The Business of BiotechOctober 16, 2006

Lynne Zydowsky Zydowsky Consultants

Agenda

• Overview of the Biotechnology Market– Industry overview and critical issues – Current and future markets/disease indications– Economics and risks of drug development – Future drivers of the Industry

• Viable Business Models and Strategies– Business models and value creation– Developing a commercial plan and effective strategy– Financing the entity: venture capital, partnerships, M&A

• New Opportunities• Case Study

– Academic scientist to successful entrepreneur - Ramon Felciano, Founder and CTO of Ingenuity Systems

• Discussion

-Industry overview and critical issues

-Current and future markets/disease indications

-Economics and risks of drug development

-Future drivers of the Industry

Overview of the Biotechnology Market

Biotechnology Industry: Year 2006• The Biotech Industry started in San Francisco (Genentech

‘76) and Boston (Biogen ‘78). Today these areas still have the largest biotech clusters.

• To be perceived as credible today companies must have products in the clinic and corporate partnerships.

• Investors are far more risk adverse and would rather pay more for a later stage of development.

• Continued high hurdles in raising capital with a greater emphasis on speed to POC and market.

• Emergence of new financing paradigms (M&A, hedge funds, private equity, reverse mergers…).

• Continued issues with regulatory approval for new drugs.

Biotechnology: Science-based Business• One of the biggest challenges still remains the melding of

scientific entrepreneurship with “commercial reality” and making science a profitable business.

• The Genentech Model for Monetizing IP:– Transfer of university technology to the private sector for

company creation.– Venture capital and public equity markets funding

critical stages while rewarding those who take risks.– Creation of a market for know-how (scientists provide IP

and intellectual capital) to established enterprises in exchange for funding.

30 Years of Genentech• 1976 founded based on recombinant DNA technology

developed by Herb Boyer with VC Bob Swanson.• 1978 established partnership with Eli Lilly:

– In exchange for marketing/manufacturing rights, Lilly funded R&D for recombinant insulin and paid royalties to Genentech.

– Marked Pharma’s first outsource of a proprietary program to a for-profit entity.

• 1980 IPO raised $35M and allowed for vertical integration.• 1982 Insulin, 1st rDNA drug on the market.• 1985 Protropin,1st rDNA drug marketed by a biotech.• 1990 $2.1B merger with Roche (56% ownership).

Amgen vs. Genentech

Biotech Companies

Biotech’s Booms and Busts

Burrill & Company, Life Sciences: A Changing Prescription

IPO Market: 2003-2006

Pharma vs. Biotech Market Cap

Pharma vs. Biotech Market Cap

Selected Biotech Mergers

The History of Biotech

Generations of Drug Discovery

Burrill & Company, Life Sciences: A Changing Prescription

Genomic Revolution• 1988 Congress funds Human Genome Project• 2000 first human genome sequence published• Movement towards development of Dx for identification

and molecular pathologies of disease

• Greatest future impact of genomics may be cases where this knowledge will enable us to:– more selectively choose therapies– understand disease at a molecular level– select patients for clinical trials increasing the efficiency

of drug development

Personalized Medicine

Systems Biology Revolution• Computational methods and capabilities allow for a better

understanding/prediction of complex biological systems• Development of molecular, cellular, tissue, organ, and

whole-body systems-level model will allow for a better understanding of disease mechanisms and create the ability to test putative therapeutic targets

Integration of “omics” information systems biology, the basis for the body to be viewed as a whole working system

Disease Indications• Current market focus on:

– Cancer, CV, anti-inflammation, CNS

• Future markets indications with emphasis on:– Memory and Alzheimer's– Anti-aging– Obesity and obesity related diseases (diabetes, heart disease,

hypertension, stroke…)– Anti-infectives and pandemic disease– Wellness or preventive medicine

• Niche markets– Genetic disorders and life threatening diseases (priority review)– Targeted therapies

15 Top $B Blockbuster Drugs

Top 20 Biotech Drugs

• =

Burrill & Company, Life Sciences: A Changing Prescription

Blockbuster Model: Multi-billion $$$ Drugs• Focus on R&D to discover the next blockbuster drug• Dominate therapeutic category and necessitate large

sales/marketing force• Majority are “me too” drugs and will soon be off patent

Blockbuster Model: Issues• In the last decade the Pharma industry has been predicated on the

blockbuster making it one of the most profitable industries and enabling large R&D spends.

