How mid-sized players can out-innovate big pharma

Bernd Kirschbaum

at INSEAD Healthcare Alumni Summit, October 8, 2009

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Contribution of big pharma to the industry innovation decreased over time

Annual new drug approvals [%] Pharma implications

Source: Johnston Blakely & Company biotechnology report 2009

59

1997

43

58

1998

51

49

1999

58

42

2000

39

61

2001 2006

4148

52

2002

74

2005

71

29

2003

33

6784

16

2004

26

Bio / specialty pharma Large pharma

• Approval of drugs per year showed declining trend

• The output by large pharma companies declined dramatically over past decade

• Contribution to innovation shifted from large pharma companies to biotechs and specialty companies

39214541313338434049

# of drug approvals

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Advantages and Disadvantages of Mid-Sized Companies

• Can not compete on scale- Manpower- Financial power- Global reach- Number of therapeutic areas covered

• Must be more resourceful and need to work in networks• Adapt to new requirements and trends better and faster

- less dependence on blockbusters- more open to new approaches (e.g. technologies, personalized medicine)- Less need to play the „numbers game“

• Keep management incl. board closer to content/science• Easier alignment from discovery to the market and simpler governance

Major DisadvantagesMajor Advantages

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“The Vicious Cycle“

1. Aggressive R&D productivity goals + high risk projects

2. Not enough resources managing too many projects plus “cutting corners”

3. Quality of projects declinecycle times increase

4. Increasing attrition rates

5. More projects required to meet same goals

Large companies have tried to play an unsustainable numbers game

Ensure effective portfolio management but use relevant Key Performance Parameters

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Stay close to science

Genomics Era

Post-GenomicsEra

Avoid misjudgment of technologies based on wishful thinking and/or despair

6 6

Avoid to work in silos

•Cytokines

•Vascularization

•Cell adherence & migration

•Receptors &signaling cascades

•Cell division & survival

• Immunity/ autoimmunity

Autoimmune & Inflammatory Diseases

OncologyNeurodegenerative

Diseases

Use internal networking, avoid re-inventing the wheel and share knowledge

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Constant optimization of a global innovation network

Effective use of external scientific and biotech network is essential

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Embrace new trends ahead of the bunch: Example “Stratified Medicine”

Clinicians:• Therapy adjustment based on

disease and patient characteristics• Tool to optimize dosing

Patients:• More effective & predictive treatment options

Healthcare Systems:• Better return on healthcare expenditure• More innovation through products with higher medical value using combination of Diagnostics (Dx) and Pharma (Rx)

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Stratified Medicine and Pharma Business –An opportunity for mid-size players

Improvedbenefit / risk

ratio

Opens doors tonew indications

Higher & fastermarket

penetration

Better price andreimbursement

Faster, more directed

development

Smallertarget market

HigherR&D costs

per applicant

Complication through

Dx testingin practice

BusinessBusinessOutcomeOutcome+

-

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Focus on People

as a key competitive advantage