Jennifer Coe

1
2002 PBIRG Annual General Meeting
Valuing Competitive Landscapes Beyond Drug
Therapeutics The potential of genomics to
transform the pharma value chain
Jennifer Coe David Deutsch, Datamonitor
plc Nancy Mancini, Pfizer Inc. Tuyen Do, Merck
Co.
2
Objectives

• Understand how genomics has the potential to
  transform the entire pharmaceutical value chain
• Proactively position marketing research and
  business intelligence to contribute to the
  identification and prioritization of commercially
  viable gene-based therapies
• Identify and assess the risks of your companys
  involvement in genomics and gene-based therapy

3
Presentation overview

• Opportunity defined the search for a new
  paradigm
• Transforming the pharmaceutical business model
• Wave 1 Drug discovery and development
• Wave 2 Health services delivery and financing
• Wave 3 Revenues
• Workshop
• Bringing it all together
• Workshop feedback
• Challenges for marketing research and business
  intelligence

4
Opportunity defined
The search for a new paradigm

• Pharma is facing a deepening productivity crisis
• Investing more in current business practices
  will not
• overcome this crisis a new paradigm is
  required
• Genomics is a disruptive technology with the
  potential
• to transform the pharmaceutical business model

5
Opportunity defined RD productivity must
increase if companies are to meet investors
growth expectations
No. products x Revenue potential
RD productivity
?
Time x Investment
6
Opportunity defined Investing more in current
business practices will not overcome the
productivity crisis. A new paradigm is required

• No significant economies of scale in RD
  activities
• Quality of pipeline linear to investment in RD
• Merging to increase absolute RD investment will
  not improve profit margins
• Size is not a competitive advantage

The commercial value of leading companies late
stage pipelines is directly proportional to their
RD spend
7
Opportunity defined Genomics enables us to
understand disease at a molecular level. The race
is on to turn this new knowledge into profits, to
get the right target for the right drug to the
right patient
Patent
GENE
FUNCTION
TARGET
PATIENT
MARKET
Identify genes associated with specific diseases
Understand gene function to determine if suitable
target
Identify novel targets for compounds
to stop/prevent disease process
Target drug to specific patient genotype ? 100
response and no ADR
Launch gene-based, personalized medicine
Genomics DNA sequencing
Polymorphisms Proteomics Model organisms
Proteins Antibodies Antisense
Pharmaco- genomics
Mass customization and diagnosis
BIOINFORMATICS
12 YEARS
Risks are high, involvement is mandatory. Success
depends upon selecting the right technologies,
data, partners and investment strategy, and in
predicting the potential of markets that dont
yet exist. At stake is the future of your company
8
Opportunity defined Ready or not, genomics will
transform the entire pharmaceutical business
model
WAVE 1 0-10 years
WAVE 2 5-10 years
WAVE 3 10 years
RD
Health services financing
Revenues

• ? time to market
• ? output
• ? trial costs
• ? attrition rates
• ? innovation

• New treatment protocols
• Physician payer re-education
• New insurance products

• ? global Rx market
• ? demand customized Rx
• ? demand bulk Rx
• Market micro-segmentation

and hence the role of marketing research and
business intelligence
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Transforming the pharmaceutical business model
Wave 1 Impact of genomics on RD

• Post-genomics, attrition, and hence portfolio
  management
• decisions, will move upstream
• Time and cost to market will increase before RD
  
• productivity improves over the longer term
• Pharma must offer more than money to remain
  biotechs
• partner of choice

10
Impact on output With a significant rise in the
number and novelty of targets, earlier go/no go
decisions are needed to prioritize the most
commercially attractive and check spiraling costs
11
Impact on time and costs Time and cost to market
will increase before productivity benefits flow
through the value chain
Timelines
Relative cost /year

• Contracted by
• Industrial-scale target
• identification
• Patient pre-selection
• Smaller and shorter trials
• Extended by
• Slow target validation
• Delays in approval process

Ph3
15
10
5
Ph2
App
Ph1
Costs
PC
0

• Reduced by
• Less late stage attrition
• Smaller and shorter trials
• Increased by
• Access to technologies
• Genetic testing

0
3
6
Time/years
Pre-genomics
Post-genomics
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Impact on pharma-biotech relationship
Intra-biotech alliances bring independence from
pharma one step closer. Pharma must offer more
than money to win the bidding war for biotech
products
Marketed product
Phase III
Phase IIb Phase IIa
Validated targets
Traditional pharma- biotech relationship
High risk independent growth
Intra-biotech collaborative growth
Pharmas preferred relationship
Sustainable independent growth
Growth strategy
Collaborative development
Increasing risk to biotech from potential product
failure
13
Transforming the pharmaceutical business model
Wave 2 Impact of genomics on health services
delivery and financing

