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Wrap-up – brief overview of Pharmaceuticals/Biotech

Wrap-up – brief overview of Pharmaceuticals/Biotech. Biotechnology: One of the World’s oldest emerging industries. Most investors think Biotech is the newest whim on earth! From a historical perspective: NOT SO!

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Wrap-up – brief overview of Pharmaceuticals/Biotech

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  1. Wrap-up – brief overview of Pharmaceuticals/Biotech

  2. Biotechnology: One of the World’s oldest emerging industries • Most investors think Biotech is the newest whim on earth! From a historical perspective: NOT SO! • Biotech’s genesis go back to some 5000 BC when farmers noticed that certain crop grew better in some conditions than others • A follow-up took place around 1000 BC when farmers cross-bred the best of two breeds – the female horse and the male donkey – creating a new animal, the mule. The mule became the first genetically engineered species.

  3. Modern biotechnology • 1950 Watson and Crick discovered the structure of DNA – not the secret of life, but a secret of life • 1973 Boyer and Cohen recombined DNA • 1978 Eli Lilly and Genentech announce they are creating genetically engineered insulin • 1980, the first IPO – Genentech • 1982, FDA approval of synthetic insulin • 2000 first Finnish IPO – Biotie Therapies • 2001 mapping of the human genome • .. • ..

  4. The Food Industry The Agri Industry The Pharmaceutical Industry Industry Recipe X The Biotechnology Industry Industry Recipe X Industry Recipe X’’ Industry Recipe X Industry Recipe X Company Paradigm Y’’ Industry Recipe X Industry Recipe X’ Industry Recipe X Strategy Logic Z’’ Company Paradigm Y’ Strategy Logic Z’ Technology and Markets in Motion The Pharmaceutical Industry Industry Recipe X Company Paradigm Y Strategy Logic Z Technological Change

  5. Lead to… • A myriad of POTENTIAL business opportunities all along the entire R&D process • Are they profitable? Are they real • A variety of NEW BUSINESS MODELS making FIPCOs (Fully Integrated Pharmaceutical Companies) dated • Product companies, • Technology companies, and • Hybrids • To this should be added SERVICES

  6. Discovery (2-10 years) Preclinical Preclinical Testing Laboratory and animal testing Phase I 20-80 healthy volunteers used to determine safety and dosage Phase II 100-300 patients used to look for efficacy and side effects Phase III 1000-5000 patiens used to monitor adverse reactions to long-term use Clinical Regulatory Review/Approval Additional Postmarketing Testing Phase IV Years 0 2 4 6 8 10 12 Drug Development Process – ’the Staircase model’ – the ’FIPCO’ model

  7. The Food Industry The Biotechnology Industry The Pharmaceutical Industry The Health Care Service Industry The Agri Industry The Materials Industry Industry Recipe X Industry Recipe X Industry Recipe X Industry Recipe X’ Industry Recipe X’’ Industry Recipe X Company Paradigm Y Company Paradigm Y Company Paradigm Y Company Paradigm Y’’ Company Paradigm Y Company Paradigm Y’ Strategy Logic Z’’ Strategy Logic Z’ Strategy Logic Z Strategy Logic Z Strategy Logic Z Strategy Logic Z

  8. New Therapeutic Cycles

  9. New Drug Targets

  10. Discovery Development Market Early Intermediate Advanced New Medicine Proposal Development Portfolio Preparation Lead Identification Lead Development Early Clinical Safety Early Clinical Efficacy Lead Optimization EIH Enabling Target Validation Phase II Phase III Launched MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE MILESTONE Target Validation Clinical Candidate Selected Start Phase III NDA Discovery to Market Process(as viewed by an bio-entrepreneur)

  11. Marketer 65-75 % Developer 10-25 % Innovator 10-15 % Sharing the income in the pharmaceutical business

  12. MARKETING PARTNERS RESEARCH GROUPS • PHASE III DEVELOPMENT • MARKETING • SALES LISENCE, SUPPLY OF PRODUCT DISCOVERY RESEARCH TRANSFER OF PROPRIETARY RIGHTS Biotech Company MILESTONE PAYMENTS, ROYALTY, PART OF GROSS MARGIN PAYMENTS ROYALTY • DISCOVERY RESEARCH • DRUG DEVELOPMENT • OWNER OF PATENTS • COMMERCIALIZATION OF DEVELOPMENT ROJECTS • MANAGEMENT OF OUTSOURCED RESOURCES DEVELOPMENT PARTNERS MANUFACTURING PARTNERS • OUTSOURCED RESEARCH • AND DEVELOPMENT COST-EFFICIENT INDUSTRIAL SCALE MANUFACTURING

