pharmaceutical innovation at a crossroads

Kenneth I Kaitin, Ph.D. Director and Research Professor

Tufts Center for the Study of Drug Development

Global Clinical Supply Group Annual Meeting Jacksonville, FL, April 4, 2011

The New Face of Pharma R&D

Pharmaceutical Innovation at a Crossroads

The Tufts Center for the Study of Drug Development

Academic

Independent

Multidisciplinary

Strategy and Policy Research Group

Tufts CSDD is an . . .

The Tufts Center for the Study of Drug Development

Agenda

Environment for pharmaceutical innovation

TCSDD’s current drug development metrics

The evolving landscape for innovation

The Current Landscape for Pharma Innovation

Current Realities for Pharmaceutical Developers

Patents on many high revenue products are expiring

Marketplace is highly competitive and reimbursement environment is increasingly restrictive

Public support is low

Regulatory hurdles are increasing

Pharmaceutical R&D remains a long, risky, and expensive process

Patent Expirations of 10 Top Selling Drugs Each Year

2010 2011 2012 2013

Product 2009 Sales

($MM) Product

2009 Sales ($MM)

Product 2009 Sales

($MM) Product

2009 Sales ($MM)

Aricept 3,991 Lipitor 12,535 Plavix 9,801 Cymbalta 4,660

Cozaar 3,561 Advair 7,794 Enbrel 6,575 AcipHex 2,728

Effexor XR 3,182 Zyprexa 4,916 Diovan 6,013 Humalog 1,959

Taxotere 3,034 Levaquin 2,648 Seroquel 5,126 Zometa 1,469

Protonix 2,052 Xalatan 1,737 Singulair 4,660 Niaspan* 853

Flomax 1,970 Concerta* 1,326 Lexapro 3,263 Lovaza 705

Arimidex 1,921 Femara 1,292 Avapro 3,088 Xopenex^ 357

Gemzar 1,363 Xeloda 1,160 Actos 2,532 Zomig^ 166

NovoSeven 1,320 Avelox 1,020 Viagra 1,892 Advicor^ 80

Coreg^ 253 Caduet 548 Avandia 724 Fuzeon^ 26

Total $22,647 Total $34,976 Total $43,674 Total $13,003

*Year of first available generic

^US Sales only

Sources: Kaitin, Clin Pharmcol Ther, 2010;87:356-361; Medco; FDA Orange Book;

(sales data): MedAdNews; www.drugs.com/top200; Medco

Patent Expirations of 10 Top Selling Drugs Each Year – By Company

2010 2011 2012 2013

Product 2009 Sales

($MM) Product

2009 Sales ($MM)

Product 2009 Sales

($MM) Product

2009 Sales ($MM)

Pfizer 3,991 Pfizer 12,535 BMS 9,801 Lilly 4,660

Merck 3,561 GSK 7,794 Amgen/Pfizer 6,575 Eisai 2,728

Pfizer 3,182 Lilly 4,916 Novartis 6,013 Lilly 1,959

Sanofi Aventis 3,034 J&J 2,648 AstraZeneca 5,126 Novartis 1,469

Pfizer 2,052 Pfizer 1,737 Merck 4,660 Abbott 853

Boehringer Ingl 1,970 J&J 1,326 Forest 3,263 GSK 705

AstraZeneca 1,921 Novartis 1,292 BMS/SAN 3,088 Sunovian 357

Lilly 1,363 Roche/Genentech 1,160 Takeda 2,532 AstraZeneca 166

Novo Nordisk 1,320 Bayer 1,020 Pfizer 1,892 Abbott 80

GSK 253 Pfizer 548 GSK 724 Roche/Genentech 26

Total $22,647 Total $34,976 Total $43,674 Total $13,003



$3.3

$4.0

$4.6

$4.7

$7.2

$8.8

$9.5

$11.3

$12.9

$29.2

0 35

Forest

J&J

Sanofi Aventis

Merck

AstraZeneca

Novartis

GSK

BMS

Lilly

Pfizer

Billions of US$

‘Industry Leaders’ in Lost Revenues Due to 2010-13 Patent Expirations



$3.6

$4.9

$5.3

$5.9

$6.1

$6.8

$8.1

$8.1

$9.2

$9.4

BMS

Lilly

AstraZeneca

Sanofi Aventis

GSK

J&J

Novartis

Merck

Roche

Pfizer

Billions of US$

Top Ten R&D Spenders for 2010

Sources: FierceBiotech, 3/8/11

New Drug Approvals Are Not Keeping Pace with Rising R&D Spending

0

13

26

39

52

0

15

30

45

60

1963 1968 1973 1978 1983 1988 1993 1998 2003 2008

R&

D E

xp

en

ditu

res

(B

illion

s o

f 20

08

$) N

ew

Dru

g A

pp

rov

als

R&D Expenditures

New Drug Approvals

* Trend line is 3-year moving average; R&D expenditure adjusted for inflation

Source: Kaitin, Clin Pharmacol Ther, 2010;87:356-361

http://www.nature.com/clpt/journal/v87/n3/full/clpt2009293a.html

Market Caps for Top-Tier Firms have Dropped $578b in 10 Years

* Market caps for WYE and SGP on 9-10-09



$287

$213

$173

$143

$104 $90 $85 $83

$76

$134

$108 $101

$44 $38

$68 $64

$46

$73

$0

$320

PFE MRK GSK BMY LLY AZN WYE SGP ABT

Bil

lio

ns

of

US

Do

lla

rs

Market Cap on 1-1-01

Market Cap on 11-23-10

.

