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Present Investor Market numbers for Biotech
Start-up – Research phase (R) – revenue minus
Seed Round · Valuation - $0 · Seed funding - $100K · 10 – 20% of company sold
Start-up (first round equity funding) · Valuation - $3 – 6 M · Second round - $0.5 – 1 M · 20 – 30% of company sold
Development Stage (D) – revenue minus
· Valuation - $8 – 12 M · Funding - $4 – 6 M · 20 – 30% of company sold
IPO
· Valuation - $20 – 60 M · Funding - $10 – 20 M · 20 – 30% of company sold
Dilution, derived from the Latin, dilutus, meaning to wash away
Dilution Happens
Everyone loses in overall percentage ownership, but everyone gains in their piece of the company obtains great dollar value.
Seventy percent of a $5,000,000 company is $3,500,000 but ten percent of a $500,000,000 company is $50,000,000.
Increasing the value of the company is the entire point.
Making each share worth more money is the point. When it comes to equity and cash, · it’s not how many shares of stock you have; · it is how much each share is worth.
Remember, you can’t sell your Founder’s Stock right away. It maybe a long time before you can depending upon the Company structure and by laws. Under any circumstance, your Founder’s Stock essentially has no value at all, because you cannot sell it.
The main interest you should have in the early days of a Company is increasing the Company’s value to the outside market
The Value of your Company will be what the Investor Market puts as a Value for all Companies at your stage.
Your Company value has little to do with what you think the value is.
Biotechnology Financing Real world
USA Dollars in millions
IPO Debt PVC Part total
2Q 03 0 2487 628 2256 6035 1Q 03 0 152 549 1203 2842 4Q 02 0 517 528 2354 3706 3Q 02 0 202 560 1242 2335 2Q 02 325 857 889 2875 5302 1Q 02 120 3675 771 1025 6601 2002 445 5251 2688 7496 17,944
Biotech Market Cap Sales / Revenues
August 2000 $475B $32B
August 2003 $332B $42.7B Ernst & Young & PhRMA (2000)
Percent per employee spent on R&D
Industry US dollars
Biotechnology $134,000
Pharmaceutical $94,000
Biotechnology investors have increased concern over valuations and risk.
It periodically catches up with Biotechnology stocks.
They can at times show major fluctuations as much as 60%.
Biotech is a small and concentrated industry.
Although Biotechnology has around 1,400 public and private firms the USA five companies accounted for over 35% of the revenues in 2000, · Amgen · Biogen · Chiron · Genentech · Immunex
75% of those 1,400 have less than 25 employees.
According to the University of California, one in three U.S. Biotech companies is located within 35 miles of a U.C. Campus.
U.C. Scientists are credited with founding one in four California Biotech firms.
San Diego is the third-largest concentration of biotech companies in the USA, with nearly 500 firms. In 2002 San Diego life sciences industry received $530 million in VC funding.
Irvine,CA over 200 biosciences companies. In Irvine, 58% of the residents have Bachelor's degrees and 25% have graduate degrees
Of the approved biotechnology drugs ~80 50% are protein therapeutics. (2001).
Biotechnology drugs make up only ~8% of the total pharmaceutical drug revenues.
In 2001 this worldwide market was $364 billion $28.5 billion was generated by biotechnology products.
Location of Sales 2001 $ % Biotech North America $181.8 B +17 Europe $88B +10 Japan $47.6B +4 Asia, Africa Australia $27.9B +9 Latin America $18.9B +.1
Total $364.2B +12
Other Life Sciences Companies USA Locations
State # Med Devices Comp
CA 2217 NY 895 NJ 784 MA 764 FL 748 PA 722 IL 717 TX 513 OH 504 MN 411
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