BioPharma Outlook 2013 presentation

GLOBAL PHARMACEUTICAL & GLOBAL PHARMACEUTICAL & BIOTECHNOLOGYBIOTECHNOLOGY

OUTLOOK OUTLOOK --20132013

Global Pharmaceutical & Biotechnology Outlook 2013 –Large Cap Pharma

Vishal Manchanda, B.E., MBA [email protected], PhD [email protected]

+1.646.657.3787

3MP Advisors

GLOBAL PHARMACEUTICALS GLOBAL PHARMACEUTICALS –– 2013 2013 OUTLOOKOUTLOOK

Opportunities - New drug approvals will transform the standard of care in several therapy areas, Outcome studies to transform market potential of drugs, Restructuring/deconsolidation, Discipline in M&A, Enhanced insurance penetration in the US to improve drug penetration

Challenges - Fiscal pressures to reduce healthcare spend will translate into higher rates of therapeutic and generic substitution, Investigational studies in high risk therapy area may continue to disappoint

Global Pharma’s Cutting Cost to Manage the Gap

4MP Advisors

HIGHLIGHTS FOR 2013 HIGHLIGHTS FOR 2013 –– GLOBAL PHARMAGLOBAL PHARMA’’SS

Ramp up of potential blockbusters drugs that were approved in 2012Will Large Cap Pharma get aggressive with M&AStrength of Innovation Vs Fiscal PressuresCost containment and growth focus from Value added InnovationEurope – Regulatory Pressures and Increasing Pro Generic StanceWill US fall to Pricing Pressures?Outcome from Major Clinical Studies/Events expected to reshape Competitive Dynamics across several therapy classesPotential New Drug Approvals in 2013

5MP Advisors

WE MIGHT SEE A NEW STANDARD OF CARE WE MIGHT SEE A NEW STANDARD OF CARE IN MANY THERAPY AREAS GOING FORWARDIN MANY THERAPY AREAS GOING FORWARD

New Generation Oral anticoagulants

Dyslipidemia – PCSK9 antibody

Respiratory COPD and Asthma –novel combinations and once daily LABA+ICS

Alzheimer’s – BACE Inhibitors

Diabetes –DPP4 inhibitor and Once weekly GLP-1 agonists

Metastatic Melanoma –BRAF+MEK inhibitors

Multiple Sclerosis – Novel Oral and Injectable options

Breast cancer

Prevalence, Market Expansion Opportunities and upcoming late stage pipelines have been discussed

6MP Advisors

GROWTH DRIVERS GROWTH DRIVERS -- NEW DRUG APPROVALS NEW DRUG APPROVALS IN 2012IN 2012

Source: MP Advisors, Company Reports

7MP Advisors

GROWTH DRIVERS GROWTH DRIVERS -- POTENTIAL DRUG POTENTIAL DRUG APPROVALS IN 2013APPROVALS IN 2013


8MP Advisors

GLOBAL PHARMA DIVIDEND YIELD AND NET GLOBAL PHARMA DIVIDEND YIELD AND NET CASH POSITIONSCASH POSITIONS


9MP Advisors

Patent Exposure: Global PharmaceuticalsPatent Exposure: Global Pharmaceuticals


10MP Advisors

GLOBAL PHARMA & BIOTECHNOLOGYGLOBAL PHARMA & BIOTECHNOLOGYOUTLOOK 2013OUTLOOK 2013

Japan PharmaJapan Pharma日本の製薬会社日本の製薬会社

!

!

Ripple Mehta, Pharmacist, [email protected]

+1.646.657.1016

Devesh Singh, Pharmacist, [email protected]+1.646.657.1016

11MP Advisors

JAPAN PHARMA JAPAN PHARMA -- TABLE OF CONTENT (TOC)TABLE OF CONTENT (TOC)I. Japan Pharma: Looking forward in 2013 and beyond

Stand on individual companiesChanging political scenario is likely to accelerate the peace of reforms

II. Analysis on Innovators Companies – Innovation and consolidation continue to serve as catalystRich Looking Pipeline Could be delusive Key R&D catalysts from Japan pharmaKey upcoming milestones Expected upcoming launches from global companies in implicationsLikely implications of recent consolidation activitiesSustainability thru increasing overseas base

III. Analysis on Generic Companies2012 – price cuts & implicationsNew layer for reforms playing out wellDominance of big players in dispensing pharmacyShrinking general practitioners marketDPC hospitals are new growth avenue

IV. Analysis on Drug Chain StoresMacro forces favoring Drug Chain StoresSuccess story from a few, likely to be replicated by followers

V. Analysis on Biogeneric CompaniesEvolving Biogenerics space in Japan

12MP Advisors

LARGE PHARMA LARGE PHARMA –– RICH PIPELINE (?)RICH PIPELINE (?)

