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Roadmapping as a Planning Tool to Assess Strategies in a Rapidly Changing Market

Bob McCarthy, Ph.D.

Director, Strategic Market Planning

Roche Molecular Biochemicals

Phone: 317-576-7475, Fax: 317-576-7317

e mail: robert-c.mccarthy@roche.com

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“We used to think the future was in the stars. Now we know its in our genes.”

James Watson, Visions (1997)

“Commentators have sought to set the project in a historical context by likening to the..Manhattan Project and the moon shot...Rather, the Human Genome project aims to produce biology’s periodic table- not 100 elements, but 100,000 genes…. The challenge ahead is to turn the periodic table produced by the era of structural genomics into tools for the coming era of functional genomics”

Eric S. Lander, Science 274:536 (1996)

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“We used to think the future was in the stars. Now we know its in our genes.”

James Watson, Visions (1997)

“There’s a gene rush on out there. In the next three years or so, the entire human genome will be known, and all the interesting targets claimed. Companies that don’t invest and secure rights to disease-modifying gene discoveries will be shut out.”

J Hartwig,WSJ 24 Sept. 1998

rScale of Human Genome Project

World 5.8 billion

peopleNucleus

23 chromosomes3 billion base

pairs6 billion basesUSA

270 million

Indiana5.8

million

1 Chromosome200 million bp

400 million bases

Marion County

Marion County800 K

Genes withinchromosome1.5 to 2000 K

bases

rAnalogy does not Reflect Complexity of Genome

Protein

DNA

mRNA

• Every cell contains entire genome

• Only 3% of genome codes for protein

• Cells function determined by proteins produced

DNA messenger RNA protein synthesized

Blueprint Extract portion of plans Protein function

Structural Genomics: analysis of the blueprint = structure of DNA in the genome

Functional Genomics: analysis of the work carried out by subcontractors = biology

rCell Circuitry:Implications for Functional Genomics

Protein

DNA

mRNA

Ligands

Receptors Ion

channels

Protein Pathways

Most cells are unique (differentiated state), live in communities (tissue and organs) and have sensors to react to specific changes in the environment (e.g., ligand receptor interactions, ion channels);

the appropriate response is mediated by pathways of complex proteins (cellular circuitry)

rCell Circuitry:Implications for Functional Genomics

Protein

DNA

mRNA

Ligands

Receptors Ion

channels

Protein Pathways

• Disease occurs when proteins in key pathways malfunction or arechanged by mutation (e.g., cancer), this leads to an abnormal state and these changes are detected by appearance of clinical symptoms

• Goal of functional genomics is to first identify and analyze the cellular circuits that control the cellular response, identify changes in disease, then manipulate this circuitry with drugs to control the disease

rProteins Key Focal Point for Functional Genomics

• Key proteins can be identified by an increasing number of methods• The ultimate goal in genomic biology is to identify all the proteins that participate in key biological pathways

A B C C

A

BKey Biological Activity

A, B, and C are unique proteins, when aggregated into a complex, generate key biological activity

rProteins Key Focal Point for Functional Genomics

A B C C

A

BKey Biological Activity

A, B, and C are unique proteins, when aggregated into a complex, generate key biological activity

“It is important to note that the target validation process may determine that anynumber of genes identified as gene targets are not appropriate as therapeutic targets. However, during the process of target validation new genes functionally related to the original gene targets may be identified as useful for investigation as new prospective therapeutic targets.”

J.W. Hawkins, Genomics: A Brave New World for Therapeutics Development, Drug & Market Dev. 9 (3) p. 72 (1998)

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E. coli S.

cerevisiae

Pre-Genomic

E. coli

S. cerevisiae

Genomic Era

DNAUniversal Code

of Life

Paradigm Shift: Biological information and function strongly conserved

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Pace for Development is Accelerating

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NSAID’s

H-2 AntgonistsBeta blockers

Lipid LowerersACE inhibitors

Biotech Drugs

Chronic degenernativedisease associatedwith aging, inflammation, & cancer

ReceptorsEnzymes

GeneticEngineering

Cell pharmacology/molecular biology

New Therapeutic Cycles

Innovations

500 drug targets

3000-10,000 drug targets

0

10

20

30

40

50

60

70

80

90

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

U.S. Sales $ billions

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

R&D as % Sales

Pharmaceutical Growth Knowledge

Dependent

rChanges in the Pharmaceutical Industry

Big Pharma

Vertical industry 1950-1970’s

• Expertise kept in house

• Drug development based on serendipity

Biotech era 1980’s

• Collaborations established to protect existing markets and expand into new markets

• Drug development move towards applying fruits of biotechnology

Genomic era 1990’s

• Collaborations essential to gain knowledge about key biological pathways

• Drug development restructured to gain knowledge faster than competition

rChanges in the Pharmaceutical Industry

Animal/clinical studiesTesting drug librariesRegulat. & reimbursementSales and marketing

Assemblers

GeneHunters

TestingServices

Combinat.Chem.

I.d. biological targetsProvide chem. librariesToxicology testing

Tier 1

Collaborationsbased on focus

& speed

RBReagent

Anal.Instrum.

RBReag/Inst.

