Transcript Burrill and Co - S Burrill - State of the Biotech Industry

Biochemistry 241
Winter 2009
January 5 to March 19
Mondays, 4:00-6:00 pm
Genentech Hall, N 106
Mission Bay Campus
G. Steven Burrill, CEO, Burrill & Company
Adjunct Professor, UCSF
1
Agenda

Introduction to “Idea to IPO…and Beyond”

About the Course

About Burrill & Company

Questions

Pitch Presentations from Students
2
Course Staff and Instructors


Instructors

Charles Craik is UCSF Professor, Depts of Pharm Chem, Chemical
& Molecular

G. Steven Burrill, CEO, Burrill & Company
Center for BioEntrepreneurship (CBE)

Gail Schechter, Course Coordinator
o


[email protected], (415) 514.9672
G. Garrett Vygantas, M.D., Sr. Associate
o

[email protected], (415) 514.9672
Rita Balian, Program Analyst
o
Burrill & Company
[email protected], (415) 514.9670
Yasmin Sidi, Program Analyst
o


Michael Keyoung, M.D., Ph.D., Director
o

[email protected], (415) 591.5483
[email protected], (415) 591.5472
Veronica Descotte Ph.D., Associate
o
[email protected], (415) 591.5447
3
Class Schedule
Week
Date
Lecture
Speaker
Homework
2
January 12
(Mon)
Course Introduction
“State of the Biotech Industry”
G. Steven Burrill, CEO Burrill & Company
3
January 20
(Tue)
Business Plans
Marc Galletti, Longitude Capital
4
January 26
(Mon)
Entrepreneurial Experience
James Sabry, Arete
Jack Anthony, Osprey
5
February 2
(Mon)
Corporate Structure
Fred Dorey, Cooley Godward
6
February 9
(Mon)
Intellectual Property
Pete Carroll, Medlen & Carroll, LLP
Market Assessment
7
February 17
(Tue)
Sources of Capital
Panel presentation:
Kristina Burow, Arch Venture
Chris Christofferson, Morgenthaler
Financial Models
8
February 23
(Mon)
9
430PM presentation open to public
Regulatory Approval
Barbara Finck, Osprey
March 2
(Mon)
Value Capture: Who is Your
Customer?
Randy Scott, Genomic Health
10
March 9
(Mon)
Lessons Learned
Brook Byers, KPCB
11
March 16
(Mon)
Business Plan Presentation to VC
Panel
Team
March 18
(Wed)
Class Debriefing
Team
Executive Summary
Product
Development
Plans and
Budget
Draft Business Plan
Presentations
4
Grading

Pass/Fail

Grading

Attendance required

Classroom participation (30%)

Deliverables/Assignments (20%)

Project (50%)
 Participation
 Quality (time, effort, substance)
 Fundability

Attitude/interest
5
Business Plan Project
Purpose: To get from an “idea” into a fundable business
 Eight Teams (seven to ten members)
 Build/construct a business plan for a new biotech/medical venture
 Executive Summary
 Business Mission/Purpose Objective
 Product/Market Opportunity
 Technology
 IP
 Management Team
 Finances/Operating Plan
 Valuation
 Document should be about 50 pages (not five, not 500)
 Team will present to “VC investors” – real people with real dollars
 Evaluation
 Opportunity for grant money to top team
6
Team Mentors

Conrad Wang
Three Arch Partners

Atta Pilram
VC Task Force, Bay Area Capital Connections

Paul Grand
Research Corporation Technologies

Robert Ang
Frazier Healthcare Ventures

Amy Belt
Advanced Technology Ventures

Evan Norton
ONSET Ventures

Garrett Vygantas
Burrill & Company

Michael Keyoung
Burrill & Company

Veronica Descotte
Burrill & Company

Tatyana Daniels
Technology Partners

Karl Handelsman
CMEA Ventures

Doug Fisher
New Leaf Ventures
7
Class Schedule
Week
Date
Lecture
Speaker
Homework
2
January 12
(Mon)
Course Introduction
“State of the Biotech Industry”
G. Steven Burrill, CEO Burrill & Company
3
January 20
(Tue)
Business Plans
Marc Galletti, Longitude Capital
4
January 26
(Mon)
Entrepreneurial Experience
James Sabry, Arete
Jack Anthony, Osprey
5
February 2
(Mon)
Corporate Structure
Fred Dorey, Cooley Godward
6
February 9
(Mon)
Intellectual Property
Pete Carroll, Medlen & Carroll, LLP
Market Assessment
7
February 17
(Tue)
Sources of Capital
Panel presentation:
Kristina Burow, Arch Venture
Chris Christofferson, Morgenthaler
Financial Models
8
February 23
(Mon)
9
430PM presentation open to public
Regulatory Approval
Barbara Finck, Osprey
March 2
(Mon)
Value Capture: Who is Your
Customer?
Randy Scott, Genomic Health
10
March 9
(Mon)
Lessons Learned
Brook Byers, KPCB
11
March 16
(Mon)
Business Plan Presentation to VC
Panel
Team
March 18
(Wed)
Class Debriefing
Team
Executive Summary
Product
Development
Plans and
Budget
Draft Business Plan
Presentations
8
Biotech/Healthcare 2009:
Navigating the Sea Change
G. Steven Burrill
Chief Executive Officer, Burrill & Company
Idea to IPO…and beyond
January 12, 2009
9
Burrill & Company -Exclusively Focused on Life Sciences

