Support in Medical Technologies

Nerac
Research & Advisory Services
For the Medical Device Industry

© 2010 All Rights Reserved. Nerac Inc. | 1 Technology Drive, Tolland, CT 06084

Agenda

 Introduction to Nerac, Inc.
 Nerac Service Offerings
 The Nerac Difference
 Engaging Nerac


Who Is Nerac?

Global research and advisory firm
for companies developing innovative
products and technologies

Areas of Concentration

Energy
Pharmaceutical
Medical Device COMPANY TYPE: PRIVATELY HELD ESOP

Specialty Chemical Founded 1966
Other
Employees 95 / National & International
Analysts 48 Ph.D.s, Masters, MBAs, Attorneys
Clients ~1500 Worldwide


How We Serve Our Clients

Intellectual R&D Process
Property
Management Regulatory
Process

Unique provider
of rapid-response research
Technical for smaller, mission- critical
Product & Business
Service Development engagements that require
Marketing highly experienced
expert advisors.


What We Do
Expert Research & Advisory Services

 Research and Product Development Process
— Perform opportunity vetting to accelerate critical go/no-go decisions
— Expedite regulatory filings and vigilance requirements

 Business Development Process
— Identify portfolio and alliance opportunities

 Technical Products & Services Marketing Process
— Understand the size and financial potential of market opportunities

 Intellectual Property Management Process
— Protect and leverage IP assets through portfolio management


Research & Development Process
Accelerate Critical Go/No-Go Decisions

PROCESS STAGE

CONCEPT & DESIGN,
OPPORTUNITY & RISK PRODUCT
FEASIBILITY DEVELOPMENT
ASSESSMENT COMMERCIALIZATION
ASSESSMENT & VALIDATION
RESEARCH & • Opportunity vetting • Technical literature reviews
PRODUCT • Technical due diligence • IP review of competitor filings
DEVELOPMENT • New market identification • Supplier/manufacturing facility identification
DEPARTMENT OR FUNCTION

REGULATORY • Post-marketing safety
surveillance
• Regulatory hurdles/risk • Regulatory strategy development
• Clinical literature reviews
identification • Competitive safety and efficacy studies
• Meta-analyses for ongoing
regulatory compliance
MARKETING • Market and competitive • Monitor
assessment - Competition
- Clinical and cost-effectiveness research
REIMBURSEMENT • Reimbursement strategy • Reimbursement strategy

LEGAL • Early stage clearance
research and risk
assessment


Research & Development Process
Examples of Recently Completed Projects

 Safety and efficacy studies of contact lens brands
— Identified the key value proposition for various competitor’s products
compared to client’s proposed in-house product
 Unmet clinical needs for a specific spinal treatment procedure
— Analysis of clinical literature and clinician opinions enabled the client to
understand the key deficiencies in existing products in the marketplace
 Clinical evaluation of an orthopedic device in knee
and hip applications
— Included assessment of failure issues and ease of use by the clinician
— Client to use information to identify areas of improvement for their products


Research and Development Process
Client Impact Case Study

Issue: The CTO of a European orthopedics company requested
assistance in reviewing the IP and competitive landscape for novel
biomaterial composite scaffolds used in spine repair. The client sought
competitors who were developing new products with new materials in
order to identify competitive threats and to uncover new potential licensing
opportunities.

Analyst Approach: Nerac Analysts identified potential companies and
universities that were developing new biomaterials for the spine repair
market. The team also reviewed IP and literature for biomaterials beyond
the spinal fusion space, in collaboration with client’s IP team.

Client Benefit: Client was able to identify two universities and nonprofit
research institutes in the United States as potential licensing candidates.
In addition, the client gained a better understanding of competitors’
R&D pipelines.


Regulatory Process
 Clinical literature reviews on Class II endoscopic
medical devices
— The reviews demonstrated safety and efficacy of the devices
— Submitted to EU Notified Bodies in partial compliance with
EU Directive 93/42/EEC

 Safety and toxicity of a chemical composition used
in medical devices and implants
— Support for client’s FDA submission and assessment
of possible adverse effects

 Recommendations on hemocompatibility testing
to satisfy FDA guidelines
— Support for client’s 510k filing


Regulatory Process

Issue: The client, a major cardiovascular stent company,
wanted to ensure proactively that their intra-aortic balloon
pump (IABP) catheters would comply with new EU regulations.
Analyst Approach: The Nerac team reviewed over 1,000 publications to
identify pertinent clinical research. A meta-analysis was performed on
260 applicable articles.
Client Benefit: The analysis validated the efficacy of IABP catheters for
certain indications and built a case for IABP catheters as a preferred
treatment approach. In addition, the analysis identified indications where
literature evidence was insufficient and clinical trials would be needed to
comply with future regulations. Finally, the analysis provided material for
publications on the best treatment techniques.


