Much Ado About Nano:Much Ado About Nano:

The InveThe Inve$$tment Climate for Nano-tment Climate for Nano-MedTech VenturesMedTech Ventures

Omar Amirana, MDOxford Bioscience Partners

MassMEDIC

April 10, 2007

OAmirana@oxbio.com

What is nanotechnology?What is nanotechnology?Nanotechnology is the understanding and control of matter at dimensions of roughly 1 to 100 nanometers

• Unique phenomena enable novel applications• Nanotechnology involves imaging, measuring,

modeling, and manipulating matter at this scale

A nanometer is one-billionth of a meter.

• Typical C-C bond lengths are in the range .12-.15 nm• DNA double-helix has a diameter around 2 nm• The smallest cellular life forms, the bacteria of the

genus Mycoplasma, are around 200 nm in length.

Unique behavior: physical, chemical, and biological properties of nanoscale materials can be exploited for a large variety of applications

Source: www.nano.gov

Source: www.nano.gov

Longer term, nanomedical opportunities Longer term, nanomedical opportunities are mystifying and intoxicating…are mystifying and intoxicating…

RespirocytesRespirocytes

Implantable Nano Power SourcesImplantable Nano Power Sources

Nanowires convert mechanical energy into current. They could be implanted in the body, and, driven by muscle contractions, blood flow, or external vibrations transmitted through tissue. They could power implantable sensors.

Vascular System and Hematology PoliceVascular System and Hematology Police

USPTO & Nano: A lot of coolUSPTO & Nano: A lot of coolstuff looking to solve problemsstuff looking to solve problems

Results of Search in US Patent Collection db for: nano: 12473 patents. Hits 1 through 15 out of 12473

PAT. NO. Title

7,200,493 Method for screening crystallization or amorphous stage conditions for molecules

7,200,318 Near infra-red composite polymer-nanocrystal materials and electro-optical devices produced therefrom

7,200,308 Frequency conversion with nonlinear optical polymers and high index contrast waveguides

7,200,152 Local area network for distributing data communication, sensing and control signals

7,200,006 Compliant thermal interface for electronic equipment

7,199,983 Magnetoresistive device utilizing a magnetoresistance effect for reading magnetic information

7,199,981 High reliability-parallel data transfer hard disk drive

7,199,924 Apparatus and method for spectral-beam combining of high-power fiber lasers

7,199,809 Graphic design of combinatorial material libraries

7,199,498 Electrical assemblies using molecular-scale electrically conductive and mechanically flexible beams and methods for application of same

7,199,443 Integration of filters using on-chip transformers for RF and wireless applications

7,199,439 Microelectronic imagers and methods of packaging microelectronic imagers

7,199,305 Protosubstrates

7,199,278 Conversion of oxygenates to olefins

7,199,277 Pretreating a catalyst containing molecular sieve and active metal oxide

Recommended photo gallery:M. Meyyappan

Director, Center for NanotechnologyNASA Ames Research Center

Moffett Field, CA 94035meyya@orbit.arc.nasa.gov

web: http://www.ipt.arc.nasa.gov

Nano = King of CoolNano = King of Cool

National Nanotechnology Initiative (NNI; founded 2001) = National Nanotechnology Initiative (NNI; founded 2001) = main source of R&D dollars but VC $ is significantmain source of R&D dollars but VC $ is significant

Sources of Nanotech Funding

74 84 104

656

399 420 417530

633 649

464

697

863989

1,081

1,351 1,392 1,445

0

200

400

600

800

1000

1200

1400

1600

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

E20

08E

$

Private Equity Funding

Government (NNI) Funding

Nanotech is still in its infancy – But the investment sector is real

Source(s): www.nano.gov, Thomson VentureSource

Venture capitalists have funded <150Venture capitalists have funded <150“nano” companies in the last 10 years“nano” companies in the last 10 years

1997-2007 Nanotech Financings and Post-$ Valuation

5.811.4

14.2 13.017.6

41.0

53.5

89.5

3.08.3 10.0

7.08.2

24.0

40.0

78.1

0

10

20

30

40

50

60

70

80

90

100

Seed/A Round B Round C Round All Other Rounds

$

Average RaiseAverage Post- $Median RaiseMedian Post-$

Source: Thomson VentureSource

Exits in nanotech have been scarceExits in nanotech have been scarceCompanies Raising Venture

Money between 1997 and 2007

140

82

54

33

0

20

40

60

80

100

120

140

160

Seed/ARound

B Round C Round All OtherRounds

# of

Com

pani

es

Status of 1997-2007 Venture-Backed Nanotech Companies

614

106

14

0

20

40

60

80

100

120

Public Acquired Private Out ofBusiness

# of

Com

pani

es

Source: Thomson VentureSource

Life science provided majority of exits Life science provided majority of exits (13 of 20); 6 known exits > $100M(13 of 20); 6 known exits > $100M

2

9

1

22

4

Drug delivery Medical DeviceLife Science Tools Electronic ManufacturingSemiconductor Specialty Materials

