2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China R&D: Life Line for pharmaceutical...

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

R&D: Life Line for pharmaceutical companies: A GM perspective

• Joseph Cho

• CEO, Astellas Pharma China

• Vice Chairman, RDPAC


Disclaimer• This is not a thorough research report by a consultant.• This is the personal perspective of a General managers with 33

years of working experience in the pharma industry– 20 years in Taiwan (sales, marketing, drug registration, clinical trial,

business development)– 13 years in Hong Kong and mainland China– 20 years of working and engagement in industry groups in Taiwan

(IRPMA), Hong Kong (HKAPI) and China (RDPAC).• Some thought exchanged with government officials and experts in

the industry and acadmics. • Information supported by colleagues in the company, friends in IMS,

colleagues in RDPAC and lessons from top management and colleagues in Astellas Pharma Group


Protection of IPR:Essential for financing drug R&D


13.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

(16)石油・ガス

(4)タバコ

(13)電力

(10)鉄鋼・金属

(12)通信

(9)メディア・写真

(44)エンジニアリング・機械

(15)家庭用品

(13)パーソナルケア

(44)自動車・自動車部品

(50)化学

(17)航空・防衛

(23)健康

(45)電子・電気

IT (115)ハードウェア

IT (59)ソフトウェア、サービス

(61)医薬品・バイオ

(600)対象企業合計

出所：医薬産業政策研究所（ 2003 ）「財務データからみた製薬企業の 10 年」　リサーチペーパーシリーズ　 N ０．１３

Increasing R&D cost ratio in pharma and Bio industry


formulations

Formulation patent

Substance

formulation

Drug Substance patent

Automobile, Electronics appliances

Pharmaceuticals

a product is composed of hundreds and thousand of patent 、 impact of a single patent limited.Existence of a patent may not hinder the develop of other patents

One Basic patent （ substance ）High royalty feeGiving up of new drug development due to patent infringement

Characteristics of patent for pharmaceuticals


Pre-clinicalClinical

trialScreening

2 ～ 3Y 3 ～ 5Y 5 ～ 10Y

No. of compounds

5 ～ 10compunds

10,000

1compound

10,000

5,000 ～10,000

compounds

Cost of JY 80 Billion/ １ NCE

Mode of action,AMDE

pharmacokinetics,Pharmaco dynamics

formulation

Clinical trialP1→P2→P3

Efficacy and safety in human

PK PD

Optimizing

Candidate compounds

Investigation

RA

2 ～ 3Y

total 10 ～20Y

Ap

ply

app

rov

al

laun

ch

regulatory

Drug discovery

development ）

500,000～

1000,000compoun

dsLibrary Synthesized Developed

compounds Product


Pre-clinical ClinicalDiscovery

screening

2 ～ 3Y 3 ～ 5Y 5 ～ 10Y

Animal studies Formul

ation

Clinical trials

P1→P2→P3

CMC

OptimizingInventionresearch

Basic research review

2 ～ 3Y

Ap

plication

app

rova

l

Review

Paten

t ap

plicatio

n

La

un

ch

ing

of N

CE

Lau

nch

of g

enerics

10 ～ 15years for R&D

Ex

clus

ive

pe

riod

10 ～15Y

α

Patent 20Yr ＋ α （ Max.5Yr ）　

=exclusivity （ Max.25Yr ）

※α= extended IPR


Specific Challenges in China pharma market for innovative drugs - market access

• In China, import or manufacture approval does not mean market accessible.– Pricing approval in provinces/cities– Listing into formulary of target hospitals– Winning in hospital bidding/price negotiations– Reimbursement by health insurance– Distribution to retail outlets

• Reduction of 5-7 years of real patent life • Generics may be launched prior to original products• Ensuring sufficient market exclusive period vital for R&D

investment return• Early entry to the market essential


How important is R&D?

• Emergence of a company.– If you have a break through new drugs.

• Rapid Growth of the Company– If you have a series of successful new product launch.

• Can keeping the company alive– When IPR of main products subsides.

