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									                    Developmental Strategy for a
                      Bioinformatics Initiative



                           September 20, 2000
                             Columbus, Ohio




Ernst & Young LLP                             Strategic Consulting for the Life Sciences
                                        Introduction

A blue-ribbon panel of the NIH recently recommended supporting the formation of 20 bioinformatics
centers with up to $20 MM for each center across the country. To obtain access to this funding
through the establishment of a local Ohio center, the Edison BioTechnology Center (EBTC) is leading
an assessment and business development project on behalf of the newly formed Ohio Information
Technology Alliance, an organization funded by the Ohio Department of Development (ODOD).
EBTC would like to determine whether the Ohio IT Alliance ought to establish a bioinformatics center
and if so, the best means by which the Center may promote its educational , research, and
technology development & commercialization objectives in the field of bioinformatics.


Commissioned by, and working closely with the EBTC, Ernst & Young LLP has conducted a study that
provides the fundamental content for a strategic business plan. This study included an overview of
the Bioinformatics field; an analysis of strengths and weaknesses in the Bioinformatics industry within
the state of Ohio; a summary of focused interviews with academic and industrial leaders in Ohio; a
roadmap to build-up a sustainable and differentiated Bioinformatics capability in Ohio through a
statewide Bioinformatics initiative; and a five-year financial model forecasting the revenue, Costs and
EBIT of the bioinformatics initiative, linked to a suit of Monte Carlo simulations run at several different
input (demand) levels. These financial models were based upon a set of surveys coordinated by the
EBTC that were sent to interview participants; their responses served as the backbone of the local
market research.




                                                  2
What is Bioinformatics?
 Bioinformatics Integrates Data from Many Sources


  Gene discovery                                      Drug design

  • High-throughput genetic sequencing                • Computer-aided drug design and molecular
  • Genetic algorithm searches                          modeling
  • Genetic linkage studies                           • High-throughput screening
  • Genetic maps                                      • Structure-based drug design
  • Polymorphisms (SNPs)                              • Small-molecule-compound libraries
                                                      • Virtual chemical libraries



                                            Bioinformatics

  Gene function                                       Drug development

  • Gene chips and microarrays                        • Clinical trial data, efficacy data
  • Gene expression profiles                          • Pharmacokinetics
  • Functional genomics                               • Pharmacogenomics
  • Proteomics                                        • Pharmacogenetics
  • Metabolic pathways                                • Toxicology
                                                      • Patient data and medical informatics


Source: C&EN News, Ernst & Young analysis
                                                 4
 Bioinformatics is a Multidisciplinary Field and Requires Cross-functional
 Expertise




   DATA GENERATION                                                                        HARDWARE BACKBONE
   • Content Generation                                                                   • Integration of sequencers and
       • Tissue banks                                                                       analytical instrumentation
       • Genotyping                                                                       • Computer power
       • Sequencing                              Bioinformatics                              • Data transfer
   • Preliminary profiling                                                                   • Data storage
       • Sequence pattern detection                                                       • Security and privacy




                                      DATA LEVERAGE
                                      • Detecting translation codes
                                      • Functionally mapping genotypes with phenotypes
                                      • Ordering and structural mapping genes
                                      • Modeling and Simulation of Gene Regulation
                                      • Modeling and Simulation of Protein Interactions
                                      • In Silico Drug Development

Source: Ernst & Young analysis
                                                           5
  Representative Bioinformatics Companies (1/4)
  DATA GENERATION – BIOTECH/GENOMICS COMPANIES

                              Year Number of   Capital Raised ($MM)
  Company Name              Founded Employee Private    Public   Total                          Business Description

Athersys                      1994         50         $60.1    NA       $60.1      Engaged in the development of therapeutic products for the treatment
                                                                                   of significant and life threatening diseases. The company’s research
                                                                                   and development programs are focused on its two proprietary platform
                                                                                   technologies: RAGE (Random Activation of Gene Expression) and
                                                                                   SMC (Synthetic Microchromosome) vector system

Celera                        1998        359         $330.0   $983.3   $1,313.3   Completed a draft version of the Human Genome on June, 2000, with
                                                                                   intent to supply high value-added genomic and proteomic data to the
                                                                                   life sciences collaborators. Celera has the world's most powerful high-
                                                                                   throughput DNA sequencing capability.

CuraGen                       1993        288         $191.3   $195.5   $386.8     Conducts project-driven genomic R&D for proprietary use and in
                                                                                   collaboration with life sciences partners. CuraGen offers collaborators
                                                                                   a variety of well-integrated databases, bioinformatics tolls and
                                                                                   services. Major collaboration includes Glaxo Wellcoma.

Exelixis                      1995        168         $57.7    $126.0   $183.7     Key player in the field of functional genomics and comparative
                                                                                   genomics, performing target validation for the pharmaceutical industry
                                                                                   with technology that can also be applied to any industry that relies on
                                                                                   organisms, including agriculture and agrochemicals.

GeneLogic                     1994        176         $30.2    $298.1   $328.3     Offers "GenExpress" gene expression database pruducts, and other
                                                                                   services to the life sciences industry.


Genome Therapeutics           1961        200         $2.1     $82.2    $84.3      Expertise in identifying and characterizing human genes associated
                                                                                   with major diseases and elucidate bacterial genes responsible for
                                                                                   many serious infectious diseases. Genome Therapeutics has a long
                                                                                   history of scientific excellence and has built a reputation as a top
                                                                                   genome sequencing facility, pioneering many of the tools and
                                                                                   techniques used in the genomics field today. Key alliances include
                                                                                   Astra and Schering-Plough.


Human Genome Sciences 1992                415         NA       $898     $898       Expertise in identifying and characterizing human genes associated
                                                                                   with major diseases and elucidate bacterial genes responsible for
                                                                                   many serious infectious diseases. Genome Therapeutics has a long
                                                                                   history of scientific excellence and has built a reputation as a top
                                                                                   genome sequencing facility, pioneering many of the tools and
                                                                                   techniques used in the genomics field today. Key alliances include
                                                                                   Astra and Schering-Plough.



 Source: Oscar Gruss, Edgar's, Company website, Biospace.
                                                               6
  Representative Bioinformatics Companies (1/4)
   DATA GENERATION – BIOTECH/GENOMICS COMPANIES

                              Year Number of   Capital Raised ($MM)
  Company Name              Founded Employee Private    Public   Total                      Business Description


Incyte                         1991       900        NA       $757.2   $757.2   Provider of genomic information-based products and services. These
                                                                                products and services include database products, genomic data
                                                                                management software tools, microarray-based gene expression
                                                                                services, genomic reagents and related services. Incyte focuses on
                                                                                providing an integrated platform of information technologies designed
                                                                                to assist pharmaceutical and biotechnology companies and academic
                                                                                researchers in the understanding of disease and the discovery and
                                                                                development of new drugs. Incyte's current products and services
                                                                                include an integrated platform of genomic databases, data
                                                                                management software tools, microarray-based gene expression
                                                                                databases and services, and related reagents and services


Millennium Pharmaceuticals 1993           750        NA       $471.5   $471.5   MLNM is engaged in the commercial application of genetics, genomics
                                                                                and bioinformatics to discover and develop a broad range of novel
                                                                                therapeutic and diagnostic products. The Company seeks to discover
                                                                                disease-related genes, produce validated drug targets and drug leads,
                                                                                and develop new, proprietary drugs to treat major human illnesses.



Myriad Genetics                1991       300        $19      $100     $119     A genomics company focused on the development of therapeutic and
                                                                                diagnostic products based on the discovery of major common human
                                                                                disease genes and their biological pathways. The Company utilizes
                                                                                analyses of extensive family histories and genetic material to identify
                                                                                inherited gene mutations which increase the risk to individuals of
                                                                                developing these diseases

                                                                                The Company innovates and integrates technologies in computational
Rosetta Inpharmatics           1997       150        $107.8   $116     $223.8   and molecular biology. Integrated platform includes the design and
                                                                                analysis of proprietary DNA microarrays, a powerful, flexible
                                                                                informatics system, and advanced molecular biology techniques to
                                                                                support gene expression profiling programs




 Source: Oscar Gruss, Edgar's, Company website, Biospace.

                                                              7
  Representative Bioinformatics Companies (2/4)
  DATA MANAGEMENT – GENOMICS / INFORMATICS FOCUSED COMPANIES                                                                    Ohio based

                              Year Number of   Capital Raised ($MM)
  Company Name              Founded Employee Private    Public   Total                       Business Description

                                                                                 Leveraging expertise in computer hardware/software designed to
Compugen                       1993       120         $75.4   Private   $75.4    accelerate bioinformatics algorithms. Business model moving toward
                                                                                 an internet portal concept, plus proprietary and collaborative gene
                                                                                 discovery.

                                                                                 An integrated genomics portal that provides a secure and
DoubleTwist.com                1993       NA          $66     $86.2     $152.2   comprehensive technology platform to simplify and accelerate life
                                                                                 science discovery. Its research agents provide easy, point-and-click
                                                                                 bioinformatics capabilities and access to a wealth of data sources,
                                                                                 including its own annotated human genomic data.
                                                                                 A spin-off from the Australian National Genomic Information Services,
eBioinformatics                1998       NA          $11.9   Private   $11.9    eBioinformatics provides a variety of web-based bioinformatics tools
                                                                                 and databases.

                                                                                 Provides enterprise-wide bioinformatics systems and services.
Genomica                       1995       NA          $36.1   $123.1    $159.2   Partnerships include AstraZeneca, Glaxo Wellcome, Park Davis and
                                                                                 PE biosystems.
                                                                                 Desktop and enterprise-wide bioinformatics products. Customer base
Informax                       1990       172         NA      $75       $75      includes 60 pharmaceutical companies, 250 biotechnology companies
                                                                                 and 500 universities.

