1 special librarians association annual meeting toronto, on june 7, 2005 generic pharmaceuticals...

1

Special Librarians Association Annual Meeting

Toronto, ON

June 7, 2005

Generic PharmaceuticalsDeveloping a Crystal Ball to Craft Product Portfolio

2

US Generic Pharmaceutical Sector – Agenda Trends & Analysis

•A 50,000 ft. view of the generic market

•Basic template for examining a generics portfolio Typical information sources

Atypical information sources

Timing

Information into analysis

•Salient industry trends

•Discussion

Copyright 2005 Cardinal HealthAll Rights Reserved

3

2004 Total Market Revenues 2004 Unit Market Share

0%

20%

40%

60%

80%

100%

USA France Germany Italy Spain UK

2004 Rx Drug Units1 (%)

$0

$50

$100

$150

$200

$250

USA Western Europe

Rx Drug 2004 Revenues ($B)

~$230B

~$120B~$17B

~$1B

~$7B

<$1B~$1B

~$3B

France

Germany

Italy

Spain

UK

Sources: IMS Health; Marakon Associates -- Excludes some branded generics units

0%

20%

40%

60%

80%

100%

USA FranceGermany Italy Spain UK

Branded

Generics

US & EU Generic Sector Significant and Growing Percentage of Prescription Drug Volume


4

•API sourcing strength

•Uncanny predictive capabilities

•Speed to develop

•Appetite for risk

•Speed to market

•Ultra low cost

It’s Better to be First than it is to be Better

Being First is Everything ! Significant and Growing Percentage of Prescription Drug Volume

•Fast & severe generic penetrationGeneric penetration >50% in first 30

days

Managed care driving hard

•Price erosion a function of the number of competitors

2nd wave entrants have a non-linear impact

Generic price at < 50% in the 1st 6 months

•Still a significant upside for generics

Current Market TrendsCurrent Market Trends


5

A Typical Generic Development Cycle Non-Litigation SODF Example

BrandBrand

ProducProductt

File DMFFile DMFFileFile

ANDAANDA

FileFilePatentPatentCertCert

Validation &Validation &ApprovalApprovalPrepPrep

ANDAANDAApprovalApproval

PatentPatentReviewReview

SourcingSourcingPre-FormPre-Form

Form &Form &Pilot BioPilot Bio

StabilityStabilityPK StudyPK Study

PortfolioPortfolioReviewReview

9 mo.9 mo. 2 mo.2 mo. 6-12 mo.6-12 mo. 12 mo.12 mo. 5 mo.5 mo. 12-18 mo.12-18 mo.

Outside CounselOutside Counsel

API SuppliersAPI Suppliers

Business DevBusiness Dev

KeyKey

InfluencesInfluences

• API suppliers wield significant power…Early

Access to difficult to develop API

Access to potential Paragraph IV opportunity

Access to sufficient quantities for development


CROCRO


Supply ChainSupply Chain


6

Just Because You CAN File… Don’t Believe Everything You Read

JP Morgan – Generic Industry Update, July-2004

Source: JP Morgan – Generic Process; USFDA Orange Book (on-line)Copyright 2005 Cardinal Health

All Rights Reserved

7

Four Types of ANDA Filings Non-Litigation SODF Example

Source: JP Morgan – Generic Process

•Lower Risk

•Low to medium return

•High risk

•Significant cost

•Potentially massive return

180-days generic market exclusivity

1st mover typically retains share past 180 days


8

A Litigation Generic Development Cycle Paragraph IV SODF Example

Timeline is 66

to 72 months

If successful, 1st generic is granted 180 days of generic market exclusivity

FDA Starts30-month

Stay of Approval

File DMF

FileANDA

FilePatentCert

Generic Development Generic Development ProgramProgram

BrandFiles

InfringementSuit

LowerCourt

Decision

AppellateCourt

Decision

ANDAApproval

34 - 40 mo. 3 mo. 30 mo. 6-12 mo.

