leerink cap makts ovw

8/9/2019 Leerink Cap Makts Ovw

1/13

April 2009

An Inside Look at the Public Capital Markets

Donald Notman

Managing Director

Equity Capital Markets


2/13

1

Overview of Healthcare Financings

Examples of Successful Transactions


3/13

2

U.S. Equity Mutual Fund Flows(US$ in billions)

Market Performance (1/1/08 Present)

Jan- 08 Mar -08 May-08 Jul-08 Sep- 08 Nov-08 Jan- 09 Mar -0940

45

50

55

60

65

70

75

80

85

90

95

100

105

110

DJIA

S&P 500

NASDAQ CompositeRussell 2000

2008

(33.8%)

(38.5%)

(40.5%)

(34.8%)

2009

(4.1%)

7.4%

(4.2%)

(9.3%)

Market Performance (4/17/09 Close Present))

2007

6.4%

3.5%

9.8%

(2.8%)

NBI (12.6%) (10.5%)4.6%

2008 20092007

7.7%

(1.4%)

(2.0%)

(14.5%)(19.4%)

(32.1%)

(37.0%)

(54.8%)

(1.9%)

(6.8%)

10.2%16.2%

DJ/W Medical Equip.MS HC Providers

AMEX Pharma.

MS HC Payors

DJIA

S&P 500

NASDAQ Composite

Russell 2000

% Change

(2.1%)

(0.4%)

1.3%

(0.1%)

NBI (2.6%)

DJ/W Medical Equip.

MS HC Providers

AMEX Pharma.

MS HC Payors

% Change

(3.3%)

3.6%

(4.5%)

(5.5%)

Source: FactSet, Placement Tracker, ici.org, sec.gov, company press releases

pr17 Apr 20 Apr 21 Apr 22 Apr23 Apr 2494

95

96

97

98

99

100

101

102

$(75.0)

$(65.0)

$(55.0)

$(45.0)

$(35.0)

$(25.0)

$(15.0)

$(5.0)

$5.0$15.0

$25.0

$35.0

Dec-05

Feb

-06

Apr-06

Jun-06

Aug-06

Oct-06

Dec

-06

Feb

-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec

-07

Feb

-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb

-09

PublicMarket Performance

U.S. Equity Mutual Fund Flows


4/13

3

Healthcare IPOs Pricing Relative to Range

Not

:Num

rs below Healthcare IPOs Pricing Relative to Range graph represent total numberof IPOs per quarter

Source: FactSet, Placement Tracker, ici.org, sec.gov, company press releases

IPO Pricing and Performance Since 1/1/2008

Healthcare IPOs Since 1/1/2008US$ in millions, except per share Midpoint IPO Valuation Current Performance

Offer Shares of Filing Pre- Post- Market Midpoint / Offer / vs. Russ.

Company Date Filed Offer Range Price Amount Money Money Price Cap. Pricing Current 2000

CardioNet 3/18/08 6.6 4.5 $23.00 $18.00 $81.0 $333.8 $387.8 $19.79 $469.6 (21.7%) 9.9% 41.5%

MAKO Surgical 2/14/08 5.1 5.1 15.00 10.00 51.0 133.4 184.4 6.90 172.4 (33.3%) (31.0%) 2.9%

Mean 5.9 4.8 19.00 14.00 66.0 233.6 286.1 13.35 321.0 (27.5%) (10.5%) 22.2%

Note: Grey shading denotes Leerink Swann deal.

