How to Build Strategic Alliance Strategies

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How to Build Strategic Alliance Strategies?
?
Presenter Mr. Rongjin Lin Date November 6, 2003
TTY Biopharm Co., Ltd Developing the Science from
Humanity
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Current Approach Will Produce Minimal Shareholder
Returns
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3 NCEs Per Year With Current Model Will Not
Suffice
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Sensitivity to Changing Key Variables in Pipeline
Model
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Total Shareholder Returns For Top 20 Pharma
Companies
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Is Continued Reliance On Blockbuster Drugs Enough?
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Exposed to New Challenges and Pressures
RD Productivity
Increasing Therapeutically Competition Decreasing
Exclusivity Patent Expirations Increasing
pressure for reaching sales top
Government Intervention Price Control
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5 Forces in Global Pharma
Today Future
Threat of New Entrants
Low
Same
Competition in the Pharmaceutical Industry
Power of Suppliers
Power of Customers
Today Future
Today Future
Medium
Increasing
Low
Same
Today Future
High
Increasing
Threat of substitutes
Today Future
Same
Medium
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5 Forces in Global Pharma
High and increasing rivalry within the industry
High growth, esp. in new markets (i.e.
neutraceuticals, lifestyle drugs) Increased
pressure on margins because of health
reforms High excess capacities Industry
consolidation and concentration (MA) - Increase
in product differentiation

• Low power of suppliers
• Some downstream integration of Biotechs
• High number of suppliers globally
• Low switching costs / few differentiation of
  supplies
• Low production costs (25 of sales)
• Low power of unions

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5 Forces in Global Pharma
Medium but increasing power of customers Highly
degree of concentration (Few customers
Government, Medical Care Organizations,
Wholesaler) Increase in market transparency
through the internet / better education
Increased demand of patients for participation in
decision making Increase of expectations
Individualization of therapies
Low threat of substitutes Decreased time of
product exclusivity Generics/ improved
products Genomics Parallel imports Trend
towards self medication (OTC) - Substitution only
partly possible
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5 Forces in Global Pharma

• Low threat of new entrants
• Advances in information management, technology
  and science enable small companies to access the
  market
• After patent expiry low costs of switching to
  generics
• Biotechs (capital market funded)
• Economies of scale less important in some New
  Technologies (i.e. Genomics)
• High barriers to entry because of capital
  intensity and sunk costs
• High product differentiation
• Patent protection
• Difficulty to set up own sales channels (access
  to doctors)
• Regulatory environment very difficult (i.e.
  safety and environment regulations)

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Global Trend Shift of the Pharma Paradigm
TTY Approach
Economies of Size Economies of Market
Orientation
Source A. T. Kearney (1997)
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Various Key Drivers for International Pharma
Companies

• Rising costs of bringing new products to market
  activities (pre-launch, post-approval)
• Impact of government intervention on industry
  operations (price control, regulation)
• Increasing role of consumer influencing health
  decisions.
• Intellectual property protection / management
• Declining RD productivity
• Increasing global competition in pharma industry
  (within therapeutic categories, influencers in
  purchasing decision)

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Key Issues for International Pharmaceutical
Companies

• Timely development of new products effective
  management of RD pipeline
• Effectively launch to peak sales
• Improving success rates of strategic alliances
  and become a preferred partner for alliances
• Develop marketing strategy and identify
  opportunities

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Multi-National Companies
MNCs are getting stronger in product development,
marketing sales in each area
To overcome the bottleneck of new product
productivity
MNCs are eager to grab any business opportunities
everywhere
MNC dominate the potential blockbusters
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Taiwanese Pharma is in a difficult position for
RD

• Difficulty of Pharmaceutical Research for Small
  Pharma
• Costs
• The average cost to develop a new drug has grown
  from US 138 million in 1975 to US 802 million
  in 2000 (Source Accenture)
• Risks
• Only 1 of 5,000 screened compounds is approved as
  a new medicine. (Source Accenture)
• Only 3 of 10 marketed drugs produce revenues that
  match or exceed average RD costs. (Source
  Accenture)
• 80 of RD expenses result in only marginal
  improved treatments (Source unverified)
• 250 drugs constitute 90 of the world need for
  drugs. 75 of them are available as generics.
  (Source unverified)
• Taiwanese companies lack any competitive
  advantage to deal with such a situation - Small
  size of the home market
• - Small size of Taiwanese science clusters
• - Lack of research specialists compared to
  international standards
• Opportunity
• Value of patents expired between 1997 and 2002
  US 19 billion (Source unverified)
• Value of patents expired between 2003 and 2005
  US 26 billion (Source unverified)
• Meanwhile Taiwanese Pharma should focus on the
  feasible No research, but development of
  improved generics and licensed drugs by applied
  formulation
• Goals Know-how capital accumulation

