The value of innovative pharmaceuticals and the potential

for VietnamMr. Koen Kruytbosch, Vice-Chairman of Pharma Group Vietnam

6th October, 2016

PHARMA GROUP

“Our priority is to ensure that Vietnamese patients have fast and sustainable access to high quality, safe, and innovative medicines in working together with the Government of Vietnam”

Pharma Group members (the foreign research-based pharmaceutical manufacturers spending more than 10% on R&D) and present inmany countries are committed to Vietnam. In the last three years:

- Investments in medical information and education: VND 290 Billion

- Employees: almost 6000 Vietnamese colleagues (more than 50% advanced-degree)

- Innovative products: an important contributor to overall healthcare in Vietnam

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The value of innovative pharmaceuticals and the potential for Vietnam

• Innovative pharmaceuticals: an opportunity – not a cost• A long journey: R&D is a long and costly endeavour

• Healthcare outcomes are becoming increasingly important

• The TPP and EVFTA make headway for patients and industry development • Faster and more sustainable access to innovative medicines for Vietnamese patients

• Agreements pave the way for investments and technology development in Vietnam

• Opportunities and challenges for doing business in Vietnam• Vietnam - a potential ASEAN hub for innovative pharmaceuticals?

• Elements to improve the business environment include Foreign Invested Enterprise and IP protection

Innovative pharmaceuticals: an opportunity – not a cost

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5

Discovery

Exploratory Development

Full

Development

Registration

Large Amounts of

Candidate Medicine

Synthesized

Project Team

and PlansSynthesis

of Compounds

Early

Safety

Studies

Candidate

Formulations

Developed

Extensive

Safety

Studies

Screening

Studies in Healthy

Volunteers Phase I

Candidate Medicine Tested in

3-10,000 Patients (Phase III)

Studies in 100-300

Patients (Phase II)

Clinical Data

Analysis

THE LONG ROAD TO A NEW MEDICINE

THE PHARMACEUTICAL INDUSTRY SPENDS A GREATER PERCENTAGE OF ITS REVENUE ON RESEARCH & DEVELOPMENT THAN ANY OTHER INDUSTRY

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Note: R&D intensity refers to R&D spending as percentage of net sales. data relate to the top 2,500 companies with registered offices in the EU (633), Japan (387), the USA (804)

and the Rest of the World (676), ranked by total worldwide R&D investment (with R&D investment above €15.5M)Source: The 2014 EU industrial R&D investment scoreboard, European Commission, JRC, DG RTD.

Innovative medicines enable reduction of per capita expenditure onhospitalization

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Example: Cardiovascular

Source: Lichtenberg, F: Have Newer Cardiovascular Drugs Reduced Hospitalization? Evidence from Longitudinal Country-level Data on 20 OECD Countries, 1995–2003 (2008)

The TPP and EVFTA make headway for patients and

industry development

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Today’s situation in VietnamImproving the country’s global competitiveness and business climate attractiveness

Vietnam’s global competitiveness ranking in selected areas

Source: Business Climate Index, Eurocham Q3 2015

Business Climate Index Development

Source: WEF Global Competitiveness Report 2015-2016, rank out of 140 economies in 2015-2016 and 144 in 2014-2015

Vietnam ranks 56th of 144 countries according to the 2015-2016 Word Economic Forum (WEF)

Improving 12 places versus last year

Low points are in legal framework, education system, IPP – and the current focus for VN to improve

In spite positive results there are key recommendations to improve on:

– Increasing the livelihood of people (Safe Medical access and Pharmaceuticals)

– Increasing consumer choice

– Legal framework

– Vietnam’s competitiveness (leverage EVFTA/TPP)

Localization strategy

Active Global Integration

Political and Regulatory Developments

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Government Goals

• Quality medicines

• Universal Healthcare Coverage

• 80% Value and Volume produced locally

• ASEAN Hub for Innovative pharma export

Government messaging is positive

Q1-2016 Q2-2016 Q3-2016Pharma FDI

Roadmap

Toll Manufacturing

Circular

Tender

Circular

IPP

Circular

Pharma

Law

FTA Developments

Trade Agreements (TPP, EVFTA, AEC)

• Patients:

• Fast and sustainable patient access to innovative medicines

• Increased HCP choice through MNC participation in competitive bidding

• Industry :

• Increased legal clarity through FIE rights

• Improved Regulatory Data and IP Protection

Q4-2016

FIE status for

MNCs in

Vietnam

Economic Impact of FDI

Economic Stagnation

Era of the Celtic Tiger

Key policy changes :• FDI Foreign Direct becomes key strategic goal• Incentives for Foreign Companies in Ireland• Social Partnership• Political Stability• Investment in Education• Deepen Roots of MNC’s - Research Capability

•1973 - Joined the EEC (EU) •Joined Euro in 1999• Financial Crisis 2008 - 2013

Ireland : Early Days…

• British Colony for over 8 centuries

• Famine in 1845 – population almost halved from 8M to 4.5M.

