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SIRTRIS PHARMACEUTICALS: LIVING HEALTHIER, LONGER John Burr Ph.D.

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Presentation on theme: "SIRTRIS PHARMACEUTICALS: LIVING HEALTHIER, LONGER John Burr Ph.D."— Presentation transcript:

1 SIRTRIS PHARMACEUTICALS: LIVING HEALTHIER, LONGER John Burr Ph.D.

2 Warm-up Question 1 1. According to which of the following countries has the highest wine consumption per capita in 2008?www.wineinstitute.org A.Switzerland B.United States C.Spain D. United Kingdom

3 Warm-up Question 1 1. According to which of the following countries has the highest wine consumption per capita in 2008?www.wineinstitute.org A.Switzerland B.United States C.Spain D. United Kingdom

4 Warm-up Question 2 2. Borders Bookstore derived its name from: A. The first store was built in El Paso, Texas, just two miles from the Mexican border. B. Tom and Louis Borders, brothers from Ann Arbor, Michigan C. Borders was originally a place to order books, not buy them...hence the name Book Orders D. Nothing in particular; the founders just thought it sounded interesting

5 Warm-up Question 2 2. Borders Bookstore derived its name from: A. The first store was built in El Paso, Texas, just two miles from the Mexican border. B. Tom and Louis Borders, brothers from Ann Arbor, Michigan C. Borders was originally a place to order books, not buy them...hence the name Book Orders D. Nothing in particular; the founders just thought it sounded interesting

6 Warm-up Question 3 3. The common, but fallacious story behind the creation of eBay is that Pierre Omidyar's wife had a large PEZ candy dispenser collection, and that he created eBay in 1995 to help her acquire even more containers. Urban myth? Maybe so, but what was the domain name that Pierre originally wanted to use? A.Collectible.com B.Shop24.com C.BuyItHere.com D.EchoBay.com

7 Warm-up Question 3 3. The common, but fallacious story behind the creation of eBay is that Pierre Omidyar's wife had a large PEZ candy dispenser collection, and that he created eBay in 1995 to help her acquire even more containers. Urban myth? Maybe so, but what was the domain name that Pierre originally wanted to use? A.Collectible.com B.Shop24.com C.BuyItHere.com D.EchoBay.com

8 Warm-up Question 4 4. What popular clothing company took its name from a derogatory term often applied to Central American countries? A.Coconut Country B.Sugar Shack C.Mango Mansion D.Banana Republic

9 Warm-up Question 4 4. What popular clothing company took its name from a derogatory term often applied to Central American countries? A.Coconut Country B.Sugar Shack C.Mango Mansion D.Banana Republic

10 CBS News 60 minutes: -0KjeM m2By2A&feature=related -0KjeM m2By2A&feature=related

11 Sirtris Study Questions 1.Describe the FDA approval process of a new drug application. 2.What are the three major decisions facing the company at the time of the case? 3.At the time Westphal joined Sirtris, what is your assessment of the odds that the company will ever generate substantial revenues? If you were Westphal, would you have left Polaris for Sirtris? 4.Should Sirtris launch SRT501 nutraceutical business? Why or why not? 5.Should Sirtris do the deal with the pharmaceutical company? Why or why not? If you recommend a deal, which equity stake (20% or 51%) would you prefer?

12 Sirtris Study Question 1 1.Describe the FDA approval process of a new drug application.

13 Sirtris Study Question 4 4. Should Sirtris launch SRT501 nutraceutical business? Why or why not? Fact:Nearly two-thirds of the American population takes at least one type of nutraceutical health product. Fact: The use of nutraceuticals, as an attempt to accomplish desirable therapeutic outcomes with reduced side effects, as compared with other therapeutic agents, has met with great monetary success.

14 Sirtris Study Question 5 Should Sirtris do the deal with the pharmaceutical company? Why or why not? If you recommend a deal, which equity stake (20% or 51%) would you prefer?