“Apple Unveils New iPods”, Roger Cheng and Ben Charny

WSJ OnLine, September 5, 2007

High Profits and Falling Stock Prices Reflect Investor Concern About Pipeline Viability and

R&D Performance

Bringing a New Drug to Market: Current Development Metrics

0 11

AIDS Antivirals

Anesthetic/Analgesic

Antiinfective*

Gastrointestinal

Immunologic

Cardiovascular

Endocrine

Antineoplastic

CNS

4.6

5.3

5.4

5.8

6.4

6.5

6.5

6.9

8.1

0.5

0.8

1.2

2.4

1.0

1.3

1.2

0.7

1.9

Years

Clinical Phase Approval Phase

10.0

7.7

7.8

8.2

6.6

5.1

6.1

7.4

7.6

* excludes AIDS antivirals

Clinical and Approval Times Vary Across Therapeutic Classes, 2005-09

Source: Kaitin & DiMasi, Clin Pharmacol Ther, 2011;89:183-188

Overall Clinical Approval Success Rate for NCEs has Dropped to 16%

0 27

CNS

Cardiovascular

GI/Metabolism

Oncology/Immunology

Musculoskeletal

Sys. Antiinfective

8.2%

8.7%

9.4%

19.4%

20.4%

23.9%

Clinical Approval Success Rate

Source: DiMasi et al, Clin Pharmacol Ther, 2010;87:272-277


Phase Transition Probabilities by Therapeutic Class

0

100

Phase 1-2 Phase 2-3 Phase 3-NDA subm

72%

35%

80%

72%

49%

55%

68%

35%

50%

63%

32%

64%

60%

33%

46%

58%

52%

79%

Tra

ns

itio

n P

rob

ab

ilit

y

Musculoskeletal

Onc/Immunologic

GI/Metabolic

Cardiovascular

CNS

Syst Antiinfective

Source: DiMasi et al, Clin Pharmacol Ther, 2010;87:272-277


Long Development Times + Low Success Rates = High R&D Costs

0

1500

Non-Clinical Clinical Total Costs

615 626

1,241

439

879

1,318

Millio

ns o

f 2005 D

ollars

Biotech Pharma (Time Adjusted)

Source: DiMasi & Grabowski, Managerial Decision Econ, 2007;28:469-479

Chronic and complex indications

Clinical trial size

Increased protocol complexity

Patient recruitment/retention

Poor preclinical screens and predictive models

Regulatory demands

Commercial demands

Drivers of High Cost, Low Success Drug Development

Source: Tufts CSDD Impact Report, Vol 12, No 3, May/June 2010

For the Research-Based Industry “Business as Usual”

is No Longer an Option

Reported Success Factors – Best Practices of Top-Performing Firms

Focus on core competencies, higher

level of outsourcing, prioritize

resources

Active collaboration with global

regulatory agencies

Enhanced utilization of e-data

management technologies

Global development strategy

Source: Tufts CSDD, 2011

R&D Reorganization

Focused units: e.g., GSK (CEDDs DPUs), PFE, ROG, NVS, BMS, SAN, LLY, AZN

Divested functions: e.g., LLY-Chorus/Vanthys; LLY-Covance; SAN-Covance; BMS-Accenture; AZN-(API); LLY-Advion (bioanalytics)

Partnerships and Alliances

Academic institutions, PPPs, Patient groups

Risk-sharing: e.g., LLY & Quintiles; MRK & PRXL (follow-on biols.)

Pharma/Pharma: e.g., MRK & AZN, SAN & DE:MRK (onc); GSK &

PFE (HIV); Enlight Biosciences (JNJ, LLY, MRK, NVS, PFE, ABT); Asian Cancer Research Group (LLY, PFE, MRK); ADNI (12 companies); BI & LLY (diabetes)

New R&D Strategies: 2 Approaches


A FIPNet Model for Drug Development: The Emergence of Innovation Nodes

Phase IV

Studies Approval

Late Stage

Development

Early Stage

Development

Discovery

Preclinical

Research

Pre-Discovery

Large Pharma

Academia

Biotechs/

Small Pharma

CROs/Other

Partners

Basic Research Translational Medicine

Execution, Monitoring, Analysis

Innovation, Partnerships

Coordination, Management Execution, Monitoring, Analysis

Large Scale Clinical Trials

Data Analysis

Medical Writing

Regulatory Approval



BOTTOM LINE:

The Innovation Landscape is

shifting. In the new environment,

all stakeholders will have a place at

the table and will share in the risks

and rewards of bioinnovation.

Conclusions

Conclusions

The time, cost, and risk to bring a new

medicine to market continue to represent

formidable challenges for drug developers.

These challenges have led to heightened

focus on R&D efficiency and performance,

and on new strategies, including R&D

reorganization, partnerships, and network

innovation.

Global clinical trial strategies introduce logistical complexity and increase clinical supplies costs (distribution, shipping, packaging, etc.)

Biologics magnify the challenges (cold storage, specialty courier services, etc.)

Industry’s move to targeted medicines increases costs for clinical supplies tailored to stratified patient populations

There is a growing move to FSP relationships with clinical supply providers

Current Trends in Clinical Supplies


“You can be on the right track,

and moving in the right direction,

but if you’re not moving fast enough,

the train will still run you over.”

Will Rogers

Tufts Center for the Study of Drug Development Tufts University, Boston, Massachusetts, USA

Kenneth I Kaitin, Ph.D. Director and Research Professor

Tufts University School of Medicine

Website http://csdd.tufts.edu

Email [email protected]

pharmaceutical innovation at a crossroads

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