• Independence in 1921

Mass Emigration (pop. falls to 2.8M) Closed Economy - Trade Protection Agriculture Irish income per capita $2,700 – one

of the poorest in Europe

Ireland – A New Policy.... The Impact : Ireland Today

# 1 >1,200 >500 500M

MNC Employment : Over 180,000 directIrish Manuf. & Services Employment : 174,000 directly

The #1 place in Europe to do business

(Forbes, 2010)

US companies favorite gateway to Europe

EU and Eurozone member –access to 500m European consumers

MNCs have chosen Ireland

“Fueled by Clear Government Commitment”

From poorest and least educated country in Europe in 1970 to “Life Sciences” Powerhouse

Vietnam - a potential ASEAN hub for innovative pharmaceuticals?

Source: Communiqué International

Elements to improve the business environment

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INCENTIVESINVESTMENT LAWPHARMA LAW

• Provide framework for FDI• Pharma industry is on list of

conditional sectors

• Enablers such as FIE rights and implementation of EVFTA/TPP commitments are precursors for investment

• Stronger incentives increase the likelihood of foreign MNC investment

The currentRegulatory

Environment

RO Manufacturing Facility

Context

Process R&D

● Trading● All tech is off-

shore

● Innovative technology and knowledge could be transferred

● Potential clinical development● Opportunity to export to ASEAN

No High

• Enables faster access to innovative medicines for Vietnamese patients

• Does not specifically allow FIEs, which hinders investment

Legal framework and roadmap: a phased development and the need for an FIE

Export capability

No Yes

ROADMAP TO BECOME ASEAN HUB FOR INNOVATIVE PHARMACEUTICAL MANUFACTURING

GAP no current options

between Rep Office and manufacturing facility

FIE & distribution

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Objective:

Secure long term investment by allowing for the establishment of a foreign invested enterprise for pharmaceutical trading.

Impact:

increased investments by international, innovative companies in Vietnamese companies

ensuring quality of medicines and advancing Vietnamese healthcare: education, quality and humanitarian projects.

Recommendation:

1. Complete implementation of Vietnam’s WTO, TPP and EVFTA commitments

2. Full liberalisation of distribution services

IMPORT AND DISTRIBUTION RIGHTS – a regional comparison (2015)

Country Allowed to

establish a legal

entity?

If yes, is the legal entity/rep office allowed to perform the following functions:

import/trading? Sell to

licensed

distributor

Sell to Trade Sell to Hospitals Distribute Promote Education

Vietnam

Malaysia Up to a certain limit

Philippines

Indonesia For NCE / products not

locally producible

Hong Kong

Taiwan Only product license

holder can import.

Hospital registered

pharma merchants

RX: direct consumer

activities not allowed

Singapore

Australia

N. Z.

The value of innovative pharmaceuticals and the potential for Vietnam

• Innovative pharmaceuticals: an opportunity – not a cost• Medicines are among the most powerful tools we have for patients to cure, treat and prevent illness both

now and in the future • A long - and costly - journey to develop a new drug: benefit must be measured on total health outcomes

• The TPP and EVFTA make headway for patients and industry development • Vietnam has a (closing) window of opportunity to leverage the FTAs and focus of the international business

community to position itself within ASEAN

• PG is interested in working with the Government of Vietnam and 3rd parties to explore ways to maximise this opportunity

• Opportunities and challenges for doing business in Vietnam• Vietnam has the potential to become an ASEAN hub for innovative pharmaceuticals – but the road is long

(2035?) and requires a dedicated and holistic approach and must be driven by Government

• Key enablers to encourage investment in innovative pharmaceuticals include the right to establish a Foreign Invested Enterprise and improved IP protection

“Our priority is to cooperate and work closely with the Vietnamese Government to ensure that Vietnamese patients have fast and sustainable access to high quality, safe, and innovative medicines”

Thank you for listening!