2014 MN Life Science Investment-Annual Report_FINAL

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Minnesota Life Science Investment Activity: 2014 Annual Report

Transcript of 2014 MN Life Science Investment-Annual Report_FINAL

Page 1: 2014 MN Life Science Investment-Annual Report_FINAL

Minnesota Life Science Investment Activity:2014 Annual Report

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Key Findings• 2014 MN LS Investment Surpasses Previous High

Reaching $430.4M• MN LS Investment Continues to Rise

2013: $348.7M - up $96.8M from 20122014: $ 430.4M - up $81.8M from 2013

• Medical Devices at a 6 Year High for Investment ($322M)

• Health IT Continues Trend of Increasing Companies and Dollars Going into Sector

• Pharmaceuticals/Biotech See a Spike in Investment Dollars and Number of Companies Securing Funds in 2014

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2014 Exceeds 5 Year Investing High• 2014: LS Investments Reach

Record High Point of $430.4M

• 2014 Continues Trend of Rising Investment• 2013 up 38% over 2012• 2014 up 23% over 2013

• Major Raises include: • HealthSense ($12M) • Holaira ($42M) • Inspire Medical Systems ($40M) • Leafline Labs ($12.4M)• Monteris Medical ($30M)

Life Science Investments

2009 2010 2011 2012 2013 2014$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

$450,000,000

$500,000,000

$326.9

$213.1

$269.5$251.8

$348.7

$430.4

Q1 Q2 Q3 Q4

Mill

ions

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2014: 86 Companies Raise Funds• 86 companies raised money in

2014, down from the high of 97 in 2013

• 2012-2014: 53% increase in number of companies receiving investment as compared to 2009 -2011

• 2012 -2014 rise likely due to improved reporting from Angel Investor Tax Credit

Life Science Investments

2009 2010 2011 2012 2013 20140

10

20

30

40

50

60

70

80

90

100

6358 60

94 97

86

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2014: 6 Year High in Number of Companies Raising $3M or More• 26 companies raise $3M or more in

2014, an 18% increase over 2013 (22), and a 13% increase over the previous high in 2009 (23)

• 2014: 6 Year High in the number of companies (17) that raised $7M or more – a 55% increase over 2013

• Medical device companies make up 71% of the companies raising $7M+ and 65% of those raising $3M+

Investment Composition

2009 2010 2011 2012 2013 2014

24 26 22

59 56

40

16 12 16

14 19

207 11 10

10 11

9

16 9 12

11 11

17

Deal Size (Millions)0-1 1-3 3-7 7+

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Investment Composition

2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

38%45%

37%

63% 58%47%

25%21%

27%

15% 20%

23%

11%19%

17%

11% 11%10%

25%16% 20%

12% 11%20%

Deal Size (Millions)0-1 1-3 3-7 7+

2014: 30% of Companies Raise $3M+• 2014: 53% of deals greater

than $1M up from 42% in 2013 and 38% in 2012

• 2012 increase in percentage of deals $1M or less likely due to improved reporting through Angel Investor Tax Credit Program

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Life Science Investment: 2010-20142014: Q4 Bucks 5 Year Trend Posting Increase Over Q3• 2014: first Q3-Q4 $ increase

on record

• 2014: Q2-Q4 highest 3-quarter run on record

• $119M raised in Q4 2014, up 17% from Q4 2013 ($102M)

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2010 2011 2012 2013 2014

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

Quarterly Amount

Mill

ions

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2014: Q4 Median Deal Size Remains High• 2014: Q3 ($3.9M) & Q4

($2.4M) record median deal size highs

• Q1 & Q2 median deal size lows in 2012, 2013, and 2014 likely influenced by increased reporting of early stage investments via Angel Investor Tax Credit

• 2014 annual median deal size ($1.36M) down 9% from 2013 ($1.5M)

Median Deal Size

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

2010 2011 2012 2013 2014

$0.0$500,000.0

$1,000,000.0$1,500,000.0$2,000,000.0$2,500,000.0$3,000,000.0$3,500,000.0$4,000,000.0

Quarterly Median Deal Size (M)

2010 2011 2012 2013 2014 $-

$500,000.0

$1,000,000.0

$1,500,000.0

$2,000,000.0

$2,500,000.0

$950,002.

