CTI LIFE SCIENCES FUND Role of a VC in Helping Commercialize Early Stage Innovation November 19 th 2007 Presented by: Richard J. Meadows Managing Partner

CTI LIFE SCIENCES FUNDCTI LIFE SCIENCES FUND

Role of a VC inRole of a VC inHelping CommercializeHelping Commercialize Early Stage Innovation Early Stage Innovation

November 19November 19thth 2007 2007Presented by: Richard J. MeadowsPresented by: Richard J. Meadows

Managing Partner Managing Partner CTI Life Sciences FundCTI Life Sciences Fund


Canada – BiotechCanada – BiotechA pipeline which seems to be A pipeline which seems to be stalledstalled

Total

Early Stage

Number of companies financed

Total amount invested (Can$M)

• After a sharp increase After a sharp increase in the 90s, the number in the 90s, the number of early stage of early stage financings is financings is decreasingdecreasing

• In spite of the number In spite of the number of early stage of early stage financings, there is no financings, there is no increase in the number increase in the number of late stage financingsof late stage financings

– The pipeline is still The pipeline is still too young…too young…

– … … or it is not or it is not progressingprogressing

0

20

40

60

80

100

120

96 97 98 99 '00 '01 '02 '03 '04 '05 '06

0

100

200

300

400

500

600

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 Late StageSource: Thompson Financial


U.S. – BiotechU.S. – BiotechThe pipeline is progressingThe pipeline is progressing

TotalEarly Stage

Number of companies financed

Total amount invested (US$M)

• The number of early The number of early stage companies stage companies financed remains financed remains constantconstant

• The pipeline is The pipeline is progressingprogressing

• The growth in the The growth in the total amount invested total amount invested is partly explained by is partly explained by the progress of the the progress of the pipelinepipeline

0

50

100

150

200

250

300

350

400

450

96 97 98 99 '00 '01 '02 '03 '04 '05 '06

0

500

1000

1500

2000

2500

3000

3500

96 97 98 99 '00 '01 '02 '03 '04 '05 '06

Source: Thompson Financial


0%

30%

60%

90%

120%

96 97 98 99 '00 '01 '02 '03 '04 '05 '06

Canada – Biotech Canada – Biotech The size of the rounds is much The size of the rounds is much smaller than in the USsmaller than in the USAverage size of the rounds (‘000 Can$)

Number of companies Canada vs US

Early Stage

Late Stage

0

2,500

5,000

7,500

10,000

96 97 98 99 '00 '01 '02 '03 '04 '05 '06

0

5,000

10,000

15,000

20,000

25,000

30,000

96 97 98 99 '00 '01 '02 '03 '04 '05 '06

X1.6

Compared to the US, in 2002-06 :Compared to the US, in 2002-06 :

• Canadian GDP is 9%Canadian GDP is 9%

• The number of early stage The number of early stage rounds is 55%, whereas the rounds is 55%, whereas the number of late stage is only number of late stage is only 15% 15%

• The size of early stage rounds is The size of early stage rounds is 60 % and the late stage 33 % 60 % and the late stage 33 %

• Total amount invested: 10% Total amount invested: 10% (33% ES, 5% LS)(33% ES, 5% LS)

US

Canada

33%

14%

ES

LS


Foreign (US) investors play an Foreign (US) investors play an important role in building exit important role in building exit value value in Canadian dealsin Canadian deals

Source: Giles Durufle, CVCA


Problems with Canadian Problems with Canadian VC’sVC’s

Source: Giles Durufle for CVCA


Seed Series A Series B Series C Mezz/PublGrants

100k 1M 5 – 10M 10 – 20M 20-30M 30M+$

$

Discovery Preclinical Phase I Phase II Phase IIIValue RecognitionCurve

Value Building Curve

Value Capture

The Real Curves

Value Creation vs. Value Capture

Cost of Development $5-25m $10-20m $20-50m $100m+

Source:D.Ho BDC Health Ventures


Investment StrategyInvestment StrategyPicking the "right" Value Inflection Picking the "right" Value Inflection PointsPoints

Size of round: $5-15MPre-Money $10-20MPost-Money: $15-35MBump Up: ≈ 2-3 x

Size of round: $1-5MPre-Money $5-10MPost-Money: $6-15 M

Size of round: $25-50MPre-Money $50-100M+Post-Money: $75-150MBump Up: ≈ 3-5 x


Best Practices: The Best Practices: The BlueprintBlueprint

Source: Giles Durufle, CVCA


What can we do?What can we do?

