panorama 2015 of the life sciences industry in france®

13TH EDITION

Panorama 2015 of the Life

Sciences Industry in France

france biotech | Panorama 2015

2

CONTENTS

04 Highlights 2014 -2015 05 Map of regions of the sample

06 Jacques Fayolle, Director of Telecom Saint-Etienne

07 France: the life sciences sector 08 Headcount of companies and qualification of employees,

origin of R&D and age of companies

09 Field of activity, creation and liquidation of companies

10 Analysis of French pharma R&D pipelines

11 Therapeutic products

12 Emerging sectors: Biocleantech and E-health

13 Medical devices and diagnostics

14 Partners and intellectual protection

15 Map of partnerships and subsidiary companies in Europe

16 Gilles Johanet, Attorney General at the Court of Auditors

17 Financing of innovation 18 10 best practices to raise funds according to KPMG

19 Funding life sciences

20 Venture capital financing, IPO and post-IPO

21 Development of European IPO in life sciences

22 Stock market experience of French companies and focus on the Nasdaq

23 Catherine Porta, Partner KPMG, biotech specialist

25 Appendices 26 Sample of companies

27 Reading committee

Acknowledgements

Nature of the studyEach year France Biotech conducts the Panorama of the Life Sciences industry in France, a study conducted on the basis of a dedicated questionnaire and company publications. It is not designed to be exhaustive and the information was collected until 30 October 2015 based on 223 companies. The companies included in the study meet the following criteria:

operate in the life sciences sector in France. invest at least 15% of their total costs in research and development. have less than 250 employees.


EDITORIAL 3

Adapt the tools to our realities Pierre-Olivier Goineau, President of France Biotech

The dynamic observed over the past few years con-tinues, with a sustained rate of creation (57 creations in 2014). Whether it be upstream or advanced phases, our companies do a better job and more than the big four with research that implements diversified disruptive technologies (68 projects in phase 2 and 3 versus 51 for pharma in France).

This marvellous French potential is the fruit of excel-lent professional training. It is even more important that this training opens up to entrepreneurship. Two thirds of start-up entrepreneurs come from academic research and have never had the occasion to tackle business (60% of founders are new managers). It must be possible to establish a more fruitful dia-logue between training courses and businesses. It is traditionally the case with engineering schools, how-ever scientific and medical universities are not open to us, hindering the exchanges of expertise that we could have. It is also curbs creative know-how. More importantly, the technologies that we implement, from diagnostic, therapy, molecule, medical device up to digital, increasingly merge. At government level,

the structures that assess us remain segmented and do not allow for any global vision of what medicine will look like in five years. It is indispensable to have access to the databases of the Caisse Nationale dAssurance Maladie (CNAM) and to have a vision of what the French National Authority for Health (HAS) and the Economic Committee for Medicinal Products (CEPS) expect to evaluate and reimburse our products. It is equally essential to have, from the outset, structured dialogues with the National Agency for the Safety of Medicines (ANSM) to enable us to move our developments forward. There is still no framework where all the actors could work together. It is the case however in the United Kingdom, which has managed to turn these regulations into a key success factor whereas we make them constraints and lose in attractiveness and legibility.

Our industry needs regulators and payers to send signs to better prioritize their expectations and to be able to diversify their research, still too focused on cancer. Current tools must be adapted to our realities and to our cycles by prolonging the staus of young innovative enterprise (JEI) and by permitting greater flexibility of threshold levels.

In our sector where funding needs are very high, strengthening the national structure of financing is indispensable. Whereas the challenge is to anchor our firms in France so that they can become mid-tier companies and generate French champions, venture capital in France is not in a position to absorb the wave of companies initiated in previous years. It is necessary to urgently reconstitute a better endowed financing fabric by earmarking life insurance towards FCPI/FCPR and by facilitating the return of banks and insurance in the financing of investments. The government is doing a great deal for our sector, today it involves mobilizing private savings that are currently lacking.

In our sector where funding needs are very important, it is essential to strengthen the national structure for financing.


4

HIGHLIGHTS

Infographics of the 2014 2015 sample

223companies studied

30%of companies are over 10 years old

57companies created in 2014

4 992 employees (22 employees

on average)

10therapeutic products

marketed

348therapeutic products in

development

43diagnostic devices in

development

89medical devices in

development

67listed companies as of 30

September 2015

373 Mturnover

426 Minvested in R&D

379 Mnet loss


HIGHLIGHTS 5

> 40

2140

1020

19

3

Pays-de-la-Loire

8

Auvergne

3

Midi-Pyrenees

18Languedoc-Roussillon

17

Aquitaine

4

Champagne-Ardenne

1

Paris- Isle-of-France

71Brittany

9

Poitou-Charentes

1

Provence-Alpes-Azur

14

Center

1Burgundy

2

Lorraine

2Alsace

8

Upper-Normandy

5Lower-Normandy1

North-Calais

4

Picardy

2

Rhone-Alpes

34

Limousin

3

Franche-comte

1

Map of regions of the sample

As in previous years, the Paris-Isle-of-France region concentrates over 34% of companies included in the study of which 24 are listed. The group of regions formed by Rhone-Alpes, Languedoc-Roussillon,

Midi-Pyrenees, Provence-Alpes-Azur represents nearly 40% of companies in the sample of which 18 are listed. Finally, the following regions appear: Alsace, Brittany, Pays de la Loire, North-Calais and Aquitaine.


6

Engineering and innovation in health Jacques Fayolle, Director of Telecom Saint-Etienne

Biotechnologies are a high-growth sector.

