Cellular Assays. A Strategic Market Analysis. Sample Slides

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Cecil Lamb
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1 A Strategic Market Analysis Sample Slides 2002 For information contact: Frontline Strategic Consulting, Inc E. Hillsdale Blvd, Suite 403, Foster City, CA x125, x135 or x145

2 E. Worldwide Market 1. Annual Worldwide Revenues (2002E-2007E) The cellular assays market is expected to grow at a compound annual rate (CAGR) of x% from $x million in 2002 to an estimated $x million in The revenues include assay development, reagents, screening, and other products and services associated with cellular assays within drug discovery. Figure I-6 WORLDWIDE CELLULAR ASSAYS MARKET CAGR = x% CAGR = x% 2002E GEOGRAPHIC BREAKDOWN xxxx x% Millions (US$) xxxx x% E 2003E 2004E 2005E 2006E 2007E ; company annual reports; analyst reports -1 xxxx x%

3 F. Trends in The cellular assays market is one that is young and evolving. Multiple key trends will shape this industry over the next five years. FIGURE I-9 KEY CELLULAR ASSAYS TRENDS Trend Trend Trend Trend Trend Trend By By using using up-to-date up-to-date knowledge knowledge of of trends trends in in cellular cellular assays, assays, companies companies in in this this market market can can make make customers customers more more aware aware of of their their expertise expertise and and provide provide them them with with strategic strategic insight. insight. -2

4 H. Strategic Analysis 2. Leading Business Scenarios There is great promise that the application of cellular assays technologies will advance the discovery and development of high value drugs. For this reason, technology companies are following various business strategies, with revenue and profit optimization as the end goal. Figure I-13 CELLULAR ASSAYS BUSINESS MODELS Business Model Business Model Business Model Example Companies A and B Description A and B Description A and B Description Descriptions -3

5 III. CELLULAR ASSAYS BACKGROUND AND TECHNOLOGY A. Overview 1. Scientific Background Cell-based assays* are critical to screening the behavior of a drug compound in a cell. The objective of creating a cellular environment is to be as comparable as possible to its presumed site of action in the living human body. assays can be used to determine a drug compound s ability to enter a cell, toxicity, and overall efficacy. Advances in imaging technologies, fluorescent probes, and assay automation have allowed the quantitative examination of cell structure and function in greater detail than ever before possible. This has led to cellular assays becoming a critical tool in the drug discovery process. Figure III-1 BIOLOGICAL PARADIGM OF CELLULAR ASSAYS Cell Insertion of lead compound Cell response used for compound optimization * Cell-based assays will be referred to as in the remainder of the report -4

6 A.1. Scientific Background Aside from testing individual signaling pathways, cellular assays can be used to influence the cell as a whole. Functional cellular assays are in early stages of development. Functional cellular analysis provides highly detailed information on the functions of particular targets of interest, and allow the observation of specific pathways and the functional consequences of activating targets under different conditions. For example, the ability of a drug to activate or inhibit a wide range of gene products can be measured to assess the functional relevance of potential drug targets. Figure III-3 FUNCTIONAL CELLULAR ANALYSIS Potential gene targets Gene X Gene B Gene Y Gene Q - Test compound + Test compound Transferred to cells Cells grow until they encounter another cell Only cells that have gene Y grow (only activates Gene Y s product) Gene Q Gene Y Gene X Gene B Cell Growth Cell Growth Stops Selection and Amplification ; Acadia Pharmaceuticals -5 Gene Y Gene Y Gene Y Gene Y Gene Y Gene Y

7 C. Applications of in the Drug Discovery Process assays have a variety of uses in the drug discovery process. Currently, the most common application of cellular assay technology is as a lead compound identification and optimization tool. However, companies are working with cellular assays to discover potential drug targets without the need to sequence and profile genes. assays are also used as diagnostic tools to be used in clinical screening for certain indications. Diagnostic cellular assays are not covered in this report as they do not apply to the drug discovery process. Current cell based assays are high content, not high throughput. At the end of the day, if you end up with 500 hits, what then is the next process? The bottlenecks are still there for high throughput. Screening with a cell based assay is slower, but the quality is much higher, and efficiency at the end of the whole process is better. -Medium-Sized Assay Figure III-6 THE DRUG DISCOVERY CONTINUUM Discovery Development Target Identification Target Validation Lead Identification Lead Optimization Preclinical Development Clinical Development NDA Future Applications Current Applications Future Applications assays assays are are being being developed developed for for use use in in all all aspects aspects of of the the drug drug discovery discovery process. process. -6

8 D. 3. Technologies a. Detection Methods Facing the challenge of turning information derived from cellular assay technology into viable therapies, companies apply a myriad of specific technologies to evaluate genes in a functional sense and ascertain their relevance and importance in disease onset and progression. analysis technology will permit the design of live cell assays with the ability to analyze individual biological responses across cell populations, and measure nuclear activation following the intracellular signaling. Several labeling methods are used for detection of the desired event in cellular assays. Figure III-9 CELLULAR ASSAY TECHNOLOGIES Fluorescence Bio/chemiluminescence Bio/chemiluminescence Other Other Detection Detection Methods Methods Nano-particles Nano-particles Quantum Quantum dots dots Radiometric Radiometric labeling labeling Other Other novel novel technologies technologies -7

