HUNT Biosciences AS Business plan

Transcription

1 HUNT Biosciences AS Business plan August 2009 Serious about biobanking 1

2 Table of contents Section Page 1. Executive Summary 3 2. Vision and Mission 4 3. Strategic Objectives 5 4. Organizational Development 6 5. Financial Projections with key assumptions 6 6. The HUNT Fund 8 7. What if? The Low Scenario 9 2

3 1 Executive Summary HUNT Biosciences was established in 2007 with an initial business plan describing two potential business areas for the company. The current plan addresses several of the recommendations from the initial plan and lays out a more specific path for taking HUNT Biosciences forward in the period , including strategic, organizational and financial elements. HUNT Biosciences is through its mandate responsible for commercialization of knowhow and scientific results emerging from the HUNT Bio- and Databanks. The plan suggests doing this by prioritizing the business area of Molecular epidemiology and Health economy through commercial contracts with customers and strategic partnership with other data- and biobank initiatives. In the second business area : Biobank Design and Management the plan recommends to explore the possibility of establishing a subsidiary with strategic and financial partners ( Table 1). This strategy may then give a profit which in turn will be used to establish a HUNT Fund to support scientific research in the area of medicine and health, as laid out in HUNT Biosciences mandate. Success in executing the plan may also lead to HUNT Biosciences taking on a national role in commercializing other Norwegian human biobanks. To build the necessary organizational capacity and competence of a professional, customer focused organization; HUNT Biosciences will recruit people with competence in business development, bioinformatics and science ( Table 2). In addition the company will buy services from HUNT Research Center/ Biobank and from external service providers. The financial projections for the period are based on a set of key assumptions as laid out in section 5. The plan shows that the company will deliver a positive result over the period. (Table 3). The cash flow analysis ( Table 4) however reveals that establishment of a HUNT Fund will reduce the cash reserve to just 1 M NOK in 2012 before the liquidity improves in Thus a working capital of 10 mill is required to implement the proposed plan. The equity ( table 5) however, will not drop below 50% of the share capital, even when payment of a dividend into a HUNT fund is included. As described above, we propose to establish a HUNT Fund as a tool for fulfilling the company s mandate. All issues including legal, tax, size and mechanisms for establishing and using such a fund will be evaluated and discussed with the board before a HUNT Fund can be established. In the event that we are not able to grow the company as projected we have also looked at the financial projections in a scenario with a reduced number of projects and a lower Public Contribution Fee from the customers in for each project ( The Low scenario - section 7). By primarily adjusting the organizational growth we will be able to keep both cash flow and equity at an acceptable level and at the same time build a smaller, but not insignificant HUNT Fund. 3

4 2. Vision and Mission HUNT Biosciences was established early in 2007 and a business plan was developed for company later that year. The business plan offered a set of recommendations for how to develop the company and the current plan lays out a more detailed action plan for taking HUNT Biosciences forward in the period HUNT Biosciences is through its mandate responsible for commercialization of knowhow and scientific results emerging from the HUNT Bio- and Databanks. As a member of the HUNT Family HUNT Biosciences shall ensure that any such commercialization activity is serving the interest of the donor population and national healthcare system. HUNT Biosciences will fulfill this mission via : Commercial contracts with international pharma, biotech and medtech companies, Strategic partnership with other data- and biobank initiatives, Research support for the purpose of providing important molecular understanding of diseases and identification of disease specific biomarkers, and Establishing a subsidiary with partners to develop products / services in the area of Biobank Design and Management. At present HUNT Biosciences is the only commercial Biobank company in Norway and is serving HUNT. However, there are several initiatives ongoing to explore the possibility for commercializing other Norwegian human biobanks, including an joint initiative from the Ministries of Health & Care services and Trade & Industry (HOD & NHD) and the Norwegian Research council (NRC). Provided that HUNT Biosciences succeeds over the next years the company may take a national role in commercialization of Norwegian human biobanks. By 2013 the company s ambitions is to: have successfully completed a number of customer contracts with pharma, diagnostics and pharmacogenomics companies. have established itself in the international market place based on professionalism in all aspects of client relationship, efficiency in project planning and execution, fast response times, quality in project output, and transparency in contracting terms and conditions. have become the major commercialization unit for biobank resources in Norway and therefore a first choice to take on a national role and responsibility. have entered into strategic alliances with several European and US data- and biobanks. have established a subsidiary with national and/ or international co-investors for the purpose of building a business in the area of Biobank Design and Management. This involves recruiting national and/ or international co-investors to take on partnership in building an infrastructure project on a feasible basis. 4