                                                                                 Desktop based gene expression, sequencing and structural
LabBook                        1999       15          $10     Private   NA       visualization software provider. Targeted customers include
                                                                                 pharmaceutical and biotechnology companies, and universities.

                                                                                 Provides enterprise-wide bioinformatics systems and services. $100
Lion Bioscience                1997       210         $100    $178.6    $278.6   million proprietary R&D collabarition with Bayer AG, largest
                                                                                 bioinformatics deal to date.
                                                              Private            Provides entreprise-wide bioinformatics systems and services.
Netgenics                      1996       NA          $47.1             $47.1    Partnerships include Pfizer, Abbott, Wyeth Ayerst and IBM.


                                          5                   Private            Tools for gene expression analysis and visualization with additional
Silicon Genetics               1998                   NA                NA       capability in data mining applications.




 Source: Oscar Gruss, Edgar's, Company website, Biospace.

                                                              8
  Representative Bioinformatics Companies (2/4)
  DATA MANAGEMENT – GENOMICS / INFORMATICS FOCUSED COMPANIES                                                                  Ohio based


                              Year Number of   Capital Raised ($MM)
  Company Name              Founded Employee Private    Public   Total                    Business Description


                                                                               Leading provider of decision analytics software solutions -- speeding
SpotFire                       1996       NA         $25     Private   $25     the discovery, development, manufacture, and marketing of products
                                                                               across the extended enterprise. Product offerings increase the
                                                                               productivity and decision making of individuals, and connect decision-
                                                                               making communities across all stages of the product life cycle.

                                                                               Bioinformatics tools and databases with a special focus on protein
Structural Bioinformatics      1996       34         $46.8   Private   $46.8   structural information, critical to rational drug design.

                                                                               Specialized computer hardware/software designed to accelerate
Timelogic                      1981       NA         NA      Private   NA      bioinformatics algorithms. Confirgurable hardware architecture offers
                                                                               competitive advantadge in some cases. Relationship with key
                                                                               academic and industrial research groups, including Stanford
                                                                               University, Roche, Bristol-Myers and Novartis.
                                                                               Viaken Systems is the premier full service ASP (Application Service
Viakon                         1999       NA         $3.7    Private   $3.7    Provider) for the life sciences, offering solutions for biotechnology,
                                                                               pharmaceutical, and agricultural companies. Viaken hosts third-party
                                                                               research informatics application solutions and e-commerce services in
                                                                               the areas of genome informatics, chem informatics, and pharmaco
                                                                               informatics at its tier one data center and delivers these services via
                                                                               the Internet. The company’s unique ASP platform enables companies
                                                                               of all sizes to utilize the same state-of-the-art research information
                                                                               technology (IT) as implemented by top-tier organizations.

                                                                                         The company develops and markets decision support tools
LeadScope                      1997       NA         $9.4    Private   $9.4              for use by life scientists engaged in drug discovery. The
                                                                                         products use proprietary algorithms to correlate structures
                                                                                         with computed and experimental data and to help scientists
                                                                                         find relationships hidden in the vast quantities of data being
                                                                                         generated. Additionally, LeadScope Inc.can provide
                                                                                         organizations with scientific expertise and knowledge of
                                                                                         informatics tools to assist with the analysis of proprietary
                                                                                         data from several phases of research including
                                                                                         combinatorial chemistry and high throughput screening.


 Source: Oscar Gruss, Edgar's, Company website, Biospace.

                                                             9
 Representative Bioinformatics Companies (3/4)
 DATA MANAGEMENT – HARDWARE / INSTRUMENTATION COMPANIES


        Company Name                                       Business Description

        Agilent Technologies                               Strategic collaboration with Rosetta Inpharmatics to
                                                           make and sell gene expression analysis systems,
                                                           including hardware and software.

        Compaq                                             Major strategic alliance with Celera to provide
                                                           integrated bioinformatics hardware, software,
                                                           networking and services solutions.
        IBM                                                IBM is conducting research into high value-added data
                                                           mining and protein structure determination methods.
                                                           IBM offers a variety of enterprise-wide IT solutions for
                                                           the life sciences market, and recently initiated a
                                                           collaboration with NetGenics.

        Silicon Graphics                                   Offers visual computing and high-performance computer
                                                           systems. SGI systems support a wide variety of
                                                           bioinformatics software applications.

        Sun Microsystems                                   Sun systems support a wide variety of bioinformatics
                                                           software applications.

        PE Corporation                                     Instrumentation for high-throughput gene sequencing

Source: Oscar Gruss, Edgar's, Company website, Biospace.

                                                              1
  Representative Bioinformatics Companies (4/4)


  DATA LEVERAGE – CONSUMER GENETIC INFORMATION BASED COMPANIES


                              Year Number of                      Capital Raised
  Company Name              Founded Employee                Private    Public    Total                 Business Description


                                                                                           Consumer genotype profiling. Offers customer the ability to identify de
DNA Sciences                  1998        45                NA           Private   NA      novo new variance in the genome, has developed SNP data base as
                                                                                           foundation for SNP assay development. High-throughput genotyping
                                                                                           process.



                                                                                           deCODE genetics is a population-based genomics company based in
deCode                        1998        300               $128         $128      $356    Iceland, that conducts research in the genetics of common diseases.
                                                                                           deCODE genetics' mission is to use human genetics and genomics to
                                                                                           acquire new knowledge about health and disease, and work with
                                                                                           pharmaceutical companies and healthcare providers to develop new
                                                                                           methods to identify, treat and prevent diseases.



                                                                                           The company will use the heart study's vast collection of genetic,
Framingham Genomic            2000        NA                $21          Private   $21     clinical, and behavioral data from the 10,000 participants, all families
Medicine                                                                                   from Framingham, to create a huge electronic database.
                                                                                           Pharmaceutical and biotechnology companies are expected to pay
                                                                                           annual fees to access the treasure trove of medical information.



                                                                                           Commercializes population genomics and informatics to improve the
Genaissance                  1999         113               $21          $78.0     $78.0   development, marketing and prescribing of drugs
Pharmaceuticals




 Source: Oscar Gruss, Edgar's, Company website, Biospace.

                                                                     1
Why Invest in Bioinformatics?

   Precedents for Potential Returns for
      Public and Private Investment
   With the Completion of Human Genome Project, the Public Domain Is
   Overloaded with Data

              GenBank SEQUENCE GROWTH

 ( '0 0 0 )                                                                                                                                                                          4 ,8 6 5

 5 0 0 0

 4 5 0 0

 4 0 0 0

 3 5 0 0                                                                                                                                                                  2 ,8 3 8

 3 0 0 0

 2 5 0 0                                                                                                                                                        1 ,7 6 6
 2 0 0 0
                                                                                                                                                          1 ,0 2 1
 1 5 0 0
                                                                                                                                                  5 5 6
 1 0 0 0            1     2         4       6         1 0        1 5         2 1         2 9         4 0         5 6     7 9     1 4 3    2 1 5

    5 0 0

        0

                                                                                                                                                                                                Draft completion
              GenBank BASEPAIR GROWTH                                                                                                                                                              of Human
M illio n s                                                                                                                                                                     3 ,8 4 1
                                                                                                                                                                                                Genome Project
  4 ,0 0 0

  3 ,5 0 0

  3 ,0 0 0
                                                                                                                                                                                                   3.12 Billion
  2 ,5 0 0
                                                                                                                                                                         2 ,0 0 9                  Base Pairs
  2 ,0 0 0
                                                                                                                                                              1 ,1 6 0

  1 ,5 0 0
                                                                                                                                                      652
                                                                                                                                              385
  1 ,0 0 0                                                                                                                            217
                    1     2     3       5        10         16          24           35         49          72         101      157

     500

        0
              8 2   8 3       8 4   8 5         8 6     8 7            8 8         8 9         9 0         9 1     9 2         9 3    9 4     9 5     9 6      9 7       9 8        9 9                6/2000

 Source: GenBank
                                                                                                                                      1
 The Biotechnology Sector has Raised $11 Billion in Equity Financing in the
 First Quarter of 2000, and is Well Positioned to Leverage this Information
 Revolution
    BIOTECHNOLOGY EQUITY FINANCING IN Q1, 2000
    $ Millions

                                                                 1,815        10,896

                                                   3,545




                                      659
                       3,754




         1,124



          IPOs     Follow-ons   Venture Capital Public Company Convertible    Total
                                  Financing     Private Financing Financing


Source: Biospace
                                               1
            Biotechnology Sector Has Raised $11 Billion in Q1 2000, More Than
            3-Fold better than the Best Quarter of the Last Financing Boom in 1996.
            37% of this Recent Financing was Bioinformatics Related

                    AVERAGE QUARTERLY FINANCING

                   12,000
                                                              10,896

                   10,000
Cash Inflow ($M)




                   8,000                                                Bioinformatics
                                              3x
                                                                           Related
                   6,000                                                                 37%
                                                                                               63%
                   4,000    3,500
                                                                                                     Other Biotech
                                    2,007
                   2,000                      1,222   1,354


                       0
                             96      97        98      99     Qt1, 00


                                            Year


    Source: Ernst & Young 13th & 14th Annual Reports, Biospace.
                                                                   1
The Aggregate Market Valuation Of the Genomics & Bioinformatics Sector
Increased 6-Fold From 1999 To 2000
This sector contributes significantly to the $2 Trillion market value of the global
pharmaceutical and biotechnology industries
      MARKET VALUATION OF GENOMIC/BIOINFORMATICS COMPANIES
                                   200                               ??
       Aggregate Market Cap ($B)




