Follow on Protein Products: Opportunity or Overblown

1
Follow on Protein Products Opportunity or
Overblown?

• Bobba Venkatadri
• 2nd November,2007

2
Presentation Outline

• Introduction
• Business Opportunity
• Development Strategy
• Product Clinical Supply
• Competition
• Summary

3
Introduction

• Biopharmaceuticals are proteins made by
  recombinant DNA technology
• Production processes and regulatory issues are
  significant
• Since 1980s over 100 new products created,
  allowing treatments never before realized
• Diabetes, cancer, genetic disorders, autoimmune
  diseases, hepatitis, etc.
• Many exciting products worth about 25 B coming
  off of patent in near term creating opportunity
  for Follow on Protein Products business
• Also referred to as bio-similars and follow on
  biologics

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Introduction (contd)

• Biopharmaceuticals are
• Highest value pharma products today on per
  therapy basis
• Therapies in US range from 10K to 100s of K
  per annum
• Highest value added products with large biotech
  companies enjoying significantly higher
  valuations than large pharma
• Fastest growing segment of pharmaceutical
  industry
• Over 100 product approvals for bio-pharma
  products were made at US FDA from 1996 to 2003

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Business Opportunity Follow on Protein Products

• Over 15 products coming off patents in next 10
  years
• A number of these are in excess of 1 B in sales
  in US and Europe alone
• Over 25 B opportunity
• Requires unique knowledge and skills to take
  advantage of this opportunity

6
The Business Opportunity Examples
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The Business Opportunity Background

• Factors in favor of the development of
  Biosimilars
• Demand for bio-pharmaceuticals is rapidly rising
  throughout the world thereby increasing
  pharmaceutical expenditure which is a huge
  budgetary issue
• Development of new, expensive treatment continues
• New emerging markets (BRICKS) in Asia, Latin
  America, Africa
• Bio-pharma prices growing at a much more rapid
  rate than traditional small molecule
  pharmaceuticals
• Political climate of goodwill

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Strategies for Success
Technical Barriers Manufacturing Approach Cost
of production
Can you make the product? Can you get the
product to market? Can you make
money? Successful product
Efficient process Low cost manufacture Access to
GMP facilities
Regulatory barriers Patent litigation
Pick the right partner Pick the right
product Pick the right indications
Sound commercialization strategy
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The Business Opportunity Success Factors

• The opportunity is large success will require
• In depth technical knowledge of the products
• Developmental and regulatory experience
• Commercial relationships expertise
• Clinical programs will cost 10 50 MM, much of
  which will need to be done in EU US to access
  those markets
• Relationships with thought leaders and their
  endorsement is essential for each indication
• Significant investment in process development and
  manufacturing, 30 to 90MM
• World class quality and low cost supply is
  critical

10
The Business Opportunity

• Follow on protein product business model will
  resemble specialty pharma or biotech business
• This will not be a generics business in the US
  and EU
• Prescriptions will not be substitutable or
  interchangeable
• Must establish product and market franchises
  using MD thought leaders patients

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The Business Opportunity

• Each product must be marketed will be costly
• Budgets for promotion, phase 4 studies, etc.
• Commercial investment in the US will be large
  requires
• Marketing materials
• Drug reps
• Physician education programs
• Niche products could cost as much as 30 MM to
  launch block busters much more

12
The Business Opportunity Product Selection
Criteria

• Patent expiry in US and EU
• Many blockbusters are coming off patent
• Potentially a lot of value, but competition will
  be intense
• Difficulty of manufacturing must be taken into
  account
• Difficulty of clinical trials and regulatory path
• Large and long clinical trials will significantly
  increase development costs and lower overall
  returns.

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Business Opportunity Example Niche products

• Commercialization resource requirements are
  relatively small and expected competition will be
  minimal or limited to innovators
• Pulmozyme sales in 2006 were 250 MM
• 200 MM in US
• 50 MM in EU
• US patent expiry 2012
• About 115 Cystic Fibrosis Centers in the US

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Business Opportunity Blockbuster examples

• Commercialization resources will be large, and
  competition will come from both first and second
  generation follow on proteins.
• Second generation (long acting) versions of EPO
  GCSF, thus avoiding heavy competition on first
  generation, shorter acting Follow on Protein
  Products
• Aranesp product sales in 2006 were 2,880 MM and
  growing rapidly, 30, displacing Epogen (1st
  generation)
• US patent expiry approximately 2016
• Neulasta product sales in 2006 were 2,300 MM and
  growing at 12
• US patent expiry approximately 2017

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Regulatory Challenges and Strategy

• EU has taken the lead on defining a regulatory
  path
• Guidelines for development of Similar Biological
  Medicinal Products (Follow on Protein Products in
  US)
• Reduced non clinical testing
• Requires phase 1 and phase 3 studies
• Safety registry (ph 4) will be required

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Regulatory Challenges Strategy

• Current PHS Act (US Law) does not allow for
  Follow on Protein Products
• Congress is addressing need to change PHS Act to
  allow for Follow on Protein Products
• We expect US to have similar guidelines as EU,
  perhaps more preclinical safety
• Most likely phase 1, 3 and 4 (registry for
  safety) will be required
• US environment Follow on Protein Products
  legislation pending

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US not that different from EU

