DM Alexander, BJ McMerty, and MJ Galeano

Feature Article: Corporate Venture Capital -- An Interview with 3 CVC’s

Life Science Trends 2013

430 Davis Dr Ste 230, Morrisville, NC 27560 919.474.0771

www.carlyleconlan.com

About this Report

Each year, Carlyle Conlan provides an overview of trends and innovations in the life

science industry, encompassing its drugs, biologics, devices and diagnostics sectors. Utilizing a number of in-depth, premium research reports available in the industry,

Carlyle Conlan’s Life Science Trends summarizes and presents a variety of the most up-to-date industry news under several macro headers: Research and Innovation,

Fundamental Trends, Investing and Deal Making, Regulatory & Government, and Health Care. The result is a meaningful, “quick-read” white paper into which topics our clients,

partners and constituents can dig deeper based on their individual interests.

Life Science Trends 2013 captures significant advances in the industry from the past year and makes observations about developments of interest through the year ahead.

Of central importance is the understanding that trends do not necessarily change on a

yearly basis. For instance, the field of personalized medicine is expected to continue as a trend well into the foreseeable future.

Our report may differ from others in that an early version is sent to CEOs, venture

capitalists, and other industry experts for review before its final release. This report was created using both primary and secondary data. Secondary data is highlighted with

associated links to further information as available in the public domain or credited to the appropriate source.

We invite you to review the information contained in this report, which we trust you will

find interesting and relevant to the sector.

About Carlyle Conlan

Carlyle Conlan, headquartered in the Research Triangle Park, is an executive and professional search firm focused on the life science and technology sectors. With a

highly dedicated, experienced, and professional team of specialists, we work with small, mid-sized and large companies to secure their most important asset, human capital.

Our placement focus is on highly experienced individual contributors through C-level search in a variety of functional position types throughout North America. More

information about Carlyle Conlan can be found at: www.carlyleconlan.com.

Table of Contents Research and Innovation

New Nanotechnology Biosensor Lets Diabetics Test for Sugar Without Finger-prick 3

Cancer-fighting Robots 3

Getting to Know the Genome 4

Lab Animals Lose Transportation 5

Mouse Eggs Made with Stem Cells 5

NIH Targets $275M for Rare Disease Research 6

Research Spending Creeps Upward 6

Transformer Cells in Diabetes 7

Fundamental Trends

Big Data Gets Personal as Healthcare and Life Sciences Converge 8

Genetics-based Personalized Medicine Gets Big Data Boost 8

HOLNets and Precompetitive Data 9

I-Study: Genomic Interpretation – Who will Pay? 9

Should Human Genes be Patented? 10

Thomson Reuters Spotlights the Impact of Personalized Medicine on Pharmaceutical R&D 11

Good Data Won’t Guarantee Good Decisions 11

Pharm Exec 50: Growth from the Bottom Up 12

The Path of Least Resistance: Repositioned Drugs Surpass New Brands 13

A New Path Ahead 14

Investing and Deal Making

The New Pharma – VC Model for Biotech Investing 15

Ten Pharmaceutical Companies Unite to Accelerate Development 15

New Models for Non-Profit Organizations are Accelerating Research and Development Efforts 16

Summary of the Campbell Alliance 2012 Dealmakers’ Intentions Survey 18

Regulatory and Government

Dotting “i”s and Crossing “t”s 21

Drugmakers Question FDA’s Integrity 21

Election Aftermath: Proposition 37 and the Food Movement 22

FDA New Drug Approvals Hit 16-year High in 2012 23

FDA, AdvaMed Seeking Clarity on Med Device Pre-Market Approvals 24

Fears over Fast-tracking Drugs 24

Government Urges FDA to Speed Drug Approval 25

Sequestration: What Does It Mean for Pharma? 26

Biomarkers, Gene Patents and Personalized Medicine in Jeopardy 26

Funding Cuts Threaten Big Data 27

Health Care

In Cancer Care, Cost Matters 29

Lookout – He’s Got a Phone! 29

Meningtitis Deaths Prompt FDA to Seek Pharmacy Oversight 30

Oops! 5 retracted science studies from 2012 31

Featured Article: Corporate Venture Capital – An Interview with 3 CVC’s 32

Research & Innovation

3

New Nanotechnology Biosensor

Lets Diabetics Test for Sugar

Without Finger-prick

Researchers have created a new

type of biosensor that can detect

minute concentrations of glucose in

body fluids other than blood such

as saliva, tears and urine. The new

technology promises diabetics a

future in which they can test their

blood sugar without having to first

draw blood, making sore, even

infected fingertips and battling for

a drop of blood on a cold morning

a thing of the past. The technology

might even be cheaper because it

does not require many processing

steps to produce.

Hybridization of nanoscale metals

and carbon nanotubes into

composite nanomaterials has

produced some of the best-

performing sensors to date. The

new technology, developed by a

team of researchers at Purdue

University, utilizes graphene sheets

which are composed of a layer of

carbon just one atom thick, along

with platinum nanoparticles and an

enzyme which reacts with glucose,

called glucose oxidase, which

converts glucose into peroxide.

The graphene sheets are arranged

in 'rose petals' with each petal

containing several layers of

stacked graphene. The edges of

the petals have dangling,

incomplete chemical bonds, defects

where platinum nanoparticles can

attach. Electrodes are formed by

combining the nanosheet petals

and platinum nanoparticles. Then

the enzyme, glucose oxidase,

attaches to the platinum

nanoparticles, converting glucose

into peroxide when it comes into

contact with it, and thereby

generating a signal on the

electrode.

examiner.com

Cancer-fighting Robots

In the not-so-distant future, a new

kind of robot, one of the tiniest

ever made, may have the ability to

track down and destroy cancer

cells.

Films such as Fantastic Voyage

(1966) and Innerspace (1987)

have long conjured fictional images

Research & Innovation

4

of microscopic submarines or

machinery that can travel inside

the human body to cure ailments.

Now Shawn Douglas, a research

fellow at Harvard’s Wyss Institute

for Biologically Inspired

Engineering, is working on making

that a reality. In a recent issue of

the journal Science, Douglas

described a method for creating

tiny machines—roughly the size of

a virus—out of strands of protein

and DNA.

These devices, dubbed “DNA

nanorobots,” are short hexagonal

tubes made of interwoven DNA

that can open along their length

like a clamshell. At one end is a

DNA “hinge,” and at the other, a

pair of twisted DNA fragments that

act as “latches” to hold the device

shut. Inside the nanorobot,

Douglas can enclose molecules of

almost any substance, essentially

turning it into a molecular “delivery

truck” that can transport

medication to specific cells in the

body.

Harvard Magazine

Getting to Know the Genome

In 2001, the Human Genome

Project produced a near-complete

readout of the human species DNA.

