The Trials

1
The Trials Tribulations of Funding
Biotech.Companies

• Bruce Savage
• BioQuest Consulting Ltd

2
Why are biotechs obsessed with raising finance?

• Essentially R D companies
• Technology
• Patents in application
• Show size and need of market
• Need X millions to develop technology.
• Typically revenue generation long way off.
• Indicate massive up-side in business plan.
• Cash flow chart typical hockey stick.
• Often need an IPO to continue to fund RD.

3
What are the problems

• Investors have discovered R D is risky!!
• Investors wary of promise of riches tomorrow in
  all tech. Sectors.
• Hot air syndrome!
• Biotech companies require investors with patience
  and deep pockets.
• Sentiment changes towards sector over time but
  still require finance to fund RD.
• Typical IPO exit closed.

4
Some case studies

• Cytocell molecular diagnostics
• Bio-Ex Alzheimers therapy diagnostic
• BioAnaLab specialised CRO.
• CMP Therapeutics Ltd

5
Cytocell

• Founded company in 1991.
• Early revenue generation through sale of DNA
  probes for detection of chromosome disorders such
  as Downs with potential upside through novel
  proprietary technology for gene detection.

6
Cytocell funding story

• 1991- 94
• Founders, friends 65k
• Smart awards 105k
• Sales 49k

7
Cytocell Funding story

• 94- 96
• OION VCR business angel finance 616k
• Apax 3i 300k
• Sales 230k in 96

8
Cytocell funding story

• 97 99
• 3i Apax invest 3.5m
• in two rounds
• Business Angels 154k
• Smart award 130k
• TCS award 75k
• Sales 712k in 99

9
Cytocell funding story

• 2000- 2001
• Apax, 3i Gartmore invest 4.0m
• Sales 1.1m
• VCs want a trade sale
• Management want a strategic alliance
• CEO resigns

10
Lessons learnt

• Business angels very patient
• VCs have short time scales and have changing
  sentiments to sector.
• Diagnostics industry dont in-license technology
  only finished products.
• IP problems in US can be hidden problems.

11
Want another go!

• 2002
• Try to raise second round finance for telemed co.
  but 3 yrs to revenue
• Work with Isis Innovation, University of Oxford
  to start 2 spin-outs.
• Difficult financing environment for R D start
  ups

12
Bio-Ex

• Spin-out from clinical neurology, University
  Oxford
• Revolutionary approach to diagnosis and treatment
  of Alzheimers disease.
• Heavy R D spend, early stage, too revolutionary.

13
BioAnalab

• Spin out from Therapeutic Antibody Centre,
  University Oxford
• Service/R D model
• Focussed on service, opportunity supported by
  market research
• Minimised R D
• Raised 520k Nov 2002
• Cash sufficient to break-even.

14
BioAnalab

• Specialised CRO focussing on analysis of
  therapeutic monoclonal antibodies in clinical
  trials.
• First invoice raised within 5 months
• Revenue in second year 560k
• Company at breakeven.
  
  
  
  
• CEO stepped down

15
CMP Therapeutics Ltd

• MRC Immunochemistry unit Uni Oxford
• Developed treatment for respiratory allergies and
  asthma
• Based upon micro-particulate chitin - patented.
• Efficacy safety demonstrated in animals
• First round finance 400k

16
Strategies for funding 2004

• Revenue the key
• Keep going in University
• Concerned about spin-out fever and lack of second
  round finance
• Must have very strong business plan
• Granted patents
• Management key
• Revolutionary technology with some proof
  demonstrated.