Copyright © 2017 QuintilesIMS. All rights reserved.

Disruption and maturity: the next evolution of biologics

Sarah Rickwood, Vice President, Thought

Leadership

2

1. Continued growth, but increasing maturity

2. Huge clinical potential

3. Exciting science

4. An immature market

Could replace the next slide making the point about maturity

Four facts about the biologics market

3

Biologics has trended consistently above the growth of

the global market, in good times and bandThe US is overwhelmingly the most important market

Source: QuintilesIMS MIDAS MAT Q2 2016; Share of growth in LC$. Brazil and Mexico non-retail included

Global biologic sales and trends

2011-16

-2%

0%

2%

4%

6%

8%

10%

12%

14%

0

50

100

150

200

250

2011 2012 2013 2014 2015 2016G

row

th, L

CU

S$

Bio

log

ic s

ale

s (U

S$

bn

)

Biologics Sales Biologics growth

Small molecule growth Global Pharma growth

58%

17%

6%8%

11%

US EU5

Japan Pharmerging

RoW

66%

11%

4%

9%

9%

Biologics – 2016 Share of sales

Biologics – Share of 5 yr growth

4

As the largest biologics market, the US is also leading

maturation

0

10

20

30

40

50

60

20

09

20

08

20

13

20

10

20

14

20

12

20

11

20

15

18%13%

20%21% 23%

16%

42%

11%

32%

2%8%7%

3%

12%10%

53%

Ne

t sa

les a

dju

stm

ent (%

)

Autoimmune

Diabetes

US: Diabetes and Autoimmune Net sales adjustment *

Biologics: Highly competitive indications

and targets

• Autoimmune: (RA, Psoriasis)

• Diabetes: (LA Insulin, SA Insulin, GLP-1)

• Oncology: (Checkpoint inhibitors, EGFR)

• Respiratory: (IL5, IL-13)

• Dyslipidaemia: (PCSK9)

Several biologic molecules with the

same MoA. Me-too’s?

Some typical biologic TAs are seeing

small molecules competition

Higher promotional spending

requirements

Source: IMS Institute for Healthcare Informatics, MIDAS Dec 2015, annual company reports; *Diabetes and

Autoimmune definition includes biologics and biosimilars

5

Several therapy of the biologic market have now

reached maturity – we are in a new era

Low High

Maturity of top 5 biologic Therapy areas

Lo

w

Pa

tie

nt p

op

ula

tio

n p

en

etr

ation

Market/patient need satisfaction

Autoimmune

Oncology

Vaccines

Blood

coagulation

Diabetes

6

Four trends to create the biologics market beyond 2020

Biologic TA expansion

Biologic M&A

Disruptive Drugs and

Technologies

Biosimilars

2016

Biologic

Market

2020+

Biologic

Market

7

Four trends to create the biologics market beyond 2020

Biologic TA expansion

Biologic M&A

Disruptive Drugs and

Technologies

Biosimilars

2016

Biologic

Market

2020+

Biologic

Market

8

Oncology will be increasingly dominant, but new TAs

for biologics proliferateHalf of the biologic pipeline falls outside of the top 5 biologic TAs

Source: QuintilesIMS MIDAS MAT Q4 2015

Biologic sales and PII+ pipeline by Therapy Area 2015

32%

50%

8%

15%

31%

20%

7%

10%

18%

5%3%

2015 Sales

US$bn

$221Bn

2015 Pipeline

(PII - Reg)

n = 848

0%

Autoimmune

All Others

Oncologics

Vaccines

MS

Diabetes

9

Over the next five years biologics will enter indications

not typically treated with biologics

Source: QuintilesIMS R&D Focus Q4 2015; Thought Leadership analysis

9

9

10

12

12

13

14

14

14

21

25

27

31

36

42

0 5 10 15 20 25 30 35 40 45

Osteoporosis

Stroke

Osteoarthritis

Malaria

COPD

Heart failure

Pain

Ebola

Parkinson’s

Allergy

HIV

Asthma

Alzheimer’s

No. of pipeline candidates for indication

Uveitis

Dengue fever

Biologic pipeline: non-traditional biologic indications(Pre-Clin to Reg)

Total 25%

biologic

pipeline

Common Factors

• Dominated by small molecules –

highly genericised

• High patient population

• Aim to treat severe subsections

of these indications

• High cost per patient cause

payer concern

• Mixed experience to date with

pioneer biologics taking this

route (Xolair in respiratory,

Praluent in hyperlipidemia)

• Biologic specific challenges

such as patient targeting,

infrastructure and administration

10

However, there remains a sales challenge for the

biologics entering non traditional areas

Source: IMS Health MIDAS Q4 2015; Top recent launches are top launches within the last 5 years

0

10

20

30

40

50

60

M0 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

Mon

thly

sale

s (

LC

US

$ M

n)

Months post launch

Opdivo

Yervoy

Cosentyx

Keytruda

Trulicity

Prolia

Repatha

Praluent

Nucala

To

p re

ce

nt

Non

-trad

bio

logic

s

US launch: Top recent biologic launches vs. biologics in non-traditional therapy areas

11

New biologics will see profound change in the next five

years..

Souce: QuintilesIMS The next frontier for biologics: Non-traditional Therapy Areas

Incre

menta

l effic

acy

Narrow Broad

Lo

wH

igh

Patient population

Respi

biologics

PCSK9

inhibitors?

Osteoporosis

biologics

Alzheimer’s

DMARD

biologic?

What happens now Xolair

is joined by Nucala,

Cinquair, and

benralizumab?

What happens now

Repatha has shown a 27%

reduction in heart attach

risk in patients with

atherosclerosis?

What happens when Prolia

is joined by

romosuzumab?

12

Four trends to create the biologics market beyond 2020

Biologic TA expansion

Biologic M&A

Disruptive Drugs and

Technologies

Biosimilars

2016

Biologic

Market

2020+

Biologic

Market

13

The pipeline has focused on mAbs, but novel

therapeutic classes are in trials

Source: QuintilesIMS R&D Focus Dec 2014. Biologic compounds only, Phase II through Registration

Pipeline Biologics by Technology Class,

(Ph II – Registered)

0 50 100 150 200 250

Gene therapy 45

Peptides 78

Vaccine 165

mAbs 225

Other non recomb. proteins 90

Other recomb. proteins 61

Interferon/cytokines 14

mAb Drug Conjugate 17

Cell therapy 29

Antisense/RNAi 44

Pre-reg/Reg

Phase III

Phase II

Total

768

15% of

biologic

pipeline

14

Delivery can also be innovative

Intravenous Subcutaneous Inhaled Implanted

IntranasalTransdermal

(micro needle)

Quick dissolving

filmOral

15

Timescale of costs: unusual compression of cost

Upfront cost of treatment vs lifetime benefit

Individual benefit vs societal benefit

Outcome uncertainty with new and very novel therapies

New innovations (often lead by biologics) will challenge

the funding status quo

16

Increasingly, alternative funding mechanisms must be

explored

Time from therapy initiationP

atie

nt se

ve

rity

Annuities

• Upfront payment to

manufacturer by 3rd party

which then receives

annuities from healthcare

system for use of product

• Still questions of where risks

and product responsibility lie

Differential

pricing Population that see

clinical benefit, but

are not yet severe

Severe population

who would be

eligible now

Annuity payments

• Widens access to patients

who would have treatment

restricted

• Could have no data tracking

requirements- severe

population size agreed before

• Can have multiple tiers

Standard

price

Price closer

to COGS

Performance

related price

Drug failure, patient

death etc.

Payment

for drugProposed efficacy

durationLost value

Time from therapy initiation

• Based on agreed RWE upon

study completion

• Risks if agreement poorly

judged or product does not

perform as expected

17

M&A continues as a key biologic market driver

Biologic TA expansion

Biologic M&A

Disruptive Drugs and

Technologies

Biosimilars

2016

Biologic

Market

2020+

Biologic

Market

18

The price to acquire a biologic product tripled between

2012 and 2016

Source: Pharma Deals Nov 2016; 2016 no. of deals extrapolated to the expected full year figure

Value and number of biologic pipeline product deals 2006-2016Deals must be product focused, Most commonly these are Licensing, Collaborative R&D, Technology sharing and M&A

Key drivers in

biologic asset

demand

• Exciting innovative

products with

scientific

developments

• Biologics have

become a

established business

model

• High availability and

low interest rates of

capital

• Competition for the

best biologic assets

is driving up prices

•

69

56

39

182324

313336

21

0

10

20

30

40

50

60

70

80

0

50

100

150

200

250

300

350

400

2016

(F)

No. o

f bio

logic

de

als

Dea

l u

pfr

on

t va

lue

(U

S$

mn

)

59

2015201420132012201120102009200820072006

Average deal upfront paymentNo. of biologic product deals

19

The increase in deals came from early stage assets

Source: QuintilesIMS Pharma Deals Q4 2015

5390

151

82

623

4882

260

143

1,015

0

200

400

600

800

1,000

1,200

No, o

f b

iolo

gic

de

als

Phase 3Phase 2

-9%

+72%

+74%

+63%

Pre-reg/regPhase 1Discovery/

Preclinical

-9%

2011-20152006-2010

Number of biologic product deals by phase of primary product2006-10 vs 2011-15

71% of deal growth is in

Discovery/ Preclinical

Early deal drivers

• Increased competition for

deal making leaves fewer

low-hanging late stage

assets

• High cost of deals pushes

towards early stage

development assets

• Pharma has greater

comfort in early stage

biologic deals

• To balance early stage

risk, milestones make up

more of the deal value

20

Four trends to create the biologics market beyond 2020

Biologic TA expansion

Biologic M&A

Disruptive Drugs and

Technologies

Biosimilars

2016

Biologic

Market

2020+

Biologic

Market

21

Key blockbuster biologics would have reached a phase

of relief for payers (if they were small mol.)The lack of released funding could disrupt innovative medicine funding

Loss of

exclusivity

Pro

du

ct lif

ecycle

sa

les

The biologic lifecycle funding challenge

Launches

~2000LoE

~2010-152020

For the next five years biosimilars

will not have huge relief for payers

Funding for

new launches

not released

Biologic

Small

molecule

e.g. Lipitor

e.g. Remicade

22

Half the top biologics have lost protection in Europe

Source: QuintilesIMS MIDAS Q4 2015; Lovenox excluded

Europe Top 10 Biologics sales by region EU expiry date

Adalimumab (Humira) 2018

Etanercept (Enbrel) Expired

Trastuzumab (Herceptin) Expired

Infliximab (Remicade) Expired

Bevacizumab (Avastin) 2019

Rituximab (Mabthera) Expired

Ranibizumab (Lucentis) 2022

Insulin Glargine (Lantus) Expired

Aflibercept (Eylea) 2025

Darbepoetin Alfa (Aranesp) 2016

1 20 43

1.374% 26%

1.486% 14%

1.872% 28%

1.973% 27%

0.876%

24%

1.081% 19%

Sales 2015 (US$ Bn)

65% 35%

2.070% 30%

2.269% 31%

3.672% 28%

1.9

EU5 Other EuropeMolecule no

longer protected

Biosimilar delay

factors:

• Cost

• Complexity in

development

• Patent

Uncertainty,

Europe wide/local

• Regulatory

difficulties and

uncertainties

23

No country has high penetration in all biosimilars, UK

and Italy lead EU5

Source: QuintilesIMS MIDAS MTH Nov 2016

High

uptake

Low

uptake

Europe: Biosimilar share of molecule treatment days

EU

5

Hig

h

pe

ne

tra

tio

n

EU

Biosimilar treatment day share (November 2016)

Country infliximab insulin glargine etanercept

UK 60.9% 1.1% 30.8%

France 27.7% 0.5% 0.7%

Germany 26.7% 4.9% 16.2%

Italy 46.0% 11.6% 0.8%

Spain 32.9% 6.6% 0.2%

Finland 92.1% 0.9% -

Norway 95.6% 1.8% 69.0%

Poland 97.7% 31.5% 0.0%

Denmark 97.8% 4.0% 78.7%

24

For Infliximab, the top 5 European countries do not

lead

Source: QuintilesIMS MIDAS MTH November 2016 ; Denmark data from MIDAS Monthly Restricted database; Latvia

excluded because only biosimilar manufacturers present in market

0%

20%

40%

60%

80%

100%

M0 M10 M20 M30

In

flix

imab

bio

sim

ilar u

pta

ke (

treatm

en

t d

ays)

Denmark Poland Norway Italy UK

Spain Germany France Finland Croatia

98%

96%

46%

61%

33%

28%

27%

EU5

Tender

system

markets

Other European

countries

98%

92%

Europe: Infliximab biosimilar market share in treatment days

25

But national data can hide a more complex subnational

picture

Source: QuintilesIMS UK data Q4 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec 14 Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15

Infliximab biosimilar usage by hospital trustOnly includes trusts using >50% biosimilar

Bio

sim

ilar

sh

are

of tr

ea

tmen

t d

ays

26

Infliximab usage increases post biosimilar entrance

Source: QuintilesIMS MIDAS Q2 2016

25

0

5

15

20

10

30

13%

8%

Q2

2015

Q4

2015

+27%

100%

Q2

2012

20

100%100%

Q2

2013

21

100%

Q4

2012

21

27

Q2

2016

29

69%

16%

15%

Tre

atm

en

t d

ays

(M

illi

on

s)

79%

25

90%

6%

4%

Q4

2014

24+15%

98%

Q2

2014

23

99%

Q4

2013

22

RemicadeRemsimaInflectra

Europe: Treatment increase as a result of biosimilar usage

Country

Infliximab

TD %

increase Q2

2012- Q2 14

Infliximab

TD %

increase Q2

2014- Q2 16

France 16% 35%

Germany 25% 22%

Spain 0% 25%

Italy 6% 9%

UK 27% 27%

Norway 19% 56%

Finland 12% 45%

Europe 15% 27%

Biosimilar

introduction

in Europe

27

Insulin biosimilars low penetration in EU5 countries

Source: QuintilesIMS MIDAS MTH November 2016, Denmark data from MIDAS Monthly Restricted database

Europe: Insulin glargine biosimilar market share in treatment days

0%

5%

10%

15%

20%

25%

30%

35%

M0 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M13 M14 M15 M16

Ins

ulin

gla

rgin

e b

ios

imil

ar

up

tak

e (

tre

atm

en

t d

ays

)

Spain Germany UK France Italy

Poland Slovakia Czech FinlandOther European

countries

12%

1%

7%

0.5%

5%

EU5

25%

32%

12%

High penetration

markets

28

Oncology will be next

Source: EMA website June 2016; Launched biosimilars have not been included

Europe: Recent biosimilar filings

Originator Name

(molecule name)

Therapeutic

area

Total pending

EMA applications

Originator

protection

expiry

European

Revenue

2016 (Bn €)

Enbrel (etanercept) Autoimmune 2 Aug-2015 €2.0 Bn

Lantus (insulin glargine) Diabetes 1 May-2015 €1.1 Bn

Herceptin (trastuzumab) Oncology 2 Jul-2014 €1.8 Bn

Mabthera (rituximab) Oncology 2 Feb-2013 €1.7 Bn

Humira (adalimumab) Autoimmune 3 Apr-2018 €3.4 Bn

Neulasta (pegfilgrastim) Oncology 4 Aug-2017 €0.5Bn

29

Each country has its own story, but only one direction

Stakeholders are making decisions which will have

lasting impact

Countries can increase usage while reducing costs

Early planning of follow-on innovation is key

Biosimilar conclusions

30

Disruption and maturity: the next evolution of biologics

• The impact of biosimilars will bring market growth dynamics in line with small molecules

• The competitive field has expanded, we have entered the era of me-too biologics

• Select biologic markets are relatively satisfied

• Players are more comfortable with biologic deal making and are willing to take greater risks

A market reaching maturity

• Biologics entering new high potential TA’s

• Biosimilar entrance will disrupt the top biologic players, refreshing the score sheet

• Breakthrough innovation in the pipeline threatens current treatment paradigms

A market awaiting

disruption