First in class targets like TLR7 & PPARy can be attractive

Diabetes & Immunological Disorders

056Dainippon Sumitomo

Novel validated targets for cancer, working on Raf/MEK pathwayCancer7413Chugai

Has two first in class targets, Chemokinereceptor 4 antagonist & A33 for cancerCancer489Kyowa Hakko

Kirin

Neuropeptide Y Y5 receptor, a very attractive target for obesity, but success rate low

Metabolic & Infectious Diseases

3126Shionogi

R&D portfolio consisting of antibodies for cancer, with some good target like PPARy

Cancer & Infectious Diseases

51317Daiichi Sankyo

Good novel targets in different therapeutic class

Diabetes, Neurology, Cardio & Immunology

3911Mitsubishi Tanabe

Antibody against folate receptor alpha, targeting cancer, can be a useful anticancer agent

Neurology & Cancer8100Eisai

R&D portfolio with some novel first in class targets, like surviving suppressant, GPR119 agonist

Cancer & Metabolic71420Astellas

Novel, varied targets for cancerCancer19419Takeda

CommentsMajor FocusPhIII CandidatesPhII CandidatesPhI CandidatesCompany

First in class targets like TLR7 & PPARy can be attractive

Diabetes & Immunological Disorders

056Dainippon Sumitomo

Novel validated targets for cancer, working on Raf/MEK pathwayCancer7413Chugai

Has two first in class targets, Chemokinereceptor 4 antagonist & A33 for cancerCancer489Kyowa Hakko

Kirin

Neuropeptide Y Y5 receptor, a very attractive target for obesity, but success rate low

Metabolic & Infectious Diseases

3126Shionogi

R&D portfolio consisting of antibodies for cancer, with some good target like PPARy

Cancer & Infectious Diseases

51317Daiichi Sankyo

Good novel targets in different therapeutic class

Diabetes, Neurology, Cardio & Immunology

3911Mitsubishi Tanabe

Antibody against folate receptor alpha, targeting cancer, can be a useful anticancer agent

Neurology & Cancer8100Eisai

R&D portfolio with some novel first in class targets, like surviving suppressant, GPR119 agonist

Cancer & Metabolic71420Astellas

Novel, varied targets for cancerCancer19419Takeda

CommentsMajor FocusPhIII CandidatesPhII CandidatesPhI CandidatesCompany

13MP Advisors

KEY CATALYSTS FOR 2013KEY CATALYSTS FOR 2013Edoxaban (DAIICHI SANKYO) - Though The Last Entrant In The Market – Has Key Differentiating Features To Become The Market Leader In the Factor Xa Space: We are very bullish on Edoxaban which is the focal point of our Investment thesis for Daiichi Sankyo and we are confident that, – 1) It will show positive data in PhIII, 2) Gain US approval, 3) Differentiate itself sufficiently among factor-xa inhibitors market and can generate ~$2.5b, and 4.) All concerns around Edoxaban are well addressable.

Dolutegravir (SHIONOGI) - approval likely in 2013 – A $2.5b opportunity: this is the first drug showing superiority of this extent to current standard of care Atripla (Gilead, FY 11 sales $3.2b); though the competitive landscape is rapidly changing in anti-HIV regime, we expect dolutegravir has potential to cross $2.5b.

Canagliflozin (MITSUBISHI TANABE- MT) - Emerging As Best In Class SGLT-2 Inhibitor: Based on the data available so far and our talks with MT, we are extremely positive about the commercial success of the candidate. At this time, we are expecting a moderate peak sales potential of ~$1b while assuming 80% probability of success.

KRP-108 (KYORIN) – Redesigned LABA/ICS combo Is poised well to Leverage Japanese market potential: It is a combination of two best selling LABA/ICS combinations i.e. Advair and Symbicort. The two generated ¥40b and ¥20b respectively in Japan in 03/12 and are growing; the overall trend of Rx combination drugs in Japan is expected to grow further in COPD/ASTHMA class.

TAK-875 (TAKEDA) – A Trump Card: our current understanding suggests that, if successful, it can replace the use of sulfonylureas initially and then can also be used concomitantly with DPPIV inhibitors or even as substitute to them. TAK-875 is also positioned well for first line therapy to metformin refractory patients– each of these segments carries ~$1b opportunity for Takeda.

A Few Candidates Carry Potential To Impact Overall Therapy Paradigm And Investment Scenarios For Their Originators!

14MP Advisors

UPCOMING KEY MILESTONES IN 2013UPCOMING KEY MILESTONES IN 2013

Edoxaban (PhIII, Stroke Prevention in Atrial Fibrillation, Daiichi-Sankyo) Top line data From ENGAGE AF study by mid 2013

TA-7284- Canagliflozin (UR, Type 2 diabetes, Mitsubishi Tanabe/JNJ) outcome at FDA advisory committee meeting in Jan 2013 and Global approval

Dolutegravir (UR, HIV, Shionogi) and its combo approval in US

SYR-322+ Actos (UR, Diabetes, Takeda) combination - US approval in January’13

TAK-875 (PhIII, Diabetes, Takeda) clinical data with Sitagliptin

Latuda (UR, Bipolar I disorder, Dianipon Sumitomo) US approval in bipolar I disorder

KRP-108 (UR, Asthma, Kyorin) JP approval: KRP-108

Some Of the Approaching Milestones Are Important To Watch out For – They DO not Only determine the success of the candidates but may give direction to long term strategy

of their originator!

15MP Advisors

GLOBAL INNOVATOR COS ACTIVITIES IN JAPANGLOBAL INNOVATOR COS ACTIVITIES IN JAPANAmongst Global Companies - Pfizer, Roche, BMY, GSK, Merck Will BE Most Active in Japan –

They may bring surprises in the Coming Year on the Consolidation Front as well!• Expected launches in 2013-2014 from global companies will increase competition (mainly in

Respiratory, oncology and RA) for domestic companies: Unfavorable macro environment for global pharma companies in US (High regulatory bar for approval) and EU (pricing pressure) has pushed global players to focus more on emerging markets and Japan for further growth. In a comparison of cos. on the strength of their Medical Representatives force in Japan, Pfizer leads with ~3000 reps with other global companies taking 5 out of the top 10 positions. This demonstrates global Pharma’s zeal to tap the Japan market through new innovation. Amongst global pharma giants, Novartis and Pfizer received highest approval in last 5 years followed by Merck and GSK, while GSK and Pfizer have the highest no. of products in late stage development or pending approval from PMDA.

