Title: Outlook and Trends for Biotech Companies in Europe Sachs Associates 6th Annual Biotech in Europe Investor Forum October 4, 2006
1Outlook and Trends for Biotech Companies in
EuropeSachs Associates 6th Annual Biotech in
Europe Investor ForumOctober 4, 2006
- Dr. Peter Reinisch, Partner
- Global Life Science Ventures
www.glsv-vc.com
2The biotech industry is transforming healthcare
- A steadily increasing of new drugs are based on
biotechnology - Already 4 out of 5 therapies in development are
based on biotechnology - Big pharma is replenishing its pipelines with
innovative new biotech products, via MAs as well
as in-licensing collaborations, with deals
increasingly early stage - Recent success of monoclonal antibodies has
confirmed the blockbuster potential of
biotechnology (Herceptin, Avastin, etc.)
3The biotech industry is transforming healthcare
- Large potential for value generation 60 billion
in global sales last year - Huge unmet medical needs represent vast market
opportunities - Higher success rates for biologics than for small
molecules - Understanding diseases on a molecular level gives
rise to novel therapeutic approaches - Pharmacogenomics and personalised medicine will
dramatically change how patients are treated
Source Ernst Young
4Chronic diseases should reach a total market size
of more than USD 200 billion in 2007
USD billion
Source SG Cowen/ Bank of America estimates
5European biotech has lagged behind, but there are
now strong reasons for optimism
- In 2005, 3.2 billion were raised by European
biotech companies - Revenues up (7 in 2005), increased expenditures
on RD (15 in 2005) - Strong interest of pharma in collaborations/acquis
itions to strengthen pipelines. Although
acquisitions lead to a drop on paper in the
number of successful biotech companies, they are
a strong boost for investment in the sector.
Examples - Chiron -gt Novartis
- Rinat -gt Pfizer
- CAT -gt AstraZeneca
- Serono -gt Merck KGaA
Source Ernst Young
6European biotech has lagged behind, but there are
now strong reasons for optimism
- Good IPO performance, increasing momentum
confidence in the sector - IPO windows are likely to remain more stably open
than in the past - Increasing number of European biotech companies
with products in Phase III and on the market - Increasing number of European biotech companies
have market caps above 500 m - The sector is approaching overall profitablity in
the US Europe will follow
7European life science companies have expanded
their pipelines
Source Fortis Bank
8In 2005, Europe had more biotech IPOs than the
US, raised more funds and showed better post-IPO
performance
9GLSV 2nd Annual Biotech Investment Barometer
- Following the interest in last years Barometer,
GLSV has conducted a new survey of biotech
executives, members of the investment community
and others, to gauge their perception of the
current investment climate and their expectations
for the future - Survey conducted from 21-28 September 2006
- 11 multiple choice, 3 rankings, 1 open question
- 186 reponses received
- 54 biotech executives
- 63 VCs, 15 LPs, 13 other investors, 12 analysts
( investment community) - 29 others
- 88 were based in Europe
10GLSV 2nd Annual Biotech Investment Barometer
- How does your view today about the biotech sector
compare with your view 12 months ago?
55 of respondents are more optimistic about the
biotech sector than 12 months ago
11GLSV 2nd Annual Biotech Investment Barometer
- What is your opinion about current biotech stock
valuations in Europe?
64 of respondents consider biotech stocks in
Europe to be somewhat or very much undervalued
12GLSV 2nd Annual Biotech Investment Barometer
- What is your opinion about current biotech stock
valuations in the US?
Only 28 of respondents consider biotech stocks
in the US to be somewhat or very much undervalued
13GLSV 2nd Annual Biotech Investment Barometer
- How do you predict biotech shares will perform
compared to the stock market in the next year?
63 of respondents predict that biotech shares
will strongly or moderately outperform the stock
market in the next year
14GLSV 2nd Annual Biotech Investment Barometer
- Do you expect the IPO window to remain open more
or less than 6 months?
67 expect gt6 months in the US (62 of investors
analysts)
74 expect gt6 months in Europe (69 of investors
analysts)
Europe
US
15GLSV 2nd Annual Biotech Investment Barometer
- What do you feel are the long-term perspectives
for investment in the biotech sector?
86 of respondents view the long-term
perspectives for investment in biotech as
generally or highly favourable
16GLSV 2nd Annual Biotech Investment Barometer
- In Europe, how do you rate the current funding
environment for early stage biotech companies?
72 of respondents rate the current funding
environment in Europe as difficult or very
difficult
17GLSV 2nd Annual Biotech Investment Barometer
- In the US, how do you rate the current funding
environment for early stage biotech companies?
Only 26 of respondents rate the current funding
environment in the US as difficult or very
difficult
18GLSV 2nd Annual Biotech Investment Barometer
- How do you currently see the future for the
biotechnology sector in Europe?
76 of respondents see the future for biotech in
Europe as fairly or highly positive
19GLSV 2nd Annual Biotech Investment Barometer
- How significant do you consider the growth of the
biotechnology sector in Asia for the industry as
a whole?
53 of investors analysts, 69 of biotech
executives consider the growth of biotech in Asia
as fairly or highly significant
20GLSV 2nd Annual Biotech Investment Barometer
- What kind of biotech-related companies do you
currently consider most attractive? (ranking 1-6
1 most attractive)
After therapeutic products (60 in 1st place),
vaccines and medtech are considered the most
attractive areas
21GLSV 2nd Annual Biotech Investment Barometer
- Which elements do you think biotech start-ups are
most often lacking when they look for funding?
(ranking 1-7 1 most often lacking)
47 of all respondents consider an experienced
management team to be the element most often
lacking, followed by a solid business concept
(46 ranked in top 2)
22GLSV 2nd Annual Biotech Investment Barometer
- What do you currently consider the greatest
threats to the biotechnology sector? (ranking
1-5 1 most important)
41 of all respondents consider insufficient
funding to be the greatest threat
23GLSV 2nd Annual Biotech Investment Barometer
- What political measures or incentives could
improve the prospects for financing, growth and
profitability of the European biotechnology
industry?
- Tax incentives/benefits for investment in early
stage, and more generally for financial risk
taking - Government early-stage financing
- Allow state aid above 0.5 m ceiling
- Government incentives for pension
funds/insurance companies to invest in VC's - Fairer tax treatment of stock options
- Focus on a few strong biotech clusters
- Greater access to capital through pan-European
funds - One combined stock exchange a European Nasdaq
24GLSV 2nd Annual Biotech Investment Barometer
- What political measures or incentives could
improve the prospects for financing, growth and
profitability of the European biotechnology
industry?
- Clear rules not to dilute founders and
management to the point where there is no real
interest left to increase shareholder value. - More seasoned entrepreneurs, less fear (stigma)
of failure - Support of university research, with longer
incubation of technologies at universities before
spin-out - Support of clinical research (which is getting
marginalized in Europe) - Promotion of science and technology education
- Publicity about the regained strength and
positive restructuring of the sector, and the
good investment opportunities
25GLSV 2nd Annual Biotech Investment Barometer
- Strong optimism, overwhelming majority views
perspectives for investment as favourable. - Biotech stocks considered undervalued in Europe,
not in US. - Biotech stocks expected to outperform market in
next year. - IPO window expected to stay open more than 6
months. - Early-stage funding considered difficult in
Europe, not in US. This is viewed as the single
biggest threat to the sector. - Solutions to funding gap include government
funding, tax incentives, pan-European access to
capital, increased support for academic and
clinical research.
The European biotech sector continues to mature
and offers excellent investment opportunities for
discerning investors.