Next to classic engineering schools centered on the technologies of biology and chemistry, issues related to the augmented human, to artificial intelligence and to biostatistics are leading to the emergence of a new sector that calls on digital technologies. This sector is exploding both at the level of research and scientific productions as well as at the level of small

and medium-sized companies, start-ups and young innovative companies, with two major axes that are namely the questions of an ageing population and home care assistance and the detection of weak signals for the prevention of epidemics. These con-cern, in particular, robotic solutions aimed at accom-panying people in their old age. These are orthotics and smart prostheses, the image of knee replacements that facilitate movement and take over from muscles or articulated hands that, tomorrow, will be able to be produced for under a thousand euros thanks to 3D printing.

These developments require concepts on the uptake of closest data, from connected bracelets and watches to more intrusive devices on humans. Engineering intervenes also in the capability to manage very large data repositories from which statistical analysis must

be carried out to extract value-added information and to produce recommendations. This approach associ-ating engineering and digital contributions to health constitutes a differentiating factor compared to the situation that existed ten years ago.

Engineering work is based on the understanding of partner constraints and today, the design of an innovative product or service depends on an even earlier integration of the needs and expectations of the end user. All of these developments suggest that engineering schools demonstrate openness to and understanding of the problems of the world of health to numerical engineers. They must also be able to accompany biologists in the digital world. All of these issues, whether it be processing health data or augmented humans, come back to the question of ethics. What are the limits between the collection and the analysis of health data for the care of a person at home and Big Brother? Until what stage can an indi-vidual who has received an artificial heart, an articu-lated hand, who sees thanks to micro-cameras still be considered as a human? At what moment does the individual become a robot with the underlying ques-tions of the death or life sustaining of a human based structure ? These developments figure, in my opinion, among the major developments of our cen-tury. Our engineering schools must equip themselves today to generate the skills of society tomorrow. Here is a direction that we must boldly take.


RUBRIQUE 7

1France: the life sciences sector

The French fabric of life sciences companies in health is dynamic, supported by strong interna-tional ambitions. Despite a context of ongoing global crisis, France remains a land of innovation. 2014 will have seen the medtech sector support the health sector whereas 2015 will have been the year of biotechnology companies.Conclusive clinical results, mega deal signatures with big pharma demonstrate the power of French research. Representative of the French ecosystem in health, the 2015 panorama stresses the frugal development in France and internationally of a forward-looking sector and driver for growth for the coming decades.



8

PART 1

Qualification of employees

1 to 10

11 to 30

31 to 99

100 and more

Headcount of companies

60%

22%

16%

2%

Almost 60% of companies have a headcount of be-tween 1 and 10 employees, indicative of the develop-ment model of companies in the sector. The bracket 11-30 represents 16% of companies in the panorama. Amongst our sample, the headcount of 47 companies is higher than 31 employees, highlighting the level

Source: France Biotech, 223 companies, October 2015

Source: France Biotech, 223 companies, October 2015 Source: France Biotech, 223 companies, October 2015

of maturity reached. Finally, 2% of companies (7) exceed 100 employees. Regarding the qualification of employees, we always find a high-level population as nearly 60% hold a university degree at the level of a Masters or Doctorate. All the companies employ 4 992 people with an average of 22 employees per company.

France enjoys a high-quality university network. 56% of compa-nies were created from research started in the public domain. The other driver for innovative companies is the creation ex- nihilo (23%) by an entrepreneur. Spin-offs of SME represent 15% of creations via repurchasing of assets. Conversely, spin-offs of large pharmaceutical groups represent only 6% of creations. The consolidation of employees reflects the structuring in progress. The 0-5 years bracket represents 14% of personnel for 8 employees per company whereas the 11 years and + bracket represents 60% of personnel with 45 employees.


Origin of R&D

Academic research

Creation ex nihilo

SME

Industrial group

23%

56%

15%

6%

Age of companies

0 to 5 years

6 to 10 years

10 years and +

31%

39%

30%

Baccalaureate

Bachelor degree

Master degree

PhD

Profile of managers

64% of founders are scientists

60% of founders are new managers

20% are founders, scientists and former managers

Need to train managers

34%

27%

12%

27%


FRANCE: THE LIFE SCIENCES SECTOR 9

Source: France Biotech, 223 companies. Multiple response questions, October 2015

Field of activity

Creation and liquidation of companies

Year 2010 2011 2012 2013 2014

Creations 65 78 53 57 57

Liquidations 10 10 26 19 16

Net 55 68 27 38 41

Sources: France Biotech, socit.com

Human therapeutics (80%) remains the first field of activity, followed by medical devices and diagnostics (38%) and veterinary therapeutics (28%). Medical devices and diagnostics progress in the hierarchy year on year and is explained by a better participation in

the study. Cosmetics as well as materials and research reagents follow with 25% and 23%, respectively. Fi-nally, human food and veterinary feed, bioinformatics and biocleantech close the market with 14%, 11% and 10%, respectively.

After having observed a peak in liquidation in 2012 in response to the world economic downturn, we wit-ness a decrease in the number of liquidations. On the increase for three years, the dynamic of net creation has not however reached the levels of 2010. In 2014,

we observe a stabilization in the number of business start-ups (57) as well as a decline in the number of liquidations (16 liquidated companies, down 16% compared with 2013).

Baccalaureate

Bachelor degree

Master degree

PhD

Human therapeutics

Medical devices and diagnostics

Veterinary therapeutics

Cosmetics

Materials and reagents

Human food and veterinary feed

Bioinformatics

Environment & Bioenergy

0 20% 40% 60% 80% 100%

80%

38%

28%

25%

23%

14%

11%

10%


10

PART 1

Comparison of French Big Pharma with French biotechs

With 104 products in clinical phase out of a total of 338 projects, French biotech today displays a larger development portfolio than the four main actors of the pharmaceutical industry in France (Ipsen, Pierre Fabre Mdicament, Sanofi and Servier). This growth can be observed particularly at advanced stages of development with 68 projects in phase 2 and 3 versus 51 for pharma in France. With 234 projects in R&D phase, the biotech sector confirms its dynamism and also demonstrates that it possesses an important reservoir of innovation.Whether it be molecules in advanced phase or in early development, the study of the French pharma portfo-lio confirms the increasing place of products origina-ting from biotech (monoclonal antibodies, conjugated antibodies, interfering RNA, messenger RNA, peptides, antisense oligonucleotides, kinase inhibitors, gene therapy products).

