George Millstien, Managing Director, Cowen




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Video title: George Millstien, Managing Director, Cowen
Released on: February 12, 2013. © PharmaTelevision Ltd
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In this episode of PharmaTelevision News Review, filmed at AusBio 2012 in Melbourne, Australia, Fintan Walton talks to George Millstien, Managing Director at Cowen
George Millstien 's perspective: Present biotech market and financings
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here at AusBiotech, in Melbourne, in 2012. On this show I have George Millstien, who is Co-Head of Healthcare Investment Banking at Cowen Group, welcome.
George Millstien:
Thank you.
Fintan Walton:
Actually based in New York, but you are actually based in San Francisco?
George Millstien:
That's correct, head office is in New York but I am based out of San Francisco.
Fintan Walton:
Right, perfect because what I would like to do is talk to you about the general mood to the biotech in the moment as seen through your eyes.
George Millstien:
So what we were seeing is a real interest in biotech investing, so we are sitting here, it's nearly November 2012, year-to-date has been really terrific. So biotech indices in general which is what we track, as we track investment returns, have been up over 30% this year, which is really terrific performance. Broader market has also been pretty reasonable but really it pales into comparison of what we've seen in biotech, biopharma as evinced by the NASDAQ biotech index and some of the other industries that we track and we follow, and that's lead to a pretty healthy amount of new investment, particularly for follow-on offerings or for offerings for existing public companies, and that's where we've really seen most of the action this year.
Fintan Walton:
Right, rather than fresh new IPOs?
George Millstien:
IPO market has still been pretty challenged. So we've had a little bit more than a dozen IPOs this year, so while it's up a bit from last year 2011, it's nowhere near the historic numbers that we saw pre, the crash of 2008 or even before that if you went back to the genomics bubble period there were much, there were many more initial public offerings and what we've seen so far is it really hasn't quite caught up with the follow-on market.
Fintan Walton:
Right, so the mature biotech companies with some good new stories are capable of continuing to improve the market capitalization, able to raise additional rounds of finance?
George Millstien:
Clearly and attracting significant amounts of investment capital.
Fintan Walton:
Indeed, if we move back in to the earlier stage companies, the private companies which have not yet IPO, what's the mood there?
George Millstien:
Mood there it's a little bit more challenging. So there is less capital available for private companies staying private and a lot of that has to do with a little bit of retrenchment on the venture capital side. So we haven't seen as many early stage funders of private companies and it really is a bit of disconnect. So there has been, the things that we look at are healthy M&A activity, meaning there has been, there have been healthy exits and purchases of private companies, that has been taking place. There has been great fund raising for public companies, but the IPO market still remains somewhat challenged we would say.
Fintan Walton:
So how would you then summarize the, if you look at it from early stage companies through to mature companies, there is this dichotomy effectively between those two sides, so just looking at it say from a, not from an investment point of view, but just purely from a drug development point of view, the chances of society getting the best medicines, where are we left with in these current conditions?
George Millstien:
So it's very tricky to attract the early stage investment capital needed to first promote a new idea. It really helps if you've got an existing track record, you've got a management team that has shown that they can do that before, that's really about attracting investment dollars, that's probably the toughest piece, once you can actually get enough capital to show your way through to a proof of concept stage in humans, so you've actually got something that's demonstrated some efficacy in man, then you can really get follow-on capital, but that early stage is tough, so does this mean that society doesn't get some new drug that could actually be really beneficial, it's quite possible, yes, because the investment dollars and the length of that cycle are challenging for investors and they tend to put money into things that they know and understand.
Current investment trend in biotech
Fintan Walton:
Right, now let's just go back to the public markets again, because you've said they are buoyant, their performance is going well, I mean what is the underlying reason for that?
George Millstien:
Well there it's really been company performance and I would look at two specific areas. So first we have a number of companies that have been successful early stage companies and moved on to the commercial stage, number of examples, an anti-infectives and in oncology, where they have became the big companies of today, people like Celgene and CUBIST, just to pick two examples that started at from very early stage, very theoretical companies and are now multibillion dollar market cap companies who sell significant product that improves the health of the public, that's piece number one. Piece number two has been the acquisition of these companies by a large pharma. So what we've seen is and we've heard this in one of the talks today here at AusBiotech, a decrease in investment, overall investment by pharma, which is really the first time that we've ever seen that. So big pharmaceutical companies the budgets have actually gone down, what that's meant is it's not, there it's not a lack of need for new medicines and so they have been purchasing companies. Now if you are an investor both of those things are good for you in the public markets, you are buying companies at a premium, so you are doing well on your investments in the public markets when they get purchased by pharma and you've got companies that have made it all the way through to commercialization, both of those things are beneficial for the markets.
Fintan Walton:
And the nature of those companies are different to the other pharmaceutical companies, those target companies, often they are orphan focused or they got some speciality element to them?
