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  • 1. Life sciences DEFINING THE NEED FOR ENABLING TECHNOLOGY AND SERVICE INNOVATION IN A TRANSFORMING INDUSTRY A TripleTree industry Analysis sPOTLiGHT RePORT WWW.TRiPLe-TRee.cOM 7601 fRAnce AVe sOUTH, sUiTe 150, MinneAPOLis, Mn 55435 952.253.5300
  • 2. TABLE OF CONTENTS EXECUTIVE SUMMARY 2 TRENDS DRIVING INDUSTRY INNOVATION 4 NEW TECHNOLOGIES & DELIVERY MODELS 10 TRANSFORMATIVE DOMAINS OF GROWTH & OPPORTUNITY Patient Safety 14 Compliance 17 Sales & Marketing 20 Collaboration 23 CONCLUSION 26 THE TRIPLE TREE HEALTHCARE TEAM 27 TripleTree, LLC 7601 France Avenue South Suite 150 Minneapolis, MN 55435 Minneapolis t 952.253.5300 f 952.253.5301 www.triple-tree.com WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 1
  • 3. EXECUTIVE SUMMARY THE DAWN OF THE NEW LIFE SCIENCES INDUSTRY The life sciences industry is witnessing multiple pressures and changes at a time when healthcare has become magnified as a major public issue influencing the consumer’s economic well-being. A wide range of vendors – a number of which have highly public visibility – are attempting to adapt in an industry affected by diverse changes. At the forefront of evolving dynamics throughout life sciences are rapidly rising healthcare costs, with drugs often called out as a favorite culprit. While costs are clearly a core component of the challenges and opportunities faced by the industry, a number of other catalysts are notable drivers, including consumer behavior and engagement, physician-vendor relationships, and process inefficiencies. As a result, life sciences companies are being forced to address and examine new business models, processes, solutions, and strategies to advance their products in a changing world. New technologies and services will enable the life sciences industry to reinvent itself by improving internal operations and interactions with partners, vendors, and customers. Across the healthcare industry, while technology has enhanced the engineering of medicine, we are now entering another phase of innovation where technology will improve efficiency and the delivery of care. In this, TripleTree’s first report focused exclusively on the life sciences industry, we will first discuss key trends that are reshaping the industry and causing industry leaders and emerging firms to reexamine all facets of their business. Next, we will examine how new technology solutions and business models are changing the information technology and solution delivery landscape throughout the industry. Finally, we have identified four key areas that call for new solutions based upon the sector’s unfolding evolution: patient safety, compliance, sales and marketing, and collaboration. While not a fully exhaustive list of disciplines and new innovations, this report begins the discussion of opportunities as the life sciences industry reinvents itself. “Across the healthcare industry, technology has enhanced the engineering of medicine; we are entering another phase of innovation where technology will improve efficiency and the delivery of care.” - TripleTree PAGE 2 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 4. This report highlights areas of opportunity for firms servicing the life sciences industry and the intersection among related constituents across the market map. TripleTree’s proprietary Q-Diagram in Figure 1 defines the life sciences services landscape. For finer clarity, we have split the sector into two areas: 1. Firms servicing the manufacturing segment of life sciences 2. Firms involved in or influencing the distribution of life sciences products and Figure 1: Life Sciences Services Q-Diagram Evidence Body Patient Based Area Analytics Studies MANUFACTURING Medication Genetics Medicine Networks Outcomes Advertising Consultative Sales Safety Patient Safety Provider Identification Pharmacovigilance Detailing Packaging Supply Chain Mgt Safety & Safety & eDetailing Provider Education Drug Delivery Systems Key Opinion Leaders Post Marketing Approval ERP Surveillance Analytics Document Management Sales & Marketing CRM Labeling Regulatory Submissions Manufacturing Patient Identification Site Management Organizations Case Report Forms Management Distributors Patient Recruiting Physician Recruiting Facilities Clinical Trials Specialty Pharmacy Clinical Pre-Clinical Drug Development Channels Retail Pharmacy Laboratory Information Mail Order Pharmacy Management Systems Online Pharmacy Discovery Convenience/Vending Pharmacy International Price Home Care Systems Communities Portals/Content Sample Management Payers & Benefit Systems Education Outcomes Management Dispensing PHR Outcomes Patient Tracking Patient Response ePrescribing Social Networking Refills/Reminders PBM Benchmarking Employer Adherence Decision Disease Health Government Medication Care Support Therapy Management Management Plan Systems Management DISTRIBUTION Source: © 2006 TripleTree, LLC. All rights reserved. Any unauthorized copying or reproduction is strictly prohibited. WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 3
  • 5. TRENDS DRIVING INDUSTRY INNOVATION Contributors to Slowed Growth in Pharmaceutical Revenue As the life sciences industry adapts to slower growth and challenges related to the lack of development of new blockbuster drugs, leading firms are looking to take • Loss of Exclusivity – Branded drugs advantage of other changing dynamics across the broader healthcare industry. representing $17 billion in sales These firms are seeking to make healthcare more comprehensive and convenient. lost exclusivity in 2007, helping to They are embracing consumerism while responding to issues of product safety drive prescription volume growth and pricing. They are deploying new forms of technology and systems to enable of 10 percent for generics. In their evolution and access to markets and solutions. They are also developing 2007, generics continued to replace new approaches to combat diseases and improve patient care and outcomes. branded prescriptions in the major therapeutic classes, increasing their Figure 2: Key Drivers for Industry Change share of total dispensed prescriptions to 67.3 percent. • Uptake of New Products – Uptake Declining Industry of new, innovative medicines Growth Rates represented just $441 million of total sales in 2007, reflecting both Consumerism Convergence with Healthcare Services the fewest new product launches in the past three decades and slower Convenience adoption by physicians of these products. • Medicare Part D Contribution Source: TripleTree, LLC – Prescriptions dispensed through the Medicare Part D program DECLINING GROWTH RATES FOR DRUGS accounted for 19 percent of retail prescriptions at the end of 2007, The lack of new blockbuster drugs, in combination with a proliferation of generic a modest increase over 2006, and substitutes, is a core predicament of life sciences manufacturers. Traditional reflective of a maturing program. manufacturers are becoming increasingly introspective as they chart out their Today, 65 percent of U.S. citizens strategy for the next generation. These firms are searching for new areas of age 65 and older are enrolled in the growth and reviewing core competencies in an effort that may completely change Medicare Part D program. the face of their organizations. In the years to come, some drug companies may abandon internal product development efforts to focus on acquisitions and • Safety Issues – Sales growth in 2007 product marketing. For this strategy to be successful, other companies must also was affected by a significant transform to become drug development laboratories and product innovators. number of “black box” warnings and product withdrawals, as well as Blockbuster Drugs with Patent Expiration 2007 – 2012 safety concerns raised by the FDA Company Drugs for products in the erythropoietins, Pfizer Norvasc, Zyrtec/Zyrtec-D, Lipitor, Xalatan, Viagra, Detrol diabetes and antidepressant therapy Astra Zeneca Nexium, Casodex, Arimidex, Atacand, Zoladex, Seroquel classes. Safety issues contributed to GlaxoSmithKline Coreg, Advair, Imigran/Imitrex, Lamictal, Valtrex, Flovent Diskus/HFA, Avandia Merck Fosamax, Cozaar/Hyzaar, Singulair significantly lower-than-expected Wyeth Effexor/Effexor XR, Protonix sales for products accounting for Sanofi-Aventis Ambien/Ambien CR, Eloxatine, Copaxone, Taxotere, Plavix, Lovenox approximately 10 percent of the Bristol-Myers Squibb Plavix, Avapro Eli Lilly Zyprexa total prescription market. Novartis Lotrel, Zometa, Diovan/Co-Diovan Source: IMS Health Source: RegentAtlantic Capital, FDA Orange Book PAGE 4 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 6. CONVERGENCE OF HEALTHCARE SERVICES AND LIFE SCIENCES The lines of demarcation between the different sectors of healthcare are diminishing and the growing convergence between traditional healthcare services and life sciences products is no exception. Driving this convergence is interoperable and collaborative technology, which will continue to drive industry change. Electronic medical records (EMR) with electronic prescribing capabilities are an example of how healthcare organizations and pharmacies can work together more efficiently to improve patient care and decrease costs: • EMR systems can notify the prescriber or pharmacist if a prescription conflicts with a patient allergy or another drug that the patient is taking. • These systems can inform the prescriber if a drug is on the patient’s formulary, ultimately lowering costs for the patient and/or his payer. • Data captured by EMRs are key in the analytics that enable effective patient safety surveillance. Consumers, through personal health records (PHR), are also demanding access to their health records. Technology leaders Google and Microsoft, as well as a variety of other firms, are seeking to answer this call. Adoption of PHRs will certainly increase as more interfaces between health plans, providers and PHR vendors are implemented. Of note, Medicare recently launched a pilot program to provide access to and populate PHRs for beneficiaries. Those beneficiaries who participate will have their PHR populated with two years of Medicare claims data. Pharmacy data and other medical information will also be able to be loaded and accessed by patients. Certainly, the U.S. government’s planned health IT initiatives will further increase the adoption of tools like EMRs and PHRs, providing additional opportunities for vendors across the healthcare and life sciences information technology landscape. Outside of the implementation of technology by providers, payers and pharmacies, other examples of convergence persist. Specialty drug manufacturers rely heavily on delivery services to administer their products. Specialty pharmacies and infusion clinics are growing rapidly and have been an area of considerable M&A activity in recent years. As large players across specialty pharmacy and distribution look to broaden the scope of the diseases they treat or expand their set of services beyond drug distribution and delivery, additional acquisitions can be expected. WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 5
  • 7. Figure 3: Walgreens Expansion Beyond Retail Pharmacy McKesson Option Care Specialty Pharmacy Infusionand Infusion and Specialty Specialty Pharmacy Pharmacy Tab Safe Home Senior Living VNA Plus Health Walgreens Pharmacy Prescription Services Pharmacies Clinic Clinic Services Services Take Care Whole Health I-trax Health Systems Management Source: TripleTree, LLC Walgreens and Johnson & Johnson (J&J) are two examples of leaders in the life sciences industry that have expanded services capabilities outside their traditional businesses. As depicted in Figure 3 above, during the past two years, Walgreens has used acquisitions to significantly extend its non-retail pharmacy offerings. Of particular interest is how Walgreens will integrate its recently acquired assets into its “Complete Care and Well-Being” offering. Walgreens Acquisitions Beyond Retail Pharmacy Closed Total Transaction Date Target Business Description Value ($mm) 12/01/2008 McKesson Specialty Pharmacy Business Specialty Pharmacy NA 09/17/2008 Medical Arts Pharmacy in Bradenton Pharmacy / Drugstore NA 05/01/2008 Whole Health Management Employer Based Health Clinics NA 04/24/2008 I-trax Employer Based Health Clinics $276 11/05/2007 TabSafe Medical Services Pharmacies Senior Living Facility Pharmacies NA 08/20/2007 Option Care Specialty Pharmacy and Home Infusion Pharmacy Services $799 07/23/2007 Familymeds Group Pharmacies Specialty Pharmacies $60 05/23/2007 Take Care Health Systems Convenient Care Clinics NA 04/30/2007 VNA Plus Home Care Services NA Source: Financial data provided by Capital IQ PAGE 6 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 8. J&J recently acquired Health Media, expanding the company’s broad reach into health coaching services. The life sciences and healthcare services industries will keenly watch how J&J will leverage Health Media’s robust online coaching platform in combination with its internal capabilities and future acquisitions. As illustrated in Figure 4, innovative future models will tie together and coordinate the efforts of physicians, pharmacists and payers to optimize patient care and outcomes at the lowest possible cost. As life sciences products become increasingly customized and service-oriented for patients, TripleTree believes manufacturers will also play a key role in this coordinated approach to care. Figure 4: Coordinated Care Provider Pharmacy Coordinated Care Approach Payer Life Sciences Manufacturer Patient Source: TripleTree, LLC “As life sciences products become increasingly customized and service- oriented for patients, TripleTree believes manufacturers will play a key role in a coordinated approach to care.“ - TripleTree WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 7
  • 9. CONSUMERISM Perhaps the most powerful driver of “real” change in healthcare is the consumer’s evolving role. The ability of the healthcare industry to insulate itself from traditional market forces and rules, such as price transparency and ramifications for poor customer service, is coming to an end. These macro economic changes will result in the consumer being the central decision maker in the system. Figure 5: Consumerism Insurers Employers Government Insurers Financial Institutions Employers Government Hospitals Outpatient Services Physicians Consumers Devices Outpatient Drugs Outpatient Hospitals Physicians Services Services Care Systems Focused Internally Care Systems Designed Around Consumer Source: TripleTree, LLC A shift to consumer empowerment and responsibility across healthcare is changing the life sciences landscape as well. Consumers are flooded with information about new offerings from drug companies, the media, the internet, and friends and family. Direct-to-consumer marketing of drugs, a subject we will discuss later in the report, has increased dramatically as drug companies have shifted portions of their sales budgets toward television and internet advertising and away from traditional detailing activities. As is occurring in other industries, life sciences manufacturers are looking at ways to satisfy consumer demand for customized products while improving outcomes. Complete Genomics has been able Personalized medicine, which customizes drug compounds or dosage based on the to reduce the materials cost for genetic makeup of a patient, is presently being offered for select diseases and will sequencing a complete human genome eventually reach a broader market. As the cost of drugs and healthcare services from approximately $100,000 to less continue to rise, improving the chances that a drug will work for a patient and than $4,000. By 2009, the company not cause other serious health problems becomes even more important. expects to further reduce this cost to under $1,000. The firm’s plan is to offer Consumers are also being empowered through collaboration technologies and outsourced sequencing services as a way internet communities. Web 2.0 provides consumers with a more powerful of maximizing the economies of scale voice and influence on the healthcare marketplace by allowing them to share within its facilities. By lowering the experiences and critiques of providers and treatments. They also have the cost of comprehensive genetic testing, benefit of exchanging insights with peers around the globe who have similar firms like Complete Genomics will health concerns. Collaboration will be discussed further later in the report. create a larger market for personalized medicine. PAGE 8 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 10. CONVENIENCE With greater consumerism comes convenience. The financial services industry has paved the way and mastered the art of customer service and convenient access to information and transactions. The extension of these capabilities to drug distribution is quickly becoming a case study in life sciences and the sight of a chain drug store on seemingly every street corner is just the beginning. It is not surprising that some of the largest pharmacy vendors in the U.S. are grocery and discount retailers such as Wal-Mart, Target, Supervalu, and Kroger; a recent article in USA Today identified pharmacies that are opening in airports, like in Atlanta, Newark, and Philadelphia, in order to catch travelers who do not have time to visit their local pharmacies. Today, prescriptions can be filled around-the-clock without a pharmacy. Vending machines offered by firms such as InstyMeds and Parata Systems or physicians offices that fill prescriptions with equipment supplied by MedVantx are clear examples of convenience across pharmaceutical distribution. Through innovative technology, outsourced services, and call centers, these solutions go beyond the capabilities employed by legacy dispensing solutions. InstyMeds has developed an ATM- like vending machine that dispenses commonly prescribed drugs directly to patients in hospitals, emergency rooms, clinics, and urgent care centers. The InstyMeds vending machine uses integrated technology to validate patient information and ensure that the patient receives the appropriate drug as prescribed. In addition, by interfacing with the medical facility’s registration system and PBMs, InstyMeds is able to automatically adjudicate claims to collect the appropriate payment from the patient directly through the machine. A telephone connected to the machine allows patients with questions to speak with a company pharmacist 24 hours a day. WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 9
