$9 ($7 now); PACB $200M/$16 ($13 now) Large VC rounds in Europe (e.g. mtm, BioCartis, Curetis $30M+, 3 of 5 largest global 10 VC rounds) + more U.S. private cos. accessing capital ex-u.s. (e.g. BioScale in $25M raise ) Strategic investors prominent - e.g. JNJ Dev. in BioCartis, ProNota and 23 and Me; Illumina in Oxford Nano) Rev. Stage vs. Dev. Stage ~1/3 of $20M+ venture deals Companies based in major hubs still most of VC deals, but some exceptions Large debt deals for public and profitable companies (e.g. Prometheus, BioRad - $200 - $400M rounds) Follow-ons/PIPE/RDs for potentially large clinical-stage opps, e.g. EXAS 4
Recent Observations From Being On the Road With Private & Public Dx Companies Valuation gap between strategic & financial still wide (Clarient-GE $580M, ~50% premium) Investors beginning to notice uptick in M&A in hot areas, notably point-of-care Scope of buyers expanding: Big Dx, Labs + drug distribution, insurers, & now Pharma (Lilly-Avid) More focus on the clinical / medical econ. so what? question versus technology Investors like strategy of partner or M&A at commercial stage and value early BD processes (even if partnering not that lucrative $-wise) Revenue and profit from research and services highly valued VCs differing with companies in assessment of clinical & regulatory risk Shift in interest from discovery and novel Dx to de-risked opportunities Continued interest in platform tech., incl. better/faster/cheaper versions of well-established tests Roll up of well-funded one product companies inevitable? Public healthcare-only funds gaining interest particularly deal buyers, but battling getting up curve quickly Growing perception of scarce supply of quality, particularly profitable, public Dx companies Sell-side coverage thin for small/mid-caps, relative to Rx Increasing coverage is yielding diamonds in rough (e.g. companies who reversed merged into shells) Cross-over investors with vision and investments in both private and public Dx doing well - e.g. Safeguard with recent gains on Clarient & Avid M&A Strategic corporate VC arms and angels (often very sophisticated industry people) making $ 5
Few Dx IPOs Since 2000 and Post-deal Performance Has Been Lackluster, With Only a Few Exceptions Relative Performance Since IPO, Deals Since 2000 600% 500% 400% 300% 200% IPO success stories Genomic Health, Cepheid and Illumina have all successfully built commercial Dx organizations over time Nanosphere Response Gen. Rosetta GigOptix Exact Orchid Ciphergen Sequenom Pacific Bio Genoptix Helicos Genomic Health Third Wave Cepheid Monogram Illumina Complete Genomics Glenmark IPO Company Date Performance Complete Genomics 11/12/10 (12.8%) Pacific Bio 10/27/10 (18.1%) Glenmark 05/28/10 (34.3%) Nanosphere 11/01/07 (62.1%) Genoptix 10/30/07 (0.4%) Response Gen. 06/06/07 (66.4%) Helicos 05/24/07 (98.2%) Rosetta 02/27/07 (84.7%) Genomic Health 09/29/05 58.4% GigOptix 07/23/04 (66.9%) Third Wave (1) 02/09/01 2.3% Exact 01/31/01 (60.5%) Ciphergen 09/29/00 (98.4%) Illumina 07/28/00 286.2% Cepheid 06/21/00 246.8% Orchid 06/21/00 (97.0%) Monogram (2) 05/02/00 (89.2%) Sequenom 02/01/00 (97.1%) 100% 0% IPO+1 IPO+99 IPO+197 IPO+295 IPO+393 IPO+491 IPO+589 IPO+687 IPO+785 IPO+883 IPO+981 IPO+1079 IPO+1177 IPO+1275 IPO+1373 IPO+1471 IPO+1569 IPO+1667 IPO+1765 IPO+1863 IPO+1961 IPO+2059 IPO+2157 IPO+2255 IPO+2353 IPO+2451 IPO+2549 IPO+2647 (1) Return reflective of acquisition price. Acquired for $11.25/share, representing a 7.1% premium to prior day s share price. (2) Return reflective of acquisition price. Acquired for $4.55/share, representing a 151.4% premium to prior day s share price. Note: X-axis on graph reflects IPO plus trading days. Source: Company filings and Capital IQ 6
Pharma / Biotech Biomarker Relationships With Dx Pharma / Biotech acquiring Dx cos. rare to date with specialty pharma leading the way Innogentics acquired by Solvay (complementary Dx in I.D., genetics & autoimmune) Proprius acquired by Cypress (rheumatologist relationships to help drive sales of fibromyalgia Rx) Avalon & Adenosine acquired by ClinicalData/PgX (Clin. Data acquires both Dx & Rx products) Is Lilly-Avid tip of the iceberg? However, Rx-Dx partnerships starting to drive M&A, with Dx and life sciences tools company acquirers looking to penetrate pharma & biotech market segments DxS Dx-Rx partnerships with EGFR/K-Ras cos. (AZ, BI, Amgen, BMS/ ImClone) key to Qiagen acquisition Monogram s Dx-Rx partnership with Pfizer s Selzentry in HIV critical in LabCorp acquisition Dx Partnership deals with pharma and biotech appear to be on the upswing Special personalized medicine initiatives at some companies e.g. GSK, AZN Specific programs which need biomarkers for patient selection / stratification driven by success stories Growing interest in prognostic markers (e.g. Pfizer Genomic Health) Big Dx like Dako and Abbott, but more and more smaller cos. (e.g. Saladax, XdX) Terms with pharma / biotech not often disclosed, but strategic value > financial value in most cases Large upfronts are uncommon, more milestones and royalty driven Some equity investment participation Dx companies appears to be retaining some key commercial rights Most big pharma have been at least somewhat active expect more from biotech, mid-size pharma More aggressive, proactive, targeted approach on part of Dx companies could lead to more Roll up sleeves a la DxS to work with pharma and biotech on key problems, with willingness to work on earlier clinical programs 7