Biotech 2010 Life Sciences:

Adapting For Success

Itisnotthestrongestof thespeciesthat

survives, northemostintelligent, butthe

onemostresponsivetochange
—CharlesDarwin

MIT Enterprise Forum

April 14, 2010

G. Steven Burrill
Chief Executive
Officer
Burrill & Company

1
Adapting For Success: Biggest Problems in the World
Today (Ignoring Terrorism)

• Global Climate Change, Sustainability of the Planet

• Clean Water

• Energy Security, Energy Self-Sufficiency

• Food Security & Food Production

• Healthcare and Healthcare “Reform”

2
Last Year’s Book – Focused This Year’s Book – Focuses
on the Sea Change… on adapting…

3
…but, what was that Sea Change?
• Imploded capital markets and financial services
industry restructuring
• Global economic chaos/recovery
• The 3 “R’s” of healthcare…and its implications
– Healthcare Reform – is it happening? impact?

– Reimbursement – who is going to pay for healthcare

– Regulation
 Approval vs. pharmacovigilence
 Comparative effectiveness (cost, quality)
• Pharma industry blockbuster model has run its course,
industry restructures and refocuses
• Emerging markets (BRIC plus MENA) trump traditional
markets (US/Europe/Japan)
• Technology & what it is enabling – the world in 2020

4
Obamanomics

5
Optimism/Pessimism (half full/half empty)?

• “New normal” ?
– World economy returns to pre-
crisis rate of growth

- OR -
– Growth stays at a permanently
lower rate – investment,
employment and productivity
growth all slowed down

• Stock market growth at all time

highs, way ahead of economic
indicators

6
Source: George Poste and Burrill & Company

7
Underlying challenges remain…
Healthcare reform – insurance reform?
– Conflict between more access, more coverage and reducing healthcare cost
burden
Congress will add power to Medicare to negotiate what it pays for
drugs/devices/diagnostic…tough for industry
Congress will reduce capital gains differential, tax rates will go up for
the “rich;” “carry” for VCs to be taxed as ordinary income (all bad for
capital raising, capital more expensive)
Stricter regulatory oversight – Regulatory hurdle increases
– Drug safety (pharmacovigilence) will trump approval
– Comparative effectiveness – a third approval standard emerges
Generic biopharmaceuticals, biosimilars, follow-on biologics

8
…and, on the positive side

Stem cell funding increases, some restrictions

removed
Healthcare IT stimulus
Biofuels/bioenergy stimulus
Economy not getting worse
Capital still available for good companies, good
ideas

9
Wall Street’s Implosion…What did it mean to us?

• Capital Markets substantially restructured

– Buy-side interest/resources reduced (hedge funds less interest, life
sciences investors moved up)
 VC/private investors (deep pockets/short arms) business
challenging – and fundraising for VCs difficult
 IPOs only for risk abated companies
– Sell-side (investment banks) permanently restructured, reduced
focus; new firms emerging
• Access to capital
– Resources for micro-cap stocks (<$1B) dramatically decreased
– Capital more difficult to find (more expensive)
• Big Pharma – not as eager (things will be cheaper if they wait), but
focused across the value spectrum (early stage/pre-clinical to generics,
orphan drugs, etc.)

10
Some Interesting Facts

• When Roche bought Genentech, Genentech valued at

$100B, Pfizer was $91B
• Today’s market caps:
Biotech Pharma
 Roche – $141B  Pfizer - $140B
 Amgen - $60B  Bristol-Myers Squibb –
$45B
 Gilead - $41B
 Eli Lilly - $42B/Bayer –
$41B
• The top 5 pharma companies have lost 51% of their market
capital in the last five years
• Biotechs have appreciated 22% from market lows in March

11
Biotech companies are becoming increasingly important as a
source of value creation and innovation in the healthcare sector

Top US Pharma* vs. Total Biotech Market Cap

Market Value of
selected Big Pharma
acquisitions of public
Biotechs (2005 - 2009)

* Pfizer, Merck, Lilly, Bristol Myers Squibb, and Abbott

Source: Capital IQ, Windhover, Burrill Analysis

12
Market Cap for Top-Tier Pharma Firms has
Dropped $516B (51%) in 10 Years

320
$287
Market Cap on 1-1-01
Market Cap on 4-12-10
$213
Billions of US Dollars

$173

$140 $143
$115
$102 $104
$90
$66
$45 $42

0
PFE MRK GSK BMY LLY A ZN

Source: Bloomberg

13
Generics – Change in stock price from five years ago
250%
Dr. Reddy’s Laboratories
Teva Pharmaceuticals
200%
Merck
Pfizer
150%

100%

50%

0%

-50%
2005 2006 2007 2008 2009 2010

Source: WSJ Market Data Group

14
The Market’s Comeback (DJIA since Oct 2007)
15000

14000

13000

12000

11000

10000

9000 All-time high on Oct. 9, 2007

14164.53
8000

7000

6000
Recent low on March 9
2007 2008
6547.05 2009 2010

15
 US Biotech Market Cap
600

Roche Acquires
Genentech

405.01 400.87 +34%

400
R ec o vering 384.00

348.05 arket 356.00 362.42

353.42
M 337.11 342.00 349.00
318.21 322.20
Genentech 301.21
Market Cap 286.43 282.85
Pre-
acquisition

200

0
J an '09 Feb '09 Mar '09 Apr '09 May '09 J un '09 J ul '09 Aug '09 Sep '09 Oct '09 Nov '09 Dec '09 J an '10 Feb '10 Mar '10

16
Is the IPO Window for Biotech Opening?
• IPO market for biotech remained closed for 12 quarters
• Three specialty pharmas successfully listed in 2009, all
operating businesses with risk abated platforms, three in
2010 Amount Raised
Company Filing Date Issue Price Today’s Price % ∆ Price
($M)
8/10/09 85.0 $17/share 10.99 ↓55%

10/1/09 550.0 $19/share 22.40 ↑15%

10/8/09 68.2 $10/share 6.25 ↓60%

2/2/10 215.6 $11.25/share 14.53

3/1/10 42.0 $7/share 6.70 ↓45%

3/12/10 89.7 $9/share 9.50 ↑5%

4/9/10 30.0 $5/share — —

17
IPOs – Are They Coming Back?

70 $7,000
66

$6,490 IPO Financings

60 $6,000

50 $5,000
45
Number of IPOs

40 $4,000

($ millions)
29
30 28 $3,000
27

19 $2,041
20 17 $2,000
$1,465
$1,701
$1,114
11 $920
$819
$688
10 7 7 7 $341 $1,000

4 4
3
$670 1
$369 $440 $445 $456 $6
0 $0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

18
US IPOs – Not What They Used to Be
Positive Negative Acquired Amount Average
Number since since or Raised* ∆ % change
of IPOs IPO IPO delisted ($ Million) Since IPO**

