BioTech Startup School@KU

1. BioTech Startup School@KU Spring 2019 Module 2 – Competitive Leverage Cory BerklandSpecial thanks - Mike Powell SofinnovaVentures

2. Sponsors

3. Overview of SS@KU

4. Where can one achieve a competitive advantage? Team Intellectual Property Reimbursement Clinical Efficacy Market Manufacturing Regulatory Know the categories, define your advantage

5. Where can one achieve a competitive advantage - SBIR? Intellectual Property Company/ Team Market Opportunity Resources: http://www.doesbirlearning.com/module-21-21/ Writing an SBIR Commercialization Plan http://www.mttc.org/wp-content/uploads/2014/08/Lessons_Learned_09042014.pdf Revenue Know the categories, define your advantage

6. VCs conduct ‘due diligence’ on all aspects of a business to maximize return • Management is capable and motivated 90% • Market demand is as expected 90% • Production is scaled up as planned 90% • Competition is held at bay and IP is defendable 90% • Liability and litigation is avoided 90% • Company has sufficient capital 90% • Existing customers are able and willing to pay 90% Success Probability 48% Sofinnova receives materials from 300-400 companies per year. Who has time for all that due diligence? Solution: Kill fast…maybe 1 in 20 get to ‘due diligence’, <1% are funded Source: David Eyler, Columbia University “Best Practice Guidance for Angel Groups – Due Diligence” July, 2007

7. Assessing the market opportunity: Market Size, Trends • What are you selling? At what price? To whom? What fraction will pay? • Market needs to be large enough to support a new entry • Market growth trending up helps achieve desired market penetration • Existence of multiple potential buyers • Theil Theory: target markets in which you can establish a monopoly • Identify, enter small markets in which you can dominate • Create, develop product which can disrupt the market, cause significant growth • Result: dominance of a now large, growing market. • Example: PayPal *Special thanks to Wally Meyer

8. Assessing the market opportunity: Competitive Landscape • Competitive analysis enables identification of new ventures • Competitive knowledge is a leverageable strength • Competitive conditions may: • Usurp available therapeutics/devices • Blunt differentiation • Drive up costs/drive down profitability • Impede achieving economies of scale *Special thanks to Wally Meyer

9. Assessing the market opportunity: Identifiable Customer Segments • Market segmentation is essential: • To enable share acquisition (‘can’t be all things to all people’) • To preserve scarce marketing resources. • Achieved by application of the Pareto Principle (80/20 Rule) • You will be asked about competition! *Special thanks to Wally Meyer

10. Tools for assessing market opportunity *Special thanks to Wally Meyer

11. How to Use Market Assessment Tools www.doesbirlearning.com/module-21-21/ Competitive Assessment Tool Perceptual Map Market Segmentation Model *Special thanks to Wally Meyer Porter’s Five Forces Model

12. Investor view - Competitive Leverage in BiotechCory Berkland with special thanks to Mike Powell (slides and mentorship)Managing General Partner Sofinnova Ventures ASSESSING AND DEFINING VALUE

13. Where can one achieve a competitive advantage? Team Intellectual Property Reimbursement Clinical Efficacy Market Manufacturing Regulatory Know the categories, define your advantage

14. 100 90 80 70 60 50 40 30 20 10 0 500 450 400 350 300 250 200 150 100 50 0 % Risk of Failure per Compound $M 85% 30% $32.1 $5.9 Discovery Preclinical Phase 1 & Phase 2 Phase 3 NDA Review 12 File NDA 6 File IND 14 0 3 9 Years Cumulative Cost Company Value Risk ‘Catalysts’ or Milestones are important competitive differentiators Source: Boehringer-Ingelheim, PhARMA, Sofinnova Ventures

15. VCs are looking for products where there is demand in the marketplace for better medications Percentage of approved drugs that are deemed effective, by indication Source: Personalized Medicine Coalition, Sofinnova

16. VCs are funding areas where there is unmet need – a chance for a ‘monopoly’ or large market share, improved speed to approval Examples: Peptic ulcer Lipidemia • Mass markets via general practitioners • Large number of patients • Mainly small-molecule Hypertension Medical needs sufficiently met Gm + Anti-infectives Depression Gm – Anti-infectives Efficacy of current treatments Orphan Diseases Broad spectrumanti-fungals • Untreated diseases • Specialist sales channel • Innovative drugs & biologics • High pharmacoeconomic benefit Pulmonology Examples: High unmet medical needs Cancer Ophthalmology Selected neurology Satisfaction with current treatment

17. VCs are looking for opportunities that align with Pharma or Public interest (exit opportunities) $50B PASTPharmaSpend $25B 5 FUTURE Pharma Spend Source: IMS Institute for Healthcare Informatics, Top Twenty Categories by Spend, last and next 5 yrs, 2012

18. VCs are looking for investments where the probability of success is reasonably high Source: Kola et al, Nature Review 3, pg711, 2004)

19. Where can one achieve a competitive advantage? Team Intellectual Property Reimbursement Clinical Efficacy Market Manufacturing Regulatory Know the categories, define your advantage

20. Market Deal Flow Regulatory People/Execution Financing Exit Technical Clinical • Competition from other drugs • Reimbursement issues • Best deals go to select VC firms • Single sector focus, differences • Management team risk • Venture team risk • $150K per patient fully loaded • Less VC money around today • Certain sectors huge clinical risk such as oncology, neurology • FDA tougher now than ever • Few biotechs understand regs • Chemistry and biology know-how must reduce mechanism risk • Pharma M&A dependent on IP • IPO market risk is huge ‘Biotech’ Venture Capital firms like Sofinnova consider multiple factors during screening and due diligence

21. Drug Mechanism Efficacy/Toxicity Formulation/Delivery Research and Development Chemistry, Manufacturing, Controls Scale up Intellectual Property • Validating ‘biology’ • Linking mechanism to disease • Understanding drug bioavailability • Predicting efficacy/tox and risks • ‘Voodoo’ magic • Understanding mechanisms • Plans for animal efficacy, IND • Reasonable cost and timeline • Drug synthesis, supply • Validation • Activity assays • Reproducibility • Stability • Pilot process feasibility • Costs/time to ‘go to market’ • Options for outsourcing • Technical understanding • Differentiation, competition VCs rely heavily on experts for technical risk assessment

22. Where can one achieve a competitive advantage - SBIR? Intellectual Property Company/ Team Market Opportunity Resources: http://www.doesbirlearning.com/module-21-21/ Writing an SBIR Commercialization Plan http://www.mttc.org/wp-content/uploads/2014/08/Lessons_Learned_09042014.pdf Revenue Know the categories, define your advantage