rd 3 The Annual Life Science Conference February 2001 Biotechnology Strategy Project Realizing Israel Potential Adi Alon Monitor Group
Agenda – Project Overview – The potential – The challenge and the action plan Febtuary 2001
Monitor Group - Overview • Founded 1983, Cambridge USA • Mix of strategy consulting, investment banking and private equity Decision Architect s™ Monitor Clipper Partners M 2 C M. A. S. T. The Action Company • Truly global operations - no local partnerships or geographic barriers Activities Processes & Systems Marketspac e Center (ECommerce) Corporate Finance Monitor University Monitor Institute • All Group companies operate through all 26 offices globally including Tel Aviv • 80%+ of engagements are repeat clients • Committed to creating action - not reports • Working in almost all industry sectors • Leading global experts Febtuary 2001
Project Overview - Key Issues Is there a potential for Biotechnology industry in Israel? If there is a potential - what should Israel do to realize it? Febtuary 2001
Competitiveness of Nations, States, and Cities The Diamond Approach Context for Firm Strategy and Rivalry Government l Factor Conditions l l A local context that encourages sustained investment in upgrading Vigorous competition among locally-based rivals Demand Conditions l Factor (input) quantity l l l Related and Supporting Industries Factor quality Factor specialization l l l A core group of demanding local customers Unusual local demand in specialized segments that can be served globally Customers whose needs anticipate those elsewhere A critical mass of capable local suppliers Clusters instead of isolated industries Febtuary 2001
Project Overview - Key Activities Israel Research International Research – Over 100 interviews - profiling the industry and the challenges it faces – Developed detailed mapping of the activities conducted in biotechnology by Israeli industry and academia – Collected analyzed relevant data to the challenges raised during Israeli cluster interviews – Conducted in depth research of international biotechnology clusters to identify development challenges and sources of success: – Profiled global industry trends and mapped them against the cluster activities in Israel Recommendations and Action Plan Febtuary 2001
Agenda – Project Overview – The Potential – The Challenge and the action plan Febtuary 2001
Global Potential - Strong Growth Is Expected in the Biotech Market Projected Growth of Global (Biotechnology Market ($B • 120 Bio. Therapeutics – Growth driven by: • Imminent patent expirations • Increasing demand • Need for improvement in R&D economics 100 • 80 Bn$ 60 40 • 20 • 0 2004 – Bioinformatics, pharmocogenomics Agricultural Biotechnology – Strong demand for insect-protected and herbicide-tolerant crops – Recent shift towards products with enhanced output traits Diagnostic – Therapy selection and monitoring utilizing genetic data Industrial Biotechnology – The pulp and paper industry 2010 Source: Consulting Resources Inc, 1998; Business (02/2000); Frost & Sullivan ; Biotechnology Industry Organization Febtuary 2001
Global Potential - Biotech Is Enjoying Increasing Investors Attention NASDAQ Biotech Index (Jan 1994 - Jan 2001) Index VC Funds investment in Biotech U. S. , UE + Switzerland, UK 1995– 1999 M$ Source: NASDAQ, Price Waterhouse Coopers Febtuary 2001
Israel Potential • High quality academic research • Skilled human resources - over 1, 700 graduates every year in related fields • Academic research and industrial R&D in key industry segments (e. g. cancer, immunology, bio -informatics, etc(. • Industrial success - growing sector with recently successful IPO’s (e. g. XTL, Compugen, Keryx. ( • Potential for the future: interdisciplinary areas Febtuary 2001
Israel Potential - Research and Industrial Development Covering Growing Segments of the Global Market Size of Key Biotech Markets in 2005** Expected Market 13% 1. 6$B Neurology Israel Cluster Relative Activity in Future Development* 15% 4. 7$B Input traits and bio pesticides 10$~B 18% 8. 8$B 12% 5. 5$B 5$~B 43% 1$B Bioinformatics Cancer 1$~B Autoimmune 17% 1. 2$B 4% 1. 3$M Infectious Diseases 108% 1. 4$B 22% 3. 1$B Cardiovascular Diagnostics cs Pharmocogenomi %of academia research projects and products developed in industry: Therapeutic areas Platform technology 0% 10% 20% 30% 40% 110% Agro-biotech %of Expected Annual Market Growth Rate (1998 -2005( *Research projects in the academia & number of products in the pipeline; ** Projected sales of existing products and of products under development Source: Data. Monitor, Harry Langbeheim; Pharmaceutical Researches & Manufactures of America, Recombinant Capital ; Monitor Analysis Febtuary 2001
What Can Israel Gain - The Future Targets • Strengthening Israel’s knowledge base economy • Increasing employment in the sector from 3, 500 today to 10, 000 - 14, 000 by 2010. • Increasing sector sales to $2 - $3 Bby 2010, almost all of it export oriented. • Keeping scientific talent in Israel, over 1, 700 students are graduating every year with science degrees in the related disciplines. • Attracting Israelis who reside oversees and have managerial experience in the industry. Febtuary 2001
What Other Countries Already Gained U. K. Example Increased Employment U. K. Biotechnology Industry Number of Employees Increased Revenues U. K. Biotechnology Industry Annual Revenues ($M( Growing Sector U. K. Biotechnology Industry Number of UK Biotech Companies Source: Ernst & Young; OST Report on the UK Biotech Cluster, Aug 1999; Northwest Biotech Development Study (June ‘ 98); ERBI Bio. Business Trends ‘ 99 Report; Speech by Lord Sainsbury, August 1999 Febtuary 2001 13
