© 2010 Frost & Sullivan. All rights reserved. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

Global Pharmaceutical Market Trends

Rhenu BhullerGVP, Pharmaceuticals & Biotechnology

Frost & Sullivan

BioMalaysia3rd November 2010

2

Agenda

2

3

1

Global Pharmaceutical Market Trends

Future Trends and Opportunities

The Healthcare World is Changing

3

The Healthcare World is Changing

4

• Cost Containment

• Reimbursement changes

• “Pay for Performance”

• Comparative effectiveness

The Healthcare World is Changing

U.S. Reform China build-out U.K.

Cost Challenge

• National HC spend more than $100B

• Expanding medical coverage – 500M rural population

• $1B direct hospital investment by 2012

Access Challenge

• Quality & service-related press focus

• Patient “right to choose” in draft NHS charter

• NHS quality charter

• Quality accounts need to be published

Quality Challenge

5

Demographics Drive Access Concerns Globally...

China• 1,300 Million population• 3 Million hospital beds• 2.2 beds/1000 people• 1.4 doctors/1000 people• 60,396 hospitals

Japan• 127 Million population• 1.8 Million hospital beds• 9.9 beds/1000 people• 2.7 doctors/1000

people• 7,785 hospitals

India• 1,100 Million population• 0.8 Million hospital beds• 0.7 hospital beds/1000 people• 0.6 doctors/1000 people• 13,896 hospital

Australia •27 million population•0.213 Million hospital beds•7.9 hospital beds / 1000 people• 2.5 doctors/1000 people• 1,317 hospitals

Korea•48 Million population•0.283 Million hospital beds • 5.5 hospitals beds/1000

people• 1.7 doctors/1000 people• 997 Hospital

Taiwan •23 Million population•0.136 Million hospital beds•5.9 beds per 1000 of the

population • 1.6 doctors /1000 people• 556 hospitals

Source: Frost & Sullivan

6

The Balance Between Young and Old Is Shifting

In 2000, 10% (606 million) of the global population was aged 60+

By 2050, this will be more than 21% (2 billion)

75% of those aged 60+ have one chronic condition - 50% have two or more chronic conditions

7

Malaysia: Increasing trend in healthcare expenditure

•The per capita health spending also showed a progressive increase from RM318 in 1997 to RM917 in 2006m increase of more than 2 folds.

•The total expenditure of health has consistently increased from RM 8,2 billion in 1997 to RM 24.4 billion in 2006 which is a 3 fold increase.

•The total expenditure for health as a % of Gross Domestic Product (GDP) has gradually increased from 2.9% in 1997 to 4.3% of GDP in 2006.

•However, healthcare spending in Malaysia is still sub-optimum – Singapore and India have higher % TEH as % of GDP than Malaysia.

Trend of total healthcare expenditure (TEH)

Per capita spending on health, 1997-2006 (RM, Nominal Value)

Source: Malaysia National Health Accounts Primary Care Expenditure, MOH, 14 Apr 2008

8

Malaysia Pharmaceuticals & Biotechnology MarketGrowth of cancers and lifestyle diseases propel the market

Pharma & Biotech Revenues, US$ Mn, 2009-2012

Market Drivers

Market Restraints

Large number of counterfeits and concern for quality of generics

Government tenders favour domestic manufacturers

Growing usage of traditional/herbal medicine

• Growing demand for lifestyle diseases drugs e.g. cancer, cardiovascular, diabetes

• Drug price controls lacking in private sector

• Strong government support for generics

9

Global Pharmaceutical Market Trends

10

Global Pharmaceutical Market . . . A USD880 billion market in 2011 driven by emerging markets

11

However . . . pharmaceutical R&D productivity declines

12

The Next Five Years Will See More Than 70 Major Drugs Come Off-Patent In The Major Markets Within US And Europe. Beyond 2011 Increasing Focus On Biologics

US 14 drugs lose patent protection (include super blockbusters Effexor and Fosamax, and potentially Advair)

