Nat. & Internat. Envio. in Pharm. Indust

Slide 1: 

National & International Environment for Pharmaceutical Industry Abhishek Dadhich

Development of Global Pharmaceutical Industry : 

Development of Global Pharmaceutical Industry In late 19th century the pharma industry had its origin in chemical industry mainly dye industry William Perkins produced first synthetic dye called aniline purple He produced synthetic quinine from aniline This prompted Swiss and German companies to venture into synthesizing drugs from dyes Bayer developed aspirin in 1899 Paul Erlich synthesized salvarsan for treatment of syphilis Early 20th century saw emergence of large number of pharma companies (Contd…)

Contd… : 

Contd… II World War provided great stimulus to conventional drug research Pharma companies like Glaxo and Beecham in UK, Bayer and Hoechst in Germany, Roche & Ciba – Geigy in Switzerland and Merck and Eli–Lilly were set up worldwide Drug discovery process was always expensive By end of 1980s global pharma industry was in high growth race

Global Pharma Market : 

Global Pharma Market Global pharma sales for the year 2006 was at US$ 643 bn. Industry characterise by presence of large number of companies with concentration restricted to top Top 20 MNC players accounted for 69% of global market in 2000 Pfizer and Merck exceeded 6% share each in 2000 In 2005 top 15 companies accounted for 51.3% of global sales with Pfizer at 7.34%, Sanofi-Aventis and GSK at 5.37 and 5.33 respectively For Pharma companies there are 3 major cost heads : 1. Selling, general and administrative cost. 35% of OP. income 2. Manufacturing cost 28% 3. R&D expenses 14%

Contd… : 

Contd… Most of the Top 25 companies have a market share between 1-6 percent Large European and US companies derive 40% of their income from overseas operations.

Market Size : 

Market Size Total market size in 2005 US$ 602 bn Top 5 countries account for 69.3% of global market while top 15 countries account for 83% of market in 2005 Growth rate in past few years has been – 7-8 percent for developing nations 12-15 percent in US 8-10 percent in Europe Japan grew with the slowest pace (3%) in 2005 The world’s top 10 markets are : (cont…)

Top 10 Pharma Markets : 

Top 10 Pharma Markets US Japan Germany France Italy UK Spain Canada China Mexico

Slide 8: 

Region-wise Break-up of the Global Pharmaceutical Market (2005) Global Market Size: US$565 bn (audited)

North America : 

North America Region included US and Canada Market size in 2005 was US$ 265.7 bn. 47% of global market US accounted for 95% of sales in 2005 North-American market grew at 5.4% Biotech products remain major growth contributor increasing by 17.2% to 32.8 bn. Generics show a growth of 20.6 percent

Contd… : 

Contd… Other factors which influeced market was fewer NCE approvals, decreasing sales of Cox – 2 class of products New products – new products decline to 20 from 36 in 2004 New block busters launched were Eli-Lilly’s Byetta, lyrica from Pfizer and Lunesta for insomania from sepracor. New products like vytorin of Schering-Merck, Genetech’s Avastin for Colorectal cancer and Cymbalta for Neuratic pain and depression

Canada : 

Canada Growth rate at 7.3% in 2005 as compared to 16.7% in 2001 Canadian hospitals and pharmacy spend US$ 16.6 bn. On prescription medications World’s 8th largest market Main therapeutic category were cardiovascular, hormones, anjti-infectives, cholesteraol agents

REGION II: EUROPE : 

REGION II: EUROPE This is the second largest pharmaceutical market in the world The total size of the European pharmaceutical market was reported at US$169.5 billion in 2005 (30% of the global market) In year 2005, the European market grew by around 7.1% over the previous year Higher cost containment efforts by Governments in the European countries have impacted the growth rate since 1990s Germany is followed by France, Italy, UK and Spain.

REGION III : ASIA, AFRICA AND AUSTRALIA : 

REGION III : ASIA, AFRICA AND AUSTRALIA This region is estimated to be the largest pharmaceutical market in the world in volume terms, but relatively small in value terms. Further, Japan, which is included in this region, dominates it with a share of over 55% of the regional market. The total market size for this region in 2000 was US$95.9 billion, i.e. 26% of the global market In 2005 this region accounted for US$ 106.7bn. The Japanese pharmaceutical market grew by 6.8% to US$60.3 bn. in year 2005. Contd….