Business Development Process
Identify Portfolio & Alliance Opportunities

PROCESS STAGE

POST-
FINAL DEAL
PIPELINE & SCREENING DUE DILIGENCE ANALYSES ACQUISITION
NEGOTIATION
INTEGRATION
BUSINESS • Identify target technologies, • Support market and • Monitor
DEVELOPMENT acquisitions, licensees/licensors competitive assessment - Competition
• Assess patent landscape - Changes in market
• Provide competitive intelligence or regulatory

• Support due diligence process environment
OPERATIONS • Provide patent protection • Monitor • Support revised
opinion/advice • Develop initial regulatory - Clinical and cost- business
• Support informed investment strategy effectiveness strategies
decisions with CI • Competitive safety and research
efficacy studies - Product releases

LEGAL • Provide patent landscaping • Perform due diligence • Monitor patent activity • Support revised
services, early-stage clearance analyses to support: IP portfolio
research , risk assessment • In-licensing, out-licensing management
and acquisition strategies
opportunities
• Negotiation positions



 Technical due diligence and value proposition analysis of a new
diagnostic device developed by a potential acquisition candidate
— Analysis of key criteria such as accuracy, turnaround time and
reimbursement aided the client’s assessment of the candidate

 Created a target list of companies working on a therapeutic
to treat a bioterrorism induced illness
— Target list was used to identify potential partnership and collaboration
opportunities

 Reviewed segment of the IVD market in order to assess the platform
technologies of competitors’ and potential acquisition candidates
— Client used the information to identify smaller companies they may
have overlooked as potential acquisition candidates


Issue: Nerac was engaged in order to evaluate acquisition opportunities
for a particular type of drug delivery device. The client, a multinational
medical device developer and manufacturer, had a goal of generating an
additional $100MM annual revenue within 5 years.

Analyst Insight: Nerac Analysts determined that the client had a strong IP
position relative to competitors. In addition, the analysis enabled the client
to understand that competitors had few advantages (e.g. manufacturing
capacity, international distribution, etc.) that would be worth acquiring.

Client Benefit: Based on Nerac’s recommendations, the client is
aggressively pursuing an organic growth strategy which utilizes their
strength in low-cost manufacturing and their defendable IP position. Nerac’s
assessment allowed the client to realize that an acquisition would provide
them with minimal advantages.


Technical Products Marketing Process
Accelerate Critical Go/No-Go Decisions

PROCESS STAGE

DESIGN,
OPPORTUNITY & RISK CONCEPT & FEASIBILITY PRODUCT
DEVELOPMENT
ASSESSMENT ASSESSMENT COMMERCIALIZATION
& VALIDATION
MARKETING • Market and competitive • Monitor
assessment - Competition
- Clinical and cost-effectiveness research

REIMBURSEMENT • Determine • Finalize reimbursement
reimbursement strategy strategy
• Compile dossier and
• Determine cost-effectiveness implications of new product
marketing materials
• Understand the current reimbursement environment
• Prepare a pricing strategy
RESEARCH & • Opportunity vetting • Technical literature reviews
PRODUCT • Technical due diligence • IP review of competitor filings
DEVELOPMENT • New market identification • Supplier/manufacturing facility identification
REGULATORY • Regulatory hurdles/risk • Regulatory strategy development • Post-marketing
identification • Competitive safety and efficacy studies surveillance and ongoing
regulatory compliance


 Created a database of competitor activities
related to time/temperature monitoring devices
— Early monitoring permits proper positioning of client’s product
in the marketplace in response to competitive threats

 Comprehensive analysis of the expected clinical and economic
benefits of an improved resolution imaging device
— Analysis was used to support preliminary decisions on pricing,
reimbursement and marketing strategy

 Reviewed global market information on hyaluronic acid in order to
identify adjacent applications (e.g. cosmeceuticals)
— Analysis helped the client to identify niche markets where their
technology applies



Issue: The VP of Marketing at a Cardiotech company engaged Nerac
to monitor competitors in the electrophysiology market.

Analyst Insight: In collaboration with the client, Nerac reviewed recent
competitor activities. The analysis enable the company to identify new
players in the market and potential acquisition candidates. In addition,
the client gained a more comprehensive understanding of how their
competition was evolving in the marketplace and how to better position
their products.

Client Benefit: The report was utilized to help the company understand why
they were losing market share and how to correct the problem. They were
able to assess the competitiveness of their products and to identify areas
of improvement. Nerac continues to provide quarterly updates.


