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A Forward Looking Strategy For Biotech Businesses

A Forward Looking Strategy For Biotech Businesses. The Landscape. Big Pharma (BP) – Many low margin, few high margin products; Significant R&D investment; Size makes formidable, also slow moving; Deep pockets make companies big targets of opportunity. Big Bio (BBio) –

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A Forward Looking Strategy For Biotech Businesses

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  1. A Forward Looking Strategy For Biotech Businesses

  2. The Landscape Big Pharma (BP) – Many low margin, few high margin products; Significant R&D investment; Size makes formidable, also slow moving; Deep pockets make companies big targets of opportunity. Big Bio (BBio) – A number of products, usually high margin; Must maintain R&D/science collaborations to continue growth; Marketing differs from Pharma in its more focused approach.

  3. The Landscape Small Bio (SBio) – Early projects, potentially high yields; Significant R&D; Many out there, few will succeed. Generic Pharma (GP)– Low margin, Low cost, High quantity; Lots of competition for market share. New Pharma/Bio (NPB) – Development stage companies with little or no revenue; Regularly in need of cash to fund R&D; More nimble in collaboration and more willing to take risks.

  4. BP/BBio – A few big earners; Some moderate earners Several losers, Lots in development SP/SBio – One or two cash cows; A few in development GP/GBio –Mature Products; Low margin, High Quantity NP/NBio – Leading Edge Discoveries Early Stage Development Characteristics of Revenue Drivers

  5. Evolution of Pharma/Biotech Industries Early Consolidation Era New BP/BBio SP/SBio Early Pharma/Bio New BP/BBio Early Stage companies bring one or more products to market.

  6. Evolution of Pharma/Biotech Industries Diversification Era BP/BBio SP/SBio GP/Bio NP/Bio Characterized by market segmentation

  7. Evolution of Pharma/Biotech Industry Personalized Medicine/Reconsolidation Era SP/Bio GP/Bio NP/Bio New BP/BBio Surviving BP/BBio Consolidation into new and existing Big Pharma players

  8. Evolution of Pharma/Biotech Industry Consolidated Landscape Era SP/Bio NP/Bio GP/GBio New BP/BBio Surviving BP/BBio Consolidated Landscape

  9. Evolution of Pharma/Biotech Industry Tomorrow’s Landscape Era SP/BBio GP/Bio NP/Bio New BP/BBio Surviving BP/BBio New landscape anticipates another round of consolidation

  10. Telecommunications Automobiles Entertainment (Movies, Radio, Television and Publishing) Agriculture and Food Computers Retail Airlines Other Industries Recently Subject to Cycle

  11. Slow New Drug Approvals - 18 in 2006 Acceleration of Takeovers - up 32% in 2006 Deteriorating Margins - driving inefficiency out of marketplace Freedom to Operate - more complex to secure Maturing Science and Technology - How many new antibiotics? Forced Product Life Cycles - Long development times & fixed patent lives Consumer Protection - activism Less Efficient Organizations - over time New Technologiesstem cells - neural stimulation, etc. showing promise Dispersion of IQ - causing competition from many regions and centers of excellence Investor Activism - desire for quick rewards Government Activism – FDA, HHS, CDC Factors Accelerating Pharma/Bio Changes • Market Downturn – Minus 514 points on the DJIA in 5 days

  12. Big Pharma/BBio Warning Signs 1 More R&D Spending, Fewer New Molecular Entities CBO Study, R&D in Pharma Industry, October, 2006

  13. Big Pharma/BBio Warning Signs 2 Federal Government Funding Lower Percentage of R&D $39.4 B Total 2006 Pharma Industry R&D $51.3 billion $28+ B 2006 Inflation Adjusted Dollars CBO Study, R&D in Pharma Industry, October, 2006

  14. Big Pharma/BBio Warning Signs 3 Fewer Patents Per R&D Dollar CBO Study, R&D in Pharma Industry, October, 2006

  15. Big Pharma/BBio Warning Signs 4 Diminishing Return on Assets CBO Study, R&D in Pharma Industry, October, 2006

  16. IP (freedom to operate) IQ (scientists/engineers) Cash Good Scientific Base Excellent Management and Marketing Good Business Case Ability to Work the Government Review Process Ability to Leverage Technology Externally Differentiating the Winners in Biotech

  17. Lack of Federal funding for embryonic research Early stage development increases risk and need for $ Misperceptions and lack of information among general population Freedom to operate difficult to acquire because of patent dispersion. High cost and long time required to bring new drug to market. Relatively new field with many unknowns Challenges & Opportunities in the Stem Cell Arena ChallengesOpportunities • Discovery of multiple sources for adult stem cells • Great promise for curing a wide range of diseases • Glitzy and glamorous to science fiction writers and lifeline for really sick people • Patent arena creates a barrier to entry for competitors • Lagging R&D productivity by existing players • Relatively new field has great opportunities for innovation .

  18. Running a biotech business and other sad stories. Develop milestones that lend themselves to easy quantification and institutional investor explanation. Strategies for continuing independent operation. What Is Your End-Game Business Strategy?

  19. Unique Aspects of Biotech Companies Covered by WBB Securities • IP-IP-IP-IP • Lead product identified • Large partner validation • and negotiating acumen • Technology and business acumen. • Understanding of capital markets

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