the future of the generc pharma industry & how it impacts business today

The Generic Market Industry

The future of the generic industry.How it impacts your business today.

Saturday March 9th 2013

The Future

Today low cost generics give much needed access to yesterdays drugs

Tomorrow it will take much more to significantly improve the health of millions

Key Messages

Do not seek to be only the best generic company

Invest 10 times more in R&D than manufacturing

Seek out disruptive technologies that could change your company & the industry

Think about tomorrow when you consider business decisions for today

Yesterday's model

Integration. Scale. Breadth.

Teva. Mylan. Actavis (Watson). Sandoz. Hospira

- International expansion to improve profitability in USA- First-to-launch generates most profits- Operational 'machines' for stock market

[Actavis, fishing company to global leader. Sandoz run like army. Teva strength exploitation]

The Future

Today low cost generics give much needed access to yesterdays drugs

Tomorrow it will take much more to significantly improve the health of millions

Yesterday's Success Model

Integration. Scale. Breadth.

Teva. Mylan. Actavis (Watson). Sandoz. Hospira

- International expansion to improve profitability in USA- First-to-launch generates most profits- Operational 'machines' for stock market

[Actavis, fishing company to global leader. Sandoz run like army. Teva strength exploitation]

Generic Industry Overview

Global EBITDA Growth 2011-2013


Case Studies

Brazil Apotex- Invested $40m 2002-2006

- Bought facility, Corporate brand entry- ANVISA influenced to delay MA approval

- Built new manufacturing facility ($25m)- Local competition destroyed prices and profits

- Partnered with EMS & sold facility

CIPLA UK- Exclusive partner lacked knowledge of key products

- Regulatory delays removed 1st mover advantage- Partner ran out of cash for clinical studies

- CIPLA Europe plan put back 4-5 years

Case Studies

Dr Reddy's US - Tactical market entry process:

API>CMO>License>Partnership>DirectSimple>Complex, >Risk, >Investment

- “Tagged along” with agent & client = knowledge and contacts- 20 year project

Celltrion- Founded 2002, $5,4bn market cap 2013

- First CMO client 2005, Co-development 2006, FDA approval 2007 (Hospira)- Stock Exchange listing 2008

- Global business development team 2009- First own biosimilar approved 2012 in Korea- India, Brazil expected next, Europe planned

Today's Success Model

Differentiation. Focus. Gap analyis

Fast growth stars:- Momenta: Formulation technology- Alvogen: Emerging market focus- Antares: Biosimilar devices- Reliance Lifescience: Biosimilar focus- Celltrion: First mover advantage

Future Failure?- Sagent: Basic portfolio. Virtual model challenge.

Top Drug Patent Expiration’s


Top Biologic Therapy Areas - Global Sales 2011


Tomorrow's Success Model?

Technology. Data. Services

Changes coming:- Dr & Pharmacy interaction (CISCO + vending machine)- Reimbursement criteria (UK NICE performance only)- Personalized medicine (biomarkers & diagnostics)- Intelligent patients (mobile apps)- Big Data (Proteus pill & Splunk)

Where does current generic company fit?

Tomorrow's Success Model?

Timeline <5 years <10 years < 15 years

Pharma focus

Small Molecule Large Molecule Prevention. Repair. Personalisation

Power Authority – Industry & Dr's

Payer – Government,

Insurance

Consumer – Selection, Funds

Efficacy 50.00% 75.00% >90%

Target Volume Value Performance

Gx Model

Pure Gx Gx + Biobetter Services & Systems

Patient acquisition

Rx Model

Patent Life Patent Cliff

Core Capabilities Brand Relationship

Sustainability

Focus Manufacturing R&D Marketing Technology Service

Patient Power

Trends:- Manufacturer transparency (quality, ethics, performance) [clothing, reviewing, EU regs]

- Brand relationships (experiential, 2-way, global) [Treato social, Walmart trust, Mylan & Apotex)

“I love my drug company; improves my life every day”

The Numbers

Market Opportunities:

1) Fully Integrated Small Molecule $250m CDMO/LICENSING

+ Sales & Marketing $1b Global

2) Large Molecule R&D $100m + royalties+ Clinical $500m + royalties+ Sales & Marketing $3b Global

3) Tech, Services & Products $10b ?! China only ?!

Impact on Today

Connect vision with deals and investments

Small Molecule: Foreign revenueLearning! - Big Pharma, LandscapeRelationships – Marketing, Dist, Payors etc

Large Molecule: Emerging market accessManufacturing technology progressClinical experiencePatient centric innovation (side affects,

compliance, cost)

Market Entry Planning

Considerations

- Reason for international activity- Commitment- Time horizon- Alignment with domestic operations- Opportunity to transfer knowledge- Profitability & shareholders

- Start and end point- Investment- Capability- Risk tolerance

Market Entry Planning

Considerations (2)

Value proposition: Best vs cheapest

Cheapest:- To the end (Teva)- Manufacturing assets- Domestic operations

Best:- R&D / Technology / IP- First with product

Looking ahead

What should be looked at now?

Gx is “Red Ocean” business!What could be the “Blue Ocean”?

Breakthrough Innovation & Rapid Disruption- What could happen in the generic industry?

Innovation & Disruption

Could the pharma industry really change?

Traditional industries can be dramatically changed Traditional players can be wiped out – e.g

- Data storage devices; tapes, CDs, zip drive- Music industry; MP3, internet promotion, Youtube- Travel agents; internet comparison websites- Bookstores; Amazon.con & Kindle- GPS devices; smartphones- Credit card machines?; Google wallet, Square


Breakthrough Innovation & Rapid Disruption

“Pharmaceuticals are too highly regulated”- Banking? - Education? - Government? - all changing!

Environment for rapid disruption:- Mobile phones- Cloud computing- Social Media- Global economics


New adoption model


What are realistic generic industry 'game changers'?

Disintermediation of supply chain

- Currently: Patient – Pharmacy – Distributor – Manufacturer

- Future? Patient – Logistics - Manufacturer Online PharmacyElectronic Prescription & Smartphone ordering

- Why? Patient medication & health tracking (Nike band)Insurance company data collectionIncreased margin for manufacturer (priceline.com)


What are realistic generic industry 'game changers'?

Compliance systems

- Currently: Bottle/blister of pills + patient memory- Waste – Cost of non-compliance - <data

- Future? Smart dose dispensing devicesCompliance pill (like Proteus)Compliance centres for expensive treatments

- Why? <Cost to payers>Treatment success


Will you lead, follow or be lost?

Idea Watch - Harvard Business Review: March 2013

“The only thing keeping most big companies from creating new categories is their lack of imagination – their inability to see beyond what they're selling today”

Disruption survival strategies: - See it coming & try diversification“Find seers who can predict the future with insight and clarity”


Ideas for leading

- “Big data”: China has cities the size of countries!- Distribution systems: Scale, access, security (Rpharm)- Software 'App' development: Dedicated industry incubator [Blueprint Health, Rock Health, BD BioVentures] – Export credit for downloads?!

- Industry Investment Co': Pfizer/Lilly/Abbott Venture Funds- Virtual IP development: University+API+FDF+Clinical+Marketing- Invest/partner emerging R&D: >China revenues + learn- Chief Innovation Officer: CISCO free consulting

Summary

Do not seek to be only the best generic company

Invest 10 times more in R&D than manufacturing

Seek out disruptive technologies that could change your company & the industry

Think about tomorrow when you consider business decisions for today

THANK YOU!