Human Healthcare (Rx, Dx, devices, services,
informatics) from innovation to delivery

Nutraceuticals/Wellness

Agbio/food

Industrial/energy

Bio-cleantech

Enabling Technologies, including nanotechnology
10
Burrill & Company
Venture Capital Group

Investing across the entire spectrum of the life sciences/biotechnology . . . Nearly $1 billion
under management

Burrill Life Science Capital Fund IV, Burrill India, China, Korea, Latin America fund raising
Private Equity Group

Raising $1 billion Private Equity fund focused on buyouts and PIPES in the healthcare sector
Merchant Banking Practice

Strategic Partnering including licensing, research and other collaborations

Strategic Advisory Services including new company formation

Merger & Acquisitions across life sciences

Spin-outs ranging from products, to research divisions to disease area franchises
Media

Conferences

Publications
Headcount: 50+ professionals and staff
11
Burrill & Company U.S. & International Locations
United States
San Francisco (HQ)
New York
Indianapolis
Portland
United Kingdom / EU
South Korea
London
Seoul
Japan
China
Tokyo
Shanghai
Middle East
Abu Dhabi
Dubai
Bahrain
Kuwait
Taiwan
Taipei
India
Latin America
Argentina
Brazil
Chile
Mumbai
Malaysia
Kuala Lumpur
12
Burrill & Company Platform
Investment Professionals
Global Experience
•$950M Under Management
•75+ Investments
•30+ Employees with MD/PhD/MBAs
China
Europe
India
Latin America
•55 Total Employees
•200+ Years of Industry Experience
Malaysia
Strategic Partners
Middle East
United States
Significant Visibility
Burrill Merchant Banking
…and many more
Annual
Biotech Book
Numerous Periodicals
International
Conferences
13
G. Steven Burrill’s Annual Book
Order our 23rd annual book now!
For ordering information go to
www.burrillandco.com
14
Burrill & Company Publications
Annually for
23 years
6x per year
Weekly
Daily
15
Sea change
 noun
1. a striking change, as in appearance, often
for the better.
2. any major transformation or alteration.
3. a transformation brought about by the sea.
16
What really happened in the last year?

World financial crisis – unprecedented (and not over yet)

“Wall Street” totally restructured

Economic dislocation in the world (well beyond the US) will be
pervasive and long term…Recession!

Healthcare systems around the world reforming

too expensive to treat everyone with all the new technology

an aging population dramatically increasing the demand

Regulatory agencies increasingly risk-averse

Reimbursement/payment systems worldwide undergoing change

Obama Administration coming to power in Washington
17
Impact of US election / the Obama Administration

A bailout? BIO asks for trading NOLs/tax credits for cash; up to
$30m/company (proposed cap)

Congress will add power to Medicare to negotiate what it pays for
drugs…tough for drug/biotech industry

Congress will reduce capital gains differential (bad for capital
raising, capital more expensive)

Stricter regulatory oversight – Regulatory hurdle increases



Drug saftey (pharmacovigilence) will trump approval
Pharmacogenomics – a third approval standard begins to emerge
Biosimilars, generic biopharmaceuticals

Stem cell funding increase, U.S. restrictions removed

Healthcare spending will go up, but more generics
18
Tom Daschle – New Head of HHS
Coverage
 Strengthen employer-based and public
insurance programs
 Expand federal employee coverage to
everyone
 Create Medicare-like government
program as an option
 Subsidize or control premiums based
on income
 Mandate insurance coverage for
everyone
What “Coverage” Means
 Emphasize coverage of preventative
care, long-term care, chronic illness
treatment, dental care, and mental
health care
19
Tom Daschle – New Head of HHS
Shared Responsibility
 Gov’t, employers, healthcare providers, insurers, and individuals
should all help support a rational, sustainable system
Increase Value
 Focus on value of care

Employ drugs, treatments, and procedures that yield the best results at
the lowest cost
Measure and publicize quality of providers; tie payment to
performance
 Create standards of care for the diseases and conditions that affect
the most Americans
Infrastructure
 Move to fully electronic, connected health-care system
 Recruit medical professionals to practice in more rural areas
 Link physicians and patients with interactive video
 Increase number of community health centers

20
Tom Daschle – New Head of HHS
Federal Health Board

Presidentially appointed board of experts with 10 year terms






Regional boards with a say in national decisions, but focused on local
issues
Staff of analysts
Set rules for expanded public insurance
Recommend coverage of drugs and procedure based on solid
research
Align incentives with high-quality care
Rationalize infrastructure
Enforcement

Federal health programs would have to follow FHB’s
recommendations, and spill over into private health programs
21
Drug Spending ($B)
Healthcare Costs Have Been Rising -For a Long Time
22
Prescription Drug Costs as Percentage of Healthcare
23
US Healthcare Costs
 Administration
35%
Personnel
35%
costs
Procedures
18%
Drugs
12%
In
0.01%
vitro diagnostics
Diagnostic tests influence 85% of clinical actions
Source: George Poste
24
The Costs of Non-Compliance with Rx Regimens

$177 billion projected cost

20 million workdays/year lost (IHPM)

40% of nursing home admissions

projected 45-75% non-compliance (WHO)

50-60% depressed patients (IHPM)

50% chronic care Rx (WHO)
Source: George Poste
25
Healthcare Costs are Unevenly Distributed