But researchers had little idea

about how those As, Gs, Cs, and Ts

were used, controlled, or

organized, much less how they ode

for a living, breathing human.

That knowledge gap has become a

little smaller. A massive

international project called

ENCODE, the Encyclopedia of DNA

Elements, has cataloged every

nucleotide within the genome that

does something. It turns out that

more than 1.5% of the genome

contains actual instructions for

making proteins. The research, a

10-year effort by an international

team of 442 scientists, shows that

the rest of the genome, the non-

Research & Innovation

5

coding majority, is still rife with

functional elements.

The Scientist

Lab Animals Lose

Transportation

People for the Ethical Treatment of

Animals (PETA) announced that

two major carriers in the United

States, FedEx and UPS, confirmed

that they will not ship mammals for

laboratory use, and restrict the

shipment of some non-mammalian

organisms. Neither UPS nor FedEx

are major players in the lab-animal

shipping business, but the move

does restrict the options for

researchers and could limit the

operations of small companies,

such as Florida-based Xenopus

Express, which relies on UPS to

ship its laboratory-grade frogs.

The Scientist

Mouse Eggs Made With Stem

Cells

New spermatozoa are seldom in

short supply, but oocytes—

immature egg cells—are much

rarer, which has made the quest to

generate oocytes from stem cells

as challenging as it is important.

Now, Japanese researchers claim

to have succeeded in coaxing

embryonic and adult stem cells

from female mice into becoming

fully functional oocytes capable of

producing viable offspring via in

vitro fertilization.

The study, published in Science,

could pave the way for a more

detailed characterization of female

germ line development. It could

also help to save endangered

species and may open new leads

for treating human infertility.

The Scientist

Research & Innovation

6

NIH Targets $275M for Rare

Disease Research

The National Institutes of Health

announced a total of $275 million

in funding for two new research

programs—one focused on

undiagnosed rare disease and the

other on the role RNA outside of a

cell plays in cellular

communication.

The programs are being funded

under NIH’s Common Fund, which

is intended to target strategic

investments that have the potential

for creating a significant impact in

a short amount of time. Both

programs are scheduled to begin

during fiscal 2013.

The Burrill Report

Research Spending Creeps

Upward

Life sciences research and

development investment will rise in

2013, even as some of the

industry’s biggest players pare

their R&D spending, according to a

forecast by R&D management giant

Battelle and R&D Magazine.

Leading life sciences companies in

the United States are on track for

2012 R&D investment levels

significantly below 2011, Battelle

says, with Pfizer cutting $1.5 billion

and Merck chopping $500 million

from their R&D programs. Johnson

& Johnson will also likely spend

less on R&D in 2012 than it did in

2011, while Lilly, Abbott, and

Biogen Idec will likely end 2012

having invested slightly more than

in 2011, according to data

gathered by Battelle and the

magazine.

But even with the ongoing

reductions in R&D spending by

large U.S. life sciences companies,

Battelle forecasts a 1.4 percent

increase in total U.S. life science

R&D to $82.7 billion in 2013. That

small U.S. increase, combined with

similar lower levels of growth

among European life science firms

and significant growth among

Asian life science firms, will lead to

2013 global life science R&D

spending of $189.2 billion, a

forecasted increase of 4.2 percent

from 2012 to 2013, says Battelle.

The Burrill Report

Research & Innovation

7

Transformer Cells in Diabetes

As cases of type 2 diabetes

progress, people get increasingly

worse at making their own insulin,

a hormone that controls levels of

sugar in the blood. The usual

explanation is that the insulin-

producing beta cells of the

pancreas are dying, but according

to a study published in Cell, the

beta cells of several breeds of

diabetic mice don’t die at all.

Instead, they de-differentiate into

a less specialized cell type.

If a similar mechanism is occurring

in humans, it might be possible to

ease the progression of diabetes by

finding new ways of preventing

dedifferentiation, the authors

suggest.

The Scientist

Fundamental Trends

8

Big Data Gets Personal as

Healthcare and Life Sciences

Converge

Sometime in the next few years,

for $1,000 or less, you’ll be able to

have your entire personal genome

sequenced, and the relevant

genomic and medical data will fit

on a thumb drive.

That will represent a remarkable

advance in the march toward truly

personalized medicine—but it’s also

just the beginning of an even

larger story.

A series of breakthroughs in

medical science and information

technology are triggering a

convergence between the

healthcare industry and the life-

sciences industry, a convergence

that will quickly lead to more

intimate—and interactive—

relationships among people, their

doctors, and biopharmaceutical

companies.

Big data and analytics are playing

indispensable roles in fostering

those enhanced relationships as

they vastly enrich the remarkable

but isolated wonder of a genome-

on-a-thumb-drive by giving

healthcare providers and drug

makers the ability to explore and

analyze genomic and proteomic

data not just for an individual but

in aggregate for millions of people.

Forbes

Genetics-based Personalized

Medicine Gets Big Data Boost

With the help of big data that

shows the effectiveness of various

treatment regimens on different

kinds of patients, personalized

medicine can "better match

patients with complex diseases to

the best therapies, eliminating the

trial-and-error process that often

has resulted in ineffective

treatments, particularly in the use

of pharmaceuticals," according to

an article in amednews.com.

The power to conduct that level of

analysis now rests with many

healthcare systems, Jon Duke,

Fundamental Trends

9

M.D., investigator and innovation

officer for the Regenstrief Institute

in Indianapolis, told the

publication. The University of

Pittsburgh Medical Center, for

example, recently announced a

five-year, $100 million project

launching a data warehouse for

personalized medicine.

FierceHealthIT

HOLNets and Precompetitive

Data

In Ernst & Young’s Beyond Borders

report for 2012, the company

articulates a re-invention of R&D,

as HOLNets (Holistic Open Learning

Network). Within the context of

the Open side of HOLNets,

members would pool their

strengths and assets (e.g. talent

and precompetitive data) and

share amongst members and the

broader research field, at large.

“It is encouraging that the term

“precompetitive” is being used

more broadly in recent years, as

companies grow willing to

collaborate in areas once

considered sources of competitive

advantage. But we believe that

the notion of the precompetitive

space will have to expand even

further, changing to some extent

the very basis of competition. For

example, while it is entirely

appropriate for companies to

compete based on the

effectiveness of molecules they

discover, is it essential that they

compete on all underlying

technologies (e.g. biomarkers) and

even on processes such as clinical

trial enrollment?”

Ernst & Young Beyond Borders

I-Study: Genomic

Interpretation - Who Will Pay?

