m
  


 
›

 ›
 
  

@ Glen T. Giovannetti & Gautam Jaggi are Global Biotechnology Leader

& Managing Editor, Beyond borders of Global Life Sciences Center-
Ernst & Young.
@ Ernst and Young latest report ³Beyond Borders´ focus on new models
and creative approaches that companies and investors are taking to
adapt to today¶s challenging economic climate..
@ Ernst & Young¶s global organization helps to improve the business of
biotech by analyzing key indicators of the industry performance. They
are: Financial activity & results; deal trends; pipeline strengths;
product approvals
@ Approach is more towards financial companies, raising capitals,
conduct, R & D and structure deals.
@ Ernst & Young¶s global organization helps to improve the business of
biotech.
 u

@ Strong aggregate performance:
á Unprecedented industry profitability
á Industry resilient, financing rebounds
á Sustained strength in deals
@ Challenges ȸbehind the numbers:
á ºigher bar for companies seeking capital
á Steep R&D cuts
@ àew normal emerges:
á Constrained capital markets
á The search for sustainability
á àew models (seeking efficiency)
@ Most of the company markets were crashed by 2008-09
crisis, faced many problems like: Financial crisis, economy
crisis, foreclosures, layoffs, job cuts, closed plants, auto
bailout,, etc.
@ Long-term concerns include: Sustainability, no quick return
to prior funding levels, expected industry consolidation, etc.
@ Anticipated reduction in number of public companies is from
33% to 25%.
@ In the US, for instance, the top 20% of fund-raising
companies garnered 74.1% of capital raised in 2008. In
2009, the proportion raised by the same quintile of
companies had increased, to 78.5%
@ The number of public biotech companies in established
centers shrunk by only 11%
á The principal challenges identified in the report are:
` a higher bar for seeking capital; and
` big cuts in R&D (21% global decrease)
á E&Y describes the new normal as ³seeking efficiency,´ which is they say is
leading to new models:
ÿ Investors are embracing virtual R&D, failing fast, strategic outsourcing and
risk sharing, and (to some extent) open innovation.
ÿ Pharma wants optionality, out-licensing, commercial milestones, and
(ditto) open innovation.
ÿ Governments and payors are pushing comparative effectiveness, outcomes-
based pricing models (where pharma reimburses payors for cost of treating
non-responding patients), and formularies; all with the goal of trying to
provide increased access with reduced budgets.
ÿ Biotech companies are turning to creative fundraising (e.g., foundations),
³deep pockets´ partnerships (e.g., Roche-Genentech pre-acquisition) and
strategic outsourcing.
ÿ Global deal data was decent: *800m IPOs, * . b follow-ons (second-
highest of the decade), *5.8b venture, *10b ³other´ (PIPEs, etc), but the
distribution shows a big split between haves and have-nots. There was a
sustained high level of licensing deals in the U.S., but a small blip
downward for pharma-biotech M&A (likely temporary).
u 
á Fully integrated pharmaceutical network
á Functional outsourcing
á àovel ways to discover and develop molecules
á Equity investments & partnerships
 

á 

 Õ

CEO
á Its not hit by global meltdown
á Emerging markets with lower costs
á Support portfolio diversification
á Insulin for Biocon
á CRO¶s
á Good at providing services
 

á 
 
  †ice
President and ºead of Genzyme R&D Asia
á Govt support
á Policy makers- investment
á Globalisation of drug R&D
á CRO¶s
V 

á Understand the local culture, markets, resource
allocation mechansims
á Tailor business models according to local
market
á Awareness of govt. and regulatory regimes
á Idea on the significant investment: time, money
á Westerners follow traditional models, like high
risk dependent models
á Do not totally trust the talent of the local
work force
á Its time for the eastern countries to serve
the needs of the patients
á To try new models of working along with
following their principles, values, and
ethics
á China¶s outlook: biologics, vaccines,
generics
á India¶s outlook: better harmonization with
US FDA, commercialization of US
discoveries,
î  

á Though it is the 2nd largest economy, their
biotech sector is still under developed
á After the global crisis the no. of companies
reduced to <500 from 587
á Govt. has invested considerable effort into
building the industry, injecting funding,
introducing administrative changes and
streamlining regulatory structures.
á †C investments is very less, reduced 30% from
2008 to 2009
÷ 

á Leading destination in Asia, due to complex and
technology intensive manufacturing of biotech
products, IPR¶s, highly skilled workforce
á In January 2010, Singapore was added to the
Organization for Economic Cooperation and
Development¶s (OECD) ³Mutual Acceptance of
Data´ framework under which data generated
in preclinical trials in compliance
with good laboratory practices is
acceptablein 30 OECD and non-OECD
member states.
á Meanwhile, the World Economic Forum¶s
Global Competitiveness Report 2009²2010
has given Singapore the top rating for
intellectual property protection
á Cost advantages, best-in-class
infrastructure and strong Government
investments have made Singapore an
attractive manufacturing location for
multinational drug companies.
  


