CrESIT Assobiotec Workshop 2009 (Varese, Nov 23rd, 2009) www.cresit.it

1. Realizing Your
Business Model
Alberto Onetti, Director, CrESIT
Antonella Zucchella, President, CIBIE
Workshop CrESIT-ASSOBIOTEC 2009
Business Models for Biotech
Varese, November 23rd
www.cresit.it
CONFIDENTIAL

2. Why you need a Business Model
To get to your Destination, you need Directions
The Business Model is the road map to your Destination
Managerial tool — Defines how the company organizes its activities
Decides your business:
“Focus” — the relevance of the different activities
“Locus” — the localization of the different activities
“Modus” — the way different activities are executed
Analytical planning tool — What you need to do “activity by activity”

3. Our Business Model Concept
FOCUS LOCUS MODUS
Who? In-house or Third Parties?
How much Where to place How? Capital or labour-intensive?
Activity A
to allocate? the activities? How much tech-intensive?
Which Skills are required
(brain-intensive)?
Activity B
Activity C
…
Source: Onetti and Zucchella, 2008

4. First Issue: How to represent complexity
The Business Model: Multiple decisions for Focus, Locus, and Modus
A company has many options
Business Model decisions characterize the company in a unique way
Too many options — risk of “losing your direction”
High Tech and Life Science firms are typically global firms: multi-location is the natural way of being
A company’s network is “broad” and “multidimensional”: they have to manage many relationships, not
only upstream (scientific community, industry…) and downstream (lead users), but also laterally (e.g.
finance)
They partner in different ways (licensing-in and –out, outsourcing, joint venture, strategic alliances…)
More than an analytical planning tool, the Business Model is a blueprint of how a
company works
A representation of the company’s Business Model
Enables one to identify the Business Model’s constituents — the “value architecture”

5. Case study: MonogramBio
(formerly ViroLogic)
Founded in 1996
Genentech spin-off
Currently 350 people, $40M in revenue
Public in 2000, acquired by LabCorp in Aug 2009 (2,800 people, $4B in revenue)
Lines of Business: molecular diagnostic products
Personalized Medicine
Tailored drug therapy, resistant tests for HIV (75% of revenue)
Testing for Pharma Companies, working on new HIV drugs
25% of revenue
From 2004 they are diversifying from virology to oncology
They bought Aclara BioSciences, Mountain View, CA

6. Case study: MonogramBio
Focus
LABS & SALES
Source: Onetti-Zucchella 2009

7. Case study: MonogramBio
Lesson learned
The company diversified but did not change its business model
They manage oncology in the same way they did virology
Managers have the feeling to approach different lines of business in different ways
Frequently they adopt the same model
They reshaped the Business Model during the life of the
company
Locus
No change, it was and still remains a Bay Area Company
Modus:
Billing: initially out, then back in
Focus
Initially R&D, thereafter Labs and Sales

8. Second Issue: Business model can
evolve and change
The Business Model may change over the time
Day by day company makes decisions that may affect Focus, Locus and Modus
Each decision, separately considered , is not necessarily a radical change, often just a fine tuning
of prior decisions
But the sum of all these decisions may radically change the way the company works and its
Business Model
The Focus may change as the company evolves
Life Science firms typically change focus as their research moves from early to later phases
Some companies do not (“satellite" companies, CROs)
Not just Focus, but also Locus and Modus
Companies can locate activities in different places
This can open up to new business opportunities or exploit new partnerships
Companies can initiate new alliances
Partnerships can change the way the company works (“platform” companies)
The more parameters are modified, the more radical is the
business model change
In some cases business model changes are so radical to drive strategy change

9. Case study: Napo Pharmaceuticals
Founded in 2001
Napo bought Shaman's library of compounds, including crofelemer
It raised approx. $300M
Currently approx. 30 people (over 100 a few years ago)
Public in 2006
Business: development and commercialization of proprietary
pharmaceuticals

10. Case study: Napo Pharmaceuticals
ACTIVITY LIST FOCUS
Strategic Importance (1=low - 10=high)
Pre-Clinical
4
Phase 1 6
Phase 2 10
Phase 3 3
Pilot Manufacturing/Tech Transfer
Focus
Registration
Business Development
Manufacturing and Sales
EARLY STAGE RESEARCH
London
Source: Onetti-Zucchella 2009

11. Case study: Napo Pharmaceuticals
ACTIVITY LIST FOCUS
Strategic Importance (1=low - 10=high)
Pre-Clinical 2
Phase 1 3
Phase 2 3
Phase 3 6
Pilot Manufacturing/Tech Transfer 6
Focus
Registration 8
Business Development 8
Manufacturing and Sales
2
REGISTRATION & BD
London
Source: Onetti-Zucchella 2009

12. Where may the Business Model tool
help?
Plan & manage your evolution, not just be driven by events
“Models evolve, change, often react to where the science or the money is”
“We figured it out based on the environment”
How do you see your company in 3 years? What actions are required to reach your new Destination?
Check the evolution path and learn from your past
Are we today what we wanted to become?
What drove my evolution?
The analysis of the past can help plan for future actions
Communicate what your company does
Life science and high tech companies are not easy to pitch
Scientists do not talk business, but business people and venture capitalists do not like to hear science (for
more than 40 secs)
Our tool analyzes and wraps-up how the company actually works
It is the snapshot of your company as it is now
3 years ago the company probably looked different
3 years from now it will likely be different
The worst thing for a manager is to be surprised about that