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Foundational Changes in the Biopharmaceutical and Healthcare Macro Environments . . . and the Impacts on Licensing & Business Development Ed Saltzman President Defined Health
LES Annual Meeting 07 October 2014
Page 2 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Page 3 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Really Working at LES: A Decade of Feeding the Pipeline
2000 2001
2007 2008
2002
2009
2003 2004 2005 2006
Page 4 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Still Working at LES
2011 Annual Meeting Featured Session Can Biopharma Still Create Value...And How? Moderator: David Flores, Co-Founder, President & CEO, Biocentury Publications Speakers: Roger Longman, CEO, Real Endpoints LLC Ed Saltzman, President, Defined Health ----------------------------------------------------------------------------- 2011 Annual Meeting Workshop Proof of Relevance Ed Saltzman, President & Founder, Defined Health
2010 Annual Meeting Workshop Proof of Relevance: The New Standard for Partnering Vincent Aurentz, Sr EVP, Portfolio Mgmt/BD, Merck Serono Martin Birkhofer, VP Strategic Transactions, BMS Jeet Mahal, Head of Corporate Development, Portola Dennis Purcell, Senior Managing Partner, Aisling Capital Ed Saltzman, President & Founder, Defined Health
2013 Annual Meeting Mini-Plenary Session Obamacare World – Strategies & Tradeoffs Moderator: Ed Saltzman, President, Defined Health Speakers: Robert Adelson, Managing Partner, Osage Partners Patricia M. Danzon, Professor, Health Care Management; The Wharton School, University of Pennsylvania Todd Davis, Founding Managing Director, HealthCare Royalty Partners Demetrios Kydonieus, formerly VP Strategy, Alliances and Transactions, Bristol-Myers Squibb
Page 5 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Nearly 20 Years of Work Reduced to Sound Bytes
Salary Survey: • You Might Not be Underpaid • You Might be Underpaid • You Probably Aren’t Telling the Truth
Feeding the Pipeline: • There are no more P3 blockbusters
available for in-licensing Sorry your boss doesn’t understand
• There are no more P2b blockbusters available for in-licensing Sorry your boss doesn’t understand
• Guess you will need to license early
Proof of Relevance: • Essential at whatever stage you license • When licensing early (even though the
drug probably will fail), it will be even worse if it gets approved and you cannot sell it
• PoR can precede PoC but bar is getting higher
Foundational Changes: • ObamaCare is only the beginning of
dramatic and permanent changes in operating environment which will have enormous impact on deal space
Page 6 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Provides a Unique Perspective on the Deal Space
Page 7 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
So Here is the Big Picture
Copyright © Mark Lynch www.cartoons-a-plenty.com; licensed for use by Defined Health
Page 8 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Unprecedented Convergence of Trends in BioPharma Operating Environment
Focus on Rare Diseases
Biomarkers and Companion Diagnostics
Disappointing Product Launches
Therapeutic Area Focus vs Opportunistic Approach
Diversification vs “Pure Pharma”
Increasing Value of Early Stage Deals Evidence-Based Medicine
Return of IPO window
Patient Advocacy Groups
Tighter Formulary Management, “Exclusion Lists”
Mobile Health “Apps”
Regenerative Medicine
Emerging Markets
Common Use of Unapproved Agents in Combination in Clinical Trials (see Immuno-Oncology)
Market Access Hurdles – Biosimilars, NICE, Gesundheitsreformgesetz
Threats to Intellectual Property
Accountable Care Organizations
Pharma-Biotech M&A
Page 9 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Are Pointing to Permanent Changes in BioPharma’s Operating Environment
permanence
per·ma·nence \ˈpər-mə-nən(t)s, ˈpərm-nən(t)s\
noun the state or quality of lasting or remaining unchanged indefinitely.
"the clarity and permanence of the dyes"
synonyms: stability, durability, permanency, fixity, fixedness, changelessness, immutability, endurance, constancy, continuity, immortality, indestructibility, perpetuity, endlessness "the permanence of their relationship gives them a mutual sense of security"
Page 10 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Yes, I see . . .
And how does this affect me again?
Page 11 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
So Let’s Have a Town Hall
Page 12 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Don’t Fear Participating!
Page 13 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Only “Cyclic” Topics are Off Limits - Let’s Focus on Permanence
Focus on Rare Diseases
Biomarkers and Companion Diagnostics
Disappointing Product Launches
Therapeutic Area Focus vs Opportunistic Approach
Diversification vs “Pure Pharma”
Increasing Value of Early Stage Deals Evidence-Based Medicine
Return of IPO window
Patient Advocacy Groups
Tighter Formulary Management, “Exclusion Lists”
Mobile Health “Apps”
Regenerative Medicine
Emerging Markets
Common Use of Unapproved Agents in Combination in Clinical Trials (see Immuno-Oncology)
Market Access Hurdles – Biosimilars, NICE, Gesundheitsreformgesetz
Threats to Intellectual Property
Accountable Care Organizations
Pharma-Biotech M&A
Page 14 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Starting Off Discussion with a Few But Rest are Up to You!
