Biotech 2008:
A Global Transformation
G. Steven Burrill
Chief Executive Officer
Burrill & Company
Wisconsin Life Sciences Transformation: World Perspectives & Wisconsin’s Advantage
Madison, WI, February 21, 2008
Last Updated: March 24, 2016
1
Burrill & Company
Exclusive focus on Life Sciences

Human Healthcare (Rx and Dx)

Nutraceuticals/Wellness

Agbio

Industrial

Biofuels/ Bioenergy

Enabling Technologies
2
Burrill & Company – exclusively focused on life sciences
Private Equity / Venture Capital Group

Investing across the entire spectrum of the life sciences/biotechnology ≈ $950
million under management
Merchant Banking (Burrill LLC)

Strategic Partnering including licensing, research and other collaborations

Strategic Advisory Services including new company formation

Merger & Acquisitions across life sciences

Spin-outs ranging from products, to research divisions to disease area
franchises
Media

Publications (biotech book, newsletters, special purpose publications [stem
cells, personalized medicine, aging etc.], The Journal of Life Sciences, webbased intelligence reports)

Conferences
Headcount: 60+ professionals and staff
3
Burrill & Company U.S. & International Locations
United States
San Francisco (HQ)
United Kingdom
New York
Indianapolis
Portland
London
China
Shanghai
UAE
Dubai
Japan
Tokyo
India
Mumbai
Malaysia
Kuala Lumpur
4
Burrill Funds Under Management -($ millions)

Burrill Life Sciences Capital Fund III (2006)
$283

Burrill Life Sciences Capital Fund II (2003)(1)
$211

Burrill Life Sciences Capital Fund I(1)

Burrill Biotechnology Capital Fund (1999)(1)
$140

Burrill Agbio I + Annex & Agbio II Capital Funds (1998(1)/2001)(1)
$ 82

Burrill Nutraceuticals Capital Fund (2000)(1)
$ 61
$283

Malaysian Life Sciences Capital Fund (a JV Fund)
$150

Burrill AgBio II Annex* (a side-car fund to the MLSCF)
$ 20
Total Funds Under Management at 12/31/07
(1)
$947
Fully invested, including reserves/commitments for subsequent financings in existing portfolio companies
5
Strategic Investors in Burrill & Company Funds
6
Burrill Merchant Banking Services (Burrill LLC)
M&A Transactions
Transactions Across Life Sciences for Public
and Private Clients




Sell-side
Buy-Side
Divestitures
Reverse mergers
Spin-Outs
Strategic Partnering
Create a New Company or Merge
into an Established Entity

Potential Scope of
Burrill LLC
Client Relationship
Newco financings for pharma
and biotech
Representing Biotech and Big
Pharma
Out-licensing, profit shares,
options, and regional deals, etc.
 Preclinical through marketed
products

Financing
Private Placements



PIPE financing
Late-stage venture financing
M&A financing
7
Burrill Created/Hosted Industry Events
For inquires, contact Britt Fenton-Olsen at (415) 591-5475 or bfenton-olsen@b-c.com
8
G. Steven Burrill’s Annual Book
Our 22nd annual book will be out February 2008
To order most recent book or complete sets, visit:
www.burrillandco.com
9
Burrill Biointelligence Group Reports


The Burrill & Company’s Special Reports:

The Burrill Personalized Medicine
Biointelligence Report

The Burrill Stem Cell Biointelligence
Report

The Burrill Aging Biointelligence
Report

The Burrill China Biointelligence
Report

The Burrill India Biointelligence Report
The Burrill Media’s quarterly/monthly biointelligence report:

