A Forward Looking Strategy
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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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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.


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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.


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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


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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.


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Evolution of Pharma/Biotech Industries

Diversification Era

BP/BBio

SP/SBio

GP/Bio

NP/Bio

Characterized by market segmentation


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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


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Evolution of Pharma/Biotech Industry

Consolidated Landscape Era

SP/Bio

NP/Bio

GP/GBio

New

BP/BBio

Surviving

BP/BBio

Consolidated Landscape


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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


Other industries recently subject to cycle l.jpg

Telecommunications

Automobiles

Entertainment (Movies, Radio, Television and Publishing)

Agriculture and Food

Computers

Retail

Airlines

Other Industries Recently Subject to Cycle


Factors accelerating pharma bio changes l.jpg

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


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Big Pharma/BBio Warning Signs 1

More R&D Spending, Fewer New Molecular Entities

CBO Study, R&D in Pharma Industry, October, 2006


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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


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Big Pharma/BBio Warning Signs 3

Fewer Patents Per R&D Dollar

CBO Study, R&D in Pharma Industry, October, 2006


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Big Pharma/BBio Warning Signs 4

Diminishing Return on Assets

CBO Study, R&D in Pharma Industry, October, 2006


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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


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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 .


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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?


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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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