is asia the answer? dr. brian w tempest the 2008 ims pharma strategy conference new york –12 th...
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Is Asia the Answer?
Dr. Brian W Tempest
www.briantempest.com
The 2008 IMS Pharma Strategy Conference
New York –12th February 2008
DR. BRIAN W. TEMPEST CSci, CChem, MRSC, BSc, PhD
Dr. Brian Tempest advises companies and investment funds on their strategy in Asia based on his wide experience in China, Japan, SE Asia and India where he has
lived for the last 9 years and continues to have a home. Tempest has previously been President, Managing Director, CEO, Chief Mentor and Executive Vice
Chairman of Ranbaxy Laboratories(the leading Indian Pharmaceutical Company) during the 12 years between 1995 and 2007. He is one of the few westerners (if not the only westerner) to lead a Sensex Nifty 50 Indian blue chip MNC and as a result has a valuable insight into India. Tempest has also been Regional Director Far East for Glaxo responsible for Japan, China, Korea and Taiwan. Tempest has worked in the Pharmaceutical Industry for the last 37 years and led Global Healthcare
businesses, R&D and Global Manufacturing Organisations. Tempest has also led Investor meetings across Asia, Europe and USA. He is now a Non Executive
Director of Ranbaxy India, an advisor to the JM Financial India Private Equity Fund and a Honorary Professor of the Management School at Lancaster
University, UK. He speaks at worldwide conferences on the Challenge from India and China and more information on these presentations is available on
www.briantempest.com [email protected] / [email protected] +91-98100-91192 / Tel:+44 1753 864 616
Asia’s Share of the World GDP (at PPP in %)
Year 1870 1913 1950 1973 2001 China 17% 9% 5% 5% 12% India 12% 8% 4% 3% 5% Japan 2% 3% 3% 8% 7%
Rest of Asia 7% 5% 7% 9% 13% Total Asia 38% 25% 19% 25% 37%
Source – WEF
- was 59% in 1820 with India 16%, China 33%
Japan’s Wealth Advantage
Canada2%
Rest of World10%
Japan27%
Germany4% Italy
4%
France5%
UK6%
USA37%
Netherlands2%
Spain1%
Switzerland1%Taiwan
1%
Source: The World Distribution of Household Wealth
Is Asia the Answer?
Market drivers Competition is rising Branded generics from Asia IP changes in USA M&A and Private Equity East-West Alliances Drug Development
The Asian Productivity Advantage
India a usa Pharma view USA India a usa Pharma view USA
1 chemist Better education x 1.3 1 chemist 1 chemist Better education x 1.3 1 chemist
70 hours/week Longer working time x 1.3 50 hours/week 70 hours/week Longer working time x 1.3 50 hours/week
$ 800 monthly Lower cost x 20 $ 12,000 monthly $ 800 monthly Lower cost x 20 $ 12,000 monthly
Sources: IPHMR Conferences, New Delhi August 2004
The Asian Education Advantage
Engineers/Science graduates p.a – India 0.7m, China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m
Asia’s Youthful Advantage
Percentage of Population aged 65 and older
6.9
5
8.3
14.714.8
21.5
29.2
12.3
18.7
21.4
13.2
22.7
China India Europe North America
2000 A
2025 E
2050 E
Sources: AXA Framlington
Company Expiry2010
Expiry2012
Expiry2011
Pfizer Aricept - $800m Lipitor - $12.1bn
Xalatan - $1.6bn
Viagra - $1.7bn
Detrol - $860m
Geodon - $1.1bn
Astra Zeneca Arimidex - $2.2bn Seroquel - $4.7bn Symbicort - $3.7bn
Sanofi-Aventis Taxotere - $2bn US Plavix - $3.8bn
Avapro - $2.1bn
Lovenox - $3.1bn
BMS US Plavix - $4.8bn
Avapro - $1.3bn
Abilify - $2.1bn
GSK Advair - $3.8bn Avandia - $2.5bn
Patent Expiry Dates
41%
38%
34%
30%
23%
% at Risk
Asian Competition is Rising CPHI Attendees, Milan, 2nd – 4th Oct’07
1. China 467 – 33%
2. India 189 – 13%
3. Germany 96
4. Italy 80
5. USA 75
6. UK 55
7. France 55
8. ROW 387
Total 1404
As registered on July 25, 2007
Generics – API’s
USA DMF filings by India % Share of USA DMF filings
India China 2005 37% 10% 2006 44% 14%
Q1’07 48% 17% Q2’07 37% 18%
Q3’07 42% 16% Source: US FDA / J P Morgan, 2 may 2007
Source: US FDA, Credit Suisse
India China 2004 187 48 2005 252 87 2006 357 128
Source: US FDA / J P Morgan, 6th August 2006
- One in every four ANDAs filed by Indian Companies in top USA FDA filers Source: KPMG
- No Chinese generic company has yet filed a USA FDA ANDAbut expected in 2008
Generics - ANDAs
0
50
100
150
200
250
300
2002 2003 2004 2005 2006
2446
64
144
ANDA Filings in USA by Indian Companies
250
Sources: Goldman Sachs 2007
Top 5 Global Pharma Markets 2020
Rank Country Size
1.