EUNine drugs lose patent protection in at least one of the major European countries (including both Fosamax and Effexor)

USFive major drugs lose patent protection (includes Prevacid)

EUSeven drugs lose patent protection in at least one of the major countries (including Nexium, Pantozol and Cozaar)

USPatent protection expires for 10 major drugs in the US (includes the superblockbusters Seroquel and Zyprexa, plus three other blockbusters)

EUFour of these, including Zyprexa, lose patent protection in three major European countries, as do seven other drugs, most notably Lipitor in November 2011

USThe US patent for Lipitor expires and for 12 other drugs (includes the blockbusters Levaquin, Cozaar and Protonix)

EUFive drugs become exposed to generic competition with Keppra the most significant of these

Decreasing number of small molecule patent expires beyond 2013

Biologics will be the focus within hospitals in the injectables field

Within the EU and US, there is increasing competition from low cost competitors

2008 2009 2010 2011Beyond

2011………

Market Size (2007-2012)

13

Major Pharma Patent Expirations - Summary

2008

14 drugs face patent expiration

Total sales at stake: $11 billion

Biggest losses: Advair for asthma (maker:GlaxoSmithKline, U.S. sales: $2.8 billion)

Effexor XR for depression (Wyeth, $2.2 billion)

Risperdal for schizophrenia (Johnson & Johnson, $1.5 billion)

Fosamax for osteoporosis (Merck,$1.5 billion)

2009

12 drugs face patent expiration

Total sales at stake: $8.5 billion

Biggest losses: Prevacid for ulcers (makers: Abbott Laboratories and Takeda, U.S. sales: $3.3 billion)

Lexapro for depression (Forest Laboratories, $1.9 billion)

Topamax for epilepsy and nerve pain (Johnson & Johnson, $1.3 billion)

Lamictal for epilepsy and bipolar disorder (GlaxoSmithKline, $1 billion)

2010

17 drugs face patent expiration

Total sales at stake: $8.5 billion

Biggest losses: Cozaar/Hyzaar for high blood pressure (maker: Merck, U.S. sales: $5.5 billion)

Abilify for schizophrenia (Bristol-Myers Squibb and Otsuka, $1.1 billion)

Aricept for Alzheimer's (Eisai and Pfizer, $600 million)

Flomax for enlarged prostate (Abbott Laboratories, $600 million

2011

21 drugs face patent expiration

Total sales at stake: $15 billion

Biggest losses: Lipitor for high cholesterol (maker: Pfizer, U.S. sales: $6 billion)

Protonix for ulcers (Wyeth, $2 billion)

Actos for diabetes (Takeda, $1.6 billion)

Zyprexa for schizophrenia (Lilly, $1.6 billion)

Levaquin for bacterial infection (Johnson & Johnson, $1.3 billion)

14

The pharmaceutical industry . . . In transition

The pharmaceutical and biotechnology industry is in a state of transition.

Companies are reorganizing to evolve and reinvent themselves in order to maintain growth centers in the face of a myriad of serious challenges.

Overall, companies are looking to align with areas of growth opportunity as well as new business strategy and product development paradigms.

Outsourcing of both manufacturing and internal functions (e.g. sales) is ‘fashionable’

A State of Transition

Importance of India and China as global markets – other Asian affiliates have to ‘fight’ for global attention and investments.

Change in consumption patterns in emerging markets – but focus still on primary care. Growth for Asia seen in specialist disease areas – CNS, oncology

Growing Influence of Emerging MarketsPharma Industrychallenges

Patent expiry of major global blockbusters

Increasing acceptance of generics and pricing pressures

Increasing regulatory scrutiny measures/reforms

Buy local

Working in ‘hybrid’/niche areas, as opposed to blockbuster mentality

Providing adequate health care to cater to the demographic pressure.

Demand for medical care, and therefore healthcare spending, grows faster than the economy, new models of financing are needed.

Pressure? Opportunities?

