© 2006 boston millennia partners

© 2006 Boston Millennia Partnerswww.bmpvc.com

Boston Millennia Partners - 1 -

- 1 -© 1999 Boston Millennia Partners

Boston Millennia Partners

30 Rowes WharfBoston, MA 02110Tel. 617 428.5150Fax. 617 428.5160

www.bmpvc.com

A. Dana Callow, Jr.Managing General PartnerBoston Millennia Partners

Harvard Medical SchoolApril 4, 2006

Invention to Venture Life Sciences 2006

Validating Your Idea

MillenniaPartners Boston



Boston Millennia Partners was founded by 7 former Boston Capital Ventures investment professionals in 1997

$700M+ in assets under management

12 investment professionals

BMP team has completed over 125 direct investments and 150 acquisitions

Investors and Partners from 15 countries worldwide

Invest in early stage companies in Healthcare, Life Sciences, and Information Technology industries

Active with early stage companies and “ideas” at various medical/technology centers in the US Tufts MIT Harvard MD Anderson Cleveland Clinic Johns Hopkins UCLA Arizona University

Review 2,000 to 3,000 opportunities annually

Highly active investment process, return potential of 10-20x on investments selected

Expect 5 to 7 year holding period for investments

Located at Rowes Wharf, downtown Boston

Boston Millennia Partners (BMP)



(Sold to Incyte Genomics, 12/00)

(IPO: 1/97; Sold to Genzyme 12/04)

(Sold to Oxford Health Plans, 3/02)

(Sold to Cedara Software, 10/04)

MillenniaPartners’ Healthcare Portfolio

(IPO: 11/05; NASDAQ: CRXX)

(NASDAQ: PRXL)



Identify sectors with the following characteristics Large, high-growth market opportunity Competition is made up of many small companies with no dominant market-share leader Undergoing a fundamental shift in the business as a result of economic or technological change Capital efficient business models

Identify initial company upon which to grow the business Focus on companies that have meaningful revenues Identify the company best positioned to exploit the market opportunity Select a management team capable of carrying out an aggressive growth plan

Accelerate the company’s internal growth through acquisition and consolidation of smaller-sized companies in similar or related market segments

Boston Millennia Partners’ Proprietary, Research-Driven Model

With the goal of building a $500-750 million market capitalization company

Core Company Investment Strategy



Current Millennia Portfolio Candidates:

Greater than $500M Valuation Potential

• Arthrosurface

• CardioMEMS

• Collegium

• CombinatoRx (NASDAQ:CRXX)

• GlycoFi

• Nexidia

• Optical Solutions

• Predix Pharmaceuticals

• Tropos Networks

Experience Building Large Scale Companies

Previous Portfolio Investments:

Greater than $500M Valuation

• PAREXEL International (Mkt. cap: $1.2B)

• ILEX Oncology (Mkt. cap: $1.5B)

• Bright Horizons (Mkt. cap: $1.3B)

• Brooks Fiber (Mkt. cap: $2.4B)

• Cornerstone Brands (Mkt. cap: $760M)

• Hotjobs (Mkt. cap: $1.9B)

• iVillage (Mkt. cap: $6.4B)

• Verio (Mkt. cap: $6.5B)



Historical “Take-off Periods” For Value Creation

After initial investment in early stage venture investing

1x

5x

10x

1 2 3 4 5 6 7 8 9 10 11 12

1997-2003

1985-1997 2003-2010

Years

Co

mp

any

“Val

ue”



From the Investors’ Dictionary

val·i·date (văl'ĭ-dāt')

tr.v., -dat·ed, -dat·ing, -dates.

1) To declare or make legally valid

2) To mark with an indication of official sanction

3) To establish the soundness of; corroborate.

Source: Answers.com



From the Investors’ Dictionary

pre·science (prĕsh'əns, -ē-əns, prē'shəns, -shē-əns )

Knowledge of actions or events before the occur; foresight

n.

Source: Answers.com



Multiple Levels of Validation Required

Scientific/Technical – does “it” work and is “it” relevant?

Management Resources – can adequate, experienced and committed management

resources be attained?

Financing – will sufficient capital be available over various stages of company

development

Market – does adequate demand and sector structure allow a large return?

Scalability-Need to build large companies

Growth-need competitive dynamics

Time to market

Liquidity/Exit – will investors be rewarded for their patience and do multiple attractive

exits exist?