• Todays uniformity of treatment practices must
  evolve to
• embrace heterogeneity in patients and care
• Physicians require re-education to meet
  patients
• expectations of a customized health service
• Insurers must develop new risk management and
  pricing
• models, and new insurance products

14
Wave 2 health services delivery and financing
Imagine a world in which patients understand
their disease susceptibility better than
physicians and actuaries
2002
2012
Phenotype Sense respond Guidelines
formularies Physician gatekeeper Clinical
acumen Apprenticeship model Provider legal
pressures
Genotype Predict prevent/treat Customized Rx
care Patient power Genetic counseling eLearni
ng Patient responsibility
New treatment protocols, physician re-education
Medical practice
New risk mgmt pricing models, new
insurance products
Population insurance pools Risk
uncertainty Patient genetic privacy
Individual responsibility Improved
prediction Informed consent, ethics
Finance
15
Transforming the pharmaceutical business model
Wave 3 Impact of genomics on revenues

• Pharmacogenomics will expand the overall Rx
  market by
• improving efficacy and expanding the treated
  population
• Declining demand for bulk Rx will be replaced by
  rising
• sales of premium-priced customized Rx
• Multi-busters targeting a range of genotypes
  will begin to
• supersede many of todays blockbusters

16
Impact on revenues Overall, genomics will expand
the global pharmaceutical market
So much for total market growth, what about
individual drug sales?
17
Impact on revenues Lower average drug revenues
will be off-set by improved and more
cost-effective targeting of patients and
physicians, so profit margin growth will be
sustained

• DRIVERS
• Targeting smaller markets will be more
  cost-effective
• Penetration rate increases as PGx makes it easier
  to identify target
• Being 2nd, 3rd or 4th to market need not be a
  disadvantage
• PGx is a potent marketing and reimbursement tool

• RESISTORS
• Average drug revenues will decline as genetic
  diagnostics enable smaller markets to be targeted
  and treated with greater efficacy

Profit margin growth sustained
18
Impact on revenues Many traditional
best-in-class blockbusters will be superseded by
best-in-segment blockbusters or multi-busters
1bn
750m
The future? Multi-busters one
indication, multiple compounds
Response
600m
High
Develop/ in-license new best- in-segment drugs
600m
500m

Moderate
250m
Low/none
Best in class Traditional blockbuster compound
Loss of non- responders Best-in-segment for high
moderate responders
Best-in-segment for high responders Growth via
wider screening diagnosis, increased
compliance targeted marketing
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Workshop
20
Workshop teams
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Workshop teams Next steps

• Each team will work on one topic
• You have 1.5 hours to complete the exercise
• One spokesperson required per team to report back
  to the wider group max. 10 minutes per team
• Flipcharts will be provided

22
Workshop 1
Competitive benchmarking of genomics-related
activity
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Background

• What constitutes a competitive advantage in the
  genomics arena is not yet clear but it is a must
  have in pharmaceutical RD
• Genomics accounts for 8 of all current RD
  expenditure
• Certain companies are spending as much as 20 of
  their RD budgets on external alliances
• Investment risks may be high but the opportunity
  costs of delayed or inappropriate investment are
  higher
• Brief
• Design a research plan to benchmark your
  companys capabilities, investment, integration
  and partnerships in genomics throughout the value
  chain
• Assuming that your current position is
  sub-optimal, recommend appropriate strategic
  responses as the basis of further market research

24
Framework for discussion

• Discussions should consider, but need not be
  limited to, the following
• What are the issues surrounding your brief?
• Who are your internal clients for this project?
• What information will they need to make a
  decision or understand the issue in greater
  depth?
• Which benchmarking parameters are most
  appropriate?
• How will you define your competitive environment?
• Which research techniques are most appropriate?
• What information do you have in-house and what do
  you need to outsource?
• How will you analyze the information?
• How will you communicate your findings?

