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Confiden'al1
Phagenesis Case StudyExit to Nestle announced 1st Sep 2016
Terms of the deal to buy Phagenesis weren’t disclosed, but a person familiar with the acquisition
said medical-device makers of Phagenesis’s size typically sell for £100 million ($131 million).
The U.K. company’s investors include London-based Inventages Venture Capital—
which is largely funded by Nestlé— and London-based Anglo Scientific.
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Confiden'al2
Theproblem:Dysphagia(swallowingdysfunc'on)affects millionsofpeople,includingca.50%ofstrokepa'ents‣ significantimpactonhealth(3-6xhighermortalityrate),qualityoflife,andcostofcare(£billions)‣ BeforePhagenesis,noclinicallyproventreatment
PhagenyxCatheterforenteralfeeding+electricalneuro-stim
PhagenyxBaseStation
ThePhagenyxtreatmentOnly3daysof10minelectricalneuro-stimcycles,administeredbydoctor,nurseortherapist
ThetreatmentprinciplePharyngealelectricalstimulation(PES)createsneuro-sensoryinput“kickstarting”reorganisationofthemotorcortex
Healthybrain PostStroke Recovery
400+patientstreatedto
date
Approvedproductonthemarket
Strong patentportfolio
10+clinicalstudies
published
£1MfromWellcomeTrust
Jan2014Hemisphericstroke
Casestudy:TheStoryofMr.K. 62yearsoldFeb5th2014
AdmissiontorehabcentrePA-Score8/8(Materialentersdeepintoairway,noefforttoeject)Startofconventionalswallowingtherapy
April10th2014PA-Score7/8(Materialentersdeepintoairway,cannoteject)
April12th–14th2014PharyngealElectricalStimulation
April25th2014Mr.K.onnormaldiet,nosupervision PA-Score2/8(nearnormalswallowing)PEGtuberemoved
Keyinvestmentcriteriaiden;fiedinduediligence(2009)
✓ Clearmarketneed–pa'ents,doctorsandhealtheconomics
✓ Groundbreakingtechnologywithlibleeffec'vecompe''on
✓ Baseunitplusconsumablebusinessmodelwith>80%grossmargins
✓ Es'matedrevenuepoten'alof£300-500millionperannum
✓ Strongexitpoten'al:acquisi'veindustryforuniquetechnologies
Company Overview World’s first clinically proven treatment for dysphagia
Exceptionalmanagement andboard
PhagenesisToday
2010-2016: Fromconcepttocompany
Confiden'al3
Anglo Scientific’s Role From company launch to exit
BeforeAngloScien;fic (1990s-2009)
CompanyLaunch (2009-2010)
CompanyBuilding (2010-2015)
CompanyExit (2015-2016)
‣ Prof.Hamdy,ManchesterUniv:groundbreakingresearchondysphagiafrommid90s;seminalstudiespublishedintopjournals
‣ In2007,setsupPhagenesiswithco-founderfromUniv.techtransferofficetocommercialisefindings
‣ Overnext2years,trytoprogresscompany,butwithnomanagementoremployees(retainedUniversityjobs),noexperiencedBoard,etc.
‣ ThusfailtoobtainfundingandPhagenesisstagnatesatincep'on
‣ 2009:ASintroducedthroughinvestorswhoappreciatespoten'al,butdeemsstructureandteamuninves'ble
‣ ASconductsextensiveduediligence,securesrobustcurrent&futureIPagreementwiththeUniversity,writesnewbusinessplan,andbuildsexperiencedfoundingteaminc.2ASDirectors
‣ Onstrengthofrestructuredcompany,£2mraisedin2010 (ASinvestors+newinvestorsthatASabractstoinvestment)
‣ ASprincipalsserveasExec.Chair&Exec.Director,Companygrowstoteamof18,securesCEMark,£10m+offurtherinvestment,etc.
‣ ASalsoprovidesitsusualcorporateservices,e.g.CompanySecretarialandAccoun'ngun'lCompanyreadytohireownFD;primarycontactformostshareholders
‣ By2013,CompanygrowntostagethatitcanabractMedtronic’sformerheadofEuropeasChairman,andin2014a“risingstar”atMedtronicasCEO
‣ 1sttermsheetreceivedmid2015
‣ PhagenesisBoardappoints 3personnego'a'ngteam:- Chairman:highlevelrela'onships- CEO:clinical/opera'onalaspects- ASDirector:pointpersononall“dealpoints”duringthe12monthsofnego'a'ons
‣ Finalnego'ateddealunanimouslylaudedbyCompany’sshareholders
‣ ASalsoappointedbyshareholdersas“SellersAgent”toactontheirbehalfinpost-closingmabers
Iden;fyandvalidatedisrup;vesolu;ontobigmarketneed,andstructureintoinves;bleCompany
BuildCompanyfromwithin,recruittopworldclassindustry talentwhenCompanyready
Ac;verolethroughtoexit,workingcloselywith
boardandmanagement
Confiden'al
EISInvestorCaseStudy
4
Illustrative Returns Analysis
First Round
LastRound *
All Rounds Average
Excluding Earn-Outs 4.1x 2.7x 3.3x
Including Earn-Outs 5.7x 3.7x 4.6x
WithEIS
‣ £100kinvestmentinPhagenesis’firstround
‣ £70knetcostamerincometaxcredit
‣ £570kreturn, capitalgainstaxfree
‣ 8.2xtax-freereturn
EquivalentwithoutEIS
‣ £70kinvestment(samenetcost)
‣ £70kto£570k=8.2x‣ £792kneededtoachieve£570kamer 28%capitalgainstax
‣ £70kto£792k=11.3x
Toachievesameresult,non-EISinvestmentsneedtoreturn:
11.3xpreCGTtax; 8.2xpostCGTtax
*Laterroundsonlyopentoexistingshareholders;inordertoparticipateinPhagenesisaninvestorhadto“getinearly”