2003 7 0 0 7 $438 (100%)

2004 29 3 13 13 1,628 (18%)

2005 17 1 7 9 819 (44%)

2006 19 6 6 7 920 19%

2007 28 4 20 4 2,071 (28%)

2008 1 0 0 1 6 (100%)

2009 3 1 2 0 1,117 (20%)

2010 3 3 0 0 311 17%

Total 105 18 49 38 6,163 (33%)

* Includes over-allotments
** As of 4/12/10
Source: Burrill & Company

19
The Biotech IPO Queue (4/12/10)

Source: Burrill & Company

20
 Structural Problems in the IPO Market…US falling
behind rivals in new listings
US listed markets in steady …starting with the advent of online
decline since 1997… brokerage and new order handing rules
Number of companies from global Companies listed on US Stock Exchanges
exchanges indexed to 1997 (000) First online brokerage
100 8 (1996)
New order handling rules
Hong Kong (1997)

7
Australia
50
Deutsche 6 -
Tokyo
Borse
43.3%
London
0 Toronto
5

US 4
-50
1991 1997 2003 2008
1991 1997 2003 2008
Pre-bubble Bubble Post-bubble
1991-1995 1996- 2001-2008
2000
Source: Grant Thornton

21
 US Biotech Financings ($M)
  2003 2004 2005 2006 2007 2008 2009 2010
1Q
Public

IPO $456 $1,701 $819 $920 $2,041 $6 $1,112 $339

Follow-ons $3,536 $3,388 $4,194 $5,766 $6,311 $1,726 $5,619 $1,030

PIPEs $2,051 $2,417 $2,376 $2,027 $1,818 $1,078 $1,632 $308

Debt $7,170 $8,418 $5,565 $13,978 $6,569 $2,824 $6,306 $55

Private

VC $2,841 $3,733 $3,518 $4,236 $4,445 $4,175 $4,066 $1,044

Other $294 $269 $1,114 $425 $611 $294 $158 $140

 

Subtotal $16,348 $19,927 $17,586 $27,352 $21,975 $10,103 $18,893 $2,896

 

Partnering $8,933 $10,933 $17,268 $19,796 $23,365 $20,023 $36,923 $6,139

Total $25,281 $30,860 $34,854 $47,148 $45,340 $30,126 $55,816 $9,035

22
Capital Raised 1980‐2010

23
Financing 2010: Adapting to a changed environment

• Governments/development authorities/research institutes providing capital

• Disease advocacy/charitable organization (active players in early stage R&D
funding)
• Development stage (rounds now extending to E/F) available but still
expensive…companies on track with progress financing at discounts to prior
rounds
• Equipment/facility financing (even IP)
• IPOs – later stage operating companies (risk abated) with revenues/profits
(Talecris 2008 sales - $1.4 billion)
• More follow-ons
• Reverse mergers into public companies, still happening
• Equity –lines of credit
• Shelf registration/registered direct/PIPES
• Global arbitrage – financing parts of business in non-local markets

24
So what else is this “Adapting For Success” all about?

• Healthcare reform – what is really happening?

• Changed pharmaceutical environment – why?
impact?
• Generics/biosimilars
• Regulation – is genomics slowing us down?
• Reimbursement – who is really paying for what?
• Emerging markets (BRIC plus MENA) versus
traditional markets (US/Europe/Japan)…changing
global focus
• Technology – where is it taking us?
25
Healthcare Reform

• What is our healthcare system?...(we don’t have

one!)
• It’s really insurance reform, reallocating who pays
for a dysfunctional “sickness” care system
• Enabling/requiring 30+M Americans to get
healthcare insurance and receive healthcare
services
• …but reducing aggregate healthcare costs? (now
$2.3T in US, going to $4T by 2015)

26
U.S. Healthcare Costs Have Been Rising for
a Long Time

Source: Sean Keehan and others (2008): “Health Spending Projections Through 2017: The Baby Boom Generation is Coming to Medicare”

27
 Tangible and Unseen Cost For Health Care
Malpractice costs are a small part of health spending, but could spur doctors to
make costly choices Medical Malpractice Tort
U.S. Health Expenditures Costs
(in trillions) (in billions)
2.5 35

30
2.0
$2.241 trillion (2007) 25

1.5
20

15
1.0

10

0.5
5

0.0 0
$30.41 billion (2007)
1975 1980 1985 1990 1995 2000 2005 1975 1980 1985 1990 1995 2000 2005

Note: U.S. Health expenditures include drug costs, nursing-home care and other spending, in addition to payments to doctors
and hospitals. Malpractice costs don’t include legal expenses incurred by pharmaceutical companies.
Source: Centers for Medicare and Medicaid Services; Towers Perrin

28
Medicaid Enrollment
(in millions)
50 46.9

40

31.7

30

20

10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Kaiser Family Foundation

29
Average annual premiums for employer-sponsored
family health policies

$14,000 $13,375
$12,680
$12,106
$12,000 $11,480
$10,880
$9,950
$10,000 $9,068
$8,003
$8,000 $7,061
$6,438
$6,000

$4,000

$2,000

$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Kaiser Family Foundation

30
Market Distortions and Perverse Incentives
in Modern Healthcare Delivery

• Focus on late-stage detection and intervention

– High cost
– Low reversibility

• Multiple reimbursements for fragmented (siloed) care versus

integrated management of patient needs

• Medical professionals paid for illness versus wellness

• Inadequate social and economic incentives for wellness
• Inadequate medical training/understanding of
genetics/genomics/proteomics

Source: George Poste / Burrill & Company

31
Annual Excess Healthcare Costs Related to
Consumer Behavior
Conditions related to
obesity and overweight
Smoking

$191 billion

Non-adherence
to drug regimens

Alcohol Abuse
$200 billion $177 billion
$2 billion

Source: RTI International & Center for Disease Control and Prevention (200), Datamonitor (2007), Americas Health Insurance
Plans (2007), Commonwealth Fund (2007), Agency for Health Research and Quality (2003), Analysis by
PricewaterhouseCoopers’ Health Research

32
Pharmacogenetic Predisposition to Adverse Drug
Reactions

• 1.5 to 3 million annual

hospitalizations (US)
• 80 to 140 thousand
annual deaths (US)
• est. cost of $30-50B

Source: George Poste

33
Pharmaceutical Expenditures Per Capita
US$ 200 200
China 4 12.2 8

27.6
Russia 38.7
119.9
UK 321.1
348.7
German 502.8
y
681.0
Japan 570.7
672.6
France 606.0
784.0

US 871.9
1,018.2
Source: Business Monitor International

34
Healthcare Costs are Unevenly Distributed

• 0.5% patients consume 25% of healthcare budget

• 1% consume 35%
• 5% consume 60%
• 10% consume 70%
• 50% consume 3%
• 75% of cost is for patients with chronic diseases

