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Biotech 2008: A 20/20 Vision to 2020. G. Steven Burrill Chief Executive Officer, Burrill & Company The Burrill Indiana Life Sciences Meeting October 21, 2008. What really happened since we were here last year?. World financial crisis – unprecedented (and not over yet)

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slide1

Biotech 2008:

A 20/20 Vision to 2020

G. Steven Burrill

Chief Executive Officer, Burrill & Company

The Burrill Indiana Life Sciences Meeting

October 21, 2008

what really happened since we were here last year
What really happened since we were here last year?
  • World financial crisis – unprecedented (and not over yet)
    • “Wall Street” totally restructured
  • Economic dislocation in the world (well beyond the US) will be pervasive and long term
  • Healthcare systems around the world reforming – too expensive to treat everyone with all the new technology
  • Regulatory agencies increasingly risk-averse
  • Reimbursement/payment undergoing change
my 2007 book was about a global transformation

…From

To…

Chemistry

Biochemistry

One Size fits all drugs

Personalized medicine

Aging (just happens)

Aging is optional / controllable

Therapeutics/diagnostics/devices

“Theranostics”

Treating sickness

Preventing Sickness

Food for survival

Food for health

My 2007 book was about a global transformation…
a global transformation

…From

To…

Fossil fuels

Alternative fuels (biomass conversion)

Unavailable local capital

Global arbitrage

Fully integrated business model (FIPCO)

Virtually Integrated business model (VIPCO)

Local companies

Global companies

US centric biotech industry

Global industry

Changing the healthcare environment

Transforming the world

…a global transformation
but now a 20 20 vision to 2020 just a dozen years away
but now….A 20/20 Vision to 2020 (just a dozen years away)

What will the healthcare delivery system look like in 2020?

  • In the U.S.?
  • In the world?

What will the “marketplace” include?

  • Products
  • Technology

Where is the “biotech revolution” taking us?

a 20 20 vision to 2020
A 20/20 Vision to 2020

So…..Where will we go for healthcare in 2020?

  • Sickness?
  • Wellness?
healthcare will be on the sickness side
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
telemedicine and remote monitoring for chronic disease care self care model
Telemedicine and remote monitoring for chronic disease care: “Self Care” model

“We will see an immediate impact improving the quality of life of congestive heart failure patients by reducing hospital readmissions… This way a patient is never far away from health care.”

Terianne Cerep, Mgr Home Health

Mercy Hospital, Scranton PA

  • Monitoring key health indicators for congestive heart failure patients
  • Data transmitted to secure website monitored by nursing staff, patient’s relatives
mobile and home health monitoring
Mobile and Home Health Monitoring
  • Chronic disease – diabetes, congestive heart failure, etc. – accounts for 75% of medical costs in the US
  • Disease management can substantially improve patient outcomes and lower cost
  • Medical devices and telecommunications technologies are converging to develop monitoring and control systems for patients with chronic disease
  • Aging, remote monitoring
and where is technology taking us
And where is technology taking us?
  • Moore’s Law
  • ID of genetic markers/links for most disease (algorithms of biomarkers)
    • Note: from a value standpoint- “Genes ‘R’ Us” model failed quickly; individual biomarker “valve” also likely to decline rapidly
  • Genetic screening becomes normal
  • Understanding of biochemical mechanisms of most diseases

Therefore:personalization (customization) of healthcare

longer term risk assessment prediction driving to prevention
Longer Term Risk Assessment (prediction) Driving to Prevention:
  • Genome wide association studies not just BRAC 1&2
      • Navigenics
      • DeCode
      • 23andMe
  • Shorter term, high accuracy risk assessment/clinical support tools
    • Proventys
    • Labcorp
    • Quest
    • Roche
    • Genomic Health
    • XDx
    • CardioDx
genetic association information network
Genetic Association Information Network

The GAIN project was launched in 2006 by the Foundation for the NIH and its partners, to pursue a series of Genome-Wide Association Studies (GWAS) designed to identify specific points of DNA variation associated with the occurrence of a particular common disease.

Objectives:

  • Develop genetic markers associated with disease
  • Roughly 18,000 samples (patients)
  • 300-500K SNPs per sample
  • Open database at NCBI (dbGaP)

Partners:

  • NIH
  • Pfizer
  • Affymetrix
  • Perlegen Sciences
  • Abbott
  • The Broad Institute

Disease Areas:

  • Schizophrenia
  • Bipoloar Disorder
  • Major Depression
  • Ischemic Stroke
  • ADHD
  • Psoriasis
  • Diabetic Nephropathy
  • Parkinsons Disease
  • Age-Related Eye Disease
the biomarkers consortium
The Biomarkers Consortium
  • A public-private partnership to accelerate the development and validation of biomarkers important.
  • Consortium members include:
    • CMS, FDA, NIH
    • Numerous commercial partners, including: Pfizer, Merck, AstraZeneca, Eli Lilly, Novartis, et al.
    • Numerous non-profit partners, including: American Cancer Society, ASCO, PhRMA, BIO, Academy of Molecular Imaging, et al.
  • First selected project validation of FDG-PET for lung and lymphoma cancers.
    • Results expected to demonstrate accelerated drug approval cycles based on use of FDG-PET as a surrogate endpoint in trials

"One of our most pressing goals under the FDA's Critical Path Initiative is to improve developmental science and technology to deliver better diagnostics and more personalized treatments to patients more quickly and ultimately improve Outcomes. We believe the identification and use of biomarkers in drug development can have a catalytic impact on this mission."