• Approx 80% of growth of the Pharma industry came from ~ 8 drugs in the last 10 years.

• However the impact of the recall of Vioxx is an example of how something like this can dramatically decrease revenues coupled with the impact of lawsuits.

• Growing concern that going forward healthcare will only pay for 1-2 drugs in each class.

• Future drugs will be based on smaller markets and more targeted therapies in hopes to protect themselves from damaging effects of recalls.

• There is a shift away from blockbusters. Only 33 of the top 200 drugs are of blockbuster status.

• This will call for more stream lined approach to R&D with a focus on fewer disease areas and more strategic partnerships.

Industrialized R&D

Harvard Business Review Oct 2006

Attrition in Drug Development

Risks and Uncertainty of R&D

2001 Nature Publishing Group biotech.nature.com

Drug Development Costs

Burrill & Company, Life Sciences: A Changing Prescription

R&D Costs

Harvard Business Review Oct 2006

Innovation Gap

Burrill & Company, Life Sciences: A Changing Prescription

Escalating Costs for R&D

• Increasing R&D costs are due to:– Increase clinical trial size, inefficiency of the process and misguided

strategies (blockbuster vs. science driven development)– Enormous development costs ~ $800M - $1B– Long development times ~ 8-12 yrs from discovery to NDA– High attrition rate ~ 9 of 100 preclinical drugs get approved– Failure rate in Phase II has increased from 35 to 50%– Partial efficacy in patients ~40 – 60% and potential for adverse

effects– Shortened life due to followers and generics

Increased expenditures do not necessarily yield better drugs nor better returns

Summary: Future of Drug Discovery

• Rising costs of R&D, coupled with a decline in productivity, resulted in a decrease in return on investment.

• Genomics will impact the model of selling one drug to millions (blockbuster) vs. selling limited more specialized drugs to selected populations (predictive medicine and targeted medicine).

Future of Drug Discovery: Biological Centric

Regulatory Approval: FDA• 2005 was a politically charged year at the FDA and the fear overall

is that the FDA is becoming a highly politicized organization.• Struggling (since 2000) with lack of leadership and long term vision

– McClellan, Crawford, and Von Eschenbach. • The McClellan era fostered an environment conducive to innovation

and collaboration between the Industry and FDA. Now we have returned to the “regulator vs. industry” mentality with concerns about collaborations due to conflict.

• Issues re drug safety were center stage with the removal of Vioxx and have forced the FDA and companies to become more proactive and now include submission of risk management plans.

• Currently there is a 50% (vs. 30%) failure rate in phase III. Is this the result of conservatism of the reviewers or the Industry submitting poorly documented applications.

• Focus on life-threatening disease allows for “Priority Review”However there is the need to understand the risk/benefit balance of therapy (removed and returned, Tysabri).

Nature Biotechnology February 2006

Personalized, Predictive & Preventative Medicine

FDA Pharmacogenomic Submission and Critical PathInitiative (established in 2004 by McClellan) are gearedtowards more effective and targeted medicines.

Selected Targeted Treatments- Personalized cancer vaccines- Gleevec (Novartis)- Iressa (AstraZeneca)- Tarceva (Genentech/OSI)- Erbiutx (Imclone/BMS)- Avastin (Genentech)- Herceptin (Genentech)

Regulatory Approval: FDA• Establishment of Interdisciplinary Pharmacogenomics Review

Group (IPRG) to review genomics data outside of the clinical review process under the Voluntary Genomics Data Submission (VGDS). Data ranges from preclinical signatures to phase 4 data. This agency may be the “bridge” between the regulators and the Industry.

