1. The Pharma Professional An industry focused learning program for students of pharmaceutical sciences Session 3 1 st March 2014 NIPER Hyderabad

2. 22 Recap – Session 2  Why are generics essential in the healthcare system?  What is the average development time of a generic?  What are the different mechanisms for manufacturing compliance programs?  What was the objective of the Hatch Waxman act?  What are the different types of patent certifications provided in an ANDA?  Name 3 generic entry response strategies

3. 33 Presentation of Session 1 assignment Each group presents the Session 1 assignment Presenter chosen by faculty Review and Q&A

4. The business of pharmaceutical outsourcing

5. 55 Outline  Overview  Market dynamics and outsourcing trends  Contract research outsourcing  Contract manufacture outsourcing

6. 6 OVERVIEW

7. 77 Overview

8. 8 GLOBAL GROWTH DRIVERS AND MARKET DYNAMICS

9. 99 Global growth drivers Patent Expiries Drugs worth USD 90bn going off patent New launches not enough to justify loss of revenue R&D productivity R&D spend increasing, new approvals decreasing Average R&D cost has increased to USD 1.4bn per NCE Focus on generics Increasing role of generics in developed countries by insurance and healthcare providers Emerging markets entering branded generics segments to boost profitability Cost pressure Falling R&D productivity coupled with pricing pressure Raw material and wage inflation

10. 10 Outsourcing trends Emerging trend in the outsourcing of core functions such as clinical trials and drug discovery Late life cycle outsourcing has the highest share – API manufacturing outsourcing at approx. 55% Drug discovery/development and formulation manufacturing outsourcing represent high scope for growth

11. 11 Market dynamics Approx. 64% of the overall USD 67bn global CRAMs market dominated by contract manufacturing Contract research represents USD 25bn globally Huge scope for growth – only 20% of global pharma R&D spend being outsourced In india, USD 2.3bn comes from contract manufacturing Contract research size at USD 1.5bn – strong growth driven by chemistry capability, skilled manpower and cost value Outsourcing market in India highly fragmented with over 1000 players

12. 12 CONTRACT RESEARCH OUTSOURCING

13. 13 Overview  CROs provide services including drug discovery, new product development, formulation, trial management till phase IIA  The Indian CRO industry has grown by 65% from 2007 onwards  Capabilities to provide late stage discovery chemistry and drug development services  Research biology skills yet in nascent stage

14. 14 Growth drivers  Cost and time advantage  Availability of diverse genetic pool  Large resource of technical expertise  Increasing compliance with ICH-GCP CostUSD mnIndia advantage Phase I20-25<50% Phase II50-60<60% Phase III100-150<60%

15. 15 Market split

16. 16 Key advantages  Collaboration between industry, academia and the government through programs such as the Drugs and Pharmaceutical Research Program  Focus on specialised pharmaceutical education  Zero duty for technology upgrades through the EPCG scheme  Public-private partnership models to harness innovation capability  Increase in weighted reduction from 150% to 200% for expenditure on in-house R&D activities

17. 17 Key challenges  Unavailability of skilled manpower for clinical trials  Attrition of skilled workforce a high risk  Concerns on diligent following of guidelines set by regulatory bodies  Concern on confidentiality and IP protection on NCEs  Significant competition within India and from China

18. 18 CONTRACT MANUFACTURE OUTSOURCING

19. 19 The contract manufacturing value chain Scaling up from large scale to kilo level and from kilo to ton level. Custom Synthesis Commercial production of APIs/ Intermediates Drug Substance Production Commercial production of formulations in different dosage form Dosage Form Development and Production

20. 20 Contract manufacturing – Key clusters Traditional Formulation Cluster Emerging Bulk Drugs Cluster Emerging Formulation Cluster Traditional Bulk Drugs Cluster GOA MAHARASHTRA – Mumbai, Pune ANDHRA PRADESH - Hyderabad GOA MAHARASHTRA – Mumbai, Pune ANDHRA PRADESH - Hyderabad ANDHRA PRADESH - Visakhapatnam HIMACHAL PRADESH – Baddi UTTARAKHAND - Pantnagar, Haridwar HIMACHAL PRADESH – Baddi UTTARAKHAND - Pantnagar, Haridwar GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara MAHARASHTRA – Mumbai, Tarapur, Aurangabad,Pune ANDHRA PRADESH – Hyderabad, Medak TAMILNADU – Chennai PONDICHERRY KARNATAKA – Mysore and Bangalore GOA - Panaji GUJARAT – Ahmedabad, Ankleshwar, Vapi, Vadodara MAHARASHTRA – Mumbai, Tarapur, Aurangabad,Pune ANDHRA PRADESH – Hyderabad, Medak TAMILNADU – Chennai PONDICHERRY KARNATAKA – Mysore and Bangalore GOA - Panaji