- Andrew C. von Eschenbach, M.D., FDA Commissioner

healthcare will be digitized
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
    • Europe / Asia may be faster, more integrated than US
tracking feedback
Tracking & Feedback
  • Nike/Apple –iPod Nano and online workouts/equipment/fitness linked
  • Tools to monitor medication regiments to drive compliance
  • Tools to measure
    • Activity
    • Sleep
    • Food consumption
incentive programs
Incentive Programs
  • Stickk.com – paying people to lose weight
  • FitNet
  • Gogetter
  • Virgin
  • Lifespring
  • Insurer rewards
  • Employer driven incentives
rapid secure communication with doctors
Rapid Secure Communication with Doctors
  • Relay health (McKesson)
  • Minute clinic
  • FitNet
patient centric healthcare closer than we think
Patient-centric healthcare: closer than we think?
  • Founded in 2000
  • Walk-in health care clinics, no appointment needed
  • Located in 20 states, 200 centers
  • Staffed by nurse-practitioners
  • Location in popular retail stores: Target, CVS
  • 350,000 visits, 99% Patient satisfaction

“We’re delighted with the continued expansion of MinuteClinic and with the enthusiastic response of health care consumers. We’re bringing innovation and change to the marketplace and consumers…”

Michael Howe, CEO

nano bio regenerative medicine
Nano/Bio/Regenerative Medicine
  • Nano devices in blood vessels “roaming under own power” to diagnose and fix problems
  • Nanoparticals:
    • Removing bacteria from food
    • Adding nutrients
    • Aids in packaging/retaining freshness

Artificial Organs/Regenerative Medicine:

    • Heart, lungs, pancreas, liver, kidney, blood, eyes, ears, legs, hands, etc.

Advanced Prosthetics:

    • Arms, legs, hands- all with biological/ technological / psychological interaction sensors
healthcare delivery in 2020 closer to patient

Secondary CareEmergency RoomIntensive CareMajor Surgery

Primary CareComplex diagnostics & treatmentsMinor surgical proceduresBasic diagnostics & prescribing by nurse practitioners“Life checks”

Patients

Primary CareWeb based self-diagnosticsOTC drugs for chronic and non-chronic conditions“Wellness” services

Healthcare Delivery in 2020 –Closer to Patient

Primary CareComplex diagnostics & treatmentsMinor surgical proceduresBasic diagnostics & prescribing by nurse practitioners“Life checks”

so what are the consequences for us of this consumer digital healthcare world
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 disease care spectrum, but more specialized
2020 globalization changing the environment too
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!
start up s globalness begins day 1
Start-up’s Globalness Begins Day 1
  • Science/technology
  • Intellectual property/patents/FTO
  • People
  • Communications
  • Competition
  • Capital
  • Markets—diseases know no borders

Even the smallest company is a global player from Day One

industry dilemmas
Industry Dilemmas…
  • Rising Healthcare Costs
  • Loss of Patent Protection for Blockbuster Drugs
  • Need for Innovation; build vs. buy
  • Reimbursement/Payment system changes – Medicare Part D
  • Compulsory Licensing in some countries
slide35

US Healthcare Costs

Diagnostic tests influence 85% of clinical actions

Source: George Poste

the costs of non compliance with rx regimens
The Costs of Non-Compliance with Rx Regimens

$177 billion projected cost

20 million workdays/year lost (IHPM)

40% of nursing home admissions

projected 45-75% non-compliance (WHO)

50-60% depressed patients (IHPM)

50% chronic care Rx (WHO)

Source: George Poste

healthcare costs are unevenly distributed
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

market distortions and perverse incentives in modern healthcare delivery
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

the strategic future of healthcare

The Strategic Future of Healthcare

Economic Unsustainability

Reform and Rational Care

or

Confronting the Imbalance Between Infinite Demand and Finite Resources

Source: George Poste

re inventing the biopharmaceutical industry
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 create new companies in a new and different competitive environment?

Source: George Poste/Burrill & Company

slide41

molecular

medicine

and

personalized

medicine

access,

cost and

quality

of care

proficient

use of

information

(e.health)

The Three Forces Shaping the Evolution of Healthcare

Demonstrating Value

Source: George Poste

slide42
Changing the value proposition in healthcare

From cost to value

From fragmented interventions to integrated care

From late intervention in chronic disease to prediction, prevention and earlier detection and intervention

From empirical Rx to rational Rx targeted to the underlying causal molecular pathologies

Escalating importance of Dx/PDx in the healthcare value chain

Reversing the profitability of Rx/Dx

Aligning Incentives

Source: George Poste/Burrill & Company

slide43
The Evolution of Molecular Medicine and Information-Based Medicine:The Foundation for Rational Care and Personalized Medicine

Drug

New competencies in molecular medicine and biomedical informatics

Real-time information for optimum decision-making

Molecular diagnostics

Drug

Disease

management

protocols,

patient

information

Package insert

Genetic

profiling

Rx 2008

Medicine 2020

Source: George Poste

slide44

Disease Subtyping: Next-Generation Molecular Diagnostics (MDx) and A New Molecular Taxonomy of Disease

