Transcript Slide 1

WBB Securities, LLC
A Forward Looking Strategy
For
Biotech Businesses
© WBB Securities, LLC 2007
WBB Securities, LLC
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 2007
WBB Securities, LLC
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 2007
WBB Securities, LLC
Characteristics of Revenue Drivers
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
© WBB Securities, LLC 2007
WBB Securities, LLC
Evolution of Pharma/Biotech Industries
Early Consolidation Era
SP/SBio
New
BP/BBio
Early
Pharma/Bio
New
BP/BBio
Early Stage companies bring one or more products to market.
© WBB Securities, LLC 2007
WBB Securities, LLC
Evolution of Pharma/Biotech Industries
BP/BBio
Diversification Era
SP/SBio GP/Bio
Characterized by market segmentation
NP/Bio
© WBB Securities, LLC 2007
WBB Securities, LLC
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
© WBB Securities, LLC 2007
WBB Securities, LLC
Evolution of Pharma/Biotech Industry
Consolidated Landscape Era
SP/Bio
GP/GBio
NP/Bio
New
BP/BBio
Surviving
BP/BBio
Consolidated Landscape
© WBB Securities, LLC 2007
WBB Securities, LLC
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
© WBB Securities, LLC 2007
WBB Securities, LLC
Other Industries Recently Subject to Cycle
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Telecommunications
Automobiles
Entertainment (Movies, Radio, Television and Publishing)
Agriculture and Food
Computers
Retail
Airlines
© WBB Securities, LLC 2007
WBB Securities, LLC
Factors Accelerating Pharma/Bio Changes
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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
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Market Downturn – Minus 514 points on the DJIA in 5 days
© WBB Securities, LLC 2007
WBB Securities, LLC
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 2007
WBB Securities, LLC
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
© WBB Securities, LLC 2007
WBB Securities, LLC
Big Pharma/BBio Warning Signs 3
Fewer Patents Per R&D Dollar
CBO Study, R&D in Pharma Industry, October, 2006
© WBB Securities, LLC 2007
WBB Securities, LLC
Big Pharma/BBio Warning Signs 4
Diminishing Return on Assets
CBO Study, R&D in Pharma Industry, October, 2006
© WBB Securities, LLC 2007
WBB Securities, LLC
Differentiating the Winners in Biotech
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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
© WBB Securities, LLC 2007
WBB Securities, LLC
Challenges & Opportunities in the Stem Cell Arena
Challenges
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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
Opportunities
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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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© WBB Securities, LLC 2007
WBB Securities, LLC
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 2007
WBB Securities, LLC
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
© WBB Securities, LLC 2007