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Biotech…A Worldwide Overview Circa 2004

Biotech…A Worldwide Overview Circa 2004. G. Steven Burrill, CEO Burrill & Company January 21, 2004. What’s really happening in Life Sciences.

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Biotech…A Worldwide Overview Circa 2004

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  1. Biotech…A Worldwide Overview Circa 2004 G. Steven Burrill, CEO Burrill & Company January 21, 2004

  2. What’s really happening inLife Sciences • US Capital market puts $32 billion into biotech in 2000, $12 billion in 2001, $10 billion in 2002, and $16 billion in 2003 …looks like market volatility is beginning to subside… • Human genome sequencing is nearing final completion—Genotyping, SNPs, Functional Genomics, Proteomics—are redefining discovery and development…RNAi is hot…and will lead us to “personalized medicine • Life sciences product approvals are on the rise; hundreds of products now on the market

  3. What’s really happening in Life Sciences • Number of products in clinical trials are increasing steadily • Internet is ubiquitous…redefining access to information, businesses, business models, success factors, profits • Products, Revenues, Profits, Market Cap are all up • Challenges persist—GMOs, Cloning, Stem Cells, Gene Therapy—and the public continues to be interested, uninformed, confused, and volatile

  4. What’s really happening in Life Sciences • Bioterrorism: Government spending up (defense, health) — market needs diagnostics, vaccines, drugs • Agricultural biotech buffeted by industry consolidation and public perception (GMOs) • Industrial biotech emerges…energy, biomass conversion, biomaterials, bioprocess

  5. Biotechnology Definition OLD: Recombinant genetic engineering...using biological processes to develop products Life sciences…biology/chemistry technology affecting discovery and development of products for: • Human healthcare (therapeutics, diagnostics, drug delivery, cell and gene therapy… even moving toward some devices and drug/device combinations) • Wellness…not just sickness • Agriculture (food, feed, fibers, transgenics) • Environment (bio-remediation) • Bio-based industrial processes and efficiency • Bio-based energy • Supply (reagents, biologicals) NEW: . . . All driven by a new set of enabling technology (genomics, combinatorial chemistry, SNPs, proteomics, etc.)

  6. US, European, Canadian & Australian Biotech All numbers reported year-end 2003 unless otherwise noted Source: Burrill & Company, Ernst & Young

  7. Historical Biotech Market Cap

  8. Pharma vs. Biotech Industry ($B)

  9. Pfizer/Merck vs. Biotech……Valuation Misalignment • Pfizer/Merck • Combined 35+ (with merger of Pharmacia) products on the market (prescription drugs) • Combined 70+ products in the clinic and expect to send 26 new medicines and vaccines to the FDA for approval over the next 4 to 5 years • Combined 2003 (12 months trailing) revenue: $85 billion • Biotech Industry • 155 drugs on the market • >370 drugs in the clinic or awaiting FDA approval • Aggregate 2003 revenue: $45 billion

  10. Let’s dig a little deeper into 2003… what was really happening? • Technology • Regulatory • Products • Partnering/M&A • Finance and Capital Markets

  11. Innovation Gap Source: Pharmaceutical Research and Manufacturers of America (PhRMA), Burrill & Company

  12. Technology Science/technology continuing advance (perhaps even faster than expected)… • RNAi • Whole genome scanning • Stem Cells • Drug delivery …along with increased complexity and integration • Gene  Cell  System  Drug • Genomics  Proteomics  Metabolomics  Toxicogenomics  …

  13. The “Omic”ization of Biotech • Genomics • Functional genomics • Proteomics • Functional proteomics • Cellomics • Metabolomics • Toxicogeneomics • Pharmacogenomics

  14. Bringing us to: Network “omics” Computing/ Bioinformatics Nanotech Systems Biology • Telecom/ Media BT/Chemicals/ Pharma

  15. A New Revolution is Taking Place… Systems Biology • Taking whole-genome biology to the next level • Integrated understanding of cellular components and how they function to create biological systems • Computational methods and capabilities to better understand (and predict) complex biological systems…and their behavior • Understanding of how microbial and human cells respond to environmental changes • …integrating “wet” biology the “digital” biology

  16. Genomics Is Just the Start Target identification Target identification High through- put screens Functional genomics Genomics Proteomics Bioinformatics Nano- technology Detection systems KO Animal model Disease models EST Positional cloning Cascade analysis Robotics Transgenes Expression arrays Microassays Chemistry Combinatorial Chemi- informatics Chemical libraries Natural products Clinical development Development candidates Lead optimization Chemical “hits” ADME Scale-up chemistry Structure based design Chemi- informatics Toxicology Computational biology Source: Lehman Brothers