The Burrill Canadian biotech News
Monthly

M&A/Partnering

Stem Cells

Personalized Medicine
10
The Journal of Life Sciences
Mr. William Patrick
Editor in Chief
A six-times per year publication.
For information, see our website
www.burrillandco.com and www.tjols.com
11
The Journal of Life Sciences on the web
Weekly Brief and Weekly Brief, California Edition
To request the free weekly e-mail editions:
weeklybrief@tjols.com
12
Themes in ’88 book
…Into The Marketplace
 Science being converted to business
 Products coming to market place
 Are product liability, regulatory reform, patent court
behavior insurmountable barriers?
 Partner or vertically integrate?
 Acquisitions by pharma desirable?
 How will the industry evolve?
13
Biotech is Transforming the Globe
…and being transformed by it
14
Transformation
Webster: trans·for·ma·tion
Pronunciation: "tran(t)s-f&r-'mA-sh&n”, -Function: noun
1. The act or process of transforming somebody or
something
Webster: trans.form
1a: To change in composition or structure
15
A Global Transformation…
…From
To…
Chemistry
Biochemistry
On Size fits all drugs
Personalized medicine
Aging (just happens)
Aging is optional / controllable
Therapeutics/diagnostics/devices
“Theranostics”
Treating sickness
Preventing Sickness
Food for survival
Food for health
16
A Global Transformation…
…From
To…
Fossil fuels
Alternative fuels
(biomass conversion)
Unavailable local capital
Global arbitrage
Fully integrated business model
(FIPCO)
Virtually Integrated business model
(VIPCO)
Local companies
Global companies
US centric biotech industry
Global industry
Changing the healthcare
environment
Transforming the world
17
Life Sciences – Biotech: A Short History …
 Circa 1953 – Watson and Crick
 Circa 1973 – Inception of biotech

ALZA (`68) Cetus (`71) Amgen (`80),

Genentech (`76 ) Biogen (`78),

Centocor (`79) Hybritech (`78)
 Circa 1993 - Meaningful biotech revenue
 Circa 2008 – Transforming the world
18
Era of Unprecedented Advances in Medical Research
 Understand the pieces

Hardware of Life (20th Century) genes/proteins

Software of Life (21st Century) – systems/network
 “Biomarkers ‘r us” (Note: “genes ‘r us” biz model failed)
 Cost per bit of biological info rapidly decreasing
(Moore’s law)
The consequences are staggering …
19
Moore’s law – Cost Per Base
20
Challenges/Opportunities in Improvement of Care
And we see its implications:

Evidence based medicine

Advances in health information (Web MD)

Personalized, predictive, preventative medicine - (3 P’s)

Electronic Health Records (EHR)
BUT …

Delivery system so flawed can’t bring healthcare “advances” to
market place

Government increasingly the payor (Medicare/other government
healthcare systems)
21
Also Era of Macro Issues
 Climate change
 Energy needs/alternative fuels
 Poverty
 Security/terrorism
 Philosophical - ideological conflict (religious conflict)
22
……yet we are the envy of the world
 FDA
 NIH
 CDC
 DOD/DARPA/SARPA
 USDA
 DOE – Energy Alternatives
23
Total US Spend for Biotech/Pharma Research
NIH
$29B
Pharma
$43B
Biotech
$30+B
TOTAL
$100+B
24
Current Healthcare System in “Silos”

Insurers

Employers (Providing $)

Providers/ Managed Care

Doctors/Nurses/Hospitals

Suppliers

Pharma Companies

Diagnostic Companies

Medical Device Companies

Medical Innovators
25
Integration Is Essential BUT Where Is It Happening?

Kaiser Permanente (California)

Intermountain Health (Utah)

Analogy (Clayton Christiansen/ Harvard)

Color TVs invented by RCA but no sales since nobody would
broadcast in color

RCA then bought NBC, then integration happened
…Therefore integration within the healthcare system is essential
if benefits of new technologies are to be realized
26
HHS Secretary Michael Leavitt
“Combining gene based medical care with
health information technology could
transform healthcare…”
“Personalized healthcare will combine basic
scientific breakthrough of the human
genome with computer-age ability to
exchange and memorize data”
27
Not only integration, but a greater need for international
collaboration
 Pandemic diseases
 Regulatory harmonization

Approvals

Patents

Drug/ Food Safety
 Diseases know no borders
 It’s a global economy
28
Entering a Period of Co-opetition
(Cooperation/ Competition)
 Strategic Partnering