Pharma/Biotech M&A
Disappointing Product Launches
Increasing Value of Early Stage Deals
Page 15 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Sizzling Early Stage Deal Market Driven by Pharma’s Near Exit from Traditional Discovery and Will Continue
Company website, EvaluatePharma, GoogleEarth
Increasing Value of Early Stage Deals
Pharma’s Reduced Discovery Footprint
Trend Foundational Change
♦ Traditional pharma discovery is gone permanently
Page 16 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Big Pharma’s Internal R&D Was Increasingly Costly, Unproductive and Unsustainable
Parexel; Defined Health analysis; FDA website; Phrma.org website; includes total Pharma R&D spend (domestic & abroad)
0
25
50
75
100
125
150
175
200
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Num
ber o
f Pro
duct
s
Total NDAs Total NMEs
Pharma R&D Spending and Output
Total R&D Spend 1981-1990 $50 billion
Total R&D Spend 1991-2000 $168 billion
Total R&D Spend 2001-2010 $407 billion
2011-2013 $150 B
Page 17 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Especially as Externally Sourced Products Continued to Drive Revenues
0%
10%
20%
30%
40%
50%
60%
70%
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
EvaluatePharma; includes revenue from in-licensed, company acquisitions, and product acquisitions
Percent of Top 10 Large Pharma Sales Derived from External Discovery
Page 18 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Going Over the Patent Cliff Turns Out to Be Best Thing to Happen to Pharma
$218 Billion in Rx Revenues to Generics in 2012
Page 19 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Partly Because it Put Pharma on a “Diet” Back to Health
EvaluatePharma
0
10,000
20,000
30,000
40,000
50,000
60,000
AZN BMS GSK LLY MRK PFE
2010 2012 2014 2016 2018 2020
Large Pharma Top-Line Revenues ($M) Pre-cliff and Post-cliff (forecasted)
Page 20 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Cutting R&D Has Created Shareholder Value in Post-Cliff World
EvaluatePharma, Defined Health analysis
Loss of over 1/3 of combined
market cap
0
475
950
1,425
1,900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2014
NVS PFE GSK MRK ROC SNY AZN JNJ ABT BAY BMS LLY
PFE MRK GSK JNJ BMS NVS LLY AZN ROC WYE PHA ABT AVE SGP SNY DNA BAY SHR
WYE->PFE SGP->MRK DNA->ROC AVE->SNY PHA->PFE SHR->BAY
Combined Market Cap ($B) of Top Pharma Companies (2000-2014)
Page 21 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Cuts in Internal R&D, but Especially “R” Major Contributor to Preserved and Growing Bottom Line -- at Least for Near Term
0
2
4
6
8
AZN BMS GSK LLY MRK PFE
2010 2012 2014 2016 2018 2020
EvaluatePharma 10/5/2014
Earnings Per Share
Page 22 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
But Longer Term Demand for Innovation Means R&D Spend Will Be Increasingly Externalized
EvaluatePharma, PhRMA website, DH estimates
R&D Spend in US Pharma on Self-Originated vs. Licensed-In Projects
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
100%
% R&D Spend Uncategorized
% R&D Spend on Licensed-In Projects
% R&D Spend on Self-Originated Project <---------------- DH Projected -------------->
Page 23 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
So Early Stage Deals Dominated “Top List” in 2013
Company Deal Partner Product Status on Deal Date (2013) Deal Value ($m) Upfront
Payment ($m)
Dainippon Sumitomo Edison EPI-589 Research project 4,238 18
Biogen Idec Elan Tysabri Marketed 3,250 3,250
Lilly Pfizer Tanezumab Phase III 1,780 200
Roche Molecular Partners Cancer Program Research project 1,156 60
Roche immatics biotechnologies IMA942 Pre-clinical 1,017 17
Celgene Oncomed Demcizumab Phase II 967 155
Celgene MorphoSys MOR202 Phase II 910 92
Gilead MacroGenics DART Program 1 Research project 836 23
Otsuka Lundbeck Lu AE58054 Phase II 825 150
AstraZeneca FibroGen Roxadustat Phase III 815 350
AbbVie Ablynx ALX-0061 Phase II 665 -
Roche Isis Huntington's Disease Project Research project 659 30
Pfizer CytomX Therapeutics Cancer Antibody Research Research project 635 25
Roche Chiasma Octreolin Phase III 595 65
Roche Prothena PRX002 Pre-clinical 585 30
AstraZeneca Moderna mRNA therapeutics – cancer Discovery CONF 240
EvaluatePharma
Top Licensing Deals in 2013
Page 24 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
And Again This Year and Will For Years to Come
EvaluatePharma
Top Licensing Deals in 2014
Company Deal Partner Product Status on Deal Date (2014)
Deal Value ($m)
Upfront Payment ($m)
Dainippon Sumitomo Edison Pharma Mitochondrial Disease Research Research project 4,295 50
Celgene Nogra Pharma GED-0301 Phase II 2,575 710
Merck & Co Ablynx Nanobody Research Research project 2,365 27
Merck & Co Bayer Adempas Marketed 2,100 1,000
Novartis Ophthotech Fovista Phase III 1,030 200
AstraZeneca Bristol-Myers Squibb Farxiga Marketed 1,000 50
Sanofi Mannkind Afrezza Approved 925 150
Les Laboratoires Servier Cellectis UCART19 Pre-clinical 840 -
AbbVie Infinity Pharma Duvelisib Phase III 805 275
Daiichi Sankyo Charleston Labs CL-108 Phase III 650 100
Merck & Co Bionomics BNC375 Pre-clinical 556 50
Roche Oryzon RG6016 Phase I 521 21
Jazz Pharmaceuticals Aerial BioPharma JZP-110 Phase II 397 125
Johnson & Johnson Aduro BioTech ADU-741 Pre-clinical 365 -
Allergan Medytox Meditoxin Marketed 362 65
Johnson & Johnson Capricor Therapeutics CAP-1002 Phase II 338 13
Biogen Idec Sangamo Biosciences Hemoglobinopathies Research Research project 320 20
AstraZeneca Immunocore Oncology Research Research project 320 20