  17. The Technological Platforms Shaping the Evolution of Healthcare Massive Datasets Ubiquitous Computing Biotech and Systems Biology New Analytical Capabilities Mining, Visualization and Embedded Intelligence Grids, Sensors and Directed Decisions Distributed Computing and Collaborative Environments Large Scale Computing Carbon-Silicon Fusion/Hybrids Automation Engineering and Robots Rule-Based Design Principles Human-Computer Interface Technologies Materials Science Computational Biology Exploring “Biospace” Micro/Opto Electronics Source: George Poste

  18. Technology Platforms and Information Overload New analytical tools Data management tools Computational infrastructure • Empirical data flood • Diverse platforms • Poor quality control/ standardization • Poor standardization • Primitive data mining and visualization tools • Massive capacity shortfalls • Shortage of trained personnel • Lack of proactive planning for dynamic, scalable networks • High throughput • Massive parallelism • Scale and diversity • Poor annotation and curation • Customized software • Ad hoc, fragmented • Excessive customization • Public vs. private databases • Limited adoption of distributed computing/collaborative environments Source: George Poste

  19. Technologies Contributing to the Flood of Information Source: IBM Life Sciences

  20. Growth of Gene Discovery Source: National Center for Biotechnology Information, Genbank Statisitics. 12/1/99

  21. Human Genome Project Resulting InExponential Growth In Number of Drug Targets Source: Drews, Jurgen, MD., “Genomics Sciences and the Medicine of Tomorrow: Commentary on Drug Development,” Nature Biotechnology, Vol. 14, November 1996.

  22. Life Science Discovery Continuum, Circa 2001 High Throughput Screening Fully Integrated Bio Pharma Cos Functional Genomics Drug Developers Genomics Proteomics Amgen Incyte Large Scale Biology Luminex Human Genome Science Gene Formatics Gene Logic MDS Proteomics Arqule Phage Tech Genentech Cellomics Xerion Lexicon 3D Pharma Millennium Immunex Zyomyx Genset Tripos Curagen deCode Genetics Biogen Visible Genetics Maxygen Aurora Celera Chiron Myriad Genetics Diversa Spectral Genomics Reagent Kits Instruments BioInformatics Invitrogen Affymetrix Lion Third Wave Compugen Aclara Promega Rosetta Caliper Qiagen IBM Bruker AXS Teche DoubleTwist Applied Bio CHANGE Agilent

  23. Integration, Circa 2003 Functional Genomics Genomics Proteomics HTS Drug Developers Large Scale Biology AME Xerion Maxygen deCode Genetics Incyte GeneFormatics/ Structure Bioinformatics Several Move From Gene ‘r Us to Dx ‘r Us Celera Third Wave Illumina Sequenom

  24. …So What? • Are the technologies integrated? • Information overload • Lack of standards • Answer: Not really • Is development cheaper? • Does this make personalized medicine more probable? • Does this Rx/Dx profitability model change

  25. The Promise of Genomics • More rational drug discovery • Novel target discovery • Target validation and prioritization • Drug design (toxicology) • Faster drug development • Patient selection • Patient response • Targeted patient population • Greater likelihood of clinical trial success • Faster time to market • Reduced marketing costs

  26. Genetics and Molecular Medicine The impact of genomics and computing on healthcare will accelerate and progress through several phases… PHASE I: 5 Years • Dramatic expansion in diagnostic tests for existing disease • Identification of discrete molecular pathologies in major diseases (right prescription: right diseases)

  27. Genetics and Molecular Medicine PHASE II: 5–10 Years • Increasing number new prescriptions derived by rational analysis of molecular basis of disease • Identification of pharmacogenic markers for patient responses to prescriptions (pharmacogenetics) • New Imaging probes for dynamic assessment of body functions

  28. Genetics and Molecular Medicine PHASE III: 10–15 Years • Disease predisposition tests (PDx) for major diseases • Emergence of prophylactic treatments (PRx) for disease predisposition

  29. Genetics and Molecular Medicine PHASE IV: >15 Years • On-body/in-body devices for monitoring health status via molecular biomarkers • Gene replacement therapy (in utero + in life) • Therapeutic control of selective gene expression is situ • Regenerative medicine: reprogramming of “self” somatic cells to produce specific cell types for autografts

  30. Regulatory

  31. FDA Approval Times1993 – 2002 Months Source: FDA

  32. Drug Development Times 14.2 14.1 11.6 8.1 Source: Burrill & Company

  33. Priorities “change” at the FDA • New FDA Commissioner: Mark McClellan, MD, PhD • Former professor at Stanford Medical School • Former researcher at the National Bureau of Economic Research • Visiting scholar at the American Enterprise Institute • Member of the President's Council on Economic Advisors • McClellan Initiatives • Risk Management - FDA will minimize risk to U.S. consumers throughout the product life cycle - from research and development through production, distribution and use. • A Strong FDA - FDA will maximize return on its human capital by recruiting and adequately compensating the highest caliber scientists and health professionals to carry out its mission. • Counterterrorism -FDA will prepare for the possibility of terrorist attacks on the U.S. population, and respond rapidly and appropriately in the event of an actual attack. • Consumer Information - FDA will engage in a variety of activities designed to provide the best available information to consumers, patients and health professionals • Adverse Events and Medical Errors - FDA will accomplish this health care goal by collaborating to establish a comprehensive reporting capability with the cooperation of the health care community

