Challenges facing the Pharmaceutical Industry

Challenges facing the Pharmaceutical Industry

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Description: Global Challenges Facing the Pharmaceutical Industry: shrinking market exclusivity, compound attrition, escalating R&D costs, regulatory requirements, shareholder expectations, patent expirations, and much more. Only 3 in 10 new medicines will ever generate enough revenue to pay for the investment in the research and development for that medicine. Also gives data on the total Bio Pharmaceutical R&D spending.

How to stay competitive and meet expectations.

Author: Pfizer (Fellow) | Visits: 7110 | Page Views: 10974
Domain:  Medicine Category: Biotech/Pharma Subcategory: Business 
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Working with Academic Institutions, Biotechnology Companies and Bioscience Associations

Illinois' Bioscience Community: Best Practices for the Future of Bioscience in Illinois
2008 Illinois Biz/Bio Conference � December 11, 2008

Outline of Today's Presentation
� Pfizer Inc � Product and Portfolio Overview � Pfizer R&D Strategy � Challenges facing the pharmaceutical industry � Worldwide Business Development--Deals and deal structure


Pfizer Inc
Product Portfolio Overview


Worldwide Pharmaceutical Operations
In-Line Products In-Line Products
$44.6 Billion*

$12,675 M -2%

$2,290 M 12% Growth

$1,604 M 10% Growth

New Products New Products

2007 Revenues $883 M 773% Growth $581 M 166% Growth $1,829 M 58% Growth

Source: Pfizer 4Q2007 Earnings Release


US Product Portfolio


Many of Our Best-Known Products Started with Deals



Co-promoted with Eisai; 2 Co-promoted with Boehringer Ingelheim; 6

Largest Pipeline In The Industry
Precl Prec i Phas liniicall ((69)/ Phase n ca 69)/ e 1 ((38 1 38) Phas ) Pha

226 Total Programs
Phas e3



se 2 e2


In Re gistr ation


85 New Molecular Entities 72 Product Line Extensions

Numbers disclosed in 2007 Pipeline Update and Annual Report

Pfizer Global Research & Development (PGRD)


A Global Research Structure Organized by Therapeutic Area
St. Louis Sandwich
Inflammation Biotherapeutics* Allergy & Respiratory Antivirals Genitourinary/Sexual Health Pain

San Francisco & BBC

Cambridge New London

Tokyo Shanghai

La Jolla


Exiting: �Kalamazoo, MI �Ann Arbor, MI �Nagoya , Japan �Amboise, France

Antibacterials Cardiovascular/ Metabolic Neurosciences
*Also done at Rinat


Pfizer Development Japan, Tokyo
� Full capacity development organization � Co-located with Pfizer Japan Headquarters � 385 staff including clinical, development operations, regulatory, CMC � Organized for maximum synergy with global programs to support simultaneous approvals

China R&D Center, Shanghai
� Located in the renowned Zhangjiang High Tech Park in Shanghai, China � A growing number of functions supporting global clinical studies, development operations, and safety risk management � Asia Research team is also based at the center

11 Therapeutic Areas with a Rich Product Pipeline in 2007
Ophthalmology Gastrointestinal Endocrinology Infectious Disease Inflammation Oncology Cardiovascular CNS Dermatology Pulmonary Urology/Sexual Health

� 400 projects in discovery research � More than 152 distinct new molecular entities in our pipeline � 83 projects to evaluate innovations for currently marketed drugs � Pipeline breadth and depth in multiple therapeutic areas


Disease Areas with a Rich Product Pipeline "Going Forward"
Ophthalmology Gastrointestinal Endocrinology Infectious Disease Inflammation Oncology Cardiovascular CNS Dermatology Pulmonary Urology/Sexual Health Schizophrenia and Alzheimer's Diabetes

� �

400 projects in discovery research More than 152 distinct new molecular entities in our pipeline 83 projects to evaluate innovations for currently marketed drugs Pipeline breadth and depth in multiple therapeutic areas

