1. Global Bio-pharmaceutics and Healthcare
Group
TIS
Global Bio-pharmaceutics and Healthcare
Biotechnology, Capital Markets & Macroeconomics
Robert Lepley, Ph.D.
TIS Group, Inc.
North Oaks, Minnesota
Lecture Material Presented March 31, 2010
CFANS 1501
Biotechnology, People and the Environment
Dr. Doug Foster
College of Food, Agriculture and
Natural Resources Sciences
St. Paul Campus
University of Minnesota

2. Increased Awareness of Global Health & Food Security
- Macroeconomic Changes in Global Architecture -
Increasing transfer of wealth from developed to developing world
Emergence of global middle class
Geopolitical power decentralized
Global information parity
WWW provides rapid global dissemination
Limitations imposed by asymmetrical access, generation and exploitation
Alteration in global perception of risk
Demand for wealth protection
Cultural self identity at expense of national ideology
Shift in work force from agriculture and manufacturing to services
Productivity gains
Increase in discretionary / leisure time
Increase in discretionary income
Increased demand for nutritional resources
Increased dietary consumption of high value foods
Anthropogenic climate change
Moving away from attribution and prediction to mitigation and adaptation
Carbon management affects all industries
Group
TIS
Group
TIS

3. Perspectives on Global Healthcare
sovereign economies & macroeconomic imbalances
Source Data: World Bank
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TIS

4. How Are Macroeconomic Forces Changing Bio-pharmaceuticals?
Post-symptomatic Medicine Based Healthcare System Too Expensive?
Less costly to “treat” wellness?
Source Data: Centers for Medicare and Medicaid Services
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TIS

5. Summary of Life Sciences Global Market Data
Human Healthcare Market is the Dominant Global Market
Relative Size by US$ (blns)
Relative Size by %
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TIS

6. Human and Animal Pharmaceutical Markets
Different Sizes and Patterns of Growth
Human healthcare market
growth in Asia and Latin
& South America
Source Data: IMS Health
Animal healthcare market growth
in Western & Eastern Europe
along with Asia
Source Data: Vetnosis
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TIS

7. Human and Animal Pharmaceutical Markets Critical Strategic Challenges
Market Changes Require Adaptation
Critical Strategic Challenges
High costs of research, clinical development and registration
Global market must repay R&D costs
“Blockbuster” pharma model flawed – too few innovator drugs
Pharmaceuticals must change business model to survive
Developed economies primary markets by sales
Looming problems:
Weak growth – increasing generic penetration
Healthcare policy reform and directives to contain costs
Shift from post-symptomatic medicine to wellness
Macro economic shift in funding priorities
Emerging economies primary markets by growth
Emerging middle class demand for health and food security growing
Healthcare and food provisioning infrastructure poorly developed
Affordability
Accessibility
Adoption
Group
TIS

8. Next Generation - “Evergreen” USPTO Patent Critical
Global Pharmaceutical Industry Applies
Same Basic Template for Drug Discovery & Development
Pharmaceutical Research and Development Cycle
Preclinical
‘Discovery’
Set the dose
Phase I
Phase II
Phase III
Revenue
Phase IV
New Label
Next Generation - “Evergreen”
USPTO Patent Critical
20 years – When? Overlap?
No patent → No innovator drug
$$$ No Revenue $$$
Clinical
Market
Group
TIS

9. Pharmaceutical Preclinical Drug Discovery
Complex Biology Requires Synchronization of Many Skill Sets
Project Teams are the Essential Core from which
Developmental Drug Candidates Emerge
Project Team
Biology
Chemistry
Molecular Biology
/ Fermentation
Informatics /
Computational
Biomarkers
Genomics /
Proteomics
Statistics
Formulation
Regulatory
/ Legal
Marketing
Consultants
Screening
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TIS

