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VALUATIONLAB�FINANCIAL ANALYSIS
Swiss Biotech Day 2014
“Unlocking the Value in Biotechnology”
Disclaimer
2 VALUATIONLAB
This presentation may contain forward-looking statements that involve risks, uncertainties, and assumptions. If any such uncertainties materialize or if any of the assumptions prove incorrect, the results of valuationLAB AG could differ materially from the results expressed or implied by the forward-looking statements we make. All statements other than statements of historical fact could be deemed forward-looking statements, including: any projections of earnings, revenues, or other financial items; any statements regarding strategies or plans of management for future operations; any statements concerning new, planned, or upgraded services or developments; statements about current or future economic conditions; and any statements of belief. The risks and uncertainties referred to above include - but are not limited to - risks associated with our business model; our past operating losses; possible fluctuations in our operating results and rate of growth; interruptions or delays in our publications; breach of our security measures; the immature market in which we operate; our relatively limited operating history; our ability to expand, retain, and motivate our employees and manage our growth; risks associated with new releases of our service; and risks associated with selling to larger enterprise customers. valuationLAB AG assumes no obligation and does not intend to update these forward-looking statements. Any unreleased services or features referenced in this or other press releases or public statements are not currently available and may not be delivered on time or at all. Customers who purchase our services should make the purchase decisions based upon features that are currently available.
Swiss Biotech Day 2014
Biotech is booming. What’s the problem?
3 VALUATIONLAB Swiss Biotech Day 2014 Source: Swiss Biotech Sector 2013, SWX ID HLTHCARE TR, valuationLAB
40
71
112
146
Swiss Biotechnology since 2000
Number of Swiss Biotech Companies vs. SWX Healthcare Index
0"
5,000"
10,000"
15,000"
20,000"
25,000"
30,000"
35,000"
40,000"
45,000"
2000" 2001" 2002" 2003" 2004" 2005" 2006" 2007" 2008" 2009" 2010" 2011" 2012" 2013"
Drop in Investment Banking research
4 VALUATIONLAB Swiss Biotech Day 2014 Source: Article “Handelszeitung” 21 November 2013, Annual Reports, valuationLAB estimates
Head count major Swiss Investment Banks & Research
UBS & Credit Suisse Investment Bank staff
10
20
30
40
26
12 Vontobel Research Team
Vontobel stock coverage 2008: 140 2013: 125
Coverage per analyst 2008: 5.4 2013: 10.4
AN EXAMPLE:
Boom – bust – boom, bottleneck!
5 VALUATIONLAB Swiss Biotech Day 2014 Source: Swiss Biotech Sector 2013, SWX ID HLTHCARE TR, valuationLAB estimates
40
71
112
146
Swiss Biotechnology since 2000
Number of Swiss Biotech Companies vs. SWX Healthcare Index
Number of Financial Analysts Visibility
Gap
125$
194$
295$
224$246$
189$
321$
215$ 214$
329$
231$ 237$
89$
555$
639$
39$ 49$ 40$
244$
45$
0$
100$
200$
300$
400$
500$
600$
700$
2003$ 2004$ 2005$ 2006$ 2007$ 2008$ 2009$ 2010$ 2011$ 2012$
Private$(in$CHF$mn)$ Public$(in$CHF$mn)$
Money talks, and money walks…
