funding gaps presentation

8/7/2019 Funding Gaps Presentation

1/17

Evolving Financial Strategiesfor UK Biotech Value Creation

Andy Sandham

BioWales 2011

1


2/17

Agenda

Planning for Finance

Pharma Funding Maps & Gaps

Funding Sources

o Angels & Seedso Venture Capital

Case studies

o Novacta BioSystems

o Syntaxin

o Kymab


3/17

Planning for Finance

Manage investor expectations

UK angel/seed funds investing 25-500k

VCs investing 5-15m each through A-C rounds

Are they compatible?

Be prepared for exit tension

Early valuations can be over-ambitious

Down rounds and angel/seed dilution

Funds become unaligned

Last in, first out

Plan to deliver project value

Understand total capital requirement/time to exit

How will investors make and realise returns?

Its a long hike, so have a map!


4/17

The Funding Map 2000

Lead Opt. Phase 3Preclinical Phase 1/2

Grants

Angels

Seed/Uni Funds

VCTs

Small VCs

Platform

Discovery

Independent VCs

Pharma VCs

Institutional

Crossover

I

P

O


5/17

The Funding Gap 2011

DiscoveryLead Opt. Phase 3Preclinical Phase 1/2

Crossover

Instit

Grants

Angels

Seed Funds

VCT/EIFs

Small VCs

Independent VCs Growth Equity

Platform

New Venture Models

Expanded Uni Spin-Out Funds

Pharma VCs


6/17

Shrinkage of EU venture capital Independent VC shift to Growth Equity, VIPES

Strategic Pharma VC investment stepped up

Refinancing is the single biggest investment risk

The Funding Gap

Gap-fill funding sources:

o Regional seed funds expansion

o University Spin-Out fund expansion (Imperial)

o Healthcare charities: CRUK, Wellcome Trust

o Philanthropic patient/disease charities (mostly US)

o Research Councils (LINK, MRC MICA, BBSRC IPA)

o Reverse merger into public casualties
http://uk.wrs.yahoo.com/_ylt=AnS3KBBdcJK6whNnM0USt4FNBQx.;_ylu=X3oDMTBpdnJhMHUzBHBvcwMxBHNlYwNzcgR2dGlkAw--/SIG=1gl31uak8/**http:/uk.images.search.yahoo.com/search/images/view?back=http://uk.images.search.yahoo.com/search/images?ei=UTF-8&p=Mind+the+Gap&y=Search&rd=r1&fr2=tab-web&fr=slv8-mdp&w=300&h=251&imgurl=users.att.sch.gr/tgiakoum/images/2004/mindgap.jpg&rurl=http://users.att.sch.gr/tgiakoum/terra32.html&size=7.5kB&name=mindgap.jpg&p=Mind+the+Gap&type=jpeg&no=1&tt=26,678&oid=e6caf1f06d2cba44&ei=UTF-8


7/17

Where Angels Dare

High net worth founderso In US may invest $0.5-2m

o In UK may invest $0.01-0.1m

Angel networks

o Local (London, SW, SE, NW, NE)o Clusters (GEIF, Cambridge Angels, Onion)

Business risks

o Variable sector knowledge

o

Herd behaviouro Managing expectations

o Lack of follow-through

o Diverse shareholder base disruptive


8/17

Seed Funds and beyond Traditional seed fund sizes up to 5m total

o Typically invest 0.1-0.5m

o Seek shorter term returns than VCs

o Limited capacity creates dilution risk

Imperfect linkage with VCso Lack of symbiosis & communication

o Capital restructuring on refinancing

New ECFs are larger

o 9 new funds, 3 in Healthcare each 20-30m

o Leverages the Capital for Enterprise 50% match

o Aspire Fund for Women Entrepreneurs; match up to 1m

o Medium term returns objective
http://uk.wrs.yahoo.com/_ylt=AjSqalOsDC1dztvMBRU0Q0VNBQx.;_ylu=X3oDMTBqaWRlZWhnBHBvcwMxOQRzZWMDc3IEdnRpZAM-/SIG=1kp21gr16/**http:/uk.images.search.yahoo.com/search/images/view?back=http://uk.images.search.yahoo.com/search/images?p=The+Wellcome+Trust&y=Search&ei=UTF-8&fr=slv8-mdp&x=wrt&w=500&h=309&imgurl=static.flickr.com/1177/907956284_ba1dc168f9_m.jpg&rurl=http://www.flickr.com/photos/mintball/907956284/&size=97.6kB&name=907956284_ba1dc168f9.jpg&p=The+Wellcome+Trust&type=jpeg&no=19&tt=2,778&oid=bcb3cef69b9ea328&fusr=Mintball&tit=The+Wellcome+Trust&hurl=http://www.flickr.com/photos/mintball/&ei=UTF-8&src=p