Source: G. Halvorson/George Poste

35
US Prescription Drug Costs as Percentage of
Healthcare

$2,500 Prescription Drugs as a Percentage of National

Health Expenditures $2,250.0

Prescription Drugs as a Percentage of National Health Expenditures

$2,100.0 12%
$1,987.7
$2,000
$1,858.9
$1,733.4
$1,602.8 10%
9.8%
Drug Spending ($ billions)

10.2% 10.3% 10.3%

$1,469.6 10.1%
$1,500 10.0% 10.0%
$1,353.3
9.4%
8.9%
8%
$1,000
7.3%
$714.0

6%
$500
$253.9
5.6%
$74.9
$27.5
4.7%
$0 4%
1960 1970 1980 1990 2000 2001 2002 2003 2004 2005 2006 2007

36
US Healthcare Costs

• Administration 35%

• Personnel costs 35%

• Procedures 18%

• Drugs 12%

• In vitro diagnostics 0.01%

Source: George Poste

37
Personalized Medicine and Lower Drug Cost

Rhumatoid
Alzheimer’s Asthma Pain Arthritis* Schizophrenia
Patients who are 30% 60% 80% 50% 60%
are helped

U.S. Prescriptions $1.5 $8.0 $14.1 $13.6 $9.5

(billions a year)

Estimated waste $1.1 $3.2 $2.8 $6.8 $3.6

(billions)

* Includes all autoimmune diseases, but RA is the most prevalent

Source: Business Week, February 1 & 8 2010

38
…but we have major challenges in healthcare

• Cost
• Demographics
• Access
• Variation in clinical practice
• Inefficient use of information
• Fragmented care versus integrated care
• Duplication, defensive medicine & waste
• Protracted adoption of innovation
Source: George Poste and Burrill & Company

39
 The Strategic Future of Healthcare

Economic Reform and Rational

Unsustainability Care
or

Confronting the Imbalance Between Infinite Demand

and Finite Resources
Source: George Poste

40
A Rational Healthcare System…

Value is created by:

• what works • validated evidence

• why it works • mechanism of action

• personalized medicine
• who it works for
• comparative effectiveness
• what works best
• best practice guidelines,
• when should it be standard-of-care and
used optimally malpractice

Source: George Poste and Burrill & Company

41
The Changing Focus of Healthcare

RISK ASSESSMENT DECISION SUPPORT

(symptoms)

Late Chronic

(cost)
Low Risk High Risk Early Chronic

(Years)

Personalized Health
Plan
PERSONAL
RISK MODIFICATION DISEASE MANAGEMENT
LIFESTYLE PLAN

Source: Ralph Snyderman

42
Technology Convergence:
Integration of DX, Rx, and HIx

Biotechnology, Nanotechnology Advanced

Systems Biology and Materials Science Computing
Synthetic Biology and and
Miniaturization Knowledge
Engineering Management

Source: George Poste and Burrill & Company

43
Personalized Medicine: Key Drivers

Science Policy Cost and Outcomes

Source: George Poste and Burrill & Company

44
Molecular Medicine and Rational Therapeutics

• opening era in linking disease molecular pathology

to rational Rx
• increasing payor, regulatory and public pressures
for reliable ID of Rx-responsive patients
• Rx/Dx combination will become an obligate
element of NDA/BLA submission and product
labeling
• development of Rx/Dx combinations as intrinsic
components of R&D programs for investigational
Rx
Source: George Poste and Burrill & Company

45
Deriving Value from “-Omics”

• useful only when correlated with additional

parameters
– clinical outcomes
– clinical utility
– actionable information
– demonstrable economic value

46
Epigenetics

Abuse affects Dining for your Epigenethics?

genes descendents

47
Epigenomic Marks

48
Genetic versus the Epigenetic Paradigm

49
Genetic versus the Epigenetic Paradigm

50
Development of Molecular Diagnostics and Biomarkers for
Personalized Medicine: The Need for End-to-End R&D Solutions
Complex Biosignature Profiling
Genomics Proteomics Immunosignature

Signature Detection, Deconvolution and Multivariate Analysis

multiplex assays novel test devices (POC) new algorithms
Source: George Poste and Burrill & Company

51
Increased Legislative Interest in Standards, Oversights and
Regulation of Molecular Diagnostic Testing

• (2008) In Vitro Diagnostic Multivariate Index

Assays (IVDMIAs)

• (2009) Quality, Regulation and Clinical Utility of

Laboratory-Developed Tests

• (2009) Good Laboratory Practices for Molecular

Genetic Testing for Heritable Diseases and
Conditions

• (2009) Secretary’s Advisory Committee on

Genetics, Health and Society (SACGHS)

• (2009) SB 42: Post-CLIA Bioinformatics Services

Source: George Poste and Burrill & Company

52
The Rise of Open-Source Networks and Consortia

Source: George Poste and Burrill & Company

53
Companion diagnostics tests have surged
Cumulative Number of Companion Dx Companies and Tests
CAGR
1998-2008
150 Total 35
Tests**

120

90
Unique 39
Tests
60

30

0
1998 2000 2002 2004 2006 2008 2008
(Mkt+Dev)
* The launch date for 16 tests (out of 161) could not be identified
** Includes duplicates
Source: Company websites, SEC filings, Capital IQ, L.E.K analysis

54
Companion Diagnostics (Leading to “Companion
therapeutics”)
Diagnostic Testing Overview

Source: Company websites, L.E.K. analysis

55
Reimbursement for Diagnostic Tests

The Imperative for Value-Based Pricing

versus Current Cost-Based Models
• inadequate US Medicare coding and payment
mechanisms
– out moded, out-dated, lacking in transparency,
inconsistently applied

• inappropriate assignment of existing CPT codes to

new tests
• engagement of third party payers who derive
economic/clinical value from new Dx

Source: George Poste and Burrill & Company

56
Personalized Medicine and Lower Drug Cost

Rhumatoid
Alzheimer’s Asthma Pain Arthritis* Schizophrenia
Patients who are 30% 60% 80% 50% 60%
are helped

U.S. Prescriptions $1.5 $8.0 $14.1 $13.6 $9.5

(billions a year)

Estimated waste $1.1 $3.2 $2.8 $6.8 $3.6

(billions)

* Includes all autoimmune diseases, but RA is the most prevalent

Source: Business Week, February 1 & 8 2010

57
On Body: In Body Sensors/Devices
For Real Time and Remote Monitoring of Individual Health Status

Source: George Poste

58
 A New Healthcare Ecosystem Arising From Technology
and Market Convergence

passive/active data
collection
Dx/
Devices analytics and patients
network
services
architecture for
HIx
EMR/PMR integrated
care
Rx performance and consumers
outcomes analysis