Nanotech ExitsAccent Optical Technologies – Acquired for $45MAcusphere – IPO at $226MAngstron Systems – Acquired at undisclosed priceApplied Optronics – Acquired at undisclosed priceAprio Technologies – Acquired at undisclosed priceArryx – Acquired at $32MBioForce Nanosciences – Acquired at undisclosed priceClinical Micro Sensors – Acquired at $280MIomai – IPO at $132MMicroE Systems – Acquired for $55MMolecular Insight Pharmaceuticals – IPO at $381MNanogen – IPO at $217MNanogram Devices – Acquired for $45MNanophase Technologies – IPO at $59MNanotronics – Acquired at undisclosed priceNimbleGen Systems – Filed for IPO 3/07Protometrix – Acquired at undisclosed priceQuantum Dot – Acquired at undisclosed priceTailored Materials – Acquired at undisclosed priceThird Wave Technologies – IPO at $457M

Source: Thomson VentureSource

Boxed companies have valuations > $100M

Post-IPO performance has been disappointingPost-IPO performance has been disappointing

Biotech/Pharma companies are partnering Biotech/Pharma companies are partnering instead of acquiring nanotech companiesinstead of acquiring nanotech companies

• Oxonica licensed nanoparticle tagging technology to Becton Dickinson to create clinical diagnostics (2007)

• Nanosyn signed agreements with Amphora, Arqule, and Euroscreen to provide medicial chemistry services using its nanoscale technology (2005-2006)

• Psivida, which develops drug delivery products, signed an exclusive research and license agreement for its technology with Pfizer Inc primarily for ophthalmology and oncology. It will receive up to $155 million in development and sales-related milestone payments.

MedTech companies are not acquiring nano MedTech companies are not acquiring nano companies either; and can provide barrierscompanies either; and can provide barriers

Larger MedTech companies:

• do not want to acknowledge flaws in their products.

• have no real need to improve unless threatened.

• view nanotech as an expensive incremental improvement / alternative

• do not want to negatively impact ASP or margin

Biophan developed coatings for pacemaker and ICD leads to improve MRI compatibility.

The ultimate example: Drug DeliveryThe ultimate example: Drug Delivery

Needle Injection is:

TraumaticPainfulIneffective / ImpreciseDangerous at timesDecades oldAccepted

But…EASYINEXPENSIVE

Other $B franchises that might benefit from Other $B franchises that might benefit from nanotech where adoption has laggednanotech where adoption has lagged

Success stories include Success stories include Advanced Magnetics (AMAG)… Advanced Magnetics (AMAG)…

Ferumoxytol, the primary value driver for Advanced Magnetics, is currently in four Phase III multi-center clinical trials for use as an iron replacement therapeutic in chronic kidney disease (CKD) patients.

Combidex is an investigational functional molecular imaging agent consisting of iron oxide nanoparticles for use in conjunction with magnetic resonance imaging, also known as MRI, to aid in the differentiation of cancerous from normal lymph nodes.

……but they are rare, recent, but they are rare, recent, and often ‘repurposed’and often ‘repurposed’

Even AGAM needed time to reach success

28%

17%

9%

6%9%

31%

Awareness, investments and spending Awareness, investments and spending should continue to increase…should continue to increase…

0.5

1.1

2.0

• Conservative case

• NSF Estimate

• Aggressive case

•Materials

•Electronics

•Chemical Manufacturing

•Aerospace

•Pharmaceuticals

•Other

Nanotechnology related goods and services – by 2010-2015USD trillions

……as the “nano” brand gets diluted and as the “nano” brand gets diluted and continues to be used for marketingcontinues to be used for marketing

The Next Big Thing is The Next Big Thing is Really Small:Really Small:

How Nanotechnology How Nanotechnology Will Change the Future of Will Change the Future of

Your BusinessYour Business

by Jack Uldrichby Jack Uldrich

• Sunscreens and cosmetics

• Longer-lasting tennis balls

• Longer and straighter flying golf balls

• Light-weight, stronger tennis racquets

• Burn and wound dressings

Recent nano applications/ innovations Recent nano applications/ innovations are not “typical” for typical VCs...are not “typical” for typical VCs...

• Step assists on vans• Bumpers on cars• Paints, Ink and coatings• Automobile catalytic

converters• Metal-cutting tools• Stain-free clothing and

mattresses• Dental-bonding agent

Source: www.nano.gov

……but the future of nanotechnology in but the future of nanotechnology in medicine could be a VC sweet spotmedicine could be a VC sweet spot

• Advanced drug delivery systems, including implantable devices that automatically administer drugs and sensor drug levels

• Medical diagnostic tools, such as cancer tagging mechanisms, lab-on-a-chip, real time diagnostics, or Sensors for airborne chemicals or other toxins

• Cooling chips or wafers to replace compressors in cars, refrigerators, air conditioners and multiple other devices, utilizing no chemicals or moving parts

• Photovoltaic (solar) cells, fuel cells and portable power to provide inexpensive, clean energy

• New high-performance materials

• THM: Find a specific problem that NEEDS to be solved.

Predictions and ProbabilitiesPredictions and Probabilities

• Nanotech will grow through corporate partnerships

• Large companies will drive nanotech adoption in various areas, avoid adoption in others

• VC Investments will be selective (later stage/proven?)

• VCs will need to set aside plenty of reserves

• More IPOs; VCs will likely invest in more PIPEs

• There will be some big winners and many losers

Certainty: Things will not stay the same.Certainty: Things will not stay the same.

Thanks to Pei Ho, Oxford Bioscience Partners