Co-development

Co-branding

Co-promotion

Co-marketing
 Country to country
 Public/private
 Big/small
 Within industry/outside industry (IT/biotech)
29
Life Science Investment Thesis
“To create and capture value across the spectrum of the life-sciences industries”
HEAL THE WORLD
FEED THE WORLD
Agriculture
Human Health Care
Therapeutics
Services
Diagnostics
K
Traits
Tools
“Sustain & Nourish the world”
Wellness Enhancers
Medical devices
Seeds
Food ingredients
Bio Processing
Biomaterials
Bio Fuels
Biopharmaceuticals
FUEL THE WORLD
30
So let’s look at where we are
and what happened
during the last year...
31
Key Industry Stats – Biotech 2008
USA
Europe
Asia/
Pacific
Sales / Rev.
$89B
$12B
$3.5B
$1.5B
$106B
Annual
R&D
$23B
$4B
$0.4B
$0.8B
$28B
Number of
Companies
1,450
1,600
740
450
4300
Number of
Employees
131,000
10,000
13,000
7000
151,000
Number of
Public Co.’s
370
160
140
75
745
Market Cap
$455B
$30B
$50B
$12B
$547B
Canada
Total
32
Pharma vs. Biotech Industry Market Cap ($B)
Company
12/31/07
12/31/06
12/31/05
12/31/04
12/31/03
12/31/02
12/31/01
12/31/00
Pfizer
155
187
172
199
280
192
251
290
Johnson & Johnson
191
180
186
184
154
112
181
146
Merck
127
82
69
69
103
165
133
216
Eli Lilly
60
62
65
65
77
50
88
105
Bristol-Myers Squibb
53
50
46
47
58
65
112
145
Pfizer/Merck
282
269
241
268
383
357
384
506
Total US Biotech
455
496
491
399
342
213
366
425
Industry
1.6x
1.8x
2.0x
1.5x
0.9x
0.6x
1.0x
0.8x
33
Top ten Biotech Companies by Market Cap
Position
Biotech 1986
Biotech 1991
Biotech 1996
Biotech 2001
Biotech 2006
Biotech 2007
1
Genentech
Amgen
Amgen
Amgen
Genentech
Genentech
2
Cetus
Genentech
Genentech
Genentech
Amgen
Amgen
Gilead Sciences
3
ALZA
ALZA
Chiron
Elan
Gilead
Sciences
Applied
Biosystems
Centocor
ALZA
Shire
Celgene
Genzyme
5
Centocor
Chiron
Biogen
ALZA
Biogen Idec
Celgene
6
Amgen
Genzyme
Genzyme
Biogen
Genzyme
BiogenIdec
Nova
Cetus
Genetics
Institute
Chiron
Serono
(ADR)
Shire ADR
Chiron
Synergen
Centocor
Immunex
Shire (ADR)
Elan
Genetics
Institute
Genetics
Institute
MedImmune
Quest
Diagnostices
Amylin
Biogen
Diagnostic
Products
4
7
8
9
10
IDEXX
Millennium
Immunex
Millennium
MedImmune
Pharmaceuticals
34
Historical Biotech Market Cap 1997–2006
$490
$500
$489
$455
$441
$400
$382
$400
$341
$312
$300
$224
$200
$149
$109
$100
$0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
35
….And these small Life Science companies are becoming increasingly
important as a source of value creation and innovation in the healthcare
sector
Top Five US Pharma* vs. Total Biotech Market
Cap
Market Value of
selected Big
Pharma
acquisitions of
public Biotechs
(2005-2007)
Source: Capital IQ, Windhover, Burrill Analysis
36
So, what really happened during the last year ?
 Stem cells politically hot and the science is delivering
 Technology/platform companies rebounded
 BioFuels are BOOMING…
 Industrial biotech is finally happening
 Ag/animal health show progress
 acreage is up
 but “organics” and “natural’ are hot
37
So, what really happened during the last year ?
 Increased interest in “wellness” not just sickness
 Personalized medicine makes real progress
 Regulatory concerns:
 IVD/MIA “approvals”
 FDA Critical Path
 Theranostics
 Biogenerics/biosimiliars/follow-on biologics
 Big pharma buys into the biotech pipeline
38
So, what really happened during the last year ?

