Executive Summary

The pharmaceutical industry is one of the most profitable sectors of the Fortune 500 with profits of approximately 18% of revenue compared to a median of 5% for other industry segments. However, this market is facing increasing competitive pressure due to escalating R&D costs, shortened patent life due to the long product approval process, increased sales and marketing costs, pricing pressures, and entrance of more competitors into the industry. It is estimated that large pharmaceutical companies (or Pharma as they are generally referred to in the industry) require 3-5 new lead drug candidates (defined as New Chemical Entities or NCEs) each year to sustain double-digit growth rates. Despite the fact that R&D costs have been increasing (typically $300-500 million per NCE), the average number of NCEs have been dropping over the last decade to under one per year across the industry. Thus, there is increasing pressure on Pharma to find newer discovery and development paradigms. Two of the strategies that have most successfully been employed to do this involve forming partnerships with non-competitive biopharmaceutical companies.

The first strategy used by Pharma to broaden their product pipeline is to identify and license promising lead compounds that are in mid- to late-stage clinical trials. Joint late-stage development and co-marketing of those drugs that benefit both the Pharma and biopharmaceutical companies because early-stage studies have established clinical utility and potential efficacy/safety. In addition, the cost of late-stage development (i.e. the 60% of R&D expenditure in clinicals) and marketing can be shared.

An alternative strategy to increase the numbers of lead compounds in late-stage development is to invest in newer technologies to address bottlenecks in the pharmaceutical discovery pipeline. Recent advances in genomic technologies have shifted the major bottleneck from discovery to high-throughput (HTP) screening of large libraries of small molecules (chemicals). The chemicals in these libraries are frequently in limited supply and may be unstable to repetitive freeze-thaw cycles required for sequentially testing and screening in different studies. Thus, for emerging technologies to improve HTP screening methods or to improve the handling of these large libraries of chemicals are highly desirable to Pharma.

This report profiles 92 emerging biopharmaceutical companies that are located in the United States and Canada. These companies are in 8 different market segments and represent a total market size of approximately $880 million in annual R&D expenditures. The primary therapeutic areas under active development include ones directed toward autoimmune/inflammation, cancer, CNS/neurology, cell/gene therapy, and infectious diseases. In addition, several of the emerging biopharmaceutical companies are focused on platform or technology areas to support the pharmaceutical discovery process. Those market segments include tissue engineering, enabling technology platform providers, and companies with novel approaches to HTP screening.

The emerging biopharmaceutical industry, while very young, has several aggressive players with broad product pipelines. The majority of these companies are less than five years old yet have an average of 3-4 products in their pipelines. Approximately half of the products in these pipelines are therapeutic agents (170 new chemical entities or drug leads) including several in late Phase I, Phase II or even Phase III clinical studies and represent key licensing opportunities for Pharma or for more established biotechnology companies. EXECUTIVE OVERVIEW

