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© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 1 -
- 1 -© 1999 Boston Millennia Partners
Boston Millennia Partners
30 Rowes WharfBoston, MA 02110Tel. 617 428.5150Fax. 617 428.5160
www.bmpvc.com
A. Dana Callow, Jr.Managing General PartnerBoston Millennia Partners
Harvard Medical SchoolApril 4, 2006
Invention to Venture Life Sciences 2006
Validating Your Idea
MillenniaPartners Boston
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 2 -
Boston Millennia Partners was founded by 7 former Boston Capital Ventures investment professionals in 1997
$700M+ in assets under management
12 investment professionals
BMP team has completed over 125 direct investments and 150 acquisitions
Investors and Partners from 15 countries worldwide
Invest in early stage companies in Healthcare, Life Sciences, and Information Technology industries
Active with early stage companies and “ideas” at various medical/technology centers in the US Tufts MIT Harvard MD Anderson Cleveland Clinic Johns Hopkins UCLA Arizona University
Review 2,000 to 3,000 opportunities annually
Highly active investment process, return potential of 10-20x on investments selected
Expect 5 to 7 year holding period for investments
Located at Rowes Wharf, downtown Boston
Boston Millennia Partners (BMP)
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 3 -
(Sold to Incyte Genomics, 12/00)
(IPO: 1/97; Sold to Genzyme 12/04)
(Sold to Oxford Health Plans, 3/02)
(Sold to Cedara Software, 10/04)
MillenniaPartners’ Healthcare Portfolio
(IPO: 11/05; NASDAQ: CRXX)
(NASDAQ: PRXL)
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 4 -
Identify sectors with the following characteristics Large, high-growth market opportunity Competition is made up of many small companies with no dominant market-share leader Undergoing a fundamental shift in the business as a result of economic or technological change Capital efficient business models
Identify initial company upon which to grow the business Focus on companies that have meaningful revenues Identify the company best positioned to exploit the market opportunity Select a management team capable of carrying out an aggressive growth plan
Accelerate the company’s internal growth through acquisition and consolidation of smaller-sized companies in similar or related market segments
Boston Millennia Partners’ Proprietary, Research-Driven Model
With the goal of building a $500-750 million market capitalization company
Core Company Investment Strategy
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 5 -
Current Millennia Portfolio Candidates:
Greater than $500M Valuation Potential
• Arthrosurface
• CardioMEMS
• Collegium
• CombinatoRx (NASDAQ:CRXX)
• GlycoFi
• Nexidia
• Optical Solutions
• Predix Pharmaceuticals
• Tropos Networks
Experience Building Large Scale Companies
Previous Portfolio Investments:
Greater than $500M Valuation
• PAREXEL International (Mkt. cap: $1.2B)
• ILEX Oncology (Mkt. cap: $1.5B)
• Bright Horizons (Mkt. cap: $1.3B)
• Brooks Fiber (Mkt. cap: $2.4B)
• Cornerstone Brands (Mkt. cap: $760M)
• Hotjobs (Mkt. cap: $1.9B)
• iVillage (Mkt. cap: $6.4B)
• Verio (Mkt. cap: $6.5B)
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 6 -
Historical “Take-off Periods” For Value Creation
After initial investment in early stage venture investing
1x
5x
10x
1 2 3 4 5 6 7 8 9 10 11 12
1997-2003
1985-1997 2003-2010
Years
Co
mp
any
“Val
ue”
© 2006 Boston Millennia Partnerswww.bmpvc.com
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From the Investors’ Dictionary
val·i·date (văl'ĭ-dāt')
tr.v., -dat·ed, -dat·ing, -dates.
1) To declare or make legally valid
2) To mark with an indication of official sanction
3) To establish the soundness of; corroborate.
Source: Answers.com
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 8 -
From the Investors’ Dictionary
pre·science (prĕsh'əns, -ē-əns, prē'shəns, -shē-əns )
Knowledge of actions or events before the occur; foresight
n.