Chem.Company

Special reagent/instrum.Platforms increase thruput

Tier 2

Big Pharma

rAndy Grove’s Strategic Inflection Point

InflectionPoint

BusinessDeclines

Business goes tonew heights

“Let’s not mince words: A strategic inflection point can be deadly when unattended to. Companies that begin a decline as a result of its changesrarely recover their previous greatness.” (p. 4, Only the Paranoid Survive) 1993 2010?

Genomic Era

rComposition of Roadmap Teams

Roadmap Working

TeamInternal

Recommend & approve experts

Review format of surveys

Review raw & condensed data

Input conclusions into roadmap

Functions

R&D, Marketing (central)Team Composition

German & U.S. Biounit (country)

Molecular biologists

Proteomics experts

Developmental biologistsCell biologists

Bioinformatics experts

Team Composition

Respond to surveysReview drafts of roadmapParticipate in discussion groupsProvide updated knowledge

Functions

Roadmap Expert GroupInternal-External.

rRoadmap Process

Market Trends M1 M2

Planning Time Years

RN1 RN2 RN?RN3Root Needs

T1 T2 T3 T4 T?Technology

CA CA CA CACompetitiveAssessment

P1P2

P3P4

TechnologyProjects

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• Biological information restricted to specific applications/model systems

• Biological studies based on phenomenology

• Shotgun mutation methods screened for gross observable changes

• Ultimate goal is to understand function of biological molecules in their proper context

• Assembling biological information infrastructure, data mining to focus on biological and/or disease models

• Developing integrated knowledge of biological pathways and networks in context of cell and organism

• Performing detailed structure-function studies in context of biological disease model

• Goal is to understand differential gene expression in disease states or biological model systems

• Saturation mutagenesis to evaluate function of specific molecules

M1 M2

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⟨ Manipulate and access relevant biological datajust in time

⟨ Rapid universal system to detect modificationof macromolecules

⟨ Detect changes in biological activity within apathway

⟨ Protein expression systems which allow rapidproduction of recombinant protein withappropriate modifications

⟨ Improved methods to detect differential geneexpression

RN1

RN2

RN4

RN3

RN5

RootNeeds

rTechnol

ogy

Customer Needs Weight Importance Technology 1 Technology 2 Technology 3 Comments

Total Score

Technology Characteristics

Technological MaturityMatch with internal skills

Technology ROITotal Score

Protein Expression

Systems

Comments on strategic fit, market opportunity, competitive position

Conclusions & Recommendations

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Technology characteristics• Pacing: potential to change entire basis of competition• Key: critical to competitive success, differentiation• Base: necessary/essential, little competitive advantage

Technology maturity• Embryonic: visionary, scientific tumult & contradiction• Growth: vision sharpened, realistic forecasts• Mature: advances slow down, technology shared • Aging: only small incremental changes in technology

Technology return on investment• Amount of $ spent to gain competitive position (H, M, L)

Match with internal skills = synergies

Technology

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Description & state of technology Characteristics, maturity, ROI, internal synergies

Rationale for technology investment: gaps, unmet needs, etc...

Competitive advantage: ability to influence environment

Preparation of Technology Brief, 1CompetitiveAssess.

DominantDominant

StrongStrong

FavorableFavorable

TenableTenable

WeakWeak

Declining quality of technical output, short term/firefighting

Powerful leader by technology commitment & reputation (dominant design?), others always catching up

Able to set take independent action, set new technological direction; committed to support development and distinguished from competitors by this action

Can sustain technological competitiveness and can exploit technology to improve position, not leader but focus on niche

Catch up mode, unable to set independent course, can maintain competitiveness but weak at differentiation

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• Sources of competitive advantage: intellectual property, know how, etc...

• Competitor profiles by company Intellectual capital

Breadth of products, number of new introductions

Evaluation of past and future strategy

Response against introduction of technology

• Recommendations, next steps

Preparation of Technology Brief, 2CompetitiveAssess.

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• Fit with business strategy (excellent to poor)

• Inventive merit, strategic importance to business (high to low) Improves competitive position?

Applicable to more than one business?

Provides foundation for new business?

• Reward: NPV’s: worst, base, and best case

• Competitive impact of technology Technology characteristics and maturity

• Uncertainty Probability of technical success (0.1-0.9)

Probability of commercial success (0.1-0.9)

Probability of overall success (0.1-0.9)

Project Proposal for InvestmentProjects

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• Implementation plan Proposal for resources and competencies required to complete the

project Propose timing for technology reviews: agreement on specifics that

drives the review (e.g, time, dollars, achievements, etc…)

• Risk R&D costs to first milestone and costs to completion (range if

appropriate)

Time to first milestone and to completion (range if appropriate)

Capital and/or marketing investment required to exploit technical success (range if appropriate)

Project Proposal for Investment, 2Projects

rTechnology Portfolio Maps

NPV

Time to Launch

High

Zero

Low

Probability of S

uccess

Builds on competency, improves position

Builds new competency & extends business

Builds new competency & new business

Long

rBenefits of Roadmaps

• Cross-functional understanding of strategic issues

• Sensitization to following

• Technology trends

• Gaps in technology in meeting needs

• Competitive position for technology

• Easily understood process to communicate issues regarding allocation of resources

• Proposal that includes management of projects through structured technology review

• Learning that can be applied when evaluating future technology opportunities