• In the next two years, key global pharma innovation getting approval in Japan is Pfizer’s Tofacitinib (First in class oral JAK inhibitor, RA, Approval expected in 2013), GSK and Novartis’ respiratory franchisee and Bayer’s Regorafenib. These products have the potential to challenge the market share of the innovator domestic companies’ key contributors, i.e. Actemraand Avastin from Chugai, and Mitsubishi Tanabe/Kyorin’s Respiratory franchisee. While expected launch of SGLT2 inhibitors (BMY- Dapagliflozin), GLP- analogues (Sanofi-Lixinetide) and Odanacatib (Merck) will expand the diabetes and osteoporosis market in Japan.

16MP Advisors

MAJOR M&A IN JAPAN IN LAST 5 YEARSMAJOR M&A IN JAPAN IN LAST 5 YEARS

Source: MP Advisors; MHLW

NANA25-Apr-12Boston BiomedicalDainippon Sumitomo

NANA3-May-12Multilab (Brazil)Takeda

NA0.01218-Jul-11Victory PharmaShionogi

NA0.03121-Dec-11IntellikineTakeda

NA0.065-Oct-12LigocyteTakeda

NA0.146-Nov-12Envoy TherapeuticsTakeda

NA0.1817-Mar-10Home Diagnostics Inc.Nipro Pharma

NA0.2618-Dec-09AkaRx IncEisai

NA0.3116-Sep-09BMY’s Indonesian Unit+ Asian RightsTaisho Pharma

38.700.3110-Feb-10SSP CoBoehringer Ingelheim GmbH

43.000.4314-Jul-09NovenHisamitsu

NA0.5016-May-11Taiyo (57% stake)Teva

NA0.8028-Feb-11PlexxikonDaiichi Sankyo

NA0.811-Apr-12URL PharmaTakeda

57.551.421-Sep-08ScieleShionogi

37.862.603-Sep-09SepracorDainippon Sumitomo

37.483.9010-Dec-07MGIEisai

55.004.0017-May-10OSIAstellas

50.004.6011-Jun-08RanbaxyDaiichi Sankyo

71.0011.0010-Apr-08MillenniumTakeda

NA13.5019-May-11NycomedTakeda

Premium to 3m. Avg Price. (%)Cash Paid ($b)Acquisition DateAcquired CompanyCompany

17MP Advisors

JP COMPANIES PERFORMANCE VS. US/EUJP COMPANIES PERFORMANCE VS. US/EU

Source: MP Advisors; Company Reports

0.24%0.40%0.20%0.16%6.15Average

29.6%52.2%15.7%13.3%6.6Pfizer

24.8%43.1%20.7%15.9%4.9Roche

15%37.7%20.0%17.2%6.5Novartis

24%30.6%24.3%17.6%6.6Bristol - Myers

Global Companies

39.2%30.5%6.8%10.5%5.97Average

48.4%22.7%3.0%7.0%4.40Kyowa Hakko

37.6%30.0%7.0%9.0%5.80Dainippon Sumitomo

40.0%34.9%5.5%9.0%5.63Mitsubishi Tanabe

37.8%36.5%8.0%9.9%5.30Shionogi

39.3%26.8%8.8%12.2%8.05Kyorin

31.9%32.1%8.5%15.7%7.12Chugai

Japanese Domestic Companies

37.0%36.1%9.4%12.0%4.94Average

38.9%33.6%8.3%9.8%4.90Eisai

37.9%31.2%11.5%10.9%4.96Daiichi Sankyo

36.6%35.9%8.0%13.0%4.80Astellas

34.4%43.8%10.0%14.4%5.10Takeda

Tax RateO M Excluding R&D expenseROEROCESales/ R&D

ExpenseCompany

18MP Advisors

REFORMS IN 2012 AND IMPLICATIONSREFORMS IN 2012 AND IMPLICATIONS

All generic companies

Impact negatively the sales of newly listed generic drugs

The abolition of the extra two points awarded to pharmacies for dispensing generic drugs and 15 points for providing drug information

Abolition of Premium for GE Dispensing and GE information provision fee

All generic companiesMore Rx will generate on generic drugs

Points awarded to pharmacies for providing drug history management and guidance will rise to 41 points from the present 30 points.

Increase in management and guidance fee


Increased generic substitution at pharmacy level

Removal of ‘no substitution permitted’column from the current Rx format and compulsory writing of the generic name of the drug.

Change in prescription format

Towa, Sawai, Nichi-Iko

Reducing the gap at lower end will make generic dugs more competitive to long listed as well as amongst generic drugs.

Currently, there is huge price difference between two brands of generics.

Reducing the difference in price of Generic drugs


Increasing discount will make generic drugs more competitive against long listed drugs

First generic version set to be at a min. 40% discount to branded drug instead of the current 30% discount.

Higher discount to new generic launch

Sawai, Nichi-IkoMore Rx on generic drugs to generate more bonus points

Awarding higher bonus point to hospitals using at least 30% generics (35 points); while awarded points for hospital using at least 20% reduced from 30 to 28 points.

