Idea to Venture in Biotechnology: Realizing the Promise of Life Science Innovation

Four  Paradoxes  for  Managing    High  Growth  Biotech  (Ad)ventures  

P1:    Breakthrough  IP  o/en  comes  from  outside  the  target  industry  and/or  from  the  slowest  moving  organiza=ons;  

P2:    Entrepreneurship  requires  individual  courage  and  is  a  team  sport;  

P3:    Financing  covers  near-­‐term  milestones  and  you  need  to  build  for  the  long-­‐term;  

P4:    Plans  rarely  survive.  Planning  is  cri=cal  to  success.  

buttered cat paradox

Venture  Capital  Deals  and  Median  Fund  Raised  by  First  LeIer  of  a  Company’s  Name  

3  Source: www.chubbybrain.com (2011)

Caselet: I’m ready for my close up!

AsULikeIt, Inc. has developed a plastic surgery product prototype to allow patients to design their body parts with a 3D printer before surgery. The largest markets are in North and South America. You have $5 MM in initial funding and require $50 MM to product approval.

Case: Kythera Financing History

Case: Kythera

1st Generation 2nd Generation 3rd Generation

natural products and derivatives

Penicillin's Sulphonamides aspirin

Psychotropics

NSAIDs

H-2 antagonists Beta blockers

Lipid lowerers ACE-inhibitors

Biotech drugs

Chronic degenerative disease associated with aging, inflammation, and cancer

• Drugs against targets identified from complex diseases

• Orphan drugs •  Prevention/chronic

care v. treatment serendipity

receptors

enzymes

genetic engineering

cell pharmacology/ molecular biology

Geonomics/proteomics

Adapted: Lehman Brothers

140  Years  of  Drug  Discovery  Technology  N

ew T

her

apeu

tic

Cyc

les

1900 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040

7  

The cost of sequencing a human genome has decreased “100 fold”

$1,000 genome Illumina’s HiSeq X Ten

Proliferation Metastasis Angiogenesis Apoptosis

Shc

PI3-K

Raf MEKK-1

MEK MKK-7

JNK ERK

Ras

mTOR

Grb2

AKT

Sos-1

Which Target?

Source: I. Serebriiskii and E. Golemis, Fox Chase Cancer Center. 9  

Source: I. Serebriiskii and E. Golemis, Fox Chase Cancer Center.

Sos-1

Ras

MEKK-1 MEK

Shc

PI3-K

Raf

MKK-7

Grb2

AKT

JNK

ERK

Which Target?

10  

‘Targeted’ Cancer Therapeutics: Targeting the microenvironment has the potential for broad applicability

Molecular-level Differences

Cellular-level Differences

Gleevec imatinib

Herceptin trastuzumab

Avastin bevacizumab

Microenvironment

Differences

Observational Prognostic Factors: Cancer Recurrence Hazard Rates

Prominent early peak of recurrences (~ 3 yrs) in absence of adjuvant therapy, particularly in ER- disease

0

5

10

15

20

25

0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 Year

Haz

ard

of re

curr

ence

by

year

ly in

terv

al

Total Node 0 Node 1-3 Node (4+) Tumour size (<1cm) Tumour size (1.1-3cm) Tumour size (>3cm) ER+ ER- Premen Postmen

Source: Early Breast Cancer Trialists’ Collaborative Group. Lancet. 1998;351:1451 ; Update of Houghton. J Clin Oncol. 2005; 23(16S):24s. Abstract 582 Saphner et al., J Clin Oncol. 14: 2738-2746, 1996

Quantitative Predictive Values: OS of MBC Patients with <5 or >5 CTC at Baseline

(N=177)

Source: Veridex

Treatment Cost and Pharmacoeconomic Benefits of Early Detection and Adjuvant Treatment

Women without breast cancer metastatic have a 5-year survival rate of 96%, while those with metastatic breast cancer have a 5-year survival rate of 21%.

Source: US National Cancer Institute’s Surveillance Epidemiology and End Results (SEER) Data base 14

Genetic Abnormalities in Adenocarcinomas of the Lung

Shaw AT et al. N Engl J Med 2011;365:158-167

Response to ALK Inhibition

Source: Kwak EL et al. N Engl J Med 2010;363:1693-1703

Zelbroraf® (vemurafenib), BRIM3 Progression-Free Survival

Nearly all patients respond, but nearly all patients progress (mPFS ~ 6 months)

Source: Chapman et al. NEJM 2011.

Mechanism of Action of PLX4032 in Melanoma

Chabner BA. N Engl J Med 2011;364:1087-1089.

