Connecting Proof of Relevance to Proven Value for ... · PDF fileRelevance to Proven Value for Pharmafor Pharma Ed Saltzman ... Innovation to Pharma is Endangered Today Page 12

Connecting Proof of Relevance to Proven Value for Pharmafor Pharma

Ed SaltzmanPresidentDefined Health

LES Annual Meeting25 September 2013

The information in this report has been obtained from what are believed to be reliable sources and has been verified whenever possible. Nevertheless, we cannot guarantee the

f d h l ll finformation contained herein as to accuracy or completeness. All expressions of opinion are the responsibility of Defined Health, and though current as of the date of this report, are subject to change. The opinions and information set forth herein are expressed solely for the benefit of the p f f p y f f faddressee and only for the purpose(s) for which the report was produced. Without the prior written consent of Defined Health, this report may not be relied on in whole or in part for any other purpose or by any other person or entity, provided that this report may be disclosed where disclosure is required by law.This presentation may contain information provided by third parties such as Thomson Reuters, Wolters Kluwer, EvaluatePharma and others with a proprietary interest in the data provided herein. Please note that you are not permitted to redistribute any such third party information without consent from the originator companythird party information without consent from the originator company.

© Defined Health, 2013

Page 2LES 2013 Annual Meeting25 September 2013

A good hockey player plays whereplayer plays where the puck is.

A great hockey player plays where the puck is goingthe puck is going to be.

Wayne Gretzky, age 52


g

Wayne Gretzky Excelled at Knowing Where the Puck Was Going

Regular season records (40)♦ Most goals: 894 in 1,487 games♦ Most goals, including playoffs: 1,016 in 1,487 regular season and 208 playoff games♦ Most goals, one season: 92 in 1981–82, 80-game schedule♦ Most goals, one season, including playoffs: 100 in 1983–84, 87 goals in 74 regular season

games and 13 goals in 19 playoff games

♦ Most 80-or-more goal seasons: 2♦ Most 90-or-more goal seasons: 1. ♦ Fastest 50 goals from start of season: 50 goals in 39 games♦ Fastest 100 points: 34 games in 1983–84♦ Most seasons averaging at least 1 point per game: 19♦ Most consecutive seasons averaging at least 1 point per game: 19♦ M t i t l t 2 i t 10

g g p y g♦ Most goals, 50 games from start of season: 61 in 1981–82 (October 7, 1981 to January 22,

1982, 80-game schedule) and 1983–84 (October 5, 1983 to January 25, 1984), 80-game schedule

♦ Most goals, one period: 4 (Tied with 10 other players) February 18, 1981♦ Most assists: 1,963♦ Most assists, including playoffs: 2,223♦ Most assists, one season: 163 in 1985–86, 80-game schedule♦ M t i t i l di l ff 174 i 1985 86 163 i t i 80 l

♦ Most seasons averaging at least 2 points per game: 10♦ Most consecutive seasons averaging at least 2 points per game: 9♦ Most game-winning goals in the playoffs: 24 (tied with Brett Hull)♦ Most 100-or-more assist seasons: 11♦ Most consecutive 100-or-more assist seasons: 11♦ Most NHL and WHA regular season assists: 2,027♦ Most NHL and WHA regular season points: 2,967♦ Most NHL and WHA regular season and playoff goals: 1 072♦ Most assists, one season, including playoffs: 174 in 1985–86, 163 assists in 80 regular

season games and 11 assists in 10 playoff games♦ Most assists, one game: 7 (tied with Billy "The Kid" Taylor) on three occasions—February

15, 1980; December 11, 1985; February 14, 1986♦ Most assists, one road game: 7 (tied with Billy "The Kid" Taylor) December 11, 1985♦ Most points: 2,857 in 1,487 games (894 goals, 1,963 assists)♦ Most points, including playoffs: 3,239 in 1,487 regular season and 208 playoff games. (1016

goals, 2223 assists)

♦ Most NHL and WHA regular season and playoff goals: 1,072♦ Most NHL and WHA regular season and playoff assists: 2,297♦ Most NHL and WHA regular season and playoff points: 3,369♦ Most MVP awards (Hart Trophy): 9♦ Most scoring championships (Art Ross Trophy): 10♦ Largest margin of victory in the scoring race: 79 (in 1983–84)♦ Most seasons where he was his team's leading scorer: 19♦ Most official NHL records: 61 on retirement, 60 at presentg )

♦ Most points, one season: 215 in 1985–86, 80-game schedule (52 goals, 163 assists)♦ Most points, one season, including playoffs: 255 in 1984–85; 208 points in 80 regular season

games and 47 points in 18 playoff games♦ Most overtime assists, career: 15♦ Most goals by a center, career: 894♦ Most goals by a center, one season: 92 in 1981–82, 80-game schedule♦ Most assists by a center, career: 1,963

b h d l

p♦ Highest Plus/Minus in a single playoff year: +28 (1984–85)♦ Highest Plus/Minus by a forward, single season: +98♦ Highest Plus/Minus by a forward, career: +518♦ Only Player To Reach 2000 Career Points♦ Only Player To Reach 3000 Career Points, Regular Season and Playoffs combined♦ Only Player To Reach 1000 Career Goals, Regular Season and Playoffs combined♦ Only Player To Reach 2000 Career Assists, Regular Season and Playoffs combined

♦ Most assists by a center, one season: 163 in 1985–86, 80-game schedule♦ Most points by a center, career: 2,857♦ Most points by a center, one season: 215 in 1985–86, 80-game schedule♦ Most assists in one game by a player in his first season: 7 on February 15, 1980♦ Highest goals-per-game average, one season: 1.18 in 1983–84, 87 goals in 74 games♦ Highest assists-per-game average, career (300 min.): 1.321 -- 1,963 assists in 1,487 games♦ Highest assists-per-game average, one season: 2.04 in 1985–86, 163 assists in 80 games♦ Highest points per game average one season (among players with 50 or more points): 2 77

Goals♦ Youngest 100 Goals (20 years, 40 days)♦ Fastest & Youngest 200 Goals (242 games)♦ Fastest & Youngest 300 Goals (350 games), (22 years, 321 days)♦ Fastest & Youngest 400 Goals (436 games), (23 years, 352 days)♦ Fastest & Youngest 500 Goals (575 games), (25 years, 299 days)♦ Fastest & Youngest 600 Goals (718 games), (27 years, 302 days)


♦ Highest points-per-game average, one season (among players with 50-or-more points): 2.77 in 1983–84, 205 points in 74 games

♦ Most 40-or-more goal seasons: 12 in 20 seasons♦ Most consecutive 40-or-more goal seasons: 12 from 1979–80 to 1990–91♦ Most 50-or-more goal seasons: 9 (tied with Mike Bossy)♦ Most 60-or-more goal seasons: 5 (tied with Mike Bossy)♦ Most consecutive 60-or-more goals seasons: 4 from 1981–82 to 1984–85♦ Most 100-or-more point seasons: 15

g ( g ), ( y , y )♦ Fastest & Youngest 700 Goals (886 games), (29 years, 342 days)♦ Fastest & Youngest 800 Goals (1116 games), (33 years, 53 days)

Assists♦ Fastest 100 Assists (92 games)♦ Fastest & Youngest 200 Assists (165 games), (20 years 265 days)♦ Fastest & Youngest 300 Assists (229 games), (21 years 43 days)♦ Fastest & Youngest 400 Assists (290 games) (21 years 362 days)

http://en.wikipedia.org/wiki/List_of_career_achievements_by_Wayne_Gretzky#Honor

Page 4Insight Series Webinar23 May 2013

Which Is No Small Feat Given How Fast a Puck Moves

• In the NHL, a good player can send a puck into the 80 90 mph range with a fewinto the 80-90 mph range, with a few extraordinary players being able to crack 100 mph.

• During a game, the average passing speedDuring a game, the average passing speed of the puck from player to player is around 30 to 60 mph, variable due to distance and the opposing players in the way.

• http://wiki.answers.com/Q/What_is_the_average_speed_of_a_hockey_puck


By Comparison, BioPharma Innovation Moves Much More Slowly


PhRMA

Which Should Give Everyone Plenty of Time to Figure Out Where the Puck is Going

Rx


Unfortunately, Course Corrections are a Lot Less Feasible


http://www.youtube.com/watch?v=_tUoUxzt9sI

Pharma Went Off Course >Decade Ago and Now Has Urgent Need for Innovation

AstraZenecal llEli Lilly

PfizerMerckSanofi

RocheAbbottNovartis


Source: Pharmaview

Despite 2012 Being a Banner Year for NMEs

39 NMEs approved in 2012 is the highest total

approved by CDER in more than a decade


CDER/FDA Novel New Drugs Summary 2012

Does Not Signal Return to Big Pharma R&D Productivity -- Nearly Half of Pharma Approvals Sourced From Biotech

NME Indication LaunchCompany How Acquired From Phase at

Deal

Myrbetriq (mirabegron) OAB Astellas Organic -- --Sirturo (bedaquiline) TB J&J Organic -- --

NME Indication LaunchCompany How Acquired From Phase at

Deal

Myrbetriq (mirabegron) OAB Astellas Organic -- --Sirturo (bedaquiline) TB J&J Organic -- --Sirturo (bedaquiline) TB J&J Organic -- --Signifor (pasireotide) Cushing's syndrome Novartis Organic -- --Neutroval (tbo-filgrastim) Neutropenia Teva Organic -- --Xeljanz (tofacitinib) RA Pfizer Organic -- --Stivarga (regorafenib) CRC Bayer, Onyx Joint Venture Onyx DR

Sirturo (bedaquiline) TB J&J Organic -- --Signifor (pasireotide) Cushing's syndrome Novartis Organic -- --Neutroval (tbo-filgrastim) Neutropenia Teva Organic -- --Xeljanz (tofacitinib) RA Pfizer Organic -- --Stivarga (regorafenib) CRC Bayer, Onyx Joint Venture Onyx DR Xtandi (enzalutamide) Prostate cancer Astellas In-licensed Medivation P3 Linzess (linaclotide) IBS Forest In-licensed Ironwood P2 Elelyso (taliglucerase) Gaucher's disease Pfizer In-licensed Protalix BioTherapeutics P3 Zaltrap (ziv-aflibercept) CRC Sanofi In-licensed Regeneron P1 Tudorza Pressair (aclidinium) COPD Forest In licensed Almirall P3

Xtandi (enzalutamide) Prostate cancer Astellas In-licensed Medivation P3 Linzess (linaclotide) IBS Forest In-licensed Ironwood P2 Elelyso (taliglucerase) Gaucher's disease Pfizer In-licensed Protalix BioTherapeutics P3 Zaltrap (ziv-aflibercept) CRC Sanofi In-licensed Regeneron P1 Tudorza Pressair (aclidinium) COPD Forest In licensed Almirall P3Tudorza Pressair (aclidinium) COPD Forest In-licensed Almirall P3 Zioptan (tafluprost) Glaucoma Merck In-licensed Santen P3 Omontys (peginesatide) Anemia in CKD Takeda In-licensed Affymax P2 Eliquis (apixaban) Thromboembolism BMS, Pfizer Company ACQ (BMS) DuPont P1 Bosulif (bosutinib) CML Pfizer Company ACQ Wyeth P3

Tudorza Pressair (aclidinium) COPD Forest In-licensed Almirall P3 Zioptan (tafluprost) Glaucoma Merck In-licensed Santen P3 Omontys (peginesatide) Anemia in CKD Takeda In-licensed Affymax P2 Eliquis (apixaban) Thromboembolism BMS, Pfizer Company ACQ (BMS) DuPont P1 Bosulif (bosutinib) CML Pfizer Company ACQ Wyeth P3 Inlyta (axitinib) Kidney cancer Pfizer Company ACQ Warner-Lambert PC Erivedge (vismodegib) Skin cancer Roche Company ACQ Genentech P2 Perjeta (pertuzumab) Breast cancer Roche Company ACQ Genentech P3 Aubagio (teriflunomide) MS Sanofi Company ACQ Aventis P2 S ib ( i ) C L C ACQ C h l 3

Inlyta (axitinib) Kidney cancer Pfizer Company ACQ Warner-Lambert PC Erivedge (vismodegib) Skin cancer Roche Company ACQ Genentech P2 Perjeta (pertuzumab) Breast cancer Roche Company ACQ Genentech P3 Aubagio (teriflunomide) MS Sanofi Company ACQ Aventis P2 S ib ( i ) C L C ACQ C h l 3


Synribo (omacetaxine) CML Teva Company ACQ Cephalon P3

EvaluatePharma, ADIS R&D Insight

Synribo (omacetaxine) CML Teva Company ACQ Cephalon P3

The “Innovation Ecosystem” That Delivered the Fruits of Innovation to Pharma is Endangered Today


Growth Driving Innovation Mostly Non-Existent in Big Pharma Pipelines


Source: Pharmaview

And Pharma’s Strategy of Buying De-Risked Innovation is No Longer Sustainable

Year Acquirer Acquired Company Sales M&A Price Multiple

$ $2007 AstraZeneca MedImmune $1,277 M $15,600 M x12

2007 Merck KGaA Serono $2,586 M $13,769 M x5

2008 Takeda Millennium $528 M $8 800 M x172008 Takeda Millennium $528 M $8,800 M x17

2008 Lilly ImClone $591 M $6,500M x11

2010 Astellas OSI Pharmaceuticals $428 M $4,000 M x92010 Astellas OSI Pharmaceuticals $428 M $4,000 M x9

2011 Sanofi Genzyme $3,977 M $20,100 M x5

2012 BMS Amylin $233 M $7,000 M x30

2012 GSK Human Genome Sciences $131 M $2,584 M x20

2013 Amgen Onyx $620 M $10,400 M x17


EvaluatePharma

Prioritizing Shareholder Payouts Means Cash is Not So Plentiful for Major Acquisitions


Source: Capital IQ

But Pharma Keeps Promising Acquisitions

At Record Cash Levels, Pharmaceutical Companies Eye AcquisitionsJanuary 07, 2013Pharmaceutical companies including Pfizer Inc. and Bristol-Myers Squibb Co. have spent the last several years digesting earlier acquisitions, refocusing their product development and setting aside cash in anticipation of expiring patents. Now, the expectation is they’re ready to start buying again. Led by Pfizer, in New York, and Whitehouse Station, New Jersey-based Merck & Co., five of the largest U.S. drugmakers had more than $70B in cash, near cash and short-term investments at the end of the third quarter. “We’re through many cost-cutting programs, restructurings and portfolio arrangements,” said Henry Gosebruch, managing director of health-care mergers and acquisitions at JPMorgan Chase & Co. “When you put that together with record levels of cash available and improving, but still moderate R&D productivity, we think there will be more big pharma M&A activity in 2013.”Johnson & Johnson, Abbott Laboratories, Sanofi, Pfizer and Merck have already shown interest in one purchase that may top $10B: Bausch & Lomb