Source: Answers.com
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 9 -
Multiple Levels of Validation Required
Scientific/Technical – does “it” work and is “it” relevant?
Management Resources – can adequate, experienced and committed management
resources be attained?
Financing – will sufficient capital be available over various stages of company
development
Market – does adequate demand and sector structure allow a large return?
Scalability-Need to build large companies
Growth-need competitive dynamics
Time to market
Liquidity/Exit – will investors be rewarded for their patience and do multiple attractive
exits exist?
IPO or M&A
Venture firms seek returns with IRR of 25-50%
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 10 -
Portfolio Company
DirectorsDirectors
CustomersCustomersInvestorsInvestors
Search FirmsSearch FirmsEmployeesEmployees
AuditorsAuditors AttorneysAttorneys
The Portfolio Company NetworkMultiple Points of Contact
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 11 -
1. Basic Information from Companya. PowerPoint deckb. Business Planc. Detailed revenue plan with backup assumptions
2. Ownership Structurea. Detailed Cap Tableb. Will option pool need to be increased?
3. Market Opportunitya. Research analyst reports - size, growth, dynamics of the spaceb. Bottom-up analysis the size of the market
4. Competitiona. Competitive Matrix including:
i. Fundingii. Last Round Valuationiii. Revenuesiv. Business Modelv. Value inflection points
5. Public Comparablesa. Business Modelb. How they compare to the company being consideredc. Revenue Modeld. Market Cap/Revenuese. Time to IPO
6. Customer Interviewsa. Relationship with the companyb. Assessment of the company - Strengths and Weaknessesc. Perceived value propositiond. Project/proposed relationship detailse. Comparison of alternatives - Strengths and Weaknessesf. What might be the potential revenues the company could generate?g. Who else might be interested in the company for their product/service?h. How does the technology/service fit in with other technologies/services
in place at the customeri. Other potential applications/avenues for the product/servicej. Hurdles to success - potential obstacles for the company to be successful
7. Analyst Interviewsa. Assessment of the company - Strenghts and Weaknessesb. Market opportunityc. Competetive landscaped. Hurdles to successe. Exit opportunities - who might acquire the company
8. Managementa. Detailed resumes for each member of management teamb. Management interviews - determine prio experience, track recordc. Open positions that need to be filled
i. When will they be filledii. Who are the candidates, type of candidates
d. Referencesi. From the management teamii. Other references from past co-workers at other companies
9. Previous Rounda. Term Sheetb. Due Diligencec. Conversation with previous round investors
i. From last round to this roundii. Future value inflection points
10. Sales Assessmenta. Review of current accounts
i. Nature of relationship, stage - e.g. pilot, beta, etc.ii. Revenue potential
b. Current pipelinec. Backlog
11. Technical Assessment (if applicable)a. Determine appropriate person to do technical assessmentb. Key questions
i. Does it work as advertised?ii. Will it scale?iii. What are the alternative technologiesiv. How much of a lead, if any, does the company have?
12. Legal Due Diligence13. Company Specific Due Diligence
Typical Due Diligence Checklist
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 12 -
BMP Healthcare Focus
Established safety profile
Demonstrated efficacy in man
Articulated mechanism of action or therapeutic pathway
Articulated pathway to regulatory approval
Articulated market and value proposition
Established reimbursement
Multiple “shots on goal” (no binary bets on single drugs or devices)
Partnerships or M&A appear to be targeted exit strategy
Management team with previous experience working both with start-ups and in
particular industry segment
Characteristics of a BMP Healthcare Investment
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 13 -
Life Science Development Road Map – Example
Company Founding Pre-Clinical Phase I Phase II/IIB Phase III
Investment Stage Bootstrap Seed Series A Series B/C Series C/D/IPO
Market Management Team Safety in Humans Safety in Humans Efficacy in Humans
Possible Efficacy Efficacy in Animals
Potential Efficacyin Humans
Preliminary Efficacy in Humans
Investors FoundersUniversitiesGrants
AngelsEarly Stage VCs
VCsCorporate Partners
VCsCorporate Partners
VCsCorporate PartnersPublic Investors
CapitalRequired
<$2M <$2M $5M - $10M $5M - $25M $50M+
Founders'Ownership
>75% 50-75% <50% <25% <20%
Time Frame Year 1 Year 2-3 Year 3-4 Year 3-4 Year 4+
Scientific Validation
© 2006 Boston Millennia Partnerswww.bmpvc.com
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AssumptionsEach Pre-Money 20% premium to previous Post-Money.Management Ownership starts at 35%, decreases to 25% in second round and decreases to 20% for subsequent rounds.IPO occurs in Year 6 but requires 12 more months due to equity lockup. Assumes same Net Proceeds at liquidation.