Page 25 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pharma-Biotech M&A
♦ Pharma no longer has financial firepower to buy de-risked innovation ♦ This is very likely a permanent state of affairs
Pharma-Biotech M&A
Advancements in Early Stage Collaboration
Models
Trend Foundational Change
Page 26 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Buying “Fully-Baked” Innovation: A Long History
Page 27 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Disruptions in Longstanding “Food Chain” Are Permanent
Google Finance 10/2/2014
Current Earnings Per Share
4.45
1.59
0 1 2 3 4 5
Gilead
Pfizer
158.36B
184.71B
Page 28 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
But Multiple Collaboration Models are Being Developed Across Pharma Acknowledging the Beginning of Permanent Change in L&BD Environment
BioPharm America 2014 presentation by company
Page 29 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Underperforming Launches of Today Point to Need to Re-Think Longstanding LCM Strategy
♦ Many recent launch disappointments are largely due to lack of payer relevant evidence available at launch
♦ LCM strategy will evolve in light of increasingly large chasm between demands of regulators and payers
♦ But development of robust payer evidence both risky and not always fully possible in “artificial” clinical development setting and will require collection of real world evidence post-launch
♦ Launch trajectories and NPV calculations will change permanently to reflect increasing post-market development of real world evidence
Disappointing Product Launches
New LCM Model
Trend Foundational Change
Page 30 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
It’s Nicer to Call These “Disappointments”
http://www.fiercepharma.com/special-reports/top-10-drug-launch-disasters
Page 31 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
New LCM Model Will Permanently Change Sales Trajectories and NPV Calculations
PoR evidence
Future Successful Sales Ramp
Traditional Successful Sales Ramp
Current Disappointing Sales Ramp
Page 32 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
How Do You Price a Breakthrough in Today’s World?
Novartis' New Heart Failure Medicine LCZ696 Cut Cardiovascular Deaths by 20% vs. ACE-inhibitor in Landmark PARADIGM-HF Trial August 30, 2014 Study showed significantly more HF-REF patients on LCZ696 regimen were alive, had fewer hospitalizations than those given enalapril regimen
On all-cause mortality, LCZ696 doubled the effect that enalapril, an ACE-inhibitor, previously showed vs placebo when added to current best treatment for HF-RE
26 million people across US and Europe live with heart failure, facing high risk of death and poor quality of life
Today at the European Society of Cardiology congress and published simultaneously in the New England Journal of Medicine, Novartis revealed that its investigational heart failure medicine, LCZ696, was superior to ACE-inhibitor enalapril on key endpoints in the largest heart failure study ever done. In PARADIGM-HF patients with heart failure with reduced ejection fraction (HF-REF) who were given LCZ696 were more likely to be alive and less likely to have been hospitalized for sudden deterioration of their heart failure than those given ACE-inhibitor enalapril. Patients received LCZ696 or enalapril on top of current best treatment. The magnitude of benefit with LCZ696 against enalapril in HF-REF patients was highly statistically significant and clinically important. In the study, the benefit of LCZ696 was seen early, was sustained and was consistent across subgroups. LCZ696:
♦ reduced the risk of death from cardiovascular causes by 20% (p=0.00004)
♦ reduced heart failure hospitalizations by 21% (p=0.00004)
♦ reduced the risk of all-cause mortality by 16% (p=0.0005)
Overall there was a 20% risk reduction on the primary endpoint, a composite measure of CV death or heart failure hospitalization (p=0.0000002). "By demonstrating a very significant reduction in cardiovascular deaths while improving Quality of Life, Novartis' new heart failure medicine, LCZ696, represents one of the most important cardiology advances of the last decade," said David Epstein, Division Head, Novartis Pharmaceuticals. "We want to thank leading cardiologists from around the world for their collaboration with us and their determination in advancing this important new life saving therapy for heart failure patients."
LCZ696, a twice a day tablet being investigated for heart failure, has a unique mode of action which is thought to reduce the strain on the failing heart[6],[7],[8]. It acts to enhance the protective neurohormonal systems of the heart (NP system) while simultaneously suppressing the harmful system (the RAAS)[6],[8]. Currently available medicines for HF-REF work only to block the detrimental effects[6],[8]. Despite existing therapies, the mortality rate remains very high with up to 50% of patients dying within 5 years of a diagnosis of heart failure[9],[10],[11]. Approximately half of patients with heart failure have HF-REF.
Analysis of the safety data from PARADIGM-HF showed side effects were manageable in the study[1]. Fewer patients on LCZ696 discontinued study medication for any adverse event compared to those on enalapril (10.7% vs 12.3%, respectively, p=0.03). The LCZ696 group had more hypotension and non-serious angioedema but less renal impairment, hyperkalemia and cough than the enalapril group. Novartis plans to file the application for marketing authorization with the US FDA by the end of 2014 and in the EU in early 2015.