• Growth hormone Sandoz
• Phase 1 and Phase 3 study
• Cerebrosidase Protalix (partnered with Teva)
• Phase 1, then directly into phase 3
• FDA and EU authorities are highly focused on
  quality safety
• In depth technical and regulatory expertise
  critical to success

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Clinical Development strategy

• Regulatory requirements contd
• All products clinical development strategy will
  be case-by-case discussion with EU and US
  authorities
• Average cost per program will be approximately
  30 MM for clinical alone higher in many cases
• Additional costs will exist for process
  development, manufacturing investment, regulatory
  quality support, GA, sales force development,
  promotional materials, etc.
• Phase 4 safety registry will be required

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Clinical Development Strategy

• Positioning the products with the market will be
  very important
• In the US, each label claim may require
  additional studies No substitutions for Follow
  on Protein Products for innovator products!
• EU has stated no studies for additional label
  claims (if justified)
• Thought leader involvement will be critical!

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Safety Quality Opportunities for Success

• Phase 4 program can be viewed as a chance to
  ensure patient safety physician endorsement
• Growth hormone registry (Ph 4) drove sales in
  80s 90s
• Set the bar high for competition
• Prescribers, FDA and patients will be highly
  focused on safety

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Development Strategy (contd)

• Strategic partnerships should be strongly
  considered and explored to share the financial
  burden
• Establish the manufacturing process early
• Validate cell banks, test methods and
  manufacturing process as soon as possible
• EU requires full validation of assays, process,
  manufacturing, prior to initiation of phase 1
  studies
• Characterize API to show comparability to
  innovator product
• Purity quality will be the focus
• Ensure compliance to regulatory and ICH standards

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Supply Chain Strategy Strategic approach

• For First time investors in bio-pharma
  products, the cost of supply chain will be
• At best, seem outrageous
• At worst, not worth it
• Plants in EU and US cost in excess of 18,000 per
  sq. meter
• To maintain a compliant facility, operating costs
  are high

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Supply Chain Strategy Strategic approach

• Strategic relationships in process development
  manufacturing should be chosen carefully
• History of compliance and quality
• Strong interest in Biopharmaceuticals and well
  developed capability
• Any strategic relationship should maximize
  efficiencies and capital of the companies in this
  space
• Technology, expertise experience in
  development, regulatory, and commercialization
  from US
• Low cost process development, manufacture
  capital in India

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Expected Competition

• Competitors will fall into three categories
• Originators, Giant Generics, Specialty Players
• Level of competition will be significant, but not
  as intense as generic Pharmaceuticals
• While as many as 20 to 50 companies are
  reportedly interested in participating, perhaps
  as few as 5 or 6 will be serious players due to
  entry barriers
• No current US generic regulatory pathway
• Technical and Manufacturing requirements
• Clinical and Marketing requirements
• Cost of development and commercialization will be
  high
• Likely consolidation and strategic alliances to
  address above

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Expected Competition (contd)

• Select Originators
• Genentech, Amgen, Genzyme, JJ
• Giant Generics Committed publicly to Follow on
  Protein Products
• Sandoz/Novartis (Momenta), Teva (Sicor, Tianjin
  Hualida Biotech), Ranbaxy (Zenotech), Barr
  (Pliva) Dr. Reddys Laboratories Ltd.
• Specialty Players
• Shire (TKT), BioPartners (LG Life Sciences,
  Rentschler Biotech, Cambridge Labs, Nycomed,
  Megapharm, Laboratorios Raffo, BioPro Pharma)
• Others to follow

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Bio-generic Companies, Products and Timescales
Note Although Transkaryotic Therapies has
marketing authorization for Dynepo in Europe it
has not launched the product pending the outcome
of patent litigation with Amgen in the US. Data
validated as of January 2004
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Bio-generic Companies, Products, and Timescales
(cont.)
Note Although Transkaryotic Therapies has
marketing authorization for Dynepo in Europe it
has not launched the product pending the outcome
of patent litigation with Amgen in the US. Data
validated as of January 2004
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Summary

• Follow on Protein Products offer a large
  opportunity
• 10s of Billions USD in next 7-10 years
• Development commercialization experience
  critical to success of penetrating US and EU
  markets
• Regulatory requirements of recombinant proteins
  unique Experience in small molecules will not
  guarantee success
• Business model vastly different from generics
  business
• Costs of development of Follow on Proteins is
  very high
• Bearsteins article, Dec. 2006, 100MM per
  molecule
• Capital and commercial requirements will offer a
  significant barrier to entry
• Strategic partnering offers a sound route to
  managing capital requirements for development and
  commercialization.

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Offshore Industry Lifecycle Curve-Pharmaceuticals
Vs. Other Industries
Key Focus
Consumer Products Retail PG, Nestlé
Automotive Ford
Financial Institutions GE, Citi, Amex, HSBC
MNC Pharmaceuticals are Laggards
GSK
Wyeth
AZ Novartis
Adoption Stage / Examples
JnJ
Aventis Roche
Pfizer
Lilly
As Other Industries Have Faced Margin Pressure,
They Have Moved To A Global Operating Model
BMS AbbottMerck
Source A.T. Kearney analysis
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Chronic Therapy market to form close to 50 of
overall market by 2020 E compared with current 25
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India to be the fifth largest drug market in the
world by 2020 E