• Change of healthcare practice– The case with H2 blockers for gastro-tectomy

• If R&D flops : – Likely lay off, – change of company, jobs and positions for many people, – Loss of investment, – Death of patients and

• Company no long exist: as shown next few slides


Relationship between R&D investment and No. of new drugs launched

R2R= 0.8328

0

5

10

15

20

25

30

0 10,000 20,000 30,000 40,000 50,000 60,000

　　　■ Mega 　　　◆Major 　　●Japan

※ 新薬数は新規化合物 R&D expense (US $Million ）

上市新薬数


18.4

38.4

6.7

5.6

36.4

32.2

15.4

11.6

23.0

12.2

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2003年

1993年

売上原価償却費販売管理費研究開発費営業利益

EU companies ： Merger 、 scale up 、 restructure

COG reduction 、 R&D increase 、 S&M increase


85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

Roche

Genentech

JR Geigy

Ciba

Ciba-Geigy Ciba-Geigy

Sandoz

Novartis Novartis

Roche

Syntex Boehringer Mannheim

94 買収

97 買収

90 資本参加 Chugai

02 買収

96 合併70 合併

ICI

Astra

Zeneca

AstraZeneca99 合併

93 　医薬品事業部門分離独立

Rhone-Poulenc Rhone-Poulenc Rorer

W.H.RorerFisons

Hoechst

Aventis

Roussel-Uclaf

HoechstMarion

Marion Merrell Dow

90 　買収95 買収

99 合併

95 　買収89

acquisition of a majority holding

68

Sanofi

Sterling

Sanofi SI

Synthelabo

Sanofi-Synthelabo94

99 合併Prescription drug 部門

Sanofi ｰaventis04 買収

Merrell Dow

Glaxo Glaxo WellcomeGlaxo SmithKline

SmithKline Beecham

SK Beckman

Beecham

Wellcome

95 合併

00 　合併89 合併


Key Acquisitions in 2008~2009 in the industry


Key Acquisition cases in Jan.~Feb. 2010 in the industry

Time acquiring Corp. Target Corp. ( bil. USD) Strategy


Leading MNC’s portfolio by development status

Most of leading MNCs have a big discover products base.

Source: Thomason Pharma


Some thoughts about drug discovery


科学技術革新

新薬誕生

1800 1900 1950 1960 1970 1980 1990 2000 2010 （年）

Aspirin（ Rheumatoid Arthritis ）

Β antagonist （ Angina ・ Hypertension ）α Antagonist （ Hypertension ・ BPH ）H2 Antagonist （ Pepti-ucler ）Ｃ a antagonsit （ Hypertension ・ Angina ）ACE inhibitor （ Hypertension ・ Cardiac Failure ）HMG-CoA reductase （ Hyperlipidemia ）

Insulin （ DM ）Growth hormone

Epoch making Epoch making New drugs New drugs

VaccinesVaccinesGene-chipsGene-chips

Organic ChemistryNaturals

PharmacologyPharmacologyReceptorIon ChannelEnzyme

BiotechnologyRecombined GenesCell fusionAntibody

Pioneer technology

GenomicsGenomics

First Golden Period 2nd golden period

－薬理学会公開講座「夢のくすり、今のくすり」 1998 年．京都市－

Pate

nt

Exp

iry


Key steps to new drug discovery

New treatment inspired by identified mechanism of diseases

－ information from papers, patients, healthcare professionals.

Establishment of physical reactions and life syndromes of target diseases.Establishment of Methodology for screening

－ Papers and laboratory observations　Creation of new drugs via new technology (organic

chemistry, Bio-technology, Antibody, Vaccines ）－ Team works of multi-disciplines in life science

発想発想

発見発見

発明発明

Innovation

（ Inspiration ）

（ Discovery ）

（ Invention ）


New challenges for drug discovery:The diseases, the causes and life styles 　

• Why some diseases occurs – In some ethnics– In some ages– In a gender– In a geographic location– In some weather conditions– In some occupations

• What are the causes– Extrinsic– Intrinsic

• What is the prognosis for different types of patients? How long will the disease last and how long does it takes to recover? The role of new drugs in the healing process.

• How to diagnose • How to prevent from occurring?• How change of life styles affect the treatment• The recurrence and the causes.• Can we prevent it from occurring?• How to test anti-bodies, biologics for human use in animals? • Scaling up of new biologics and genomic product?