2.
3.
4.
5.
USA
China
Japan
France
India
$ 475b
$ 125b
$ 61b
$ 51b
$ 43b
BCG 100 Challengers
Country Total State Private
China 41 29 12
India 20 0 20
Brazil 13 1 12
Russia 6 3 3
Source BCG
Speed of Clinical Trials in India
EU India
Patients 85 650 Sites 22 5 Time 36m 18m
Neck Cancer CT
Plan Actual
Patients 100 130 Sites 10 9 Time 5m 2.5m
Overactive bladder CT
300 patients, 30 sites$5.6m EU/USA vs $ 1.8m plus
30% faster at $800K per day savings
No. of USA investigators: 2001 - 2006 26,000 18,000
Sources: CT Outsourcing Conference, 24th July 2007, Mumbai
Electronic Data Capture in India
% Trials in EDC
2005 2007 25% 45%
Savings
Paper EDC
$2.8m $ 0.5m
2004 data
Sources: CT Outsourcing Conference, 24th July 2007, Mumbai
Accuracy
- 300 GSK Staff
- 2.2m Clinical Data sheets
- 450 Trials
- No data security issues
- Error rate <0.01 / 100k
Source: BCG report “Looking Eastward, Sept’2006”
Branded Generics
Promotion to doctors rather than pharmacists Consistent sales year on year No huge highs & lows for sales and profits Need field force to promote products Tend to be profitable Promoted in conventional manner Global generic brands Relevant to Central Europe, East Europe, Latam, Asia Ranbaxy half branded generics & half commodity
generics
Branded Generics - the Analyst’s view
“Branded Generics are the most profitable place to be in generics and there are a few markets with better branded characteristics than those of the Middle East and North Africa region”
Frances Cloud Nomura September 14 2007
Different Global Generic Market Sizes $bn
Region Sandoz
2006
IMS
2008USA 23 68
West Europe 14 19
East Europe 13 NA
Japan 3 3
Latam/Canada 10 3 (Canada only)
ROW 37 7
Total 100 100
IP – USA Pendulum
“A key USA Supreme Court ruling KSR VS Teleflex led to Pharmaceutical patents being more easily challenged on the grounds of obviousness, a ruling which immediately came into play when J&J & Merck had a US patent for Pepcid Complete (Famotodine) found to be obvious”.
Scrip, July 6th 2007, p3
The full beneficial impact of this ruling on the generic industry is yet to be seen .
Bilateral FTAs - USA Pendulum
Democrats now chairing Committees- Ways & Means USTR legally required to work within TRIPS USA has been incorporating TRIPS PLUS IP protection into
bilateral free trade agreements Corrections to bilateral trade agreements eg Peru, Columbia,
Panama FTAs
TRIPS
Basic product patent
Data protection
TRIPS PLUS + Data exclusivity
+ New forms, isomers etc
+ New Indications
+ New Combinations
Sources: 1. IMS Midas, March 20052. Earth Trend Data Tables 2005
82% of the world population accounts for only 12% of the Global pharmaceutical sales
Region Pharma Sales Population
North America
Europe
Japan
$255 b 47%
$158 b 30%
$59 b 11%
332 5%
725 11%
128 2%
Asia/Africa/Aus
Latam
88%
$41 b 8%
$20 b 4%
18%
4711 73%
558 9%
12% 82%
Worldwide $533 b 100% 6454 100%
Should IP be the same across all Countries?
0
1000
2000
3000
4000
5000
6000
USA Thai China IndiaBrazil
USD
Sources: World Health Report 2005
Per Capita Expenditure on Healthcare 2002
Enforcement or Evergreening ?