Dx Platforms

  • Massive parallelism
  • Miniaturization
  • Automation
  • Rapid
  • POC

RIGHT Rx forRIGHT DISEASE SUBTYPE

B1 skin, B2, melanocytes, B3, melanoma, B4 and 5 metastatic melanoma From: C. Haqq et al. (2005) 102, 6092

Source: George Poste

physician adoption of the new diagnostics
Physician Adoption of the ‘New Diagnostics’
  • Demonstrated clinical value and better patient outcomes
  • Solid scientific basis
  • Ease of use, simple to understand
    • “Just another test”
  • Fits into the clinical workflow
  • Enables early diagnosis and prediction
  • Well-received by patients
  • Low capital outlay
  • Reimbursable
140 years of drug discovery technology

1900

1950

1960

1980

1990

2000

2010

2020

2030

2040

1970

140 Years of Drug Discovery Technology

1st generation

2nd generation

3rd generation

genomics

/

proteomics

cell pharmacology/

molecular biology

drugs against

natural products

targets identified

genetic engineering

and derivatives

from disease genes

receptors

chronic

degenerative

serendipity

disease associated

enzyme

with ageing,

Biotech drugs

inflammation,

cancer

New Therapeutic Cycles

lowerers

lipid

ACE-inhibitors

Source: CMS, Lehman Brothers research

H2-antagonists

beta

blockers

NSAIDS

psychotropics

penicillins

sulphonamides

aspirin

slide54
How often are your discoveries accidental? -almost always

-Kevin SharerCEO of Amgen

slide55
“Big” and “innovation” are not two words we usually put together.

-Kevin Sharer CEO of Amgen

analyzing the molecular profiles biosignatures of body functions in health and disease
Analyzing the Molecular Profiles (Biosignatures) of Body Functions in Health and Disease

The Molecular Basis

of Biological Processes

The Molecular

Heterogeneity of Disease

Individual Genetic

Variation

Alterations in Disease

Disease Subtypes

Pharmaco-

genetics

Disease

Predisposition

New Targets for

Dx, Rx, Vx

Right Rx for

Disease

New Targets

for Dx,

Rx, Vx

PDx

PRx

r d process of the future
R&D Process of the Future

A Biotech / Pharma Company will only develop a molecule when it is confident that the mechanism of action works

pharmacogenomics and biomarkers in drug development
Pharmacogenomics and Biomarkers in Drug Development

Drug Safety and Contraindications

Differentiating pharmacokinetics and metabolism

  • Determining personalized dosage

Demonstration of efficacy for targeted populations

  • Prospective hypothesis (e.g., EGFR receptor targeted drugs)
  • Retrospective analysis (e.g., tamoxifen)

Biomarkers as surrogate endpoints for trials

  • Accelerating clinical development
  • Enabling adaptive trials
safer more effective drugs

Faster path to

disease targets

using genetic data

Speed trials by testing on

patients selected for likely

high response and safety

Target

Identification

Target

Validation

LeadDevelopment

Preclinical

Clinical

Market

Target optimal population

by combining drug withmolecular diagnostic testing

Knowledge of biological pathways

and gene variants help eliminate

poor candidates

Safer, More Effective Drugs
pharma r d outsourcing accelerating
Pharma R&D Outsourcing Accelerating
  • Cost savings in FTEs, facilities and programs continue to drive research (and increasingly development) outsourcing to China and India
    • Dr. Reddy’s Aurigene Discovery Technologies Ltd. Division (India)
      • Discovery and lead optimization for Forest Laboratories for small molecule candidates in obesity/metabolic disorders; lead generation and optimization for Merck Serono for small molecules to treat autoimmune diseases
    • Nicholas Piramal (India)
      • Discovery collaboration against two cancer targets for Merck
    • Ranbaxy Laboratories Ltd (India)
      • Ranbaxy to undertake lead optimization, selection and clinical trials through PoC in multi-year collaboration with GSK
      • With Ranbaxy purchase by Daiichi Sankyo, collaborations will move to other players
    • Hutchison Medipharma (China)
      • Research collaboration in inflammatory disease and cancer with Eli Lilly
fda approves updated warfarin prescribing
FDA Approves Updated Warfarin Prescribing

“Today's approved labeling change is one step in our commitment to personalized medicine. By using modern science to get the right drug in the right dose for the right patient, FDA will further enhance the safety and effectiveness of the medicines Americans depend on," said Commissioner of Food and Drugs Andrew C. von Eschenbach, M.D.