• IPRG drafted the 2005 Drug Test Co-development Concept Paper for parallel development of drugs and diagnostics. IPRG’s position is biomarkers are critical at earlier stages of development. Feedback shows a gap between the agency’s view and industry reality.

• Prescription Drug User Fee Act (PDUFA, designed to foster new initiatives) is up for renewal and will probably include drug safety and monitoring. Bottom line, drug safety goes beyond regulatory approval.

Nature Biotechnology February 2006

Drug Approvals: Trends 2005 - 2006• Key trend in 2005 approvals. 2005 provided no sign of recovery in

productivity and was marred by regulatory uncertainty. The year was punctuated by setbacks to development time lines brought on by the need for further clinical safety data; approvals conditional on the production of post-marketing safety data; approval failures; and restrictions placed on the marketing of certain products. The significant volume of black-box warnings issued was also a stark reminder that marketing approval does not guarantee success.

Key trend in 2006 approvals. 2006 depends on how regulators manage the tension between addressing product safety concerns and the need to support innovation and reduce the time drugs take to reach the market. The industry is waiting to see what balance regulators strike between risk and benefit, particularly for 'first in class' candidates. Stakeholders will also watch how the FDA will provide its critics with assurance of its ability to function without conflict of interest while working alongside the industry to progress projects such as the Critical Path Initiative. Ultimately 2006 must provide greater certainty over the future state of the regulatory environment, or confidence will be further undermined.

•Leland Gershell, SG Cowen & Co

FDA: The Critical Path Initiative• In 2004, the FDA launched the Critical Path Initiative, intended to

promote research into ways to help drugs clear the hurdles of demonstrating efficacy and safety more quickly and cheaply. The initiative's latest report, released in March, includes projects to speed drug development, such as developing better disease models and developing surrogate markers to measure drug efficacy more quickly. But the most far-reaching and revolutionary aspect of the report is the FDA's embrace of the idea that the way to get more drugs approved is by “tailoring therapy” to each patient.

• Although tailored medicine might increase the number of drugs that make it to market, how it will affect the drug-making business seems unclear. Drug approval might be made faster and cheaper, but the number of patients that can be treated by any particular drug will be smaller. Will this threaten the development of billion-dollar blockbuster drugs, and can Pharma survive without them? Will tailored medicine open up new opportunities, such as in biomarker tests, which can compensate? Nature Medicine 12, 481 (2006)

Value of Healthcare: Bench to Bedside

BioCentury Sept 2006

Pricing: Cost of Goods

BioCentury Sept 2006

Pricing Models for Drugs: What is Fair?

BioCentury Sept 2006

The Influence of Managed Care

Biogenerics

Burrill & Company, Life Sciences: A Changing Prescription

The Reimbursement Issue• 125 million Americans have at least 1 chronic disease• Chronic disease accounts for ~ 75% of all healthcare costs

with current costs for chronic disease approaching $1trillion• By 2015 annual healthcare costs will be ~ $4 trillion with $1

in every $5 dollars spent on healthcare• Generics will become more part of the solution to lower

prescription drug-benefit costs• Healthcare issues are on everyone’s agenda

Companies need to start factoring in the likelihood of reimbursement prior to approval by the FDA

Summary: Economic Risks of R&D• Rising costs of R&D coupled with declining productivity• Regulatory issues associated with drug approval

– 14 NCE’s were approved in 2005 ave time 13 – 16 mo’s– 37 black box warnings given to drugs in 2005 – Vioxx, Bextra and Tysabri withdrawn in 2004/2005– 9 blockbuster drug patents expiring in 2005 and 2006– Continued change in FDA due to organizational (need

for leadership and vision) and operational issues.• Social and political pressures on pricing• Price pressures of managed care• Competition from generics

Future Drivers of the IndustryRegulatory ChangeDx, Theranostics, BiomarkersFDA Critical Path Initiative