9 D.3. Technologies b. Fluorescence Fluorescent tags are the most commonly used detection methods in cellular assays for drug discovery. Green fluorescent protein (GFP) technology is the leading application of fluorescence-based signaling. GFP was discovered from the study of the luminescent Pacific Northwest jellyfish, Aequorea victoria. GFP was first produced through stimulation of the jellyfish. The incorporation of GFP into the cellular DNA allows GFPs to be produced by the cells. Unlike other reporters, GFP fluoresces in the absence of any other proteins or substrates. Figure III-11 GFP FLUORESCENCE REACTION Energy transfer GFP Green Fluorescence Reporter molecules are used within cells to indicate gene expression and transcription. Fluorescence in the sample indicates gene quantification by looking at how much of the proteins are illuminated in the sample. - Large Instrument and Reagent Manufacturer -8

10 A.2. Segment Market Shares b. Bio/Chemiluminescence The bio/chemiluminescence segment market share will grow with a CAGR of x% from 2002E to 2007E Figure IV-5 BIO/CHEMILUMINESCENCE SEGMENT REVENUE CAGR = 18 % CAGR = 12 % 80 Millions (US$) E 2003E 2004E 2005E 2006E 2007E -9

11 A. Worldwide Market 3. Supplier Market Shares E and 2007E X and X are currently the dominant players in the cellular assays market. Front Line expects many companies will emerge with innovative technologies by Figure IV-9 CELLULAR ASSAYS COMPANY MARKET SHARE 2002E TOTAL MARKET = $x MILLION *Others include: Companies x, y, z and other companies. 2007E TOTAL MARKET = $x MILLION The main players in the cellular assays market have strong and dominant positions. However, we expect some companies to move their strategic focus away from the development of drug discovery technologies and toward pharmaceutical development. -10

12 B. Supplier Competitive Analysis 1. Comparison in 2002E Figure IV-10 CELLULAR ASSAYS KEY PLAYER STRATEGIC COMPARISON 2002E = Low TECHNOLOGY/PIPELINE MARKET POSITION = Moderate = High Current Technology Non-Drug Discovery Application Technical Outlook Overall Technology Position Breadth of Product Offerings Market Share Deals Overall Competitive Strength -11

13 B.1. Comparison in 2002E X currently has the most competitive strength in terms of technologies and market position. Strong Figure IV-11 CELLULAR ASSAYS KEY PLAYER POSITIONING MATRIX 2002E* X Worldwide 2002E Assay Revenues = $x-x million Technology Position X Worldwide 2002E Assay Revenues = $x-x million X Worldwide 2002E Assay Revenues = $x-x million Weak Weak * Analysis, description of criteria, and basis of rankings can be found in Section II. Bubble size estimates 2002 revenues and market shares. X Worldwide 2002E Assay Revenues = $x-x million Market Position/Competitive Strength Strong -12

14 B.3. Amersham Pharmacia Biosciences X s products for cellular assay market consist mainly of product x technologies. Figure IV-15 SAMPLE PRODUCTS LISTING Products Description Expected Revenue Trend Product X Description Product X Description Product X Description Key Strong Growth Moderate Growth Strong Decline Moderate Decline Low Growth Low Decline -13

15 C. Technical Benefits and Limitations 2. Difficulties In Growing Human Cell Lines Figure IV-24 DIFFICULTIES IN GROWING HUMAN CELL LINES Difficulties in Growing Human Cell Lines - Negative Factor - Negative Factor -14

16 A.6. Outsourcing Assay Development V. Trends Sample and Drivers Pages b. Outsourcing Rate Less than x% of major pharmaceutical and biotechnology companies outsource their cellular assay development. The most compelling reasons for outsourcing cellular assays in the future will be to reduce costs and to ease the internal workload. Frequency of Responses (%) Figure V-7 ASSAY DEVELOPMENT CURRENTLY OUTSOURCED x% ; Interviews The big pharmaceutical companies can pay high prices associated with outsourcing. It would have to be a lot cheaper for us to do it. - Medium biotechnology company When we don t have enough manpower, we outsource, but internal assay development meets most of our needs. - Large pharmaceutical company x% x% x% 0% 1-5% 6-10% >10% Percentage of Assay Development Outsourced By By offering offering moderate moderate price price ranges ranges for for service, service, the the cellular cellular assay assay market market can can penetrate penetrate small small and and medium medium size size as as well well as as larger larger pharmaceutical pharmaceutical companies. companies. -15