Financing scenario:
Series AYear 0
Series BYear 2
Series CYear 3
Series DYear 4
Pre-Money: $10M $24M $53M $99M
Raise: $10M $20M $30M $40.0M
Post-Money: $20M $44M $83M $139M
BMP Investment: $6M $5M $4M $3M
BMP Ownership: 30% 25% 19% 15%
Mgmt. Ownership: 35% 25% 20% 20%
Exit required to attain meaningful venture return:
Market Cap./Exit Value: $500M BMP Proceeds: $73M
BMP Total Investment: $18M BMP Return Multiple: 4x
BMP Ownership at Exit: 15% BMP IRR For Sale In year 6: 37%
Management Proceeds: $100M BMP IRR For IPO-Proceeds in Year 7:
30%
6 year-old investment sold for $500M:
Life Science Venture Investment Scenario
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 15 -
Industry: Healthcare and Life Sciences-Oncology
Description: Drug development company focused on anti-cancer agents. The company leverages it expertise to also serve as a value added provider of contract development services.
Role: Lead; small co-investor syndicate
Financing: Initial financing had a pre-money of $15M; market cap reached $1.5B after IPO; acquired by Genzyme
Reasons to Invest
Management Already highly skilled scientifically Helped create focus around strategy Augmentation at middle level
Business Strategy Executed drug development with
outsourced oncology services play Leveraged BMP’s experience in CRO
segment
Capital structure Small initial round Created manageable syndicate with
consistent goals
Key Relationships Multiple existing relationships with large
pharmaceuticals and selected small biotech companies
Value Creation Through Millennia Investment
Case Study of Completed Investment
Lower risk - Phase II and beyond opportunities
Exclusive in-sourcing of drug candidates from Texas
based health system
ILEX one of first movers in cancer therapeutics
combined with CRO experience
BMP team experienced in CRO field after investment
in PAREXEL; considered ILEX to be a “hedged” bet
Founder Dan van Hoff and founding team some of
key thought leaders in oncology in U.S.