Integrated Technology Data Mining Increasingly Targeted

Platforms and Integration Care and Efficient
Services Use of Finite Resources

Source: George Poste

59
Personalized Medicine
Progressive Evolution Based on Increasingly Comprehensive
Profiling of Disease Risk and Health Status
• Rational Rx based on profiling of underlying
Targeted molecular pathology
Therapy • MDx and disease subtyping

• Rational Rx based on comprehensive molecular

Individualized profiling of individuals
 disease subtypes and optimum Rx
Therapy  Rx AE risk
 disease predisposition risk and mitigation

• Integrated framework of longitudinal data on

Personalized individual health status
Care • Real time remote health status monitoring
• Transition to disease prediction and preemption
Source: George Poste

60
21st Century Science: Comprehending Biological Design
– “Systems and Synthetic Biology”
• the design principles of biological order and complexity
• the information content of biopathways and networks
• engineering bio-inspired novel functions and life forms

Miniaturization
Biotechnology, Engineering,
Systems Biology Directed Molecular
and Synthetic Assembly
and
Biology Novel
Materials

Large Scale
Computing
and
Computational
Biology

Source: George Poste

61
The Convergence in Healthcare Delivery

• Technologies
– biotechnology, medicine, engineering, computing,
telecommunications and social media

• Clinical Practice
– molecular medicine and increasingly customized care
– diagnostic, drug and device combinations
– POC testing and remote monitoring
– reduced error and improved compliance
– improved outcomes

• Connectivity
– integrated care networks for chronic disease
– social media networks and informed consumers
– new supplier networks of specialized turnkey expertise
– value added ‘content’ services for clinical data mining
– clinical decision-support systems

62
The Convergence in Healthcare Delivery (continued)

• Realigned Incentives
– integrated care for complex chronic diseases
– earlier disease detection and risk reduction
– wellness versus illness
– remote health status monitoring

• Consumers
– increased personal responsibility for health
– new incentives for wellness/compliance
– health status monitoring

63
Evolution of Molecular Medicine and Information-Based Medicine:
Foundation for Rational Care and Personalized Medicine

Rx 2009

64
Healthcare 2000 Years Ago vs. Today

2000 Years Ago Today

• Episodic • Episodic
• Local healers / midwives • Doctors / nurses / hospitals
• Medicine “Man” • Pharmacists / pharmacies
• Evidence in Ancient Egypt, • Governments provide and
publicly provided health pay
care system with healers
paid by the community
• Most people died of disease
• Most things don’t work and
people die

65
So what will healthcare
look like in 2020?

66
Healthcare will be…digitized

• Smart cards with electronic health records & sequenced DNA

• Consumer driven personal health planning
– PHR
 Microsoft -HealthVault™
 Google Health
 WebMD
 Revolution Health
 WalMart/Dell/eclinicalWorks
– Note: Europe / Asia may be faster, more integrated than
US

67
Need to Check Your Cholesterol?

There will be an app for that.

68
Smart-Phone Makers Call the Doctor

69
Monitoring Fitness (fitbit)… See How You Run,
Walk and Sleep

70
Far From a Lab? Turn a Cellphone Into a Microscope

The process creates holograms that can

show, for example, a stained white blood
cell

71
Handheld Ultrasound – The New Stethoscope?

72
GlowCap

Source: Vitality

73
Interesting Facts

• 55% of consumers want to communicate with their

Dr. via e-mail

• 57% want to schedule appointments via e-mail

• 57% want to buy prescriptions via e-mail
• 42% want personal health records (only 9% have
them today)

Source: Deloitte’s survey of 4,000 US consumers 18 years and older

74
Doctors & E-prescribing

• Only 12% of office based doctors e-prescribe

(doubled in last year)

• 20% of prescriptions are never filled (patients

don’t bother taking them to pharmacy)

• CMS now pays a bonus of 2% on charges billed to

medicare in 2009/2010, declines to .5% by 2013
(avg. is
$2-4k per doctor)

75
Is there a doctor in the “mouse”?

• American Well, Inc. – a web service allowing

patients to communicate via
web/video/text/chat/phone with doctors (who can
review PHR through Microsoft HealthVault)

• Swift MD, Inc. - $18 sign up/ $9 per month

– Doctor’s call/connect in less than 30 minutes
($59/consultation)

• TelaDoc, Inc. – online/phone consultations with

doctors

76
Managing Health Online
• HazMap – federal government site for health & safety
professionals
• EverydayHealth.com – (recently merged with RevolutionHealth)
– Markets 24 separate sites catering to various interests
• HealthCentral.com
• Google Health
• Microsoft HealthVault
• WebMD.com
• VisualDxHealth.com
• QualityHealth.com
• Healthline.com
• Wellsphere.com
• RealAge.com

77
So Who Is Interested in Consumer Digital Health?

Broadband
Enablers Information Providers Payors Facilitators Patients
Carriers

• Individuals
• Social Media
• Blogs

Local
Delivery

All Hospitals/
Clinics

78
Sources Used to Find or Access Health/Wellness
Related Information
Percentage of Adults Referencing…
Disease associations/ Support groups 7%

Pharmaceutical Companies 10%

Someone else with the same condition 11%

Nurse/Nurse Practioner 15%

Pharmacist 18%

Television 19%

Newspaper/Magazines 22%

Relatives/Friends/Co-workers 29%

Doctor 55%

Internet 59%

Source: iCrossing

79
Popular Types of Healthcare Social Media Platforms
% of Usage
• Blogs – DiabetesMine, HealthMatters (Healthline), WebMD, 4%
NYT HealthBlog

• Microblogs – Livestrong, Stupid Cancer

• Social Networking – OrganizedWisdom, PatientsLikeMe,
DailyStrength, 6%
NursesRecommendDoctors, TheHealthCareScoop,
MySpace, Facebook,Twitter

• Podcasts – Johns Hopkins Medical Podcasts, Mayo Clinic, NHI, CDC

Travelers Health, dLife for diabetes

• Video Sharing – 5%
• Forums – Health Groups, Revolution Health Groups,
iVillage15%

• Wikis – Wikipedia, FluWiki, WiserWiki 21%

Source: iCrossing

80
Reasons Online Health Information Seekers Use
Internet to Connect With Others

What other consumers say about a medication or treatment 36%

Research other consumers’ knowledge and experiences 31%
Learn skills or get education that helps me manage a condition27%
Get emotional support 17%
Build awareness around a disease or cause 15%
Share my knowledge and experiences with a 14%
medication or treatment
Share my knowledge and experiences with a health issue 14%
Find consumers’ recommendations and opinions about 13%
hospitals and other treatment options
Find consumers’ recommendations and options about doctors10%
Feel I belong to a group or community 8%
None of the above 22%

Source: JupiterResearch

81
Current Trends

• 41% of users read blogs

• 70% of users watch online video
• Over 175 million users on acebook

• Over 6 million users on witter

• Share! Connect! Comment! Engage!

