Download Free Medical Evolving landscape of the Life Sciences debt market PowerPoint Presentation

Evolving landscape of the Life Sciences debt market PowerPoint Presentation

DOWNLOAD MEDICAL POWERPOINT PRESENTATION

About This Presentation

Description : This report by Torreya gives an overview of the evolving landscape of the Life Sciences debt market. The report talks about life sciences companies, direct private debt market, segmentation of the Life Sciences Debt Market etc.

Tags : Life Sciences debt market, life sciences companies

Published on : Jun 28, 2020 | Views : 1091 | Downloads : 0

Shareable Url :

Embed Code :

Comment

Transcript

Slide 1-

Securities offered in the United States are offered through Torreya Capital LLC, Member FINRA/SIPC. In Europe such services are offered through Torreya Partners (Europe) LLP, which is authorized and regulated by the UK Financial Conduct Authority. Creating Value Through Intelligent Borrowing Part I: The Evolving Landscape of the Life Sciences Debt Market November 2019
Slide 2-

Debt is lightly used by life science companies: The aggregate net debt to market ratio for life sciences companies is 8.4% The overall debt to market ratio for publicly traded companies in the US and Europe is 32%. Debt usage is significantly less in the life sciences sector than in the remainder of the economy There are pros and cons to debt leverage, and timing and market insights impact when debt makes sense as part of a life science company’s capital structure The life sciences debt market is segmented into publicly issued bonds, bank debt, privately placed but liquid offerings and illiquid direct offerings where one or two institutions lend to an issuer with the intention of holding to maturity. This latter type of offering which we call a direct private has been the biggest area of growth in the life sciences sector The direct private debt market for life science companies has grown dramatically: The use of direct privates has risen consistently since 2013, when roughly 1.5 private direct debt deals were announced per month So far in 2019, we have seen more than 10 private direct deals announced per month, making 2019 an all time record for the private direct debt market issuances in the life sciences Dollar volume in the market has grown, on average by 15.2% a year over the last six years The number of deals done outside the US is up over time Thus far in 2019, 16% of all direct private deal have involved European borrowers As the value of debt is recognized, the landscape of borrowers is evolving: More life science companies are appreciating the ability to extend cash runways without diluting equity We find that while over 2/3 of borrowers are commercial stage, 2019 has also seen a record number of non- commercial companies access the direct debt markets Venture lending is becoming less common than it once was, especially in the world of biotech, where more than 75% of all direct loans are now made to publicly-traded companies rather than to private companies 2 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 Executive Summary Source: S&P Capital IQ data from October 5, 2019, Torreya Life Sciences Debt Database, Torreya Calculations
Slide 3-

Usage of Debt in the Life Sciences
Slide 4-

The chart at left shows the ratio of total net debt* to market cap for the entire publicly- traded life sciences sector in the US and Europe as of October 2019 With an aggregate net debt to market cap ratio of 8.4%, the life sciences sector has one quarter of the leverage as the total economy (32% net debt / market cap) This pattern of underutilization is commonly related to the nature of the underlying cash flows (or lack thereof) and high R&D requirements for the majority of Note: We define net debt as total debt less cash less short-term investments Leverage in the Life Science Sector is Modest Compared to the Rest of the Economy Debt is used modestly in the life science industry, especially when compared to its sector-sibling, health care services, which is three times more leveraged. Economy-wide Comparison Total Sector Net Debt* / Market Capitalization, 51% Source: S&P Capital IQ data from October 5, 2019, Torreya Calculations 4 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 40% 32% 30% 26% 24% 22% 8% 4% Energy Industrials Total Economy Communications Consumer Discretionary Health Care Services Consumer Staples Life Sciences Information Technology (US & Europe, October 2019)
Slide 5-

$350 $335 $364 $386 $388 $516 $655 $703 $759 $792 $300 $200 $100 $0 $400 $600 $500 $800 $700 2014 2015 2017 2018 $ Billions 2016 Cash & Investments Total Debt Source: S&P Capital IQ data from October 5, 2019, Torreya Calculations 5 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 Use of Debt Has Been Rising Over Time in the Life Sciences In a comparison of balance sheets of public companies in the life science sector, Torreya has noticed that leverage has risen modestly over the last five years. In 2018, the life science industry accumulated $388 billion in cash & investments and $792 billion in debt in the US and Europe alone. Total Debt and Cash in the Life Sciences Sector in US/Europe, 2014-2018 ($ Billions) $900
Slide 6-

