Capitalizing on the Opportunities: Global Trends in the Biopharmaceutical Industry

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Capitalizing on the OpportunitiesGlobal Trends
in the Biopharmaceutical Industry
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Agenda

• Biopharmaceutical Industry Trends
• Regulatory Landscape
• Convergence of Compliance Technology

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Biopharmaceutical Industry Trends
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Industry Growth Drivers

• Demographic changes
• Number of Americans over 65 to double over next
  50 years
• Over 65 health care expenditures 4 times higher
  than those under 65
• Innovative medicines targeting life-style
  diseases
• Cardiovascular agents, CNS products,
  Alimentary/metabolism products
• New Drug Approval Outlook
• Approved 25 new biotech and biotech-derived
  medicines in 2003 (67 increase over 2002), but
  momentum slowed in 2004
• Modest pipelines key concern for Mature Biotechs
  (17 non-partnered drug launches through 2009)
• Rising Biotech Stars gathering momentum
• 130 projected to reach sustained profitability
  2005-2009
• 9 IPOs in 2003, jumped to 27 in 2004
• 20 new launches expected for 2005, momentum to
  carry through 2006
• Emerging Markets seen as growth engine for
  healthcare demand worldwide (India, China,
  Brazil)
• Medicare Drug benefit Plan should boost top line
  by 2

Biopharmaceutical Industry Trends
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Industry Structural Changes

• Increasing role of generic pharmaceuticals
• Fueled by patent expirations worth 80 billion
  through 2010
• Increasing globalization
• BioGenerics (follow-on proteins) on the horizon
• Fueled by biologics patent expirations worth 18
  billion through 2011
• Manufacturing issues dominate (bio-equiv., cost,
  expertise, economies of scale)
• TGA approved first in 2004, Europe to follow, US
  lagging a couple of years
• Getting harder to distinguish Big Pharma from
  Major Biotech
• Industry consolidation
• 45 deals in 2004 with total value in excess of
  90b (highest deal rate since 2000)
• Top 10 companies market share up from 28 in
  1990 to 46 in 2002
• Structured-finance emerging as alternative for
  capital-hungry biotechs
• Development company funded by private investors
• Licensor has exclusive buy-back right at
  pre-determined price
• Emphasis on outsourcing in manufacturing and RD
• Business development strategies becoming more
  open
• Mergers Acquisitions, In-licensing/Out-licensing
  , Co-development, Co-marketing

Biopharmaceutical Industry Trends
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Market Performance
Worldwide Pharmaceutical Market by Sectors,
through 2008 ( Billions)
Biopharmaceutical Industry Trends
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Pharmaceutical Market Performance
Worldwide Pharmaceutical Market by Sectors,
2000-2003 and 2008 ( Billions)
Source BCC, Inc., IMS Health
Biopharmaceutical Industry Trends
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Among the Many Challenges

• Time cost to bring new drugs to market
• 1 out of every 20 drugs entering clinical testing
  will be approved for marketing
• It takes 10-12 years (12-15 biopharm) to bring a
  new drug to market
• Average cost to bring a new drug to market is
  350-850 million
• A clear view is not necessarily a short
  distance
• Pricing controls / pressures
• Competition intensifying (shorter exclusivity
  periods)
• Increasing buying power of third-party payers
  (therapeutic substitution, OTC switches)
• Increased health awareness by patients
• Declining RD productivity
• Will need to triple rate of development of new
  chemical entities to maintain projected AAGR
• Modest pipelines key concern for Mature Biotechs
  (17 non-partnered drug launches through 2009)
• Compliance with Stringent Regulatory Requirements
• FDA and foreign equivalents (21 CFR Part 11,
  HIPAA, others)
• Sarbanes Oxley
• General Agreements on Tariffs Trade (GATT)
• Trade Related Intellectual Property Rights
  (TRIPS)
• Is biopharmaceuticals manufacturing likely to be
  capacity constrained??
• Global Biotech contract manufacturers operating
  at or near full capacity to support the 120
  current marketed products270 additional
  compounds are in late stage pivotal trials

Biopharmaceutical Industry Trends
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Regulatory Landscape
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FDA Notable Actions Events

