TM

rd

T

a l L ife S c ie n c

c eThe 3rd Annual Life

Science ConferenceThe 3rd Annual Life

Science Conference

February 2001

Biotechnology Strategy ProjectBiotechnology Strategy ProjectRealizing Israel PotentialRealizing Israel PotentialBiotechnology Strategy ProjectBiotechnology Strategy ProjectRealizing Israel PotentialRealizing Israel PotentialAdi Alon Monitor Group

TM

Febtuary 2001

– Project Overview

– The potential

– The challenge and the action plan

AgendaAgenda

TM

Febtuary 2001

Monitor Group - OverviewMonitor Group - Overview

The Action Company

Decision Architects

™

M2CMonitor Clipper

Partners

M.A.S.T.

Marketspace Center

(E-Commerce)

Corporate Finance

Monitor University

Monitor Institute

Activities Processes &

Systems

• Founded 1983, Cambridge USA

• Mix of strategy consulting, investment banking and private equity

• Truly global operations - no local partnerships or geographic barriers

• All Group companies operate through all 26 offices globally - including Tel Aviv

• 80%+ of engagements are repeat clients

• Committed to creating action - not reports

• Working in almost all industry sectors

• Leading global experts

TM

Febtuary 2001

Project Overview - Key IssuesProject Overview - Key Issues

Is there a potential for Biotechnology industry in Israel?

If there is a potential - what should Israel do to realize it?

TM

Febtuary 2001

A local context that encourages sustained investment in upgrading

Vigorous competition among locally-based rivals

A critical mass of capable local suppliers

Clusters instead of isolated industries

A core group of demanding local customers

Unusual local demand in specialized segments that can be served globally

Customers whose needs anticipate those elsewhere

Factor (input) quantity

Factor quality Factor specialization

Related and Related and Supporting Supporting IndustriesIndustries

Demand Conditions

Factor Conditions

Context for Firm

Strategy and Rivalry

GovernmentGovernment

Competitiveness of Nations, States, and Cities Competitiveness of Nations, States, and Cities The Diamond ApproachThe Diamond Approach

TM

Febtuary 2001

Project Overview - Key ActivitiesProject Overview - Key Activities

Israel Research

International Research

Recommendations and Action Plan

– Over 100 interviews - profiling the industry and the challenges it faces

– Developed detailed mapping of the activities conducted in biotechnology by Israeli industry and academia

– Collected and analyzed relevant data to the challenges raised during Israeli cluster interviews

– Conducted in depth research of international biotechnology clusters to identify development challenges and sources of success:

– Profiled global industry trends and mapped them against the cluster activities in Israel

TM

Febtuary 2001

– Project Overview

– The Potential

– The Challenge and the action plan

AgendaAgenda

TM

Febtuary 2001

0

20

40

60

80

100

120

2004 2010

Projected Growth of Global Biotechnology Market ($B)

$Bn

Source: Consulting Resources Inc, 1998; Business (02/2000); Frost & Sullivan ; Biotechnology Industry Organization

Global Potential - Strong Growth Is Expected Global Potential - Strong Growth Is Expected in the Biotech Marketin the Biotech Market

• BioTherapeutics– Growth driven by:

• Imminent patent expirations • Increasing demand • Need for improvement in R&D economics

– Bioinformatics, pharmocogenomics • Agricultural Biotechnology

– Strong demand for insect-protected and herbicide-tolerant crops

– Recent shift towards products with enhanced output traits

• Diagnostic– Therapy selection and monitoring utilizing

genetic data• Industrial Biotechnology

– The pulp and paper industry

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Febtuary 2001

Global Potential - Biotech Is Enjoying Global Potential - Biotech Is Enjoying Increasing Investors AttentionIncreasing Investors Attention

Source: NASDAQ, Price Waterhouse Coopers

Index

NASDAQ Biotech Index(Jan 1994 - Jan 2001)

0

400

800

1200

1600

2000

94-

ארנו

י

94-

לייו

95-

ארנו

י

95-

לייו

96-

ארנו

י

96-

לייו

97-

ארנו

י

97-

לייו

98-

ארנו

י

98-

לייו

99-

ארנו

י

99-

לייו

00-

ארנו

י

00-

לייו

01-

ארנו

י

452

557

715668

1,041

118

183

646

110 118

251

347

474929

0

400

800

1200

1995 1996 1997 1998 1999

U.S.