Note: The category “other” includes pharma services, life science tools and HCIT. Capital Structures Differ by Stage of Development 11.6% 11.5% -5.0% -16.5% 9.9% 6.1% 11.0% -0.4% -1.5% -5.3% -5.6% 12.0% Life science companies with EBITDA over $100 million have positive ratios of net debt to market cap across the board. In contrast, loss-making companies have negative net debt, on average. This is particularly true for biopharma companies where time to commercialization is the longest. Aggregate Net Debt / Market Cap by EBITDA Public Life Science Companies in US/Europe, October 2019 15% -20% -10% -15% -5% 0% 5% 10% Aggregate Net Debt / Market Cap (%) Biopharma Devices Other EBITDA > $1 Billion * $100mm < EBITDA < $1Bn $0 < EBITDA < $100mm Negative EBITDA Source: S&P Capital IQ data from October 5, 2019, Torreya Calculations 6 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019
Slide 7-

Segmentation of the Life Sciences Debt Market
Slide 8-

Debt Market Segmentation Life Sciences Debt Market Bank Debt Flexible revolving credit and term loans. Can be very inexpensive. Commercial Paper Available to highly rated large borrowers. Short-Term Debt Due within a year Long-Term Debt Due in more than one year Multiple Segments of the Debt Market Direct Debt Privately placed debt offered to one or two lenders. Includes venture debt. Rarely traded. 8 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 Liquid Privates Liquid private debt that is syndicated into the market and tradeable. Aimed at credit funds. Public Bonds Bonds and notes offered to institutions. Can be fully registered or offered via 144a. Can be rated.
Slide 9-

Details on Debt Financing Alternatives Typically comes as a term loan May also be in the form of a revolving credit line For syndicated bank loans can be offered in multiple tranches Multi-tranche second lien bond + senior + a possible mezz piece (typically preferred) | Other possibilities are unitranche or “senior stretch” Typically provided in one tranche but may be combined with a revolving credit line Common for the debt to be tranched out to the issuer over time Call or non-call structure | rated or non-rated | most likely 144A structure | sometimes structure as convertible bond. Sometimes CP is asset- backed but generally this is an unsecured obligation of the issuer Used in the life sciences market only by the largest well capitalized issuers Generally not traded But syndicated bank debt is increasingly traded over the counter This debt is often traded between funds Market makers are typically large investment banks This debt is not traded and designed to be held to maturity Sometimes lenders will securitize their holdings to get liquidity Freely tradeable Freely tradeable but rarely trades due to short duration 3 to 8% 5% to 12% 8% to 15% 2% to 7% 0.1% to 1.5% 1x LTM EBITDA 3x to 7x LTM EBITDA; no credit rating required Venture backing or significant equity value. Cash flow helps. Up to 4x LTM EBITDA; credit  2X LTM EBITDA. rating is normally present Most common flavors Typical Requirements Maturity Speed of Execution Cost of Capital Tradeable? 9 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019
Slide 10-

Senior Debt / First Lien Bond Second Lien Bond Unitranche Alternative Instrument Flavor of This Product Dilution Cost of Capital Accounting Treatment Typical Requirements Maturity Collateral Speed of Execution 10 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 Structure of Tradeable Private Debt
Slide 11-

Illustrative Direct Loan Structure Direct debt can serve as an alternative source of capital, allowing a borrower to preserve more equity ownership and lower overall cost of capital. 11 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019
Slide 12-

Illustrative Venture Debt Structure Venture debt is provided to pre-commercial companies in the life sciences, usually in the presence of a venture capital provider. Sometimes, this debt is provided to public companies without a VC in place. 12 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019
Slide 13-

