Pharmaceutical Contract Services Market

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Pharmaceutical Contract Services Market
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A. Contract research organizations

• Offer pharmaceutical companies a range of
  services covering all phases of drug development
• Increasing emphasis on informatics services to
  complement other activities
• Enable big pharma firms to staff for valleys
  rather than peaks of research cycle
• Facilitate worldwide testing of new products
• Dependence on pharmaceutical companies budgets
  creates high volatility in results
• CROs involvement in genetic research will have a
  long-term payback

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Company Profiles

• Quintiles Transnational Corp. largest CRO, with
  revenues of 2.15 bil. Provides integrated
  product and commercial development services to
  the pharma, biotech and medical industries
• Covance Offers broad range of outsourced
  development services growth through
  acquisitions diversifying into biotechnology
• Parexel International Corp. Clinical research,
  consulting, medical marketing and informatics,
  growth through acquisitions
• continued next page

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Company Profiles (contd)

• Pharmaceutical Product Development, Inc.
  includes PPD Discovery (genomics technology), PPD
  Development (analytical lab and Phase I-IV
  clinical development services, and PPD Virtual
  (consulting)
• Inveresk Research Group pre-clinical and
  pharmacology evaluation services acquired Clin
  Trials Research
• Kendle International clinical research and
  drug development services acquisitive
• ICON plc clinical research for pharma and
  biotech industries

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• Contract Research Organizations (CROs) Summary
• ( in millions)

¹ Represents sum of market value of common stock
and equivalents ² Prices as of 5/01/05
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B. Manufacturing services organizations

• U.S. market for outsourced pharmaceutical
  manufacturing is growing
• Integration of pharmaceutical research,
  manufacturing and packaging services
• Chemical Industry still has less outsourcing than
  other industries

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• Benefits of outsourcing can be measured by
  comparing new paradigm with former pharmaceutical
  business model

New Paradigm
Old Paradigm
Entire Supply Chain
Focus
Factories
Discount Cash Flow (DCF)
COGS
Costs
Recycle Capacity
Add Capacity
New Products
Outsource
Add Capacity
Existing Products
Under-utilized Assets
Avoid Capital Investment Reinvest cash in RD and
in Marketing
Results
Source Patheon Co. website
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Company Profiles

• Lonza Group AG supplier of active chemical
  ingredients, intermediates and biotechnology
  solutions to the pharma and agrochemical
  industries 1.3 billion in revenues
• CCL Industries Canadian co. providing
  outsourcing in personal care, OTC pharma and oral
  care products
• Cambrex Corp. Life sciences company providing
  pharmaceutical ingredients, intermediates and
  services to drug companies
• Patheon Co. Vertically integrated approach to
  pharmaceutical development with manufacturing
  expertise in both prescription and OTC products
• continued next page..

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Company Profiles (contd)

• Catalytica acquired by DSM in Dec. 2000.
  Pharmaceutical and fine chemical contract
  manufacturer
• ChiRex aqcquired by Rhodia in Sept. 2000.
  Contract research and contract manufacturing of
  active pharmaceutical ingredients
• Draxis Pharma unit of Draxis Health inc.
  Contract manufacturer with ability to produce a
  variety of dosage forms also packaging
  capability
• DPT Laboratories acquired West Pharmaceutical
  Services contract manufacturing unit in November
  2001.

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• Manufacturing Services Companies Summary
• ( in millions)

¹ Represents sum of market value of common stock
and equivalents ² Prices as of 5/01/05
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C. Information Technology Companies

• Sector Fundamentals
• Provide the following services
• lt Health portals (health information sites)
• lt Connectivity and communications services
• lt E-commerce, including on-line health insurance
  and drug prescriptions
• Rising costs compel industry participants to
  examine use of technology
• Consumers are becoming more active in their
  health care management, as managed care is
  redefining the doctor-patient relationship

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C. Information Technology Companies (contd)

• Health care had under-invested in information
  technology relative to other industries
• As the health care delivery model changes,
  participants need additional information to
  measure outcomes

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Company Profiles

• IMS Health Inc. Split off from Cognizant in
  Jan. 1998. Provides market information and
  decision support services to the healthcare
  sector
• Web MD Corp. Leverages Internet to provide
  services that connect participants in health care
  sector and automate workflow
• Cerner Corp. Information management systems,
  primarily sold to hospitals
• IDX Systems Corp. Information systems and
  medical transcription services
• continued next page ..

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Company Profiles (contd)

• NDC Health Corp. Point-of-service systems, high
  volume, network-based information solutions and
  information management systems
• Eclipsys Corp. Healthcare information systems
• The TriZetto Group Internet hosting and
  software consulting services
• Allscripts Inc. Point-of-care medication
  management, distribution and software

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• Information Technology Companies Summary
• ( in millions)

¹ Represents sum of market value of common stock
and equivalents ² Prices as of 5/01/05
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D. Developing Trends

• Pharmaceutical and consumer product manufacturers
  expected to increase their contract activities to
  reduce costs and improve speed to market
• Complexity of FDA approval process enhances
  values of already approved proprietary
  methodologies and heightens attractiveness of
  contract services
• European manufacturers of pharmaceutical and fine
  chemicals such as DSM and Lonza may be contract
  service providers to establish a presence in the
  US market
• Competitive environment in outsourcing has
  intensified, due to existing production
  overcapacities at the pharma companies coupled
  with the declining number of approvals for new
  products
• Future consolidation likely through mergers and
  acquisitions