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G. Steven BurrillChief Executive OfficerBurrill & Company

Biotech 2008: A Global Transformation

Last Updated: April 20, 2023

Wisconsin Life Sciences Transformation: World Perspectives & Wisconsin’s Advantage Madison, WI, February 21, 2008

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Burrill & Company

Exclusive focus on Life Sciences

Human Healthcare (Rx and Dx)

Nutraceuticals/Wellness

Agbio

Industrial

Biofuels/ Bioenergy

Enabling Technologies

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Burrill & Company – exclusively focused on life sciences

Private Equity / Venture Capital Group

Investing across the entire spectrum of the life sciences/biotechnology ≈ $950 million under management

Merchant Banking (Burrill LLC)

Strategic Partnering including licensing, research and other collaborations

Strategic Advisory Services including new company formation

Merger & Acquisitions across life sciences

Spin-outs ranging from products, to research divisions to disease area franchises

Media

Publications (biotech book, newsletters, special purpose publications [stem cells, personalized medicine, aging etc.], The Journal of Life Sciences, web-based intelligence reports)

Conferences

Headcount: 60+ professionals and staff

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Burrill & Company U.S. & International Locations

San Francisco (HQ)New YorkIndianapolisPortland

United States

Shanghai

China

Tokyo

Japan

Mumbai

India

London

United Kingdom

Kuala Lumpur

Malaysia

Dubai

UAE

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Burrill Life Sciences Capital Fund III (2006) $283

Burrill Life Sciences Capital Fund II (2003)(1) $211

Burrill Life Sciences Capital Fund I(1)

Burrill Biotechnology Capital Fund (1999)(1) $140

Burrill Agbio I + Annex & Agbio II Capital Funds (1998(1)/2001)(1)$ 82

Burrill Nutraceuticals Capital Fund (2000)(1) $ 61 $283

Malaysian Life Sciences Capital Fund (a JV Fund) $150

Burrill AgBio II Annex* (a side-car fund to the MLSCF) $ 20

Total Funds Under Management at 12/31/07 $947

(1) Fully invested, including reserves/commitments for subsequent financings in existing portfolio companies

Burrill Funds Under Management -($ millions)

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Strategic Investors in Burrill & Company Funds

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Burrill Merchant Banking Services (Burrill LLC)

Transactions Across Life Sciences for Public and Private Clients Sell-side Buy-Side Divestitures Reverse mergers

M&A Transactions

Potential Scope of Potential Scope of

Burrill LLCBurrill LLC

Client RelationshipClient Relationship

Representing Biotech and Big Pharma Out-licensing, profit shares,

options, and regional deals, etc. Preclinical through marketed products

Strategic Partnering

Create a New Company or Merge into an Established Entity Newco financings for pharma

and biotech

Spin-Outs

Private Placements PIPE financing Late-stage venture financing M&A financing

Financing

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For inquires, contact Britt Fenton-Olsen at (415) 591-5475 or bfenton-olsen@b-c.com

Burrill Created/Hosted Industry Events

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To order most recent book or complete sets, visit: www.burrillandco.com

G. Steven Burrill’s Annual Book

Our 22nd annual book will be out February 2008

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Burrill Biointelligence Group Reports

The Burrill & Company’s Special Reports:

The Burrill Personalized Medicine Biointelligence Report

The Burrill Stem Cell Biointelligence Report

The Burrill Aging Biointelligence Report

The Burrill China Biointelligence Report

The Burrill India Biointelligence Report

The Burrill Media’s quarterly/monthly bio-intelligence report:

The Burrill Canadian biotech News Monthly

M&A/Partnering Stem Cells Personalized Medicine

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Mr. William Patrick

Editor in Chief

A six-times per year publication.

For information, see our website

The Journal of Life Sciences

www.burrillandco.com and www.tjols.com

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The Journal of Life Sciences on the web Weekly Brief and Weekly Brief, California Edition

To request the free weekly e-mail editions: weeklybrief@tjols.com

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Themes in ’88 book

…Into The Marketplace

Science being converted to business

Products coming to market place

Are product liability, regulatory reform, patent court behavior insurmountable barriers?