At last year’s Personalized Medicine

Conference at Harvard Medical

School, 80% of audience members

predicted ‘interpretation’ would be

the strongest product segment by

2021. To better understand

challenges and opportunities in

healthcare diagnostics, Cambridge

Healthtech Associates and

GenomeQuest, working with the

Personalized Medicine Coalition,

partnered to conduct an industry-

wide study among organizations in

the value-chain of ‘interpretation’

in personalized medicine. This

landmark study included interviews

with over 55 industry leaders

representing sequencing

companies, diagnostics companies,

Fundamental Trends

10

academic labs, healthcare

providers and payors, and

healthcare cost management firms.

During this webinar, members of

the study review team present

preliminary findings.

NGS Leader Events

Should Human Genes be

Patented?

In August 2012, an appeals court

decided that Myriad Genetics Inc.

had the right to keep its patents on

two genes for ovarian and breast

cancer. As a result, a large group

of plaintiffs in the biomedical

community including patient

advocates, small companies, and

physicians, petitioned the Supreme

Court to invalidate the lower

court’s finding. On November 30th

of 2012, the Court agreed to hear

the case.

Two researchers from the

University of Pennsylvania, Arupa

Ganguly and Haig Kazazian, had

developed a novel method for

screening for the two genes.

Myriad accused the two of patent

infringement in 1998, spurring the

first court cases on the BRCA1 and

BRCA2 gene patents. Currently

the patent allows Myriad to create

and distribute screening tests for

the two genes.

The case is expected to have far

reaching impacts in the medical

community and genetic research in

general. “DNA occurs naturally in

the human body and cannot be

patented by a single company that

can then use its patents to limit

scientific research and the free

exchange of ideas,” Chris Hansen,

lawyer for the American Civil

Liberties Union (ACLU), which filed

an appeal, told the AFP News

Agency.

The Supreme Court will hear the

case in March of 2013 and is

expected to render its decision in

June, according to the AFP.

The Scientist

Fundamental Trends

11

Thomson Reuters Spotlights

the Impact of Personalized

Medicine on Pharmaceutical

R&D

The IP & Science business of

Thomson Reuters announced the

publication of a new report that

provides a comprehensive view of

the potential effects of

personalized medicine on drug

research and development.

Spotlight on Personalized Medicine

details the current challenges

posed by the paradigm of stratified

medicine as well as its clinical,

economic and societal value.

The report shows that a stratified

paradigm could result in more

efficient ways of conducting drug

development, as well as address

increased public awareness related

to post-marketing withdrawals of

popular drugs and debates

concerning drug pricing and

reimbursement. Further, the ability

to better assess biological factors

related to disease and therapy at

the genetic level lends itself to the

development of safer, more

effective treatments for specific

patient subgroups.

The slow pace of the industry to

adopt a more stratified approach

has been reinvigorated with high-

profile drug launches and

successes; however, numerous

challenges still exist that could

affect a large-scale integration of

the personalized medicine

paradigm into biopharmaceutical

R&D. Analysis suggests a gap in

connecting the dots between

genetic variation, disease

association, patient segments with

those variations, clinical trial

design and patient recruitment in

the clinic.

Thomson Reuters

Good Data Won’t Guarantee

Good Decisions

Global businesses have entered a

new era of decision-making.

The ability to gather, store, access

and analyze data has grown

exponentially during the past

decade and companies now spend

tens of millions of dollars to

Fundamental Trends

12

manage the information streaming

in from suppliers and customers.

But investments in analytics can be

useless and even harmful unless

employees can incorporate that

data into complex decision making.

To help organizations measure and

improve employees’ facility with

data driven decision making

Corporate Executive Board created

the Insight IQ, which assesses the

ability to find and analyze relevant

information.

Managers need to wake up to the

fact that their data investments are

providing limited returns because

their organization is underinvested

in understanding the information.

Companies seeking to make better

use of data they gather should

focus on two things – training

workers to increase data literacy

and more efficiently incorporate

information into decision making,

and giving workers the right tools.

Leaders need to ensure that their

processes and human capabilities

keep pace with the computing

firepower and information they

import. To overcome the insight

deficit in big data – no matter how

comprehensive or well analyzed –

needs to be complemented by big

judgment.

Harvard Business Review

Pharm Exec 50: Growth from

the Bottom Up

2012’s Pharm Exec 50 shows an

industry whose growth has slowed

to a crawl in the face of patent

expirations, aggressive payers, and

a tough environment for approvals.

The 50 this year sold $610 billion

in human prescription

pharmaceuticals, up just 2.8

percent from last year's $593

billion. The top 10 grew even more

slowly—by just 2.6 percent—and

accounted for 59 percent of the

50's total sales, just like last year.

In a year in which investors have

looked with increasing disfavor on

large R&D budgets, R&D spending

grew by just 4.5 percent, from

$101 billion to $105. Among the

top 10, R&D was almost flat,

growing by just 1.6 percent.

PharmExec.com

Fundamental Trends

13

The Path of Least Resistance:

Repositioned Drugs Surpass

New Brands

It was in 1984 when FDA first

added the 505(b) (2) pathway for

drug approval, a hybrid between

the accelerated pathway for

generic drug applications and the

standard de novo NDA pathway for

proprietary drugs. But in the past 6

years, approvals received through

the 505(b) (2) pathway have

consistently outnumbered de novo

NDAs.

Why might we be seeing this

change in the number of

applications between 505(b) (2)

and de novo? One obvious reason

is the risk involved: “If you file a

de novo NDA after phase 3, you

still only have a 10-20% chance of

getting it approved,” says

Raghuram Selvaraju, managing

director, head of healthcare equity

research, Aegis Capital Corp. “If

you file a 505(b)(2), you have a

40-70% chance of getting it

approved.” The numbers clearly

indicate that the 505(b) (2) is a

safe bet and therefore it has seen a

dramatic uptick in the number of

applications and subsequent

approvals.

Indeed, the drugs seen taking the

505(b) (2) pathway are more often

than not a repositioning of some

kind. Many smaller biotechs, such

as Anthera or IntelGenX, have

articulated a strategy centered on

developing drugs eligible for the

505(b) (2) pathway. Smaller

companies and their investors

often don’t have the resources

necessary to recruit for and

conduct big clinical trials; they

don’t have as many shots on goal,

or as much time to get across the

finish line. Aris Persidis, president

and co-founder of Biovista, a

company focused on the

505(b)(2), adds, “In addition, the

first to file patent regulations that

will take effect in the US in 2013

are making companies realize that

they may be susceptible to

competitors repositioning their own

drugs. This, plus the patent cliff

and the cost and risk reductions,

are some of the key reasons

behind the 505(b) (2) increase and

interest in drug repositioning as a

whole.”

PharmExec.com

Fundamental Trends

14

A New Path Ahead

Pharmavoice’s Nov/Dec 2012

report discusses corporate

strategies in the drug industry. In

the article, Nagaraja Srivatsan,

senior VP and head of life sciences,

North America, at Cognizant, says

life sciences companies should be

migrating from being just pure

drug manufacturers to being

companies that provide the drug

and services around their products.

