Baltimore Workforce Investment Board

1
Baltimore Workforce Investment Board Presentation
On Growth Industries
11 March 2005
2
AGENDA

• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
• Life Sciences
• Healthcare Services

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ECONOMIC ALLIANCE OF GREATER BALTIMORE BACKGROUND

• Sole public/private partnership bringing together
  business, government and educational institutions
  to attract new employers and investment into the
  Greater Baltimore region for over 10 years
• Markets the Greater Baltimore Region and
  accelerates investment through targeted business
  development marketing initiatives

There was no one group integrating assets and
resources for the Greater Baltimore region
maximize economic development efforts
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DEAL MAKING v ORDER TAKING
Major responsibilities
Partners
Partner focus
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GREATER BALTIMORES STRATEGIC ADVANTAGES

• Sectors of Strength
• Life Sciences
• IT / Defense
• Healthcare Services
• Financial Services
• Logistics

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THREE COMPONENTS FOR NEW APPROACH
Industry specialization Attract staff with
industry related competencies knowledge
Strategic analysis Formulate business case
addressing regional assets company needs
Deal Structure Work with high level decision
makers to ensure deal execution
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AGENDA

• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
• Life Sciences
• Healthcare Services

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GOAL IDENTIFY AND PRIORITIZE HIGH YIELD
OPPORTUNITIES IN FINANCIAL AND HEALTH SERVICES,
LIFE SCIENCES, AND HOMELAND SECURITY SECTORS

• Low cost of doing business
• Academic Institutions
• Access to New York City and Washington, DC
• Collaboration with cutting edge research
• Workforce educated and trained in high-knowledge
  fields

• Strong tradition of sector specialized personnel
  training
• Concentration of eminent research institutions
  such as JHU and the NIH
• Multiple secure installations such as Ft. Meade
• Affordable executive and non-executive quality of
  life

Specific Assets
Company Needs
Regional Offerings

• Well educated workforce
• Low cost of doing business
• Tax incentives
• Proactive investment community
• Easy access to New York City and Washington, DC

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METHODOLOGY FOR SHORT LISTING TARGET COMPANIES
Defining target sub-markets
Life Sciences, IT / Defense, Financial Services
Prioritize Opportunities
Identify opportunities
Frame business Case
Relationship Building
Description

• Identify sub-markets where Baltimore maintains a
  competitive advantage

• Identify and segment major public companies by
• Cash/Cash flow
• Organizational structure
• Current sites

• Inventory regional assets
• Academia
• Private sector companies in industry
• Federal institutions
• Build business case by leveraging synergies
  between partner needs and competencies

• Determine key decision makers target
  accessibility by local contacts
• CEO, COO, CFO
• Heads of BD, Operations, RD
• Determine conferences/ venues to reach

• Assess best fit opportunities based on
• Ability to invest
• Company Size
• Propensity towards Baltimore

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AGENDA

• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
• Life Sciences
• Healthcare Services

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CASE STUDY THE LIFE SCIENCES STRATEGY
The Greater Baltimore region is at the
convergence of defining trends in the Life
Sciences industry

• Greater Baltimore Region
• Positioned competitively due to critical mass of
  discovery to attract private sector investment

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ALTHOUGH BALTIMORE IS A DISCOVERY LEADER, IT LAGS
BEHIND IN IMPORTANT DRIVERS OF DRUG DEVELOPMENT
High
Low
Boston/ Cambridge
Greater Baltimore
SF/ Bay area
Philadelphia
Driver
Discovery pipeline
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MAXIMIZE VALUE OF DISCOVERY THROUGH CO-LOCATED
DEVELOPMENT MANUFACTURING
Drug development value chain
Current approach
Local function
Non-regional functions
Result

• Out-licensed to partner due to lack of
  development abilities primarily outside of region
• Current tech transfer focus on near term
  licensing revenue vs. long term value creation

Minimal return to region institution due to
cherry-picking licensing strategy
New approach
Local function

• Retain discovery-development regionally
• Translational development facilities/partners
• Clinical research organizations
• Attract manufacturing facilities to co-locate
  alongside RD facilities
• Refocus tech transfer on long term tech
  development goals

Result
Maximize return to region and institution by
bundling assets attracting partners across
value chain
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SUBMARKET ATTRACTIVENESS DRIVEN BY FINANCIAL
RESOURCES AND CULTURE
High
Low
Pros
Cons
Attractiveness
Pharmaceutical