About the PARADIGM-HF study: PARADIGM-HF is a randomized, double-blind, phase III study evaluating the efficacy and safety profile of LCZ696 versus enalapril (a widely studied ACE inhibitor) in 8,442 patients with HF-REF[6],[13]. The baseline characteristics showed the patients enrolled were typical HF-REF patients with NYHA Class II-IV heart failure. PARADIGM-HF was specifically designed to see if LCZ696 could decrease CV mortality by at least 15% vs. enalapril[6]. Patients received LCZ696 or enalapril in addition to current best treatment regimen. The primary endpoint is a composite of time to first occurrence of either cardiovascular death or heart failure hospitalization, and is the largest heart failure study ever done[6]. Secondary endpoints are change in the clinical summary score for heart failure symptoms and physical limitations (as assessed by Kansas City Cardiomyopathy Questionnaire) at 8 months; time to all-cause mortality; time to new onset atrial fibrillation; and time to occurrence of renal dysfunction[6]. It was initiated in December 2009 and in March 2014 the Data Monitoring Committee confirmed that patients given LCZ696 were significantly less likely to die from CV causes, leading to the trial being stopped early[14]. The DMC also confirmed the primary endpoint had been met.
About LCZ696 in heart failure: LCZ696 is an ARNI (Angiotensin Receptor Neprilysin Inhibitor) and has a unique mode of action which is thought to reduce the strain on the failing heart[6],[8]. It harnesses the body's natural defences against heart failure, simultaneously acting to enhance the levels of natriuretic and other endogenous vasoactive peptides, while also inhibiting the renin-angiotensin-aldosterone system (RAAS). Heart failure is a debilitating and potentially life-threatening disease in which the heart cannot pump enough blood around the body. Symptoms such as breathlessness, fatigue and fluid retention can appear slowly and worsen over time, significantly impacting quality of life[4],[15]. It is a significant and growing public health concern with a high unmet need for new treatments. Every year, HF costs the world economy $108 billion[16], and hospitalizations comprise 60-70% of treatment costs[17],[18].
http://www.novartis.com/newsroom/media-releases/en/2014/1852531.shtml
Overall there was a 20% risk reduction on the primary endpoint, a composite measure of CV death or heart failure hospitalization (p=0.0000002). "By demonstrating a very significant reduction in cardiovascular deaths while improving Quality of Life, Novartis' new heart failure medicine, LCZ696, represents one of the most important cardiology advances of the last decade," said David Epstein, Division Head, Novartis Pharmaceuticals
Page 33 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Translation: We Will Increase Price to Reflect Value When We Collect Enough Post-Launch Evidence
BioCentury
Pharmaceuticals Division Head David Epstein said LCZ696 won’t be priced like a generic, but that Novartis doesn’t think a high price is necessary for the company to continue developing products. “Companies have a responsibility to price reasonably, and we will do that,” he (Epstein) said.
Page 34 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
OK Now It’s Your Turn
Page 35 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
The Floor is Yours!
Page 36 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Therapeutic Area Commitments Will Become at Least Semi-Permanent
♦ Companies are starting to look at whether they can be competitive and achieve critical mass in a specific therapeutic area and otherwise, try to monetize
♦ Each pharma company will focus on 3-4 TA areas and become global leaders
Therapeutic Area Focus vs Opportunistic Approach
Franchise Commitment
Trend Foundational Change
Page 37 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Most of Pharma Has Focused on Limited Therapeutic Areas
BioPharm America 2014 presentation by company
Page 38 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
But At Least One Has Swung Back the Other Way
BioPharm America 2014 presentation by company
Page 39 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
But This Looks More Permanent
http://www.reuters.com/article/2014/04/22/us-novartis-idUSBREA3L07T20140422
Novartis and GSK Trade Assets as Pharma Industry Reshapes Apr 22, 2014 Novartis and GlaxoSmithKline agreed to trade more than $20 billion worth of assets on Tuesday to bolster their best businesses and exit weaker ones as the drug industry contends with healthcare spending cuts and generic competition. The deals, which include Novartis' purchase of GSK's cancer drugs and GSK's acquisition of Novartis' vaccines business, came just after a newspaper report that AstraZeneca Plc had turned down a $101 billion bid approach from Pfizer Inc, a story that sent shares up across the sector. In addition, Novartis is selling its animal health arm to Indianapolis-based Eli Lilly for about $5.4 billion in cash. That would make Lilly's Elanco unit the world's second-largest animal health business when that deal closes early next year. A flurry of dealmaking has overtaken the global pharmaceutical industry recently as most large companies try to focus on a small number of leading businesses, while smaller specialty and generic producers seek greater scale. Deal values have almost doubled since the start of 2014 to $77.9 billion from a year earlier, according to Thomson Reuters data.
The overhaul at Novartis marks the end of a yearlong review of its sprawling portfolio after the departure of longtime Chairman and Chief Executive Officer Daniel Vasella, the architect of the merger of Ciba-Geigy and Sandoz that led to the company's formation in 1996. The Swiss drugmaker said it would buy London-based GSK's oncology products for $14.5 billion plus another $1.5 billion that depends on the results of a trial in melanoma. The deal will strengthen Novartis's world No. 2 position in cancer behind crosstown rival Roche Holding AG. Novartis said GSK was buying its vaccines, excluding flu, for $5.25 billion plus potential milestone payments of up to $1.8 billion and ongoing royalties. The companies also will form a joint venture in consumer healthcare. The transactions, and their hint of more deals ahead for the drug sector, lifted the ARCA Pharmaceuticals Index 1.8 percent.