Technology ChangeEnabling and DisruptingTechnologies & Systems Biology

Manufacturing ChangeBiologics

Market ChangeGenericsPricing and ReimbursementNew Markets (Aging, Obesity Regenerative Medicine, Anti-infectives)Personalized/Predictive MedicineMolecular DiagnosticsBiomarkers

R&D

-Business models and value creation

-Developing a commercial plan and effective strategy

-Financing the entity

Viable Business Models and Strategies

Common Issues of Emerging Companies• Positioning the company in the context of today’s

market (consideration to current and future drivers)

• Financial challenges ($$ and valuation)

• Lack of Infrastructure and minimal staffing (many with little to no start-up nor business experience)

• Parallel tracks with multiple goals

• Need to focus on value-add milestones

• Potential for founder issues, ensuring continued creativity and opportunities for contribution

Building Value in Emerging Companies• Strength of intellectual property

– Originates from universities and companies or generated in-house– Strength of IP -> patentability + freedom to operate– Developing an IP strategy integrated with overall business strategy

• Strength of technology and science– Products (sm molecules, proteins, biologics, genes), platform, drug

delivery, devices……Everything rests on the data• People

– Management, founders, investors, board of directors, scientific advisors• Commercial strategic plan

– Defining the opportunity and need and other issues (e.g. regulatory)– Assessing the competitive landscape (e.g. niche market, time to market)

• Operating plan and budget– Defining the value-add milestones (milestones to $$), revenue generation

(near/long term), and looking “over the horizon”• Financing strategy

– Defining a strategy and identifying investors for this stage and type of company.

Definition of Success

• Develop new medicines Molecules in man and a better way to discovery Improved drugsand develop drugs

• Build a lasting Sustainable pipeline company and balanced

portfolio

• Create significant 3-10X returns in shareholder value 5+yrs

Value Creation

Valuation

• Valuations must be consistent with engaging entrepreneurial instincts as well as be realistic.

• Timelines and key value-add milestones must be consistent with the “hockey stick” valuation curve.

• Investment size must be commensurate with true needs– Balance financial risk with leadership risk– Balance financial risk with starvation risk

-> Are we heading towards a new model for private equity financing? Old model to invest $100M with 5-7yr return vs. new to invest $250M+ with 10yr return.

Creating Value and ROI

BioCentury Sept 2006

Biotech Development Stages

Business Models: Defined By Product

• Drug development or therapeutic area driven– Drug discovery and development focused on therapeutic

areas (e.g. Anacor, Millennium)– In-licensing late stage drug development plays (e.g.

Cerimon, Jazz)• Technology platform

– breadth and depth (e.g. Alnylam, Millennium)• Instruments and reagents

– (e.g. Affymetrix)• Diagnostics

– (e.g. Celera)

Therapeutic Area: Anacor Founded 2002

Anacor: Commercial Strategy• 1997 DARPA grant funded the initial research.• Shapiro’s (Stanford) discovery of an essential gene in

Gram-negative bacteria, a novel target for antibiotic drug development, coupled with Benkovic’s (Penn State) inhibitors of the target, novel boron-containing compounds, formed the basis of Anacor's proprietary technology.

• Founded in 2002 based on capital from a “non-dilutive”source - $21M DARPA and USAMRIID contract

• Additional capital raised in a VC-based financing totaling $7M in 2002 and $25M in 2005.

• Sole focus in area of infectious disease.• 2006 value creation in 4 yrs from inception with Phase II

demonstration of efficacy in lead compounds

Drug Development: Cerimon Founded 2004

Raised $70M in Series AWith a focus on:- Expanding markets- Expand indications- Expand pipeline

MLNM: Early Business Strategies• Millennium’s strategy in moving from platform-based

to product-focused was “by design”.• The transition to drug developer was done with 3 major

strategies:– Generation of revenue (near term) from strategic

alliances based on target discovery and licensing of platform technology in >20 collaborations and >$2B of “committed funding” in revenue.

– Royalty-based revenues (long term) on drugs created by partners with Millennium’s targets and technology and candidates discovered and sold to partners.