Reimbursement Process
 Created a reimbursement dossier to support
discussions with payers for a new diagnostics panel
— Dossier used by the client’s customers to demonstrate the value
of the newer aspects of the testing panel

 Prepared a comprehensive ICD-9 code and DRG landscape for sepsis
in order to understand the susceptible patient population and the
current reimbursement levels
— Research provided background for a preliminary model on the cost-
effectiveness of early detection of sepsis

 Developed a comprehensive landscape of existing CPT codes
and reimbursement levels for a particular bone repair procedure
— Client now able to assess if a currently marketed product could gain
acceptance for a new application with existing codes


Reimbursement Process

Issue: The client, an in vitro diagnostics company, launched a new panel
assay to test multiple targets. After the product was launched, their
customers, clinical laboratories, began having difficulty obtaining
reimbursement from certain payers.

Analyst Insight: Nerac Analysts prepared a dossier that highlighted the
clinical benefit of each component of the assay. In addition, a preliminary
model was developed to quantify the potential savings associated with
early detection.

Client Benefit: The client distributed the dossier and model to their
customer to support reimbursement discussions with payers. As the
company grows, they plan to fill the evidence gaps that were uncovered
during the dossier development process.


Intellectual Property Process
Enable Effective IP Portfolio Management
PROCESS STAGE

PATENT FILING
OPPORTUNITY & RISK IP PORTFOLIO IP RIGHTS
AND/OR LICENSING
ASSESSMENT MANAGEMENT ENFORCEMENT
NEGOTIATION
LEGAL • Provide patent landscaping • Create patent portfolio • Patentability research • Identify enforcement
services, early-stage for case and asset • Support in-licensing targets
clearance research , risk management due diligence • Support assertion
assessment • Analyze out-licensing positioning
opportunities

RESEARCH & • Provide patent protection • Assess R&D efforts in • Identify patent
PRODUCT opinion/advice other business units or protection targets
DEVELOPMENT • Support informed investment locations
decisions with CI
BUSINESS • Assess patent landscape • Link portfolio segments • Support negotiation • Inform decisions to
DEVELOPMENT • Provide competitive to costs and revenues positions assert patents
intelligence • Identify latent • Identify
opportunities for IP commercialization
commercialization partners
MARKETING • Guide marketing efforts
via commercial scope
of IP


Intellectual Property Process
 Due diligence research required for a client’s freedom
to operate assessment of a gynecology device
— Used by client to evaluate the validity of patents issued by their competitors
— Reviewed designated companies’ patents for any potential trend in the
technology of interest

 Prior art search for all patents issued by an orthopedic company in
disc replacement technologies
— Confirmatory information ensured that a competitor had not developed
a more advanced, potentially overlapping, technology
— Set up an ongoing alert to monitor future activities

 Due diligence research needed for a client’s freedom to operate
assessment of a drug/device combination
 Analysis provided confirmation that prior art, which would impair
the client’s ability to sell and market a new product, did not exist


Intellectual Property Due Diligence

Issue: The CSO of a small foreign diagnostics company requested assistance
conducting clearance research for a cancer diagnosis platform based on
genetic profiling. This research was necessary to determine the advisability
of licensing the rights to the platform from an academic laboratory.

Analyst Approach: Nerac Analysts skilled in biosequence research advised
the client of the available methodologies with associated costs and
limitations for identifying patents claiming the probe sequences. The team
also reviewed the identified patent claims with the CSO to illustrate the
potential risk associated with developing the platform for commercial use.

Client Benefit: Potential commercialization barriers were identified. Counsel
negotiated licensing conditions that reduced or eliminated certain royalty
payments if any of the risks materialized. In addition, the client was able to
propose claim amendments to the licensor to cover the intended product.


Case Study Example
Evaluation of IVD Product

Client engaged Nerac for an independent, third party assessment
of their In Vitro Diagnostic (IVD) product’s cost-effectiveness. The
assessment is being used in the client’s marketing materials and in
discussions with payers. The project also enabled the client to refine
their pricing strategy.
Nerac was engaged to evaluate the client’s IVD product based on
the following criteria:
a. Clinical effectiveness (life years gained, fatalities avoided)
b. Cost-effectiveness (total health care costs, cost per life
year gained)
c. Profitability of running the test for customers
NEGATIVE POSITIVE FAILED
The cost-effectiveness model enabled the client to communicate the
benefits of the test to patients, payers, and clinical laboratories. In
addition, the pricing model enabled the client to understand how key
variables impacted the customer’s profit margin.


