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Life Science VC Gap in Missouri
July 17, 2012
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2012 BIO Benchmarking Class
Representative Shelley Keeney Marble Hill - Republican Majority Caucus Chair
Representative Anne Zerr St. Charles - Republican
Senator S. Kiki Curls Kansas City - Democrat
Representative Sue Allen Town & Country - Republican Majority Caucus Secretary
Representative Mike Kelley Lamar - Republican
Representative Casey Guernsey Bethany - Republican
Representative Gail McCann Beatty
Kansas City - Democrat
Representative Marsha Haefner St. Louis - Republican
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2012 BIO Benchmarking Class
Representative Pat Conway St. Joseph - Democrat
Representative Margo McNeil Florissant - Democrat
Representative Steve Cookson Fairdealing - Republican
Representative Jeanne Kirkton Webster Groves - Democrat
Representative Bart Korman High Hill - Republican
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Announcements
July 19, 2012 - The JOBS Act, Reg A, Small Cap IPO and Crowdfunding The Federal Reserve Bank of St. Louis Information about the event is available as you exit. Sept. 13, 2012 - Next PLSN Meeting Details coming soon!
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Panel
Dan Broderick – Senior Fellow, BioGenerator and Vice President, BioSTL Karen Spilizewski – Vice President, RiverVest Venture Partners J. Joseph Schlafly III – Senior V.P. & Director of Public Finance, Stifel Nicolaus and Co.
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DAN BRODERICK The Venture Capital Industry and How it Affects BioSTL
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Plant and Life Science Network July, 2012 D. J. Broderick
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NYSE.com
Investment Company Institute (12/31/2010)
Hedge Fund Reports (12/31/2010)
Thomson Reuters (12/31/2010)
PWC MoneyTree (12/31/11)
NVCA
Angel Capital Association
Thanks to John Taylor, V.P Research, NVCA
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Venture capital
= 0.2% of US GDP
US GDP is $12.5 Trillion
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
$18,000
NYSE Mkt Value
Equity Mutual Funds
Hedge Funds Buyout Funds (Est)
Venture Capital
$16,700
$5,666
$1,917 $800
$177
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$0
$200
$400
$600
$800
$1,000
$1,200
0
200
400
600
800
1,000
1,200
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$B Assets Under Mgt
# Firms
# Firms AUM $B Active Firms
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$B 10 12 18 31 58 107 38 4 11 19 31 32 31 26 16 14 18
0
20
40
60
80
100
120
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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
# LS FF 153 192 202 166 192 167 173 165 185 206 268 259 242 157 188 153
0
50
100
150
200
250
300
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2003 2004 2005 2006 2007 2008 2009 2010 2011E
US All FF 100% 123% 138% 163% 176% 166% 103% 135% 155%
US LS FF 100% 112% 124% 159% 152% 139% 94% 113% 91%
80% 90%
100% 110% 120% 130% 140% 150% 160% 170% 180%
2003 = 100%
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Uncertain regulatory environment – FDA
Higher cost of development ◦ Due to regulatory
Cost of pre-IND/IDE studies
Cost of human trials
Increased numbers, tests and length of follow up
“Allowing” Angels to “de-risk” the deal ◦ To raise money today most companies need…
at least drug safety data – or
first in man device studies
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0%
10%
20%
30%
40%
50%
60%
1981 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 2008 2009 2010 1H11
% of total VC investment $
% Disk Drive % Cln Tch % Bio incl. Pharma % Software
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Iowa, Indiana, Illinois, Kansas, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio, Oklahoma, South Dakota, Wisconsin
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% of Deals Done 4Q 2009 through 3Q 2011
# of Deals roughly even between devices and biotech,
Biotech, 118, 49%
Medical Devices, 110,
46%
Healthcare Services, 11,
5%
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$ Invested 4Q 2009 through 3Q 2011
MN 27%
IL 24%
OH 15%
IA 9%
WI 9%
MI 6%
IN 3%
KS 2%
MO 2%
OK,KY,ND,NE 3%
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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 9M
$M Inv 673 931 1,186 2,009 3,222 5,970 2,310 1,248 1,053 1,091 1,203 1,169 1,645 1,756 1,197 1,692 1,362
# Deals 204 263 341 340 407 611 364 285 224 231 212 249 314 340 261 300 266
0
100
200
300
400
500
600
700
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
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$ Invested 4Q 2009 through 3Q 2011
41% of $ invested in life science related companies
Ag not a category by itself – yet!
