Open Innovation In Action At DSM & Chemelot

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYOpen Innovation in action atDSM & ChemelotRobert KirschbaumVP Open InnovationSeptember 27th, 2013FOR INTERNAL USE ONLYIntroduction- Royal DSM- Open InnovationExamples- Biobased Products & Services- Biomedical MaterialsChemelot- History- Current situation- FutureLearnings1

27-9-2013FOR INTERNAL USE ONLYCONFIDENTIALDSM’s missionOur purpose is to createbrighter lives for people todayand generations to come.We connect our uniquecompetences in life sciencesand materials sciences tocreate solutions that nourish,protect and improveperformance.DSM: 110 years of successful transformationCoal Mining(Petro)chemicalsLife Sciences &Materials Sciences2

27-9-2013FOR INTERNAL USE ONLYDSM organization chartDSM Managing BoardDSM Innovation CenterCorporate StaffShared CompetencesBusiness SupportNutritionDSM Nutritional Products- Human Nutrition and Health- Animal Nutrition and HealthPharmaDSM PharmaceuticalProductsPerformanceMaterialsDSM Engineering PlasticsDSM DyneemaDSM ResinsPolymerIntermediatesDSM Fibre IntermediatesDSM Anti-InfectivesDSM Food SpecialtiesDSM todayLeading in Life Sciences & Materials SciencesRevenues:Employees:R&D:Credit Rating: 9 bn 23.500 at 200 locations worldwide 10% of peopleSingle ALeader3

27-9-2013FOR INTERNAL USE ONLYGlobal presenceWorld total 23,500 employees*North America: 5,000 employeesChina: 3,500 employeesEurope: 13,000employeesIndia: 500 employeesLatin America: * 1,000 employees* Employees from Tortuga not yet included in numberFOR INTERNAL USE ONLYInnovation is different from R&D -howIdeasKnowledgeBusinessModelsMarket SolutionsInnovation4

27-9-2013FOR INTERNAL USE ONLYDSM in motion: driving focused growthPeople - Planet - Profit: creating value along three dimensionsFOR INTERNAL USE ONLYAccelerating and supporting Innovation 80%DSM Innovation CenterNew Business Development 20%EnablersEBA BiomedicalExcellence inInnovationEBA Bio-basedProducts & ServicesCTO OfficeEBA AdvancedSurfacesLicensingBusiness IncubatorVenturing5

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYProf. Henry Chesbrough: 2003 2012FOR INTERNAL USE ONLYWhy do we need Open Innovation?99.999996%of worldpopulationoutsideDSM!DSMNetworksneeded!6

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYOpen Innovation ModelMarket Scouting / Business nturingFuzzy Front EndSpin inAcquisitionsInteraction/ SynthesisDivestmentsR&D services(Chemelot)LicensingOutSpin out/offCompetence Development, Technology IntelligenceIntellectual Asset ManagementFOR INTERNAL USE ONLYInnovation is like a parachute It works muchbetter whenOpen!7

27-9-2013FOR INTERNAL USE ONLYVenturing : How to mitigate risks?DSM Venturing – Corporate VC of DSMSummary Investment scope Companies in early stage to expansion stage, active in DSM strategic scope Typical initial investment: 0.5 – 5 mln Minority participations typically a 10 - 25% stake Recognized potential for strategic cooperation with DSM Businesses Representation in board of start-up Global (focus on USA, EU, China and India)8

27-9-2013FOR INTERNAL USE ONLYPortfolio Direct InvestmentsLife SciencesMaterial SciencesDSM Venturing – Corporate VC of DSMDSM Venturing’s Track Record 40 direct investments since 2001; 23 still active in our current portfolio 17 divested:– 2 acquired by DSM businesses (LTP and TCG)– 2 sold to third party acquirers (Morphotek and OPM)– 2 sold back to the founders (Creagri and Terreco)– 1 successful IPO (Speedel)– 10 failed and were dissolved, liquidated, wound down Net financial result is positive – i.e. ‘free’ option generation! Partnerships realized with 30 portfolio companies in various forms anddegrees (feasibility studies, joint development, licensing,distribution/marketing relations, supply relations) In addition, DSM Venturing facilitated similar partnerships with 50 otherstart-ups which it scouted but did not invest in We scouted and screened more than 4000 companies which provideduseful insights and complementary window-on-the-world for our businesses9

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYIntroduction- Royal DSM- Open InnovationExamples- Biobased Products & Services- Biomedical MaterialsChemelot- History- Current situation- FutureLearnings FOR INTERNAL USE ONLYBiobased Chemicals and Materials10

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYFossil resource useFrom the Fossil Age to the Bio-Age10002000A briefFossilmomentin historyLiving off the land3000Living off the landPageFOR INTERNAL USE ONLYDSM in public-private partnerships for Industrial Biotechnology16 M CANADAConcordia University fungalenzymes screening30 M UNITED KINGDOMBBSRC SustainableBioenergy CentreUSACellulasesdevelopment11 M FRANCEBIOHUB SucciniumTHE NETHERLANDSB-BASICEUROPEAN UNION (FP7)KACELLE19 M EUROPEAN UNION (FP7)BIOCORE20 M THE NETHERLANDSCatchbio50 M 13 M 55 M EUROPEAN UNION 120 M EIT KIC ClimateTHE NETHERLANDS 120 M BE-BASICTotal volume of projects 450 M (2004-2014)Page11