Some biotechnology companies dependent on a single product h h i k i l d l i h l l fInc., the eye-care company, is for sale by Warburg Pincus LLC. The private equity firm is seeking at least $10B for the business and those companies

may be bidders, according to people with knowledge of the matter. This week will set the year’s deal-making agenda at JPMorgan’s annual health-care conference in San Francisco. Almost 8,000 attendees and more than 400 companies will gather to make public presentations, have one-on-one meetings and get a sense of available and competing assets.‘Circus Bazaar’: “It’s like a circus bazaar for business development,” said Geoff Meacham, JPMorgan’s biotechnology analyst, in a telephone interview. “It’s at the beginning of the year, the time when everyone sets the stage; there are crowded hallways, lots of buzz. And there’s probably a million 10-

have seen their stocks triple or quadruple in the last couple of years, to market values from $2B to $5B, as those products have seen success. g g y , y g ; y , p y

minute cups of coffee between companies.” Big drugmakers will probably be on the hunt for assets to fill revenue holes left by expired patents. Pfizer’s Lipitor, which drew more than $12B in annual revenue at its peak, lost marketing exclusivity in November 2011. Eli Lilly & Co. lost patent protection on its top-seller, the antipsychotic Zyprexa, in October 2011. The drug had drawn more than $5B in peak sales. New York-based Bristol-Myers faced generic competition last year to Plavix, its best-seller with more than $7B in revenue.Cash Reserves: At the same time, they’ve got deep pockets. Pfizer ended the third quarter with $23B in cash, near cash and short- term investments. Lilly had $6.9B, while Merck had $18.1B, and J&J, $19.8B. “Many large cap pharma companies still face a patent cliff and have the financial capability

While those companies are attractive, big pharmaceutical firms may look elsewhere for acquisitions, such as to larger firms trading at more digestible multiples and with more established products.

Lilly had $6.9B, while Merck had $18.1B, and J&J, $19.8B. Many large cap pharma companies still face a patent cliff and have the financial capability and strategic willingness to partner and acquire their way to continued innovation,” Leerink Swann analysts including Seamus Fernandez wrote in a Jan. 3 report. They cited Bristol-Myers, Lilly and London-based AstraZeneca Plc as potentially the most active acquirers. Still, they’re likely to be careful buyers, avoiding purchases where valuations have risen too high, Gosebruch said. Some biotechnology companies dependent on a single product have seen their stocks triple or quadruple in the last couple of years, to market values from $2B to $5B, as those products have seen success. While those companies are attractive, big pharmaceutical firms may look elsewhere for acquisitions, such as to larger firms trading at more digestible multiples and with more established products, he said.


p ,

http://www.nj.com/business/index.ssf/2013/01/pharmaceutical_companies_with.html

Though of a Smaller Sort

"We will be open to more disruptive acquisitions, larger acquisitions if

“I don’t think we need a big acquisition in the short term. You may see us do more bolt-ons,” that would range “between $2 billion and $4 billion,

they make sense. (But) you have to consider the likelihood of that is lower because I don't think we need a large-scale acquisition to succeed.“

g $ $ ,not more than that.”

Joe Jimenez, CEO Novartis08-Jan-2013

Pascal Soriot, CEO AstraZeneca31-Jan-2013 “We are constantly looking at the market, and will

concentrate on smaller & mid-sized acquisitions.”

Severin Schwan CEO Roche Severin Schwan, CEO Roche10-Jun-2012“I don’t see us looking for

another large combination. The conclusion we’ve reached at Merck is that the sweet spots He made it abundantly clear that he was game to buy are really in the early stage.”

Kenneth Frazier, CEO Merck08-Jan-2013

more bolt-on assets so long as they can be acquired for €1-2B--a modest sum in the Big Pharma M&A game.

Chris Viehbacher, CEO Sanofi10-Jun-2012


newsandinsight.thomsonreuters.com; bloomberg.com; wsj.com; fiercebiotech.com

Clearly Delicious, But How Digestible Are These Multiples?

k k

Large Pharma Large Biotech

Company Market Cap ($M) PE Ratio Cash ($M)

Roche 220,741 16.0 7,990

Company Market Cap ($M) PE Ratio Cash ($M)

Amgen 88,031 15.7 22,018

Pfizer 191,790 13.1 34,299

Novartis 174,935 15.3 5,250

Gilead 97,746 33.1 1,943

Celgene 61,633 27.7 4,081

Merck 140,495 13.5 18,098

Sanofi 131 607 14 0 6 884

Biogen Idec 58,974 30.7 667

Al i 22 225 45 7 990Sanofi 131,607 14.0 6,884

GSK 116,999 13.5 4,654

Alexion 22,225 45.7 990

Regeneron 29,090 68.8 308


EvaluatePharma 22-September-2013, PE Ratio - normalized

Puck Not Going Where Expected! Most Valuable “Goals” of 2012 Were Scored by Early Programs

Licensor Partner Product / Technology Headline $m

Upfront ( $m) /% of headline

Molecular Partners Allergan MP0260 PC dual anti VEGF-A/PDGF-B DARPin for wet AMD; discovery

alliance/options against selected targets in serious eye disease 1,463 62.5 / 4.3%

Galapagos Abbott Collaboration for oral JAK1 inhibitor (GLPG0634) in RA and other autoimmune diseases (P2) 1,350 150 / 11.1%

Five Prime Tx GSK Discovery collaboration with options for asthma and COPD targets 1,191 30 over 4y / 2.5%

Genmab J&J License to daratumumab, oncology (P1/2) 1,100 135 / 12.3%

MacroGenics Servier Discovery alliance with options for Dual-Affinity Re-Targeting (DART) 1 100 20 / 1 8%MacroGenics Servier platform technology for 3 cancer targets 1,100 20 / 1.8%

Endocyte Merck License to vintafolide for ovarian cancer, NSCLC and other solid tumors (P3) 1,000 120 / 12%

Astellas J&J ex-JPN rights to ASP015K, an oral JAK inhibitor for RA and psoriasis (P2) 945 65 / 6.9%

Selecta Sanofi Discovery collaboration for antigen-specific immuno-therapies for life threatening allergies based on Synthetic Vaccine Particle platform 900 ND

Forma Tx Boehringer Ingelheim

Discovery of small molecule therapeutics against oncology-relevant protein-protein interactions 815 65 / 8%

Evotec Bayer 5 year multi-target collaboration to develop 3 candidates for endometriosis 765 15 / 2%

Forma Tx J&J Discovery/dev - novel small molecule candidates - target tumor metabolism 700 ND

Xenon Genentech Strategic alliance to discover develop drugs and companion Dx for pain 646 NDXenon Genentech Strategic alliance to discover, develop drugs and companion Dx for pain 646 ND

Symphogen Merck KgaA License to Sym004 - antibody targeting EGFR in advanced metastatic CRC (P1/2) and squamous cell carcinoma head and neck (P2) 638 26 / 4.1%

Isis Pharma Biogen Idec License with options to discover /develop antisense drugs against 3 undisclosed targets to treat neurological disorders 630 30 / 4.8%

Ablynx Merck License for discovery of Nanobodies at a voltage gated ion channel target 587 8 / 1.4%


Ablynx Merck License for discovery of Nanobodies at a voltage gated ion channel target 587 8 / 1.4%

Medius Associates - Annual Deal Watch 2012

Early Stage Deals Back in Demand as Pharma is Showing Renewed Hunger for Innovation

JPM Takeaway: Pharma Wants to Engage Earlier & More ActivelyJanuary 11th, 2013 – Bruce BoothMost of the news flow around the JPM Healthcare conferences centers around the main event: public companies presenting their earnings forecasts, R&D updates, new partnering deals, and the like. There’s also a small private company track at JPM, and there are a few satellite conferences catering to private companies like the EDB’s Biotech Showcase or the New Paradigms meeting. But my partners and I didn’t manage to spend much time at any of those events unfortunately. Instead, we had a few dozen meetings with Big Pharma/Biotech companies to review updates on our biotech portfolio, highlight some of the new investment themes and seed projects we were making, and understand what they were looking for in their partnering and outreach strategies.

The resounding theme we heard from Pharma was about their desire to not only identify, track, and potentially partner around innovative early stage assets, but their interest in helping build new startups with us prospectively. Continuing a trend over the last few years, Pharma clearly wants to get closer to venture Unlike past JPMs, I didn’t repeatedly hear the “this is too early, creation around new startups.

Unlike past JPMs, I didn’t repeatedly hear the “this is too early, keep us posted when you get your Phase 2 data” message from prospective partners. What I did hear a lot of was “what new startups are you working on…”, “there aren’t enough innovative assets in Phase 2 or 3″, and “we’re looking for pre-IND stage innovative programs”. Their collective interest has definitely moved upstream into earlier stage R&D, and includes late discovery and development candidate programs in IND-enabling work as well as new platforms for exploring novel biology. Whether or not this will translate into more deals remains to be seen, but it certainly is a change in the posture of Pharma’s external engagement relative to only a few years ago. Innovative preclinical programs like Nimbus’ IRAK4 and

keep us posted when you get your Phase 2 data” message from prospective partners.

Wh t I did h l t f “ h t t t kiAcetyl-coA Carboxylase inhibitors, miRagen’s cardiac miR-208 inhibitor, and RaNA’s gain-of-function approach were of great interest to many prospective partners. Lotus’ acquisition this week by Shire highlights this as well – its lead program was a preclinical orphan disease protein replacement therapy. And multiple early stage platform collaborations were announced this week with GSK-Priaxon, Gilead-Macrogenics, and Cubist-Heptares.

Here are a few sub-points of this theme worth highlighting:

Pharma wants to creatively engage in earlier BD around high innovation-quotient new medicines. One exec mentioned that all of their recent deals but one were for pre-IND stage candidates, and that all of those were based on relationships that had been built over 12-24 months of tracking, monitoring, and

What I did hear a lot of was “what new startups are you working on…”, “there aren’t enough innovative assets in Phase 2 or 3″, and “we’re looking for pre-IND stage innovative programs”.

p g p g gengaging on the biotech’s scientific plan. Building trust around the robustness of the science and integrity around collaborative potential is critically important.

Seed-stage discovery projects were of particular interest to Pharma. The opportunity to work with us closely around some brand new startups, primarily for shaping and proximity and not for exclusivity, was of clear interest. Its also not about primarily about providing access to seed-stage capital: Pharma recognizes (as do we) that they have a deep bench of talent in areas like lead optimization, pharmacology, preclinical, and early development that could greatly aid startups’ early plans, and doing so would put them in the pole position for future deal-making. J&J’s new Innovation Centers concept is aimed at this type of interaction.


Bruce Booth, Atlas Ventures, January 11th, 2013

Early Stage Deals Back in Demand as Pharma is Showing Renewed Hunger for Innovation

JPM Takeaway: Pharma Wants to Engage Earlier & More ActivelyJanuary 11th, 2013 – Bruce BoothMost of the news flow around the JPM Healthcare conferences centers around the main event: public companies presenting their earnings forecasts, R&D updates, new partnering deals, and the like. There’s also a small private company track at JPM, and there are a few satellite conferences catering to private companies like the EDB’s Biotech Showcase or the New Paradigms meeting. But my partners and I didn’t manage to spend much time at any of those events unfortunately. Instead, we had a few dozen meetings with Big Pharma/Biotech companies to review updates on our biotech portfolio, highlight some of the new investment themes and seed projects we were making, and understand what they were looking for in their partnering and outreach strategies.

The resounding theme we heard from Pharma was about their desire to not only identify, track, and potentially partner around innovative early stage assets, but their interest in helping build new startups with us prospectively. Continuing a trend over the last few years, Pharma clearly wants to get closer to venture creation around new startups.

Unlike past JPMs, I didn’t repeatedly hear the “this is too early, keep us posted when you get your Phase 2 data” message from prospective partners. What I did hear a lot of was “what new startups are you working on…”, “there aren’t enough innovative assets in Phase 2 or 3″, and “we’re looking for pre-IND stage innovative programs”. Their collective interest has definitely moved upstream into earlier stage R&D, and includes late discovery and development candidate programs in IND-enabling work as well as new platforms for exploring novel biology. Whether or not this will translate into more deals remains to be seen, but it certainly is a change in the posture of Pharma’s external engagement relative to only a few years ago. Innovative preclinical programs like Nimbus’ IRAK4 and

Pharma wants to creatively engage in earlier BD around high innovation-quotient new medicines.

S d t di j t f ti l i t t tAcetyl-coA Carboxylase inhibitors, miRagen’s cardiac miR-208 inhibitor, and RaNA’s gain-of-function approach were of great interest to many prospective partners. Lotus’ acquisition this week by Shire highlights this as well – its lead program was a preclinical orphan disease protein replacement therapy. And multiple early stage platform collaborations were announced this week with GSK-Priaxon, Gilead-Macrogenics, and Cubist-Heptares.

Here are a few sub-points of this theme worth highlighting:

Pharma wants to creatively engage in earlier BD around high innovation-quotient new medicines. One exec mentioned that all of their recent deals but one were for pre-IND stage candidates, and that all of those were based on relationships that had been built over 12-24 months of tracking, monitoring, and

Seed-stage discovery projects were of particular interest to Pharma.

p g p g gengaging on the biotech’s scientific plan. Building trust around the robustness of the science and integrity around collaborative potential is critically important.

Seed-stage discovery projects were of particular interest to Pharma. The opportunity to work with us closely around some brand new startups, primarily for shaping and proximity and not for exclusivity, was of clear interest. Its also not about primarily about providing access to seed-stage capital: Pharma recognizes (as do we) that they have a deep bench of talent in areas like lead optimization, pharmacology, preclinical, and early development that could greatly aid startups’ early plans, and doing so would put them in the pole position for future deal-making. J&J’s new Innovation Centers concept is aimed at this type of interaction.