• Large RD budgets and proportion dedicated to RD
• Broad focus across many therapeutic areas (TAs)
• Seeking sources of NCEs to fill pipelines

• Several players have a culture of pure LA and
  MA vs. alliances
• Discovery stage deals too high risk for some shops

Biotechnology

• Large proportion of budget allocated to RD
• Culture of alliances with academia
• More nimble

• Lower cash flows due to fewer products on the
  market
• Narrowly focused RD in few TAs
• Smaller RD budgets

Medical Device Equipment

• Shorter product development cycle forces need to
  innovate (more nimble)
• Engineering and biomedical focused innovation
  requires cross-disciplinary approach

• Strong culture of pure LA and MA vs. alliances
• Smaller RD budgets and smaller proportion of
  budget allocated to RD

CONFIDENTIAL DO NOT DISTRIBUTE
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POTENTIAL BEST FIT PHARMA COMPANIES

• Ability
• To
• Invest
• Cash/ cash flow
• RD spending / revenues ()

• Level of decentralization
• Number and location of RD sites

CONFIDENTIAL DO NOT DISTRIBUTE
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MOST ATTRACTIVE PHARMACEUTICAL TARGETS
Baltimore value proposition
Companies
Differentiators

• High RD spending
• Minimal presence in the mid-Atlantic

• Roche
• Eli Lilly
• Boehringer Ingelheim

Tier 1

• Rich RD assets
• Fits in academic alliance strategy
• Educated workforce
• Leading clinical resources

• High RD spending
• Medium presence in the mid-Atlantic

• Novartis
• Merck
• Pfizer
• Aventis-Sanofi

Tier 2

• Teva (Israel)
• Indian generics
• Dr. Reddys
• Cipla
• Ranbaxy
• Lupin

• Little to no RD presence in the U.S. but strong
  willingness to grow presence
• Requirement of market to expand more aggressively
  into branded Rx need discovery alliances in near
  term

• US RD base
• Capacity to expand
• Strong Indian community and culture in region
• Provides legitimacy with U.S. shareholders and FDA

Tier 3
CONFIDENTIAL DO NOT DISTRIBUTE
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AGENDA

• Economic Alliance background
• Business Development strategy
• Sector Specific strategy (Baltimore City)
• Life Sciences
• Healthcare Services

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HEALTH CARE HIGH COSTS, AND STILL
RISINGMEDICARE AND MEDICAID ARE SUFFERING FROM
THE WOES OF THE INDUSTRY

• Medicare and Medicaid are projected to rise at
  average annual rates of 9.0 and 7.8
  respectively through 2015 Source Congressional
  Budget Office (CBO)
• For the entire 2000-2003 period, Medicaid
  spending increases were largely driven by
  enrollment growth, much of which was attributable
  to the economic downturn
• Source Health Affairs, Jan. 26, 2005

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CMS TAKES THE ROLE OF ADMINISTERING MEDICAID AND
GUIDES THE STATE BY STATE POLICY FOR MEDICARE
The Centers for Medicare and Medicaid Services
(CMS) spends 20 of the Federal Governments
dollars about 519 billion in FY
2005 Including State spending, these programs
spend about 45 of the Nations health care
dollars.
83 Million Beneficiaries Covered by CMS
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MEDICARE PRESCRIPTION DRUG IMPROVEMENT AND
MODERNIZATION ACT OF 2004 (MMA) MARKS THE BIGGEST
CHANGES TO MEDICARE SINCE ITS INCEPTION 40 YEARS
AGO
Implication MMA HAS INCREASED GOVERNMENTS
IMPORTANCE NOT ONLY AS A REGULATOR, BUT AS A
CUSTOMER

• Government is taking on an increasingly important
  role in health care spending
• Government will account for nearly half of all
  the nation's health care spending by 2014
  (compared to 25 of all health spending in the US
  when Medicare / Medicaid were created in 1965)
• Medicare, which now accounts for 2 of spending
  on prescription drugs, will account for 28 next
  year

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THE CMS LOCATION IN BALTIMORE COUNTY IS NOW A
CENTER FOR HEALTHCARE POLICY INNOVATION
Proximity to CMS drives Greater Baltimore as a
prime location choice for healthcare companies.