Navigating the Sea Change - Burrill & Company

Biotech 2009: Life Sciences 

Navigating 

the Sea Change 

G. Steven Burrill 

Chief Executive Officer 

Burrill & Company 

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2 

Sea Change 

20 

Industry Metrics 

30 

Healthcare 

72 

Personalizing Medicine 

102 

Wellness 

130 

Emerging Technologies 

168 

Politics and Policy 

192 

BioGreenTech 

242 

Interna tional 

322 

M&A/Partnering 

340 

Finance & Capital Markets 

404 

About Burrill & Company

Contents 

Chapter 1: Sea Change 2 

Old Rules, New Rules 5 

» Targeted therapies will be key to success 6 

» Pharma becomes the only game in town 7 

» Global arbitrage provides opportunities 7 

» Companies will find a new way to finance 7 

» A premium is placed on effectiveness 8 

Capital Markets 8 

» Prices will be bargain basement 9 

Healthcare 10 

» Medicine enters the genomic era 10 

» Technology drives healthcare innovation 10 

» Several forces could be a drag on new technologies 11 

» Healthcare providers rethink delivery 12 

Stem Cells 12 

Regulatory Climate 13 

» Follow-on biologics legislation is expected 13 

The Environment 14 

» Obama will boost biofuels 14 

» Biotechnology becomes truly global and the future is good 14 

Burrill’s A,B,C’s for navigating the sea change 16 

Burrill’s Predictions for 2009 18 

Chapter 2: Industry Metrics 20 

Markets 22 

» More mature companies weather the period 24 

Big Pharma 24 

Big Biotech 26 

Industry Sales 27 

Biotech Financing 27 

Partnering 27 

At a Glance 28 

Chapter 3: Healthcare 30 

» The drug industry is under the politcal microscope 32 

» A long laundry list grows longer 32 

» Healthcare delivery has a turbulent year 32 

Drug spending 34 

» Spending on biologics grows 34 

» Competition is increasing 35 

Innovation 35 

» First-of-kind product approvals increase 36 

» Few approved drugs seen as potential blockbusters 36 

Global 38 

» There is slowing growth in mature markets 39 

» “Pharmerging” markets see rapid expansion 39 

» There is an emphasis on specialist-driven markets 39 

» Generics market continues to evolve 40 

» Payor actions in Europe could pressure markets 40 

Biotech Drugs 40 

Pharmaceutical Products 42 

State of Health 42 

» Non-communicable conditions rise globally 42 

» Cancer will become the world’s No. 1 killer 43 

» HIV/Aids outlook is better in the United States than globally 43 

» Chronic illness is a key driver of U.S. health problems 44 

» U.S. bill of health is mixed when compared with other countries 44 

» The United States spend the most per capita on healthcare 45 

State of Healthcare 47 

» Primary physician shortage is a growing problem 48 

Healthcare Spending 48 

» Prescription drug spending grows more slowly in 2007 49 

Insurance Coverage 50 

» The cost of coverage continues to rise 50 

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Biotech 2009 

» Large employers provide best coverage 51 

» Lack of coverage leads to catastrophic healthcare costs 51 

Healthcare Reform 52 

» Income-based subsidy for uninsured is discussed 52 

» Obama reform hits a speed bump 53 

» Comparative effectiveness remains controversial 56 

» U.S. public seems broadly in favor of major overhaul 56 

Healthcare Companies 56 

» Insurer stocks fall at least 50 percent 57 

» Pharmacy benefits managers outperform market 57 

» Many companies could benefit under Obama Administration 57 

Alternative Delivery 60 

» Healthcare systems are getting into the retail clinic game 61 

» Employers expand onsite health clinics 61 

» The “medical home” model gains currency 62 

» Boutique medicine rises in popularity 62 

» Telehealth becomes more widespread 63 

» Teleradiology gains in acceptance 63 

» Digital pathology has a strong year 63 

Healthcare Information Technology 63 

» Feds give healthcare IT grants to physicians 65 

» States and companies pick up the slack 65 

» Personal health records gain traction 66 

» DOD takes a fancy to personal health records 66 

» E-prescriptions get a boost 66 

» Web solidifies importance as source of health information 67 

» Europe’s healthcare IT efforts are mixed 68 

Outlook for 2009 70 

» Companies face a difficult year 71 

» Medical devices are a bright spot 71 