  • 11. NEW TECHNOLOGIES AND DELIVERY MODELS As the life sciences industry reacts to the aforementioned trends, technology will play a key role in enabling the sector’s advancement. Firms across the industry are searching for solutions that actively engage consumers, interact with other healthcare constituents, and speed product time to market. Software vendors, technology-enabled outsourcers, and mobile technology providers are developing unique ways to attack the challenges facing the industry and creating new markets to improve the healthcare system. APPLICATION INNOVATION: THIRD PARTY AND ON-DEMAND SOFTWARE Traditionally, the life sciences industry relied heavily on custom-built applications and highly customized third-party systems. While the industry has kept up with technical advances from a scientific perspective, its support systems and infrastructure have lagged. This makes innovative technologies and delivery models critical as the industry looks to modernize its systems and keep pace with a changing healthcare environment. The cost associated with maintaining the legacy software that many life sciences firms use clearly does not align with the cost-cutting efforts employed across the industry. To centralize best practices across brands and to streamline technology costs, many technology strategies include implementing best-of-breed approaches across enterprises. This involves identifying and selecting key solutions that meet global needs while avoiding costly custom development. Other organizations still manage their application purchasing decisions at the brand or geographic level, while similarly employing best-of-breed solutions. TripleTree believes there is a significant need for new application innovation across the industry to replace old systems while improving the complex business processes and functions the incumbent legacy systems were built to enable. The proliferation of Software as a Service (SaaS) as a strategic software delivery model is disrupting industry and domain areas while changing how software is engineered and delivered. Pioneered by Salesforce.com and with innovative business applications being introduced by Google, Facebook, and Amazon.com, SaaS supports new business opportunities and business services to organizations of all sizes. TripleTree is a well established advisor to SaaS firms and currently tracks over 1,800 on-demand vendors whose specialized solutions are transforming staid markets and creating new ones. In some domains this growth can be considered chaotic, as user adoption and application extensibility meets market needs that have been ignored or underserved by licensed software models or proprietary systems. SaaS ecosystems are evolving rapidly as well and allow for software vendor alignment around a common web infrastructure platform. This results in lower costs and more specialized solutions. Well-architected SaaS solutions are able to scale to meet the needs of small and PAGE 10 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 12. large enterprises. Through per user pricing models and a single code base, many SaaS vendors are able to provide solutions to groups as small as 10-20 people. From manufacturers to service providers, the life sciences sector is realizing the operational, financial and competitive benefits of deploying these influential technologies. One example is Verticals onDemand which is replacing or supplementing the license-based CRM software deployed by many life sciences manufacturers. Verticals onDemand has been able to sell to smaller firms that would not normally be able to afford a license-based sales force automation system and to some of the largest global manufacturers that are especially attracted to the system’s flexibility in supporting new sales models. In another example, SciQuest has transformed its business by selling a SaaS solution to the life sciences industry as well as other research-focused sectors. Started as an online exchange in 2001, the company redesigned its solution as an on-demand procurement and purchasing system which allows one-to-many supplier enablement. Today, 11 of the top 15 pharmaceutical manufacturers use the system, taking advantage of immediate access to up-to-date supplier information. SaaS is not the only viable model today. Traditional software can still be relevant, especially where firms are concerned about data security outside their firewalls. However, attributes of the current economic environment (tight cash management and operating expense concerns) will likely propel the SaaS model because of more simplistic, subscription-based pricing. These realities will significantly change application buying decisions and drive application development teams to embrace on-demand models. In 2007, a group of former Siebel and Salesforce.com executives started Verticals onDemand with the goal of becoming the leading SaaS provider of CRM solutions to the global pharmaceutical industry. Verticals onDemand has built its Pharma CRM products on Force.com from Salesforce.com, and was one of the early vendors to align within the Salesforce.com AppExchange partner ecosystem. The company has differentiated its solution through enabling targeted and specialized relationship management with targeted groups such as managed markets, primary care, and specialty care. WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 11
  • 13. OUTSOURCING The trend toward third-party software may also be tied to an increase in outsourcing among life sciences firms. In a 2008 outsourcing survey by Contract Pharma, eighty-five percent of the pharmaceutical companies responding said they planned to outsource more than last year and fifty-three percent responded that they planned to increase outsourcing spending by over five percent. Companies are outsourcing projects and ongoing operations to firms in the U.S. and Europe and to lower cost countries such as China and India. Outsourcing firms have emerged for almost every aspect of a manufacturer’s operations, from laboratory and research services, to manufacturing, to marketing. This is different from the outsourcing of the 1990s that mainly focused on non- core capabilities, such as IT support and payroll management. In this legacy outsourcing model, BPO firms took ownership of their clients’ systems as well as responsibility for the human resources required to operate the technologies and business processes, often exploiting labor arbitrage opportunities. In newer models, life sciences companies have turned to outsourcing providers specializing in strategic domains as a way to improve their offerings. These BPO firms often use proprietary technology to supercharge and differentiate their outsourced capabilities, technology that the firms’ clients could not take advantage of without contracting for the services. Eli Lilly’s strategic decision to outsource much of the company’s research and development capabilities to Covance is a key example of a manufacturer choosing to partner for a strategic component of its business operations. At the next level of sophistication, BPO firms using SaaS as their technology platform can take advantage of greater economic and operational efficiencies as well as allow for direct interface and collaboration with clients in a highly cost efficient and convenient way. TripleTree believes that the next level of technology value will come from an assemblage of unique intellectual property enabling highly scalable models and delivered through outsourced services. A future opportunity for BPO firms, and one that some are already doing effectively, United BioSource is a life sciences is data analytics. Many outsourcing companies have archives of valuable data services company focused on that have been collected over years of serving various customers. Firms that can providing real world evidence to unleash the value of that data into new products and service offerings will be drug and device companies about able to accelerate growth and enter new markets while differentiating themselves their products, especially focused from competitors. While data ownership questions may limit some applications, around safety, cost effectiveness and firms that can harness value from data assets will see new opportunities emerge. outcomes. In providing outsourced services, the company takes advantage of proprietary technology and analytics capabilities to evaluate outcomes of life sciences products based on quality of life metrics. PAGE 12 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 14. WIRELESS