5 3: Strategic Objectives Two business areas were identified for HUNT Biosciences in the initial business plan, namely (1) : Molecular epidemiology and Health economics and (2) Biobank design and management. In this initial start up phase of the company from 2010 to 2013, the following Strategic Objectives have been identified and prioritized as shown in table 1 : Table 1 : Strategic objectives Priorities Priority High High Medium Medium/low Molecular epidemiology and health economics Scientific inventory and product development Customer projects In-house biomarker projects Biobank design and management Infrastructure products and services through a subsidiary Scientific inventory and product development It is essential for the further development of HUNT Biosciences that resources are put into a detailed assessment of the HUNT Databank in order to identify and describe the various disease associated sub-populations included in the data records. With a detailed picture of the healthcare data available in HUNT we will develop customer product packages and also better understand the need for bio-informatics tools to support efficient and high quality customers services. The product description will also include information on the potential use of HUNT data in other geographical areas / ethnic groups. Customer projects In consistency with its Vision and Mission HUNT Biosciences will identify and discuss with potential user groups to enter into contracts with customers to utilize the HUNT Dataand Biobanks. This effort will provide valuable feed back from the market place and support the scientific inventory analysis and product development described above.. Meeting with potential customers will also bring important competitor information back to HUNT Biosciences, helping to profile HUNT against other databanks,and allow Hunt Biosciences to identify HUNT s strengths and potential weaknesses. Infrastructure products and services through a subsidiary HUNT Biosciences is still in early development and is not equipped to develop systems that can be sold to other data/ biobanks while at the same time building the world class customer related services described above. Therefore, it will be considered to form a daughter company of HUNT Biosciences specifically to take on the ambition in the area of Biobank design and Management. A daughter company shall be based on separate capital and resources, only partly provided by HUNT Biosciences. In the financial projections we propose a one-time investment of 2 M NOK from HUNT Biosciences into the daughter company, provided a positive outcome of further market and commercial feasibility assessments. In-house biomarker projects A full scale research project with the goal of identifying new biomarkers is a formidable task, and presently beyond the scientific and economic capability of HUNT Biosciences. Hence, HUNT Biosciences will instead prioritize customer driven biomarker projects that will provide the company with funding and important information about the full range of requirements, including bioinformatics tasks and tools. 5

6 4. Organizational Development Based on discussions with a number of potential customers and strategic partners, the plan covering consists of building a portfolio based on three types of customer projects: Association studies type projects, typically consisting of large genotype-phenotype studies of individuals, Biomarker validation type projects and Health economy type projects. In order to handle this project portfolio the following organizational capacity and capability is expected: Table 2 : Building Projects and Organizational Capacity General and administration( G&A) Business Development Legal 1 1 Bioinformatics Research and development ( R&D) Total headcounts Projects 1 Health Economy 1 Association study 1 Biomarker validation 1 Association study 2 Health Eco 1 Biomarker validation 2 Association study 2 Health Eco 2 Biomarker validation 5. Financial projections with key assumptions The financial projections for the period are based on the following key assumptions: Share capital : The existing owners contributes with new share capital of 9.0 M NOK in 2009 bringing the share capital to a total of 10 M NOK. Salaries: Salaries are calculated according to the projections in table 2 using salaries typically found in other small- medium sized Norwegian life sciences companies. Investments : Investments of a total of 9.6 M NOK are made in Bioinformatics hardware and software, laboratory equipment including genomics and proteomics analytical tools and a 2 M NOK investment in a Biobank design and management subsidiary. Depreciations: In the financial projects the investments (above) with the exception of the 2 M NOK -subsidiary investment are depreciated using an average of 30% year over year. 6