Chapter 4: Personalizing Medicine 72 

Pharmaceuticals 76 

» Companies begin to see advantages to linking tests with new drugs 76 

Return on Investment 76 

» Pairing diagnostics with therapies could enhance physician relationships 77 

» Quantifying personalized medicine’s ROI becomes key 77 

Scientific Developments 78 

» Researchers go gene hunting 78 

» Researchers look into why some fend off HIV infection 79 

» Investigators mix and match cancer drugs 79 

» Genetic risk factors for obesity are indentified 79 

» Genetic variants in six genes are strongly associated with BMI 80 

Comparative Genomics 80 

» Researchers look into what makes a Panda 80 

» Europe looks for biomarkers 81 

» Pfizer looks to personalized medicine 81 

» Merck gets in the game 82 

» Bristol-Myers Squibb partners with molecular diagnostics company XDx 83 

» Evidence-based healthcare offers important solutions for better health 83 

Business and Finance 83 

» Affymetrix gets some good news 84 

» Illumina sees continued growth 84 

» Inverness continues acquisition spree 84 

» Inverness strikes distribution deal with PrognostiX 84 

» Shares of Hologic fall 85 

» Luminex shares post positive gains 85 

» Monogram expects healthy growth but shares dive 86 

» Genomic Health teams up with Pfizer 86 

» Diagnostics companies succumb to tough economy 87 

» Sequenom revenues increase 88 

» Myriad Genetics launches another molecular diagnostic product 88 

» Prezeon analyzes protein expression by immunohistochemistry 88 

» Myriad plans a spinoff of its R&D business 88 

» Diagnostics companies have difficult year 90 

» Cepheid gets FDA approval for skin infection test 90 

Companion Diagnostics 91 

» New prostate cancer diagnostics in the works 92 

» Biomarker research for lung cancer advances 93 

Partnering and M&A 93 

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Contents 

» Landmark research collaborations take place 96 

» Study launches to look at personal genetic testing 97 

» FDA seeks to provide genomics insights 98 

» bioMérieux goes on a buying spree 98 

Consumer Genomics 99 

» Infrastructure built to accelerate consumer-based breast cancer research 99 

» deCODE Genetics helps provide relevant medical associations 99 

» Navigenics offers a whole genome scan 100 

» DNA Direct closes additional financing 100 

» The first for-profit company offers whole genome sequencing 100 

Chapter 5: Wellness 102 

Major Trends 105 

» Consumers redefine quality 105 

» Better quality of life is a main goal 106 

Market Performance 106 

» Whole Foods suffers as consumers curb spending 108 

Mergers and Acquisitions 110 

» Coca-Cola makes bid to expand in China 110 

Regulatory Matters 112 

» Nanotechnology in food raises hopes and concerns 112 

Healthy Aging 113 

» Scientists seek to unlock the secrets of the “Wellderly” 113 

» Companies pursue life-extending elixirs 113 

» Company screens drugs for brain-growing power 115 

» Exercise for brain health gains currency 115 

» Cosmeceuticals continue to grow 116 

Wellness 116 

» Employers are taking the lead 116 

Information Technology 120 

Food and Nutrition 120 

» Natural and organic food continues to grow 121 

» Condition-specific supplements are booming 121 

» Combining OTC drug and herbal supplements raises controversy 122 

» Anti-cancer supplements are growing 122 

» Probiotics market explodes 122 

Functional Foods 123 

» Energy drink sales show vitality 124 

Obesity 126 

» Biotech and pharma continue search for the skinny pill 126 

» Research moves forward 127 

» There is new hope for leptin in fight against obesity 127 

Personal Genomics 128 

» Landmark study will assess personal genetic testing 129 

Integrative Medicine 129 

Looking Ahead 129 

Chapter 6: Emerging Technology 130 

» Developers face new pressures 132 

» Big Pharma steps up to the plate 133 

Regeneration Gap 134 

» FDA gives Geron a green light to begin clinical trial 135 

» Several therapies make it to clinic 137 

» Genzyme and Osiris sign blockbuster deal 138 

» Researchers harness the power of regeneration 138 

» Therapeutic cloning can be used to fight neurodegeneration 141 

» Human neural stem cells transplantation believed to rescue congenital brain disorder 141 

