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February 11, 2000

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Subject:  Profound Changes Ahead
Author:  NDM

Profound Changes Ahead

There is some great discussion and general knowledge being disseminated in this board, as well as emotive and sometimes-vitriolic stuff. Perhaps it is because CRA represents such an intellectually challenging and interesting business concept.

Think back fifty years and the relative lack of medical, molecular and diagnostic knowledge & technology then. Think back further and we realize that humanity progressed a great deal (with infant mortality declines and other achievements clear to see � although not equally widespread among all of humanity). But we also see that what we've achieved to date is, while noteworthy and exceptional, also rudimentary in many respects; in fact, better sanitation conditions is as responsible for our collective better health over the last century than actual medical knowledge about diseases and ailments. Vaccinations and antibiotics come to mind as stellar achievements but we are still plagued by viruses (in the words of Nobel Laureate Joshua Lederberg � "Our only real competition for the dominance of the planet remains the viruses. The survival of humanity is not pre-ordained" extracted from The Edge of the Unknown by James Trefil, an excellent read [for the non-scientific] of 101 things we do not know about science � a pretty humbling read indeed). We also, in effect, know precious little about cancers, the common cold (influenza), our immune system and so many other genetic and other serious ailments.

I read recently a piece by two physicians (Dr. Shaywitz of Mass General and Dr. Ausiello of Harvard and Mass General) in the WSJ discussing some aspects of the Warner/Pfizer merger. They make some interesting points, including an acknowledgement that we are entering an era of profound change in medicine. This is because we are now beginning to understand the molecular basis of disease, which is ultimately driven by unique combinations of molecules gone amok. This knowledge was not generally previously available in the last fifty years and, in fact, impossible to have been available even ten years ago because of lack of massive computing power. It is likely, they assert, that treatments will be more individualized, customized to your own genetic make-up. This is indeed profound because the implication is that there will not be one cure for cancer, but perhaps several cures for individuals with a certain make-up but not others. No blockbuster drugs either. Also, research to date has apparently focused, through complex search for chemical molecules (in the rain forests and elsewhere) capable of acting on proteins, on a universe of about 500 proteins. The Human Genome will have identified and catalogued about 100,000 or more proteins. The completion of the Human Genome will be like completing, or unfolding, the alphabet which will enable, with a lot of computing power and a bit of luck, in effect, to assign individual names to each person. You need truly astonishing � and perhaps not yet available � computing power to match the task.

CRA is in the middle of this revolution - with the Human Genome, on one side, and humanity, on the other (now I start to understand their recent Chinese venture). It will have the computational power and bio-informatic know-how to create useful and valuable knowledge streams (knowledge defined as (i.) Human Genome, (ii) ability to harness and apply such database ultimately on a selective individual basis, and (iii) speed). Future drug development depends on this "knowledge". It is very valuable indeed as it is extremely cost effective when compared to traditional search for chemical molecules (think of how much money has been spent on cancer research in the last twenty years). This knowledge, I think, is hard to replicate in its entirety and will become harder to replicate as time goes bay as this knowledge in effect compounds on itself.

So what does this all mean for CRA and its valuation, as was recently discussed on this board? Heck, I have no idea. I think it is impossible to ascribe value at this stage because you would need the hindsight of 15 years from now. I can assure you that we all will be ultimately proven to be either very astute and a bit lucky and we all saw something on the verge of a truly profound revolution (and profited handsomely). Or, equally plausible, profoundly obtuse and gullible as the revolution turned out to be too late, never came to anything (those proteins turned out more difficult to control and understand because of their very complex shapes!), or someone else figured it out. I'm comfortable either way. In the good tradition of American risk taking, I do not mind (at all) risking some (not all) of my hard earned savings on CRA on the hope that CRA will participate, even drive, this revolution that in my sober, rational (and enthusiastic) judgement is upon us. So enjoy and sit back.

And yes, I do hope CRA turns out to be my personal "10 bagger"! The sooner it gets there, the better, although I am prepared for a long wait. Fool forward in unison, Fools!

Good luck to all.

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