Producers of the innovative products in the healthcare industry

2. Producers of the innovative products in the healthcareindustry • Pharmaceutical • Biotechnology • Genomics/proteomics • Medical device • Information technology

3. Pharmaceutical Sector

4. Pharmaceutical Sector a high risk, long time lines for development and investment on returns. pharmaceutical therapy yields a tremendous productivity improvements and tremendous care gains. producers need to find ways of being more efficient to control the prescription costs – high. newer drugs have fewer side effects, less interactions with other drugs, and better efficacy and time duration than older drugs.

5. Pharmaceutical Sector newer drug technology treat a disease that previous medications did not. as we age, our prescription bill goes up - # of prescriptions, newer and more expensive drugs and therapies. anticipated population growth and GDP are the criteria determining the trend.

6. Pharmaceutical Sector Pharmaceutical Pricing: the level of capability of drugs. pre-existing agents treating the disease. contributing to patient’s health & well-being. a lower bias if the medicine is useful mostly for elderly patients. an upward bias if the drug is a biotechnology drug due to higher risk funding and manufacturing complexity.

7. Pharmaceutical Sector Strategy: value for the investment. technological feasibility. competitive advantage and success.

8. Pharmaceutical Sector Problem/Challenge: pharmaceutical discovery, development, manufacturing, and marketing are no more efficient today than they were twenty-five years ago. discovery researcher’s tools have increased as well as the overall cost of deploying them. lack of biological understanding results in low productivity and high variability in pharmaceutical research and development. more dependent on the biotechnology industry as its engine of innovation for new drugs.

9. Pharmaceutical Sector Problem/Challenge: clinical trials are becoming more complex and data intensive. success rates decline and total drug development time increases. a tremendous cost savings for pharmaceutical discovery, if research hypothesis can be tested earlier in the discovery phase. building an organizational culture that is flexible, quick to adapt, able to succeed at risk taking is the key to organizational advantage in pharmaceutical business.

10. Pharmaceutical Sector Manufacturing: accounts for 1/3 of the human resources. consumes more expenses than R&D. FDA imposes Good Manufacturing Practices compliance. misjudgment of capacity requirements resulted in product shortages. approximately 5,000 days or more for any drug to launch globally from conception stage.

11. Pharmaceutical Sector Value Chain within Manufacturing: For Making the medicine. bulk manufacturing is to increase yield, maximize asset utilization, and minimize adverse health, safety, and environment impacts. F/F/F (Form/Fill/Finishing) sites are typically not outsourced as they control the product’s appearance and packaging, and also pricing discussions for new pharmaceuticals.

12. Pharmaceutical Sector Value Chain within Manufacturing: For Supplying the medicine. pharmaceutical companies see little benefit in vertical integration due to low profit margin associated with the drug distribution business. Manufacturing performance, system integration, and customer-focused culture are the three key factors influencing customer service responsiveness.

13. Pharmaceutical Sector Manufacturing Excellence: Forecast accuracy – influences both short term and long term supply of medicine; drives appropriate capacity planning. Compound potency – influences manufacturing operation and economics. Process robustness.

14. Pharmaceutical Sector Commercialization: one-to-one sales representatives – with physicians is the primary driver of sales growth. multi-channel access to customers – websites and call centers for commonly asked questions concerning a company’s drugs. customer relationship management – analysis of customers information by behaviors and beliefs to find the best targeted communications. E-detailing, telephone detailing, and video detailing – physicians participate at a time and place of his or her convenience and preference.

15. Biotechnology Sector

16. Biotechnology Sector a scientific discovery in genetic engineering to improve healthcare. For example, cloning of specific sequences of DNA. biotechnology drug development’s product life cycle spans about fifteen years from discovery through commercialization. Drugs made from monoclonal antibodies and other natural proteins, tissue plasminogen activator and erythropoietin, could be produced with the new genetic engineering techniques.

17. Biotechnology Sector US Supreme Court grants patent on genetically engineered cell under Section 101. Genentech is the founder of the biotechnology industry along with Amgen, Biogen, Genetics Institute, Cetus, Chiron, Repligen, and Centocor. at least 196 biotechnology drugs on the market since 1982 and more than 370 new products in clinical development. US biotechnology company revenues reached $46.2 billion in 2003. However many drugs are licensed to pharmaceutical companies prior to launch causing difficulty to know the exact revenue generated by drugs.

18. Biotechnology Sector Impact on Healthcare: pharmaceutical sector physicians patients pharmacies employment academic research and technology transfer

19. Biotechnology Sector Key Driver of the Biotechnology Sector: the invention of new technologies applicable to drug discovery and development. monoclonal antibodies – the basis of many approved biotechnology drugs. genomics - change drug discovery, shorten pharmaceutical product. proteomics – study of proteins’ structure and function. To discover ways proteins may be useful in drug discovery.

20. Biotechnology Sector Business Models: FIPCO – the model that many of the first wave of biotechnology companies pursued. Technology Platform Model – wide variety of types of technology. RIPCO – license their initial products to a large pharmaceutical company in exchange for a royalty on sales. NRDO – pharmaceutical companies that are developing small molecule-based drugs.

21. Biotechnology Sector Financing and the Capital Markets: over $85 billion in private capital has been invested in the biotechnology sector in the last six years (1998-2003). allies with pharmaceutical companies play a major role. continue to have access to capital from a variety of sources. public debt and PIPEs, private investment in public equity, have played an important role in funding young companies.