» Human embryonic stem cells may lead to diabetes treatment 142 

» Regenerative medicine is a real business today 142 

» War spurs development of regenerative medicine 142 

Gene Therapy 143 

» Experimental gene therapy in HIV/AIDS reports positive safety results 143 

» A stable and scalable gene therapy platform is developed 144 

» A gene therapy treatment for Hemophilia B is in the works 144 

» There is hope for neurodegenerative disease patients 145 

» Other players pursue gene therapy for neurodegenerative disease 145 

» Blindness is another gene therapy target 145 

» Cancer-fighting gene delivered to normal brain tissue 146 

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Biotech 2009 

» Zinc finger proteins represent new approach in gene modification 147 

» RNAi technology continues to attract big dollars 148 

» There is a significant “de-risking” for RNAi 148 

» MicroRNA moves into the spotlight 149 

» microRNAs can be a powerful diagnostic tool 150 

» First commercially available microRNA-based diagnostic test is launched 150 

» Blood tests predicting response to ovarian cancer treatment are in development 151 

» Researchers are focusing more on MicroRNAs 151 

Countering Aging 152 

» Interest in anti-aging therapies sparks M&A 152 

Vaccines: A New Approach 153 

» DNA vaccine for Type 1 Diabetes is sought 154 

» Cancer vaccines remain challenging, but there’s hope 155 

» Personalized, anti-cancer vaccine makes progress in trials 155 

Genomics 156 

» A $10,000 whole-genome scan is in sight 157 

» Complete Genomics predicts it will become first large-scale human genome sequencing company 158 

Getting Personal 159 

» Genetics-based infrastructure is expected to accelerate disease research 160 

» Companies increasingly work with physicians 160 

» The behavioral impact of personal genetic testing is examined 160 

Nanotechnology: A Small Revolution 161 

» Diagnostics increasingly incorporate nanotechnology 161 

» A European team develops nanotechnology biosensor 161 

Medical Devices: Implantable Sensors 161 

» Implantable cardioverter defibrillator wins approval from European regulators 162 

» New materials help solve implantable sensor problems 163 

Synthetic Biology 163 

» Amyris reaches a milestone towards commercialization 163 

» Amyris’ technology platform is applied to sugarcane 164 

» Synthetic biology is being used to produce proprietary biofuels 164 

Outlook 164 

Chapter 7: Politics and Policy 168 

» Report finds FDA can’t fulfill its mission 171 

» Industry calls for more money for its regulator 171 

» Heightened safety concerns are not reflected in warnings and recalls 172 

Food Safety 172 

» FDA moves to establish offices in five foreign regions 172 

Follow-on Biologics 174 

» Lack of U.S. approval pathway delays a follow-on biologics market 174 

» Bioactivity plays a role in determining follow-on version 174 

Patent Reform 176 

» BIO fights against patent reform legislation 176 

Direct-to-Consumer Advertising 176 

» Pharma trade group adopts new voluntary ad guidelines 177 

» Congress promises a watchful eye 177 

FDA Advisory Committees 178 

» New policy calls for limiting financial conflicts of interest 178 

Genetic Non-Discrimination Act 178 

» Act prevents genetic discrimination by employers and insurers 178 

Comparative Effectiveness 179 

» Senate introduces Comparative Effectiveness Research Act of 2008 180 

» A comparative effectiveness institute would set research agenda 180 

» Industry organizations support comparative effectiveness research 181 

» Experts say comparative effectiveness must examine all healthcare system components 182 