EU + Switz.

UK

VC Funds investment in Biotech U.S., UE + Switzerland, UK 1995–1999

$M

TM

Febtuary 2001

Israel PotentialIsrael Potential

• High quality academic research• Skilled human resources - over 1,700 graduates every

year in related fields• Academic research and industrial R&D in key industry

segments (e.g. cancer, immunology, bio-informatics, etc.)• Industrial success - growing sector with recently successful

IPO’s (e.g. XTL, Compugen, Keryx).• Potential for the future: interdisciplinary areas

TM

Febtuary 2001

* Research projects in the academia & number of products in the pipeline; ** Projected sales of existing products and of products under developmentSource: DataMonitor, Harry Langbeheim; Pharmaceutical Researches & Manufactures of America, Recombinant Capital ; Monitor Analysis

0% 110%

% of Expected Annual Market Growth Rate (1998-2005)

Expected Market Size of Key Biotech Markets in 2005 **

Israel Cluster Relative Activity in Future Development*

20% 40%10%

~$1B

~$10B

~$5B

Autoimmune

12%$5.5B

18%$8.8B

Cancer

43%$1B

Bioinformatics

108%$1.4B

Pharmocogenomics

4%$1.3M

Cardiovascular

17%$1.2B

Infectious Diseases

13%$1.6B

Neurology

30%

% of academia research projects and products developed in industry:

Therapeutic areas

Platform technology

Agro-biotech

22%$3.1B

Diagnostics

Input traits and bio pesticides

15%$4.7B

Israel Potential - Research and Industrial Development Israel Potential - Research and Industrial Development Covering Growing Segments of the Global MarketCovering Growing Segments of the Global Market

TM

Febtuary 2001

What Can Israel Gain - The Future TargetsWhat Can Israel Gain - The Future Targets

• Strengthening Israel’s knowledge base economy• Increasing employment in the sector from 3,500 today to 10,000 -

14,000 by 2010.• Increasing sector sales to $2 - $3Bby 2010, almost all of it export

oriented.• Keeping scientific talent in Israel, over 1,700 students are

graduating every year with science degrees in the related disciplines.

• Attracting Israelis who reside oversees and have managerial experience in the industry.

TM

13Febtuary 2001

What Other Countries Already GainedWhat Other Countries Already GainedU.K. ExampleU.K. Example

Source: Ernst & Young; OST Report on the UK Biotech Cluster, Aug 1999; Northwest Biotech Development Study (June ‘98); ERBI BioBusiness Trends ‘99 Report; Speech by Lord Sainsbury, August 1999

130

160175

248

268 275

0

100

200

300

1994 1995 1996 1997 1998 1999

U.K. Biotechnology Industry - Number of UK Biotech Companies

Growing SectorU.K. Biotechnology Industry -

Number of Employees

9000

11000

14000

0

5,000

10,000

15,000

20,000

1994 1996 1999

Increased Employment

500

760

1870

0

500

1,000

1,500

2,000

1994 1996 1999

Increased RevenuesU.K. Biotechnology Industry -

Annual Revenues ($M)

TM

Febtuary 2001

– Project Overview

– The Potential

– The Challenge and the action plan

AgendaAgenda

TM

Febtuary 2001

The Challenge - Supporting The Growth of a The Challenge - Supporting The Growth of a Young IndustryYoung Industry

1,274

275

144

0

300

600

900

1,200

1,500

US UK Israel

Number of Biotech Companies, 1999

Emerging industry...

17.5

6.7

2.6

120

50

23

0

5

10

15

20

US UK Israel

0

30

60

90

120

150Sales Employees

Average Sales and Number of Employees per Company, 1999

...Comprised of small scale companies..

