New York Pharma Forum NIF Ventures JUNE 23, 2005 Goro Takeda
New York Pharma Forum – June 23, 2005 CONFIDENTIAL NIF Ventures At a Glance Global VC Firm with Over 20 Years of Operational History Founded in 1982 $1.4B under management NIF VENTURES Offices in Tokyo, Palo Alto, Taipei, & Shanghai Active in life sciences, IT, and business services Financing Life Science Innovations 8 dedicated LS investment professionals 91 investments since 1987, 24 exits via IPO or M&A Venture Investor with Strong Track Record Largest local Biotech IPO market share: recent IPO’s include Transgenic (02), Medibic (03), LTT Biiopharma &TakaraBio (04), Medicinova & Effector Cell (05) Maturing US/European portfolio: Cyclacel, AlgoRx & Prestwick have filed S-1 (TolerRx withdrawn) CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL NIF Life Science Portfolio NIF VENTURES Current active portfolio comprises 47 in Japan, 11 in US and 7 in Europe CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Creating Productive Relationship with Pharma Continued dialog with 20+ Pharma BD groups Sponsoring business development events “Atlas -NIF- Itochu Conference” in April 2005 NIF VENTURES Sourcing In-licensing 40 US/European Biotech presented Opportunities 200 BD executives from 70 Japanese Pharma/Biotech attended 150 one-on-one meetings arranged Japanese Pharma actively out-licensing to US Biotech Out-licensing Molecules having failed in certain indications, which may De-prioritized be developed in others, i.e., repositioning Assets Individual assets: non-core therapeutic area products, under-promoted products Corporate Fully operational units/divisions Spin-outs Special purpose R&D vehicles Make a lot of economic sense, at least in theory… CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Recently Announced Out-licensing Deals Between Japanese Pharma and Biotech Licensor Licensee Compound Date Shionogi Peninsula Doripenem 5/28/03 NIF VENTURES Takeda Peninsula TAK-599 10/1/03 Kyowa Hakko Novacardia KW-3902 10/9/03 Dainippon Sunesis SPC-595 10/16/03 Sankyo Cyclacel SC-682 12/8/03 Mitsubishi Dynogen MCI-225 12/22/03 Otsuka Vela VPI-013 4/2/04 Fujisawa Gloucester FK-228 4/16/04 Nippon Shinyaku Optimer Prulifloxacin 6/29/04 Daiichi-Suntory Replidyne Faropenem Daloxate 8/17/04 Mitsubishi Dynogen Pumosetrag 11/4/04 Mitsubishi Perlegen Sciences MCC-555 4/12/05 Source: NIF Ventures CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Current State of Japanese Biotech - Promises Fastest aging population; $66.4 billion Rx market (2003) Global blockbuster drugs discovered in Japan (Pravacol, Precid, Large Market & Aricept) Solid Core Competencies/ Academia has increasing interests in start- ups; TLO’s becoming more NIF VENTURES Leverageable professional and actively involved Business Highly fragmented businesses, creating significant spin-out opportunities once consolidate (approx. 500 companies) Conglomerates/cross-shareholdings unwinding Emergence of more vocal, foreign institutional shareholders increase market pressure - 7 of top 10 Pharma have >30% foreign shareholders Drastic Changes in Large Pharma finally consolidating and divesting non-core assets Corporate Mentality 490 IPO’s from 1/01 – 12/04 in JASDAQ/Mothers/Hercules compared to 443 in NASDAQ, 463 in AIM Total offerings $13.2 billion in 2004, up 220% from $6 billing in 2003 Favorable IPO Steady demand for Biotech IPO’s - no “Window Closing” Environment Lower maturity hurdles for IPO access; IPO market still rewarding early stage companies with favorable valuations CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Biotech Stock Performance Post IPO NIF VENTURES Source: Lehman Brothers 12 companies out of 15 Biotech IPO’s trading below their IPO prices… …Current Biotech stock performance highlights fundamental issues for Japanese Biotech industry. CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Current State of Japanese Biotech - Challenges Will platform companies be able to maintain sustainable growth? Platform Technology Will they be able to transform from platform to product-based company Dominate when they need? Banks would not support dedicated Biotech analysts unless there is a NIF VENTURES meaningful number of product-based companies Small Research Without Biotech analysts institutional investors are reluctant to take Coverage