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Ground View

The biomedical industry requires a large amount of capital for the discovery and development of new therapeutics and medical products. Biomedical companies are also high-risk ventures. With many sources of capital declining as well as weak capital markets and a declining M&A environment, we see an increase in the expectation of companies having a sale or divestiture over the next 12 months. Companies and investors will be continuing to watch the upward trend in IPOs as well as look to secure other non-traditional sources of funding. Government programs, such as SBIR/STTR, have played an important part in helping start companies, but mid-stage companies have few non-traditional sources for the large capital needed to advance programs through the clinic. The following snapshots profile two companies, Regulus and Organovo, which went public this year through a traditional IPO and a reverse merger, respectively. Both of these companies are on the cutting edge of life sciences innovation: Regulus in microRNA and Organovo in 3-D bioprinting.

CEO Survey: Why did the company delay the research or development project?

Why did the company delay the research or development project?

Seventy-four percent of CEOs surveyed indicated that the reason research and development projects were delayed was because the funding was not available. While the survey did not involve the same respondents, it is important to not that only 40 percent of those surveyed in 2011 indicated funding as an issue for delaying research and development. Regulation and change in corporate strategies held the second and third position for the past two years.

CEO Survey: Which of the following finance sources you utilized last year and which you plan to use in the coming year?

Indicate which of the following finance sources you utilized last year and which you plan to use in the coming year.

For 2012, majority of funding for companies comes from venture capital and corporate licensing and partnerships as well as bank lines of credit. Government and angel funding also plays a large role in the California biomedical industry ecosystem. Many companies expect to receive funding in 2013 from venture investors and corporate venture or secure a corporate partnership or licensing agreement.

CEO Survey: Over the next 12 months, how likely is your organization to take part in:

A merger or acquisition

CEO Survey: How likely is your organization to take part in a merger or acquisition over the next 12 months?

A sale or divesture

CEO Survey: How likely is your organization to take part in a sale or divesture over the next 12 months?

 

While respondents are different to the survey from year to year, 53 percent of CEOs indicated that over the next 12 months their organization is more likely to participate in a merger or acquisition. In 2011, 62 percent of CEOs indicated this would be likely. The mood seems to have shifted to companies looking for a sale or divesture. In 2012, 44 percent indicated a sale or divesture is likely in the next 12 months compared to 34 percent in 2011.

SNAPSHOT:
IPOS
Regulus Therapeutics
(NASDAQ: RGLS)

Regulus Therapeutics
Regulus Therapeutics
“Our industry needs to focus considerable scientific and financial resources to uncover innovative, new biology that can be used to treat diseases with high unmet medical need or treat diseases with new, more patient-friendly regimens to improve cure rates.”

Kleanthis Xanthopoulos, Ph.D., President and CEO, Regulus Therapeutics

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SNAPSHOT:
REVERSE MERGERS
Organovo
(OTC: ONVO)

Organovo
Organovo
“Legislation such as the JOBS Act have created opportunities for flexibility in seeking financing for companies without compromising investor protection, and more steps like this are urgently needed.”

Keith Murphy, CEO, Organovo

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