93.0 97.0

210.0

264.0

2.1

83.0

0

100

200

300

1996 1997 1998 1999 2000 2000

Market Capitalization of Public Companies, 2000*

IsraelUSA

..With lower overall market capitalization

Source: Harry Langbeheim; NBC; Press release; Interviews; Ernst & Young Life Science Report, 1999 & 2000

TM

Febtuary 2001

Key Principles of Action PlanKey Principles of Action Plan

• Placing Biotechnology of the National Agenda

• Supporting infrastructure development:– Physical– Knowledge– Regulatory

• Foster scale up and industry development through networking and linkages

TM

Febtuary 2001

Eastern Region Biotechnology Initiative

Creating Cluster Dynamic U.K. - Role of the Private Creating Cluster Dynamic U.K. - Role of the Private Sector In CambridgeshireSector In Cambridgeshire

• Aims to enhance the development of Biotechnology cluster

– Promote local, national & international networking

– Support successful growth of new ventures– Ensure the infrastructure of the region supports

biotechnology• Provides services to members:

– Secures better terms from service companies (legal and accountancy)

– Web site postings of partnering opportunities abroad

– Staging networking events– Holding seminars on strategy, marketing &

finance– Collecting and publishing industry data

Lundbeck

Head of ERBIPrivate Sector

Academia

Institute of Biotechnology

Univeler Research Ltd

John Innes Research Center

Government

Government Office for the East

East of England Investment Agency

County Council

Biotech Companies

CeNes

CTBL Ltd

Cambridge Drug Discovery

Peptide Therapeutics

Alizyme Plc

Reddie & GrosePatent Agents

BarclaysBank

Weil, Gotshal & MangesLaw Firm

GarrettsLaw Firm

Rothschild & SonsInvestment Bank

Arthur AndersenAccountants

Beeson GregoryStockbroker

Customers

Glaxo Wellcome

Service Companies

TM

Febtuary 2001

Board of Directors

Industry Representatives

Other ClusterRepresentatives

Genzyme

Biogen

Genetics Institute

Millenium

Additional Industry

Representatives

MIT Office of Technology

Transfer

Venture Capital

Massachusetts General Hospital

Arthur Andersen

Additional Cluster Representatives

Activities and Mechanisms

The council provides a forum for networking between the various parts of the cluster, improves the business environment and interfaces between the industry and government

Creating Cluster Dynamic Creating Cluster Dynamic Massachusetts Biotechnology Council Massachusetts Biotechnology Council

• Policy: Addresses issues related to policy, clinical trials, regulatory etc..

– The Council regularly lobbies local, state, and federal government officials on issues related to biotech (e.g. regulatory affairs)

• Networking: Separate committees are also established to develop networks among professionals in specific areas of biotech activity (e.g. bioinformatics, business development, purchasing etc…)

– Committees may also include pharmaceutical companies and other interested parties (e.g. Compaq and Pfizer)

• Purchasing: The Council negotiates broad based agreements with scientific suppliers as a cost saving mechanism for its members

• Conferences: Local and international conferences are organized on broad issues (e.g. BIO2000) or on a specific topic (e.g. financing)

TM

Febtuary 2001

Private sector leadership headed by the IBO to work with government on implementing cluster initiative

• Appoint a full time project leader or executive director to lead the implementation effort • Bring biotech on the national agenda and declare a clear vision for the industry• Form an intergovernmental task force to coordinate government policy

Upgrade physical infrastructure which supports the industry

• Attract an int’l company and support Israeli companies which offer integrated services and equipment in

– pharmacology and animal testing– analytical services – GMP pilot batches manufacturing facility

Support applied research and technology transfer processes

• Work with one university on a pilot plan which includes:– Increase financial and human resources to improve commercialization activities– Create a pre-seed funding to support final development of innovations with

commercial potential to improve the odds of a successful technology transfer– Align IP and equity ownership rules of commercialization companies in the

Universities with incubators

Areas of Recommendations — 7 Points ProgramAreas of Recommendations — 7 Points Program

TM

Febtuary 2001

Areas of Recommendations — 7 Points Program (cont.)Areas of Recommendations — 7 Points Program (cont.)

Improve early commercialization - create world class incubators dedicated to the industry

• Set up world class scientific and business advisory board to support incubator projects• Increase funding and timing of projects to meet industry needs• Implement highly selective screening process for projects

Reinforce regulatory infrastructure

• Increase communication with the industry - clarify guidelines and information requirements for clinical trials

• Facilitate approval of phase 1 clinical trials through either a) stronger linkages with the FDA (e.g. FDA affiliate office), or b) by adding resources to the health ministry

• Add resources to the institute of standardization and control of pharmaceutical specialized in biotechnology for evaluation and GMP accreditation

Map infrastructure required to support research in academia

• Map equipment requirements for academic research to ensure that Israel’s academia maintains its position

• Track data on industrial and research activity to facilitate networking and monitor performance

Implement tracking system for industry data and performance matrix