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TVM Accelerator Fund
A new building block in the innovation
landscape of Germany
Technology Innovation Summit, Munich, 23. March 2015
Confidential
TVM Capital’s track record
• Leading European investment firm. Offices in Munich,
Montreal and Dubai. Founded by Siemens AG,
Germany, in 1983.
–>260 deals in 25 years
–€1.4bn ($1.8bn) raised in seven fund generations
–Long-standing pan-European and transatlantic
experience
• Life sciences practice: AUM €824m ($1.1bn)
–120 Life sciences venture and growth investments
–90 total exits, 30 active portfolio companies
–45 IPOs on Nasdaq, London, Frankfurt, Zurich,
Vienna
TVM Capital - 25 year track record
TVM Capital’s business
2 Source: TVM Capital
Confidential
TVM Accelerator
Time (y)
Duration
of
phase
14 Y Clinical Stage Preclinical Stage
Hit
to
lead
Lead
Optim. Preclin PhI III II Market Science
Target
to
hit
S
Source: Paul et al. Nature Reviews 9: 203 3
Accelerator Accelerator
+ Syndicate
Focus on truly innovative early asset and their development in
Virtual Single Asset (“VSAD”)
TVM LS VII
Confidential
Life Science Venture Capital – Status
Difficult Fund Raising Environment especially in
Europe/Germany
Macroeconomic environment changed post
2008(Risk Adverse at LP Level)
Performance issues at VC level since 2000
High capital use
Long investment cycles
High risk of failure
In Europe limited exit channels via public
markets
4 Source: TVM Capital
Confidential
0
5
10
15
20
25
30
35
40
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Amount raised Number of IPOs
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Am
ount ra
ised (
US
$b)
Num
ber
of
IPO
s
Solid Capital Influx into Life Science Sector since 2012
IPO window opened again
6 Source: Ernst & Young
Confidential
- 23%
+100%
Keine IPOs seit 2006
In Germany levels of capital for Biotech remains low
7 Source: Ernst & Young
Confidential
The opportunity: filling the gap in early stage drug discovery
Dramatic venture funding gap: constant high levels of medical
research output but insufficient venture capital funding to translate
discovery into clinical development
9
Target
Identific. Target
Valid. Assay
dev. Screen
Hit to
lead
Lead opt.
Animal POC GLP tox IND
ACADEMIA Screening
centers Industry +
Specialized VC funds Funding gap
Source: TVM Capital
Confidential
Stand: 31.10.2014
28,3
Mio. €
78,7
Mio. € 70,1
Mio. €
99,8
Mio. €
124,2
Mio. € 120,9
Mio. €
186,2
Mio. €
135,6
Mio. €
German VCs contribute to innovation at very low levels
Source: High-Tech Gründerfonds 10
Confidential
But there is light at the end of the tunnel …
• Demand for innovations across the health sector remains high
– Unmet medical need
– E-health
– Demographic Development
– Emerging markets
• Pharma recognized innovation gap and tackles it by various strategies.
Incubators, investment in early projects, alliances etc.
• Academic research delivers constant stream of innovations. CRISPR etc
.
• But note that 80 % of innovations from academia can’t be replicated in
other laboratories
• Cambridge MA and San Francisco provide role models for translation of
academic inventions into biotech/pharma
11 Source: TVM Capital
Confidential
Early-stage deals on the rise
12 Source: BIO Industry Analysis, Elsevier Database, October 2013
Confidential
The opportunity: filling the gap in early stage drug discovery
• Dramatic venture funding gap: constant high levels of medical research output
but insufficient venture capital funding to translate discovery into clinical
development
• Pull from Pharma: need for in-licensing and M&A to dampen patent cliff losses
and high in-house development attrition
Trend: increasing competition for early stage deals!
• Innovation sells: Increasing pricing and reimbursement pressure and regulatory
hurdles generally favor innovative development projects in high unmet need
indications.
13
Target
Identific. Target
Valid. Assay
dev. Screen
Hit to
lead
Lead opt.
Animal POC GLP tox IND
ACADEMIA Screening
centers Industry +
Specialized VC funds Funding gap
Source: TVM Capital
Confidential
Key ingredients for success
• Innovation: novel, biology validated targets with early leads addressing high unmet
need disease areas
• Intelligent deal sourcing strategy: preferred access to and proactive collaboration
with several prestigious research institutions, biotech and pharma companies
• Virtual development approach: investment into “virtual single asset development
companies” (“VSADs”) centered around one single molecule from entry to exit point
• Capital efficiency: each VSAD will be financed according to stringent go/no-go
decisions (early kill). Successful projects require €3-5m and about 3-5 years. We
expect up to 25% of projects to be successful. Average project costs are expected
to be €2-3m
• Partnerships with Max Planck / LDC ;Ascenion,PROvendis : unique deal
sourcing, preferred service partners, excellent understanding of buyer’s universe
14 Source: TVM Capital
Confidential
Innovation
Engine
TVM Accelerator Building Blocks
15 Source: TVM Capital
Innovation: Max-Planck-Innovation,
Ascenion, PROvendis and others
Translation: Small highly focused
teams and extended outsourcing
Venture Capital: TVM
Confidential
Invest in areas where customers have interest and are invested
Therapeutic areas
(ICD-10 nomenclature)
Focus Out of focus Partner interest *
Circulatory system atherosclerosis, CHF, slect. arrhythmias, RR lowering only,
lipid lowering
High
Endocrine, metab. Dis. T2D: Glc plus strategy, hormonal disorders,
diab sequela
T2D („Glc lowering
only“)
High
Infectious disease Gram neg, C. diff. MRSA High
Neoplasms Solid tumors, metastasis,
New MOAs
Liquid tumors High
Nervous system Pain, migraine prophylaxis Alzheimer’s disease High
Eye and ear Dry AMD, hearing loss, tinnitus Wet AMD
Digestive system ? yes Med
Female health, Endometriosis, hormonal replacement Birth control Med
Genitourinary system benign prostate hyperplasia (BPH) ? Med
Respiratory severe chronic obstructive pulmonary
disease (COPD), bronchiectasis
Mild /mod.Asthma Med.