82
Why Consumers Are Attracted to Social Media

• People trust “a person like me” more than

authority figures from business, government and
media
• Seeking ongoing dialogue, not one-way
advertisement
• Trust, transparency, openness, honesty

83
Case Study – Mayo Clinic

• Online newsroom
• Podcasts and blogs
• YouTube channel, Facebook page
• Sharing Mayo Clinic

84
Whole Genomic Sequencing Is Becoming Cost
Equivalent to Existing Tests
Cost per Human Genome Existing Genetic Tests

Source: Life Technologies

85
Healthcare will be… …on the sickness side
Centrally Delivered
•
& other consumer distribution centers
• Genetic Screening
• Pharmacy Distribution
• “Doc-in-the-Box”, staffed with nurse practitioners
Specialized Delivery
• Comprehensive cancer / cardiovascular centers
• “Heart Transplants ‘R’ Us” (surgery centers)
• Complex diseases
Home Diagnostics/Monitoring systems:
• Drop blood onto your Blackberry or iPod, telecommunicated to central
labs,
real-time Dx/Px
• Home monitoring

86
Pharma 3.0 – A New Ecosystem
Pharma 1. 0 (drugs)

Pharma 2. 0 Physician Providers

Information
(diversified drug portfolios) s Companies
Pharma 3. 0 (outcomes) Social
Media
Academia CROs
Health
Records
Firms

Pharma Patients

Telecom

Biotech Medtech
Governments

Food Insurers
Retailers

87
Molecular Understanding of Disease is Unlocking
the Promise

Technologies are Key Enablers

Source: Life Technologies, WHO classification criteria; SEER Cancer Statistics Review 2009

88
Medicine Today: An Imperfect Art

Source: Spear et al. TRENDS in Molecular Medicine Vol.7 No.5 May 2001; PMC Nov 2006, Life Technologies

89
Molecular Medicine From Birth to Elderly
Diseases we inherit… …Diseases we
acquire

Source: Life Technologies

90
In Addition To Acquired Diseases, Sequencing Will
Unlock Genetic Diseases

Source: L.E.K. analysis

91
Get to the Point When Medical Students Study…

This… …And this

Source: Cell Signaling; Nature Dec 09, Life Technologies

92
Laying the groundwork for the Genomic Physician

Source: Life Technologies

93
Healthcare Reform in BRIC Markets
Country Pharmaceutical Market Size Reforms
China • US$25.5B • “Healthy China 2020” – universal access to essential
• Projected to reach health care services
US$35.3B – Phase I: Allocates US$124B to curb medical costs,
by 2014 urban-rural gap
– Phase II (2010–2015): boost services beyond
– Phase III (2015–2020): Complete a robust health care
system with universal coverage
India • US$25.5B • Established system to track supply trends – market
• Projected to reach drugs and allow government to forecast drug supply
US$35.3B shortages
by 2014 • Drug tracking system – increase prices to incentivize
pharmaceutical companies to relaunch versions of drugs
in local markets.
• Boost regulatory regime to increase competitiveness of
Brazil • US$16.6B • Pharma – one
exports and of four newproviders
outsourcing industrial policy pillars
• Projected to reach • Federal government created special financing program
US$24.9B to increase local production of medicines, facilitate R&D
by 2014 developments and encourage M&A
• Government plan to boost investment in biotechnology
R&D through 2017

Russia • US$7.9B • Reforms expand coverage for prescription drugs by

• Projected to reach 2010
US$13.6B • Universal prescription drug coverage will expand
by 2014 demand for retail prescription drugs (paid out-of-pocket)
Source: The World Pharmaceutical Markets Fact Book 2009

94
The Promise of Mobile Technologies for Health
8000
6,692
7000

6000

5000
(millions)

4000

3000
2,293
2000

1000
305
11
0
Hospital Beds Computers Mobile Phones Population

95
mHealth – Players and Incentives

Players Incentives
Patient Improved health outcomes
Health Care Provider More efficient and effective delivery of health
services
NGO Advance organizational mission, attract funding
Foundations Advance organizational mission
Government More efficient health care provision, effective
government
Equipment Provider Device revenue generation, improved brand
recognition
Service Provider Revenue from service fees, increased subscriber
base
Application Solutions Revenue from additional applications license fees
Provider
Content Management Increase in volume of readership or revenue
Platform Provider Revenue from sales

96
Taking the Lead on Wireless Health

97
 2009 Wireless Health Venture Investments
Amount
Company ($M)
Description
Proteus Biomedical 25.4 Ingestible and implantable biosensors – track medication adherence and effects

CardioMEMS 22.1 Implantable wireless sensors – track cardiac output, blood pressure, heart rate

Autonomic Technologies 20.0 Implantable devices that aim to soothe severe headaches
Phreesia 11.6 Automatic patient check-in device and service to improve patient-provider
relationship
BiancaMed 9.8 Wireless monitoring devices, motion sensor that detects heart rate and
respiration
TelaDoc Medical Services 9.0 National network of primary care physicians – telephonic diagnosis, treatment,
and prescriptions
WellAware 7.5 Wireless remote monitoring systems – track the daily activities of home-care
individuals
Myca Health 5.0 EMR, comprehensive admin system, ability for doctors to communicate with
their patients via a variety of channels
Echo Therapeutics 3.6 Wireless blood glucose monitor for diabetics
BL Healthcare 3.0 TVx, platform gathers info from Bluetooth-based wireless medical devices at
home and displays on TV
Monica Healthcare 1.6 Wireless technology for monitoring the health of expectant mothers and babies

Wireless Medcare 0.54 Medical applications for wireless and web-enabled devices
Source: MobiHealthNews and Burrill
GymFu 0.16 &Motion-detecting
Company data iPhone fitness apps. include peer challenges to motivate users

98
 Examples of 2009 Wireless Health Deals
Company Company Deal
U.S. Army AllOne Health, Diversinet Army to pilot AllOne Mobile to stay in touch with
“wounded warriors” through their mobile devices
Google Anvita Mobile Anvita developed a mobile viewer of Google Health
for Android
Kaiser Permanente Mobilestorm Completed a pilot for text message appointment
reminders
IBM Continua Health Alliance, Continua Health Alliance, IBM, and Google to create
Google guidelines for wireless medical devices to connect to
Google Health
Vodafone Foundation UN Foundation Foundations teamed up with the Rockefeller Foundation
to create the Health Alliance
AllOne Health Significa Insurance Group Health plans’ members can view, manage, and exchange
and Erin Group their health info with their providers
Administrators
Microsoft ANT Wireless Microsoft to allow personal health devices to connect to
HealthVault via ANT+
Verizon Wireless Alcatel-Lucent, Ericsson Verizon Wireless launches 4G innovation center with
Alcatel-Lucent and Ericsson
Bayer Healthcare Nintendo Bayer created “Didget” a blood glucose meter that plugs
into Nintendo DS portable game system
Department of Veterans mVisum Involves getting physicians access to patient data while
Affairs on their way to the bedside
Verizon Wireless Qualcomm Verizon Wireless and Qualcomm – joint venture, nPhase
to manage machine-to-machine services, including
Source: MobiHealthNews wireless health offerings

