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Speaker: Owen Gordon, Director of Finance and Corporate Development, Axela Biosensors This session builds on the introduction to budgets in Entrepreneurship 101. Our speaker shares his experience in setting up budgets for pharma and med device start-up. How much should you budget for IP? For clinical trial consultants? Owen will fill in some of the blanks, or at the very least let you know what should be budgeting for! More information including audio file: http://www.marsdd.com/Events/Event-Calendar/BioEntrepreneurship/2008/budgeting-02132008.html
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February 13th, 2008
Budgeting for Life Science Companies
Owen Gordon, Axela Inc.
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Budgeting for Life Science Overview
Why budget?
Who should be involved in the budgeting process?
How frequently should I update my budget?
What should be included in my budget?
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Why Budget?
Cash flow planning
Grant submissions/reporting
Shareholder Agreement/board requirement
Investor Due Diligence
Bank/lender requirements
Strategic Alliance negotiations/monitoring
Other regulatory compliance (CRA, etc.)
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Who Should be involved?
Those most closely involved with the underlying activities
Scientist
CRO/consultant liaison
Collaborator
Business development personnel
Finance
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What should be included?
Assumptions Headcount/FTE’s
Benefits, bonuses, recruitment fees, tax equalizationpayments, relocation of non-residents
Occupancy costs
Machine rental (Mass Spectrometers, NMR’s, etc.)
Capital Expenditures (wet/dry lab build-out, chemistryhoods)
Tax credits (SR&ED, GST input credits)
Professional Fees (Legal corporate and IP-related, audit);patent costs
Insurance (Key person, D&O, etc.)
Board/SAB member fees
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What should be included (cont’d)?
Assumptions (cont’d) Exchange rate
Conferences
Travel & Entertainment (T&E) Fundraising (CEO/CFO/CTO, etc.)
Board/SAB/Clinical Advisory Board meetings
Development driven (clinical trials, etc.)
Regular
Profit & Loss/Income Statement on cash basis
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Select Items – Therapeutics Co.
(assuming no CRO)
Number of planned trial sites
Protocol/trial design fees
Patient recruitment fees
Sample collections
Statistical data analysis fees
Regulatory fees
CRA T&E
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Select Items – Research Tools Company
Instrument development phases
Tooling
Consulting
Outside engineering resources
Software development
Assay development
Alpha/Beta testing
Instrument compliance costs (CSA, CE, ROHS, etc.)
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Budgeting Fundamentals
Annual Strategic Plan
Objectives
Activities
Budgets
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Budgeting Fundamentals (cont’d)
Annual Strategic Plan
An operating plan of your major deliverables for the year (orwhatever planning cycle makes sense)
e.g. Complete a Phase I trial, have a successful product launchfor a medical device.
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Budgeting Fundamentals (cont’d)
Annual Strategic Plan
Objectives
The 3 – 6 major milestones or goals you will measure to see ifyou are on track to meet your Strategic Plan
e.g. select CRO by X date, complete patient recruitment by Ydate
e.g. have product launch collateral completed by Z date
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Budgeting Fundamentals (cont’d)
Annual Strategic Plan
Objectives
Activities
e.g. Interview 3 CRO’s in Q2 including T&E to visit HQ’s
Select graphic designer; Spend $X on mock-ups andmasters; Print batches by Y date in advance of launch
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Budgeting Fundamentals (cont’d)
Annual Strategic Plan
Objectives
Activities
Budgets
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Assumptions – Chart of Accounts
Financial/Statutory
1 Financing - Gross Proceeds
2 GST Refund
3 Scientific Research and Experimental Development (Investment Tax Credit)
4 Investment Income
Corporate Payroll
5 Corporate Salaries
6 Employee Benefits - Corporate
7 Performance Bonus - Corporate
8 Recruiting Fees - Corporate
9 Employee Relocation - Corporate
10 Training - Corporate and R&D (50%/50%)
Professional Fees
11 Legal - Corporate
12 Accounting/Audit - Corporate
13 SR&ED Tax Consultants - R&D
14 MIS/IT - Corporate
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Assumptions – Chart of Accounts (cont’d)
Office, General & Admin
15 Bank Interest & Charges - Corporate 25 Building Mtce - Corporate & R&D (25%/75%)
16 Postage/Courier/Ship-Corporate & R&D (25%/75%)26 Director/Committee Fees - Corporate
17 Telecomm/Security - Corporate & R&D (25%/75%) 27 Board/Audit/Comp Cttee Meetings - Corporate
18 Office Costs - Corporate & R&D (25%/75%) 28 Insurance - D&O - Corporate
19 Printing/Advertising - Corporate 29 Insurance - Keyman - Corporate
20 Communications/PR - Corporate 30 Insurance-Building-Corporate & R&D (25%/75%)
21 Subscriptions/Dues/Memberships - Corporate 31 Telephone Equip Lease - Corporate & R&D (25%/75%)
22 Conferences - Corporate 32 Photocopier lease-Corporate & R&D (25%/75%)
