1st International Conference on Innovative Growth for Pharmaceutical and Medical Industry in Russia.Integrating Academic and Industrial ScienceMIPT, 12 May 2011

Henrik A. E. Konarkowski

ChemRar High Tech Centerwww.chemrar.ru

The hard way to make a Medicine:Less than 1 in 100,000 compounds tested eventually reaches consumers.Only 1 of every 5 compounds that enter clinical testing reaches the market.Only 3 of 10 drugs that reach the market ever earn enough money to match or exceed the average R&D cost per new medicine.

THE COST OF A DELAY DAY(SELECT BLOCKBUSTER DRUGS)

$259$364

$499

$635

$802

$0

$250

$500

$750

$1,000

US

$ i

n M

illi

on

s

1992 1994 1996 1999 2001

$0

$5

$10

$15

Ave

rag

e D

aily

Sal

es

(US

$ i

n M

illi

on

s)

Lipitor Zocor Prilosec Zyprexa Norvasc

Note: The average drug generates $1.3 million sales daily

Source: IMS Health, 2002 and PhRMA Profile, March 2007

The Cost of Developing a Drug

DISTRIBUTION OF BIG PHARMA R&D SPENDING

Other, 12.60%

Pharmaceutical dosage formulation &

stability, 5.10%

Synthesis & extraction, 9.30%

Biological screening & pharmacological

testing, 12.10%

Clinical evaluation phase IV, 8.80%

Clinical evaluation phase I-III, 25.60%

Bioavailability, 1.50%

Toxicology & safety testing, 4.10%

Regulatory IND & NDA, 3.00%

Process development for manufacturing &

QC, 7.00%

Source: PhRMA Annual Survey, 2006

• Money• Time

Or Accessing

• Money• Time

Or Accessing

•New Technologies

Source: Contract Pharma Second Annual Outsourcing Survey, 2006

Ordering Tactical Outsourcing Strategic OutPartnering Insourcing

Catalogue / Menu

Fee for Service Preferred Fee for Service

Partner Collaboration

Alliance

Localized

Integration

Price

Trust

Independence Collaboration

•Co-investment

•Shared business objectives

Source: Modified from Price Waterhouse Coopers Am.Pharm.Outsourcing 6,01:30-32 and J. Wilmer, Prime Trials Outsourcing Clinical Trials CRO Perspective, 2004

Value

• Contracting out – fee for product business

N

NH

N

N

R3d R3b

R3e R3a

R2

R3c

R1

X

N

NH

NN

NH

R1

R2

R3

N

NH

NN

NH

R1

R2

R3

N

NH

NN

NH

R1

R2

R3

N

NH

NN

NH

OR1

R3

N

NH

NN

NH

O

R1

R3

N

NH

NN

NH

R1

R2

R3

N

NH

NN

NH

N

R1

R2

R3

N

NH N N

NH

NR1

R2

R3

• Contracting out – fee for product business• • Preferred vendor status, based on • 1) Price 2) Quality,

• Russia: since early 1990s• Asia: since early 2000s

Contracting Out by fee for service

Completion of the required data package paid for by time used

N

N

NH

R3 R1

R2

O

O

O

N

NH

R1

R2

R3

O

NS

N

NH

R1

R2

R3

O

N

O

NH R1

R2

R3a

R3b

O

NN

H

R1

R2O

NNH

R1

R2O

NON

O

H

R1

R2 NN

H

R1

R2

O

A AIn house chemistry

i.e. special Chemistry on Demand

Contracting Out by fee for service

• Preferred vendor status is based on:

1) Reliability (confidentiality, relationship, timeliness)2) Quality 3) Cost

• – drift from cost based outsourcing to quality based (value builder)

• Variety of business models in a broad partnership

ChemRar experience from mid 2000s with companies Avalon, Eli Lilly, Merck KGaA, Genentech, Solvay, Abbott

• Risk share based platform R&D– ChemRar prosecutes assets for:

• Partial R&D payment, success based development milestones. 12 Targets to generate 2 Clinical Candidates

– Solvay’s assets: • Targets, Hit series, Leads from Pharma

• Potential Deliverable– POC– Bring more later stage aassets in– Create more value for:

17

Hit series

Lead series

Leads

Clinical Candidates

2 year

FHD

POC

«We are very happy to consolidate a portion of our external research activities that are currently being outsourced to several different contract research organizations as this we believe will shorten development timeline. Moreover we are pleased to have found a partner that shares our business model approach» Frédéric Cren, Head of Research at Solvay Pharmaceuticals

4 year

ClinicalCandidate

FHD POC PII PIII NDA

• Variety of business models in a broad partnership

• Preferred vendor status is based on such competitive features as: – Long term relationship building

• Usually diversify an established “tactical” relationship• Value building for Sponsor’s R&D at “Milestones”: Lead, IND, POC(PII), PIII• Shared risk / reward element

ChemRar experience from mid 2000s with companies Avalon, Eli Lilly, Merck KGaA, Genentech, Solvay, Abbott

Передача лицензии

на территориюРоссии

Проведениедоклиники и\или

клиники в РФ

Производствоинновационногопрепарата в РФ

Передача результатовклинических

исследований

Коммерциализацияза рубежом

Руб.

Кросс-Роялти %

Финансирование От Российских партнеров

Модель трансферта разработок инновационных лекарственных средств

$$$Иностранный

партнер

Российский партнер

Иностранный партнер

Российский партнер

• Money• Time

Or Accessing

• Money• Time

Or Accessing

•New Markets

From 2008 ChemRar experts prominently participated in drafting of the “Russian Federation Innovative Development Strategy for the Pharmaceutical Industry through the year 2020” (Pharma2020).

December, 2010: Prime Minister Vladimir Putin visiting ChemRar with Ministers of Industy and Health

Bringing into Russia innovative development projects at various stages, from Biotarget stage, to clinical candidates, and developing them into Medicines

In-Partnering Development Projects Globally

20 years, more than 1200 partners 20 years, more than 1200 partners

first line

Service Research Organizations

Biotech Companies

Manufacturing &Market Access

• Moscow State University• Moscow Institute of Physics and Technology (MIPT) • D. Mendeleyev University of Chemical Technology of Russia • YSPU Yaroslavl University• State Research Center for Applied Microbiology & Biotechnology (FSIS SRCAMB)• M.M. Shemyakin and Yu.A. Ovchinnikov Institute of bioorganic chemistry of the Russian Academy of Sciences• Moscow Centre for HIV/AIDS Preventionand Treatment

7 programs funded 7 programs funded 8 in various funding 8 in various funding

stagesstages

7 programs funded 7 programs funded 8 in various funding 8 in various funding

stagesstages

15 programs suggested 15 programs suggested for fundingfor funding

250k to 2.5M for seed250k to 2.5M for seed5-30M for development5-30M for development

15 programs suggested 15 programs suggested for fundingfor funding

250k to 2.5M for seed250k to 2.5M for seed5-30M for development5-30M for development

65 programs selected 65 programs selected for evaluationfor evaluation

65 programs selected 65 programs selected for evaluationfor evaluation

200 partners identified200 partners identified200 partners identified200 partners identified

Partnering with Russia’s Scientific Institutions2007-2009

ChemRar seed funds Co-funding relationship with

• Rosnanotech ($5.5B investment bank), • Russian Venture Corporation ($1,5B fund of funds)• Ministry of Production and Trade «med-pharma»

federal program initiated Y2011 ($4B)• Russian «SBIR» ($100m per year)• SKOLKOVO

Partnership with Health Care Ventures, Celtic, Avalon Ventures, Domain, 5AM, other private equity and angel investors

Established JV for late stage co-development and market access with Pharmstandart, R-Pharm, Protek and other local players