Bruce Booth, Atlas Ventures, January 11th, 2013

Which Should Have Come as No Surprise Since Doing This

AstraZeneca details R&D overhaul March 2, 2010

London--AstraZeneca plc said Tuesday it will stop research into several diseases and close sites in the US and Europe. The move is part of an overhaul of the drug maker's research-and-development operations which it first announced at the end of January. AstraZeneca said Tuesday it was ending discovery research in thrombosis, acid reflux, ovarian and bladder cancers, systemic scleroderma, schizophrenia, bipolar disorder, depression and anxiety, hepatitis c and vaccines other than respiratory syncytial virus and influenza.

Early-stage discovery research will cease at the company's U.S. Facility in Wilmington, Del., And it will close its facility in Lund Sweden In the U K Charnwood and a smaller facility acquired with Kudos in

On Jan. 28, AstraZeneca said it would build on previous restructuring efforts by revamping its R&D operations--a move that cuts 8,000 jobs across the company, including a net reduction of

close its facility in Lund, Sweden. In the U.K., Charnwood and a smaller facility, acquired with Kudos, in Cambridge, will be shuttered. Pharmaceutical development work at the Avon facility will also end, and AstraZeneca said it aims to sell its arrow therapeutics business in London.

On Jan. 28, AstraZeneca said it would build on previous restructuring efforts by revamping its R&D

1,800 in R&D.

operations--a move that cuts 8,000 jobs across the company, including a net reduction of 1,800 in R&D. AstraZeneca, the U.K.’s second largest drugmaker by sales after GSK, was formed in 1999 by the merger of Sweden's Astra AB and U.K.-based Zeneca group. It currently has more than 65,000 employees and operations in more than 100 countries, according to its web site.


http://online.wsj.com/article/SB10001424052748704548604575097583802928828.html?mod=googlenews_wsj

And This

Pfizer Plans to Cut Research Spending By Up To $3B February 4, 2010Pfizer Inc. said Wednesday that it plans to cut research-and-development spending by as much as $3 billion by 2012, in an attempt to wring efficiencies following its take-over of Wyeth without sacrificing future product development. The New York pharmaceutical giant outlined the aggressive cuts, which represent more than a quarter of the two companies' combined research budgets in 2008, as it reported fourth-quarter earnings of $767 million, or 10 cents a share, up from $266 million, or four cents a share, a year earlier. The drug maker also forecast lower financial targets from the Wyeth deal than it provided last year, sending Pfizer shares down 2.3% to $18.62 on the New York Stock Exchange.

Research is considered the lifeblood of pharmaceutical companies. Big drug makers like Eli Lilly & Co. and Bristol-Myers Squibb Co. are increasing their p p g g y y q gspending to find new products that can replace aging blockbusters. Yet drug discovery is unpredictable, and industry scientists have struggled in coming up with big new products. Pfizer's announcement suggests executives believe its research hasn't been worth the high levels of investment.

The largest drug makers have been retrenching as blockbuster drugs start facing competition from less expensive generic versions. After early cost cutting focused on trimming sales representatives, companies have set their sights on labs and scientists. Last week, AstraZeneca PLC said it would cut about 3,500 research jobs as part of a larger work-force reduction. Pfizer also targeted research previously, cutting as many as 800 research workers last year and closing six of 20 research sites as part of the Wyeth acquisition completed in October. Meantime, the $68 billion Wyeth takeover and other deals are filling Pfizer's

Pfizer's announcement suggests executives believe its research hasn't been worth the high levels of investment.

p y q p , $ y gpipeline with therapies discovered elsewhere.

Chief Executive Jeffrey Kindler said he believes Pfizer has struck the "right balance" between efficiency and innovation by embracing deals and partnerships while still investing heavily in internal research. "The days of a monolithic approach to either research or commercialization are behind us," he said. Pfizer said its research expenses would be $8 billion to $8.5 billion in 2012. The combined research spending for the two companies was $11 billion in 2008, the last full year before the merger. Chief Financial Officer Frank D'Amelio said the research cuts are aimed to reduce overlaps in the two companies.The planned cuts are part of a total of $7 billion in savings Pfizer expects to realize from both the Wyeth deal and its cost-cutting efforts begun before the acquisition. Pfizer will

"The days of a monolithic approach to either research or commercialization are behind us," said Jeffrey Kindler, CEO.

are part of a total of $7 billion in savings Pfizer expects to realize from both the Wyeth deal and its cost cutting efforts begun before the acquisition. Pfizer will still have among the industry's biggest research budgets, company officials said. Chief executives at GlaxoSmithKline PLC and Sanofi-Aventis SA have talked about the poor returns from company labs and reworking their approach to drug development. Sanofi Chief Financial Officer Jerome Contamine said in July that the company planned to cut R&D spending by 20% between 2008 and 2011.Consultants like Terry Hisey, vice chairman and U.S. life sciences leader at Deloitte LLP, is telling drug makers that it is "more cost effective" to bring in promising therapies from the outside than trying to develop them all in-house. Yet Sanford Bernstein analyst Tim Anderson said the research cuts by drug conglomerates could "come back to bite" the companies because they will need new products.


The Wall Street Journal: http://online.wsj.com/article/SB10001424052748704259304575042863590302630.html?mod=WSJ_newsreel_business

Inevitably Leads to This

1 200

Number of Pre-Clinical and Phase 1 Programs in Top 10 Pharma Pipelines (2003-2012)

1,000

1,200

Phase 1Pre-Clinical

600

800

200

400

0

200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


EvaluatePharma

But Even Though We Told You 3 Years Ago Where the Puck Would be Going…


Majority of VCs Continued to Believe Puck Was Sitting Here

“Today, the big inflection points are:i. initial P2 results, which suggest efficacy ii. advanced P3 trials, which lead to a New Drug Application (NDA), and iii. market launch.”


http://www.nature.com/bioent/building/planning/012003/fig_tab/nbt0602supp-BE36_F2.html

Woes of Many VCs Today Result From Overcrowding Around the P2 Value Inflection Strategy

Most investors would rather reach the inflection point at phase 2 after 1–2 years at a cost of $3–4 million than after more than 4 years at a cost of $15 million And that—in amore than 4 years at a cost of $15 million. And that in a financial nutshell—is the rationale for the in-licensing model for biopharmaceutical startups.

Dennis P. SchaferIn-licensing as a business modelNature Biotechnology June 2002Nature Biotechnology, June 2002


http://www.nature.com/bioent/building/planning/012003/fig_tab/nbt0602supp-BE36_F2.html, Nature Biotechnology 20, BE36-BE39 (June 2002)

P2 Value Inflection Strategy Worked for Awhile for a Limited Few

Eckard Weber, MD

♦ Chairman of Peninsula Pharmaceuticals until the company was sold to J&J in 2005

♦ Chairman of Cerexa until the company was sold to♦ Chairman of Cerexa until the company was sold to Forest Laboratories in 2007

• Chairman of NovaCardia until the company was sold to Merck in 2007

• Board member of Conforma until it was sold to Biogen-IDEC

• Board member of Cabrellis until it was sold to Pharmion

• Chairman of the Board at Ascenta Therapeutics, Ocera Therapeutics, Orexigen Therapeutics, Sequel Pharmaceuticals, Syndax Pharmaceuticals, Tobira Therapeutics

• Board member of BioVascular and DiObex


Company website

But Number and Value of Private Exits are Now Down

M&A Activity

Value of private co acquisitions

Value of public co acquisitions

No. of public co acquisitions

No. of private co acquisitions (A)

o. o

f dea

lsDeal value $

No $B


BioCentury - Biotech Preview 2013: The State of the Markets, Current Trends and Products to Watch; graphics modified

And Suddenly Both Number of Clinical Phase Deals and Valuations are Declining Across All Therapeutic Categories

Therapy AreaProduct deal count Up-front payments ($m) Total deal value ($m)

Phase 1 to Phase 3 Product Deal by Therapy Area

py2010 2011 2012 2010 2011 2012 2010 2011 2012

Oncology & immunomodulators 51 93 51 713 662 446 3,408 6,713 5,360

Systemic anti-infectives 25 34 33 398 50 204 1,226 226 774

Central nervous system 42 49 22 199 297 105 2,884 2,488 874

Gastro-intestinal 19 21 13 108 23 85 1,765 76 504

Respiratory 13 14 11 10 58 22 25 150 82

Musculoskeletal 6 13 10 145 100 189 1,455 347 1,659

E d i 8 14 8 95 409 0 2 155 3 146 0Endocrine 8 14 8 95 409 0 2,155 3,146 0

Cardiovascular 17 16 7 148 2 0 2,421 9 54

Dermatology 12 5 6 0 0 40 0 0 52

Various 8 6 6 45 5 23 373 23 26

Blood 8 7 4 167 2 0 1,094 364 2

Genito-urinary 17 7 3 213 0 0 1,364 0 0

Sensory organs 7 10 1 60 45 0 230 420 0

Totals 233 289 175 2 301 1 652 1 114 18 399 13 961 9 387


EvaluatePharma report - Therapy area licensing in 2012 – Rags and riches

Totals 233 289 175 2,301 1,652 1,114 18,399 13,961 9,387

VCs Are Not Happy About Today’s Buyers’ Market

Avalon’s Kinsella Calls Out Big Pharma for “Bad Behavior” That’s Pushing Biotech Ventures “Almost to Point of Extinction”

“There have been numerous instances of what I refer to as bad behavior—combined with short-sighted, brass-knuckle negotiating tactics—by some pharma companies that really go to the heart of whether this partnership between Big Pharma and bi t h ll ti ” Ki ll H i t i th t th h ti lbiotech can really continue,” Kinsella says. He maintains that the pharmaceutical industry is doing enormous damage to the life sciences venture capital ecosystem. “Their predatory business practices,” he says, “are pushing the sector almost to the point of extinction.”p

Kinsella concedes that Big Pharma CEOs might not even realize how their companies have been undermining the well-being of the biotech startups that Kinsella says are their chief source of new drug candidates. Talk to a Big Pharma CEO, Kinsella says,their chief source of new drug candidates. Talk to a Big Pharma CEO, Kinsella says, and he or she will glibly tell you that the next generation of products is coming from biotech, “while two floors below in business development, they are wreaking havoc on biotech startups.”


http://www.xconomy.com/san-diego/2011/02/17/avalons-kinsella-calls-out-big-pharma-for-bad-behavior-thats-pushing-biotech-ventures-almost-to-point-of-extinction

Supply of “Available” Clinical Stage Assets

Number of Unpartnered Compounds Owned by Non-Commercial Stage Biotechsby Non Commercial Stage Biotechs

2000

2500Phase 3Phase 2

1500

2000 Phase 2Phase 1

500

1000

0

500

2000 2004 2006 2007 2008 2009 2010 2011 2012


Data analysis provided courtesy of Thomson Pharma IDdb

Now Greatly Exceeds Demand

Deals as a Percentage of Biotech Programs by Phase

20%Phase 2

Phase 1

Programs by Phase

10%

15%

5%

10%

0%2000 2004 2006 2007 2008 2009 2010 2011 2012


Recap, Thomson Pharma IDdb

Regardless of Who is At Fault, VC Funded Pipeline Contains Relatively Few Differentiated Drugs for Widespread Chronic Diseases

Avalon’s Kinsella Calls Out Big Pharma for “Bad Behavior” That’s Pushing Biotech Ventures “Almost to Point of Extinction”

♦ One consequence of not being able to rely on Big Pharma to play fair, Kinsella says, is that venture syndicates are less willing to take on the risk of d l i d f h i di h h hdeveloping drugs for chronic diseases. The current ecosystem is such that a drug must get approved pretty quickly, which rules out clinical trials with thousands of patients.

♦ It helps to explain why so many venture-backed biotechs prefer to develop new treatments around drugs already approved by the FDA, and why they are so reluctant to develop novel drugs for heart disease, neurological disorders, osteoporosis, and other chronic conditions.


http://www.xconomy.com/san-diego/2011/02/17/avalons-kinsella-calls-out-big-pharma-for-bad-behavior-thats-pushing-biotech-ventures-almost-to-point-of-extinction

And Pharma Has Also Retreated From These Areas

AstraZeneca Drops Psychiatric, Other Drug ResearchTue, Mar 2 2010LONDON, March 2 (Reuters) – AstraZeneca is to stop researching some disease areas that form the backbone of its current business -- including schizophrenia and acid reflux -- in a drive to focus R&D efforts and cut costs. The Anglo-Swedish drugmaker, which faces one of the sector's worst "cliffs" of expiring drug patents, told its staff on Tuesday it would cease discovery in 10 of its current disease areas, or around one quarter of the total. A wide-ranging overhaul had been expected since the group said in January it was cutting a further 8,000 staff, or some 12 percent of the workforce, including a net 1,800 in research. But it is only now that staff know where the axe will fall. AstraZeneca is not alone in taking the knife to previously sacrosanct R&D, though its cuts are particularly deep. Pfizer and GlaxoSmithKline are also ditching drug discovery work that does not pay its way.AstraZeneca will still invest across the same therapy areas but said it would drop discovery in schizophrenia, bipolar disease, depression, anxiety, acid reflux, thrombosis, ovarian and bladder cancers, systemic scleroderma and hepatitis C. It also plans to end early vaccine research other than for flu and respiratory syncytial virus. "AZ is going to continue to be a research-focused company. We will not diversify to the extent that some of the others are doing," development head Anders Ekblom told Reuters. "We are focusing on the diseases areas where we would like to be."UNPREDICTABLE TRIALS: The decision to drop psychiatry drug research reflects the unpredictable and risky nature of clinical trials to assess medicines working on the brain as well as a lack of good scientific opportunities he said For AstraZeneca this a major shift since its second

AstraZeneca will still invest across the same therapy areas but said it would drop discovery in schizophrenia, bipolar disease, depression, anxiety, acid reflux, thrombosis, ovarian and bladder

medicines working on the brain, as well as a lack of good scientific opportunities, he said. For AstraZeneca, this a major shift, since its second biggest seller is schizophrenia drug Seroquel and it recently struck a deal worth up to $1.24 billion for an antidepressant from Targacept. Ekblomsaid he remained confident about the Targacept drug, which is shortly to start final Phase III tests, but saw limited longer-term opportunities in the psychiatric field. His views echo those of Glaxo CEO Andrew Witty, who last month said Glaxo would stop researching antidepressants because of uncertain returns. The move away from acid reflux ends a line of AstraZeneca drug development that created the stomach ulcer and heartburn treatments Losec and Nexium, its biggest sellers, while exiting thrombosis comes just as its big new blood-thinner hope Brilinta awaits

l l D i h d i i i i Ekbl id A Z ld ill d h d l d i h

cancers, systemic scleroderma and hepatitis C.