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The Trend of Global Pharmaceutical Market

• MNCs are getting bigger through industry
  consolidation
• Market opportunities for multinational niche
  player are growing
• Localization will be the competitive advantage of
  generic market
• Industry collaboration and contract services of
  value chain activities will be the trend of
  pharmaceutical RD

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Position of Company type
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Develop Regional Niche Core Competencies
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The Trend of Taiwan Pharmaceutical Market

• Only top 3 generic companies can survive
• Few generic companies could build competitive
  advantages or unique capabilities and survive
• Top 20 multinational companies can survive in
  Taiwan

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The Trend of China Pharmaceutical Market

• Multinational companies can fill these needs and
  survive
• China will become the fifth-largest
  pharmaceutical market with the estimated revenues
  of over USD24 billion by 2010. (3X of current
  size)
• Top 100 generic companies can survive in China
• Lots of generic companies with competitive
  advantages or unique capabilities can survive
• Focusing the head of Chinese operations on
  assessing and shaping local abilities are
  essential
• Only Taiwanese can do success business in China
  market
• building the abilities to support Chinese
  operation with world-class regulatory specialists
  and marketers can win

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What Asia Means for MNC

• Large rapidly growing markets
• Across the board software, components,
  services, content, etc.
• Demographics highly attractive long-term
  opportunity
• Favorable government policy fostering
  biopharmaceutical industry a top priority
• Key production base
• Cost-efficient supplier of labors

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Key Success Factors of Biopharm Companies

• Develop and accumulate human capital and
  knowledge capital
• Leverage the networks of value chain
• Build self-learning organization
• The guarantee of success survive longer enough
  till the new innovation launched

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Key Issues for Big Pharma

• Timely development of new products effective
  management of RD pipeline
• Effectively launch to peak sales
• Improving success rates of strategic alliances
  and become a preferred partner for alliances
• Develop marketing strategy and identify
  opportunities

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TTYs Visions
Becoming one of the most innovative
biopharmaceutical companies,
specialising in anti-cancer drugs in Asia, and
specialising in new formulation
technology Becoming the first international
pharmaceutical company focusing
on prevalent Chinese disease. Focusing on
marketing and new drug development (MD)
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Strategic Plans for 2005 to 2010
Our planning
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Applicability of Alliances to TTY

• Alliances can be build along each function of the
  value chain, in case of the existence of
• A clear win-win situation (mutual benefit)
• A situation where a prisoners dilemma can be
  avoided (avoidance of mutual harm)

• The most critically functions are the most
  interesting for international alliances
• RD Alliances Licensing and product development
• Marketing and Sales Alliances Market knowledge
  and coverage
• National alliances can be used for a maximum
  leverage of
• Clinical trials
• Production

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TTYs Specific RD Development Strategy
Discovery
Marketing
Phase III
Phase II b
Phase II a
Phase I
Pre-Clinical
Concept Approval
lead
candidate
Taiwan
China
US EU
?
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TTYs Position

• TTY is focusing on marketing and new drug
  development (MD)
• Position in the industry value chain
• Be the best Asia partner of international
  biopharmceutical companies
• Geography focus on Taiwan China
• Build core competences of channel management
  new drug development
• Speed, speed speed
• Co-develop the early phase new drug with
  international biopharmceutical companies to
  create and share the IP right

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Key Successful Factors

• Bringing corporate strategies into operation
• ????????????
• Training and recruiting right people
• ??, ?????????
• Effective management (PDCA) of pipeline and
  portfolio.
• ????, ??, ??, ???????????
• Becoming a preferred partner for alliances in
  licensing.
• ????????????????????
• Reducing time to reach high sales (fast
  penetration)
• ???????????????

