Transcript Document

Baltimore Workforce Investment Board
Presentation On Growth Industries
11 March 2005
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AGENDA
• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
– Life Sciences
– Healthcare Services
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ECONOMIC ALLIANCE OF GREATER
BALTIMORE BACKGROUND
Mission
• Sole public/private partnership bringing together business, government
and educational institutions to attract new employers and investment into
the Greater Baltimore region for over 10 years
• Markets the Greater Baltimore Region and accelerates investment
through targeted business development marketing initiatives
There was no one group integrating
assets and resources for the Greater
Baltimore region maximize economic
development efforts
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‘DEAL MAKING’ v ‘ORDER TAKING’
Major
responsibilities
Partners
Partner focus
‘Order Taking’
’Deal Making’
Traditional Approach
New Approach
• Site selection
• Public sector incentives
• Strategic analysis
• Deal structure
• Real estate developers/ site
• Corporate partners (e.g., Pharma / Biotech)
• Research institutions (UMB, UMBC, JHU)
• Venture capital/ Private equity firms
consultants
• Site-consultants looking for
• CEOs & Sr. Mgmt team looking for
Old focus does not play to the
strengths of key assets (R&D
v Cost)
Does not leverage public
incentives optimally
‘Deal Making’ approach shifts dialogue from
real estate focus to the business opportunity
available ‘lowest’ cost option
growth opportunities in revenue,
profits, or market share
New business model applies an
investment banking approach to
traditional economic development
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GREATER BALTIMORE’S STRATEGIC ADVANTAGES
Academic research
institutions
• Johns Hopkins
• University of Maryland
• UMBC
Proximity to
key assets
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Sectors of Strength
NSA
NIH
APL
FDA
CMS
Capitol Hill
Wall Street
• Life Sciences
• IT / Defense
• Healthcare Services
• Financial Services
• Logistics
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Workforce
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PhDs / MDs
Engineers
Scientists
Nurses
Financial
Professionals
Transportation
infrastructure
Port of Baltimore
BWI
Rail
Highways
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THREE COMPONENTS FOR NEW APPROACH
Industry specialization
Attract staff with industry related
competencies & knowledge
Strategic analysis
Formulate business case addressing
regional assets & company needs
Deal Structure
Work with high level decision makers
to ensure deal execution
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AGENDA
• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
– Life Sciences
– Healthcare Services
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GOAL: IDENTIFY AND PRIORITIZE HIGH YIELD OPPORTUNITIES
IN FINANCIAL AND HEALTH SERVICES, LIFE SCIENCES, AND
HOMELAND SECURITY SECTORS
• Low cost of doing
•
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•
•
business
Academic Institutions
Access to New York
City and Washington,
DC
Collaboration with
cutting edge research
Workforce educated
and trained in highknowledge fields
• Strong tradition of sector
Company Needs
Specific Assets
Regional
Offerings
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specialized personnel training
• Concentration of eminent
research institutions such as
JHU and the NIH
• Multiple secure installations
such as Ft. Meade
• Affordable executive and nonexecutive quality of life
Well educated workforce
Low cost of doing business
Tax incentives
Proactive investment community
Easy access to New York City and
Washington, DC
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METHODOLOGY FOR SHORT LISTING TARGET COMPANIES
Life Sciences,
IT / Defense,
Financial
Services
Description
Defining
target submarkets
• Identify submarkets
where
Baltimore
maintains a
competitive
advantage
Prioritize
Opportunities
Identify
opportunities
• Identify and
• Assess ‘best fit’
segment major
public companies by
– Cash/Cash flow
– Organizational
structure
– Current sites
opportunities based
on:
– Ability to invest
– Company Size
– Propensity
towards
Baltimore
Frame business
Case
Relationship
Building
• Inventory regional • Determine key
•
assets
– Academia
– Private sector
companies in
industry
– Federal
institutions
Build business
case by leveraging
synergies between
partner needs and
competencies
decision makers
target & accessibility
by local contacts
– CEO, COO, CFO
– Heads of BD,
Operations, R&D
– Determine
conferences/
venues to reach
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AGENDA
• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
– Life Sciences
– Healthcare Services
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CASE STUDY: THE LIFE SCIENCES STRATEGY
The Greater Baltimore region is at the convergence
of defining trends in the Life Sciences industry
Pharmaceutical industry forced
to rethink business model
• Shrinking discovery pipeline
• Prohibitive cost of drug
development
• Public pressure to reduce drug
prices threaten R&D budgets
Research
institutions need to
build up their ability
to develop drugs
Interstate war on
“talent” & capital
• Loss of “old” economy
jobs to lower cost
markets
• Many states focusing
on life sciences due to
high growth potential
– Building bioparks
– Hefty incentives
Greater Baltimore Region
• Positioned competitively
due to critical mass of
discovery to attract private
sector investment
• Traditionally focused
on discovery and not
development
• Essential to partner
with private sector
for development
competencies
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ALTHOUGH BALTIMORE IS A DISCOVERY LEADER, IT LAGS
BEHIND IN IMPORTANT DRIVERS OF DRUG DEVELOPMENT
Driver
Boston/
Cambridge
SF/ Bay area
Philadelphia
Greater
Baltimore
High
Low
Key issues
Discovery
pipeline
• Sustainability dependent
on public funding
Technology
transfer
infrastructure
• Lack of incentives for
researchers to patent &
spin out technology
• IP/legal competencies not
well developed regionally
Workforce
• Bioprocess engineering,
drug development &
management labor pool not
sufficient to meet demand
Early stage/
risk capital
• Local funding has been
lacking historically
Private sector
translational /
development
partner*
• No major top 15 drug
development partner
invested heavily in
region
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MAXIMIZE VALUE OF DISCOVERY THROUGH CO-LOCATED
DEVELOPMENT & MANUFACTURING
Drug
development
Discovery
value chain
Current
approach
Result
Development (Clinical trials)
Pre-clinical
Phase I
Phase
IIa
Local
function
Phase
IIb
Non-regional functions
• Out-licensed to partner due to lack of
Minimal return to
region & institution due
to ‘cherry-picking’
licensing strategy
development abilities primarily outside
of region
• Current tech transfer focus on near
term licensing revenue vs. long term
value creation
New
approach
Result
Phase
III
Large scale
manufacturing
Local function
• Retain discovery-development
regionally
– Translational development
facilities/partners
– Clinical research organizations
• Attract manufacturing facilities to
co-locate alongside R&D facilities
• Refocus tech transfer on long
term tech development goals
Maximize return to
region and institution
by bundling assets &
attracting partners
across value chain
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SUBMARKET ATTRACTIVENESS DRIVEN BY FINANCIAL
RESOURCES AND CULTURE
Pros
Cons
Pharmaceutical
• Large R&D budgets and
proportion dedicated to R&D
• Broad focus across many
therapeutic areas (TAs)
• Seeking sources of NCEs to
fill pipelines
• Several players have a
culture of pure L&A and
M&A vs. alliances
• Discovery stage deals too
high risk for some shops
Biotechnology
• Large proportion of budget
allocated to R&D
• Culture of alliances with
academia
• “More nimble”
• Lower cash flows due to
fewer products on the
market
• Narrowly focused R&D in
few TAs
• Smaller R&D budgets
Medical Device &
Equipment
• Shorter product
development cycle forces
need to innovate (more
nimble)
• Engineering and biomedical
focused innovation requires
cross-disciplinary approach
• Strong culture of pure L&A
and M&A vs. alliances
• Smaller R&D budgets and
smaller proportion of
budget allocated to R&D
High
Low
Attractiveness
CONFIDENTIAL – DO NOT DISTRIBUTE
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POTENTIAL BEST FIT PHARMA COMPANIES
5
Tier 2
Novartis
4
Ability
To
Invest
Merck, Pfizer
Wyeth
3
Bayer
AVE
GSK,
AZN
Tier 1
Lilly
JNJ, Roche, BI
BMS
NVO, Forest Labs
SGP
Abbott
Teva
2
• Cash/ cash flow
• R&D spending /
1
revenues (%)
Tier 3
Indian Average
0
0
2
4
6
8
10
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Propensity to be in Baltimore
• Level of decentralization
• Number and location of R&D sites
CONFIDENTIAL – DO NOT DISTRIBUTE
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MOST ATTRACTIVE PHARMACEUTICAL TARGETS
Companies
Differentiators
Tier 1
• Roche
• Eli Lilly
• Boehringer
Ingelheim
• High R&D spending
• Minimal presence in
the mid-Atlantic
Tier 2
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• High R&D spending
• Medium presence in
the mid-Atlantic
Tier 3
Novartis
Merck
Pfizer
Aventis-Sanofi
• Teva (Israel)
• Indian generics
– Dr. Reddy’s
– Cipla
– Ranbaxy
– Lupin
• Little to no R&D
presence in the U.S.