50 $643,000.

00

$2,012,12

7.00 $1,495,90

5.00

$1,356,250.00

Annual Median Deal Size (M)

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Sector Analysis: Dollars

2009 2010 2011 2012 2013 2014$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

$450,000,000

MD HIT P D RT OHC

Mill

ions

2014: Medical Device Dominates but Health IT and Pharma/Biotech Post Gains• 2014: Medical device posts

gains in total dollars invested (up $19M) over 2013

• Funding increases to emerging HIT (up $12M) and pharma/biotech sector (up $45M)

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2014: Increased Diversification of Companies Securing Investment• Composition of LS companies

shifts to include larger numbers of HIT (21) and Pharma/Biotech (11)

• Medical device companies make up 50% of funded companies in 2014 followed by HIT (24%) and Pharma/ Biotech (13%)

Sector Analysis: Company Number

2009 2010 2011 2012 2013 20140

20

40

60

80

100

120

MD HIT P D RT OHC

Com

pany

Num

ber

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Holaira

All images courtesy of Holaira.

Dennis Wahr’s success in Minnesota began with an eleventh hour phone call. Wahr was a cardiologist embarking on his first entrepreneurial endeavor when Dale Spencer, a mentor and serial entrepreneur, called to endorse Minnesota’s medical device community and tell Wahr that this was the place to build a device company. This conversation convinced Wahr to pull out of a mortgage and planned launch in California, and come to Minneapolis.“This is my third company in 15 years of experience,” said Wahr. His first two companies, Velocimed and Lutonix, both had successful exits. He is the current president and CEO of Holaira, a medical device company developing treatments for COPD. “Practically speaking, medical device start-ups can’t be

Now, Wahr’s track-record easily attracts investors. Holaira’s $42 million raise in 2014 was led by a sovereign fund and backed by several U.S.-based VCs. “Investors invest when you have a compelling idea, a highly qualified team, an excellent board of directors, and confidence that a solid financial syndicate can be put together,” Wahr explained.

Practically speaking, medical device start-ups

can’t be done by five guys in a dorm room;

you need experience to know the nuances of this

industry.

”done by five guys in a dorm room; you need experience to know the nuances of this industry,” said Wahr, explaining his move to Minneapolis. “I was fortunate to have had great access to and support from people highly experienced in the medical device industry.”

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Holaira

All images courtesy of Holaira.

Holaira prides itself on being upfront about the realities of long-term capital needs to develop truly novel, game-changing medical products and gathering rigorous clinical data. “Simply achieving FDA approval is not sufficient. Success in today’s world requires an even higher bar of clinical evidence,” said Wahr. “Investors are looking for companies who have proven a ‘value proposition’ that meets the stringent requirements of professional medical societies and reimbursement authorities such as CMS and large insurance companies.”Even with a history of fundraising success, Wahr acknowledges the challenges start-ups face. “Getting a list of active VCs isn’t easy, but that’s where experienced mentors can help: to lend their credibility and to provide introductions to investors,” said Wahr. “The board should be more than just your investors; your company benefits from the input of people with deep knowledge of the industry and business strategy.” Being direct about financial needs is key to attracting realistic investors and building credibility. Wahr commented on the overall fundraising climate saying, “While investors would love to have a situation where a product could be brought fast-to-market, have low capital requirements, and a steep revenue ramp, that’s not the reality of this industry. There’s an illusion that things happen that way but virtually all meaningful advances in life science have had a more realistic timeline. The days of easy were not easy at the time,” said Wahr. “It’s never been easy to do what hasn’t been done before.”