27-9-2013FOR INTERNAL USE ONLYBiomass “cracking” enables the Bio-economyLigninStarchHemicelluloseFuel, Chemicals & FoodFatty acid(veg. oil)CelluloseProteinFOR INTERNAL USE ONLYGrowing a Biobased Chemicals IndustryLacticAcid1G EtOHPDOEthyleneSuccinicAcidAcrylicAcid1,4BDO2G lOilsItaconicAcidi-BuOHDevelopmentCommercialnot exhaustive / stages estimatedFDCAFumaricC2C3C4C5 2312

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYRenewability is Not Enough as a Value PropositionFOR INTERNAL USE ONLYDSM BiomedicalPage 25Page13

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYInnovation in Biomedical MaterialsA new application for Dyneema Purity:Fixation of transplanted ligaments in the kneeA continuous loop made fromDyneema Purity is used tosecure the soft tissue transplant,providing strength and stiffnessThe application of these verystrong yet soft fibers reducetrauma to the transplantProduct is ingredient-brandedwith the Dyneema Purityingredient logoPageFOR INTERNAL USE ONLYOur Strategic Pathwayrepair replace restore cal coatingsand polymersResorbable polymersand Drug DeliveryTherapeutic materials,Regenerative medicineExamples: Pacemaker leads Hip replacementsExamples: Back-of-the-eye delivery Drug Eluting Stent coatingExample: Delivery of biologicsfor cartilage repair14

27-9-2013FOR INTERNAL USE ONLYOpen Innovation in practiceMergers & Acquisitions(Joint) VenturingLicensingInternal InnovationR&D Alliances & CooperationsScientific Advisory Board& other ConsultantsPageFOR INTERNAL USE ONLYMove Forward selectively in the Value ChainExtended offeringMaterialsBiomedicalMaterialsUS 1.5bnAssemblyMedical DeviceDevelopmentJointdevelopmentMedical DeviceManufacturing/ AssemblyUS 150bnImplantSurgeryPatientAftercare US 150bnRoyaltiesLicense agreementsMaterials SupplyAgreementComponent SupplyAgreementDevice SupplyAgreements15

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYIntroduction- Royal DSM- Open InnovationExamples- Biobased Products & Services- Biomedical MaterialsChemelot- History- Current situation- FutureLearningsFOR INTERNAL USE ONLYEindhovenOnce upon a time these plants were all from DSMBrusselsAachenMaastricht16

27-9-2013FOR INTERNAL USE ONLYChange in the DSM business portfolioSlide 32FOR INTERNAL USE ONLYChemelot Campus: Development since 2000# companies# jobs2900Birth sPhase401200100 2500ChemelotCampus BVTriple HelixAccelerationPhaseChemelot Campus 2.02000332002200520122023‘Chemistry connects People’17

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYContextWhat is Chemelot? One of the largest chematerial communities in Europe ( 800 ha.) Chemelot Industrial Park; andChemelot Campus (ca. 20 ha.) Number of companies on industrial park 110 Chemelot Campus: 40 companiesMany of them global leader in their product market combination6.000 jobs on Chemelot 90 new companies since 20054.800 on Industrial Park1.200 on Chemelot CampusChemelot Industrial ParkSharing infrastructure and costsChemelot CampusSharing knowledge & global networks‘Chemistry connects People’FOR INTERNAL USE ONLYInter-Regional Initiatives (Geleen, onCenter18

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYInnovation is our Sport !FOR INTERNAL USE ONLYOpen Innovation at ChemelotStart upSMEKnowledgesourcesPage19

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYFOR INTERNAL USE ONLYNew LANXESS Elastomers headquartersDelivered January 2013, 125 peopleNew DSM Materials Science CenterReady July 2014, 420 people20

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYContextA True Triple Helix ApproachChemelot Campusinitiator, developer, broker40Confidential‘Chemistry connects People’FOR INTERNAL USE ONLYPublic Private Partnerships at ChemelotPage21

27-9-2013FOR INTERNAL USE ONLYFOR INTERNAL USE ONLYResultsChemelot Campus - The Results in 2023Chemelot Campus has a significant contribution to EconomicGrowth, Employment, Regional Cohesion and Sustainability: The technological hot spot in Europe for chemistry andperformance materials Acceleration of innovation and business growth via OpenInnovation ecosystem fully embedded in Brainport region Creation of 13.500 new jobsoodirect growth on campus from 1000 – 2500 (and beyond)indirect labor: factor 8 – 10* (at least 12.000 jobs) Attraction of new talent via unique education set up (CHILL)o 1000 students Close cooperation with academia in region & cross borderoRWTH Aachen, TU/e, Maastricht University Creation of new scientific instituteso Chemelot InSciTeo Material Science Centre42* Study Brainport 2020Confidential‘Chemistry connects People’FOR INTERNAL USE ONLYIntroduction- Royal DSM- Open InnovationExamples- Biobased Products & Services- Biomedical MaterialsChemelot- History- Current situation- FutureLearnings22

27-9-2013FOR INTERNAL USE ONLYSummarizing . Corporate Venturing gives you a window on the worldCorporate Venturing for portfolio rejuvenation!Open Innovation: sharing is the new owningPPP’s and Start-ups mitigate the Innovation risksNominate & empower “Intrapreneurs”DSM & Chemelot create an Ecosystem for InnovationChemelot Campus combines 4 E’s:- Expertise (competences/experience)- Experimenting (Labs, Pilot plants)- Entrepreneurship (VC Funding)- Education (TUE, UMC , PPP’s)23

DSM Anti-Infectives Corporate Staff Shared Competences Business Support DSM Managing Board DSM Innovation Center DSM today Leading in Life Sciences & Materials Sciences Revenues: 9 bn Employees: 23.500 at 200 locations worldwid