Partner or vertically integrate?

Acquisitions by pharma desirable?

How will the industry evolve?

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Biotech is Transforming the Globe

…and being transformed by it

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Webster: trans·for·ma·tion    Pronunciation: "tran(t)s-f&r-'mA-sh&n”, -Function: noun

1. The act or process of transforming somebody or something

Webster: trans.form

1a: To change in composition or structure

Transformation

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Chemistry Biochemistry

A Global Transformation…

To…To………FromFrom

On Size fits all drugs Personalized medicine

Aging (just happens) Aging is optional / controllable

Therapeutics/diagnostics/devices “Theranostics”

Treating sickness Preventing Sickness

Food for survival Food for health

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A Global Transformation…

To…To………FromFrom

Fossil fuels Alternative fuels (biomass conversion)

Unavailable local capital Global arbitrage

Fully integrated business model (FIPCO) Virtually Integrated business model (VIPCO)

Local companies Global companies

US centric biotech industry Global industry

Changing the healthcare environment Transforming the world

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Circa 1953 – Watson and Crick

Circa 1973 – Inception of biotech

ALZA (`68) Cetus (`71) Amgen (`80),

Genentech (`76 ) Biogen (`78),

Centocor (`79) Hybritech (`78)

Circa 1993 - Meaningful biotech revenue

Circa 2008 – Transforming the world

Life Sciences – Biotech: A Short History …

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Understand the pieces

Hardware of Life (20th Century) genes/proteins

Software of Life (21st Century) – systems/network

“Biomarkers ‘r us” (Note: “genes ‘r us” biz model failed)

Cost per bit of biological info rapidly decreasing (Moore’s law)

The consequences are staggering …

Era of Unprecedented Advances in Medical Research

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Moore’s law – Cost Per Base

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Challenges/Opportunities in Improvement of Care

And we see its implications:

Evidence based medicine

Advances in health information (Web MD)

Personalized, predictive, preventative medicine - (3 P’s)

Electronic Health Records (EHR)

BUT …

Delivery system so flawed can’t bring healthcare “advances” to market place

Government increasingly the payor (Medicare/other government healthcare systems)

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Climate change

Energy needs/alternative fuels

Poverty

Security/terrorism

Philosophical - ideological conflict (religious conflict)

Also Era of Macro Issues

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FDA

NIH

CDC

DOD/DARPA/SARPA

USDA

DOE – Energy Alternatives

……yet we are the envy of the world

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Total US Spend for Biotech/Pharma Research

NIH $29B Pharma $43B Biotech $30+B

TOTAL $100+B

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Current Healthcare System in “Silos”

Insurers

Employers (Providing $)

Providers/ Managed Care

Doctors/Nurses/Hospitals

Suppliers

Pharma Companies

Diagnostic Companies

Medical Device Companies

Medical Innovators

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Integration Is Essential BUT Where Is It Happening?

Kaiser Permanente (California)

Intermountain Health (Utah)

Analogy (Clayton Christiansen/ Harvard)

Color TVs invented by RCA but no sales since nobody would broadcast in color

RCA then bought NBC, then integration happened

…Therefore integration within the healthcare system is essential if benefits of new technologies are to be realized

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HHS Secretary Michael Leavitt

“Combining gene based medical care with health information technology could transform healthcare…”

“Personalized healthcare will combine basic scientific breakthrough of the human genome with computer-age ability to exchange and memorize data”

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Not only integration, but a greater need for international collaboration

Pandemic diseases

Regulatory harmonization Approvals

Patents

Drug/ Food Safety

Diseases know no borders

It’s a global economy

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Entering a Period of Co-opetition (Cooperation/ Competition)

Strategic Partnering

Co-development

Co-branding

Co-promotion

Co-marketing

Country to country

Public/private

Big/small

Within industry/outside industry (IT/biotech)

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Life Science Investment Thesis “To create and capture value across the spectrum of the life-sciences industries”

K

Biopharmaceuticals

Seeds

Food ingredients

Bio FuelsBiomaterials

Bio Processing

Tools

Agriculture

Addressing major m

arket needs

Therapeutics Traits

Diagnostics

Wellness Enhancers

Medical devices

Services

Human Health Care

“Sustain & Nourish the world”

Buildin

g sust

ainab

le b

usines

ses

FEED THE WORLD

FUEL THE WORLD

HEAL THE WORLD

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So let’s look at where we are and what happened during the last year...