  • 2M patients in US start taking warfarin (coumadin) each year
  • Complications due to mis-dosing cost an estimated $1.2B per year – it is the second most common pharmaceutical emergency room adverse event
  • Two gene variants – CYP2C9 and VKORC1 – are biomarkers for warfarin metabolism, affecting about 30% of patients taking the drug
  • Genelex, Clinical Data among those offering the test
selected targeted treatments
Selected Targeted Treatments
  • Gleevec (Novartis) - pH+ CML kinase inhibitor
  • Iressa (AstraZeneca) – EGFR tyrosine kinase inhibitor
  • Tarceva (Genentech/OSI) – HER1/EGFR inhibitor
  • Erbitux (ImClone/BMS) – HER1/EGFR inhibitor
  • Avastin (Genentech) – VEGF/VEGFR inhibitor
  • Herceptin (Genentech) – HER2 inhibitor
  • BilDil (NitroMed) - heart failure in African American patients
  • Other “Semi Targeted” Treatments (approved or late stage trials)
  • Nexavar (Bayer/Onyx) – multikinase inhibitor
  • Tykerb (GSK) - ErbB-2/EGFR inhibitor
  • Enzastaurin (Lilly) - PKC-Beta, AKT/P13 inhibitor
  • Personalized cancer vaccines (Problematic Development)
    • Favrille – FavId for non-Hodgkin's lymphoma
    • Genitope – MyVax for non-Hodgkin's lymphoma
amgen kevin sharer ceo
Amgen -Kevin Sharer (CEO)
  • How do you decide the areas of science most promising?
    • How much do we understand the biology?
    • What is our IP position & how do we defend it?
    • Do we have human safety & efficacy data that looks promising?
    • Competitively, where are we in the queue?
    • Will there be markets, will there be people to pay for it?
  • Conclusion -big decision is when you push the button to go from PH II proof of concept studies to PH III efficacy studies ….now we are starting to make hundreds of millions of dollars of investments
health not sickness
Health not Sickness

The World Health Organization defines health as:“A state

of complete physical, mental and social well-being and not

merely the absence of disease or infirmity”

the obesity epidemic
The Obesity Epidemic

70

60

50

40

30

20

10

Overweight

0

Obese

1960-

1976-

1999-

2003-

1962

1980

2000

2004

% Overweight and obese in adults 20-74 years old

the case for wellness
The Case for Wellness
  • 30-60% of health plan claims are related to health risks that are modifiable by nutrition, exercise, stress reduction, etc.
  • Well-managed employer health and productivity management programs return $6-15 for every dollar spent
  • Cost of smoking: healthcare cost of smoking over a lifetime $220K per person = $40 in healthcare cost per pack of cigarettes smoked!
  • 67% of the US population is overweight or obese, and 12% of healthcare costs are obesity-related

Source: Wellness Councils of America

health and wellness advances 2007 2008
Health and Wellness advances 2007-2008
  • Global functional foods market expected to be $167B by 2010, growing 14% annually
  • Global nutraceuticals market $228B in 2007 – unreimbursed!
  • Weight loss and weight management a huge, poorly served market with opportunity for drug, device, food/nutrition companies
  • Employer-sponsored wellness programs on the rise – so are legal issues around discrimination!
    • 86% of employers in North America offer employee wellness plans; only 25% in Europe, 21% in Asia
    • “Where there’s smoke…you’re fired!” Employers aggressive stance on unhealthy behaviors under legal scrutiny
wellness changes become evident
Wellness – Changes Become Evident
  • School meals –obesity and health education/PE
  • Organic and health food markets growing rapidly
  • Nutrition labeling
  • High fructose corn syrup/trans-fats destined to be regulated
  • Customized food to treat specialized medical conditions
  • Employee incentive programs/cost reduction tied to fitness programs

…but, mixed gains on alcohol reduction/drug use/improved sexual health/reduced nicotine consumption

10 key trends for 2008 in food nutrition and health
10 Key Trends for 2008 in Food, Nutrition and Health
  • Digestive Health - a wellness issue and the biggest opportunity
  • Fruit and superfruit - the future of food and health
  • The marketing power of "naturally healthy"
  • Beauty foods - the newest niche
  • Weight management more about maintaining than losing
  • Mood food feels its way
  • A tipping point for the premiumisation of health
  • Healthy snacking for the "me" generation
  • Kid's nutrition - connecting to multiple trends is crucial
  • Are antioxidants the new probiotics?

Source: 10 Key Trends in Food, Nutrition & Health 2008,by Julian Mellentin, New Nutrition Business

traditional medical value chain is changing
Traditional Medical ‘Value Chain’ is changing !!
  • Universities
  • Government
  • Labs
  • Pharma
  • Biotech
  • Diagnostics
  • Devices
  • Physicians
  • Hospitals
  • Pharmacy
  • Other
  • Caregivers
  • Personalized
  • Wellness
  • Coach,
  • Fitness,
  • Diet
  • Consumer
  • Directed
  • Payment
  • Plans
  • Rich Health
  • Information via Internet
  • Patient-
  • Centered
  • Care
healthcare changes to wellness vs sickness
Healthcare Changes to Wellness (vs. sickness)
  • Healthcare moves from one size fits all to the three/four P’s:
    • Personalization
    • Prediction
    • Prevention / disease preemption
    • Patient Responsibility
  • Increased life span (80s are new 60s; 100s are new 80s)
        • Health maintenance
        • Fitness
        • Eat for life
and so healthcare cost increases are on everyone s agenda
…and so, healthcare cost increases are on everyone’s agenda
  • Politicians/Congress/White House/Gov’t Leaders
  • Payors/Reimbursors/Insurers
  • Physicians/Providers
  • Patients/Consumers

…and patients are empowered, have economic costs, and really want to stay well!

current healthcare system

Products & Supplies

Pharma Companies

Diagnostic Companies

Medical Device Companies

Medical Innovators

Payors

Insurers

Governments (Medicare/Medicaid, etc.)