• Pharmaceutical cGMPs for the 21st Century
• Bioterrorism Act
• Title III Protecting Safety Security of Food
  Drug Supply
• 21 CFR Part 11 Scope and Application Guidance
• Bar Code Label Requirements for Human Drugs and
  Blood
• Strengthened commitment to international
  harmonization activities
• EU Mutual Recognition Agreement effective June
  20, 1997, Final Rule (21 CFR Part 26) effective
  December 7, 1998
• Confidentiality Agreement and Implementation Plan
  to facilitate regulatory cooperation between EU
  and FDA/DHHS for medicinal products for human use
  (finalized September 2004)
• General Principles for EMEA-FDA Parallel
  Scientific Advice Meetings Pilot Program
  (September 2004)
• FDA final report on Combating Counterfeit
  Drugs, February 18, 2004
• FDA to create independent Drug Safety Oversight
  Board (DSB)
• Pharmacogenomic Data Submissions, Final
  Guidance, March 22, 2005
• First laboratory test for genotyping approved by
  FDA

Regulatory Landscape
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Pharmaceutical cGMPs for the 21st Century

• Principles
• Risk-based orientation
• Science-based policies and standards
• (incorporate up-to-date science, and encourage
  advances in technology)
• Integrated quality systems orientation
• International cooperation
• Strong public health protection
• Broad Actions
• External review of existing cGMPs, and product
  review practices
• Reassess and reevaluate current scientific
  approach to cGMPs and product review process
• Emphasize risk-based control point analysis and
  facilitate latest innovations in pharmaceutical
  engineering

Regulatory Landscape
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Pharmaceutical cGMPs for the 21st Century

• Immediate Steps
• Encouraging innovation by allowing certain
  manufacturing process changes without prior FDA
  review/approval
• Enhancing expertise in pharmaceutical
  technologies
• Exploring better mechanisms for communicating
  deficiencies to industry
• 21 CFR Part 11 lead shifted to CDER (Chaired by
  Joe Famulare)
• Including product specialists in inspection teams
• Centers to provide reviews of all Warning Letters
• Developing a technical dispute resolution process
• Emphasizing risk-based approach in work planning
  process
• FDA is encouraging industries to adopt new
  technologies such as Process Analytical
  Technologies (PAT) to improve manufacturing
  efficiency and overall quality of the drug product

Regulatory Landscape
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21 CFR Part 11 Guidance

• Scope Application Guidance
• Withdrew preceding draft guidance and Compliance
  Policy Guide
• Specific definition of records subject to Part 11
• Enforcement Discretion to be exercised for
• Audit Trails
• E-copies of E-records
• Record Retention
• Validation
• Effectively grandfathers systems in place prior
  to August 20, 1997
• Emphasis on decision based on documented risk
  assessment
• 21 CFR Part 11 and preceding guidance subject to
  review,
• Regulations are likely to be revised, but have
  not changedYET!

Regulatory Landscape
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Bar Coding Regulations

• Motivation
• Medication errors are a huge problem
• 770,000 patients injured or die annually
• Cost to treat was 177.4 billion in 2002
• Bar coding to unit of use level ensures right
  patient gets the right drug at the right time
• FDA estimates rule will prevent 500,000 adverse
  events and transfusion errors and save 93
  billion in healthcare costs over next 20 years
• Final Rule
• Bar Code Label for Human Drug Products and
  Blood, 21 CFR Parts 201,606, and 610
• Finalized February 25, 2004

Regulatory Landscape
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The Convergence ofCompliance Technology
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Existing and Emerging Technology

• Process Analytical Technologies (PAT)
• Systems for analysis and control of manufacturing
  processes based on timely measurements of
  critical quality parameters and performance
  attributes of raw and in-process materials and
  processes to assure acceptable end product
  quality at the completion of the process
• Electronic Batch Record (EBR)
• Manufacturing Execution System (MES)
• Private Trading Exchanges for Manufacturing
  (PTX-M)
• AMR predicted market would reach 35 billion by
  2005, but
• Taggants Related Detection Systems
• Radiofrequency Identification applications (RFID)

Compliance Technology
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Process Analytical Technologies

• PAT Drivers
• Cycle time reduction (some steps gt50 reduction)
• Close coupling of batch steps to produce
  semi-continuous operations
• Improved utilization of production equipment (10x
  throughput increase)
• Reduce processing errors
• Reduce opportunities for product contamination
• At/on/in-line measurements of performance
  attributes (variability)
• Enable real-time control and decisions through
  control of Process Critical Control Points (PCCP)
  and setting of Process End Point (PEP)
  rangeClosed Loop!
• PAT Applications
• Monitor incoming materials attributes to
  predict/adjust optimal processing parameters
• Direct or inferential measurement of quality and
  performance
• Sample Pharm/Biopharm Applications
• Drug substance particle size monitoring (size,
  distribution)
• Tablet analysis to assess blend Uniformity
• Automated release of PW/WFI water using on-line
  TOC Analysis
• Fermentation Process End Point Determination