                                   180

                                   160                                      • In ten years, > 90% of new drugs
                                                                              entering development are poised for
                                   140                                        design through the use of genomic
                                                             ?
                                                                              data
                                   120
                                                                            • The market valuation of genomic and
                                   100                                        informatics related companies is
                                                                              poised to exceed the current $60
                                    80                                        billion level
                                    60
                                                      60 B                  • Genomic and bioinformatics may
                                                                              contribute significantly to an
                                    40          6X                            increasing proportion of the global
                                                                              Pharma / Biotech industry.
                                    20   10 B
                                     0
                                         99           00             2010

                                                     Year
Source: CSFB
                                                                 1
Opportunities and Strengths for
   Bioinformatics in Ohio
Ohio has the potential to build a substantial presence in bioinformatics
Academic presence
• OSU has completed the functional annotation of human chromosome 22
• The James Cancer Center tissue bank can provide a unique set of genetic content
• The Cleveland Clinic is a leader in cardiovascular genetic research
• The University of Cincinnati Children’s Hospital Medical Center and OSU are among the first academic
  institutions that have formed a partnership with bioinformatics leader Celera
• The supercomputer center within Ohio is among the best in the country

Industrial presence
• Existing life science companies can provide the leadership and experience to support the growth of the
  bioinformatics industry in Ohio, including
  – Battelle
  – Cardinal Health
  – Chemical Abstracts
  – Digineer
  – Gliatech
  – Proctor & Gamble
  – YSI Inc
  – Integrex

• There are several vibrant start-up bioinformatics-related companies growing within Ohio, including
  – Athersys
  – LabBook
  – LeadScope
  – NetGenix


Government presence
• Wright-Patterson Air Force Base harbors an extensive research capability in computer graphics, simulation
• NASA Lewis                                    1
     Composition of the Industrial landscape for the Life Sciences in Ohio
     Number of Companies
                                                         Bioinformatics
                        Biotechnology
                                                                      Academic Institution

                                                    8 3           15
Medical Devices                                                                              Medical / Clinical
                                     23                                            17

                                                                                                Industrial Supplier
                                                                                        7

                                                                                        11     Reagent Supplier

                                    40                                             11
Professional Services                                                11                     Contract R&D
                                                            6
                                                                           Contract Manufacturing
                                                            Industrial Services



Note: Certain companies and institutions were counted in multiple categories
Source: EBTC Web Site, Ernst & Young Analyses
                                                                               1
 Composition of the Industrial landscape for the Life Sciences in Ohio

 Emerging Infrastructure to Support the Growth of a Bioinformatics Initiative
includes:

• Edison Program Incubators
     Akron         Cincinnati            Columbus            Cleveland
     Dayton        Mansfield             Toledo              Youngstown

• Edison Centers of Excellence
     Ohio Information Technology Alliance
     Edison Biotechnology Center

• Research Parks
     BioPark, Cleveland         Science and Technology Center at the Ohio State University

• Seed capital funds at various stages in development
     Technology Action Fund
     Columbus
     Appleseed Fund, Cleveland
     BioVentures, Cincinnati




                                            2
Strengths and Implications for the Development of a Bioinformatics Initiative

                         Strengths*                                              Implications

                   • “Supercomputer center is                                • Substantial potential for the
                     one of (top) in the country”                              processing of complex data


                   • “Rich data repositories                                 • Potential for high-value add
                     available from Chemical                                   annotation on a systematic
                     Abstracts”                                                basis



                   • “Tissue sources available                               • Targeted research can be
                     from clinical tissue banks”                               carried out on tissue-specific
                                                                               disease states

                   • “Cost of living is low, while
                     standard of living is high”                             • Potential for significant
                                                                               employee recruitment and
                                                                               retention


*Statements that were repeated the most in multiple independent interviews
Source: Company and institutional Interviews
                                                                         2
Weaknesses and Challenges for
    Bioinformatics in Ohio




             2
Development of a bioinformatics industry in Ohio faces several challenges

Academic Challenges:

 • Biology faculty need computational support to carry our bioinformatics research
    • Individual labs require software development capabilities to permit research progress
    • Universities require better coordination of shared resources to benefit all (avoid “Silos”)

 • Faculty interested in Bioinformatics do not know of the research interests and skill sets of peers at other
   Universities and institutions
    • There is a duplication of effort for solving commonly encountered problems
       – script writing for hardware instrumentation
       – pattern detection algorithms
    • Faculty drop or delay projects because of an inability to easily tap into bioinformatics resources

 • Many universities do not provide the opportunities for students to study bioinformatics even though the
   student demand is great
    • Large Universities cannot fulfill the needs of all students
    • Small Universities cannot rapidly develop courses on their own

 • There is no leadership coordinating and supporting state-wide bioinformatics research
    • Faculty seek collaborations outside of the state and often avoid internal collaborations




                                                       2
Development of a bioinformatics industry in Ohio faces several challenges

Industrial Challenges:

• The present industry structure is not suitable to support the rapid, scaleable
  growth of the bioinformatics industry
    • The current group of life science-related companies in Ohio are fragmented and their resources are
      scarce, and thus they lack “critical mass”
    • The lack of a local talent pool limits the growth of every company
       – Out-of-state executive recruitment firms may lack the motivation to prioritize Ohio searches and cannot
         realistically convey the local environment to potential recruits
       – Executive and other searches may have a long turn-around time

• Local private funding sources often prefer to invest out-of-state
    • This is due in part to the lack of local senior management, and large local networks

• Public-private partnerships are not focused on the bioinformatics industry
   • The EBTC and other organizations are already resource-constrained, so additional expansion is
     difficult




                                                        2
Weaknesses and Implications for the Development of a Bioinformatics Initiative
              Weaknesses*                                                       Implications


         • “Relatively few funding sources for                                • Entrepreneurship can be impeded
           seed and early stage capital”                                        before innovative ideas reach a
           (Venture Capital, Angel Investors)                                   mature proof of concept stage


         • “Lack of formal bioinformatics                                     • Insufficient pool of potential
           training in academic institutions”                                   employees with appropriate skills,
                                                                                made more difficult by a lack of
                                                                                local bioinformatics education

         • “Limited pool of cross-trained and                                 • Emerging companies may become
           experienced scientific staff and                                     constrained due to limitations on
           entrepreneurial management”                                          human resources

         • “Ohio does not have a culture of                                   • Development of synergies
           inter-company collaborations such                                    amongst different companies and
           as strategic alliances, and is often                                 technology platforms are limited
           insular in business dealings”

 *Statements that were repeated the most in multiple independent interviews
 Source: Company and institutional Interviews
                                                                          2
Approaches for Fostering
 Bioinformatics in Ohio




          2
Approaches to Fostering the Development of Bioinformatics in Ohio




                    Build Infrastructure for the Future, such as
                      • Education for training potential employees
                      • Public and Private funding sources for start-ups
                      • Research support for generation of IP
                      • Attraction of entrepreneurial senior management
                      • Local expertise in professional services to support
                        entrepreneurial companies



                    Leap-Frog Past the Competition
                      • Understand the current-state of the art
                      • Focus on targeting technologies “beyond this horizon”




                                   2
    Approaches to Fostering the Development of Bioinformatics in Ohio

Build Infrastructure for the Future

• Ohio must build a sustainable infrastructure to support the growth of its bioinformatics companies

   Enabler: Ohio must support the development of future bioinformatics talent at all Universities
   Solution: Introductory and advanced bioinformatics courses should close the gap among Universities of
             different sizes and cover all regions of Ohio.
              –   Team-taught courses that rotate from campus to campus.
              –   Computer science for biologists; Biology for computer scientists.



• Ohio must help the industrial and academic communities to conduct efficient and timely research and
  development which forms the backbone of future companies

   Enabler: Shared services which provide cost-effective, expert knowledge support to all Universities and
             Companies throughout Ohio
   Solution: Efficient, centralized data hosting and management services to safely store rapidly growing
             amounts of genomics and bioinformatics data
   Solution: Responsive consulting service branch coordinated by the Bioinformatics Initiative tasked with
             solving difficult technology challenges in short time periods




                                                       2
   Approaches to Fostering the Development of Bioinformatics in Ohio
Build Infrastructure for the Future


 • Ohio must build critical mass in local talent pool to support the growth of its bioinformatics companies

    Enabler: Attracting talent to companies in Ohio helps to promote the success of these companies and
              helps to brand Ohio as a bioinformatics center
    Solution: Establish a local, focused recruitment network through a dedicated Recruiter



 • Ohio must build a local base of funding to allow early-stage start-up companies to locally mature

    Enabler: Ohio must support the development of emerging bioinformatics companies
    Solution: Use any cash generated from the Bioinformatics Initiative to provide seed-stage funding for
              local entrepreneurs in a hybrid public-private partnership.