TECHNOLOGY AND MOBILITY The use of mobile and wireless technologies is becoming ubiquitous in today’s communication. While computer systems and their associated applications play a vital role in the daily life and advancement of global business, the use of cell phones as communication and collaboration devices reign superior in their reach. To illustrate, Apple’s iPhone has become the top wireless device globally, with thousands of applications available for download: games, navigation tools, news, sports, finance, health and education information, and social networking. The application of wireless technology to the life sciences industry is in its nascent stage of delivery. However, with consumerism pervading healthcare, the industry’s ability to leverage wireless communications will lead to rapid adoption once innovative solutions are developed and deployed. Given their unique architecture and capabilities to incorporate advanced processing, hardware, and software, wireless healthcare applications are viewed by multiple organizations as a ripe opportunity to extend core competencies. This is evident as companies attempt to combine healthcare domain expertise with the untethered generation and delivery of information that wireless technologies enable. Companies such as GE, Qualcomm, Philips, Intel, Medtronic, Johnson & Johnson and numerous other name-brand firms are currently piloting, funding and marketing wireless solutions that range from prescription adherence to health monitoring devices. The innovative influences of wireless technologies go well beyond simply replacing wired telephones or doctor visits. Privately-owned Proteus Biomedical has developed technology that equips pills with microchip sensors that can provide physiologic feedback to patients and providers after ingested. Proteus’s first application for the technology seeks to improve guideline-recommended therapy for heart failure patients. In another example, electronics giant Philips recently released a prototype of a battery-powered, programmable drug capsule the company is calling “iPill” that uses sensors to identify the optimal place within the body to release medication. Wireless technology communicates statistics regarding the capsule’s surroundings to an outside receiver in order to determine when to release the drug. In an era of brand versus generic medications, these solutions ultimately could alter the relevance of name-brand drugs, where embedded monitoring adds incremental value and substantiates the price for branded drugs versus lower cost generic alternatives. WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 13
  • 15. TRANSFORMATIVE DOMAINS OF GROWTH & OPPORTUNITY “The need to determine the safety of PATIENT SAFETY a product through trials with large Patient safety has received considerable attention due to lawsuits against drug sample sizes of patients over long time companies that have been heavily covered by the mainstream media. It is a horizons is clearly at odds with the broad area covering everything from early stage clinical trials to the prevention public’s desire for new and improved of adverse reactions to drugs and devices after they are available for public use. drugs, and manufacturers need for Barriers exist across all aspects of patient safety, many due to the lack of effective revenue after years of development“ technology solutions that can interact across healthcare constituents and enable - TripleTree effective data analytics to identify safety issues. Two areas of significance are addressed below. According to a Harris CLINICAL TRIALS Interactive survey, “85% of Clinical trials are one of the first lines of defense in uncovering the potential harm cancer patients were either that a product may cause. Trials sit at an interesting and conflicting inflection unaware or unsure at the point in the lifecycle of a drug or device. The need to determine the safety time of their diagnosis that of a product through trials with large sample sizes of patients over long time participation in clinical trials horizons is clearly at odds with the public’s desire for new and improved drugs, was an option. Of those, and manufacturers need for revenue after years of development. 75% said they would have been willing to enroll had The subject of clinical trials has faced significant scrutiny as drug developers they known it was possible.” attempt to comply with trial requirements. Primary challenges include: • Finding patients to participate and physicians to run trials; - Wall Street Journal • Potential litigation from trial participants; and 5/ 14/2008 • Data security Opinions regarding trials vary widely across the healthcare industry. Some Key Criticisms and Challenges propose that the drug approval process involving clinical trials be completely of Clinical Trials: changed to become much more expansive, while others argue it should be reduced in scope and timeframe with subsequent tracking of products in the market after • Patient sample size is too small; approval. • Patients that could benefit from Technologically, clinical trials software has existed for several years, allowing data trials most or want to participate to be collected more efficiently and analyzed more quickly than in traditional are not identified; paper-based trials. These systems allow trial sponsors to monitor results, quickly • Finding clinical investigators focus on the best performing sites, and conclude more quickly. Companies such to take on trials is difficult, as Phase Forward, Oracle, ArisGlobal, etrials Worldwide, Medidata Solutions, with not enough physicians and OmniComm Systems are leading the way in electronic data capture and participating; clinical data management technologies that enhance the efficiency of clinical trials. Remote patient monitoring systems are another technology tool being • Trials open product developers introduced in clinical trials. They provide consistent patient health information and physicians to potential that can easily be shared with physicians, clinical trial operators, or drug litigation; and developers to track the patients’ well-being. However, of the life sciences product developers who choose to use clinical trials software and other technologies, few • Conducting trials in developing take full advantage of the data the systems generate. countries has raised ethical concerns. PAGE 14 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 16. POST-APPROVAL SURVEILLANCE Outside the FDA and other regulatory approval processes, cases such as Vioxx, Avandia, and Vytorin focused a lens on post-approval product safety and the data analytics that can be performed to identify safety concerns. While the FDA and regulatory bodies such as EMEA and Japan’s Ministry of Health, Labor, and Welfare are one piece of the drug safety puzzle, a whole new area of healthcare has developed called pharmacovigilance. The World Health Organization defines pharmacovigilance as “the science and activities relating to the detection, monitoring, assessment, understanding, and prevention of adverse effects or any other drug related problems.” Today, the practice of pharmacovigilance has been mostly passive. Under the current system, if a U.S. physician observes a patient having an adverse reaction to a drug, the doctor can choose to enter the reaction in a federally run system like MedWatch. TripleTree believes that voluntary systems do not work effectively as not all adverse reactions are reported and thus it takes years for safety issues to be identified. Efforts to improve the MedWatch system are in process and there is reason to be optimistic that a simplified system with a more collaborative approach will increase participation in the program. The core question in drug approval is whether the benefit of a new drug is worth its associated risk. In 2006, Tysabri, a drug developed by Biogen Idec and Elan, was allowed back on the market after it was withdrawn the previous year for causing a deadly brain disease. An FDA panel decided that the benefit of the drug in treating patients with multiple sclerosis outweighed the risks. But in allowing the drug to return to the market, the FDA set stringent requirements under a restricted distribution program in which patients must consent to participation in the program and physicians and pharmacies must follow protocols According to Applied Clinical to monitor patients. As more drugs are released that require advanced Trials, pharmacovigilance includes patient monitoring and tracking, life sciences firms must be prepared to the following activities: offer technology and outsourced solutions to help providers comply with the requirements of the program. • Prephase I safety considerations • Pharmacovigilance (safety) strategy To be truly effective, pharmacovigilance needs integrated data sets, including but not limited to electronic medical records, claims data, and voluntarily • Clinical trial safety including reported data. Active pharmacovigilance monitors adverse reaction databases, surveillance like MedWatch, in conjunction with mining other data sources. Several initiatives have been launched or announced recently heeding the call for active • Risk management planning, pharmacovigilance. plans, and strategy First, the European Union is sponsoring a project called ALERT that will analyze • Signal detection EMR data from more than 30 million patients from the Netherlands, Denmark, • Pharmacovigilance systems WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 15