57%

90%

73%56%

45%

33%

78%

100%

43%

50%

18%

22% 45%

33%

11%

10% 9%

22%

9% 11%

0%0%0%0%

0%

33%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Q2-07 Q3-07 Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09

7 10 2 11 9 11 3 9 2 0 0 0 0

Priced Below Priced Within Priced Above

# IPOS


5/13

4Source: FactSet, Placement Tracker - Includes transactions >

5MM in size

Historical PIPE and RDO Volume

Annual Healthcare RD & PIPE VolumeTotal Raised ($ in millions)

$0

$900

$1,800

$2, 00

$3, 00

$4, 00

2005 2006 2007 2008 2009 YT

B otech Spec. Pha ma edtech

2005 2009 YTD

$R

$R

C

$R

C

$R

C

$R

t

r

B

t

$2,014.7 $2,961.0 47.0% $3,173.3 7.2% $1,141.8 (64.0%) $3

1.7

Phar

a $432.4 $595.2 37.6% $208.7 (64.9%) $95.3 (54.3%) $20.0

Medtech $426.2 $827.9 94.3% $244.2 (70.5%) $226.5 (7.2%) $98.1

Total $2,873.4 $4,384.1 52.6% $3,626.2 (17.3%) $1,463.6 (59.6%) $469.8

2006 2007 2008

NumberofDeals

Sector 2005 2006 2007 2008 2009 YTD

B

otech 72 104 112 53 15

Spec. Pharma 19 26 10 4 1

Medtech 26 22 16 12 5

Total 117 152 138 69 21


6/13

5Source: FactSet, Placement Tracker

Healthcare PIPEs and RDOs Completed Since 1/1/08

Total Raised ($ in millions) # of Transactions Completed

Pre-Offer Market Cap Ranges

3

$0

$100

$200

$300

$400

$500

$600

$300

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Gross Proceeds Raised


7/13

6Source: FactSet, Placement Tracker

Healthcare PIPEs and RDOs Completed Since 1/1/09

Prices as of4/!

" /!

009(1) Includes transactions # $ % & & in si

'

e(

!

)(

mountofwarrants as a percentofshares in the transaction.

(3) Exercise price ofwarrants as a percent premiumtothe transaction price.

US$ in millions, except per share Offer ) 0 Offer/ Offer 1 rice PricePerformanceP re -O ff er a % of Avg. Daily Discountto PostOffering

Units Offer Offer Market Pre-Offer Trading Warrants 10 Days Prior 2 ext 10 DaysDa te C om pa ny Industry Ticker Offered Amount Price Cap Mkt. Cap. Value Amt Prem Prior Close Close Post Today

PIPEs4/13/09 Rosetta 3 enomi4 s Biotech ROS3 2.000 8.0 4.00 38.3 20.9% 113.9x 0% NA 38.8% 43.9% (12.5%) (18.8%) (23.0%)4/9/09 Chemgenex Biotech CXSP 1.550 7.1 4.58 183.4 3.9% 34926.9x 0% NA ( 58.0%) (60.6%) 150.7% 149.4% 150.7%4 /6 /0 9 BioMimetic Therapeutics Medtech BMTI 5 .941 8.0 8.50 151.0 5.3% 16.1x 0% NA 9.7% 14.1% (10.1%) 6.4% (8.8%)3/2/09 Cardima Medtech CADM 18.519 20.0 1.08 158.1 12.6% 3465.9x 22% 16% (1.8%) (6.1%) 15.7% 4.6% 1.9%2/23/09 Opko Health Spec. Pharma OPK 20.000 20.0 1.00 235.6 8.5% 381.6x 0% NA (20.0%) (9.1%) 10.0% (9.0%) 16.0%2/19/09 EnteroMedics Medtech ETRM 13.110 15.1 1.15 54.6 27.6% 1312.7x 50% 20% (10.9%) (0.9%) (0.9%) 47.8% 95.7%2/13/09 Cadence Pharmaceuticals Biotech CADX 12.040 87.3 7.26 478.8 18.2% 158.8x 50% 8% (2.6%) (3.1%) (1.4%) (3.2%) 36.3%2/13/09 Affymax Biotech AFFY 0.652 10.0 15.33 317.6 3.1% 33.8x 65% 9% (5.5%) 0.5% 1.8% (21.7%) 11.8%2/13/09 Affymax Biotech AFFY 2.845 32.0 11.25 317.6 10.1% 147.6x 0% NA (30.7%) (26.2%) 38.7% 6.7% 52.4%1/27/09 EXACT Sciences Biotech EXAS 3.000 6.0 2.00 44.0 13.6% 39.9x 0% NA 26.6% 38.9% (18.5%) (27.5%) (24.5%)1/15/09 Re