Despite these challenges, Wahr believes medical advances are occurring at an accelerated pace. Most importantly, these inventions will benefit patients and be financially rewarding for investors.

The days of easy were not easy at

the time. It’s never been easy to do

what hasn’t been done before.

“”

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2014: Medical Device Investment at 6 Year High• 2014: $322M invested in

medical device companies, up 6.3% from 2013

• 2014: Medical device median deal size is $1.6M

Sector Analysis: Medical Device

2009 2010 2011 2012 2013 2014 $-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

0

10

20

30

40

50

60

70

4440

36

5558

43

Q1 Q2 Q3 Q4 Company Number

$295

$180

$211 $206

$303

$322

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2014: 40% of Medical Device Investments $3M+• 2014: 28% (12) of MD

companies raise more than $7M – a 6 year high

• Notable Raises include:• Holaira ($42M)• Inspire Medical Systems ($40M)• Interrad ($7.5M)• Monteris Medical ($30M)• NxThera ($7.4M)• Rotation Medical ($27.2M)• Tendyne ($26M)• Zyga Technology ($12M)

Sector Analysis: Medical Device

2009 2010 2011 2012 2013 2014

39% 43%

19%

55% 50%40%

23% 18%

33%

18%17%

21%

11%20%

22%

11%16%

12%

27%20% 25%

16% 17%28%

Deal Size (Millions)0-1 1-3 3-7 7+

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Herbert believes Minnesota can attract money to the state by highlighting its critical differentiator from other markets – the talent. “In Minnesota, you’re not fighting with otherstart-ups for the same limited pool of qualified employees experienced in medical devicetechnology; you’re recruiting directly from established companies. Furthermore, these are individuals who want the opportunity to work for an emerging company,” said Herbert.

Inspire Medical Systems

Inspire Medical Systems is one example of the many promising start-ups in Minnesota. In Herbert’s words, “We’re a PMA company, but in Minnesota we are familiar with the PMA pathway, and that doesn’t intimidate those who want to support us or finance us. We have the talent, experience, know-how and ability to generate new ideas. That’s the environment here.”

“Don’t wait until you’re thirsty to dig a well,” Tim Herbert, president and CEO of Inspire Medical Systems, says this mantra sums up his success at building relationships with investors. Herbert leveraged connections, such as board members, for initial introductions to potential investors and then kept in touch, continuing to inform those he met on company progress.Inspire successfully raised $40 million in 2014 frominvestors on both coasts. Its new implantable device treats obstructive sleep apnea by detecting breathing patterns and stimulating the upper airway to keep it open during sleep. The company just celebrated their 100th commercial implant in December 2014.

Given the quality of companies and talent that exist in Minnesota, Herbert believes there is an opportunity to elevate Minnesota’s health technology community by raising awareness of the talent and experience and by facilitating introductions with active medical device VCs.

All images courtesy of Inspire Medical Systems.

We’re a PMA company, but in Minnesota we are familiar with the PMA pathway, and

that doesn’t intimidate those who want to

support us or finance us. ”

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HIT 2014: Number of Companies & Investment Amount Rises• 2014: HIT funded companies

increase 10% from 2013 to 21

• Dollars Invested up 41% in 2014 from $29M to $41M

• Major 2014 Raises Include: • Gravie ($10.4M)• Healthsense ($12M)• MedNet Solutions ($4M)• Red Brick Health ($7.5)

Sector Analysis: Health IT

2009 2010 2011 2012 2013 20140

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

45000000

0

5

10

15

20

25

$26,299,919

$18,984,113

$40,516,286

$14,713,295

$28,885,753

$40,690,915

87

8

16

19

21

Company Number

Mill

ions

Com

pany

Num

ber

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Rotation MedicalRotation Medical was founded in 2009 as a spin-out from Denali Medical, a medical device incubator. The company addresses tendon tears through a unique bioinductive implant, which will first be applied to the management of rotator cuff injuries. The implant enables the body’s healing process rather than providing a traditional mechanical fix.

