Sectorifics_IIMA_Pharma

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Our presentation for Pharma Sector.
Problem statement: You are Pfizer and your major blockbuster drug, Lipitor ($12 bn in sales in 2008, ~20% of your total revenue), is going off-patent in 2011. A decline in the sales of Lipitor is inevitable and you are looking to make a major move into emerging economies where growth in pharma sales is the highest. How would you go about doing this?

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Sectorifics_IIMA_Pharma

  1. 1. Sectorifics – Pharma IIM Ahmedabad
  2. 2. Table of Contents About Us Our Approach Pfizer-Lipitor  2011 Patent Cliff Therapeutic Segments  Cardiovascular Market  Cancer Market  CNS Market Pharmerging Markets Benchmarking Case Studies Course of Action Acquisition of Bio-pharmaceuticals Opportunities across the Value Chain 2
  3. 3. About Us Akshay Gautam Education: B.Tech IIT Delhi, Computer Sc. & Engineering Interned at: Nomura Investment Banking , Mumbai Work Exp: 10 months at IBM Worked on: Worked with the DCM and the M&A team. Sectors covered include Pharma, Retail, Consumer, Solar Energy, IT and Ports in India Siddhartha Bhargava Education: B.Tech IIT Roorke, Chemical Engineering Interned at: JPMorgan Chase Investment Banking, Mumbai Work Exp: 3 years in Royal Dutch Shell Worked on: Worked with the ECM and the M&A team. Sectors covered include Infrastructure, Metals &Mining, Industrials and Power, Pharma and Real Estate in India 3
  4. 4. Our Approach Therapeutic  Cardiovascular Segments  CNS  Oncology Opportunities  Acquire Bio-tech firms to enhance Therapeutic Segments across Pharma pipeline Value Chain  Acquire distribution & marketing firms with presence in EMsCase Studies Value Chain Pharmerging  India Countries  China  Brazil  Russia Course Benchmarking  R&D Expenses of Action Pfizer and its  Sales & Marketing Expenses Competitors  Top 5 selling drugs Strategy in  Revenues by therapeutic areas Pharmerging Emerging  Revenues by Geographic areas Countries Markets Pfizer and its  Revenue from Emerging Markets Competitors  Presence in Emerging Markets Financial in Emerging  Strategy in Emerging Markets Benchmarks Markets Case Studies  How companies such as Takeda, Merck and Bristol-Myers Squibb have responded to their block buster drugs going off patent 4
  5. 5. Pfizer - Lipitor Overview Global Sales of Lipitor Lipitor is global no. 1 selling drug, with 2010 sales of US$ 10.7 billion Lipitor to face patent cliff on Nov 30, 2011 US$ Billions  Indian drug maker Ranbaxy was “First-to-File” for production of 14.0 12.9 12.7 12.4 12.2 generic Lipitor and will introduce Lipitor in the US market with 10.9 11.4 12.0 10.7 180-days exclusivity from November 2011 and an early entry in 10.0 9.2 other select markets  Pfizer has granted Watson Laboratories, Inc., the exclusive right 8.0 to sell the authorized generic version of Lipitor in the U.S. for a period of five years, which is expected to commence in 6.0 November 2011 4.0 Ranbaxy’s ability to manufacture generic Lipitor has become unclear 2.0 owing to safety concerns raised by the FDA and therefore, Pfizer may look to manufacture its generic version of Lipitor 0.0 Pfizer is pursuing pediatric extension in EU, extending it to May 2012 2003 2004 2005 2006 2007 2008 2009 2010 Pfizer - Existing Pipeline Pfizer’s Product Portfolio We conduct research internally and also through contracts with  Lipitor – LDL cholesterol third parties, through collaborations with universities and  Enbrel – Rheumatoid Arthritis biotechnology companies and in cooperation with other  Lyrica – Postherpetic Neuralgia pharmaceutical firms Biopharmaceuticals  Prevnar – Pneumococcal Disease  Viagra – Erectile Dysfunction  Effexor XR – Antidepressant  Startect – Animal Health Phase I Phase II Phase III   Advil – Pain Management Robitussin – Respiratory Diversified  S26 Preterm Feeding System – Nutrition  Centrum – Dietary Supplements 116 programs 234 programs 24 programs Source: Pfizer, Ranbaxy. 5
  6. 6. 2011 Patent Cliff Overview Blockbuster drugs going off patent Starting in 2011, ~26 blockbuster medicines, worth over US$96bn •Zyprexa - Eli Lilly will go off-patent in the world’s largest drug market, US (1) Majority of losses will occur in 2012 when it is expected that more 2011 •Lipitor - Pfizer than US$42 Billion in sales revenue will be lost by originator •Avapro/Avalide - Bristol-Myers/Sanofi companies (2) The pharmaceutical classes set to be most affected–and at risk of 2012 •Plavix - Bristol-Myers/Sanofi losing 80% or more of their market share–include anti-ulcerants, anti-depressants, anti-coagulants, Alzheimer’s medications, •Geodon - Pfizer osteoporosis medications and narcotic analgesics 2012 •Atacand - Astra Zeneca Once drugs lose patent protection, lower-price generics quickly siphon off as much as 90% of their sales •Lovaza - GlaxoSmithKline On average, 44% of top 20 company sales are at risk of generic 2013 •Temodar - Merck competition between 2009–2014 Lifecycle: Branded v/s Generics (3) Loss in sales post patent cliff (3) US$ Billions 50 42.4 40 37 30 27.4 26.8 18.9 19.3 20 14.7 10 0 2009 2010 2011 2012 2013 2014 2015 1. Source: IIFL Research Report. News Runs. 2. http://www.gabionline.net/Reports/Patent-cliff-and-the-generics-industry 6 3. Source: IMSHealth, Cipla.
  7. 7. Therapeutic Segments
  8. 8. Cardiovascular Market Overview Pfizer cardio portfolio, pipeline The global cardiovascular market recorded sales of US$170 billion in Fragmin Compound Expected 2010 and is expected to grow to US$187 billion in 2016 at a CAGR Cardura 2% Year of of 1.6% 3% Others Launch 8%  US continues to be the largest market, with a share of 40% of the overall market Revatio Apibaxan Pre- Pfizer retained its position as the market leader with $15.2bn in 3% registration 2011 2010 sales, led by key brands such as Lipitor, Norvasc, Caduet, and Caduet 3% Viagra Apibaxan Phase-II  Pfizer(8.9%) was followed by Sanofi-Aventis(6.2%), Norvasc 2011 10% AstraZeneca(5.5%), Novartis(5.1%), Bristol-Myers Squibb(4.9%) and Merck(4.4%) PD-348292 Phase-II Growth Drivers: Changing disease profiles in the Emerging Markets Lipitor 2014 71% Cardiovascular sub segments Potential Opportunities for PfizerSegment Leading Drugs and their Patent market share Expireshypertensives Diovan – Novartis (9.6%) 2012 Alliances with Acquire to generic Invest in R&D in(22%) replenish the Benicar – Daiichi Sankyo (7.7%) 2016 manufacturers in Russia pipeline Russiadyslipidemics Lipitor – Pfizer (40%) 2011(18%) Crestor – Astra Zeneca (22.6%) 2016 Outsource drug Enter Genericsthrombotics Plavix – Bristol-Myers (50.4%) 2011 manufacturing to Lipitor Market(11%) low cost EMs Lovenox – Sanofi-Aventis (20.1%) 2012Others Tracleer – Actelion (1.9%) - Source: Pfizer, Datamonitor.. 8