Launch


9

Paragraph IV Cases are Messy & Expensive It NEVER Goes Smoothly

• Brand is not required to sue 30-month stay starts when suit is filed Generic can request declaratory judgment

• Exclusivity only granted for the 1st to file Paragraph IV

Exclusivity can be split

• Typically an appeal Lately a trend to launch “at risk”

• NOT a “1 size fits all” strategy

Source: Adapted from Bear Stearns Bottle Report, Aug 31, 2004


10

High Level Portfolio Decision Inputs The Magic Triangle

•What do you really want?Accuracy

Flexibility

Speed

Process or 1-off

•What do you have to work with?Basic product information

Innovator organization information

Therapeutic information

Market data

IP Assessments

API Intelligence

GoodGood

CheapCheapFastFast

QualityQuality

CostCostSpeedSpeed


http://www.sr-71.org/photogallery/blackbird/index.htm

11

Basic Information

Innovator Organization

Therapeutic Classification

Market Information

Molecule

Dose form

Brand product

Brand intro date

Strengths

Packaging

Indication

Other dose forms

Organizational expertise

IP Assessment

API Intelligence

Brand developer

Manufacturer

Marketer

Co-Pro ?

LCM behavior

In-house Generic

Franchise ?

Parent-child

Other countries

Relevant strategies

Therapeutic class

Drug class

Key brand competitors

Concomitant meds?

Dosing regimen

Chronic or acute

Unit volumes

Sales volumes

Pricing

Channel %

Primary channel

OB patents

Exclusivities

Dates

Patent types

Abstracts

# of sources

Consistency

Cost

PDRPublic ReportsNews/Press

SEC (Edgar)WebsiteIntelligence

PDRFacts & Comparisons

IMS, NDC, et alFirst Data Bank

FDA Orange BookIP Counsel

NewportOPD Buyers GuideFDAINTERACTION

Mid-Level Portfolio Decision Inputs API Sourcing is Key

Expertise

ExpenseCopyright 2005 Cardinal Health

All Rights Reserved

12

•Dose form•Brand sales•Brand unit volume•Expected erosion model•Company advantage•Strategic fit

•Dose form•Brand sales•Brand unit volume•Expected erosion model•Company advantage•Strategic fit

•Lead / opportunity ID•Requests within Org•News / market intel•API opportunities•Partner opportunities

•Lead / opportunity ID•Requests within Org•News / market intel•API opportunities•Partner opportunities

•Database screening criteria

•Financial models•Company advantage

•Database screening criteria

•Financial models•Company advantage

Base PortfolioBase PortfolioPre-Screening Hopper

Pre-Screening Hopper

High Level Screen

High Level Screen

Pharmaceutical Universe

Pharmaceutical Universe

Consistent ReviewConsistent ReviewConsistent ReviewConsistent Review

Balanced PortfolioBalanced Portfolio

Stepwise Screens Enable a Flexible Portfolio

•Periodic review•Review prior to significant expenditures

•Review per significant changes/events in market

•Periodic review•Review prior to significant expenditures

•Review per significant changes/events in market


13

A Typical Generic Development Cycle Non-Litigation SODF Example

BrandBrand

ProducProductt

File DMFFile DMFFileFile

ANDAANDA

FileFilePatentPatentCertCert

Validation &Validation &ApprovalApprovalPrepPrep

ANDAANDAApprovalApproval

PatentPatentReviewReview

SourcingSourcingPre-FormPre-Form

Form &Form &Pilot BioPilot Bio

StabilityStabilityPK StudyPK Study

PortfolioPortfolioReviewReview

9 mo.9 mo. 2 mo.2 mo. 6-12 mo.6-12 mo. 12 mo.12 mo. 5 mo.5 mo. 12-18 mo.12-18 mo.

Outside CounselOutside Counsel


Business DevBusiness Dev

KeyKey

InfluencesInfluences

• API suppliers wield significant power…Early

Access to difficult to develop API

Access to potential Paragraph IV opportunity

Access to sufficient quantities for development


CROCRO


Supply ChainSupply Chain


14

•To qualify the opportunity (build the model) we need:

Market data (Dollars & Units)Market data (Dollars & Units)

Understanding of the IP situationUnderstanding of the IP situation

Perspective on API availabilityPerspective on API availability

Market trends & expected competitionMarket trends & expected competition

Therapeutic class trendsTherapeutic class trends

Pharmacokinetic & pharmacology informationPharmacokinetic & pharmacology information

Regulatory requirementsRegulatory requirements

Perspective on resident capabilitiesPerspective on resident capabilities

Basic Inputs for a Predictive Generic Model Beware the Point of Diminishing Returns


15

I. The size of the Advair® market is staggering

II. Follow on COPD pipe-lines are mostly early stage

III. Generics have had some limited success in challenging UK patents

III. US patents have not yet been challenged

Generic version of Advair for US Market could be lucrative

Build a forecast model

Hypothesis

Portfolio Intelligence Example Prospectively Qualifying an Opportunity

Portfolio Example

Sources: Factiva, Pharma Marketletter, M2 Presswire, Bull Int. Inform Droit et Pharmacie, Bernstein Research Call, FDA


