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Alan E Smith Senior Vice President Chief Scientific Officer Genzyme MIT R&D Conference November 3rd 2005.

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Presentation on theme: "Alan E Smith Senior Vice President Chief Scientific Officer Genzyme MIT R&D Conference November 3rd 2005."— Presentation transcript:

1 Alan E Smith Senior Vice President Chief Scientific Officer Genzyme MIT R&D Conference November 3rd 2005

2 Biotechnology - business appears to be great … n ~ 150 marketing approvals for biotech drugs and vaccines in last 5 years – more than all previous years combined n Many big revenue products: - Enbrel- Aranesp/Epogen - Cerezyme- Rituxin - Remicade- Neulasta/Neupogen - Synagis- Rebif - ReoPro- Avonex - Herceptin - Viread n 2004 R&D l approx 32 new - 1 st indication “biotech” products approved l 350 products in clinical stage development n 2004 Financing l 37 Biotechs went public WW, 28 in US l $21B financing raised; 2 nd best year ever

3 Our business is time-consuming, expensive, & risky Center for Study of Drug Development, Tufts University, 2003 - 2005... but the Biopharmaceutical World is tough 10,000 250 10 1 2486121014 15 Years Lead Discovery Safety & efficacy in animals Safety & efficacy in humans Regulatory Approval ~$1B Post - Approval : 73% need additional studies 30% recoup development costs 0

4 PhRma 2002, Nature Drug Discovery 2005 The Productivity Conundrum NMEs approved R&D Spending ($B) 20 25 30 35 40 45 50 55NMEs 15 17 19 21 23 25 27 29 31 33 $35B 1996 0.3 1997 0.5 1998 0.7 1999 0.7 2000 1.0 2001 1.4 2003 1.6 2002 2.1 15 13 $B/NME Increased R&D investment hasn’t translated into more products

5 But in even this environment Genzyme is doing well Revenues & R & D Spending 0 0.5 1.0 1.5 2.0 2.5 1995199619971998199920002001200220032004 Total Revenues ($B) 0 50 100 150 200 250 300 350 400 450 R&D Spending ($M) 1 st $Billion – 19 Years 2 nd $Billion – 3 Years

6 Where do opportunities that drive long term growth come from? Current+1+2+3+4+5+6+7 Revenue Committed Growth Rate Existing Product Revenue Revenue Gap New Product Revenue Success demands continuous development of new opportunities Year Always a revenue gap in the out years

7 Internally Originated Discovery Programs Preclinical Candidates Drugs in Clinic Marketed Drugs Clinical Candidates Drugs in Clinic Marketed Drugs Discover more: Discover outside & partner or acquire: Discover inside: We have to do all three Marketed Products Discovery Preclinical Research Preclinical Development Pivotals Clinical Research Our Model

8 Why look outside? Estimated global health R&D funding 2000 Public funding: advanced countries Private funding: Pharma, Biotech Private funding: not for profit Public Funding: developing countries TOTAL $38.0B $53.0B $9.4B $2.5B $103B * Global Health Forum 2001, PMPRB 2002, Genzyme Est.

9 Of the top 10 selling drugs in 2002.. Monsanto 3.0 NSAIPfizer Ferrosan 3.0 Anti-depressantsGlaxo SmithKline Takeda 3.1 AntiulcerantsTAP Pharma Pfizer/Sumitomo 3.8 Calcium antagonists Pfizer Kirin-Amgen 4.2 Antianaemics Johnson & Johnson Warner-Lambert 7.9 Antihyperlipidaemics Pfizer Originator ‘02 $B Therapeutic Category Company Celebrex 9 Seroxat/Paxil 8 Prevacid 7 Norvasc 5 Procrit/Eprex 4 Lipitor 1 Product# Success demands it

10 Risk of Failure Cost of Deal Preclinical Candidates Drugs in Clinic Marketed Drugs An investment balance required – early & late stage partnerships Every company strives hard to strike the correct portfolio balance between the risk of early stage and the growing cost of late stage partnerships

11 Genzyme has ongoing collaborations with all kinds of organizations Public/Commercial Pharmaceutical companies Biotech companies Startups Venture Capital groups Private/Non-Profit University Investigators Clinical / Hospital Investigators Government Institutes Private Research Institutes How do you do it?

12 Genzyme’s Unsolicited Partnering Opportunities Q1-Q3 ’04 Snapshot Total - 538 submissions 89 (16.5%) Interesting 14 - Followed up by BD or Scientist 27 - Received more information; then no interest 11 - Pending with additional information 37 (6.9%) - Initiated a Confidentiality Agreement 7 - Pending review of information 1 (0.2%) - Received info = SRA 3 (0.5%) - Received info = MTA 1 (0.2%) - Received info = LIC 25 - Received info: no interest A 1% hit rate... about average

13 Renagel example - partnership and acquisition Henri Termeer Chairman, Genzyme Board of Directors Member, Geltex Board of Directors Bob Carpenter Chairman, Geltex Board of Directors Member, Genzyme Board of Directors Joint venture with Geltex in 1997 before product approval $27.5M for 50% of Renagel in US & Europe Geltex acquired in 2001 after Renagel launch, $1 Billion in cash and stock 2005 revenues ~$400M (annualized Q2 2005) Later stage acquisition lowers risk...but at a price!

14 ... but acquisitions have downsides too Cost of acquiring quality late stage products candidates is high, and getting higher – l Buying someone else’s innovation... l to reduce internal risk... l with steadily increasing competition – many in same game, many with deep pockets - all looking for the same thing Many, perhaps most, acquisitions fail to live up to expectations Outside collaborations and acquisitions must be carefully chosen and managed. How? …

15 Reproducible ‘proof of concept’ efficacy data in relevant disease model Preliminary animal safety data Stable prototype formulation Production plan for manufacturing product Commercial plan – including access to IP, competition, etc. Regulatory strategy Clinical development plan What’s important: 1) a solid, compelling story A development checklist:

16 Financial – Upfront and ongoing commitment Financial – Expected return on investment Timing – Pipeline needs Technical – Therapeutic area experience and expertise Technical – Therapeutic platform Capacity – People and facilities Market – Call point Strategic – Desired area of growth Needs & abilities on both sides of the table: Initial partnering requirements: a compelling story AND a good fit: What’s important: 2) a fit

17 Personal Connection - awareness of opportunity wherever it might be Champion(s) - person(s) who are connected & truly believe Initiative – turning belief into action Persistence – there are always non-believers & setbacks Dedication – it’s always more work than you think Organizational Flexibility – Partners have differing needs from relationship Openness – Frequent face-to-face communication Experience – Realistic expectations, well-founded decisions Quality – Essential in all aspects of a collaborative After the ink is dry, success requires people who will are committed and organizations that – while recognizing and respect differences - are compatible What’s important: 3) people & organization

18 Summary Biotech industry Success is rare, time consuming, and very expensive Committed to aggressive long-term growth Seeks and commercializes innovation An essential part of the equation is partnering & acquisition Partnering Must choose wisely Need an extensive understanding of external landscape and a Through understanding of internal needs that partnership will fill Goal is to find a fit between the external opportunity and internal need Dedicated people and receptive organizations make the relationship work


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