  • 17. the United Kingdom, Spain, and Italy to detect signals that could indicate adverse reactions to certain drugs. The project focuses on the side effects of newly introduced drugs in children, one of the most sensitive populations to adverse drug reactions. Second, WellPoint announced that its Healthcore subsidiary, in partnership with the FDA, will mine data to monitor the safety of pharmaceuticals and other medical therapies. WellPoint has claimed that if this system had been in place at the time, it would have been able to identify heart-related hazards from Vioxx within four months after the drug was released. In addition to medical claims data on its 35 million members, WellPoint also has access to lab test results and medical chart information of at least 20 million of its members. This allows the company to identify trends from drugs much more quickly and accurately than a health plan that only has access to claims data. Finally, the FDA announced that it will begin analyzing Medicare claims data to identify safety risks from newly approved drugs. One problem with analyzing this particular population is that Medicare beneficiaries use an average of 28 prescriptions per year, compared with 13 prescriptions by the average American.1 This makes the senior population more difficult to analyze and to determine precisely which medication caused a certain problem. While the EU ALERT initiative has the benefit of being able to use electronic medical records currently and in the process of being implemented by European governments, the majority of healthcare providers in the U.S. will not adopt EMRs in the near future. Despite this, the use of claims data by WellPoint and the FDA is a good start toward active pharmacovigilance and is yet another example of the convergence between healthcare services and life sciences. Once more information is available in real time via EMRs and health information exchanges, these systems will become even more valuable and effective. Innovative solutions that can support and improve pharmacovigilance efforts will be well received by the market. TripleTree believes there is ample opportunity for firms to increasingly focus on developing solutions to improve patient safety. 1 The New York Times, 5/23/2008 PAGE 16 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 18. COMPLIANCE GOVERNANCE, RISK, AND COMPLIANCE (GRC) Traditional technology vendors like Microsoft and IBM are waking to the opportunities and potential leverage of offering compliance solutions to key industry verticals. In parallel, life sciences developers and manufacturers are working to stay current and compliant with a myriad of regulations and laws, and software, content, and services firms are looking to benefit. Basel II in Europe, Sarbanes-Oxley in the U.S. and J-Sox in Japan are examples of government mandates dictating how businesses across industries can sell to and maintain customers, market and develop products, and report on operational performance. To meet these challenges, emerging software companies such as Paisley and MetricStream are developing industry-focused modules on top of general compliance applications. Specific to the life sciences industry, CSC through its acquisition of First Consulting Group now has a business unit dedicated to sophisticated document management solutions including embedded business rules required to comply with regulations related to all stages of the drug development lifecycle. These products, called FirstDoc® and FirstPoint,™ are built upon standardized document management solutions, EMC’s Documentum, and Microsoft’s SharePoint. In a recent TripleTree report entitled “Next Generation Compliance,” our team illustrates how some GRC technology vendors are messaging to businesses regarding the need to approach risk management at an enterprise level by federating silos of data separated by brand, business unit, or geography. For traditional software vendors, companies that are intent on replacing legacy systems and processes with an automated approach provide a pathway into the C-suite, creating a formidable competitive threat for entrenched vendors. There is no current GRC platform for life sciences that spans from development Paisley, a leading provider of a to manufacturing/distribution to promotion/sales that meets the enterprise comprehensive software platform needs of the industry. As software vendors look to gain market share, they for governance, risk and compliance will be forced to make acquisitions to address the unique GRC challenges (GRC) was acquired by Thomson facing the life sciences sector. Benefitting from these market dynamics will Reuters, a global provider of be niche solution providers of compliance and regulatory technologies such intelligent information. Serving a as document management, regulatory submissions, sales activity tracking, and global customer base including 30 consumer communication that have been able to prove the effectiveness of percent of the Fortune 500 with their solutions through satisfied customers and growing sales pipelines. over 120,000 users in 40 countries worldwide, Paisley will provide Of particular focus across life sciences manufacturers is the implementation of Thomson Reuters and its customers a systems to comply with the ever-changing government regulations controlling one-stop solution to more effectively sales and marketing activities. Companies have needed and are working to manage compliance with financial implement new tracking tools and technologies to comply with regulations and regulations and to more precisely record sales representative activity and corporate spending on sales. Implementing manage internal financial controls. a tracking system, however, is only the first step. Because these regulations are WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 17
  • 19. corporate-wide, companies must take an enterprise approach. This requires life sciences firms to use a single system across the enterprise, find a way to integrate disparate systems across brands and business functions, or create a data warehouse and analytics capabilities to mine activities across the organization. Industry dynamics around sales and marketing activity will be discussed later in this report. CLINICAL COMPLIANCE - DRUG ADHERENCE Drug adherence is a hot topic that spans across nearly every healthcare constituency – life sciences manufacturers, pharmacies, healthcare providers, health plans, employers, population health management vendors, and patients – with overlays of compliance, patient safety, outcomes improvement, and technology. While it may seem self serving to some constituencies (i.e., manufacturers), adherence improves patient outcomes and thus lowers overall health costs. This is despite the fact that adherence programs generally lead to increased spending on drugs. In this regard, adherence is a “virtuous cycle.” Figure 6: Virtuous Cycle Significant Barriers to Improving Adherence Incentives to ensure adherence lead to... • Economic - No insurance or under-insured ...more revenue ...lower cost of claims - High co-pay through additional despite potential for product sales increased drug cost. - Prescription not included in plan formulary Patients • Convenience - Access to transportation - Not enough time ...proper care regimen and better health. • Physical Health - Side effects - Lack of understanding benefits ...more revenue through additional prescriptions being filled. • Behavioral - Past negative experience with drugs Source: TripleTree, LLC - Lack of motivation to improve health With economic, educational, and behavioral elements, adherence includes and - Fear of adverse reactions extends beyond drug compliance. A key is to understand why some patients do - Lack of understanding not take drugs as prescribed and remove the economic, logistical, physical and provider instructions behavioral barriers that prevent adherence. PAGE 18 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 20. Health coaching and disease management services have focused on improving adherence as part of their broader offerings since many of these programs were developed. Technology and services firms have also attempted to create adherence applications using common technology platforms, such as outbound IVR and mobile phones. Many of these technology offerings are in their infancy, with today’s solutions typically focused on providing reminders to patients, especially Medication Therapy seniors, to take their drugs at certain times throughout the day. Management MEDICATION THERAPY MANAGEMENT Capitalizing on CMS’s