– Generation of a drug pipeline (building a sustainable business) by internal discovery and development and M&A

MLNM: Commercial Strategy• Founded in 1993 with IPO in 1996• Generated $2B in early partnership revenue• Raised $400M in convertible debt and $768M in a

secondary offering in 2002• Acquired by M&A: Leukocyte (Velcade), Cambridge

Discovery Chemistry, COR (Integrilin)• Established franchises in oncology, inflammation and CV• Velcade was launched in 2003 and generating $143M in

revenue by 2004• Executed co-promotion agreements for: Velcade with J&J

and Integrilin with Schering-Plough

MLNM: Platform to Fully Integrated

>$700M in cash -> more M&A in 2006?

Platform Technology• Enabling platforms have both the “breadth and depth”• Perform feasibility studies to assess potential and allow for

the generation of data to fully leverage the platform• License access to all data and/or technology• License or partner off plums to fund further development of

the platform and drug discovery programs• Retain option to keep some programs for conversion to

drug discovery and development model (e.g. early Millennium, Exelixis, HGS, and Aurora)

Platform Technology• Broad platform creates multiple product opportunities and can be

highly leveraged to raise money (MLNM, ALNY)• Platform must produce enough products to sell/partner + keep to

develop as internal programs

Platform: Alnylam Founded 2002

ALNY: 2004 IPO

Enabling Technology: Novartis-Alynlam

ALNY: Summary of Commercial Strategy

• Founded in 2002 to discover/develop therapeutics based on RNAi

• Raised $17M in Series A/B + add’l $24M upon acquisition in 2002

• Completed IPO in 2004 for $34M• 2005 landmark Nature paper showing systemic delivery

and efficacy in primates • Executed partnerships with: Merck (2003), Medtronic

(2005), Novartis (2005), Biogenidec (2006), NIAID (2006) $23M contract for biodefense + licensed technology

• Established programs in oncology, RSV, pandemic flu, CF, neuropathic pain, Parkinsons, CNS disease……..

Reagents: Affymetrix

AFFX: Founded 1991

AFFY: Business Model• Initial strategy was a “value-based” pricing model that was

royalty driven. Issues were both internal due to deferred cash flow and external due to resistance from customers re the “reach-through”.

• Revised model was “fee based” using a NPV calculation based on projected revenue from royalties– Initial model consisted of large upfront ($2-4M) +

reasonable fee for easy access to other products. Resulted in early cash flow, but also created “cap” on the value of reagents.

– Moved to model with variable fees based on cost + “value of information”, i.e. information content of chip.

Diagnostics: Celera Founded 1998

CRA: Founded 1998• Founded in1998 by C Venter • 1999 begin sequencing the human genome and pioneers

“shotgun” sequencing • 2000 subscription-based model for its genetic database

and announces completion of human genome• 2001 Celera founds “Celera Diagnostics” and acquires

Axys Pharmaceuticals (sm molecule drug discovery)• 2002 FDA approval for HIV genotyping test• 2004 strategic partnerships: Abbott, Seattle Genetics, GE • 2005 Celera discontinues genetic database subscriptions• 2006 Celera Genomics merges with Celera Diagnostics

Diagnostic Market• IVD industry will play a prominent role in healthcare

decisions due to molecular diagnostics and molecular imaging.

• 2005 WW market is ~ $36B with US accounting for ~ 43% of the revenue and Europe (26%), Japan (10%) and rest of world (22%).

• US demand is expected to grow ~6% annually to $17.9B by 2009

• Clinical diagnostics are divided by: – Dedicated Companies (BD, Beckman Coulter), – Pharma (Roche, Bayer, Abbott, J&J), – Biotech (Affymetrix, Third Wave, Gen-Probe)

Access To Capital Markets

• Venture capital– Seed stage -> full rounds

• Hedge funds ($1 trillion under management) or other public (mutual) funds and private equity players

• Quasi-public or “big brother” (e.g. Genentech + Roche)• M&A including acquisition of early stage technology (e.g.

Amgen + Avidia) • IPO, market barrier to entry remains high.