These products emanate from the integration of biotech companies by pharma, just like Genzyme bought out by Sanofi in 2011 or, more often by agree-ments with biopharmaceutical companies from North America or Europe. For five years, Ipsen, Pierre Fabre Mdicament, Sanofi and Servier have concluded over 70 R&D or licensing agreements with biotechs, in the majority North American or European. At the Euro-pean level, the countries most represented among these alliances with French pharma are, on equal terms, France and Germany, ahead of Belgium, the Nether-lands, Switzerland, Austria, the United Kingdom and Sweden. In terms of the therapeutic areas concerned, cancers, infectious diseases, cardiovascular diseases, neurodegenerative diseases, rare diseases and diabetes are top priority. French biotechs are still too removed from big pharmaceutical companies; these have not yet seen the potential of R&D programmes.

Origin of biopharmaceutical companies in R&D partnership with French pharma since 2010

Sources: laboratory sites, BioCentury, October 2015

# in research # Phase 1 # Phase 2 # Phase 3

Panorama Biotech n=108 234 36 45 23

Ipsen 10 6 (phase 1-2a) 6 (phase 2b-3) 3 in registration phase

Sanofi nc 19 9 9 + 4 in registration phase

Pierre Fabre 1 nc 2 2

Servier 36 17 7 9

Sources: laboratory sites, BioCentury, BioPharmAnalyses, October 2015

North AmericaEurope

Asia TotalFrance Germany United Kingdom Others

Ipsen 2 1 3 2 8

Pierre Fabre 2 1 2 1 6

Sanofi 20 5 5 1 4 7 42

Servier 8 3 2 3 1 17

Total 32 9 5 4 12 11 73


Stage of development


Therapeutic areas

Oncology

Infectious diseases

Central nervous system

Metabolism (diabetes, obesity)

Ophthalmology and sense organs

Genetic diseases

Cardiovascular system

Digestive system

Dermatology

Other fields

0 5% 10% 15% 30%20% 25% 35%

2010

2011

2012

2013

2014

Therapeutic products

Source: France Biotech, companies, October 2015

Source: France Biotech, 108 companies, standardized data based on 100 out of 108 companies, October 2015

With a rich pipeline of 348 products ranging from proof of concept to commercialization, the R&D pipeline of companies reflects the scientific producti-vity in France. 67% of development programmes are focused on early phase (proof of concept and precli-nical), therefore the future is promising. Furthermore, we observe a sharp increase in products in phase 2

and phase 3 accounted for by taking into account AB Science which alone conducted 9 programmes in phase 2 and 13 in phase 3, in different indications in oncology and central nervous system, around its lead product masitinib. However, too few companies go as far as commercialization, only mid-tier companies manage to do so.

33%

17%

10%

7%

5%

3%

3%

1%

1%

8%

exist in other therapeutic areas some of which are priority for French Big Pharmas. This observation brings to light the absence of an industrial reflection by startups in order to follow in the steps of industrialists.

One third of R&D programmes is focused on cancer with 114 products in development. This is followed by infectious diseases (17%), 59 products in development and the central nervous system (10%), 36 products in development. However, development opportunities

160

80

100

120

140

40

60

0 Proof of concept Preclinical Phase 1 Phase 2 Phase 3 Registration MA

NC 126 138 152 142

63 59 57 66 74

40 29 34 26 33 27 35 34 31 42 8 6 8 8 21 4 3 4 4 0 12 12 11 12 10


12

PART 1

Emerging sectors: Biocleantech and E-health

Biocleantech Field of application Stage of development

Recycling and recovery of waste

Nutrition

Water treatment

Biofuel

Tools for R&D

Other

Digital diagnostic/ Computer-aided diagnosis

Telemedicine

Connected objects

Telemonitoring of patients

Research and development

Research

Development

Commercialization


Source: France Biotech, 10 companies, October 2015 Source: France Biotech, 10 companies, October 2015

50%

12%

13%

25%

100%

Sector of the future, the cleantech/biocleantech industry in France is under the spotlight in this year of COP21. Offering alternative solutions to global issues (pollution, nutrition, mobility), this sector can see its actors slowly gain maturity and visibility. Indeed, these companies structure themselves via the signature of R&D partnerships, the formation of joint ventures

(example: Cristal Union and Global Bioenergies) with a view to speeding up the development and industrial-ization of these technologies. Once the pilot phases of transformation have been successfully passed, the sector will see national champions emerge that could have a knock-on effect for the other actors.


At a time when the digital transformation of compa-nies brings about large-scale changes at a fast pace, the health sector takes advantage not only of these technological developments but also of practices in a context that seeks to promote cost controls of public health care. Mobile applications, connected objects, big data are equally new tools likely to improve our health

care system thereby making it sustainable for decades to come. With a world market estimated at 2,4 billion in 2012 and an annual progression between 4 and 7% according to the 2015 report of the National Council of Digital technology, e-health is an excellent opportunity of growth for France and for Europe.