At the company’s helm is President and CEO Martha Shadan, a seasoned medical device executive with experience at Covidien and Zimmer. As a first time CEO, Shadan networked with other CEOs to learn best practices and get introductions to VCs.

Rotation Medical successfully raised $27.2 million in 2014 through VC investments from throughout the United States.

“Fundraising is a journey, not a sprint,” said Shadan. “If you think you need money in a year start now and turn over every rock: VCs, sovereign funds, family-owned investing, strategics, investment conferences, trench selling, etc.” Shadan credits leveraging her board with helping her identify warm leads, but also recommends doing your homework before and after meeting with potential investors.

“Investors are betting on you, so show them as much as you can that the opportunity has been de-risked,” said Shadan. “Investors need more information as time goes on about the market, the unmet clinical need, and the product’s effectiveness.” Shadan explained that cultivating relationships with physician consultants is also important at this stage. “Demonstrating that the biggest thought leaders in a space are using your product adds credibility and shows that the clinical need is there,” said Shadan.

All images courtesy of Rotation Medical.

Article is continued on the next slide.

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Rotation Medical

“You should be targeting and screening investors,” said Shadan. “One mistake entrepreneurs make is spending time with a potential investor who is not a good fit. Ask the VCs questions about where they are in the fund, the potential slots to be filled, the general profile of the fund, and at what business stage they usually invest.”

An investor who declines can still help you get to the next investment.“I would pitch to an investor and get a ‘no’. So I would ask to set up adebrief call about what they had heard and how the pitch worked forthem,” said Shadan. “It is rare for CEOs to ask for feedback, but it gaveme another opportunity to educate the investor and refine my pitch sothat it was more effective. I always gained insight, from every single call.”

All images courtesy of Rotation Medical.

I would ask to set up a debrief call about what they had heard and how the pitch worked for

them. It gave me another opportunity to educate the investor and refine my pitch.

“”

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Sector Analysis: Pharma/Biotech

2009 2010 2011 2012 2013 2014 $-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

$50,000,000

0

2

4

6

8

10

12

$10,907,250

$6,170,000

$11,029,750

$970,000

$4,404,078

$48,541,830

5 5

4 4

5

11

Company Number

Mill

ions

Com

pany

Num

ber

2014: Investment in Pharma/Biotech Rises Dramatically • 2014: 10 Fold increase over

2013 in investment amount; More than 2X as many companies received investment

• Rise in investment amount driven by raises from Leafline Labs ($12.4M) and Rebiotix ($25M)

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Rebiotix

Jones’ advice to other start-ups is to assemble a top-tier team. “Have the right network, the right people. Having recognizable people on your board and on your team is important because it can be difficult to get your foot in the door,” Jones said, explaining how a diverse management team and board of directors open up a broader network of potential investors.

Rebiotix is a unique company. It uses donor fecal matter to introduce good bacteria into sick patients for the treatment of multi-recurrent clostridium difficile infections. This is a first-in-class product pursuing a Biologics License Application through the FDA. “It is such an interesting company and so different than what I have worked on before,” said Lee Jones, founder, president, and CEO of Rebiotix.

Given its unique market position, the company’s fundraising methods and success – $25 million raised in2014 – were also unique. “We didn’t meet the standardcriteria for many of the VC funds. A typical VC is lookingfor a low risk investment with a clear or predetermined

All images courtesy of Rebiotix.

“Many of our investors are familiar with investing in medical technology and they put their own money on the line because they know the medical industry and the inherent opportunities,” said Jones. “One of the reasons Rebiotix has been so successful at continuing to raise funds is by taking the initial investment and hitting all the milestones we said we would.”

Have the right network, the right

people. Having recognizable people

on your board and on your team is important.

”exit plan. It’s hard for them to put money into a technology that has no precedence because the risks are unknown in a new therapeutic space,” said Jones. “We went with private money because those investors are willing to take more risks and place value on the basis of relationships, where they believe in the management team and know its track record.”

