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From Research To Revenue

Rapid Testing for Animal Health and Agriculture, Food Safety and Public Health. From Research To Revenue. Executive Summary. Safeguard Biosystems (SGBio) is commercializing platform technologies for rapidly detecting the presence or absence of illness and disease causing agents.

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From Research To Revenue

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  1. Rapid Testing for Animal Health and Agriculture, Food Safety and Public Health • From Research To Revenue

  2. Executive Summary • Safeguard Biosystems (SGBio) is commercializing platform technologies for rapidly detecting the presence or absence of illness and disease causing agents. • Platforms being commercialized include: • 3-D Gel Biochips and Sensor Arrays • Lateral Flow devices • Optical, Silicon based Biosensors • Applications of our products are in animal health, agriculture, food safety, environment and public health. • SGBio is focused on systems that detect DNA, RNA and proteins at a molecular level with minimal laboratory equipment and handling. • Tests can now be done in minutes or hours rather than days or weeks. We refer to our solutions as Decision Point Diagnostics™. • The company produces portable Syndrome Biochips, “Pocket Diagnostics™”, and High Throughput Systems.

  3. The Issues • Global trade has opened new ways for pathogens to enter countries. • Global warming is causing tropical diseases to move northward • Industrialization intensification of agriculture causes disease intensification. • Recent food stuffs and products contamination have led to international trade concerns. • Agricultural market entry strategy allows for technology development with income prior to move into human diagnostics. • There are massive, unexploited niches we have discovered in agriculture and food. • Changes in consumer habits will require a dramatic increase in testing.

  4. The Company • Developed business concept, plan in 2004 with U. of Texas. • Incorporated in 2005 • Signed small license agreement with Argonne National Laboratories, U. of Toronto. • Signed license agreement with U. of Toronto. • Raised $750K financing. • Finance in 2006 • Signed Development & License Agreement with Veterinary Laboratories in UK. • Secured lead investor in UK. • Registered Safeguard Holdings in the UK. • Bid successfully for purchase of UK Government spinout, Forsite Diagnostics (cash + shares). UK Government took a 2% equity position. • Raised $10.0M Series ‘A’ Preferred financing, 50% from UK, 50% from Canada. $30M post-money valuation. • Expanded Argonne License Agreement, they took a 3% equity position. • Becoming a real business in 2007 • Extended IP with Freiburg technology. Established small manufacturing centre. • Began marketing plant test kits (30 in total). • Developing first livestock test kits (AvianGuard™, CattleGuard™, PorcineGuard™, FIT™ • Developed first Human Test. HPV Screen. • Revenue beginning, will do $1-2M for fiscal 2007

  5. Partners & Relationships • Licensors of Technology, R & D Partnerships: • Argonne National Laboratory, USA. • Institute of Microsystem Technology (IMTEK), University of Freiburg, Germany. • Central Sciences Laboratory, UK. • University of Toronto, Mississauga. • Veterinary Laboratories Agency, UK. • Aurora Photonics, USA. • Canadian Centre for DNA Barcoding. • US Department of Agriculture, Berkeley. • Safeguard Offices: • London, UK. (3) • York, UK. (15) • Toronto, Canada (5) • Freiburg, Germany (2) • Calgary, Canada (1) • Palo Alto, USA (1)

  6. Research To Revenue Success Factors • Quit your day job. • Be fanatical about conserving resources. • Think globally, act globally. Practice good corporate citizenship in your target markets. • Have a Backup Plan for everything. • No one knows a thing about valuation. You have to make your own valuation.

  7. Think globally, act globally Practice good corporate citizenship • Deciding not to be a Canadian Company: • Companies are valued higher outside of Canada. • There is more investment capital outside of Canada. • You will be more “loved” outside of Canada. • The experience will make you a much better company. • Decide to invest something in every foreign major market: • Look for partnerships, licenses, R&D with leading institutions. • Personally commit the company to contribute something back to those markets. • Motivate your partnership to make introductions to revenue opportunities. • Learn the local financial community: • Lawyers, accountants, government “entrepreneurial” agencies, brokerages • Provide “success fees” for contacts. Legal work, etc. • “Work it”. Plan on spending 1 year. Having a local business partner helps.

  8. Why getting investment is tough • Investment Competition • Energy, Mining, everything else Harvard Business Review

  9. No one knows a thing about valuation You have to make your own valuation • There are three classes of “investors”: • Carnivores. These are typically resellers. Early public market plays. They buy at wholesale, sell at retail. They are very fleet of foot, but can be deadly. • Herbivores. These are Venture Capital, labour - sponsored funds, etc. They graze for investments. Incredibly big and slow moving. • Omnivores. Rare in Canada. Private equity, diversified or special situation funds. Flexible, smart, invest their own capital along with other investors. Tough to find the right one. Can often become a Carnivore or Herbivore. • Find believers in you and your business. They will be your investors. • People invest based on their past personal experiences, good and bad. Find out what these are. • Rule of “10” applies to valuations: • To sell a 10¢ share, YOU need to sell $1.00 of value visibility. • To sell a $1.00 share, YOU need to sell $10.00 of value visibility. • To sell a $10.00 share, YOU need to sell $100.00 of value visibility. • Establish a valuation base in the Angel Round - “Tied Investment” • Commit early investors to two rounds of financing tied together. • Define appropriate expectations and milestones along the way.

  10. Safeguard’s Share Structure Today • Board Makeup - 4 management, 1 investor nominee • Future Financing • Interim (pre-IPO) round late ‘07, early ‘08 ~ $2.50 - $4.00 • IPO late ‘08

  11. Other Financing Factors • The “Indiana Jones” warehouse of IP. Do the diligence and buy with a little cash and a lot of stock. • Make it “strategic”, connect the IP to the important issues in the country. • UK, Canada, cattle • Germany, cancer • USA, everything • Foreign currency competitiveness in R&D. • You would be surprised by some places in Europe and the USA. • EG. European Universities R & D is subsidized and low overhead (cost + 5%) • US Government R & D (cost + 5-15%). • Always, always, tie a portion of the acquisition price of a company to some level of performance. It will cost you less.

  12. Richard Strafehl • rstrafehl@sgbio.com • North America (647) 200 6944 Registered number: 5813853 Registered address: St Alphage house, 2 Fore St, London EC2Y 5DH

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