The Pharma Professional

An industry focused learning program for students of pharmaceutical sciences

Session 3

1st March 2014

NIPER Hyderabad

22

Recap – Session 2

Why are generics essential in the healthcare

system?

What is the average development time of a generic?

What are the different mechanisms for

manufacturing compliance programs?

What was the objective of the Hatch Waxman act?

What are the different types of patent certifications

provided in an ANDA?

Name 3 generic entry response strategies

33

Presentation of Session 1 assignment

• Each group presents the Session 1 assignment

• Presenter chosen by faculty• Review and Q&A

The business of pharmaceutical outsourcing

55

Outline

Overview

Market dynamics and outsourcing trends

Contract research outsourcing

Contract manufacture outsourcing

6

OVERVIEW

77

Overview

8

GLOBAL GROWTH DRIVERS AND MARKET DYNAMICS

99

Global growth drivers

Patent Expiries

• Drugs worth USD 90bn going off patent

• New launches not enough to justify loss of revenue

R&D productivity

• R&D spend increasing, new approvals decreasing

• Average R&D cost has increased to USD 1.4bn per NCE

Focus on generics

• Increasing role of generics in developed countries by insurance and healthcare providers

• Emerging markets entering branded generics segments to boost profitability

Cost pressure

• Falling R&D productivity coupled with pricing pressure

• Raw material and wage inflation

1010

Outsourcing trends

25%

15%20%

55%

15% 15%

0%

10%

20%

30%

40%

50%

60%

Discovery APIdevelopment

Dosagedevelopment

API manufacturing Dosagemanufacturing

Packaging

• Emerging trend in the outsourcing of core functions such as clinical trials and drug

discovery

• Late life cycle outsourcing has the highest share – API manufacturing outsourcing

at approx. 55%

• Drug discovery/development and formulation manufacturing outsourcing represent

high scope for growth

1111

Market dynamics

• Approx. 64% of the overall USD 67bn global

CRAMs market dominated by contract

manufacturing

• Contract research represents USD 25bn

globally

• Huge scope for growth – only 20% of global

pharma R&D spend being outsourced

• In india, USD 2.3bn comes from contract

manufacturing

• Contract research size at USD 1.5bn – strong

growth driven by chemistry capability, skilled

manpower and cost value

• Outsourcing market in India highly fragmented

with over 1000 players

12

CONTRACT RESEARCH OUTSOURCING

1313

Overview

CROs provide services including drug discovery, new

product development, formulation, trial management till

phase IIA

The Indian CRO industry has grown by 65% from 2007

onwards

Capabilities to provide late stage discovery chemistry

and drug development services

Research biology skills yet in nascent stage

1414

Growth drivers

Cost and time advantage

Availability of diverse genetic pool

Large resource of technical expertise

Increasing compliance with ICH-GCP

Cost USD mn India advantage

Phase I 20-25 <50%

Phase II 50-60 <60%

Phase III 100-150 <60%

1515

Market split

1616

Key advantages

Collaboration between industry, academia and the government through programs such

as the Drugs and Pharmaceutical Research Program

Focus on specialised pharmaceutical education

Zero duty for technology upgrades through the EPCG scheme

Public-private partnership models to harness innovation capability

Increase in weighted reduction from 150% to 200% for expenditure on in-house R&D

activities

1717

Key challenges

Unavailability of skilled manpower for clinical trials

Attrition of skilled workforce a high risk

Concerns on diligent following of guidelines set by

regulatory bodies

Concern on confidentiality and IP protection on NCEs

Significant competition within India and from China

18

CONTRACT MANUFACTURE OUTSOURCING

1919

The contract manufacturing value chain

• Scaling up from large scale to kilo level and from kilo to ton level.

