State of Affairs in the Biotech Industry

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Alaina Waters
6 years ago
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1 CED Life Sciences Conference - Discussion Materials (3.216) v1.pptx\29 FEB 216\1:58 PM\1 State of Affairs in the Biotech Industry March 2, 216

2 Remember the Macro Environment Key Indices S&P5 2,5 Current Sources of Uncertainty 1 Revenue Recession 2 Oil Prices 3 China Slowdown 4 Risk of Rising Rates VIX 1 2, S&P ,948 Mid-27 1,5 5 1, Volatility (VIX) VIX S&P

3 General Downturn In Market Share Price Since 214 Indexed to 1 25 Since (5%) 9 (8%) 8 (14%) 2 7 (25%) 6 Jan-16 Jan-16 Feb-16 Feb-16 Since 216 PTLA / GWPH Jan-16 Jan-16 Feb-16 Feb-16 GWPH (41%) PTLA (45%) % +12% +8% +5% 5 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 May-15 Aug-15 Nov-15 Feb-16 "Big 4" Biotech Large-Cap Pharma 3

4 Biotech IPO Volumes and Market Windows Since 213 Biotech Deal Volume Breakdown 213 Volume: $2.7Bn 214 Volume: $4.8Bn 215 Volume: $4.1Bn $Bn 29 Deals 51 Deals 34 Deals Q'13 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 # of Deals: Longest Period Biotech IPO Window Closed >3 Days with No Biotech IPO Pricings NBI, S&P Indexed to NBI S&P # of Days IPO Window Closed 4

5 IPO Market Has Deteriorated Biotech IPOs 215TD Biotech IPO Issuance Volume $Bn Q'15 2Q'15 3Q'15 4Q'15 9 Jan Feb Issuance Volume IBB Vol # of Deals IPO Pricing Environment Has Deteriorated, But Deals Getting Done % Q'15 2Q'15 3Q'15 4Q'15 Jan Feb Withdrawn / Postponed Completion (%) N/A 8 Below In Range Above IPO Pricing and Trading Post-Labor Day Has Been Challenged % (15) (7) (3) (3) (13) (2) 1Q'15 2Q'15 3Q'15 4Q'15 Jan Feb Median File-to-Offer Median Offer-to-1 Week IBB Vol

6 Where is Public Market Biotech Funding Going? 214TD Biotech Capital Raised ($MM) 9, 24% 19% 6, 15% 13% 3, 8% 6% 6% 4% 3% 3% Oncology CNS / Psychiatric / IPOs Pain Autoimmune Cardiology Skin / Dermatology Other % 6

7 Fundamental Valuation Drivers for IPO Company Positioning Financial Model External Factors Market size and position Robustness of clinical data Translatability Pipeline visibility Business momentum Business model + Key inflection points Funding requirements Visibility of revenues and earnings Existing investors + Comparable valuations Market volatility Tone of markets M&A Shareholder activism Management quality 7

8 Will Partnering Return as an IPO Critical Success Factor? IPOs With >$25MM Pre-Money Valuations Since 21 Pre-Money IPO Summary Value Size >$5MM Phase of Company Year ($MM) ($MM) Partner(s)? Crossovers? Cash Lead Asset Voyager I CytomX Preclinical FibroGen 214 1, III MacroGenics III ready Acceleron II Agios Preclinical OncoMed I Epizyme I Portola III Merrimack III ChemoCentryx III Ironwood III 8

9 How Does Partnering Drive Strategic Value? Benefits + Non-dilutive $ to de-risk through inflection points + Eliminate need to build certain infrastructure + Enhance visibility to strategics + Financially sound return Considerations Retention of rights vs. royalty Governance Strategic appeal (and timing) Assessment of Risk / Reward 9

10 What Will Drive Accelerated M&A Activity? Seeking growth Continued threats generic cliffs, disappointing R&D productivity Long-lived (non-cliff) assets Newly approved products Specialty therapeutic areas Partnerships not precluding acquisitions Diversification single product risk, therapeutics Potential for synergies Hostile activity and shareholder activism 1

11 Profitable Biopharma Target Universe is Shrinking Mid-Cap Pharma Universe ~$1Bn $3Bn Market Capitalization ($Bn) Sept. 28 Today Scarcity of assets; Strategics directing attention to emerging SMID universe Independent Acquired Market Cap Prior to Transaction 11

12 Unprofitable Biopharma Target Universe Unprofitable Mid-Cap Biotech / Spec. Pharma Universe ~$1Bn $3Bn Market Capitalization ($Bn) Companies in Mid-Cap Biotech $61Bn lost in 216 (32%); 3 co s down 3% Independent Acquired Market Cap Prior to Transaction 12

13 When Do Acquisitions Happen? Transaction Value ($Bn) (211) (6) (4) (2) Time of Launch (Yrs) 13

14 When Do Acquisitions Happen? Transaction Value ($Bn) (216) (6) (4) (2) Time of Launch (Yrs) Transactions in Last ~12 Months 14

15 Current State of the Industry Fundamental strength remains significant Maturing universe to deliver important milestones in 216 / 217 Product launches, pivotal trials Strategic activity will remain high and accelerate Business plans adjusting to reduced public investment Strategic partnerships Disciplined use of cash for meaningful inflection points Creative financings 15

FOR RELEASE: MONDAY, MARCH 21 AT 4 PM

FOR RELEASE: MONDAY, MARCH 21 AT 4 PM Interviews with 1,012 adult Americans conducted by telephone by Opinion Research Corporation on March 18-20, 2011. The margin of sampling error for results based on the total sample is plus or minus 3