54%

15%

31%

E-health Field of application Stage of development

50%

0% 10%

10%

20%

10%


17


Medical devices and diagnostics

Classification

Class 1

Class 2a

Class 2b

Class III

In vitro diagnostic medical device

Active implantable medical device

18%

30%

9%

6%4%

33%



Therapeutic areas

Orth

opae

dic

surg

ery

Infe

ctio

us d

iseas

es

Card

iolo

gy/V

ascu

lar

Gas

trol

ogy/

Ente

rolo

gy/H

epat

olog

y

Imm

une

syst

em

Onco

logy

Radi

othe

rapy

Pneu

mol

ogy/

Resp

irato

ry

Imag

ing

Gen

eral

sur

gery

Uro

geni

tal/N

ephr

olog

y

Rean

imat

ion/

Perf

usio

n

Opht

halm

olog

y

Neu

rolo

gy

Gen

etic

dise

ases

Dres

sings

/com

pres

ses

Corr

ectiv

e su

rger

y

Stom

atol

ogy/

Dent

istry

Othe

r fiel

ds

15

12

9

6

3

0

The distribution of the classification of medical devices (MD) brings to light two categories that concentrate more than 60% of developments in MD; class III MD (30%) and in vitro diagnostic MD (33%). Medicine of the future pushing towards personalized medicine, the use of in vitro diagnostic MD is bound to become generalized in the years to come. Monitoring of bio-therapies, predictive genetic screening, are the many fields that attract the attention of private actors and also the government in a logic of controlling health care expenditure.

56 companies reported being involved in MD. The distribution of programmes per branch places ortho-paedic surgery in first position. This is followed by the trio of infectious diseases (10%), cardiology/vascular (7%) and gastrology/enterology/hepatology (7%). With already 44 products on the market, the sphere of medical technology companies demonstrates its level of maturity. Finally, with as many as 91 programmes in R&D phase, the medical technologies sector is a real driver of innovation.


Stage of development

Research

Development

Commercialization

80

70

60

50

40

30

20

10

0

74

44

15%

10%7% 7% 7% 7%

6% 6% 5% 4% 4% 3% 3% 2% 2% 2% 1% 1%

7%


Intellectual protection is a key element in the strategy of value creation of innovation companies. Consequently, it is essential for these companies to have a high level of protection of their research work. Close to 178 companies (80%) protected their discoveries via the registration of national and international patents. Just under half of the patents delivered (47%) were outside the European area. The profile of companies taking out patents is that of a 9-year-old structured company with a headcount of 26 employees.

14

PART1



Distribution by type of partner

68%

10%

7%

15% 46%

29%

6%

19%

France

Europe

North America

Rest of World

Academic research

Industrialists

Biotech

Others

France/Europe

USA

Rest of World

13%

57%

30%


The lack of resources impairs the development of structural inter-national partnerships. However, with promising clinical results, sup-ported by a remarkable stock market performance, certain biotechs create enthusiasm among both Big Pharma and the international financial community. In this way, the first partnership over 500 M$, of which 50 M$ upfront between a US big pharma and Adocia, came about at the end of 2014. Earlier in the year, it was immunotherapy that was under the spotlight with the signature of a double deal of capital importance for Cellectis, specialist of CAR-T cells, with the laboratory Servier and the American Pfizer. The first deal foresees an initial payment of 7,5 M and up to 105 M for each of the six drug candidates potentially developed. For the second agreement, con-cluded some months later, Cellectis will receive an upfront payment of 80 M$ that could go up to 185 M$ per product. Concurrently, Pfizer took a 10% stake in the capital of Cellectis. Genticel, a company

specializing in the treatment of papillomavirus, signed a licence agreement around its technological platform Vaxiclase with the Serum Institute of India for a maximum amount of 57 M$. IDD Biotech, specialist in the production of monoclonal anti-bodies, formed an alliance with Genmab for a maximum amount of 101 M. The partnership signed with Astra Zeneca, definitively brought Innate Pharma into play in the major league. Savvy in such international agreements, the Marseilles biotech signed a co- development agreement with Bristol-Myers-Squibb in 2011, for its lead programme the antibody Irilumab, that could reach 430 M with an upfront payment of 35 M$. The co-development agreement concluded with the British giant in April 2015 is for another earlier stage programme. This mega-deal, valued at 1 275 billion $, includes an upfront payment of 250 M$, providing sufficient latitude to Innate Pharma to pursue its international development.

Geographic distribution of partners

Patents delivered



FINLAND 2

SWEDEN 2 2 Academic research Industrialists

Biotech

Others

Map of partnerships and subsidiary companies in Europe

DENMARK 1 10

NETHERLANDS 1 3

AUSTRIA 1

GERMANY 8 2

UNITED KINGDOM 3

SPAIN 1 4

ITALY 4 3 PORTUGAL 1

SWITZERLAND 9

LUXEMBOURG 1

BELGIUM 4

International subsidiaries (75)

International partnerships (99)

NORTH/SOUTH AMERICA 42 36 MIDDLE EAST 5 ASIA/OCEANIA 9 15


16

Evaluation of the medicinal product should be objectified Gilles Johanet, Attorney General at the Court of Auditors and former president of the Economic Committee for Medicinal Products (CEPS), former director of the CNAM

The risk-benefit analysis established itself in order to evaluate the innovation that a new treatment brings to a patient. Purely scientific, the benefit analysis should nonetheless progress more easily than the risk analysis, closely linked to fears of our developed companies where risk aversion is ever increasing. Faced with a new anti-cancer drug that increases life expectancy by three months and causes fever and

pain, only these risks of side-effects and the duration of this prolongation seem to be taken into account. Yet, it must not be forgotten that these three months are a coach in the train of progress that, today, is no longer approached as a continuous chain. Here we are witnessing a separation between an increasingly sci-entific benefit analysis and an increasingly imaginary risk analysis. How can the two be reconciled? The only tools we have today are the international evaluations and the post-MA studies, the first authorize a risk as-

sessment that is the most neutral and most objective possible and the second making it possible to deter-mine the real situation faced with an existing risk.

With this in mind, I had integrated the setting up of a monitoring committee of studies in real life in the framework agreement governing the conventional policy between the State and the pharmaceutical industry. This committee convenes the Economic Committee for Medicinal Products (CEPS) and the French Health Authority to examine the issues raised by conducting post-MA studies, in order to facilitate producing tangible and workable results. Afterwards the question can be asked, which is not incidental, whether the National Health Insurance Cross-Schemes Information System (Sniiram) data bases should be made accessible to accomplish this work.

