Tree Frogs and Balanced Innovation

Notes from the East Woods
musings on opportunities in the life science marketplace

July 2009

Greetings!

This month the grey tree frog shows us the importance of balance. Please have a read and feel free to let me know what you think. Thanks.

Regards,

Paul Danis
Founder and Principal

ps. if you missed some of our earlier Notes, you can see them here.

This Month's Features

- Tree Frogs and Balanced Innovation

- Life Science Market Update

- About Us

Tree Frogs and Balanced Innovation

I marveled at the balance of the little grey tree frog that had one toe on a leaf, one on a branch and a third on the window. He carefully supported himself on these three spots to remain upright while hanging in mid-air. It reminded me of the dynamics organizations undergo as they grow and evolve.

As companies move to new markets, mature their operations, or simply get more sales, they must maintain a proper balance within their organizations. On a simple level, the priority of the three main areas - operational efficiency, innovation leadership, and customer relations - have to be weighted appropriately according to the situation in the company. You need to focus on one area, but maintain an adequate level of involvement the others. The tree frog would be dangling if only one toe was holding on.

If we look at young life science technology companies, they are usually heavily focused on innovation -- being close to customers is not a priority, nor is having streamlined operations. As the organization grows it needs to shift its balance with more weight towards the other two areas. Excel spreadsheets are fine when there are 12 customers, but with a hundred, more efficient and formal systems need to be in place.

Another area of shifting balance is when companies move to new markets, with either new or current products. A common scenario is when the instrument company decides to sell to application-focused customers in areas such as food safety, drug manufacturing, or environmental monitoring. The companies soon realize that they need to be much more closely aligned to the customer's world than with their own technology.

If, for example, we look at process analytical technology (PAT) applications in pharmaceuticals, a whole new set of requirements comes into play. Not only must the instrument perform well, but the supplier must also have proper quality systems and lots of other internal controls on the products. Without these, they can't play in the PAT sandbox. They must shift their balance.

So while the current situation may be just fine, when a company is growing, a keen awareness of balance is needed. It is important to know whether increased focus on the customer or improved innovation will provide the support for growth. Like the tree frog with a toe on each surface, having the right balance in the company will keep you upright and growing.

Life Science Market Update

Index	June Value	Change YTD	Yearly High	Yearly Low
EC BioTools	558	26%	558	411
EC BigPharma	715	-4%	715	617
EC Biotech	461	-6%	487	431

All life science indices were up over last month with Tools posting the largest gains, up 8% from May's value, while Pharma and Biotech inched up 2% and 1%, resp. With the exception of HLCS, all Tool companies were up, with half of them gaining over 10% on the month. In the Pharma index advances lead declines 4 to 1, while Biotech was 2 to 1.

---------------------

Many of the life science indices currently available are a mixture of various types of companies. In order to better assess the situation in the different segments, Eastwoods Consulting has created these price-weighted indices for the sectors of large pharmaceutical companies, biotech companies, and life science research tools companies.

EC BioTools Index - A, ACCL, AFFX, BEC, BIO, BRKR, CALP, DNEX, HBIO, HLCS, ILMN, LIFE, LMNX, PKI, QGEN, SIAL, TMO, VARI, WAT
EC BigPharma Index - JNJ, PFE, GSK, NVS, SNY, MRK, ABT, LLY, AZN, WYE, BMY, NVO, BAX, TEVA, SGP, ROG.VX
EB Biotech Index - AMGN, GENZ, BIIB, CEPH, GILD, BMRN, AMLN, IDXX, SEPR, OSIP, PDLI, CPHD, ALKS, REGN, MEDX, THRX, HGSI, SGMO, NKTR
Prices are taken at the close of each month. YTD is the year to date change taken from the end of December, 2008.

About Eastwoods Consulting

Eastwoods Consulting helps life science companies translate innovations into profits. Please visit our web site or contact us to learn more about how we help companies succeed in competitive markets.

Copyright � 2009, Eastwoods Consulting. This publication may be freely redistributed in full or in part as long as full attribution including our contact information and web address, are included. Eastwoods is a registered servicemark of Eastwoods Consultng.