Contract Research and Manufacturing CRAM

1
Contract Research and Manufacturing (CRAM)
Mumbai November 10, 2006
Mahesh Sawant Program Manager Biotechnology and
Life Sciences Practice (South Asia Middle East)
2
Agenda

• Global Scenario
• Outsourcing across the Value chain
• Opportunity scan
• Indian Scenario
• Case Studies
• Conclusion

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Global Outsourcing Scenario

• US 37bn growing at a CAGR 10.8.
• Frost Sullivan estimates the market to grow to
  72.7 billion by 2011.
• Established segments
• API manufacture
• Clinical research
• Key trends
• Shift of full service preference to functional
  expertise
• Research
• Chemistry based services continue to drive
  outsourcing
• 3 out of top 5 service providers generate
  revenues from chemistry based contracts
• Clinical Development
• Alternative options for Phase I
• Biomarker development validation
• Microdosing
• Manufacture
• API formulation strengths in niche areas

4
Contract Research

• US18.7 bn growing at 14.7. Expected to continue
  growth of over 16 to 2011
• Key areas of outsourcing
• Screening technology platforms
• Genomics
• Therapeutics
• In all the segments, big pharma is the largest
  outsourcer, accounting for more than 50 percent
  of the payouts on an average
• In the cardiovascular disease segment, big pharma
  dominates completely with 92.3 percent share
• In the autoimmune/inflammation and CNS segments,
  mid-size pharma is prominent with a share of 37.4
  percent and 24.1 percent, respectively

Segment-wise Breakup of Total Alliance Payouts
(Global), 1997-2004
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Contract Research
Top Drug Discovery outsourcing players, 2004

• Outsourcing in drug discovery market valued at
  approximately 4.1 billion in 2005.
• According to Frost Sullivan forecasts, the
  market will move forward at a 15 to 20 growth
  rate to almost 7.0 billion by 2009. The top 10
  competitors in the space currently account for
  approximately 30 of the market, or an estimated
  1.23 billion.
• India's drug-outsourcing market amounted to just
  470 million in 2005. But it's expected to grow
  30 a year, hitting 800 million by end 2007.

6
Clinical Research Outsourcing

• The global CRO market was worth US15.2bn in 2005
  with a YOY growth rate of 14.3.
• The market includes services such as clinical,
  bio-analytical, biostatistical, data management
  services, biomarkers, regulatory submissions,
  medical writing, and site management services for
  the four phases of clinical development of a NCE
  and the bio-analytical / bio-equivalence services
  for generics.
• The Clinical research segment currently comprises
  more than 1,000 companies. 2/3rd based in US.
• The segment derives most of its revenues from
  U.S. based projects.
• Nonetheless, Europe and Asia are also important
  areas for CRO activity and the trends that affect
  industry players tend to operate on a global
  rather than regional basis.

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Contract Manufacturing

• The global pharmaceutical contract manufacturing
  market is segmented into injectables, solid and
  liquid dosage forms spanning across North
  America, Europe, and Asia.
• Injectables are expected to show the highest
  growth during the next few years. Solid dosage
  forms represented 47.0 percent of the global
  market in 2004. Liquid dosage forms are projected
  to grow the slowest during the forecast period.
• Within the contract manufacturing segment,
  Cardiovascular drugs is the largest among all
  other application categories with worldwide
  revenue of about 2.56 billion in 2004, it is
  rising at an CAGR of 8.7 through the forecast
  period.
• Analgesics seem to be rising at the highest pace
  in the contract manufacturing business with the
  expected annual average growth rate of 11.9 over
  the period of five years.

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Indian Scenario
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Case Studies

• Chemistry based services
• India with its skills in reverse engineering is
  all set to capture the chemistry based services
  market.
• There are four major chemistry service categories
  that CROs provide
• Building Blocks
• Compound Synthesis
• Process Research
• Library Design
• Chemistry is the largest discovery outsourcing
  segment, representing more than 1.6 billion in
  2004 growing at 10 and is estimated to reach
  2.3 billion by 2008.

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Case Studies Vertex Pharmaceuticals
(contd..)