Finally, it is necessary to remember a very important element in the context. Four or five years ago, it was asked whether the period of blockbusters and great therapeutic progress was over. However, it was just a vacuum and we are once again in an era of major discovery. The question of the acceptance by the public authorities of the increase in drug costs for health insurance is going to be violently and brutally raised. Our governments however do not seem to be ready, even if this increase is accompanied with real therapeutic advances. If this question is asked for the drug, it is because it presents an extraordinary property which is both an advantage and a draw-back: it is the only health product whose evaluation is global and it can be decided whether it is useful or not. The future is therefore in the objectivation of the evaluation of the medicinal product. To achieve this, I would willingly support the extension of the Swedish experience with its list of control medicines. Ultimately, the patients but also the pharmaceutical industry would win.

Our governments however do not seem to be ready, even if this increase is accompanied with real therapeutic advances.


RUBRIQUE 17

2Financing of innovation

This year the world pharmaceutical market surpassed the symbolic mark of 1 000 billion $ (924 billion ) representing growth of 8,8% (source: IMS Health). This level of growth reflects very different realities at world level. On the one hand, emerging countries are the main drivers of this strong growth with rates currently fluctuating between 10% and 11% which will be maintained between 4 and 5% by 2018. On the other hand, the political context of cuts in public spending puts strain on the health sector. Until now rarely called into question, the prices of drugs could soon come under downward pressure. It is therefore innovation that will be the main driver of growth enabling highly priced innovative therapeutic solutions to be placed on the market. Thus, IMS Health expects high levels of growth in the USA and in the UK, around 6,4% and 5,1%. The French market should stabilize at -0,3% until 2018 after several years of most marked decline. In this context, the financing of biotech/medtech/biocleantech companies in France remains dynamic and has known a steady increase since the low point of 2011 without reaching the pre-crisis levels.



18 PART 2

The 10 best practices to raise funds according to KPMG

The company must have a strategic thinking and have considered its positioning in the future (even if the latter is likely to evolve marginally) in order to be in a position to present its equity story. This story will be much more credible if it is accompanied by quantified information, even a complete business plan;

Once its equity story has been defined, a company must know how to tell its story and prepare to do so. As far as scientifc technology is concerned, the ability to adapt to the interlocutor to present the technical aspects with a certain degree of precision and in an understandable way remains key;

It is important to approach and to be in contact with investors early enough, upstream active phases of fund raising, and to spend time sharing successes with them;

The visibility of the company soon becomes an important issue (publications, congresses, investor meetings, etc.) to be attractive, but entailing significant cost;

In the context of fund raising, the two parties place themselves in a win-win position; showing its potential and its ability to integrate funds into its capital and to benefit from its experience remain important to initiate good contacts;

For the good development of the company, the manager and its shareholders must be able to ensure a balanced governance between scientists and functional roles (finance/HR/compliance). This balance is subject to develop according to the maturity of the company;

Being attentive to internal control procedures must remain a priority for the manage-ment team: adopt an approach of progress on the specific focus points such as repor-ting procedures, accounting, compliance, human resources, etc.;

Be in a position to ensure the intellectual protection of its discoveries over time and the discoveries of R&D teams;

A manager who has decided to engage in a fund raising campaign must always plan, secure to be in a position to appreciate where the raised funds will take the company and think of the following turn by anticipating its future requirements;

Finally, investors always ask themselves about the ability of the management team to roll out the project. The managers ability to have a competent team and to ensure complementary skills is key to success.


The life sciences industry appears to be increasingly influenced by the health of financial markets for the success of its development. Following a phase of a fall in investment in the life sciences sector during the times of financial crisis in which risk aversion amplified, the trend reversed as from 2011. Indeed, we observe sustainable growth to all the means of financing French innovation in the sector of health. Each financing vehicle saw its volume increase steadily from 2011 to 2015. Venture capital fund raising, actor initiating the financing chain, more than doubled between 2011 and 2013 going from 121 M to 252 M. In comparison to 2013, the level of investments in 2014 collapsed to 144 M (-43% vs. 2013). When venture capital reaches its limits in terms of support, the most commonly envisaged solution is flotation on the stock market. We observe a strong increase in financing via the market either by flotation on the stock market at 351 M (+129% vs. 2013) or through different modes of capital increase of listed com-panies. The latter, indicators of the level of maturity

reached by the French sector, significantly increased with 405 M raised in 2014 (+177% vs. 2013) confirming the good progress of certain biotechs that achieved fund raising over 50 M such as Transgne and Innate or Genfit and Onxeo. The attraction of American investors increasingly present in this fund raising was equally confirmed. A number of French biotechs and medtechs became more credible and sufficiently mature to be studied closely by specialized American investment funds. Meeting a number of criteria such as the level of market capitalization, robust data in clinical development or the signature of structural partnerships are all assets that make the French market draw attention. The most developed companies, such as DBV Technologies, Celyad or Cellectis, all crossed the threshold of the Euronext/Nasdaq dual listing with a triple objective in their line of vision: stabilize their financing and market capitalization, gain in terms of international visibility and establish themselves on the worlds largest market.

