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Business Models That Biotech Companies Employ

Business Models That Biotech Companies Employ. A. M. Pappas & Associates Francis J. Meyer, PhD Vice President, Enterprise Development KFBS Biotech Speakers Series November 25, 2002. Francis J. Meyer, PhD Vice President, Enterprise Development.

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Business Models That Biotech Companies Employ

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  1. Business Models That Biotech Companies Employ A. M. Pappas & Associates Francis J. Meyer, PhD Vice President, Enterprise Development KFBS Biotech Speakers Series November 25, 2002

  2. Francis J. Meyer, PhDVice President, Enterprise Development • PhD, Pharmacology, University of Maryland Medical School • Senior Management of 2 medical product companies • Associate Dean for Technology Licensing, Johns Hopkins University School of Medicine, 10 years • Associate Vice Provost for Technology Development, University of North Carolina-Chapel Hill, 5½ years • A. M. Pappas & Associates, 2 years • Life Science Venture Capital Fund Management & Advisory Services

  3. Presentation Outline • Mission of biotechnology companies • Biotech business models with examples • Linking financial models with business models • Regulatory or ethical concerns that could alter the business model • How does a technology itself influence the business model

  4. Mission of Biotechnology Companies • Varies • Focus on Human Health Companies • Using a platform to develop drugs

  5. Designing Drugs

  6. Leads to Drugs

  7. Drug Development - A High Risk Undertaking Time 10-15 years from discovery to market; patent life 20 years Cost $700 million + (includes costs of failures) Success 1 approval/ 5000 cmpds screened; 1 approval /5 cmpds entering clinical trials Return 3 in 10 approved drugs recover development costs

  8. Clinical Trials

  9. Genomics System Pathways Proteomics Cell Biology Life Science Development Cycle PATIENT MANAGEMENT THERAPEUTICS DIAGNOSTICS BIOLOGY COMMERCIALIZATION Screening Sequencing FDA Expression Target Validation Assay Development Target ID Human Trials Natural Extracts Lead ID Lead Optimization Preclinical Development Synthesis Compounds HTS FDA CHEMISTRY Discovery Development

  10. Business Models for Human Health Biotech Companies • Product Companies • Subscription Companies • Service Companies

  11. Product Companies • Product Company • Develop products through clinical trial stage • initial products partner with pharma • later products sell and market directly • Examples: Inspire, Panacos, Signase

  12. Subscription Companies • Subscription company • Develop genomics databases • Pharma subscribes to databases • Subscription fees • No downstream royalties • Examples: Millennium Pharmaceuticals, Inc., Incyte Genomics, Inc., Celera Genomics Corp., GeneLogic

  13. Changed Model • Most subscription companies have become fully integrated pharma or research companies • Wall Street less value for subscription-only companies • Examples: Human Genome Sciences, Inc., Millennium Pharmaceuticals, Inc., Incyte Genomics, Inc., Celera Genomics Corp.

  14. Service Model • Product is service • Full range of services to support pharmaceutical companies ideal • Technology know-how strong • IP less important

  15. Service Model • Contract Research Organization (CRO) • Full range of services to support pharma • Preclinical • Clinical • Regulatory • Post marketing • Production/Manufacturing • Specialty Testing • Staff, know how, databases are the assets • Examples: Quintiles, Piedmont Research

  16. Service Model • Chemistry Service Companies • Chemical Libraries, Scaffolds,Synthesis • Staff, Know How, Databases, Libraries, IP, Robotics are the Assets • Examples: Albany Molecular Research, Aurora Biosciences, Tripos, Synexis Chemistry & Automation • Smart Screening Companies • Development and Use of Proprietary Models ( animals & others) • Staff, Know How, Databases, Models, IP, Robotics are the Assets • Example, EnVivo

  17. Tool Companies • Product companies that sell tools, not as a service, but as a product • Example: Chip companies such as Affymetrix, Aclara, Caliper

  18. Development Companies • Development companies (Devco model) • In-license compound, take it through Phase II or III clinical trial • Out-license to big pharma • Downstream royalties • Example: Pozen Pharmaceutical, Inc., DevCo Pharmaceuticals, Inc.,

  19. Bioinformatics Companies • Service & software company • Variation under subscription • Many to categorize • Examples: Bioinformatics Group, Incellico, Divisions of IBM, SAS

  20. Linking Financial Models with Business Models • Business model independent of source of capital funding • Example: AlphaVax, Inc. • NCBC • SBIR • Foundation • Venture Capital • There is a point when co.may not want venture capital money • Very early stage

  21. Regulatory or Ethical Concerns That Could Alter Business Model • Drugs • Diagnostics • Medical Devices • Research Reagents/Tools • Stem Cell Research • Geron & Univ. of Wisconsin

  22. How Does the Technology Itself Influence the Business Model? • Platform technology • Products • Services • Databases / Tools

  23. Critical Factors in Start-Up • Management Team • Business Model • Technology

  24. A Company for Today • Profile: • Post Genomic • Rapidly Identify & Validate Disease-Causing Cancer Genes • High-Throughput Functional Cloning • Developing Data, Tools and Therapeutics • Treat Based on Individual Disease Profiles

  25. A Business Model for Today • Profile: • Combination of Subscription, Tools & Products • Logical Evolution of Income Producers Over Time • Strategic Partners from Day One • Several Sources of Cash & Conserve

