Our Biotech/Pharma BOOM

Dr H M PangSenior consultant, HK UST

Technology transferJune 2005, Shanghai,PRC

Booming statistics-West

• 500 biotech companies employing >50K people, mostly established over the last 5 years

• genetically engineered products launched

• >150 in clinical stages, more in preclinical

• Many INDs filed since 1999 of bio origin

• Sales increased by ~30%, profit 20%

Biotech boom- China

• Over 4 billion sales in 2004• Companies listing • Biopharma generics • A few new drugs ??• Drug spending increased 6 fold in 15 years• 5th ranking in 2010• 2nd ranking in 2020• …….. Lots of headache for now

Biotech boom: Asia

• Singapore’s massive investment getting results: MNC head quarters, R&D, export

• Taiwan’s gradual strengthening of its bio tech on its strong pharma infra structure

• Korea excellence in stem cell research

• Hong Kong : direction unclear, good Unis.

IPOs with significant R&D in HK 0 0 0 0 2 0

IPOs with significant R&D in China 0 0 1 4 4 1

Drivers of growth

• Growing economy & healthcare expense• Huge and aging population • Internal market>>critical mass for drug • Maturing consumers • Hunger for new drugs• Cost advantages, + skilled work force• Returnees with excellent expertise,& drive Excellent universities• Post genomic applications• Regulatory, ethical and legal considerations: stem cell

Government commitment

• Science parks and clusters• Clear priority and focus areas• Technology innovation, and incentives• Respect for IP ? ….improving • Modernizing SFDA• Quality of science, talent pool• Industrial players, and mega players• Funding : govt, VC, and other industries

Industry sub sectors

• Bio pharma: DDS, gene therapy, biochips, diagnostics

• TCM, and functional food

• Agro biotech and transgenic animals

• Stem cells, tissue engineering, and cloning

• Plant bio

• Medical device and bio reagents

Focus areas

• DDS / chemical drugs

• Stem cell and clinical applications

• Bio protein drugs: recombinant technology

• Medical devices, and genetic screening

• GMP upgrade

• GLP/GCP upgrade

• APIs

Achievements

• Centre for r&D, pre/clinical studies (dog)• Contract r&D centre for MNC’s & small cos.• Creation of clusters and science parks• Stem cell banks and application• Approval of engineered human tissue • mAB facility • Export of biotech to India and Cuba• API and finish dosages for export

Cruel reality: the truth

• Few really success stories• No world class players, small sales in global terms• Below standard products• Me-too products only• Lack significant VCs • No window in equity market• General depression of the pharma industry• FDA under pressure from consumers and industry• Virtual companies need short term success to justify surv

ival, coming to China• Major failures of big companies:FE and 999

Success stories: ???

• Many biotech companies making losses

• Few break even or small profit

• No real players, no exciting news

• No real export to sophisticated market

• Why????????????????????????????

• Gross underestimation of the Drug Development cycle, not ready for World

Development hurdles

• No real significant stars• Fierce competition, price wars, tenders• Formulary control ( Good time over , soon )• IP issues still not clear• Poor healthcare infrastructure to justify investment and

return, very few VCs• Short, cheap, and fast philosophy prevails• Lack ROBUSTNESS: quality and performance• Lack INNOVATION• Not SUSTAINABLE• Insignificance in world market sales• Social out cry for change in healthcare provision

Part 2: INNOVATION: new fishes

The HK Science Park Biotech initiatives ( attempt )

HKSTP bio road map

• Biomedical research output audit

• SWOT analysis of criteria for

• Cluster formation

• Total technology management

• Seasoned executives & entrepreneurs

• Others: industry, regulatory, funding

Technology transfer: Biomedical research in HKSAR

• Basic questions:

• 1. Innovation/knowledge: tradable?

• 2. Tech transfer: definition and skills?

• 3. Commercialization capability?

• 4. Future?

Dr H M Pang, HKUST, March16,05

Value from Cluster Formation

ConceptionFormation

GrowthMaturity

Knowledge Creation Technology Transfer

CommercialisationClusters & Networks

Industry R & D

Public & PrivateFunding

Universities &Research Institutions

Patents &Licences

Proof of ConceptTesting

Incubation/Research Parks

Venture Capital

Clinical Trials

Collaboration/Partnerships

RegulatoryApproval

Business Planning

Job Creation

IPOs /gazellesLabour MarketProduct Pipeline

Economicsof Scale

RegulatoryEnvironment

M&A Activity

IndustryPartnerships

Biomedical Science Strength

0

500

1000

1500

2000

1997 1998 1999 2000 2001 2002

Bas

ic p

aper

s pe

r ye

ar (

reta

ined

) MV

CB

OX

EH

HK

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

HK

MV

EH

OX

CB

% PIC 1 % PIC 2 % PIC 3 % PIC 4

Hong Kong and Mainland China

0

250

500

750

1000

1250

1500

UHK CHU BEI UST FUD THB QMH PEK HPU PWH SYS ZSG MMG HBU CUH SJT GUZ SHA

BEI Beijing UniversityFUD Fudan University, ShanghaiGUZ Guangzhou UniversityMMG First Military Medical College, GuangzhouPEK Peking Union Medical College

