Life Science -innovaation globalisoi(tu)minen

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1 Taking innovations further Life Science -innovaation globalisoi(tu)minen Markku Jalkanen, tj. Faron Pharmaceuticals Oy

2 Keskeisiä suomalaisia haasteita kuluneen puolivuosisadan aikana 40-luku: Selviämmekö sodasta ja sotaveloista? 50-luku: Saavutammeko koskaan Ruotsin BTK:ta? 60-luku: Voitammeko koskaan Ruotsia jääkiekossa tai jääkiekon MM:ta? 70-luku: Suomessa ei koskaan kehity maailmanluokan POPtähtiä, tai emme koskaan voi voittaa Euroviisuja? 80-luku? Suomesta ei koskaan voi tulla merkittävää ICTmaata! 90-luku: Bio-nokia on höpö-höpö puhetta! 00-luku: Menetämme kaikki teolliset työpaikat Kiinaan ja Intiaan!

3 Life Science sisältää useita nopeasti kasvavia alueita, Terveydenhuollon sovellukset (lääkkeet, rokotteet, diagnostiikka, laitteet) Prosessiteollisuuden sovellukset (teolliset entsyymit, kemia, puunjalostus, ym.) Ympäristösovellukset (jäteveden puhdistus, ympäristömyrkkyjen poisto ym.) Ravintotuotannon (perus- ja elintarvike) sovellukset (geenimuunnellut kasvit/eläimet, funktionaaliset elintarvikkeet) Materiaalisovellukset (bioaktiiviset materiaalit, biohajoavat pakkaukset, ym.) Bioinformatiikka (biodatapankit, biosirut, ym.)...jotka koskettavat lähes kaikkia teollisuudenaloja

4 THE HEALTH-RELATED LIFE SCIENCE MARKET ALONE IS BIG AND GROWING FAST High Demand for More and Better Products Fast growing pharma and medtech market Increasing life expectancy Increasing welfare, esp. in developed countries (e.g. China) Increased focus on quality of life Pharma Market ca. $ 500 Bn, growth 9% Medtech Market ca. $ 200 Bn, growth 10% New innovations, better technologies Large unmet needs (e.g. Alzheimer, cancer, diabetes) New diseases (e.g. avian flue) Revenue [bn$] Bigger sales and exit markets due to globalization Sources: Pharma-Daten Deutscher Bundesverband Pharmazeutische Industrie e.v.: Burrill & Company, UBS U.S. publicly listed biotech companies Global pharmaceuticals market

5 ESPECIALLY SMALLER COMPANIES BENEFIT FROM THE OVERALL GROWTH OF THE LIFE SCIENCE SECTOR Innovative smaller companies have stronger position within the sector and can therefore increase their value significantly! Acute pipeline shortage in large companies Smaller companies more mature and highly productive Innovations protected by patents E.g. today more than 60% of new pharmaceuticals originate from small companies R&D expenditures [$B] # NME approved by FDA Better license deals Increasingly building own commercial organizations better return Number of Alliances # Alliances Average Deal Value [M$] 22,0 21,0 20,0 19,0 18,0 17,0 16,0 Average Deal Value [M$] ,0 Biotech R&D Big Pharma R&D Biotech NME approvals Big Pharma NME approvals 179 M&A in 2005 versus 152 in 2004

6 GLOBAL BIOTECH INVESTMENTS STAY HIGH YEAR AFTER YEAR: 2005 AND 2004 FIGURES DEMONSTRATED SIGNIFICANT PUBLIC TRUST Investments in biotechnology according to main investment types 2005 in blue and 2004 in grey ($M) Public offerings Private biotechs Public/other Total Source: BioWorld 2006 report

7 NORTHERN AND CENTRAL EUROPE ARE ONE OF THE MOST INNOVATIVE BIOTECH REGIONS IN THE WORLD Biotechnology Innovation Scorecard Top 10 Countries Citations in Clinical Medicine Top 10 Countries (per 1,000 population) Switzerland 63 Sweden 57 Denmark 60 Scotland 54 Sweden 57 Switzerland 53 US 52 Finland 52 Belgium 48 Denmark 49 Finland 42 Netherlands 42 Netherlands 41 England 34 Germany 37 Norway 31 UK 37 US 30 France 35 Israel 30 Source: Biotechnology Innovation Scoreboard 2003, European Commission Source: The Lancet, Vol 363, 2004