• Ensure adequate financing.Ensure adequate financing.

• Bring in high quality investors.Bring in high quality investors.

• Fine tune/re-do the development plan.Fine tune/re-do the development plan.

• Finance to achievable milestones and Finance to achievable milestones and be prepared to re-adjust.be prepared to re-adjust.

• Bring in ad hoc support to help Bring in ad hoc support to help management create value.management create value.


Private Market Valuations on the Private Market Valuations on the RiseRise

0

10

20

30

40

50

60

70

80

Life SciencesAll 06

Life All 06 Non LifeScience All

06

Non Life All05

Life ScienceAll 04

Flat RoundDown RoundUp Round

Sources: n=79 Life Science Co. in the Bay Areas Who Raised Money in 2006: Fenwick&West LLP


1995/19981995/1998 2005 2005

$15-30 mm$15-30 mm Capital InvestedCapital Invested $40-80 mm $40-80 mm 3-5 years3-5 years Average lengthAverage length 5 - 8 years 5 - 8 years

IPOIPO Exit Form Exit Form M&A M&A > IPO> IPO

$150 MM $150 MM Average IPO price Average IPO price $200 MM $200 MM2-42-4 Number of syndicate members Number of syndicate members 5-7 5-7

Source : JSB Partners

The Changing Investment Paradigm


Raison D'être of CTI Life Raison D'être of CTI Life Sciences Fund Sciences Fund

"Where broad Operational and VC experience come together to create and realize

shareholder value in Canadian Life Sciences Companies with pre-clinical and clinical drugs

and enabling technologies”.


CTI Life Sciences Fund CTI Life Sciences Fund OverviewOverview

Emphasis on Quebec & Canadian life sciences Emphasis on Quebec & Canadian life sciences companies with pre-clinical, clinical drugs and companies with pre-clinical, clinical drugs and enabling technologies. enabling technologies.

• An investment team that combines Operational and An investment team that combines Operational and VC experience.VC experience.

• A unique pro-active exit strategyA unique pro-active exit strategy Through active post investment management.Through active post investment management. Leveraging relationships with top advisors and US VC Leveraging relationships with top advisors and US VC

investors to position companies for successful exits.investors to position companies for successful exits. M&A’s vs. I.P.O’s.M&A’s vs. I.P.O’s.

• First Close: CAD $71 million, June 20 2006.First Close: CAD $71 million, June 20 2006.• Target size: CAD $100 million, Achieved March 1 Target size: CAD $100 million, Achieved March 1

20072007


Value Creation happens once the Value Creation happens once the Investment Decision has been made.Investment Decision has been made.


CTI Life Sciences Fund – CTI Life Sciences Fund – PeoplePeople

Jean-François Leprince -Managing Partner

Accomplished leader with 30 years of multifunctional, multi-geographical experience in the pharmaceutical industryRichard Meadows-Managing Partner

VC experience in two multi-billion dollar private equity funds along with 15+ years Business Development experience in the pharmaceutical industry

Ken Pastor General Partner’s Representative

20 years experience in the financial market

Shermaine Tilley – Principal

20 years experience in the biotech industry, including investment management, consulting, tech transfer and strong academic experience

Documents

CTI LIFE SCIENCES FUND Role of a VC in Helping Commercialize Early Stage Innovation November 19 th 2007 Presented by: Richard J. Meadows Managing Partner