9/17

Financing for Growth

Sowing the seed round

o Pragmatic valuations for early stage

o Enough capital to reach a Series A trigger

o Keep the capital structure simple

o Crossover investment at VC Series A

Reaping the VC crop

o Financing plan to exit how many rounds?

o Aim for syndicate sufficient for next 2 rounds

o Take care about where VC funds are in their cycle

o Keep the capital structure simple


10/17


11/17

VC Dynamics II

CONFIDENTIAL

11

Pharma strategic VCs

o Expanding cluster:

JJDC, Novo A/S, SR One, Novartis Venture & Option Funds,

Lilly Ventures, Amgen Ventures, Genenfund, Biogen

Ventures, Medimmune Ventures, MerckSerono Ventures,Abbott Ventures, Lundbeckfond Ventures, Boehringer

Ingelheim Venture Fund

o Mix of independent and deal-linked models

o Increasingly syndicating together and co-leadingo Evergreen funds

o Exit drives similar to independent VCs

but more flexibility


12/17

VC Investment Appetite

Proven management science & business Technology/Product leadership

Focus on killer applications (do a few things well)

Well crafted business model

Location prejudice

and liquidity strategy

o Strong corporate partnering potential

o Capital efficiency through outsourcing

o Sound financing plan
http://uk.wrs.yahoo.com/_ylt=AtwbXGHGq9cNl4OhQxUkAnJNBQx.;_ylu=X3oDMTBpaWhqZmNtBHBvcwMzBHNlYwNzcgR2dGlkAw--/SIG=1kstjo7q3/**http:/uk.images.search.yahoo.com/search/images/view?back=http://uk.images.search.yahoo.com/search/images?ei=UTF-8&p=champagne%20celebration&y=Search&rd=r1&fr2=tab-web&fr=slv8-mdp&w=333&h=500&imgurl=static.flickr.com/29/44270733_cd42ec8c5d_m.jpg&rurl=http://www.flickr.com/photos/dopiaza/44270733/&size=63.8kB&name=44270733_cd42ec8c5d.jpg&p=champagne+celebration&type=jpeg&no=3&tt=10,809&oid=5ddfaf1d8a2f77b0&fusr=dopiaza&tit=Celebration&hurl=http://www.flickr.com/photos/dopiaza/&ei=UTF-8&src=p


13/17

Financing Case Study I

Novacta was incubated by PBL/founders in 2001 Anti-infective Drug discovery & service business

Raised 5m equity and convertible debt:

o Challenge Funds, Angels, VCTs, Seed VCo Wellcome Trust Translational & Strategic Awards

Transition to preclinical/clinical required >10m

Change of management: over 100 doors opened 2009: 13m Financing with Celtic Pharma II

Restructured for asset value capture exits


14/17

Financing Case Study II

Syntaxin was spun-out of HPA in 2005 Targeted Secretion Inhibitors drug discovery

Corporate partnering model and deals

Has raised 40m over 3 VC equity rounds

o Series A 2005 6m Abingworth sole investor

o Series B 2007 16m SROne, JJDC, LSP, ABV IV

o

Series C 2010 18m Ipsen, Lundbeck, Seventure + Management change

o Executive chair continuity

o New CEO for Series B and C


15/17

Kymab was spun-out of Sanger Institute in 2010 Building the complete human antibody mouse

Platform (3 years) to mAb Product (7 years)

Equity financing took 12 months

o Initial target was a 10-12m Series A for platform

o Top tier VC syndicate identified for 16m raise

o

20m Series A from Wellcome Trust Investments Building for growth

o Funding enables platform to preclinical for Series B

o Experienced pharma management, 20 employees

Financing Case Study III


16/17

Founders, Angels, Seed Funds & VCs:

Are a tough combination for pharma investment As capital needs are large and timelines to value long

But value creation for all can be possible

If the Chairman, CEO and Founders can ride the scree !


17/17

Evolving Financial Strategies

for UK Biotech Value Creation

Andy SandhamChairman & CEO, Kymab

Chairman, Bicycle TherapeuticsConsultant, Abingworth LLP

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funding gaps presentation

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