15 Update Sirtris went public at $10/share in May 2007, raising > $60 million. In April 2008, agreed to be acquired by GSK in a $720 million deal (purchased at $22.50/share when it was trading at $12/share, an 80% premium). Westphal stayed on to lead merger integration effort. “This is likely to be the most important thing I do in my life.” His stock options and restricted stock vested out to A small number of scientists left to launch other start- ups. Sirtris remained a standalone division inside GSK.

16 GSK Abnormal Returns around Acquisition Date

17

18 IN SOME BUSINESS MODELS: CREATING VALUE IS ABOUT INCREASING EXPECTED VALUE, NOT GENERATING NEAR-TERM REVENUE AND PROFITS Lesson 1

19 Biotech – What’s it worth!

20 Step-downs in risk and funding July 2004Tatar and Sinclair report resveratrol extends life of roundworms August 2004 Round A -$5 million October 2004 Round A1 - $13 million March 2005 Sinclair started getting data that showed resveratrol extends lifespan in a mammal Round B - $27 million April 2006Confirmatory results that high doses of resveratrol affect obese mice Round C - $22 million Feb 2007Reserveratrol increased stamina of mice two-fold Round C1 - $35.9 million

21 0.01% Time zero payoff distribution 99.99% E(Exit Value) =.9999 * Lose All * Make Billions Lose AllMake Billions Time zero payoff distribution

22 5% 95% E(Exit Value) =.95 * Lose All +.05 * Make Billions Lose AllMake Billions After Christoph joins & science advances

23 Q4: Entering Nutraceuticals business 5% 95% E(Exit Value) =.95 * DCF Nutraceuticals +.05 * Make Billions?? Lose AllMake Billions 95% ??

24 Q5: Adding pharmaceutical deal 5% 95% E(Exit Value) = ?? * Lose All + ?? * (Make Billions / 2) Lose AllMake Billions ??

25 UNDERSTANDING MOTIVES FOR DIVERSIFICATION Lesson 2

26 CROSS- SELLING BENEFITS ECONOMIES OF SCOPE ECONOMIES OF SCOPE Horizontal Scope Decision In what businesses? INTERNAL MARKETS DIVERSIFY RISK DIVERSIFY RISK SPILLOVERS ACROSS BUSINESS UNITS IF:

27 Diversify Risk Generally, not a good reason –Corporate investors can diversify more efficiently themselves Makes sense if –Corporation can diversify risk better than external market –In “new” markets, there may not be available risk hedging alternatives for investors, so corporations have to diversify for them.

28 IMPORTANT TO THINK ABOUT THE INCENTIVE STRUCTURES & PROS AND CONS OF STRATEGIC PARTNERSHIPS, ESPECIALLY FROM THE PERSPECTIVE OF THE SMALLER PARTNER Lesson 3

29 Big Pharma Table: Number of New Drugs Released by Top Ten Pharmaceutical Companies, listed in order of market capitalization, from 1998 to 2002 Pharmaceutical companyNew Drugs Pfizer5 Johnson & Johnson0 Merck7 GlaxoSmithKline6 Novartis8 Amgen0 Eli Lilly & Co.1 AstraZeneca2 Abbot Laboratories3 Wyeth4 Source: Bryan Bergeron & Paul Chan, BIOTECH INDUSTRY: A GLOBAL, ECONOMIC, AND FINANCING OVERVIEW 58 (2004).

30 Small Biotech Source of Capital Validation to partners, investors Experienced teams to go through the FDA approval process Tension: Different time frames under which pharmaceutical and biotech companies operate? Tension: Competition?

31 Feb. 10 Noodles & Company Readings: the case and the assigned article “Franchising” Study Questions for Case: Noodles & Co. –What are the challenges faced by Noodles at the time of the case? –What’s your evaluation of Noodles’ performance? Compare it to industry competitors such as Panera, Starbucks, and Chipotle. –What are the G&A/sales ratios of Noodles ( )? Use numbers from Exhibits to calculate. High or low compared with industry average? –Do you recommend Noodles & Company expand by franchising or company-owned stores? What are the quantitative and qualitative implications of each alternative? –What issues would you recommend Kennedy include in his presentation to the board?


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