BioIT Market Update

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Bio-IT Market Update
Debra Goldfarb Group Vice President, WW Systems
and Life Sciences dgoldfarb_at_idc.com
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Agenda

• Bio-IT Infrastructure Practice Overview
• Overall Biotech Market Trends
• Global
• EMEA
• Asia/Pacific
• Bio-IT Forecast Update and General Trends
• By sector
• By customer type
• Final Thoughts
• Q A

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Bio-IT Definition and Market View
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Big Themes

• Boom--bust cycle?
• We are taking a breath.
• Market is in nascent stagethere will be
  casualties
• Business models remain fluid
• Companies are struggling with the right model/mix
• High profile forays into market were not well
  received
• Complexity of industry should not be
  underestimated
• Web of interdependencies is growing and will
  continue to grow over time
• Industry disaggregation will create turmoil and
  opportunities for new companies, business models,
  skills etc

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Global Biotechnology Trends
Global Biotech Investment Market Capitalization
have fallen off significantly since 2000

• Triggers
• Market-wide investor flight
• Product setbacks

Source BioWorld / Ernst Young
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Global Biotechnology Revenues vs. RD
Source Ernst Young LLP
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Biotech Market Conditions EMEA

• EMEA
• 49 billion (57) drop in Biotech market
  capitalization since market-wide slump began in
  2000
• Sector will remain soft through mid-2003
• Public equity investments have shut down, while
  private investment is still flowing (rate of 1
  billion/year)
• Important for investors to appreciate the time
  frame
• U.K. and Germany still dominate, followed by
  France, Denmark and southern Sweden

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European RD Environment

• A significant percentage of RD dollars leave
  Europe for US and ROW markets
• 59 of EU RD stayed within European borders
• 34 US
• 7 ROW
• This trend is accelerating..
• In comparison, 80 of RD spending by the US
  Pharma industry stayed in the US
• Data suggests key trends
• The European industry is losing competitiveness
  as compared to the US
• There is a growing concentration of RD into
  North America

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Biotech Market Conditions Asia/Pacific

• AP Biotech market is very young, particularly
  outside of Japan
• Over half of the AP Biotech market is public
  sector
• Private sectors are being jump started by
  government decree
• Tens of billions of dollars are being invested in
  the Asia/Pacific biotech economy
• Expect a very different picture in 5-10 years

Source IDC 2002
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Japan Bioscience Environment, 2002

• Pharma industry - RD spending in the industry
  is lower than in the US or Europe companies are
  mostly family owned and have cash in the bank
• Biotech industry - during 1980s was focused on
  process technology, not life sciences RD.
  Emphasis now changing now, but developing a
  strong domestic biotech industry will take time (
  recent 30 million deal between daiichi
  pharmaceuticals and celestar lexico sciences)
• Linkages between medical and biological
  research need improvement for large
  pharmacogenomics research in Japan
• Funding system for public sector research is
  not well developed. Large amounts of money are
  given out by a handful of senior scientists at
  the large universities

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Regional Picture, Bio-IT Infrastructure
Development, 2002-2006
Public and Private Investment and Priority
Rate of Development
Source IDC 2002
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Worldwide Bio-IT Forecast by Sector

• Hardware is the largest sector today. (includes
  servers, clients, storage, networking,
  accelerator boards, etc.)
• End user spend on services will overtake hardware
  in 2003.
• By 2006, services will account for 42 of the
  total market.
• Total market growing from 12.2B in 2001 to
  30.3B in 2006.
• Five Year CAGRs
• Hardware 15.8
• Software 25.4
• Services 21.2

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Worldwide Bio-IT Forecast byCustomer Type

• Large Pharma is the biggest and fastest growing
  customer segment, accounting for 3.6B in 2001.
• Biotech accounted for 3.3B in 2001, but is
  growing slightly slower because of a contraction
  in VC investment.
• Five Year CAGRs
• Large Pharma 24.3
• Medium Pharma 18.3
• Small Pharma 12.6
• Biotech 21.1
• Gov/Academic 15.1
• Agribusiness 17.1

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Final Thoughts

• Stay the course
• The market will evolve in a chaotic mannerthose
  suppliers who stay in the game will dominate
• Continue to build out your alliances and
  partnerships
• Key strategic imperative
• Investment and commitment remain challenging
• Huge pressure for biotechs to perform
• Inflection point vs. continued infrastructure
  investment
• Be aware of Pharma Y2K
• In the next few years, FDA approval must be
  submitted via a fully electronic process