22. Biotechnology Sector Biotechnology-pharmaceutical company alliance: pharmaceutical company is a large, multinational, fully integrated, multi-layered, well-resourced, public company that has been in business for many years. biotechnology company is a much smaller, resource-limited private company, highly influenced by its investors, with a limited management structure and core technology or product base and with a fast-paced, entrepreneurial culture and few processes.

23. Biotechnology Sector Biotechnology-pharmaceutical company alliance: Biotechnology advantage: 1) Are able to access capital in order to fund research. In 2003 in the US, biotechnology raised almost $10 billion from pharmaceutical alliances. 2) Gain validation of their products or technology by the more experienced large pharmaceutical partner. 3) Are able to access capabilities - manufacturing, development, regulatory, and marketing and sales – that they do not have in order to complete the development and commercialization of their own products.

24. Biotechnology Sector Biotechnology-pharmaceutical company alliance: Pharmaceutical advantage: 1) Gain access to product opportunities to fill their pipelines. 2) Can acquire or access innovative technologies that can support drug discovery and development at lower risk than the cost of building them from scratch. 3) Can access some of the culture of scientific innovation that big companies often struggle to replicate within the context of their complex management structures.

25. Biotechnology Sector Managing a biotechnology firm: Effective management Access to capital High quality science Entrepreneurial culture Flexibility to change and adjust strategy Recruiting for top management positions

26. Biotechnology Sector Global Structure of Biotechnology firms: Extensive resource and time of building infrastructure Gaining marketing approval from the local regulatory authorities and Marketing of pharmaceutical products is prohibitive. Individual national markets are not large enough to support cost. Cultural and regulatory differences

27. Mergers & Acquisitions in Pharmaceutical Sector

28. Mergers & Acquisitions in Pharmaceutical Sector Mergers & Acquisitions: Mergers – when a company being acquired by a similar size company. Acquisitions – when a company being acquired by a larger size company. Gain a particular technology or product with positive risk of opportunity.

29. Mergers & Acquisitions in Pharmaceutical Sector increasing trend in mergers and acquisitions in pharmaceutical companies. several good reasons for M&A. Economies of scale are seldom realized, except for sales and marketing. M&A tends to report little financial impact. utilized to sustain growth rates in increasing large firms. satisfies the demand for earnings growth.

30. Medical Device Sector

31. Medical Device Sector one of the most attractive and profitable among all businesses. It accounts for approximately $165 billion in worldwide revenues per year. range from the simplest surgical staples/sutures to the complex electronic implantable devices. three characteristics – sustainable growth, high profitability, and rapid change. sustainable growth due to demographics, unmet clinical needs, procedure penetration, and price. reduction in the number of medical technology initial public offering of a company’s stock (IPOs) during the last ten years. The three necessary requirements for the development of medical device companies – financial and intellectual capital, technological know-how, and a supportive regulatory environment.

32. Medical Device Sector medical technology demand and supply is exceedingly “inelastic”. That is, demand does not depend on price. larger companies have capabilities to influence the market for new innovative products. expenditures on medical devices are buried in the hospital costs and expenditures. procedures and medical personnel are extraordinary expensive. an important role in the value chain and cost continuum of care. trend toward drug-device combinations products.

33. The Healthcare Information technology Sector

34. The Healthcare Information technology Sector Healthcare IT spending in the US is only 2.5 percent of overall health expenditures. Expecting to grow at a near double digit rate worldwide for the next decade. • Increase healthcare quality and efficiency • Prevent medical errors • Reduce healthcare costs • Decrease paperwork and administrative works • Improve tracking of chronic disease management

35. The Healthcare Information technology Sector increase investment in healthcare clinical information technology – to improve clinical performance and efficiency. increase regulatory to assure interoperability and compliance. IT will help healthcare professionals consumers will find easier access to medical knowledge and to care provision.

36. The Healthcare Information technology Sector information technology can connect patient diagnostics to remote providers. converging in technologies IT will lower barriers to access to medical knowledge and consultation both regionally and worldwide.

37. The Healthcare Information technology Sector Problems/challenges for Healthcare organization in information technology: • The complexity of healthcare organizations creates difficulty in adapting modern IT. • The inability to extract and organize data retrieved from data repository in a format that enables clinicians to use it. • Infrastructure, hardware, middleware, GUI, database management utilities, computer memory, disk storage capacity, systems integration, and cost of clinical informatics software.

38. The Healthcare Information technology Sector Healthcare IT Applications: EMR and CPOE diagnostic radiology picture archiving & communication systems (PACS) remote clinical management systems – hospital and ambulatory patients. customized-directed health insurance plans and real-time claims management and payment systems. clinical decision support systems.

39. Conclusion & Recommendation each healthcare sectors must possess greater understanding of the others in order to collectively add value to the healthcare provider and consumer. Focus on strategic alliances that allow them to achieve economies of scale and integration. Pharmaceutical and biotechnology firms are now relying on genomic and proteomic foundations for drug discovery. More interdependent on innovation and adoption. Biotechnology firms have spent more of their revenues on R&D than what pharmaceutical sector is spending at 15 – 20 percent. Among all the five sectors, medical device firms are the best dealing with innovation and commercialization. Mergers and Acquisitions (M&A) creates another common business model in an effort to leapfrog the competition, facilitate convergence of complementary technologies, increase attractiveness, and achieve economies of scale.

40. Conclusion & Recommendation Keys to be competitive advantage are based on combinations of “resources” and “routines” that are unique to a firm. financial, scale, and sales channels are important resources. organizational routines and capabilities that are critical to success are ability to manage knowledge, integrative mechanisms, portfolio management and optimization, management of strategic alliances and collaboration, and managing the balancing act. Affordable innovation is the most important capability in the future. Is there a market?... Can the firm deliver?