1. ASTP – Site Visit Oxford14th September 2007 Spin-outs and Portfolio ManagementMr James Mallinson, Isis Innovation

2. Isis Innovation - technology transfer • Patenting • Decision to support or not • Licensing • Existing company has advantages • Newco / spin-out route is alternative • Consulting • Service for researchers • Spin-out companies • All the above plus business planning, recruitment, fund-raising • Seed funding • Management of the spin-out process

3. Founder Researchers Shareholder, Director, Consultant I N V E S T M E N T Shareholders Isis Project Manager University Nominee Director Shareholder, Director Investor (1) Investor (2) ? Manager (1) Manager (2)? CEO, Shareholder Lawyers Lawyers Advisers Accountants Accountants Bankers Bankers Time Spin-outs – The Players

4. Spin-out Strategy Research Group Head New ManagingDirector technology interchange moves Senior Scientist Research Director University New Company Support Finance & Admin Scientists Sales & Marketing Production Scientists

5. Oxford Spin-outs (pre 2000)

6. Oxford Spin-outs (post 2000) Total external investment to date in spin-outs Post 1997: £314m £34m Seed/Business Angels & £280m Venture/Institution Capital

7. Seed / Proof of Concept Funding • The funding gap • Research grants are for non-commercial work • Typically long lead times • Publication / commercialisation trade-off • External investors want ‘belt and braces’ • Operation of the University Challenge Seed Fund • £4m from DTI, Gatsby Foundation, Wellcome Trust, OU • Launched in 2000, used in three years • 68 projects from £2,500 to £250,000 • Four Universities Proof of Concept Fund • Cambridge, Imperial, UCL, Oxford £1.9m POC fund • Awarded under Higher Education Innovation Fund 2 • Projects up to £25,000 or £50,000, no return to Fund

8. Isis Innovation - Networks • Isis Angels Network • ~100 members, no fee, no commitment • Business angels and venture capitalists • Helps Isis to meet regulatory requirements • Distributes investment proposals and holds investment meetings • Isis Spinners • Meetings for CEOs and senior executives from spin-outs • 2-3 meetings per year • Oxford Innovation Society • Industrial corporations and professional firms • Want to develop close links with Isis / University of Oxford • Annual membership fee of £6,800 • Variety of benefits

9. OIS Meeting & Dinner • Tea & coffee reception • Academic presentation • Sponsor presentation • Champagne reception • Dinner in College • After dinner drinks

10. Number of UK university spin-outs

11. Oxford spin-outs – Funds raised per round

12. Funding raised by Oxford Spin-outs by Year

13. Funding Profile for each Oxford Spin-out

14. Portfolio management • Shareholder rights • Spin-outs governed by Shareholders Agreement • OU is party to Shareholders Agreement • OU is usually ‘Qualified Party’ • Information rights – Board papers and accounts • Right to nominate a Director • Smaller shareholding => reduced rights • Information • Valuation & progress information reported to University • Commercial information vital for future fund-raising etc • Commercial progress very helpful for Isis licensing • Management and Board • PM relationship with CEO, chairman, OU nominated director • Advice and support to CEO • Influence on company approaching fund-raising, major transactions

15. Oxford Catalysts - The role of technology transfer • Isis Innovation • First disclosure 15 February 2001 • Project manager • Two project managers since inception • Dr Mairi Gibbs has managed since June 2002 • Decision to file patents • Three filed to date, all costs initially met by Isis • Seed funding • Management of the spin-out process

16. Avidex – Case Study • £1 million raised at start-up • Classic novel technology biotech drug discovery company • Business angels • University £100,000 • £10 million raised in 2000 • Seed investors delighted • Major ‘success story’ • No investors can sell their shares early • £11 million raised in 2002 • Aggressive terms from investors • One seed investor sells shares • Investors fund company with convertible loans c£10m • £5 million raised from Syngenta in January 2006 • Reduced valuation from 2002 • Severe dilution for ‘ordinary’ shareholders • Sold to MediGene AG for £37 million • Total investment £38 million

17. Observations and conclusions • Technology transfer plays a vital role in forming University spin-outs • Isis spin-outs have been successful in raising significant amounts of capital • The last three years have seen Isis spin-outs raising <£1m in first round funding • Venture capitalists will negotiate hard for their position (they have struggled to deliver good returns)

18. Contacts Isis Innovation Ltd Ewert House Ewert Place Summertown Oxford OX2 7SG T 01865 280830 F 01865 280831 E innovation@isis.ox.ac.uk www.isis-innovation.com