Hurricanes and Catching Waves

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

September 2009

Greetings!

This month, hurricanes create waves of opportunity Catching them is another story. 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

- Hurricanes and Catching Waves

- Life Science Market Update

- About Us

Hurricanes and Catching Waves

Hurricanes - not a typical New England thing - have been on my mind lately. With two near misses in the last couple weeks (Bill and Danny) the threat is no longer a CNN tour of devastation in the southeast US. If not for a mound of air pushing in from Canada, the East Woods could have been turned into a pile of kindling.

Fortunately the biggest effect of the storms was waves - the kind that all would-be surfers try to catch. New England is not known for its surf culture so these folks had their hands full. It is similar to the efforts of many businesses that are now trying to get a grasp on the wave of opportunities that are starting to roll.

After hibernating for the better part of 3 quarters, it is not easy to jump up to full speed again. So how do you catch the wave? I'm sure you remember your fruitless early attempts at bodysurfing, then finally the roaring, frothy acceleration of a properly ridden wave - replete with the broad grin. It is a similar process.

The essence is this: don't stand still. You must be moving to catch the wave. You need to have some forward momentum before the wave reaches you.

Firstly you need to be mentally prepared that the waves are indeed coming and imminent. It is easy to relax and think that waves aren't coming yet, but the signs are here - increased R&D spending, production ramping due to reduced inventories, and Uncle Sam pumping in some ARRA cash. It's estimated that around $8B will pour into life science coffers over the next couple years.

Your buddies are already catching these waves so you might as well get in on the action. Bruker mentioned last week how they have pocketed $10M in new business directly from stimulus funds. I'm sure others are capitalizing as well, but haven't let out the secret yet.

Due to long buying cycles, sales and marketing have to be ramped up months ahead of any waves you intend to catch. Hopefully you have already started moving here, since those still watching are going to miss some waves. As the CEO of Nvidia said, "There is no better time to invest...than when the competition in cutting investments. We know from experience that doing so puts us in a stronger position once the tide turns."

When you do want to catch the wave, you need to completely go for it. A half-hearted effort and you will slide off the back of the wave. Many pharma and biotech companies are well underway with increased spending on R&D. Merck, Biogen, Lilly, Bristol-Myers Squib, Gilead, Celgene, Regeneron, Abbott and others are spending over a billion more in the first half of 2009 than last year at that time.

So if there are products to launch - press go; training - start tomorrow; research to do - staff up; sales funnel empty - fill 'er up. The wind has blown, and the waves are starting to crash on the beach. It's time to catch some waves.

Life Science Market Update

Index	August Value	Change YTD	Yearly High	Yearly Low
EC BioTools	603	36%	603	411
EC BigPharma	781	5%	781	617
EC Biotech	518	6%	518	431

In a relatively quiet month, all indices inched upwards for new yearly highs. Most noteworthy is Helicos BioSciences' run up of almost 400% for the month on the positive news for its next generation sequencing platform, though the $3 share price is somewhat modest. For the BigPharma index, advances led declines 4 to 1, while for Biotech it was 2 to 1. For the BioTools index, advances slightly outnumbered declines.

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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.

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