SHA Shantou UniversitySJT Shanghai Jiao Tong UniversitySYS Sun Yat Sen University, GuangzhouTHB Tsing Hua University, BeijingZSG Zhongshan University, Guangzhou

Hong Kong and Mainland China

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

FUD

SYS

BEI

CHU

UHK

UST

%PIC 1 %PIC 2 %PIC 3 %PIC 4

0

50

100

150

200

250

300

350

1997 1998 1999 2000 2001 2002

Pap

ers

per

year

UHK

CHU

BEI

FUD

THB

Basic Conditions for a Biotech Cluster

Research Funding Human ResourcesExcellence in Research

Build-in IncentivesEntrepreneurship

and Creativity

ExperiencedManagement

SufficientRisk Capital

Efficient Tech Transfer

General BusinessConditions

Excellence inBusiness Plans

Biotech ClusterFormation

Academic Institutions

Industry and Capital Market

GovernmentSupport

Research to Business Food Chain

Upstream

Midstream

Downstream

Summary of Analysis

General conditions for high-tech

Biomedical research

University trained resources

Attitudes to commercialisation

Human resources abroad

Technology transfer

Biotech industry and business exec.

Private venture capital for biotech

Recommendations

• Organize a cluster• Introduce TTM• Proper funding : pre seed fund• Cooperation between Industry & Research• Regional cooperation• Further exploit CEPA, and clinical trial• Stimulate research• Draw up road map for implementation

Recommendation 2Improve Total Technology

Management

G & AF in a n ce

I TA dm in is tra tio n

M arketingT e ch n o lo gy D a ta ba s e

W e b- s ite po rta lP ro m o tio n

Em beddedTechnology O ffi cerC o m m e rc ia l P o te n tia l

E n tre pre n e u ria l C o u rs e s

Em beddedTechnology O ffi cerC o m m e rc ia l P o te n tia l

E n tre pre n e u ria l C o u rs e s

Em beddedTechnology O ffi cerC o m m e rc ia l P o te n tia l

E n tre pre n e u ria l C o u rs e s

Em beddedTechnology O ffi cerC o m m e rc ia l P o te n tia l

E n tre pre n e u ria l C o u rs e s

Em beddedTechnology O ffi cerC o m m e rc ia l P o te n tia l

E n tre pre n e u ria l C o u rs e s

Em beddedTechnology O ffi cerC o m m e rc ia l P o te n tia l

E n tre pre n e u ria l C o u rs e s

Com m ercial ProjectsP ro je ct M a n a ge rs

Special SupportM a rke t A n a lys is

L e ga lI n te lle ctu a l P ro pe rty P ro te ctio n

CEO

Board of D irectors

Pre-seed/ Seed Fund

CEO

Board of D irectors

Technology transfer

• Answers to questions:

• 1. Innovation/knowledge: yes. Tradable?

• 2. Tech transfer: to be re-modeled.

• 3. Commercialization: can be done!

• 4. Future: lets TALK………

• Dr H M Pang , HKUST, March16,05

Part 3: commercialization

• Find the fish

• Catch the fish, irrespective of size

• Grow that fish: live, multiply, and more

• Return in the shortest time, cost; quick $$

• Lack long term vision, diligence, and often ethics and professionalism

• Result= poor robustness, quality and performance

Elements of the Product Development Process

R&D Milestones

Key Product

Development Milestones

and Activities

Drug Substance Campaign

Drug Product Campaign

Product SupplyProcess

Physical Product Development Team

Asset Management

PPD TeamEstablished

AssessDevelopability

Select Versionand

Physical Form

Prelim. Formfor Tox

Lock FinalIsolation

of DS

DS Stability

Develop FTIH Formulation

NPS TeamFormed

SupportIND/CTX activitiesNPS leader

assigned

28 day ToxSupplies

Phase 1 Supplies

Phase 2 Supplies

Phase 1 Supplies

Phase 2a Supplies

300g for SA and

PD

50g preparedby Med Chem

DS for tox and formulation development

Drug Discovery Review SafetyBoard

Gate 2 Gate 3

PP

D 1

PP

D 2

Product Development Process

Gate 1

Confirm Physical Form

Validation Batches

Commercial Batches

DS for Q batches and

stability

Phase 2B Supplies

Ongoing Phase 3 Supplies

Phase 3 and Stability Batches

Commercial Scale Batches

Phase 3 Supplies

Validation Batches

Onco and 12 month toxsupplies

Sourcing Decision

Scale Up at Manf.