Combined BRAF and MEK Inhibition

Source: Infante et al. ASCO 2011.

Baseline Cycle 5 Day 1

•  51-year-old female with BRAF V600E mutation-positive melanoma •  Received 6 prior treatments (including interferon, IL-2 and ipilimumab)

Combined BRAF and MEK Inhibition

Source: Infante et al. ASCO 2011.

Baseline Cycle 5 Day 1

•  51-year-old female with BRAF V600E mutation-positive melanoma •  Received 6 prior treatments (including interferon, IL-2 and ipilimumab)

Do accelerated FDA development pathways work?

Sources: FDA; ASCO Post (2014)

0"

50"

100"

150"

200"

250"

300"

350"

400"

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"2008"2009"2010"2011"2012"2013"

No."Orphan"Drugs"Approved"

No."Orphan"Drugs"Designated"

No."Designa?on"Apps"

Targeted Therapies Drive Orphan Drug Development

Source: FDA OOP (2014)

T-Cell Killing a Tumor Cell

Source: P Greenberg (2012)

Start-­‐Up  Biofinancing  ConTnuum  

24  

Num

ber o

f Inv

esto

rs

per F

inan

cing

Capital Requirements

Bootstrapping

Angels

Venture Capital

Reverse Merger

IPO SPO

PIPE

Private

Public

Low High

Biotech Venture Financings 1995-2014

$

$ 200,000,000

$ 400,000,000

$ 600,000,000

$ 800,000,000

$ 1,000,000,000

$ 1,200,000,000

$ 1,400,000,000

$ 1,600,000,000

$ 1,800,000,000

$ 2,000,000,000

20

40

60

80

100

120

140

160

180 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 Q

3 Q

1 20

11

Q3

2011

Q

1 Q

3 Q

1 Q

3 Q

1

Fina

ncin

g $

No

of F

inan

cing

s

No of Financings

Source: PWC Money Tress (2014)

Exits are Not Existential Exercises for Entrepreneurs

* Please say 3 times quickly

Biotech IPOs

Biotechnology Index vs. S&P 500 and NASDAQ Indices 1989-2014

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

Nov-

89

Nov-

90

Nov-

91

Nov-

92

Nov-

93

Nov-

94

Nov-

95

Nov-

96

Nov-

97

Nov-

98

Nov-

99

Nov-

00

Nov-

01

Nov-

02

Nov-

03

Nov-

04

Nov-

05

Nov-

06

Nov-

07

Nov-

08

Nov-

09

Nov-

10

Nov-

11

Nov-

12

Nov-

13

Inde

x 100

=Nov

1989

-Mar

2014

S&P 500

Biotechnology (BTK)

Nasdaq

External Products Comprise 34% of Top 10 Biopharma Companies Pipeline (2013)

Source: Biocentury (2013)

Types of Strategic Alliances

Level of Commitment

Potential/Risk

High

Low

High Low

In/Out/Cross-License

Import/Export

Joint-Ventures

Mergers & Acquisitions

Franchise

Co-Promotion/ Co-Marketing

Mergers and Marriages: Do We Want Either?

•  Marriages: Divorce rate in America for first marriage is 41%; second marriage is 60%; and third marriage is 73%

•  M&A: 67% of mergers and acquisitions fail to increase value

•  JVs: 80% of joint ventures last less than 4 years

First half 2014 biopharma M&A is off to a good start

1H13 35 Deals

$669M Average

Total Value

1H14 40 Deals

$825M Average

Total Value

2H13 45 Deals

$927M Average

Total Value

23 Deals Proposed

0

10

20

30

40

50

60

70

80

2013 1H14

No.

of d

eals

Completed M&A Deals for Biopharma Cos. (2013 vs. 1H14)

Private Biopharma

70%

Small-Cap Biopharma

(<$1B) 17%

Mid-Cap Biopharma ($1-$50B)

13%

Biopharma Therapeutic Product and Technology Platform Co. M&A

(1H14)

40 Completed Biopharma

M&As (1H14)

Source: BCIQ: BioCentury Online Intelligence

Four  Paradoxes  for  Managing    High  Growth  Biotech  (Ad)ventures  

P1:    Breakthrough  IP  o/en  comes  from  outside  the  target  industry  and/or  from  the  slowest  moving  organiza=ons;  

P2:    Entrepreneurship  requires  individual  courage  and  is  a  team  sport;  

P3:    Financing  covers  near-­‐term  milestones  and  you  need  to  build  for  the  long-­‐term;  

P4:    Plans  rarely  survive.  Planning  is  cri=cal  to  success.  

buttered cat paradox

www.pukanapartners.com