99
Select Competitors vs. Potential Collaborators
by Market

CDH

Source: Fitnet

100
Health 2.0 in 2009: Competitors/Collaborators
by Function

CDH

Source: Fitnet

101
So, What are the Consequences for us of this
Consumer Digital Healthcare World?

• Low margin ethical drugs will predominate

– China/India/other low cost manufacturing sites will have an
edge

• Theranostics – Rx tied to Dx
• Worldwide pricing/parallel pricing – direct importation from
lowest priced country

• Pro-generics environment
• Patents devalued – increasing competition in marketplace
• Big pharma will become product distributors/disease managers –
more value across the entire care spectrum, but more
specialized

102
Stratified/Personalized Medicine will Profoundly Alter
R&D and Business Strategies

• Increased reliance on biomarkers

• Greater reliance on Phase IV studies to verify clinical
effectiveness and safety
• Emergence of new clinical development paradigm (phase
1-3 distinctions will become obsolete)
• New project management, business, and manufacturing
models
• Increasing partnerships with diagnostics companies
• New regulatory framework
• Legal and ethical issues
• Challenge to healthcare financing systems
Source: Kenneth Kaitin

103
R&D moves from technology to market

R&D used to be “we have a molecule, a

medicine, or a technology…looking for rich
patients.”
Now we start with patients – how can we help
them?
~Chris Viehbacher, new CEO Sanofi-Aventis

104
Retail Clinics Growth

1,200 Independent
Hospital System
1,000

800
1,175

600
901

400

200 311

108 121
17 32 74
0
2005 2006 2007 2008

Source: Merchant Medicine

105
Wal-Mart Comes out of Rehab

• Wal-Mart projected 400 walk-in clinics by 2010…but

instead went into reverse
• Of the 78 clinics in operation in 2008, all but 17 were
closed by May 2009
• Wal-Mart reorganized in partnership with local hospitals
and now has 33 clinics in operation, 26 with hospital
affiliation
-------------------------------------------------------------------------------
• Mayo Clinic looking for new model of care, opening 6
walk-in retail clinics, open early, on weekends, and
closing late
• Geisinger Clinic opens 2 retail clinics in supermarkets
106
Ecosystems Based on Convergence

Source: Triple Tree

107
Confluence of Technology

System biology
(tools, techniques
from sequence to
systems) Genomics/
Evo devo proteonics/
biomarkers

Improving power IT/digital

supply/constant Redefining healthcare information
monitoring (Rx/Dx/Device combinations)
(products/services/patient
care/outcomes

Telemetry/ EHR
communications/
telemedicine

Imaging/
Nanotechnology
visualization

Source: Burrill & Company

108
Healthcare 2020

• Healthcare moves from the “one size fits all” world

to the three/four P’s:
– Personalization
– Prediction
– Prevention / disease preemption
– Patient Responsibility

• Changes from sickness to wellness

• Increased life span (80s are new 60s; 100s are
new 80s)
– Health maintenance
– Fitness
– Eat for life

109
So What is Consumer Digital Health?

• Healthcare will be digitized

• Advancing consumer-centric, technology-enable
health and wellness
• Ability to connect with physicians anywhere in the
world
• Doctors able to practice medicine virtually
anywhere, anytime

110
Re-Inventing the Biopharmaceutical Industry

• Changing the industry versus changing with the industry

• Escaping the myopia of current markets and investor horizons
• Organizational re-structuring and process re-engineering are
insufficient for survival
• Creation of unimagined products, services and businesses
– Integration of Dx, Rx and Ix

Where is the white space?

How do we adapt companies to a new
and different competitive
environment?
Source: George Poste / Burrill & Company

111
Big Pharma Sales Growth

$400

$300
M&A
$ in Billions

$200

$100 Organic

$0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
E E E

Source: Datamonitor

112
Global Pharmaceutical Market Forecast
Sales

10-20

15-25
Russia*
15-25
Europe S. Korea
27% 15-25 I ndia

North 12-22 Turkey

Emerging
America Mexico
Markets 22-32
41% 7 Brazil
13% 10
10 China
11
11
19 68-78
Japan
11% 25
Rest of World
8% 2008 2013

* Russia 2013 estimate based on September 2008 forecast

Source: IMS Health, Market Prognosis

113
U.S. Health Care Industry Profit Margins
30%
2006
2007
25%
2008
2009

20%

15%

10%

5%

0%
Drug Retailers Health Care Sector Average Medical Pharmaceuticals Biotechnology
Providers Equipment

* Calculated by dividing calendar year net income by revenue for the companies in the S&P 500 Health Care Index
Source: Bloomberg

114
Global Pharmaceutical Sales in 2008

Audited Market 2008 Sales % Growth (const US$)

US$bn %Mkt Shr 2008 2003-2008
CAGR

Worldwide $773.1 100% 4.8 6.6

North America 311.8 40.3 1.4 5.7
Europe 247.5 32.0 5.8 6.4
Asia/Africa/Australia 90.8 11.7 15.3 13.7
Japan 76.6 9.9 2.1 2.7
Latin America 46.5 6.0 12.6 12.7
Note: All forecasts are from IMS Market Prognosis International 2009-2013 which provide a view of the audited and unaudited market, using
audited sales and adjusting for unaudited sales. The forecast are based on the March 2009 Market Prognosis release.