Skin, muscosceletal Fibrotic disease Atop. dermititis Low
Pan – therapeutic area
approaches
Fibrosis, orphan diseases, mitochondrial
diseases,
Inflammation -
* Acc. to: Nat Biotechnol. 2013 Apr;31(4):284-7.
16 Source: TVM Capital
Confidential
TVM Accelerator Checkpoints
Checkpoints for TVM team to rapidly evaluate offered assets for an investment:
• Is asset/technology innovative and addresses true medical need
.
• Innovator aproachable, supportive of valorization effort. Trustworthy.
• Team with expertise and right social skills.
• Differentian to standard of care.
• Preferably orphan or niche indication/subgroup of patients can be identified for
initial PoC
• Exit. Does pharma interest exist in this indication/technology. Or is another round
of financing most likely needed?
17 Source: TVM Capital
Confidential
Our strategic partnership with Max Planck / LDC
18
Lead Discovery Center
• The Lead Discovery Center (LDC) was established in 2008 by the technology transfer organization Max
Planck Innovation (MI), as a novel approach to capitalize on the potential of excellent basic research for
the discovery of new therapies for diseases with high medical need. The LDC seeks to advance promising
research projects into the development of novel medicines in a professional manner.
• Proven track record:
– Nominated leads
The LDC has already concluded five projects successfully with the generation of lead series that
demonstrate initial proof of concept in animal models and meet all required lead criteria.
– First LDC lead licensed to Bayer
– 2nd LDC lead licensed to Qurient
– Drug discovery alliances with AstraZeneca and Daiichi Sankyo
– Strategic partnership with Merck Serono
– Joint track record with TVM: Direvo, Develogen, Evotec, GPC Biotech, Probiodrug, Morphosys
Strategic partnership – key points of the agreement
• Partnership with the most prestigious academic research institution in Germany
• Access to relevant assets:
• Pre-negotiated term sheet to transfer assets into VSAD structure
• Access to services and people of the LDC and the Max Planck institutes
Source: TVM Capital
Confidential
TVM +
Originator
Virtual Single Asset Company
CROs
Pharma
Exit through
M&A or
licensing
eLeads + IP + tranched
investment
Project management
Go / Nogo decision
Corp. Governance Preclinical candidate/IND readyness
Exit proceeds
The Virtual Single Asset Development (“VSAD”) Concept
19 Source: TVM Capital
Confidential
Simple math: 1 in 4 PoS and killing early will create value
20
Step 1
Step 2 Step 3
Step 1
Step 2 Step 3
Step 1
Step 2 Step 3
Step 1
Step 2 Step 3
Cost Return
1.2m 0
2.4m 0
5.0m
3.6m
20-30m*
0
Total
investment
cost: 12,2m
Overall return
multiple: ~2x
*based on industry comparables; combination of upfront and NPV of milestones
Source: Life Science Accelerator
Confidential
The VSAD approach has many benefits
VSAD Approach Traditional Approach
Business Model One Asset to preclin POC (focused) Multiple Assets (diversified)
Management Semi-virtual/Low headcount High headcount
Capital Needs to Exit € 3-5m, low fixed costs €100m+, high fixed cost
Capital Source Accelerator (+/- one other Inv.) Many/Syndicate
Time to Exit 3-5 years 8-10+ years
Exit Route Trade Sale IPO, M&A, Licensing
Share Class for Originators Common Shares –
as TVM
Common Shares –
behind many classes of preferred
shares
Dilution for Originators None High
Comparison VSAD Versus Traditional Approach
21 Source: TVM Capital
Confidential
Summary
The current status of VC investment in Life Science in Germany ist still
unsatisfactory
• Number of VCs with local focus and long investment perspectives not sufficient
– Positive is, that problem has been recognized and could be transported to a
wider public. Remedies are discussed, but not yet implemented ( Alliance for
Venture Capital of BVK)
• No local access to capital market similar to Euronext or Nasdaq
– Thus local biotech will preferable exit vs. Asset sale. Only minority is able to
access public markets abroad.
• VCs adapted to situation in Germany by either shifting their focus of investment
abroad and/or focus on single asset/platform based companies.
Last but not least: Limited access to Venture Capital is hampering innovation
in German Life Science. The science, the teams, the assets are available in
Germany
22 Source: TVM Capital
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