Lilly's Elanco animal health unit will acquire about 600 animal health brands from Novartis, including vaccines and anti-parasite medicines that will allow it to enter the acquaculture, or fish farming, market. This would be the eighth and largest acquisition since 2007 for Elanco, which by global sales would trail only Zoetis Inc, which also specializes in products for farm animals and pets. "With this transaction, we'll go from being No. 5 to No. 3 on the pet side globally and become a top 2 or 3 player in every segment" of products for farm animals, Jeff Simmons, Lilly's head of animal health, said in an interview. Last year Elanco had sales of $2.15 billion, compared with $1.1 billion for Novartis Animal Health. "Novartis has agreed (to) an elegant set of transactions that either removes or strengthens its underperforming assets, while boosting its oncology portfolio," Jefferies analysts said. In afternoon New York Stock Exchange trading, Novartis shares were up 1.4 percent at $86.63, while GSK rose 4.2 percent to $55.34. Lilly dipped 0.9 percent to $60.32.
FIGHTING FIT: Novartis CEO Joe Jimenez said the revamp would help make the company "fighting fit" to meet the challenges of the global healthcare industry over the next 10 years. He told reporters the deals would lower overall sales by about $4 billion but result in higher profits as the company swaps lower-margin vaccines for higher-margin oncology drugs. Cancer is a particular focus for some drugmakers as novel medicines show promise by boosting the body's immune system. "We reckon the real value of the (cancer) deal should be searched for in the pipeline and the newly launched products, strengthening Novartis' position in melanoma and hematology," Vontobel analyst Andrew Weiss said. Analysts at Swiss broker Notenstein were also upbeat, saying the new cancer drugs would help Novartis to navigate patent expiries on top-selling medicines more easily. However, analysts at Barclays described the price tag of as much as $16 billion for the oncology assets as "rather hefty.“ Drugmakers are stocking up their oncology pipelines as they bet that combinations of drugs will become the future of cancer care. A desire to boost its oncology business is seen as a key factor behind Pfizer's reported interest in AstraZeneca. Cancer is an extremely competitive marketplace, however, and some analysts said it was right for GSK to exit a field where it was only No. 14 in the world. GSK boss Andrew Witty said the company did not have the scale to compete in cancer drugs, so it made sense to put them into "the hands of somebody who is a world leader in oncology.“ Conversely, he said the deals with Novartis strengthened two of GSK's core businesses: vaccines, given in more than 2 million shots every day, and consumer health, where the company will take the lead in running a business worth about $10 billion in annual revenue with the Swiss group. The deals were another step in his strategy of focusing on areas of strength, he said, moving further away from the monolithic model of drugs companies that tried to do everything.
After the deal, GSK will get 70 percent of sales from its franchises in respiratory, HIV, vaccines and consumer health. Novartis said it would start a separate sale process for its flu business immediately, which was not part of the GSK deal. Lilly said it would fund its animal health transaction with $3.4 billion of cash and $2 billion of loans, and it expected cost savings of about $200 million per year within three years of closing the deal.
Novartis and GlaxoSmithKline agreed to trade more than $20 billion worth of assets on Tuesday to bolster their best businesses and exit weaker ones as the drug industry contends with healthcare spending cuts and generic competition.
"Novartis has agreed (to) an elegant set of transactions that either removes or strengthens its underperforming assets, while boosting its oncology portfolio," Jefferies analysts said. In afternoon New York Stock Exchange trading, Novartis shares were up 1.4 percent at $86.63, while GSK rose 4.2 percent to $55.34.
Cancer is an extremely competitive marketplace, however, and some analysts said it was right for GSK to exit a field where it was only No. 14 in the world. GSK boss Andrew Witty said the company did not have the scale to compete in cancer drugs, so it made sense to put them into "the hands of somebody who is a world leader in oncology.“ The deals were another step in his strategy of focusing on areas of strength, he said, moving further away from the monolithic model of drugs companies that tried to do everything.
Page 40 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pricing Environment Hostile in All Major Markets
Drug Pricing Down
Trends Foundational Change
♦ Payer is now loudest and most powerful stakeholder and will maintain that position permanently
♦ Drug pricing as well as long standing regional drug pricing models are all headed in same direction, down!
Tighter Formulary Management, “Exclusion Lists”
Market Access Hurdles – Biosimilars, NICE,
Gesundheitsreformgesetz
Page 41 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Globalization for Real
♦ Nature of business less important than requirement for global scale which will be permanent objective for Pharma
♦ Emerging markets will permanently have emerged and will demand similar levels of innovation but at far lower cost than established markets
• As in developed markets, Pharma will need to share in risk of outcomes
• Pharma’s current emerging market “strategy” of selling branded generics soon to vanish
Diversification vs “Pure Pharma” True
Globalization
Trends Foundational Change
Emerging Markets
Page 42 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Bayer Will Not Be Going Back: These are Permanent Changes
Bye-Bye, Polymers: Bayer to Divest Material Science Business 09/18/2014 Chemicals giant Bayer plans to get rid of the remaining material science and polymers business: The company wants to focus on life science solutions, bringing its subsidiary Bayer material Science on the stock market by 2016. Already in 2004, the company had divested large parts of its specialty chemicals and polymer business into the new formed Lanxess. After the Wall Street Journal discussed the possibility of Bayer divesting its polymers business Bayer material Science, the German based company confirms the rumours: The company intends to focus on its life science businesses - Health Care and Crop Science – from 2016 on, the Bayer board stated. In 2013, Bayer Material Science contributed € 11.2 billion to Bayer's € 40 billion turnovers. The split–off could be Germany's biggest stock market launch in recent times, market insiders believe. Only ten years ago, the company had divested big parts of its polymers and specialties business into the newly found Lanxess.