This is a fundamental shift in the

go-to-market model. “Life

Sciences companies are slowly

migrating from giving a pill to the

market to a pill plus service

model,” he says. “This model will

help payers with what they need.

This means not just providing a

drug, but also providing a program

that ensures compliance with the

drug regimen to ensure that the

right outcomes are delivered.” In

addition, one of the questions

being posed is whether

pharmaceutical companies are

providing payers with what they

need to make the right strategic

decisions. Parexel’s Chuck Stevens

notes that “Some private payers

have publicly questioned the

validity and relevance of clinical

trial data when products are used

in the real world settings. The

problem facing pharma is that the

post approval payment market is

changing rapidly, implementing

new types of payment

methodologies, focusing on

outcomes, and requiring patient

consumers to pay more for

products, while regulatory approval

processes and clinical trial

methodologies have not. This

results in pharma companies

delivering product data that meets

regulatory approval standards, but

falls short of meeting the new data

demands of payers.”

PharmaVOICE

Investing and Deal Making

15

The New Pharma – VC Model

for Biotech Investing

With decreased interest from public

investment, large pharmaceutical

companies are beginning to

recognize the value of filling the

gap in the biotech industry.

In March 2012, GlaxoSmithKline

(GSK) and Johnson & Johnson

(JNJ) announced the formation of a

$200 million fund with Index

Ventures to invest in early-stage

biotech companies.

GSK and J&J will each invest $50

million to the new fund while Index

Ventures will contribute $100

million. The companies will control

2 seats on a nine-member

scientific advisory board, but the

ultimate decision to fund a

program will be made

independently by an Index

Ventures panel.

The new model allows the

pharmaceutical companies to

become acquainted with an asset

as it is being developed and the

portfolio companies of the Index

fund can get the wisdom of the

pharmaceutical industry early on in

the process.

Neither GSK nor JNJ will have any

rights to assets selected for the

fund and will compete with all

other companies to secure a given

asset for further development.

BIO’s Biotech Now

Ten Pharmaceutical Companies

Unite to Accelerate

Development

Ten leading biopharmaceutical

companies announced that they

have formed a non-profit

organization to accelerate the

development of new medicines.

Abbott, AstraZeneca, Boehringer

Ingelheim, Bristol-Myers Squibb,

Eli Lilly and Company,

GlaxoSmithKline, Johnson &

Johnson, Pfizer, Genentech (a

member of the Roche Group) and

Sanofi launched TransCelerate

BioPharma Inc. ("TransCelerate"),

the largest ever initiative of its

kind, to identify and solve common

drug development challenges with

the end goals of improving the

quality of clinical studies and

Investing and Deal Making

16

bringing new medicines to patients

faster.

Through participation in

TransCelerate, each of the ten

founding companies will combine

financial and other resources,

including personnel, to solve

industry-wide challenges in a

collaborative environment.

Together, member companies have

agreed to specific outcome-

oriented objectives and established

guidelines for sharing meaningful

information and expertise to

advance collaboration.

Members of TransCelerate have

identified clinical study execution

as the initiative's initial area of

focus. Five projects have been

selected by the group for funding

and development, including:

development of a shared user

interface for investigator site

portals, mutual recognition of

study site qualification and

training, development of risk-based

site monitoring approach and

standards, development of clinical

data standards, and establishment

of a comparator drug supply

model.

As shared solutions in clinical

research and other areas are

developed, TransCelerate will

involve industry alliances including

Clinical Data Interchange

Standards Consortium (CDISC),

Critical Path Institute (C-Path),

Clinical Trials Transformation

Initiative (CTTI), Innovative

Medicines Initiative (IMI),

regulatory bodies including the US

Food and Drug Administration

(FDA) and European Medicines

Agency (EMA), and Contract

Research Organizations (CROs).

PR Newswire

New Models for Non-Profit

Organizations are Accelerating

Research and Development

Efforts

The Multiple Myeloma Research

Foundation (MMRF) announced the

publication of a new white paper

entitled, “The Advancing Role of

Non-Profit Organizations in Drug

Development.” This paper explores

how non-profit organizations

(NPOs) are taking on a larger role

and driving progress in drug

development by uniting the

research enterprise around a cure-

based, patient-centric agenda.

Based on a series of expert panel

discussions at an industry-wide

roundtable convened by the MMRF

and Harvard Stem Cell Institute

(HSCI), the white paper outlines

Investing and Deal Making

17

best practices and most effective

new models NPOs are undertaking

to accelerate research and

development efforts. Hosted by

Harvard Business School, the

roundtable included

representatives from NPOs, the

pharmaceutical industry, venture

capital and academia. In addition

to the MMRF and HSCI, the white

paper highlights case studies and

key insights from the Bill & Melinda

Gates Foundation, the Michael J.

Fox Foundation for Parkinson’s

Research, the Juvenile Diabetes

Research Foundation, the Cure

Alzheimer’s Fund, Harvard

Business School, Polaris Venture

Partners, Millennium: The Takeda

Oncology Company, and the

Bridgespan Group.

MMRF

Investing and Deal Making

18

Summary of the Campbell Alliance 2012 Dealmakers’ Intentions

Survey

The following are some of the highlights of the Campbell Alliance 2012

Dealmakers’ Intentions Survey which reports strategic trends in deal

making. In summary, safety will be expensive.

Overall, there is growing optimism among the respondents as compared to

the prior year. Over half of the out-licensers and in-licensers who responded

believe that there will be more preclinical and phase I deals compared to the

prior year. There is also optimism regarding phase II and marketed

products. There were mixed survey results regarding Phase III assets where

the optimism of in-licensers and the pessimism of out-licensers offset. This

portends, possibly, the best selling opportunity for phase III assets in recent

history.

In-licensers are pushing risk down the food chain to out-licensers. Supply

and demand is skewed heavily toward in-licensers demanding de-risked,

late-stage assets in the most established therapeutic areas.

Discount rates have been rising, which is driving the in-licensers to chase

late-stage assets. Respondents use a variety of methods to evaluate

investment opportunities.

Investing and Deal Making

19

Investing and Deal Making

20

Oncology leads the therapeutic areas where in-licensers anticipated doing

deals. A relative surplus of early-stage oncology assets may exist, rep-

resenting true buying opportunities

Buying opportunities in off-the-beaten-path asset classes may also exist,

especially for those in development stages.

Campbell Alliance

Regulatory and Government

21

Dotting “i”s and Crossing “t”s

Getting money from the US

government to do research isn't

exactly a walk in the park. With the

grant funding that comes from the

National Institutes of Health (NIH)

or the 2009 stimulus act come a

slew of rules that dictate how

university administrators need to

keep track of how the cash is

spent. And recently, the

government has been holding

those administrators and grantees

accountable for every dollar.

