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“The neurotechnology industry made substan tial gains in 2007, which has continued into 2008,” says Casey Lynch, managing director of Neuro Insights. Neuro Insights found that in 2007, global neurotech industry revenue rose 8.3% to $130.5 billion. Of the industry’s three segments, Neuro pharmaceuticals recorded revenue of $109 billion and 8% annual growth; revenue from neuro devices jumped 22% to $5.5 billion; and neuro diagnostics revenue rose 6% to $16 billion. Recent advances in neuroscience have dramatically expand ed understanding of the basic bio logical and behavioral components of neurological diseases and psychiatric illnesses. Different types of proteins critical for normal brain functioning have been identified and characterized, and genetically engineered animal models have improved target validation. The report highlights the following important trends in improving neurological disease diagnosis and therapeutic effectiveness: The use of stem cells, cell replacement, and neuro regeneration technologies. The brain has extremely limited capabilities to repair itself, but these new methods have the potential to improve the brain’s ability to regenerate lost neurons and to facilitate the incorporation of implanted stem cells into brain circuitry. The use of neuroimaging to diagnose and research brain and nervous system illnesses. For United States and the United Kingdom, they accounted for 7.7% and 15.8% of sales, respectively, in 2007. Even higher percentages of OTC sales are often found in regions that are less developed, such as India or China. “The state of the economy, lifestyle, culture, the time it takes to see a doctor, and the condition of medical care, all contribute to people seeking to self medicate,” notes Kalorama Analyst Melissa Elder. “While it’s not the optimal method of treatment, and could lead to complications and undiagnosed conditions, it is nonetheless an important factor driving sales, especially in emerging countries like China.” Neurotechnology MAY PROVIDE KEY to Unmet Needs of Patients Brain and nervous system illnesses rep resent the largest unmet medical market, with 2 billion people worldwide suffering from brain related diseases and disorders. Building on decades of research and advances in neuroscience, neurotechnology holds great potential for major scientific discoveries, commercial success, and sustainable investment opportunities. According to a study from NeuroInsights, Neu rotechnology Industry 2008 Report: Drugs, Devices, and Diagnostics for the Brain and Nervous System, venturecapital investment in neurotechnology reached an all time high at $1.77 billion in 2007,with more than 250 investors participating in neurotech financings. Global OTC Market TO GROWAT STEADY PACETHROUGH 2012 Longer life expectancy, rising health care costs, and a large uninsured population have prompted consumers to take an increasingly active role in managing their own health through self medication. Purchasing over the counter (OTC) pharmaceuticals is often cheaper and more convenient than a doctor’s visit, especially as more prescription drugs are becoming available in OTC form. Recent studies show that up to 40% of consumers who are prescribed medication by a doctor choose to substitute it with an OTC alternative. Ultimately, purchasing OTC drugs saves U.S. consumers around $15 billion annually. Kalorama Information’s report — World OTC Pharmaceutical Markets: Self Medication, Developing and Petro Rich Economies, BTC, and Other Growth Trends — projects that the global OTC drug market will show a compound annual growth rate (CAGR) of 4.3% through 2012. Global sales of OTC drugs reached $68.4 billion in 2007, reflecting a CAGR of 3.9% since 2005, driven by increased sales of gastrointestinal products and allergy, cough, cold, and flu remedies. OTC drug sales account for between 8% and 30% of total pharmaceutical sales in the majority of world regions. In developed regions, such as the PHARMA TRAX SALES, MARKETING, AND R&D TRENDS AFFECTING THE HEALTHCARE INDUSTRY While it’s not the optimal method of treatment, and could lead to complications and undiagnosed conditions, OTC products are nonetheless an important factor driving sales, especially in emerging countries like China, says Melissa Elder, Analyst at Kalorama. Melissa Elder Commercial neuroscience represents one of the fastest growing and critically needed sectors of the healthcare industry, says Casey Lynch, Managing Director of NeuroInsights. Casey Lynch FORECASTEDTOTALWORLDOTC MARKETANALYSIS:20082012 