10. Pharmaceutical Drug Development Pathway - Preclinical
Preclinical Research
Early / Mid
Late
Very Late
Discovery
Target Identification
Target Validation
Lead finding chemistry
PK & PD
Pathology & Toxicology
Formulation IP
Lead Declaration
Senior management approval
Set the dose
Go to humans
Lead is the prospective drug
Investigational New Drug Application
Regulatory transition
IND to FDA
Defines approach to clinical trials in
great detail
“The Protocol” - doesn’t change, costly!!
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TIS

11. Drug Candidate Development Overview of U.S. FDA Clinical Trial Process
IND
BLA
NDA
Panel
Small Mql Drug
Biologic Drug
FDA CDER
FDA CBER
PI/PII/PIII
Approval / PIV
Some Class III Devices are “Combination Products”
that enter the CDER/CBER approval pathway
PMA
Panel
Approval / PIV
Medical Device
IV Diagnostic
FDA CDRH
510(k)
IDE
Approval
Class III
Class II
Class I
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TIS

12. Source Data: PharmaProjects
Pharmaceutical Drug Development Pathway - Clinical
Clinical Development
Phase I
Phase II
Phase III
Numbers:
Length: several months
Goal: Safety
Cost: $10s Millions
Numbers: 100’s
Length: months - 2yrs
Goal: Efficacy
Cost: $10’s – $100’s Mlns
Numbers: 1000’s
Length:1 - 4+yrs
Goal: safety, dose, efficacy
Multi-center / Transnational
Cost: $100’s Mlns
Attrition Rate
≈ 29%
Successful Launch
≈ 52%
≈ 15%
≈ 40%
≈ 6.5%
≈ 76%
Source Data: PharmaProjects
Group
TIS

13. Phase I, II & III and Clinical
Development Pathway –Registration / Launch Boundary
Preclinical To Launch
Cost: $100s Mlns to Blns
Preclinical Costs Variable
$100s Mlns to Blns
Preclinical to Successful Launch
2006 data ≈ 10%
Variable – depends on therapeutic class
Oncology ≈ 4%
Anti-infective ≈ 10%
Variable - depends on compound
NCE generally lower
Biologics vs small molecules?
Phase I, II & III and Clinical
Launch
Marketing & Sales
Name
Advertisement
Hospital / Clinic / Physician contacts
Feedback
Phase IV
Numbers: 100’s to 1000’s
Length: indefinite
Goals: Population specific effects,
safety, dosages, efficacy, toxicity.
New label claims
Cost: $10’s to $100’s millions
Withdrawal Possible
COX II Inh / Rezulin / Tysabri
FDA re-approval possible
Tysabri
Patent Life is 20 Years !!
Don’t patent too early
Stack IP
Next generation underway in preclinical.
$$$
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TIS

14. Source Data: PharmaProjects
Pharmaceutical R&D Pipeline Census
Source Data: PharmaProjects
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TIS

15. While Biotechnology is Applied to Nearly All Aspects of R&D
The Majority of New Drugs Are NOT Biologics
New Medical Entity and Biologic Approvals
Source Data: U.S. FDA
Group
TIS

16. What’s Wrong With Pharmaceutical
Preclinical Research & Drug Discovery? Lack of Innovation!
The majority of FDA drug approvals are “me too” drugs
FDA Standard vs Priority Approvals
Source Data: U.S. FDA
Group
TIS

17. Pace of Innovation Has Slowed in Pharma and Biotech
Too few innovator drugs in pipelines to support blockbuster model
Sharp decline in the number of triadic biotech patent families
Source Data: OECD
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TIS

18. What’s Wrong With the Pharmaceutical Industry
Why the Lack of Innovation?
Major fault lies with failure of “blockbuster drug” business model
Merger and acquisition strategy emerged in the early 1990’s
Created huge internal R&D apparatus to focus on billion Dollar drugs
Gave rise to “blockbuster drug” business model
Idea that synergies of scale would make blockbuster drug discovery efficient
Assumed era of no price controls and long periods of patent exclusivity
Business model driven by R&D speed and efficiency
No real understanding of the biology – metric driven
Macro level management view that discovery needed to be everywhere
Biology was too complex and discovery programs were not well integrated
Management focus on performance metrics that did not correlate well
with discovery of innovator drugs
M&A led to internal competition between acquired sites
Post merger strategy should have been top close sites
But by keeping sites open, duplicated efforts became competitive
Management did not want personalized medicine
Because markets were not blockbuster drug oriented
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TIS

