Risk-Sharing Partnerships in

Drug Development and

Commercialization

Perspectives from a CRO,

Payer, and Investor

Patrick Jordan

Managing Director

Quintiles

Disclaimer

• The views and opinions expressed in the following PowerPoint slides are those of the individual presenter and should not be attributed to Drug Information Association, Inc. (“DIA”), its directors, officers, employees, volunteers, members, chapters, councils, Special Interest Area Communities or affiliates, or any organization with which the presenter is employed or affiliated.

• These PowerPoint slides are the intellectual property of the individual presenter and are protected under the copyright laws of the United States of America and other countries. Used by permission. All rights reserved. Drug Information Association, Drug Information Association Inc., DIA and DIA logo are registered trademarks. All other trademarks are the property of their respective owners.

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Description and Agenda

• Description

– This panel will share CRO, Payer, and Investor perspectives on

biopharma partnerships that reduce risk, enhance innovation, and

ultimately create value

• Agenda

– Introductions

– Panel Perspectives

• Sponsor-CRO Relationships: Emerging Models and Key Learnings

• Risk Management: Pharmaceutical and Payer Initiatives

• Product-Based Investing in Biopharma

– Panel and Attendee Discussion on data from the 2012 New Health

Report

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Managing Biopharmaceutical Risk with

New Partners

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CROs: Clinical Risk

Tim Dietlin, MBA

Vice President, Alliance Management, INC Research, Inc.

Payers: Commercial Risk

Ed Pezalla, MD, MPH

National Medical Director for Pharmacy Policy and Strategy, Aetna

Investors: Financial Risk

Will Robb, MBA

Partner, NovaQuest Capital Management

New Health Report 2012

WHAT IS THE NEW HEALTH REPORT?

• Annual survey of stakeholders who are involved in or impacted

by drug development

• Responses received from biopharmaceutical executives,

managed care/payer executives, investors and patients being

treated for a chronic illness

• Respondents were from the U.S. and the U.K.

HOW MANY PEOPLE PARTICIPATED IN THE SURVEY?

• >1,350 U.S. and U.K.-based biopharmaceutical executives,

managed care executives, investors and patients being treated

for a chronic illness

– 102 biopharmaceutical executives

– 75 managed care executives in the U.S.

– 72 NHS executives in the UK

– 100 investment professionals focused on healthcare and biopharma

– 1,000 adults in the US and UK who were diagnosed with and

receiving treatment for a chronic illness; and 100 investment

professionals focused on the healthcare/biopharma sector.

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Implications for the Industry

• STAKEHOLDERS EACH POSSESS A UNIQUE PERCEPTION AND TOLERANCE LEVEL OF

RISK/BENEFIT WITH REGARDS TO HEALTHCARE AND MEDICINE.– Biopharma respondents themselves have no clear consensus as to whether their company should

accept more risk in clinical development and commercialization. This could partly be explained to

the current financial state of the company, as companies with looming patent expirations or thin

pipelines will have a different risk-tolerance appetite than companies who are performing well.

• BETTER TOOLS ARE NEEDED TO ACCURATELY ASSESS RISK.– Current metrics used by biopharma and payers are insufficient and fail to account for the varying

degrees of weight different stakeholders assign to clinical, quality-of-life outcomes and value.

• BIOPHARMA AND PAYERS NEED BETTER ACCESS TO ROBUST SOURCES OF DATA.– Biopharma continue perceives Phase III as the most risky, but also as the phase in which they

feel less confident about available data.

• DESPITE THE PERCEIVED OBSTACLES, OPPORTUNITIES EXIST TO MITIGATE RISK.– Pre-competitive alliances and risk-sharing agreements are supported by both biopharma and

payers, and are perceived as increasing patient access to new therapies.

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Biopharma’s Biggest Challenge

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• Biopharma still

perceives the FDA as

its biggest challenge,

although a roughly

equal number of

respondents also say

financial concerns or

increasing evidentiary

requirements is their

company’s biggest

challenge.

Biopharma’s Risk/Reward Balance

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• Biopharmaceutical

executives are divided

on risk:

– As many executives

believe they should

take more risks as

those who think they

should take less

• 55% of executives

think the reward for

risk is less today than

5 years ago

Who Should Take More Risk?

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When Are Payers Involved?

When Do They Want to be Involved?

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Biopharma and Payers Sharing Risk

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The Pharma Investor’s Paradox

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Investor and Biopharma Perception of Risk

by Development Phase

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Precompetitive Alliances

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• Biopharma executives

support the concept of pre-

competitive alliances, yet

fewer than half say their

organizations participate.

• 37% report that their firm

currently participates in pre-

competitive alliances. 25% of

the remaining executives felt

that their firm was very likely

to in the next 5 years.

A Reason for Optimism?

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• The drug development enterprise is well known for its risks, whether they

manifest as clinical risk, regulatory risk, financial risk, or commercial risk. Yet,

with risk comes opportunity.

– Strengthening the design of studies with CROs contributing know-how and experience

– Attracting capital to do more with less, sharing the downside and upside

– Demonstrating a clearer “value of pharmaceuticals”

• Sharing risk is more than just reducing the downside. It is also about

increasing the magnitude of the upside.

– The whole of biopharma, CRO, investor, and payer insight is more than the sum of the

parts

• The industry expects more risk- and cost-sharing agreements, but managing

them isn’t all that easy.

– Risk sharing should not always be risk transferring

– Effective governance to align goals and the way partners achieve them

• Time is short but expectations are high.

– We are all in the business of improving health and quality of patient lives

– There is tremendous opportunity for new parties in healthcare that collaborate to

innovate

Implications and Opportunities