Employers (providing $)

Current Healthcare System

Prescribers (Doctors)

Providers (Hospitals)

PatientsUsers

reimbursement
Reimbursement
  • Who is the payor?
    • Government?
    • Employers?
    • Patients?
  • Studies in comparative effectiveness –who will pay for this?
  • Evidentiary framework should not be left to payors (CMS/HHS/Kaiser/Aetna, etc.) –Pharmaco-economic benefit tests?
efficacy
Efficacy

Drug is 30% effective

vs.

Drug effective for 30% of the market

global pharmaceutical sales in 2007
Global Pharmaceutical Sales in 2007

All information is current as of Feb 26, 2008.*Excludes unaudited markets, and Russia, Ukraine and Belarus audited data. Sales cover direct and indirect pharmaceutical channel purchases in U.S. dollars from pharmaceutical wholesalers and manufacturers. The figures above include prescription and certain over-the-counter data and represent manufacturer prices. Totals may not add due to rounding.

Source: IMS Health

number of products approved 1982 2007
Number of Products Approved — 1982–2007

45

New Indications

40

35

Biotech Drugs

30

25

20

15

10

5

0

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

1992

1993

1994

1995

products in ww development 2007 iii and registration
Products in WW Development 2007 III and Registration

571 Total

388 Risk-Adjusted to Approval

248 Total

208 Risk-Adjusted to Approval

Source: BioCentury Publications

big new markets
Big “New” Markets
  • Alzheimer's/memory
  • Obesity/diabetes/metabolic disease
  • Anti-aging
  • Anti infectives (antibiotic resistance)
  • Wellness (preventative/predictive cure)
generics why is it booming
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
how the industry has changed
How the Industry has Changed

FDA being more risk averse

NCE approvals in 2007 down 40% over 2006

Approvable letters on the rise (requiring further studies)

Marketed products receiving label restrictions

Pharmacovigilence is big driver today

New FDA guidelines

Phase III trials now require 2500 subjects US (1500 Int’l)

Stalling diabetes startups for Type 2 diabetes

but we are not without major issues
….but we are not without major issues
  • Off-label promotions
  • Follow-on biologics (biosimliars/generic biopharmaceuticals)
  • Drug recalls
  • QC – Heparin
  • “Modernizing” clinical trials
    • Duke/FDA (Rob Califf)
  • Patent reform
  • Co-pays going up/Congressional inquiry
  • Polypill, especially for developing world
  • Financing innovation
on the regulatory patent policy front gov ts are our partners
On the Regulatory/Patent/Policy Front…Gov’ts are our Partners!
  • Patent reform (PTO proposals to restrict claims examined in a single application and limit continuation applications)
  • FDA resources – PDUFA IV authorization
    • follow-on biologics (biogenerics)
    • drug safety
    • theranostics
    • food safety (pet food)
  • Biofuels – renewable and alternative energy sources through use of biotechnology
  • Medicare Prescription Drug Price Negotiation Act – Non-interference (proposal to require Medicare interference)
  • Sarbanes Oxley compliance – reducing the burden on small companies
  • SBIR eligibility
  • Agbio/ GMO’s
  • Stem cell research – federal funding
  • Passing of Genetic Information Non-Discrimination Act (GINA)
major government initiatives in biotechnology
Major Government Initiatives in Biotechnology
  • Canada
  • EU: Scandinavia, Germany, UK, Spain, Italy, Switzerland
  • Eastern Europe
  • China
  • India
  • Japan
  • Korea
  • Malaysia
  • Singapore
  • UAE (Dubai/Abu Dhabi), Bahrain and Kuwait
  • Israel
  • Latin America (esp. Chile/Brazil/Argentina)
  • Australia/New Zealand
biotech and healthcare are global businesses
Biotech and Healthcare are Global Businesses

UK/EUROPE

CANADA

ISRAEL

USA

JAPAN

MIDDLE EAST

CHINA

ASEAN

INDIA

LATIN AMERICA

AUS/NZ

world market for health and wellness is expanding
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: 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
medical tourism on the rise
Medical Tourism on the Rise
  • Market for medical tourism in 2007 about $50B, expected to grow to over $100B by 2012
  • Originally cosmetic/elective procedures, now: CABG, heart valve replacement, orthopedic including hip/knee replacement, cancer, transplant, etc.
  • Last year 500,000 Americans traveled overseas for surgery
  • Cost including travel 2-3x lower than in US
  • Patient financing programs becoming available, some insurers providing incentives
  • Magazines, associations, conferences
slide101

Medical Tourism Growth Drivers

  • 40% of consumers say they would travel outside the country for medical treatment, if the quality was comparable and the cost was cut in half.
  • - Deloitte
  • Medical Tourism: 2008 Survey of Health Care
  • “Foreign health care providers often have physicians with
  • internationally respected credentials”
  • - National center for Policy Analysis
  • Medical Tourism Offers Hope To Control Health Care Cost
  • “As always there are challenges, butfrom humanity's standpoint
  • (medical tourism) is something… we ought to celebrate."
  • - Harvard Business School
  • The Rise of Medical Tourism

