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WHY VC’S SHOULD CONSIDER FUNDING START-UP BIOTECHS

WHY VC’S SHOULD CONSIDER FUNDING START-UP BIOTECHS A PRESENTATION AT BIOMALAYSIA 2011 KUALA LUMPUR BY SANJAY

A PRESENTATION AT BIOMALAYSIA 2011 KUALA LUMPUR

BY

SANJAY K. SEHGAL MANAGING PARTNER & CEO EAST WEST CAPITAL PARTNERS

Life Sciences & Healthcare Principal Investments and Corporate Finance Advisory

November 2011

East West Capital Partners

East West Capital Partners Who are East West Capital Partners (“EWCP”)?  Healthcare/Life Sciences Investments and

Who are East West Capital Partners (“EWCP”)?

  • Healthcare/Life Sciences Investments and Corporate Finance Advisory

  • Headquartered out of Singapore; Presence in London, Malaysia, and India

  • 4 Partners with over a 100 years of combined Deep Domain and Global Operational and Financial Expertise

What is EWCP’s Focus and Investment Strategy?

  • FOCUS o Facilities (hospitals, specialty clinics) o Services (clinical research organizations, healthcare insurance, IT) o Pharma (specialty drug delivery technologies, manufacturing) o Medical Technology (e.g. OEM, manufacturing/distribution)

  • Knowledge transfer and IP development from West to East and East to West

  • STRATEGY:

    • We are Engaged hands-on value -add investors

    • We seek control or effective control investments

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Topic is: Why VCs Should consider funding start-up Biotechs

Topic is: Why VCs Should consider funding start-up Biotechs Should the Question be the Other Way

Should the Question be the Other Way Around? that is…

Topic is: Why VCs Should consider funding start-up Biotechs Should the Question be the Other Way

Why Should VCs consider funding start-up Biotechs?

The VC Money Cycle – Is It Alive & Well?

The VC Money Cycle – Is It Alive & Well? 4
The VC Money Cycle – Is It Alive & Well? 4

Who are VCs?

Who are VCs? 5

VCs Usually Know What They are Investing In, right?

VCs Usually Know What They are Investing In, right? 6
VCs Usually Know What They are Investing In, right? 6

How about Biotech VCs?

How about Biotech VCs? Biotech 7
Biotech
Biotech

What do VCs Really Want?

What do VCs Really Want? 8
What do VCs Really Want? 8

How Long are VCs Prepared to Wait?

How Long are VCs Prepared to Wait? 9
How Long are VCs Prepared to Wait? 9

The Essential Nature of Biotech

The Essential Nature of Biotech 10
The Essential Nature of Biotech 10

What is the Typical Biotech?

What is the Typical Biotech? Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Revenues
Yr 1
Yr 2
Yr 3
Yr 4
Yr 5

Profits/ (Losses) Or Investment

What is the Typical Biotech? Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
What is the Typical Biotech? Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
What is the Typical Biotech? Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
What is the Typical Biotech? Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
What is the Typical Biotech? Revenues Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

What has Changed so Dramatically for

the Biotech Industry?

First…

What has Changed so Dramatically for the Biotech Industry? First… “Our portfolio has had seven NDA
What has Changed so Dramatically for the Biotech Industry? First… “Our portfolio has had seven NDA

“Our portfolio has had seven NDA submissions since 2008, with five approved and two still pending. That should be a success, except it has taken twice as long to get there as it used to five or six years ago. The math with the FDA just doesn’t work anymore for us in terms of a venture fund lifecycle… It’s incredibly frustrating to watch this happen…”

Quote from

Kate Mitchell of Scale Venture Partners (BofA’s Venture group who stopped investing in biotech in November 2011)

What has Changed so Dramatically for

the Biotech Industry?

Second…

What has Changed so Dramatically for the Biotech Industry? Second… Uncertain Exit for Investors 13

Uncertain Exit for Investors

And so… Where are the Returns in Biotech?

And so… Where are the Returns in Biotech? 14
And so… Where are the Returns in Biotech? 14

The Mis-match Between What VCs Want and the Fundamental Nature of Biotech

The Mis-match Between What VCs Want and the Fundamental Nature of Biotech VCs Biotech What VCs

VCs

Biotech

The Mis-match Between What VCs Want and the Fundamental Nature of Biotech VCs Biotech What VCs

What VCs want:

What Biotech offers:

-Low Risk -Low Investment -High Return -Pronto!

-High Risk -High Investment -Binary outcomes -Years of Waiting

Given this Mis-match, Why Do VCs Invest in Biotech?

Given this Mis-match, Why Do VCs Invest in Biotech?  Returns – looking for the next
  • Returns – looking for the next BILLION dollar home-run

  • Superman syndrome…I believe I can pick the winners

  • Portfolio – Investors want diversification to spread risk

  • Doing good – Bringing a benefit to humanity, e.g., stem cells

  • Bragging rights – Being part of the next Big Thing

  • Government support and encouragement

So, Should VCs Invest in Start-up Biotechs?

So, Should VCs Invest in Start-up Biotechs? 17
So, Should VCs Invest in Start-up Biotechs? 17

How Should Biotech Companies Prepare Themselves for this New Paradigm? 1 of 2

How Should Biotech Companies Prepare Themselves for this New Paradigm? 1 of 2  Understand your
  • Understand your VC

  • Try to get funding up to a clear valuation point – avoid being caught short of cash mid-way

How Should Biotech Companies Prepare Themselves for this New Paradigm? 2 of 2

How Should Biotech Companies Prepare Themselves for this New Paradigm? 2 of 2  Be more
  • Be more capital efficient:

    • Leverage emerging markets

    • Enter into risk-sharing deals with suppliers

    • Get Government support / grants

    • Be Virtual

  • De-risk: Either find a near-term revenue model or identify an interested license or joint venture partner early on

  • C O N T A C T Sanjay K. Sehgal

    M A N A G I N G

    P A R T N E R

    &

    C E O

    Tel: +65 9675 6436 sanjay@eastwestcap.com www.eastwestcap.com

    C O N T A C T Sanjay K. Sehgal M A N A G I

    WHY VC’S SHOULD CONSIDER FUNDING START-UP BIOTECHS?

    A PRESENTATION AT BIOMALAYSIA 2011 KUALA LUMPUR

    Life Sciences & Healthcare Principal Investments and Corporate Finance Advisory

    November 2011