IPO or M&A

Venture firms seek returns with IRR of 25-50%



Portfolio Company

DirectorsDirectors

CustomersCustomersInvestorsInvestors

Search FirmsSearch FirmsEmployeesEmployees

AuditorsAuditors AttorneysAttorneys

The Portfolio Company NetworkMultiple Points of Contact



1. Basic Information from Companya. PowerPoint deckb. Business Planc. Detailed revenue plan with backup assumptions

2. Ownership Structurea. Detailed Cap Tableb. Will option pool need to be increased?

3. Market Opportunitya. Research analyst reports - size, growth, dynamics of the spaceb. Bottom-up analysis the size of the market

4. Competitiona. Competitive Matrix including:

i. Fundingii. Last Round Valuationiii. Revenuesiv. Business Modelv. Value inflection points

5. Public Comparablesa. Business Modelb. How they compare to the company being consideredc. Revenue Modeld. Market Cap/Revenuese. Time to IPO

6. Customer Interviewsa. Relationship with the companyb. Assessment of the company - Strengths and Weaknessesc. Perceived value propositiond. Project/proposed relationship detailse. Comparison of alternatives - Strengths and Weaknessesf. What might be the potential revenues the company could generate?g. Who else might be interested in the company for their product/service?h. How does the technology/service fit in with other technologies/services

in place at the customeri. Other potential applications/avenues for the product/servicej. Hurdles to success - potential obstacles for the company to be successful

7. Analyst Interviewsa. Assessment of the company - Strenghts and Weaknessesb. Market opportunityc. Competetive landscaped. Hurdles to successe. Exit opportunities - who might acquire the company

8. Managementa. Detailed resumes for each member of management teamb. Management interviews - determine prio experience, track recordc. Open positions that need to be filled

i. When will they be filledii. Who are the candidates, type of candidates

d. Referencesi. From the management teamii. Other references from past co-workers at other companies

9. Previous Rounda. Term Sheetb. Due Diligencec. Conversation with previous round investors

i. From last round to this roundii. Future value inflection points

10. Sales Assessmenta. Review of current accounts

i. Nature of relationship, stage - e.g. pilot, beta, etc.ii. Revenue potential

b. Current pipelinec. Backlog

11. Technical Assessment (if applicable)a. Determine appropriate person to do technical assessmentb. Key questions

i. Does it work as advertised?ii. Will it scale?iii. What are the alternative technologiesiv. How much of a lead, if any, does the company have?

12. Legal Due Diligence13. Company Specific Due Diligence

Typical Due Diligence Checklist



BMP Healthcare Focus

Established safety profile

Demonstrated efficacy in man

Articulated mechanism of action or therapeutic pathway

Articulated pathway to regulatory approval

Articulated market and value proposition

Established reimbursement

Multiple “shots on goal” (no binary bets on single drugs or devices)

Partnerships or M&A appear to be targeted exit strategy

Management team with previous experience working both with start-ups and in

particular industry segment

Characteristics of a BMP Healthcare Investment



Life Science Development Road Map – Example

Company Founding Pre-Clinical Phase I Phase II/IIB Phase III

Investment Stage Bootstrap Seed Series A Series B/C Series C/D/IPO

Market Management Team Safety in Humans Safety in Humans Efficacy in Humans

Possible Efficacy Efficacy in Animals

Potential Efficacyin Humans

Preliminary Efficacy in Humans

Investors FoundersUniversitiesGrants

AngelsEarly Stage VCs

VCsCorporate Partners

VCsCorporate Partners

VCsCorporate PartnersPublic Investors

CapitalRequired

<$2M <$2M $5M - $10M $5M - $25M $50M+

Founders'Ownership

>75% 50-75% <50% <25% <20%

Time Frame Year 1 Year 2-3 Year 3-4 Year 3-4 Year 4+

Scientific Validation



AssumptionsEach Pre-Money 20% premium to previous Post-Money.Management Ownership starts at 35%, decreases to 25% in second round and decreases to 20% for subsequent rounds.IPO occurs in Year 6 but requires 12 more months due to equity lockup. Assumes same Net Proceeds at liquidation.

Financing scenario:

Series AYear 0

Series BYear 2

Series CYear 3

Series DYear 4

Pre-Money: $10M $24M $53M $99M

Raise: $10M $20M $30M $40.0M

Post-Money: $20M $44M $83M $139M

BMP Investment: $6M $5M $4M $3M

BMP Ownership: 30% 25% 19% 15%

Mgmt. Ownership: 35% 25% 20% 20%

Exit required to attain meaningful venture return:

Market Cap./Exit Value: $500M BMP Proceeds: $73M

BMP Total Investment: $18M BMP Return Multiple: 4x

BMP Ownership at Exit: 15% BMP IRR For Sale In year 6: 37%

Management Proceeds: $100M BMP IRR For IPO-Proceeds in Year 7:

30%

6 year-old investment sold for $500M:

Life Science Venture Investment Scenario



Industry: Healthcare and Life Sciences-Oncology

Description: Drug development company focused on anti-cancer agents. The company leverages it expertise to also serve as a value added provider of contract development services.

