R&D Activities in DermatologyKenneth Watson MD MBA

Executive DirectorBeauty Eurasia Seminar

Istanbul, June 14 2007

Introduction

• Galderma : the world-leading company in dermatology

−Acne, Rosacea

−Psoriasis, Steroid-Responsive Dermatoses

−Skin Cancer, Pigmentation Disorders, Onychomycosis

−New : Aesthetic & Corrective Dermatology

• Focus on R&D and innovation

−Biggest investor in dermatological R&D (together with L’Oreal)

• Presentation focused on research, drug development and new products “from a business perspective”

Galderma’s Ambition

To be recognized as the most competent and successful

innovation-based company focused exclusively on

meeting the needs of dermatology patients

and physicians

The World of Modern Health CareDynamics in Obtaining & Providing Treatments

PROVIDERS

-Pharmaceutical (Rx / OTx)

-Cosmetic (OTC)

-Procedures

PATIENTS

‘SENIOR’ CUSTOMERS

TREATERS- Derms- GPs/PCPs- Pharmacists- Beauty Spa centres

SOLUTIONS

PAYERS

Health Care & Managed Care

Beauty centreInternet -telemedicineAbility to pay

-Rx: R&D cost

-Procedures: Physicians

Evidence-based medicine

Income-related practise

Cost containment“Need-clause”

Power of patients grows worldwide

Changing Environment for Dermatologists

Trends impacting Dermatology

Source: Galderma Business Intelligence Reports

Competitive environment for

Pharmaceutical companies:- Dermatology is still an

“open market”-Low barrier of entry, many

new competitors

Epidemiology trends:- Aging population

- Cases of skin cancer will increase

Evolution of Health Care systems:

- Pressure on healthcare costs- De-reimbursement from public to

private or patient-cash outlay - Generics

Evolution of how Dermatology conditions

are treated:-Dermatologists will

focus on moderate to severe conditions and conditions treated

by procedures- GP as Gatekeeper

Efficiency : Critical aspect of drug development

“New Drugs” in Clinical Studies (1995 – 2004)

0

250

500

750

1000

1250

1500

Phase I Phase II Phase III

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Drugs in clinical trials from 1995-2004

Nu

mbe

r of

dru

gs

Source: Pharmaprojects 2004

5 6215 507

3 5673 233

1 3211 576

1977-80 1981-84 1985-88 1990-92 1994-95 1998-01

Approval Period

Su

bje

cts

Mean Number of Subjects in NDAs

Sources: Boston Consulting Group, 1993; Peck, Food and Drug Law J, 1997; PAREXEL, 2002

5,9

8,8

8,6

9,4

9,3

10,4

1,4

2,3

1,8

2

2,1

1,4

2,6

3,8

2,9

2,9

4,4

5

0 4 8 12 16 20

Anti-infective

Cardiovascular

All

Analgesic/Anesthetic

CNS

Antineoplastic

Years

Synthesis to 1st in Humans 1st in Humans to NDA Approval Phase

16.2

14.3

14.3

14.2

13.7

12.3

Mean Development & Approval Times

Source: DiMasi, Clin Pharmacol Ther, 2001;69(5):286-96

FDA NME Approvals

Source : www.fda.gov

Development Costs per Approved Drug

121

336 282

466403

802

0100200300400500600700800900

Mil

lio

ns

of

"20

00

$"

Preclinical Clinical Total

Out-of-Pocket Capitalized

Source: DiMasi et al., J Health Economics 2003;22(2):151-185

At 7% annual growth $1.5 billion by 2015

Observations

• Governments and Health Care Institutes face dramatically rising costs and aim at cost-containment

• Developing innovative products takes > 7 years, and is risky and very costly

−Many pharmaceutical companies struggle to launch good new products

• Dermatology: little innovation in past decades

−Aesthetic dermatology is “booming and blooming”

−Innovative R&D continues……

2004 Worldwide Dermatology Business27.7 billion US $

14.1 Billion US$ CAGR: +3,5 %

1.2 Billion US$ CAGR: +10 %

10.1 Billion US$ CAGR: +4 %

1 Billion US$ CAGR: +10 %

0.8 Billion US$ CAGR: +10 %

0.6 Billion US$ CAGR: +10 %

CAGR: 2004 - 2014

Innovation & GrowthDermatology “Disease” Areas

Innovation ("public")