» Personalized medicine and evidence-based medicine come together 182 

Information Technology 182 

Preemption 182 

» Preemption issue remains in play 183 

Genetically Engineered Animals 184 

Stem Cells 184 

NIH Funding 185 

Farm Bill 186 

Medicare 187 

» Mental health coinsurance rates are lowered 187 

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Contents 

» Medicaid is subject to a redesign 188 

» Medicaid is under pressure to reduce spending 188 

» State Children’s Health Insurance Program gets a boost 188 

International Developments 188 

» The continent proposes to relax a drug repackaging ban 189 

» EU sets up panel to look at innovative new treatments 189 

» Germany’s lawmakers ease restrictions on stem cell research 189 

» Canada moves toward new drug approval process 189 

Policy Changes 190 

» There is attention deficit disorder in D.C. 190 

Chapter 8: BioGreenTech 192 

Sustainability 195 

Food Security 196 

» Biotech crops lead to environmental gains 197 

Energy Security 200 

» The era of cheap oil is over 200 

» United States is likely to miss alternative fuel targets 201 

Environmental Security 201 

» Recent improvements lead to greater greenhouse gas reductions 202 

» Global warming spurs change in policies 203 

» Policy backs biofuel development 203 

» Consumer sentiment backs renewable energy 203 

» Cap-and-trade is a key part of Obama plan 204 

» World gets serious about biofuels targets 204 

» China eyes cap-and-trade system 204 

Biogreentech Companies 204 

» China sees increased investment in cleantech 206 

» Cellulosic biomass conversion companies draw attention 207 

» Funding tapers off in the end of 2008 208 

» Cleantech investing is expected to be flat in 2009 209 

» Advanced biofuels continue to attract capital 209 

» Carmakers and big oil invest in alternative energy 211 

» Industrial biotech and biofuel companies have a bumpy ride 212 

» Joint ventures are the norm in renewable energy field 213 

» Verenium moves forward with commercialization of cellulosic ethanol 214 

» Funding for new ethanol projects appears stalled 214 

» Biofuels partnering remains strong 215 

» Select biofuels partnering highlights from 2008 include 215 

» India invests in biofuels 217 

» Malaysia and Indonesia cooperate in palm oil deal 217 

Agbiotech Companies 219 

» Agbiotech company shares reflect market vulnerability 221 

» Monsanto experts R&D investment to pay off 221 

» Sygenta makes several deals 221 

» DuPont sees increase in agriculture and nutrition sales 222 

» Global farming boom boosts Bayer Crop Science 222 

» Dow sees big business in biotech and seeds 222 

BioGreenTech Innovation 222 

» Engineered traits are seen as the future 223 

» Developing crops for biofuels is a growing research area 224 

» Biotech crop adoption continues to grow 225 

» Resistance to biotech crops softens 226 

» Many European countries increase GM crops 227 

» India’s adoption of Bt cotton appears to be a success 228 

» China moves cautiously on biotech crops 228 

» Australian states lift bans on transgenic crops 229 

» Advances in plant genomics facilitate breeding strategies 230 

» Genomics is being used to make better energy crops 230 

» Biofortification gains steam 232 

» Next-generation biofuels advance 233 

» Gasoline from algae receives growing interest 233 

» Non-food crops are a growing source of feedstock 234 

» Enzymes play a growing role in biofuels 235 

» Designer microbes help produce fuels with higher energy content 236 

» Soil bacterium is being looked at for isobutanol production 237 

» Alternative energy projects get government backing 237 

» Federal financing comes at a necessary time 238 

Green Chemistry 239 

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Biotech 2009 

Biocatalysts 239 

Integrated Biorefineries 240 

Bioplastics 241 


Chapter 9: International 242 

Europe 244 

Mergers & Aquisitions 244 

» Sanofi-Aventis takes over Acambis 249 

» U.K. biotech appears to be contracting 249 

» Some investors are disappointed 249 

Financing 252 

» Genmab halts development of lymphoma drug 252 

» Deal-making is crucial but is it possible? 253 

» Reverse mergers may come more into style 253 

Regulatory Changes 253 

Denmark 253 

» Product Pipeline 254 

» Venture Capital 254 

» Clinical Research 255 

Europe Outlook 2009 255 

Canada 256 

» MethylGene’s market cap falls to $10 million 256 

» Vasogen suffers a setback 256 

» Companies consider their strategic options 257 

» M&A reduces number of Canada’s elite companies 258 

» ViRexx finds itself short of funds 258 

» With IPO window closes, OncoGenex uses reverse merger 258 

» Companies leverage lead products for cash 258 

» Æterna Zentaris raises more than $50 million 259 

» Oncothyreon Restructures 259 

» Canadian biotechs search for financing 259 

» Venture capital does flow 259 

» Sea change will take its toll on Canadian biotech 262 

» Federal budget disappoints biotech sector 263 

» It is a buyer’s market 263 

Australia 264 

» Many listed companies face demise 264 

» Capital inflows dry up 264 

» Biotech sector suffers a variety of setbacks 264 