Source: Health Travel Guides

slide102

Medical Tourism Growth Drivers

  • India
    • Gov’t investing $3.6 Billion in medical tourism infrastructure.
    • McKinsey estimates Indian medical tourism at $2.3B by 2012.
  • 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.
  • Costa Rica
    • One in five visitors is a medical tourist

Source: Health Travel Guides

china
China
  • Rapid growth of pharmaceutical sales in China
    • Over $70B in 2007, growing about 20%
    • China will be one of world’s largest pharma markets within 10 years
  • Biotech 5-Year Plan focus areas
    • Vaccine
    • Diagnostic
    • Innovative drugs
    • Modern TCM
    • Bioengineering and biologic manufacturing
    • Agbio/Biofuel/Industrial biotech
  • Strong science infrastructure
china continued
China, continued
  • Regulatory and IP Protection making some progress
    • Dealing with corruption
    • But still many safety and quality issues: heparin, pet food, lead in products
  • IPOs had a ‘breakout year’
    • 3SBio, Simcere, WuXi, Fosun, Tongjitang, China Napstar Chain Drugstore
  • M&A Activity
    • Chinese companies out shopping for (global) acquisitions – e.g., WuXi/Apptec
china continued105
China, continued
  • Looking ahead
    • China will move up the value chain, becoming more fully integrated and developing innovative pharmaceuticals
    • Partnering opportunities with multinational firms will abound
    • CRO services will become increasingly competitive, with consolidation occuring
    • Rapid growth of China market will promoted branded generics and strong local pharma sales and marketing companies, especially outside major metropolitan areas (Beijing/Shanghai)
    • China will develop FDA-compliant generics and biologics manufacturers to gain access to the global market
    • More domestic and Hong Kong listings of China life sciences companies as China’s capital market matures
india
India
  • Indian economy continues to experience rapid growth
    • Rising middle class, growth in consumer spending and healthcare spending
  • More than 280 biotech companies, growing more than 35% per year for the past 4 years, a $2B+ market in annual revenue
    • Key Exports: Vaccines, CRAMS services, generics
    • India has highest number of FDA-approved manufacturing plants
    • Leading the way in biosimilars
    • Moving from cost-savings to market expansion to innovation
  • Healthcare projected to grow at 15% CAGR , to a $350B+ market in 2022
    • New disease burdens: diabetes, cardiovascular, cancer
    • Medical device opportunities in imaging, diagnostic and surgical devices to treat these disease areas
    • Retail healthcare growing: pharmacy chains, OTC medicines, health and wellness (functional foods, supplements, traditional medicines)
india continued
India, continued
  • Ready access to growth capital
    • M&A for global reach and access to world markets, including developing world
    • High liquidity and increased investment caps resulted in significant foreign direct investment
    • Access to early stage venture capital very limited
  • National strategy for biotech
    • $1.6B in support pledged from government over 5 years
    • Increases in research budgets for life sciences
    • Improved IP protection, walking the line between protecting corporate investments and access to medicines
us r d dominance dwindles
US R&D dominance dwindles
  • US citations – 205,000
  • Non-US citations – 250,000

China, South Korea, India growth outpacing others

Source: NSF/Thompson Scientific

europe
Europe
  • Strong first half 2007, lackluster second half
  • US sub-prime issues affect European market confidence
  • Three Biotech $100M+ IPOs: Addex (Switzerland), Ablynx (Belgium) and Pronova Biopharma (Norway)
  • Continued harmonization in regulatory environment between EMEA and US FDA: orphan drug reg’s, advanced therapies (e.g., gene therapy, stem cells, tissue engineering)
  • Patients increasingly unhappy with denial of care and waiting times in national health services
  • Denmark-Sweden ‘Medicon Valley’ strong healthcare, biopharma cluster
summary an increasingly borderless world
Summary: An increasingly borderless world….
  • Global healthcare systems under intense pressure will undergo transformational change in the next 10 years
    • New business models emerging in all sectors from biopharmaceutical discovery, development and manufacturing to healthcare delivery to retail consumer healthcare solutions
  • Aging populations, growing demand for quality healthcare in emerging growth countries will mean continued high demand
  • Consumers around the world playing an increasing role in healthcare decision-making
  • Enormous opportunities to bring business value in this changing world, leveraging global capital, talent and markets
agbio increases crop productivity and improves quality
Agbio –Increases Crop Productivity and Improves Quality
  • Cuts pesticide use
  • Decreases carbon emissions
  • Lessens tillage/land erosion
  • Increases drought tolerance
  • Increases nitrogen efficiency
  • Improves Nutritional Attributions
the demands for agriculture stay the same
The Demands for Agriculture Stay the Same

More food on less land with half the water.