FINANCING OF INNOVATION 19

Evolution of financing of the life sciences industry in France

Post-IPO

IPO

Venture capital

Number of operations

Sources: France Biotech, KPMG

1400

1200

1000

800

600

400

200

0

Amount in M

2011 2012 2013 2014 Q3 2015

146

80

138

153

146

25292

121

547

478

193

351

405

144

54

4951

467444


20 PART 2

Over the period from 2011 to Q3 2015, a steady progression is observed of levels raised with venture capital funds, with 2013 as an exception. This progres-sion is steadier for all sources of financing for biotech companies. The average prices on the operations carried out in 2014 and 2015 are between 6 and 7 M, the number of funds raised over 15 M remaining very low: 3 in 2014 (Voluntis, Lysogne and Poxel) and 5 in the first nine months of 2015 (Echosens, AAA, GenSight, Biomup and Therachon). In all of these significant-sized fund raising efforts, the presence of one or several international investors around the table can be observed. The majority of these foreign venture capital funds are American, which concretize their appetite for French companies by investing from now on in very early stage financing rounds, even if these funds concern lower amounts compared with operations on the other side of the Atlantic. According to the information in this study, we have been able to estimate a need in capital amounting to 490 M for the next 24 months for the companies of the panorama.

The Paris market continues to consolidate its domi-nance on the European stock exchange. 2013 will have seen the medtech sector (5 out of the 7 new ratings) support this life sciences stock market frenzy started in 2010. This trend persisted in 2014 as 5 of the 11 new ratings are medtech companies with 115 M funding raised. With regard to the biotech sector, 4 are listed on Euronext Paris for a total amount of 172 M (+856% vs. 2013). Finally, Fermentalg, leader in the production of molecules of interest avoiding petro-chemical production channels, completed the largest fundraising drive for a biocleantech with over 40 M.

If the stock market window closed in Europe in the second six-month period 2014, some companies like DBV Technologies chose to be listed on the American technological market, the Nasdaq. The French biotech,

Biocleantech

Diagnostic

Medtech

Biotech


600

500

400

300

200

100

02011 2012 2013 2014 Q3 2015

6

7

13

4023

18

8 7

11

13

86 65 122

115

156

172

377

68

13


Amount in M

Evolution of French IPO in life sciences Biocleantech Diagnostics

Medtech

Biotech



Distribution of venture capital investments

300

250

200

150

100

50

02011 2012 2013 2014 Q3 2015

38

41

47

40

1 6

13

6

333

10980

48

6752

123

20

49

141

130

Amount in M



Since the crisis, France has established itself as an important financial centre in the euro zone. After a period of relative calm, where only the French market supported biotech IPO, the tendency to use financial markets was confirmed in 2014 for French life sciences companies. With 10 new IPO on the Paris stock market, France leads the way in the life sciences sector. After 3 years absence of activity on the Belgian and Dutch stock markets, 2013 witnessed a renewed interest in life sciences. Indeed, Cardio3 BioSciences, now known as Celyad, managed to raise 23 M on the Belgian and French markets. In 2014, the upward trend was confirmed with the IPO of the Belgian and French companies arGEN-X (40 M) and Probiodrug (23 M) respectively. During the first three quarters of 2015, the French stock market continued to attract French innovative companies with 12 new IPO. Euronext in Belgium saw two great inital public offerings with Bone Therapeutics, leader company in bone cellular therapies (37 M) and Biocartis, specialized in diagnostics (100 M).

specialist of immunotherapy in the field of allergies, managed to secure over 104 M during its IPO, strengthening its cash position for the upcoming deadlines whilst at the same time gaining a foothold in the American continent. By contrast, the first nine months of 2015 will have seen the return to the fore of biotechnology companies. They still occupy a prominent place in the heart of investors. The 8 companies listed on the stock market at Q3 2015 are biotechs raising 377 M (+119% vs. 2014). The record amounts of IPO continue to increase, proof of the ever growing interest in this sector of innovation. In this way, Medtech Surgical raised 20 M in 2013, SuperSonic Imagine 50 M in 2014 and recently Amplitude Surgical with106 M. These amounts are growing yet are still well behind the funds raised by their Anglo-Saxon counterparts in an environment of ample liquidity. Thus, Avoxant, US biotech special-ized in the treatment of Alzeimers disease, launched itself on the Nasdaq last June raising 315 M$. This operation was controversial at the time in financial circles due to the very early stage of development of its leading product. Centered on a compound acquired from GSK for 5 M$, the keen interest around this biotech is intriguing knowing that there are no clinical data so far and not one patient included in a clinical trial. On the other side of the channel, Circassia Pharmaceuticals, specialist of allergies, raised over 275 M during its IPO in 2014. One year later, in order to finance its external growth, Circassia Pharmaceuticals successfully launched a capital in-crease of over 380 M. These two examples illustrate the disparity between these two worlds that might explain in part the valuation difference between US and European companies.

Sources: France Biotech, Euronext

500

400

300

200

100

0Q3 20152013

153

35

2012

145

2011

92

353

137

2014

247

40

23

Netherlands

Belgium

France(6)

(8) (7)

(2)(10)

(1)

(1)

(2)

(12)

Evolution of European IPO in life sciences

Amount in M


22

PART 2

Sources: France Biotech, KPMG* as of 23/11/2015, Index rebased at 100 as of 01/01/2014; the France Biotech index indicates the performance of different members of the index weighted by size of market capitalization.

France Biotech

Nasdaq Biotech Index (NBI)

Next Biotech

280

240

220

200

180

160

140

120

100

80

02.0

2.14

03.0

2.14

04.0

2.14

05.0

2.14

06.0

2.14

07.0

2.14

08.0

2.14

09.0

2.14

10.0

2.14

11.0

2.14

12.0

2.14

01.0

2.15

02.0

2.15

03.0

2.15

04.0

2.15

05.0

2.15

06.0

2.15

07.0

2.15

08.0

2.15

09.0

2.15

10.0

2.15

11.0

2.15

Stock market experience of French life sciences companies 2014-2015 YTD*

The France Biotech index, regrouping the 64 French listed SME/mid-tier companies in the fields of biotech, medtech and biocleantech, outperforms the European indexes (Next Biotech) and American (Nasdaq Biotech) over the considered period. This relative performance highlights the success of some French companies thanks to the validation of the science, the continuity of projects and teams and the obtainment of positive clinical results The upturn in performance of this index is notably achieved by the companies whose market capitalization exceed 200 M having experi-enced considerable jumps in value such as:

- Adocia and Cellectis whose prices increased more than tenfold,

- DBV Technologies, Genfit, Innate Pharma, Nanobiotix, Erytech Pharma whose performances

vary widely from about x5 to x2.It should be noted that the evolution of French and European indexes are close as a result of the dom-inance of the French financial market in relation to other European geographies (more than 75% of Next Biotech members are French). The American index collects 143 companies and presents a curve evened out over the period.