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Competitive Advantage
DC Core Competence
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Competitive Advantage DC

• DC Team
• New formulation techniques of slow-released and
  liposomal products and new indications
• Integrated DC team
• Project evaluation
• Formulation
• Pre-clinical studies
• Clinical studies (CRA team)
• Regulation
• Project management

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Competitive Advantage DC
Core Technologies

• Liposome technology
• Production technology of liposomal drugs
• New-generation liposomal techniques have been
  developed and patents had been filed.
• Lipo-Dox, LAIA97, LIIA01
• Sustained release technology
• Slow-release product development including high
  dose and low solubility drugs.
• Regrow SR, Lacoxa, GNTA98, TTTA01
• New indication development of anti-cancer drugs
• New indication clinical studies in oncology
• UFUR, Thado, Oxalip, Asadin, Lipo-Dox

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Competitive Advantage DC
Brief History of Clinical Trial of TTY

• 1996 DOH Taiwan issued 1st edition of GCP
  guideline
• JIRB in Taiwan was established
• TTY established the SOPs of GCP
• 2000 The first GCP anti-bacterial drug in
  Taiwan
• The first GCP anti-cancer drug in
  Taiwan
• 2000 Phase I trial of thalidomide conducted in
  Taiwan
• 2000 Eight clinical trials approved by IRB/DOH
  
• Clinical trials on new indications started
• 1. Phase III trial of Thado for HCC
• 2. Phase II trial of Oxalip for GC
• 3. Phase II/III trial of Asadin for
  HCC
• 2003 Phase II trial of Oxalip for NSCLC

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Competitive Advantage DC
Clinical studies for anti-cancer drugs
40 clinical trial results were published or
presented
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Competitive Advantage DC

• NDA Registration Experience
• According to DOHs Criteria of New Drug, nine new
  drugs were launched.
• An innovative learning network and professional
  integration ability to speed up the development
  and commercialization of new drugs
• 43 trials are either accomplished and or are in
  progress

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Competitive Advantage - Production

• New plant specialized in production of
  anti-cancer drugs was built in Taiwan in 2000
• Hai-Pu GMP plant was certified in China
• Hai-Pu oncology plant was certified in China

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Competitive Advantage Marketing Sales

• Brand marketing ability
• Channels penetrated all medical centers
  teaching hospitals in Taiwan
• Hai-Pu has already extended its channels to East
  Central China

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Why Partner?

• Grow at home, go abroad strategy no longer
  viable
• Partnering makes emerging growth firms move in
  swift
• Only large companies can afford time,
  cost-consuming, me-alone penetration
• Lots of partnering opportunities with Asian firms
• U.S. market is their No. 1 target
• U.S./Asian technology highly compatible/mutually
  adaptable
• Survival strategy during recession
• License your IP in exchange of capital

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TTYs Alliance Strategies

• Know your position
• Your partners Who are they?
• Map out how you want alliance to work
• Play to your core competence
• FIT your position
• Localized Marketing Sales
• Involve the right people
• Well Planning, Implementation and Controlling
• Leverage the power of niche products
• Looking for affordable, safe, and efficacious
  products
• Grow at home, go abroad with your partners!

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Who are Potential Strategic Partners?

• Pharmaceutical companies
• International, national, niche
• CROs
• Vertical integrators
• Big biotech
• Consolidators (e.g. Elan)
• Other companies which dont fit the usual mold
• Hospitals, philanthropic organizations, etc.

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Types of Alliances

• Definition of alliance
• Explicit agreement to leverage combined
  resources to achieve a competitive advantage
• Types of partnering
• Licensing (benefit for money)
• Co-operative alliance (mutual benefit)
• Operate typically as virtual organizations
  sometimes minority equity investments
• Frequent applications
• Development
• Co-marketing
• Co-promotion
• Joint venture
• Has typically an entity of its own
• Frequent application Collaborative research and
  development
• (Merger)
• Two directions of partnering
• Vertical collaboration, i.e. biotech discovers
  drug and pharma develops and markets the drug
• Horizontal collaboration, i.e. collaborative
  research of two pharmaceutical companies

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Conclusions for TTYs Business

• Impossibility of New Drug Discovery
• TTY focuses on improvement of existing drugs
• Global pressure on Pharma to assure
  capitalization of investments in the market by
  the means of market orientation throughout the
  value chain
• Strategic planning of RD investments
• (...) ?
• Operational excellence of Marketing
• TTY strives for mastery in Marketing

• Fields where alliances can contribute to TTYs
  business
• Formulation
• Marketing

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Problems of Alliance Building

• Requirement for alliance building Complementary
  competences of the partners
• Problem What to bring to the deal?
• TTY RD capabilities (?)
• 2 D-technologies Lipo and SR
• - no R-technologies
• - no patents
• - competencies build for Taiwan
• TTY market position ()
• Sales Strength in important HP channel
• Marketing capabilities of personnel
• Strength of brand
• - Size of Taiwanese market
• - IP protection in Taiwan
• TTY financial power (-)
• TTY production (-)

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Thank you!