  9. 9. Cancer Market Overview Pfizer oncology portfolio, pipeline The global cancer market in 2010 was valued at US$44 billion, an Compound Expected increase of 1.9% over the previous year’s sales, and is forecasted to Year of grow at a CAGR of 6.4% from 2010–16, reaching US$64 billion in Launch 2016  US continued to dominate the global cancer market, with 2010 sales of US$17.2 billion and a market share of 39.2% Crizonitib Phase III Oncology has become one of the major focus areas for pharmaceutical and biotechnology companies because of the high unmet need for improved treatments for multiple types of cancer Bosutinib Phase-III Roche led the global cancer market with 2010 sales of $19.3bn, which was mainly based on sales from Avastin, Herceptin, MabThera, and Xeloda Aromasin Axitinib Phase-III  Roche was followed by Eli Lilly, AstraZeneca, Sanofi and Takeda 100% Growth Drivers: aging population and changing lifestyle Oncology sub segments Potential Opportunities for PfizerTherapeutic Leading Drugs and their PatentSegment market share Expires Acquire to Alliances withAntineoplastics Avastin– Roche (17.2%) replenish the generics Invest in R&D(82%) pipeline with late manufacturers Herceptin – Roche (145%) stage molecules MabThera – Roche (14.3%) Taxotere – Sanofi (7.8%) Sales and Outsource drug Marketing partner manufacturing toCytostatic Arimidex – AstraZeneca (19%) for small pharma low cost EMsHormones players(18%) Femara– Novartis (17.3%) Lupron-Depot – Takeda (17%) Source: Pfizer, Datamonitor.. 9
  10. 10. CNS Market Overview Pfizer CNS portfolio, pipeline The global CNS market recorded sales of US$ 71billion in 2010 and Aricept Compound Expected Pristiq 6% 0% is expected contract by a CAGR of -3.9% reaching US$56 billion in 7% Year of 2016 Launch  US continues to be the largest market, with a share of 40% of the overall market Bapineuzumab Phase-III Eli Lily retained its position as the market leader with US$9.3 billion Zoloft 2013 7% in 2010 sales, led by key brands such as Zyprexa and Cymbalta Lyrica  Pfizer(10.8%) was followed by Astra Zeneca(8%), Johnson & 42% Lyrica Phase-III Johnson(6.9%), Otsuka(6%), Forest(5.2%) and Eisai(4.8%) Growth Drivers: 2013  Age-linked diseases such as Alzheimer’s disease and Parkinson’s Geodon disease have the greatest potential. 14% PF-02545920 Phase-II  Adult ADHD which is largely undiagnosed also has strong growth Effexor potential 24% CNS sub segments Potential Opportunities for PfizerSegment Leading Drugs and their Patent market share Expires Acquire toAntipsychotics Seroquel – AstraZeneca (23%) 2011 Alliances with replenish the(34%) generics Invest in R&D Zyprexa – Eli Lily (20%) 2011 pipeline with late manufacturers stage moleculesAntidepressants Cymbalta – Eli Lily (24%) 2013(21%) Lexapro – Forest (16%) 2012 Sales and Outsource drug Marketing partnerAnti-epilectics Lyrica– Pfizer (11%) 2013 manufacturing to for small pharma(13%) low cost EMs players Keppra – UCB (14%) ExpiredOthers Aricept – Eisai (47%) Expired Source: Pfizer, Datamonitor.. 10
  11. 11. Pharmerging Markets
