bchb 566 class1 overview 040116

Overview of Drug Development:Discovery to Post-Approval

Georgetown University Medical CenterBCHB 566April 1, 2016

Stephen J. SullivanCRO Advisors LLC

05/03/23 CRO Advisors LLC 2

Course Objectives

Understand the complete process to help you: make good career choices, know how to contribute, relate to co-workers in adjacent functions, maximize your contribution to the firm

Develop the perspective needed to serve the drug industry as a service provider, financier, consultant or board member

Develop the insight required to help improve the process

Understand the terms, nomenclature, and demarcation lines for this complex process

Develop a working knowledge of current issues in drug dev

Help you become an informed investor

Course Outline

Section 1- Overview and key issues, Today

Section 2- Drug Discovery. Today

Section 3- Pre-clinical, Safety, Mfg.- Sat. 4/2

Section 4- Clinical Development- Sat. 4/2

Section 5- The Regulatory Process- Fri. 4/8

Section 6- Commercialization, Post-approval- Fri. 4/8

Section 7- What lies ahead? –Sat. 4/9



Course Requirements

Participation – requires being here – 15%

Case assignment – 35%

Final Exam: 50%

We are in good company!


Developed by Eli Lilly & Co.Available 4/2016

Developed by Terrapin offered 9/2015

Why this course?

10,000’ deep, 2’ wide

Perspective

Need for fresh eyes

Massive industry

Infinite choices

Lots of issues


What is a biotechnology company?


TraditionalBiotech

EvolvingBiotech

Medium &Large Pharma

AmgenGenentechLarge Molecules

Small BiopharmaSM and LMCombinations

Top 50Pharma

R&D spending growth

805/03/23

YOY%

15

10

5

0

Total Pharma 2.5%

Top 10 Biotech15%

Small-MediumPharma / Biotech9%

2009 2010 2011 2012 2013 2014 2015


My perspective………….

Founder of CRO Advisors LLC, consulting firm to outsourced pharma service providers across the DD continuum

CEO of a large private equity owned CRO

CEO of a NASDAQ early gene expression company

CCO of a NASDAQ generic pharma

Group President NYSE company (several divisions)

VP / GM of a billion dollar unit of a Fortune 50

20 years as Adjunct in top MBA program (Kellogg)

US Marine Officer


CRO Advisors LLC perspective

Discovery Pre-Clinical Phase I Phase II Phase III Phase IV

ClinicalSupportServices

Logistics / Packaging / Related

2 Boards 2 Boards

1 Board

Clients:45% Private equity45% Pharma Services10% other investors

50 M&A projects

5 M&A projects

3 M&A projects

Negotiating withPowerful BuyersWorkshops

6 M&A projects


“All generalizations are false, including this one.”

Mark Twain


All generalizations are false……

R & D spending growth 0% or 15%

Revenue growth 0% or 15%

Therapeutic areas (5)% or 17%

Drugs in development 1% or 8%

Employees (1)% or 13%


Source: Pharmaceutical Industry Profile 2008 (PhRMA, March 2008, p.4)

$31 billion 12 billion $71 billion $26 billion

$141 Billion

Year 0 5 7 9 11 13

1805/03/23

BioPharma Income Statement

19

Revenue 100Cost of Goods 15Gross Profit 85

Operating Expenses:R&D 20S&M 30G&A 5Operating Income 30

Revenue 100Cost of Goods Gross Profit 99

Operating Expenses:R&D &D 27 S&M 34G&A Operating Income 39

Revenue 5Cost of Goods 1Gross Profit 4

Operating Expenses:R&D 160S&M 15G&A Operating Income (141)

Top 10 Pharma Commercial Biotech Development Biotech


Pharma / Biotech in context

Healthcare approaching 20% of GDP in the USDrugs are about 10% of healthcare88% of prescriptions are generic drugs— 28% of

revenueEthical / specialty drugs continue to be the lion’s

share of the marketBioPharma Research is 20% of US industry research


Critical challenges for the drug industry

R&D ProductivityROIC for the industry decliningPrices of specialty drugs rising rapidlyUS prices are often 2-3x the ROWPayers and reimbursementThe image of the industry is low………….