According to a report by The

Chronicle of Higher Education,

audits and investigations of highly

funded research universities are on

the rise. Inspectors at agencies

such as the Department of Health

and Human Services (HHS), which

oversees about $25 billion awarded

by the NIH annually, and the

National Science Foundation (NSF)

have been finding oversights and

minor misappropriations and

charging grantees with repaying

misspent grant money.

The Chronicle of Higher Education

Drugmakers Question FDA’s

Integrity

In the run-up to an evaluation of a

new drug review process at the US

Food and Drug Administration

(FDA), pharmaceutical industry

trade groups are calling on the

federal agency to vouch for the

independence of the third party

contractor conducting the audit.

The independent contractor will

evaluate the agency's New

Molecular Entity (NME) Review

Program—a model enacted by the

latest version of the Prescription

Drug User Fee Act (PDUFA V)

meant to speed the approval of

drugs and get them onto the

market quicker. While the industry

is largely in favor of the new

program, the Pharmaceutical

Research and Manufacturers of

America (PhRMA) and the

Biotechnology Industry

Organization (BIO), trade groups

representing thousands of

drugmakers, worry that the FDA

will have too much leeway to edit

or revise the contractor's report.

In an open letter to the FDA, BIO

cited several mentions in the

PDUFA V commitment letter that

seem to give the agency the ability

to revise the independent

contractor’s review, or work plan.

Regulatory and Government

22

The trade group implored the

agency to assure drugmakers that

the independent contractor

conducting the review would in fact

remain independent. "We request

that FDA clarify in the final

statement of work that as an

independent entity, the Contractor

is not required to adopt FDA’s

proposed revisions to the work

plan, proposed data collection and

analysis methodologies, interim

and final assessments, or

presentations to the public," BIO

wrote. "In order to maintain the

independence, autonomy, and

credibility of the Contractor, the

statement of work should explicitly

acknowledge that FDA does not

have authority to overrule the

decisions of the Contractor

regarding the conduct and

outcomes of the assessment."

According to FDANews, both BIO

and PhRMA worry that the potential

back and forth between the

contractor and the FDA will

effectively shut out other key

stakeholders from the NME

evaluation, tarnishing the

independence of the audit.

The Scientist

Election Aftermath:

Proposition 37 and the Food

Movement

Marijuana legalization, same-sex

marriage and tax measures won

big in some state votes in

November’s elections, but

California's Proposition 37 was

among the losers.

Voters rejected the ballot initiative,

which called for labeling some

foods made with genetically

modified ingredients, 54% to 46%.

The proposition had been trailing in

polls for weeks amid a campaign

battle that saw a big-money push

for "No on 37."

Some supporters built up passage

of Proposition 37 as "a shot heard

'round the world" to bring about

wider food-system reform. Many

proponents of the measure saw it

as an opportunity to spark a

national referendum as well as

challenge what some call "Franken-

food" and the use of only a few

Regulatory and Government

23

seed types owned by a small

number of giant companies, said

Tom Philpott in Mother Jones.

Los Angeles Times

FDA New Drug Approvals Hit 16-year High in 2012

U.S. regulators approved 39 new

drugs in 2012, the most in 16

years, suggesting that

pharmaceutical makers are poised

for growth after losing billions of

dollars in recent years to generic

drug makers because of patent

expirations.

There were eight approvals in

December alone, including a new

treatment from Johnson & Johnson

called Sirturo for drug-resistant

tuberculosis, the first new TB drug

in decades.

The pharmaceutical sector badly

needs a pick-up in productivity as

companies try to refill their

medicine chests after heavy losses

to generic manufacturers, which

have benefited from a string of

patent expirations that peaked in

2012. When generics go on the

market at a lower cost, sales of

name brand drugs plummet.

The tally of 39 new drugs and

biological products approved by the

Food and Drug Administration

compares with 30 in 2011 and just

21 in 2010. At least 10 of the

drugs had fast track status in

2012, which enabled them to be

reviewed more quickly.

It is the highest number since

1996, when 53 so-called new

molecular entities won a green

light.

Reuters

Regulatory and Government

24

FDA, AdvaMed Seeking Clarity

on Med Device Pre-Market

Approvals

The FDA and the Advanced Medical

Technology Association (AdvaMed)

gave cardiovascular device

manufacturers plenty to think

about with information presented

at a workshop. The two bodies

came together to explain

requirements for 30-day notices

and annual change reports for Pre-

Market Approvals (PMAs), an

important gateway to medical

device access and

commercialization.

The six and a half hour meeting

tackled a wide range of topics,

from the role of risk assessment to

supplier changes, as agency

officials attempted to shed more

light on when companies need to

submit 30-day notices for

manufacturing changes. Those

changes that qualify for a 30-day

notice submission affect device

safety and effectiveness and either

the manufacturing procedure or

the method of manufacture. But

device manufacturers must

beware; a 30-day notice containing

inadequate information could face

conversion to a 75-day

Humanitarian Device Exception

(HDE) supplement or a 135-day

PMA supplement. In these

instances, the company will need

to offer additional information or

take further actions in order for the

FDA to accept the change.

The workshop in the Federal took

many months to prepare and came

more than a year after the FDA

issued guidance explaining what

changes qualify for 30-day notices

and which ones do not. This

meeting also came as the agency

prepares to move 30-day notice

reviews from the Office of

Compliance to the Office of Device

Evaluation (ODE), with the

cardiovascular devices division

piloting the program.

PharmExec.com

Fears over Fast-tracking Drugs

Drugs given Fast Track review by

the US Food and Drug

Administration (FDA) may have

higher health risks and more side

effects, argue two authors in the

September 5, 2012 volume of the

Journal of the American Medical

Association (JAMA).

In 2011, the FDA expedited

approval for nearly half of all 35

new drugs it reviewed. Many of the

drugs chosen for the Fast Track

Regulatory and Government

25

process are aimed at treating

ailments with unmet medical

needs, such as certain types of

cancer and multiple sclerosis. In

their article, the JAMA authors

focus on three drugs—vandetanib,

fingolimod, and dabigatran—that

were approved despite serious

toxicity and concerns regarding

safe dosing. As an example, the

blood thinner dabigatran (also

called Pradaxa) was approved for

lowering the risk of stroke in

patients with irregular heart beat.

However, within less than a year,

“Pradaxa accounted for more

serious adverse drug events

reported to the FDA during the

second quarter of 2011 than any

other regularly monitored drug,”

mostly for increasing risk of

uncontrolled bleeding in older

patients, wrote the authors (one of

whom is consulting for patients

who have entered litigation for the

side effects of dabigatran).