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Key Industry Stats – Biotech 2008

USA Europe

Asia/Pacific Canada Total

Sales / Rev. $89B $12B $3.5B $1.5B $106B

AnnualR&D $23B $4B $0.4B $0.8B $28B

Number ofCompanies 1,450 1,600 740 450 4300

Number ofEmployees 131,00

010,000 13,000 7000 151,000

Number ofPublic Co.’s 370 160 140 75 745

Market Cap $455B $30B $50B $12B $547B

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Pharma vs. Biotech Industry Market Cap ($B)

Company 12/31/07 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00

Pfizer 155 187 172 199 280 192 251 290

Johnson & Johnson 191 180 186 184 154 112 181 146

Merck 127 82 69 69 103 165 133 216

Eli Lilly 60 62 65 65 77 50 88 105

Bristol-Myers Squibb 53 50 46 47 58 65 112 145

Pfizer/Merck 282 269 241 268 383 357 384 506

Total US Biotech 455 496 491 399 342 213 366 425

Industry 1.6x 1.8x 2.0x 1.5x 0.9x 0.6x 1.0x 0.8x

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Top ten Biotech Companies by Market Cap

Position

Biotech 1986

Biotech 1991

Biotech 1996

Biotech 2001

Biotech 2006

Biotech 2007

1 Genentech Amgen Amgen Amgen Genentech Genentech

2 Cetus Genentech Genentech Genentech Amgen Amgen

3ALZA ALZA Chiron Elan

Gilead Sciences

Gilead Sciences

4 AppliedBiosystems Centocor ALZA Shire Celgene Genzyme

5 Centocor Chiron Biogen ALZA Biogen Idec

Celgene

6 Amgen Genzyme Genzyme Biogen Genzyme BiogenIdec

7Nova Cetus

GeneticsInstitute Chiron

Serono (ADR) Shire ADR

8Chiron Synergen Centocor Immunex Shire

(ADR) Elan

9 GeneticsInstitute

GeneticsInstitute IDEXX MedImmun

e

QuestDiagnostic

es Amylin

10Biogen

DiagnosticProducts Immunex Millennium MedImmun

e

Millennium Pharmaceutical

s

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Historical Biotech Market Cap 1997–2006

$109

$149

$312

$441

$382

$224

$341

$400

$490 $489$455

$0

$100

$200

$300

$400

$500

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

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….And these small Life Science companies are becoming increasingly important as a source of value creation and innovation in the healthcare sector

Source: Capital IQ, Windhover, Burrill Analysis

Top Five US Pharma* vs. Total Biotech Market Cap Market Value of

selected Big Pharma

acquisitions of public Biotechs

(2005-2007)

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So, what really happened during the last year ?

Stem cells politically hot and the science is delivering

Technology/platform companies rebounded

BioFuels are BOOMING…

Industrial biotech is finally happening

Ag/animal health show progress

acreage is up

but “organics” and “natural’ are hot

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Increased interest in “wellness” not just sickness

Personalized medicine makes real progress

Regulatory concerns:

IVD/MIA “approvals”

FDA Critical Path

Theranostics

Biogenerics/biosimiliars/follow-on biologics

Big pharma buys into the biotech pipeline

So, what really happened during the last year ?

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So, what really happened during the last year ?

