Business strategy from idea to product Viktor Drvota MD, PhD SEB Venture Capital

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Business strategy from idea to productViktor
Drvota MD, PhDSEB Venture Capital
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SEB is a significant player in the private equity
market
SEB Private Equity EUR 1.1bn
SEB Enskilda
SEB Acquisition Finance EUR 1.5bn
SEB Venture Capital - EURM 250
KTH Chalmers Capital
Bank financing
Venture Capital
In addition, SEB is an investor in EQT,
Innovations Kapital, AskEmbla (Baltics) etc
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SEB Venture Capital in brief

• Established 1995
• Evergreen fund structure current AuM SEK 2.4bn
• No. of existing direct investments 27
• Technology 16
• Life Science 8
• Growth 3
• No. of existing fund investments 9
• No. of investment professionals 19
• Total no. of exits since inception 61
• Total no. of investments since inception 94
• Total amount invested since inception SEK 3.1bn

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Exit windows
Exit window 2 (P/S, P/E exit)
Exit window 1 (Tech value exit) (Rare scenario)
Value
Turnover
Inv. cap.
10 y
RD phase
Dev. phase
Marketing phase
Time
VD -08
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The long way to market
Critical Knowledgable community
Pressure from society For new safe innovative
medicines/ products
Higher hurdles
Evidence based medicine
Evidence based economics i.e. reimbursement
Regulatory
Innovation
Pressure from society to lower cost
HTA
To pass through all these barriers, only true
innovation will survive True innovation means
that you make a SIGNIFICANT difference from what
was known previously. Is this invention going
to change the practice of medicine and will it
be the first line device/drug that will be used
in 90 of procedures/cases Significant barriers
of entry. Significant investments. Significant
valuations if success
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The VC route - Medtech
Stage Idea Prototype/preclin Market rollout/clin
Cost 1-10 MSEK 10 - 300 MSEK 100 - 400 MSEK
Turnover 0 0 50 - 150
Value of company 0.5 10 MSEK 10 200 MSEK P/S (3-6) or P/E (10-20) multiple
CEO type Founder Project manager Marketing person
No of employees 1 - 2 2 - 15 10 - 50
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The long and winding road.
R D phase
Sales marketing phase
Transition from R D to sales organization
US market
US when?
US study
US regulatory
Clinical trials
Reimbursement Health economy
Exit
Define the business case
Regulatory
Scientific premarketing
Sales process
Sales strategy
Continuous business development
Areas marked red are usually difficult for
small medtech companies
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Impossible?
POC In humans
Academia
Company
Partner early, codevelopment with industrial
partner gt trade sale ?
Healthcare provider
Research funds
Merge with cash flow generating business to
support your development
Tech transfer office
Project A
Different routes of financing

• Stay in Academia as long as possible
• Patent wisely
• Do a problem detection study
• Do a mini HTA (including willingness to pay)

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Funding early stage innovative companies today

• Financing climate
• Only the best companies gets financed in a down
  market. Otherwise you will have to wait for the
  equity financing windows. Characteristics for an
  equity financing window Extensive media coverage
  of sector, Big Biotech/pharma have multiple
  success stories
• How to finance a Scandinavian company with non
  Scandinavian money.
• Industrifonden, Novo, Health cap, Lundbeck, Nxt2b
  as lead -gt LSP, GIMV, Forbion, Index, Gilde. Do
  not forget Corporate ventures especially in
  pharma. Forget US investors
• Look for multiple sources of funding.
• Do not forget patient advocacy groups and NIH
  (which is a significant source of funding for US
  companies). Codevelopment and customer financing.
  Beware of high valuations with business angels.
• Listing on smaller exchange
• Private placement

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What kind of Medtech companies get financing in
the current climate

• Cash flow positive (Private equity)
• Market roll out close to cash flow positive
• Earlier stages in hot areas (Cardiology,
  Orthopedics)
• .all other things as management, IP, market
  need, market size etc must of course be
  outstanding

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Market acceptance in medicine
Degree of innovation
Overspending period
10 y
Market entry
Time to market acceptance
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Business development

• Present the company on a continuous basis for big
  medtech or your potential takers
• A continuous business development is necessary in
  order to always have a business plan that match
  the current phase in the company
• Have continuous discussions with users.
• Be present on fairs and scientific conferences
  (scientific premarketing)
• Start developing contacts with reimbursement
  authorities early
• What are they prepared to pay for?
• Have a continous competitors surveillance
• Promote co-development or partnering deals with
  larger companies
• Bring the RD people to the market as well
• Travel with distributors and add value to them

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Our view on Internationalisation

• Identify the best markets not to far away
  (Netherlands)
• Focus on a few markets in EU!!. HAVE RESPECT FOR
  THE US!!!
• Build own organisation on home market and partner
  on other markets
• Reimbursement, how does it look in your markets?
  Include health economy early, Private pay? Can
  they pay? (Greece, Spain etc)
• Constantly evaluate your business model /
  pricing, different models for different markets?
• If your market is an oligopoly, you will most
  likely have to partner with one of them
• HTA Be prepared to compared to ANY other method
  / medicine
• Beware of cost!!!!

gt High market penetration in a few markets
FOCUS
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Other important aspects

• Owner syndicate structure of syndication funds
• Owner and management agenda
• Always look for commercial validation of your
  product
• External financing rounds
• Codevelopment agreements with industrial partners
• Licensing deals

Investor ? Board ? CEO
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Exit

• Have sales above 100 MSEK.
• Have at least 70 gross margin.
• Have proven the concept in its local market.
• Have an US regulatory approval
• (Have some sales in US).
• Constitute a threat in the market for potential
  takers.
• Good, well kept, IP portfolio essential
• Build relationship with buyer(s) - early
  codevelopment deals etc

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