– 1st US company to do IPO in Japan Medici Nova raised $107M• Reverse mergers (e.g. Infinity + Discover Partners)

Jazz Raises $250M Financing

- Financing: a mix of VC, private equity, healthcare funds, private investors……

US IPO Market

Infinity Completes Reverse Merger

- Financing: a mix of VC, private equity, healthcare funds, private investors……

Capital Raised

Corporate Partnerships: What’s Needed

Partnering: Pharma and Biotech

Strategic Alliances: Jun 2004 – Jul 2005

Corporate Partnerships

Summary: Building Companies• Emerging companies need:

– Strong IP, solid technology, and good data– World-class team– Well thought-out commercial strategy and

operating plan– Near-term and long-term financing strategy

with realistically aggressive value-add milestones

– Maintain flexibility and awareness of the external environment

Building Companies in Canada: Issues• People

– Entrepreneurs and management with little to no biotech experience

• Money– Access to capital markets and VC funds

outside of Canada– Lack of NIH or SBIR like funding and other

early stage money to support research longer in academic environment

New Opportunities for Biotech

- Personalized medicine, molecular diagnostics and biomarkers and theranostics (DxRx)- High through-put technologies to sequence genomes- RNAi as a new modality- Infectious disease and the emerging field of biodefense- Regenerative medicine and stem cell research- Next generation of protein therapeutics- Synthetic biology, Green Biotech and Nanomedicine- And more…………

Genomics, Genetics and Modern Medicine

Molecular Diagnostics

Burrill & Company, Life Sciences: A Changing Prescription

Diagnostics Value to Therapeutics: DxRx• Product Differentiation

– Better clinical information– Greater efficacy– Less adverse effects– Improved dose benefit– Improved risk benefit and health economics

• Market Expansion– Improved diagnosis– Increased compliance– Rapid growth in: cancer, CV, genetics, diabetes,

infectious disease

Rapid Sequencing: The $1000 Genome

-Sequencing of individual genomes, a key resource for personalized medicine-Solexa, 454, Pacific Biosciences, Helicos – all novel sequencing technologies

RNAi: A New Therapeutic Modality

Antibacterials: The Unmet Need• The emergence of resistance has brought the Industry to

the point of requiring a paradigm shift in how antibacterials are developed and brought to market.

• There needs to be a better vision of the importance of antibiotic resistance, this is becoming a public health concern.

• Prioritization of resources away from R&D efforts focused on the development of antibiotics, due to a shift in business strategies, have been driven by the lack of commercial value in lieu of treating chronic diseases (the blockbusters).

• There is a critical need for re-engagement of Pharma directly or in partnership with biotech to address this problem.

Antibacterials: The Need for Better Drugs• 2003 Project Bioshield developed a 10 year, $5.6B initiative for the

research and development of biocounter measures.• Recently, the ISDA (Infectious Disease Society of America) called

on Congress to launch Bioshield II to address the need for new anti-bacterials.

• Tax breaks, patent extensions are other incentives (money from the DOD) are being established in an effort to get the Industry back into this field.

• Pharma wants broad spectrum drugs which have highest probabilityof resistance (and commercial success). Inadequate diagnosis also necessitates the use of broad spectrum reagents.

• Biotech companies are approaching this area with new creative strategies, targets and other tools yielding many novel new antibacterials in clinical development. Strategies to leverage government funding can be an effective means to financing R&D.

The Evolving Field of Biodefense

Stem Cell Research Breakthroughs

1993US split embryos to create Genetically identical twinsAnd grow to 32 cell stage

1996Dolly, the sheep iscloned from adult cells

1972Transplantation of frogEmbryos into unfertilizedFrog eggs – British clone frogs

1998US clone 3 generations of mice from adult cells

Aug 2001Bush allows limited funding of stem cell research using stem cell lines already derived

Nov 2001Scientist at US biotech cloneHu embryos by replacing eggnuclei with mature nuclei from adult cells

Stem Cell Research Breakthroughs

2004Hwang from South Korea announced cloning of 30 human embryos

Feb 2005Intro of Stem Cell ResEnhancement Act of 2005. Bill would require NIH to fund stem cell research. Lawsuits filed.