  26. Today’s Fund Raising Climate • Cash is Very Hard to Get • Only the BEST are Obtaining Funding • BEST Management • BEST Business Model • BEST Technology • BEST Products • BEST Markets

  27. Conclusions • Constant change will continue • Biz models change to adapt to science change • Genomics, functional genomics, bioinformatics, proteomics, etc. • Which model is best????? • “ Morphing” • Management team • First 8 years of genomics will pale compared to next 25

  28. A. M. Pappas & Associates If interested in additional information contact: Fran Meyer at 919-998-3314 or fmeyer@ampappas.com

  29. Pappas Ventures I Portfolio • Aclara BioSciences (Nasdaq: ACLA) (Mountain View, CA) • Arena Pharmaceuticals (Nasdaq: ARNA) (San Diego, CA) • ArgoMed (Cary, NC) • Bio-Informatics Group (Cary, NC) • EBM Solutions (Nashville, TN) • Elitra Pharmaceuticals (San Diego, CA) • Nereus Pharmaceuticals (San Diego, CA) • Panacos Pharmaceuticals (Gaithersburg, MD) • Reprogenesis (acquired by Curis) (Nasdaq: CRIS) (Cambridge, MA) • Signase (Houston, TX) • Variagenics (Nasdaq: VGNX) (Cambridge, MA) • X-Ceptor Therapeutics (San Diego, CA)

  30. Pappas Ventures I Portfolio Aclara Biosciences biochip company developing microfluidic lab-on-a-chip technology with applications for genetic analysis, high throughput drug screening and clinical diagnostics Arena Pharmaceuticals biopharmaceutical company that has developed a technology to accelerate the development of lead compounds targeting G-protein coupled receptors ArgoMed company developing a proprietary, water-induced thermotherapy device and technique to address the non-surgical treatment of benign prostatic hyperplasia (BPH)

  31. Pappas Ventures I Portfolio Bio-Informatics Group company developing an innovative, proprietary 3-D biochip to enhance the capacity, efficiency, accuracy and automation of gene screening; NC State University EBM Solutions healthcare information company that provides evidence-based disease treatment protocols via the Web to physicians and patients; Duke, Emory, Mt. Sinai NYU, OHSU, Vanderbilt and Washington University Elitra Pharmaceuticals antimicrobial functional genomics company focused on the identification, development and commercialization of novel antimicrobial compounds that target essential gene products of pathogenic organisms

  32. Pappas Ventures I Portfolio Nereus Pharmaceuticals drug discovery and development company focusing on marine environments as a source of small-molecule compounds for the treatment of inflammation, cancer, and infectious diseases; Scripps Institution of Oceanography Panacos Pharmaceuticals drug discovery and development company focusing on novel antiviral compounds targeting the treatment of HIV, RSV and hepatitis; University of North Carolina at Chapel Hill Reprogenesis (now Curis) company developing in vivo tissue augmentation/ repair products; MIT and Harvard

  33. Pappas Ventures I Portfolio Signase cancer therapeutics company developing novel, small molecule inhibitors of a critical cell replication pathway to inhibit tumor growth; M. D. Anderson Cancer Center Variagenics pharmacogenomics company with proprietary gene variance detection technology anticipated to streamline drug development X-Ceptor Therapeutics biopharmaceutical company focused on research in the field of orphan nuclear receptors; Salk Institute, Baylor College of Medicine, UT Southwestern and Ligand Pharmaceuticals

  34. Pappas Ventures II Portfolio • Calyx Therapeutics Inc. (Hayward, CA) • Cognetix, Inc. (Salt Lake City, UT) • Dynogen Pharmaceuticals, Inc. (Boston, MA / RTP, NC) • Incellico, Inc. (Durham, NC) • NuVasive, Inc. (San Diego, CA) • Peninsula Pharmaceuticals Inc. (Fremont, CA) • Plexxikon, Inc. (Berkeley, CA) • Sensys Medical, Inc. (Chandler, AZ) • Syntonix Pharmaceuticals, Inc. (Waltham, MA)

  35. Pappas Ventures II Portfolio Calyx Therapeutics pharmaceutical company focusing on oral therapies for diabetes and inflammatory diseases utilizing natural plan extracts with demonstrated clinical activity in humans Cognetix biopharmaceutical company developing peptide therapeutics for the treatment of epilepsy, pain and anesthesia; University of Utah Dynogen Pharmaceuticals neuroscience-based drug discovery and development company targeting novel therapies for genitourinary and gastrointestinal disorders

  36. Pappas Ventures II Portfolio Incellico bioinformatics company developing proprietary solutions that will significantly streamline biological and genomic data mining and processing NuVasive medical device company that has developed a minimally invasive system for spine surgery Peninsula Pharmaceuticals pharmaceutical development company focused on in-licensing and developing clinical stage pharmaceutical products.

  37. Pappas Ventures II Portfolio Plexxikon drug discovery company that utilizes a structural proteomics approach to discover novel pharmaceuticals Sensys Medical developer of non-invasive technology for blood glucose monitoring Syntonix biopharmaceutical company focused on the discovery and development of innovative drug delivery technologies for improved administration of protein drugs and vaccines; Harvard Medical School

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