CEO experience in drug development Previously developed Betaseron® for multiple sclerosis
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 16 -
Oncology Pharmaceuticals
Relative Market Share
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
0.001x0.01x0.1x1x10x
Re
ve
nu
e G
row
th R
ate
Amgen
Sanofi Aventis Roche Novartis
AstraZenecaGenentech
Eli Lilly
IVAX
Biogen IDECGenzyme
ChironLigand
ILEX (acquird by Genzyme 12/04)
Bristol-Myers Squibb
PfizerMillennium (130%)
Sector Growth 18%
Johnson & JohnsonGlaxoSmithKline
Relative Market Share, 2003-2004
= $1.8B in 2004 estimated revenue
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 17 -
Anti-Inflammatory DrugsRepresentative Market Share, 2003-2004
Relative Market Share
Re
ve
nu
e G
row
th R
ate
= $640 million in 2004 revenues*Due to safety concerns Vioxx was removed from production in September 2004 and Bextra sales were suspended in the U.S. in April 2005
-40%
-20%
0%
20%
40%
60%
80%
100%
0.01x0.1x1x10x
NSAID
COX-2 inhibitor
TNF blocker
Bextra (Pfizer)*
Celebrex (Pfizer)
Vioxx (Merck)*
Voltaren (Novartis)
OTC Motrin/Advil
Naprosyn (Roche)/Aleve
Relafen (GSK)
Remicade (J&J/Schering Plough)
Mobic (Abbott/Boehringer Ingelheim)
Sector Growth = 24%
(NASDAQ: CRXX)
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 18 -
Medical Devices and Biologics
Relative Market Share, 2004-2005
-25%
0%
25%
50%
75%
100%
0.01x0.1x1x10x
Relative Market Share
Re
ve
nu
e G
row
th R
ate
= $2B in 2005 Revenues
Private
Public
Sector Growth = 12%
StrykerJ&J
(DePuy)
Smith &NephewZimmer
WrightMedical
Biogen
Biomet
GoreMedical
Arthrocare
DJ Orthopedics
Genzyme
OsteoBiologics
Impliant
Teknimed
Scandius BioMedical
Regentis Biomaterials
Arthrosurface Histogenics (pre revenue)
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 19 -
0
100
200
300
400
500
600
700
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Venture-backed IPOs vs. M&A Transactions
Nu
mb
er
of
Tra
ns
ac
tio
ns
Source: National Venture Capital Association
= Venture-backed M&A
= Venture-backed IPOs
Liquidity: IPO vs. M&A Exits
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 20 -
New England IPOs – Number of Deals
79
34
22
46
41
35 4
9
16
0
10
20
30
40
50
60
70
80
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Nu
mb
er
of
IPO
s
● In 2005, 6 of the region’s 16 IPOs were from biopharmaceutical or medical device companies.
Source: WilmerHale 2005 IPO Report
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 21 -
Guidelines for Validating Your Ideas
Think Big – “don’t move the deck chairs on the Titanic”
Find a passion and focus
If one idea and approach doesn’t work then find another
Assemble a team
Find constituencies who share goals and values
“21 No’s” – then move on
Listen and hear what others are really saying
Replace the subjective with the objective
Assess and re-assess your skills and identity
“Be careful what you wish for, it may come true”
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 22 -
Conclusions
Time to build successful companies has been extended – patience and capital
efficiency is necessary
Multiple levels of validation are required to build relevant and financially rewarding
companies for both the entrepreneur and venture firm
Scientific, management, financial, market and liquidity
Must address market that is pertinent and large
Entrepreneurs need to utilize the full network of resources around an idea
Venture firms require significant investment returns – we seek IRRs of 25-50%
Must create companies with a market cap of over $500M
Equal partnership between entrepreneur and venture firm
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 23 -
Appendix
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 24 -
$22$19
$9$13
$83
$58
$27
$17
$13
$7$3
$6$7
$50
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
To
tal C
om
mit
me
nts
to
VC
Fu
nd
s (
$ B
illio
ns
)
Source: VentureSource/Venture One
Commitments to U.S. VC Funds
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 25 -
2.63.13.02.8
5.3
11.6
5.4
2.3
1.61.2
0.7
$0
$2
$4
$6
$8
$10
$12
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
To
tal C
om
mit
me
nts
to
VC
Fu
nd
s (