… My projections for 2008 will followat the end

Reimbursement dynamics continue to dominate, especially in the US

India/China make real progress (Malaysia, Korea, others do too)

Industry raises $45b in capital in US alone

The last year has been a good year, not a great one

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Transformation:Sickness to Wellness

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Healthcare Industry Dilemma…

Rising Healthcare Costs

Loss of Patent Protection for Blockbuster Drugs

Need for Innovation; build vs. buy

Reimbursement/Payment system changes – Medicare Part D

Compulsory Licensing

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Healthcare Costs Have Been Rising -For a Long Time

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Prescription Drug Costs as Percentage of Healthcare

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Estimate of Overall US Healthcare Spending on Prescription Drugs (by general public)

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Worldwide Global Pharmaceutical Sales –

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…by the way, the Global Nutraceuticals Industry is $228 Billion in 2006

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

US

A

Eur

ope

Japa

n

Can

ada

Chi

na

Res

t of A

sia

Lat A

mer

Aus

t/NZ

EE

/Rus

sia

Mid

Eas

t

Afr

ica

Source: Nutrition Business Journal May/June 2007

Supplements

Natural Foods

Functional Foods

Personal Care

(millions)

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Today’s Medicine Challenge: One Size Doesn’t Fit All

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Pharmacogenomics Shapes the Healthcare Business in 2000+

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140 Years of Drug Discovery Technology

penicillinssulphonamidesaspirin

psychotropics

NSAIDS

H2-antagonistsbeta blockers

lipid lowerersACE-inhibitors

Biotech drugs

chronicdegenerativedisease associatedwith ageing,inflammation,cancer

drugs againsttargets identifiedfrom disease genes

1900 20301950 1960 1970 1980 1990 2000 2010 2020 2040

New

Th

erap

euti

c C

ycle

s

1st generation 2nd generation 3rd generation

natural productsand derivatives

serendipity

receptors

enzyme

genetic engineering

cell pharmacology/molecular biology

genomics/ proteomics

So

urc

e:

CM

S,

Le

hm

an

Bro

the

rs r

ese

arc

h

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Confluence of Technology, Tools, and Knowledge

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A Systems Biology Approach – Follow the Pathways

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The Molecular Basis of

Biological Processes

Alterations in Disease

New Targets for Dx, Rx, Vx

The Molecular Heterogeneity of

Disease

Disease Subtypes

Right Rx forDisease

Individual Genetic Variation

Pharmaco-genetics

New Targets for Dx, Rx, Vx

DiseasePredisposition

PDxPRx

Analyzing the Molecular Profiles (Biosignatures) of Body Functions in Health and Disease

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Selected Targeted Treatments

Personalized cancer vaccines

Favrille – FavId for non-Hodgkin's lymphoma

Genitope – MyVax for non-Hodgkin's lymphoma

Gleevec (Novartis) - pH+ CML kinase inhibitor

Iressa (AstraZeneca) – EGFR tyrosine kinase inhibitor

Tarceva (Genentech/OSI) – HER1/EGFR inhibitor

Erbitux (ImClone/BMS) – HER1/EGFR inhibitor

Avastin (Genentech) – VEGF/VEGFR inhibitor

Herceptin (Genentech) – HER2 inhibitor

BilDil (NitroMed) - heart failure in African American patients

Other “Semi Targeted” Treatments (approved or late stage trials)

Nexavar (Bayer/Onyx) – multikinase inhibitor

Tykerb (GSK) - ErbB-2/EGFR inhibitor

Enzastaurin (Lilly) - PKC-Beta, AKT/P13 inhibitor

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Innovation Gap Getting Wider

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Safer, More Effective Drugs

Target Identification

Target Validation

LeadDevelopment

Preclinical Clinical Market

Faster path todisease targetsusing genetic data

Speed trials by testing onpatients selected for likelyhigh response and safety

Knowledge of biological pathwaysand gene variants help eliminatepoor candidates

Target optimal populationby combining drug withmolecular diagnostic testing

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Big “New” Markets

Obesity/diabetes/metabolic disease

Alzheimer's/memory

Anti-aging

Anti infectives (antibiotic resistance)

Wellness (preventative/predictive cure)

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Projected Alzheimer’s Disease Prevalence, 2000 to 2100

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Aging . . . Is it a Disease?