"Our intention is to create two top global corporations: Bayer as a world-class innovation company in the Life Science businesses, and Material Science as a leading player in polymers," Bayer CEO Dr. Marijn Dekkers announced. He said both companies have excellent prospects for success in their respective industries. Employment levels are expected to remain stable over the next few years, both globally and in Germany.
Future Bayer Focus on Agrochemicals and Life Sciences
In recent years, Bayer's center of gravity has greatly shifted toward its Life Science activities, the company states. Recently, it had sucesfully launched new pharmaceutical products and announced interests to buy Merck & Co's over-the-counter products business in the US. Following its regular evaluation of the business portfolio, the Board of Management has therefore decided to focus the company on these areas. The Life Sciences currently already account for about 70 percent of Bayer's sales and 88 percent of EBITDA before special items.
Stock Market Launch by 2016
It is planned to float the Material Science business on the stock market as a separate company within the next 12 to 18 months. A major reason for this move is to give Material Science direct access to capital for its future development. This access can no longer be adequately ensured within the Bayer Group due to the substantial investment needs of the Life Science businesses for both organic and external growth, the firm believes. The companies of the future Bayer Group had pro forma sales of approx. € 29 billion in 2013 and will employ nearly 99,000 people, including about 29,500 in Germany. Corporate headquarters will remain in Leverkusen.
http://www.process-worldwide.com/management/markets_industries/articles/459765/
"Our intention is to create two top global corporations: Bayer as a world-class innovation company in the Life Science businesses, and Material Science as a leading player in polymers," Bayer CEO Dr. Marijn Dekkers announced. He said both companies have excellent prospects for success in their respective industries.
Page 43 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
“Fee-for-Service” Model Already Nearly Dead in Last Bastion US
Accountable Care Organizations
Multiple Outcome-Based Payment Systems
Trend Foundational Change
♦ But today’s ACO is only one “flavor” of what will become numerous payment systems all based on outcomes
♦ Pharma is not even close to ready for this dramatic and permanent change
• This is greatest risk faced by industry today
Page 44 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pharma Will be Forced to Accept New Risk for Outcomes
Biomarkers and Companion Diagnostics Risk Sharing
Trend Foundational Change
♦ Risk sharing on efficacy/cost in patient populations
♦ Pharma will need to refund money for drugs that don’t work
♦ Who will define whether drug “works”?
• If Pharma cannot contribute to this measure, it will be measured for them likely unfairly
• Lack of clear Companion Dx strategy is a huge problem for Pharma
Page 45 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pharma Currently Pursuing Lower and More Obvious Differentiation Hurdles Over Outcomes
No prior therapy
Orphan
Extended survival
Pharmacoeconomic benefit
Utility in first line non-responders or as add-on
Tolerability, Safety & QoL
Improved Overall Therapeutic Profile
Overall Improved Outcomes
Page 46 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pharma is Actively Courting Patients But Needs to Be Careful What it Wishes For
♦ Emergence of patients as increasingly powerful stakeholders is inevitable and will have permanent impact on portfolio and development strategy
♦ Pharma is counting on patient advocacy for more than program funding: Hopes extend to regulatory advocacy and siding with Pharma against payers
♦ But Pharma will very seriously miscalculate if patient demands for outcomes-based value are underestimated
Patient Advocacy Groups
Patient as Key Stakeholder
Trend Foundational Change
Page 47 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pharma’s Small Success in Rare Disease is Not Sustainable but has Driven Permanent Change in R&D Model
• “Genetics-heavy” discovery process for rare diseases will continue to change the way pharma thinks about approaching R&D, especially on reduced spend
• Examples: research on discovery of PCSK9 involvement in LDL; Xenon/Genentech pain collaboration (studying rare phenotypes to discover/validate new pain targets)
• Genetically mediated MoAs will dominate across orphan and larger population diseases
Focus on Rare Disease
Pharma’s Approach to R&D has Changed
Trend Foundational Change
Page 48 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pharma “R” Re-Invented and Now Begins With Biology and is Heavily Genetics-Based
Page 49 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Use of Unapproved Agents in Combination in Clinical Trials (see Immuno-Oncology) Becoming More Common
Common Use of Unapproved Agents in Combo in Clinical
Trials (see Immuno-Oncology)
New and Re-Built Regulatory Paths in Many
Therapeutic Areas
Trend Foundational Change
♦ First cautious steps taken by FDA but future of most promising new therapies, especially immunotherapies, means traditional regulatory paths will need to evolve and will do so permanently
♦ But evolution of regulatory paths will hinge on advancing regulatory science
• Though currently nascent, approval paths in future will be radically different than today
♦ L&BD arrangements will need to evolve in parallel
Page 50 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Soon This Type of Thing Will No Longer Be News
Novartis Announces Clinical Collaboration to Evaluate Bristol-Myers Squibb's Novel Immunotherapy in Combination Treatments for NSCLC October 06, 2014 Phase I/II studies will evaluate Zykadia(TM), INC280 and EGF816 in combination with Bristol-Myers Squibb's investigational immunotherapy Opdivo®
Combination studies will evaluate compounds that have demonstrated evidence of targeting mutations associated with tumor growth in patients with NSCLC
Collaboration highlights promising new treatment approach for patients and underscores Novartis' commitment to patients and the lung cancer community
Novartis announced today that it has entered into a clinical collaboration with Bristol-Myers Squibb Company (NYSE: BMY) to evaluate the safety, tolerability and preliminary efficacy of three molecularly targeted compounds in combination with Bristol-Myers Squibb's investigational PD-1 immune checkpoint inhibitor, Opdivo® (nivolumab), in Phase I/II trials of patients with non-small cell lung cancer (NSCLC). "Preclinical data suggests that combining molecularly targeted agents with immunotherapies such as nivolumab may have synergistic effects and lead to better outcomes for patients," said Alessandro Riva, MD, Global Head, Novartis Oncology Development and Medical Affairs. "This collaboration enables us to study several key compounds, including our new highly-potent ALK inhibitor Zykadia, together with a promising, novel immunotherapy agent, paving the way for potential new treatment approaches for patients with NSCLC."