  34. “McClellan Accomplishments” • DRUGS • Proposed Bar Codes for Drugs, Blood; New Adverse Reaction Reporting • New industry guidance on using pharmacogenomic information in product development -- encourages drug and biologic developers to conduct pharmacogenomic tests during drug development and clarifies how FDA will evaluate the resulting data. • FOOD & DIETARY SUPPLEMENTS • Announced a change in industry food labeling standards for manufacturers who want to make claims that their products help prevent diseases • Took action to help consumers get accurately labeled and unadulterated dietary supplements by proposing a requirement for good manufacturing practices (GMPs) in their manufacturing, packing, and holding • Announced action to discontinue the sale of dietary supplement products containing ephedra • TERRORISM & EMERGING DISEASES • New Security Guidance as Part of Operation Liberty Shield To Protect the Food Supply …established a 10-Point Program for ensuring the safety and security of the food supply • Comprehensive prevention program to stop BSE

  35. Products

  36. Important Product Approvals in 2003

  37. Declining Market Exclusivity

  38. Only 30% of Marketed Drugs Generate Sufficient Revenue

  39. Biotech is “On a Roll”… • More than 100 marketing approvals for biotech drugs and vaccines in last five years • Less than 40 biotech approvals in previous 13 years • Biotech blockbusters: • ReoPro (heart disease) • Enbrel (arthritis) • Remicade (arthritis) • Synagis (respiratory virus) • Rituxin (non-Hodgkin’s lymphoma) • Herceptin (breast cancer) • In 2003, ~18 new biotech products approved • There are more than 370 biotech products in clinical stage development

  40. Future Driver: Patent Expirations • Patent expirations loom for pharma’s blockbusters… increasing the urgency to turn to biotech for innovation and new drugs

  41. * Based on Global Sales ** Intron A losses likely more significant – undisclosed. Generic Erosion

  42. Top Biopharmaceuticals and their Biogeneric Status Source: IMS Healthcare, Burrill & Company

  43. …and the marketplace is changing too

  44. Aging…Is it a disease? • About 1.4 million Americans are in their 90s, and another 64,000 are 100 years old or older • Baby boomers represent 30% of the total US population • Per person, seniors consume about five times the drugs of their working-age counterparts • US pharmaceutical companies are developing more than 200 new medicines to treat diseases of aging

  45. Feel Good/Feel Better Drugs Product For Company Lipitor Lowers Cholesterol Pfizer Propecia Male Pattern Baldness Merck Renova Wrinkle Remover Johnson & Johnson Celebra Arthritis Pain Pfizer Sonata Insomnia Wyeth Evista Osteoporosis Eli Lilly Detrol Incontinence Pfizer Viagra Male Impotence Pfizer

  46. Marketplace Integration Payment Methods Fee for service Discounted fee for service Per diem Per DRG Package priced Capitated Payors Government Insurance Employer Suppliers Pharmaceuticals (Rx & Dx) Medical devices Disposal medical equipment Distributors Key Drivers Information Patient advocacy Cost reduction Types of Care Preventive/wellness Outpatient Dx & Rx services Inpatient hospital services Specialized inpatient services Restorative care/rehabilitative Sub-acute case Home health Long-term care Assisted living/residential Hospice Access Source: KPMG Report for PhRMA

  47. Practice of Medicine Databases,Applications Smart Cards Services Counseling Diagnostics Hospitals GeneticProfiling Today Tomorrow Drugs Disease Mgt.Protocols,Patient Info. Drugs

  48. Big PharmaIntegration/Dis-Integration • Big Pharma Combinations (Mergers) • Big Pharma Split Ups • Pharma/Biotech Acquisitions • Pharma/Biotech Strategic Alliances • Biotech/Biotech Combinations • Spinouts from Pharma/Biotech

  49. What’s Driving This Change • New technologies (systems biology…) • An aging population (US, Europe) • Consumers are consolidating • Managed-care • Little room for “me-to” drugs • Increased use of drugs vs. expensive hospital care • Greater interest/access to “healthy foods” (i.e., nutraceuticals), supplements, and “total wellness” • Virtual integration

  50. Vertical vs. Horizontal Integration Defines a 2-D space Marketing to consumers and managed care Detailing physicians Large scale production/packaging Different disease areas Different foci: disease managementoutcomes, research, drug delivery Different industries: Chemical, drugs, foods,fragrances, animal health Phase III trialsPhase II trialsPhase I trialsToxicity/pharmacology testingLead optimizationScreeningLead identificationLead researchChemical production

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