Custom Synthesis

• Commercial production of APIs/ Intermediates

Drug Substance Production

• Commercial production of formulations in different dosage form

Dosage Form Development and Production

2020

Contract manufacturing – Key clusters

Traditional Formulation

Cluster

Traditional Formulation

Cluster

Emerging Bulk Drugs Cluster

Emerging Bulk Drugs Cluster

Emerging Formulation

Cluster

Emerging Formulation

Cluster

Traditional Bulk Drugs Cluster

Traditional Bulk Drugs Cluster

GOAMAHARASHTRA – Mumbai, PuneANDHRA PRADESH - Hyderabad

GOAMAHARASHTRA – Mumbai, PuneANDHRA PRADESH - Hyderabad

ANDHRA PRADESH - VisakhapatnamANDHRA PRADESH - Visakhapatnam

HIMACHAL PRADESH – BaddiUTTARAKHAND - Pantnagar, Haridwar

HIMACHAL PRADESH – BaddiUTTARAKHAND - Pantnagar, Haridwar

GUJARAT – Ahmedabad, Ankleshwar, Vapi, VadodaraMAHARASHTRA – Mumbai, Tarapur, Aurangabad,PuneANDHRA PRADESH – Hyderabad, MedakTAMILNADU – Chennai PONDICHERRYKARNATAKA – Mysore and BangaloreGOA - Panaji

GUJARAT – Ahmedabad, Ankleshwar, Vapi, VadodaraMAHARASHTRA – Mumbai, Tarapur, Aurangabad,PuneANDHRA PRADESH – Hyderabad, MedakTAMILNADU – Chennai PONDICHERRYKARNATAKA – Mysore and BangaloreGOA - Panaji

2121

Benefits analysis

Benefit Analysis

Cost-efficiency

Rationalization of assets

Focus on core competencies

Life-cycle management

Operational efficiency

Regulatory Expertise

2222

Cost arbitrage

50

25

25

3

10

5

15

7

United States

India

Raw Materials Manpower Depreciation Other Site Exp

Percentage points comparison with U.S.

Manufacturing Cost Arbitrage, India

The United States

China

India – Non-

USFDAIndia – USFDA

approved

Europe

Percentage points comparison with U.S.

Cost Comparison, India

100

95

70

66

22

7

4

United States

Germany

Italy

United Kingdom

Poland

India

China

Percentage points comparison with U.S.

Labor Cost Arbitrage, India

2323

Infrastructure and facilities

Cost competitiveness plus product quality

More than 100 US FDA approved facilities

GMP compliant, catering to international standards

5

8

10

25

27

55

119

Hungary

Israel

Taiwan

Spain

China

Italy

India

Number of U.S. FDA-approved Facilities, Global, 2011

2424

Existing business models

China India

EuropeThe United StatesBulk and Sourcing Hub

• Good cost of RM/ early stage intermediates

• Late lifecycle APIs

Scale Manufacturing Hub (API and formulations)

• More than 100 U.S. FDA-approved plants

• High-quality managerial

Quality assurance •

Strong API and

formulations capability

Early Stage and LaunchHub

• R&D expertise and

investments

• Technology capability• Facilities to support

launch• Relationships and track

record

Existing Business Model, Global

•

2525

Emerging business models

Pre-clinical API

Pre-clinical Formulation

Phase-I API

Phase-II a API

Phase-II b API

Phase III

API Registrat

ionLaunch Commercial

Manufacturing

Clinical Trials Formulations

Formulations Development

PRE-CLINICAL DEVELOPMENT CLINICAL DEVELOPMENT COMMERCIALIZATION

FULL-SCALE SUPPLIESEARLY PHASE CUSTOM SYNTHESIS AND FORMULATIONS DEVELOPMENT

DEVELOPMENT PARTNER LAUNCH PARTNERLIFECYCLE

MANAGEMENT PARTNER

Prior 20002000-20052005-20102010-20152015 OnwardsAPIs/ Bulk

Drugs

Prior 20052005-20102010-20152015-20202020 OnwardsFormulations

2626

Selecting a CMO – key factors

Capacity

Reputation/Credibility

Technical expertise

QualityLow

Low High

Low High

2 105 6 8

2 104 6 8

2 104 6 8

Low High

2 104 6 8

High

Personal relationship

Communication

Timely delivery/ Speed

Approved facilities/Regulatory support

Low

Low High

Low High

2 104 6 8

2 104 6 8

2 104 6 8

Low High

2 104 6 8

High

Cost LocationLow High

2 104 6 8Low High

2 104 6 8

Note: Above are the key competitive factors in the selection of a CMO by Pharmaceutical/Biotech companies for contract manufacturing services. The factors are rated on a scale of 1 to 10 with 1 = Low importance and 10 = High importance based on the end-user’s input.