$ B
illio
ns
)
Source: VentureSource/Venture One
New England Investment Activity
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 26 -
$0
$5
$10
$15
$20
$25
$30
3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05
Me
dia
n P
re-$
Va
lua
tio
n (
$ M
illio
ns
)
Valuation MovementRecent Increase in Private Company Valuations
Source: VentureOne
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 27 -
Millennia Team Experience
• Founding Partner, Boston Millennia Partners• Founding Partner, Boston Capital Ventures• Consultant, Braxton Associates (Bain/BCG heritage)• Software Engineer, Tymshare/McDonnell Douglas• Dartmouth College (Tuck School), MBA• Tufts University, AB in Economics• Board of Trustees and Investment Committee, Tufts University • Advisory Board, Private Equity Center at Dartmouth College• Board of Overseers, Tufts University Medical School
• Founding Partner, Boston Millennia Partners• Principal, Boston Capital Ventures• Assistant General Counsel, Lifetime Corporation• Attorney, Warner & Stackpole/Kirkpatrick & Lockhart • Georgetown University, JD• University of Maryland, MA in Economics• Boston College, BA in Economics
Robert S. Sherman, PartnerA. Dana Callow, Jr., Managing Partner
Martin J. Hernon, Partner Patrick J. Fortune, Ph.D., Partner
• President & COO, New Era for Networks (Nasdaq: NEON)• CIO, Monsanto Corporation• CIO, Bristol-Myers Squibb• President & COO, Coram Healthcare• Northwestern University, MBA• University of Wisconsin, Ph.D. in Physical Chemistry• University of Wisconsin, BA in Chemistry
• Founding Partner, Boston Millennia Partners• Partner, Boston Capital Ventures• General Partner, Hambro International Venture Fund• Assistant Vice President, Bank of Boston• Harvard Business School, MBA• Amherst College, AB in Economics
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 28 -
• Regional Market Manager, Corning, Inc.• Senior Analyst, Corning Communications• Project Leader, TotalElfFina• Engineer, Saint Gobain• Dartmouth College (Tuck School), MBA• Institut National Polytechnique, MS in Engineering• Lycée Pierre de Fermat, BS in Math & Physics
• Principal, Boston Capital Ventures• Managing Director, Watch Hill Corporation• Finance Director, BBN Communications As (Copenhagen)• Controller, Bolt Beranek & Newman, Inc.• Financial Analyst, General Electric Corporation• Dartmouth College (Tuck School), MBA• Haverford College, AB in Economics
Robert W. Jevon, Jr., PartnerJean-Yves Lagarde, Partner
Millennia Team Experience
• President, Tiedemann & Company• CFO positions at early stage companies (e.g. PAREXEL, HPR)• Certified Public Accountant• Bentley College, BS in Accountancy
Bruce R. Tiedemann, CFO Paul McManus, Executive Search• Entrepreneur in Residence/Lecturer in Strategy & Policy, Boston University• President, The McManus Group• Vice President, Aubin International• Managing Director and Co-Founder, The Bell Mason Group• Manager, Digital Equipment Corporation• Boston University, MBA• Wentworth Institute of Technology, BS in Mechanical Engineering
© 2006 Boston Millennia Partnerswww.bmpvc.com
Boston Millennia Partners - 29 -
www.bmpvc.com
Boston Millennia Partners Healthcare Portfolio, Additional Information Available on the Internet:
Portfolio Company Web Site Address
Arthrosurface www.arthrosurface.comAthenix Corp. www.athenixcorp.comCardioMEMS www.cardiomems.comCoapt Systems, Inc. www.coaptsystems.comCollegium Pharmaceuticals www.collegiumpharma.comCombinatoRx, Inc. www.combinatorx.comeMed Technologies www.emed.comEpigenesis Pharmaceuticals www.epigene.comEntigo, Inc. www.entigo.comGalt Associates, Inc. www.galt-assoc.comGlycofi, Inc. www.glycofi.comMedAptus, Inc. www.medaptus.comNovalar Pharmaceuticals, Inc. www.novalarpharm.comPHT Corp. www.phtcorp.comPredix Pharmaceuticals, Inc. www.predixpharm.comProtein Forest, Inc. www.proteinforest.comRejuvenon Corp. www.rejuvenon.com
Other resources on Angel Investors and Venture Capital:Association Web Site Address
National Venture Capital Association www.nvca.comAngel Capital Association www.angelcapitalassociation.orgUniversity of New Hampshire - Center for Venture Research www.unh.edu/cvr