Biotech and Advanced Therapies: A Pharma Renaissance

These are troubled times.....

llUSlNESS __ .-__ -,................... -

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Warning that UK 'may neverrecover' ifGreece exits euro•

~. theguardian€90bn Irish bailout ends in turmoil.Now Europe fears crisis will spread._....... _ • __ • d_....- -----_ ----

These are troubled times.....

.....and pharma is not 'immune~.

TOP 10 COMPANIESMany big drug companies are

seeing their sales decline

12-MONTHSALES· CHANGE IN

(S BilliONS) SALES

Pfizer $51.9 -8.6%Novartis SO.8 2.0Merck & Co. 40.9 6.8Sanofi 38.9 -0.9Roche 35.0 2.7AstraZeneca 34.5 -5.4Glaxo$mithKline 33.6 -1.8Johnson & Johnson 26.8 -4.5Abbott laboratories 25.8 4.1Teva 24.0 -3.4

TOTAL $362.2 ·L2%GLOBAL MARKET $857.3 3.5%

.. For the 12 months ending on June 30. 2012.SOURCE: IMS Institute 101" Healthcare Inlormahcs

.....and pharma is not 'immune'.PHARMACEUTICAlR&DEXPENDITURES

$70 billion

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New DrugAHrov.ts (NME.)

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Drug Development: Costly and Lengthy

Number of Compounds to Produce a New Drug

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10-15 yearsfrom start to launch

Just to put things in perspective...

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10-15 yearsfrom start to launch

The Patent Cliff: A Race Against Time

Blockbuster US Patent Expiries

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Annual Sales Volume in the EUbecoming available for competition

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TOP 10 PRODUCTSSa~ are declining for many of the workfs top pharmaceuUcals

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Developed Markets Generic Share

24.2% •

'""-4)'-

41-•-

15.3%

16.2%

11.9% ,

8-9%

;:=~21-22%_ .... 21-22%

13-14%• 2010Generic Shar~

.2015 Shar@lncrease

.- 31.7% • 34·35%

12_8% •-21.3%

13.4%

15-16%

=~~~_... 27-28%

__.... 21-22%

Sou~: UtS Molkft. PwIt....... A9t 2011------

•


SOLUTIONCompanies offer a mixed portfolio ofnew medicines and..

generic medicines.

• -HOWEVER

Many originator companies do not possess the experienceand/or know-how to play in the generic space, and must• acquireor form joint ven,tures with existing players.

PROBLEMIncreased scrutiny from competition watchdogs.

Federal Trade Commission v. Watson Pharmaceuticals Inc et al.,.... .." U5'Supreme Court

Are we prepared to pay?In Europe, generics make up almost one halfofvolume

sales. but merely a fraction ofvalue sales,....",,,

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11 Volume· aeneric market share70K 10K

Are we prepared to pay?

"Europe must ensure that it doesn't slip intoa position where it simply focuses onacquiring medicines at the lowest possiblecost. This will destroy the incentivisation forinnovation, and will ultimately lead to a lossofthe breakthrough opportunities ofnewmedicine research. The importance ofthisindustry to health, healthy ageing, andeconomic growth is just too great to run that. I "rise

(Richard Bergstriim, Director General EFPIA)

Are we prepared to pay?

"Europe has unfortunately slipped in termsofits willingness to pay for innovation. ...We're now at a point where we have to takethe view and I think face the reality thatreally it's about the U.S. and, excitinglyanew, it's about Japan in terms ofwhereinnovation should be driven."

(Sir AndreIV Witty, CEO ClaxoSmithKline)

Where have we heard this before?NME LAUNCHES

New Mol.cular Entities (NMEs)by Region of First Launch

203 170----

• •

/

Europe

1/u.s.

o+-,~~~~~~9293949596979899000102

20

o, 993-1997 1998-2002

Enter the Global Markets.

Spending by Geography

SI,I]5-I,20S6n

>0"

• United States·'"'• lllP¥l• Ph¥merlllng

• Cilllllda• Rest of Europe• S(IO,lth Korea• Rest of Wor1d


'''' "" INOex "'"' 2011 INDEX "'"' 2016 INOEX, United Slales "", United St.l", '"

, United Stde, ""2 Japan 35 2~"" " 2 A China ", A fr.nce "

, A ChilD ", V """ ", V Germany "

, Germany ", A Br.zil ", A Ch;"" • , V france " , V Ge'lI'\llny ", V It.ly • , A BIiI.;[ • , V Fr.n<:t ", A Spain , , V Italy • ,

'"",, V "'

, • V Spain , , A lndia ,• V ~.~

, • C.nada , • A Russia ," Brazil 5 " V "'

," V C.n.d. ,

" AlI$t"li.l , " A Russia ," V "'

," Mexico , " V Au,tuli. , " V Sp.lin 5

" South Ko... , " A India , " V Australi. ," Russia , " V Sootll Kore. , " A Argenti". ," V lodi. 2 " V Mexico , " V South Ko,e. ," A Turkey 2 " Turkey , " V Mel<ko ," V Nethe,wnds 2 " A ~.~ 2 " A VeneZllela ,18 V 8l'lgium 2 18 A Venezuela 2 18 V Turkey ," A Gr_e 2 " V Netherl,""l$ 2 " A lndo~ia 2

" V "'.~2 " V Bolgium 2 " V "'.cd 2

........ Change in r.nking OVI!f prior 5 ye."ApP'tndi. nolesR,nk;'"') in an y"" b.<ed on ....od;"'I in ,,,,,,tonl US!.I Q<\ l{)ll u,h."9I' .. tu.

Sourct: [MS ""'.1<<1 Progno'i'. ""'I' 2012 I"m in "ch 'I'" too," on "tio of country .....din9 to U.S. ,pendiog (in con,unt US,) in the y.. '.


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Global New Molecular EntitiesCountry Availability

Pharmerging

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I I

• Additional 2006-2010 NME avallat>~ In 2016

.2006-2010 NME available In 2011

Sou"",: DlS In<titIIu for Htalthr.o.. lnb....tic.. May lOll

Global markets are not European

• Diverse healthcare systems

• Fragmented markets

• Complex regulatory systems

• Cultural and language barriers

• Increased competition (local and global)

• Varied infrastructure

• Highly dynamic situation


Figure 2: Tne Wealth Pyramid across the emerging markets (adapted from Praflalad andUeberthal, 19981),

PlJrdlaslng power parity Population in millons

In U.S. doILn Chi" ..... ...",

B Greatel'" than S20,OOO 2 7 •

How \ S10,000 to S20.000 60 63 15

H..... "'" \ SS.COO to S10,000 m 125 27

/ _not \ le,st• .,,,,OOO 800 700 105


2016 PharmaceuticaL Spend Per Capita2005S and Population

(hlno ,'U Plop. '.)<19.....""""""'!ling lie, J '96 I'bp. 1.012""

I...... Ul Pop. 1,192.....

~--U5. '892 Pop.3Z6Mn

JI.-n $6«4 I'q). U ......

c...lo '420 !'<>p. J6Mn

EU5 $375 ,..,.., 320Mn

__un !'<>p. SOHn " ~=,

! !leS' 01 Eun>pe pn "",,1_ I

BrOlW "eo Pop. 20''''

R..... '179 ""p. 140Hn

•

~.~o~700

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~ ,~ .~ - - ,-.. ~ POPIJI..,I,T10N wrrn 2016 INCOI'lE >15,000

I Volume Growth and PopulationsI With >S5,OOOjYear Income by Country in 2016

Global markets are not EuropeanIntellectual Property

• Indian patent law allows for compulsory licensing if"reasonable requirements of the public with respect tothe patented invention have not been satisfied; thepatented invention is not available to the public at areasonably affordable price; or the patented inventionhas not been worked in the territory of India".

• 2012: Indian patent office authorised Natco Pharma tomake and sell generic sorafenib (Nexavar, Bayer AG)whilst still under patent, paying 'fA> of its net (reduced)sale in royalties to Bayer.

• Trastuzumab (Herceptin, Roche), ixabepilone anddasatinib (Ixempra and Sprycel , Bristol-Myers Squibb)under consideration.

Global markets are not EuropeanPrice control:

• China: In 2013 cut prices of more than 400medicines by up to 20%.

• India: In 2012 widened scope of price controls to348 medicines from 74. In 2013, proposes thatprices of patented medicines be based on thecountry's per capita income.

• "Most countries follow some form ofprice control.We need to ensure that expensive drugs areavailable at affordable rates to the poor. n

(D.S. Kalba, Secretary, Pharmaceutical Department)


"The danger ofpushing the pricesofprescription drugs down, down,down is that at some point thebusiness model of developingthese drugs will lose itsattractiveness. India isbecoming very reluctant torespect IP for Western companiesand that is becoming a challengefor us."

(Marijn De""ers, CEO Bayer)


Global Spending, 2011 aocl 2016r

Pharmerging Spending and Growth

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Changes in the industry: a renaissance"1 really believe that in the jilture,companies like Novartis are goingto be paid on patient outcomes asopposed to selling the pill. ... Manyhealth-care systems around theworld are under intense financialpressure and would prefer to payfor a patient who is actuallygetting a result and feeling better.... The industry needs to spendmore money on R&D and less onsales and marketing."

(joseph jimenez, CEO Novartis)

Changes in the industry: a renaissance

rSpending and (j,owth in leading Therapy Areas Spending in 2016

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Changes in the industry: a renaissanceBiosimilar penetration in Europe embryonic;potential in USA post 2014For R&D based companies is going to be an established market play

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Changes in the industry: a renaissance

''It's not like engineering where theiPhone 5 follows on ji-om the iPhone 4.Coming up with a new drug requires skill,insight and luck. .... But we are on theverge, potentially, ofa new wave ofpharmaceutical innovation."

(Kenneth Frazier, CEO Mere" & Co)

European industrial pharmacists

Q12013: Annus horribilis• GSK to close financial services operations in Cork (Ireland), 94 jobs to

go

• MSD to close facility in Rathdrum (Ireland); 280 jobs to go

• Actavis Malta to close R&D unit by end 2013; 64 jobs to go

• AstraZeneca to close Aiderly Park (UK), overhaul R&D, cut about 1,600

jobs; 2.300 job cuts in sales and adnlinistration; total of 5,050 jobs by2016

• Eli Lilly to layoff 1,000 US sales jobs

• TEVA to reduce manufacturing footprint, job losses in Israel likely over

next five years

• AbbVie to fire mid-hundreds of sales force for heart drugs

European industrial pharmacists• A changing workplace:

• drug discovery in Europe, drug development andcommercialisation in far East, registration andmarketing in Europe or North America

• drug discovery, development and commercialisation infar East, and then registered and marketed in Europe

• Logistical challenges to avoid shortages of su pply

• Challenges to safeguard quality, safety and efficacy• Temperature control of biologicals in transportation• Falsified medicinal products

Falsified Medicinal Products

I 2008 2009 I 2010 I 2011

Numberofcases 3.2 °7 3>368 1,812 2,494

Numberofarticles 8,891,°56 11,462,533 3,200,492 27,460,538

India UAE India China(51.6%) (73-7%) (93.2%) (68.2%)

ProvenanceTop 3Syria India China India

(36.4%) (22.6%) (4-7%) (28.2%)

UAE China Hong Kong Hong Kong(8:7"10) (1.4%) (0·9%) (1.5%)

European Commission Taxation and Customs Union

European industrial pharmacists

Seven Skill Sets Necessary to Operate in the PharmaceuticalIndustry of the Future

1) Ability to Manage Decentralized Intellectual Capital Resources

2} Ability to Work In Joint Ventures and Across Divisions. Cultures and Countries

3) Abflity to Integrate an Understanding of Intellectual Property laws.Scientific Expertise and Business Strategy

4) Ability to Spur Creativity While Managing Commercially

5) Knowledge and Insight on the Decision-Making Dynamics of Payers

6) Expertise In the Functioning and Decision-Making of Regulatory Agencies

7) Human Resource Skills to Help Transform Pharmaceutical Companies

C: European Industrial Pharmacists Group

• The main objective of EIPG is to promote and upholdthe importance and role of the industrial pharmacistwithin the pharmaceutical industry.

• Promote the modern pharmaceutical industry toobservers and more importantly to young pharmacists

• Ensure that educational standards meet the needs of theindustrial pharmacist in the industry of 2020

• Provide mentoring and coaching to young pharmacistswho need career advice

«:European Industrial Pharmacists Group

'f EIPe, is to I G~le of the i ~

:::.~,~.-c,..i""V,, ....

Q~t

~~~~....

{{Former/~ when religion was strongand science weak, men mistook magic

for medicine; noL1f, when science isstrong and religion weak, men mistake

medicinefor magic."

Thomas Szasz

Biotech and Advanced Therapies: A Pharma Renaissance

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