‘Saturated developed markets’ – low unmet need

15

Future Trends and Opportunities

16

Changes In The Global Pharmaceutical Environment Require Pharmaceutical And Biotech Companies To Adapt To Changing Business Models

Pre Pre 20052005

Blockbuster Model

20152015

Niche Drugs and R&D

20202020

Integration & Supply Chain

Integrated packages of products and services

Patient monitoring & compliance

Pharma and medical devices providing sophisticated and efficacious solutions

Integration of pharmaceuticals, diagnostics, medical devices, patient monitoring and healthcare IT

Will result in a high profile, risk free, user friendly, low cost and safe healthcare solution

Preventative Healthcare & Wellness

Astounding growth in the vaccines industry

Marketing of Value Added Services

Genomics and proteomics expected to reduce R&D times

‘In life testing’ will take over the current clinical trial process. Continuous data monitoring can be done by the regulators during the testing process. Clinical trials will eventually become shorter

Supply chain functions will evolve to a revenue generating model. Products and services will be marketed through the supply chain

Just –in time manufacturing, novel delivery methods and direct to consumer distribution will be adapted from other industries like the automotive industry

Automated dispensing of drugs

Smart cards / internet to store patients details

20152015

20202020

Opportunities in the Global

Pharma Market

17Confidential to Frost & Sullivan and Invida

Key Global Therapeutic Clusters

4

2

2

5

5

4

4

5

5

2

2

3

4

4

2

4

5

3

2

3

3

5

5

3

5

5

5

2

3

3

4

5

3

5

4

5

3

3

4

4

5

5

5

5

4

2

2

3

4

5

3

5

4

3

5

4

3

3

3

3

4

5

4

0 5 10 15 20 25 30 35 40

Gastrointestinal

Hematology

Endocrine

Autoimmune

Cancer

Infectious

Neurological

Cardiovascular

Diabetes

Market Attractiveness Scoring (Units)

Market Size

Grow th Rates

Entry Barriers

Degree ofInnovationNo. of productsreleasesCost of Care

Reimbursementlevels

#1

#2

#3

#4

#5

• Globally the top 5 scoring therapeutic segments stand out as the most attractive segments in the global markets. Key drivers of these markets include their market size, high degree of innovation, strong growth rates and attractive levels of reimbursement

• Over the next decade, biotechnology companies are expected to stay focused on producing innovations aimed at treatment of Autoimmune, Cancer, Neurological, and Cardiovascular diseases

Source: Frost & Sullivan

Global Therapeutic Disease Clusters & Attractiveness in Asia

18

The Biologics Market is Growing . . . “Even a 20% price reduction on just six off-patent biopharmaceutical products would save the EU some euro dollar $1.6 ($2.4) billion each year," EGA president Greg Perry

19

and Growing . . . Product Sales Have More than Doubled Every 5 Years Since

1995

CAGR is >25%

Over 60 new biotech products approved in last 5 years

Sales of Biologics (2006) ~ $ 65bn

Sales of top 20 Biologics (2006) : $ 48 bn (GCSF & EPO among top 20)

Biosimilar market growth –compound annual rate of 135% by 2010

•Biosimilarmarket value –Estimated at $ 16.4 bn by 2011

20

Biosimilars . . . Getting crowded . . . ROI remains a challenge

LONDON, 2008 April 25 (APM) -First-generation biosimilar medicines "will not make any money," analyst Frances Cloud of Nomura Code has

told a European Generics Association meeting.