Slide 14: 

Excluding Japan, the Africa and Australian region recorded a growth rate of 11% in 2005 to US$ 46.4 bn. The growth was high on account of the presence of a large number of developing countries in this region where the purchasing power of individuals has increased and healthcare systems have expanded. China is the second largest market in the region, after Japan. China stands out as number one registering a growth rate of 20.4% to touch US$ 11.7 bn. As for Japan, the ongoing economic downturn, introduction of a new product pricing mechanism, and implementation of stringent regulatory norms have affected the market growth there.

REGION IV: LATIN AMERICA : 

REGION IV: LATIN AMERICA The size of this market was around US$24 billion 4.2% of the global market, in 2005. The pharmaceutical market in the Latin American region witnessed a year-on-year growth of 18.5% in 2005 mainly because of the large number of developing countries in the group. The Latin American region is dominated by Mexico, and Brazil, which accounts for over 50% of the regional market because of large population. Contd….

Slide 16: 

The pharmaceutical industry in Brazil had faced a de-growth in 1999 on account of poor economic conditions (high inflation rates and unemployment levels led to a decline in the purchasing power of individuals) then prevailing in the country. Mexico, which accounts for over 30% of the Latin American market, recorded strong growth since 2000, The Latin American pharmaceutical market is expected to grow at the rate of 8% during 2001-2005

Determinants of Market Size : 

Determinants of Market Size Purchasing power Status of development in a region influences the death rate Why the developed nations (highest per capita income) normally have the lowest death rate The least developed nations (with the lowest per capita income) have the highest death rate Thus it may be concluded that besides incidence of disease and size of population, income level and purchasing power are the other major determinants of market size

Per capita expenditure on drugs : 

Per capita expenditure on drugs Per capita income has a considerable impact on the market size Lower levels of prosperity often results in product prices being lower, and this reduces the market size in money terms It can be concluded that level of expenditure on pharma products moves in tandem in the level of per capita income Aging of population also determines market size of the population. This is especially true for chronic ailments where the treatment continues for the life time In developed markets with lower death rates the size of older population is increasing and hence the size of the market for drugs for geriatric population increases

Per Capita Drug Expenditure across Select Countries : 

Per Capita Drug Expenditure across Select Countries

Per Capita Income & Expenditure on Drugs in Select Nations : 

Per Capita Income & Expenditure on Drugs in Select Nations

Demand for Pharmaceutical Products : 

Demand for Pharmaceutical Products Incidence of disease: All diseases can broadly be divided into three main categories on the. basis of their root causes. These are: Degenerative diseases such as heart diseases, psychosis and cancer. These are mainly related to lifestyle, urbanization and aging. .Genetic diseases such as cystic fibrosis and brain disorders. These are caused by genetic disorders or hereditary problems. .Invasive diseases such as viral and bacterial infection, tuberculosis and malaria. These depend on the quality of hygiene and sanitation, which is a function of Govemment spending on the health sector and the reach of the Governments' health programme.

Prescribing habits of doctors : 

Prescribing habits of doctors This, in turn, is dependent on a number of factors, some of which are: Doctors' knowledge about the drug Relationship of the doctor with the respective pharmaceutical company Income level of the patient. Price of the drug Drug effectiveness and side-effects Consistency in quality of drug. Availability of drug

Creation of demand through aggressive marketing strategies : 

Creation of demand through aggressive marketing strategies Pharmaceutical companies are resorting to aggressive marketing, and are incurring higher expenditures for promoting drugs among doctors and consumers. The basic aim is to create demand for their products and achieve higher penetration. Aggressive marketing is particularly noticeable for products in the over-the-counter (OTC) range, where creating awareness and product availability play a key role.