Higher bonus points to Hospitals for more usage of generics

Sawai, Towa, Nichi-Iko

Higher generic substitution at dispensing pharmacy

Further increase in incentive for pharmacist; likely for those who dispensed more than 30% generics

Premium for generics dispensing

Biggest Beneficiary Companies

ImpactDescriptionReform

19MP Advisors

DRUG CHAIN STORES: A NEW INVESTMENT DRUG CHAIN STORES: A NEW INVESTMENT ATTRACTION ATTRACTION -- WARRANTS A CLOSE LOOKWARRANTS A CLOSE LOOK

• Drug chain stores are going to play an important role in Japanese pharmaceutical distribution system and they also present several opportunities to tap in. New regulations have removed the compulsion of pharmacies to stock generic brands from several companies i.e. the drug stores can stock generic brand of their choice and it could be as low as a single brand for one generic product.

• With several hundred outlets nationwide, they can negotiate with generic companies for pricing/ margin and keep products of their choice. But more importantly, if these drug chains enter into the manufacturing and/or marketing of their own generic products, they could enhance their business prospects much better.

• So far, only Nihon Chouzai has ventured into its own generic business and has been very successful. It currently sells ~750 generic products from its own generic subsidiary, Nihon Generics and we expect it to generate ~¥10b from its generic business. Out of these ~750 products, ~350 are manufactured by Nihon Generics itself while remaining is manufactured thru Contract Manufacturing Organizations (CMO’s).

• We do not see any reason that will prevent other leading Drug chain stores to not or will not enter into the generic business. A low margin drug selling business synergizes well with generic business. A close look is warranted on the Drug chain stores as a potential investment idea.

Structural reforms increase bargaining power of drug chain stores – a scenario that could bring novel investment space in Japan!

20MP Advisors

BIOGENERICS OPPORTUNITY IS OPENING BIOGENERICS OPPORTUNITY IS OPENING IN JAPANIN JAPAN

• ¥160b Biologics market is going to open by 2015 in Japan. JP regulators are half way through compared to US and EU in drafting the biosimilar guideline. As batch to batch biologic variation is high, JP regulators are not willing to accept import of biogenerics/biosimilars from outside and hence we expect this opportunity to be exploited locally. Currently ~ 3 biogeneric’s are available i.e. Somatropin BS by Sandoz and Epoetin alfa. Recent development in biogenericspace by the local generic companies is indicative of JP companies’ interest to exploit these biogenerics opportunities. We think biogeneric penetration would not replicate the poor generic penetration story of JP Pharma. Pl. refer to our therapy class report – Biosimilar/biogeneric opportunity in Japan for more details.

Biogeneric are not going to replicate slow generic story – A number of players look vigorous in exploiting the new market and bring investment opportunity in

biosimilars space!

21MP Advisors

SELECT JAPANESE COMPANIES ON MPSELECT JAPANESE COMPANIES ON MP’’S S RADARRADAR

1 Towayakuhin 22 Tanabe Mitsubishi 43 Sato 64 Alfresa Pharma

2 Sawai 23 Nihonyakuhin Kogyo 44 Hisamitsu 65 Mochida

3 Nichiiko 24 Irom 45 Asahikasei Pharma 66 Biotec Bay

4 Nichiiko Pharma 25 Nihon Generic 46 Sankei 67 Essential Pharma

5 Nipro Pharma 26 Sanwakagaku 47 Shioe 68 Elmed Eisai

6 Tatsumi kagaku 27 Aska 48 Nihonkayaku 69 Shionogi

7 Kyowa yakuhin kogyo 28 Maedayakuhin 49 Tohoshinyaku 70 Tatsumi

8 Tsuruhara 29 Wakamoto 50 Kowa 71 Toa eiyo

9 Choseido 30 Yoshida 51 Bio medics 72 hushimiseiyakusho

10 Taishoyakuhin kogyo 31 Otsuka 52 Yutoku 73 Esai

11 Fuji Pharmaceutical 32 Fresenius medical care Japan 53 Toyo Capsul 74 Kissei12 Takata 33 Meijiseika 54 Fuji 75 Satoyakuhin

13 Kobayashikako 34 Nagase 55 Nihon chemipher 76 Tokai Capsul

14 Yoshindo 35 Chemix 56 Kaken 77 Toho yakuhin

15 Isei 36 Jdolph 57 Nitten 78 Takedayakuhin

16 Kyorin remedio 37 Kyukyu 58 Hizon 79 Fuji Capsul

17 Ohara 38 Teikoku 59 Ikedayakuhin 80 Kyorinseiyaku

18 Iwaki 39 Mayado 60 Santen 81 Kyowairyokaihatsu

19 TeijinPharma 40 Maruishi 61 Sanyu 82 Astellas

20 Terumo 41 Showayakuhin 62 Senju 83 Zeria

21 Nipro Genepha 42 Daikyo 63 Taiho 84 Daiichisankyo

22MP Advisors

GLOBAL PHARMA & BIOTECHNOLOGY

OUTLOOK 2013

Rising Stars (Non-profitable) & Mature Biotech (Profitable)

Subita Srimal, PhD Khyati Thkrar, M.Sc., PGDBM Sanjeev Mishra, [email protected] [email protected] [email protected]+1.646.657.3794 +1.646.434.7588 +1.646.434.7588

23MP Advisors

MATURE BIOTECH MATURE BIOTECH ––

2012 WAS GREAT!!!2012 WAS GREAT!!!

““WILL THE PARTY CONTINUEWILL THE PARTY CONTINUE””??

