Folie 1

Funding for Life Sciences how, when and where to get money from

Dr. Patrik FreiAugust 2012 | ENIFarMed, Brazil

www.venturevaluation.com1Mission

Offices HQ: Zurich with representative offices in North America, Europe and Asia (Seoul)

Employees6 people in Switzerland, 7 representatives, JV in India

ClientsPharma, Biotech and Investors such as Novartis Venture Fund, GSK, European Investment Bank, 4SC, Arpida/Evolva, Celtic PharmaVenture ValuationIndependent assessment and valuation of technology driven companies / products in growth industriesInformation services / Life Sciences DatabasesBiotechgate: www.biotechgate.com

www.venturevaluation.com2Financing trendsFinancing sourcesPublic Financing sourcesEquity Financing sourcesConclusion / Q&AAgenda

www.venturevaluation.com3Financing TrendsSource: Biotechgate.com by Venture Valuation=> Alternatives to classical VC finance

www.venturevaluation.com4Increasing cost of developmentHigher hurdles for registrationDisappointment of investorsGeneral risk adversity of market

=> Less capital available for earlier stage companies

Funding gap

www.venturevaluation.com5Financing TrendsHow do companies cope with lack of VC money?

Corporate Investors becoming more importantLicensing as key source of fundingFee for Service as a way of financing innovationProduct / Project financing by VCsPublic money is very important

www.venturevaluation.com6Financing trendsFinancing sourcesPublic Financing sourcesEquity Financing sourcesConclusion / Q&AAgenda

www.venturevaluation.com7Own development => resources neededOwn financing (Services)Public: Grants / Government FundingRegionalNationalEuropean / internationalRaise capitalEquity (VC, Corporate, Family Office, BA)Venture Debt / Convertibles Product FinancingOut-licensingValue retention; lead vs. follow-on products

Financing Sources

www.venturevaluation.com8Licensing vs VC FinancingVC FinancingLicensing DealVenture Capitalist/InvestorDilution / valuation

Enough to get to next value creating milestone

Risk / reward remains with shareholdersKnow-how for M&A dealsPortfolioPharmaDeal terms / value preservation Collaboration modelMilestone payments must fund development

Risk / reward sharingUp-side cappedKnow-how for developmentSingle product

www.venturevaluation.com9Licensing Trends

Source: Nature Reviews, Drug Discovery, 2011Financial crisis, risk aversion of investors; pressure on pharmaDemand from big pharma, patent cliff

www.venturevaluation.com10Prioritize projects and have clear licensing strategyCombine different global regions / Cross-boarder licensingFocus own development on more developed productsOut-license earlier products

Licensing Conclusions

www.venturevaluation.com11Financing QuestionsHow much money do I need?Where should I get the money from?Dilutive / non-dilutive financing?Valuation as a key issue?Raising money takes a lot of time?

www.venturevaluation.com12Equity FinanceVenture CapitalCorporate InvestorsFamily OfficesBusiness AngelsSize> USD 5 mOpenOpen< USD 2mCompany typeHigh risk / potentialStrategic fit, innovativeService component, opportunisticSeed / early stage

Total capital requirementHighHighMediumLowExitSet 5-10 yearsM&ALong-term partnerMedium term

www.venturevaluation.com13Non-Equity FinancePublic Grants / GovernmentPrivate GrantsConvertiblesRevenue, Royalty Product FinancingSize< USD 2 m< USD 5 mopen> USD 10 m

Company typeInnovative, R&D, early stageInnovative, R&D, niche markets, High growth, later stageMature, later stageTotal capital requirementAllAllAllHighExitNoneNoneRepay / convertnone

www.venturevaluation.com14Financing trendsFinancing sourcesPublic Financing sourcesEquity Financing sourcesConclusion / Q&AAgenda

www.venturevaluation.com15Public funding sourcesBasic research

National programmes e.g. National Science Foundation in Switzerland

EU programmes e.g. European Research Council ERCApplied R&D

National programmes (e.g. CTI in Switzerland)

EU programmes e.g. Cooperation projects in FP7 Tech. Transfer & Market application

National tech. transfer and support programmes, e.g. CTI Start-up in Switzerland

European tech transfer and support programmes, e.g. Enterprise Europe Network

www.venturevaluation.com16Dos in public fundingStrategy: apply only if project is in line with your strategyRules: evaluate which program fits your needs, study the rulesPartner: find the right partners completing your expertiseEvaluation: public funded projects are evaluated, so you have to sell your projectSupport: there are different support organizations, so ask them (e.g. the national contact points)

www.venturevaluation.com17Donts in public fundingProfit: Dont apply to make a profit, but to get knowledge and a network; funding is for pre-competitive supportTopic: only apply if your research fits the themePartners: make sure you have reliable partnersScope: Dont ask for EU funding for regional scopeNot easy: Competition is high, dont expect easy funding

www.venturevaluation.com18Financing trendsFinancing sourcesPublic Financing sourcesEquity Financing sourcesConclusion / Q&AAgenda

www.venturevaluation.com19Venture Capital CycleFF&FUnderstand the Venture Capital CycleLook at the whole Company Life CycleIPO, Trade saleSeries CSeries BSeries AVC InvestmentExitRequired IRRRequired IRRVenture Capital Investment Cycle20

www.venturevaluation.com20Exit possibilitiesInvestor look for exit possibilities to realize returnSale of shares => very difficultExit via different channels possible:Merger & Acquisition (M&A)Management Buy-out (MBO)Initial Public Offering (IPO)

www.venturevaluation.com21--- International Kontake, andere UGs in PortfolioDos for VC preparationYou need a business plan Be specific. Substantiate statements with market dataSummarize and properly structure financial information; Show how much money you need; how do you spend itNetwork like crazy Do reference checks on the VC (previous investments)

www.venturevaluation.com22Donts in VC preparationDont use highly technical descriptions of productsDont make vague or unsubstantiated statementsDon't ignore or underplay your competitionDon't ignore key risksDont take the funding processlightlyDont try to raise between significant milestonesDon't be afraid to ask for adequate funding

www.venturevaluation.com23Dos in Sales pitchShow a clear and logical exit strategySave up good news for the middle of the process Wait until you have significant tractionBe direct and have a plan VCs like to see your confidenceBe open and honestBe brief provide executive summary

www.venturevaluation.com24Donts in the sales pitchDont pitch ideal VCs first practiceDont just pitch - listen to the VCDont be defensive Dont plan on closing any rounds in August / December or within a short timeDont engage in a bidding war. Dont travel too much stay localDont press people beyond the Thank You email after a meeting.

www.venturevaluation.com25Financing trendsFinancing SourcesPublic Financing sourcesEquity Financing sourcesConclusion / Q&AAgenda

www.venturevaluation.com26Financing ConclusionThink outside the box / optionsUse local government and global research grants (non-dilutive) but keep focusFind best match for own developmentConsider out-licensingUnderstand the value of each productGet the money when you canNetwork, network, network.

www.venturevaluation.com27

Thank you for listening!

Slides available on www.venturevaluation.com

Tel.:+41 (43) 321 86 60Venture Valuation AGFax:+41 (43) 321 86 61Kasernenstrasse 11www.venturevaluation.com8004 Zrichp.frei@venturevaluation.comSwitzerland

www.venturevaluation.com28Workshop: Valuation of early-stage projectsswiTT / SBA