The Evolving Direct Life Sciences Debt Market
Slide 14-

Life Science Private Direct Borrowers by Region The directly placed private debt marketplace has broadened geographically over time. Europe now accounts for 16% of volume, up from 4% in 2013. Other countries including Australia, Canada and Israel account for little overall volume. 14 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 160 140 120 100 80 60 40 20 0 Transaction Count Deal Count by Borrower Headquarters Source: Torreya Life Sciences Debt Database, Torreya Calculations. Data for 2019 are annualized as of October 5, 2019.
Slide 15-

Life Sciences Borrowers by Segment Specialty Pharma deals accounted for more than $11 billion in deal volume in our database. These companies are typically creditworthy, but require substantial sums at the time of product launch. The direct lending market has been highly active in this area. Biotechnology $5,568 Source: Torreya Life Sciences Debt Database, Torreya Calculations 15 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 Medical Device $6,242 Specialty Pharma $11,152 Generic Pharma $3,162 Healthcare IT $1,005 Pharma Services $1,145 $2,768 Direct Private Life Sciences Debt Volume ($ Millions) by Segment, 2013-2019 Diagnostics
Slide 16-

Borrowers by Industry Subsector Specialty Pharma is 37% of the market volume but biotech and devices account for over half of the transactions. Biotech companies have the highest transaction count but the lowest average deal size at $27 million. Source: Torreya Life Sciences Debt Database, Torreya Calculations 16 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 Notes: 2019 activity as of Oct 4, 2019. This was annualized for comparison purposes. The other segment includes animal health, OTC, healthcare IT and pharma services.
Slide 17-

Torreya Capital Markets Team and Capabilities
Slide 18-

Where We Can Help: How We Can Help: Torreya’s Capital Markets Capabilities Torreya Partners has fundraising capabilities across the capital structure and will support your company through the entire deal making process. Tom Babich Anna A. Makki Head of Capital Markets, NY Managing Director, NY John Bradley Managing Director, NY Nicola Benatti Associate, NY Shane Moriarty Analyst, NY 18 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019
Slide 19-

Sale of royalties to Up to $22 million December 2016 Term loan from $15 million January 2018 Debt financing from $20 million September 2015 Royalty-backed financing facility for an undisclosed spec pharma company with $100 million February 2016 Partial sale of royalty and milestones $40 million September 2016 Venture debt raise with $20 million April 2019 Financing with $40 million March 2019 Credit facility from $70 million January 2019 Sale of royalties to $17.5 million December 2016 Acquisition financing term loan $20 million March 2018 Partial royalty monetization with $7.5 million June 2018 Term loan from $40 million June 2018 Growth financing with June 2019 Majority recap by $125 million April 2019 Torreya Is a Leader in Arranging Non-Dilutive Financing in Healthcare Selected transactions since 2015: Debt recapitalization from $125 million September 2018 19 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019
Slide 20-

At Torreya, we are engaged in providing strategic advice to companies in the life sciences industry. Torreya has a five person capital markets team covering the life sciences debt marketplace including public bonds, bank debt, tradeable privates and direct privates. We have compiled internally a comprehensive debt database of directly placed debt issuances by life sciences companies in the US, Canada, Europe, Australia and Israel, and used this database to analyze trends in the debt market between 2013-2019. This report is the first in a four part series examining the current debt market place: Part I examines the usage of debt for life science companies Part II examines the rationale for using debt Part III addresses the lender landscape Part IV discusses term sheet structuring. The analysis and remarks in this report were compiled by Torreya in the Fall of 2019. We have focused on ideas and trends that we observed in both our database analysis (described above) as well as our practice and conversation with our clients in recent years. All opinions and forecasts are our own and may prove to be inaccurate. All errors and omissions are our own and the information in this report, particularly on private companies, may be inaccurate, dated or, at best, directional. All content in this report is subject to the disclaimer on the last page of the presentation. Please contact the Torreya Capital Markets team if you have any questions or comments: 20 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 Closing Remarks
Slide 21-