• Kinase Targeted drug candidate
• 15 million on signing
• 200 million in research funding over 6 years
• 190 million in license fees 180million in
  milestones
• 230 million in clinical cost reimbursements
• 150 reimb for Second opportunity compounds
  plus supply and JV Option
• Co Promotion in NA EC

• In May 2000, Vertex entered into an agreement
  with Novartis Pharma AG to collaborate on the
  discovery, development, and commercialization of
  small molecule drugs directed at targets in the
  protein kinase family.
• Under that agreement, as amended in February
  2004, Vertex has responsibility for drug
  discovery and identification of potential drug
  candidates. Novartis will have exclusive
  worldwide development, manufacturing and
  marketing rights to drug candidates that it
  accepts for preclinical and clinical development
  from Vertex.
• Royalty on Net sales ( Supply or JV)
• Vertex will generate eight novel chemical
  entities, targeting selected kinases.
• 200 million interest free loan facility for
  proof of concept studies loans given on drug
  candidate acceptance.
• First Opportunity shall be successful completion
  by Vertex of Proof of concept studies and second
  opportunity shall be information to commence a
  Pivotal registration study.

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Case Studies Albany Molecular Research
(contd..)

• Amine neurotransmitter reuptake inhibitors
• 8 million upfront
• 10 million R D funding over 3 years
• 66 million in milestone per 1st 2 compounds
• 22 million milestones per each other compound

• Tiered royalty on
• NS lt 1 Billion
• NS 1Billion -2Billion
• NS gt 2 Billion
• AMRI has royalty free rights to released
  compounds
• BMS previously assigned patent rights to AMRI for
  CNS field.
• BMS shall manufacture, AMRI right to manufacture
  CON if BMS outsources.

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Case Studies Pharmacopeia (contd..)

• Compounds for FSH SRF Receptors
• 835K on signing and additional 835K on 1st
  Anniversary
• 4.165 million init Equity purchase and
  additional 4.165 Equity purchase in May 1997
• 9 million in R D over 3 yrs
• Up to 10 million in milestones

• 6 royalty on Net sales
• Organon shall manufacture
• Pharmacopeia delivers optimized lead compounds
• Milestone Amounts and royalty payout depend on
  speed of discovery/development
• 835K on signing, plus 835K on first anniversary
  as tech transfer fee. 3 million per year for 3
  yrs (12FTEs _at_ 250K/FTE), plus 100k/month for 4
  months interim funding until signing.

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Conclusion
Contract Manufacturing Organizations
Opportunity area
Opportunity area
Manufacturing services
Clinical Research Organizations
Opportunity area
Opportunity area
Clinical services
Opportunity area
Opportunity area
Drug Discovery Contract Research
Preclinical services
Traditional APIs Dosage forms
Cytotoxic, steroids, hormone APIs Dosage forms
Biotech based APIs Dosage forms
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Conclusion

• In order to sustain their profits more and more
  pharmaceutical companies are outsourcing
  significant amounts of their operations to lesser
  developed countries like India and China.
• Few major pharmaceutical companies already have
  pilot programs in place or plans to offshore
  sizeable components of their operations.
• Off shoring is expected to increase by 16 percent
  annually, driven by robust increases in the span
  of activities and relocation of both back-office
  and core processes.
• Thus, pharmaceutical off shoring is a phenomenon
  waiting to happen which could yield high returns
  for the domestic pharmaceutical companies. And
  very rightly, most Indian companies (big and
  small) have identified the same and are taking
  steps to project themselves as the best option
  for attracting off shored activities.

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Conclusion
Would you tell me, please, which way I ought to
go from here? That depends a good deal on where
you want to get to, said the Cat. I dont much
care where said Alice. Then it doesnt much
matter which way you go, said the Cat.
A discussion between Alice and the Cheshire Cat
from Lewis Carroll's Alice in Wonderland.
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Healthcare Practice Frost Sullivan
Established in 1961 in New York City, Frost
Sullivan today is headquartered out of Palo Alto
in Silicon Valley in the United States and has 25
offices across the globe.Our charter is to
collaborate with clients in helping them identify
specific growth opportunities for their
businesses and facilitate the accomplishment of
these objectives.
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