regulatory approval. Despite the decision to exit certain areas, Ekblom said AstraZeneca would still advance those products already in the pipeline and might also license in drugs, if the opportunity was right.There will be major changes for staff as the research machine is reorganised. In the United States, early-stage discovery research will cease at Wilmington, Delaware, while the Swedish research site in Lund will close, as will the British site at Charnwood, as respiratory and inflammation work moves to Moelndal in Sweden. AstraZeneca also aims to sell its Arrow Therapeutic antiviral business in London, acquired in 2007 for $150 million.


http://www.reuters.com/assets/print?aid=USLDE62019Q20100302

And Has Done So Massively

Pfizer to Cut Research, Shut Plants in Savings EffortFeb 1, 2011 - BloombergIan Read, the new chief executive officer of Pfizer Inc., plans to lower costs by closing labs and reducing research spending by as much as $3 billion as the company faces declining sales of its best-selling drug. “We have to fix our innovative core, and that’s what this R&D change is about,” Read told reporters at Pfizer headquarters in New York today. The reductions are part of a plan to overhaul the company’s research operation to focus on the most-profitable programs, Read said. Research and development spending will be $6.5 billion to $7 billion in 2012, the CEO said. That compares with $9.4 billion in 2010 and is $1.5 billion lower than previous Pfizer forecasts. Pfizer plans to buy back $5 billion in shares next year as part of a $9 billion repurchase program, he said. Today was the first earnings report under Read, who succeeded Jeffrey Kindler in December. Pfizer is counting on products from the $68 billion Wyeth acquisition in 2009 to replace sales lost to generic copies of the cholesterol pill Lipitor, the world’s best-selling drug. Read said Wyeth drugs won’t be enough to make up for that shortfall, and the company must rein in its unproductive spending. No Pennant - “It’s like being the New York Yankees and having a huge bankroll and never being able to win the pennant,” said Tony Butler, an analyst at Barclays Capital in New York,

f i t th M j L B b ll t “Thi i i ‘I’ll t k th Cl l d I di b d t d h t d ith th t ’ S di d ’t tti thi t ”The company plans to halt funding research in the areas of allergy,referring to the Major League Baseball team. “This is saying: ‘I’ll take the Cleveland Indian budget and see what we can do with that.’ Spending more doesn’t mean getting anything out.” “This is all good,” Butler said. Pfizer rose $1, or 5.5 percent, to $19.22 at 4 p.m. in New York Stock Exchange composite trading of 133 million shares, more than triple the three-month average. It was Pfizer’s biggest gain in six months, helping the Dow Jones Industrial Average to its first close above 12,000 since June 2008. Pfizer shares have climbed 2.3 percent in the past 12 months. The company plans to halt funding research in the areas of allergy, urology, respiratory, internal medicine and tissue repair, Read said. Pfizer will focus on the more-profitable areas of cancer, neuroscience, inflammation, vaccines and immunology, he said. “At some point your shareholders and stakeholders demand you have a return on investment in research,” Read said. “We’re looking at areas where we think it’s not a competitive advantage.” More Accountability - To improve productivity, Pfizer will demand more accountability of its business managers and scientists for the commercial success of experimental drugs, which can cost $1 billion each to develop, Read said. If the research team finds a compound that shows promise, and if the business team chooses not to pursue it, the company will push to sell

The company plans to halt funding research in the areas of allergy, urology, respiratory, internal medicine and tissue repair, Read said.

Pfizer will focus on the more-profitable areas of cancer, can cost $1 billion each to develop, Read said. If the research team finds a compound that shows promise, and if the business team chooses not to pursue it, the company will push to sell the rights to other companies. Read said Pfizer will increasingly outsource business. The company will close its research hub in the U.K. seacoast town of Sandwich, England, where Pfizer developed five of its 20 top drugs, including Viagra, before the purchase of Wyeth. Pfizer will also shift resources to its facilities in Cambridge, Massachusetts, from Groton, Connecticut. The company estimated it will record $2.2 billion to $2.9 billion in costs to complete the research changes. The jobs in Sandwich won’t be moved elsewhere, Read said. Instead, most of the research will be halted and some will be contracted to other companies. Needs to Shrink - “Pfizer’s future is to shrink in order to maintain profits and pull money from R&D and use it for share buybacks to keep investors happy for another quarter or two,” said Erik Gordon, a professor at the University of Michigan Ross School of Business, in Ann Arbor, who studies drug development. The company will pursue “the occasional expensive acquisition to keep the company afloat,” he said in an e-mail. Pfizer’s $3.6 billion deal to buy King Pharmaceuticals Inc. received regulatory approval last week, and the company

neuroscience, inflammation, vaccines and immunology, he said.

yesterday said it expects to complete the purchase this month. The acquisition expands Pfizer’s painkillers and experimental pain medicines that are less addictive than available drugs. Patent exclusivity for Lipitor ended in Canada and Spain last year and will expire in the U.S. in November. Sales of Lipitor declined 17 percent in the fourth quarter to $2.63 billion, Pfizer reported today. Sales will fall by more than half in 2012 after generic- drug makers flood the U.S. market with cheaper copies, Barclay’s Butler said in a telephone interview. He has a “positive” rating on Pfizer with a price target of $21, according to data compiled by Bloomberg. Cost-Reduction Plan - Pfizer is continuing a cost-reduction plan that includes firing 19,000 employees, closing 8 plants and shutting 6 research centers. Even before that plan was enacted, Pfizer eliminated about 40,000 jobs during the 6 years ended in 2009. Pfizer today reported that fourth-quarter net income rose to $2.89 billion, or 36 cents a share, from $767 million, or 10 cents, a year earlier, Pfizer said. Revenue rose 6.2 percent to $17.6 billion. The company said 2011 profit will be $2.15 to $2.26 a share, falling short of the $2.30 average estimate of 20 analysts surveyed by Bloomberg


analysts surveyed by Bloomberg.

http://www.bloomberg.com/news/2011-02-01/pfizer-fourth-quarter-net-topss-analyst-estimates-shares-fall-on-outlook.html

Unfortunately, Chronic Costly Disease Will be Exactly Where the Puck is Going Next

Rx


Because These are the Diseases that Continue to Drive Healthcare Costs


http://www.agingstats.gov/agingstatsdotnet/Main_Site/Data/2010_Documents/Docs/OA_2010.pdf

Chronic Diseases are Under-Represented in 2012 Approvals:7 Drugs for Chronic Diseases, but 3 are “Me-Toos”

• 0 Anti-infectives• 2 CardiovascularCDER’S 2012 NMEs

Other

Oncology &

n=10, 26%Chronic

First-in-classn=4, 10%

Chronic Diseases

Rare

Oncology &Hematologyn=15, 38%

ChronicNot First-in-Class

N=3, 8%

n=7, 18%

Diagnosticsn=2, 5%

Diseasesn=5, 13%


CDER/FDA Novel New Drugs Summary 2012

Anyone Think This is Not a Sure Signal…

Pfizer-Drug Xalkori Approved for Lung Cancer, but at What Cost?August 30 2011New York City-based Pfizer Inc gained FDA approval for their drug Xalkori the first new medicine in several years for deadly advanced lungNew York City-based Pfizer Inc. gained FDA approval for their drug Xalkori, the first new medicine in several years for deadly, advanced lung cancer, according to new research. Xalkori is used to treat certain patients with late-stage -- advanced or metastatic -- lung cancer along with an abnormal anaplastic lymphoma kinase (ALK) gene, which causes cancer development and growth. The drug, which works by blocking certain proteins called kinases, including the protein produced by gene abnormality, is being approved with a companion diagnostic test from Abbott Molecular Oncology that helped determine if a patient has the gene.

“The approval of Xalkori with a specific test allows the selection of patients who are more likely to respond to the drug,” said Richard Pazdur, M.D., director of the Office of Oncology Drug Products in the FDA’s Center for Drug Evaluation and Research. “Targeted therapies such as Xalkoriare important options for treating patients with this disease and may ultimately result in fewer side effects.”

The Wall Street Journal reports that, four years ago, Pfizer Inc. was on the verge of abandoning a cancer therapy until scientists discovered its effectiveness for, at the time, only a small group of people -- 6,000 patients a year in the U.S. The results may not achieve multi-billion-dollar sales, but whether that yields a product for tens of millions of patients or 10,000 patients, we're interested, Geno Germano, who runs Pfizer's

i lt d b i t ld WSJ I t li i l t i l i l i b t 255 ti t X lk i d l d t i f t l t

Pfizer plans to charge $115,200 a year per patient for Xalkori.

specialty-care and cancer businesses, told WSJ. In two clinical trials involving about 255 patients, Xalkori delayed tumor progression for at least ten months in slightly more than half the patients who had a specific genetic mutation, the study noted. Roughly one to seven percent of those with larger-celled lung cancer have the ALK gene abnormality, according to the FDA. Patients with this form of lung cancer are typically non-smokers. Federal health regulators discussed the drug shortly after its U.S. approval based on it being reasonably likely to predict a clinical benefit to [lung cancer] patients, they said. Xalkori is approved for the roughly four percent of patients with non-small cell lung cancer who have the gene.

In one study, the objective response rate was 50 percent with a median response duration of 42 weeks. In another, the objective response rate was 61 percent with a median response duration of 48 weeks with most patients tested had tumors shrink or disappear for months, without the nasty side effects of chemotherapy. FDA officials said the most common side effects reported in patients receiving Xalkori included vision disorders, nausea, diarrhea, vomiting, swelling, and constipation.

Pfizer plans to charge $115,200 a year per patient for Xalkori.


http://www.ibtimes.com/pfizer-drug-xalkori-approved-lung-cancer-what-cost-306928

Of Where the Puck is Heading?

German Cost Agency Spurns XalkoriFebruary 21, 2013

The well-armed German pricing gatekeepers have dismissed another Big Pharma drug. Pfizer's lung cancer treatment Xalkori got an initial thumbs-down from the Institute for Quality and Efficiency in Health Care (IQWiG).

Under recent healthcare reforms--and budget cuts--in Germany, IQWiG assesses new treatments in comparison with existing alternatives The agency's decisions determine whether new drugs can wear premium price tags If theexisting alternatives. The agency s decisions determine whether new drugs can wear premium price tags. If the treatments aren't deemed superior to older drugs, then companies' pricing power is virtually nil. "No additional benefit" is the operative phrase when IQWiG is least impressed. And that's the designation the agency awarded Xalkori.

The Pfizer lung cancer drug is designed for patients with an abnormal ALK gene. That's about 5% of people diagnosed ith ll ll l It t d ith t f f i th U S h FDA d it i 2011 hi hl

If the treatments aren't deemed superior to older drugs, then companies' pricing power is virtually nil.

" dd l b f " h h h lwith non-small cell lung cancer. It was greeted with great fanfare in the U.S. when FDA approved it in 2011 as a highly effective, targeted drug for patients whose disease is particularly difficult to treat. But it's highly expensive as well.

IQWiG took issue with Xalkori's side effects in comparison with other NSCLC chemotherapies. And it slapped a "no additional benefit" on the drug in comparison with best supportive care because Pfizer hadn't provided any data.

"No additional benefit" is the operative phrase when IQWiG is least impressed. And that's the designation the agency awarded Xalkori.

Pfizer, in turn, took issue with the assessments in a statement titled "IQWiG method distorts the benefits of personalized cancer medicine." The company says it believes Xalkori offers a "significant benefit" for appropriate patients. And it plans to argue its case before the agency deadline in early March.


http://www.fiercepharma.com/node/93063/print (modified)

How About This?

Aggregate European Sales by 10 Innovator Pharmas

Total Sales Europe US Emerging

2011 2012 2011 2012 2011 2012 2011 20122011 2012 2011 2012 2011 2012 2011 2012

Total $335.8 $324.1 $91.0 $80.9 $133.6 $127.4 $63.8 $67.9

2011 vs 2012 Difference -$11.7 -$10.1 -$6.2 $4.1

2011 vs 2012 %2011 vs 2012 % change -3% -11% -5% 6%


BioCentury, Volume 21 • Number 7

In Europe, Pharma is Skating Away From the Puck

Europe Ltd.February 18th, 2013As pricing pressures continue to increase in Europe pharma companies are starting to shrink their European footprint with smallerAs pricing pressures continue to increase in Europe, pharma companies are starting to shrink their European footprint with smaller commercial organizations and a narrower focus on key products or specialty areas.

The sales numbers tell the story: Across 10 pharma companies that have broken out their numbers, 2012 European drug sales were down $10.1 billion (11%) compared to 2011.

U.S. declines were much less at $6.2 billion (5%) and were driven largely by patent expirations of blockbusters like Pfizer Inc.’s Lipitor

As pricing pressures continue to increase in Europe, pharma companies are starting to shrink their European footprint with

U.S. declines were much less at $6. billion (5%) and were driven largely by patent expirations of blockbusters like Pfi er Inc. s ipitoratorvastatin. In contrast, emerging markets for eight pharmas that break out revenues for the region were up $4.1 billion (6%).

Growth in emerging markets and more emphasis on U.S. launches could partially offset declines in European sales in the short term. But healthcare reform will soon bring additional pricing pressures in the U.S., too, and emerging markets are being driven by lower-margin products such as branded generics.

smaller commercial organizations and a narrower focus on key products or specialty areas.

Growth in emerging markets and more emphasis on U.S. launches Indeed, the available — albeit limited — data suggest the new revenues may be nudging gross margins toward those more typical ofcompanies that play in consumer health. The end game is therefore likely to be lower margins overall, which means pharmas will need to rethink how they generate sales for innovator products.

Thus even as companies look outside Europe for sales, industry is engaging with European governments to develop solutions that would help single-payer systems reimburse for higher-priced drugs.

g g pcould partially offset declines in European sales in the short term. But healthcare reform will soon bring additional pricing pressures in the U.S., too, and emerging markets are being driven by lower-p g p y y g p g

Along these lines, the European Federation of Pharmaceutical Industries and Associations (EFPIA) and at least one company arecontemplating new ways to aid healthcare systems in paying for innovation through co-pay systems or tiered pricing schemes.