 • Ohio must expand its’ base of academic research and teaching to embrace and nurture bioinformatics

    Enabler: Ohio should support the development of bioinformatics research and teaching at all
              Universities
    Solution: The State of Ohio should provide competitive levels of financial support for academic
              research to fill gaps in Federal funding, and to support the expansion of University-level
              teaching related to bioinformatics course content



                                                   2
    Approaches to Fostering the Development of Bioinformatics in Ohio
Leap-Frog Past the Competition

 The business strategy and research goals of entrepreneurial companies must be leap-frog beyond the
 current state-of-the-art to avoid playing a doomed game of catch-up

    • Focus on next-generation technology platforms:

       – Functional annotation integrated with complex physiological data

       – Functional annotation of the genomes of agricultural crops and other plants, for which Ohio
         already has a leadership position in agricultural research

       – Pattern detection and computational analyses of “polygenic” diseases (i.e. diseases for which
         several genes together cause illness - cancer, diabetes, cardiovascular disease,…)

       – Pharmacogenomics - the tuning of drug dosages and combinations to individual physiology

       – Drug discovery based on the phenotyping of functional genomic content

       – Diagnostic devices based upon genetic and genomic information

       – Data-mining of patient records from longitudinal studies of chronic disease (i.e. cancer)

       – Data-mining of plant genomes to identify targets for agro-biotechnology products (i.e. insect and
         pesticide resistance, adaptation to environmental stress, nutritional content)



                                                   3
How to Build a Bioinformatics
  Infrastructure in Ohio?




             3
Overview of Proposed Approach: Five Parallel Bioinformatics Initiatives

                             Academic
  Rotating Courses
                             Professional


                             Academic
  Consulting Services
                             Industrial                     Enhance
                                                     Bioinformatics-based
                                                     Economic Development
  Retained Search            Private-Public
                                                     for the State of Ohio

                             Academic
  Data Hosting
                             Industrial



  Entrepreneurship           Private-Public



                                 3
                      Overview of the Rotational Courses Program

         What                               How                              Impact

• Bioinformatics is an            • Start with 10-faculty team:       • Stimulate inter-
  interdisciplinary field which      - 8 academic                       departmental, inter-
  requires expertise both in         - 2 industrial                     institutional and academic-
  Biology and in Computer                                               industry collaborations
  Science.                        • 4 or more locations within the
                                    state of Ohio, such as:           • Increased capability in
• Current curriculum in Biology       - Columbus                        attracting federal grants
  has little or no computer           - Cleveland
  training, and Computer              - Cincinnati                    • Create statewide uniform
  Science students have little        - TBD                             Bioinformatics curriculum
  Biology.                                                              standard
                                  • 1 course per location
• A Biology course for                                                • Produce high quality
  Computer Science students       • 30 - 40 students per course         Bioinformatics research
  and a Computer Science                                                talent and skilled workforce
  course focused in               • Concurrent short training
  programming for Biology           courses for professionals         • Establish academic
  students will provide the         already in the work force           reputation in Bioinformatics
  required knowledge for these                                          and attract world class
  two groups of students to do    • Make it a significant honor for     Bioinformatics faculty and
  joint Bioinformatics research     faculty to participate              entrepreneurs

                                                                      • Improved course quality

                                           3
   Catching the Synergy of Rotational Course Programs

    Rotational courses can foster cross-departmental and cross-
    institutional collaborations, expand research, and attract new
    faculty.

             Inter-University
             Rotating Courses                              +
   +                                     +



Attraction of             Cross-Departmental,                      Highly Trained
Bioinformatics            Cross-Campus Research                    Bioinformatics
Faculty                        • Human Genome Annotation
                               • Agrigenomic Annotation            Talent



    +            Expanding               +
                 Research                                      +
                 Activities



                                 3
                        Overview of the Retained Search Program
         What                                How                                 Impact
• Bioinformatics is a relatively   • Start with 1 - 2 dedicated           • Allow a quick and
  new field, and a great             executive recruiters who have,         comprehensive search for
  proportion of the talent           or can rapidly develop, a              Bioinformatics talent which
  needed to help start-up            nationwide and global network.         will be critical to the launch
  Bioinformatics activities                                                 of the Bioinformatics
  requires out-of-state import.    • Conduct a national search to           initiative.
                                     identify and recruit a director
• There will be no less than a       for the Bioinformatics initiative.   • Tap into a nationwide talent
  two-year gap before Ohio can                                              pool and allow an inflow of
  produce enough locally-          • Recruit post-doctoral students,        fresh bioinformatics talent
  trained talent.                    programmers, and technical             at a national level.
                                     personnel to support the start-
• Many leading Bioinformatic         up of a research and                 • Talented people coupled
  academic and industrial            consulting based                       with new ideas and
  research groups are outside        bioinformatics initiative.             infrastructure will create
  the state                                                                 new start-ups, and
                                   • Help to recruit trained                stimulate economic growth
• Professional searching is the      Bioinformatics talent for Ohio         in Ohio.
  most effective way to tap into     based Bioinformatics
  a national and global talent       companies from out-of-state.         • Talented people will
  pool.                                                                     conduct cutting edge
                                   • Executive recruiters are               research and create start-
                                     compensated based on the               up opportunities, which will
                                     number and level of talent they        attract more Bioinformatics
                                     recruited.                             talent from outside Ohio.

                                            3
Catching the Synergy of Retained Search Programs
 Retained searches carried out by a dedicated Ohio resource with
 the knowledge of both the Ohio environment and the bioinformatics
 industry will accelerate the filling of local human resource needs,
 supporting business growth
                         Conduct
                         Retained
               +         Searches            +



         Expanded       +
                                Close Gap in
         Business Re-investment Human Resources
         Growth   from Revenues


               +                              +
                         Expanding
                         Business
                         Activities




                             3
                    Overview of the Consulting Services Program
         What                                How                              Impact
• Bioinformatics is a relatively   • Start with a group of 6 - 10      • Help to start Bioinformatics
  new field that needs               people including a world class      research for those who
  knowledge and technical            Bioinformatician (the director)     couldn’t do so because of a
  knowhow in both Biology and        and support programmers.            lack of domain expertise in
  Computer Science                                                       programming.
                                   • Survey and codify existing
• Most Biologists need help in       commercial software, and          • Enhance the statewide
  programming and IT system          make recommendations to             Bioinformatics capability to
  integration to leverage the        clients for their software          a nationally competitive
  Bioinformatics revolution.         selection.                          level

• The primary needs in             • Write scripts and interface       • Generate revenue for the
  consulting services will be in     software for clients to ensure      Bioinformatics initiative.
  the area of commercial             seamless integration.
  software selection,                                                  • Drive future economic
  customized script writing, and   • Collaborate with hard ware          growth in Ohio with
  hardware-software                  and soft ware vendors, stay          -new start-ups
  integration.                       current with the latest              -new spin-offs
                                     developments in the                  -joint ventures
• Computer Science                   Bioinformatics service field.
  departments studying                                                 • Reduce research and
  Bioinformatics problems will     • Generate group purchasing           development costs for
  need high level                    power (e.g. for software and        academics and companies
  Bioinformaticians to define &      hardware) over time.                through group purchasing
  solve these problems.                                                  power.

                                            3
  Catching the Synergy of Consulting Activities
Consulting services will help to solve imminent critical problems fast
and help to launch new research and development. Clients could be
located in both Ohio and in other areas (avoid an insular focus).
                        Engage in
                        Bioinformatics
             +          Consulting
                        Projects                   +
      Increased
      Need for
      Consulting             +              Solve Critical
        +               Revenues,           Technical Challenges
                                                 • Hardware Interfaces
     Expanded           Royalties, &             • Data Management
                                                 • Detection Algorithms
     Business           Equity lead to
     Opportunities      Reinvestment

                                                    +
             +          Increased
                        Bioinformatics
                        Productivity


                            3
                            Approach to Financial Modeling

• Participants in the original interviews carried out for this project were asked to
answer to a set of survey questions by email related to the financial modeling

• In particular, respondents were asked to estimate their potential use of
      • rotational courses (students interested in courses, courses per location)
      • consulting services (hours to be purchased, acceptable billing rates)
      • data hosting (data storage needs, data transfer needs)

• The answers to these questions were tabulated and averaged and the averages
used as line item inputs into the financial models which are described in the appendix

• The financial models showed cash-flow positive results from Year One.

• While this cash flow may be unusual for start-up businesses in Ohio, these values
follow directly from participants specific responses. Further, the framework for the
financial modeling is itself conservative and based on industry precedents.




                                           3
                                  Summary of Financial Modeling
                                                       (data in $000)




                                                         Year 1         Year 2      Year 3        Year 4       Year 5
                               Rotational Courses*       399.2          466.2       569.1         701.8        873.4
           Revenue             Executive Search          202.5          341.6       491.6         653.0        826.5
                               Consulting services*      2,089          2,891       3,923         4,916        6,631
                               Hosting*                  1,719          2,026       2,267         2,558        2,842

    -                          Rotational Courses         80.00         88.00        96.80        106.5         117.1
           Costs               Executive Search           169.0         175.8        365.6        380.2         395.4
                               Consulting services        676.0         831.5        1,026        1,250         1,475
                               Hosting                    1,364         792.3        1,135        1,583         2,177


                               Rotational Courses*        317.5         381.8        475.0        587.8         747.2
            EBIT               Executive Search            33.5         165.9        126.0        272.8         431.1
                               Consulting services*       1,379         2,052        2,834        3,864         5,327
                               Hosting*                   443.7         1,231        1,140        974.1         680.3
                               Total                      2,174         3,830        4,575        5,699         7,186


*These output values represent the 50th percentile within a population of values derived from 1000 Monte Carlo simulations.
For the Monte Carol simulations, certain input values were established through Ohio respondents’ answers to a set
of survey questions related to the financial modeling (see appendix).



                                                          4
Steps to Building a Bioinformatics
      Infrastructure in Ohio




               4
  Potential Pit-Falls to Fostering the Development of Bioinformatics in Ohio
Focusing Soley on Short-Term Gain

  • Bioinformatics is an inherently complex area and requires substantial support from multiple scientific
    fields

  • Time is required to build critical mass, focus on long-term growth

Focusing on Current Competitors

  • Companies in other regions (i.e. Celera in MD, Incyte in CA) have enormous head-starts and several
    hundred million dollars of funding supported by ample infrastructure and talented staff.

  • Companies in Ohio cannot compete with Celera and Incyte in a head-to-head contest: Do not try to
    emulate these companies without a distinct and sustainable competitive advantage

Seeking Out Artificial Deals

  • Partnerships cannot be forced between private companies without clear value to all parties; people
    need to get to know each other and appreciate their mutual value to one another

  • Academic and Industrial labs have different priorities and work at different time scales

Constraining Strategy to Historical Trends

  • Leadership and vision require looking beyond past and current business models

  • Incremental changes yield incremental results.