6 VALUATIONLAB Swiss Biotech Day 2014
Number of Financial Analysts
Source: Swiss Biotech Report 2013, Ernst & Young, valuationLAB estimates
Capital Investment in Swiss Biotech Companies
-1.5
-1
-0.5
0
0.5
1
1.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
News flow determines risk attitude
7 VALUATIONLAB Swiss Biotech Day 2014
Number of Financial Analysts
Source: Company reports, valuationLAB estimates
Positives
Negatives
Major events
0"
500"
1,000"
1,500"
2,000"
2,500"
Cosmo" Basilea" Evolva" Newron" Cytos" Addex" Santhera"
2007" 2010" CURRENT"
0"
2,000"
4,000"
6,000"
8,000"
10,000"
12,000"
Actelion"
2007" 2010" CURRENT"
Research coverage SIX listed biotechs
8 VALUATIONLAB Swiss Biotech Day 2014 Source: Company survey, valuationLAB estimates
20 x = Broker Analyst Coverage
Market Capitalization (in CHF mn) and Broker Analyst Coverage
AR
PN
15
19
4 3
2
12
15
3
12 1
2 7
6 2
9
2 0 5
2 0
7
4 0
Research before the crisis
9 VALUATIONLAB
Big Caps
Mid Caps
Small Caps
Institutions
Family Offices
Specialist Funds
Retail
Bankers
Research Sales
Investment Banks $$ $$
$
COMPANIES INVESTORS SELL-SIDE RESEARCH
..negative factors already appearing before the financial
crisis… Swiss Biotech Day 2014
Source: valuationLAB
Negative factors affecting brokers
§ “Decoupling” research and commission (best research is not necessarily best transaction fee)
§ “One-size-fits-all” research approach large institutions not satisfactory
Financial crisis enhanced downward trends, and
§ “Drop in IB business” experienced specialist staff reductions
Financial institutions are dropping small cap Life Science coverage increasingly!!
10 VALUATIONLAB Swiss Biotech Day 2014
$
$$
Shift towards research “boutiques”
11 VALUATIONLAB
Big Caps
Mid Caps
Institutions
Family Offices
Specialist Funds
Retail
Bankers
Research Sales
Investment Banks $$
Research
RESEARCH BOUTIQUES
Research only
$$
$$
$
COMPANIES INVESTORS SELL-SIDE RESEARCH
FREE 4 ALL
$$
VALUATIONLAB Small Caps
Sales
NEW PLAYERS
Decoupling One-size-fits-all
Drop IB business
Swiss Biotech Day 2014 Source: valuationLAB
Unlock value - Three key steps
Understand Quantify Share
Analysis
? $ Valuation Research
WWW
12 VALUATIONLAB Swiss Biotech Day 2014
• USP • 7P’s • Translate • Visualize
K.I.S.S.
• Cash (life) • Key drivers • Risk adjust • Sensitivity • Catalysts
S.M.T.M.
• Website • Newswires • Investors • Conferences
USE IT!
Source: valuationLAB
Valuation Report - Newron
13 VALUATIONLAB
Newron Pharmaceuticals (SIX)
Initiation Road shows
Swiss Biotech Day 2014
A.A.N.
Source: Investis Ltd, valuationLAB
Valuation Report - Gentium
14 VALUATIONLAB
Gentium (NASDAQ) Initiation Jazz tender offer
Swiss Biotech Day 2014
Positive opinion
Source: Yahoo, valuationLAB
Negative opinion
Life cycle positioning - Public Biotechs
15 VALUATIONLAB Swiss Biotech Day 2014
~ 10-14! 20! YEARS!
RESEARCH & DEVELOPMENT PHASE! RETURN PHASE! EXPIRY!
REG
ISTR
ATIO
N!
PHAS
E III!
PHAS
E II!
PHAS
E I!
PRE-
CLIN
ICAL!
SAFETY! DOSE! EFFICACY / APPROVAL!
“STAR”! “CASH COW”! “DOG”!~10%! 10% -45%! 40% - 65%! ~80%!
BREAKEVEN!
GENERICS!
! RISK-ADJUSTED DISCOUNTED CASH FLOW " !
SUCCESS <5%!
ANIMALS! ~10s! ~ 100s! ~ 100s – 1,000s PTS!
BIO-SIMILARS !
COSTS!
SALES!p<0.05!
P/E >20x! P/E ~10-15x! P/E > 6-10x!
“MATURE”!
P/E ~ 15x!
0!
