SPI Infoamtion

Table of Contents

Executive Summary

Macroeconomic trends and implications
Accelerating biopharma collaboration
Valuing investment opportunities in small biopharma
Priorities and preferences of private investors
Top-line trends in venture financing
Investment choices of most active firms in 2009

Chapter 1 Macroeconomic trends and implications

Summary
Introduction
Recent events
Supply side factors- higher cost of capital
Demand side factors- Decreased earnings potential

Provider-level constraints

Patient-level implications

Short and long term implications
Non-dilutive funding in an era of excessive dilution

Research grants and government contracts

Incentives of non-profit foundations

Government incentives and associated initiatives

Issues surrounding NDF from non-profit agencies

Chapter 2 Accelerating biopharma collaboration

Summary
Accelerating biopharma collaboration
Rapidly evolving deal structures

De-risking R&D via options-based investing

Due diligence in biopharma alliances

Marketing agreement

Licensing arrangement/Product acquisition

Joint venture

Alliance/Corporate partnering

Outright acquisition of a company

Conclusions

Chapter 3 Valuing investment opportunities in small biopharma

Summary
Introduction

Valuation methods and usage

Discounted cash flow

Risk-adjusted net present value

Real options

Comparables

Assessing commercial potential

Sales potential

Pricing and positioning

Cost of commercialization

Chapter 4 Priorities and preferences of private investors

Summary
Introduction

Stages of investment

Investors: definition, overview

Distinction between private equity and venture capital funds

Angel investors

Venture capital funds

Mezzanine investors

Venture investors versus buyout investors

Process of getting new investment

Term sheets

Type of security

Board representation

Valuation

Capital expenditure

Single versus multiple investors

Investor priorities in the new landscape

Market attractiveness and product-market-focus

The organization

Financials

Business plan

Assessment of risks

Intellectual property protection

Chapter 5 Top-line trends in venture financing

Summary
How to use this chapter
Definition of key terms

Venture financing

Seed

Start-up

Early stage

Growth/expansion capital

Later stage

Mezzanine

Bridge loan

Private placement

Other

Countries attracting the most venture financing

Recent trends

Conclusions

Distribution of venture financing rounds by investment stage

Recent trends

Further analysis of financing rounds by stage
Conclusions

Chapter 6 Investment choices of most active firms in 2009

Summary
Most active venture capital investors in 2009

Analysis of investment preferences

Therapeutic areas of focus

Investment destinations by geography

Stage of investments

Two types of venture investors
Corporate Venture Capital (CVC) funds

Emerging role of CVC in Life Sciences

Strategic motivations

Novartis Venture Fund

Novo A/S, Denmark

Independent venture capital funds

SV Life Sciences

Investment focus in 2009

Texas Coalition for Capital

Chapter 7 Appendix

Research methodology
Index

List of Figures
Figure 1.1: Components of government healthcare expenditure in US, 2008
Figure 1.2: Market share of generic medicines in Europe, 2007 (by volume)
Figure 1.3: IPOs have recently reappeared at a low level
Figure 1.4: Grant-making focus of Bill & Melinda Gates Foundation
Figure 2.5: How biotech entrepreneurs hope to deal with the financial crisis
Figure 2.6: Reliance of big pharma on R&D externalization
Figure 2.7: Trends in biotech-pharma deals by development stage
Figure 2.8: Overview of partnering issues
Figure 2.9: Option agreements by top 20 pharma companies (≤Phase I)
Figure 2.10: Reliance on the option model varies by company
Figure 2.11: Deal structures and responsibilities
Figure 3.12: Primary valuation methodology by investor type, 2009
Figure 3.13: Assessing the net earnings potential of a medical intervention
Figure 3.14: Assessing revenue potential
Figure 3.15: Pricing and positioning
Figure 3.16: Impact of incoming therapies on payor budgets
Figure 3.17: Development and commercialization costs
Figure 4.18: Company growth stages and funding sources
Figure 4.19: The deal “funnel” at a typical VC firm
Figure 4.20: Sequence of documents
Figure 4.21: Board size: advantages and limitations
Figure 5.22: Geographic distribution of venture financing rounds
Figure 5.23: Trends in geographic distribution of venture financing rounds
Figure 5.24: US investments by region, 2008-2009
Figure 5.25: Total number of financing rounds by stage, 2004-2010
Figure 5.26: Distribution of financing rounds by stage, 2004-2010
Figure 5.27: Trends in financing rounds by stage, 2004-2019
Figure 5.28: Early-stage funding by type, 2004-2010
Figure 5.29: Mid-stage funding by type, 2004-2010
Figure 5.30: Late-stage funding by type, 2004-2010
Figure 6.31: Preferences of top 15 venture finance investors, 2009
Figure 6.32: Preferences of top 15 venture finance investors, 2009
Figure 6.33: Number of deals by investment stage, 2009
Figure 6.34: R&D performance scorecard
Figure 6.35: Novartis Venture Fund investments in 2009
Figure 6.36: Novo A/S ownership structure
Figure 6.37: Novo A/S investments, 2000-2008
Figure 6.38: Novo A/S investments in 2009
Figure 6.39: SV Life Sciences investments in 2009
Figure 6.40: Texas Coalition for Capital investments in 2009

List of Tables
Table 1.1: Non-dilutive sources of funding
Table 2.2: Established and evolving deal structures
Table 2.3: Incentives in a strategic licensing arrangement
Table 3.4: Overview of valuation methods
Table 4.5: Stages of equity investing
Table 6.6: Most active venture investors in 2009
Table 6.7: R&D focus of top 15 venture investors, 2009