24MP Advisors

FAVORABLE OUTLOOK FOR THE NEXT FIVE FAVORABLE OUTLOOK FOR THE NEXT FIVE YEARS!YEARS!

• Optimism prevails around the future of this sector as a whole which was reflected in the unprecedented rally in shares in 2012.

• We expect this trend to continue in the next five year driven by launch of Innovative drugs catering to unmet needs in Alzheimer’s, HCV, osteoporosis, RA, Psoriasis, MS, Dyslipidemia, Cystic fibrosis, Cancer and orphan diseases.

• Drug approvals and label expansion of existing portfolio of launched drugs and data from late stage pipeline drugs should maintain the growth momentum and investors interest in the next five years.

• Favorable regulatory environment should finally see biosimilar mAbs entry in regulated markets in the next five years. The optimism of biosimilar players is reflected in the maturing pipeline. Para IV Filing from other generic players continues to pour leaving room for surprises and volatility

25MP Advisors

MATURE BIOTECH MATURE BIOTECH –– TABLE OF CONTENT (TABLE OF CONTENT (ToCToC))Macro Analysis1. Performance of the Mature Biotech companies recommended by MP Advisors in 2012 –

Impressive Report Card; Positive sentiments to prevail in 2013 and beyond 2. Valuation Multiples and Fundamentals- Drivers of Growth. 3. MP Advisors’ Proprietary Sum-of-The-Parts Valuation and Top Picks for 2013 4. Drug Approvals 2012-15 5. Key Milestones During 2013/14 6. Impact on revenue 2012-2017 from Patent Expiry and Strategies deployed to meet the challenges. 7. Pipeline of Biosimilar mAbs8. Joint Ventures between innovators and biosimilar players 9. Merger & Acquisitions Forecast- 2013-2020

Industry Tables1. Valuation Snapshots 2. Expected Drug Clinical Milestones 3. MB sector Selected M&A Activities 4. Marketed Products’ Potential 5. Pipeline Potential Thru 2017 6. Patent Expiry – Impact On The Sector

26MP Advisors

IN-DEPTH COMPANY ANALYSIS AND REPORTS ToC CONTINUED…

1. Acorda - AMPYRA addresses co-morbidities associated with multiple sclerosis (MS) and with no competition, future growth in US and EU to sustain the current valuation. Pipeline remains a free call option.

2. Alexion - Innovative drugs, diversification and focus on orphan diseases will continue to lend stability. Availability of Soliris (eculizumab, C5a inhibitor) indicated for Paroxysmal Nocturnal Hemoglobinuria (PNH) and Hemolytic-uremic syndrome (HUS) in other geographies along with label expansion should drive growth in the next five years. Pipeline (Asforase alfa, ALXN1102/1103, ALXN1007) beyond soliris is also maturing.

3. Amgen - Sales of denosumab (Prolia: Postmenopausal Osteoporosis, male osteoporosis and XGEVA: skeletal-related events in patients with bone metastases from solid tumors) and novel compounds in the pipeline targeting bone health, cancer and Hypercholesterolemia should sustain Amgen’s reputation as an innovator. Through acquisitions and collaboration, Amgen is poised to tap the emerging market opportunities.

4. Biogen Idec - Poised to sustain its leadership in MS with the well awaited launch of the best in class oral therapy BG-12 (dimethly fumerate, R). Diversification in other therapy area - hemophilia is the future driver.

27MP Advisors

IN-DEPTH COMPANY ANALYSIS AND REPORTS ToC continued…

5. Celgene – Leadership in hematological cancers will be sustained with the launch of pomalidomide. Diversification in autoimmune and inflammatory diseases and label expansion of marketed drugs will drive growth. Risk of Para IV challenges remain.

6. Gilead - Leading in HIV and poised for a similar feat in HCV. Product pipeline beyond the Anti-viral is maturing and promising.

7. Grifols – Stable growth in the plasma protein business, while IVIG opportunity in Alzheimer’s disease remains a wild card.

8. Onyx - Oncology drugs portfolio (Nexavar, Kyprolis, Stivarga) is attractive and places it high on the acquisition target list. Kyprolis is not restricted to R/R MM (3rd-line) and label expansion in 1st –line MM could be a blockbuster opportunity.

9. Regeneron – Growth trajectory driven by Eylea in wet Age-related macular degeneration (AMD), Central Retinal Vein Occlusion (CRVO) and Diabetic macular edema (DME,). Pipeline targeting Hypercholesterolemia, Cancer and RA promises long term growth.

10. Vertex - Bleak prospects for INICVEK as better drugs for HCV are poised to hit the market. Kalydeco (CF potentiator) in combination with VX-809/VX-661 (CF corrector) for larger Cystic Fibrosis opportunity remains a binary event.