requirements for certain Medicare Pharmacists can play a key role in improving adherence. This corresponds with beneficiaries to receive medication pharmacist trade group pursuits that would allow pharmacists to spend less time therapy management services, filling prescriptions and more time providing clinical and pharmacotherapy several firms have been created to consulting to patients. Often referred to as medication therapy management assist pharmacies and health plans (MTM), consultative services offered by pharmacists have gained momentum with delivering these services. in recent years. First, as part of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which took effect in 2006, pharmacists must be Medication Management Systems reimbursed for providing MTM services to select Medicare Part D enrollees, based (MMS) is a company that takes on the number of chronic conditions the patient suffers from, how many drugs a patient-centric approach to the patient takes, and the amount of money the patient spends on drugs each MTM. It offers technology and year. Other programs sponsored by private payers across the country have paid services to aid pharmacies with pharmacists for working more closely with patients who have various health risks their MTM programs and is able and diseases including diabetes, high blood pressure, and high cholesterol. The to interface with each patient’s rationale behind most of these initiatives is that a pharmacist can be a central physician by describing issues and hub for a patient who may be seeing multiple physicians and in many cases the recommendations for improvement programs have reported positive medical and economic outcomes. The MTM of care. Through MMS’s MTM model is a close alternative to the medical home initiatives being launched by services, the company reviews all payer and provider groups. medications taken by each patient, including neutraceuticals and Ultimately the virtuous cycle of drug adherence provides opportunities for vitamins, and how they all work technology and services companies that can prove their solution’s ability to together. improve health outcomes with a positive return on investment. While few stand-alone adherence solutions have gained traction today, TripleTree believes Pharm MD has targeted health firms will make advancements to tackle this issue. Likely these firms will need to plans and employer groups offering be embedded in other service offerings in order to effectively reach patients. MTM services. The company helps its customers maximize their Always a key question, of course, is who will pay for the solution. Most of the pharmacy benefit plan design, successful models described above are paid for through health plans and other review data on the member health payers. Other beneficiaries of the virtuous cycle, especially manufacturers, population to identify challenges should consider investments in adherence solutions as a way to increase with drug utilization, conduct revenue. employee level analyses to reduce risk factors, and communicate with employees and their physicians as appropriate, in order to improve health outcomes. WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 19
  • 21. SALES & MARKETING When it comes to sales and marketing in life sciences, the “arms race” that has occurred over the past decades is drawing to a close. Gone are the days when one pharmaceutical company would add 1,000 new sales representatives just to match its competitors. In 2007 alone, eight leading life sciences companies, led by Pfizer, AstraZeneca, and Bayer, announced layoffs of over 350,000, a good portion of which came from the companies’ sales and marketing organizations.2 The year 2008 witnessed additional reductions in force as firms completely revamped their sales teams and approaches. The result has led life sciences manufacturers to evaluate sales and marketing strategies to identify those that are more cost effective. As discussed earlier, confounding the traditional direct-to-physician sales model is pressure from politicians, physician groups, and hospitals regarding gifts and payments to doctors. Intended to influence behavior, these gifts have become notorious across the industry. State governments, including California, Vermont, and Minnesota, as well as the District of Colombia have passed laws either reducing or controlling gifts provided by life sciences firms to physicians or restricting the access of sales representatives. Within the provider community, Carolinas HealthCare System and Cleveland Clinic have banned physicians from giving drug samples to patients. According to Carolinas HealthCare System, it seeks “to protect patients, limit liability, and decrease the influence of drug companies on prescribing habits.”3 Device, supply, and medical technology companies also face vendor credentialing requirements at medical facilities. It is not enough to simply “sell” the doctor; rather, manufacturers today must focus attention on the facility as well. In response to multiple challenges, life sciences companies are reworking their approaches to sales and marketing through various initiatives: • Replacing armies of sales representatives with smaller teams focused on different market constituencies – hospitals, clinics, long term care facilities, etc. • As hospitals look to cut costs, some have moved to formulary models similar to health plans – ensuring that drugs are on these formularies is a key initiative for some firms’ sales forces in targeting hospitalists and administrators. • Additional sales teams may be acting as financial consultants for hospitals, working with hospitals’ business staffs on economic matters. 2 FierceBiotech, 10/15/2007 3 Charlotte Observer, 5/12/2008 PAGE 20 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 22. • Firms are formally engaging large employer groups, augmenting teams that were already targeting health plans. • Telephone detailing to physicians after office hours has become a preferred channel to reach high volume physicians who do not have time to meet with detailers during the work day. • Replacing traditional sales representatives with clinicians and pharmacists who have the education and experience to have more technical and sophisticated conversation with physicians. • Deploying sales teams that are able to speak to off-label uses for drugs. • Increasing television advertising and other forms of direct-to-consumer marketing. • Utilizing technology of various mediums as an alternative to traditional detailing. Aiding the delivery of new initiatives are innovative solution providers that are taking advantage of besieged sales and marketing models. Various software and services vendors are well-equipped to meet market demands to enable solutions ranging from small group sales to large enterprise relationship management. Subsequently, these vendors have needed to create pricing models and functional depth to attract their target customers. OpenQ has developed a leading system to manage the complex relationships that life sciences manufacturers have with key opinion leaders (KOL), as well as tools to understand peer relationships and influence networks within the physician community. In addition to delivering KOL management software, OpenQ can embed updated physician content or integrate customer data. MTI Information Technologies offers campaign and communication management services to manufacturers that target and interact with physicians based on a multichannel approach. Rather than focusing on any one means of outreach, MTI utilizes a services model, In October 2008, the Physicians backed by its proprietary technology, that recognizes the channel to best Interactive business unit of Allscripts reach and message to individual physicians, and which ultimately drives was acquired by a private equity the greatest return on spend. fund of Perseus, LLC. As a newly independent company, Physicians One channel being used by MTI, and which other firms have chosen to Interactive will continue to focus on specialize in, is eDetailing, a solution that has yet to achieve complete alternative channel marketing and market acceptance. One possible reason for the sluggish implementation is sales products including direct mail, that the marketing managers who make purchasing decisions are often eDetailing and video detailing. former detailers who have been skeptical of these new technology WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 21