EFPIA also is in discussions with technology assessment agencies about creating a “relative efficacy assessment” scheme that could be applied across Europe.

margin products such as branded generics.



And Looking Again for the Comforts of Home

Quoted in BioCentury 18-February, 2013



Where Every Sign Points to Puck Going to Same Place

In Cancer Care, Cost MattersOctober 14, 2012By PETER B. BACH, LEONARD B. SALTZ and ROBERT E. WITTESBy PETER B. BACH, LEONARD B. SALTZ and ROBERT E. WITTES

AT Memorial Sloan-Kettering Cancer Center, we recently made a decision that should have been a no-brainer: we are not going to give a phenomenally expensive new cancer drug to our patients. The reasons are simple: The drug, Zaltrap, has proved to be no better than a similar medicine we already have for advanced colorectal cancer, while its price — at $11,063 on average for a month of treatment — is more than twice as high.

In most industries something that offers no advantage over its competitors and yet sells for twice the price would never even get on the market. But that is not how things work for drugs. The Food and Drug Administration approves drugs if they are shown to be “safe and effective.” It does not consider what the relative costs might be once the new medicine is marketed. By law, Medicare must cover every cancer drug the F.D.A. approves. (A 2003 law, moreover, mandates payment at the price the manufacturers charge, plus a 6 percent cushion.) In most states private insurers are held to this same standard Physician guideline setting organizations likewise focus on whether or not a treatment is effective and rarely factor in cost in their determinations Ignoring the cost of

At MSKCC . . . we are not going to give a phenomenally expensive new cancer drug to our patients The reasons are simple: Theheld to this same standard. Physician guideline-setting organizations likewise focus on whether or not a treatment is effective, and rarely factor in cost in their determinations. Ignoring the cost of

care, though, is no longer tenable. Soaring spending has presented the medical community with a new obligation. When choosing treatments for a patient, we have to consider the financial strains they may cause alongside the benefits they might deliver.

This is particularly the case with cancer, where the cost of drugs, and of care over all, has risen precipitously. The typical new cancer drug coming on the market a decade ago cost about $4,500 per month (in 2012 dollars); since 2010 the median price has been around $10,000. Two of the new cancer drugs cost more than $35,000 each per month of treatment. The burden of this cost is borne, increasingly, by patients themselves — and the effects can be devastating. In 2006, one-quarter of cancer patients reported that they had used up all or most of their savings paying for care; a study last year reported that 2 percent of cancer patients were driven into bankruptcy by their illness and its treatment. One in 10 cancer patients now reports spending more than $18,000 out of pocket on care.

new cancer drug to our patients. The reasons are simple: The drug, Zaltrap, has proved to be no better than a similar medicine we already have for advanced colorectal cancer, while its price is more than twice as high.

Which brings us back to our decision on Zaltrap. In patients with advancing, metastatic colorectal cancer, the new drug, approved by the F.D.A. in August and jointly marketed by Sanofi and Regeneron, offers the same survival benefit as Genentech’s Avastin, which works through a similar molecular mechanism. When compared with the standard chemotherapy regimen alone, adding either medicine has been shown to prolong patient lives by a median of 1.4 months. Major clinical practice guidelines, like those from the National Comprehensive Cancer Network, agree that Zaltrap is no better than Avastin in this setting. (Full disclosure: Two of us, Dr. Bach and Dr. Saltz, have been paid consulting fees by Genentech.) But Avastin costs roughly $5,000 a month: very expensive in its own right, yet less than half of Zaltrap’s price tag. And while the side effects in both drugs are roughly equal, doses of Avastin generally take less time to administer than those of Zaltrap, which makes Avastin more convenient for patients. Consider that colorectal cancer is typically diagnosed in older individuals and the cost issue becomes starker still. Many patients are on Medicare and living on fixed incomes. And because Medicare requires patients to co-pay for cancer drugs, 20 percent of the cost of drugs like Zaltrap and Avastin is passed on — absorbed either by

l l i b h i h l T h i i ld l l i i h i ld h h $2 200

more than twice as high.

In most industries something that offers no advantage over its competitors and yet sells for twice the price would never even get on the market But that is not how things work for drugssupplemental insurance or by the patients themselves. To put these percentages in perspective, an older colorectal cancer patient without extra insurance would have to pay more than $2,200 out

of pocket for a month’s treatment with Zaltrap. That’s greater than the monthly income for half of Medicare participants. Once you take all this into account it may seem surprising that the decision to exclude Zaltrap from our hospital’s formulary was a hard one to make. But because our medical culture equates “new” with “better” so unequivocally, a decision like this one can seem out of place at a leading cancer hospital Political rhetoric today is similarly slanted. Our refusal to adopt this remarkably expensive therapy risks being labeled “rationing,” not rational. This political climate also helps explain why the Affordable Care Act precludes Medicare from changing its coverage or payment amounts based on cost comparisons like the one we have outlined, even when two drugs appear to work equally well. And it is probably why neither presidential candidate has addressed runaway cancer drug prices. But if no one else will act, leading cancer centers and other research hospitals should. The future of our health care system, and of cancer care, depends on our using our limited resources wisely. The current level of spending on health care, estimated to be $2.8 trillion this year, is already too high. The growth rate in health spending is unsustainable. Of course, we know our decision about Zaltrap will not meaningfully address these larger problems. P j t d U it d St t l f Z lt i 2013 l th $150 illi 0 005 t f ll d ll t h lth O ld t f ll t f th t b

on the market. But that is not how things work for drugs.


Projected United States sales of Zaltrap in 2013 are less than $150 million, or 0.005 percent of ll dollars spent on health care. Our use would account for a very small percentage of even that number. But it is a step in the right direction — one of many we need to take.

http://www.nytimes.com/2012/10/15/opinion/a-hospital-says-no-to-an-11000-a-month-cancer-drug.html?_r=1&&pagewanted=print

Puck is Heading for Therapies That Can Help Address This Problem

Per Capita Health Care Spending2006, $ at PPP*

Per capita GDP ($)*


*Purchasing power parity** Estimated Spending According to WealthSource: Organization for Economic Co-operation and Development (OECD)

Slide provided courtesy of Dr. Peter Bach, Memorial Sloan-Kettering Cancer Center

Because Not Getting What you Pay for is Unsustainable

Overall Quality: Life Expectancyth i h ldThe US is 50th in the world for life expectancy at birth

8485

78798081828384

7475767778

acau orra

apan

pore

rino

Kong

ralia

nada

ance

eden

land

nsey

srae

llan

dgu

illaan

dsm

uda

land

Italy

altar

naco

stein

pain

rway

rsey

eece

stria

ands

Malt

aan

dsou

rgm

any

gium

elon

ands

dom

land

rdan

Man

orea

nion Rico

vina

lena

prus

mar

klan

dtu

gal

tuna ates

Ma

And Ja

Singa

pSa

n M

aHo

ng K

Aust Can

Fra

Swe

Switz

erl

Guer

n IsIce An

gCa

yman

Isla

Berm

New

Zea

Gibr

aM

onLie

chte

ns SNo

r Je Gre

Aus

Faro

e Isla M

Neth

erla

Luxe

mbo

Germ Belg

Sain

t Pie

rre a

nd M

ique

Virg

in Is

laUn

ited

King

dFin Jo

rIsl

e of M

Sout

h Ko

Euro

pean

Un

Puer

to

Bosn

ia an

d He

rzeg

ovSa

int H

e Cyp

Denm Ire Port

Wall

is an

d Fu

tUn

ited

St


Source: OECDSlide provided courtesy of Dr. Peter Bach, Memorial Sloan-Kettering Cancer Center

And US Drug Pricing is Major Target for System Cost Reduction


McKinsey Global Institute. Accounting for the cost of US health care. Dec 2008. http://www.mckinsey.com/mgi/reports/pdfs/healthcare/US_healthcare_report.pdf. Slide provided courtesy of Dr. Peter Bach, Memorial Sloan-Kettering Cancer Center

So This is Most Definitely Unsustainable

Monthly and Median Costs of Cancer Drugsat the Time of FDA Approval 1965-2013


Slide provided courtesy of Dr. Peter Bach, Memorial Sloan-Kettering Cancer Center

This is What Unsustainable Looks Like Right Now

Sanofi Halves Price of Cancer Drug Zaltrap After Sloan-Kettering RejectionNovember 8, 2012 – The New York TimesIn an unusual move, a big drug company said on Thursday that it would effectively cut in half the price of a new cancer drug after a leading cancer center said it would not useIn an unusual move, a big drug company said on Thursday that it would effectively cut in half the price of a new cancer drug after a leading cancer center said it would not use the drug because it was too expensive. The move — announced by Sanofi for the colon cancer drug Zaltrap — could be a sign of resistance to the unfettered increase in the prices of cancer drugs, some of which cost more than $100,000 a year and increase survival by a few months at best.

Zaltrap came to market in August at a price of about $11,000 a month. Soon after, Memorial Sloan-Kettering Cancer Center in New York decided not to use the drug, saying it was twice as expensive but no more effective than a similar medicine, Avastin from Genentech. Both drugs improved median survival by 1.4 months, doctors there said. Three doctors at Sloan-Kettering publicized the cancer center’s decision last month in an Op-Ed article in The New York Times. “Ignoring the cost of care is no longer tenable,” they wrote. ”Soaring spending has presented the medical community with a new obligation. When choosing treatments for patients, we have to consider the financial strains they

l id th b fit th d li ”

In an unusual move, a big drug company said on Thursday that it would effectively cut in half the price of a new cancer drug after a l di t id it ld t th d b itmay cause alongside the benefits they may deliver.”

Sanofi executives argued that the price they had set was very similar to that of Avastin. “The intent was not to charge a premium,” Christopher A. Viehbacher, the chief executive of Sanofi, said in an interview last month. Sloan-Kettering, he said, was basing its price comparison on a dose of Avastin that was half the dose Sanofi used in its own comparison. On Thursday, Sanofi backed down. “We believe that Zaltrap is priced competitively as used in real-world situations,” it said in a statement. “However, we recognize that there was some market resistance to the perceived relative price of Zaltrap in the U.S. — especially in light of low awareness of Zaltrap in the U.S. market. As such, we are taking immediate action across the U.S. oncology community to reduce the net cost of Zaltrap.” The move was first reported on Thursday by The Cancer Letter, a newsletter about cancer issues.

leading cancer center said it would not use the drug because it was too expensive. The move — announced by Sanofi for the colon cancer drug Zaltrap — could be a sign of resistance to the unfettered increase in the prices of cancer drugs some of which

Sanofi said it would not change the official price for Zaltrap but would offer discounts of about 50 percent. Zaltrap, which is given intravenously, is not bought directly by patients but is sold to doctors or hospitals, which administer it. The cost is then reimbursed by Medicare or private insurers. Patients could be liable for a co-payment. Dr. Leonard B. Saltz, chief of gastrointestinal oncology at Sloan-Kettering and one of the authors of the Op-Ed article, said Sanofi’s offer of discounts “doesn’t really address the problem from our perspective” because Medicare reimbursement and patient co-payments would still be based on the higher list price, at least for several more months. Also, he said, the discounts could give doctors and hospitals an incentive to use Zaltrap because they could profit from the difference between the discounted price they pay for the drug and the higher price at which they are reimbursed by insurers. Dr. Saltz said even at the lower price, he did not foresee Sloan-Kettering doctors using Zaltrap because it was no better than Avastin and might be more toxic Dr Saltz is now a consultant to Genentech and has been one to Sanofi

unfettered increase in the prices of cancer drugs, some of which cost more than $100,000 a year and increase survival by a few months at best.

was no better than Avastin and might be more toxic. Dr. Saltz is now a consultant to Genentech and has been one to Sanofi.

Zaltrap, developed by Sanofi and Regeneron Pharmaceuticals, a biotechnology company in Tarrytown, N.Y., was approved by the Food and Drug Administration in August for use as a second-line treatment for colorectal cancer, meaning after an initial regimen had stopped working. Like Avastin, Zaltrap impedes the formation of blood vessels that nourish cancer cells. Dr. Peter B. Bach, director of the Center for Health Policy and Outcomes at Sloan-Kettering and one of the authors of the Op-Ed piece, said the price of Zaltrap reflected a bigger problem — that over all there was little relation between drug prices and the value they provided. “Normal markets wouldn’t behave like this,” he said on Thursday. “You couldn’t introduce something twice as expensive and no better and still sell it.” Dr. Lee Newcomer, senior vice president for oncology at UnitedHealthcare, said it was the first time he could recall a company cutting the price of a cancer drug so much. “It was the first time physicians have stood up and said,

Sanofi said it would not change the official price for Zaltrap but would offer discounts of about 50 percent.


“Enough is enough,’ ” he said. “And I think that was a watershed moment.”

http://www.nytimes.com/2012/11/09/business/sanofi-halves-price-of-drug-after-sloan-kettering-balks-at-paying-it.html?_r=0&pagewanted=print

Yet Sticker Prices for the New NME Class Begin High

Company Drug Indication Treatment cost Notes

Teva Synribo omacetaxinemepesuccinate

Chronic or accelerated phase CML

$87,700 (chron)$46,800 (accel)

Chronic (1 yr Tx), Accelerated (~6m Tx)

Curis, Genentech, Roche Erivedge vismodegib Basal cell carcinoma (BCC) $85,800 10m median treatment

Genentech, Roche Perjeta pertuzumab Breast cancer $77,400 Used in combo; 1y TxGenentech, Roche Perjeta pertuzumab Breast cancer $77,400 Used in combo; 1y Tx

Exelixis Cometriq cabozantinib Medullary thyroid cancer $72,100 204d median Tx

Medivation, Astellas Xtandi enzalutamide Prostate cancer $62,600 8.3m median Tx

Pfi I l i i ib R l ll i (RCC) $59 300 dPfizer Inlyta axitinib Renal cell carcinoma (RCC) $59,300 6.4m median Tx

Sanofi Aubagio teriflunomide Multiple sclerosis (MS) $49,600

Regeneron Zaltrap ziv-aflibercept Colorectal cancer $43 200Used in combo; 9 - 2w cycles; Sanofi offers 50%Regeneron Zaltrap ziv aflibercept Colorectal cancer $43,200 cycles; Sanofi offers 50% discount US oncologists

Onyx (Amgen) Kyprolis carfilzomib Multiple myeloma (MM) $39,800 Four 28d cycles Tx

Johnson & Johnson Sirturo bedaquiline Tuberculosis (TB) $30,000 6m Tx


Biocentury, 02-September, 2013

And Climb Much Higher- How Many More Will it Take to Break Budgets?