GROWTH : 

GROWTH The global pharmaceutical industry has been reporting a compounded annual growth rate (CAGR) of approx. 7% since 1991. The size of the global pharmaceutical market was estimated at US$362.8 billion in 2000. The figure has risen to US$ 643 billion for the year 2006 as per IMS. Growth in the pharmaceutical industry is linked to the introduction of new drugs and increase in prices, among other factors. The global pharmaceutical industry is characterized by a relative immunity to economic cycles in the short to medium term. Contd…

Slide 26: 

In the early 1990s, the major pharmaceutical markets of the world, including Japan and Europe, experienced a decline in their growth rates. During the same period, however, the emerging economies witnessed high growth. In the case of some of the developed countries (in the European Union), the growth rates for the pharmaceutical market declined because of the increasing levels of price regulation, which resulted in a decline in value growth, despite higher volume growth. However, most of the developed countries witnessed healthy growth rates during the late 1990s, with the pharmaceutical industry in the US reporting a CAGR of 18.5 % during 1995-99, and Europe reporting a CAGR of 14.5% for the same period. Contd….

Slide 27: 

As mentioned, the rate of new product introduction is one of the key determinants of growth in the pharmaceutical industry. This was one of the reasons for high rate of growth in the US market. According to IMS Health 1999 data, 57% of the sales of new medicines marketed since 1995 originated in the US as against 25% in the European market. The Japanese pharmaceutical industry witnessed a low growth of 7% during 1995-99 mainly on account of poor economic and political conditions prevailing in the country. There was a steep decline in the Japanese market growth rate in late nineties and early 2000. It rebounded in 2005 with a 6.8% growth rate touching US$60.3 billion in 2005. North American market grew 5.2%, Europe 7.1%, Latin America 18.5% and Africa 11%.

DIMENTIONS OF GROWTH : 

DIMENTIONS OF GROWTH Increase in prices Increase in volume New product introduction Drugs that serve unmet needs Drugs that increase demand in existing marketsDrugs that create demand for products that did not exist earlier

THERAPEUTIC SEGMENTS : 

THERAPEUTIC SEGMENTS The size and growth of the therapeutic segments vary widely across regions. The main reason for the variation is the incidence of diseases, which, in turn, depends on the socio-economic profile of the region concerned. Infectious and parasitic diseases are more prevalent in the developing world, while cardiovascular (CVS) and other problems have a much higher incidence in the developed world. Following chart plot the disease-wise cause of death in developing and developed countries respectively

Causes of Deaths : 

Causes of Deaths

Global Market Shares of Various Therapeutic Segments : 

Global Market Shares of Various Therapeutic Segments

Therapy wise retail sales in key markets : 

Therapy wise retail sales in key markets

Slide 34: 

Leading Therapy Classes in 2005 by Global Pharmaceutical Sales

Slide 35: 

In the pharmaceutical industry, the price of a product is inversely related to the age of the molecule. As companies are investing more in R&D of specific therapeutic segments, the rate of new product introductions is relatively faster here. Consequently, the relative price of the products is higher in these segments. According to industry estimates, growth in the global pharmaceutical industry is likely to be driven by the drugs for the treatment of: Diseases relating to age, like Alzheimer's, diabetes, tumors and cancers. Diseases relating to modem lifestyles, viz. obesity, allergies, depression. Diseases in new therapeutic areas such as Acquired Immuno-deficiency Syndrome (AIDS)

Shares of Therapeutic Segments in the Pharmaceutical Markets of Developed Countries : 

Shares of Therapeutic Segments in the Pharmaceutical Markets of Developed Countries

Top 10 Drugs in Global Pharmaceutical Industry : 

Top 10 Drugs in Global Pharmaceutical Industry

MARKET STRUCTURE : 

MARKET STRUCTURE Globally a new structure is evolving in the pharmaceutical industry with a number of companies focusing on specific areas. Such companies include: Generics Companies Contract Research Organizations Contract Manufacturing Organizations Platform Technology Companies

Slide 39: 

Although most large pharmaceutical companies are truly transnational in character, most of them are concentrated in Europe and the US. In 2000 nine European companies figured among the top 20 pharmaceutical firms globally, even as eight were from the US while in 2005 amongst top 16, 7 companies are from Europe and 9 from US . In spite of lower growth rate in the domestic pharmaceutical market (during 1995-2000), at the individual company level some Japanese companies have done well on account of their international presence. This is evident from the fact that as against a single Japanese company that figured in the list of top 20 pharmaceutical players globally in 1998, three players figured in the list in 2005. These three are: Takeda, ranked 15th (17'h in 1993 and 20th in 1998) Astella’s 16th and Dalichi-Sankyo, ranked 19th; and Shionogi, ranked 20th. light regulations and price controls in various developed markets had discouraged Japanese companies from venturing into this industry till mid 90s but poor economic conditions in the domestic market (in the second half of 1990s) encouraged these companies to globalize their operations.