  • 23. solutions. As pressure to reach more prescribers with fewer sales representatives continues, and these systems increase their functionality and prove their effectiveness, adoption may increase. eDetailing firms have developed online content delivery and video capabilities to reach physicians at a significantly lower cost than traditional detailing. However, access to physician information is still a challenge. Without good data, the value of sophisticated technology and expensive, flashy marketing campaigns are lost. In addition to influencing physicians through detailing and gifts, many industry observers are concerned about the effects of the direct-to-consumer (DTC) marketing practices and Web 2.0 technologies that have been adopted by the life sciences industry. It is rare that one turns on the television without seeing a commercial for a drug that will help improve sleep, lower cholesterol, or fix other health concerns. Some in Congress are calling for toll free numbers to be included in all DTC advertisements that consumers can use to report adverse effects of drugs. But despite criticism, according to Pharmaceutical Executive, direct-to-consumer marketing will continue to expand with the bulk of the growth coming from email and the internet. Product placements in television and movies may be next. The flu drug Amantadine, led Google’s list of “hot trends” search words after the drug was mentioned in an episode of House, a medical drama on Fox TV. Web 2.0 technologies such as social networking, online communities, and blogs, in addition to legacy message boards, provide consumers with considerable power to publicize their experiences with certain products to a broad based audience. According to Forrester Research, one-fifth of online consumers use heath-related social computing tools. These collaborative tools also allow product manufacturers to have a new form of direct dialogue with individual consumers – dialogue that can also be witnessed and reviewed by millions of other consumers who may be accessing a web site. As this form of corporate to consumer dialogue continues to evolve, it will be interesting to see how regulators respond to ensure these forms of marketing do not violate existing regulations or whether new regulations will become necessary. In this regard, Pfizer has received a warning for omitting risk information in online marketing activities for Viagra. Most major life sciences firms, including Pfizer, GlaxoSmithKline, Medtronic, Johnson & Johnson, Novartis, and Eli Lilly are using forms of Web 2.0 technology. PAGE 22 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 24. COLLABORATION Enterprise collaboration and social software solutions are seeing rapid innovation and adoption across all industries. TripleTree recently published a report on this subject entitled “Collaboration, Communities and the Extended Enterprise,” which discusses how the collaboration phenomenon is transforming business. At the forefront of growth in this market are social tools and the reality that many adults now stay connected through automated, collaborative technologies. For most enterprises, managing the customer experience is centered on collaboration tools like email, instant messaging and web conferencing, with tools such as eLearning experiencing reinvigoration. All of these forces are converging as businesses seek automated processes that reduce costs while building and nurturing a network of customer advocates. As detailed in the previous section, Web 2.0 technologies are allowing consumers to take advantage of collaborative technologies to learn and share ideas. ENTERPRISE COLLABORATION Several trends have influenced the surge in interest for enterprise collaboration and the rapid creation of innovative technologies, including: • Increased willingness for businesses to invest in customer-centricity; • Improved productivity from corporations seeking continuous technology improvement; • A dispersed and increasingly global workforce; and • Maturation of web standards and Web 2.0 technologies Knowledge transfer within today’s organizations, and to and from their customers, has been liberated by Web 2.0 tools. Traditional product research and feedback from field sales interactions have limitations and cannot offer the 360 degree perspective that leading edge communication strategies and automated tools can provide. In the world of consumer products, Amazon.com and other well-known brands pioneered technologies that allow businesses to access real-time feedback “Twenty years ago…80% of the regarding products and services. This valuable information empowers sales, knowledge that workers required to do marketing, strategy, and product engineering teams to make immediate changes their jobs resided within their company. in productivity, which impacts quality, service, and consumer adoption. In order Now it is only 20% because the world to get closer to consumers, some life sciences manufacturers have experimented is changing ever faster. We need to be with allowing consumers to log comments and questions about products on their open to new and unknown connections brand web sites. Product teams then post responses to the site that can be viewed with people and content…” by all visitors. Andy Mulholland, Chief Technologist – Capgemini (as quoted in The Economist 10/23/2008) WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 23
  • 25. COMMUNITIES In addition to enabling direct interaction with corporations, collaboration tools have given consumers a more powerful voice and influence on the healthcare marketplace. In today’s environment, individual consumers are empowered with internet technology to communicate with the masses about their experience with a specific product or service. They also have the benefit of exchanging insights with peers around the globe who have similar health problems to solve. Healthcare-focused Web 2.0 communities across the internet, such as PatientsLikeMe, are densely populated with consumers’ experiences with drugs and courses of treatments. Many of these sites, like WebMD, Everyday Health Network, and the recently launched myOptumHealth.com, a part of United Health Group, have become a significant focus for life sciences manufacturers’ advertising budgets, as these firms are able to directly target a captive audience for their products. While advertising has been effective for some companies, it will not be a successful source of revenue for the vast majority. Certainly considerable value has been created since the internet bubble burst by companies relying on advertising, such as WebMD, Facebook, and YouTube. However, TripleTree believes that online communities and Web 2.0 platforms that have created profitable ad-based models should be strategizing to develop alternative sources of revenue, especially considering the difficulties facing other media sectors that have traditionally relied on advertising income. Despite these concerns, few online communities have yet to be able to prove successful business models that do not rely on advertising, resulting in innovative concepts not realizing their A combination of macro-market full potential or failing. trends that are highly relevant in today’s life sciences environment A company that illustrates the power of collaboration in life sciences, and make it imperative that organizations healthcare in general, is Sermo. The most widely used physician community on of all sizes reevaluate how they the internet, Sermo has created a model that does not rely on advertising. Instead, encourage and manage collaboration the company charges fees to external organizations such as pharmaceutical internally and externally. These manufacturers, research organizations, and financial services companies, allowing trends include: these customers access to direct interaction with the physician membership of the community, who can join for free. Companies can pose questions in the • Changing competitive forces; form of surveys and receive direct feedback from physicians on the site. While this interaction between product firms and physicians is not the main purpose for • Changing workplace physicians to log into the site, it provides a value-added collaboration between requirements; life sciences firms and thousands of physicians in real-time, which would be virtually impossible or prohibitively expensive to otherwise create. In no other • Changing economic and situation could a drug manufacturer receive structured feedback from a captive ecological conditions; and audience of thousands of physicians within hours of posing a question. This type • Changing enabling of access to the physician community has powerful applications for exchanging technologies. thoughts among clinical peers and thus improving patient care. PAGE 24 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 26. Ultimately, collaboration tools will be a key component of next generation enterprise systems and will continue to empower consumers. Successful corporate collaboration platforms will be driven not by technology and features, but by their ability to transform the way businesses and individuals can cost effectively and influentially improve internal productivity and interaction with constituents outside the enterprise. Consumer interaction via Web 2.0 communities provides a platform for life sciences firms and healthcare professionals to access targeted populations in real-time. These applications are still in their infancy but the opportunities to expand such consumer interaction are vast. It will be within the power of innovative firms to create models that can unleash the full potential of these tools. “Globalization and eCommerce have fundamentally changed the competitive landscape, leveling the playing field while lowering the barriers to entry in nearly every industry. While these trends have opened new market opportunities, they have also opened the door to more competition, undercutting customer loyalty and complicating traditional methods of gaining a competitive advantage.” – Jeff Kaplan, Managing Director, THINKstrategies WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 25