Incr

easi

ng

reg

ula

tory

hu

rdle

s

SE

A,

Chi

na,

Indi

a, K

orea

, E

U, J

apan

, U

S

US•Somatropin: Omnitrope(Sandoz); ccretropin(Congene/Apotex)

EU•EPO: Retacrit®, Silapo®(Hospira/Stada), Binocrit, Epoietinalpha-Hexal, Abseamed(Sandos/Hexal/Medice)•Somatropin: Omnitrope(Sandoz); Valtropin(BioPartners)•Filgrastim: TevaGrastim, Ratiograstim, ratiopharmfilgrastim, Biograstim-pending EC final approval (Teva/Ratiopharm/CT)

India•>40 products and >10 companies. Insulin: (Biocon), Wosulin(Wockhardt)•EPO: Wepox(Wockhardt), Epofit(Intas), Erypro(Biocon)•Filgrastim: Grafeel™(Dr Reddy’s), Neukine®(Intas)•Rituximab: Reditux™(Dr Reddy’s)

Korea•EPO*: (Dong-A), (LG Life Sciences), Epokine(CJ Corp)•Filgrastim: Leukine(CJ Corp)•Somatropin: (Biotechnology General), (Dong-A), (LG Life Sciences)

China• EPO*: 13 companies• Filgrastim: 17 companies• Somatropin: 4 companies

Competitors with their own cGMP proprietary manufacturing system & sound understanding of regulatory affairs and intellectual property are anticipated to lead this market

21

Cardiovascular : ~US$ 600 mn of blockbuster sales going off patent in 2010/2011

By 2025 : India 70 mn diabetics , China 50 mn diabetics

0

0

0

APAC Oncology market 2010: ~US$ 3 bn; up from US$ 1.4 bn in 2004.

Growth from early diagnosis of cancers and targeted therapy in top 3 types of cancer: lung cancer, breast cancer and colorectal cancer

Source: Frost & Sullivan.

Cardiovascular and metabolic

diseases

Lifestyle diseases

Vaccines, Biologics and

biotherapeutics

Branded generics & biosimilars

Oncology

Use of ‘nibs’ and ‘mabs’ in multiple indications ranging from oncology to pain and CNS. APAC biologics market 2010 : ~ US$ 5 bn

Asia building up local vaccine product across a range of adult and paediatric vaccines. Potentially a $3 billion market in 2010.

Rise in prescriptive aesthetics, currently dominated by mid-size pharma APAC : ~US$ 3 billion

Global smoking cessation market : ~US$ 2bn. Increase in lung cancer and female smokers in Asia drive market

APAC generics and biosimilars market 2010 : ~US$ 20 bn; 35% growth rate

APAC biosimilars : EPOs and HGH are growing markets

APAC HGH market : ~US$ 100 mn in 2010; represents < 5% of global market

Top Growth Opportunities : APAC Pharmaceuticals and Biotech Market

22

Global Growth Shift in Opportunities . . . From Mature Markets To Emerging Markets

Central and Eastern Europe High unmet needs in Cardiovascular and respiratory disease treatments Increasing private healthcare expenditure – co-payments on the rise Markets are dependant on parallel imports for innovative medicines Russia, Poland, Czech and Hungary demonstrating healthy R&D climate Turkey: Ability to produce active ingredients and finished products

Brazil Latin American hub for FDI and

exports to neighboring nations Government policies favour

generics use – branded drugs’ revenues are low

Recognised potential for CRO and CMO growth – still in development phase

Argentina Approval of ‘Generics law’-

patients choose between branded and generic drugs

Marketing strategy focused on patients, moving away from physicians

Emerging market with huge potential for R&D outsourcing

India Highly skilled labor and low costs – attractive

market for partnerships (CRO, CMO) (APIs) Pharmaceutical companies with global presence US FDA approved labs – preferred destination for

R&D outsourcing Weak IP protection – a concern

Singapore US-Singapore FTA – Asia-Pacific Manufacturing hub Highly competent facilities for clinical trials and drug

development Favorable investment policies – Asia-Pacific

headquarters of major foreign pharma companies

China API manufacturing hub Increasing competency in R&D

outsourcing Anti-infectives and Cardiovascular

drugs – fastest growing markets Improved IP laws – potentially

attractive climate for FDI

Korea Innovative capability

and well developed industry

Malaysia Small domestic market Explore opportunities in

CMO, CRO, halal meds

23

Thank you