  • Boldness requires the acceptance of risk.        4
Considerations for a Strategic Roadmap for the Bioinformatics Initiative

    • Given scarce resources and a limited time to establish credibility, need a
      targeted and highly focused approach to any bioinformatics initiative

    • Given the need to build a brand based on core strengths, need to identify
      areas where Ohio could make a distinctive and potentially unique contribution

    • Clear, defensible roadmap with no false starts and stops, leading to a one-
      way migration towards the building of a statewide bioinformatics initiative

    • Accepted and defined metrics for success to monitor progress and detect
      nascent blockages

    • Need a common view of collaborative and shared service issues, based on
      both open discussions, both internal and external

    • A “big project” with high visibility success might pull people together and
      improve both the internal and external perception of the State of Ohio regarding
      bioinformatics

    • Highly articulated roles and responsibilities of different institutions and companies
      within different regions of Ohio


                                        4
                                Strategic Roadmap for the Bioinformatics Initiative
                 Year One                          Year Two                            Year Three                         Year Four                           Year Five

Bioinformatics      Hire total headcount of 7:     Increase headcount by              Increase headcount by             Increase headcount by              Increase headcount by
Initiative       -    One Director                 hiring:                             hiring:                            hiring:                             hiring:
                 -    One Business Development     -    One Additional Business        - One Additional Post-doctoral     - One Additional Business           - One Additional Post-doctoral
                      Associate                         Development Associate               Student                            Development Associate               Student
                 -    Two Post-doctoral Students   -    One Additional Post-doctoral                                                                          -    One Additional Programmer
                 -    Two Programmers
                                                                                       -    One Additional Programmer     -    One Additional Post-doctoral
                                                        Student                                                                Student
                 -    One Support Staff                                                   Win Three Grants                                                      Win Five Grants
                                                      Win Two Grants                                                     -    One Additional Support Staff
                    Win One Grant                                                        Recruit 16 Additional                                              
                                                      Recruit 6 Additional Members                                          Win Four Grants                     Recruit 22 Additional
                    Recruit 30 Members                                                     Members                                                                Members
                                                                                                                           Recruit 16 Additional
                                                                                                                             Members
Consulting        Acquire a total of 12           Acquire an Additional Set of 4      Acquire an Additional Set of      Acquire an Additional               Acquire an Additional
Services         academic & 5 industrial           academic & 2 industrial clients;    4 academic & 1 industrial          Set of 6 academic & 3               Set of 8 academic & 3
                 clients; use 3 consultants*       use 4 consultants                   clients; use 6 consultants         industrial clients; use 9           industrial clients; use 13
                    Serve each academic              Serve each academic client         Serve each academic client     consultants                         consultants
                      client with 28 hours per          with 30 hours per year              with 33 hours per year           Serve each academic                Serve each academic
                      year                            Serve each industrial client       Serve each industrial client        client with 37 hours per            client with 40 hours per
                    Serve each industrial              with 674 hours per year             with 741 hours per year            year                                year
                      client with 613 hours per                                                                            Serve each industrial              Serve each industrial
                      year                                                                                                   client with 815 hours per           client with 897 hours
                                                                                                                             year                                per year
Data Hosting     Build Data Server Center          Buy 21 Additional Servers        Buy 77 Additional Servers           Buy 63 Additional Servers          Buy Additional 138
                 - Build T-1 Access                 Hire One Additional Support      Hire One Additional Support         Hire One Additional                  Servers
                 - Buy 48 Servers                     Staff                             Staff                                Support Staff                     Hire One Additional
                 - Hire One Support Staff           Host 16 clients data, with 1650  Host 20 clients data, with          Host 26 clients data, with           Support Staff
                  Host 12 clients data,              GB per client                     1815 GB per client                   1997 GB per client                Host 34 clients data, with
                   with 1500 GB per client                                                                                                                       2196 GB per client
Rotational        Recruit 10 faculty               Recruit 10 faculty                 Recruit 10 faculty             Recruit 10 faculty                    Recruit 10 faculty
Courses           Host 8 rotating courses          Host 8 rotating courses with       Host 10 rotating courses with  Host 10 rotating courses              Host 10 rotating courses
                    with 35 students per              37 students per course, in          38 students per course, in      with 40 students per                   with 41 students per
                    course, in four locations         four locations                      five locations                  course, in five locations              course, in five locations
                  Host 2 Professional              Host 2 Professional Courses        Host 2 Professional Courses  Host 2 Professional                     Host 2 Professional
                    Courses                                                                                               Courses                                Courses

Search              Hire One Executive               Bioinformatics Center              Hire One Additional               Bioinformatics Center            Bioinformatics Center
Program               Recruiter and One               Recruit Four Executives              Executive Recruiter and          Recruit Eight Executives          Recruit Ten Executives
                      Support Staff                   Recruit Seven Ph.D. Staff            One Support Staff                Recruit Eleven Ph.D. Staff        Recruit Eleven Ph.D.
                    Recruit Two Executives           Recruit Seven Post-docs            Recruit Six Executives            Recruit Eleven Post-docs           Staff
                    Recruit Five Ph.D. Staff                                             Recruit Nine Ph.D. Staff                                            Recruit Thirteen Post-
                    Recruit Five Post-docs                                               Recruit Nine Post-docs                                                docs
Venture             Host Two Professional          Provide seed funding to start-       Provide seed funding to           Provide seed funding to          Provide seed funding to
Activities            Valuation and                   up bioinofmatics ventures             start-up bioinofmatics             start-up bioinofmatics            start-up bioinofmatics
                      Investment workshops          Apply for DARPA, ATO-NIST,             ventures                           ventures                          ventures
                                                                                                                                               *Consulting staff will be drawn as appropriate
                                                                                       4                                                       from the group of post-doctoral associates.
                          Overview of Proposed Organizational Structure
                                            Year One

                                                    ODOD


                                 Director of        Electable   Advisory Board
                               Bioinformatics
                                  Initiative

   Business
  Development                               Administrative
  Associate (1)                               Staff (1)

  Post-Doctoral
  Associates (2)
                                                Out-sourced
                                                 Legal and
     Software                                    Consulting
    Developers*
        (2)
                              OSC
*Joint appointment with OSC
                                                4
                          Overview of Proposed Organizational Structure
                                            Year Two

                                                    ODOD


                                 Director of        Electable   Advisory Board
                               Bioinformatics
                                  Initiative

   Business
  Development                               Administrative
  Associate (2)                               Staff (1)

  Post-Doctoral
  Associates (3)
                                                Out-sourced
                                                 Legal and
     Software                                    Consulting
    Developers
        (2)
                              OSC
*Joint appointment with OSC
                                                4
                          Overview of Proposed Organizational Structure
                                           Year Three

                                                    ODOD


                                 Director of        Electable   Advisory Board
                               Bioinformatics
                                  Initiative

   Business
  Development                               Administrative
  Associate (2)                               Staff (1)

  Post-Doctoral
  Associates (4)
                                                Out-sourced
                                                 Legal and
     Software                                    Consulting
    Developers
        (3)
                              OSC
*Joint appointment with OSC
                                                4
                          Overview of Proposed Organizational Structure
                                            Year Four

                                                    ODOD


                                 Director of        Electable   Advisory Board
                               Bioinformatics
                                  Initiative

   Business
  Development                               Administrative
  Associate (3)                               Staff (2)

  Post-Doctoral
  Associates (5)
                                                Out-sourced
                                                 Legal and
     Software                                    Consulting
    Developers
        (3)
                              OSC
*Joint appointment with OSC
                                                4
                          Overview of Proposed Organizational Structure
                                            Year Five

                                                    ODOD


                                 Director of        Electable   Advisory Board
                               Bioinformatics
                                  Initiative

   Business
  Development                               Administrative
  Associate (3)                               Staff (2)

  Post-Doctoral
  Associates (6)
                                                Out-sourced
                                                 Legal and
     Software                                    Consulting
    Developers
        (4)
                              OSC
*Joint appointment with OSC
                                                4
Defining Success for a Bioinformatics
          Initiative in Ohio




                 5
                 Aggregate Definitions of Success for a Bioinformatics Initiative*

      • “Keep smart highly trained people in the state of Ohio, supporting emerging companies”

      • “Serve as a magnet to draw people into the state of Ohio, resulting in high-paying,
         high-tax generating revenues”

      • “Serve as an aggregation function for general business development”
           • “Coordinate and integrate independent discoveries”

      • “Raise the profile of Ohio as a bioinformatics area and as a nexus for high technology”

      • “Create a critical mass to attract federal funds to establish a genome center”

      • “Convince venture capital firms and other investors to invest in Ohio-based start-ups”

      • “Establish scientific credibility for long-term success through research grants and
         high profile publications”

      • “Ensure that there is broad participation from universities, companies, and research
         institutions throughout Ohio.”


