Phagenesis Case Study Confiden’al Phagenesis Case Study Exit to Nestle announced 1st Sep 2016...
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Confiden’al 1 Phagenesis Case Study Exit to Nestle announced 1 st Sep 2016 Terms of the deal to buy Phagenesis weren’t disclosed, but a person familiar with the acquisition said medical-device makers of Phagenesis’s size typically sell for £100 million ($131 million). The U.K. company’s investors include London-based Inventages Venture Capital— which is largely funded by Nestlé— and London-based Anglo Scientific. “ ” “ ”
Transcript of Phagenesis Case Study Confiden’al Phagenesis Case Study Exit to Nestle announced 1st Sep 2016...
Confiden'al1
Phagenesis Case StudyExit to Nestle announced 1st Sep 2016
Terms of the deal to buy Phagenesis weren’t disclosed, but a person familiar with the acquisition
said medical-device makers of Phagenesis’s size typically sell for £100 million ($131 million).
The U.K. company’s investors include London-based Inventages Venture Capital—
which is largely funded by Nestlé— and London-based Anglo Scientific.
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Confiden'al2
Theproblem:Dysphagia(swallowingdysfunc'on)affects millionsofpeople,includingca.50%ofstrokepa'ents‣ significantimpactonhealth(3-6xhighermortalityrate),qualityoflife,andcostofcare(£billions)‣ BeforePhagenesis,noclinicallyproventreatment
PhagenyxCatheterforenteralfeeding+electricalneuro-stim
PhagenyxBaseStation
ThePhagenyxtreatmentOnly3daysof10minelectricalneuro-stimcycles,administeredbydoctor,nurseortherapist
ThetreatmentprinciplePharyngealelectricalstimulation(PES)createsneuro-sensoryinput“kickstarting”reorganisationofthemotorcortex
Healthybrain PostStroke Recovery
400+patientstreatedto
date
Approvedproductonthemarket
Strong patentportfolio
10+clinicalstudies
published
£1MfromWellcomeTrust
Jan2014Hemisphericstroke
Casestudy:TheStoryofMr.K. 62yearsoldFeb5th2014
AdmissiontorehabcentrePA-Score8/8(Materialentersdeepintoairway,noefforttoeject)Startofconventionalswallowingtherapy
April10th2014PA-Score7/8(Materialentersdeepintoairway,cannoteject)
April12th–14th2014PharyngealElectricalStimulation
April25th2014Mr.K.onnormaldiet,nosupervision PA-Score2/8(nearnormalswallowing)PEGtuberemoved
Keyinvestmentcriteriaiden;fiedinduediligence(2009)
✓ Clearmarketneed–pa'ents,doctorsandhealtheconomics
✓ Groundbreakingtechnologywithlibleeffec'vecompe''on
✓ Baseunitplusconsumablebusinessmodelwith>80%grossmargins
✓ Es'matedrevenuepoten'alof£300-500millionperannum
✓ Strongexitpoten'al:acquisi'veindustryforuniquetechnologies
Company Overview World’s first clinically proven treatment for dysphagia
Exceptionalmanagement andboard
PhagenesisToday
2010-2016: Fromconcepttocompany
Confiden'al3
Anglo Scientific’s Role From company launch to exit
BeforeAngloScien;fic (1990s-2009)
CompanyLaunch (2009-2010)
CompanyBuilding (2010-2015)
CompanyExit (2015-2016)
‣ Prof.Hamdy,ManchesterUniv:groundbreakingresearchondysphagiafrommid90s;seminalstudiespublishedintopjournals
‣ In2007,setsupPhagenesiswithco-founderfromUniv.techtransferofficetocommercialisefindings
‣ Overnext2years,trytoprogresscompany,butwithnomanagementoremployees(retainedUniversityjobs),noexperiencedBoard,etc.
‣ ThusfailtoobtainfundingandPhagenesisstagnatesatincep'on
‣ 2009:ASintroducedthroughinvestorswhoappreciatespoten'al,butdeemsstructureandteamuninves'ble
‣ ASconductsextensiveduediligence,securesrobustcurrent&futureIPagreementwiththeUniversity,writesnewbusinessplan,andbuildsexperiencedfoundingteaminc.2ASDirectors
‣ Onstrengthofrestructuredcompany,£2mraisedin2010 (ASinvestors+newinvestorsthatASabractstoinvestment)
‣ ASprincipalsserveasExec.Chair&Exec.Director,Companygrowstoteamof18,securesCEMark,£10m+offurtherinvestment,etc.
‣ ASalsoprovidesitsusualcorporateservices,e.g.CompanySecretarialandAccoun'ngun'lCompanyreadytohireownFD;primarycontactformostshareholders
‣ By2013,CompanygrowntostagethatitcanabractMedtronic’sformerheadofEuropeasChairman,andin2014a“risingstar”atMedtronicasCEO
‣ 1sttermsheetreceivedmid2015
‣ PhagenesisBoardappoints 3personnego'a'ngteam:- Chairman:highlevelrela'onships- CEO:clinical/opera'onalaspects- ASDirector:pointpersononall“dealpoints”duringthe12monthsofnego'a'ons
‣ Finalnego'ateddealunanimouslylaudedbyCompany’sshareholders
‣ ASalsoappointedbyshareholdersas“SellersAgent”toactontheirbehalfinpost-closingmabers
Iden;fyandvalidatedisrup;vesolu;ontobigmarketneed,andstructureintoinves;bleCompany
BuildCompanyfromwithin,recruittopworldclassindustry talentwhenCompanyready
Ac;verolethroughtoexit,workingcloselywith
boardandmanagement
Confiden'al
EISInvestorCaseStudy
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Illustrative Returns Analysis
First Round
LastRound *
All Rounds Average
Excluding Earn-Outs 4.1x 2.7x 3.3x
Including Earn-Outs 5.7x 3.7x 4.6x
WithEIS
‣ £100kinvestmentinPhagenesis’firstround
‣ £70knetcostamerincometaxcredit
‣ £570kreturn, capitalgainstaxfree
‣ 8.2xtax-freereturn
EquivalentwithoutEIS
‣ £70kinvestment(samenetcost)
‣ £70kto£570k=8.2x‣ £792kneededtoachieve£570kamer 28%capitalgainstax
‣ £70kto£792k=11.3x
Toachievesameresult,non-EISinvestmentsneedtoreturn:
11.3xpreCGTtax; 8.2xpostCGTtax
*Laterroundsonlyopentoexistingshareholders;inordertoparticipateinPhagenesisaninvestorhadto“getinearly”