Source: IMS Health, March 2009

115
Worldwide Global Pharmaceutical Sales

Source: IMS Health

116
Significant Mergers and Acquisitions (2009)
Merck/
Pfizer/Wyeth Abbott/Solvay
Pharma/Pharma Schering Plough
$ 68 billion $ 6.6 billion
$ 41.1 billion

GlaxoSmithKline/ Warner Chilcoot/ Dainippon Sumitomo

Pharma/Specialty Stiefel Laboratories P&G Pharmaceuticals Pharma/Sepracor
$ 3.6 billion $ 3.1 billion $ 2.6 billion

Bristol-Myers Squibb/ J&J/Cougar

Roche/Genentech J&J/Elan Stake
Pharma/Biotech Medarex Biotechnology
$ 46.8 billion $ 1.4 billion
$ 2.4 billion $ 1 billion

Lundbeck/Ovation Endo Pharmaceuticals/

Novartis/Corthera
Pharmaceuticals Indevus Pharma
$ 620 million
$ 900 million $ 637 million

Gilead/CV Onyx Pharmaceuticals/ Celgene/Gloucester

Vertex/ViroChem
Biotech/Biotech Therapeutics Proteolix Pharmaceuticals
$ 377 million
$ 1.4 billion $ 851 million $ 640 million

Beckman Coulter/ Thermo Fisher

Inverness/Concateno Inverness/ACON Labs
Diagnostics Olympus Scientific/B.R.A.H.M.S
$ 201 million $ 200 million
$ 800 million $ 470 million

Abbott/Advanced Johnson & Johnson/

Danaher/MDS Medtronic/Core Valve
Medtech Medical Optics Acclarent
$ 1.1 billion $ 700 million
$ 1.4 billion $ 785 million

117
Market Share/Pharmaceutical Industry 2009

With Schering Plough

118
Significant Partnerings (2009)

AstraZeneca/
Roche/PTC Therapeutics AstraZeneca/Targacept
Pharma/Biotech Nektar Therapeutics
$ 1.9 billion $ 1.2 billion
$ 1.5 billion

BMS/ZymoGenetics Novartis/Incyte Takeda/Amylin

$ 1.1 billion $ 1.1 billion $ 1.1 billion

BMS/Alder Sanofi-aventis/Exelixis GSK/Concert

$ 1 billion $ 1 billion $ 1 billion

GSK/Chroma Therapeutics Wyeth/Santaris Pharma Sanofi-aventis/Regeneron

$ 1 billion $ 847 million $ 800 million

Amgen/Cytokinetics Onyx/S*BIO Biogen Idec/Acorda

Biotech/Biotech
$ 650 million $ 550 million $ 510 million

Celgene/GlobeImmune Cephalon/ImmuPharma CominatoRx/Clinical Data

$ 500 million $ 500 million $ 252 million

119
“Pharmadapting”
• Teva (global generics leader)  therapeutics
• Life Technologies/(Invitrogen/AB1)  diagnostics
• Sanofi-Aventis  Animal health; generics in emerging markets
• Novartis  Eye care (Alcon) – consumer products
• Roche  Genentech for pipeline enhancements
• Merck/Schering Plough  for scale
• Pfizer/Wyeth  biologics (including stem cells) and vaccines
• Pfizer/Strides Arcolab  generics in India
• Pfizer/Protalix Biotherapeutics  rare diseases
• GlaxoSmithKline  Dr. Reddy’s (generics)
• Merck KGaA/Millipore  bioequipment/supply/services

…and everyone wants to look like

J&J with a diverse business model
120
“Pharmadapting” (continued)

• Mega-mergers for growth in major markets

• Acquiring biotechs aggressively for pipeline and
access to innovation (including tools)
• Expansion of investment in emerging economies
– Especially BRIC

• Acquiring/building products/services in lower risk,

healthcare services

121
 Virtual Pharma: New Organizational Models for
Leverage of Open-Source Services

• PharmaCommons: integration of rapidly expanding

open-source data sets
– Discovery, toxicology, clinical trials

• Network of web-based turn-key contract services

• China/India/other low cost (R&D, clinical development
and manufacturing) sites will dominate
• New role of Big Pharma as integrator to generate
value across the entire disease episode spectrum
– Wellness to terminal care

Source: George Poste/Burrill & Company

122
Generics –Why is it Booming?

• Major blockbusters coming off patent

• Scale/globalization is key

• Emerging markets growing

• Fewer NCE approvals

• Little growth in primary care markets

123
Major Pharma Patent Expirations
2009 2010 2011 2012
Product Sales Product Sales Product Sales Product Sales
($MM) ($MM) ($MM) ($MM)
Prevacid 3,514 Aricept 1,810 Lipitor 7,493 Singulair 3,327
Topamax 2,302 Cozaar/Hyzaar 1,454 Plavix 4,483 Enbrel 3,274

Lamictal 2,099 Protonix 1,132 Advair 4,321 Diovan 2,848

Valtrex 1,777 Taxotere 1,078 Seroquel 3,772 Lexapro 2,617
Flomax 1,485 Arimidex 729 Actos 2,957 Lovenox 2,539
Imitrex 1,312 Gemzar 722 Zyprexa 2,670 Viagra 1,046
Adderall 1,309 Xalatan 544 Levaquin 1,779 Geodon 989
Keppra 1,247 NovoSeven 497 Avapro 843 Detrol 905
CellCept 968 Combivir 407 Caduet 485 Provigil 867
AmbienCR 899 Mirapex 402 Femara 447 Zometa 796
Suboxone 468 CoregCR 311 Xeloda 420 Avandia 676
All Others 2,335 All Others 3,260 All Others 2,366 All Others 4,584
Totals $19,715 Totals $12,346 Totals $32,036 Totals $24,468

Source: Kenneth Kaitin

124
Biologics Prompt an Exclusivity Debate

Key
Drug Companies Uses Approve Patent U.S.
d Expiration Sales
Epogen/Procrit Amgen/Johnson & Johnson Anemia 1989 2012- $3.8B
s
2015
Enbrel Amgen, Wyeth Rheumatoid 1998 2012 $3.4B
arthritis, psoriasis,
others
Neupogen/ Amgen Prevent infections 1991/200 2013/201 $3.4B
Neulasta during 2 5
chemotherapy
Avastin Genentech Cancer 2004 2017/201 $2.7B
9
Rituxan Genentech, Biogen Idec Cancer, rheumatoid 1997 2014/201 $2.6B
arthritis 6

Avonex Biogen Idec Multiple sclerosis 1996 2012 $1.3B

Source: company reports, Deutsche Bank

125
World Market for Health and Wellness is Expanding

• China and India have large populations, growing wealth and middle
class and increased demand for high quality healthcare
– Additional growth markets: South Korea, Middle East, Latin America, South
Africa, Russia, Eastern Europe

• Burden of disease is changing in developed and developing countries:

chronic diseases (cardiovascular, diabetes, cancer, CNS et al.) on the
rise everywhere

• Aging populations around the world

• National healthcare and private payor/employer models are converging
and all facing issues of affordability, quality and equal access
– Consumers becoming an important factor in the healthcare equation

126
2020 – Globalization / Changing the environment too

• Markets - demand increases in Asia & developing

world

• R&D migrates to Asia

• Regulations – International agencies collaborate
• Information – healthcare payors share data on
performance (clinical & financial)

• Diseases know no boundaries

• Every company is global from day one!