16

I. If IMS (et al) data is unavailable, other references can be used

II. For IPI. FDA Orange Book

II. US PTO

III. FDA Paragraph IV site

Advair forecast supports assumption of large market

P-IV filing is uncertain

Dose form will have legs

Interim Conclusion

III. DPI Dose Forms can be expected to remain prevalent

Portfolio Intelligence Example, cont. Prospectively Qualifying an Opportunity

Portfolio Example

Sources: Lehman Brothers, USFDA Orange Book, USPTO, Express Scripts


17

I. API is available but limitedI. It will be expensive OR

II. It will be unobtainable

II. Generic market trends favor technology challenges, etc.

Cost prohibitive

GSK will vigorously protect

Smaller numbers of generics

Interim Conclusion

III. Generics have wide adoption for pulmonary indications

IV. Advair is priced lower than the sum of its “parts”


Portfolio Example

Sources: USFDA, Thomson Newport Strategies, Lehman Brothers, Express Scripts


18

I. Product doses b.i.d. and has asthma & COPD indications

II. GSK has a pediatric extension for Advair

Longer market life

Market entry will be later

Non-standard regulatory path

Highly differentiated technology

Interim Conclusion

III. FDA has codified the regulatory pathway


IV. DPI technology is becoming more scarce

Portfolio Example

Sources: Thomson Micromedix PDR, Adis R&D Insight, USFDA, Pfizer Website


19

Advair® Enjoys Significant US Market GrowthFluticasone/Salmeterol DPI Forecast Through 2013

Portfolio Example

• Forecast the brand Linear regression vs. othersLinear regression vs. others

Usually a WAG

Depends on quantity of historical info

Stick with unitsStick with units Dollars useless after generic launch

Gut testGut test

• Enormous market potential at 2009 peak

• GSK transitioning volume from Flovent®

• Technical challenges limit generic competition

• Thin innovative pipeline for asthma & COPD

• UK patent resolution alludes to at least 3 generics in US market at patent expiry


20

# of Generic Competitors

2nd+ Wave

1st Wave


• Number of generic entrants

• Which entry wave

• Who are the generics (and from where)

• Dose form (channel)

Price ErosionPrice Erosion

Portfolio Example

• Managed care diving much of this

• CMS vs. 3PP

•Who is the brand

• Indication

Generic PenetrationGeneric Penetration


21

Limited API – DMF TalleyLimited API – DMF TalleyLimited API – DMF TalleyLimited API – DMF Talley

AbbottChemagisCiplaHovioneSicorSterling (It)

Fluticasone Fluticasone Fluticasone Fluticasone SalmeterolSalmeterol SalmeterolSalmeterol

66

Cipla

11

Key Technical ChallengesKey Technical ChallengesKey Technical ChallengesKey Technical Challenges

• API source

• DPI device access

• Legal resources & wherewithal

• Manufacturing capabilities

Generics Face Significant HurdlesCan it be Done ?

• Most US generic manufacturers are configured for solid orals Ivax, Cipla most capable for pulmonary deliveryIvax, Cipla most capable for pulmonary delivery

• Limited sources of Salmeterol = limited # of generics

• Limited generic organizations with sufficient resources

• Access to a DPI device and manufacturing know-how will be scarce

Portfolio Example


22

• Electricity

• Food

• Entertainment

• Rent

$100

$300

$400

$1,200

Average

$50

$150

$150

$1,200

$400

$500

$1000

$1,200

HighLow

$1,550Monthly Total $2,000 $3,100

$400$400

$700$700

$1,200$1,200

$75$75

$2,375$1,770 $2,900

$290$290

$902$902

$1,200$1,200

$52$52

Monte Carlo SimulationsEmploying a Quantitative Measure of Risk


23

Quantifying RiskProbability for Year 3 EBITProbability for Year 3 EBIT

Portfolio Example


24

Quantifying RiskVariable SensitivityVariable Sensitivity

Portfolio Example


PerceivedPerceivedRisk Risk

Actual Risk

Generic Portfolio Modeling PitfallsPerfectionists Need Not Apply…

Assumption Assumption VariabilityVariability

Access to API

Authorized Generics

Price Erosion Assumptions

Life Cycle ManagementIMS Data

Shifting Reimbursement Landscape

Off-Shore Competition

Market Share Assumptions


26

Portfolio Intelligence An Easy Way and a Hard Way

Source: Thomson Newport Strategies


27

Key Generic Sector Trends Boom Times

• Significant industry consolidation Pricing stability

• Brand protection strategies continue to evolve

• New entrants from low-cost geographies Pricing IN-stability

• API strategic sourcing

• Follow-on Proteins

• Authorized generics Very


28

•Significant industry consolidation

Stratification into very large and very small organizations

Many of the mid-tier are API mfgs who have crossed over to make dose

Key Current Generic Sector Trends Continued Consolidation Will Create a Caste System