0.5% patients consume 25% of healthcare budget

1% consume 35%

5% consume 60%

10% consume 70%

50% consume 3%

75% of cost is for patients with chronic diseases
Source: G. Halvorson/George Poste
26
Market Distortions and Perverse Incentives
in Modern Healthcare Delivery

Focus on late-stage detection and intervention

High cost

Low reversibility

Multiple reimbursements for fragmented (siloed) care
versus integrated management of patient needs

Medical professionals paid for illness versus wellness

Inadequate social and economic incentives for wellness

Inadequate medical training/understanding of
genetics/genomics/proteomics
Source: George Poste / Burrill & Company
27
The Strategic Future of Healthcare
Economic Unsustainability
Reform and Rational Care
or
Confronting the Imbalance Between Infinite Demand
and Finite Resources
Source: George Poste
28
The Changing Focus of Healthcare
29
The Three Forces Shaping the Evolution of Healthcare
Demonstrating Value
molecular
medicine
and
personalized
medicine
access,
cost and
quality
of care
proficient
use of
information
(e.health)
Source: George Poste
30
Re-Inventing the Biopharmaceutical Industry

Changing the industry versus changing with the industry

Escaping the myopia of current markets and investor horizons

Organizational re-structuring and process re-engineering are
insufficient for survival

Creation of unimagined products, services and businesses

Integration of Dx, Rx and Ix
Where is the white space? How do we
create new companies in a new and
different competitive environment?
Source: George Poste/Burrill & Company
31
The Evolution of Molecular Medicine and Information-Based Medicine:
The Foundation for Rational Care and Personalized Medicine
Drug
New competencies in molecular medicine and
biomedical informatics
Molecular diagnostics
Real-time information for
optimum decision-making
Drug
Package insert
Genetic
profiling
Disease
management
protocols,
patient
information
Rx 2008
Source: George Poste
Medicine 2020
32
A 20/20 Vision to 2020
So…..Where will we go for healthcare in 2020?

Sickness?

Wellness?
33
A 20/20 Vision to 2020
34
Healthcare will be… …on the sickness side
Centrally Delivered




& other consumer distribution centers
Genetic Screening
Pharmacy Distribution
“Doc-in-the-Box”, staffed with nurse practitioners
Specialized Delivery



Comprehensive cancer / cardiovascular centers
“Heart Transplants ‘R’ Us” (surgery centers)
Complex diseases
Home Diagnostics/Monitoring systems:


Drop blood onto your Blackberry or iPod, telecommunicated to central
labs, real-time Dx/Px
Home monitoring
35
Telemedicine and remote monitoring for chronic disease care:
“Self Care” model
“We will see an immediate impact
improving the quality of life of
congestive heart failure patients by
reducing hospital readmissions… This
way a patient is never far away from
health care.”
Terianne Cerep, Mgr Home Health
Mercy Hospital, Scranton PA
Monitoring key health indicators for
congestive heart failure patients
Data transmitted to secure website
monitored by nursing staff, patient’s
relatives
36
Mobile and Home Health Monitoring
Chronic disease – diabetes, congestive heart
failure, etc. – accounts for 75% of medical costs
in the US
Disease management can substantially
improve patient outcomes and lower cost
Medical devices and telecommunications
technologies are converging to develop
monitoring and control systems for patients
with chronic disease
Aging, remote monitoring
37
Moore’s law – Cost Per Base
38
And where is technology taking us?
Moore’s Law

ID of genetic markers/links for most disease (algorithms
of biomarkers)

Note: from a value standpoint- “Genes ‘R’ Us” model failed
quickly; individual biomarker “valve” also likely to decline
rapidly

Genetic screening becomes normal

Understanding of biochemical mechanisms of most
diseases
Therefore: personalization (customization) of healthcare
39
Longer Term Risk Assessment (prediction) Driving to Prevention:

Genome wide association studies not just BRAC 1&2
o Navigenics
o DeCode
o 23andMe

Shorter term, high accuracy risk assessment/clinical
support tools







Proventys
Labcorp
Quest
Roche
Genomic Health
XDx
CardioDx
40
The Biomarkers Consortium
 A public-private partnership to accelerate the development and validation of biomarkers
important.
 Consortium members include:

CMS, FDA, NIH

Numerous commercial partners, including: Pfizer, Merck, AstraZeneca, Eli Lilly,
Novartis, et al.

Numerous non-profit partners, including: American Cancer Society, ASCO, PhRMA,
BIO, Academy of Molecular Imaging, et al.
 First selected project validation of FDG-PET for lung and lymphoma cancers.

Results expected to demonstrate accelerated drug approval cycles based on use of
FDG-PET as a surrogate endpoint in trials
"One of our most pressing goals under the FDA's Critical Path Initiative is to
improve developmental science and technology to deliver better diagnostics and
more personalized treatments to patients more quickly and ultimately improve
Outcomes. We believe the identification and use of biomarkers in drug
development can have a catalytic impact on this mission."
- Andrew C. von Eschenbach, M.D., FDA Commissioner
41
The Biomarkers Consortium – Government Partners
42
The Biomarkers Consortium – Industry Partners
43
The Biomarkers Consortium – Non-Profit Partners
44
Healthcare will be …digitized