Dec 2001US scientists clone firstcloned pet - cat

May 2005San Francisco chosen asHeadquarters for CA $3B stem cell initiative

Aug 2005Hwang announced 1st cloned dog and 11 stem cell lines from skin of individual patients

Oct 2005Senate pushes back debate On Stem Cell Res Enhancement Act of 05 to 06

StemCells receives clearance from FDA to begin phase I trials To Tx Batten disease. Uses HuNeural stem cells as potentialTherapeutic agent

Stem Cell Research Breakthroughs

Feb 2006International consortium on stem cell ethics law produces guidelines

Dec 2005Investigation of Hwang’s work finds fabricated data

Oct 6, 2006CIRM in CA announces 10 yr strategic plan for $3B including how initial $150M will be allocated

Nov 2005Establish CIRM in SF, CA

Hwang admits using eggsFrom paid donors and members of his team, resigns position

Regenerative medicine and stem cell research

Sept 2005Till & McCullough win the Lasker Prize for experiments that first identified a stem cell.

The Future of Biologics• Pharma has historically focused on sm molecules. This will change

with ~60% of revenue growth forecast to come from biologic products (therapeutic proteins and monoclonal antibodies)

• By 2010, annual sales of biologics will have increased by $26B (compared to a $13B increase for sm molecules)

• Within the Pharma peer set, the revenue growth rate to 2010 forecast for biologics is a robust CAGR of 13.0%, outstripping the near-static CAGR of 0.9% predicted for sm molecules - depressed by exposure to intense generic competition

• Pharma has assumed a strong position within the antibody market, a major attraction being the total absence of generic risk. In contrast, bio-similars are an emerging threat for members of the therapeutic protein class

• Roche is the leading Pharma player within the biologics market; Its strong position in the antibody market is thanks to its 1990 merger with Genentech. Roche is forecast to record the highest sales growth rate to 2010 within the peer set

Datamonitor 2006

Next Generation Protein Therapeutics

AstraZeneca and CAT

Codon Devices: Synthetic Biology

Codon Devices: Constructive Biology

Amyris: Synthetic Biology

Platform Technology-$42.6M grant from Gates Foundation in 12/04-$20M in Series A 10/06

Synthetic Genomics: Green Biotech

Angiotech: NanoMedicine

Summary: More New Opportunities• Improved drug delivery (oral delivery of biologics)• Continuous monitoring feedback devices• Functional imaging (molecular diagnostics + imaging)• Neuro economics- convergence of brain imaging, behavioral sciences -

--the “ultimate mind reader”• Exploration of periodic table for compound libraries resulting in

expanded chemical diversity and properties of molecules • Improvements in complex synthetic chemistry to enable hitting protein-

protein interactions • Gene therapy - use sm molecules to get indigenous cells to do

something different rather than trying to introduce cells into the organism.

• Devices: species bar-coding, emerging pathogens and for biodefense• Enzyme mining with all the metagenomics and

genotyping/resequencing across microbial, human and everything in between. Application to biofuels (e.g., cellulose breakdown), industrialenzymes, biotherapeutics.

Biotechnology Industry: Year 2026• Move from US to global markets (China, India, Europe, Japan).• Capital markets will continue to play a key role in reshaping the

industry with moving towards more M&A .• Pharma will continue to access innovation through Biotech• See move from blockbusters to niche markets.• Move from genomics and systems biology to personalized and

predictive medicine.• See more reform of the FDA especially with regards to safety.• Healthcare costs and reimbursement issues will influence pricing

strategies and revenue for the Industry.• Evolution of science will change the way we view life-threatening and

debilitating diseases (e.g. regenerative medicine).• Research on antibiotics/anti-virals will expand with an increased

emphasis on pandemic disease.• Move from small molecules -> proteins, Ab, gene therapy, stem cells.