# Presentation: 316698

## So, you want to build a biotech company?

## Therapeutics: From the Bench to the Boardroom

- John W. Holaday, Ph.D.
- Founder, Medicis, EntreMed, MaxCyte
- Chairman, HarVest Bank of Maryland

## Summary

- Biotech history and accomplishments
- Building biotech companies
- Critical path for drug development
- Drug approval - FDA
- Big pharma - Biotech
- Critical path for financing
- Outlook for the future

## Biotech Companies are Entrepreneurial

- Founded by an individual or perhaps a small group, usually scientists
- Technology obtained from tech transfer
- Angel or Venture capital backed
- High risk
- There are now over 300 public U.S. biotechnology companies out of 600 public biotech companies worldwide
- U.S. companies generated over $40B (72% of worldwide biotech product revenues) in 2002

## History of Biotechnology

- 1953 - double helical structure of DNA published in *Nature *by* *Watson and Crick*
- 1980 - the U.S. patent for cloning genes is awarded to Cohen and Boyer**
- First biotech companies formed:
- 1976 - Genentech
- 1978 - Biogen
- 1980 - Amgen
- 1981 - Immunex
- 1981 - Chiron
- 1981 - Genzyme

- *Nature 171, 737(April 2, 1953)
- **Proc Natl Acad Sci U S A. 1973 Nov;70(11):3240-4  and Proc Natl Acad Sci U S A. 1974 May;71(5):1743-7

- The industry is
- only 25 years old...
- it takes time!

## The Biosciences

- 	885,000 people are employed in the Biosciences in the US

## Contributions of Biotech

- More than 325 million people worldwide have been helped by 160 approved biotech drugs and vaccines
- >350 more biotech drugs and vaccines now in clinical trials targeting more than 200 diseases (Big Pharma only has ~75 drugs)
- Biotechnology is responsible for hundreds of diagnostic tests, including HIV tests and home pregnancy tests, DNA fingerprinting...

## Number of biotech products approved

## It takes imagination...

- And execution!

## Licensing Goals	

- Enhancement of the education process
- Maximize research benefits to society
- Facilitate commercialization of IP
- Creation of companies and jobs
- Provide a fair financial return to university on licensed IP (but Tech Transfer is not a major source of funds)

## When is science ready to become a business?

- When is science ready to become a business?

- There are too many science projects
-  masquerading as companies...

- Karen Bernstein
- BioCentury

## Caveats for successful startups...

- Be careful to select science with commercial potential
- Secure intellectual property
- Bet on the jockey, not on the horse
- Establish frequent and candid dialogue among investigators and stakeholders
- Avoid conflicts of interest, practice good business principles

## How do you build biotech companies?

- Potential
- Partners
- Price
- Promises
- Performance

- People
- People
- Plans
- Patents
- Products
- Platform

- Follow the “P’s”:

- Persistence
- Perspiration
- Passion
- Pfocus
- Pfinancial
- P-luck
- Pfun

## Drug Development

## Drug Development-Critical Path

- Observation
- Proof of concept
- Characterization
- Production
- Preclinical pharm/tox
- Formulation
- Manufacturing
- Clinical evaluation
- Regulatory approval
- Commercial development

- $

- $

## Drug development times...

## FDA

## Slide 18

## FDA approval times increasing...

## Slide 20

## Big Pharma and Biotech

## Biotech - Big pharma Alliances

- Big pharma does some things very well (develop, market, sell)
- Must overcome NIH
- As with any marriage, both parties must nurture the relationship

## Judah Folkman

- Big companies like small molecules, small companies like big molecules.

## Big pharma challenges...

- R&D spending growing faster than sales growth
- New product discoveries lagging relative to industry growth needs
- Need for licensing products from outside
- Blockbuster drugs going off patent - 40% of Pharma revenues become generic in 2005

## Revenue and Patent Expiration of Top 12 Pharmaceuticals

**Note:****	***** Includes alliances with values estimated to be greater than $20M including up-front payments, equity, R&D funding, and contingent milestone payments**
**Sources :****	****Recombinant Capital, MedAd News**

- Innovation gap...

- Burrill & Co

## “By 2010 most pharmaceutical research will be undertaken by biotechnology companies”

**	****	****	****	****	****Deutsche Bank**

## Biotech outlicensing...

## Only 1 drug of every 5,000 is commercialized (most drugs fail!)
It costs over $1M
And takes over 12 years
2/3 of all drugs that make it to the market do not recover  R&D expenses

- It costs over $1M
- And takes over 12 years
- 2/3 of all drugs that make it to the market do not recover  R&D expenses

- Sorting the wheat from the chaff

- Who is going to pay?

## Financing

## Dollars vs. Data

- DATA

## Financing -Critical Path

- 3 F’s (friends, family, fools)
- Grants (SBIR, ATP, DARPA)
- Angel investors
- Venture capital
- Partnering
- Public offering (institutions)
- Merger/acquisitions

- $

- $

## The saga of biotech...

## Capital Financing Needs

**Company Stage****	****	****Private investment per company**
- Proof of Concept		$25,000 – $100,000
- Pre-seed			$50,000 – $500,000
- Seed				$150,000 – $2 million
- Early-stage			$1 million – $5 million
- Expansion-stage		Up to $10 million
- Mezzanine			Up to $20 million

## FinancingWhat companies are getting financed?

- Experienced management
- Companies with products - clinical stage or later
- Companies already owned by investors
- Companies with clear business plans/clear milestone driven events
- Companies with revenue that provide services leading to products

## U.S. biotech industry fundraising ($ in Millions)

## Slide 37

## U.S. Biotech...cash survival time

## Slide 39

## Slide 40

## Slide 41

## Slide 42

## Bringing it all together...

## No Research, Development Only(NRDO)

- No Research, Development Only(NRDO)

## A commercial bank... helping to build Montgomery County’s Business Community

## HarVest Bank of Maryland

- Maryland bioscience, tech, government contracting & professional communities  - rapidly growing
- Clear need for industry savvy bank
- Clear industry and geographic focus
- Local companies will have their accounts managed by seasoned bankers who understand the industry
- Not the primary lenders, but providers of critical introductions to financial resources, government contracts, strategic partners, real estate, insurance providers and others to facilitate business growth

## The Future...

## Things are looking up!

- Powerful innovation, capitalizing on human genome project
- Deep pipeline
- Regulatory environment improving
- Impressive revenue growth
- Healthcare spending increasing
- Strategic alignment with big companies
- Good corporate governance = best business practice

## The environment improved in 2003

## Things are looking up!

## What is the future of Biotech?

## Acknowledgements...

- Burrill and Company
- Ernst and Young
- Biotechnology Industry Organization

## Money
Passion
Dancing

- Passion
- Dancing

- What it takes...

## You gotta work like you don’t need the money,
Love like you’ve never been hurt,
And dance like nobody’s watching...

                                                        Satchel Page

- Love like you’ve never been hurt,
- And dance like nobody’s watching...
-                                                         Satchel Page