Focus where we're best and where we have the best chance to make truly innovative medicines

Pfizer Organization in 2009 and Beyond

Business Units Research Development Medical Sales & Marketing


Platform Services (Pharm Sci, Drug Safety R&D, Development Operations, Portfolio Planning & Decision Support, Public Affairs & Policy, Regulatory Affairs & Quality Assurance, Safety & Risk Management, Business Development, Corporate Strategic Planning)

Enabling Functions (Finance, Human Resources, IT, Legal, Communications, Procurement, Global Operations)



Challenges Facing the Pharmaceutical Industry


Global Challenges Facing the Pharmaceutical Industry...
Compound Attrition Government & Payors Shareholder Expectations Escalating R&D Costs

Competition Regulatory Requirements

Decreased Field Force Productivity

Patent Expirations

Media & Political Attacks

Shrinking Market Exclusivity
Innovative Drug / Year Introduced
Inderal - 1965 Tagamet - 1977 Capoten - 1980 Seldane - 1985 AZT - 1987 Mevacor - 1987 Prozac - 1988 Diflucan - 1990 Recombinate - 1992 Celebrex - 1999

2nd Generation Drug/Year
Lopressor - 1978 Zantac - 1983 Vasotec - 1985 Hismanal � 1989 Videx � 1991 Pravachol � 1991 Zoloft � 1992 Sporonox � 1992 Kogenate � 1992 Vioxx� 1999 Vioxx�












Years of Exclusivity for Innovative Drug

Only 3 in 10 new medicines will ever generate enough revenue to pay for the investment in the research and development for that medicine.

Attrition is the Name of Game
Millions of Compounds Screened

~100 Discovery Approaches
High Risk Process 12-15 years, $1 Billion
1 �2 Products

Preclinical Pharmacology

Preclinical Safety Clinical Pharmacology & Safety


Early Development
Phase I Phase II

Full Development
Phase III






12 - 15 Years


The Challenges of Innovation:
"There are a lot of ways to fail"

Most Body � Adverse Reactions � Poor Absorption � Compounds Do Not Become Not Sufficiently Selective � Side Effects � Unsafe � Medicines
Unstable � Competition � Impractical To Make

Complex Disease Targets � Too Long in

Low Levels in Body � Not Effective Enough �

Total BioPharmaceutical R&D Spending 2005-2006
$55 $50 $45 $40 $35 $30 $25 $20 $15 $10 $5
1970 1975 1980 1985 1990 1995 2000 2005

Total spending increased by $3.4 B From 2005 to 2006

Biotech 20%

Spending is increasing but... # of NCE approvals are not changing

Pharma 80%


Source: 2006 PhRMA Annual Survey


Pfizer is one of the leading sources of Biotech funding
Industry leading investment in R&D
$7.7 $7.5 $7.1

$5.2 $4.8


$1.8 $1.6


� Total Strategic Alliances Spending: >$1.4B in the last 4 years � Total Technology Spending: >$2.8B in last 4 years � "Pfizer...the largest source of discovery stage biotech capital"
Source: In Vivo, September 2004







Source: Pfizer Annual Report

Staying Competitive in a Changing Global Environment: Pfizer's evolving strategy
� Pressure on the industry to hold down costs � Go to where the technology is... � Technical expertise is available around the globe � China has chemistry innovation and clinical trial capacity � India has chemistry innovation � South Korea has advanced data collection and transmission, patient monitoring and clinical trial capacity and implementation � All of these countries have scientific and technical experts educated in the west and trained at the top 20 pharmaceutical companies in the west

Sources of Incremental Savings
� Delayer � Increase spans of control � Eliminate redundancies � Reduce global sales force � Rationalize and reallocate marketing and medical spending � � � � � � � � Reduce number of sites/increase outsourcing Effectiveness/efficiency: right first time culture Lean manufacturing Technology and innovation Reduce site infrastructure Discontinue discovery in several therapeutic areas Increase outsourcing and operational improvements Out License