Company Drug Indication Treatment cost Notes

Protalix, Pfizer Elelyso taliglucerase alfa Gaucher’s disease $355,800

Vertex Kalydeco ivacaftor Cystic fibrosis (CF) $311,500

NPS Gattex teduglutide Short bowel syndrome $295,000

Aegerion Juxtapid lomitapide Homozygous familial $295,000 Used in comboAegerion Juxtapid lomitapide hypercholesterolemia (HoFH) $295,000 Used in combo

Novartis Signifor pasireotide Cushing’s disease $175,000

Chronic myelogenous leukemia Ariad Iclusig ponatinib (CML); acute lymphoblastic

leukemia (ALL) $116,600

Pfi B lif b i ib

Chronic, accelerated or blast phase Philadelphia $99,500 (chron)

$82 900 ( l)Chronic (1yr Tx),

l d ( )Pfizer Bosulif bosutinib phase Philadelphia chromosome-positive (Ph+) CML

$82,900 (accel)$24,800 (blast)

Accelerated (10m Tx), Blast (3m Tx)

BTG Voraxaze glucarpidase Methotrexate toxicity in patients with renal impairment $90,000 Single treatment


p p

BioCentury, 02-September, 2013

To Pharma, Pre-POC Programs for Large Population Chronic Disease Are Afflicted With Too Much of This

SCIENTIFIC RISK


And Post PoC Programs Are Scary Because They Lack Differentiation

COMMERCIAL RISK


Unfortunately, Too Many of Biotech’s Programs are Both Too Early and Lack Obvious Differentiation


Way Too Few Programs Clear This Hurdle

P fP fProofProofofofofof

RelevanceRelevanceT MT MRelevanceRelevancePage 56

LES 2013 Annual Meeting25 September 2013

PoR Strategy is the Pragmatic Pursuit of MeaningfullyDifferentiated Medicines

T T MM


Dominance of Generics in Large Chronic Disease Markets Has Pushed Pharma Out


But Pharma Has Avoided Dealing With What Constitutes Meaningful Differentiation of Chronic Disease Therapies


Especially Against the Context of a Rapidly Changing Therapeutic Environment


Pharma Will Never Prove Relevance Until it Proves Value

Pharma fears it is not up to demands of 'value challenge' - EIU World News | February 07, 2012Drugmakers realise they need to demonstrate the value of their new treatments to payers but many are concerned about their ability to do soDrugmakers realise they need to demonstrate the value of their new treatments to payers, but many are concerned about their ability to do so.

That is one of the key findings from a new report from the Economist Intelligence Unit, sponsored by Quintiles. The analysis, called 'The Value Challenge', is based on findings of a survey of 399 senior executives from the life sciences industry, and it states that the situation is "further complicated by a shift in the balance of power among industry stakeholders, each of which may require different evidence to be convinced of a product’s value".

Moreover, although deteriorating financial circumstances are prompting some payers —particularly governments —to focus

The EIU report argues that the value challenge is "not just a temporary symptom of current economic conditions, but a long-term issue that is a leading concern for a majority of drug companies worldwide". Moreover, although deteriorating financial circumstances are prompting some payers —particularly governments —to focus more closely on reducing pharmaceutical spending, "the demand for proof of value has been evolving for decades".

However many stakeholders especially biopharma companies "lack confidence in the industry’s ability to respond to the value challenge" the

more closely on reducing pharmaceutical spending, "the demand for proof of value has been evolving for decades".

However, many stakeholders, especially biopharma companies,However, many stakeholders, especially biopharma companies, lack confidence in the industry s ability to respond to the value challenge , the report claims. Only about one-half of survey respondents say that the pharmaceutical sector is adjusting well to increasing demands for proof of value.

All respondents are harsher about biopharmaceutical companies’ ability to demonstrate value and, among payers and regulators, only 25% are confident about the broader claims of value made by these firms. However, 68% of life sciences respondents saw the growing demand to provide value has had an important impact on their business models; 85% have made at least one change to their model for this reason 82% to

However, many stakeholders, especially biopharma companies, "lack confidence in the industry’s ability to respond to the value challenge", the report claims. Only about one-half of survey respondents say that the pharmaceutical sector is adjusting well

provide value has had an important impact on their business models; 85% have made at least one change to their model for this reason, 82% to their R&D strategy, and 78% to their commercial plans.

The EIU survey also notes that biopharmaceutical companies see their market power decreasing, but others still regard them as dominant players. The report quotes Ed Pezalla, national medical director for pharmaceutical policy and strategy at US insurance major Aetna, as saying that “the industry is still making decisions about what drugs come to market and what they can charge. It is just beginning to pay attention to payer sensitivity ”

to increasing demands for proof of value.


payer sensitivity.”

http://www.pharmatimes.com/article/12-02-07/Pharma_fears_it_is_not_up_to_demands_of_value_challenge_-_EIU.aspx

And Takes on the Opportunity to Differentiate Based on Outcomes

New Competitive Arena Emerges for Pharmaceutical Companies in Healthcare’s Changing Payment Landscape, Finds PwC Health Research Institute StudyInstitute StudyNEW YORK, May 17, 2012Pharmaceutical companies that are first to meet healthcare’s new expectations pof value could have an advantage in the competition for market share and brand differentiation, according to a report published today by the Health Research p y yInstitute (HRI) at PwC US. Physicians, health insurers and patients now want to know how well a drug will work and affect total medical costs. Yet an HRI survey of health plan executives finds the information currently provided by the biopharmaceutical industry no longer suffices.


www.pwc.com/us/en/health-industries/publications/pharma-reimbursement-value.jhtml

g

Pharma Prefers Lower and More Obvious Differentiation Hurdles Over Outcomes

Overall Improved OutcomesOverall Improved Outcomes

Pharmacoeconomicbenefit

Pharmacoeconomicbenefit

Utility in first line nonUtility in first line non Improved OverallImproved Overall

No prior therapyNo prior therapy

OrphanOrphan

Extended survivalExtended survival

Utility in first line non-responders or as add-onUtility in first line non-responders or as add-on

Tolerability, Safety & QoLTolerability, Safety & QoL

Improved Overall Therapeutic ProfileImproved Overall Therapeutic Profile


Extended survivalExtended survival y Qy Q

Which is a Major Reason for the Current Obsession with Orphan Disease and Cancer


http://www.pharmaceuticalonline.com/doc/pfizer-s-approach-to-developing-a-sustainable-business-in-rare-disease-r-d-0001

Modest Forecasts for Much of 2012 NME Class Reflect Emphasis on “Small” Total Burden Diseases, Where Relevance of Drug is Obvious and No Generic SoC Exists

NME Product Indication Launch Company 2018 WW ForecastedSales ($M)

Eliquis Thromboembolism BMS, Pfizer $3,952 P j t B t R h $2 800Perjeta Breast cancer Roche $2,800 Xtandi Prostate cancer Astellas $2,724 Xeljanz RA Pfizer $2,635 Linzess IBS Forest $936 M b t i OAB A t ll $834Myrbetriq OAB Astellas $834 Stivarga CRC Bayer, Onyx $575 Tudorza Pressair COPD Forest $568 Inlyta Kidney cancer Pfizer $542 Aubagio MS Sanofi $473Aubagio MS Sanofi $473 Zaltrap CRC Sanofi $433 Signifor Cushing's syndrome Novartis $427 Omontys Anemia in CKD Takeda $422 Erivedge Skin cancer Roche $396Erivedge Skin cancer Roche $396 Zioptan Glaucoma Merck $382 Elelyso Gaucher's disease Pfizer $380 Bosulif CML Pfizer $250 Sirturo TB J&J $178


Sirturo TB J&J $178

EvaluatePharma, ADIS R&D Insight

But Misalignment Between Disease Burden and Current Pipeline is a Pending Catastrophe for Pharma

Number of Agents in Clinical Development Pipeline Compared to Percent of Elderly Population in US with Chronic Health Conditions

50%

60%

1 200

1,400

1,600

t Pip

elin

e

% of Populat

30%

40%

800

1,000

1,200

Dev

elop

men

ion 65+ years

20%

400

600

ents

in C

linic

al with Chronic

0%

10%

0

200

HTN Arthritis HeartDi

Cancer Diabetes Depression Asthma COPD Stroke

# of

Age

Condition


ADIS R&D Insight, http://www.agingstats.gov/agingstatsdotnet/Main_Site/Data/2010_Documents/Docs/OA_2010.pdf, Defined Health analysis

Disease

Misalignment Between Disease Burden and Current Pipeline is a Pending Catastrophe for Pharma

401 600

Disease Burden (DALYs) from Noncommunicable Diseasesin the WHO European Region by Cause

30

35

40

1,200

1,400

1,600 DALYS (disat Pip

elin

e

20

25

800

1,000

, ability-adjuste Dev

elop

men

10

15

400

600

ed life year) men

ts in

Clin

ical

0

5

0

200

Cardiovasculardiseases

Neuropsychiatricconditions

Cancer(malignant)

Digestivediseases

Respiratorydiseases

Sense Organdiseases

Musculoskeletaldiseases

Diabetesmellitus

illions # of

Age


http://www.euro.who.int/__data/assets/pdf_file/0008/96632/E93736.pdf; DALY = disability-adjusted life year

Yet Perception of Commercial Risk Means Deal Space in Therapeutic Areas With Largest Disease Burden is Anemic

Therapy AreaProduct deal count Up-front payments ($m) Total deal value ($m)

Phase 1 to Phase 3 Product Deal by Therapy Area

py2010 2011 2012 2010 2011 2012 2010 2011 2012

Oncology & immunomodulators 51 93 51 713 662 446 3,408 6,713 5,360

Systemic anti-infectives 25 34 33 398 50 204 1,226 226 774

Central nervous system 42 49 22 199 297 105 2,884 2,488 874

Gastro-intestinal 19 21 13 108 23 85 1,765 76 504

Respiratory 13 14 11 10 58 22 25 150 82

Musculoskeletal 6 13 10 145 100 189 1,455 347 1,659

E d i 8 14 8 95 409 0 2 155 3 146 0Endocrine 8 14 8 95 409 0 2,155 3,146 0

Cardiovascular 17 16 7 148 2 0 2,421 9 54

Dermatology 12 5 6 0 0 40 0 0 52

Various 8 6 6 45 5 23 373 23 26

Blood 8 7 4 167 2 0 1,094 364 2

Genito-urinary 17 7 3 213 0 0 1,364 0 0

Sensory organs 7 10 1 60 45 0 230 420 0

Totals 233 289 175 2 301 1 652 1 114 18 399 13 961 9 387


Totals 233 289 175 2,301 1,652 1,114 18,399 13,961 9,387

EvaluatePharma report - Therapy area licensing in 2012 – Rags and riches

But Instead of Running Away From Widespread Diseases

RM-493: MC4R Peptide Therapeutic♦ A new drug class for the treatment of obesity and diabetes

♦ D l i th i f b it i h ll i b f di t l h i l i♦ Developing new therapies for obesity is challenging because feeding represents a complex, physiologic function necessary for survival, with many redundant pathways.

♦ Recent studies suggest that a common pathway responsible for suppression of feeding and regulation of energy homeostasis is mediated by the melanocortin type 4 receptor (MC4R). In humans mutations of MC4R are associated with obesity and are estimated to be responsible for 4%-humans, mutations of MC4R are associated with obesity and are estimated to be responsible for 4%-6% of all severe obesity.

♦ In preclinical studies, when stimulated, MC4R induces a dramatic reduction in both food intake and body weight.

♦ RM 493 is a small peptide agonist ith high specificit for MC4R In preclinical st dies RM 493♦ RM-493 is a small peptide agonist with high specificity for MC4R. In preclinical studies, RM-493 induced dramatic reductions in food intake, body weight, and insulin resistance.

♦ RM-493 is in Phase 2 clinical trials as a potential new treatment for obesity and diabetes that reduces body fat and insulin resistance and improves cardiovascular function

♦ The MC4R program leverages advances in peptide engineering, synthesis, and formulation to enable the design of novel peptide therapeutics that retain the inherent selectivity and specificity of the human hormones from which they are derived, improve on their potency, and reduce the risk of off-target adverse effects compared with small-molecule drugs.


http://www.rhythmtx.com/PROGRAMS/RM493.html

Maybe Pharma Should Explore Sub-Segmenting

Rhythm Initiates Phase 2 Clinical Trial of RM-493 for ObesityJanuary 4, 2013Rhythm announced today the initiation of a Phase 2 clinical trial with RM-493, the company’s novel melanocortin 4 receptor (MC4R) agonist, for the treatment of obesity.

“This Phase 2 study will greatly expand our understanding of RM-493’s profile for the treatment of obesity,“ said Liz Stoner, MD, Chief Development Officer of Rhythm. “Based on the data from preclinical studies and early clinical trials, we believe RM-493 has substantial therapeutic potential for reducing body weight and insulin resistance in obese and diabetic patients.”

The Phase 2 trial is designed to evaluate the effect of RM-493 on weight loss and safety in obese subjects treated for three months. The trial will also assess the drug’s effects on glucose and insulin resistance. In 2012, Rhythm completed Phase 1 clinical trials with RM-493 in which obese subjects were treated for up to 28 days. These studies evaluated RM-493’s safety, pharmacokinetics, and effect on body weight. Extensive preclinical studies in obese primates preceded these human clinical trials; primates treated for eight weeks lost an average of 13.5% of their body weight, with significant improvements in both insulin sensitivity and cardiovascular function.

“We have seen compelling preclinical and clinical results with RM-493 to date, “said Keith Gottesdiener, MD, CEO of Rhythm. “RM-493’s potential for double-digit-percent weight loss, its promising initial cardiovascular safety profile, and the improving regulatory climate for obesity drug development present a unique and exciting opportunity to improve the treatment of obesity and diabetes.”

About RM-493: RM-493 is a small-peptide melanocortin 4 receptor (MC4R) agonist that is in clinical development for the treatment of obesity and diabetes The MC4 receptor mediates a key pathway in humans that regulates energy homeostasis and food intake The MC4 pathway isand diabetes. The MC4 receptor mediates a key pathway in humans that regulates energy homeostasis and food intake. The MC4 pathway is well validated in humans; mutations of MC4R are associated with obesity and are estimated to be responsible for 4%-6% of all severe obesity.