28MP Advisors

VALUATION MULTIPLES VALUATION MULTIPLES BASED ON PROJECTION THRU 2016BASED ON PROJECTION THRU 2016

19.936.54.30.635.059.125.3307 1,007Acorda

20.429.47.92.326.711.79.2899 5,043Vertex

13.934.94.80.830.029.710.5(2,522)7,918*Grifols**

38.187.312.31.245.336.834.0745 19,046Alexion

42.357.422.40.848.350.635.0117 20,395Regeneron

14.218.33.30.815.719.412.6739 34,252Celgene

14.122.94.81.023.323.312.62,235 35,688Biogen Idec

14.216.97.40.719.326.214.9(6,071)60,210Gilead

9.011.33.21.513.39.22.4(1,104)68,591Amgen

EV/EBITDAP/CP/B

PEG (12/12-

16)PE '12EPS

Growth %Sales

Growth %Net Cash

($m)Mkt Cap*

($m)Company

* As on 11/23/2012; ** in €; ONXX not considered; Bold are MP’s 2013 Top PicksSource: MP Advisors, Company Reports

29MP Advisors

FUNDAMENTALS TO DRIVE GROWTHFUNDAMENTALS TO DRIVE GROWTH

LowLowLowPlasmaGrifols

LowLowMedHCV, CFVertex

HighLowMedOphthalmic, OncologyRegeneron

LowLowLowCancerOnyx

HighMedHighAnti-ViralGilead

HighLowMedHematological, Oncology, InflammationCelgene

MedLowMedMSBiogen Idec

MedHighLowESA, Oncology, Inflammation, Bone health

Amgen

MedLowHighOrphan DiseasesAlexion

LowLowLowMSAcorda

Diversified Strategies for Future growth

Generic threat (next Five

Years)

Potential of Late stage Pipeline

Management and Overall

Historical Performance

Focus and Dominance in a Therapy Area

Therapy Area- FocusCompany

Bold are MP’s 2013 Top PicksSource: MP Advisors, Company Reports

30MP Advisors

RISING STARSRISING STARS

•• Innovation is not Enough! Innovation is not Enough!

•• Therapy AreasTherapy Areas-- focus in 2013 focus in 2013

Rising stars Rising stars -- Innovative Research Driven Unprofitable CompaniesInnovative Research Driven Unprofitable Companies

31MP Advisors

NO GAIN WITHOUT PAINNO GAIN WITHOUT PAIN

• Innovative and improved drugs therapies developed through novel target discovery and technology platforms have originated from the backyards of small research focused companies (Rising Stars, RS, non-profitable biotech companies).

• The universe continues to grow despite the high risk and the long wait to transform into a successful profitable Mature Biotech .

• 2012 saw new drugs approvals for unmet needs, first in class drugs for Anti-obesity, Myelofibrosis, cancers and better drug options for HCV, RA, MS, psoriasis, HCC, dyslipidemia etc.

• We expect approval of “better drugs for bad bugs”, targeted therapies for cancer, Alzheimer’s, antivirals and orphan diseases in the next five years

32MP Advisors

RISING STARS RISING STARS –– TABLE OF CONTENTS (TABLE OF CONTENTS (ToCToC))

Macro Analysis- Top Picks for 20131. Select Drug Approval in 2011-12 and Drug Launches in 2013-14 2. Select Mid To Late Stage Drug Disappointments 3. Cash Balance of Select RS Companies 4. Challenges and Unmet Need of Innovators - Launched and Pipeline Unpartnered Compounds 5. Resisting resistance – Emergence of Bad Bugs – GAIN Act 6. New Targets And Drugs For Bad Bugs 7. Select Mid To Late Stage Anti-Infective Pipeline For Serious Hospital Infections 8. Retrograde Evolution- Where Innovation is Killed by Innovators 9. Oral vs. Injectables - Select Oral RA Drugs in Development.

Industry Tables1. Drug Clinical Milestones 2. Drug Launch Table- 2013 3. NPV Valuation

33MP Advisors

IN-DEPTH COMPANY ANALYSIS AND REPORTS ON TOC CONTINUED…

1. Cempra – GAIN from Drugs for Bad Bugs 2. Galapagos - GLPG0634 Excels vs. all JAK Inhibitors for RA. 3. Incyte - JAKAFI/ JAKAVI Approved for Myelofibrosis and Drugs in Pipeline –Drivers of Growth 4. MorphoSys - Maturing Pipeline and Partnering/Acquisition in the Offing5. ArQule - Failure in NSCLC – Disappointing but Not “The End” for Tivantinib6. Basilea - Ceftobiprole + Early Stage Pipeline Remains A Free Option! 7. Medivir - Simeprevir in the HCV Race - Value Un-Appreciated! 8. Rigel - Be in SyK (for RA)– Positives Coming Ahead 9. SymBio - Novel Oncology Drug Portfolio Available as a Free Call Option! 10. Trius - Partnering or Buy Out on the Cards. 11. Vivus - Marketing Anti-obesity Drugs -Where Being First Has not Helped12. Amarin - VASCEPA – Left to Fend on its Own!13. Aveo - Tivozanib – Wait May be Longer!14. Halozyme - rHuPH20 Benefits for Chronic Use - Still Under Scrutiny15. Immunomedics - Lack of Catalysts in Near Term16. ISIS - What More is Left Beyond KYNAMRO?

34MP Advisors

PROOF OF RELEVANCE PROOF OF RELEVANCE ……

• VRTX- Retrograde Evolution…

• Arena, Vivus - 2013 will be testing- Will the companies also become slimmer?

• JAK and Syk players- Oral RA drug launch also under test…

Proof of relevance Proof of relevance -- the abilitythe ability to establish differentiated attributes and to establish differentiated attributes and commercial valuecommercial value of compounds will matter in coming yearsof compounds will matter in coming years

35MP Advisors

THERAPY AREAS THERAPY AREAS -- TO WATCH OUT FORTO WATCH OUT FOR

• HCV- IFN-Free drugs and Vaccines

• Alzheimer’s disease- Gammagard and any other surprises!