Source: ABN-AMRO Healthcare Banking – The Changing Competitive Landscape – IRR Generics Summit – Sep-2004


29

•Brand protection evolves Authorized generics

Generic subsidiaries

ReformulationsDose form

Isomers

Strengths

PatentsMetabolite

Polymorph

Late-listings

FDA mechanismsCitizens petition

Label changes

Legislation

Key Current Generic Sector Trends Brand Protection is Constantly Evolving

Source: Bear Stearns Bottle Report, Aug 31, 2004

Innovator Generic SubsidiaryMerck WestPoint Pharma

Schering Warrick

Pfizer Greenstone

Novartis Sandoz

J&J Patriot

Sanofi-Aventis ?????


30

Low Cost Countries Penetrating US Market The Profile of Indian API Has Risen Sharply in the Past 5 Years

Source: Arthur D. Little Benelux

•Lax IP protection created API development haven WTO patent adherence kicked in Jan-2005

•Most API firms now make finished dose Cipla, Reddy Cheminor, Ranbaxy & Wockhardt are the largest

•India now has the greatest number of FDA approved manufacturing sites outside of the U.S.


31

•Backward integration into API production Ivax – Chemsource; Sandoz – Lek; Actavis – Fako

•Forward integration Ranbaxy, Reddy Cheminor, Glenmark

•Bus Dev alliances with API/dose companies

Cipla – Watson; Cipla – Ivax

•SPCs (EU) limit competition No Bolar provision

•Fewer independent, high caliber API mfgs. are available today

Strategic relationships

Organic pursuit of finished dose

•Increasing use of licensing & alliances vs. simple purchasing

Success attracts partners

Alliances are struck much earlier

Generics & API are Inexorably Linked As Consolidation Diminishes Sourcing Options, Relationships Prevail

Sources: Q Street Advisors


32

Generic BiologicsNow a Question of WHEN (and HOW)

0

5

10

15

20

25

30

35

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

New Biotech Drug and Vaccine Approvals/New Indication Approvals by Year

0

5

10

15

20

25

30

35

1992 1994 1996 1998 2000 2002

U.S. Biotech Revenues•Biopharmaceuticals growing at 2x the rate of total pharmaceuticals

•Marketed (US) biologics are approx. $30 billion 12% of total pharmaceuticals

Growing 20% annually

By 2010, will reach $60 billion (US)

• Over 850 biotech products & vaccines currently in clinical trials

250 Products: Phase III

600 Products: Phase I & II

•The average 1-Day Cost (2003) for Biotech is $45

All other drugs = $1.66

Source: Ernst & Young; http://www.bio.org/er/approveddrugs.asp


33

Authorized GenericsStrange Bedfellows

•An NDA brand product which is re-labeled and marketed under the generic drug name Can license to another company or self market through subsidiary

•PhRMA companies are motivated to launch an AG to : Settle patent litigation

Maximize profit at or after generic competition hits their brand

Address manufacturing capacity issues

•Generic companies are motivated to accept an AG to : Settle litigation

Enter an otherwise prohibitive market / sector

Drive incremental revenue


34

Key Take Aways

•The Generic sector will continue to grow… …more fiercely competitive !

•Consolidation will continue Key differentiation will be speed, flexibility

•Sector will polarize into an Oligopoly Morphing into Specialty organizations &

•Generic Biologicals will happen Cost pressures will force the issue

TrendsTrends

•API sourcing strength Early awareness

Strong relationships

•Accurate predictive capabilities

•Sector situational awareness Regulatory & legislative

M&A

•Speed to develop / to market

•Understanding your appetite for risk

•Ultra-efficient

RequireRequire


35

Thank You

Michael Kopp

Cardinal Health

678.947.2939 (dir)

[email protected]

1 special librarians association annual meeting toronto, on june 7, 2005 generic pharmaceuticals...

Documents

rights reserved slide

cardinal health

generic pharmaceuticals

generic franchise

generic market basic

api access

days copyright

launch copyright