Agenda – Project Overview – The Potential – The Challenge and the action plan Febtuary 2001
The Challenge - Supporting The Growth of a Young Industry Emerging industry. . . Number of Biotech Companies, 1999 . . . Comprised of small scale companies. . With lower overall market capitalization Average Sales and Number of Employees per Company, 1999 Market Capitalization of Public Companies, 2000* USA Source: Harry Langbeheim; NBC; Press release; Interviews; Ernst & Young Life Science Report, 1999 & 2000 Febtuary 2001 Israel
Key Principles of Action Plan • Placing Biotechnology of the National Agenda • Supporting infrastructure development: – Physical – Knowledge – Regulatory • Foster scale up and industry development through networking and linkages Febtuary 2001
Creating Cluster Dynamic U. K. - Role of the Private Sector In Cambridgeshire Head of ERBI Private Sector Eastern Region Biotechnology Initiative • Aims to enhance the development of Biotechnology cluster – Promote local, national & international networking – Support successful growth of new ventures – Ensure the infrastructure of the region supports biotechnology • Provides services to members: – Secures better terms from service companies (legal and accountancy( – Web site postings of partnering opportunities abroad – Staging networking events – Holding seminars on strategy, marketing & finance – Collecting and publishing industry data Academia Institute of Biotechnology Univeler Research Ltd John Innes Research Center Government Office for the East of England Investment Agency County Council Biotech Companies Febtuary 2001 Ce. Nes CTBL Ltd Cambridge Drug Discovery Service Companies Reddie & Grose Patent Agents Barclays Bank Weil, Gotshal & Manges Law Firm Garretts Law Firm Rothschild & Sons Investment Bank Arthur Andersen Accountants Beeson Gregory Stockbroker Customers Glaxo Wellcome Peptide Therapeutics Alizyme Plc Lundbeck
Creating Cluster Dynamic Massachusetts Biotechnology Council The council provides a forum for networking between the various parts of the cluster, improves the business environment and interfaces between the industry and government Activities and Mechanisms • Policy: Addresses issues related to policy, clinical trials, regulatory etc. . – The Council regularly lobbies local, state, and federal government officials on issues related to biotech (e. g. regulatory affairs( • Networking: Separate committees are also established to develop networks among professionals in specific areas of biotech activity (e. g. bioinformatics, business development, purchasing etc(… – Committees may also include pharmaceutical companies and other interested parties (e. g. Compaq and Pfizer ( • Purchasing: The Council negotiates broad based agreements with scientific suppliers as a cost saving mechanism for its members • Conferences: Local and international conferences are organized on broad issues (e. g. Febtuary BIO 2000) or on a specific topic (e. g. financing ( 2001 Board of Directors Industry Representatives Other Cluster Representatives Genzyme MIT Office of Technology Transfer Biogen Venture Capital Genetics Institute Massachusetts General Hospital Millenium Arthur Andersen Additional Industry Representatives Additional Cluster Representatives
Areas of Recommendations — 7 Points Program Private sector leadership headed by the IBO to work with government on implementing cluster initiative Upgrade physical infrastructure which supports the industry • Appoint a full time project leader or executive director to lead the implementation effort • Bring biotech on the national agenda and declare a clear vision for the industry • Form an intergovernmental task force to coordinate government policy • Attract an int’l company and support Israeli companies which offer integrated services and equipment in – pharmacology and animal testing – analytical services – GMP pilot batches manufacturing facility • Work with one university on a pilot plan which includes: Support applied research and technology transfer processes – Increase financial and human resources to improve commercialization activities – Create a pre-seed funding to support final development of innovations with commercial potential to improve the odds of a successful technology transfer – Align IP and equity ownership rules of commercialization companies in the Universities with incubators Febtuary 2001
Areas of Recommendations — 7 Points Program (cont(. Improve early commercialization create world class incubators dedicated to the industry Reinforce regulatory infrastructure Map infrastructure required to support research in academia Implement tracking system for industry data and performance matrix • Set up world class scientific and business advisory board to support incubator projects • Increase funding and timing of projects to meet industry needs • Implement highly selective screening process for projects • Increase communication with the industry - clarify guidelines and information requirements for clinical trials • Facilitate approval of phase 1 clinical trials through either a) stronger linkages with the FDA (e. g. FDA affiliate office), or b) by adding resources to the health ministry • Add resources to the institute of standardization and control of pharmaceutical specialized in biotechnology for evaluation and GMP accreditation • Map equipment requirements for academic research to ensure that Israel’s academia maintains its position • Track data on industrial and research activity to facilitate networking and monitor performance Febtuary 2001
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