Smart cards with electronic health records & sequenced
DNA

Consumer driven personal health planning

PHR
o Microsoft -HealthVault™
o Google Health
o WebMD
o Revolution Health

Europe / Asia may be faster, more integrated than US
45
Tracking & Feedback

Nike/Apple –iPod Nano and online
workouts/equipment/fitness linked

Tools to monitor medication regiments to drive
compliance

Tools to measure

Activity

Sleep

Food consumption
46
Incentive Programs

Stickk.com – paying people to lose weight

FitNet

Gogetter

Virgin

Lifespring

Insurer rewards

Employer driven incentives
47
Rapid Secure Communication with Doctors

Relay health (McKesson)

Minute clinic

FitNet
48
Nano/Bio/Regenerative Medicine

Nano devices in blood vessels “roaming under own
power” to diagnose and fix problems

Nanoparticles:

Removing bacteria from food

Adding nutrients

Aids in packaging/retaining freshness
Artificial Organs/Regenerative Medicine:

Heart, lungs, pancreas, liver, kidney, blood, eyes, ears, legs, hands, etc.
Advanced Prosthetics:

Arms, legs, hands- all with biological/ technological / psychological
interaction sensors
49
Ecosystems Based on Convergence
50
Patient-centric healthcare: closer than we think?
Founded in 2000
 Walk-in health care
clinics, no appointment
needed
 Located in 20 states, 200
centers
 Staffed by nursepractitioners
 Location in popular
retail stores: Target, CVS
 350,000 visits, 99%
Patient satisfaction

“We’re delighted with the continued
expansion of MinuteClinic and with
the enthusiastic response of health care
consumers. We’re bringing innovation
and change to the marketplace and
consumers…”
Michael Howe, CEO
51
Healthcare Delivery in 2020 –Closer to Patient
Secondary Care
Emergency Room
Intensive Care
Major Surgery
Primary Care
Complex diagnostics & treatments
Minor surgical procedures
Basic diagnostics & prescribing by
nurse practitioners
“Life checks”
Patients
Self- Care
Web based self-diagnostics
OTC drugs for chronic and non-chronic
conditions
“Wellness” services
52
So, What are the Consequences for us of this Consumer
Digital Healthcare World?

Low margin ethical drugs will predominate






China/India/other low cost manufacturing sites will have an
edge
Theranostics – Rx tied to Dx
Worldwide pricing/parallel pricing – direct importation
from lowest priced country
Pro-generics environment
Patents devalued – increasing competition in
marketplace
Big pharma will become product distributors/disease
managers – more value across the entire disease care
spectrum, but more specialized
53
2020 –Globalization / Changing the environment too

Markets - demand increases in Asia & developing
world

R&D migrates to Asia

Regulations – International agencies collaborate

Information – healthcare payors share data on
performance (clinical & financial)

Diseases know no boundaries

Every company is global from day one!
54
Start-up’s Globalness Begins Day 1

Science/technology

Intellectual property/patents/FTO

People

Communications

Competition

Capital

Markets—diseases know no borders
Even the smallest company is a global player
from Day One
55
Confluence of Technology, Tools, and Knowledge
56
140 Years of Drug Discovery Technology
1st generation
2nd generation
3rd generation
genomics/ proteomics
cell pharmacology/
molecular biology
drugs against
targets identified
from disease genes
genetic engineering
receptors
serendipity
enzyme
Biotech drugs
chronic
degenerative
disease associated
with ageing,
inflammation,
cancer
lipid lowerers
ACE-inhibitors
H2-antagonists
beta blockers
NSAIDS
psychotropics
penicillins
sulphonamides
aspirin
1900
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
Source: CMS, Lehman Brothers research
New Therapeutic Cycles
natural products
and derivatives
57
Key Scientific Developments 2008

Complete Genomics sequenced a human genome for $4,000

Rhesus monkey was cloned; embryos used to grow stem cells.

Genome sequences of 2 malaria parasites defined

Nanofiber use in spinal cords of paralyzed mice restores
mobility

Gene RGS5 can reverse angiogenesis – the growth of blood
vessels inside tumors.

iPS - Adult skin cells reprogrammed into motor neurons

Stem Cells: Science magazine “Cellular Reprogramming"
Breakthrough of the Year
58
The Cost of Developing a New Drug has Greatly Increased
59
A Systems Biology Approach – Follow the Pathways
60
Analyzing the Molecular Profiles (Biosignatures) of Body
Functions in Health and Disease
The Molecular Basis
of
Biological Processes
The Molecular
Heterogeneity of
Disease
Alterations in Disease
Disease Subtypes
Pharmacogenetics
Disease
Predisposition
New Targets for
Dx, Rx, Vx
Right Rx for
Disease
New Targets
for Dx,
Rx, Vx
PDx
PRx
Individual Genetic
Variation
61
Safer, More Effective Drugs
Faster path to
disease targets
using genetic data
Target
Identification
Speed trials by testing on
patients selected for likely
high response and safety
Target
Validation
Lead
Development
Preclinical
Knowledge of biological pathways
and gene variants help eliminate
poor candidates
Clinical
Market
Target optimal population
by combining drug with
molecular diagnostic testing
62
Selected Targeted Treatments

Gleevec (Novartis) - pH+ CML kinase inhibitor

Iressa (AstraZeneca) – EGFR tyrosine kinase inhibitor

Tarceva (Genentech/OSI) – HER1/EGFR inhibitor

Erbitux (ImClone/BMS) – HER1/EGFR inhibitor

Avastin (Genentech) – VEGF/VEGFR inhibitor

Herceptin (Genentech) – HER2 inhibitor

BilDil (NitroMed) - heart failure in African American patients

Other “Semi Targeted” Treatments (approved or late stage trials)