*Statements that were repeated the most in multiple independent interviews
Source: Company and institutional Interviews
                                                                         5
                    Catching the Synergy of the Bioinformatics Initiatives
                                              Net Revenue
                                              Streams from
                                              Bioinformatics                 +
         +          +              +
                                              Initiatives


                          Increased                       Internal Seed-Stage
             Product      Participation                   Capital for Venture
Equity                                           +
             Royalties    in Bioinformatics               Investments
                          Initiatives       Re-investment  • Equity Participation
                                            from Revenues • Royalty Agreements


         +      +                  +                                         +

                                             Expanded
                                             Entrepreneurial
                                             Activities
                         Venture
                         Capital   +                                     +       Equity
                                       External Venture
                                       Investments
                                           • 15+ Private Venture Funds

                                             5
          Implications of Success for the Public-Private Partnerships

Public investment can lead to private returns:


• Incubators and Technology Support Centers - can catalyze entrepreneurship


• Tax Savings Programs - can attract new business to Ohio


• Educational System Enhancements - provide graduates with critical talent to companies



Private investment can lead to public returns:


• Job Creation - Higher employment levels stimulate further economic growth


• Tax Base - Increases in tax revenues can fund further economic development programs


• Further Attraction of Investors - Success breeds success, increasing investor interest
                                            5
       Implications of Success for Success in Federal Grant Applications
The bioinformatics initiative can build the infrastructure to attract Federal funding:

• Hiring a World-Class Director provides a cutting-edge research focus for grant applications

• Building Inter-University and Inter-Departmental Collaborations strengthens the collective
  scientific skill set required for successful funding in bioinformatics

• Research Program Enhancements - provide assurance to granting agencies that their
  funds will be well-used

Ohio should target building the infrastructure that promotes effective use of federal funds:

• Understand the issues and concerns of federal agencies disbursing federal funds

    • Quality of Scientific Research
          • Principal Investigators
          • Post-Doctoral Fellows
          • Graduate Students

    • Quality of Resources Supporting Research
         • Access to Critical Scientific Instrumentation
          • Access to Computational Resources

• Demonstrate that these concerns have been addressed at a state-wide level
                                                  5
Implications of Success for the Stakeholders of the Bioinformatics Initiative

                                                       LabBook
                                     Battelle
                                                                        Digineer

                         NetGenics                Corporations
                                                      $$                 LeadScope
                            ChemAbstracts
                                                                                      Importing
           Education                                                                    Capital



Research                 Universities                                                        Economic
                                                    Success                  ODOD           Development



     Work-Force                                                                       Attracting
     Development                                                                      Companies


                                     Ohio Board
                                                             Federal Institutions
           Educational               of Regents
            Mission                                                                     NIH
                                                                                     Sponsored
                                                                                      Research
                       Bioinformatics           Ohio                NSF
                        Coursework          Supercomputer        Sponsored
                                                Center            Research


                                                      5
Appendices




   5
Bioinformatics Business Models

       Representative Cases
                            Representative Bioinformatics Business Model
                                         Incyte Pharmaceuticals

    – Informational Products:                LifeSeq - Human Gene Sequence (FL, Genome, SNP) &
                                                        Expression Databases, Data-Mining /Bioinformatics
             Subscription Fees                          Software (3D), Gene Mapping (Atlas)
              - Recurring Basis              ZooSeq - Animal Gene Sequence & Expression Databases
              - Upgrade Strategy
                                             PhytoSeq - Plant Gene Sequence & Expression Databases
                        +
                                             PathoSeq (PD)- Microbial Gene Sequence Databases
               Licensing Fees
              - Collaborative Research       LifeProt - Proteomic Sequence Databases
              - Downstream Royalties


    – Biological Products:                   Bulk Clones - Gene Albums
                                             Boutique Clones - Clone Transfer Services
               Product Sales
           - Broad Inventory Needs           Microarrays - GEM, Human UniGem, GEM Tools Analysis
           - Relatively Low Volume                           Applications


    – Consulting Services:                   Life Tools - Data Management System, Project Manager,
                                                            Analysis, EST Dataflow, Genomic Dataflow)
             Time and Materials             Customized Services from Genome Systems -
             - Highly Trained Staff         sequencing, robotics, DNA preparation, knockouts, &
             - Relatively Low Leverage
                                            Fluorescence In Situ Hybridization (FISH).
Source: Incyte website, BioWorld.
                                                   5
Bioinformatics Companies Use Different Business Model To Sell Both Tools
And Solutions To End Users
 BUSINESS MODEL FOR BIOINFORMATICS COMPANIES
                               •Celera charges $5 - $15 million per year to companies who want access to its
                                database
     Subscription              •Gene Logic offers a subscription to its large-scale GeneExpress database on a
        Fees                    multiple year basis and charges between $3 and $5 million annually
                               •Geneva Bioinformatics offers Internet access of SIB’s Swiss-Prot protein database
                                and charges either a few thousands dollars per user or up to $90,000 per year for
                                unlimited usage


                               •Small packages, such as Silicon Genetics’ GeneSpring software are sold for $20,000
      Software                  per copy
      Licensing                •Large software packages are sold for hundred of thousands dollars per user seat
         Fees                  •Customized software is sold for millions of dollars


                               •eBioinformatics offers a pay-as-you-use model through the Internet. Individual user is
                                charged by eBio units at 50 cents per unit, and an active user can use 1,000 units
        Internet                per year
         based                 •Double Twist operates an Internet-based research portal and offers three level of
         ASPs                   access. Bronze provides limited access for free, silver and gold level access provides
                                additional tools and a proprietary database. Low-demand users spend $500 for
                                certain analyses, and heavy users might pay a few thousands dollar per “seat” per
                                analysis.

Source: Ernst & Young analysis; C&EN News, Company Websites

                                                              5
Questionnaires




     6
                                                 - -Academic Questionnaire - -

Dear Participant,

Thank you for your participation in our ongoing strategic study to determine the best course of action regarding the potential
creation of a bioinformatics initiative. Based on our interviews with you, we have sketched out several possible approaches
that may contribute to your research and development efforts. So that we may continue to incorporate your views and insights
into our planning process, we would appreciate it if you could take a few moments to complete and return by email this brief
questionnaire. Your involvement at this stage is critical and we appreciate your time!

Idea #1 – Develop a set of rotating courses to be staffed by faculty from multiple universities and whose location changes from
campus to campus within the state of Ohio. Two courses are proposed: one which introduces computer science to biologists,
and one which introduces biology to computer scientists. To that end:

(1) How many students do you feel could be recruited to participate in a semester-long introductory course in bioinformatics at
your campus?
            Low Estimate - ___________High Estimate - ___________

(2) How many of these classes do you feel could be conducted per year on a state-wide basis?
            Low Estimate - ___________High Estimate - ___________

Idea #2 – Develop a shared service bioinformatics consulting group to provide technical programming and software
development support for your research programs. This service would be available to all institutions in the State of Ohio. To that
end:

How many hours of bioinformatics / computer consulting would you be willing to pay for on an annual basis?

- In your lab:
                 Low Estimate - ___________High Estimate - ___________

- In your University:
              Low Estimate - ___________High Estimate - ___________


                                                            6
                                                 - -Academic Questionnaire - -

What price would you be able to afford for premier consulting services on-site and customized to your needs? (Note:
Professional service firms traditionally charge between 125 and 600 $ per hour)
              75$ / hour? Yes              or          No
              100$ / hour? Yes             or          No
              125$ / hour? Yes             or          No
              Other Rate? Yes              or          No            Rate ($/hour) _______

Idea #3 – We are considering the utility of establishing a data storage and management service for you. As bioinformatics
data increases in volume, this might assist in the coordination of data to serve your research needs. To that end:

How many gigabytes of data per year would you consider storing on a safe, secure host server?

- In your lab:
                 Low Estimate - ___________High Estimate - ___________

- In your University:
              Low Estimate - ___________High Estimate - ___________

How much bandwidth (Gigabytes / day) would you estimate you would require on a daily basis to manage this amount of
data? This would include transferring data to and from the host server.

- In your lab:
                 Low Estimate - ___________High Estimate - ___________

- In your University:
              Low Estimate - ___________High Estimate - ___________

Thank you for your participation! We appreciate your interest in this initiative and we will keep you updated!




                                                             6
                                                  - - Industry Questionnaire - -

Dear Participant,

Thank you for your participation in our ongoing strategic study to determine the best course of action regarding the potential
creation of a bioinformatics initiative. Based on our interviews with you, we have sketched out several possible approaches
that may contribute to your research and business development efforts. So that we may continue to incorporate your views
and insights into our planning process, we would appreciate it if you could take a few moments to complete and return by
email this brief questionnaire. Your involvement at this stage is critical and we appreciate your time!

Idea #1 – Develop a set of rotating courses to be staffed by faculty from multiple universities and whose location changes from
campus to campus within the state of Ohio. Two courses are proposed: one which introduces computer science to biologists,
and one which introduces biology to computer scientists. To that end:

Would you support the development of this course through having your scientific staff give a guest lecture?

             Yes           or            No

Idea #2 – Develop a shared service bioinformatics consulting group to provide technical programming and software
development support for your business. This service would be available to all businesses and academic institutions in the
State of Ohio. To that end:

How many hours of bioinformatics / computer consulting would you be willing to pay for on an annual basis?

             Low Estimate - ___________High Estimate - ___________

What price would you be able to afford for premier consulting services on-site and customized to your needs? (Note:
Professional service firms traditionally charge between 125 and 600 $ per hour)
              75$ / hour? Yes              or          No
              100$ / hour? Yes             or          No
              125$ / hour? Yes             or          No
              Other Rate? Yes              or          No            Rate ($/hour) _______


                                                            6
                                                - - Industry Questionnaire - -

Idea #3 – We are considering the utility of establishing a data storage and management service for you. As bioinformatics
data increases in volume, this might assist in the coordination of data to serve your research needs. To that end:

How many gigabytes of data per year would you consider storing on a safe, secure host server?

- In your lab:
                 Low Estimate - ___________High Estimate - ___________

- In your University:
              Low Estimate - ___________High Estimate - ___________

How much bandwidth (Gigabytes / day) would you estimate you would require on a daily basis to manage this amount of
data? This would include transferring data to and from the host server.

- In your lab:
                 Low Estimate - ___________High Estimate - ___________

- In your University:
              Low Estimate - ___________High Estimate - ___________

Thank you for your participation! We appreciate your interest in this initiative and we will keep you updated!