127
Medical Tourism on the Rise

• Market for medical tourism in 2008 about

$60B, expected to grow to over $100B by
2010
• Originally cosmetic/elective procedures,
now: CABG, heart valve replacement,
orthopedic including hip/knee
replacement, cancer, transplant, etc.
• 750,000 Americans traveled overseas for
surgery in 2008, expected to be 6 million
by 2010
• Cost including travel 2-3x lower than in US
• Patient financing programs becoming
available, some insurers providing
incentives
• Magazines, associations, conferences

128
Price Shopping for Procedures
Hip Heart Valve Hysterectomy
Replacement Replacemen
t

United States $43,000 $160,000 $20,000

India $5,000 to $9,000 $2,300 to

$7,100 $6,000

Thailand $12,000 $10,000 $4,500

Source: San Francisco Chronicle Magazine, January 4, 2009

129
Medical Tourism Growth Drivers
• Costa Rica
– One in five visitors is a medical tourist
• India
– Government investing $3.6 Billion in medical tourism infrastructure.
– McKinsey estimates Indian medical tourism at $2.3B by 2012.
• Korea
– Big focus: “New growth empire”
• Mexico
– StarMedica hospital groups built 7 hospitals in last 5 years;
– AmeriMed opening 10 new hospitals by 2012;
– Grupo Angeles (largest private hospital group in Mexico) spending $700 million to
build 15 hospitals in the next 3 years
• Singapore
– More internationally accredited facilities than any other country.
• Thailand
– One Bangkok hospital (Bumrungrad) served over 500,000 health travelers last year.
Source: Health Travel Guides

130
Major Government Initiatives in Biotechnology

• Australia/New Zealand
• Canada
• China
• Eastern Europe/Russia
• EU: Germany, Italy, Scandinavia, Spain, Switzerland, UK
• India
• Israel
• Japan
• Korea
• Latin America (esp. Brazil/Chile/Argentina)
• Malaysia
• Singapore
• GCC: UAE (Abu Dhabi/Dubai), Qatar, Bahrain, Kuwait, and Oman

131
but… and who is the payor?
Products &
Supplies
Pharma Companies
Diagnostic Companies
Medical Device
Companies
Medical Innovators
Prescribers (Doctors)

Providers (Hospitals)
Payors
Insurers
Governments
(Medicare/Medicaid,
etc.)
Patients
Users
Employers
(providing $)

132
 Patient Access to Selected Biologics Restricted or
Denied by NICE

Drug Indication Company Patient Access

Tysabri MS Biogen-Idec/Elan Restricted
(natalizumab)
Humira Psoriatic arthritisAbbott Restricted
(adalimumab)
Rituxan/MabThera RA Genentech/Biogen-IdecRestricted
(rituximab)
Fludara (fludarabine)CLL Bayer Denied

Gemzar Breast cancer Lilly Restricted

(gemcitabine)
Avastin Colorectal Genentech Denied
(bevacizumab) cancer
Erbitux (cetuximab) Colorectal ImClone Systems Denied
cancer

Source: BioCentury, 2008

133
Source: George Poste

134
Comparative Effectiveness is real…

Source: WSJ, April 14, 2009

135
Out-sourcing / Off-shoring

• Out-sourcing
– Subcontracting to a third-party company

• Off-shoring
– Relocating business processes from one country to another

Is it happening?
YES!
(Key example: Eli Lilly – Chorus model)

136
Overall Indexed Clinical Trial Costs

Source: SalaryExpert.com; WDI Database; Economist Intelligence Unit; CBRE Global Markets Rent 2005;
A.T. Kearney analysis, Aug 2005; Clinical Trial Offshoring

137
Healthcare – It’s changed/changing…

• Technology
• Markets
• Regulatory
• Reimbursement/payment
• Delivery
• Patients

138
Building a business has risks:
Biotech/Rx/Dx/Device Risks
• Technology
– IP and FTO
– Proof of concept
• Clinical/regulatory
– Regulatory pathway (consider alternatives)
– Non-US regulatory pathways
– Focus on areas of unmet medical need
• Reimbursement/pricing
– Understand payor and payor priorities (CMS, other governments, insurance
companies, self pay, other)
• Financial
– Construct capital efficient business models to achieve valuation step-ups
– Tranche financing rounds to specific milestones and limit financial exposure
– Syndicate investors
– Creativity essential
• Execution
– What will cause this to fail?
– What is necessary to succeed?

139
“Bio-adaption” – The Secret for Success

• Creative financing for fuel to grow – increasingly from

non-traditional sources (disease advocacy groups early,
foreign markets late)
• Big biocompanies “selling” to global pharma
• Small companies focusing on more narrow market
areas
• Increased risk sharing in partnering – big companies
buying “options”
• VIDDOs- virtually integrated drug discovery
development organizations
• Reducing FDA-centric risk, looking for pathways to
market globally

140
Challenges Ahead

• Dueling forces
– Increasing healthcare demand
– Slowing growth of healthcare expenditure growth
• Innovation accelerating vs. market adoption
• Growth in emerging market exceeding growth in
traditional markets (generics/brands vs. IP
protected Rx/Dx)
• Comparative effectiveness – who will pay for
studies?
• Changing healthcare delivery venues (consumer
digital health)

141
Challenges Ahead (continued)

• Ethics (mistakes vs. fraud)

– off label use
– improper medicine changes/substitution
– conflicts of interest
• De-linkage between users (patients), deliverers
(doctors, hospitals, caregivers), and payors
(government, insurance, managed care)
• Moving from a sickness to wellness system
• Business changing…emergence of new business,
new business models

142
My Predictions for 2010

• Continued impressive developments in science/technology

– More genomes sequenced, human genome $1,000
– Regenerative medicines/stem cells – real progress
– Personalized, predictive, preventative medicine progress
– Antibodies vaccines will be big

• Regulatory world more complex, more international

– Pharmacovigilence
– Cost effectiveness

• Manufacturing/QC issues (Genzyme)

• Growth of generics/biosimilars

143
My Predictions for 2010… (continued)

• Dramatic changes in pricing/reimbursement on Rx side;

Dx generating increased value

• Global markets increasingly important

– Russia/China/India/Brazil (and all of Latin America), MENA

• Bio pharma consolidation continues evolution from vertically

integrated to more virtually integrated; more distribution
focused, (more like Johnson & Johnson, less like Merck!)

• Funding world improving:

– Capital available, but expensive and demand overwhelms supply of
capital
– Increased globalness: arbitrage value difference

• Consumer digital health continues to emerge

144
“It is not the strongest of
the species that survives,
nor the most intelligent,
but the one most
responsive to change”
Charles Darwin

145
146
 Biotech 2010 Life Sciences:
Adapting For Success
Itisnotthestrongestof thespeciesthat

survives, northemostintelligent, butthe

onemostresponsivetochange
—CharlesDarwin

MIT Enterprise Forum

April 14, 2010

G. Steven Burrill
Chief Executive
Officer
Burrill & Company

147