But safety is not an absolute

measure, as drugs for illnesses

such as cancer are permitted to

have harsher side effects than

preventative measures like

vaccines. "Making regulatory

decisions about drugs always

involves uncertainty and risk," an

FDA spokesperson told Ed

Silverman at Pharmalot Blog. “FDA

works directly with the affected

patient populations and treating

physicians when considering just

how much uncertainty and risk are

reasonable to accept.”

The Scientist

Government Urges FDA to

Speed Drug Approval

Patients who are morbidly obese or

who have other high-risk diseases

may get more attention from

pharma companies in years to

come if the US Food and Drug

Administration takes the

recommendation of the President’s

science advisors, who unveiled a

plan to double the number of

prescription drug approvals for

certain diseases.

Regulatory and Government

26

The advisory panel proposed that

the FDA approve certain drugs with

side effects that may otherwise

prevent approval, for use in

patients who have no other options

for treatment, but restrict those

drugs from being used in the

general population. For example,

an individual with morbid obesity

may be willing to take a drug with

more severe side effects than a

patient with moderate obesity if

that drug is effective at reducing

the obesity. However, those with

milder obesity could not be

prescribed the drug.

The Scientist

Sequestration:

What Does It Mean for Pharma?

Lurking in the shadows of the US

General Elections is something

called The Sequestration

Transparency Act of 2011. Of late,

you may have read the occasional

article that breathlessly reports

that “US defense will be halved by

Sequestration” or “Air Traffic

Controllers will be drastically

reduced under Sequestration”, and

even “Sequestration will lead to the

next Great Recession if enacted”.

All pretty dire stuff, for sure, and if

you begin slicing and dicing these

stories, there does appear to be

some truth in all of them…if the Act

goes into effect.

So, with reported near

Armageddon apparently on the

horizon, what in the world is this

Sequestration Act and more

importantly, what impact, if any,

will it have on US Pharma? Read

on, and I think you will be

surprised at the answers.

PharmExec.com

Biomarkers, Gene Patents and

Personalized Medicine in

Jeopardy

Fallout from the US Supreme Court

landmark decision to deny two

patents to Prometheus

Laboratories may complicate the

future profitability of the industry.

If this is indeed a precedent-setting

decision, biomarker patents may

now fall under the realm of “law of

nature”, cutting off the prospect of

exclusive market penetration that

once justified the significant

research and development onus in

the early stages.

The ruling of the United States

Supreme Court claims that certain

processes cannot be patented

because they fall under “law of

Regulatory and Government

27

nature” stipulated by the 1952

Patent Act which protects

processes that occur naturally,

and are not an advent of a

particular group, person or

company. If these processes were

to be defined as part of this scope,

any patents claiming proprietary

rights to the identification of a

biomarker within the body would

be inadmissible.

As some see it, will a liberalization

of “natural process” lead to more

shared development, and in turn

more product development?

Further, is this decision perhaps

the exception to the rule, and not

the beginning of a trend?

onemedplace

Funding Cuts Threaten Big Data

In 2007, the US National Library of

Medicine (NLM) shunted millions of

dollars away from infrastructure

grants, which supported widely

used databases that house

terabytes of biological data, and

instead invested those resources in

informatics research, Nature

reported. As a result, at least five

such databases are now facing

serious funding shortages and are

on the brink of being shuttered.

But the databases are not going

down without a fight from their

user communities. More than 90

scientists wrote letters in support

of the Biological Magnetic

Resonance Data Bank (BMRB),

which contains thousands of

entries on the nuclear magnetic

resonance of biomolecules used by

structural biologists around the

world. The BMRB has been funded

by the NLM since 1990, but is now

looking to other federal funders,

according to University of

Wisconsin-Madison’s John Markley.

Protégé, which has 200,000

registered users, is also looking for

federal funding, specifically from

the National Institutes of Health

(NIH), as Musen, a bioinformatician

at Stanford, feels strongly that

charging scientists for access

would discourage them from using

the site at all. Last June, Musen

submitted an NIH grant

application, but it was rejected,

despite having been accompanied

Regulatory and Government

28

by more than 100 letters of

support. Musen is still awaiting a

decision on his resubmitted

application.

Another option is commercial

sponsors. New England Biolabs, for

example, already partially supports

a database of enzyme data called

REBASE, and will take on the full

costs of the database when its

federal support runs out in 2014,

CSO Richard Roberts, who also

founded REBASE, told Nature.

Unfortunately, the drought in

federal funding is unlikely to

change any time soon. “The whole

system is rigged against

infrastructure of any kind,”

Princeton genomicist David

Botstein, a member of the NIH

working group that drafted a report

on the issue in June, told Nature.

The Scientist

Health Care

29

In Cancer Care, Cost Matters

At Memorial Sloan-Kettering

Cancer Center, a recent decision

was made that should have been a

no-brainer: they are not going to

give a phenomenally expensive

new cancer drug to their patients.

The reasons are simple: The drug,

Zaltrap, has proved to be no better

than a similar medicine already

available for advanced colorectal

cancer, while its price — at

$11,063 on average for a month of

treatment — is more than twice as

high.

In most industries something that

offers no advantage over its

competitors and yet sells for twice

the price would never even get on

the market. But that is not how

things work for drugs. The Food

and Drug Administration approves

drugs if they are shown to be “safe

and effective.” It does not consider

what the relative costs might be

once the new medicine is

marketed.

The New York Times

Look Out—He’s Got a Phone!

Last October at Melbourne’s grand

Intercontinental Hotel scores of

technophiles watched a researcher

for IOActive, a Seattle-based

computer-security firm,

demonstrates an ingenious new

way to kill someone—a method

that one can imagine providing a

sensational plot twist in an episode

of Homeland.

The IOActive researcher, a man

named Barnaby Jack, was so

worried about the implications of

his work that he intentionally

obscured many of the details in his

presentation. As a further

precaution, he asked the attendees

not to take any pictures—a tough

Health Care

30

request in a crowd full of

smartphones and laptops.

Jack’s work concerned pacemakers

and implantable cardioverter-

defibrillators (I.C.D.’s). More than

three million American heart

patients carry around these small,

computerized devices, which

monitor their heartbeat and deliver

jolts of electricity to stabilize it

when needed. To check and adjust

these devices, many doctors use

wand-like wireless programmers

that they wave a few inches above

patients’ chests—a straightforward

and seemingly safe procedure. But

now, with a custom-built

transmitter, Jack had discovered

how to signal an I.C.D. from 30

feet away. It reacted as if the

signal were in fact coming from the

manufacturer’s official I.C.D.

programmer. Instructed by the

counterfeit signal, the I.C.D.

suddenly spat out 830 volts—an

instantly lethal zap. Had the device

been connected to an actual

human heart, the fatal episode

would likely have been blamed on

a malfunction.