Reimbursement dynamics continue to dominate,
especially in the US

India/China make real progress (Malaysia, Korea, others
do too)

Industry raises $45b in capital in US alone

The last year has been a good year, not a great one
… My projections for 2008 will follow
at the end
39
Transformation:
Sickness to Wellness
40
Healthcare Industry Dilemma…

Rising Healthcare Costs

Loss of Patent Protection for Blockbuster Drugs

Need for Innovation; build vs. buy

Reimbursement/Payment system changes – Medicare
Part D

Compulsory Licensing
41
Healthcare Costs Have Been Rising For a Long Time
42
Prescription Drug Costs as Percentage of Healthcare
43
Estimate of Overall US Healthcare Spending on
Prescription Drugs (by general public)
44
Worldwide Global Pharmaceutical Sales –
45
…by the way, the Global Nutraceuticals Industry is $228
Billion in 2006
(millions)
90,000
80,000
70,000
60,000
Functional
Foods
Supplements
50,000
40,000
30,000
Africa
MidEast
EE/Russia
Aust/NZ
Lat Amer
China
Canada
Rest of Asia
Source: Nutrition Business Journal May/June 2007
Japan
0
Europe
Personal
Care
20,000
10,000
USA
Natural Foods
46
Today’s Medicine Challenge: One Size Doesn’t Fit All
47
Pharmacogenomics Shapes the Healthcare Business in 2000+
48
140 Years of Drug Discovery Technology
1st generation
2nd generation
3rd generation
genomics/ proteomics
cell pharmacology/
molecular biology
drugs against
targets identified
from disease genes
genetic engineering
receptors
serendipity
enzyme
Biotech drugs
chronic
degenerative
disease associated
with ageing,
inflammation,
cancer
lipid lowerers
ACE-inhibitors
H2-antagonists
beta blockers
NSAIDS
psychotropics
penicillins
sulphonamides
aspirin
1900
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
Source: CMS, Lehman Brothers research
New Therapeutic Cycles
natural products
and derivatives
49
Confluence of Technology, Tools, and Knowledge
50
A Systems Biology Approach – Follow the Pathways
51
Analyzing the Molecular Profiles (Biosignatures) of Body
Functions in Health and Disease
The Molecular Basis
of
Biological Processes
The Molecular
Heterogeneity of
Disease
Alterations in Disease
Disease Subtypes
Pharmacogenetics
Disease
Predisposition
New Targets for
Dx, Rx, Vx
Right Rx for
Disease
New Targets
for Dx,
Rx, Vx
PDx
PRx
Individual Genetic
Variation
52
Selected Targeted Treatments

Personalized cancer vaccines

Favrille – FavId for non-Hodgkin's lymphoma

Genitope – MyVax for non-Hodgkin's lymphoma

Gleevec (Novartis) - pH+ CML kinase inhibitor

Iressa (AstraZeneca) – EGFR tyrosine kinase inhibitor

Tarceva (Genentech/OSI) – HER1/EGFR inhibitor

Erbitux (ImClone/BMS) – HER1/EGFR inhibitor

Avastin (Genentech) – VEGF/VEGFR inhibitor

Herceptin (Genentech) – HER2 inhibitor

BilDil (NitroMed) - heart failure in African American patients
Other “Semi Targeted” Treatments (approved or late stage trials)
Nexavar (Bayer/Onyx) – multikinase inhibitor

Tykerb (GSK) - ErbB-2/EGFR inhibitor

Enzastaurin (Lilly) - PKC-Beta, AKT/P13 inhibitor
53
Innovation Gap Getting Wider
54
Safer, More Effective Drugs
Faster path to
disease targets
using genetic data
Target
Identification
Speed trials by testing on
patients selected for likely
high response and safety
Target
Validation
Lead
Development
Preclinical
Knowledge of biological pathways
and gene variants help eliminate
poor candidates
Clinical
Market
Target optimal population
by combining drug with
molecular diagnostic testing
55
Big “New” Markets

Obesity/diabetes/metabolic disease

Alzheimer's/memory

Anti-aging

Anti infectives (antibiotic resistance)

Wellness (preventative/predictive cure)
56
Projected Alzheimer’s Disease Prevalence,
2000 to 2100
57
Aging . . . Is it a Disease?