Nexavar (Bayer/Onyx) – multikinase inhibitor

Tykerb (GSK) - ErbB-2/EGFR inhibitor

Enzastaurin (Lilly) - PKC-Beta, AKT/P13 inhibitor

Personalized cancer vaccines (Problematic Development)

Favrille – FavId for non-Hodgkin's lymphoma

Genitope – MyVax for non-Hodgkin's lymphoma
63
Pairing Drugs and Genes
Drug
Use
Genetic Marker
Identifying suitable patients
Herceptin (trastuzamab)
Breast Cancer
Her2 in tumor
Erbitux (cetuximab)
Colon Cancer
KRAS
Tamoxifen
Breast Cancer
CYP2D6
Ziagen (abacavir)
HIV
HLA-B*5701
Campostar (irinotecan)
Colon Cancer
UGT1A1*28
Tegretol (carbamazepine)
Epilepsy
HLA-B*1502
Coumadin (warfarin)
Blood clot prevention
CYP2C9 and VKORC1
Celebrex (celecoxib)
Pain and arthritis
CYP2C9
Plavix (clopidogrel)
Blood clot prevention
CYP2C19
Iressa (gefitinib) and Tarceva (erlotinib)
Lung cancer
EGFR in tumor
Bucindolol
Heart failure
Alpha-2c & beta-1
Prozac (fluoxetine)
Depression
CYP2D6, CYP2C19, et al.
Avastin (bevacizumab)
Various cancers
VEGF
Avoiding Side Effects
Prospective Markers
64
Healthcare Changes to Wellness (vs. sickness)


Healthcare moves from one size fits all to the three/four P’s:

Personalization

Prediction

Prevention / disease preemption

Patient Responsibility
Increased life span (80s are new 60s; 100s are new 80s)

Health maintenance

Fitness

Eat for life
65
…and so, healthcare cost increases are on everyone’s agenda

Politicians/Congress/White House/Gov’t Leaders

Payors/Reimbursors/Insurers

Physicians/Providers

Patients/Consumers
…and patients are empowered, have economic costs, and
really want to stay well!
66
Current Healthcare System
Products & Supplies
Pharma Companies
Diagnostic Companies
Medical Device Companies
Medical Innovators
Prescribers (Doctors)
Payors
Providers (Hospitals)
Insurers
Governments
(Medicare/Medicaid, etc.)
Employers
(providing $)
Patients
Users
67
Reimbursement

Who is the payor?

Government?

Employers?

Patients?

Studies in comparative effectiveness –who will
pay for this?

Evidentiary framework should not be left to
payors (CMS/HHS/Kaiser/Aetna, etc.)
–Pharmaco-economic benefit tests?
68
Efficacy
Drug is 30% effective
vs.
Drug effective for 30% of the market
69
Worldwide Global Pharmaceutical Sales
70
Global Pharmaceutical Sales in 2007
Audited Market 2007
Sales
% Growth (const US$)
US$bn
%Mkt Shr
2007
CAGR 6-Feb
$663.50
100%
6.1
7.8
North America
304.5
45.9
4.2
8.7
Europe
206.2
31.1
6.7
6.6
Asia
62.2
9.4
13.1
11.3
Japan
58.5
8.8
4.2
2.8
32
4.8
12
13.4
529.5
79.8
5.1
7.4
Worldwide
Latin America
10 Key Markets
All information is current as of Feb 26, 2008.
*Excludes unaudited markets, and Russia, Ukraine and Belarus audited data. Sales cover direct and indirect pharmaceutical channel
purchases in U.S. dollars from pharmaceutical wholesalers and manufacturers. The figures above include prescription and certain over-thecounter data and represent manufacturer prices. Totals may not add due to rounding.
Source: IMS Health
71
Number of Products Approved — 1982–2007
45
40
New Indications
35
30
Biotech Drugs
25
20
15
10
5
0
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
72
FDA Approvals Relatively Constant

2008 – 24 approvals

2007 – 18 approvals

2006 – 22 approvals

2005 – 20 approvals
73
Biotech New Medicines Approved 2008
Brand Name
Company
Generic Name
Indication
Intelence
Tibotec
etravirine
Treatment of HIV-1
Treanda
Cephalon
bendamustin
hydrochloride
Chronic lymphocytic
leukemia
Cleviprex
Medicines Company
clevidipine
butyrate
Reduces blood pressure
Arcalyst
Regeneron
Pharmaceuticals
rilonacept
Familial Cold AutoInflammatory Syndrome and
Muckle-Wells Syndrome
Adolor
alvimopan
GI recovery following partial
large or small bowel
resection surgery
Durezol
Sirion Therapeutics
difluprednate
ophthalmic
emulsion
postoperative ocular
inflammation and pain
Nplate
Amgen
romiplostim
Idiopathic (immune)
thrombocytopenic purpura
Entereg
74
Big “New” Markets

Alzheimer's/memory

Obesity/diabetes/metabolic disease

Anti-aging

Anti infectives (antibiotic resistance)

Wellness (preventative/predictive cure)
75
Regulatory News – FDA Developments 2008/2009

LabCorp's OvaSure Dx 'High Risk,' Validation 'Inadequate’

Draft Guidance on Regulating Genetically Engineered Animals

Warning Letters to Ranbaxy Laboratories Ltd., and an Import Alert for
Drugs from Two Ranbaxy Plants in India