Vanity Fair

Meningitis Deaths Prompt FDA

to Seek Pharmacy Oversight

The top U.S. drug regulator asked

Congress for more authority over

pharmacies following the deadly

meningitis outbreak, a request met

with resistance by lawmakers who

said existing oversight hasn’t been

used to the fullest.

The outbreak that has led to 438

infections, including 32 deaths, can

be blamed in part on a patchwork

of state regulations for

compounding pharmacies that

restrained federal officials from

intervening, Food and Drug

Administration Commissioner

Margaret Hamburg told members

of a House subcommittee in

Washington recently. She asked for

greater federal power to inspect

Health Care

31

the pharmacies and test their

medicines.

Bloomberg Businessweek

Oops! 5 Retracted Science

Studies from 2012

When you read about medical

breakthroughs in the newspapers,

you shouldn't get your hopes up.

This is not because of journalistic

hyperbole or even the fact that

cures often are years away from

the initial publication of result.

It seems that an increasing

number of scientific studies are

just plain wrong and are ultimately

retracted. Worse, a study

published in October 2012 in the

Proceedings of the National

Academy of Sciences claims that

the majority of retractions are due

to some type of misconduct, and

not honest mistakes, as long

assumed.

The blog Retraction Watch tracks

such retractions and has notified

its readers of hundreds of journal-

article withdrawals in 2012 alone.

The king of retractions, according

to Retraction Watch, is Japanese

anesthesiologist Yoshitaka Fuji,

who falsified data in 172 of 212 of

his papers published between 1993

and 2011. All of this came to light

in 2012.

Sadly, fudged studies create false

hopes, and they also sully the

reputation and publication record

of the co-authors, often students,

who weren't aware of the

fraudulent behavior.

Fox News

Featured Article: Corporate Venture Capital

32

An An Interview with 3 CVC’s

There has been a significant increase in corporate venturing in the life

sciences sector in recent years. Recently, Don Alexander of Carlyle Conlan

interviewed John Hamer of Monsanto Growth Ventures, Alex Steel of

Syngenta Ventures and Geeta Vemuri of Baxter Ventures for their

perspectives on corporate venturing, A.K.A. “strategics” and CVC.

Don: What are the objectives of your venturing program — strategic, financial, both, other?

John: Both. Monsanto is strategic in its venture approach and is also

seeking a financial return. I think there is a strong relationship between innovation, high quality companies and return on capital, in that; you should

be able to get a good return from strong technologies in great companies.

The return sought is not necessarily a venture multiple but we are aiming for a reasonable return over 10 years. As a venture group, our aim is to have a

very broad impact across Monsanto. There are new approaches to trait development, vegetable production or water management and precision

farming. Therefore, there is a broad mandate for us to make an impact across the company in our review of technology-based companies and how

their technology can impact agriculture. There will likely be a good percentage of deals done as a business development structure versus equity

investment. I like to say we have “an all of the above” strategy with regards to accessing and financing emerging technology...

Alex: Syngenta Ventures is a strategic investor. We invest in innovative

companies that accelerate innovation in agriculture and support Syngenta’s vision of increasing farm productivity by growing more crops from fewer

resources. Our investments are strategically relevant to Syngenta and

typically take the form of novel technologies or new business models. Once invested, we engage in a way similar to a financial investor and focus on

maximizing shareholder value.

Geeta: Our Primary objective is to support entrepreneurs with true

innovative ideas that are meaningful to Baxter’s long-term growth and

vision. We would hope our investments will bring new pipeline ideas to

support Baxter’s core franchises and adjacencies as well as further Baxter’s

goal of a company that provides life saving treatment options to patients.

Featured Article: Corporate Venture Capital

33

We do want to make investments that will provide superior returns to

Baxter. We will manage these two objectives by constantly evaluating our

portfolio. Baxter is unique due to the breath of product offerings we are

involved with and thus we can choose investments based on strategic fit and

also financial returns.

Don: Measuring success is often problematic in corporate venturing.

What is your approach?

John: Ultimately, the measure is the quality of companies in the portfolio and their impact on Monsanto. As a newer group, we are also in the process

of reviewing ways on which to measure success. As the venturing group is part of the corporate global strategy group, one way we are discussing is to

survey different business units for their impression of our impact. A scorecard, if you will, of the impact the venture group. We are also going to

do a retrospective analysis. We will review venture deal databases for analysis of metrics like: Did we know about the deal? Did we see it? Did

we participate? Did we pass? Should we re-examine? We would like to be

involved in a significant percentage of deals that Monsanto should be involved with but the quality of deals (teams, syndicate, valuation) as well

the quality of relationships, in the innovation community, is also very important.

Alex: We measure both financial and strategic value. The financial case is

assessed using classical tools such as Internal Rate of Return and cash multiples. We set ourselves internal targets that we expect to exceed over

the long term. These targets are easy to measure and transparent. The more difficult and subjective aspect to measure is strategic value. We assess

this using a number of criteria. Our business teams typically negotiate a separate and distinct collaboration agreement alongside our investment

agreement. The breadth and depth of this collaboration provides a good indicator of the potential strategic value. We also seek feedback from our

internal stakeholders on the value we bring through our interactions with

them. Our activities provide them with valuable insights on external innovation.

Geeta: We are still defining this and are looking to other established

Corporate Venture Capital groups (“CVCs”), not only in the healthcare space

but also in the non-healthcare arena such as GE or Dell, to arrive at some

measurable metrics.

Featured Article: Corporate Venture Capital

34

Don: How does your team support your company’s innovation

strategy?

John: Our goal is to be at the spear tip of Monsanto’s innovation strategy. How can we use our imbeddedness within the broader innovation ecosystem

to drive value for Monsanto’s businesses? We need to be flexible, there are times when equity may not work and a license is the best path. Personal

relationships matter to us, our reputation as investors, colleagues. We don’t see ourselves as doing or handing off deals and disappearing. In terms of

structure at Monsanto, there is a technology prospecting team that closely tracks crop based research at the major research universities and at various

innovation type meetings. They may identify deals that may be handed upstream to my team or down stream to a business development lead. The

venture team’s objective is to become integrated with innovation rich communities in life sciences, biotech, cleantech and IT.

Alex: Syngenta has developed a broad innovation toolkit that includes internal R&D spend, collaborations, licensing, M&A and corporate venture

capital. Syngenta Ventures is a core component in this toolkit and provides access to external innovation and entrepreneurial talent.

Geeta: Our group’s mission is to invest in innovative companies and ideas.

We partner with our Business Unit in order to understand their long-term

goals and invest in innovative companies based on our collaboration. In

fact, our investment approval committee comprises our Global Business Unit

Heads in addition to our CEO and our CFO.