The relationship between the level of satisfaction with medical treatment and the level of contribution that medication makes to treatment (Japan)

Contribution of medication to treatment

（％）

Diseases mainly taken care of by PCPs Note: Questionnaire for Japanese doctors ( :15/10/1999-22/12/1999; postal survey; 128 responses;) Source: Japan Human Science Foundation: 2000 report on survey into basic technology in Japan, “Outlook on

medical needs in 2010”; internal Astellas data; BCG analysis;

Herpes virus infection

Tuberculosis

Dermatophytosis

MRSA infection

Chlamydia infectionCandidiasis

Stomach cancer

AIDS

Colon cancerLiver cancerLung cancer

Breast cancer

Uterine cancer

Prostate cancer

Leukemia

Fibroid

Diabetes mellitus

Diabetic neuropathy

Diabetic retinopathyDiabetic nephropathy

Hyperlipidemia

Schizophrenia

Depression

Anxiety

Parkinson’s disease

Alzheimer’s diseaseSenile dementia

Multiple sclerosis

Epilepsy

Autonomic ataxia

Neuromuscular disturbance and myopathy

Myocardialinfarction

Arrhythmia

Hemorrhagic stroke

Cerebral infarction

Asthma

Atopic dermatitis Pressure soresRheumatoid arthritis

Osteoarthritis

SLE

Spondylosis

Low back pain

Osteoporosis

Gout

Peptic ulcer

Cirrhosis Hepatitis B

Hepatitis C

Nephrosis syndrome

Chronic glomerulonephritis

Chronic renal failure

Prostate hyperplasia

Endometriosis

Glaucoma

Cataracts

0

10

20

30

40

50

60

70

80

90

100

0 10 20 30 40 50 60 70 80 90 100

Level of satisfaction with medical

treatment（％）

Chronic pelvic pain

Stress urinary incontinence

TransplantationChronic obstructive pulmonary disease

Irritable bowel syndrome

Occlusive peripheral arterial disease

Satisfaction is relatively high for diseases in the PCP market

HypertensionAngina Pectoris

Allergic rhinitis

Urinaryincontinence


New challenges of clinical research for unmet needs

• More aging population with many underlying diseases who use many drugs.

• Difficulty in conduct clinical trials for infants.• Diagnostic method and parameters not established. • Need to provide long term efficacy and safety.• Not just for efficacy and safety, need to justify the value

with health-economic models, accepted by the payers and, healthcare professionals and patients.

• How to justify value to quality of life and extension of life expectancy not in years.

• Early engagement in clinical trial design of marketing for proper positioning of the new drug


6 phases of failed clinical development project

• Enthusiasm

• Disillusionment

• Panic

• Search for guilty

• Punishment for the innocent

• Praise and honors fir non-participants


The Global Scenario Envisioned by Astellas

Progress of policies to control health expenditure New healthcare reforms in EU, USA and Japan all

focusing in cost containment. Who should pay for the drug and technology innovation?

Government? Insurance? Patient? Decrease in market growth rate

Market growth in EU, Japan and USA decreased to 5% of below, except pharmerging markets led by China.

Increased complexity of the market Many diseases cared by primary care professionals are

getting satisfactory treatment by medicines while good remedies for chronic diseases, CNS, DM, RA and diseases related to auto-immune system remains few.


The total number of blockbusters produced by the top 10 drug companies, the number of blockbusters being delivered to the market and

the number of blockbusters with expiring patents

* The number of products delivered to the market for 2001-2010 is based on risk-adjusted estimates Note: Blockbusters are those drug products with peak sales of US$500 million or more based on 2001 prices. The ranking of the top 10

drug companies was based on the 2001 market; since that time some of those companies have been amalgamated through the M&A process. Source: FDA, Lehman Brothers, Paine Webber, Scrip, BCG analysis

Stagnation of new deliveries and the expiration of patents will simultaneously brake market growth.

Number of blockbusters

launched,

Number of blockbusters with expiring patents

Number of blockbusters

0

5

10

15

20

25

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 20100

20

40

60

80

100

120

（ Launch Year ）

Result Forecast

Total number of blockbusters sold

on the market

Number of blockbusters delivered to the market annually

(average over 3 years*)

Number of blockbusters expiring annually after average patent term

(average over 3 years)


a. Super-scale players: 2-3 companies– Focusing on the conventional market, they compete with size as their advantage.

– In order to resist the pressure of falling earnings brought about by decreasing market growth rates, they buy out their competitors (achieving cost synergies) and advance the process of consolidation between superior companies.

– Global market share of the top player is 20-30%.

b. Specialized players: many– As the market becomes increasingly complex, they capitalize on a single strength unrivaled by

others.

– A diverse range of specialized players exists and new players will continue to enter the market.

c. Global category players: 5-10 companies– They have global reach, and construct top-level franchises in multiple highly specialized

therapeutic areas/diseases.

– While not greatly affected by the declining growth of conventional markets, they can sustain their level of growth by taking advantage of the increasing market complexity.

d. Local players– Develop business in local markets by focusing on generics.