8 FINLAND: WORLD CLASS INNOVATORS, BUT NO INVESTORS Biomedical Research Citations (EU+US) Top 10 Countries (per 1,000 people) European VC Investments in Biotechnology, EUR million, 2004 UK 358 Sweden Denmark Finland US UK Netherlands Belgium Austria France Germany Germany France Switzerland Denmark Austria Sweden Belgium Italy Ireland Norway Spain Netherlands 1 Finland 0 Source: BMJ 2005 Source: Tornado Insider There were no new life science venture capital investments in Finland in 2003 or 2004, and only two publicly announced in 2005

9 SEED TO EARLY STAGE COMPANIES CAN CREATE THE HIGHEST RETURN FOR INVESTORS - BUT ONLY IN MATURE CAPITAL MARKETS (e.g., in USA) Average long-term returns for venture capital investments in the U.S. by stage of investment 45,8% 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 19,8% 17,0% 15,2% 13,0% 13,7% 13,0% 8,7% 5,0% 0,0% -5,0% -10,0% 1,8% Early stage VC Balanced VC Later stage VC Buy-outs -4,2% -6,6% -8,6% -15,0% 5 years 10 years 20 years Prerequisite: Investors with extensive experience are needed! According to higher maturity of the sector, Europe has the possibility to catch up in the future Source: National Venture Capital Association publication Private Equity Performance as of Q1 05

10 EUROPE NEEDS CENTRALIZED IPO-MARKET BEFORE PUBLIC FLOATING BECOMES A REALISTIC EXIT ROUTE FOR TECHNOLOGY INVESTMENTS Higher liquidity due to increased size and centralization: a real pan- European trading place for technology stocks challenging NASDAQ Comparable peer -values and transparent analysis supported by Investment Banks: Origin of company s country reduced or not significant Will increase technology investments and change investment climate to a more similar as in US: higher risks - higher returns

11 NORTHERN AND CENTRAL EUROPE PRESENTS AN EXCEPTIONALLY ATTRACTIVE MARKET FOR BIOTECH DEVELOPMENT Number of Biotech Companies in Europe Nordic countries Germany UK France Sweden Switzerland Denmark Netherlands Finland Belgium Italy Ireland Norway Other countries High number of companies in Northern Europe and Germany Over 40% of European companies.. but fragmented company structure Relatively small companies Low revenue per employee Low proportion of public companies Young product pipelines Need for consolidation Companies lack critical mass High-level commercial management needed Strong need for consolidation and a higher level of maturity Source: Ernst & Young: Refocus The European Perspective, Global Biotechnology Report 2004

12 ACTIVE OWNERSHIP APPROACH HAS PROVEN TO CREATE HIGHER RETURNS Current Problems with Biotech Companies Idea and Technology (Seed stage) Product Development (Early stage) Sales Driven Company (Late stage) Hurdle #1 Hurdle #2 Lack of business development skills Lack of vision and experience for growth Lack of money to speed up fast growth The Solution: Active Ownership Approach! According to a recent McKinsey study The most effective investors simply devote more hours to the initial stages of deals (= take a truly hands-on approach) Better value creation plans are crafted and they are executed efficiently: Naturally, management s plan is a part of the process, but the best new owners view it skeptically and develop their own well-researched viewpoint that they use to challenge it. Once developed, the plan is subject to near continual review and revision, and an appropriate set of key performance indicators is developed to ensure it remains on track. Source: Tekes-report: Pharma development in Finland today and 2015: McKinsey study, 2004

13 BUILD SYNERGIES, e.g. BETWEEN GERMANY AND FINLAND, TO DRIVE THE BUSINESS PROCESS Finland: Highly innovative, but underserved VC market Germany: Mature biotech scene, but lack of new innovations Highly innovative Technology scene Attractive investor scene Second largest capital market in Europe Big commercial market Largest single EU market Many exit opportunities Top-tier pharmaceuticals and life science groups Funding, personnel, exit and deal synergies Germany provides attractive outlet for Finnish companies

14 Taking innovations further Taking innovations further Taking innovations further Taking innovations further through a cost constrained business model

15 Faron s cost effective drug development model... Costs Money burning biotech model Faron s lean model Target search In vivo concept Preclinical Initial clinical studies Phase IIb Phase III...allows parallel project development.