� Leverage purchasing power

Support Functions

� Increased outsourcing � Demand management and standardization

Worldwide Business Development
� � � � � Organization Strategy Process Representative Deals Pfizer Teams
� � � � Venture Investments Out Licensing Biotherapeutic and Bioinnovation Center The Pfizer Incubator

An Aggressive Business Development Strategy is Integral for Our Success
"In the interests of bringing in much-needed products, let's be opportunistic and willing to depart ... from pre-established paradigms about our product profiles, our revenue requirements, our go-to-market systems. I don't mean that we should be reckless, do bad deals, or ignore our well-considered strategies. But I do think we should quickly seize opportunities that otherwise make sense even if they don't fit perfectly into our pre-established plans and practices." - Jeff Kindler

Top-Down Support for Business Development Activities

Worldwide Business Development:
Reorganized to Deliver on New Strategy
Search & Evaluation Search & Evaluation
Robert Bagdorf, Ruth Keir Robert Bagdorf, Ruth Keir

� Responsible for finding and conducting the technical and commercial evaluations on potential compound-driven opportunities that complement Pfizer's therapeutic areas of interest Pfizer's therapeutic areas as out-licensing candidates and negotiating and transacting out � licensing deals

Out-Licensing/ Externalization � Responsible for identifying internal portfolio assets across Out-Licensing/ Externalization
David Rosen David Rosen

Science & Technology Science & Technology
Ruth Keir Ruth Keir

� Responsible for the negotiation and management of alliances for preclinical compounds, diagnostics, devices and the full spectrum of technology and platform collaborations � Identify new revenue generating business opportunities in innovative complementary, synergistic and adjacent healthcare areas � Strategic, targeted investments in biotech, specialty pharma, drug delivery, diagnostics, & other technology to increase product flow � Negotiation and execution of in-licensing, out-licensing, alliance and M&A deals � Build trust and relationships between partners, act as "neutral" party to advocate for the alliance and asset, and ensure alliance needs are met

Bill Ringo Bill Ringo SVP SVP

New/International New/International Business Development Business Development
Tony Scullion Tony Scullion

Venture Investment Venture Investment
Barbara Dalton Barbara Dalton

Transactions Transactions
Doug Giordano Doug Giordano

Alliance Management Alliance Management
Charles Ritrovato Charles Ritrovato

Partnering Strategy to Drive Revenue Growth
� Complement Current Portfolio
� Address gaps in drug portfolio � Seize opportunistic investments � Coordinate search for value across therapeutic areas

� Acquire Synergistic Products and Services
� Amplify value of current and future products � Enhance our ability to demonstrate value

� Pursue Adjacent Healthcare Products and Businesses � Out License non-progressing assets


Evolution of Licensing Deals
� Licenses/ � Acquisitions

� Co-Promotes/ � Co-Development � Joint Ventures � � � � � �

M&A Staged M&A Licenses Options Incubators Co-Promotions/ Co-Developments � Joint ventures � Financial structures
Equity stakes Debt Structures Venture debt Hedge funds


Deal and Alliance Types
� � � � Research � Genes, Leads, Targets, Technology (Scripps) Candidate Producing (Kosan) In-Licensing � Early & Late Stage (Renovis, TransTech) Out-licensing and Start Ups � Assets, IP, Patents, Niche products (Tibotec, Vertex, Esperion II, RaQualia) � Co-promotion Deals � Risk & Reward (Rebif) � M&A � Pipeline, Resources, Financial, Strategic (Rinat, Coley, Powdermed)

We'll do any deal that makes financial sense and is aligned with our strategic objectives and the objectives of our partner

Spurring Innovation Through Partnerships

1) How are opportunities identified? 2) How are opportunities evaluated and why aren't all potential partnerships formed?


Finding Partnership and Technology Opportunities

Scientists (95%)
1. 2. 3. Networking with scientific community Attending scientific meetings Monitoring literature (scientific and patent)

Receiving unsolicited non-confidential disclosures from third parties (4%) Attending venture capital meetings and biotechnology conferences (