Transcript No Slide Title

rd
3 Annual
er
enc
e
The 3
rd
An
nf
o
n ua
l Life Science C
The
Life
Science Conference
February 2001
TM
From Business Plans to Business Financing
Miranda Toledano - Ernst & Young, Israel
Bio-Sector Climate in Israel
• Lack of well-defined or central bio-infrastructure
• Biotech start-ups require international partnering & IR
strategies from the outset
• The trade-off:
– viable implementation of global strategy for success
– dealing with local issues of the biotech start-up
• Balancing act
Tech
Expertise
(Strong IP)
Winner
Financing
Strategy
February 2001
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Early Stage Decision Making
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Joining the incubator (implications for the future)
Leaving the incubator in a sound position
Retaining IP from academia
Dictating flow of technology development
Recruiting and retaining key employees, management and
SAB
• Selecting Application-driven models that have clear and
defined market potential
• Impressing the investor with viable business model
February 2001
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The Industry is Flying High?
• In 2000, Biotech was ranked as 4th highest grossing IPO
sector
• Financial Upsurge follows in Israel
•Israeli VC backed
investment doubled itself
almost every quarter of
2000
•Total: $200 Million
=3 fold increase over 1999
February 2001
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Internal Drivers: Communicating
Success
• Entrepreneur’s talent + Availability of funding
• Universal Theme for Biotech start-ups
– technological know-how is there
– ability to position tech in commercial setting is not
• Key Success Factor: the company that can communicate
and execute its potential to be a viable investment and a
profitable business
• This takes strategic planning
– identifying critical junctions to arrive at desired outcome
– articulation of tasks by management
February 2001
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Business Plans can Help
• Simple tool of communication between start-up and investors
• Contribution: exchange of ideas, information, and brainstorming
that lead to the launch of a new venture
• A concise explanation of why we are creating a new business and
what is its value proposition to the biotech sector:
– technological evaluation of current state of market
– logical flow of critical R&D milestones
– early stage identification of potential partnering opportunities
• Goal: Translate mission into “revolutionary concept” that will
achieve financing goals
February 2001
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Preparing for Fundraising
• Recognize which stage your company is in:
February 2001
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Early R&D Stage: Monitoring
Risk and Delivering Value
• All business involves risk but not all risk is equal
• Earlier stage financing partners absorb greatest risk
– they are impacted by current and subsequent stages of risk
– they deserve greater opportunity for upside return!
• How to achieve successful seed/first round:
– understand when to raise how much cash from whom
– developing rational financing/business plan that:
• Reduces risk
• Minimizes equity dilution
• Increases opportunity for success
February 2001
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Overcoming Business Risks
Experienced
Management
IP
Protection
Balanced
Business
Model
World Class
Science
Market
Focus
INVESTOR
RETURNS
Communicatio
n
Technology
Portfolio
Innovation
and
Research
Team
Building
February 2001
TM
Funder
Support
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Biotechnology – Measures that Matter
Technology/Quality
of Science
Is the Company’s tech innovative? IPR portfolio strength,
depth, sustainability
Competitive
Advantage
Differentiation, bio e-strategy, IT. Alignment to emerging a
standards and technological trends. KNOW YOUR PEERS.
Products,
Services
Development potential, management of portfolio
Have you budgeted enough to lead to sustainability?
Funding
Strength and range of collaborations, impact of pharma
consolidation on partnering possibilities; understanding
potential partners to optimize alignment
Alliances
Risk management, internal info flow and monitoring, external
newsflow
Governance
Experience, motivation, succession
Management
February 2001
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Budgeting...
• Natural tendency for biotech start-up is to ask for as little as
possible at stages where investors demand a relatively large
equity position
• Remember though:
– underestimating funding requirements to avoid dilution could
mean:
• Running out of Cash
• Reentering IR climate too soon (or during a market
downturn)
• Ultimately, slowing down R&D program
February 2001
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Modeling the Business
• Design a modular approach to establish credibility and
focus (Like Rome, most successful biotech companies were
not built in day!)