  13. Marketing Authorisation Clinical Phase I -III Outsourcing Discovery Pharma Outsourcing of R&D

  14. The US vs. Europe – the whole industry vs. listed co’s (June 12, 2002) THE WHOLE INDUSTRY US EUROPE 2001 2000 Ch.% 2001 2000 Ch.% 30,0 27,0 10,9 Turnover 14,4 10,4 35 16,5 14,4 14,6 R&D exp. 7,9 5,8 35 7,3 6,3 15 Loss 1,6 1,9 -16 1457 1374 6 # Co’s 1879 1734 8 191,000 176,000 8,5 # empl. 87,182 67,445 29 LISTED CO’S 26,6 23,9 12 Turnover 7,2 4,9 46 10,9 9,7 13 R&D exp. 4,5 3,0 48 5,1 4,3 17,1 Loss 0,58 0,36 60 342 344 -0,6 # Co’s 104 107 -3 141,000 130,000 8,5 # empl. 34,180 25,964 32

  15. Biotech Global Product Sales and Forecast 2000-2010 (Millions of Dollars) Key Sectors Base Year Forecast Years ‘00-’10 Growth 2000 2005 2010 ppa Human Therapeutics 11,700 20,600 36,300 12 Human Diagnostics 2,500 3,700 5,400 8 Agriculture 780 1,950 4,200 18 Specialities 550 1,170 2,400 16 Non-Medical Diagn. 320 480 700 8 TOTAL 15,850 27,900 49,000 12 WORLD TOTAL 25.000 35.000 85.000 Source: Consulting Resources Corporation

  16. POTENTIAL ENTRANTS Global market demand Constantly Changing Threat of INDUSTRY COMPETITORS Internal rivalry Bargaining power of Bargaining power of SUPPLIERS BUYERS Government regulation Threat of SUBSTITUTES Porter’s five forces in BIOTECH

  17. Issues important in Strategic Market Management • Not only technological, regulatory, and financial • science and getting scientific results • availability of R&D funding; public and private • regulatory; FDA, EMEA, KOSEISHO • You need to understand – on a long-term basis: • Medical and Healthcare system related • treatment changes • diagnostics changes • reimbursement changes which are national • who is paying and how much • health economics

  18. The regulatory focus areas of the biotech industry – Legal gates to market entry EU (EMEA/ CPMP) USA (FDA) Japan (Koseisho/ OPRS)

  19. Issues important in Strategic Market Management • Other issues • demographic changes • changes in disposable income • changes in society • cultural diversity • treatment praxis varies between countries • what is seen as good in one country is seen as bad in another • ethical issues • varies between countries

  20. Market estimations • are not only quantitative estimations of market potential • require equally much qualitative assessments • It is a combination of BOTH

  21. Future major issues affecting market entry and success • Expanding healthcare market • nutraceuticals • complementary and alternative medicines • New drug delivery systems • New diagnostic methods • validation procedure! • Biomaterials • Changes in patent regulations

  22. Future major issues affecting market entry and success • Rx to OTC switching • a way to cut healthcare costs • Branding • Empowered consumers • Direct-to-consumer advertising • In the US since 1997 • In New Zeeland since 1981 • The rest of the world is watching – Europe is about to try a restricted version • Direct-to-consumer branding

  23. Conclusions • Biotechnology is truly the future horn of plenty. However, achieving success will require business management capabilities. • It is not just enough with top technology and some money. • It is not enough to know your way in the regulatory jungle • Biotech is a global business, moving fast • knowledge grows and stuns • markets change all the time • Companies have to master market management – it is a strategic issue to them

  24. “If you think research is expensive try disease” Mary Lasker “evangelist” for medical research, as quoted by Nobel Prize-winning DNA scientist Arthur Kornberg in the Golden Helix IT WILL BE EVEN MORE EXPENSIVE IF YOU DON’T KNOW YOUR MARKET(S)!

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