16 Criteria for development projects The following criteria should be used to choose development projects : Strong scientific background Promising IP-position that can be improved even further Unmet need and significant market potential Joint commitment with inventors for further development Industrial business models with 2-3 alternatives and an early implementation

17 ONE SOLUTION IS GETTING THE RIGHT MIX: LIFE SCIENCE COMPANIES WITH WIDEST SPREAD OF SKILLS IN THEIR TEAMS STAND THE BEST CHANCES OF SUCCESS Capable management: Biotech industry, as any industry area, requires specialized management skills only obtained through years of practice Good relations with early Investors: Limited resources require maximal synergy and utilization of skills from both sides Diversity of skills encompassed by company s research and development team: Broader view will prevent wrong decisions and help to unlock product potential and value Early complementation of R&D team for diversification Technology mix for maximal exploration of product potential in various market segments Value-adding process through technology mixing How can we organize this in Finland if we can t use capital to do this? Source: Nature 2006:442:

18 Model for National Innovation Center of Finland VTT State financing Universities Innovation circle National innovation center (NIC) Commercial circle Tekes National health institute Enterprises

19 EHDOTUS NIC N RAKENTEEKSI: VOITTOA TUOTTAMATON HOLDING - YHTIÖ, JOLLA INSENTIIVEILLÄ VARUSTETTUJA TYTÄRYHTIÖITÄ Patenting Licensing Networking Operational core units Business development Financing Marketing International operations Sector expertise life science ICT others

20 Kysy itseltäsi,... kun sairastut syöpään, haluatko mielummin sairastaa sitä huonosti vai hyvin terveydenhuolloltaan kehittyneessä maassa, kun seuraava maailmanlaajuinen epidemia puhkeaa, haluatko valtiosi mielummin suojelevan sinua vai ei, kun vanhenet, teetkö sen mielummin teknologisesti edistyneessä vai vähemmän edistyneessä maassa, kun lapsesi valmistuvat ammatteihin, kuinka tärkeää olisi että he saisivat tehdä sitä mahdollismman hyvistä lähtökohdista synnyinmaassaan,...miten voisit edistää life science teollisuuden kehittymistä Suomessa?

21 Bio-Nokia kolkuttaa jo nurkan takana! Biotekniikka voi synnyttää uusia Nokioita, puhujan siteeraus vuodelta 1997 Menestystarinoita on jo syntynyt: Orionin Parkinson taudin -lääkeryhmä Bayer/Schering/Leiras kohdunsisäiset ehkäisimet Fibrogen, Inc.: S. San Franciscolainen yritys, jonka keksintöjuuret Suomessa (prof. Kari Kivirikko): Fibrogenin kliinisissä tutkimukissa olevat anemialääkkeet ovat keränneet lähes miljardin dollarin etappimaksut viimeisen vuoden aikana myymällä lisenssioikeuksia Eurooppaan ja Japaniin Yhtiön listautuessa Sitra saattaa saada takaisin kaikki tähän astiset biosijoituksensa Keskeisinä toimijoina on edelleen suomalaisia (mm. prof. Kivirikko ja kaksi hallituspaikkaa) Useissa yrityksissä kehitetyt Bioimplantit Ark Therapeutics n maailman ensimmäiset viruslääkkeiden kaupalliseen tuotantoon hyväksytyt (FDA) GMP-tilat Kuopiossa Hormos Medical n uudelleen herääminen amerikkalaisomistuksessa ja paljon muuta on tulossa!

22 Taking innovations further Contacts: Dr. Markku Jalkanen, CEO Faron Pharmaceuticals Ltd. Itäinen Pitkäkatu 4B, FIN Turku, Finland Phone: Fax: