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Feeding the Pipeline IV:Feeding the Pipeline IV:A Licensing ComplexA Licensing Complex
Ed Saltzman Ed Saltzman President President Defined HealthDefined Health
LES 2003 Annual MeetingLES 2003 Annual MeetingSan DiegoSan Diego
© Defined Health, 2003
© Defined Health, 2003LES – 2003, San Diego
definedhealth.com
© Defined Health, 2003LES – 2003, San Diego
The Venue For Feeding The Pipeline III The 2002 LES Annual Meeting
© Defined Health, 2003LES – 2003, San Diego
Feeding The Pipeline I-III
• Three Years of Research
• One Singular Conclusion: – There are no late stage products with blockbuster
potential available for in-licensing.
© Defined Health, 2003LES – 2003, San Diego
Feeding The Pipeline 2001 – 02:Taking The “Opportunity Inventory”
Total Compounds US Phase III and Above
2001 2002
817 833
6363 77
(695)Taken or Very Unlikely (695)
122 138
(131)Estimated Peak US Sales
(59)<$200mln <$500mln
Precious Few Products, Few Precious Deals: Announced Deals 9/2002-9/2003
Color = Phase IIII +. Orange = PCP, Yellow = Specialty.Recap
© Defined Health, 2003LES – 2003, San Diego
Date Company Deal Size Product Stage Disease Area09-03 BMS 30 Inhaled Insulin I Diabetes09-03 Aventis 510 VEGF Trap I Cancer/Ophthalmics09-03 Amgen 86.5 11b-HSD1 enzyme inhibitor II Diabetes08-03 BMS 165 Basulin II Diabetes07-03 BI 137 MIV-310 II Anti-HIV07-03 Roche 90 IL-15 Antagonist Preclinical Anti-inflammatory07-03 Roche 188 Avastin Ex-US III Cancer/Ophthalmics06-03 GSK 160 MT-400 II Migraine06-03 Ortho Biotech 535 Velcade Ex-US Approved Cancer/Ophthalmics06-03 Aventis 110 ZP10 I/II Diabetes06-03 Amgen 133.5 IL-15 receptor program II Anti-inflammatory05-03 Pfizer 57 NAALADase Inhibitors Preclinical CNS05-03 GSK 102 MIV-210 I Anti-HIV05-03 Roche 230 Interferon Alpha & Beta Discovery Hep B & C03-03 Novartis 350 IL-I Trap II Anti-inflammatory03-03 Novartis 862 2 HepB drugs, plus options to others III/I Anti-Virals01-03 GSK 545 Long-acting Beta2 agonist I Asthma/COPD12-02 Lilly/BI 280 Duloxetine Filed SUI/Depression12-02 Pfizer 760 Macugen III AMD & DME12-02 Roche 150 Diflomotecan and BN 80927 II Cancer12-02 Pfizer 575 Indiplon III CNS11-02 Roche 500 Drug Portfolio III Cancer11-02 Endo 57 Chronogesic Pain Therapy III/II Pain09-02 Lilly 445 Exanatide III Diabetes
© Defined Health, 2003LES – 2003, San Diego
Which is the Sorrier Spectacle?
# of Candidates in California
Gubernatorial Recall Election
# of Opportunities
> $500 mlnin 2001
# of Opportunities
> $200 mlnin 2001
63 7
247
© Defined Health, 2003LES – 2003, San Diego
Feeding The Pipeline I-III
• 3 Years of Research
• One singular reaction:
– Whew! Thanks! Could you please, pretty please, share this data with my boss?
So, how is our search for
a late stage in-licensing opportunity
going?
LES – 2003, San Diego© Defined Health, 2003
Well, unfortunately, ah umm, things are very tough out
there right now. There doesn’t appear to be very much that looks attractive.
LES – 2003, San Diego© Defined Health, 2003
Well, of course, I know that, but as you know we only need one. The more the
better but let’s just find one, OK?
© Defined Health, 2003LES – 2003, San Diego
Well as you know, with all due respect, we are
working very hard. Our finders have attended 314 meetings in the last four
months, gone to 56 partnering events where we
sat in on a total of 432 presentations and reviewed
every record in the PharmaProjects, IDDB, NDA Pipeline and R&D
Insight databases.
LES – 2003, San Diego© Defined Health, 2003
In total, we have examined 870 compounds in Phase
II or later, have built business cases for 104 of them and have taken 14 of
those though full due diligence. We have
incorporated all of our learning into our global opportunity database,
which we feel is the very best in the industry.
LES – 2003, San Diego© Defined Health, 2003
We even hired Defined Healthto do their own independent search. Despite the negative
tone of this preamble, I am now very pleased to finally have some have some very good
news to report!
© Defined Health, 2003LES – 2003, San Diego
© Defined Health, 2003LES – 2003, San Diego
Great! I knew you would
come through. What is the name of the
product?
Oh, we still don’t have a product. As I have told you a hundred times, there ARE
NO late stage potential blockbuster products
available for in-licensing.
LES – 2003, San Diego© Defined Health, 2003
© Defined Health, 2003LES – 2003, San Diego
I just saved a bundle on
my car insurance at
GEICO!!!
LES – 2003, San Diego© Defined Health, 2003
© Defined Health, 2003LES – 2003, San Diego
Feeding the Pipeline I-III
• Three Years of “Shouting from the Rooftops” There
are no available late stage products
• One singular post-script:– Can you find us one anyway?
© Defined Health, 2003LES – 2003, San Diego
Alternatives To Futility And Frustration
© Defined Health, 2003LES – 2003, San Diego
Alternatives To Futility And Frustration
1. Simple Questions/Simple Answers
2. Complex Questions/Complex Answers
© Defined Health, 2003LES – 2003, San Diego
Simple Questions/Simple Answers
If there aren’t any late stage products available, should we license earlier?
Of course. You’ve been doing it all along anyway, since you always got them on the cheap. Unfortunately, today’s most coveted early-stage opportunities have greater impact and are priced as high as yesterday’s late-stage opportunities.
© Defined Health, 2003LES – 2003, San Diego
The New “Late Stage” Deal Math
$1,000 -1,500 mln
$510mln
$80mln + $45 mlnequity
Phase I
9/03Regeneron/ Aventis
VEGF Trap
$800 -1,000 mln
$187mln
$25mln + $70 mlnequity
Phase II
1/01OSI/ Genentech-Roche
EGFRInhibitor
Estimated Peak Year
SalesTotal Deal Value
Committed $
Stage at Signing
Date SignedCompanies
Product Class
Recap, Defined Health estimates
I am very pleased to tell you I found a late stage
product. I’m sorry I had to do your job for you, but if you want it done well, as
they say, you have to do it yourself.
LES – 2003, San Diego© Defined Health, 2003
Well, I’m certainly very
curious to know what it is.
LES – 2003, San Diego© Defined Health, 2003
Wonder no more. It’s AT7942, a novel VEGF inhibitor from
Angiomute. Go get it!
LES – 2003, San Diego© Defined Health, 2003
But, but with all due respect,
that’s still in pre-clinical
development
LES – 2003, San Diego© Defined Health, 2003
Yes, but it works just like Avastin!
LES – 2003, San Diego© Defined Health, 2003
© Defined Health, 2003LES – 2003, San Diego
Press Release
Phase III Trial of Avastin Plus Chemotherapy Markedly Extends Survival of Metastatic Colorectal Cancer Patients
SOUTH SAN FRANCISCO, Calif. -- May 19, 2003 -- Genentech, Inc. (NYSE: DNA) today announced that a Phase III study of Avastin™ (bevacizumab, rhuMAb-VEGF) plus chemotherapy in previously-untreated metastatic colorectal cancer patients met its primary endpoint of improving overall survival. The magnitude of the benefit observed far exceeded what the study was designed to demonstrate. The trial also met the secondary endpoints of progression-free survival, response rate, and duration of response. Genentech plans to submit data from this Phase III metastaticcolorectal cancer trial to the annual meeting of the American Society of Clinical Oncology (ASCO), May 31 - June 3.
"This study also provides the first Phase III clinical validation of the long-pursued 'anti-angiogenic' hypothesis - that by targeting a tumor's blood supply, you may impact its viability. Based on the strength of these data, Genentech plans to discuss the filing of a Biologics License Application with the U.S. Food and Drug Administration," continued Dr. Hellmann.
© Defined Health, 2003LES – 2003, San Diego
Working Just Like Avastin
Positive Colorectal Cancer DataNegative Breast Cancer Data
Avastin Clinical Data: Impact on Genentech’s Stock Price
BigCharts.com
© Defined Health, 2003LES – 2003, San Diego
Simple Questions/Simple Answers
Is our company too choosy? Given how few possibly legitimate opportunities there are out there – at all stages of development – and how underwhelming our internal productivity has been, should we reconsider some of our rejects?
Good idea. Aside from that old demon, NIH, it is easy after sifting though piles of doggy compounds to become very jaded. Try very hard to keep as many as compounds as possible in the more positive of the following two categories.
© Defined Health, 2003LES – 2003, San Diego
The Billion Dollar “Dissed” Club
© Defined Health, 2003LES – 2003, San Diego
OriginatorOriginator
Lundbeck
Reason DissedReason Dissed
As It Turned Out
As It Turned Out
ContrarianWinner
ContrarianWinner
Late undifferentiated entrant in highly competitive class.
Stage In-Licensed
Stage In-Licensed
Peak SalesPeak Sales
II/III
$1,452 mln
CelexaCelexa
MDs and patients welcomed another option in treatment algorithm characterized by frequent brand switching. Differentiation on side effects
was also accomplished.
Forest
The Billion Dollar “Dissed” Club
Recap, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
OriginatorOriginatorLipha
Reason DissedReason Dissed
As It Turned Out
As It Turned Out
ContrarianWinner
ContrarianWinner
Biguanide already on the market in Europe – not an accepted treatment mode for Type II Diabetes
in US market.
US physicians accepting of managing insulin resistance, a key differentiating factor versus
established SFU drugs.
Stage In-Licensed
Stage In-Licensed
Peak SalesPeak Sales
Marketed in Europe
$1,838 mln
GlucophageGlucophage
BMS
The Billion Dollar “Dissed” Club
Recap, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
OriginatorOriginator IDEC
Reason DissedReason Dissed
As It Turned Out
As It Turned Out
ContrarianWinner
ContrarianWinner
Small market – Incidence of 50,000 NHL patients.
Prevalent treatment population is a more appropriate market size indicator.
Stage In-Licensed
Stage In-Licensed
Peak SalesPeak Sales
II
> $3,000 mln (est.)
RituxanRituxan
Genentech
The Billion Dollar “Dissed” Club
Recap, Defined Health Estimates
© Defined Health, 2003LES – 2003, San Diego
OriginatorOriginator Shionogi
Reason DissedReason Dissed
As It Turned Out
As It Turned Out
ContrarianWinner
ContrarianWinner
Late entrant in hugely competitive class.
Market shifted heavily in direction of LDL lowering effect. Due to recent launch, outcome TBD, but
most pharmacos would take it!
Stage In-Licensed
Stage In-Licensed
Peak SalesPeak Sales
II
>$3,000 mln (est.)
CrestorCrestor
AstraZeneca
The Billion Dollar “Dissed” Club
Recap, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
OriginatorOriginatorSanofi
Reason DissedReason Dissed
As It Turned Out
As It Turned Out
ContrarianWinner
ContrarianWinner
Anti-platelet activity not much greater than aspirin; using both together would increase bleeding risk
to unacceptable levels.
When added to aspirin benefit is synergistic, with only a slight increase in bleeding events.
Stage In-Licensed
Stage In-Licensed
Peak SalesPeak Sales
II
>$4,000 mln (est.)
PlavixPlavix
BMS
The Billion Dollar “Dissed” Club
Recap, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
OriginatorOriginator
Otsuka
Reason DissedReason Dissed
As It Turned Out
As It Turned Out
ContrarianWinner
ContrarianWinner
Late-in-class entrant, not meaningfully differentiated, perhaps less efficacious than
marketed drugs.
With market becoming crowded with similarly effective atypical agents, competition moves to
side effect profiles, where Abilify wins. TBD due to recent launch, but trend is highly favorable.
Stage In-Licensed
Stage In-Licensed
Peak SalesPeak Sales
III
$1,450 mln (est.)
AbilifyAbilify
BMS
The Billion Dollar “Dissed” Club
Recap, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
Simple Questions/Simple Answers
It’s one thing to become jaded, but my company seems to be going in the other direction. We are obsessed with novel targets and being first-in-class, and turn up our noses at anything else. Is this a problem?
Sure. Like all other fields, licensing has its flavors of the moment. Getting too wrapped up in one way of thinking leads to rejection of perfectly valid opportunities which may currently be out of fashion. There is also kind of a “bubble effect,” which can leave the last company in paying way too much for an opportunity.
What’s In Vogue?A decade plus of Big Pharma “Fashion”
20031995 2000
What’s NOT!!
Commercially-Precedented Targets
Novel Targets
Novel Targets
Commercially-Precedented Targets
Clinically Validated Novel Targets
© Defined Health, 2003LES – 2003, San Diego
1990
What’s HOT!!
© Defined Health, 2003LES – 2003, San Diego
Simple Questions/Complex Answers
OK. You win. Even my boss now realizes we can’t rely on opportunistic late stage in-licensing as a strategy to save the company. Now that I can stop wasting time chasing the impossible, I have plenty of time to think strategically about other challenges ahead. What do you think should be on my mind?
Glad you asked! Given how busy you have been in the futile chase, you may not have noticed you live in a complex of Big Pharma, Biotech and Specialty Pharmaceutical companies.
© Defined Health, 2003LES – 2003, San Diego
Simple Questions/Complex Answers
I know that, but why should I care?
Because within the complex has existed the perfect symbiosis of wants and needs, a microcosm of the “global village.” However, pressures within each sector of the complex arising from foundational problems with existing business models threaten this symbiosis. This, in turn, may make your job of bringing in products at any stage either much easier or much harder, depending on the strategy your company elects to pursue.
© Defined Health, 2003LES – 2003, San Diego
Huh????
Hey, I warned you the answer would be complex! Bear with me as I explain the current and future dynamics of “A Licensing Complex”
Simple Questions/Complex Answers
© Defined Health, 2003LES – 2003, San Diego
Main Entry: 1com-plex
Pronunciation: ‘kam-”pleks
Function: noun
Etymology: Late Latin complexus totality, from Latin, embrace from complecti
Date: 1643
2: a group of culture traits relating to a single activity, process or culture unit
Merriam-WebsterDICTIONARY
Merriam-Webster
1: a whole made up of complicated or interrelated parts
“Complex” Defined
© Defined Health, 2003LES – 2003, San Diego
Complex Reverberations
Event:
Pfizer acquires Pharmacia
1 less buyer for biotech products
Pfizer announces that 75% of combined R&D portfolio will be developedPotential product outflow to Specialty Pharma
Pfizer acquires Oncology franchise, driving them to do more Oncology in-licensing50% of biotech product development is in Oncology
© Defined Health, 2003LES – 2003, San Diego
Welcome To Pharmbiospeci Village
© Defined Health, 2003LES – 2003, San Diego
Big Pharma
Biotech$$$$
Specialty Pharma
Welcome to PHARMBIOSPECI
Village
© Defined Health, 2003LES – 2003, San Diego
Life in the Complex
• The Perfect Symbiosis
© Defined Health, 2003LES – 2003, San Diego
Let’s Be Honest!
“Without Biotech, we would be launching even fewer new products than we are now.”
TRUE or FALSE?
Big Pharma
© Defined Health, 2003LES – 2003, San Diego
0
5
10
15
20
25
30
35
40
45
50
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 20010%
5%
10%
15%
20%
25%
30%
35%
40%
NMEs Launched WW % of Biotech Derived NMEs
PAREXEL’s Pharmaceutical R&D Statistical Sourcebook 2002, CMR International
Pharma Needs Biotech’s Products
© Defined Health, 2003LES – 2003, San Diego
Pharma Needs Biotech’s Products
0
2000
4000
6000
8000
10000
12000
14000
16000
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Companies included in analysis: US: BMS, Lilly, Merck, JNJ, Pfizer/Pharmacia, Schering Plough, WyethEU: AstraZeneca, Aventis, GSK, Novartis, Roche
Evaluate Pharma, Defined Health estimates
WW Sales ($mil) of Launched Pharma Products, Originated by Biotech, 1987-2002
© Defined Health, 2003LES – 2003, San Diego
Let’s Be Honest!
“Without Big Pharma, we would have no money.”
TRUE or FALSE?
Biotech
© Defined Health, 2003LES – 2003, San Diego
Big Pharma Holds The Cash
-10
0
10
20
30
40
50
60
70
80
90
100
$B
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Top 20 Pharma Specialty Big Biotech
Evaluate Pharma, Defined Health estimates
Free Cash Flow
© Defined Health, 2003LES – 2003, San Diego
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1998 1999 2000 2001 2002
Tota
l Val
ue ($
mil)
Windhover’s Strategic Transactions Database, Recap
Biotech Needs Pharma’s Cash
Total Funding (in $mil) By Big Pharma in Biotech Alliances 1998-2002
$5501$6275
$6988$7688
$9460
© Defined Health, 2003LES – 2003, San Diego
0
5
10
15
20
25
30
35
40
$B
1997 1998 1999 2000 2001 2002BioCentury
Biotech Needs Pharma’s Cash
0%
20%
40%
60%
80%
100%
120%
Funding Dollars For Biotech (in $bil) and Percentage Contribution of Funds From Big Pharma, 1997-2002
© Defined Health, 2003LES – 2003, San Diego
Let’s Be Honest!
“Without Big Pharma’s cast-offs, we would have no business at all.”
TRUE or FALSE?
Specialty Pharma
© Defined Health, 2003LES – 2003, San Diego
Specialty Pharma Needs Pharma’s Products
CarnrickTanabeGalenTanabePfizer
Lundbeck
ShireAllerganHoechstLundbeckOriginator
$3,952Total145metaxaloneElanSkelaxin148diltiazemBiovailCardizem175levothyroxineKingLevoxyl181diltiazemForest Tiazac249brimonidine tartrateAllerganAlphagan
254escitalopram oxalateForest Lab
Lexapro
428dextroamphetamineShireAdderallXR
440botulinum toxin type AAllerganBotox481ramiprilKingAltace
$1,451citalopramForest Celexa
WW Sales ($$MM)Generic NameCompanyProduct
Evaluate Pharma, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
A Licensing Complex in Flux
• Life in Pharmbiospeci Village is changing, and becoming more complex
• Threats to traditional business models are disrupting the perfect symbiosis.
– The Endangered List
© Defined Health, 2003LES – 2003, San Diego
Now Let’s Be REALLY Honest!
“We are no longer competitive in the PCP market. In-licensing cannot help us. Even if there were something out there, we would never get it. We need to partner with biotech in specialty markets.”
TRUE or FALSE?
Big Pharma(Except Pfizer, GSK, AstraZeneca, Merck, Novartis)
© Defined Health, 2003LES – 2003, San Diego
Big Pharma’s Endangered List
• The Primary Care-centered, “One Size Fits All” blockbuster drug.
• The business model set up to chase (internally or externally) those precious few opportunities.
• Big pharma companies with significant primary care franchises.
• Deal power in non-therapeutic franchise areas.
© Defined Health, 2003LES – 2003, San Diego
Worldwide Rx Sales $338 Billion
Primary Care
Other
Estimated WW Primary Care Market (2002): $187 bil.
Evaluate Pharma, Defined Health
© Defined Health, 2003LES – 2003, San Diego
Evaluate Pharma, MedAdNews
Drug Classes Introduced or Grown to Peak, 1995-2001:
PPI
SSRI
Statin
ARB
COX-2
$11.38.8
17.7
5.06.3
Worldwide Sales ($bln)
A Golden Era for Primary Care Medicines
© Defined Health, 2003LES – 2003, San Diego
26106Top 20 Product Sales Growth ($bln)
2002199819951992
Top 20 Blockbusters’ Contribution to Total Sales Growth
674740Top 20 Pharmaco Total Rx Sales Growth ($bln)
65392923Top 20 Product Sales ($bln)
24718013393Top 20 Pharmaco Total Rx Sales ($bln)
Evaluate Pharma and Defined Health estimates
Pharma’s Value Contribution Imbalance
16% 21% 39%
© Defined Health, 2003LES – 2003, San Diego
Money Checks In…
0
10
20
30
40
50
60
1993 1994 1995 1996 1997 1998 1999 2000 2001
New
NM
E A
ppro
vals
0
5
10
15
20
25
30
Dem
estic
R&
D S
pend
ing
($b)
New NME ApprovalsDomestic R&D
FDA, PhRMA
But Doesn’t Check Out
© Defined Health, 2003LES – 2003, San Diego
Dry pipelines undermining EMEAMonday, December 30, 2002 A dramatic drop in new drug applications is now threatening Europe’s medicines regulator the EMEA with a financial crisis, and could hinder plans to expand its role.In October, the Agency announced it was slashing its budget by €5 million in response to a sharp fall in the number of new drugs submitted for approval, now confirmed at 31 for 2002, down from 58 in 2001 and 54 in 2000.Called to discuss the EMEA’s expected financial problems with the European Parliament’s Environment, Public Health and Consumer Policy committee, Executive Director Thomas Lonngren said:
The EMEA, like its US counterpart the FDA and other national regulators, relies on fees from applicants to fund its work. Earlier this year the FDA said fewer new drug applications had meant “significantly less” users fees from the industry, and in turn less money to fund its drug review operations. The US regulator approved just 16 drugs in 2002, compared to 24 in 2001, and the record 53 in 1996.
“Never has so much money been spent on R&D with so little result.”
Money Checks In…But Doesn’t Check Out
© Defined Health, 2003LES – 2003, San Diego
0%
10%
20%
30%
40%
50%
60%
70%
1997 1998 1999 2000 2001
Preclinical Phase 1 Phase 2 Phase 3 Pre-registration
PAREXEL’s Pharmaceutical R&D Statistical Sourcebook 2002
Phase II: Pharma’s New “Valley of Death?”Number of Products Discontinued in Development, by Phase
© Defined Health, 2003LES – 2003, San Diego
0%
10%
20%
30%
40%
50%
60%
70%
1997 1998 1999 2000 2001
Preclinical Phase 1 Phase 2 Phase 3 Pre-registrationPAREXEL’s Pharmaceutical R&D Statistical Sourcebook 2002
Phase II: Pharma’s New “Valley of Death?”Number of Products Discontinued in Development, by Phase
© Defined Health, 2003LES – 2003, San Diego
0%
10%
20%
30%
40%
50%
60%
70%
1997 1998 1999 2000 2001 2002
Preclinical Phase 1 Phase 2 Phase 3 Pre-registration
PAREXEL’s Pharmaceutical R&D Statistical Sourcebook 2002
Phase II: Pharma’s New “Valley of Death?” Number of Products Discontinued in Development, by Phase
© Defined Health, 2003LES – 2003, San Diego
A Rising Wave Of Generic Erosion
0
5000
10000
15000
20000
25000
WW
Sal
es ($
MM
)
2001 2002 2003 2004 2005 2006 2007
Total Projected WW Sales of Drugs Losing Patent In That Year 2001-2007
Evaluate Pharma, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
Going, Going Gone.....
ZyrtecMevalotinZoladexEpogen*Ortho-Novum
SeroquelActosRocephinParaplatinAccupril
EffexorAmbienZofranDiflucanFlonase
NorvascZocorZoloftAllegraPaxil
FosamaxPravacholZithromaxCelexaCipro
RisperdalNeupogen*BiaxinDuragesicFlovent
PulmicortLotensin
ToprolLamisilArediaSerzone
20072006200520042003
* Assume no generics
N O T A B L E P A T E N T E X P I R A T I O N S
Evaluate Pharma, Defined Health estimates
Specialty DrugPCP Drug
© Defined Health, 2003LES – 2003, San Diego
LipitorasaurusRex
© Defined Health, 2003LES – 2003, San Diego
Zoloftapatosaurus
© Defined Health, 2003LES – 2003, San Diego
Allegraopsisaurus
© Defined Health, 2003LES – 2003, San Diego
New Product Launches from Top 10 Pharmas
12
25
24
46
20
23
19
35
010203040506070
93-95 96-99 00-03 04-07*
PCP Focused Specialist Focused
* Probability of success adjusted
Defined Health
© Defined Health, 2003LES – 2003, San Diego
Only 4 Of Top 10 Pharmacos Generate the Majority of Sales From PCP Products
0%
10%
20%
30%
40%
50%
60%
70%
80%%
of 2
002
Rx
Sale
s
Ast
raZe
neca
Mer
ck
Pfiz
er*
GSK
Nov
artis
BM
S
Lilly
JNJ
Roc
he
Ave
ntis
* Post merger salesDefined Health estimates
© Defined Health, 2003LES – 2003, San Diego
Pfizer Will Continue To Thoroughly Dominate Primary Care
0
2
4
6
8
10
12
14
Pfizer
Novartis
GSK
Merck
JNJ
AZN
Lilly
BM
S
Aventis
Roche
# of New PCP Product Launches Expected During 2004-2007
Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
Pfizer Rules in Sales Force Size
0 2000 4000 6000 8000 10000 12000 14000
Pfizer
GSK
Merck
AstraZeneca
Novartis
BMS
Aventis
Lilly
Roche# of Sales Reps in the U.S.
MedAdNews September 2003
© Defined Health, 2003LES – 2003, San Diego
But Pfizer Will remain Less Competitive in Specialty Markets
0123456789
10
JNJ
Novarti
s
BMS
LillyAve
ntis
Roche
Pfizer
GSK
AZNMerc
k# of New Specialist Product Launches Expected During 2004-2007
Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
Top 10 Pharma’s New Competitive Segments
© Defined Health, 2003LES – 2003, San Diego
Brawny Big Pharma
• > 50% Of Rx Sales From Primary Care Dominated Drugs
© Defined Health, 2003LES – 2003, San Diego
Brainy Big Pharma
• >75% Of Rx Sales From Specialist Dominated Drugs
© Defined Health, 2003LES – 2003, San Diego
Hybrids
• 55%-70% Of Rx Sales From Specialist Dominated Drugs
© Defined Health, 2003LES – 2003, San Diego
The Next Hybrid?
Merck Licenses Amrad Technology to Develop New Asthma Drugs WHITEHOUSE STATION, N.J., June 23, 2003 - Merck & Co., Inc. and Amrad Corporation Limited (ASX:AML) today announced an exclusive licensing and multi-year research collaboration agreement between Merck Sharp & Dohme(Australia) Pty. Limited, the Australian subsidiary of Merck, and Amrad. Based on the results of the collaboration, Merck will seek to develop drugs with therapeutic potential in areas such as asthma, other types of respiratory disease, and oncology.Dr. Peter S. Kim, president of Merck Research Laboratories, cites this agreement as a significant entry by Merck into the biologics arena and consistent with Merck’s continuing emphasis on external partnerships to supplement its world-class research capabilities.
© Defined Health, 2003LES – 2003, San Diego
Big Pharma’s New Competitive Segments
• Conventional view of Big Pharma as a group of huge “PCP-focused” companies is already more than slightly inaccurate.
• Primary care power is rapidly consolidating in the hands of a few companies.– These companies will need to feed their primary care
pipelines largely internally as Biotech development remains mainly specialty-focused.
– Safe prediction: When they can’t do this, they will acquire!
• Doing neither well: Hybrid companies will remain, but may become less competitive in both primary care and specialty markets; these companies may have trouble staying on Biotech’s therapeutic area preferred provider lists.
© Defined Health, 2003LES – 2003, San Diego
The Revenge Of The Nerds
• True specialty-focused Big Pharmacos will win a greater number of sought-after deals as their growing franchise strength conveys competitive advantage as preferred partners. These companies will compete more effectively for Biotech’s specialist–targeted products.
© Defined Health, 2003LES – 2003, San Diego
The Revenge Of The Nerds
• Will sales force reduction return?
– Initial driver was early 90’s fear of healthcare reform
– New driver may be lack of primary care products!
– 3,000 reps for 3800 Rheumatologists?
© Defined Health, 2003LES – 2003, San Diego
Biotech Develops Products for Specialists
0
20
40
60
80
100
120
140
160
Cance
rInf. D
is.
Autoim
mun.Neu
ro.
AIDS
Resp. GI
DermGen
etic CV
Diabete
sTran
spl.
Growth
Infert.
BloodOphthal.
Other
Num
ber o
f Dru
gs in
Dev
elop
men
t
PhRMA Survey of New Medicines In Development – Biotechnology; 2002.
© Defined Health, 2003LES – 2003, San Diego
23Phase II
55Deals Over Last Three Years (Pre-clinical –Discovery Stage)
43Deals Over Last Three Years (Development Stage)
31Phase III and Up
108Age of Portfolio (Years)
63Total # of Patented In-Line Products
42Therapeutic Oncology Sales Ranking (2002)
RocheAventisTherapeutic Oncology
Preferred Partners Do More Deals
Adis, Evaluate Pharma, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
The Penalty For Not Picking The Preferred?
JNJ Velcade co-promotion announced
© Defined Health, 2003LES – 2003, San Diego
Specialist Driven Therapeutic Area Health Report Card: 2002 - 2008
High Patent Exposure Low Patent Exposure
Low
Pip
elin
e O
ppor
tuni
tyH
igh
Pipe
line
Opp
ortu
nity
BMSDiabetes
GSKInfectiousDisease
PfizerNeurology
GenentechOncology
BMSOncology Lilly
Diabetes
Defined Health estimates
SGPInfectiousDisease
Size of the bubble corresponds with the relative sales in the therapeutic area in 2002
AventisOncology
RocheOncology
PfizerOphthal
NovartisDerm
J&JAnemia
RocheAnto-
immune
RocheInfectiousDisease
© Defined Health, 2003LES – 2003, San Diego
Now Let’s Be REALLY Honest!
“We will never create true value by saving Big Pharma. We can access the specialty market for our lead product with a small sales force.”
TRUE or FALSE?
Biotech
© Defined Health, 2003LES – 2003, San Diego
Biotech’s Endangered List
• Realistic chances of any company becoming the “next Amgen.”
• Companies with pipeline strength sufficient to build strong therapeutically focused commercial franchises.
© Defined Health, 2003LES – 2003, San Diego
Given the number of high profile — and even more low profile —mergers and acquisitions in the pharma industry in recent years, one might expect the total number of companies involved in Pharma R&D to have shown a steady decrease. In fact, quite the reverse is true. The number of companies has been rising every year — from 956 in May 1997 to 1,269 in January 2002 — a spectacular increase of nearly 30%. Interestingly, most of this growth is because the number of small companies, many with only one or two projects, has increased by almost 200 in the same period. Thus, the picture is one of an industry which is consolidating at one end, while diversifying at the other.SCRIP Magazine: Scrip’s Review of 2001, February 2002
Too Many Mini-FIPCOs?
© Defined Health, 2003LES – 2003, San Diego
Too Many Mini-FIPCOs?
# of development-stage Biotechs (no marketed products)# Phase II/III products in development by these companies Assumed success rate
# approved products
Average # of approved products by company
138
55%
76
0.26
291
Company websites, Parexel Sourcebook 2002/2003
© Defined Health, 2003LES – 2003, San Diego
Approval Perhaps, Franchise No-Chance!Biotech’s New Commercial Grads
VariousIHistamine·2HCl (topical)
CancerIIIHistamine·2HClMaxim
ImmunosuppressionILJP 1082
ImmunosuppressionIIIAbetimusLa Jolla
Alzheimer’sIPPI 1019
CancerPre-RegAbarelixPraecis
Bacterial InfectionsICB 181963
Bacterial InfectionsApprovedDaptomycinCubist
InflammationIMLN 2201
CancerIING-1
Crohn’sIINeuprex (opebacan)
PsoriasisPre-RegRaptiva (efalizumab)Xoma
IndicationPhaseDrugCompany
© Defined Health, 2003LES – 2003, San Diego
Now Let’s Be REALLY Honest!
“Our food bowl of Big Pharma cast-offs is empty. It’s obvious we’d better start to do some development.”
TRUE or FALSE?
Specialty Pharma
© Defined Health, 2003LES – 2003, San Diego
Specialty Pharma’s Endangered List
• Marketed products with any real growth potential that can be obtained from Big Pharma.
• Growth potential (without any major step-up in R&D spend).
• Freedom from Big Pharma competition.
© Defined Health, 2003LES – 2003, San Diego
Specialty Pharma’s Growing Pains
42664935624223%1,196Shire Pharmaceuticals
1,00980844330134%1,489King Pharmaceuticals
1,3411,38776151729%2,557Forest Labs2,71937420513983%689Cephalon1,04951628319245%951Biovail$377$861$472$32117%$1,586Allergan
Same as 00-
0330%20%15%CAGR:
00-032003E Sales
CAGR: 2003-2008
Average Annual Revenue Growth Required to Meet Targeted Growth Rate (in $MM):
Evaluate Pharma; Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
The Costs Of A Pipeline
0%2%4%6%8%
10%12%14%16%18%20%
Kin
g
Bio
vail
Fore
st
Alle
rgan
Shire
Ave
rage
Larg
e C
apPh
arm
aA
vera
ge
% o
f 200
2 R
even
ue
Defined Health; Company reports
R&D Spending As % Of Pharmaceutical Revenue
© Defined Health, 2003LES – 2003, San Diego
Recently Launched Products by Major Pharmacos: PCP vs. Specialty Audience
IressaFaslodexLantusAbilify**ReyatazStratteraForteoBexxarTrizivirEmendCancidas
CrestorNexium *Symbicort *KetekGlucophage XR *Glucovance *Metaglip *Cialis **Avodart **Levitra **
AdvairConcertaReminylZetiaStarlix **ZelnormRelpax **Bextra **Dynastat *Zyvox
ZometaGleevecXolairGeodon**Rebif**SomavertVfendPegasys **ZenapaxFuzeonElidel
PCP SPECIALTY
* Line extension; ** Me tooDefined Health
© Defined Health, 2003LES – 2003, San Diego
The Value Of A Niche: Old vs. New Therapies
$400 (Expected
Peak)
$25 (2002)
US Sales (mil)
$7,000-10,000$270*
Average Annual
Cost
AmeviveCutivate
$1,170 (2002)
$75 (2002)
US Sales (mil)
$15,000**$516*Average Annual
Cost
RemicadePentasa
* AWP for daily dose of 2g and a total of 95 days of therapy annually
* AWP for 4g total a day for 8 weeks per year** AWP for 310mg every 8 weeks
Redbook, Defined Health estimates
© Defined Health, 2003LES – 2003, San Diego
Guess who’s moving in?
BIG PHARMABIOTECH SPECIALTY
PHARMA
Primary Care Market Specialty
Markets
© Defined Health, 2003LES – 2003, San Diego
BIG PHARMA BIOTECH SPECIALTY PHARMA
Guess who’s moving in?
BIG PHARMA
Primary Care Market Specialty
Markets
© Defined Health, 2003LES – 2003, San Diego
Welcome to the Future Pharmbiospeci Village
• The Complex Truth
© Defined Health, 2003LES – 2003, San Diego
PCP, MD
Spec, MD
Pfizer
GSK
AZ
MerckNovartis
BMS
Lilly
J&JRoche
AventisBMS
LillyJ&J
Roche Aventis
© Defined Health, 2003LES – 2003, San Diego
Welcome to the future Pharmbiospeci Village
• The Complex Truth is :
• IT’S ABOUT THE FRANCHISE…….!!!!
© Defined Health, 2003LES – 2003, San Diego
A synergistic combination ofintellectual property intellectual capital
competitive advantage sustained
andconfers upon its owner some measure of meaningful
which
over a period of time.
“Franchise” Defined
© Defined Health, 2003LES – 2003, San Diego
• Every sector needs to build franchise strength. – Even big Pharma can only be in a handful of
therapeutic areas.– Biotechs can’t be in more than one, maybe two.– With few exceptions, “Specialty” Pharma has
never really built specialty franchise strength.
A Licensing Complex: Strategic Implications from the Changing Neighborhood
© Defined Health, 2003LES – 2003, San Diego
• Pharma needs to decide whether it wants to be brawny, brainy or a hybrid, or whether this decision will be made for them.– In all the noise, try - at all costs - to avoid
cynicism and “group think”– Indecision results in cacophony for L&BD –
chasing Primary Care blockbusters on the one hand, and trying to focus on strategic therapeutic franchise plays on the other.
– Pharma should look to licensing to build integrated, clinically and commercially relevant therapeutic franchise portfolios offering sustainable value.
A Licensing Complex: Strategic Implications from the Changing Neighborhood
© Defined Health, 2003LES – 2003, San Diego
• Biotech needs to think harder about building a genuine commercial presence, not just about commercializing a single product and moving on to the next, unrelated product in its pipeline.– In-licensing will become just as important as out-
licensing as a core competency for Biotech L&BD execs, as they focus on building their second act – creating a viable commercial presence and becoming a genuine player for in-licensing deals.
A Licensing Complex: Strategic Implications from the Changing Neighborhood
© Defined Health, 2003LES – 2003, San Diego
• Specialty Pharma needs to move beyond the “scavenger” model by developing a credible value proposition for the other elements of the complex.– L&BD execs need to be aware that, lacking
internal discovery capability, their company’s future is wholly dependent on getting past their purely opportunistic mindset so that sources of compounds in Pharma and Biotech see them in some type of preferred partner position.
A Licensing Complex: Strategic Implications from the Changing Neighborhood
© Defined Health, 2003LES – 2003, San Diego
• Future deal making in all sectors will be much more strategically driven and complex than in the past!
A Licensing Complex: Strategic Implications from the Changing Neighborhood
© Defined Health, 2003LES – 2003, San Diego
© Defined Health, 2003LES – 2003, San Diego
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