» Companies make key filings with the U.S. Food and Drug Administration 265 

» Acrux launches spray for treating menopause 265 

» Many companies with weak management are expected to disappear 265 

» There are 17 profitable companies in the sector 265 

China 270 

Healthcare Reform 270 

Globalization 270 


» Foreign companies continue to make acquisitions 271 

Private Financing 274 

» VCs invest in emerging healthcare players 274 

» Private equity investment picks up 274 

Partnering and Licensing 274 

» Domestic companies seek out partnering opportunities 276 

Outlook 278 

Japan 281 

Deals 282 

» Takeda acquires Millennium 284 

» Shionogi acquires Sciele 285 

Initial Public Offerings 286 

Stem Cell Research 287 

Nutraceuticals 287 

Healthcare 287 

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Contents 

South Korea 288 

Equity Markets 288 

Public Investments 288 

Private Investments 289 


Innovation 289 

Partnering and Licensing 290 

Clinical Trials 291 

Outlook 291 

India 292 

Biotech industry 293 

» Global generics market is off pace 293 

» Biopharma remains the main revenue generator 293 

Healthcare industry 294 

» Declining consumer spending is seen affecting growth 295 

Government 295 

» Government backs biotech parks 295 

Growth Opportunities 296 

» Second-tier cities may help fuel growth 296 

» Biopharmaceuticals industry gains steam 296 

» Affordable vaccines are a key market 297 

» Biosimilars are expected to become highly profitable 297 

» Medical devices have high growth potential 297 

» Medical tourism is attracting more U.S. patients 297 

» Indian companies are spinning out their R&D 298 

» The need for a strong R&D base is increasing 298 

» U.S. healthcare reform could boost India’s BIO-IT 299 

» The clinical research organization appears immune to recession 299 

Future Outlook 299 

Markets 300 

» Private equity continues to invest in India 300 

» Investors seek best growth areas 300 


Cross-Border Deals 301 


» Two record acquisitions take place 302 

» Valuations see a big drop 302 

» Domestic acquisitions increase with softening market 303 

Partnering 303 

Life Sciences and Healthcare Indices 305 

» The Burrill India Healthcare Index outperforms 307 

Malaysia 310 

Government Support 310 

Pharmaceuticals 311 

» Pharma market is seen growing at a good clip 312 

Medical Tourism 312 

Generics 312 

Herbal and Traditional Medicines 312 

Export Market 313 

Contract Research and Manufacturing 313 


Biofuels 313 


Latin America 314 

Argentina 314 

» Health Sector 315 

» Agriculture 315 

» Food Processing 315 

» Human Health 315 

» Biofuels 315 

» Export Potential 316 

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Biotech 2009 

Brazil 316 

» Biofuels 317 

» Airplanes are being designed with flex engines 317 

Chile 317 

Middle East 319 

Saudi Arabia 319 

» Healthcare 319 

United Arab Emirates 320 

» Dubai 320 

» Abu Dhabi 320 

» Mubadala Healthcare seeks to build a healthcare infrastructure 320 

» NeoBiocon launches breast cancer treatment in UAE 321 

Chapter 10: M&A/Partnering 322 

M&A 325 

» GlaxoSmithKline makes headlines with Sirtris takeover 326 

» Average biotech deal value declines 328 

» King’s Alpharma buy marks biggest specialty deal 328 

» Big Pharma and diagnostics companies pay highest premiums 329 

» Cancer, CNS, and diagnostics companies are top targets 331 

Licensing 332 

» GlaxoSmithKline does three large licensing deals in 2008 334 

» Big Pharma-licensee deals increase in value 334 

» Large specialty pharma licensee deals rise in volume 336 

» Phase I transactions nearly double 337 

» Cancer and central nervous system are the hot therapeutic areas 338 

Outlook 339 

Chapter 11: Finance and Capital Markets 340 

Equity Performance 343 

» Burrill Small Cap Biotech Index drops 43 percent 344 

» Big Pharma scoops up deals 344 

» Larger companies weather the storm 344 

» Amgen and Genentech get back on track 345 

» Biotech share valuations take a beating on Wall Street 346 

» The billion-dollar club shrinks 347 

» The big get smaller 348 

» The number of microcap companies grows 348 

Financing 348 

» U.S. biotech raises the bulk of the funds 348 

» Alternative financings gain in popularity 348 

» Global financing environment deteriorates dramatically 348 


Alternative Financing 352 

The Debt Market 352 

Venture Capital 352 

Medical Devices 354 

» Device innovation continues despite downturn 354 

» Medical devices IPOs dwindle in 2008 355 

» Medtech mergers and acquisitions remain active 355 

» Medical devices venture capital investment remains robust through the first half of 2008 356 

Life Sciences Outlook 357 

» Medical devices outlook is mixed 357 

Industry Financial Data 359 

Chapter 12: About Burrill & Company 404 

Burill Venture Capital 406 

Burrill International 415 

Advisory Boards 423 

Large Corporate Limited Partners 426 

Portfolio Companies 432 

Burrill Private Equity 444 

Burrill Merchant Banking 447 

Burrill Media 452 

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Navigating the Sea Change - Burrill & Company

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