Compliance Technology
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Electronic Batch Record

• Collection of Information required for reporting
  to
• Quality Assurance
• Contract Customers
• FDA
• Provides for
• Complete history of Batch
• Identification of Material and Quality data of
  materials
• Operator interactions
• Electronic Signatures
• Systems Data
• Laboratory Information Management System
• Automation
• Historian
• QA Reports
• Quality due-diligence Information

Source Rockwell Automation
Compliance Technology
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Manufacturing Execution
Source Rockwell Automation
Compliance Technology
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Private Trading Exchange for Manufacturing (PTX-M)

• An IT platform with business process management
  capabilities and a portal to make visible
  inventory, material, schedules, capacity, and
  orders across sites (AMR MAS Report, February,
  2002)

• Integrates across business functions
• Enterprise-level visibility to information, data,
  transactions across multiple sites with disparate
  systems and processes
• Collaborative, manufacturing-oriented exchange
• Provides a logical point of normalization to
  synchronize with ERP
• Provides a foothold for applications, such as
  MES, PLM, multisite scheduling
• Allows plant standardization to prioritize data
  standards at the site level (improved accuracy
  visibility), rather than attempting to replace
  all software with a standard MES package
• Production sites can implement systems that best
  suit their needs

Compliance Technology
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MES PTX-M Within the Technology Landscape
MES
MES
Compliance Technology
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Taggants

• Microscopic tracers used as unique identifiers
  for materials, components, finished products,
  shipping containers, etc.
• Considered effective anti-counterfeiting method
  as compliment to other techniques (color shifting
  inks, holograms, chemical markers, RFID)
• Most approaches involve engineered materials not
  found in nature, but some emerging techniques use
  DNA and specialized detectors (Integrated
  Nano-Technologies, Applied DNA Sciences)
• Sample Applications
• Blended with raw materials (bulk chemicals,
  excipients, tablet coatings, etc)
• Manufactured directly into paper or synthetic
  substrate
• Added to ink, over varnish, adhesives for
  labeling and packaging
• Detection UV light, magnetic thread reader, DNA
  detection, black light, color sequencing, others

Compliance Technology
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Primary components of RFID

• Electronic Product Code (EPC)
• Unique serial number to be assigned at the
  pallet, case, and package level
• Pedigree
• Combination of EPC, transaction history, and
  related information
• Radiofrequency Identification (RFID) Systems
• Silicon tags containing EPC
• Passive (passive communication, no on-tag power
  source)
• Semi-passive (passive communication, on-tag power
  source)
• Active (active communication, on-tag power
  source)
• Tag readers (interrogators)
• Application systems to allow users to ID and
  track each drug package and its associated data

Compliance Technology
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Some RFID Challenges

• Costs (tags, other hardware, systems integration,
  compliance
• Development of standards and business rules
• Environmental and material effects on performance
• Addressing database management issues
• Need to determine effect of RFID on product
  quality
• Initial and ongoing cooperation between company,
  supply chain stakeholders, and government
  agencies
• Thomas Ryan, VP, The Aberdeen Group predicts
• 3 billion tags and at least 1,000 systems among
  300 companies by 2005 to comply with Wal-Mart and
  Dept. of defense mandates
• 30 billion tags and 50,000 to 100,000 systems
  among 20,000 to 30,000 companies by 2006

Compliance Technology
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For More Information

• Pharmaceutical cGMPs for the 21st Century A
  Risk-Based Approach
• http//www.fda.gov/cder/gmp/21stcenturysummary.htm
  
• Process Analytical Technologies (PAT)
  http//www.fda.gov/cder/OPS/PAT.htm
• Bar Coding Regulations http//www.fda.gov/OHRMS/D
  OCKETS/98fr/04-4249.htm
• RFID FDA final report on Combating Counterfeit
  Drugs issued February 18, 2004
• 21 CFR Part 11
• 21 CFR Part 11, Electronic Records Electronic
  Signatures Final Rule, FDA, March 1997
• Guidance for Industry Part 11, Electronic
  Records Electronic Signatures Scope and
  Application, CDER, February 2003
• Bioterrorism Act http//www.fda.gov/oc/bioterrori
  sm/bioact.html
• Pharmacogenomic Data Submissions
• http//www.fda.gov/bbs/topics/news/2005/NEW01167.h
  tml

References
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Thank You!Mark LesterMark_at_ConsilientCapital.com