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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