á Faces stiff challenges like geographic isolation,
small domestic market and sparse †C
á angel investors are playing an increasingly
significant role in financing start-ups, with
more than à
*50 million (US*31.8 million)
invested in 2009, a 72% increase over the
previous 12-month record of à
*29 million
(US*18.4 million).
á Govt. support in eliminating R&D tax credit
á The àew
ealand limited partnership (LP)
regime, introduced in 2008, allows foreign
investors to avoid any àew
ealand tax
liability from investing in an LP, subject to
the LP¶s extent of business activities. This,
together with the country¶s absence of a
capital gains tax regime, offers an
attractive proposition.
á 25% increase in bioscience industry from
2007 to 2009
á Govt. grants for clinical trials
á LCT has licensed its patented encapsulated
technology to non-competing partners to
help fund ongoing trials.
á Govt. interest in the industry
á Strength in biofuels and foods
á They are looking for investors to develop
their products further and provide market
entry into Europe and the US.
 

á World¶s 2nd largest user of GM crops
á GM soy, GM corn, GM cotton( bollgard)
á The country which is home to one-third of the
world¶s sugarcane plantations currently
produces around 25 billion liters ( .5 billion
gallons) of ethanol annually from sugarcane
and plans to increase production by as much as
150% by 2017
á Stem cell research has been attracting
investments from the Govt & private players
á Brazilian biotech companies largely rely on
Government grants and income streams
from services. Currently, the Government
accounts for around 5%±70% of total
R&D expenditures
á The regulatory structure is fairly
complicated with diff laws and regulators
governing various segments of the industry
á Govt. is making efforts to streamline
policies and strengthen IP protection for
the nation
á It is attracting considerable foreign
investment
  ! 

á Extraordinarily rich biodiversity
á Govt. funding 58%, rest from private sector
á †C investments as a share of investment across
all industries declined from 24% in 200 to 18%
in 2008.
á With its agricultural foundation in commodity
crops such as oil palm, Malaysia is well
positioned to take advantage of the global focus
on developing environmentally friendly
technologies.
á Malaysia¶s rich tropical biodiversity and
abundant natural resources provide a key
differentiator as investors and businesses
everywhere focus on green technologies.
The Government continues to make
investments, but attracting private-sector
investors will become increasingly
important for building a sustainable
biotechnology industry.
á There is a need for foreign collaboration
for technology and knowledge transfer
especially in the development of the health
care and industrial biotechnology sectors.

" #$  % 
á There were 22 public biotech companies in the
established biotech centers as of December
2009, compared to 700 a year earlier ² an 11%
decline, well short of the 25%±33% decrease
that many analysts were expecting.
á The industry¶s revenues fell by 9%, from
US*8 .8 billion in 2008 to US*79.1 billion in
2009 (bulk of this decline was driven by Roche¶s
acquisition of Genentech
÷##&&!
u
÷ 
á The revenues of US public companies fell to US*5 .
billion in 2009, a 13% drop compared to 2008. After
removing Genentech from the 2008 numbers, the
industry¶s revenues would have instead increased by
10%
á R&D spending decreased by 24%, compared to a 20.5%
increase in 2008
á The net income of publicly traded biotech companies
increased from about *US400 million in 2008 to an
unprecedented US*3.7 billion in 2009
›
á The number of public companies decreased by only 4%, from
179 companies in 2008 to 171 in 2009
á Revenues of publicly traded European companies grew from
¼11.0 billion in 2008 to ¼11.9 billion in 2009 ² an 8%
increase
á R&D expenditures were essentially flat, posting a modest 2%
decrease in 2009.
á The cost cutting helped boost the sector¶s net income by a
remarkable 8%, as combined net loss fell from ¼913 million
in 2008 to only ¼288 million in 2009. Out of this ¼ 25
million improvement on the bottom line, ¼147 million came
from the decrease in public company count
 

á The number of public companies declined significantly, from
72 companies in 2008 to 4 companies in 2009 ² an 11%
reduction
á On the private company side, the number of firms declined
9%, from 28 in 2008 to 2 0 in 2009
á The cost cutting efforts have delivered results on the bottom
line, where the publicly traded industry¶s net loss fell an
astounding 94%, from US*1.2 billion in 2008 to only US*70
million in 2009 ² the industry¶s lowest overall net loss in the
last decade
á R&D spending fell by 44% in 2009
á Boosted by an overall stock market recovery, the industry¶s
market cap surged 5 % during the year

  
á

 

   
 

  
 
 

 
  ! "     
 


#"

 

 
á $
    

  


"
á
 %  
  &"
 
''
 

á
 %()*     " 

# 
 
& 
 
   
m
 '#
á One of the most dynamic applications of biotechnology today
is the production of fuels from renewable biological sources,
known as biofuels. A host of factors are propelling biofuels
development ² rapid population growth around the world,
burgeoning middle classes with increased purchasing power
in emerging economies such as China and India, energy
security concerns and the effort to combat climate change.
á Biofuels are clearly a big part of the response and, as a
matter of fact, they are among the very few credible
solutions in the area of transport « Our vision is that
biofuels have the potential to be between 10% and 20% of
global transport fuel energy by 2030.´
"
(%u))
á +,---