• Rheumatoid Arthritis - SyK after JAKs?

• Obesity- Arena, Vivus on test - Orexigen may be the winner even if its 3rd to launch!

• Multiple Sclerosis - Great expectations from BG-12 (DMF, R, Biogen Idec), Lemtrada (Sanofi).

• Niche - Amyotrophic lateral sclerosis (ALS), Duchenne Muscular Dystrophy (DMD, SAREPTA), Cystic Fibrosis (KALYDECO, VX-809, Vertex), Marquibo (vincristinesulfate liposome injection, Ph- ALL)

• Biosimilars/Biobetters…..

• Regenerative /Stem cells

36MP Advisors

RECOMMENDATIONS FOR 2013RECOMMENDATIONS FOR 2013

• Incyte - 2013 will be a decisive year for INCY, as JAKAFI / JAKAVI’s (ruxolitinib, JAK 1/2 inhibitor, PhII/III in PV/ET, partnered with Novartis for Ex-US rights) growth trajectory in US and uptake in EU.

• MorphoSys - Clinical data from several PhII partnered/ unpartnered compounds and licensing of unpartnered programs to further bring upside in coming years.

• Galapagos - GLPG0634 (PhII, JAK 1 inhibitor, partnered with Abbott) offers best efficacy and safety among all JAKs/ oral drugs in RA, and we expect it to achieve blockbuster sales

• Cempra – Favorable wind due to the GAIN Act for companies focused in developing anti-infective; Two unpartnered products which address Serious hospital infections, demonstrated favorable efficacy, safety, and tolerability profiles comparable to current ‘gold standard’ therapy (levofloxacin and linezolid) in PhII trials. Unpartnered products offer an attractive investment and alliance opportunity.

MP Advisors

India Pharma Growth Drivers:India Pharma Growth Drivers:Consolidation in India Market and Consolidation in India Market and

Complex Generics in USComplex Generics in US

Vivek Agrawal, [email protected]

+1.646.657.3787

Nimish Mehta, [email protected]+1.646.657.3787

38MP Advisors

US GENERICS US GENERICS –– WHAT AFTER THE WHAT AFTER THE PATENT CLIFFPATENT CLIFF

1. In CY 2012, products worth ~$30b in annual sales ( small molecule ) have lost patent in US.

2. Conversely, 2013 is likely to witness patent expiry of ~$10b only.

3. It is almost impossible for the generic companies to sustain the high base created so far in the US generic market from Para IVs or me-too generics.

Complex Generics Complex Generics –– The Only Answer For GrowthThe Only Answer For Growth

39MP Advisors

COMPLEX FORMULATIONS COMPLEX FORMULATIONS –– THE NEXT THE NEXT LEAP FORWARDLEAP FORWARD

Non Systemically Acting Generic Drugs Require Clinical TrialsNon Systemically Acting Generic Drugs Require Clinical Trials

Complexities in synthetic generic drug development and manufacturing can be categorized into:

• Difficulty in characterization of drug substance, e.g. Copaxone

• Formulation related complexities like modified release drugs

• Non-systemically acting drugs. These drugs usually require clinical trials to prove bioequivalence.

• Drugs that require device or a patch

Of the above, Non Systemically Acting Drugs and Drugs with Device or Patch together offer the largest opportunity currently.

40MP Advisors

NON SYSTEMCIALLY ACTING AND DRUGS NON SYSTEMCIALLY ACTING AND DRUGS WITH DEVICEWITH DEVICE

Non Systemically Acting Drugs further may be divided into:• Locally Acting and • Targeted Drug Delivery.

Below are the drug technologies that act non-systemically in the body:

• Liposomal• Colon Targeted• Topical• Inhalers

Transdermal drugs are non non-systemic, but are drugs with device that too requires clinical trials before generic approval in US.

Market Size is $25Market Size is $25--30b of Patented Sales in US With Low 30b of Patented Sales in US With Low CompetitionCompetition

41MP Advisors

TOPICAL DRUGS TOPICAL DRUGS –– THE MOST NEAR TERM THE MOST NEAR TERM OPPORTUNITYOPPORTUNITY

Entry Barriers• Clinical Trial requirement• Cosmetic Acceptability

Opportunity in US – About $8b in patented sales with patents of products worth $5b having expired. Patent expired products still witness low competition.

With need for various dosage forms (like gels, lotion etc) in topicals, this also offers opportunities for branded generics.

Global Acquisitions in Topical Space: Topical segment has witnessed many M&A activities as it remains the most near term opportunity.

Acquisitions in Dermatology Segment

640Oct-06ConnectisStiefel

400Oct-07BradleyNycomed

420Feb-08CollagenexGalderma

148Jun-08Barrier TherapeuticsStiefel

95Sep-08Coria LabsValeant

3,600Apr-09StiefelGSK

320Sep-10TaroSun Pharma

425Jul-11DermicDermatologyValeant

1,500Jul-12FogeuraSandoz

2,600Sep-12MedicisValeant

230Dec-12DusaSun Pharma

Value (US$m)DateTargetAcquirer

42MP Advisors

DOMESTIC MARKET DOMESTIC MARKET –– GROWTH STAGESGROWTH STAGES

• Till 2005, growth was in single digit growth – despite robust economic growth. Growth remained largely driven by new product introductions.