2727

Key players and services

Analytical: Sample Types

Divi’s Laboratory

Ltd.

Piramal Healthcare Ltd.

Jubiliant Organosys

Ltd.

Aurobindo Pharma

Ltd.

Dr. Reddy’s Laboratory

Ltd.

Raw Materials

API Testing

Dosage Form

Cleaning Validation

Intermediates

2828

Key players and services

API Types Divi’s Laboratory

Ltd.

Piramal Healthcare Ltd.

Jubiliant Organosys

Ltd.

Aurobindo Pharma

Ltd.

Dr. Reddy’s Laboratory

Ltd.

Small Molecules

Controlled Substances

Custom Organic Synthesis

API - Intermediates

Cytotoxics

Process Development

2929

Key players and services

Formulations List

Divi’s Laboratory

Ltd.

Piramal Healthcare Ltd.

Jubiliant Organosys

Ltd.

Aurobindo Pharma

Ltd.

Dr. Reddy’s Laboratory

Ltd.

Injectable

Oral

Topical

Buccal/ Sub-lingual

Ophthalmic

Antibodies Formulation

3030

Pushing and pulling forces

Enormous Cost-

saving Benefits

Manufacturing costs reduced by 40 – 60 %

Patent Cliff

Drugs worth $90

billion going off patent

globally

Increasing Regulatory

Support

Novel technology,

new pharmaceutical

hubs, SEZ policy

Industry Consolidation

Strategic alliances between

Big Pharma and

domestic participants

Limited Technical Know-how

Lack of expertise in sterile products,

technology platforms

IPR Protection

Breach of proprietary information

Drivers Restraints

3131

Trend of strategic alliances

Drive among MNCs to outsource manufacturing has

gained momentum

MNCs prefer Indian generic companies vs. pure play

contract manufacturers

Generic companies capable of manufacturing products across

therapeutic categories

Already manufacturing products for emerging markets

Have already demonstrated compliance in regulated markets

3232

Some examples

Month

MNC Indian Company

Deal Type Rationale

Jan-10

Pfizer Strides Arcolab

Collaboration of existing product portfolio

Pfizer to commercialize off-patent drugs

Mar-10

Astrazeneca

Torrent Supply of generic medicine in emerging

markets

Enhance product portfolio in emerging markets

Mar-10

Aspen Indoco Drug supply pact Indoco to manufacture and Aspen to carry out marketing

May-10

Abbot Cadila Drug supply pact Abbot to market 24 products of Cadila

Sep-10

Astrazeneca

Aurobindo Drug supply pact Astrazeneca to market drugs in emerging markets

Oct-10

Pfizer Biocon Development and manufacturing deal

Global rights of insulin products except in few countries

Jan-11

Bayer Cadila JV to market pharmaceutical products

in India

JV to concentrate on women healthcare, oncology and CVS

segments

3333

What’s the future like?

CMOs moving up the value chain – consolidating

horizontal spread, expanding vertical spread

A ‘one stop shop’ promoting a complete portfolio and

range of services

Shifting from a purely transactional relationship to a risk-

sharing model

Transition from ‘small molecule blockbuster’ model to

biopharmaceutical model

3434

3535

Group Assignment

Divide yourselves into groups of 5

Do a company analysis of any one CRO and one CMO in India

Company analysis should include Product pipeline

Strategy

Key capabilities and revenues

Alliances and collaborations (including any authorized generics deals)

Assignment should be submitted as a PowerPoint presentation (10-

15 slides) by Friday 7th March 2014 to support@learning-curve.co.in

with a cc to your department head