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Role of a VC in Helping Commercialize Early Stage Innovation

Role of a VC in Helping Commercialize Early Stage Innovation. November 19 th 2007 Presented by: Richard J. Meadows Managing Partner CTI Life Sciences Fund. Canada – Biotech A pipeline which seems to be stalled.

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Role of a VC in Helping Commercialize Early Stage Innovation

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  1. Role of a VC inHelping Commercialize Early Stage Innovation November 19th 2007 Presented by: Richard J. Meadows Managing Partner CTI Life Sciences Fund CTI LIFE SCIENCES FUND

  2. Canada – BiotechA pipeline which seems to be stalled • After a sharp increase in the 90s, the number of early stage financings is decreasing • In spite of the number of early stage financings, there is no increase in the number of late stage financings • The pipeline is still too young… • … or it is not progressing Number of companies financed Total amount invested (Can$M) Total Early Stage Late Stage CTI LIFE SCIENCES FUND Source: Thompson Financial

  3. U.S. – BiotechThe pipeline is progressing Number of companies financed • The number of early stage companies financed remains constant • The pipeline is progressing • The growth in the total amount invested is partly explained by the progress of the pipeline Total amount invested (US$M) Total Early Stage CTI LIFE SCIENCES FUND Source: Thompson Financial

  4. Canada – Biotech The size of the rounds is much smaller than in the US Compared to the US, in 2002-06 : • Canadian GDP is 9% • The number of early stage rounds is 55%, whereas the number of late stage is only 15% • The size of early stage rounds is 60 % and the late stage 33 % • Total amount invested: 10% (33% ES, 5% LS) Average size of the rounds (‘000 Can$) Early Stage US Canada Late Stage Number of companies Canada vs US ES X1.6 LS 33% 14% CTI LIFE SCIENCES FUND

  5. Foreign (US) investors play an important role in building exit value in Canadian deals CTI LIFE SCIENCES FUND Source: Giles Durufle, CVCA

  6. Problems with Canadian VC’s CTI LIFE SCIENCES FUND Source: Giles Durufle for CVCA

  7. Value Capture Grants Seed Series A Series B Series C Mezz/Publ Value Building Curve Value Recognition Curve Discovery Preclinical Phase I Phase II Phase III $ 100k 1M 5 – 10M 10 – 20M 20-30M 30M+ Value Creation vs. Value Capture The Real Curves $ Cost of Development $5-25m $10-20m $20-50m $100m+ CTI LIFE SCIENCES FUND Source:D.Ho BDC Health Ventures

  8. Investment StrategyPicking the "right" Value Inflection Points Size of round: $25-50M Pre-Money $50-100M+ Post-Money: $75-150M Bump Up: ≈ 3-5 x Size of round: $1-5M Pre-Money $5-10M Post-Money: $6-15 M Size of round: $5-15M Pre-Money $10-20M Post-Money: $15-35M Bump Up: ≈ 2-3 x CTI LIFE SCIENCES FUND

  9. Best Practices: The Blueprint CTI LIFE SCIENCES FUND Source: Giles Durufle, CVCA

  10. What can we do? • Ensure adequate financing. • Bring in high quality investors. • Fine tune/re-do the development plan. • Finance to achievable milestones and be prepared to re-adjust. • Bring in ad hoc support to help management create value. CTI LIFE SCIENCES FUND

  11. Private Market Valuations on the Rise Sources: n=79 Life Science Co. in the Bay Areas Who Raised Money in 2006: Fenwick&West LLP CTI LIFE SCIENCES FUND

  12. The Changing Investment Paradigm 1995/1998 2005 $15-30 mm Capital Invested $40-80 mm 3-5 years Average length 5 - 8 years IPO Exit Form M&A > IPO $150 MM Average IPO price $200 MM 2-4 Number of syndicate members 5-7 Source : JSB Partners CTI LIFE SCIENCES FUND

  13. Raison D'être of CTI Life Sciences Fund "Where broad Operational and VC experience come together to create and realize shareholder value in Canadian Life Sciences Companies with pre-clinical and clinical drugs and enabling technologies”. CTI LIFE SCIENCES FUND

  14. CTI Life Sciences Fund Overview Emphasis on Quebec & Canadian life sciences companies with pre-clinical, clinical drugs and enabling technologies. • An investment team that combines Operational and VC experience. • A unique pro-active exit strategy • Through active post investment management. • Leveraging relationships with top advisors and US VC investors to position companies for successful exits. • M&A’s vs. I.P.O’s. • First Close: CAD $71 million, June 20 2006. • Target size: CAD $100 million, Achieved March 1 2007 CTI LIFE SCIENCES FUND

  15. Value Creation happens once the Investment Decision has been made. CTI LIFE SCIENCES FUND

  16. CTI Life Sciences Fund – People Jean-François Leprince -Managing Partner Accomplished leader with 30 years of multifunctional, multi-geographical experience in the pharmaceutical industry Richard Meadows-Managing Partner VC experience in two multi-billion dollar private equity funds along with 15+ years Business Development experience in the pharmaceutical industry Ken Pastor General Partner’s Representative 20 years experience in the financial market Shermaine Tilley – Principal 20 years experience in the biotech industry, including investment management, consulting, tech transfer and strong academic experience CTI LIFE SCIENCES FUND

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