3

en Biologics Medtech R3

BO 2.015 7.1 3.50 28.8 24.5% 104.9x 15% (66%) (18.6%) (7.9%) 0.0% 17.1% (15.7%)1/7/09 Infinity Pharmaceuticals Biotech INFI

6

.000 30.0 15.00 155.2 19.3% 105.9x 150% 61% 90.1% 106.3% (51.4%) (51.0%) (59.8%)

Total $7 8 0. 9

Mean $7 0. @ $9 . 7 $180.3 14% $3,400. A 7 @ % 8% (11%) ( 9 %) 10% 8% 19%Median 12. 8 4.3 156. A 13% 130. A 8% 12% (8%) (5%) (0%) 1% A %

RDOs4 /2 /09 Savient Pharmaceuticals Biotech SVNT 5.927 $31.0 $5.23 $270.4 11.5% 8x 85.0% 100% (9%) 5.9% (4.4%) (7.8%) (4.7%)3/30/09 Novavax Biotech NVAX 12.500 11.0 0.88 $64.7 17.0% 109x 0.0% NA 26% (6.4%) 15.9% (8.0%) 221.6%3/10/09 Cytori Therapeutics Biotech CYTX 4.771 10.0 2.10 $75.9 13.2% 22x 140.0% 23% (24%) (18.9%) (10.0%) (18.1%) (15.2%)3 /5 /09 Optimer Pharmaceuticals Biotech OPTR 0.458 5.0 10.93 325.0 1.5% 3x 20.0% 0% 3% (0.0%) (0.8%) 0.3% 27.5%3/5 /09 Optimer Pharmaceuticals Biotech OPTR 2.795 27.9 10.00 325.0 8.6% 18x 0.0% NA (6%) (8.5%) 8.4% 9.6% 39.3%2/20/09 Ariad Pharmaceuticals Biotech ARI A 14.379 24.3 1.69 117.6 20.7% 44x 75.0% 27% (25%) 0.0% (12.4%) (41.7%) (14.8%)1/30/09 Dexcom Medtech DXCM 15.994 48.0 3.00 92.9 51.6% 137x 0.0% NA (1%) (3.8%) 7.7% 22.7% 37.0%1/30/09 Pharmasset Biotech VRUS 4.678 45.5 9.73 244.7 18.6% 52x 0.0% NA (9%) (7.0%) 17.2% 30.3% (6.8%)1/29/09 Avi BioPharma Biotech AVII 14.224 16.5 1.16 89.0 18.5% 89x 100.0% 0% 4% (7.2%) (25.0%) (23.3%) (19.8%)

Total $219.3

Mean $24.4 $5.0 $178.3 18% $53.7 47% 30% (5%) (5%) (0%) (4%) 29%Median 24.3 3.0 117.6 17% 44.4 20% 23% (6%) (6%) (1%) (8%) (5%)

Note:3

rey denotes Leerink transactions - Rosetta3

enomics and Infinity Pharmaceuticals not included in Offer Price Discount to 10 Days Prior or Prior Close (Mean and Median)


8/13

7

Current Trends

Separation ofthe haves and have-nots

Public investors remain risk adverse and are movingupstream in marketcap size

Venture investors filling some but by nomeans all ofthe void

Mostly, ifnot e clusively, participating in financings for portfoliocompanies that arealready public

Mustfund through importantmilestones

Issuers lookingmore closely at bought deals and ATM offerings

Critical deal considerations:

Marketcapitalizations less than $100 million are difficult

Later-stage programs and depthofpipeline important

Less than 12 months ofcashtakes away all leverage


9/13

8

Overview of Healthcare Financings

Examples of Successful Transactions


10/13

9

Leerink Swann acted as sole placement agent for Momenta Pharmaceuticals in the

Companys $25.2 million registered direct offering announced on 12/12/08

Transaction highlights:

Superior e ecution in a challengingmarket

Accomplished critical financinggoal ofCompany to e tend cash runway totwo years

Launched and priced transaction withonly four days ofmarketing

Momenta stock price traded up 30% duringthe intra-weekmarketing period; the NASDAQ

Biotechnology inde was flatoverthe period Transaction priced at a 3% premiumtothe closing price priorto launch and required no

warrants

Bookconsisted ofsignificant,high-quality new investors as well as participation by selectede isting investors

Momenta is a leader in developing bio-generics with compelling value proposition in

current environment

Near-term value catalyst in potential approval ofM-Enoxaparin,genericofSanofis Lovenoxwith$3.6 billion ofglobal sales in 2007

Significanttechnical hurdles forcompetitors Amphastar, Hospira, and Teva

Momenta technology and scientists helped resolve global heparin contamination crisis

ANDA filed for M356,generic version ofTevas Copaxone,with$1.4 billion ofglobal sales in2007

Majorcollaboration with industry leaderNovartis / Sandoz

Proprietary follow-on biologics capabilities and pipeline

$25.2 million

Registered DirectOffering

Sole Placement

Agent

December 2008

Case Example: Momenta Registered Direct Offering


11/13

10

Leerink Swann LLC acted as sole placement agent in the 1/30/09 announced Pharmasset

(Nasdaq: VRUS) $45.5 million registered direct offering

Superior execution

Accomplished critical financinggoal ofCompany, removingfinancingoverhang

Achieved maximum deal size withoversubscribed book and stocktradingup on announcement

Tight, intra-weekmarketingwithminimal share price impact

Priced at a 7% discounttothe prior days closing price and required nowarrants

World-class bookwith significant participation from both new and existing blue chip healthcareinvestors

Sales and tradingcoordinated with researchtoorganize several high quality non-deal marketing events

MEDACorp resources were used tocraft selling and positioning points to investors

Pharmasset is a world-class company developing blockbuster potential anti-viral drugs

R7128 represents a multi-billion dollar blockbuster drugcandidate forthe treatmentofHCV

Clevudine represents a late-stage potential paradigm-shiftingtherapy for HBV

Pharmassethas the leading nucleoside analogue development platform, a key strategic asset

Managementhas consistently delivered on data and timelines attracting a leadinghealthcareinstitutional investor base

Case Example: Pharmasset Registered Direct

$45.5 million


Sole PlacementAgent

January 2009

10


12/13

11

Background:

Market Cap:$286.7 mm

Market Price:$5.24(H - $28.42 ; L - $2.80)

PDUFA on July 30, 2009 for lead product

Transaction:

$31 million

Unit Offering:

1 share ofcommon 1 warrantto buy 0.85 common share

Price - $5.23 perunit

Warrant Pricing: Initial strike at$10.46 with adjustable pricing and expiration based on FDA outcome(PDUFA 7/30/09)

Pricing:

Approval, strike of$10.46

IfComplete Response Letter(CRL):

Repriced based on 5-day VWAP at T + 11-15 days

Floorof$1.56

Expiration:

Approval or rejection 9 months post CRL

Ifneither approval nor rejection, earlierof:

15 months after CRL

9 months post Company Response

Ifno CRL, 7 years

Case Example: Savient Pharmaceuticals (SVNT)

$ 1 million


April 2009

11


13/13

12

Factors For a Successful PIPE / RDO

Non-Deal Roadshows are important in this environment

Identification ofanchororder is critical

Anchor is 10% - 20%ofdeal

Prior validation ofstrategic supportor interest

Existing base ofsolid institutions attracts more and creates good support

Creative deal structures may be more frequent(Savient)

leerink cap makts ovw

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