Disclaimer 21 TORREYA | CREATING VALUE THROUGH INTELLIGENT BORROWING – NOV 2019 This presentation may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with Torreya. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the Information contained in this publication without obtaining specific professional advice. The information used in preparing these materials was obtained from or through public sources. Torreya assumes no responsibility for independent verification of such information and has relied on such information being complete and accurate in all material respects. No representation, warranty or undertaking, express or implied, is made and no responsibility is accepted by Torreya as to or in relation to the accuracy or completeness or otherwise of these materials or as to the reasonableness of any other information made available in connection with these materials (whether in writing or orally) to any interested party (or its advisors). Torreya will not be liable for any direct, indirect, or consequential loss or damage suffered by any person as a result of relying on any statement contained in these materials or any such other information. None of these materials, the information contained in them or any other information supplied in connection with these materials, will form the basis of any contract. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed and discussed with the managements of the Company and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecast obtained from public sources, represent reasonable estimates). There is no guarantee that any of these estimates and projections will be achieved. Actual results will vary from the projections and such variations may be material. Nothing contained herein is, or shall be relied upon as, a promise or representation as to the past or future. Torreya expressly disclaims any and all liability relating or resulting from the use of this presentation. Torreya assumes no obligation to update or otherwise review these materials. These materials have been prepared by Torreya and its affiliates and accordingly information reflected or incorporated into these materials may be shared with employees of Torreya and its affiliates and agents regardless of location. This presentation speaks only as of the date it is given, and the views expressed are subject to change based upon a number of factors, including market conditions. Distribution of this presentation to any person other than the recipient is unauthorized. This material must not be copied, reproduced, distributed or passed to others at any time without the prior written consent of Torreya. This presentation has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instrument. You should not construe the contents of this presentation as legal, tax, accounting or investment advice or a recommendation. Torreya does not provide any tax advice. Any tax statement herein regarding any U.S. federal or other tax is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement related. Each taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. This presentation does not purport to be all-inclusive or to contain all of the information that the Company may require. No investment, divestment or other financial decisions or actions should be based solely on the information in this presentation. The distribution of these materials in certain jurisdictions may be restricted by law and, accordingly, recipients represent that they are able to receive this memorandum without contravention of any unfulfilled registration requirements or other legal restrictions in the jurisdiction in which they reside or conduct business. By accepting these materials, the recipient agrees to be bound by the foregoing limitations. Insofar as these materials originate in the United Kingdom or are capable of having an effect in the United Kingdom (within the meaning of section 21 of the Financial Services and Markets Act 2000) they are directed only at classes of recipient at whom they may lawfully be directed without contravening that section or any applicable provisions of the Conduct of Business Sourcebook of the Financial Conduct Authority, including persons of a kind described in Article 19 (Investment professionals) or Article 49 (High net worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) and are not intended to be distributed or passed on, directly or indirectly, to or relied or acted on, by any other class of persons. Torreya (Europe) LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is not acting for you in connection with any potential transaction(s) described in these materials and thus will not be responsible for providing you the protections afforded to clients of Torreya (Europe) LLP or for advising you in connection with any potential transaction(s) as described in these materials except and unless subject to a subsequent specific written agreement relating to such potential transaction(s) between you and Torreya (Europe) LLP. Torreya (Europe) LLP is authorised and regulated by the Financial Conduct Authority. Securities offered in the United States are offered through Torreya Capital LLC, Member FINRA/SIPC.

User Presentation
Related Presentations

Update on the Financing and Deal Environment in Biopharmaceutical Sector

By: anupma
Views: 1168

AN EMERGING HEALTHCARE HUB IN THE WORLD

By: anupma
Views: 2149

DNA and Genes - The Human Genome and Inheritance

By: anupma
Views: 2504

Hospital Pharmacy Compliance Handbook

By: anupma
Views: 970

Pharmacy Handbook to Compliance

By: anupma
Views: 1090

Medical Parasitology

By: FrankMarco
Views: 1110

Pharmacology of Anesthetics

By: yourdoctors
Views: 748

Nursing as a profession

By: drdwayn
Views: 8583

Cataract And Implant Surgery

By: KhushbuSG
Views: 495

Acute Pancreatitis

By: medhelp
Views: 856

anupma

About : A Healthcare MarCom professional...I have experience on managing healthcare marketing communication online...on website, social media and off course email.
Occupation : Health Enthusiast
Specialty : Health Enthusiast
Country : India
Website : https://www.medicpresents.com

HEALTH A TO Z