About Obesity and Diabetes: Over 78 million U.S. adults and 12.5 million U.S. children and adolescents are obese. Obesity is also a risk factor for the development of diabetes and is likely the critical factor in the 25% increase in the prevalence of diabetes over the past 20 years. Of the 24 million people with diabetes in the U.S., two-thirds have a body mass index (BMI) exceeding 27. The World Health Organization forecasts the prevalence of both obesity and diabetes to double worldwide over the next 20 years with substantial health and economic impact


prevalence of both obesity and diabetes to double worldwide over the next 20 years, with substantial health and economic impact.

http://www.rhythmtx.com/NEWS/releases/010413.html, IN VIVO, Vol. 31, No. 7; July/August 2013

Differentiating vs. Generics to Achieve Improved Outcomes in Costly Diseases is Where PoR = Proof of Value

♦ Clearest path to proof of value

♦ Some recent meaningful success already achieved in “low hanging fruit” categories where prior SoC has been poor: Factor Xa inhibitors Interferon-free regimens in HCV

♦ But areas with stronger generic SoC represent greater challenges, especially in large PCP-driven Tx categories But these categories especially CVD and CNS represent greatest disease cost But these categories, especially CVD and CNS represent greatest disease cost

burden despite common perception of inexpensive and effective drug therapies Not all differentiation requires head to head superiority vs. generics and add-on

therapies to improve outcomes are a viable strategytherapies to improve outcomes are a viable strategy Drugs don’t improve outcomes if not taken, so tolerability and QOL matters


Costly Disease Differentiation Example #1: Overactive Bladder

♦ Overactive bladder (OAB) syndrome, also known as urge syndrome and urgency/frequency syndrome, is defined as “urgency, with or without urge incontinence usually with frequency and nocturia ”

Spectrum of Overactive BladderEst. 15-20M patients in the US

Est 25-30M patients in EU5incontinence, usually with frequency and nocturia.

♦ These symptoms are suggestive of detrusoroveractivity (urodynamically demonstrable involuntary bladder contractions) but can be due to other forms of voiding or urinary dysfunction. The diagnosis of OAB

Est. 25-30M patients in EU5

Frequency, including g y y g

can be made if there is no proven infection or other obvious pathology.

♦ OAB is therefore clearly distinct from urodynamicallyproven detrusor overactivity -- although the majority

Nocturia

Urgency

of people with OAB are thought to have this underlying diagnosis.

♦ The estimated prevalence of OAB/UI worldwide is between 40-50M. This patient population is expected t t t d 2 4%

Urge Incontinenceto grow at a rate around 2-4% per year.

♦ The OAB population includes patients with urge incontinence, urgency but without incontinence and urinary frequency, including nocturia.

Incontinence


Medscape.com, Cowen Therapeutic Categories, Medscape, Advances in the Diagnosis and Management of the Patient With Overactive Bladder/Incontinence CME/CE, C.R. Chapple, MD

Overactive Bladder is Both Widespread and Costly in US

The total economic burden of overactive bladder in the United States: a disease-specific approach.Am J Manag Care 2009 Mar 15(4 Suppl) S90 7Am J Manag Care. 2009 Mar;15(4 Suppl):S90-7.

OBJECTIVE: To employ results from a recent US population-based survey to calculate disease-specific total costs of overactive bladder (OAB).

STUDY DESIGN: Disease-specific total cost-of-illness method using population prevalence estimates.

METHODS: Cases were identified as community-dwelling adults reporting the presence of urinary urgency or urgency urinary incontinence. Two OAB classifications were used based on Likert scale responses of OAB symptoms: "often" (base case) or "sometimes" (alternative). The study estimates disease-specific total costs of OAB from the societal perspective and using an average costing method. A population-based survey, a claims data analysis, and the published literature provided the prevalence and resource utilization data.

The disease-specific total cost of OAB is estimated at $24.9 billion for the base case.

RESULTS: The prevalence of OAB as defined in the base case (alternative) was 18.6% (28.7%) in the adult US population, accounting for 42.2 million (65.1 million) community-dwelling adults. The disease-specific total cost of OAB is estimated at $24.9 billion for the base case and $36.5 billion for the alternative case. Total direct costs were $22.3 billion in the base case and $33.5 billion in the alternative case. Costs were higher among adults younger than 65 years of age compared with adults 65 years or older This relative cost burden was lower for the base case compared with theage, compared with adults 65 years or older. This relative cost burden was lower for the base case compared with the alternative case in the full sample, with a larger gap among men.

CONCLUSION: The total cost of OAB among community-dwelling adults is significant and varies with demographic groups. Future research is needed to determine whether the differential cost burden is robust to alternate cost-of-illness estimation methods.


As Well as in Europe

The current and future burden and cost of overactive bladder in five European countries.Eur Urol 2006 Nov;50(5):1050 7 Epub 2006 May 9Eur Urol. 2006 Nov;50(5):1050-7. Epub 2006 May 9.

Reeves P, Irwin D, Kelleher C, Milsom I, Kopp Z, Calvert N, Lloyd A.

OBJECTIVE: To estimate and compare the current and future direct cost of overactive bladder (OAB) to the health care systems of five European countries.

METHOD: A health economic model was created to estimate the number of people currently affected by OAB symptoms, the expected number to be affected in the future, and the resultant economic burden on health care systems in Germany, Italy, Spain, Sweden, and the United Kingdom.

RESULTS: The model estimated that in 2000, 20.2 million people over age 40 in the five countries experienced the symptoms of OAB; 7 million of these had urgency with urge incontinence. This figure is expected to rise to 25.5 million by

Total cost to health care systems across all five countries was estimated at €4.2 B in 2000, and by 2020, the expected total cost was estimated to be €5 2 B an increase of €1 B (26%)symptoms of OAB; 7 million of these had urgency with urge incontinence. This figure is expected to rise to 25.5 million by

2020, including 9 million who will have urgency with urge incontinence. Average annual direct costs of OAB management ranged from €269 to €706 per patient per year. The largest cost was the use of incontinence pads, accounting for an average of 63% of the annual per patient cost of OAB management. Total cost to health care systems across all five countries was estimated at €4.2 billion in 2000, and by 2020, the expected total cost was estimated to be €5.2

€

was estimated to be €5.2 B, an increase of €1 B (26%).

billion, an increase of €1 billion (26%).

CONCLUSION: OAB is prevalent, with a substantial direct cost that is anticipated to increase in the future in line with aging populations. The overall burden, including indirect costs, may be considerably larger, and will fall predominantly on the elderly OAB population with urge incontinence. Recommended medical treatments could help manage those costs and should be evaluated


and should be evaluated.

Major SoC Drugs Either Off-Patent or Close to Expiration

OAB Disease Overview - Current Therapies♦ Oral antimuscarinics are first-line treatment for overactive bladder with and without urge

incontinence (in addition to non-pharmacological therapies such as acupuncture, pelvic ( p g p p , pexercises, behavioral modification, weight loss and diet changes).


National Institutes of Health

But are Plagued by Tolerability Issues

Ditropan/XL (oxybutynin)

Detrol/LA (tolterodine)

Sanctura/XR (trospium)

Vesicare (solifenacin)

Enablex (darifenacin)

Toviaz (fesoterodine)

Oxytrol (oxybutynin)

Patent Expiry 2006 2012 2025 2015 2015 2022 2011

Current Oral Therapies

Patent Expiry 2006 2012 2025 2015 2015 2022 2011

Company JNJ/Generic Pfizer/Generic Allergan, Indevus Astellas, GSK Novartis Pfizer Watson

Indications OAB with symptoms of urge UI, urge and frequency

Muscarinic selectivity M3/M1>>M2 Non-selective

antagonist Non-selective

antagonist M3>>M2 M3>>M2 Non-selective antagonist M3/M1>>M2

Route Oral Oral Oral Oral Oral Oral Transdermal patch

Frequency QD QD BID QD QD QD 2x/week

UI episodes -71% -69% -46% -62% -58% -56% -51%

Urinaryfrequency -30% -26% -10% -20% -17% -16% -15%frequency

AE: Dry Mouth 30% 22% 6% 11% 20% 19-35% 7%

AE: Constipation 6% 8% 5% 5% 11% 5% 3%


Aetna formulary used as an example of tier status (Aetna one of the largest US healthcare insurers)EvaluatePharma, Thomson Reuters RedBook, ADIS R&D Insight, Thomson Pharma Partnering

Antimuscarinics have moderate to good efficacy, but also have high levels of adverse side effects which many patients find intolerable.Antimuscarinics have moderate to good efficacy, but also have high levels of adverse side effects which many patients find intolerable.

Drugs Cannot Improve Outcomes if Not Taken

Overactive Bladder MedicationsTime to Discontinuation

Almost 50% of patients never refill the initial 30-day OAB prescription


J Manag Care Pharm. 2009;15(9):728-40

Better Tolerated Drugs May Reduce Total Disease Burden Costs Even if More Costly Than Generic SoC Options

FDA Approves Overactive Bladder Treatment Myrbetriq from AstellasMyrbetriq is the first and only beta-3 adrenergic agonist indicated for the treatment of overactive bladderNORTHBROOK Ill June 28 2012 /PRNewswire/ -- Astellas Pharma US Inc ("Astellas") a U S subsidiary of Tokyo-based Astellas Pharma Inc (Tokyo: 4503)NORTHBROOK, Ill., June 28, 2012 /PRNewswire/ Astellas Pharma US, Inc. ( Astellas ), a U.S. subsidiary of Tokyo based Astellas Pharma Inc. (Tokyo: 4503), announced today that the U.S. Food and Drug Administration (FDA) has approved Myrbetriq™ (mirabegron) extended-release tablets for the treatment of overactive bladder (OAB) with symptoms of urge urinary incontinence, urgency and urinary frequency. "Myrbetriq is the first oral OAB treatment with a distinct mechanism of action since the launch of anticholinergic agents 30 years ago," said Steven Ryder , MD, president, Astellas Pharma Global Development. "The approval of Myrbetriq represents an important milestone in OAB treatment and in our ongoing commitment to advancing urological health."Myrbetriq is a once daily oral beta-3 adrenergic agonist discovered and developed by Astellas. It has been studied extensively in more than 10,000 individuals over 10 years. Myrbetriq offers a new treatment option for patients with OAB. Antimuscarinics are the current OAB treatment standard. Myrbetriq uses a y y q p p y qdistinct mechanism of action. Antimuscarinics work by binding to muscarinic receptors in the bladder and inhibiting involuntary bladder contractions. Myrbetriq relaxes the detrusor smooth muscle during the storage phase of the urinary bladder fill-void cycle by activation of beta-3 adrenergic receptors which increases bladder capacity. "OAB impacts each individual differently so it is important to have a variety of treatment options available," said Victor Nitti , MD, professor of Urology and Ob/Gyn, vice chairman, Department of Urology and director of Female Pelvic Medicine and Reconstructive Surgery NYU LangoneMedical Center. "With Myrbetriq, U.S. physicians now have a new therapy option to offer many Americans living with overactive bladder." The recommended starting dose for Myrbetriq is 25 mg once daily with or without food. Myrbetriq 25 mg is effective within eight weeks; based on individual efficacy and

l bili h d b i d 0 d il

The most commonly reported adverse reactions (greater than 2% of Myrbetriq patients and greater than placebo) were hypertension, nasopharyngitis, urinary tract infection and h d htolerability, the dose may be increased to 50 mg once daily.

Myrbetriq was studied in patients who were primarily Caucasian (94 percent) and female (72 percent) with a mean age of 59 years (range 18 – 95 years). The population included both naive patients who had not received prior antimuscarinic pharmacotherapy for OAB (48 percent) and those who had received prior antimuscarinic pharmacotherapy for OAB (52 percent). The approval of Myrbetriq was based on safety and efficacy data from three placebo-controlled Phase 3 studies, in which treatment with Myrbetriq 25 mg and 50 mg resulted in statistically significant improvement in efficacy parameters of incontinence episodes and number of urinations per 24 hours. In treatment with Myrbetriq 25 mg, incontinence episodes were reduced by 1.36 episodes from a baseline of 2.65, a statistically significant reduction of 0 40 vs placebo in 12 weeks The number of urinations was reduced by 1 65 urinations from a baseline of 11 68 a

headache.

statistically significant reduction of 0.40 vs. placebo in 12 weeks. The number of urinations was reduced by 1.65 urinations from a baseline of 11.68, a statistically significant reduction of 0.47 vs. placebo in 12 weeks. In treatment with Myrbetriq 50 mg, incontinence episodes were reduced by 1.49 episodes from a baseline of 2.71, a statistically significant reduction of 0.40 vs. placebo in 12 weeks. Number of urinations was reduced by 1.75 urinations from a baseline of 11.70, a statistically significant reduction of 0.55 vs. placebo in 12 weeks. Myrbetriq was evaluated for safety in more than 2,700 patients in three, 12-week Phase 3 double-blind, placebo-controlled studies and in a one year, randomized fixed dose, active-controlled study in patients with OAB. The most commonly reported adverse reactions (greater than 2 percent of Myrbetriq patients and greater than placebo) were hypertension, nasopharyngitis, urinary tract infection and headache. Myrbetriq will be supplied in 25 mg and 50 mg tablets and is expected to be available in pharmacies in the fourth quarter of


y q pp g g p p q2012. Mirabegron was approved in Japan in July 2011, and regulatory applications are under review in several other countries.

http://www.prnewswire.com/news-releases/fda-approves-overactive-bladder-treatment-myrbetriq-mirabegron-from-astellas-160732575.html

Myrbetriq Off to Fast Launch and Rapid Uptake Despite Pending Genericization of SoC

3,500US $M

WW Sales – Overactive Bladder/UI ($US mil)

2 500

3,000Myrbetriq (Astellas)

Toviaz (PFE)

2,000

2,500Enablex (NVS, WCRX)

Sanctura/XR (AG)

1,000

1,500 Ditropan/XL (JNJ)

Botox (AGN)

0

500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Vesicare (Astellas)

Detrol/LA (PFE)


EvaluatePharma, Cowen Therapeutic Categories Mar-2011

Costly Disease Differentiation Example #2: Depression

Depression costs American business $63B each year, with $36.6B resulting from reduced productivity and increased absenteeism, not the cost of treatment.