George Millstien:
Absolutely. So in particular orphan disease, as you mentioned, has been something that has really taken the excitement of the investor community, and so what you've seen is when you've got a targeted therapeutic they can have a nice return and a registration path, this is very important, through FDA that is understandable by investors, those can really move on to have significant and very healthy lives in the public markets and then ultimately get acquired by a pharmaceutical. They are different, it's not big pharma trying to be all things to many, it's really targeted companies that are doing things very, very well within their sub-sectors.
Fintan Walton:
Right, so looking at that activity, looking at these companies, potential targets, do we see a trend where large pharmas are going to now just gobble up some of these smaller biotech companies, which are an amateur and have got their own product base?
George Millstien:
I think we will see that trend continuing, and it's been going on for quite some time. I think the other thing that we will see is larger biotech companies or companies that came from a biotech model that are acquiring smaller companies that are really more of their bretherin and they truly understand the nature of that innovation, and so if you take a company like Gilead for example in the Bay Area, where I am from, that has evolved to be a real dominant player certainly in HIV drugs, but they've also been acquiring companies in other areas, notably oncology and respiratory et cetera, and those have been large biotech buying small and mid-size biotech, that's a development that's been new in about the last five to seven-years, it's creating competition for pharma, we think that competition is very healthy for the environment of developing new medicines as well as for investment and we think that that trend continues as well.
Opportunities in emerging markets
Fintan Walton:
Right, the other component to all of this is are the emerging markets, and obviously now we are moving into areas where you are actually selling products rather than looking at innovation, as a source of innovation, what sort of impact do you think the emerging markets have in terms of investment in companies which are based let's say in the United States?
George Millstien:
So these are areas of real growth and it's has to do with the growth of the middle class and the private payer base primarily in those markets. So if you take the classic BRIC countries we are clearly seeing that evolution, it's a great market for new medicines. It's also true that in some cases they have disease and disease states that are distinct from what we have in the west and so you will start to see investments specifically designed to treat those disease states in places like say China or India that may be somewhat different from what we see in Western European and North American populations, all of that is ongoing growth.
Fintan Walton:
And is an opportunity obviously for biotech companies based in the US or in Europe?
George Millstien:
Or anywhere, I mean it's, I mean we are here in Australia I think this is a it's an opportunity here, you've got proximity to the pacific rim and an understanding as a trading partner that's even stronger than what we have in the US, and certainly would not be surprised to see a fair amount of that innovation come out of places like Australia, New Zealand, Israel, Western Europe and many other places.
George Millstien's views: Growth of biotech over the next five years
Fintan Walton:
So George when you sit in your San Francisco office and you try and visualize what do you see the world of the pharmaceutical, biotech world look like in the next say three to five-years, what do you see?
George Millstien:
Hope we see a big shift actually and more of a pronounced focus by biotech on research and innovation leading to sales and partnerships with drug companies, big drug companies, big pharma and big biotech and less of an emphasis on that sort of basic fundamental research at big pharma which is what we are seeing. We also see a real focus on targeted therapies, so not just orphan indications or well defined orphan disease, but sub populations within broader disease sets where through a genetic test or a biomarker you can tell and you know before you actually start developing a medicine or prescribing it that this is something that will work in the target population, that's probably what we've seen all along, I mean the efficacy results that you see in broad populations, sometimes in the 50, 60% range, but that's really probably telling you is you've got a sub population of about 50 or 60% that have some sort of genetic or biomarker that you are efficacious, we think we will see that targeted therapy development really be the rule of the day.
Fintan Walton:
George Millstien, thank you very much indeed for coming on the show.
George Millstien:
You are very welcome, thanks for having me.
Fintan Walton
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
George Millstien
Co-Head
At the time of recording this PTV interview George Millstien serves as Co-Head of Healthcare Investment Banking at Cowen Group. George Milstein is a Managing Director in the Health Care Investment Banking Group focusing on Biotechnology and Life Sciences. He joined Cowen from Wedbush Pacific Growth Life Sciences, where was Head of the Strategic Advisory practice. Previously, Mr. Milstein was the Head of Investment Banking, a shareholder and a member of the Executive Committee for Pacific Growth Equities. Prior to his experience at Pacific Growth, he was an investment banker with Robertson, Stephens & Company. Mr. Milstein holds a B.S. in Biology from the University of Southern California and a J.D. from the University of Arizona.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
Cowen
Cowen Group, Inc. is a diversified financial services firm and, together with its consolidated subsidiaries, provides alternative investment management, investment banking, research, and sales and trading services through its two business segments: Ramius LLC and its affiliates makes up the Company's alternative investment management segment, while Cowen and Company LLC is its broker-dealer segment. Its alternative investment management products, solutions and services include hedge funds, replication products, managed futures funds, fund of funds, real estate and health care royalty funds. Cowen and Company offers industry focused investment banking for growth-oriented companies, domain knowledge-driven research and a sales and trading platform for institutional investors. Founded in 1918, the firm is headquartered in New York and has offices located in major financial centers around the world.