Market growth

High

High

Low

Low

Acne

acne

Rosacea

rosacea

Pso/SRD

psoriasis/SRD

PD

PD

Onychomycosis

onychomycosis

skin cancers

SkinCancers

Innovation :# leads in development# launches 2002-2007

Market growth:% growth in $ (’02-’07)

aesthetic dermatology

AestheticDermatology

Doctor driven

Medical condition

Patient driven

Aesthetic condition

Acne

Melasma

PD/ PA

Photodamage/ Photoaging (AK)

Pigmentation disorders

Vitiligo

PIH

Psoriasis

Skin cancer

Solar Lentigo

Rosacea

Most treatments reimbursed

Most treatments not reimbursed

Becomes medical/reimbursed if cancer risk

Health Care Position on Reimbursements

•Causes unknown - Autoimmune disease

•Fewer treatments and less predictable response than Melasma

Acne Trends Strength & intensity of competition

Food, Drug, Mass

HealthBeauty

Cosmeceuticals*€1.8bn

Med

icat

ed O

TC

*$1

.6b

n

No

n-M

ed

icat

ed

OT

C*

2.0b

n€

Rx**

€2.2bn

Proactiv $400m Neutrogena $50m Clean & Clear $36m Clearasil $30mPhysiogel

Efflacar AIClearenceExfoliac

Soap Hand & Body Lotion Facial Cleansers Moisturizers

Navigant 2005* ; IMS MAT 2006**; Kine&Co report 2006*** Feedback research services 2006****

Medicated OTX***

Derms onlyUS $ 99m

+16.3% 02-05****

Acne: $20m Mostly cleanser

Total professional market (ageing, acne )*** Pharmacy, Dr, internet, Spa ww 1.65b€ +43% cagr 02-05

Pharmacy

Kinerase $22.3m +43% 04-05

SkinceuticalsNV PerriconeSkinmedica

Lasers

Dermabrasion

Peeling

OLS

Isotretinoin

Retinoids

Antibiotics

Dr Dispensed

Procedures

Spa

Cetaphil

Acne R&D

Galderma R&D

PPAR/RAR concepts

0

10

20

30

40

50

60

70

80

90

before2000

2000 2001 2002 2003 2004 2005 2006 2007

molecular

cellular

Pharmacology tests

RARVDR

PPARRXR

LXRPPAR PPAR

FP-RMC1-R

TYROSINASE

SOAT

TACERoDH4DHRS9

AR

Steroid receptors

(ER, GR, PR, MR)

HSD11b 1, 2

3HSDHyaluronidasesCollagénases

MMPADAM

NFKappa BTNF

CXCR1 CXCR2NRs GPCRs ENZYMES

INFLAMMATION PATHWAY

Patients

Getting older, living longer

Changing Life style

Cash out to enhance appearance

Easy access to Information

Young and old…….: beauty is what matters!

DermatologistsPlastic surgeons

Others …

Procedures

Skin preparation

Combination treatment : efficacy enhancement

Comfort improvementMaintenance treatment

Fillers BTX-A

Patient Management

• Skin Care• Anaesthetics• Keratolytics/ Peelings

• Skin Care/ Sun blocks• Wound healing• Retinoids

• Retinoids• Hydroquinone• Anti-inflammatory

PDT

• « Classic » indications:

− Nasolabial folds

− Mouth area: corners, vermilion border and body

− Marionette lines

• Volume indications:

− Cheeks, chin

− Scars

− Lipoatrophy

• “Advanced” indications (difficulty)

− Tear trough

− Glabellar and crow’s feet

− Ears and nose

− Brow

− Body indications: neck, hands

Dermal fillers: from « classic » to « advanced » indications

Galderma: focus on patient interest &comfort. New topical anesthetic!

Dosage and administration:• For minor procedures: 20-30 minutes • For major procedures: 60 minutes

How it works:• Improved transdermal delivery• Delivery stops once completely dry• Stays where it is placed and adheres to folds and contours on the face and other parts of the body • Formulation allows for easy removal of product

Main competitive advantages:• Greater efficacy• Mean duration: 11 hours• No occlusion• Easy removal

Evolution of Dermatology Practice ?

Past & Present Present & Future

Medicalindications

Procedures

Corrective & Aesthetic indications

Rx/non-Rxtopicals and systemics

Corrective & Aesthetic indications

Rx/non-Rxtopicals and systemics

Procedures

Medicalindications

Source: Internal Phase I reportDermatological Procedures: Preliminary evaluation and market opportunity- October 2005

Conclusions

• Dermatology: even more focus on patient needs (beauty-driven)

• Development of effective, innovative drugs is challenging & costly

• Procedures; important!

• Aesthetic & corrective dermatology revolutionizes dermatological practices

• R&D : no longer exclusively focused on new drugs

Istanbul :

a beautiful city!