Earnings Volatility of Global Pharmaceutical Majors : 

Earnings Volatility of Global Pharmaceutical Majors The year-on-year sales pattern of a pharmaceutical company depends on its product portfolio. Even a single successful product launch has a considerable impact on the overall performance of a company. The revenue growth and the profitability of the global pharmaceutical players depend to a large extent on few products. To illustrate, the top 10 products of GlaxoSmithKline accounted for 49% of its revenues from the pharmaceuticals business in the year 2000. For Pfizer, the figure was as high as 73%. For Eli Lilly, the figure was even higher at 82%, and a single product, Prozac (Fluoxetene), accounted for 24% of the company's total sales in the year 2000. This product Innovation factor contributes substantially to the volatility in rankings. The top 10 pharmaceutical companies globally in 2000/2005 in terms of sales were as follows:

Top 10 Global Pharmaceutical Companies : 

Top 10 Global Pharmaceutical Companies Figure based on 2000/2005 sales Market shares calculated on the basis of audited global sales of US$ 317.2 billion by IMS Health Compiled by ICRA Information Services from Pharmaceutical Executive and IMS Health

Leading Products in 2002 Global Pharmaceutical Sales : 

Leading Products in 2002 Global Pharmaceutical Sales

Leading Products in 2005 by Global Sales : 

Leading Products in 2005 by Global Sales Combined sales US$56.9 bn

2002 Global Pharmaceutical Sales by Region : 

2002 Global Pharmaceutical Sales by Region Source: IMS World Review.

R&D Expenditure in US Pharmaceutical Industry : 

R&D Expenditure in US Pharmaceutical Industry US based firms are spending large amount in R&D activities. In the year 2006, pharmaceutical firms in USA have spent over US$ 55 billion on R&D, a growth of 6.5% over the previous year. R&D spending by US firms (company financed) are mostly in Pre-clinical and Phase – III of clinical stages

Segment-wise Allocation of R&D Expenditure in US Pharmaceutical Industry : 

Segment-wise Allocation of R&D Expenditure in US Pharmaceutical Industry

Europe : 

Europe Europe is the second largest pharmaceutical market, next to USA, with a production level of over US$ 200 billion in 2005. Europe is a home around 8 out of top 20 pharmaceutical companies in terms of sales. European pharmaceutical firms have spent over US$ 26 billion in R&D in 2005. R&D spending by European pharmaceutical industry accounts for 18% of total R&D budget by the manufacturing industry. Contd…

Slide 48: 

Some of the major European countries producing pharmaceutical products include France (21%), UK (14%), Germany (13%), Italy (11%), Ireland (10%), and Switzerland (9%).These six countries together have produced over three-fourth of total pharmaceutical production in Europe.

Japan : 

Japan The total pharmaceutical sales in Japanese market in the year 2006 were estimated at around US$ 57 billion, thus accounting for over 9 percent of global sales. Cardiovascular drugs are the largest therapeutic segment produced in the country accounting for 22% of total drug production of the country. The pharmaceuticals contribution by Japan in other therapeutic category include central nervous system related drugs (8.4%), antibiotics (6.2%), blood/humoral products (5.4%), biologicals (4.5%), and dermatological drugs (4.1%).

R&D Expenditure of Japanese Pharmaceutical Industry : 

R&D Expenditure of Japanese Pharmaceutical Industry R&D expenditure in Japan has shown a steady growth since 1995 reaching ¥ 906.7 billion by the end of 2004. This accounts for 8.64 percent of pharmaceutical sales in the same year. R&D as a percentage of sales has remained around 8% during the last decade.

