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McMaster PresentationJune 20, 2002

Shameze Rampertab

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Agenda

A. The financing landscape

B. Views from an analyst

C. Financing

D. My criteria

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A. The financing landscape

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Financings

Venture capital financings: volume and value, 1997-2001

0

200

400

600

800

1997 1998 1999 2000 2001

Year

Total value(C$ millions)

160

190

220

250

Number of financings

Total value(C$ millions)

Number of financingsSource: Ernst & Young

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Financings by province

Venture capital financings: value by province (C$ millions)

0

50

100

150

200

250

New B

runs

wick

Nova

Scot

ia

Quebe

c

Ontari

o

Manito

ba

Sask

atch

ewan

Alber

ta BC

Province

Valu

e (

C$ m

illio

ns)

20011997

Source: Ernst & Young

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Distribution of biotech companies

Distribution of biotech companies by province (2001)

0

50

100

150

200

BC

Alber

ta

Sask

atch

ewan

Manito

ba

Ontar

io

Quebe

c

New B

runs

wick

Nova

Scot

iaPE

I

Newfo

undl

and

Province

Nu

mb

er

of

co

mp

an

ies

Total 2001Public 2001

Source: Ernst & Young

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Financings by type

1997 1998 1999 2000 2001IPO $48.2 $25.6 $41.6 $152.4 $25.3Secondary 106.2 146.7 776.0 924.5 1,447.6Venture Capital 372.0 328.8 430.4 811.4 617.1Total 526.4 501.1 1,248.0 1,888.3 2,090.0

Source: Ernst & Young

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Financings by stage

Venture capital financings by developmental stage

0%

10%

20%

30%

40%

50%

60%

1997 1998 1999 2000 2001

Year

Perc

en

tag

e o

f ven

ture

fi

nan

cin

g b

y d

oll

ar

valu

e

Early stage

Mid stage

Late stage

Other stage

Source: Ernst & Young

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IPOs in 2001

Company DateAmount

($ millions) Use of funds Milestone achieved

Adherex Technologies May 6, 2001 $10.0 Working capitalStrategic alliances with Fujisawa and Biochem Pharma

BioMS Medical March 21, 2001 0.3Prospect evaluation Completion of clinical trial Phase II

Cytovax Biotechnologies February 21, 2001 10.0 Working capitalStrategic alliance with BioChem Pharma

Transition Therapeutics January 3, 2001 5.0

Exploration/ development/ production Strategic alliance with Cangene

Source: Ernst & Young

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B. Views from an analyst

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Great Ideas and Great Technology….Does Not Make a Good Business

• If I had a dime for every great idea

• What did we learn from the telecom crash?

• No one will fund a science project

• Business is all about making money

• No one cures disease

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Good Entrepreneur

• Understand market reality

• Sense of urgency

• Exit strategies for investors

• Team oriented

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Dotcom … risk aversion

• Who will pay?

• Why will they pay?

• How much will they pay?

• Looking over your shoulder

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Business Plan Holes

• Management bios

• Audited financial statements

• Assessment of competition

• Financial projection assumptions

• Multiple projection scenarios

• Capital needed, and use of proceeds

• Real world product/service use

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What not to do

• Over-promise

• Expand beyond your expertise

• Lose focus

• Pure novelty

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Key ideas to consider as putting together business proposal

• Executive summary

• SWOT analysis

• Background information on sector

• KISS

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Healthcare gaps in need of innovation

• Improved safety profile

• Pharmacokinetics

• Drug delivery

• Toolboxes …. Acquisition

• Computer modeling

• Automated lab techniques

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C. Financing

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Other Capital

• Angel investors

• Strategic partnering

• Non-equity

• Asset financing

• Royalties

• Securitization of SRED

• Convertible debt

• LP

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Venture Capital

• Initial financing

• Subsequent financing

• Assemble executing teams

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D. My criteria

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Criteria Public

1) Validated science

2) Management’s commercialization strategy

3) Big market

4) In the clinic

5) Pending big pharma

6) Pipeline

7) Valuation

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Criteria Private

1) Validated science

2) Big market

3) Existing VC investor

4) Succession strategy

5) Valuation

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Knowledge

Now you know all I know.

Good luck!