                                                            6
Financial Models




      6
 Rotational course

                                              2001            2002            2003            2004            2005
REVENUE                               $    344,000    $    411,648    $    528,955    $    637,949    $    878,759
COSTS                                 $     80,000    $     88,000    $     96,800    $    106,480    $    117,128
EBIT                                  $    264,000    $    323,648    $    432,155    $    531,469    $    761,631



REVENUE
 Courses
  Tuition
  Student Course                                                                                                          COSTS
   CS for Biologists
    # students per location - LOW                20              22              24              27              29        Labor
    # students per location - AVE                35              37              38              40              41         # Faculty                                     10            10            10            10            10
    # students per location - HIGH               50              55              61              67              73          Academic                                      8             8             8             8             8
    # Locations - LOW                             3               3               4               4               4          Industrial                                    2             2             2             2             2
    # Locations - AVE                             6               6               7               7               8         Percentage of Academic                       80%           80%           80%           80%           80%
    # Locations - HIGH                            8               9              10              11              12         # Lectures per person                          20            20            20            20            20
    # Courses per Location                        1               1               1               1               1         Average salary per lecture per person$       400 $         440 $         484 $         532 $         586
    Fee Per Course per student        $      1,000 $         1,040 $         1,082 $         1,125 $         1,170         Total labor cost                      $    64,000 $      70,400 $      77,440 $      85,184 $      93,702
   Inflation factor                              4%              4%              4%              4%              4%        Burden
   Expansion factor                             10%             10%             10%             10%             10%         Burden rate (overhead+materials)             25%           25%           25%           25%           25%
   Total Fees for CS for Biologists   261,159.66      257,619.35      252,194.05      396,372.65      452,994.29           Fully burdened labor cost            $     80,000   $    88,000   $    96,800   $   106,480   $   117,128
   Biology for CS                                                                                                         EBIT
    # students per location - LOW                20              22              24              27              29                                             $    340,265   $   315,148   $   397,263   $   627,887   $   812,386
    # students per location - AVE                35              37              38              40              41
    # students per location - HIGH               50              55              61              67              73
    # Locations - LOW                             3               3               4               4               4
    # Locations - AVE                             6               6               7               7               8
    # Locations - HIGH                            8               9              10              11              12
    # Courses per Location                        1               1               1               1               1
    Fee Per Course per student        $      1,000 $         1,040 $         1,082 $         1,125 $         1,170
   Inflation factor                              4%              4%              4%              4%              4%
   Expansion factor                             10%             10%             10%             10%             10%
   Total Fees for Biology for CS
   Total student course fees          129,090.09      174,237.69      256,842.00      292,666.75      452,256.26

  Professional Course
    # students per location                      30              30              35              40              50
    # Locations                                   2               2               2               2               2
    # Courses per Location                        1               1               1               1               1
    Fee Per Course per student        $      1,000 $         1,100 $         1,210 $         1,331 $         1,464
   Total professional course fees     $     60,000 $        66,000 $        84,700 $       106,480 $       146,410
  Total course fees                   $    189,090 $       240,238 $       341,542 $       399,147 $       598,666

  Materials
  Student course
   CS for Biologists
    Fee Per Course per student        $         100   $         110   $         121   $         133   $         146
   Total Fees for CS for Biologists       27,660.19       27,555.05       33,865.14       42,578.53       39,266.86
   Biology for CS
    Fee Per Course per student        $         100   $         110   $         121   $         133   $         146
   Total Fees for Biology for CS          18,249.33       23,955.42       19,843.19       47,151.80       72,454.85
  Total student material fees         $      45,910   $      51,510   $      53,708   $      89,730   $     111,722

  Professional Course
    Fee Per Course per student        $        150    $        165    $        182    $        200    $        220
   Total professional material fees   $      9,000    $      9,900    $     12,705    $     15,972    $     21,962              Note: Aggregated results from the preceding questionnaires
  Total material fees                 $     54,910    $     61,410    $     66,413    $    105,702    $    133,683
                                                                                                                                were used to set the lower, average, and upper boundaries
  Grants
   Curriculum development grant       $    100,000    $    110,000    $    121,000    $    133,100    $    146,410
 Total revenue                        $    344,000    $    411,648    $    528,955    $    637,949    $    878,759              for Monte Carlo simulations of this financial model.
COSTS

 Labor
                                                                                                                      6
Retained Recruit Search

                                                2001       2002        2003        2004        2005
REVENUE                                    $ 202,500   $ 341,640   $ 491,587   $ 652,984   $ 826,505
COSTS                                      $ 169,000   $ 175,760   $ 365,581   $ 380,204   $ 395,412
EBIT                                       $ 33,500    $ 165,880   $ 126,006   $ 272,780   $ 431,093


  Executive Management
  # Industrial Executive Recruits                  2           4           6           8          10
  Average Commision percentage/Recruit          25%         25%         25%         25%         25%
  Average Salary/Recruit                     150,000     156,000     162,240     168,730     175,479
  Toal Executive Industrial Commision         75,000     156,000     243,360     337,459     438,697
     Inflation Factor                             4%          4%          4%          4%          4%


  Ph.D. Level-Staff Scientist Management
  # Industrial Staff Recruits                      5           7           9          11          13
  Average Commision percentage/Recruit          25%         25%         25%         25%         25%
  Average Salary/Recruit                      70,000      72,800      75,712      78,740      81,890
  Total Staff Industrial Commision            87,500     127,400     170,352     216,536     266,143
     Inflation Factor                             4%          4%          4%          4%          4%
  Postdoctoral Fellows
  # Industrial Postdoctoral Recruits               5           7           9          11          13
  Average Commision percentage/Recruit          25%         25%         25%         25%         25%
  Average Salary/Recruit                      32,000      33,280      34,611      35,996      37,435
  Total Postdoctoral Commision                40,000      58,240      77,875      98,988     121,665
     Inflation Factor                             4%          4%          4%          4%          4%
  Total Recruit Commision                    202,500     341,640     491,587     652,984     826,505

Cost
  Labor
  Headcount
     # Executive Recruiters                        1           1           2           2           2
     # Support Staff                               1           1           2           2           2
  Average Salary
     Executive Recruiter                     100,000     104000      108160     112486.4 116985.86
     Support Staff                            30,000      31200       32448     33745.92 35095.757
     Inflation Factor                             4%          4%          4%          4%          4%
  Burden
     Burden rate (overhead+materials)            30%         30%         30%         30%         30%
  Total Labor Cost                          $169,000    $175,760    $365,581    $380,204    $395,412


EBIT                                       $ 33,500    $ 165,880   $ 126,006   $ 272,780   $ 431,093




                                            6
  # Academic Clients                                                            12              14                16               18               21
  # Industrial Clients                                                           5               6                 7                8                9
  Per hour Academic Billing Rate - LOW                                          75              78                81               84               88
  Per hour Academic Billing Rate - AVE                                          88              91                95               98              102
  Per hour Academic Billing Rate - HIGH                                        100             104               108              112              117
  Per hour Industrial Billing Rate - LOW                                       125             130               135              141              146
  Per hour Industrial Billing Rate - AVE                                       613             637               662              689              717
  Per hour Industrial Billing Rate - High                                    1,100           1,144             1,190            1,237            1,287
  # Consultants                                                                  3               4                 5                6                8
  Utilization Rate - Adademic Consulting                                       5%             10%               15%              20%              25%
  Utilization Rate - Industrial Consulting                                    10%             15%               20%              25%              30%
  Annual Billable Hours Per Client - Academic Consulting - LOW                  10              11                12               13               15
  Annual Billable Hours Per Client- Academic Consulting - AVE                   25              28                30               33               37
  Annual Billable Hours Per Client - Academic Consulting - HIGH                 40              44                48               53               59
  Annual Billable Hours Per Client - Industrial Consulting - LOW               125             138               151              166              183
  Annual Billable Hours Per Client - Industrial Consulting - AVE               613             674               741              815              897
  Annual Billable Hours Per Client - Industrial Consulting - HIGH             1100            1210              1331             1464             1611
  Annual Academic Consulting Revenues                               $      38,807 $        39,660 $          21,192 $         99,896 $        117,442
  Annual Industrial Consulting Revenues                             $   1,693,071 $       687,243 $       1,566,577 $      6,290,791 $      6,724,560
  Total Annual Consulting Revenues                                  $   1,731,879 $       726,903 $       1,587,769 $      6,390,686 $      6,842,002
  Inflation factor                                                             4%               4%               4%               4%               4%
  Expansion factor                                                            10%              10%              10%              10%              10%
 Membership
  # Premium                                                                     5                6                7                8              10
  # Silver                                                                    15               20               25               30               30
  # Basic                                                                     10               10               20               30               50
  Total Members                                                               30               36               52               68               90
 Per Member Fee
  Premium                                                           $       5,000    $       5,200    $       5,408    $       5,624    $       5,849
  Silver                                                            $         500    $         520    $         541    $         562    $         585
  Basic                                                             $         100    $         104    $         108    $         112    $         117
  Inflation factor                                                             4%               4%               4%               4%               4%
 Membership Fees
  Premium                                                           $     25,000     $     31,200     $     37,856     $     44,995     $     58,493
  Silver                                                            $      7,500     $     10,400     $     13,520     $     16,873     $     17,548
  Basic                                                             $      1,000     $      1,040     $      2,163     $      3,375     $      5,849
 Total Membership Fees                                              $     33,500     $     42,640     $     53,539     $     65,242     $     81,890
 Workshops
  # Workshops Per Year                                                           2                2                2                2                2
  # Participants Per Workshop                                       $          15    $          17    $          19    $          20    $          22
  Fee Per Participant                                               $       3,000    $       3,120    $       3,245    $       3,375    $       3,510
 Total Workshop Fees                                                $      90,000    $     106,080    $     123,302    $     134,984    $     154,421
 Total Revenue                                                      $   2,055,379    $   1,275,623    $   2,364,611    $   7,390,912    $   8,178,313