Revision of Process for Responding to Drug Applications; moves from
“Approvable” and “Not-Approvable” to “Complete Response” letters

Attempts to harmonize pharmacogenomic definitions and sample coding
guidance

Establishing eight full time permanent FDA positions at U.S. diplomatic
posts in China, pending authorization from the Chinese government

Watch out for Sidney Wolfe – 4 year term on the FDA’s Drug Safety and
Risk Management Committee
76
On the Regulatory/Patent/Policy Front…Gov’ts are our Partners!
 Patent reform (PTO proposals to restrict claims examined in a single application and
limit continuation applications)
 FDA resources – PDUFA IV authorization

follow-on biologics (biogenerics)

drug safety

theranostics

food safety (pet food)
 Biofuels – renewable and alternative energy sources through use of biotechnology
 Medicare Prescription Drug Price Negotiation Act – Non-interference (proposal to
require Medicare interference)
 Sarbanes Oxley compliance – reducing the burden on small companies
 SBIR eligibility
 Agbio/ GMO’s
 Stem cell research – federal funding
 Passing of Genetic Information Non-Discrimination Act (GINA)
 Bailouts (US, UK)?
77
Major Government Initiatives in Biotechnology













Canada
EU: Scandinavia, Germany, UK, Spain, Italy, Switzerland
Eastern Europe
China
India
Japan
Korea
Malaysia
Singapore
UAE (Dubai/Abu Dhabi), Bahrain and Kuwait
Israel
Latin America (esp. Chile/Brazil/Argentina)
Australia/New Zealand
78
World Market for Health and Wellness is Expanding

China and India have large populations, growing wealth
and middle class and increased demand for high quality
healthcare




Additional growth markets: Middle East, Latin America, South
Africa, Russia, Eastern Europe
Burden of disease is changing in developed and
developing countries: chronic diseases (cardiovascular,
diabetes, cancer, CNS et al.) on the rise everywhere
Aging populations around the world
National healthcare and private payor/employer models
are converging and all facing issues of affordability,
quality and equal access

Consumers becoming an important factor in the healthcare
equation
79
Medical Tourism on the Rise

Market for medical tourism in 2008
about $60B, expected to grow to over
$100B by 2010

Originally cosmetic/elective procedures,
now: CABG, heart valve replacement,
orthopedic including hip/knee
replacement, cancer, transplant, etc.

750,000 Americans traveled overseas for
surgery in 2008, expected to be 6 million
by 2010

Cost including travel 2-3x lower than in
US

Patient financing programs becoming
available, some insurers providing
incentives

Magazines, associations, conferences
80
Price Shopping for Procedures
Hip
Heart valve Hysterectomy
replacement replacement
United States
$43,000
$160,000
$20,000
$5,000 to
$7,100
$9,000
$2,300 to
$6,000
$12,000
$10,000
$4,500
India
Thailand
Source: San Francisco Chronicle Magazine, January 4, 2009
81
Medical Tourism Growth Drivers
 India
 Gov’t investing $3.6 Billion in medical tourism infrastructure.
 McKinsey estimates Indian medical tourism at $2.3B by 2012.
 Mexico
 StarMedica hospital groups built 7 hospitals in last 5 years;
 AmeriMed opening 10 new hospitals by 2012;
 Grupo Angeles (largest private hospital group in Mexico)
spending $700 million to build 15 hospitals in the next 3 years
 Singapore
 More internationally accredited facilities than any other country.
 Thailand
 One Bangkok hospital (Bumrungrad) served over 500,000 health
travelers last year.
 Costa Rica
 One in five visitors is a medical tourist
Source: Health Travel Guides
82
Significant Mergers and Acquisitions 2008
Pharma/Specialty
Shionogi/Sciele
$ 11 billion
Novartis/Alcon
$ 10.4 billion
Pharma/Biotech
Roche/Genentech
$ 44 billion
On the “table”
Takeda/Millennium
$ 8.2 billion
GSK/Reliant
$ 1.65 billion
GSK/Sirtris
$ 720 million
Pfizer/Encysive
$ 195 million
$ 6.7 billion
Celgene/Pharmion
$ 2.7 billion
ViroPharma/Lev
Pharma
$ 618 million
Galderma/CollaGenex
$ 420 million
Diagnostics
Roche/Ventana
$ 3.4 billion
Hologic/Third Wave
$580 million
Inverness/BBI
$ 100 million
Inverness/Paradigm
$ 230 million
Medtech
Fresenius/APP
Pharma
$ 3.7 billion
CSL/Talecris
$ 3.1 billion
Kinetic Concepts/
LifeCell
$ 1.7 billion
Johnson & Johnson/
Mentor
$ 1.07 billion
Biotech/Biotech
Invitrogen/Applied
Biosystems
King/Alpharma
$ 1.6 billion
Boehringer/Actimis
$ 515 million
Eli Lilly/ImClone
$ 6.2 billion
Eisai/MGI Pharma
$ 3.5 billion
83
Significant Partnerings 20008
Pharma/Biotech
Biotech/Biotech
Takeda/Amgen
$ 1.78 billion
GSK/Archemix
$ 1.4 billion
Takeda/Anylam
$ 1 billion
Roche/Synta
$ 1 billion
GSK/Synta
$ 965 million
BMS/Exelixis
$ 865 million
GSK/Valeant
$ 820 million
GSK/Dynavax
$ 810 million
Astellas/CoMentis
$ 760 million
GSK/Tolerx
$ 750 million
Pfizer/Medivation
$ 725 million
Genzyme/Osiris
$ 1.38 billion
Genzyme/Isis Pharma
$ 1.1 billion
Celgene/Array
$ 1.04 billion
Nycomed/Immunomedics
$ 620 million
Celgene/Acceleron
$ 560 million
Genzyme/PTC Theraputics
$ 437 million
84
Wall Street’s Implosion…What does it mean to us?
It’s a sea change, not a temporary blip