Purchasing Over the counter (OTC) pharmaceuticals is often cheaper and more convenient than a doctor’s visit. YEAR REVENUE 2012 $84.2 2011 $80.5 2010 $77.1 2009 $73.9 2008 $71.0 Source: Kalorama Information, New York. For more information, visit Note:$ in billions at the manufacturers’ level. INDIVIDUALS AFFLICTED BY INDICATION, WORLDWIDEANDU.S. CONDITION WORLDWIDE U.S. Addiction 790 48 Anxiety disorders 400 40 Obesity 300 80 Chronic pain 290 86 Migraine 240 30 Depressive disorders 240 21 Sleep disorders 238 60 Hearing loss 140 35 Attention disorders 120 15 Alzheimer’s and MCI* 90 17 Stroke 60 5 Epilepsy 50 3 Vision 35 10 Traumatic brain injury 25 5 Schizophrenia 25 2 Parkinson’s disease 5 2 Multiple sclerosis 2 0.4 * Alzheimer’s disease: 37 million worldwide, 5 million in U.S. Source: NeuroInsights, San Francisco. For more information, visit Note: Numbers in millions Recent advances in neuroscience have dramatically expanded understanding of the basic biological and behavioral components of neurological diseases and psychiatric illnesses. example, positron emission topography (PET) scans have been shown to be 93% accurate in detecting Alzheimer’s disease three years before the conventional diagnosis of “probable Alzheimer’s” is reached. • The use of new techniques for the delivery of treatments to the brain and spinal cord. Companies are developing a number of delivery methods that bypass the blood-brain barrier to deliver drugs to specific sites in the brain or spinal cord. Some examples include implantable pumps, encapsulated cell technology, receptor-mediated transport systems, and cell-penetrating peptides. M&A Overtakes Licensing as Most Popular Method of Expanding Biotech Presence Under the current economic climate, the valuation of U.K.-based biotech firms has reached a level where acquisition is sometimes a better financial move than licensing for pharmaceutical companies interested in acquiring new technology or products to shore up their increasingly shrinking pipelines. According to a study released by Cambridge Health & Biotech (CH&B), the number of merger and acquisition (M&A) deals involving U.K. biotech companies in 2007 exceeded the total number of licensing deals — the first time this has happened. The study — License or Buy? Current Trends in the Biotech Sector and Recommended Strategic Options: the U.K. Perspective — reports one reason may be that the net present value of licensing deals is now higher than the value of the biotech companies owning the products or technology that the pharma companies are interested in licensing, making the outright purchase of the biotech firm a more attractive option. The report also notes that the most effective partnering strategy often depends on the situations of the companies involved, as well as prevailing market conditions. For example, licensing allows a pharma company to mitigate risks through a smaller up-front investment and tranche milestone payments, and eliminates the need to integrate any liabilities attached to the biotech firm. On the other hand, acquisition is preferable when the targeted biotech firm has more than one validated asset, and the remaining entity is a good strategic fit with the acquiring pharma company’s business model. More Physicians Relying on PDA-Based Information The majority of physicians now rely more on PDA-based information than traditional sources of pharma communication, with almost half of all U.S. physicians using PDAs or smart phones in clinical practice. According to a recent Skyscape survey, Effect of PDA-based Information on Treatment Decisions, 81% of physicians say they have increased their adoption of a new treatment based on clinical information available on their PDAs. In addition, four of five physicians agree that PDA-based information is more influential than traditional media such as pharma rep visits, journals, and direct mail, as well as other forms of electronic media such as pharma brand Websites and e-detailing. The study shows, amongst other things, that the number of acquisitions of U.K. biotech companies has now overtaken the number of licensing deals involving U.K. companies, says Martyn Postle, Director, Cambridge Healthcare & Biotech. During a patient encounter communication channels that provide clinical information that most influences prescribing and treatment decisions: 81% of physicians say they have increased their adoption of a new treatment based on clinical information available on their PDAs. number of M&A and licensing deals involving uk biotech companies

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