By 2030, 20% of US population will be over 65 years of age…

About 1.4 million Americans are in their 90s, and another 64,000 are 100 years old or older

Baby boomers represent 30% of the total US population

Per person, seniors consume about five times the drugs of their working-age counterparts

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Medicines in Development for Older Americans*

* Some medicines are listed in more than one category

DISEASE

Alzheimer's Diseasse/Dementia

27

Bladder/Kidney 9

Depression 19

Diabetes 48

Epilepsy 7

Eye Disorders 23

GI Disorders 23

Lung/Respiratory 52

Musculoskeletal 6

Osteoarthritis 11

PRODUCTS INDEVELOPMENT

DISEASE

Osteoporosis 20

Pain 41

Parkinson's Disease 17

Prostate 6

Rhumatoid Arthritis 38

Sepsis 3

Sexual Dysfunction 15

Skin Conditions 14

Sleep Disorders 11

Other 17

PRODUCTS INDEVELOPMENT

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Chronic Disease

125 million Americans have one or more chronic conditions (e.g. congestive heart failure, diabetes)

Chronic diseases account for 75% of all health care expenditures

Current costs for chronic diseases is approaching $1 trillion

These expenditures are not delivering what is possible

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Stratifying Into Risk Categories Diabetes Type 2: What’s Becoming Possible?

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Products in WW Development 2007 III and Registration

0

100

200

300

400

500

600

Phase III RegistrationSource: BioCentury Publications

571 Total

248 Total

388 Risk-Adjusted to Approval

208 Risk-Adjusted to Approval

63

Products in Phase III by Disease / Target Area

Source: BioCentury

64

0

5

10

15

20

25

30

35

40

45

19821983198419851986 19871988198919901991 1992199319941995 19961997199819992000 20012002200320042005

New Indications

Biotech Drugs

2006

Number of Products Approved — 1982–2006

2007

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Biotechnology Drugs in Clinical Development

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MDx is at the Center of the New Dx World

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Diagnostic Innovation Makes Impact on Cancer Therapy

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In Vitro Diagnostics, By Application

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Looking Forward, Patent Exposure is Set to Increase Significantly

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Biogeneric Status of Biotech Drugs

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Adverse Event Reports 1990-2006

0

50100

150

200250

300

350

400450

500

Source: CDER OSE report 10/5/07 AERS database (includes all US marketed drug and biologic products)

(thousands)

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Pulled from the MarketDateApproved

Drug Name

Use Risks

Date

Withdrawn

2002

2001

Zelnorm

Bextra

IBS - C

Pain reliever

Heart attack

Heart attack/stroke; fatal skin reactions

2007

2005

1999 Vioxx Pain reliever Heart attack/stroke 2004

1997 Baycol Cholesterol Severe damage to muscle, that is sometimes fatal

2001

1999 Raplon Anesthesia An inability to breathe normally 2001

1993 Propulsid Heartburn Fatal heart rhythm abnormalities 2000

1997 Rezulin Type 2 diabetes Severe liver toxicity 2000

1988 Hismanal Antihistamine Fatal heart rhythm abnormalities 1999

1997 Raxar Antibiotic Fatal heart rhythm abnormalities 1999

1997 Posicor High blood pressure

Dangerous interactions with other drugs

1998

1997 Duract Pain reliever Severe liver damage 1998

1985 Seldane Antihistamine Fatal heart rhythm abnormalities 1998

1973 Pondimin Obesity Heart valve abnormalities 1997

1996 Redux Obesity Heart valve abnormalities 1997

Blockbuster drugs pulled from the

Blockbuster drugs pulled from the

market gave investors concern

market gave investors concern

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On the Regulatory/Patent/Policy Front… Patent reform (PTO proposals to restrict claims examined in a

single application and limit continuation applications) FDA resources – PDUFA IV authorization

follow-on biologics (biogenerics) drug safety theranostics food safety (pet food)

Biofuels – renewable and alternative energy sources through use of biotechnology

Medicare Prescription Drug Price Negotiation Act – Non-interference (proposal to require Medicare interference)

Sarbanes Oxley compliance – reducing the burden on small companies

SBIR eligibility Agbio/ GMO’s Stem cell research – federal funding

74

The Cost of Developing a New Drug has Greatly Increased

75

CMS Becomes Dominant Customer (40% of Market in 2008)