19. Macro Economic Forces Have a HUGE Impact on Corporations
U.S. Pharma Market Is NOT Growing – Capital Market Effects
NYSE Top 10 Pharmaceuticals‡
Market Cap and Total Assets on Balance Sheet
‡ Top NYSE by R&D Spending
1 PFIZER INC 6 SANOFI-AVENTIS
2 NOVARTIS AG-ADR 7 ASTRAZENECA PLC
3 JOHNSON&JOHNSON 8 ELI LILLY & CO
4 GLAXOSMITHKLINE 9 BRISTOL-MYER SQB
5 MERCK & CO 10 ABBOTT LABS
Source Data: Bloomberg, LP
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TIS

20. Macro Economic Forces Have a HUGE Impact on Corporations
U.S. Pharma Market Is NOT Growing – Capital Market Effects
NYSE Top 10 Pharmaceuticals Ranked by R&D Spending‡
‡ Top NYSE by R&D Spending
1 PFIZER INC 6 SANOFI-AVENTIS
2 NOVARTIS AG-ADR 7 ASTRAZENECA PLC
3 JOHNSON&JOHNSON 8 ELI LILLY & CO
4 GLAXOSMITHKLINE 9 BRISTOL-MYER SQB
5 MERCK & CO 10 ABBOTT LABS
Source Data: Bloomberg, LP
Group
TIS

21. Pharmaceutical R&D Requirement for Innovator Drugs
Is Very Costly - Must Justify ROI in Drug Price
Source Data: DiMasi, J.A., R.W. Hansen, and H.G. Grabowski, “The Price of Innovation:
New Estimates of Drug Development Costs,” Journal of Health Economics 22:
Tufts CSDD. Cost to develop new biotech products is estimated to average $1.2 billion."
Impact Report Volume 8 Number 6. November/December 2006.
Group
TIS

22. Pharmaceutical Branded Drugs
Face Increasing Pressure from Generic Drugs
Government pressure to contain healthcare costs favors generic drug market
Source Data: U.S. Census Bureau. The 2009 Statistical Abstract:
The National Data Book - Health & Nutrition: Health Expenditures.
Group
TIS

23. The Pharmaceutical Sector Faces New Strategic Challenges
Healthcare reform in U.S. market – world’s largest drug market by sales
Significant downward pressure on prescription drug costs
New R&D risk mitigation strategies needed
New markets in Asia, Latin America and South America
Personalized medicine – phenotypic drug response differences
Imposition of new globalized discovery strategies
Companies can’t export culture
Healthcare paradigm shift to wellness
Emphasis on prophylaxis: vaccines, biomarkers and surrogate endpoints
Wellness based therapeutics
Anthropogenic climate change
Unknown healthcare implications
Innovation needed!
Group
TIS

24. What are likely business solutions to the innovation problem?
Biopharma is adapting a partnership based approach to drug discovery
Internal R&D operational units becoming smaller
Focused, inter-firm partnerships
Shift away from outsourcing to avoid loss of synergy in internal talent pool
Repurpose preclinical discovery projects
Less emphasis on target driven approaches: target = technology = metrics
Integrate all aspects of biology
Translational medicine and systems biology have increasing importance
Drug discovery will shift to smaller market scales
Personalized medicine
Couple pharmacogenomics to get companion diagnostics for drugs
Identify in advance of treatment in who drug will work and wont work
Longer term, pharmaceuticals will demerge to become small “biotech-like”
Group
TIS

25. Most Important Solution Will be Talented People
Knowledge of science, the technology, the business and the global context
Strong problem solving skills
Willing to be part of a team
Dedicated, goal oriented and focused
Willing to adapt as changes are imposed on R&D
Innovative and entrepreneurial
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TIS