Source: 1999-United Nations

agbio vs djia nasdaq 1 years
AgBio vs. DJIA & NASDAQ (1 years)

Source: Burrill & Company

agbio vs djia nasdaq 5 year
AgBio vs. DJIA & NASDAQ (5 year)

Source: Burrill & Company

what we can learn from agbio
What We Can Learn From Agbio
  • Be proactive, get ahead of the issues
  • Engage all parties, respect their issues (they may be right)
  • Do not be defensive
  • Find common ground
  • Energy security, sustainability, reduced environmental foot print
  • It is not about the science it is about the political, social, economic and environmental issues
  • Advance opportunities where appropriate
industrial bio fuels bio energy
Industrial/Bio-fuels/Bio-energy
  • Less reliance on fossil fuel, more reliance on renewable sources
  • Grain ethanol is a “transition” product, cellulosic bio-fuels will be the norm provided transformation costs are reduced
  • Synthetic biology - genetically engineered organisms to produce agricultural commodities, waste management, factories of pharmaceuticals, etc.
2005 was the tipping point for industrial biotechnology
2005 Was The Tipping Point For Industrial Biotechnology

Perfect Storm

Energy security

Global Warming

Economics

Political Will

Market Pull

Ready Technology

Biofuels

Sustainability

2008

119

exciting time since
Exciting Time Since

VC investments increased dramatically

Oil companies invested in technology and infrastructure

Supportive legislation

Frenzy to access technology

Frothy Pre-money Valuations

No success stories

what has happened since
What Has Happened Since?

Ethanol plant construction exploded (All corn based)

Now have 113 in operation, 77 under construction

Production at 6 billion gallons, potential for 12B

16 cellulosic ethanol plants under construction

Price of feed grains

$2 historically, topped $6.00 (corn)

20% of corn crop today, 50% in two years !

13% of soybeans going to biodiesel

The focus has been on biofuels – Ethanol

A new biofuels debate has emerged –GHG emissions, grain shortages

projected feedstock available for biofuels
Projected Feedstock Available for Biofuels

Source: Oak Ridge National Laboratory

2007 great year but with storm clouds forming
2007 Great Year But with Storm Clouds Forming

Perfect Storm

Energy security

Global Warming

Economics

Political Will

Market pull

Ready technology

Second Perfect Storm

Social

Economic

Environmental

storm clouds
Storm Clouds

Commodity prices drive up food prices

Acreage Swap between Corn and Soybeans

The linkage: Corn – Soybeans – Palm Oil -Energy

Exaggerated by imminent US lead recession

Economic discontinuities caused by speed of adoption

social economic and environmental issues dominate 2008
Social, Economic and Environmental Issues Dominate 2008

US recession

How long how deep?

Fewer IPOs, Fewer Acquisitions

What will big oil do ?

Food crops for fuel

Access to project financing

Funding of small technology companies

$5M, $20M, $100 M

Will we get the project financing needed given the economic and political uncertainty

IPOs early in year critical – several good ones ready to file, some even have revenues!

Uncertainty a big risk

opportunities in bioenergy
Opportunities in BioEnergy

From an investor stand point –“Grain ethanol is dead”

Cellulosic sourcing of sugars will be hot

Increasing interest in alternative fuels

Butanols

Alkanes

Lots of opportunities outside biofuels

Bioplastics / Biomaterials

APIs

Specialty chemicals

large mid small cap 1 year
Large, Mid, Small Cap (1 year )

Source: Burrill & Company

slide134

….And these small Life Science companies are becoming increasingly important as a source of value creation and innovation in the healthcare sector

Top Five US Pharma* vs. Total Biotech Market Cap

Market Value of selected Big Pharma acquisitions of public Biotechs (2005-Oct 2008)

Source: Capital IQ, Windhover, Burrill Analysis

significant mergers and acquisitions in the last year
Significant Mergers and Acquisitions in the Last Year

Pharma/Specialty

Shionogi/Sciele

$ 11 billion

Novartis/Alcon

$ 10.4 billion

Boehringer/Actimis

$ 515 million

Teva/CoGenesys

$ 400 million

Pharma/Biotech

Roche/Genentech

$ 44 billion

On the “table”

Takeda/Millennium

$ 8.2 billion

Eli Lilly/ImClone

$ 6.2 billion

Eisai/MGI Pharma

$ 3.5 billion

GSK/Reliant

$ 1.65 billion

GSK/Sirtris

$ 720 million

Pfizer/Encysive

$ 195 million

Biotech/Biotech

Invitrogen/Applied

Biosystems

$ 6.7 billion

ViroPharma/Lev

Pharma

$ 618 million

Celgene/Pharmion

$ 2.7 billion

Galderma/CollaGenex

$ 420 million

Inverness/BBI

$ 100 million

Inverness/Paradigm

$ 230 million

Diagnostics

Roche/Ventana

$ 3.4 billion

Hologic/Third Wave

$580 million

Medtech

Fresenius/APP

Pharma

$ 3.7 billion

CSL/Talecris

$ 3.1 billion

Kinetic Concepts/

LifeCell

$ 1.7 billion

Getinge AB/Datascope

$ 841 million

significant partnerings in the last year
Significant Partnerings in the Last Year

Pharma/Biotech

Takeda/Amgen

$ 1.78 billion

Takeda/Anylam

$ 1 billion

GKS/Synta

$ 965 million

GKS/Valeant

$ 820 million

Astellas/CoMentis

$ 760 million

GSK/Tolerx

$ 750 million

Pfizer/Medivation

$ 725 million

BMS/PDL Pharma

$ 710 million

Biotech/Biotech

Genzyme/Isis Pharma

$ 1.1 billion

Celgene/Array

$ 1.04 billion

Nycomed/Immunomedics

$ 620 million

Celgene/Acceleron

$ 560 million

Genzyme/PTC Theraputics

$ 437 million

ipos not what they used to be144
IPOs – Not What They Used to Be

* Includes over-allotments** As of 10/10/08

Source: Burrill & Company

finance and capital markets
Finance and Capital Markets

The global financial markets have created additional opportunities for companies to look outside their borders for financing