Focus on the NASDAQPreparation: An American story to tell (project of development in

the United States) If existing listing in France, more vigilance on the

communication with potential investors (respect equality of shareholders)

Seek specialist advice (lawyers, auditors, press rela-tions) capable of bringing best practices

Do not underestimate these costs (between 5x and 10x in relation to a listing in France) and the effort namely in production of documentation

Anticipate potential issues with SEC (without ne-glecting relations with AMF for companies already listed in France)

Do not focus only on the main think about the secondary in the next steps of its life as a company listed on the Nasdaq (Insurances, 144A certification to complete at IPO, etc.).

Post-listing: Management of fundraising in dollars when expen-

diture in euros Strengthen structure in order to meet regulatory

expectations or result of volontary process to follow US market

Accounting options: even if not mandatory, the question must be asked with regard to American comparables to publish accounts quarterly

SOX: exemption can fall sooner than 5 years need to prepare upstream notably with regard to non-compatible IS

Total additional cost > 2 M per year Maintain visibility (road show, etc.)



Biotech companies must gain visibility and attractive-ness to raise finance.

The increase in fundraising observed since 2011 is confirmed and is amplified on all forms of financing (risk-capital, IPO, post-IPO). It is to be welcomed as this strong increase shows a growing appetite for a sector that presents the difficulty of being highly capitalistic with extremely long cycles but starting to claim real success.

Partnerships with the pharmaceutical industry deve-lop as well. Their existence is encouraging and this tendency must continue and grow. Biotech companies have the R&D and innovation potential whereas the pharmaceutical industry has the resources to finance them. Simultaneously, the pharmaceutical industry is subject to a frenzy of acquistions. Pfizer is ready to buy out Allergan for 160 billion dollars; Roche and Celgene have each spent over 7 billion dollars this year to buy two loss-making companies, Intermune and Receptos. Biotechs are therefore coveted and perhaps constitute natural prey for the pharma-ceutical industry. Nevertheless, this passion does not appear to be as strong in France. The founders of biotech are often scientists who may wish to keep

A good molecule does not make a good manager Catherine Porta, Partner KPMG, biotech specialist

their independence and are not convinced by the sharing of risks and the advantages proposed by the pharmaceutical industry.

Questions still exist on the financing chain. Up-stream, biotech companies have access to research tax credit, to Bpifrance and to seed capital funds yet remain faced with crossing the valley of death that hampers their development. However, they do not appear to favour the solution that the resources of big pharma could open up. The European Invest-ment Fund (FEI) derived from the Juncker plan can ge-nerate new opportunities for biotechs. A billion euros has already been committed since the beginning of the year. Sofinnova received the support of the FEI for its new funds and Bifrance is also going to raise FEI funds. These first disseminations of the Juncker plan in France are an extremely positive sign. However, these funds have to invest in French companies.

Biotech companies must gain visibility and attractive-ness to raise finance. The hunt for funds often leads them to neglect the finance, human resources and compliance functions, whereas these play an impor-tant role to present themselves with the best possible prospects to potential investors. The latter, in the same way as the markets and regulators, look closely at the governance and composition of the board. This should not limit itself to scientists but should also incorpo-rate funtional roles (finances, human resources). Biotech companies must therefore show greater rigour and be more vigilant towards internal control and reporting functions. Having a good molecule does not mean being a good manager.


24

KPMG is the leading firm for audit and advisory services in France and combines a multidisciplinary approach and sectoral skills. Our 8 200 professionals access to international key accounts, mid-tier firms and family groups, microbusinesses and in different sectors of industry, commerce and financial services. KPMG in France has more than 70 000 clients among which: 200 listed companies or public-interest entities Almost 30 % of SME with over 50 employees 6 300 associations and actors of the Social and Solidarity Economy 47 000 artisans, retailers and independent professions 6 000 references in public authorities KPMG France is a member of the KPMG Interna-

tional network, operating in 155 countries. In 2014, KPMG International had revenues of 24,82 billion $ US with 162 000 employees in 155 pays.

France Biotech is the French association of bio-technology companies and their partners.Its mission is to contribute to making the French industry of biotechnologies leader in Europe. France Biotech is a driving force for change acting with public authorities, economic organizations, academic research, media and the investors community in particular to foster the emergence of biotechnology as preferential leading-edge industry, and to enhance the economic, legal, regulatory and managerial environments of these companies.

Created in 1997, France Biotech is the association of entrepreneurs that federates leaders of strong growth innovate companies and their partners (investors, law firms, school and centre of value). Its members, situated throughout France, are from the Life Sciences industry (Biotech, Diagnostics, Medtechs & Bio-cleantech). Grouped together within France Biotech, their managers fight to impose a new entrepreneurial model, to support the creation of firms and jobs, while sharing the benefits of their growth.

Chaired by Pierre-Olivier Goineau since 2014, France Biotech takes action today for over fifteen years with public authorities, economic decision makers and media.