2002 Rx Payment Sources ($B)

Out of Pocket, $48.6

Other Public, $5.0

Medicaid, $28.6Medicare, $2.6

Private Insurance, $77.6

2008 Projected ($B)

Out of Pocket, $60.0

Other Public, $10.0

Medicaid, $30.0

Medicare, $65.0

Private Insurance, $95.0

2002 Rx Payment Sources ($B) 2008 Projected ($B)

Total = $260Total = $162.4

2002 data: Health Affairs Volume 23, Number 1; January 2004.2008 data: Tag & Associates estimate

Source:

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Medicare Heads Towards Bankruptcy

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Major Government Initiatives in Biotechnology

EU/Eastern Europe/Scandinavia China India Japan Malaysia Singapore UAE/Dubai and Kuwait Israel Various Latin American Countries (esp.

Chile/Brazil) Australia/New Zealand

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Healthcare Costs are Growing Much Faster Than Productivity (Revenue Per Employee)

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

1998 1999 2000 2001 2002

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

Revenue per employee

Healthcare costs per employee

Source: Hewitt Health Value Initiative; United States Census; Bureau of Labor Statistics (2002 Productivity estimated based on first 3 Quarters)

CAGR=3%

CAGR=10%

GM Cannot CompeteHealthcare costs per car are $1700

more then Toyota

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…so, healthcare cost increases are on everyone’s agenda

Politicians/Congress/White House

Payors/Reimbursors/Insurers

Physicians/Providers

Patients/Consumers

…and patients are empowered, have economic costs,

and really want to stay well!

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PHARMA/PHARMAPHARMA/PHARMA PHARMA/BIOTECHPHARMA/BIOTECH BIOTECH/BIOTECHBIOTECH/BIOTECH

Significant Mergers & Acquisitions 2007

Schering-Plough/Organon

$ 14.4 billion

Hologic/Cytyc

$ 5.9 billion

Mylan/Merck Generics

$ 6.6 billion

Siemens/Dade Behring

$ 7.1 billion

AstraZeneca/MedImmune

$ 15.6 billion

Eisai/MGI Pharma

$ 3.5 billion

GSK/Reliant

$ 2.7 billion

Shire/New River

$ 2.5 billion

Celgene/Pharmion

$ 2.7 billion

Qiagen NV/Digene

$ 1.5 billion

Amgen/Illypsa

$ 420 million

Genzyme/Bioenvision

$ 308 million

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M&A 2007 - Total

Industry M&A Activity:Total Deal Number & Average Deal Value

0

50

100

150

200

250

2004 2005 2006 2007

Nu

mb

er o

f D

eals

$0

$200

$400

$600

$800

$1,000

Do

llar

is i

n M

illi

on

s

Number of Deals Average Deal Value

82

M&A

Industry M&A Activity: Total Number of Deals by Total Deal Value

78

19

33

69

61

57

19

43

13

7 7

1

58

17

49

20

128

5

59

16

50

15 13 13

2

0

10

20

30

40

50

60

70

80

90

<50M 50M-99M 100M-499M 500M-999M 1B-2.5B 2.5B-10B 10B+

Num

ber

of D

eals

2004 2005 2006 2007

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Partnering – Big Pharma

BIG PHARMA ALLIANCES IN 2007

0

5

10

15

20

25

30

Num

ber

of A

llian

ces

Series1 24 21 20 18 18 17 15 15 13 13 11 11 10 9 8 6

Novartis

J&J GSK Merck Roche Pfizer AZBayer Scheri

ngEli Lilly Wyeth SP

Sanofi Aventis

Abbott Takeda BMS BI

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Partnering - Upfronts

$0

$10

$20

$30

$40

$50

$60

$70

Dollars in Millions

Average Total Upfront Payments By Stage of Development At Deal Closing

2003 2004 2005 2006 2007

85

Wellness: Its Time Has Come

Rising healthcare costs are impacting individuals

Rising incidence of chronic disease

Recognition of the importance of genetic variation

Scientific knowledge base for:

Personalization

Cost effective technologies

Financial markets beginning to recognize opportunity

86

The Demands for Agriculture Stay the Same

0

1

2

3

4

5

6

7

8

1950 1975 2000 2020

WorldPopulation

Arable Land(billion ha.)