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2014: Investment Up from 2013• 2014: Investment ($18M) up

125% over 2013 ($8M)

• Celcuity LLC, a cell-based diagnostic company, raises $4M

• Exosome Diagnostics, a non-MN firm with significant operations in MN, raised $27M in 2014. If included, it would bring the 2014 total to $45M, a 6 year high

Sector Analysis: Diagnostics & Tools

2009 2010 2011 2012 2013 2014$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

0

2

4

6

8

10

12

14

16

18

$14,612,632

$7,251,881$6,276,609

$30,285,715

$7,767,495

$18,459,946

4

6

9

17

11

9

Company Number

Mill

ions

Com

pany

Num

ber

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Major Raises

•Sunshine Heart ($56M)•CVRx ($41M)

Medical Device

•Diamedica ($2.6M)

Pharma/ Biotech

•RedBrick Health ($14M)•HealthSense ($4.6M)HIT•11 Companies raised $7M+

Notable

•Holaira ($42M)•Inspire Medical ($40M)•Tendyne ($25M)

Medical Device

•Rebiotix ($25M)•Leafline Labs ($12.4M)

Pharma/ Biotech

•Gravie ($10.5M)•RedBrick Health ($7.5M)•Mednet Solutions ($4M)HIT•17 Companies raised $7M+: 12 are medical device, 50% are pursing PMA products

Notable

2013 2014

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2014 Liquidity EventsTarget Company

Purchasing Entity

$ (M)

Industry

Apothecary Norwest Equity Partners

N/A Pharma

Lake Region Manufacturing

Accellent Inc. $390 Medical Device

Fast Forward Medical

Vention Medical

N/A Medical Device

Gel-Del Technologies

PetVivo Holdings

$40 Medical Device

Corventis Medtronic N/A Medical Device

Ability Network

Summit Partners

$550 HIT

Preventice eCardio $230 HIT

HIT Cashes Out $780M Dollars in 2014• MN companies saw over

$1B in exits in 2014

• Transactions for Preventice and Ability Network are Valued at $780M

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MethodsInvestment data was collected from a variety of sources including:

• Evaluate Medtech’s Venture Capital Financing Report • PWC's MoneyTree™ Report • BioEnterprise’s Midwest Healthcare Finance Report • Minnesota Angel Investment Tax Credit program• SEC filings• Company press releases• News publications • LSA Investment Survey

Duplicate data has been removed to arrive at the investment numbers. While all data is available in public sources, LifeScience Alley does not release the list of companies that have raised money unless an individual firm has first made its own public announcement.  

For this report, the life science sector is defined as medical device, pharmaceutical, biotechnology, diagnostic, and health information technologies.

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Get Engaged

Report your investment Although we monitor a variety of sources for investment activity, we believe there is more to capture. Please help us by reporting your company's fundraising events as they happen. 

Anything shared with us is confidential and will be de-identified before being incorporated into aggregate data for our reports. 

To share information, please contact Cheryl Matter, PhD, Director of Intelligence & Research, at [email protected] or 952.746.3817.

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LifeScience Alley SupportLifeScience Alley and its member firms are invested in building a strong ecosystem to support the formation and development of new ventures through: 

Bipartisan Policy Development and Advocacy• Angel Investor Tax Credit• Increasing R&D Tax Credit and making it refundable• Matching Funds Program for SBIR grant recipients

Research & Intelligence on Issues that Impact Startups• Comprehensive financing analysis• Capability briefs to highlight and characterize strong and

emerging sub-sectors in the state 

Member Services that Connect, Support, and Promote MN Organizations

• Referrals to partners, talent, consultants, advisors, and investors  

• SBIR Submission Program• Build global relationships to promote the region to investors

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AbbreviationsMD: Medical DeviceD: DiagnosticHIT: Health Information TechnologyRT: Research ToolsP: Pharmaceuticals & BiotechnologyO: Other HealthcareLS: Life Science

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CONTACT US

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