India IP 02/03 06//07 Filed 11466 28882 Examined 9538 14119 Granted 1379 7359
- 140 patent examiners 2007- 600 more planned- Attrition an issue- Weekly patent journal- IP Appellate Court
Source: Business Standard, 16th Aug’2007
• 1995 – 2005 FDA cleared 327 drugs
• 95% pre 1995 – before WTO deal
• 16 basic patent molecules possible
• However 9000 Pharma applications - for evergreen changes
- for new indications
Source: Gopa Kumar “Centre for Trade & Development, Delhi”
PCT Filings from Asia
PCT Files from Developing Countries 2006
1. Huawei - China2. LG - Korea3. Samsung - Korea4. LG Cem - Korea5. Elec Telecom – Korea6. 2TE – China7. STR – Singapore8. Ranbaxy – India9. CSIR – India10. NHN - Korea
Ranbaxy Patent Filings to 2005
24 32 49 86 146 170 185
M&A in India
Year Deals Investments
2005 467 $ 18 b
2006 782 $28 b
2007 >1000 $ 70 b
Source Grant Thornton Deal Tracker
% PE/VC Share of all Global M&A Deals
0
5
10
15
20
25
2000 2001 2002 2003 2004 2005
5%6%
9%
16%17%
21%
Sources: Thomson One Banker, BCG Analysis
Asian PE Deals
Country No. of deals Sum Invested - $mChina 103 1489
India 90 1369
Hong Kong 5 186
Australia 26 71
Taiwan 6 33
S.Korea 30 29
Thailand 2 29
Singapore 4 16
New Zealand 9 3
Total 278 3233
Sources: Thomson Financial in H1 2007 excluding Japan
Private Equity Investment in India
Year Deals Investments
2004 60 $ 1 b
2005 124 $ 2 b
2006 302 $8 b
2007 405 $ 19 b
Source Grant Thornton Deal Tracker
CO2 emission - % of World total in 1990-2000
USA 23%EU 25 17%China 14%Russia 7%Japan 5%India 4%
– source: WRI, EIA
Potential Challenge – Climate Change
Potential Challenge – Infrastructure
Source – Manmohan Singh
“Our greatest potential will be realised only if we can ensure that ourInfrastructure does not become a severe and critical handicap”
Corruption Perception Index
Rank Country
1 Finland, Iceland, NZ5 Singapore11 Austria, Luxemburg, UK16 Germany20 Belgium, Chile, USA42 Mauritius, S.Korea51 South Africa, Tunisia70 Brazil, China, India, Mexico121 Philippines, Russia
163 Haiti
Sources: Transparency International 2006, selected countries only
Potential challenge – Oil prices
Source – Assocham
• A war against Iran could drive oil > $200 a barrel - ‘Times’ 22nd June 2006• India is expected to import 85% of crude oil by 2012 from 70% today
Source – BP
The Tempest Crystal Ball
•India will continue to be a Key Driver in the Global Generic Industry
•Competition is rising – Post TRIPs Indian companies will evolve
•Discovery companies will continue to be attracted to India for CT, EDC, MO. China will be perceived to be stronger in biology/ toxicology
•IP changes in US will slowly favor Generics
•Alliances between Western Biotech and Asians companies will expand. M&A PE deals will grow. Singapore, Vietnam, Bangladesh & Nepal will take a rising importance
•How to use Asia in Drug Development will become the key opportunity
Early discovery leads from USA, Europe or Singapore Molecular optimisation from India
Toxicology from China, Central Europe, Singapore Electronic Data Capture India
API Manufacture India
Drug Formulation Manufacture India, USA
Phase 1 Clinical Trials Europe
Phase 2,3 heavy use of India
Corporate back office India
Is Asia the Answer for Drug
Development?
“The Indian System looks ramshackleand improvised. But at its best it is capable of brilliance”
“When we say the Silicon Valley isbuilt on ICs we don’t mean integratedcircuits – we mean Indians & Chinese”
“The UK needs to wake up to whatIndia is becoming”
Source: DEMOS report – January 2007
Perceptions of Asia
Asia economic strength is returning to levels seen in the past India is a global strategic asset for developed markets having
many advantages with some challenges. India is a rich location for R&D alliances and CT outsourcing
MNCs will dip in & out of India & China South East Asian economies will be driven by India & China
Japan will continue to represent a huge share of global wealth “China & India represent the future of Asia and quite possibly
the future for the global economy” – Steve Roach, Morgan Stanley
Summary