Role: Lead; small co-investor syndicate

Financing: Initial financing had a pre-money of $15M; market cap reached $1.5B after IPO; acquired by Genzyme

Reasons to Invest

Management Already highly skilled scientifically Helped create focus around strategy Augmentation at middle level

Business Strategy Executed drug development with

outsourced oncology services play Leveraged BMP’s experience in CRO

segment

Capital structure Small initial round Created manageable syndicate with

consistent goals

Key Relationships Multiple existing relationships with large

pharmaceuticals and selected small biotech companies

Value Creation Through Millennia Investment

Case Study of Completed Investment

Lower risk - Phase II and beyond opportunities

Exclusive in-sourcing of drug candidates from Texas

based health system

ILEX one of first movers in cancer therapeutics

combined with CRO experience

BMP team experienced in CRO field after investment

in PAREXEL; considered ILEX to be a “hedged” bet

Founder Dan van Hoff and founding team some of

key thought leaders in oncology in U.S.

CEO experience in drug development Previously developed Betaseron® for multiple sclerosis



Oncology Pharmaceuticals

Relative Market Share

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0.001x0.01x0.1x1x10x

Re

ve

nu

e G

row

th R

ate

Amgen

Sanofi Aventis Roche Novartis

AstraZenecaGenentech

Eli Lilly

IVAX

Biogen IDECGenzyme

ChironLigand

ILEX (acquird by Genzyme 12/04)

Bristol-Myers Squibb

PfizerMillennium (130%)

Sector Growth 18%

Johnson & JohnsonGlaxoSmithKline

Relative Market Share, 2003-2004

= $1.8B in 2004 estimated revenue



Anti-Inflammatory DrugsRepresentative Market Share, 2003-2004


Re

ve

nu

e G

row

th R

ate

= $640 million in 2004 revenues*Due to safety concerns Vioxx was removed from production in September 2004 and Bextra sales were suspended in the U.S. in April 2005

-40%

-20%

0%

20%

40%

60%

80%

100%

0.01x0.1x1x10x

NSAID

COX-2 inhibitor

TNF blocker

Bextra (Pfizer)*

Celebrex (Pfizer)

Vioxx (Merck)*

Voltaren (Novartis)

OTC Motrin/Advil

Naprosyn (Roche)/Aleve

Relafen (GSK)

Remicade (J&J/Schering Plough)

Mobic (Abbott/Boehringer Ingelheim)

Sector Growth = 24%

(NASDAQ: CRXX)



Medical Devices and Biologics

Relative Market Share, 2004-2005

-25%

0%

25%

50%

75%

100%

0.01x0.1x1x10x


Re

ve

nu

e G

row

th R

ate

= $2B in 2005 Revenues

Private

Public

Sector Growth = 12%

StrykerJ&J

(DePuy)

Smith &NephewZimmer

WrightMedical

Biogen

Biomet

GoreMedical

Arthrocare

DJ Orthopedics

Genzyme

OsteoBiologics

Impliant

Teknimed

Scandius BioMedical

Regentis Biomaterials

Arthrosurface Histogenics (pre revenue)



0

100

200

300

400

500

600

700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Venture-backed IPOs vs. M&A Transactions

Nu

mb

er

of

Tra

ns

ac

tio

ns

Source: National Venture Capital Association

= Venture-backed M&A

= Venture-backed IPOs

Liquidity: IPO vs. M&A Exits



New England IPOs – Number of Deals

79

34

22

46

41

35 4

9

16

0

10

20

30

40

50

60

70

80

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Nu

mb

er

of

IPO

s

● In 2005, 6 of the region’s 16 IPOs were from biopharmaceutical or medical device companies.

Source: WilmerHale 2005 IPO Report



Guidelines for Validating Your Ideas

Think Big – “don’t move the deck chairs on the Titanic”

Find a passion and focus

If one idea and approach doesn’t work then find another

Assemble a team

Find constituencies who share goals and values

“21 No’s” – then move on

Listen and hear what others are really saying

Replace the subjective with the objective

Assess and re-assess your skills and identity

“Be careful what you wish for, it may come true”



Conclusions

Time to build successful companies has been extended – patience and capital

efficiency is necessary

Multiple levels of validation are required to build relevant and financially rewarding

companies for both the entrepreneur and venture firm

Scientific, management, financial, market and liquidity

Must address market that is pertinent and large

Entrepreneurs need to utilize the full network of resources around an idea

Venture firms require significant investment returns – we seek IRRs of 25-50%

Must create companies with a market cap of over $500M

Equal partnership between entrepreneur and venture firm



Appendix



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$58

$27

$17

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$6$7

$50

$0

$10

$20

$30

$40

$50

$60

$70

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To

tal C

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nts

to

VC

Fu

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)