  • 27. CONCLUSION While it is clear the life sciences industry faces complex challenges, the opportunities for innovation have never been greater. Trends impacting the industry such as declining sales growth, the convergence of life sciences and healthcare services, consumerism, and convenience are forcing all industry constituents to examine their business strategies and prepare for a new era. This new era will witness the emergence of innovative technology solutions, delivery models, and outsourced services that will enable industry change and lead to offerings we have yet to imagine. As life sciences evolve, inventive firms will answer the call to improve patient safety and adherence to prescriptions. Technology vendors and outsourcers will assist manufacturers with compliance solutions and new models for sales and marketing. Finally, the industry will adapt to the public’s increasing use of and adopt its own, collaboration technologies, the power of which will ultimately be harnessed to improve worldwide health. TripleTree’s investment banking and advisory services are focused on the intersection of disruptive technology delivery models, business services, and vertical industry specialization. Our commitment since our founding in 1997 has been to provide best in class private businesses with independent perspectives, insight based on proprietary research, and candid advice regardless of the popularity of our views. TripleTree’s principals bring decades of experience as former operators of technology-based businesses in healthcare, financial services, professional services, telco and distribution. We have led over 100 sell-side M&A transactions totaling $5B in enterprise value with clients and buyers on three continents. Our recapitalization practice is growing quickly and since 2006 our team has concluded over a dozen financing transactions with an enterprise value in excess of $1B. After you have considered the perspectives offered in this report, we look forward to learning more about your organization, the opportunities you are facing, and how we can accelerate your success through unique and insightful investment banking support. PAGE 26 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 28. THE TRIPLE TREE HEALTHCARE TEAM Peter Erickson, Managing Partner • Joined TripleTree in 1998 • Special emphasis on life sciences, consumer health, health and wellness, mobility, and human capital management • Sell-side M&A and capital growth client representation across both technology and healthcare sectors; has worked on more than 30 engagements with leading companies such as HCSC, Fiserv and Microsoft • BA, DePauw University; MBA, Carlson School of Management, University of Minnesota Kevin Green, Managing Partner • Co-founded TripleTree, LLC • 25+ years building and advising IT companies • Senior executive roles in public and private IT companies; two as CEO • Active with numerous industry associations and boards • BA and MBA, University of San Diego Joseph Schiesl, Managing Partner • Joined TripleTree in 2007 • 30+ years of experience leading new growth strategies in private and public technology and services companies • Senior executive and operating roles in private and public companies. • BA, Loras College Scott Tudor, Managing Partner • Joined TripleTree in 1998 • Specializes in IT Outsourcing & Managed Services and Healthcare IT • Worked on more than 40 transactions with leading and global companies such as Experian, HCSC, UnitedHealth Group, HP, Compaq Computer, Verizon, Cardinal Health, Avanade and Ciber • Served as TripleTree’s research chairman • Previously practiced law • BA and JD, University of Illinois; MBA, Carlson School of Management, University of Minnesota continued on next page... WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 27
  • 29. THE TRIPLE TREE HEALTHCARE TEAM David Brownlie, Principal • Joined TripleTree in 2004 • Primary focus on the firm’s Healthcare IT and Outsourcing engagements • Worked on more than 20 transactions with leading and global acquirers such as Microsoft, Walgreens, and UnitedHealth Group • Previous experience advising IT companies at Accenture and Mobius Venture Capital • Former attorney focused on corporate transactions • BS in Finance, Indiana University; MBA and JD, University of Colorado Jason Grais, Senior Associate • Joined TripleTree in 2006 • Focus on M&A engagements and capital formation in the healthcare sector • Special emphasis on healthcare analytics, mobility, life sciences, and workers’ compensation • Previous experience at Fair Isaac, Arthur Andersen, and BearingPoint • BBA in Finance, University of Wisconsin; MBA, Carlson School of Management, University of Minnesota Seth Kneller, Associate • Joined TripleTree in 2005 • Special focus on healthcare revenue cycle management, clinical systems, geriatric care, and healthcare analytics • Prior experience includes Capital Institutional Services (CAPIS) and the Mayo Clinic in Rochester, MN • BBA in Finance & Business Economics, University of Notre Dame; holds an International Certificate from John Cabot University in Rome, Italy • Passed Level III of the Chartered Financial Analyst Program Judd Stevens, Senior Analyst • Joined TripleTree in early 2008 • Primary focus on healthcare services and technology • Previous corporate experience at Honeywell • BA in Finance, Carlson School of Management, University of Minnesota PAGE 28 Q1 2009 LIFE SCIENCES MINNEAPOLIS 952.253.5300 WWW-TRIPLE-TREE.COM
  • 30. TRIPLE TREE HEALTHCARE SENIOR ADVISORS Shawn Green, PhD – Senior Advisor • Leverages over a decade of experience as an entrepreneurial scientist and senior operating executive of public and private companies • Holds a number of teaching positions at a variety of universities; author of dozens of articles in leading scientific journals • Founder of a privately held life sciences informatics firm that established a network of partners and clients, including Bristol Myers, Squibb, IBM Life Sciences, Johnson & Johnson, John Wiley & Son Publishers, Fijitsu and Itochu • Serves on the Board of Directors for the Virginia Biotechnology Industry Organization, the Board of Advisors for the Foundation of Genetic Medicine, and is an advisor to Ernst & Young’s Health Science Compliance Group and the School of Management for Biosciences at George Mason University • PhD in Cell Biology & Anatomy, Georgetown University Schools of Medicine & Dentistry; MBA, Georgetown School of Business Rob McCray, JD – Senior Advisor • 25+ years experience as a business owner, senior operating executive and legal and transactional advisor to public and private companies • Chairman and one of the founding members of the Wireless-Life Sciences Alliance • Active Board of Director with several public and private companies • Graduate of the University of California, Davis School of Law and the University of California, San Diego Thomas (Tad) O’Donnell, III – Senior Advisor • 15+ years investment experience in healthcare service and healthcare information technology • Previously General Partner at HLM Venture Partners, a healthcare focused venture capital partnership with over $400 million in capital commitments • Began career as an investment banking analyst in the Health Care Group at Smith Barney and moved on to Greylock and General Catalyst • BA and MBA, Harvard University WWW.TRIPLE-TREE.COM MINNEAPOLIS 952.253.5300 Q1 2009 LIFE SCIENCES PAGE 29
  • 31. About TripleTree TripleTree is a leading investment banking firm dedicated to meeting the needs of technology, business services, and healthcare companies. TripleTree’s professionals have over 100 years of combined senior executive operating experience building high growth technology, healthcare and financial companies. Specializing in M&A, private placements and financial advisory services, we represent growth-oriented companies in pursuing strategic alternatives that drive premium valuations. Unlike most investment banking firms, TripleTree brings a unique approach to advisory services through strict industry focus and extensive commitment to research. Such a commitment has allowed TripleTree to build an investment bank focused on identifying and delivering strategic solutions that enable shareholders and business executives to maximize the value of their firm in a dynamic and rapidly changing marketplace. For further information, visit our website at: www.triple-tree.com Copyright © 2009 by TripleTree, LLC Minneapolis t 952-253-5300 f 952-253-5301 7601 france Avenue south suite 150 Minneapolis, Minnesota 55435