ADDEX!
CYTOS!
BASILEA!
ACTELION!
SANTHERA!
NEWRON!
COSMO!
LIFE CYCLE POSITIONING – SIX LISTED BIOTECHNOLOGY COMPANIES!
Source: valuationLAB estimates
Life cycle positioning - Swiss NCE’s
16 VALUATIONLAB Swiss Biotech Day 2014 Source: “The Swiss Biotech Sector 2013” by SBA, valuationLAB estimates
~ 10-14! 20! YEARS!
RESEARCH & DEVELOPMENT PHASE! RETURN PHASE! EXPIRY!
REG
ISTR
ATIO
N!
PHAS
E III!
PHAS
E II!
PHAS
E I!
PRE-
CLIN
ICAL!
SAFETY! DOSE! EFFICACY / APPROVAL!
“STAR”! “CASH COW”! “DOG”!~10%! 10% -45%! 40% - 65%! ~80%!
BREAKEVEN!
GENERICS!
! RISK-ADJUSTED DISCOUNTED CASH FLOW " !
SUCCESS <5%!
ANIMALS! ~10s! ~ 100s! ~ 100s – 1,000s PTS!
BIO-SIMILARS !
COSTS!
SALES!p<0.05!
P/E >20x! P/E ~10-15x! P/E > 6-10x!
“MATURE”!
P/E ~ 15x!
0!
LIFE CYCLE POSITIONING – DRUG CANDIDATES OF SWISS BIOTECH COMPANIES!
31#26#
8#
11#
Product wave expected to continue
§ New biotech product wave just starting § Margin boost for already profitable companies
§ New “success stories” - 1st product revenues and profits
§ Maturing private biotech pipeline § Broad range of innovative therapies
§ Funding of early stage products still a concern
§ Public/corporate/private ventures needed
§ Cash-rich Big Pharma and Big Biotech still shopping
17 VALUATIONLAB Swiss Biotech Day 2014
European biotech will participate too
§ US (44% of global AUM) easier to attract funding § Largest single market, one language, one currency, one …
§ Dominant healthcare sector, seasoned financial specialists
§ Risk appetite, entrepreneurs
§ Europe (31% of global AUM) has its strengths too § Lower valuations
§ Local markets, local players, local knowledge key
§ Changing risk appetite, emerging entrepreneurs
18 VALUATIONLAB Swiss Biotech Day 2014
“New” capital waiting to be found
§ Attractive investment opportunities abundant (but largely unknown)
§ Sufficient “new” capital sources waiting to invest § High Net Worth Individuals
§ Family offices
§ Pension Funds
§ New EU member states
19 VALUATIONLAB Swiss Biotech Day 2014
FRANCE!24%!
GERMANY!23%!
UK!13%!
ITALY!7%!
SWITZERLAND!7%!
SPAIN!3%!
SWEDEN!3%!
DENMARK!2%!
AUSTRIA!2%!
BELGIUM!2%!
OTHER!14%!
EUR76,48077BN7
Investment fund assets by country of sales
Source: European Fund and Asset Management Association (EFAMA) “Asset Management Report 2013”
Unlocking the Value in Biotechnology
§ Three key steps to unlock the value in biotechnology § 1) Understand (K.I.S.S.); 2) Quantify (S.M.T.M.); 3) Share (USE IT)
§ Quality research coverage is key to: § Provide sufficient funding for innovative products
§ Help change perceived risk, find new sources of funding
§ Investment Banks come and go – Boutiques filling the gap
§ More co-operation desired between European governments, biotech associations, financial markets, and large biopharma companies to support innovative emerging biotechs
20 VALUATIONLAB Swiss Biotech Day 2014
VALUATIONLAB�FINANCIAL ANALYSIS
“We value your business” Contact: Bob Pooler [email protected] +41 79 652 67 68 www.valuationlab.com
Swiss Biotech Day 2014 VALUATIONLAB
