wbb securities, llc © wbb securities, llc 2007 a forward looking strategy for biotech businesses
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WBB Securities, LLC
© WBB Securities, LLC 2007
A Forward Looking Strategy
For
Biotech Businesses
WBB Securities, LLC
© WBB Securities, LLC 2007
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.
WBB Securities, LLC
© WBB Securities, LLC 2007
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.
WBB Securities, LLC
© WBB Securities, LLC 2007
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
WBB Securities, LLC
© WBB Securities, LLC 2007
Evolution of Pharma/Biotech IndustriesEarly Consolidation Era
EarlyPharma/Bio New
BP/BBio
Early Stage companies bring one or more products to market.
SP/SBio NewBP/BBio
WBB Securities, LLC
© WBB Securities, LLC 2007
Evolution of Pharma/Biotech IndustriesDiversification Era
BP/BBio
SP/SBio GP/Bio NP/Bio
Characterized by market segmentation
WBB Securities, LLC
© WBB Securities, LLC 2007
Evolution of Pharma/Biotech IndustryPersonalized Medicine/Reconsolidation Era
SP/Bio GP/Bio NP/Bio
New BP/BBio
Surviving BP/BBio
Consolidation into new and existing Big Pharma players
WBB Securities, LLC
© WBB Securities, LLC 2007
Evolution of Pharma/Biotech IndustryConsolidated Landscape Era
SP/Bio GP/GBio NP/Bio
Consolidated Landscape
Surviving BP/BBio
New BP/BBio
WBB Securities, LLC
© WBB Securities, LLC 2007
Evolution of Pharma/Biotech IndustryTomorrow’s Landscape Era
SP/BBio GP/Bio NP/Bio
New landscape anticipates another round of consolidation
New BP/BBio
Surviving BP/BBio
WBB Securities, LLC
© WBB Securities, LLC 2007
Other Industries Recently Subject to Cycle
• Telecommunications• Automobiles• Entertainment (Movies, Radio, Television and Publishing)
• Agriculture and Food• Computers• Retail• Airlines
WBB Securities, LLC
© WBB Securities, LLC 2007
Factors Accelerating Pharma/Bio Changes
• 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 Technologies stem 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
• Market Downturn – Minus 514 points on the DJIA in 5 days
WBB Securities, LLC
© WBB Securities, LLC 2007
Big Pharma/BBio Warning Signs 1
More R&D Spending, Fewer New Molecular Entities
CBO Study, R&D in Pharma Industry, October, 2006
WBB Securities, LLC
© WBB Securities, LLC 2007
2006
$28+ B
Total 2006Pharma Industry R&D
$51.3 billion
$39.4 B
Inflation Adjusted Dollars
Big Pharma/BBio Warning Signs 2
Federal Government Funding Lower Percentage of R&D
CBO Study, R&D in Pharma Industry, October, 2006
WBB Securities, LLC
© WBB Securities, LLC 2007
Big Pharma/BBio Warning Signs 3
Fewer Patents Per R&D Dollar
CBO Study, R&D in Pharma Industry, October, 2006
WBB Securities, LLC
© WBB Securities, LLC 2007
Big Pharma/BBio Warning Signs 4
Diminishing Return on Assets
CBO Study, R&D in Pharma Industry, October, 2006
WBB Securities, LLC
© WBB Securities, LLC 2007
Differentiating the Winners in Biotech
• 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
WBB Securities, LLC
© WBB Securities, LLC 2007
Challenges & Opportunities in the Stem Cell Arena
• 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
• 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 .
Challenges Opportunities
WBB Securities, LLC
© WBB Securities, LLC 2007
What Is Your End-Game Business Strategy?
• 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.
WBB Securities, LLC
© WBB Securities, LLC 2007
Unique Aspects of Biotech Companies Covered by WBB Securities
•IP-IP-IP-IP
•Lead product identified
•Large partner validation and negotiating acumenTechnology and business acumen.
•Understanding of capital markets
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