swedish-american life science summit 2008 biotech under dire conditions aug 20, 2008 thomas von koch
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Swedish-American Life Science Summit 2008
Biotech under Dire Conditions
Aug 20, 2008
Thomas von Koch
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Entrepreneurs with an industrial orientation and a strong will to drive change
Part of the Wallenberg network
Strong record of delivering superior returns to investors over time
Founded in 1994, over €12Bn in capital raised
3 business lines
– Buy-out in Europe and Greater China
– Mezzanine
– Special Opportunities
178 people
13 offices
EQT today: Northern European private equity fund with local knowledge
New York1 Partners3 Other Professionals
Hong Kong2 Partners7 Other Professionals
Helsinki1 Partner6 Other Professionals
Copenhagen 3 Partners5 Other Professionals
Oslo1 Partner2 Other Professionals
Stockholm12 Partners18 Other Professionals
Munich7 Partners14 Other Professionals
Zurich1 Partner
Frankfurt 2 Partners5 Other Professionals
Shanghai3 Professionals
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Approx. 30 divestments (1997 – 2008)Analysis of value creation in all EQT Equity’s exits
% of equity created
5%
46%
Label
32%
17%
Sales growth
Margin expansion
Strategic re-positioning
Debt pay down
Value Driver
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Proof of industrial model
Yearly growth during ownership period in all investments held more than 1 year
Sales13%
Sales13%
EBITDA20%
EBITDA20%
Number of employees
12%
Number of employees
12%
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Opportunities exist across segments, so far EQT has made acquisitions in Medtech mainly
Pharmaceuticals
Large cap pharma
Niche pharma
Biotech
Medtech*
Diagnostic & Monitoring
PI&D, Consumables
& Supplies
Service providers
Primary Acute carePost- sub-acute care
B2B healthcare services (& intermediaries)
Healthcare IT CXOsProduct
distributionPhysician
Practice MgmtDisease
ManagementOther
® 2008 EQT – All Rights ReservedStrictly private and Confidential
50
84 91
155
99
59 45
93
149
235
245
133
27
31
46
90
77
28 35
86
94 77
90
26
0
50
100
150
200
250
300
350
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1H08
US Europe
Private Equity fundraising still strong – albeit slowing down
US
D (
Bill
ion
)
Source: US Data: Private Equity Analyst, Europe Data: EVCADoes not include Real Estate or Fund of Funds
BO = 64%
BO = 90%
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Asset Managers over-allocated to PE
PE Managers performance rapidly deteriorating
Risk/ Reward for asset class in current market not appealing
Fundraising – Dire Future
PE Fund Managers will hold on to their money
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Current financing situation- deal volume and deal count
0
5
10
15
20
25
30
35
40
45
50
0
10
20
30
40
50
60
70
80Q4
Q1
Deal count
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Q2
Q3
Source: Thomson Financial, JP Morgan
Volume (in €bn) Deal count
® 2008 EQT – All Rights ReservedStrictly private and Confidential
300 Bn USD of LBO debt “stuck” in banks’ balance sheets
All LBO debt trading below nominal value
London/ NY bank syndication markets closed – uncertain when/ if they will open
Very hard to make transactions in excess of 1 Bn Euro
Debt Market Closed
Very few LBO transactions will be made
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Not a functioning debt market
No exit market available
– IPO closed
– PE semi-closed
– Industrial buyers window closing
Business cycle in decline
Deal Activity Collapsing
® 2008 EQT – All Rights ReservedStrictly private and Confidential
MBA Incorporado Nmas 1 Private Equity 2008 S. Europe 184
Verna Group II Bank of Scotland 2008 UK & Ireland 72
Molnlycke Health Care III Investor & Morgan Stanley 2007 Scandinavia 2 704
Dako EQT 2007 Scandinavia 943
Laboratorios Indas Vista Capital 2007 S. Europe 361
Barloworld Scientific Nova Capital 2007 UK & Ireland 112
Craegmoor Healthcare II Advent International 2008 UK & Ireland 424
Healthcare Homes Bowmark Capital 2008 UK & Ireland 109
BUPA Hospitals Cinven 2007 UK & Ireland 2 083
USP Hospitales II Cinven 2007 S. Europe 672
Gambro Healthcare Bridgepoint 2007 Scandinavia 596
Medi-Partenaires II LBO France 2007 France 567
Care Principles II Delta Three 2007 UK & Ireland 400
Healthcare at Home II Hutton Collins 2007 UK & Ireland 373
Mater Private II CapVest 2007 UK & Ireland 347
Casa Reha III HgCapital 2007 Germanic 346
Ultralase 3i 2007 UK & Ireland 254
Integrated Dental Holdings Merrill Lynch 2008 UK & Ireland 427
Active Pharmaceutical Ingredients (API) 3i 2008 Scandinavia 289
Premier Research Group ECI Partners 2008 UK & Ireland 87
Alliance Medical III Dubai International Capital 2007 UK & Ireland 912
Oasis Healthcare Duke Street 2007 UK & Ireland 130
Penn Pharmaceuticals LDC 2007 UK & Ireland 98
Synerlab AXA PE 2007 France 90
During last 18 months 24 major PE deals have been made in European healthcare
MED
TEC
H*
HEA
LTH
CA
RE
PR
OV
IDER
S
PH
AR
MA
, B
IOTEC
H &
O
TH
ER
H
EA
LTH
CA
RE
COMPANY BUYER YEAR REGION DEAL SIZE (€M)
Note: * Medtech includes medical devices and supplies; Includes all LBO transactions involving European targets valued >$75M by European- and foreign-based firms
Source: Bain European Private Equity database
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Private market almost closed
Buy out liquidity low/ Venture Capital worse
Trend of PE money becoming public activist money
Trend of PE money becoming debt oriented money. Todayequity returns for taking junior debt risk
Risk Aversion – where will the money go?
® 2008 EQT – All Rights ReservedStrictly private and Confidential
Risk aversion at a high point
Nuclear melt down in financial markets must be resolved
Negative business cycle sentiment must turn
Only positive Healthcare is a defensive sector
Concluding remarks
It will take time until Private Equity is back to normal