ANNEXES 25

3Appendices



Sample of companies

AAb Science*

Abivax*

Acticor Biotech

Ad Scientiam

Adjuvatis

Adocia*

Advanced BioDesign

Affichem

Affilogic

Aguettant Biotech

AGV Discovery

Aliz Pharma

Alkion biopharma

Alliospharma

Alzprotect

Amarok Biotechnologies

Amoba*

Anagenesis Biotechnologies

ANGANY Genetics

Antabio

APCure

ApoH-Technologies

Apteeus

Archimej Technology

Archimmed

Ariana Pharmaceuticals

Atlanbio

Atlangram

Axelife

BB Cell Design

BCI Pharma

BGene Genetics

BIOalternatives

BioCytex

Biogalenys

Biomanda

Biomedical Tissues

Biomunex Pharmaceuticals

Biophytis*

Biosynex*

Brain Dynamic Imaging

CCarbios*

CarboMimetics

Carmat*

Celenys

Cell Constraint & CancerCellectis**

Cellipse

CellProthera

Cerenis Therapeutics*

CermaVein

Chromalys

Chrysalis-Pharma

Ciloa

Cirma

Colcom

Conidia

Crossject*

CYBERnano

CYTOO Cell Architects

CYTOSIAL Biomedic

DDa Volterra

DBV Technologies**

Defymed

Deinobiotics

Deinove*

Dendris

Dendritics

Diafir

Dialpha

Diaxonhit*

DNA Therapeutics

DOMAIN Therapeutics

DOSIsoft

EEffimune

ElsaLys Biotech

Emercell

Enterome

ENYO Pharma

EOS imaging*

Eove

ERYTECH Pharma*

EuKaRS

Eveon

FFermentalg*

Flamel Technologies**

GGalenix innovations

GamaMabs Pharma

Genbiotech

Genepep

Genfit*

Genomic Vision*

GenoSafe

Genoscreen

Genoway*

Genticel*

Global Bioenergies*

GLYcoDiag

Graftys

GTP Technology

HHemarina

Histalim

Horama

Horus Pharma

Hybrigenics*

IIsonic Medical

ID bio

iDD biotech

Imaxio

ImmunID

Immutep

Implanet*

Inanov

InFlectis BioScience

Innate Pharma*

InnaVirVax

Innopsys

Inotrem

Instent

IntegraGen*

Invectys

InvivoGen

KKaptalia Monitoring

Klia

LLaboratoire Symbiotec

LCA-Dermatech

LPS-BioSciences

Lunginnov

MManRos Therapeutics

Mauna Kea Technologies*

Medesis Pharma

MEDIAN Technologies*

Medicrea*

MEDIT

Medsenic

Medtech*

Mega BioPharma

Meiogenix

Mellitech

Metabolic Explorer*

METAFORA biosystems

METIS Biotechnologies

Mitologics

NNanobiotix*

NanoMedSyn

Naturamole

Novacs*

Neurochlore

Neuronax

Nicox*

Normandy Biotech

Nosopharm

Novacyt*

OOlmix*

Olygose

Oncodesign*

Onxeo*

OREGA Biotech

Oroxcell

Orphit

Orthotaxy

OSE Pharma*

OTR3

Oxeltis

PPacific Biotech

PathoQuest

PEP-Therapy

Peptinov

Pharmaleads

Pharnext

Phenocell

Pherecydes Pharma

Phylogne

Pixience

Pixium Vision*

Plant Advanced Technologies*

PlugMed Heart

PolyplusTransfection

Polytheragene

Poxel*

PrimaDiag

QQuantum Genomics*

RRegulaxis

ROOT Lines Technology

SScanelis

ScreenCell

SeleXel

Sensorion*

Smaltis

Spineguard*

Stentys*

Stilla Technologies

Stratoz

SuperSonic Imagine*

Surgical Perspective

Surgimab

Surgivisio

SynapCell

Syndivia

Syneika

Synthelis

TTargeon

TBF Gnie Tissulaire

Teknimed

Tetrahedron

Therachon

Theraclion*

Theradiag*

Theranexus

Theravectys

Transgene*

TxCell*

VVaiomer

Valneva*

Vaxeal Research

Vaxon Biotech

Vexim*

VFP Therapies

ViroXis

Visible Patient

VitaDX

XXegen

YYslab

* Euronext/Alternext/

free market

** Nasdaq/dual listed

26

APPENDICES


Reading committeePierre-Olivier Goineau, President of France Biotech

Haude Costa, General Delegate of France Biotech

Joffray Lanon, Project Manager France Biotech

Anne-Lise Berthier, Chief Editor BioPharmAnalyses

Catherine Porta, Partner KPMG, biotech expert

Raquel Pires, Manager M&A KPMG

APPENDICES 27

France Biotech in actionFrance Biotech acts and participates actively as a driving force behind propositions to the Government to impose new propositions and to favour the economic development of an innovative sector, Life Sciences. After having successfully initiated the Status of Young Innovative Enterprise in 2004, France Biotech pursues its actions with the Government in order to strengthen the development of the Life Sciences industry by proposing new sources of financing. France Biotech is part of the following different governmental authorities Health Industries Strategic Council (CSIS), Industry Strategic Committee, Medicine of the future.

France Biotech leads several working commissions: Carr des Juristes (legal advisers), Business Development Commission, Corporate Finance Commission, Communication Commission, Medical Devices Commission, Advanced Therapy Medicinal Products Commission, Social and Fiscal Commission.

The different actions of France Biotech have the following objectives: creation, development, promotion, competitveness of innovative French companies in health.

The Panorama of the Life Sciences Industry in France Since 2002, France Biotech has produced the panorama of Life Sciences, the only study in France making it possible to analyze year on year the evolution of the innovative sector of Life Sciences in France. The results of this study enable France Biotech to analyze the situation of companies to support our propositions of improvement and to make this industry a sector in its own right.

AcknowledgementsFrance Biotech wishes to thank the following organizations that contributed to producing the 2015 issue of Panorama of Life Sciences in France. Atlanpole AVRUL Eurasant Eurobiomed ID2 Sant Incubateur Descartes Premice Bourgogne

Art Direction: www.vherrmann.ch

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