Both studies will be conducted by Novartis. One trial will evaluate the combination of Opdivo with Zykadia(TM) (ceritinib), an FDA-approved treatment for patients with anaplastic lymphoma kinase-positive (ALK+) metastatic NSCLC who have progressed on or are intolerant to crizotinib[1]. A second study will investigate Opdivo with INC280, a potent and highly selective inhibitor of c-MET receptor tyrosine kinase, and separately with EGF816, a potent, third-generation EGFR tyrosine kinase inhibitor that is active against T790 mutations. INC280 and EGF816 are currently being investigated in various Phase I/II NSCLC trials. Additional details of the collaboration were not disclosed.
This collaboration with Bristol-Myers Squibb further advances Novartis' development efforts in the field of immunotherapy. Earlier this year, Novartis acquired CoStim Pharmaceuticals Inc., adding late discovery stage immunotherapy programs focused on key oncogenic targets, including PD-1. Novartis is also actively investigating the potential of chimeric antigen receptor (CAR) T cell technologies in the treatment of various liquid and solid tumors through its alliance with the University of Pennsylvania.
About Zykadia: Zykadia (ceritinib) is indicated in the US for the treatment of patients with ALK+ metastatic NSCLC who have progressed on or are intolerant to crizotinib. This indication is approved under accelerated approval based on tumor response rate and duration of response. An improvement in survival or disease-related symptoms has not been established. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. Outside of the US, Zykadia (ceritinib) is an investigational agent and has not been approved by regulatory authorities. Regulatory reviews are currently underway in the European Union and several countries within South America, Central America and Asia.
About INC280 and EGF816 Because these are investigational compounds, the safety and efficacy profiles of INC280 and EGF816 have not yet been established. Access to these investigational compounds is available only through carefully controlled and monitored clinical trials. These trials are designed to better understand the potential benefits and risks of the treatments. Because of the uncertainty of clinical trials, there is no guarantee that INC280 and EGF816 will ever be commercially available anywhere in the world. Novartis licensed INC280 from Incyte Corporation and holds exclusive worldwide development and commercialization rights to the compound in all indications.
About Opdivo (nivolumab) Cancer cells may exploit "regulatory" pathways, such as checkpoint pathways, to hide from the immune system and shield the tumor from immune attack. Opdivo is an investigational, fully-human PD-1 immune checkpoint inhibitor that binds to the checkpoint receptor PD-1 (programmed death-1) expressed on activated T-cells. Bristol-Myers Squibb has a broad, global development program to study Opdivo in multiple tumor types consisting of more than 35 trials - as monotherapy or in combination with other therapies - in which more than 7,000 patients have been enrolled worldwide. Among these are several potentially registrational trials in NSCLC, melanoma, renal cell carcinoma (RCC), head and neck cancer, glioblastoma and non-Hodgkin lymphoma. In July, 2014, Opdivo received manufacturing and marketing approval in Japan for the treatment of patients with unresectable melanoma. Opdivo is also under review by the U.S. Food and Drug Administration and European Medicines Agency. Bristol-Myers Squibb has proposed the name Opdivo (pronounced op-dee-voh), which, if approved by health authorities, will serve as the trademark for nivolumab.
http://www.novartis.com/newsroom/media-releases/en/2014/1860778.shtml
One trial will evaluate the combination of Opdivo with Zykadia(TM) (ceritinib), an FDA-approved treatment for patients with anaplastic lymphoma kinase-positive (ALK+) metastatic NSCLC who have progressed on or are intolerant to crizotinib. A second study will investigate Opdivo with INC280, a potent and highly selective inhibitor of c-MET receptor tyrosine kinase, and separately with EGF816, a potent, third-generation EGFR tyrosine kinase inhibitor that is active against T790 mutations. INC280 and EGF816 are currently being investigated in various Phase I/II NSCLC trials.
Page 51 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Gene Therapy and Gene “Editing” are Cool Again!
Regenerative Medicine Curative Products
Trend Foundational Change
♦ First wave of approved gene therapy products have argued (successfully) for “breakthrough” ($mln) price, but this is unsustainable given size of pipeline
♦ Current Rx pricing models, largely based on chronicity and annual cost of care are already strained, but need to truly evolve to place value on “cure”
♦ Measures such as QALY will be insufficient alone to determine value of curative products
Page 52 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
If You Predicted This 10 Years Ago You Would Have Been Declared Insane or at Least Very Drunk!