• From 2006 onwards, growth went up to 13-15% growth till 2010. Growth driven by new products as well as volume increase in existing products.

• 2011 too is witnessing similar growth albeit slightly below the average so far.

Source: MP Advisors, IMS India Market Survey

Annual Growth of Indian Pharma Market in Value, Volume, and New Products

Growth Picked Up After 2005Growth Picked Up After 2005

8

57

9

18

13 13

1817

15

18

02468

101214161820

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Grow th (%)

43MP Advisors

REGULATORY REFORMS POST 2005REGULATORY REFORMS POST 2005Stricter Manufacturing Norms: Introduction of “Schedule M” in the ‘Drug & Cosmetics Act’ that mandates all pharmaceutical units to comply to WHO GMP standards. This was strictly implemented from June 2005 despite several pleas by SMEs. As per the new manufacturing norm, the incremental average capital expenditure required was ~Rs.20-30m – significant for most of the SMEs. This also added to their operational costs.

Reforms Evened Out The Cost Differences Between Big and Small CoReforms Evened Out The Cost Differences Between Big and Small Cos.s.

• Changes in Excise Duty Structure: A new law in 2005 required, excise duty calculation on the retail price unlike the cost of production earlier. Further the excise duty was reduced to 8%.

• Setting up of Excise Free Zone: These reforms coincided with many states setting up excise free zones. Consequently, most of the big pharma cos. Shifted their manufacturing base to these zones.

• All these reforms leveled the cost of production between SMEs and big pharma cos.

44MP Advisors

Impact of Reforms Post 2005 = Impact of Reforms Post 2005 = SMEsSMEsSufferingsSufferings

• Reforms took away the cost advantages (in the form of low quality and excise evasion) of SMEs.

• Most of the SMEs had to bear the additional capex of Rs.20-30m as they were GMP non-compliant. As against that, big cos. were mostly GMP compliant.

• Big cos. shifting manufacturing to excise-free zones gave them an edge over small cos. that could not shift due to family issues (being individual driven).

A Highly Fragmented Market Is Now Getting A Highly Fragmented Market Is Now Getting ConsolidatedConsolidated

45MP Advisors

Post 2010 Post 2010 –– Reforms ContinueReforms Continue• New Laboratory Practice Norms Effective Nov 2010: Introduction of GLP (Good

Laboratory Practices) with effect from 1 Nov 2010.• Our talk with the chairman of CIPI (Confederation of Indian Pharma Industry) – an SME

pharma association suggested that the impact of GMP was immediate and long lasting with an incremental capex of Rs.20-30m

• GMP + GLP increases the operational expenditure by 5-7% on an average. • Bar Coding on Packaging Effective Oct 2011: With an intention to improve the ‘Brand

India’, govt. has made bar coding compulsory for all export items in a phased manner. From Oct 2011, it is made compulsory on Tertiary packing, from Jan 2013 on Secondary Packaging and Primary packaging from July 2013.

• With ~50% of SMEs involved in exports, this will further escalate the overall operational costs making it even more uncompetitive.

Ongoing Reforms Further Adds To the Burden on Ongoing Reforms Further Adds To the Burden on SMEsSMEs

46MP Advisors

New Draft Drug Pricing Policy New Draft Drug Pricing Policy –– Neutral To Neutral To PositivePositive

• The new policy puts 30% of the drugs under price control, i.e. all the drugs listed under the National List of Essential Medicines (NLEM).

• Ceiling Price (CP) to be decided based on simple average price of drugs with more than 1% market share and to be revised annually as perWholesale Price Index (WPI) of manufactured goods. Other than that, revision only once in 5 years.

• The Impact: Price increase to the extent of Manufactured Products Inflation will help most of the impacted brands to recover its price in 2-3 years.

• Exemption from price control on combination products may encourage manufacturers to shift its impacted product to an innocuous combination to blunt the price control.

Market & Inflation Based Pricing May Blunt Any Price ControlMarket & Inflation Based Pricing May Blunt Any Price Control

47MP Advisors

GLOBAL PHARMA & BIOTECHNOLOGY

OUTLOOK 2013

THERAPEUTIC CLASS REPORTS

Subita Srimal, PhD Vishal Manchanda, B.E., MBA Devesh Singh, Pharmacist, [email protected] [email protected] [email protected]+1.646.657.3794 +1.646.657.3787 +1.646.657.1016

48MP Advisors

THERAPEUTIC CLASS REPORTS INCL.THERAPEUTIC CLASS REPORTS INCL.1. Emergence of Biogeneric Era in Japan - The opportunity to be exploited

locally

2. Herceptin Biosimilar - Risk Reward of Developing a Herceptin Biosimilar –A Thorough Assessment

3. Rituximab –Risk Reward of Developing Rituxan Biosimilars and Biobetters

4. Future of GPR agonist for treatment of Type 2 diabetes

5. HCV- Market Dynamics within the Oral IFN free therapy Options, Emerging Market Opportunities and HCV vaccines

6. Hemophilia- New Therapies and Changing Market Dynamics

MP Advisors

Thank You Thank You

[email protected]

(o)

(e)w)

Contact us:

MP AdvisorsB-203, Alkapuri Arcade,R C Dutt Road,Vadodara – 390007

Address:

BioPharma Outlook 2013 presentation

Documents

Transcript of BioPharma Outlook 2013 presentation