  • Europeans on NASDAQ/NYSE
  • Chinese on NYSE
  • Americans on AIM/Euronext/SWX
  • Other markets are available
    • Mothers (Tokyo)
    • DFX (Dubai)
    • Hong Kong
financing circa 2008
Financing – Circa 2008
  • Development stage (B/C/D rounds) available but expensive
  • Equipment/facility financing (even IP)
  • IPOs –fewer and later stage operating companies with revenues/profits
  • More PIPEs
  • Reverse mergers into public companies
  • SPACs
  • Equity –lines of credit
  • Shelf registration/registered direct
wall street s implosion what does it mean to us
Wall Street’s Implosion…What does it mean to us?

It’s a sea change, not a temporary blip

  • We’ve had ≈ 30-40 years of relatively easy access to relatively cheap capital
    • That game is OVER! Capital markets permanently restructured
  • Access to capital
    • More difficult to find (IB resources for micro-cap stocks decreased)
    • More expensive
    • Buyside interest/resources reduced (Hedge funds gone)
    • VC/private investors (deep pockets/short arms) business is challenging – no IPOs for exits
  • Big Pharma – not as eager (things will be cheaper if they wait)

…But, there is an alternative view

alternative view of capital markets
Alternative view of Capital Markets
  • “This too will pass”
  • Markets reconstruct, reorganize, interest returns
  • New group of boutique investment banking firms emerge (like the old “4 horsemen”– H&Q, Robbie Stephens, Alex Brown, Montgomery)
  • Genentech/ImClone put big $ back into buy side, money redeployed
  • Capital market efficiency: Returns improve, drawing more capital back into markets
how does all this impact entrepreneurial start ups in 2008
How Does All This Impact Entrepreneurial Start-ups in 2008
  • VC & Angels are hesitant to invest
    • Business models are changing
    • More financing of projects
  • Higher bar for regulatory approval
  • Reimbursement compression
  • Globality essential
  • Capital efficiency required

BUT…

  • Rate of start-ups around the world are increasing (go figure…)
the old models are not working what is ahead
The old models are not working – what is ahead?
  • Continued rapid pace of innovation in medicine (stem cells, engineered materials, bio-nano, etc.)
  • Development of personalized medicine and targeted therapies
  • Consumers gain power and medicine becomes ‘patient centric’
  • Increased focus on wellness, not sickness
  • Globalization
  • New business models emerge
    • Virtual integration of pharma/biotech/service providers (VIPCO not FIPCO)
changing business models

Sales &

Distribution

Manufacturing

Clinical &

Regulatory

Research

Technology

Changing Business Models

FIPCO (Fully Integrated Pharma Co.)

VIPCO (Virtually Integrated Pharma Co.)

Partnerships

Sales &

Distribution

CSO

Manufacturing

CMO

Clinical

Development

CROs

Preclinical

Support

Preclinical CRO

R&D

Academia, Scientific, Institutions

virtual pharma new organizational models for leverage of open source services
Virtual Pharma: New Organizational Models for Leverage of Open-Source Services

PharmaCommons: integration of rapidly expanding open-source datasets

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 BigPharma as integrator to generate value across the entire disease episode spectrum

Wellness to terminal care

Source: George Poste/Burrill & Company

the predictions for biotech in 2008 2009 regardless of who wins the us election
The Predictions for Biotech in 2008/2009…(regardless of who wins the US election)
  • Sales of products will continue to increase, but reimbursement becomes more challenging
  • Stricter regulatory oversight, tougher to get products to the market in US/Europe
  • Regulators
    • Raising the bar for innovation, theranostics
    • Drug safety will continue to be a major issue (Pharmacovigilence is the name of the game)
  • US Congress aiming to add power to Medicare to negotiate what it pays for drugs
  • US Congress may reduce the capital gains differential (bad for the capital raising side of the industry)
the predictions for biotech in 2008 2009 continued
The Predictions for Biotech in 2008/2009…(continued)
  • Biofuels boom in non-food crops
  • Ag/Animal Health see increase because of world food crisis
  • Biotech’s globality increases with US dominance continuing to decrease
  • US research engine faces challenging times
  • Non-health care aspects of biotech also becoming more dominant as industrial, biofuels, ag increase in importance
  • Clusters are redefined away from geography to virtual clusters (diseases, pathways, markets, unique industry segments)
  • Business models continue to evolve –more virtual but more consolidation too
the predictions for biotech in 2008 2009 continued156
The Predictions for Biotech in 2008/2009… (continued)
  • Both big Pharma and big Biotech will be competing for companies with advanced product pipelines
  • “Capital Markets”:
    • 4Q08 very difficult financing environment worldwide
    • 2009 $25 billion will be raised by the US biotechs (half of ’08)
    • Europe will lag US, few IPOs and difficult VC financings
    • China, India, other economies continue to finance biotech Cos
    • Companies arbitrage value differences globally
slide157

So…

Go for it…

slide158

Biotech 2008:

A 20/20 Vision to 2020

G. Steven Burrill

Chief Executive Officer, Burrill & Company

The Burrill Indiana Life Sciences Meeting

October 21, 2008