Bio-IT Market Update

1. Bio-IT Market Update Debra Goldfarb Group Vice President, WW Systems and Life Sciences dgoldfarb@idc.com

2. Agenda • Bio-IT Infrastructure Practice Overview • Overall Biotech Market Trends • Global • EMEA • Asia/Pacific • Bio-IT Forecast Update and General Trends • By sector • By customer type • Final Thoughts • Q & A

3. Pharmaceutical • Drug discovery • Pharmacogenomics • Clinical trials • Aging • Biotechnology • Informatics • Genomics • Proteomics • Monoclonal antibodies • Protein engineering • Target gene therapy • Healthcare • Disease research & management • Diagnostics • Regenerative biology • Clinical research Bio-IT The use of information technology to create, organize, analyze, store, retrieve and share genomic, proteomic, chemical and clinical data in the life sciences. • Academic Research • Basic research • Education • Training • Government • Military • Research/R&D • Funding • Regulation • Intellectual Property • Bioterrorism • Environment • Waste management • Environment clean-up • Agriculture • Disease resistant strains • Novel therapeutics • Genetically modified stock • Chemical • Manufacturing • Petroleum Bio-IT Definition and Market View

4. Big Themes • Boom--bust cycle? • We are taking a breath…. • Market is in nascent stage…there will be casualties • Business models remain fluid • Companies are struggling with the right model/mix • High profile forays into market were not well received • Complexity of industry should not be underestimated • Web of interdependencies is growing and will continue to grow over time • Industry disaggregation will create turmoil and opportunities for new companies, business models, skills etc…

5. Market Capitalization Total Investment GlobalBiotechnology Trends Global Biotech Investment & Market Capitalization have fallen off significantly since 2000 • Triggers … • Market-wide investor “flight” • Product setbacks Source: BioWorld / Ernst & Young

6. Global Biotechnology Revenues vs. R&D Source: Ernst & Young LLP

7. Biotech Market Conditions: EMEA • EMEA • $49 billion (57%) drop in Biotech market capitalization since market-wide slump began in 2000 • Sector will remain soft through mid-2003 • Public equity investments have shut down, while private investment is still flowing (rate of $1 billion/year) • Important for investors to appreciate the time frame • U.K. and Germany still dominate, followed by France, Denmark and southern Sweden

8. European R&D Environment • A significant percentage of R&D dollars leave Europe for US and ROW markets • 59% of EU R&D stayed within European borders • 34% US • 7% ROW • This trend is accelerating….. • In comparison, 80% of R&D spending by the US Pharma industry stayed in the US • Data suggests key trends: • The European industry is losing competitiveness as compared to the US • There is a growing concentration of R&D into North America

9. Biotech Market Conditions: Asia/Pacific • AP Biotech market is very young, particularly outside of Japan • Over half of the AP Biotech market is public sector • Private sectors are being “jump started” by government decree • Tens of billions of dollars are being invested in the Asia/Pacific biotech economy • Expect a very different picture in 5-10 years Source: IDC 2002

10. Japan Bioscience Environment, 2002 • Pharma industry - R&D spending in the industry is lower than in the US or Europe; companies are mostly family owned and have cash in the bank • Biotech industry - during 1980s was focused on process technology, not life sciences R&D. Emphasis now changing now, but developing a strong domestic biotech industry will take time ( recent 30 million deal between daiichi pharmaceuticals and celestar lexico sciences) • Linkages between medical and biological research need improvement for large pharmacogenomics research in Japan • Funding systemfor public sector research is not well developed. Large amounts of money are given out by a handful of senior scientists at the large universities

11. Regional Picture, Bio-IT Infrastructure Development, 2002-2006 Public and Private Investment and Priority Rate of Development Source: IDC 2002

12. Worldwide Bio-IT Forecast by Sector • Hardware is the largest sector today. (includes servers, clients, storage, networking, accelerator boards, etc.) • End user spend on services will overtake hardware in 2003. • By 2006, services will account for 42% of the total market. • Total market growing from $12.2B in 2001 to $30.3B in 2006. • Five Year CAGRs • Hardware: +15.8% • Software: +25.4% • Services: +21.2%

13. Worldwide Bio-IT Forecast byCustomer Type • Large Pharma is the biggest and fastest growing customer segment, accounting for $3.6B in 2001. • Biotech accounted for $3.3B in 2001, but is growing slightly slower because of a contraction in VC investment. • Five Year CAGRs • Large Pharma: +24.3% • Medium Pharma: +18.3% • Small Pharma: +12.6% • Biotech: +21.1% • Gov/Academic: +15.1% • Agribusiness: +17.1%

14. Final Thoughts • Stay the course • The market will evolve in a chaotic manner…those suppliers who stay in the game will dominate • Continue to build out your alliances and partnerships • Key strategic imperative • Investment and commitment remain challenging • Huge pressure for biotechs to perform • Inflection point vs. continued infrastructure investment • Be aware of Pharma Y2K • In the next few years, FDA approval must be submitted via a fully electronic process