About 1.4 million Americans are in their 90s, and
another 64,000 are 100 years old or older

Baby boomers represent 30% of the total US population

Per person, seniors consume about five times the drugs
of their working-age counterparts
By 2030, 20% of US population will be over 65 years of
age…
58
Medicines in Development for Older Americans*
DISEASE
Alzheimer's Diseasse/
Dementia
PRODUCTS IN
DEVELOPMENT
27
Bladder/Kidney
9
DISEASE
PRODUCTS IN
DEVELOPMENT
Osteoporosis
20
Pain
41
17
Depression
19
Parkinson's Disease
Diabetes
48
Prostate
Epilepsy
7
Rhumatoid Arthritis
6
38
Eye Disorders
23
Sepsis
GI Disorders
23
Sexual Dysfunction
15
Lung/Respiratory
52
Skin Conditions
14
Musculoskeletal
6
Sleep Disorders
11
Other
17
Osteoarthritis
11
3
* Some medicines are listed in more than one category
59
Chronic Disease

125 million Americans have one or more chronic
conditions (e.g. congestive heart failure, diabetes)

Chronic diseases account for 75% of all health care
expenditures

Current costs for chronic diseases is approaching $1
trillion

These expenditures are not delivering what is possible
60
Stratifying Into Risk Categories
Diabetes Type 2: What’s Becoming Possible?
61
Products in WW Development 2007 III and Registration
571 Total
600
500
388 RiskAdjusted to
Approval
400
248 Total
300
208 RiskAdjusted to
Approval
200
100
0
Phase III
Registration
Source: BioCentury Publications
62
Products in Phase III by Disease / Target Area
Source: BioCentury
63
Number of Products Approved — 1982–2006
45
40
New Indications
35
30
Biotech Drugs
25
20
15
10
5
0
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
64
Biotechnology Drugs in Clinical Development
65
MDx is at the Center of the New Dx World
66
Diagnostic Innovation Makes Impact
on Cancer Therapy
67
In Vitro Diagnostics, By Application
68
Looking Forward, Patent Exposure is Set to Increase
Significantly
69
Biogeneric Status of Biotech Drugs
70
Adverse Event Reports 1990-2006
(thousands)
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
500
450
400
350
300
250
200
150
100
50
0
Source: CDER OSE report 10/5/07 AERS database (includes all US marketed drug and biologic products)
71
Pulled from the Market
Date
Approved
Date
Withdrawn
Drug Name
Use
Risks
2002
Zelnorm
IBS - C
Heart attack
2007
2001
Bextra
Pain reliever
Heart attack/stroke; fatal skin reactions
2005
1999
Vioxx
Pain reliever
Heart attack/stroke
2004
1997
Baycol
Cholesterol
Severe damage to muscle, that is
sometimes fatal
2001
1999
Raplon
Anesthesia
An inability to breathe normally
2001
1993
Propulsid
Heartburn
Fatal heart rhythm abnormalities
2000
1997
Rezulin
Type 2 diabetes
Severe liver toxicity
2000
1988
Hismanal
Antihistamine
Fatal heart rhythm abnormalities
1999
1997
Raxar
Antibiotic
Fatal heart rhythm abnormalities
1999
1997
Posicor
High blood pressure
Dangerous interactions with other
drugs
1998
1997
Duract
Pain reliever
Severe liver damage
1998
1985
Seldane
Antihistamine
Fatal heart rhythm abnormalities
1998
1973
Pondimin
Obesity
Heart valve abnormalities
1997
1996
Redux
Obesity
Heart valve abnormalities
1997
72
On the Regulatory/Patent/Policy Front…
 Patent reform (PTO proposals to restrict claims examined in a single
application and limit continuation applications)
 FDA resources – PDUFA IV authorization

follow-on biologics (biogenerics)

drug safety

theranostics

food safety (pet food)
 Biofuels – renewable and alternative energy sources through use of
biotechnology
 Medicare Prescription Drug Price Negotiation Act – Non-interference
(proposal to require Medicare interference)
 Sarbanes Oxley compliance – reducing the burden on small companies
 SBIR eligibility
 Agbio/ GMO’s
 Stem cell research – federal funding
73
The Cost of Developing a New Drug has Greatly
Increased
74
CMS Becomes Dominant Customer
(40% of Market in 2008)
2002 Rx Payment Sources ($B)
2002 Rx Payment Sources ($B)
Out of Pocket,
$48.6
2008 Projected ($B)
2008 Projected ($B)
Out of Pocket,
$60.0
Private Insurance,
$95.0
Private
Insurance, $77.6
Other Public,
$10.0
Other Public,
$5.0
Medicaid, $30.0
Medicaid, $28.6
Medicare, $2.6
Total = $162.4
Medicare, $65.0
Total = $260
Source: 2002 data: Health Affairs Volume 23, Number 1; January 2004.
2008 data: Tag & Associates estimate
75
Medicare Heads Towards Bankruptcy
76
Major Government Initiatives in Biotechnology