We’ve had ≈ 30-40 years of relatively easy access to relatively cheap
capital


Access to capital





That game is OVER! Capital markets permanently restructured
More difficult to find (IB resources for micro-cap stocks decreased)
More expensive
Buyside interest/resources reduced (Hedge funds gone)
VC/private investors (deep pockets/short arms) business is challenging
– no IPOs for exits
Big Pharma – not as eager (things will be cheaper if they wait)
…But, there is an alternative view
85
Alternative view of Capital Markets

“This too will pass”

Markets reconstruct, reorganize, interest returns

New group of boutique investment banking firms
emerge (like the old “4 horsemen” – H&Q, Robbie
Stephens, Alex Brown, Montgomery)

Genentech/ImClone put big $ back into buy side, money
redeployed

Capital market efficiency: Returns improve, drawing
more capital back into markets
86
Billion Dollar Club
87
Capital Raised 1980 - 2008
88
US Biotech Financings ($M) 2003-2008
2003
2004
2005
2006
2007
2008
$456
$3,536
$2,051
$7,170
$1,701
$3,388
$2,417
$8,418
$819
$4,194
$2,376
$5,565
$920
$5,766
$2,027
$13,978
$2,041
$6,311
$1,818
$6,569
$6
$1,726
$1,078
$2,824
2,841
294
$3,733
$269
$3,518
$1,114
$4,236
$425
$4,445
$611
$4,175
$294
$16,348 $19,927
$17,586
$27,352 $21,975 $10,103
$8,933 $10,933
$17,268
$19,796 $23,365 $20,023
$25,281 $30,860
$34,854
$47,148 $45,340 $30,126
Public
IPO
Follow-ons
PIPEs
Debt
Private
VC
Other
Subtotal
Partnering
Total
89
Pharma vs. Biotech Industry Market Cap ($B)
Company
12/31/2008
12/31/2007
12/31/2006
12/31/2005
12/31/2004
Pfizer
115
155
187
172
199
Johnson & Johnson
166
191
180
186
184
Merck
64
127
82
69
69
Eli Lilly
45
60
62
65
65
Bristol-Myers Squibb
46
53
50
46
47
Pfizer/Merck
179
282
269
241
268
Total US Biotech
404
455
496
491
399
2.25x
1.6x
1.8x
2.0x
1.5x
Industry
90
….And these small Life Science companies are becoming increasingly
important as a source of value creation and innovation in the healthcare sector
Top Five US Pharma* vs. Total Biotech Market Cap
Market Value of
selected Big Pharma
acquisitions of
public Biotechs
(2005 - 2008)
Source: Capital IQ, Windhover, Burrill Analysis
91
Biotech’s Five cycles
Length of Rallies/Droughts in Months
92
IPOs – Not What They Used To Be
93
IPOs – Not What They Used to Be
Total
Number
of IPOs
Positive
since
IPO
Negative
since
IPO
Acquired
or
delisted
2003
7
0
2
5
$438
(96%)
2004
29
4
14
11
1,628
(26%)
2005
17
2
8
7
819
(43%)
2006
19
5
11
3
920
(18%)
2007
28
2
24
2
2,041
(47%)
2008
1
0
1
0
6
(79%)
101
13
60
28
5,852
(51%)
Source: Burrill & Company
Amount
Raised*
($ Million)
Average
D % change
Since IPO**
* Includes over-allotments
** As of December 2008
94
11/
3/ 2
008
11/
17 /
200
8
12/
1/ 2
008
12/
15 /
200
8
12/
29 /
200
8
7/2
8/ 2
008
8/1
1/ 2
008
8/2
5/ 2
008
9/8
/2 0
08
9/2
2/ 2
008
10/
6/ 2
008
10/
20 /
200
8
6/2
/2 0
08
6/1
6/ 2
008
6/3
0/ 2
008
7/1
4/ 2
008
4/2
1/ 2
008
5/5
/2 0
08
5/1
9/ 2
008
4/7
/2 0
08
20.00%
2/2
5/ 2
008
3/1
0/ 2
008
3/2
4/ 2
008
12/
31 /
200
7
1/1
4/ 2
008
1/2
8/ 2
008
2/1
1/ 2
008
Burrill Select Index vs. DJIA, NASDAQ (2008)
30.00%
DJIA
NASDAQ
Burrill Select
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%
-60.00%
95
/3
1/
2/ 200
29 3
/
4/ 200
30 4
/
6/ 200
30 4
/
8/ 200
31 4
1 0 /2 0
/3 0 4
1
1 2 /2 0
/3 04
1/
2/ 200
28 4
/
4/ 200
30 5
/
6/ 200
30 5
/
8/ 200
31 5
1 0 /2 0
/3 0 5
1
1 2 /2 0
/3 05
1/
2/ 200
28 5
/
4/ 200
30 6
/
6/ 200
30 6
/
8/ 200
31 6
1 0 /2 0
/3 0 6
1
1 2 /2 0
/3 06
1/
2/ 200
28 6
/
4/ 200
30 7
/
6/ 200
30 7
/
8/ 200
31 7
1 0 /2 0
/3 0 7
1
1 2 /2 0
/3 07
1/
2/ 200
29 7
/
4/ 200
30 8
/
6/ 200
30 8
/
8/ 200
31 8
1 0 /2 0
/3 0 8
1
1 2 /2 0
/3 08
1/
20
08
12
Burrill Select Index vs. DJIA, NASDAQ (2004 - 2008)
60.00%
50.00%
DJIA
NASDAQ
40.00%
Burrill Select
30.00%
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
96
Large, Mid, Small Capital Markets (2008)
30.00%
MidCap
SmallCap
20.00%
LargeCap
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%
-60.00%
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
97
12
/3
1/
2
2/ 00
29 3
/2
4/ 0 0
30 4
/2
6/ 0 0
30 4
/2
8/ 0 0
31 4
10 /20
/3 04
1
12 /2 0
/3 04
1/
2
2/ 00
28 4
/2
4/ 0 0
30 5
/2
6/ 0 0
30 5
/2
8/ 0 0
31 5
10 /20
/3 05
1
12 /2 0
/3 05
1/
2
2/ 00
28 5
/2
4/ 0 0
30 6
/2
6/ 0 0
30 6
/2
8/ 0 0
31 6
10 /20
/3 06
1
12 /2 0
/3 06
1/
2
2/ 00
28 6
/2
4/ 0 0
30 7
/2
6/ 0 0
30 7
/2
8/ 0 0
31 7
10 /20
/3 07
1
12 /2 0
/3 07
1/
2
2/ 00
29 7
/2
4/ 0 0
30 8
/2
6/ 0 0
30 8
/2
8/ 0 0
31 8
10 /20
/3 08
1
12 /2 0
/3 08
1/
20
08
Large, Mid, Small Capital Markets (2003 - 2008)
80.00%
Large Cap
60.00%
MidCap
SmallCap
40.00%
20.00%
0.00%
-20.00%
-40.00%
-60.00%
-80.00%
98
Finance and Capital Markets
The global financial markets have created additional
opportunities for companies to look
outside their borders for financing
 Europeans on NASDAQ/NYSE
 Chinese on NYSE
 Americans on AIM/Euronext/SWX
 Other markets are available
 Mothers (Tokyo)
 DFX (Dubai)
 Hong Kong
99
Financing – Circa 2009