COSTS
 Labor
  Headcount                                                                     7                9               11               14               16
   # Directors                                                                  1                1                1                1                1
   # BD Associates                                                              1                2                2                3                3
   # PostDocs                                                                   2                3                4                5                6
   # Programers                                                                 2                2                3                3                4
   # Support Staff                                                              1                1                1                2                2
  Average Salary
  Inflation Factor                                                             4%               4%               4%               4%               4%    Note: Aggregated results
   Director                                                         $    200,000     $    208,000     $    216,320     $    224,973     $     233,972
   BD Associate                                                     $     60,000     $     62,400     $     64,896     $     67,492     $      70,192
                                                                                                                                                         from the preceding
   PostDoc                                                          $     35,000     $     36,400     $     37,856     $     39,370     $      40,945    questionnaires were
   Programer                                                        $     80,000     $     83,200     $     86,528     $     89,989     $      93,589
   Support Staff                                                    $     30,000     $     31,200     $     32,448     $     33,746     $      35,096    used to set the lower,
  Salary Total
 Burden
                                                                    $    520,000     $    639,600     $    789,568     $    961,759     $   1,134,763    average, and upper
  Burden rate (overhead+materials)                                            30%              30%              30%              30%              30%    boundaries for Monte
 Total labor cost                                                   $    676,000     $    831,480     $   1,026,438    $   1,250,286    $   1,475,192
                                                                                                                                                         Carlo simulations of this
EBIT                                                                $   1,379,379    $    444,143     $   1,338,173    $   6,140,626    $   6,703,122

                                                                                                                                                         financial model.
                                                                              6
 Hosting Services

                                                        2001              2002              2003                2004                2005
REVENUE                                      $      1,754,964    $    2,055,411    $    2,314,646    $      1,891,983    $      3,385,914
COSTS                                        $      1,364,000    $      792,320    $    1,135,339    $      1,583,112    $      2,177,217
EBIT                                                   390964          1263091           1179307               308871            1208696


REVENUE
 Hosting Service Fees
  # Academic Clients                                       12                16                20                  26                  34
 Storage
  Average Annual Storage (GB) - LOW                      1000              1100              1210                1331                1464
  Average Annual Storage (GB) - AVE                      1500              1650              1815                1997                2196
  Average Annual Storage (GB) - HIGH                     2000              2200              2420                2662                2928
  Annual Storage Fee per GB                  $          1,200 $           1,224 $           1,248 $             1,273 $             1,299
  Annual Storage Fee Revenues                         1754802           2055024           2314358             1891279             3385318
 Data Transfer
  Average Annual Data Transfer (GB) - LOW                 0.1               0.1               0.1                 0.1                 0.1
  Average Annual Data Transfer (GB) - AVE                 1.6               1.7               1.9                 2.1                 2.3
  Average Annual Data Transfer (GB) - HIGH                3.0               3.3               3.6                 4.0                 4.4
  Data Transfer Fee per GB per year                       199               203               207                 211                 216
  Annual Data Transfer Fee Revenues                       162               388               288                 704                 596
  Inflation factor                                         2%                2%                2%                  2%                  2%
  Expansion Factor                                        10%               10%               10%                 10%                 10%
 Total Revenue                               $      1,754,964    $    2,055,411    $    2,314,646    $      1,891,983    $      3,385,914

COSTS
 Labor
  Material / Hardware
   Annual Access Fee to High-Speed T1 Line              60,000            60,000            60,000              60,000              60,000
   Server Hardware                               $1,200,000.00       $516,000.00       $737,880.00       $1,055,168.40       $1,508,890.81
  Labor / Support Staff
   Number of Support Staff                                   1                 2                 3                  4                   5
   Average Salary of Support Staff           $         80,000 $          83,200 $          86,528 $           89,989 $            93,589
  Salary Total                               $         80,000 $         166,400 $         259,584 $          359,956 $           467,943
  Overhead                                   $         24,000 $          49,920 $          77,875 $          107,987 $           140,383
  Inflation Factor                                         4%                4%                4%                  4%                  4%
  Burden rate (overhead)                                  30%               30%               30%                 30%                 30%
 Total Cost                                  $      1,364,000    $      792,320    $    1,135,339    $      1,583,112    $      2,177,217


EBIT                                         $       390,964     $    1,263,091    $    1,179,307    $       308,871     $      1,208,696




                                                                                       Note: Aggregated results from the preceding questionnaires
                                                                                       were used to set the lower, average, and upper boundaries

                                                                                       for Monte Carlo simulations of this financial model.

                                                                 6
Monte Carlo Simulation for Year One EBIT for the Bioinformatics Initiative



                                                Cumulative Density Function
                              120%                                                                         To generate this data, we
 Cumulative Probability (%)




                                                                                                           created several triangular
                                                                                                           distributions, each bounded by
                              100%                                                                         different sets of three possible
                                                                                                           market penetration coefficients
                                                                                                           that Ohio might achieve in each
                              80%                                                                          financial model (i.e. low,
                                                                                                           average, and high values).
                                                                                                           These values were determined
                              60%                                                                          through a survey of participants.
                                                              Mean Expected Value                          With the resultant triangularly-
                                                                                                           distributed rate, we jointly ran
                              40%
                                                                                                           5,000 Monte Carlo simulation
                                                                                                           trials to arrive at an estimate for
                              20%                                                                          potential aggregate revenues
                                                                                                           for the bioinformatics initiative.
                                                                                                           The cumulative probability
                               0%                                                                          shows the range of values that
                                                                                                           resulted from this set of 5,000
                                     $0   $1,000,000   $2,000,000   $3,000,000   $4,000,000   $5,000,000
                                                                                                           simulation trials.

                                          Potential Annual Revenue ($)



                                                                         7
                         Monte Carlo Simulation of Aggregate EBIT for the Bioinformatics Initiative
                                         Overlay of Cumulative Density Function for EBIT in Years 1 through 5
                                                            (5000 Monte Carol Simulations Per Year)


                             120%
Cumulative Probability (%)




                             100%

                                                                                                                          EBIT Year One
                             80%                                                                                          EBIT Year Tw o
                                                                                                                          EBIT Year Three
                                                                                                                          EBIT Year Four
                             60%                                                                                          EBIT Year Five

                                                                                       Mean Expected Values
                             40%


                             20%


                              0%
                                    $0       $2,000,000   $4,000,000    $6,000,000     $8,000,000     $10,000,000   $12,000,000     $14,000,000

                                                             Potential Annual Revenue ($)

                                                                              7
            Monte Carlo Simulation of Aggregate EBIT for the Bioinformatics Initiative

                                           Overlay of Histograms show that the Breadth* of Probable Revenue Per Year
                                           increases with each Year
                               45%
                                                                                                                                                  EBIT Year Five
                                                                                                                                                  EBIT Year Four
                               40%                                                                                                                EBIT Year Three
Percentage of Population (%)




                                                                                                                                                  EBIT Year Tw o
                               35%                                                                                                                EBIT Year One


                               30%

                               25%

                               20%

                               15%

                               10%

                               5%

                               0%
                                      0
                                     $1,041,355   $2,848,400           5
                                                               $4,655,445    $6,462,490                10                            15
                                                                                          $8,269,536 $10,076,581 $11,883,626 $13,690,671 $15,497,716 $17,304,762    20


                                                                            Potential Annual Revenue ($MM)
            *Breadth = Full-Width at Half Maximum



                                                                                              7
Monte Carlo Simulation of Aggregate EBIT for the Bioinformatics Initiative
                           The Time Series of Revenue Probability Ranges
                           Shows that the Probability of Postitive EBIT
                           is High for most of the Simulation Range (5 to 95%)
       $14,000,000


       $12,000,000


       $10,000,000


        $8,000,000                                                               95%
                                                                                 Mean
                                                                                 5%
        $6,000,000


        $4,000,000


        $2,000,000


               $0
                     EBIT Year   EBIT Year   EBIT Year   EBIT Year   EBIT Year
                       One         Two        Three        Four        Five




                                             7
Bench Marks




    7
  Ohio is Ranked 33rd in the Nation in “New” Economic Strength
                                                                                             = Massachusetts
                                                                                             = Ohio
                                                                                             = Mississippi


                                       1          5       10   15   20   25   30   35   40    45      50


                     Overall Rank

  Managerial/Professional Jobs

            Workforce Education

      Foreign Direct Investment

                     Job Churning

 Commercial Internet Domains

          Education Technology

                  High-Tech Jobs

       Scientists and Engineers

      Industrial R&D Investment

                  Venture Capital

                                IPO


Source: State New Economy Index, Ernst & Young Analyses

                                                               7
                     Strategic Consulting for the Life Sciences Industry
Our management consulting practice provides a full range of entrepreneurial services for life sciences companies
at every stage of their business evolution, allowing entrepreneurial companies to focus on key strategic issues
while leveraging leading practices. Consulting services include:

Strategic Planning From the formulation of business models to merger and acquisition transactions, we can provide a wide
range of strategic consulting services. We can assist with scenario planning, competitive strategy, licensing strategy, strategic
partnering, financial modeling and research and development portfolio management.

Market Research and Assessment We can provide a detailed investigation and systematic analyses of competitive
products, firms, markets, and industries. We can assist with product definition, market sizing, and product positioning to drive
robust product development and strategic planning.

New Product Development Our new product development team assists organizations in selecting the optimal mix of
potential new products and services while effectively targeting niche markets. Further, we can efficiently drive the
development process to result in high-impact products or services that are rapidly brought to market.

Product Launch Our product launch services guide the development of a cohesive and integrated product launch strategy,
coordinating the build-up of manufacturing, distribution, sales and marketing capabilities to optimize market entry. We can
provide launch readiness assessments to determine risk factors and interdependencies related to an upcoming launch.

Supply Chain Optimization We can improve the efficiency and effectiveness of the supply chain through cutting-edge
business process, information flow and materials management, and optimize each step in the supply chain according to
industry best practices and benchmarks.

Activity-Based Cost & Performance Management Our solution team assists organizations in achieving optimal
performance and execution of business strategies through the development and deployment of performance measures. We
can also utilize cost management techniques to provide information for key business decisions, including the development of
activity-based cost models and the rollout of enterprise-wide performance scorecards.




                                                            7

								
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