17 B. Drivers of 1. Patents a. From to Genes and Proteins V. Trends Sample and Drivers Pages assays provide detailed information on the function of genes and proteins that can significantly enhance the strength of filed patents and the intellectual property position of the holder. This is particularly important now that the U.S. Patent and Trademark Office finalized guidelines, in January of 2001, to forbid stealth patenting where patents are filed on gene sequences that researchers have identified but have not discovered their biological functions. Figure V-10 CELLULAR ASSAY PATENTS PATENT Genes Proteins While While genomic genomic studies studies provide provide sequence sequence information information that that can can be be used used as as the the basis basis of of patents, patents, cellular cellular assays assays can can supply supply additional additional functional functional information information useful useful for for the the patent patent claims. claims. Source: Front Line Strategic Consulting, Inc; -16

18 B.1. Patents c. Useful Patent Claims V. Trends Sample and Drivers Pages The explosion of information from the Human Genome project has caused the U.S. government to develop more stringent guidelines to define ownership and to prevent overlapping patents for research tools. In addition to sequence information that can be generated from genomics studies and used as the basis of patents, cellular studies can supply the following information useful for the patent claims. Figure V-12 USEFUL INFORMATION FOR PATENT CLAIMS Interaction Characterization Quantitation Source: Front Line Strategic Consulting, Inc; Philipkoski, K New Quest: Mapping Gene Patents. -17

19 B. Drivers of V. Trends Sample and Drivers Pages 2. Drug Discovery a. Drug Discovery Bottleneck: Target Validation Target validation is a widely recognized bottleneck in genomic-based drug discovery and development. The explosion of genomic data has produced an approximate 100-fold increase in the number of known drug targets, without an increase in information about those targets. As a result, target validation has become essential for pinpointing the most valuable parts. After potential drug targets have been identified, cellular assay technologies can be used to assist in the important process of validation. Target validation refers to methods that add sufficient supporting information to conclude that an individual protein or gene, if affected by a drug in a specified way, could alter the initiation or continuation of a disease. Figure V-13 CELLULAR ASSAYS FOR TARGET VALIDATION Normal Nucleus Overexpress proteins in a normal cell Normal Nucleus Disease Nucleus Identification Identification of of protein protein interactions interactions within within the the cell; cell; role role in in signal signal transduction transduction pathways pathways is is assessed. assessed.? Does the protein cause the disease phenotype when overexpressed in a normal cell? V A L I D A T I O N -18

20 B. Near Term Industry Landscape We expect the supply of drug targets to increase dramatically due to the information from the human genome project and rapid advances in technology. In addition, current contracts to deliver over 2,000 targets to pharmaceutical partners will drive down the cost of drug targets over time. The cellular assay market is undergoing strong growth and will experience heavy demand for products that provide rapid and accurate results in a cost efficient manner. To this end, the industry landscape is expected to continue to evolve and mature in a number of ways. Specifically, we feel three dramatic changes are likely to occur within the cellular assay industry over the next 3 to 5 years. Figure VI-2 MAJOR CHANGES IN THE CELLULAR ASSAY INDUSTRY Trend Trend Trend -19

21 C. Leading Business Scenarios 1. Licensing Deals Licensing deals increase the value of a company s products without costly in-house research and development. X signed a distribution and licensing agreement with X, now a wholly-owned subsidiary of X. X will distribute a range of products manufactured by X, including Product Line X products. Product Line X products are commonly used in conjunction with X products, such as Product Line X, for drug discovery purposes. This agreement allows X and X to create a complete solution for their drug discovery customers. They will also work together to co-develop related future products in this line, and work to make the current products function optimally together. Figure VI-9 AMERSHAM AND PACKARD DISTRIBUTION AGREEMENT SignalScreen LeadSeeker Complete Drug Discovery Solution Source: Front Line Strategic Consulting Inc. -20

22 D.2. Technology Opportunities b. High Quality i. Human Cell-Based Systems It is widely believed that a shift must be made to high quality data generation, potentially at the cost of high-throughput. As the movement toward cell-based screening is apparent in the drug discovery arena, technologies currently provide reliable cellular assays in high throughput formats. However, most of the cell models currently bear no resemblance to the human system they are trying to reflect. Therefore, the development of new and more relevant cells are essential. Achieving a balance between stability of cellular response and original tissue types is greatly needed. With the development of relevant human cell-based systems for correlating molecular assumptions, an early and accurate picture of biological responses can be observed, enabling a greater degree of confidence when submitting compounds to the development pipeline. Figure VI-16 HUMAN CELL-BASED SYSTEM Current Need New and more relevant human system cells Engineering Cells Future Obtain more accurate picture of human biology Fully Fully exploiting exploiting the the potential potential of of cellular cellular assays assays will will require require the the implementation implementation of of other other complementary complementary technologies technologies such such as as precise precise engineering engineering of of cell cell phenotypes. phenotypes. -21

Pharmacogenetics: A SNPshot of the Future. Ani Khondkaryan Genomics, Bioinformatics, and Medicine Spring 2001

Pharmacogenetics: A SNPshot of the Future Ani Khondkaryan Genomics, Bioinformatics, and Medicine Spring 2001 1 I. What is pharmacogenetics? It is the study of how genetic variation affects drug response