25
Workshop 2
Informing portfolio reviews with pharmacogenomics
data
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Background

• Pharmacogenomics has the potential to eliminate
  unsuitable candidates and targets at early and
  less costly stages of development
• Following pharmacogenomic studies in phase II
  clinical trials, your company now has multiple
  compounds that have displayed safety and efficacy
  in certain population segments
• Brief
• Devise a framework to help management
  systematically evaluate the relative
  cost-benefits of continuing to develop and then
  market these compounds

27
Framework for discussion

• Discussions should consider, but need not be
  limited to, the following
• What are the issues surrounding your brief?
• Who are your internal clients for this project?
• What information will they need to make a
  decision or understand the issue in greater
  depth?
• Which research techniques are most appropriate?
• What information do you have in-house and what do
  you need to outsource?
• How will you analyze the information?
• How will you communicate your findings?
• How can marketing research inform the continued
  development of prioritized projects?
• What are the major differences between current
  go/no go decision processes and those which, in
  the future, will incorporate pharmacogenomics
  data?

28
Workshop 3
Sizing the potential of customized Rx markets
29
Background

• Your company currently markets an asthma drug,
  EasyBreathe, that generates annual sales of 600m
• Pharmacogenomic markers of disease biology have
  been identified
• Phase IV pharmacogenomics trials reveal that only
  40 of patients currently using EasyBreathe are
  high responders, while 25 and 35 are low and
  non-responders, respectively
• Brief
• Design a research plan to assess the implications
  of this for sales of EasyBreathe under two
  scenarios
• If it is best-in-segment
• If it is no longer best-in-segment
• As the basis of further market research,
  recommend appropriate strategic responses to each
  scenario to optimize EasyBreathes sales

30
Framework for discussion

• Discussions should consider, but need not be
  limited to, the following
• What are the issues surrounding your brief?
• Who are your internal clients for this project?
• What information will they need to make a
  decision or understand the issue in greater
  depth?
• Which research techniques are most appropriate?
• What information do you have in-house and what do
  you need to outsource?
• How will you analyze the information?
• What are the key drivers of EasyBreathes current
  sales?
• In each scenario, which drivers of sales will be
  changed by pharmacogenomics trial results and
  how?
• What actions can be taken to optimize the drugs
  commercial potential under both scenarios?
• Design a timeline to ensure that all data are
  available at the required time
• How will you communicate your findings?
• What are the major differences between current
  market forecasting processes and those required
  by a genomics-driven business model?

31
Workshop 4
Marketing personalized medicines to patients
32
Background

• Patients will be the dominant force in the
  micro-segmented markets that typify the
  genomics-driven business model
• One size fits all marketing will be a
  non-starter
• Novel techniques will be required to raise
  awareness and understanding of genetic testing
  and gene-based therapy, and to build life-long
  relationships with targeted patients
• Brief
• Devise a research plan to help management assess
  the likely impact of pharmacogenomics on
  patient-focused marketing strategies
• As the basis of further market research,
  recommend appropriate strategic responses

33
Framework for discussion

• Discussions should consider, but need not be
  limited to, the following
• What are the issues surrounding your brief?
• Who are your internal clients for this project?
• What information will they need to make a
  decision or understand the issue in greater
  depth?
• Which research techniques are most appropriate?
• What information do you have in-house and what do
  you need to outsource?
• How will you analyze the information?
• How will you communicate your findings?
• What is the likely impact on behavior of patients
  knowing more about their disease susceptibility?
• Will payers encourage patients to seek genetic
  screening?
• What are the major differences between current
  patient-focused marketing practices and those
  required by a genomics-driven business model?
  E.g.
• Impact on marketing costs and return on
  investment
• Impact on marketing mix
• Impact on marketing message

34
Bringing it all together
Challenges for marketing research and business
intelligence

• Initially, genomics will not alter the types of
  questions
• needing answers, but it will dramatically
  increase their
• volume
• Data on individual customers and how their needs
  evolve
• over time will precede delivery of
  personalized, total
• healthcare solutions

35
Challenges for marketing research and business
intelligence Initially, genomics will not alter
the types of questions needing answers, but it
will dramatically increase their volume
What will constitute a commercial advantage is
not yet known. In times of change, the ability to
stay one step ahead of the competition is critical
36
Challenges for marketing research and business
intelligence Data on individual customers and
how their needs evolve over time will precede
delivery of personalized, total healthcare
solutions
Individualization
Health mgmt solution
Multiple niche

• Patient X
• Female health
• management
• across life stages
• Diabetic health
• management across
• disease progression
• and co-morbidities

Mass segmentation
Mass market
1990s
2020s
Existing therapies tailored to genotype
Predisposition testing
Population genotype databases
Networked pharmas will evolve to deliver the
broad range of products and services required of
individualized health management solutions