The business of preclinical research -
Positive market dynamics
Leigh Berryman
1

Bio-pharmaceutical research
The Business The Science
• Virtual biotech companies • Patent protection of identified
replacing global pharma in biological processes is key
discovery
• Large molecules of known
• Goal is ‘added value’ as pharmacological activity
opposed to marketed product
• Focus on preclinical
• Funding heavily reliant on development cf clinical
marketing ‘hype’
• Focus on understanding at a
• Companies have few platform molecular level
technologies
2

Increased R&D spending
Global R&D spending
Pharma and 100
biotech spending $86
90
80
• Pipeline development
$ US billions
70
$63
$57
60 $52
• Expanding biotechnology base $48
$45
50
$42
• Rising R&D costs per drug 40
30
• Financial markets focusing to 20
provide capital to virtual / 10
biotech developers 0
2000 2001 2002 2003 2004 2005 2008
Source: Kalorama information
3

Total R&D outsourcing
Outsourced global CRO R&D spending
Pharma & biotech
spending outsourced 24 40
Percentage of R&D outsourced
$21
to CROs 20 35
$ US billions
• Faster, cost-efficient 16 30
$13
alternative $11 25
12
$10
• Access to critical expertise $8 24%
$7 20
8
21%
$6
19% 19%
• Biotech industry growth 15
4 17%
16%
14%
• Pharma reducing 0 0
CapEx spending 2000 2001 2002 2003 2004 2005 2008
Source: Kalorama information
4

Preclinical outsourcing segment
$4 Billion - 16% CAGR (2005-2008)
Source: Kalorama information
1 FDA
5,000 - 10,000
Preclinical Phase III Approved
Phase II
Phase I
New Drug
Drug
Candidates
Global Global
60% 7% 13% 20%
R&D projects R&D projects
Fastest growing outsourcing market segment
• Critical stage of drug development process
• Project termination once commenced is unlikely
• High barriers to entry
5

Barriers to entry 6
Facilities Client Credibility Personnel Regulatory
Capital intensive Established Access Highly
and highly track records to skilled & regulated
specialized of quality and experienced environment
facilities on-time delivery scientific
personnel
Disciplined Competitive
Environment
6

A speculative thought…..
The paradigm
• Funding is through investment groups looking for a return on
investment
• Biotech companies provide early research and intellectual
property
• The CROs provide developmental services
(preclinical/clinical/manufacturing)
• Large investment funds now include both biotech and CROs
Are we seeing the emergence of the investment group
as the new global pharma of the future ?
7

Today’s Agenda
The process of drug development
• Early Stage drug discovery and lead optimization
(going fishing ?)
• Production of the active product and scale-up
• Does it work ? Biological models
• Is it safe ? Toxicity
• Can we bring it to the market ? Regulatory
8