China : 

China The traditional Chinese medicine market, was valued at US$ 19 billion in 2005. It is expected that the pharmaceutical industry in China would reach a size of US$ 47 billion in 2010. China still uses largely Traditional Chinese Medicines with only 25 percent share in overall healthcare spending oriented to synthetic pharmaceuticals. In over the counter (OTC) market china positioning as the fourth largest market in and fastest growing market in the world

R & D the Heart beat of Pharma Industry : 

R & D the Heart beat of Pharma Industry Importance of Research Research in Pharma industry refers to directional search for solutions to existing medical problems and unmet medical needs Also aimed at improving existing solutions to minimize the side effects and improve their efficacy Special Characteristics of Pharma R&D: Scope of research is not just due to emergence of new diseases Existing medicines to be upgraded Constant up-gradation required as known ailments develop resistance to existing medicines Modifications in exiting drugs by producing new salt esters or dosage frame. Contd…

Contd… : 

Contd… Ability to introduce new drugs is a key success factor R&D expenditure is on upswing globally R&D expenditure of US based Pharma industry was 14% of total sales revenue in 2005

Scope of Pharma Research : 

Scope of Pharma Research Basic Research Prototype Design a Discovery Pre clinical Development Clinical Development FDA Filling/ approval and launch preparation

Focus of Global Research : 

Focus of Global Research Size of unmet medical need and changes in disease profile Scientific potential of the field as potential market size Competitive issues- Presence of competition or the drug pipe line of competitors Research in lifestyle diseases segment Special focus in certain their aphetic areas by Pharma companies e.g. Aventis concentrates on Respiratory (Asthma), CNS (Alzeimer’s, multiple sclerosis), CVS (Coronary astery disease) According to CMR Intl. Global R&D expenditure in 2003 was estimated at US$ 50.3 bn. The expenditure on R&D in America rose to US$ 51.3 bn. In 2005.

Slide 56: 

New compounds under development by PhRMA members in 2005 Cancer – 682 Neurological disorders – 531 Cardiovascular disorders – 303 Infections - 341 Psychiatric disorders - 190 HIV/AIDS – 95 Arthritis -86 Diabetes – 62 Asthma – 60 Alzeimer - 55

Slide 57: 

Changing focus of research Change in favors of lifestyle related dug Less focus an anti-infective, parasitic diseases and respiratory disorders. R & D expenditure on CNS drugs, anti-neoplastic drugs, endocrime and metabolic diseases has increased Out of 6000 compounds in the development process in 2000 the share of anti-cancer molecules (25%) was highest Next comes focus an CNS drugs (22%) Anti-infective molecules (18%)

Regional Concentration in Global Research : 

Regional Concentration in Global Research Around 44% of R & D expenditure world wide is performed in US, followed by Japan (15%) UK (9%), Germany (8%), Switzerland (5%) Italy (2%), Sweden (3%), France (7%), others (7%) Above figures relate to Global R&D expenditure in 1999 US & Europe are most popular choice for submission of INDA’s as these 2 regions accounts for 75% of Global consumption of Pharmaceuticals Greater R&D investment flow to US is because of 2 reasons Greater opportunities Price control policies in Europe and Japan has stifled new products development

PRESENT STATUS AND ENVIRONMENT OF GLOBAL PHARMA INDUSTRY : 

PRESENT STATUS AND ENVIRONMENT OF GLOBAL PHARMA INDUSTRY Introduction Research capability, manufacturing capability, producer portfolio, and marketing and distribution network are the key determinants of success. Global Pharma industry faces pressures on account of declining R&D productivity For global companies research in a very important driver of growth Research in Pharma field a) NCEs/NMEs b) NDDS c) Generic Drugs Contd…

Slide 60: 

Av. Cost of developing a new product in Intl. Pharma market is around US$ 800-880 million and average time is 12-15 years. Process research or reverse engineering is comparatively very cheap. Focus of Global Research is towards lifestyle drugs Historically Indian industry has focused on: Process re-engineering NDDS for formulations Entry into NCE Research NCE research in India is cost effective International Generics market is a big opportunity for India

TRANSLATIONAL RESEARH : 

TRANSLATIONAL RESEARH Concerned with moving basic discoveries from concept into clinical evaluation and is focused on specific diseases entities or therapeutic concepts. Critical Path Research Directed towards improving the product development process itself by establishing new evaluation tools Research Focus in Pharma Industry New Molecular Entities or NCES Innovative drugs: Compounds that serve unmet medical needs i.e. which provide treatment for ailments for which no drugs existed on drugs that have different mechanism of action Follow on Products Address same medical needs as the innovative drugs

Contd… : 

Contd… Modified drugs Drug Delivery Mechanism New mechanisms for delivering therapeutic agents to the desired site New combination of active ingredients New salts of approved drugs Generic Products The discovery of NCE is most important area in Pharma Research. As per CMR. 72% of R&D expenditure globally is allocated to NCE discoveries and R&D in Generics

Stages in the R&D Process for an NCE: Pre-clinical Research : 

Stages in the R&D Process for an NCE: Pre-clinical Research

Stages in the R&D Process for an NCE: Clinical Trials : 

Stages in the R&D Process for an NCE: Clinical Trials

Segment-wise Allocation of R&D Expenditure in US Pharmaceutical Industry (Est. for 2001) : 

Segment-wise Allocation of R&D Expenditure in US Pharmaceutical Industry (Est. for 2001)

Highlights of top 16 international Pharma companies ($ mn) : 

Highlights of top 16 international Pharma companies ($ mn)

Therapy-wise retails sales in key markets : 

Therapy-wise retails sales in key markets

Slide 68: 

European companies spent only 59% of their world-wide R&D expenditure in the EU in 1999 down from 73% in 1990 Between 1992-96 more companies opted for EU NDA filings (54%), US being second (26%) Between 1997-2001, the situation reversed with US submission first at 70% and only 19% in EU

Slide 69: 

R & D expenditure by Geographic Area for PhRMA member companies in 2002 (Estimated R & D expenditure = US $ 31 bn) USA 84.7% Canada & Latin America 1.4% Europe 13.3% Asia Pacific (excluding Japan) 0.3% Australia 0.3% Middle East 0.1%

Cost of Research : 

Cost of Research Over last 20 years R&D expenditure for US Pharma industry as percentage of sales has increased from 10 % to 16% Global R & D expenditure increased at average rate of 5.4 for 5 years ended 2003 In 2003 top 10 Pharma companies globally incurred an R &D expenditure of US $ 36 bn This averaged 17.5% of the sales revenue for Pharmaceutical business (as against 16.3 to in 2002) For individual companies there is wide variation in the ratio of R&D expenditure as a percentage of sales was 14.1% to 24% (Johnson & Johnson)

R&D Expenditure of Prominent Pharmaceutical Companies in 2003 : 

R&D Expenditure of Prominent Pharmaceutical Companies in 2003

Reasons for increase in R&D costs : 

Reasons for increase in R&D costs Complexity in health problems More intensive regulatory process Increase in no. & size of clinical trials Technological advances

Number of New Drugs in Clinical Trial or Filed for Status for select R&D based Global Pharmaceutical Companies : 

Number of New Drugs in Clinical Trial or Filed for Status for select R&D based Global Pharmaceutical Companies

Stage-wise break of R&D Costs by Pharmaceutical companies in US (domestic R&D expense on ethical pharmaceuticals(% of Total Expenditure in US financial by Research based pharmaceutical companies) : 

Stage-wise break of R&D Costs by Pharmaceutical companies in US (domestic R&D expense on ethical pharmaceuticals(% of Total Expenditure in US financial by Research based pharmaceutical companies)

Global Pharma Research : 

Global Pharma Research Staff cost in R & D Human resource is amongst the most important factors for research in any industry and more so in Pharma Employs cost constitute, a considerable proportion of total r& D cost Significant increase in number of R&D employees The share of scientific + professional + technical staff in total R& D personnel of Pharma member companies was 94.1% as against 5.1 % share of support staff during 2002 Largest proportion of R&D costs is incurred on scientific professionals Hence countries like India have advantage

Trends in Global R & D : 

Trends in Global R & D Rising R& D costs and declining productivity -Decline in NCE introduced in past few years No. of NCE introduced in 2003 was 26 least in last 20 years Year NCE Approval in US 1993 25 1994 22 1995 28 1996 53 1997 39 1998 30 1999 35 2000 27 2001 24 2002 17 2003 21 2005 19 2006 (estimated) 25

Slide 77: 

Increased product failures being faced by Pharma Industry Increase in number of molecules dropped at later stage One reason is concern over safety and Efficacy Molecules dropped in pre clinical stage amounts to 53% of total molecules dropped in 2001 as against 70% in 1997 Rise in number of molecules dropped in clinical trial especially phase II. This is largely on account of bio-availability of drugs. Decreasing pipeline of NCE Longer stay of NCE’s in Phase I & II and higher attrition rate leads to decreasing pipeline in Phase III Various factors responsible for this are regulatory environment, company environment and Quality issues.

Global Pharma R & D : 

Global Pharma R & D Increasing Role of biotechnology Outsourcing of Pharma R&D CRO’s Global outsourcing market for R& D related functions was estimated in the region of US & 9-9.5 b. R&D outsourcing has a CAGR of 12-15% since 1998 Increase in number of alliances Millennium Pharma + Abbott Research on Gender diseases US biotech form Allian Aventis undertake steps to develop drugs acting on such Genes and proteins Contd…

Slide 79: 

Agreement for commercialization and development of anti-cancer drug (Vel code) with ortho Biotech products (J&J Subsidiary) for which millennium received USFDA approval in 2003. Drug would be marketed in US by millennium. Outside US, Otrho Biotech a its affiliated will market the drug. Verlex a biotech company has alliances with many global Pharma majors like GSK, Aventies, NOVARTIS etc.

Global Pharma R & D : 

Global Pharma R & D Glaxo smithklino has signed 36 major collaborations since 2000. 24 for products in clinical development and 12 for preclinical (till the end of 2003) As per CMR, Group of companies comprising of over 80% of global R&D, had atleast 50% of biotech products which were cither acquired or in-licensed

Increasing importance of Alliances & In-licensing : 

Increasing importance of Alliances & In-licensing Large companies seeking opportunities to co-develop & co-promote products In-licensing & strategic alliances to supplement internal R&D efforts Involvement of mile-stone payments. This limits companies liabilities in case of failures Some recent global co-development agreements were between pfizer & Neurocrine Biosciences for Indiplon (for treatment of insomnia) Pfizer & Dalichi for DK 507K (for treatment of Respiratory tract inf.) Between Noro Nordisk and Dr. Reddy’s for antidiabetic drug (Balaglitzaone – Type II diabetes – DRF 2593) Ranbaxy & Schwarz pharma Rbx 2258 (urology-BPH) Ranbaxy & Bayer – Ciprofloxacin once a day

Alliances between large pharma companies and small biotech comps. : 

Alliances between large pharma companies and small biotech comps. To help strengthen the depleting pipeline of NCEs biotech cos. Gain in terms of support for product development. Regulatory approach, mfg. and marketing e.g. Aventis invetmentin millenium pharmaceuticals Abbott’s joint venture with celera diagnostics Eli Lilly’s partnership with Amylin Pharmaceuticals for Exenatide a type II diabetes product Eli Lilly + ICOS corporation for dialis Eli Lilly + Alkermes – inhaled insulin Eli Lilly + Ligand (for potential diabeties, CVs & obesity treatment) Eli Lilly + Gastrotech pharma K(for peptides to treat digestic diseases_ Eli Lilly + Antares Pharma – needle free drug delivery technology. MBS + Imclone systems – Erbitux for treatment of colorctal canco.

Contd… : 

Contd… Some important major products like plavix, Avapro, Abilify & Erbitux have been result of collaborative agreements BMS has also gone for out-licensing deal with Merck for its Type II diabetes treatment Muraglitizar (currently in phase III trials)

Growth of outsourcing in Pharma Industry : 

Growth of outsourcing in Pharma Industry Outsourcing looking for a partner & establishing long-term relationship with service provider who will perform certain functions which are non-care to the firm and care to the provider Also defined as buying from a provider, services that are not at the care of an organization’s competencies care competencies are major strengths of a firm Also defined as reliance on external sources for manufacturing components and other value adding activities Lifeline of pharma industry Contact drug development and mfg. is over $ 30 bn. Industry. Estimated to be US$ 53 bn. By 2010

Slide 85: 

Estimated growth rates of 17-20% per year Strategic shift to outsource were manufacturing and research services to reduce costs and get products to market faster Introduction of new patent regime will open up outsourcing opportunity of around $ 15 bn for bulk drugs globally Growing global cost pressures, ever short lasting product life cycles, increasing regulations concerning the drug related legislative sector permanent intensified specialization with development of new products urge to focus on care competencies Streamlining supply chain through successful contract management, is important companies can reduce time to market through faster launches Outsourcing increases efficiency

Value Chain Competition : 

Value Chain Competition Quality Value Speed Cost The Golden Triangle The success of a particular healthcare organization will depend on the composition and efficiency of its value chain