EU/Eastern Europe/Scandinavia

China

India

Japan

Malaysia

Singapore

UAE/Dubai and Kuwait

Israel

Various Latin American Countries (esp. Chile/Brazil)

Australia/New Zealand
77
Healthcare Costs are Growing Much Faster Than
Productivity (Revenue Per Employee)
$220,000
$6,000
$200,000
CAGR=3%
$5,500
$180,000
GM Cannot Compete$5,000
$160,000
Healthcare costs per car are$4,500
$1700
$140,000
CAGR=10%
more then Toyota
$120,000
$4,000
Revenue per employee
Healthcare costs per employee
$100,000
$3,500
1998
1999
2000 2001
2002
Source: Hewitt Health Value Initiative; United States Census; Bureau of Labor Statistics (2002 Productivity
estimated based on first 3 Quarters)
78
…so, healthcare cost increases are on everyone’s agenda

Politicians/Congress/White House

Payors/Reimbursors/Insurers

Physicians/Providers

Patients/Consumers
…and patients are empowered, have economic costs, and
really want to stay well!
79
Significant Mergers & Acquisitions 2007
PHARMA/PHARMA
PHARMA/BIOTECH
BIOTECH/BIOTECH
Schering-Plough/Organon
$ 14.4 billion
AstraZeneca/MedImmune
$ 15.6 billion
Celgene/Pharmion
$ 2.7 billion
Siemens/Dade Behring
$ 7.1 billion
Eisai/MGI Pharma
$ 3.5 billion
Qiagen NV/Digene
$ 1.5 billion
Mylan/Merck Generics
$ 6.6 billion
GSK/Reliant
$ 2.7 billion
Amgen/Illypsa
$ 420 million
Hologic/Cytyc
$ 5.9 billion
Shire/New River
$ 2.5 billion
Genzyme/Bioenvision
$ 308 million
80
M&A 2007 - Total
Industry M&A Activity:
Total Deal Number & Average Deal Value
250
$1,000
Number of Deals
$800
150
$600
100
$400
50
Dollaris in Millions
200
$200
0
$0
2004
2005
Number of Deals
2006
2007
Average Deal Value
81
M&A
Industry M&A Activity: Total Number of Deals by Total Deal Value
90
80
78
Number of Deals
70
60
57 58
59
49 50
50
43
40
33
30
19 19
20
20
17 16
13
10
15
9
6
12 13
7
13
8
6 7
5
1 1
2
0
<50M
50M-99M
100M-499M 500M-999M
2004
2005
2006
1B-2.5B
2.5B-10B
10B+
2007
82
Partnering – Big Pharma
BIG PHARMA ALLIANCES IN 2007
30
Number of Alliances
25
20
15
10
5
0
Series1
Novarti
s
J&J
GSK
24
21
20
Merck Roche
18
18
Pfizer
AZ
17
15
Bayer
Scheri Eli Lilly Wyeth
ng
15
13
13
SP
11
Sanofi
Abbott Takeda
Aventis
11
10
9
BMS
BI
8
6
83
Partnering - Upfronts
Average Total Upfront Payments By Stage of Development
At Deal Closing
$70
$60
$50
$40
Dollars in Millions
$30
$20
$10
$0
D
o
isc
ry
ve
li
ec
Pr
ca
ni
l
2003
ND
I
/
2004
P
se
a
h
I
2005
P
se
ha
II
2006
P
se
ha
III
N
DA
ar
M
te
ke
d
2007
84
Wellness: Its Time Has Come

Rising healthcare costs are impacting individuals

Rising incidence of chronic disease

Recognition of the importance of genetic variation

Scientific knowledge base for:


Personalization

Cost effective technologies
Financial markets beginning to recognize opportunity
85
The Demands for Agriculture Stay the Same
8
7
6
World
Population
5
4
Arable Land
(billion ha.)
3
Farmland per
person(ha)
2
1
0
1950
1975
2000
2020
More food on less land with half the water.
Source: 1999-United Nations
86
Market Overview – Agriculture
87
Global Area of Biotech Crops 1996 to 2005 By Crop
88
2005 Was The Tipping Point For Industrial Biotechnology
Perfect Storm
• Energy security
• Global Warming
• Economics
• Political Will
• Market pull
• Ready technology
Biofuels
Sustainability
2008
89
89
Exciting Time Since

VC investments increased dramatically

Oil companies invested in technology and
infrastructure

Supportive legislation

Frenzy to access technology

Frothy Pre-money Valuations

No success stories
90
What Has Happened Since?



Ethanol plant construction exploded (All corn based)

Now have 113 in operation, 77 under construction

Production at 6 billion gallons, potential for 12B
Price of feed grains

$2 historically, topped $5.00

20% of corn crop today, 50% in two years !

13% of soybeans going to biodiesel
The focus has been on biofuels - Ethanol
91
Implications

Unprecedented energizing of rural America

Price of corn

Feed costs: poultry, beef, and swine

Sales of pickup trucks, farm equipment and new
kitchens

Land values

Food costs: Meat, HFCS
92
Energy Bill & Farm Bill
Key Future Drivers!

The Energy Independence and Security Act of 2007


By 2022
o Renewable Fuel (20% reduction in GHG)
36 B gallons
o Advanced biofuels (other than corn
starch with 50% life cycle reduction
in GHG
21 B gallons
o Cellulosic Biofuel (>60% reduction in GHG)
16 B gallons
2008 Farm Bill – Energy Title (In Conference)

Tax incentives

Funding for development and demonstration
93
2007 Great Year But with Storm Clouds Forming
Perfect Storm
•
•
•
•
•
•
Energy security
Global Warming
Economics
Political Will
Market pull
Ready technology
Second Perfect Storm
• Social
• Economic
• Environmental
94
Storm Clouds

Commodity prices drive up food prices

Acreage Swap between Corn and Soybeans

The linkage: Corn – Soybeans – Palm Oil

Exaggerated by imminent US lead recession

Economic discontinuities caused by speed of adoption
95
Social, Economic and Environmental Issues will
Dominate 2008

US recession

How long how deep?

Fewer IPOs, Fewer Acquisitions

What will big oil do ?

Access to project financing

Funding of small technology companies

$5M, $20M, $100 M

Will we get the project financing needed given the economic and
political uncertainty

IPOs early in year critical – several good ones ready to
file, some even have revenues!

Uncertainty a big risk
96
Opportunities

From an investor stand point – “Ethanol is dead”

Cellulosic sourcing of sugars will be hot

Increasing interest in alternative fuels


Butanols

Alkanes
Lots of opportunities outside biofuels

Bioplastics / Biomaterials

APIs

Specialty chemicals
97
Some Learnings From Agbio

Be proactive, get ahead of the issues

Engage all parties, respect their issues (they may be
right)

Do not be defensive

Find common ground

Energy security, sustainability, reduced environmental
foot print

It is not about the science it is about the political, social,
economic and environmental issues
98
Capital Raised 1980-2007
99
Biotech’s F=Five cycles
Length of Rallies/Droughts in Months
60
50
Droughts
40
Rallies
30
20
10
0
1983
1986
1991
1995
2000
2003
100
Small, Mid-Cap vs. NASDAQ, DOW
22.50%
20.00%
17.50%
15.00%
12.50%
10.00%
7.50%
5.00%
2.50%
Mid Cap
Small Cap
Dow Jones
NASDAQ
0.00%
-2.50%
-5.00%
-7.50%
-10.00%
-12.50%
-15.00%
-17.50%
-20.00%
-22.50%
Dec/06
Jan/07
Feb/07
Mar/07
Apr/07
May/07
Jun/07
Jul/07
Aug/07
Sep/07
Oct/07
Nov/07
Dec/07
101
Billion-Dollar Club
102
IPOs – Not What They Used To Be
103
IPOs – Not What They Used to Be
Total
Number
of IPOs
Positive
since
IPO
Negative
since
IPO
Acquired
2003
7
1
4
2
$438
(3.34%)
2004
29
6
17
6
1,628
(12.64%)
2005
17
5
10
2
819
4.55%
2006
19
6
13
0
920
8.26%
2007
28
11
18
0
2,041
2.00%
100
29
62
10
5,846
(0.24%)
Source: Burrill & Company
Amount
Raised*
($ Million)
Average
D % change
Since IPO**
* Includes over-allotments
** As of 12/31/07
104
2007 Life Science Financing Overview
Initial Public Offerings:

27 offerings with proceeds of at least $20.0m

$2b total proceeds raised

$70m average deal size

$162.3m median pre-money valuation

The share price of issuing companies increased 2% on
average 5 days post pricing

The share price since time of offering has increased 2%
on average
105
Finance and Capital Markets
The global financial markets have created additional
opportunities for companies to look
outside their borders for financing
 Europeans on NASDAQ/NYSE
 Chinese on NYSE
 Americans on AIM/Euronext/SWX
 Other markets are available
 Mothers (Tokyo)
 DFX (Dubai)
 Hong Kong
106
Transformation:
FIPCO’s to VIPCO’s
107
Changing Business Models
FIPCO (Fully Integrated Pharma Co.)
Sales &
Distribution
VIPCO (Virtually Integrated Pharma Co.)
Sales &
Distribution
Partnerships
CSO
Manufacturing
CMO
Clinical
Development
CROs
Manufacturing
Clinical &
Regulatory
Preclinical
Support
Research
Technology
R&D
Preclinical CRO
Academia,
Scientific,
Institutions
108
So What Does Big Pharma Do Better Than Anyone Else?

Discovery?

Development?

Manufacturing?

Distribution?

Disease Management?

What is the Answer?
109
Financing Biotech Companies the Old Way Doesn’t Work

Difficult financing at early stages

Successive venture rounds at increasing value is
challenging…public equity values have compressed the
whole equation

Time and cost of development has been increasing and
risk/return has been decreasing
Therefore, a new model must emerge
110
How Does All This Impact Entrepreneurial Start-ups in
2008

VC & Angels are hesitant to invest


Business models are changing
More financing of projects

Selective platforms are coming back

Higher bar for regulatory approval

Reimbursement compression

Capital efficiency required
BUT…

Rate of start-ups are increasing
(go figure…)
111
So the predictions for 2008…
112
The Predictions for Biotech in 2008

Sales of products will continue to increase, but reimbursement
becomes more challenging

Despite stricter regulatory oversight, more products to the
marketplace
 Regulators
 Raising the bar for innovation, theranostics
 Pharmacovigilence is the name of the game
 Drug safety will continue to be a major issue
 Congress aiming to add power to Medicare to negotiate what
it pays for drugs
 Congress may reduce the capital gains differential (bad for the
capital raising side of the industry)
113
The Predictions for Biotech in 2008 (continued)
 Biofuels boom
 Ag/Animal Health continue to progress

Biotech’s globality increases with US dominance continuing to
decrease

US research engine faces challenging times

Non-health care aspects of biotech also becoming less dominant as
industrial, biofuels, ag increase in importance

Clusters are redefined away from geography to virtual clusters
(diseases, markets, unique industry segments)

Business models continue to evolve
114
The Predictions for Biotech in 2008 (continued)
 Both big Pharma and big Biotech will be competing for
companies with advanced product pipelines
 We will see US biotechs accessing capital
overseas…international companies accessing capital in nonlocal markets
 “Capital Markets” worse than 2007, but

30 IPO’s in 2008 (mostly 2H ‘08)

2008 $50 billion will be raised by the US biotechs

MKT Cap will reach $500B

Of the 60 IPO’s completed by 2006, most all trading above offer
price by end of 2008
115
It’s going to be a
tough, competitive year with biotech
companies transforming the world
… and being transformed by it!
116
Biotech 2008:
A Global Transformation
G. Steven Burrill
Chief Executive Officer
Burrill & Company
Wisconsin Life Sciences Transformation: World Perspectives & Wisconsin’s Advantage
Madison, WI, February 21, 2008
Last Updated: March 24, 2016
117