Source: VentureSource/Venture One

Commitments to U.S. VC Funds



2.63.13.02.8

5.3

11.6

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2.3

1.61.2

0.7

$0

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$4

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tal C

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VC

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s (

$ B

illio

ns

)

Source: VentureSource/Venture One

New England Investment Activity



$0

$5

$10

$15

$20

$25

$30

3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05

Me

dia

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re-$

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n (

$ M

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)

Valuation MovementRecent Increase in Private Company Valuations

Source: VentureOne



Millennia Team Experience

• Founding Partner, Boston Millennia Partners• Founding Partner, Boston Capital Ventures• Consultant, Braxton Associates (Bain/BCG heritage)• Software Engineer, Tymshare/McDonnell Douglas• Dartmouth College (Tuck School), MBA• Tufts University, AB in Economics• Board of Trustees and Investment Committee, Tufts University • Advisory Board, Private Equity Center at Dartmouth College• Board of Overseers, Tufts University Medical School

• Founding Partner, Boston Millennia Partners• Principal, Boston Capital Ventures• Assistant General Counsel, Lifetime Corporation• Attorney, Warner & Stackpole/Kirkpatrick & Lockhart • Georgetown University, JD• University of Maryland, MA in Economics• Boston College, BA in Economics

Robert S. Sherman, PartnerA. Dana Callow, Jr., Managing Partner

Martin J. Hernon, Partner Patrick J. Fortune, Ph.D., Partner

• President & COO, New Era for Networks (Nasdaq: NEON)• CIO, Monsanto Corporation• CIO, Bristol-Myers Squibb• President & COO, Coram Healthcare• Northwestern University, MBA• University of Wisconsin, Ph.D. in Physical Chemistry• University of Wisconsin, BA in Chemistry

• Founding Partner, Boston Millennia Partners• Partner, Boston Capital Ventures• General Partner, Hambro International Venture Fund• Assistant Vice President, Bank of Boston• Harvard Business School, MBA• Amherst College, AB in Economics



• Regional Market Manager, Corning, Inc.• Senior Analyst, Corning Communications• Project Leader, TotalElfFina• Engineer, Saint Gobain• Dartmouth College (Tuck School), MBA• Institut National Polytechnique, MS in Engineering• Lycée Pierre de Fermat, BS in Math & Physics

• Principal, Boston Capital Ventures• Managing Director, Watch Hill Corporation• Finance Director, BBN Communications As (Copenhagen)• Controller, Bolt Beranek & Newman, Inc.• Financial Analyst, General Electric Corporation• Dartmouth College (Tuck School), MBA• Haverford College, AB in Economics

Robert W. Jevon, Jr., PartnerJean-Yves Lagarde, Partner

Millennia Team Experience

• President, Tiedemann & Company• CFO positions at early stage companies (e.g. PAREXEL, HPR)• Certified Public Accountant• Bentley College, BS in Accountancy

Bruce R. Tiedemann, CFO Paul McManus, Executive Search• Entrepreneur in Residence/Lecturer in Strategy & Policy, Boston University• President, The McManus Group• Vice President, Aubin International• Managing Director and Co-Founder, The Bell Mason Group• Manager, Digital Equipment Corporation• Boston University, MBA• Wentworth Institute of Technology, BS in Mechanical Engineering



www.bmpvc.com

Boston Millennia Partners Healthcare Portfolio, Additional Information Available on the Internet:

Portfolio Company Web Site Address

Arthrosurface www.arthrosurface.comAthenix Corp. www.athenixcorp.comCardioMEMS www.cardiomems.comCoapt Systems, Inc. www.coaptsystems.comCollegium Pharmaceuticals www.collegiumpharma.comCombinatoRx, Inc. www.combinatorx.comeMed Technologies www.emed.comEpigenesis Pharmaceuticals www.epigene.comEntigo, Inc. www.entigo.comGalt Associates, Inc. www.galt-assoc.comGlycofi, Inc. www.glycofi.comMedAptus, Inc. www.medaptus.comNovalar Pharmaceuticals, Inc. www.novalarpharm.comPHT Corp. www.phtcorp.comPredix Pharmaceuticals, Inc. www.predixpharm.comProtein Forest, Inc. www.proteinforest.comRejuvenon Corp. www.rejuvenon.com

Other resources on Angel Investors and Venture Capital:Association Web Site Address

National Venture Capital Association www.nvca.comAngel Capital Association www.angelcapitalassociation.orgUniversity of New Hampshire - Center for Venture Research www.unh.edu/cvr

© 2006 boston millennia partners

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