1. CURRENT OVERVIEW OF BIOPHARMACEUTICAL RESEARCH AND DEVELOPMENT   THE PHARMACEUTICAL R&D PROCESS       Figure 1. The Drug Development Process   OVERVIEW OF MAJOR THERAPEUTIC MARKET SEGMENTS       Figure 2. Distribution of companies and their products among the therapeutic classes of emerging                             biopharmaceutical companies.   AUTOIMMUNE/INFLAMMATION MARKET SEGMENT       Figure 3. Distribution of lead drug candidates by stage of development (all market segments)   CANCER THERAPY MARKET SEGMENT   CNS/NEUROLOGY MARKET SEGMENT   CELL OR GENE THERAPY MARKET SEGMENT   INFECTIOUS DISEASE THERAPY MARKET SEGMENT   TISSUE ENGINEERING MARKET SEGMENT   ENABLING TECHNOLOGY MARKET SEGMENT   HTP SCREENING MARKET SEGMENT 2. FOCUS OF BIOPHARMACEUTICAL R&D AND BUSINESS   OVERVIEW OF EMERGING BIOPHARMACEUTICAL COMPANIES       Figure 4. The number of emerging biopharmaceutical companies in each major market segment       Figure 5. Approximate number of employees within emerging biopharmaceutical companies by market segment       Figure 6. Relative numbers of employees by market segment in the emerging biopharmaceuticalindustry       Figure 7. Distribution of emerging biopharmaceutical companies by year of incorporation       Table 1. The largest emerging biopharmaceutical companies profiled   AUTOIMMUNE/INFLAMMATION MARKET SEGMENT       Table 2. Participants in the Autoimmune/Inflammation market segment.       Figure 8. Size of participants in the autoimmune/inflammation market segment in 2002   CANCER THERAPY MARKET SEGMENT       Table 3. Participants in the Cancer therapy market segment   CNS/NEUROLOGY MARKET SEGMENT       Table 4. Participants in the CNS/Neurology market segment       Figure 9. Size of participants in the CNS market segment in 2002   CELL OR GENE THERAPY MARKET SEGMENT       Table 5. Participants in the Cell/Gene Therapy market segment       Figure 10. Size of participants in the cell/gene therapy market segment in 2002   INFECTIOUS DISEASE THERAPY MARKET SEGMENT       Table 6. Participants in the Infectious Disease market segment   TISSUE ENGINEERING MARKET SEGMENT       Table 7. Participants in the Tissue Engineering market segment       Figure 11. Size of participants in the Tissue Engineering market segment in 2002   ENABLING TECHNOLOGY MARKET SEGMENT       Table 8. Participants in the Enabling Technology market segment   HTP SCREENING MARKET SEGMENT       Table 9. Participants in the HTP Screening market segment       Figure 12. Sizes of large and small emerging technology participants in 2002       Figure 13. Size of participants in the HTP screening market segment in 2002 3. PRODUCT PIPELINE BY THERAPEUTIC CATEGORY   OVERALL PRODUCT PIPELINE BY STAGE       Figure 14. Breakdown of lead drug candidates by stage of development   OVERALL PRODUCT PIPELINE BY THERAPEUTIC CATEGORY       Figure 15. The number of lead drug candidates by disease focus   AUTOIMMUNE AND INFLAMMATION THERAPIES       Figure 16. Distribution of drug candidates by stage of development at companies in the                             autoimmune/inflammation market segment       Table 10. Lead drug candidates under development in the autoimmune/inflammation market segment   CANCER THERAPIES       Figure 17. Distribution of drug candidates by stage of development in the cancer market segment segment   CNS/NEUROLOGY DRUGS       Figure 18. Distribution of drug candidates by stage of development at companies                              in the CNS/neurology market segment       Table 12. List of lead drug candidates under development at companies in the CNS/neurology market segment   CELL OR GENE THERAPY PRODUCTS       Table 13. List of lead drug candidates under development at cell/gene-based therapy companies companies   INFECTIOUS DISEASE THERAPIES       Figure 20. Distribution of drug candidates by stage of development at companies in the infectious                             disease market segment       Table 14. List of lead drug candidates under development at companies in the infectious disease market segment 4. PARTNERSHIP OPPORTUNITIES WITH EMERGING COMPANIES   AUTOIMMUNE/INFLAMMATION SEGMENT ANALYSIS AND EVALUATION       Table 15. Analysis and Evaluation of the autoimmune/inflammation market segment participants   CANCER THERAPY SEGMENT ANALYSIS AND EVALUATION       Table 16. Analysis and Evaluation of the cancer market segment participants       Table 17. Late-stage