Farmland perperson(ha)

Source: 1999-United Nations

More food on less land with half the water.

87

Market Overview – Agriculture

88

Global Area of Biotech Crops 1996 to 2005 By Crop

89

2005 Was The Tipping Point For Industrial Biotechnology

Perfect Storm • Energy security

• Global Warming

• Economics

• Political Will

• Market pull

• Ready technology

89

Biofuels Sustainability 2008

90

Exciting Time Since

VC investments increased dramatically Oil companies invested in technology and

infrastructure Supportive legislation Frenzy to access technology Frothy Pre-money Valuations No success stories

91

What Has Happened Since?

Ethanol plant construction exploded (All corn based) Now have 113 in operation, 77 under construction Production at 6 billion gallons, potential for 12B

Price of feed grains $2 historically, topped $5.00 20% of corn crop today, 50% in two years ! 13% of soybeans going to biodiesel

The focus has been on biofuels - Ethanol

92

Implications

Unprecedented energizing of rural America

Price of corn Feed costs: poultry, beef, and swine Sales of pickup trucks, farm equipment and

new kitchens Land values Food costs: Meat, HFCS

93

Energy Bill & Farm Bill

The Energy Independence and Security Act of 2007 By 2022

o Renewable Fuel (20% reduction in GHG) 36 B gallons

o Advanced biofuels (other than corn starch with 50% life cycle reduction in GHG 21 B gallons

o Cellulosic Biofuel (>60% reduction in GHG) 16 B gallons

2008 Farm Bill – Energy Title (In Conference) Tax incentives Funding for development and demonstration

Key Future Drivers!

94

2007 Great Year But with Storm Clouds Forming

Perfect Storm

• Energy security• Global Warming• Economics• Political Will• Market pull• Ready technology

Second Perfect Storm

• Social

• Economic

• Environmental

95

Storm Clouds

Commodity prices drive up food prices

Acreage Swap between Corn and Soybeans

The linkage: Corn – Soybeans – Palm Oil

Exaggerated by imminent US lead recession

Economic discontinuities caused by speed of adoption

96

Social, Economic and Environmental Issues will Dominate 2008

US recession How long how deep? Fewer IPOs, Fewer Acquisitions

What will big oil do ? Access to project financing

Funding of small technology companies

$5M, $20M, $100 M Will we get the project financing needed given the

economic and political uncertainty

IPOs early in year critical – several good ones ready to file, some even have revenues!

Uncertainty a big risk

97

Opportunities

From an investor stand point – “Ethanol is dead”

Cellulosic sourcing of sugars will be hot Increasing interest in alternative fuels

Butanols Alkanes

Lots of opportunities outside biofuels Bioplastics / Biomaterials APIs Specialty chemicals

98

Some Learnings From Agbio

Be proactive, get ahead of the issues Engage all parties, respect their issues (they may

be right) Do not be defensive Find common ground Energy security, sustainability, reduced

environmental foot print It is not about the science it is about the political,

social, economic and environmental issues

99

Capital Raised 1980-2007

100

0

10

20

30

40

50

60

1983 1986 1991 1995 2000 2003

Droughts

Rallies

Biotech’s F=Five cycles Length of Rallies/Droughts in Months

101

Small, Mid-Cap vs. NASDAQ, DOW

-22.50%

-20.00%

-17.50%

-15.00%

-12.50%

-10.00%

-7.50%

-5.00%

-2.50%

0.00%

2.50%

5.00%

7.50%

10.00%

12.50%

15.00%

17.50%

20.00%

22.50%

Dec/06 Jan/07 Feb/07 Mar/07 Apr/07 May/07 Jun/07 Jul/07 Aug/07 Sep/07 Oct/07 Nov/07 Dec/07

Mid Cap

Small Cap

Dow Jones

NASDAQ

102

Billion-Dollar Club

103

IPOs – Not What They Used To Be

104

IPOs – Not What They Used to Be

Number

of IPOs

Positive sinceIPO

Negative

sinceIPO

Acquired

Amount Raised*

($ Million)