but strong willingness
to grow presence
• Requirement of market
to expand more
aggressively into
branded Rx; need
discovery alliances in
near term
Baltimore value proposition
• Rich R&D assets
• Fits in academic alliance
strategy
• Educated workforce
• Leading clinical resources
• US R&D base
• Capacity to expand
• Strong Indian community and
culture in region
• Provides legitimacy with U.S.
shareholders and FDA
CONFIDENTIAL – DO NOT DISTRIBUTE
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AGENDA
• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
– Life Sciences
– Healthcare Services
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HEALTH CARE: HIGH COSTS, AND STILL RISING
MEDICARE AND MEDICAID ARE SUFFERING FROM THE WOES
OF THE INDUSTRY
•Medicare and Medicaid are projected to rise at average annual rates of 9.0% and
7.8% respectively through 2015 Source: Congressional Budget Office (CBO)
•For the entire 2000-2003 period, Medicaid spending increases were largely driven by
enrollment growth, much of which was attributable to the economic downturn
Source: Health Affairs, Jan. 26, 2005
Medicare and Medicaid Spending Projections
(in Billions of Dollars)
(Source: Congressional Budget Office, Jan. 2005)
766
800
708
654
700
600
500
400 297
300
176
200
325
186
380
193
453
426
205
223
484
241
520
598
565
284
262
307
333
361
392
100
0
2004
2005
2006
2007
2008
2009
Medicare
2010
2011
Medicaid
2012
2013
2014
2015
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CMS TAKES THE ROLE OF ADMINISTERING MEDICAID AND
GUIDES THE STATE BY STATE POLICY FOR MEDICARE
The Centers for Medicare and Medicaid Services (CMS)
spends 20% of the Federal Government’s dollars
– about $519 billion in FY 2005
83 Million
Beneficiaries
Covered by CMS
Including State spending, these programs spend about
45% of the Nation’s health care dollars.
CMS Expenditures FY 2005
(in billions)
SCHIP
$5B
Admin.
Costs $5B
Medicaid
$182 B
Medicare
42 million
Dual Eligible
6 million
Medicaid
43 million
Medicare
$327B
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MEDICARE PRESCRIPTION DRUG IMPROVEMENT AND
MODERNIZATION ACT OF 2004 (MMA) MARKS THE BIGGEST
CHANGES TO MEDICARE SINCE ITS INCEPTION 40 YEARS AGO
Implication : MMA HAS INCREASED GOVERNMENT’S IMPORTANCE – NOT ONLY
AS A REGULATOR, BUT AS A CUSTOMER
Government is taking on an increasingly
important role in health care spending:
– Government will account for nearly half
of all the nation's health care spending
by 2014 (compared to 25% of all health
spending in the US when Medicare /
Medicaid were created in 1965)
– Medicare, which now accounts for 2% of
spending on prescription drugs, will
account for 28% next year
Proximity to CMS will become increasingly important for
health service companies
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THE CMS LOCATION IN BALTIMORE COUNTY IS NOW A CENTER
FOR HEALTHCARE POLICY INNOVATION
American
Healthways
XL Health
Calvert
Health
Partners
Pinnacle Care
International
• Opened location in Columbia in 2003, has just announced expansion of
the Columbia operations by 200 nurses after winning a share of the CCIP
contract from CMS.
• Founded in Baltimore City, has received $64 million dollars from investment
bank Goldman Sachs. XL Health also won a share of the CCIP contract.
• Recently founded in Baltimore, is relying on the innovative policies coming out
of CMS to form a base for a new kind of healthcare parent company.
• Founded and headquartered in Baltimore, was featured in the Wall Street
Journal in an article describing their new concierge model of healthcare.
Proximity to CMS drives Greater Baltimore
as a prime location choice for healthcare
companies.
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