lead drug candidates in the cancer market segment   CNS/NEUROLOGY SEGMENT ANALYSIS AND EVALUATION       Table 18. Analysis and Evaluation of the CNS/neurology market segment participants       Table 19. Late-stage lead drug candidates in the CNS/neurology market segment   CELL/GENE THERAPY SEGMENT ANALYSIS AND EVALUATION       Table 20. Analysis and Evaluation of the cell/gene therapy market segment participants   INFECTIOUS DISEASE SEGMENT ANALYSIS AND EVALUATION       Table 21. Analysis and Evaluation of the infectious disease market segment participants       Table 22. Late-stage lead drug candidates in the infectious disease market segment       TISSUE ENGINEERING SEGMENT ANALYSIS AND EVALUATION       Table 23. Analysis and Evaluation of the tissue engineering market segment participants   ENABLING TECHNOLOGY SEGMENT ANALYSIS AND EVALUATION       Table 24. Analysis and Evaluation of the enabling technology market segment participants   HTP SCREENING SEGMENT ANALYSIS AND EVALUATION       Table 25. Analysis and Evaluation of the HTP screening market segment participants 5. COMPANY PROFILES: ACTIVITIES OF LEADING EMERGING FIRMS   AUTOIMMUNE AND INFLAMMATION MARKET SEGMENTS       ChemoCentryx, Inc.       EluSys Therapeutics, Inc.       Epicyte       Exhale Therapeutics, Inc.       GeneEx, Inc.       Hawaii Biotech, Inc.       Santarus, Inc.    CANCER THERAPY MARKET SEGMENT       Advanced Life Sciences, Inc.       CancerVax Corp.       CEPTYR, Inc.       Conforma Therapeutics Corp.       Cyternex, Inc.       Echelon Biosciences, Inc.       EmerGen, Inc.       EXIMIAS Pharmaceutical Corporation       Favrille, Inc.       Helix Twelve Pharmaceuticals       Immunicon Corp.       Libraria, Inc.       Metabasis Therapeutics, Inc.       Raven Biotechnologies, Inc.       Receptron, Inc.       Signature BioScience, Inc.       Structural GenomiX Inc.       Syrrx, Inc.       Transave, Inc.       Triad Therapeutics, Inc.       Vaccinex, Inc.    CNS/NEUROLOGY MARKET SEGMENT       Ceregene, Inc.       EpiCept       MIICRO Inc.       Nanomed Pharmaceuticals, Inc.       Neurogenetics, Inc.       NeuroMed Technologies, Inc.       Nyxis Neurotherapies, Inc.       Psynomics, Inc.       Rejuvenon Corp.       Sention, Inc.       Targeted Molecules Corp.       TransMolecular, Inc.    CELL OR GENE THERAPY MARKET SEGMENT       Copernicus Therapeutics, Inc.       DirectGene, Inc.       Genteric       Intronn, Inc.       MaxCyte Inc.       Nephros Therapeutics, Inc.       Neuronyx, Inc.       PPL Therapeutics Inc.       REPLICor, Inc.    INFECTIOUS DISEASE THERAPY MARKET SEGMENT       Anadys Pharmaceuticals, Inc.       BioSyn, Inc.       Biota, Inc.       Divergence, Inc.       First Circle Medical       Functional Genetics, Inc.       Iomai Corporation       LigoCyte Pharmaceuticals Inc.       Message Pharmaceuticals, Inc.       MithraGen Inc.       NewBiotics, Inc.       Nucleonics, Inc.       PhageTech Inc.       Quorex Pharmaceuticals, Inc.       Tao Biosciences, Inc.    TISSUE ENGINEERING MARKET SEGMENT       Automated Cell Technologies, Inc.       Applied Tissue Technologies, LLC       Cellect Bio, Inc.       ReGen Biologics, Inc.       Tissue Engineering Inc.       TissueInformatics, Inc.    ENABLING TECHNOLOGY MARKET SEGMENT       B310       Bionaut Pharmaceuticals, Inc.       BioSeek, Inc.       ChemCodes, Inc.       Genoptix       Gryphon Therapeutics, Inc.       Iris AO Inc.       IatroQuest       Lipocine, Inc.       Nanostream, Inc.       Novasite Pharmaceuticals, Inc.       Phenomix, Inc.       Picoliter Inc.       Plexxikon Inc.       Target Discovery, Inc.       U.S. Genomics       Xenogen Corporation    HTP SCREENING MARKET SEGMENT       Aptus Pharmaceuticals, Inc.       Auilix Biopharma, Inc.       CombiMatrix Corp.       Consensus Pharmaceutics, Inc.       GenPhar, Inc.       Guava Technologies, Inc.       NimbleGen Systems, Inc.       Novasite Pharmaceuticals, Inc.       Virtual Arrays, Inc. 6. SUMMARY APPENDICES    APPENDIX 1 -AUTOIMMUNE AND INFLAMMATION COMPANY CONTACTS    APPENDIX 2 - CANCER THERAPY COMPANY CONTACTS    APPENDIX 3 - CNS/NEUROLOGY COMPANY CONTACTS    APPENDIX 4 - CELL OR GENE THERAPY COMPANY CONTACTS    APPENDIX 5 - INFECTIOUS DISEASE COMPANY CONTACTS    APPENDIX 6 - TISSUE ENGINEERING COMPANY CONTACTS    APPENDIX 7 - ENABLING TECHNOLOGY COMPANY CONTACTS    APPENDIX 8 - HTP SCREENING COMPANY CONTACTS FOR ORDER OR INQUIRY, PLEASE CLICK "ORDER / INQUIRY FORM"