Average % changeSince IPO**

2003

7 1 4 2 $438 (3.34%)

2004

29 6 17 6 1,628 (12.64%)

2005

17 5 10 2 819 4.55%

2006

19 6 13 0 920 8.26%

2007

28 11 18 0 2,041 2.00%

Total

100 29 62 10 5,846 (0.24%) * Includes over-allotments ** As of 12/31/07Source: Burrill & Company

105

2007 Life Science Financing Overview

Initial Public Offerings: 27 offerings with proceeds of at least $20.0m $2b total proceeds raised $70m average deal size $162.3m median pre-money valuation The share price of issuing companies increased

2% on average 5 days post pricing The share price since time of offering has

increased 2% on average

106

Finance and Capital Markets

The global financial markets have created additional opportunities for companies to look

outside their borders for financing

Europeans on NASDAQ/NYSE Chinese on NYSE Americans on AIM/Euronext/SWX Other markets are available

Mothers (Tokyo) DFX (Dubai) Hong Kong

107

Transformation:

FIPCO’s to VIPCO’s

108

FIPCO (Fully Integrated Pharma Co.)

ResearchTechnology

Manufacturing

Clinical &Regulatory

Sales &Distribution

CSO

CMO

CROs

Partnerships

Academia, Scientific, Institutions

R&D

Preclinical Support

Clinical Development

Manufacturing

Sales & Distribution

Preclinical CRO

VIPCO (Virtually Integrated Pharma Co.)

Changing Business Models

109

So What Does Big Pharma Do Better Than Anyone Else?

Discovery?

Development?

Manufacturing?

Distribution?

Disease Management?

What is the Answer?

110

Difficult financing at early stages Successive venture rounds at increasing value is

challenging…public equity values have compressed the whole equation

Time and cost of development has been increasing and risk/return has been decreasing

Therefore, a new model must emerge

Financing Biotech Companies the Old Way Doesn’t Work

111

VC & Angels are hesitant to invest Business models are changing More financing of projects

Selective platforms are coming back

Higher bar for regulatory approval

Reimbursement compression

Capital efficiency required

BUT…

Rate of start-ups are increasing (go figure…)

How Does All This Impact Entrepreneurial Start-ups in 2008

112

So the predictions for 2008…

113

The Predictions for Biotech in 2008

Sales of products will continue to increase, but reimbursement becomes more challenging

Despite stricter regulatory oversight, more products to the marketplace

Regulators Raising the bar for innovation, theranostics Pharmacovigilence is the name of the game Drug safety will continue to be a major issue

Congress aiming to add power to Medicare to negotiate what it pays for drugs

Congress may reduce the capital gains differential (bad for the capital raising side of the industry)

114

Biofuels boom

Ag/Animal Health continue to progress

Biotech’s globality increases with US dominance continuing to decrease

US research engine faces challenging times

Non-health care aspects of biotech also becoming less dominant as industrial, biofuels, ag increase in importance

Clusters are redefined away from geography to virtual clusters (diseases, markets, unique industry segments)

Business models continue to evolve

The Predictions for Biotech in 2008 (continued)

115

The Predictions for Biotech in 2008 (continued)

Both big Pharma and big Biotech will be competing for companies with advanced product pipelines

We will see US biotechs accessing capital overseas…international companies accessing capital in non-local markets

“Capital Markets” worse than 2007, but

30 IPO’s in 2008 (mostly 2H ‘08)

2008 $50 billion will be raised by the US biotechs

MKT Cap will reach $500B

Of the 60 IPO’s completed by 2006, most all trading above offer price by end of 2008

116

It’s going to be a tough, competitive year with

biotech companies transforming the world

… and being transformed by it!

117

G. Steven BurrillChief Executive OfficerBurrill & Company

Biotech 2008: A Global Transformation

Wisconsin Life Sciences Transformation: World Perspectives & Wisconsin’s Advantage Madison, WI, February 21, 2008

Last Updated: April 20, 2023