SVB Life Science Presentation Sept 2005

SVB Life Science: Debt Financing Options : SVB Life Science: Debt Financing Options Peter R. Scott Senior Vice President Silicon Valley Bank 9/11/05


Slide2 : Silicon Valley Bank Overview: Space: Bank is dedicated to Technology and Life Science Size: $16.0B in Total Assets (Bank and Assets under Management) Founded: Started over21 Years Ago Scale: 30 Regional Offices New Offices: London, Bangalore. Shanghai and Tel Aviv in ’06.


Silicon Valley Bank Overview (cont.): : Silicon Valley Bank Overview (cont.): SVB Commercial Bank Cash Management International Asset Management Debt Financing SVB Capital Fund of Funds Direct Equity Investment SVB is the banker for 300+ Venture Capital firms Private Client Services SVB Alliant Mandamp;A Advisory PIPE’s Private Placements


SVB Debt Financing For Life Science Companies: : SVB Debt Financing For Life Science Companies: Define the Market: Biopharma, Medical Device, andamp; Healthcare Services VC Backed and Publicly Traded Companies Cash Burn


What SVB Debt is Not: : What SVB Debt is Not: Debt that converts to Equity Royalty Financing Debt that Encumbers IP


Market Intelligence: Debt Options For Life Sciences Companies Today- : Market Intelligence: Debt Options For Life Sciences Companies Today- 1) Debt Product: Venture Debt Growth Capital Equipment Financing Solution: Extends Runway


Debt Financing: Extended “Runway” allows company Time to increase Valuation without Dilution : Debt Financing: Extended 'Runway' allows company Time to increase Valuation without Dilution Time Valuation *Milestone Achieved: First Customers *Milestone Achieved: $10.0M Revenues *Milestone Achieved: EBITDA Positive


Example #1: Biotech RX : Example #1: Biotech RX Situation: Series A, VC Backed, Rasied $10.0M @ a $12.0M Pre-money Valuation. Oncology compound in Phase 1 Clinical Trials. Debt Deal: $3.0M Growth Capital Loan, 36 Mo Amort, 5% Warrant Coverage, T’s + 4%, 6% Back-end. Result: 30 Months later Company announces positive Phase 1 data. Post $ Series A = $22.0M Pre-money series B = $45.0M Cost to Company= Interest on debt and warrant coverage andlt;1% ownership of dilution Increase in Valuation = 2X


Market Intelligence (cont): Debt Options… : Market Intelligence (cont): Debt Options… 2) Debt Product: Working Capital Financing for Life Science Company with Growing Revenue Base. Solution: Provides Runway by leveraging AR and INV Growth Few Providers of this type of high risk debt Low Cost of Capital compared to alternative PIPE or Private Placement


Example #2: Biotech RX : Example #2: Biotech RX Situation: IPO ’03, Public Company, $45.0M Revenues, $80.0M Market Cap, Tools Company expected to grow revenues 40%. Needs additional capital to reach positive EBITDA in 12 months. Due to company stock trading near 52 week low, board and mgmt would prefer avoid equity instrument (PIPE or secondary) at current valuation. Debt Deal: $18.0M LOC, P+1.50, 5% Warrant Coverage. Result: Adds additional runway fully funding Company in order to reach positive EBITDA milestone in 2006. Once company reaches this milestone valuation will increase.


Market Intelligence (cont): Debt Options… : Market Intelligence (cont): Debt Options… 3) Debt Product: Liquidity Backed Term Loan for Life Science Company that is: Publicly traded Highly liquid with high burn Depressed stock price/valuation Solution: $20-$50.0M Term Loan (Not syndicated) Allows company to reach critical milestone without highly dilutive equity


Example #3: Biotech RX : Example #3: Biotech RX Situation: IPO ’00, Public Company, $80.0M Cash, 24 Months of Cash, $150.0M Market Cap, Drug Discovery Company with multiple drugs in key stages of clinical trials. Board and Mmgt team are highly confident they can raise less dilutive equity once they announce milestones in the next 12 months. Debt Deal: $35.0M LOC, T’s+2 .5%, 0% Warrant Coverage. Result: Adds additional runway helping the Company reach critical milestone without any dilution.


SVB Debt Financing: Key Questions to Consider : SVB Debt Financing: Key Questions to Consider What is my cost of capital and cost of runway? What is the capital source of my debt providers? (Commercial Banks, Finance Companies, Captive Venture Debt Funds, andamp; Venture debt funds. What will I have to give up? (IP, Blanket Lien, and/or Future Working Capital Financing)