21. 21 Benefits analysis

22. 22 Cost arbitrage Percentage points comparison with U.S. Manufacturing Cost Arbitrage, India The United States China India – Non- USFDA India – USFDA approved Europe Percentage points comparison with U.S. Cost Comparison, India Percentage points comparison with U.S. Labor Cost Arbitrage, India

23. 23 Infrastructure and facilities  Cost competitiveness plus product quality  More than 100 US FDA approved facilities  GMP compliant, catering to international standards Number of U.S. FDA-approved Facilities, Global, 2011

24. 24 Existing business models

25. 25 Emerging business models Pre-clinical API Pre-clinical Formulation Phase-I API Phase -II a API Phase -II b API Phase III API Registrat ion Launch Commercial Manufacturing Clinical Trials Formulations Formulations Development PRE-CLINICAL DEVELOPMENTCLINICAL DEVELOPMENTCOMMERCIALIZATION FULL-SCALE SUPPLIESEARLY PHASE CUSTOM SYNTHESIS AND FORMULATIONS DEVELOPMENT DEVELOPMENT PARTNER LAUNCH PARTNER LIFECYCLE MANAGEMENT PARTNER Prior 20002000-20052005-20102010-20152015 Onwards APIs/ Bulk Drugs Prior 20052005-20102010-20152015-20202020 Onwards Formulations

26. 26 Selecting a CMO – key factors Capacity Reputation/ Credibility Technical expertise Quality Low High LowHigh 210568 2 468 2 468 Low High 210468 High Personal relationship Communication Timely delivery/ Speed Approved facilities/ Regulatory support Low High Low High 210468 2 468 2 468 Low High 210468 High Cost Location Low High 210468 Low High 210468 Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input.

27. 27 Key players and services Analytical: Sample Types Divi’s Laboratory Ltd. Piramal Healthcare Ltd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr. Reddy’s Laboratory Ltd. Raw Materials API Testing Dosage Form Cleaning Validation Intermediates

28. 28 Key players and services API TypesDivi’s Laboratory Ltd. Piramal Healthcare Ltd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr. Reddy’s Laboratory Ltd. Small Molecules Controlled Substances Custom Organic Synthesis API - Intermediates Cytotoxics Process Development

29. 29 Key players and services Formulations List Divi’s Laboratory Ltd. Piramal Healthcare Ltd. Jubiliant Organosys Ltd. Aurobindo Pharma Ltd. Dr. Reddy’s Laboratory Ltd. Injectable Oral Topical Buccal/ Sub- lingual Ophthalmic Antibodies Formulation

30. 30 Pushing and pulling forces Enormous Cost- saving Benefits Manufacturing costs reduced by 40 – 60 % Patent Cliff Drugs worth $90 billion going off patent globally Increasing Regulatory Support Novel technology, new pharmaceutical hubs, SEZ policy Industry Consolidation Strategic alliances between Big Pharma and domestic participants Limited Technical Know-how Lack of expertise in sterile products, technology platforms IPR Protection Breach of proprietary information Drivers Restraints

31. 31 Trend of strategic alliances  Drive among MNCs to outsource manufacturing has gained momentum  MNCs prefer Indian generic companies vs. pure play contract manufacturers  Generic companies capable of manufacturing products across therapeutic categories  Already manufacturing products for emerging markets  Have already demonstrated compliance in regulated markets

32. 32 Some examples

33. 33 What’s the future like?  CMOs moving up the value chain – consolidating horizontal spread, expanding vertical spread  A ‘one stop shop’ promoting a complete portfolio and range of services  Shifting from a purely transactional relationship to a risk- sharing model  Transition from ‘small molecule blockbuster’ model to biopharmaceutical model

34. 34

35. 35 Group Assignment  Divide yourselves into groups of 5  Do a company analysis of any one CRO and one CMO in India  Company analysis should include  Product pipeline  Strategy  Key capabilities and revenues  Alliances and collaborations (including any authorized generics deals)  Assignment should be submitted as a PowerPoint presentation (10- 15 slides) by Friday 7 th March 2014 to support@learning-curve.co.in with a cc to your department headsupport@learning-curve.co.in