7 Direct and indirect costs: Customers cover all direct cost at HUNT Biobank, HUNT Research centre and at HUNT Biosciences and in addition a 75 % overhead covering other non-project specific costs including G&A. The association study-type projects include in addition a 5 M NOK direct cost for use of a sub-contractor. Public Contribution Fee : In its mandate HUNT Biosciences is set up as a semi-public company to generate profit based on previous and future investments made by the public including the population of Nord Trøndelag. Hence all customers will be asked to pay a Public Contribution Fee of 50 % on top of direct and indirect costs associated with the execution of projects. The Public Contribution Fee will partly be used to support the growth of HUNT Biosciences and, equally important, to accumulate contributions into a HUNT Fund which will be able to support health related research projects as set out in HUNT Biosciences mandate. In financial projections for the HUNT Fund is set at 25 % of the Public Contribution Fee. Public grants It is anticipated that HUNT Biosciences, as a start-up biotech company will obtain public support during Through Skattefunn 20% of all investment into the strategic objective Scientific inventory product development (se table 1) will be eligible to reimbursement (up to a limit of 2.2 M NOK / yr). Furthermore, it is highly probable that a young and innovative company in a prioritized area will be well positioned to apply for public research grants, limited to 50% of the committed investments. This assumption is supported by the grants already received from Innovation Norway and thus continued support of approximately 5 million over 4 years is probably a conservative expectation. Tax: According to the company s auditor HUNT Biosciences could realistically hope to avoid taxation due to its public ownership and mandate. This will be looked into during Q However, in the financial projections a corporate tax rate of 28% on net result is applied. Furthermore, according to the company auditor the creation of a HUNT Fund will not reduce taxation of the company. Table 3 : Profit and loss (P & L) 1,000 NOK Revenues Association study contract 12,225 12,225 24,450 Biomarker validation contract 4,463 4,463 8,925 Health Economy contract 2,750 5,500 5,500 Total revenues 2,750 16,688 22,188 38,875 Total expenses 3,663 16,235 21,070 31,340 Net result Tax Net result after tax , ,

8 Table 4 Cash flow 1,000 NOK Cash flow Year start 9,000 7,737 2,613 1,152 Total revenues 2,750 16,688 22,188 38,875 Total expenses 3,663 16,235 21,070 31,340 Tax Investments Public grants Year end , , , ,575 2,200 4, ,600 2,200 9,709 Reservation for HUNT FUND 250 1,391 1,891 3,281 Year end 7,737 2,613 1,152 2,896 Table 5 Equity 1,000 NOK Share capital 10,000 9,057 8,930 10,650 Retained P&L ,118 7,535 Tax Depreciations ,284-1,895 Public grants ,200 2,200 Equity 9,057 8,930 10,650 16,381 Equity and cash position The net result (Table 3) is positive over the period and the equity will stay well above 50 % of the share capital. The cash flow analysis (Table 4) however reveals that establishment of a HUNT Fund will reduce available cash to only 1 M NOK in 2012 before the cash reserve improves in 2013, thus a working capital of 10 mill is required to implement the proposed plan 6. The HUNT Fund As a part of its mandate HUNT Biosciences shall through its activity contribute to scientific research for the benefit of medical treatment and with its owners stimulate health initiatives in the region. In the plan for we propose to establish a HUNT Fund as one of the tools for fulfilling the mandate. Establishing a HUNT Fund will apparently have no tax implications but other issues like the size and the mechanism for establishing and using such a fund needs to be looked into. All of these elements will therefore be evaluated and discussed with the HUNT Biosciences board before a HUNT Fund can be established. 8

9 7. What if? the low scenario The current business plan with its organizational and financial projections is based on recommendations in the business plan of 2007, our experience from HUNT Biosciences during and a set of assumptions described in section 5. The plan is aggressive in the sense that by 2013 the company will have 14 employees serving a large project portfolio, with a turn over of nearly 39 M NOK. The experience from shows a potential for all three types of customer projects described in the plan. There is however always uncertainty in making projections, especially for a start-up company like HUNT Biosciences. The fact that our potential customers in the pharma industry are going through another round of consolidations also makes projections more uncertain. We have therefore also looked at the financial projections in a scenario with a reduced number of projects and a lower Public Contribution Fee in for each project. The key changes in assumptions are: The number of contracts in the period is reduces from 13 to 9 The Public Contribution Fee for each project is reduced from 50% to 40 % of cost The number of employees in 2012 is reduced from 14 to 6 Total investments are reduced by 1 M NOK ( for equipment). The Low scenario yields the following key financial parameters by 2013 compared to the main financial projections ( in brackets) The cash reserve after donation to a HUNT Fund is increased to 3.8 M NOK ( 2.8 M NOK) The equity including the HUNT Fund is reduced to 13.4 M NOK ( 16.3 M NOK) The donations into the HUNT Fund is reduced to 3.5 M NOK ( 6.8 M NOK) The low scenario shows that even with a less aggressive plan the company will make profit and is able to build a HUNT Fund and at the same time preserve the equity invested by the owners. 9