■ There will be four basic types of players in the future market


Brief on China Pharma market

• About 400M covered by urban worker’s and resident insurance.

• About 800M covered by New Rural Cooperative health program for primary care

• Market size reached RMB 210 Billion with growth of 27% in 2009.

• Progress of new healthcare reform has profound impact on the industry.

• Healthcare technology assessment to be used for price negotiation for expensive drugs


Total China hospital market Reached 243.9 billion RMB in 2009

Local companies were driving the increase of china pharma MKT.

Source: IMS 4Q09

75,668.4 84,712.7108,308.8

139,897.3

178,947.031,482.435,987.1

43,192.1

52,083.9

64,947.2

243,894.2

191,981.2

151,500.9

120,699.8107,150.8

0

50,000

100,000

150,000

200,000

250,000

300,000

MA

T R

MB

(m

io)

JV + IMPORT 31,482.4 35,987.1 43,192.1 52,083.9 64,947.2

LOCAL 75,668.4 84,712.7 108,308.8 139,897.3 178,947.0

CHPA 107,150.8 120,699.8 151,500.9 191,981.2 243,894.2

MAT4Q05 MAT4Q06 MAT4Q07 MAT4Q08 MAT4Q09

5 yr CAGR=22.8%


Leading MNCs Ranking in past decade

Besides company merging, new product launching is another engine for MNCs to improve ranking in China market.


New products play an important role to China business

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009

Ne

w p

rod

uc

t s

ha

re in

Ch

ina

bu

sin

es

s

PFIZER GROUP

ASTRAZENECA GROUP

BHC GROUP

SANOFI-AVENTIS GP.

ROCHE GROUP

NOVARTIS GROUP

GLAXOSMITHKL GROUP

NOVO NORDISK GROUP

M.S.D. GROUP

ELI LILLY GROUP

ASTELLAS GROUP

New product= launched within 5 years


Leading therapy class by Country in past years


Affluence is changing lifestyle and prevalence of chronic condition such as diabetes, hypertension and cerebro-vascular is rising rapidly.

0 5 10 15 20 25 30

Injury and poisoning

Psychotic disorders

Infectious Diseases

Malignant tumors

Neurological Diseases

Eye Diseases

Geriatric Chronic Bronchitis

Arthritis

Gallbladder Disorders

Acute Gastritis

Genitourinary Diseases

Cerebrovascular Diseases

Diabetes

Heart Diseases

Hypertension

2003

1998

1993

Source: MOH statistics yearbook 2008

Urban Patient Number (Mil)

7.4%

6.9%

-3.3%

7.0%

1.4%

0.9%

-2.2%

-1.0%

0.5%

-0.5%

2.4%

8.6%

16.7%

4.8%

12.5%

7.4%

6.9%

-3.3%

7.0%

1.4%

0.9%

-2.2%

-1.0%

0.5%

-0.5%

2.4%

8.6%

16.7%

4.8%

12.5%

CAGR93-03


The elderly is taking a growing share of the China Total population giving another evidence to the increase of the chronic disease.

Source: National Bureau of Statistics

Population composition by age

0

20

40

60

80

100

120

Sh

are

of

To

tal p

op

ula

tio

n %

>65 5.58 7.09 9.35

15~64 66.81 69.99 72.78

0~14 27.7 22.9 17.88

1990 2000 2007


Antibiotics lost its share in the last decade while share of TCM and Oncology's are increasing drastically

Top 10 TCs in 2008

0%

5%

10%

15%

20%

25%

30%

35%

SYS

. A

NTIB

AC

TER

IALS

TC

M

ON

CO

LOG

ICS

IN

TR

AV

EN

OU

S S

OLU

TIO

NS

CER

EB

.+PER

IPH

E.V

AS

OTH

ER

AP

AN

TI-

ULC

ER

AN

TS

AN

TI-

HYPER

TEN

SIO

N

CA

RD

IAC

TH

ER

APY

IM

MU

NO

STIM

ULA

TIN

G A

GEN

TS

DR

UG

S U

SED

IN

DIA

BETES

Mark

et

share

(%

)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

CA

GR

(%

)

1999 Value Share 2008 Value Share CAGR99-08

Chronic diseaes

Source: IMS 4Q08


In 6 of top 10 TCIII in China market, the sales of generic product is even bigger than the origin product (red line)

Source: IMS


Comparison of Pharma Industry of China and India

• Similarity– Production of low cost, low concentration of industry– Mainly produce Generics– Small share of independent innovation research and the

proportion of drugs

• Difference– The manufactures in china always copy low-tech product and

compete in the market with low price but seldom choose high-tech product

– The India manufactures choose a better way– innovative copy and get their own patent so that get more profit.