Sectors to Watch in Biotech and Healthcare Investing: Regenerative Medicine 5 August 2014 Regenerative medicine has far-reaching implications for treating numerous devastating and costly diseases. The Alliance for Regenerative Medicine (ARM), a multi-stakeholder advocacy organization, defines regenerative medicine research as that which “translates fundamental knowledge in biology, chemistry and physics into materials, devices, systems and a variety of therapeutic strategies, which augment, repair, replace or regenerate organs and tissue.”
Regenerative medicine has the potential to treat a wide range of chronic and life-threatening diseases and conditions, including cancer, diabetes, genetic disorders, Parkinson’s, Alzheimer’s, ALS, macular degeneration, cardiovascular disease, and stroke. In addition, these advances have the potential to change the economics of both healthcare delivery and drug discovery by allowing for the treatment of the fundamental causes of disease and damage from injury and age. But regenerative medicine isn’t limited to just stem cell or cellular therapies, as is commonly thought. In addition to therapeutics (either alone or in combination with other technologies such as gene editing or bioengineering), regenerative medicine companies are also developing tools to aid in drug development, such as the creation of in vitro models of human disease to enable drug discovery, as well as drug efficacy and toxicity testing. Lastly, companies also are developing drugs that stimulate the body’s own innate capacity to regenerate or repair itself.
According to a recent report from ARM, the field has reached critical mass and has matured enough to be ready for commercial development. There are more than 700 companies worldwide with a regenerative medicine focus and the field is drawing an increasing level of interest and investment from industry, as evidenced by many of the major biopharma companies having active programs underway.
The combined regenerative medicine field, including cell, gene, and gene-modified cell therapies, generated $4.74 billion through partnering deals, acquisitions, and public and private investments from March 2013 to March 2014. There are close to 700 clinical trials currently underway with the largest areas of focus in oncology, CNS disorders, and cardiovascular diseases. And, the clinical pipeline is maturing with over one-third of those trials in later stages (Phase II or III). The rate of growth is reflected in the public markets: 25% of the biotech IPOs in the second half of 2013 were regenerative medicine companies. Gene therapy companies bluebird bio (Nasdaq: BLUE) and uniQure NV (Nasdaq: QURE) raised $116 million and $91.8 million, respectively, in their IPOs; Cellular Dynamics International (Nasdaq: ICEL), a manufacturer of stem cell tools, raised $46.1 million in its IPO. In the private markets, Juno Therapeutics, a cancer immunotherapy company, raised $145 million in its Series A round, one of the biggest ever in biotech.
This year promises to be a banner year with several companies expected to announce clinical trial results in stroke, cardiovascular diseases, cancer, and HIV, and more investigational new drug applications expected for the companies seeking to treat diabetes, Parkinson’s disease, and congestive heart failure, among other diseases.
http://www.poliwogg.com/news/125-sectors-to-watch-in-biotech-and-healthcare-investing
The combined regenerative medicine field, including cell, gene, and gene-modified cell therapies, generated $4.74B through partnering deals, acquisitions, and public and private investments from March 2013 to March 2014. There are close to 700 clinical trials currently underway with the largest areas of focus in oncology, CNS disorders, and cardiovascular diseases. And, the clinical pipeline is maturing with over one-third of those trials in later stages (P2 or P3). The rate of growth is reflected in the public markets: 25% of the biotech IPOs in the second half of 2013 were regenerative medicine companies.
Page 53 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
Pharma Business Model Must Evolve to Consider Diagnosis and Monitoring in Non-Professional Setting
Mobile Health “Apps” Disease Prevention
Trend Foundational Change
♦ Developments in self-monitoring technology likely to be disruptive and herald permanent change in point-of-care
♦ But Pharma model overwhelmingly professionally–targeted and is treatment-based as opposed to preventive
Page 54 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
2012 is 20 Years Ago in “Technology Years”
Page 55 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
My Bad! This is LES: Anyone Want to Discuss IP?
Threats to Intellectual Property ???
Trend Foundational Change
♦ But discussions of BioPharma patents/length will need to consider context of increasingly hostile environment for drug pricing
Page 56 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
We Are Out of Time Now But Let’s Keep the Discussion Going
Page 57 LES 2014 Annual Meeting - 07 October 2014 © Defined Health
BioEurope Spring March 9 – 11, 2015 | Paris, France
http://dfndhlth.com/BES-2015
Defined Health is pleased to present:
Defined Health will also be participating in the following industry events:
Licensing Executives Society Annual Meeting | October 5-8, 2014 | San Francisco |http://dfndhlth.com/LES-2014
22nd Annual International Cancer Immunotherapy Symposium | Oct 6-8, 2014 | New York, NY |http://dfndhlth.com/CRI-2014
ID Week 2014 | October 8-12, 2014 | Philadelphia, PA | http://dfndhlth.com/IDWEEK2014
Therapeutic Area Partnerships | November 19-21, 2014 | Boston, MA | http://dfndhlth.com/TAP-2014
ASH Annual Meeting | December 6-9, 2014 | San Francisco | http://dfndhlth.com/ASH-2014
Biotech Showcase 2015 | January 12-14, 2015 | San Francisco, CA | http://dfndhlth.com/BTS-2015
Biocom's Global Life Science Partnering Conference | February 26-27, 2015 | La Jolla, CA |http://dfndhlth.com/BGLSLC-2015
26h Annual Cancer Progress Conference March 17 – 18, 2015 | New York City, US
www.cancerprogressbyDH.com