Bio 26%
Devices 15%
SW 14%
Media/Ent 10%
Ind/Energy 8%
IT Svcs 8%
Bus Products 5%
HC Services 4% Other
10%
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With R$D budgets being cut corporations are turning to alternative sources for new products like start-up companies
Corporate VC will be a more important source of funding
Need to understand strategic needs of the investing corporation
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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1
2011 Q2
2011 Q3
2011
% Deals w/CVC $ 17.3% 14.9% 16.5% 16.3% 16.5% 18.1% 18.8% 12.8% 13.6% 15.1% 14.4% 15.6% 15.2%
% of Ttl $ from CVC 9.1% 6.9% 6.9% 6.7% 7.6% 8.1% 7.7% 7.3% 8.4% 8.6% 9.4% 9.2% 7.3%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
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Source – Angel Capital Association
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Life Sciences
Life science investing is popular with Angels
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Percentage
of Groups
Angels clearly like investing at the stages
important to BioGenerator
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Angel investors are an increasingly important source of capital for start up companies ◦ Amount of invested capital in 2011 about 21 billion
dollars!*
◦ Almost equal to Venture Capital Firms
This is not going to change in foreseeable future
* Burrill and Associates
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Existing ◦ VC
MHIN, NVCA, Past co-investors
◦ Angels
Arch, FTL Capital
Emerging ◦ Other VC’s – new relationships developing
◦ New Angels
M-COIN, Hyde Park – Many more
Seek new Angels – Locally – most important
◦ Corporate investors
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Careful evaluation of financing risks
Thoughtful, (expert) design of seed funding milestones – value drivers
Deal selection – needs to be “special” ◦ Solve a big problem
◦ Extraordinary team
◦ Reduced financing risk – quick to human data
◦ Pre-series A value proposition
Data, fill out team, human data, IDE/IND (or equiv.)
◦ Some deals requiring VC funding will not be done
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BG is a credible source of deals – life blood of VC’s
Amount of NIH and other Government sources of grants (RO1 and SBIR/STTR)
◦ Washington University, St. Louis University, UMSL, Donald Danforth Plant Science Center
Infrastructure – existing and emerging
◦ Bio STL – very impressive, momentum builder
◦ BAL – best in class, nothing else like it
◦ Deal pace – 26 deals, ~30 months
◦ i6, EDA grants, local cooperation/coordination
◦ BG, TREX, ITEN, Helix, Arch Grants etc.
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KAREN SPILIZEWSKI Venture Capital in the Midwest. What Works?
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Plant and Life Sciences Network
July 17, 2012
Karen Spilizewski
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2011 US Venture Investing
Total VC investment in 2011 = $32.5 billion VC investment in Healthcare = $9.1 billion
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$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2005 2006 2007 2008 2009 2010 2011
Total US Healthcare Financings $M invested
Medical Devices and Equipment Biopharmaceuticals Healthcare Services & IT
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State 2011 2010 2009 2008 2007
$ Millions # of Cos. $ Millions # of Cos. $ Millions # of Cos. $ Millions # of Cos. $ Millions # of Cos.
Minnesota 223.3 24 138.7 20 199 23 318.9 22 296.1 25
Ohio 177.8 67 147.2 47 105.4 40 189.1 43 295.5 44
Missouri 168.7 9 19.9 9 65.8 8 50.2 11 69.6 7
Western PA 67 25 86.2 20 37.8 24 126.2 33 101.4 17
Wisconsin 53.8 9 51.3 9 16.2 10 48.5 8 56.2 12
Illinois 44.2 9 160.9 11 38.9 8 97.3 13 125.5 7
Michigan 30.8 16 76.3 12 102.2 14 105 12 56.2 5
Kansas 18.5 2 14.5 13 4.3 5 16.9 9 56.6 6
Indiana 14.1 9 25.05 16 76.3 14 75.4 7 135.6 10
Kentucky 11.5 7 11.4 4 97.3 7 19.2 6 32 4
Iowa - - 7.3 1 36.8 3 4 1 - -
Total 809.6 178 738.9 161 780 156 1,050.5 165 1,224.7 137
Midwest Health Care Venture Investment (By State)
Data compiled by BioEnterprise from various sources
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2011 Missouri Healthcare Deals
• Advanced ICU Care - $8 million • Cardialen – $0.74 million • Endostim - $5.55 million • Essence Group Holdings - $61 million • Nawgan - $6 million • Pulse Therapeutics - $1.33 million • Venti - $15.1 million • Veran Medical Technologies - $15 million • HealthMEDX - $56 million
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Midwest Health Care Venture Investment (2011 - By Sector)
$295
$259
$251
Medical device
Health care IT and service
Biopharmaceutical
Data compiled by BioEnterprise from various sources
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How Ohio Started in 2002
• Private/Institutions – Focus on entrepreneurs and innovation
– Technology transfer
– Venture firms and professional services
• Philanthropy – Fund For Our Economic Future: $90 million
– Investments for capital formation
• Public – State of Ohio: $2.3 Billion+ Capital, Operating Support, Business
Attraction
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2002: Ohio Commitment
• $1.3 Billion, 10-Year Technology Initiative – Ohio Third Frontier
– Funding for: • Research distinctiveness and translation • Capital formation and attraction
(seed and venture) • Entrepreneurial infrastructure (inc. BioEnterprise) • Company acceleration
– Collaboration required, nationally assessed • Capital – Ohio Capital Fund
– $250 million to invest as LP – High-tech growth loan fund
• Annual general operating support
• Plus related business attraction and physical development
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Result: Growth in Innovation Cleveland Healthcare Equity Investments
$ Millions
COMPANIES FUNDED:
5 6 13 21 16 22 28 26 21
Avg.142
33 35
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J. JOSEPH SCHLAFLY III MOBIO Plans and Studies
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PANEL DISCUSSION AND Q&A