Development stage (B/C/D rounds) available but
expensive
Equipment/facility financing (even IP)
IPOs –few (if any) and later stage operating companies
with revenues/profits
More PIPEs
Reverse mergers into public companies
SPACs
Equity –lines of credit
Shelf registration/registered direct
Biobundles, (a new Goldman Sach’s version of an old
plan)
Bio-bonds
100
How Does All This Impact Entrepreneurial Start-ups in 2009?

VC & Angels are hesitant to invest


Business models are changing
More financing of projects

Higher bar for regulatory approval

Reimbursement compression

Globality essential

Capital efficiency required
BUT…

Rate of start-ups around the world are increasing
(go figure…)
101
Changing Business Models
FIPCO (Fully Integrated Pharma Co.)
Sales &
Distribution
VIPCO (Virtually Integrated Pharma Co.)
Sales &
Distribution
Partnerships
CSO
Manufacturing
CMO
Clinical
Development
CROs
Manufacturing
Clinical &
Regulatory
Preclinical
Support
Research
Technology
R&D
Preclinical CRO
Academia,
Scientific,
Institutions
102
Virtual Pharma: New Organizational Models for
Leverage of Open-Source Services

PharmaCommons: integration of rapidly expanding
open-source datasets

Discovery, toxicology, clinical trials

Network of web-based turn-key contract services

China/India/other low cost (R&D, clinical
development and manufacturing) sites will dominate

New role of BigPharma as integrator to generate value
across the entire disease episode spectrum

Wellness to terminal care
Source: George Poste/Burrill & Company
103
So the predictions for 2009…
104
The Predictions for Biotech in 2009…
 Bio-cleantech boom in non-food crops
 Ag/Animal Health see increase because of world food crisis

Biotech’s globality increases with US dominance continuing to
decrease

US research engine faces challenging times

Clusters are redefined away from geography to virtual clusters
(diseases, pathways, markets, unique industry segments)

Business models continue to evolve –more virtual but more
consolidation too
105
The Predictions for Biotech in 2009… (continued)
 Both big Pharma and big Biotech will be competing for companies with
advanced product pipelines
 Industry consolidation will occur (1+1=3; 1+1=2; 1+1=.5)
 “Capital Markets”:

2009 very difficult financing environment worldwide

US/UK industry bailout Capital?

2009 – $10 billion will be raised by the US biotechs, but partnering/M&A will
trump financings

VCs will move upstream – PIPEs vs “A/B” rounds, and $ is expensive

Few, if any, IPOs

Europe will lag US

China, India, other economies continue to finance biotech Cos

Companies arbitrage value differences globally

Start ups (globally) will continue to find capital

Industry Market cap will increase 25% in 2009
106
So…
When the going gets tough, the tough get going –
107
Biotech/Healthcare 2009:
Navigating the Sea Change
G. Steven Burrill
Chief Executive Officer, Burrill & Company
Idea to IPO…and beyond
January 12, 2009
108