Case Study Example (Continued)
Clinical and Economic Cost Benefit Modeling

Approach: A user-friendly model was developed,
based on a review of the clinical and cost-effectiveness
literature. The model calculated costs and benefits over Key Results:
a 10 year period. The model provided a framework for
Economic benefits discussions with payers.
Clinical benefits Cost per life year gained
Number of patients
$60,000 The user-friendly input allowed payers to
400 calculate the estimated clinical and economic
$50,000 impact of the client’s test for their member
300
population including:
$40,000
1. Life years gained/quality of life years
200 2. Cost per life year
$30,000 3. Avoidance of treatment costs
Test A
100 Test B $20,000 The model became a central component of
the client’s marketing efforts with both payers
- $10,000 and end users, because it highlighted the
# cancers Fatalities message that the client’s test provided a
detected avoided (10 $- better standard of care with lower costs.
through yrs)
screening Test A Test B


Pricing Assessment

Approach: An analytical model was developed to calculate
the profit margin of laboratories running the test.
Key Results:
Potential lab profit versus compliance rate
Patient compliance rate vs. Profit / $US (thousands) Modeling of reimbursement and
compliance rates enabled the client
$15,000
to understand the pricing levels that
would result in profitability for
$10,000 laboratories and payers.
Taken together with health and
Above this
economic outcomes data, this
PROFIT

$5,000 threshold, Test A
analysis is useful for understanding
is more profitable
the relative value of a diagnostic
to run than Test B
$- test for customers/end users.

This analysis was used by the
$(5,000) client to revise their pricing strategy
to account for the profitability
advantage of their product over
$(10,000) competitive products.
Patient compliance rate (%)


Case Study Example
Opportunity Identification in the Tissue Engineering Market

• Client wanted to explore entering the tissue engineering market
through a combination of internal development, partnerships,
acquisitions, and/or licensing.
• Nerac was engaged to evaluate various market
segments based on the following criteria:
a. Indications for Use/Unmet Medical Needs
b. Competitive Landscape
c. Expected Market Growth
d. Strategic Fit
e. Development Time/Cost
f. Reimbursement/ Regulatory Environment
• Nerac developed a framework for evaluating the opportunities in various
segments. Client utilized the recommendations to make a go/no-go
decision that matched their business goals and risk tolerance.


Opportunity Identification in the Tissue Engineering Market

Approach: Nerac researched various aspects
of the tissue engineering market through
both primary research (e.g. interviews with Tissue Engineering Market - Risk v Reward
key opinion leaders in industry and clinicians)
and secondary research (e.g. literature High
reviews, evaluation of key business and
financial disclosures)
RISK
— An assessment of key criteria guided the WW Research Investment
client’s decision making process. Low

High
Low
Result: Client has decided to forgo this market
entirely:
— Established market segments are highly Low High

fragmented and have low profit margins Reward (WW market potential for break-through technology)
— Emerging market segments do not fit with
client’s risk tolerance


Case Study Examples
Nerac Analyst Bios

Marco Bafan, M.S. Roz Sweeney, Ph.D.
Postdoctoral Fellow, Chemical Engineering,
M.S., Biomedical Engineering,
California Institute of Technology
California Polytechnic University
Ph.D., Cellular and Molecular Biology,
University of Texas at Austin

Ron Sills Huidong Yuan, Ph.D.
Ph.D., Biochemistry,
M.S., Biological Sciences,
Chinese Academy of Sciences
Southern Connecticut State University
M.B.A., Fuqua School of Business,
B.S., Biological Sciences,
Duke University
University of Connecticut


The Nerac Experience

A Turn-Key Research Operation

Seamless
Partnership.
Rapid
Progress.

In Just Days Confidential Collaboration High Impact Results
Nerac can move from with highly skilled research tailored to client scope,
scoping client need to staff as an extension timing and budget
project execution of your team


The Nerac Difference
Rapid Response, Highly-Skilled Expert Advisors

• Seamless teaming with client staff to form a trusted partnership

• Flexible engagements which offer rapid, impactful results

• Custom research services tailored to client scope, timing and budget

• Unique blend of Nerac Analysts’ keen insights and industry experience

• Unwavering integrity and relentless protection of client information

• Nerac researchers, analysts and IP advisors bring four decades experience
serving thousands of medical device companies


Engaging Nerac
Simple & Flexible Agreements

EXPERT RESEARCH RESEARCH & ADVISORY SPECIAL PROJECT SERVICES
REQUEST SERVICES SERVICES
Source and synthesize relevant information Expert analysis of business and Scope of work to be defined under a
from many sources technical information to produce specific agreement
actionable insights Designed for large engagements
Administer and manage alerts
Data-driven evaluation of technical, executed for a fixed price
Research key resources, including
business and intellectual property
scientific, technical, medical and patent
trends
sources
Designed for individuals who
Contact industry, commercial, academic, or
want expert analysis and opinion
government facilities
in addition to sourcing and
Discuss research or business challenges synthesis
and needs
Designed for individuals who prefer to
conduct their own synthesis and
analysis


Next Steps

 Define Need
 Assign and Introduce Analyst or Team of Analysts
 Schedule Scoping Meeting
 Distribute Agreement for Review and Sign-off
 Project Launch Meeting/Discussion


Support in Medical Technologies

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