Pharma R&D in China

• Majority of pharma industry have been focusing on copying in past few decades.

• China has decided to become an innovative state in 2007.

• Many budget allocated for life science, RMB 6.6Billion allocated to various projects since late 2008.– Projects included all types of collaboration of industry and

research institutions and healthcare institutions.– Grant amount usually less than 200M per institute.

• R&D is encouraged by the government but not sufficient for return to investment for pharma R&D due to regulatory and risk sharing system in China.


Key barriers for Pharma R&D in China under current registration system•Requesting Pharma R&D may not be equipped with the production facilities• Pharma R&D have to transfer the technology to drug manufacturer, the right and benefits

are not well protected

Key benefits of market authorization system for Pharma R&D in China•Pharma R&D can be the Marketing Authorization Holder without production facilities•Pharma R&D can collaborate with drug manufacturer for toll manufacturing with/without mandatory technology transfer•Reasonable amount of return back to R&D as incentive for stimulating sustainable R&D •Pharma R&D can focus on R&D with their key competence

38

Marketing Authorization System


About clinical trial in China


China Is Underrepresented Relative To Other Countries Based On Its Population And Market Size

Source:Clinicaltrials.gov; Global Insight; IMS; team analysis *CAGR Cumulative Annual Growth Rate

Phase III trials sponsored by industry

32

54

25

26

26

36

28

25

CAGR* of trials

(2003-2007)

89

92

99

58China

106India

100Czech

144Poland

128Russia

Argentina

Brazil

Mexico

9

4

963

378

90

250

48

85

Number of trials

(2007)Number of trials per 100 million population (2007)

8

6

3

11

44

23

17

34

Number of trials per

$1bn drug sales (2007)


Global Clinical Trial in China• According to SFDA record during Jan 2004 and Apr 2008, the

average evaluate time of global clinical trial is 7 month.


Benefits• Submission to and review by relevant regulatory authorities at the

same time• Broader regulatory oversight and experiences

• Earlier availability of innovative drug therapy to emerging market population; ultimately leads to reduction in “drug lag”

• Enables science-based approach to better define intrinsic and extrinsic factors (risk-based) • Identify clinically meaningful ethnic differences & discuss next

steps• Registration dossiers to include higher percentage of Asian data

• Advance knowledge, experience and competence of drug clinical development of investigators / medical community

42

Simultaneous Global Development


Simultaneous Global Development-2

Challenges• Longer CTA approval times (agency & ethics committee) & start-up times• Other general barriers (not inclusive of all countries)

• Lack of harmonization – requirements, processes• Unique requirements, outside international standards (e.g., country-specific Quality

data)• Lack of formal mechanism for agency consultation• Inflexibility to CTA amendments (protocol & quality changes)• Uncertainty of ICH/WHO GCP enforcement• Inefficient/outdated review processes, lack of transparency• Unpredictable requests• Intellectual property concerns• Insufficient resources within regulatory agencies


Global development could speed up product launch in China.


• Separation administration of CTA and NDA• Implementation of Special Review Procedures• Speed up the approval process for clinical trial of innovative products• Enhancement of clinical trial administration by allocating the responsibilities to all

stakeholders• Introduction of Marketing Authorization System• Communication and interaction among stakeholders• Harmonization, the principle of “ sameness” will direct the development path

45

RDPAC’s suggestion on SGD

For SGD, it is a race to change! Who will be left behind ?


Source: RDPAC Drug Registration Timeline Survey

Trend – Increasing IMCT in China


- 47 -

Drug Development Model in China

Ye

sterd

ay

To

da

y

Global Development CPP R-CTA Review Clinical Trial IDL Review

4 YearsApproval

Outside China

ApprovalIn China

A Linear Development Model Following International Approval≥4 years drug lag

A Parallel Development Model

Global Development CPP R-CTA Review Clinical Trial IDL Review

Clinical TrialGCTA Review IDL Review

2 Years

CPP

CPP = Certificate of Pharmaceutical ProductR-CTA = Regional Clinical Trial ApplicationIDL = Import Drug LicenseGCTA = Global Clinical Trial Application

≥2 years drug lag


- 48 -

The Road To Enlightenment…Follow The Lights


Many thanks for your kind attention!

[email protected]

www.astellas.com.cn

www.rdpac.org

49

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China R&D: Life Line for pharmaceutical...

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