CMC Sourcing in Transition: Consolidation, Offshoring and the Market Outlook. Pharmaceutical Technology Breakfast at AAPS November 7, 2005

Transcription

1 CMC Sourcing in Transition: Consolidation, Offshoring and the Market Outlook Pharmaceutical Technology Breakfast at AAPS

2 Market conditions CRO/CMO posted strong results in H H Revenue Growth CRO Sales Activity 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% CMC API Clinical Preclinical $ billion $5.00 $4.00 $3.00 $2.00 $1.00 $ Q4 04Q2 04Q4 05Q2 Backlog Bookings 2 Source: PharmSource

3 Market conditions Results reflect strong early stage pipeline Global Drug Development Pipeline Source: IMS and Bear Stearns 1000 Number of candidates Phase I Phase II Phase III Reg Dec 02 Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 3

4 Market conditions R&D spending growth still strong 14% 12% 10% $24.0 bil $6.5 bil Big jumps Amgen 21% Genentech 26% J&J 24% Novartis 15% 8% 6% 4% 8% 11% Restructuring efforts Pfizer Biogen-Idec 2% 0% Big Pharma Mid Pharma More focus on inlicensing/acquisition 4 Source: PharmSource

5 Market conditions Growth expected into 2006 Share of Responses Expected Growth for Outsourced Spend Source: PharmSource/Pharm Tech survey 50% 40% 30% 20% 10% 0% Down < 10% 10-20% > 20% Survey respondents see continued growth Early pipeline and CRO backlog herald continued growth Financial markets continue to support early stage companies even in Europe 5

6 Market strength driving M&A activity Supply Chain Acquisitions Portal Acquisitions Buyer Target Service Buyer Seller Service Aptuit Quintiles EDLS Formulation, CTM, Clin. pkg. Aptuit Almedica Clin. pkg. Dishman Chemical Fisher Clinical Fisher Clinical McKesson BioServices Lancaster Labs Clin. pkg., specimen storage Analytical chem/micro Bilcare ProClinical Form,CTM, Clin. pkg. Wallace Nicolas Piramal Jubilant Organosys Synprotec Goodwin Biotech Avecia Pharm Chem Target Research Chem proc dev, CTM Bio proc dev, CTM Chem proc dev, CTM, API Clinical research 6

7 Evolving CMC business models Process Turnkey High scale-up product Process integration Low Category killer Integrated clinical supply chain Low High Supply chain integration 7

8 Evolving CMC models Integrated clinical supply chain Concept Take product from bench to the clinic API and dose Client benefits/ risks Contractor benefits Examples Aptuit Process development, CTM manufacture, analytical, clinical packaging and distribution Leverage information technology Speed to Proof of Concept Lower search and management costs All eggs in one basket CRO may not be equally competent in all ops Bigger sale, keep more of spend Lower marketing costs Problems in one area hurt client relationship Maintaining utilization and expertise in all ops Maybe Fisher Clinical, Almac 8

9 Evolving CMC models Process scale-up Concept Take process from bench to commercial scale API or dose Client benefits/ risks Contractor benefits Process development, CTM manufacture and analytical Leverage proprietary technology and PAT Speed to commercialization Lower search and management costs May be captive to proprietary technology Capture commercial opportunity early Lower marketing costs Examples Patheon, Lonza Few clients graduate to commercial Most CMOs ultimately 9

10 Evolving CMC models Turnkey product Concept Take process from bench to commercial scale API plus dose Process development, CTM manufacture and analytical Leverage proprietary technology and PAT Client benefits/ risks Contractor benefits Speed to commercialization Lower search and management costs All eggs in one basket CMO may not be competent in all ops Differentiate from other CMOs Problems in one operation hurts client relationship Maintain utilization and expertise in all operations Examples Diosynth, Cambrex, BI Other API manufacturers possible 10

11 Evolving CMC models Category killer Concept Dis-integrate value/supply chain into component activities (e.g., central lab, global logistics) Maximize benefits from economies of scale and specialization Coordinate with internal value/supply chain management Client benefits/ risks Contractor benefits Access best-in-class for individual functions Maximize benefits of own scale (purchasing leverage, relationship mgmt) Best opportunity for measurable performance improvement All eggs in one basket Large, multi-year contracts Demonstrable performance advantages versus smaller players Leverage existing investment and capabilities across industries Examples Central labs (Covance, Quest, Labcorp); data management (Accenture) Possibly FEDEX and UPS in CTM logistics 11

12 Indian contractors buying Western presence Portal Acquisitions Buyer Seller Service Bilcare ProClinical Form,CTM, Clin. pkg. Dishman Chemical Wallace Nicolas Piramal Jubilant Organosys Synprotec Goodwin Biotech Avecia Pharm Chem Target Research Chem proc dev, CTM Bio proc dev, CTM Chem proc dev, CTM, API Clinical research 12

13 Offshore sourcing Local presence improves market access Preference for Accessing Asia Sources Source: PharmSource/Pharm Tech survey US/Europe-based CROs/CMOs have some market advantage Either 58% US company 28% Asian company 14% Acquisitions may improve Asian CRO market penetration 13

14 Big pharma expects more offshoring Share of responses Projected India/China Share of Services Spend Source: PharmSource/Pharm Tech Survey 60% 50% 40% 30% 20% 10% 0% Big pharma only < 5% 5-10% 11-25% >25% Share of Spend Going to India/China Factors driving big pharma offshore Cost savings Finding patients for clinical trials Local market opportunities McKinsey projects that 50% of clinical research jobs will migrate offshore 2 Years 5 Years 14

15 Final thoughts Cost is the primary industry driver Supply chain management and sourcing/procurement are key processes Measureable performance trumps strategic concepts 15

16 PharmSource market intelligence services PharmSource Lead Sheet PharmSource.com contractor database Bio/Pharmaceutical Outsourcing Report Market Intelligence Notes Market intelligence briefings Short answer research Multi-client research 16