Don: What partner inflection points need to occur for you to be

interested?

John: It all depends on the deal. For deals right in core seed business, we

seek buy-in from our commercial or R&D teams. In these deals we are willing to go very early, perhaps even be the sole investor and may elect to

also have a deep R&D relationship. For deals that are in areas where we do not have a commercial business, but rather have a deep strategic interest

say renewables or water technology, we connect with our strategy team,

and look at the deal from the perspective of gaining new insights into an emerging technology area. We have clearly mapped our target space and

we are constantly communicating it and reiterating on that strategy. This

Featured Article: Corporate Venture Capital

35

gives us comfort in reaching well beyond Monsanto’s current commercial

interests.

Alex: We look for strong internal interest in the companies that we invest in as we recognize the value of the deep knowledge that resides within the

organization.

Geeta: Baxter’s preference is to consider BD transactions after human

proof-of-concept is established. However, we make exceptions based on the

business and its importance to our franchise.

Don: How do you interact with the financial venture capital

community? Do you take the lead in syndicates? Seek board seats?

John: There are a handful of leading venture firms that are doing work in

life sciences and agriculture. These relationships are very important to us. One of the challenges a strategic like us can encounter is being constantly

asked to be a limited partner in a fund as we will be more focused on strategic value than IRR (internal rate of return). Part of what we are doing

now is reviewing how we should work with funds as a co-investor versus being a LP (Limited Partner). When does being an LP make sense? How can

we drive more value from the relationship? Monsanto will take the lead in deals and with regard to board seats, where we can be helpful to the board

and add value; we would seek to do this. Observer seats are another way to

engage, as well.

Alex: We maintain a close relationship with the financial venture capital community as our interests are closely aligned. We prefer to invest in

syndicates – the value and insights that financial and strategic investors bring is often different, and working together harnesses the value that both

groups bring. As a strategic investor we can tap into the parent organization to support and accelerate the development of the portfolio company. This

can take the form of R&D know how, field trial and testing capabilities, or perhaps access to commercial channels. Investing in Agriculture requires a

long-term view. Bringing new technologies to the market can often take more than 10 years. On governance, our preference is to have either a

board or observer seat. We are an active investor who brings real value

through our intimate knowledge of the industry.

Geeta: Yes, we like to work with financial investors; this allows us to keep

our eye on financial returns – in addition to meeting our stated strategic

Featured Article: Corporate Venture Capital

36

objectives. Our preference is to be a co-lead or a co-investor but we have

been leading deals as the economic environment outside is quite challenging

for financial VCs to support early stage Biopharma companies. We have

taken board seats.

Don: Have you done any co-investments in deals where there are

other strategics involved?

John: Yes. We are in a couple of deals with other strategics. The easy

scenario is when there is a health sciences company where Monsanto might see the translational value to agriculture applications. These deals are fairly

easy because we are in a different vertical, but it can be a little more challenging in other deal types. There is an excellent collaborative example

found in our work with the Nidus fund where Monsanto, Novozymes and Bunge are all participating.

Alex: We have made a number of co-investments with other strategics and

recently completed our first co-investment with a competitor. To achieve the step-change in productivity needed as part of the sustainable intensification

of agriculture, innovation rates must accelerate. Increasing investment in agriculture is a positive step, and we will invest alongside other strategics on

the same terms.

Geeta: Yes, recently we did an investment in an Illinois based company

called Naurex where we have 3 other strategics alongside Baxter Ventures.

Don: How has your corporate venture capital strategy evolved over

the past couple of years and what near term forecasts do you

anticipate moving forward?

John: There are about 50% less institutional investors now than a couple of

years ago so entrepreneurs will rely more and more on corporate VC’s. The

other trend is on the company side in that there are entrepreneurs doing their 3rd or 4rth company. There are sophisticated entrepreneurs wanting to

form companies versus spinning a technology out of a lab. Incubators are

popping up everywhere and gaining access requires a new skill set and a new set of relationships. Trust, relationships and network will become even

more to critical to CVCs as young emerging companies become ever more sophisticated and well coached by experienced and successful

entrepreneurs. Monsanto will distinguish itself by its openness, cadence of

Featured Article: Corporate Venture Capital

37

deal making and reputation for wanting to be first and best in class. We see

a powerful role we can play in helping bridge gaps and bring our R&D power to help companies reach key proof points for value creation.

Alex: Our corporate venture capital strategy has changed very little since

we established Syngenta Ventures in 2009. It’s worth noting that corporations are using venturing for many different purposes. There is no

right or wrong approach. What’s important is that the objectives are clear from the outset and that expectations are aligned internally. Venturing is a

long-term business that requires a long-term commitment.

The traditional venture capital market has been through some challenging times, and corporate venture capital has replaced some of the traditional

early-stage venture capital investment. More corporate venturing can be expected as the trend towards open innovation is here to stay. In looking at

the agriculture sector, the biggest frustration might be the lack of innovation

and limited number of quality investment opportunities. Despite this, the demand for innovation has never been greater. Today there are very few

financial venture capital firms focusing on agriculture, but this is starting to change as high profile exits attract interest. Increased investment will

support and stimulate more innovation. As the leading venture investor in agriculture, Syngenta Ventures has an important role to play in accelerating

the rate of innovation.

Geeta: Our venture capital efforts are fairly new. Baxter committed $200

MM in venture investment in mid-2011 and we have stayed with our stated

mission.

CVCs have co-invested with regular financial VCs for many decades but the

number of healthcare companies creating venture pools and entering the

venture capital investment arena has increased over the last few years. This

is partly driven to fill their own pipeline gap through equity investments (and

eventual BD transactions) and partly to learn about new vectors one can

enter through modest commitment. Their commitment to stay for a longer

term is also more obvious as they are hiring people with venture experience.

CVCs are taking a very active role in filling the gap in funding created by

financial venture capitalists in healthcare, especially in therapeutic space –

drugs and devices. In this new paradigm, however, CVCs are leading deals.

Featured Article: Corporate Venture Capital

38

They are not simply relying on financial investors to source deals thus

busting the earlier myths from “easy money, passive follow-on investors,

observe but not active board members” to “potentially distracting or

disruptive early-on” or worst still, corporations entering the market at its

peak and leaving in its trough.

CVCs have staying power in good companies, as well as the ability to do

more for the small companies due to in house expertise (as needed), thus

continuing to benefit small companies.

Finally, Baxter is a very unique company – it has well established Global

presence and brand recognition, yet has the feel of a nimble Biotech with an

ability to adapt quickly to market needs and pressures. The Company has

very well established businesses in Biopharma and Medical Products, this

investment approach agnostic to either molecule or devices, and allows us to

select and fund the best therapeutic modality for a disease based on the

market need and ease of use and cost versus artificially staying within one

treatment category.