Slide 87: 

Need for Outsourcing Allows companies to operate at high level of flexibility and at the same time see direct implications in cost reduction and revenue enhancement with dramatic improvement in profitabiity. Advantages Relieves mfg. constraints Mfg. flexibility both side and downside Additional capacity Allows company to turn off pipeline quickly in the event of drug not taking off without issues associated with fixed capital and people Help more towards a variable cost modes

Slide 88: 

Key Drivers of outsourcing : Focus on core strengths Reduced operational cost Minimize ownership cost Enhance delivery options Decrease time to market Enhance service portfolio

Top 15 Outsourcing Firms : 

Top 15 Outsourcing Firms

The Outsourcing Market for Production of Formulations: : 

The Outsourcing Market for Production of Formulations: “Areas Covered” – All activities of production and packing Approximate $ 9.9 bn Only 10-15% outside placement of order Reason for outsourcing upto now are small volume requirements Market growth mainly due to take over and overcapacity of pharmaceutical enterprises

Outsourcing Market for Process Development for API’s Areas Covered : 

Outsourcing Market for Process Development for API’s Areas Covered Development of production processes Supply for clinical tests The Market App $ 900 million Growth through fast increase in new chemical and biological substances Order placement increasingly separated from later custom manufacturing Speed and flexibility are most important criteria for success Many specialised companies with only very limited production capacity

The Outsourcing Market for Physical Preparation : 

The Outsourcing Market for Physical Preparation Areas covered Services between active ingredient production and formulation Alteration of physical properties or mixing with auxiliary substances Micronisation, granulation, lyophilisation Market App. $ 900 million High growth rates based on increasingly tight specializations for active ingredients Highly specialised providers for one technology in each case – active ingreident producers that provide additional physical processing

Slide 95: 

To dilute the impact of patent expiry on financial performance companies have adopted product lifecycle management strategies such as incorporating new formulations, combination and dosing options for such products and their scotching the existing patents to new doses. Some companies try to gain 6 months additional marketing exclusivity by conducting trials or extend the exclusivity period by obtaining patents on different doses or delivery formulations of the products or even developed on improved product and converts patient’s to same. For e.g. basic molecule patent for prilosec, a brand owned by Astra Zeneca expired in 2001 (excluding paediatric exclusivity till June 2002), but the company launched a new product Nexium, a chiral molecule, to prevent the loss of market to generic product Shifting of product from prescription to OTC market is another strategy while nearing the patent expiry e.g.shering plough converting claritin (an anti-allergy drug) frp, a prescription to OTC drug.

Generic Penetration of Some Key Pharmaceutical Markets : 

Generic Penetration of Some Key Pharmaceutical Markets Above values are app.and for year 2003. France, Germany and Spain the values are for retail sales only for others they are for retail + hospital sale

Emergence of New Research Technologies : 

Emergence of New Research Technologies Generic / Pharmaceutical Technology Proteonomies, proteome refers to all proteins produced try a specific Combinational chemistry proteonomies is the sturdy of proteins expression and interaction among proteins High through screening Bio – informatics Chemo- informatics

Approved Generics : 

Approved Generics Innovator company authorizes a generic player other than the one that challenged the patent to manufacture the drug concurred. This way, the revenue opportunity for the challenging from the 180 day marketing exclusivity is diluted. Launch of approved Generics in US Markets

Contd… : 

Contd… Some examples of para IV challenges by Indian companies despite co-exclusivity and authorized generics are Dr. Reddy’s challenges of Eli Lilly’s Zyprexa (olanzipine) and GSK’ s zofran (ondansetron) and Ranbaxy’s para IV filing against Lipitor (Pfizer)

Protection Beyond Patent Expiration : 

Protection Beyond Patent Expiration Pharmaceutical Companies are developing new versions of successful drugs-- either chemical cousins that may be more potent or produce fewer side effects than original or combination therapies with another compound to treat a different type of illness or which offer more effective treatment This does not prevent entry of generics but it helps retain many patients Companies try to find new uses for existing drug here not effort is required for proving safety and cost of synthesizing a new drug. However unless the new drug represents a significant advance; pharma companies will find it difficult to persuade doctors to prescribe the new version with basically the same ingredient.