40 years of prosperity

1970 1975 1980 1985 1990 1995 2000 2005 2010 2012 2013

800

700

600

500

400

300

200

1982-83DRGs

1994- Clintons attempt tonationalize HC

Revenue Billions

R & DSpending

150

120

100

70

50


Drug Classifications

Traditional or “ethical” drugs chemically derived otherwise called Small Molecule drugs

Biologics from living organisms (often called Large Molecules)

Generics

Specialty Drugs

Orphan Drugs

Biosimilars

R&D Productivity: Is it really improving?

The case for: FDA approvals

# of blockbusters

Targeted therapies

Robust biotech market

Huge profits

The case against:

Cost per new $2.6 BN62% of Big pharma

launches from elsewhere

Corporate Integrity

Agreements (CIAs)

Inexplicably high prices



Source: Pharmaceutical Industry Profile 2008 (PhRMA, March 2008, p.4)

$31 billion 12 billion $71 billion $26 billion

$141 Billion

Year 0 5 7 9 11 13

Industry Benchmarks - 2015

Average Benchmarks R&D cost allocation R&D Cycle timesDiscovery to 1st tox dose 26% 34%

Preclincal to Phase II 29% 39%

Phase III and submission 46% 27%


Source: Deloitte LLP and Global Data proprietary data, Measuring the Return from PharmaceuticalInnovation 2015. p. 28.

Eroom’s Law*

*Nature Reviews Drug Discovery, “Diagnosing the decline in pharmaceutical R&D efficiency” pp191-200, March 2012

The number of new drugsapproved perbillion of R&Dspending hashalved every 9 years since1950.


Quantifying the damage:Oliver Wyman*

The Age of Abundance

$275M

The Age of Scarcity

$75M

*Source: “Beyond the Shadow of a Drought: The need for a new mindset in Pharma R&D,Oliver Wyman Point of View, November,2011

05/03/23 Confidential CRO Advisors LLC 32

Era of abundance----Era of scarcity-----Era of superabund.

35 43

35

2011 2012 2013 2014 2015

50

DEMOCRATS REPUBLICANS DEMOCRATS

57

Clinton Bush Obama40 per yr. 23 per yr. 42 per yr.

Non- Responders Common and Costly

Source: George Poste

GAvastin Rituxan Herceptin Revlimid Gleevec

Taxotere Alimta Gemzar Tarceva Femara

Erbitux Velcade Xeloda Arimidex Leuplin

R

$3.059B $2.466B $1.526B $1.373B $1.285B

$1.042B $975M $723M $661M $650M

$646M $598M $508M $393M $483M

ResponderNon-responder

Sources: Individual drug labels, FDAMarket and Product Forecast, Top 20 Oncology Therapy Brands, DataMonitor 2011

Personalized Medicine Improving Efficacy in Oncology and other TAs

ALK gene

Cells expressing CD 304

BRAF Mutation 5%

HER-2 HER-2

37

Trend

Time

38

Jobs Created

2000 2003 2006 2009 2012 2015

BiotechCROs, CMO

Big Pharma

39

Productivity

2000 2003 2006 2009 2012 2015

Cost perNew Drug

10 year IRR

40

Source of innovation

2000 2003 2006 2009 2012 2015

External62%

Internal


Critical challenges for the drug industry

R&D ProductivityROIC for the industry decliningPrices of specialty drugs rising rapidlyUS prices are often 2-3x the ROWPayers and reimbursementThe image of the industry is low………….


Intangibles such as key soft skills will be considered

Perspective

Critical Thinking Skills

Values


PerspectiveCriticalThinkingSkills

Values


PerspectiveCriticalThinkingSkills

Values

Leadership