23 Meals/Entertainment/Travel - Corporate 33 Miscellaneous
24 Building Lease-Miss-Corporate & RD(25%/75%) 34 Financing fees
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Assumptions – Chart of Accounts (cont’d)
Research & Development
35 R&D Salaries 46 Subscriptions/Dues/Memberships - R&D
36 Employee Benefits - R&D 47 Conferences - R&D
37 Performance Bonus - R&D 48 Meals/Entertainment/Travel - R&D
38 Recruiting fees - R&D 49 Scientific Advisory Board fees
39 Employee Relocation - R&D 50 Clinical Advisory Board fees
40 Consultants - R&D 51 SAB Meeting - R&D
41 Other Research Agreements 52 CAB Meetings - R&D
42 Project II Research Agreement 54 Insurance - Keyman - RD
43 Lab Supplies - R&D 55 Insurance - Clinical Trials
44 Legal - Patents - Spinout 56 Miscellaneous
45 Legal - Patents - Collaborator A
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Assumptions – Chart of Accounts (cont’d)
Business Development
57 BD Salary
58 Employee Benefits - BD
59 Performance Bonus - R&D
60 Consultants
61 Meals/Entertainment/Travel - BD
62 Conferences - BD
63 Research Reports - BD
CAPEX
64 Capital Expenditures
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January February March October November December Total
Net cash, beginning of period 1,656,712 1,124,697 813,584 (61,797) 20,604,426 373,688
Inflows:
Financing 2,503 - - 21,500,000 - 27,470,898
GST refund 12,441 - 43,337 5,053 3,681 118,885
SR&ED ITC - Federal & Provincial - - - - - 1,283,077
Investment income 779 1,194 2,136 - - 7,671
Other - - - - -
Total inflows 15,723 1,194 45,473 21,505,053 3,681 28,880,531
Outflows:
Corporate
Salaries 52,598 36,085 34,273 31,538 31,538 430,505
Employee benefits - - - 4,725 4,725 28,369
Performance bonus - 12,875 - - - 25,750
Recruiting fees - - - - - -
Employee relocation - - - - - -
Training - - - 500 500 3,000
Legal - Corporate - 225 - 6,250 6,250 42,958
Accounting/audit 11,931 - 14,317 - - 61,997
MIS/IT 3,732 1,913 2,004 3,167 3,167 39,040
Interest and bank charges 106 88 55 100 100 6,156
Sample Budget Format
~//~
Capital expenditures
Computer - network - - -
Computer equipment 4,108 - -
Leasehold improvements - - -
R&D equipment - - -
Office equipment 1,459 - -
Office furniture - - -
Total capital expenditures 5,567 775 -
Total outflows 547,737 312,307 1,014,062
Net cash, end of period 1,124,697 813,584 19,594,044
Headcount 6 7 9
/========/
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Sample Budget – Clinical Trial Phase I
January February November December Total
Phase 1 program
Research 64,400 49,595 68,000 372,244
CMC development - - 40,000 200,000
Preclinical development - - 80,000 1,235,000
Clinical development - - - 400,000
Regulatory - - 25,000 50,000
Project management - - 12,000 78,000
Pharmacology-biology 43,387 15,044 - 173,100
Analytical chemistry 96,962 - - 562,825
Toxicology 29,641 35,407 - 101,801
Genotoxicology - - - -
Reprotoxicology - - - -
Safety/Pharmacology - - - 72,995
Metabolism - - - 80,000
Clinical Subproject - - - 2,766
CMC Subproject 85,000 - - 116,881
Regulatory Subproject - - - 12,216
Consultant - 150 - 6,618
Consultant - - - -
Consultant - - - -
Consultant - - - 4,708
Other Clinical Consultants - - - 1,000
Founders - 3,210 - 9,095
~//~
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Sample Budget – Clinical Trial Phase II
~//~January February November December Total
Phase 2 program
License fee - - - 1,500,000
Research - - - -
CMC development - - 100,000 600,000
Preclinical development - - - 30,000
Clinical development - - 500,000 800,000
Regulatory development - - 5,000 85,000
Project management - - 10,000 60,000
Consultat - - - -
Consultant 11,195 - - 16,331
Consultant - - - 14,733
Consultant - - - 88,755
Other Consultants - - - 9,565
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Sample Budget – other examples
Total
Q3 Q4 2007KEY EQUIPMENT
Core chemistry apparatus -$ -$ -$
Core pharmacology apparatus (Laval CRULRG) -$ -$ -$
PROGRAM 1
Pharmacophore analysis of preleads -$ -$ -$
Lead optimization -$ -$ -$
Post-IND candidate declaration chemistry -$ -$ -$
HPLC methods -$ -$ -$
Process research for API -$ -$ -$
Formulation research for drug product -$ -$ -$
GMP production of API -$ -$ -$
GMP production of drug product -$ -$ -$
Genotoxicology -$ -$ -$
Pre-IND meeting -$ -$ -$
In vivo toxicology -$ -$ -$
Ancillary assays -$ -$ -$
Preparation of IND and CMC -$ -$ -$
Phase IA (SAD) study -$ -$ -$
GMP production of drug product (for phase II) -$ -$ -$
Post-study (biostatistical) analyses -$ -$ -$
In vivo GLP toxicology studies -$ -$ -$
Phase IB (MAD) study -$ -$ -$
Phase IIA study -$ -$ -$
TOTAL -$ -$ -$
ACTIVITY2007
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Sample Budget Roll-up example
Q3 Q4Rent & Research Contracts
Partner 1 -$ 5.8$
Partner 2 -$ 25.0$
Partner 3 10.0$ 15.0$
Partner 4 -$ 55.0$
Office Supplies & Equipment 25.0$ 2.0$
Insurance
Key man -$ 0.6$
Directors' and Officers' -$ 6.0$
Telephone / Internet 1.5$ 1.5$
Legal
Corporate 120.0$ 80.0$
Intellectual Property 10.0$ 5.0$
Advisors
Executive Chairman -$ -$
BOD -$ -$
SAB -$ -$
Others -$ 25.0$
Payments to Licensors 120.0$ -$
Accounting 3.0$ -$
Closing Costs
First Closing 58.0$ -$
Second Closing -$ -$
Meetings -$ 5.0$
Travel & Entertainment -$ 7.0$
Dues & Subscriptions 1.0$ 1.0$
Repairs & Maintenance 6.5$ 6.5$
Miscellaneous 2.5$ 2.5$
TOTAL 357.5$ 242.9$
ACTIVITY2007
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