Corporate vs non-corporate Venture Capital. Innovation Patient Benefit Superior Returns. May 28, 2016 Ghent, May 26, NVF Freiburg v1

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Shonda Griffith
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1 Corporate vs non-corporate Venture Capital May 28, 2016 Ghent, May 26, 2016 Innovation Patient Benefit Superior Returns NVF Freiburg v1

2 Definition In essence, it is best to think of CVC as a subset of venture capital whereby a company is investing, without using a third party investment firm, in an external startup that it does not own. Source: Wikipedia 2

3 Motivations to do Corporate Venture Capital 1. Strategic Access external innovation Contribute to R&D pipeline 2. Financial Generate return for shareholders 3

New drugs do not come easy NME Success Rates By Phase And Overall 2009-2013 Industry Portrait Preclinical Phase 1 Phase 2 Phase 3 Registration 1.

4 New drugs do not come easy NME Success Rates By Phase And Overall Industry Portrait Preclinical Phase 1 Phase 2 Phase 3 Registration Success Rate For Each Phase % 41% 24% 63% 86% Percent Calculated To Achieve 1 Approval % 5% 13% 54% 86% KMR Group, Inc. 4

5 R&D productivity is low may shows signs of improvement Number of FDA approvals of new molecular entities % of NMEs approved which have a new mechanism of action % of top 50 products by sales with an outcomes benefit % 70% 50 45% 40% 60% 40 35% 50% 30% 40% 30 25% 20% 30% 20 15% 20% 10 10% 5% 10% % % fc 1 mortality, hospitalization, disease progression Source: FDA, Evaluate Pharma 5

6 Big Pharma seems to be playing a declining role in clinical innovation Clinical trial starts each year, industrial sponsors only Big Pharma Other sponsors Source: Clinicaltrials.gov 6

7 Breakthrough concepts are predominantly originating in biotech Publicly announced breakthrough therapy designations Number of designations by compound originator Big Pharma; 33 Biotech; 52 Source: company press releases 7

8 Biotechs have grown as the leading source of the most important products Origins of top 100 products' revenues % revenues of top 100 products by originator type US$ 226 B US$ 245 B 7% 8% 8% 4% Non-profit/academia Specialty 14% 6% 18% 25% 12% Other Biotech Large Biotech 16% Regional majors 48% 36% Global majors 2007 Source: Evaluate 2014; McKinsey analysis

9 Corporate Venture Capital 9

10 Funding ($MM) Biopharma venture funding continues to rise... $7 000 $6 000 Biopharma Venture Investment $5 000 $ $3 000 $2 000 $1 000 Source: NVCA $ H

11 Funding ($MM)... as well as Corporate Fund investments Corporate Venture Fund Life Sciences Investment Q Source: NVCA 2015 Corporate Venture Funds. Includes both Biotech and Medtech 11

12 Healthcare VC significantly outperforms S&P 500 Source: Correlation Ventures ( 12

13 Deals with CVC backing seem to have returned higher multiples 13

14 Number of Exits NVF has been a leader in exits among corporate funds 12 M&A and IPO Corporate VC Exits Astellas Biogen Idec New Ventures Novo Ventures J&J Developmen t Corp Lilly Ventures MedImmune Ventures Merck Capital Ventures Novartis Venture Funds Pfizer Venture Investments Roche Venture Fund SR One Total Total % M&A % IPO % 67% 37% 31% 67% 78% 83% 73% 50% 83% 67% 37% 33% 64% 69% 33% 22% 17% 27% 50% 17% 33% 131 *NVF 2015 Exits: Diagnoplex, Immune Targeting Systems, Heptares 14

15 New Novartis: More focused, stronger 2015 net sales: USD 49.4 bn Three divisions All driven by innovation Global scale Alcon; 20% Sandoz; 19% Pharma; 62% Source: Novartis Full Year Results Press Release 15

16 Novartis Venture Fund key facts NVF status NVF structure One of the top biopharma Evergreen fund structure CVC groups by exits ~ 40 private companies > $ 700m Capital Base Focused on ~ $15-30M $ per investment Innovation ~ 5 new investments / year patient benefit and financial return Focus on USA and Europe Independent of Novartis strategy Investment performance in top decile of VC benchmark 16

17 Should you have a corporate VC in your syndicate? Pros Cons Usually in there for the long run You may not want to show May increase interest and your hand credibility Corporate may loose interest Able to finance in bad times due to corporate strategy due to evergreen fund May lead to negative structures competitive dynamics May increase return May lead to positive competitive dynamics 17

18 Innovation Patient Benefit Superior Returns

M&A und Allianzen in Life Science Aktuelle Entwicklungen und Trends

M&A und Allianzen in Life Science Aktuelle Entwicklungen und Trends Symposium Life Science am Kapitalmarkt Frankfurt, 3. Juni 28 Global biotech industry Strong growth in most areas but Visible product