Major depressive disorder and bipolar disorder are incur massive healthcare costs to the European Government. The annual cost of mood disorders in Europe peaked to €113.41 billion in 2010, with average annual cost per person being €3,406.


http://www.aspenpointe.org/Innovation/Solutions+for+Employers-111.html

Programs Need to Focus on Clear Elucidation of Unmet Need

CERC-301♦ MK-0657 (“CERC-301”) is a novel potent and selective NR2B antagonist. It is a

potential first-in-class, best-in-class, oral medication that is complimentary to existing treatments in depressed patients who have failed to respond to availabletherapies. We are particularly interested in the potential to rapidly reduce depressive symptoms, including suicidal ideation, in these severely affected patients. Patients and families who struggle with severe refractory depression and suicidality easily recognize the need for more effective and more rapid Current anti-depressant therapy is limited by modest responseacting treatments, and we will develop CERC-301 with the purpose that befits such an important unmet need.

♦ Current anti-depressant therapy is limited by modest response rates of ~60%, poor remission rates of ~35%, slow onset of action (~4-6 weeks) and problematic side effects including sexual dysfunction. There is an urgent need for a new treatment with a rapid onset of action for severely depressed/treatment resistant patients who may also be experiencing suicidal ideation and planning Building on the results of a recently published exploratory study in

Current anti depressant therapy is limited by modest response rates of ~60%, poor remission rates of ~35%, slow onset of action (~4-6 weeks) and problematic side effects including sexual dysfunction. There is an urgent need for a new treatment with a

experiencing suicidal ideation and planning. Building on the results of a recently published exploratory study in severe, resistant depression by the National Institutes of Mental Health (“NIMH”), Cerecor has acquired exclusive, worldwide rights from Merck to develop and commercialize CERC-301, an orally acting NMDA receptor subunit 2B (NR2B) antagonist. There is a growing body of evidence to support the hypothesis that NMDA receptors are involved in the pathology of depression. NMDA channel blockers such as ketamine, as well as antagonists specific for NR2B, have recently been shown to provide rapid profound improvement in patients with severe depression and suicidal

rapid onset of action for severely depressed/treatment resistant patients who may also be experiencing suicidal ideation and planning.

have recently been shown to provide rapid, profound improvement in patients with severe depression and suicidal ideation. These properties have been described as a potential ‘breakthrough’ in anti-depressant therapy by experts in the field. However, all drugs studied to date (excepting CERC-301) have required intravenous administration, and the use of ketamine has been limited by its unfavorable side-effects (hallucinations). An orally bioavailable drug that selectively targets the NR2B subunit of the NMDA receptor might provide rapid onset of profound antidepressant effects and yet allow for chronic treatment


effects and yet allow for chronic treatment.

http://www.cerecor.com/r-d-CERC-301.php

Costly Disease Differentiation Example #3: Hypertension

Cardiovascular disease is the leading cause of death in the United States and constitutes 17% of overall national health expenditures, of which hypertension is the most expensive component. Between 2010 and 2030, total direct medical costs are projected to triple. Risk of developing cardiovascular disease in patients with hypertension can be greatly reduced with effective antihypertensive therapy.with hypertension can be greatly reduced with effective antihypertensive therapy.

Hypertension is a common clinical problem faced by both primary care clinicians and specialists. According to the most recent statistics published by the Centers for Disease Control (CDC), approximately 30% of adults in the United States have hypertension Of those taking medication 30% remain uncontrolledhypertension. Of those taking medication, 30% remain uncontrolled (>140/90mm Hg), and 2% have true resistant hypertension, defined as poor control despite compliant use of three or more agents, including a diuretic.


http://www.ncbi.nlm.nih.gov/pubmed/21262990; http://www.ncbi.nlm.nih.gov/pubmed/18391085

One of Many Unpartnered Programs for Hypertension Targets Improved Compliance

Vasomera™: A long acting VIP analogue

Vasoactive intestinal peptide (VIP), a naturally occurring 28-amino acid peptide, is a powerful vasodilatory neuropeptide with positive ionotropic and chronotropic properties whose biological effects are mediated by specific G-protein-coupled receptors VPAC1 and VPAC2. Nerve fibers containing VIP are widely distributed throughout the central and peripheral nervous system, in myocardial tissue and in systemic and coronary arteries. Several cardiovascular diseases, such as myocardial fibrosis, heart failure, cardiomyopathy and pulmonary hypertension, have been found to be associated with changes in myocardial VIP concentration or with alteration of affinity, density and physiological responsiveness of VIP receptors. Therefore application of VIP based therapies may have beneficial effects in the treatment of hypertension PAH and heart failure However the clinical utility of VIP as amay have beneficial effects in the treatment of hypertension, PAH and heart failure. However, the clinical utility of VIP as a therapeutic agent is limited as native VIP has a half-life of only about 2 minutes in the blood as a result of enzymatic degradation.

PhaseBio is developing Vasomera™, a genetic fusion of an analogue of VIP with our ELP biopolymer. The inherently short in vivo stability and bioavailability of the native peptide have precluded its therapeutic use. Vasomera™ overcomes these limitations and demonstrates prolonged circulatory drug exposure and potent activity. Furthermore, Vasomera™ was designed to be highly selective

A goal at PhaseBio with the development of Vasomera™ is the creation of a direct, long acting vasodilatory neuropeptideanalogue that would provide 24/7 blood pressure control when

d l kl h d hp g y g p p y g g y

for binding to the VPAC2 receptor to reduce the potential complications of gastrointestinal side effects believed to be associated with interaction of VIP with the VPAC1 receptor. Vasomera™ has been shown to be highly effective in animal models of hypertension, PAH and heart failure, with positive cardiac inotropic (contractility) and lusitropic (relaxation) effects without an increase in myocardial oxygen demand.

A goal at PhaseBio with the development of Vasomera™ is the creation of a direct long acting vasodilatory neuropeptide analogue

given adjunctively , once weekly, with a diuretic, or other antihypertensive therapies for the treatment of hypertension.

A goal at PhaseBio with the development of Vasomera™ is the creation of a direct, long acting vasodilatory neuropeptide analogue that would provide 24/7 blood pressure control when given adjunctively with a diuretic, or other antihypertensive therapies for the treatment of hypertension. For both PAH and HF, there is a clear unmet need for treatments that both treat the symptoms of the condition and slow or reverse progression of the disease. PhaseBio is developing Vasomera™as an agent to restore diastolic function in acute and chronic heart failure and to improve hemodynamics and improve oxygenation in patients with PAH. Vasomera™ is manufactured in E.coli, is stable as a liquid formulation and delivered subcutaneously or intravenously, depending in the indication.


, q y y, p g

http://www.phasebio.com/content.php?page=20

Another Targets a Difficult to Treat, ThoughSignificant, Subpopulation

Quantum Genomics announces initiation of a First-in-Human clinical study with QGC001, its lead compound for the treatment of hypertensionMass France April 13th 2012Massy, France - April 13th 2012Quantum Genomics (NYSE Euronext Paris : MLQGC), following the approval from the French Agency for Safety of Health Products (AFSSAPS), announces today the initiation of a phase I clinical study in healthy volunteers with its product QGC001. QGC001 is the first of a new class of drugs that is able to monitor high blood pressure by inhibiting the aminopeptidase A enzyme (APA) at the brain level.Arterial hypertension affects an estimated 1 billion people worldwide (13 million people in France). Despite the availability of many antihypertensive drugs, 30% to 60% of patients diagnosed with hypertension do not have their blood pressure properly controlled by current medications for various reasons (49% in

QGC001 might thus be useful for all patients suffering from hypertension, particularly those with a low renin profile whose hi h bl d i f diffi l l i hFrance ([1])). Moreover, the overall incidence of resistant hypertension to at least three antihypertensive drugs (including a diuretic) is estimatedaround 8% to

12% of the hypertensive population.Lionel Segard, CEO of Quantum Genomics says: "This first study in Human is a major milestone for our Company and demonstrates its ability to develop an innovative compound originated from academic research. QGC001 is the first representative of a new class of antihypertensive drugs that may improve the control of blood pressure in many patients with no current appropriate drug treatment and reduce their concomitant risks of cardiovascular diseases".APA inhibitors, amongst which QGC001 is the first to reach the clinical stage, were co-discovered by the research teams of Dr. C. Llorens-Cortes (INSERM U1050/Collège of France) and Prof BP Roques (INSERM U1022/CNRS/Université Paris Descartes) "QGC001 has already demonstrated its efficacy after oral

high blood pressure is often more difficult to control with conventional blockers of the renin angiotensin system.

The objective of QGC001 is to offer a therapeutic alternative forU1050/Collège of France) and Prof. BP. Roques (INSERM U1022/CNRS/Université Paris Descartes). QGC001 has already demonstrated its efficacy after oral administration in several experimental models of hypertension. Its mechanism of action allows it to act simultaneously on the vessels, the heart, the elimination of water and salt in the urine. QGC001 might thus be useful for all patients suffering from hypertension, particularly those with a low renin profile whose high blood pressure is often more difficult to control with conventional blockers of the renin angiotensin system", comments Dr. Catherine Llorens-Cortes.This First-in-Human clinical trial is a single ascending oral dose, double-blind and placebo-controlled Phase I study. "The trial will aim at assessing the overall safety, tolerability and pharmacokinetics of QGC001 in healthy volunteers" adds Fabrice Balavoine (Vice-President Research & Development).

The objective of QGC001 is to offer a therapeutic alternative for the treatment of high blood pressure for all hypertensive patients particularly those with Low Renin High Vasopressin profile (LRHV). The LRHV patients could represent 30% of hypertensivey y p y ( p )

The trial received financial support from the French National Agency for Research (ANR BiotecS). It is conducted in partnership with the Center for Clinical Investigation 9201/APHP-INSERM led by Pr. Michel Azizi (Hôpital Européen Georges Pompidou - Paris, France).About QGC001: The objective of QGC001 is to offer a therapeutic alternative for the treatment of high blood pressure for all hypertensive patients particularly those with Low Renin High Vasopressin profile (LRHV). The LRHV patients could represent 30% of hypertensive population and have reduced response to angiotensin I converting enzyme (ACE) inhibitors, angiotensin receptor blockers (ARBs), renin inhibitors and beta-blockers.

The LRHV patients could represent 30% of hypertensive population and have reduced response to ACE inhibitors, ARBs, renin inhibitors and beta-blockers.


[1] Thobie H et al. BEH 2008;49-50: 478

http://www.quantum-genomics.com/news_read.php?txtid=33

Connecting Proof of Relevance to Proven Value for Pharma: Key Takeaways

♦ Pharma would continue to prefer to address its negative growth dilemma by good old M&A, but lack of activity is a clear indication that the “valuation gap” makes acquiring mid-cap and remaining large-cap biotechs unaffordable. Thus, focus is turning p g g p , gupstream to energizing the innovation “ecosystem.”

♦ Pharma's return to the early stage deal space -- an inevitable result of their staged, but certain exodus from internal discovery is very welcome news for innovativebut certain exodus from internal discovery -- is very welcome news for innovative early stage companies, especially those with potentially transformational discovery platforms which have already seen deal valuations escalating.

B Ph ’ li i l f li ll L&BD i i i b dl♦ But Pharma’s current clinical stage portfolio, as well as L&BD priorities, are badly misaligned with the intersection of long-term global economic contraction and the resultant pressure on healthcare costs. Recent reference pricing flare-ups in EU (especially Germany) and escalating pushback on pricing for new drugs for metastatic ( p y y) g p p g gdisease (even in the US), are a warning sign of much more to come. Pricing pressure on drugs for orphan diseases will surely follow as this space becomes more active and an increased number of new drugs seeking steep prices are approved and launched.



♦ Pharma must redirect portfolio priorities to focus to a far greater extent on large patient population chronic diseases, especially as aging populations in major global markets continue to dramatically escalate costs.y

♦ Long development timelines , expense and regulatory risk have pushed Pharma out of chronic disease space. But it is fear of commercial risk associated with reimbursement concerns especially against a prevailing generic SoC in many of thesereimbursement concerns, especially against a prevailing generic SoC in many of these diseases, that is the major hurdle.

♦ But Pharma must face up to the challenge of differentiating novel therapies based on i d d l l h i d ill l i limproved and less costly outcomes or the industry will almost certainly never return to respectable growth and, on a global scale, may be threatened with irrelevancy.

♦ Some of the novel discovery platforms that have captured Pharma’s interest could be the ”seed stock” of these new therapies, but this cannot happen if disease priorities and indications are misdirected prior to entering clinical development. Even if directed properly, payoff is a decade or more away.



♦ Clinical stage opportunities being developed by biotech companies which target costly chronic disease are, to the most extent, unpartnered across all stages of development as the therapeutic areas and diseases being pursued are presently p p g p p yunfashionable to Pharma.

♦ Many, if not most, of these programs may be lacking in PoR, but exceptions surely exist wherein a truly differentiated profile could be achieved and proven valueexist wherein a truly differentiated profile could be achieved and proven value established. Solid thinking around differentiation strategy focusing on improved overall outcomes could lead to some nearer term success while waiting for the payoff from properly focused early discovery initiatives.


Defined Health is pleased to present:

BioEurope Spring25h Annual Cancer Progress Conference BioEurope Spring March 10 – 12, 2014

Turin, Italywww.therapeuticinsight.com

25h Annual Cancer Progress ConferenceMarch 4 – 5, 2014

New York Citywww.cancerprogressbyDH.com

Defined Health will also be participating in the following industry events:

LES Annual Meeting 2013 | September 22 - 25, 2013 | Philadelphia, PA | http://dfndhlth.com/LES-2013Life Sciences Summit | November 20 - 21 2013 | New York City | http://dfndhlth com/LSS-2013Life Sciences Summit | November 20 21, 2013 | New York City | http://dfndhlth.com/LSS 2013AACR-NCI-EORTC Intl Conf Molecular Targets & Cancer Tx | Oct 19 - 23, 2013 | Boston, MA | http://dfndhlth.com/AACROCT-2013ASH Annual Meeting | December 7 - 10, 2013 | New Orleans, LA | http://dfndhlth.com/ASH-2013Biotech Showcase™ 2014 | January 13 -14, 2014 | San Francisco, CA | http://dfndhlth.com/BTS-2014Cancer Progress by Defined Health | March 4 - 5, 2014 | New York City | http://www.cancerprogressbyDH.com


Therapeutic Insight by Defined Health at BIO-Europe Spring® | March 10 - 12, 2014 | Turin, Italy | http://dfndhlth.com/BES-2014