Universe significant position in Biotech papers Most public Biotech companies have >1000 shareholders!! Vs. 20 or so in US Concentration in Less educated investors unable to appreciate Pharma R&D process Retail Investors Investment time horizon very short - based on earnings 12 companies out of 15 Biotech IPO’s have traded down - possibly overpriced IPO Overpricing & Valuation methodologies unclear High Volatility Extremely high volatility post IPO; tend to overreact to announcements in newspapers and downward fiscal revisions Still significant stigma attached to “venture” or “Biotech” Lack of late stage companies that could attract experienced Pharma Lack of Managerial talents Talent Where have the 1000 people gone who left as a result of Yamanouchi/Fujisawa merger? CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Concentration in Retail Investors NIF VENTURES Source: Lehman Brothers CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Lessons Learned from US Experience – Not Yet! How do you sustain mid- to long-term growth? Product History has taught that transforming from platform technology to vs product-based company is extremely difficult, require different skill Platform sets NIF VENTURES Will capital intensity be a norm; $20-30M pre-IPO in Japan vs $100M pre-IPO in US? Capital Given limited appetite from pension funds investing in technology Intensity focused VC funds, how will we match increased capital requirements? A lot of successful examples in US and Europe: Actelion, Basilea, BioXell (Roche), Seattle Genetics (BMS), Biovitrum (Pharmacia), Corporate Affymax (GSK) Spin-outs Will Japanese Pharma be open to spinning-out fully operational units/divisions or a portfolio of assets? A robust US M&A market for early stage Biotech provides alternative route for exits to shareholders M&A Market Japanese Biotech too immature to be considered a credible As Route To Exit acquisition candidate for Pharma To catch up we need to capitalize on US experiences – successes and mistakes. CONFIDENTIAL
New York Pharma Forum – June 23, 2005 CONFIDENTIAL Robust US Private M&A Market Selected M&A Transactions for Development Stage Private Biotech ANNC. DATE 5/12/05 4/19/05 3/9/05 2/24/05 2/7/05 1/20/05 9/28/04 9/1/04 9/1/04 2/23/04 NIF VENTURES TARGET/ Cephalon/ JNJ/ JNJ/ Pfizer/ Takeda/ Pfizer/ Exelixis/ MGI/ MGI/ Merck/ ACQUIROR Salmedix Penninsula Transform Idun Syrrx Angiosyn X-Ceptor Zycos Aesgen Aton BUSINESS Oncology/ Anti-infective/ Formulation/ Apoptosis/ SBDD/ Angiogenesis/ NHR/ DNA/ DDS/ Oncology/ DESCRIPTION Specialty Specialty Platform Platform Platform Platform Platform Platform Platform Platform TRANSACTION $200 $258 $230 $285 $270 $527 $23 $50 $90 $75 VALUE ($ in MM) Upfront $160 $245 $230 $285 $270 $15 $23 $50 $32 small upfront Contingent $40 Cerexa OS $512 $58 # OF COMPOUNDS Marketed 0 0 0 0 0 0 0 0 0 0 Phase III 0 1 0 0 0 0 0 0 1 0 Phase II 3 0 1 1 1 0 0 1 0 1 Phase I 0 0 0 0 1 0 0 1 0 0 Preclinical 0 0 0 2 4 1 3 0 0 0 TOTAL VC$ $143 $93 $60 $156 $135 $1.75 $25 $54 $22 $49 LAST POST $105 $105 NA $71 $228 $4 $30 $33 $36 $52 Source: Lazard CONFIDENTIAL
Venture Capital Funding of Biotechnology in the U.S. and Japan 11
Arthur Klausner Venture Partner A. M. Pappas & Associates June 23, 2005 12
Overview of A. M. Pappas & Associates • Life Sciences Venture Capital – Biopharmaceuticals, Medical Technology • $200MM Under Management – Currently raising Pappas Ventures III ($150MM) • U.S. Geographic Focus – West Coast, Northeast, Underserved Regions 13
Annual VC Investment into U.S. Biopharm Companies (by stage) Later Stage 5600 Second Round First Round Seed Round 4200 $MMs 2800 1400 0 1998 1999 2000 2001 2002 2003 2004 2005 (Q1) Source: VentureSource 14
Biopharmaceuticals Discovery-Based Clinical Stage Sales & Marketing Companies Companies Companies “Biotech” “Specialty Pharma” 62% 38% 2000 IPOs 92% 8% 2004 IPOs Source: Kaufman & Co. 15
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Number of Bioventure Companies in Japan 464 440 500 383 400 316 255 300 209 169 149 200 126 108 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Change in Number of Japanese Bioventures 67 61 100 57 46 40 24 23 20 17 18 12 50 8 9 6 6 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 (Source Japan Bioindustry Association) 17
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