• All biotech start-ups must have a clear mission and identity
• Non-core competencies needs can be outsourced
• Create realistic and achievable short-term goals to increase
share-holder value:
– first concentrate on “R & D” stage but always remember your
market positioning. Stay FLEXIBLE
February 2001
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Short & Long Term Survival
Through Strategic Alliances (SA)
• SA are the fastest and most efficient way to do business in
biotech & constitute an increasingly important source of
funding, they:
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–
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enable partners to gain non-core competency products and services
help develop core competency or hedge industry standard
validate the biotech start-ups know-how in the commercial setting
Knowledge management and strategy are key
IP protection comes first
But, Biotech business models must recognize external
communication obligation
February 2001
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The Historical Context no Longer
Applies
• With few exceptions, the model is not a viable aspiration
Discovery
Development
Manufacturing
Supply
Chain
Sales and
Marketing
• Genentech and Amgen are mostly exceptions to the rule
• Difficulties include:
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–
–
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excessive financial demands in advance of revenue
a crucial shortage of management skills
no direct access to customers
the effect, globally, was to kill biotech ambition and diminish VC
funding
February 2001
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SA Need to Move with Increasing
Demands of Sector
Investors
Pharmaceutical
Companies
• demand for growth
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•
•
•
patent expiry
need new products
consolidation
cash rich
Healthcare
Providers &
Governments
• new products
• lower cost
• public expectations
STRATEGIC ALLIANCES
• provide innovation
• need cash
Biotechnology
Companies
February 2001
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New Dynamics of SA
• Basic premise of biotech is to streamline process of
discovering promising drugs and to develop them into
marketable therapies
• Constructive relationships with “Big Pharma” and “Big
Biotech” must happen, even earlier on in the game
• Need to Show:
– How can “big pharma” decrease true cost of innovation
– How does “big pharma” or investor understand that
environment will provide opportunity to achieve financial return
• Interrelation of multiple technologies will drive Israeli
biotech industry forward (2 models)
February 2001
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Bio-Therapeutics Converge with
Targeted Delivery Platforms
% Sales from Products Launched 1994-2000E
• The opportunities are clear
• Patent expiry takes a
large toll on “big
pharma”
45%
40%
Zeneca
35%
Warner Lambert
30%
25%
20%
15%
Synthelabo
AHP
10%
5%
0%
BMS
Bayer
GlaxoWellcome
RPRNovartis
Abbott
SB
HMR
Roche
P&U
Pfizer
Sanofi
Eli Lilly
Merck
Schering-Plough
• Growth opportunities
from new markets &
technologies (functional
proteins,
nutraceuticals)
Astra
10%
20%
30%
40%
50%
% Sales Vulnerable to Patent Loss, 1998-2002
60%
February 2001
TM
• $26 Billion spent in
2000 to license enough
leads and technologies
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Israeli Bio-Delivery Model
• Develop horizontal pipelines that ensure short and long term growth
– Delivery platform as short term partnering objective
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•
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Significantly less R&D time
Aims to derive initial top-line growth
Establish investor confidence & increase valuation
Demonstrate value creation & validate technology
Serve your partners’ immediate needs
– Therapeutic development as mid or long term partnering
objective
• Mid-Term: After Phase I/IIa (Safety & Dosage)
• Long-Term: After Phase II (Efficacy and Side Effects)
February 2001
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Partnering Strategy
February 2001
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Model Companies
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Lavsys Biotherapy Ltd.
– Intracellular macromolecule delivery platform for functional proteins ($4.5
billion market)
– Lead drug development for prostate and breast cancer
J.P.M.E.D. Ltd.
– Taste-Masking Protein granulates to develop functional foods for the elderly
– DNA protection factor based on Sub-Micron Oil-in-Glycerin Gel for intradermal delivery of Genistein and other herbal extracts to the skin
BioSight Ltd.
– Designs a pipeline of proprietary vectors used to target and release prodrugs
directly to the sight of malignant tissues and cancer cells (chemotherapy)
– Proprietary protein targets
Coraltis Ltd.
– Pulsatile delivery system to decrease dosage of nutraceuticals and drugs ($10
billion market)
– Novel formulations for Cyclosporin A and Indomethacin
February 2001
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IT Converges with Drug Discovery,
Development and Disease
Management
• Pharma Drivers
– Looming NCE gap that makes it increasingly difficult to sustain current
high rates of growth
– Objective to ensure that 30% of all drugs launched achieve blockbuster
status with sales of over $1 Billion
– To need to compress R&D cycle from 12 to 7 years or less
– Optimization of treatments to enable individualized care regimes
• Disease Management Drivers
– Move towards early diagnosis of disease and monitoring disease
progression
– Cost-containment to manage pharmacoeconomics of healthcare
– Decreases in human error & increasing “served population”
February 2001
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Model Companies
• Optimata Ltd.
– In silico tools for optimized cancer drug development for “Big
Pharma”
– In silico tools for optimized individual treatment regimes for the
clinical market
• Ardia Ltd.
– Expert system to aid pathologist in analysis of biopsy tissue
(subscription + pay-per-use revenue models)
• WideMed Ltd.
– Internet Monitoring and Mining of Medical Data Platform to provide
integrated telemedicine approach to sleep apnea market
February 2001
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Change your “Time to Market”
• Investors often equate exit with “IPO” or “M&A”
• We Challenge a new model for Israeli Biotech:
– Creation of SA for peripheral value added activities to generate
short term top-line growth.
• This is a winning exit strategy but requires:
– strong correlation of the Company’s R&D and business
milestone implementation
– continual awareness of market dynamics to assess partnering
opportunities that will maximize short term cash-inflows
– Strong acknowledgment of the power of external
communication to attract potential partners
– Investment into exposure to multinationals at the right time
February 2001
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–Technology transfer of early stage
findings to generate returns for
mission critical development goals
will alter the investment
community’s perception of biotech
in Israel
February 2001
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