Site

Validation batches

Complete

Initiate NDA/MAA

Stability

Provide Input to

MAA/NDA

Initiate Tech

TransferBusiness

AcceptanceSign offEnd of PII

meeting

Lock final Formulationand process

Prepare for PAI

Respond to RegulatoryQuestions

Select FinalRoute of

Manufacture

Commercial image &

pack defined

Gate 4

PP

D 3

PP

D 6

PP

D 5

a

PP

D 5

b

PP

D 4

Lead to Candidate

Commit to Candidate to

FTIH

FTIH to Commit to Product Dev.

Com

mit

to

Can

dida

teC

omm

it to

C

andi

date Commit to Prod.

Dev.to Commit to Phase III

Phase III File and LaunchLifecycle

Management

Com

mit

to

Pro

duct

D

ev

Com

mit

to

Pha

se I

IIC

omm

it to

P

hase

III

Com

mit

to

Fil

e &

L

aunc

h

Lau

nch

Lau

nch

Therapeutic Strategy

Gate 5 Gate 7Gate 6 Gate 8

ProductF

TIH

FT

IH

Analysis of Key Batches of Drug Substance and Drug Product and Process Stretching

Respond to RegulatoryQuestions

New DevelopmentReview Review Review Review Review

Total Tech Management:TTM

• Complex, lengthy process• Resource/talent intensive, integrated skills• Need pharma industry expertise• IP and legal management • Regulatory and clinical component• Market intelligence / post marketing skills• Supply and logistics management• Financial skills• Critical mass

The 2nd pharma revolution

• New products, technology and services

• New market, customers, payment terms

• New sales and marketing approaches

• New team and culture

• Entry into new horizon, with good players

• Go international

• Sustainable model

New challenges

• Survival, M&A, consolidation• Formulary, Rx, and price control• IP and regulatory: who stole my cream• Product and technology • Core competency• Focus• sustainability • Dancing with capital, to finance upgrade

New business models

• Integrated company or core strength

• Work with universities and institutions

• Work with virtual co, contract out research

• Collaboration with the west, virtual cos.

• Collaboration with the West, medium size

• MNCs

• Develop new drugs, at huge cost / risks

Cases : a Zhangjiang co.

• Set up 1996• HK Gem board 2002• One diagnostic launched, contract selling• Quality issue, broke contract • Robustness???• Money being spent, no real revenue• Huge pipe line hype• Lack real execution plan

Case 2: a TCM company, HK

• Run by famous professor from Canada

• Gem listing in HK 2001

• Lack operational and business acumen

• Unreal forecast, lack execution experience

• Picked gingko for formulation improvement

• Burnt out and sold in 2004

Case 3: a local medium pharma

• 800M Yuan sales• Vision to become top 5 in 10 years• International involvement, courted with• Many international companies from India and Europe• Product introduction slow, • Alliance never realized• Failed to capture chances from capital market• Lack clear mid term strategy, team and culture• Fire fight in current hostile market• Uncertainty with future, lack sense of urgency / fear• Just received substantial investment for growth • Towards a potential ‘world class’ company

Case 4: stem cell in South

• A few cases as basis for business plan

• No clear strategy, direction, IP, team and financial models. Doing everything.

• Obtained some finance , but insufficient for the expected burnt rate

• Sustainability?

Case 5: biochip diagnostics

• Multi genetic assay for cancer• Well received by investors, and supported

by insurance companies• Company run by non business

professionals, and scientist engage in more than one company

• Short term apparent success• Issues: robustness, validation and

marketing

Key success factors

• Product: quality, robustness, IP

• Market: user friendly, entry barrier

• Team: integrated skills, international

• Finance: good start up, and profit/loss

• Strategic investors

• Execution: timely, and correctly

• Sustainable business model

Sustainable company

• Not too dependent on Allah ( GOD )• Ready to face competition• Continuous favorable performance ( no blip)• Not affected by cycles• Good pipeline portfolio• Not dependent on one Hero, holistic & governance• Evergreen, stable, long term team , execution capability• Anticipation and Management of change• International link• Tomorrow driven

Thank you

mingpang@ust.hk