  12. 12. Pharmerging Markets India China Brazil RussiaGrowth Drivers  Middle Class Pop  Aggressive govt. spend  Large Population  Reimbursement system  Infra improvement  Chronic drugs demand  Strong domestic  Private, out-of-pocket  Birth rate  Rising incomes pharma industry spending  Increasing awareness  Unmet demand  Large, unmet demandSize of the Pharma 30 70 25 15Market (2015) (US$ Bn)CAGR Growth 14.9% 16.9% 29% 14.2%(2006-2010)Per Capita healthcare 109 342 765 638spending (US$)Healthcare spending 4.9% 4.5% 7.5% 5.3%as a % of GDPPresence of strongR&D base 2 3 2 1Degree of Price Control& Regulation 4 4 3 3Degree of LocalGeneric Competition 4 4 3 3Degree of PatentProtection 1 1 2 1Opportunities in Respiratory, HIV Respiratory, HIV Medicines, Medicines HIV MedicinesSegments Cardiovascular Cardiovascular, Cancer Source: AnandRathi, Datamonitor. 12
  13. 13. Pharmerging Markets: Pfizer’s Focus India China Brazil RussiaCardioCNSHIVRespiratoryOncologyAnti-infectionDiabetes 13
  14. 14. Benchmarking
  15. 15. Benchmarking Pharma MNCs Pfizer GSK Abbott 80.0 US$ Billions 67.8 20% 60.0 US$ Billions 30% 60.0 US$ Billions 20% 45.4 45.1 44.3 44.0 60.0 48.1 48.3 50.0 15% 35.2 15% 40.0 20% 40.0 29.5 30.8 25.9 40.0 10% 10%Financials 20.0 5% 20.0 10% 20.0 5% 0.0 0% 0.0 0% 0.0 0% 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 Revenues Profit Margin Revenues Profit Margin Revenues Profit Margin 4% 3% 5% 9% 9% Biopharmaceuticals Pharmaceuticals PharmaceuticalsRevenue by Animal Health 11% Nutritional 11% Nutritional NutritionSegments 16% Diagnostics 16% Diagnostics 57% 57% Consumer Vascular Vascular 87% Healthcare 18% 15%Revenue by 33% 43% USA USA 43% USA Others Others InternationalGeography 39% Emerging Markets 52% Emerging Markets 57% 10.0 US$ Billions 9.4 20% 4.5 US$ Billions 15.5% 4.0 US$ Billions 3.7 11% 9.0 15% 4.0 4.0 3.5 10% 8.1 7.9 4.0 14.5% 7.8 3.7 R&D 8.0 10% 3.5 3.3 13.5% 3.0 2.5 2.7 2.7 9% 7.0 5% 2.5 8% Expenses 6.0 0% 3.0 12.5% 2.0 7% 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 R&D Expenses % R&D Expenses R&D Expenses % R&D Expenses R&D Expenses % R&D ExpensesSource: Company Websites. Street Research. 15
  16. 16. Benchmarking Pharma MNCs Merck Astra Zeneca Novartis 60.0 US$ Billions 60% 60.0 US$ Billions 30% 60.0 US$ Billions 30% 50.3 46.0 44.3 38.1 41.5 40.0 40% 40.0 31.6 32.8 33.3 20% 40.0 20% 27.4 29.6 24.2 23.9Financials 20.0 20% 20.0 10% 20.0 10% 0.0 0% 0.0 0% 0.0 0% 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 Revenues Net Income Revenues Net Income Revenues Net Income 12% 12% 13%Revenue by Pharmaceuticals Pharmaceuticals 18% Pharmaceuticals VaccinesSegments 88% Others 88% Others 63% Sandoz 6% 9% US 18% 19% AmericasRevenue by 33% 44% 20% Europe 8% USA EMEA 50% EuropeGeography 29% Japan Others 31% Asia, Africa & Australia Asia, Africa & Australia 39% Canada & Latin America 15.0 US$ Billions 26% 6.0 US$ Billions 20% 10.0 US$ Billions 9.1 19% 11.0 24% 5.5 5.3 15% 18% 5.2 5.2 7.2 7.5 10.0 8.0 18% R&D 5.0 4.9 4.8 5.8 22% 5.0 4.4 10% 6.0 6.4 17% 20% 4.5 5% Expenses 17% 0.0 18% 4.0 0% 4.0 16% 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 R&D Expenses % R&D Expenses R&D Expenses % R&D Expenses R&D Expenses % R&D ExpensesSource: Company Websites. Street Research. 16
  17. 17. Benchmarking Pharma MNCs Pfizer GSK Abbott US$ Billions US$ Billions US$ Billions 30.0 40% 30.0 40% 30.0 40% Sales & 20.0 15.6 14.5 14.9 19.6 30% 20.0 13.9 14.2 15.0 14.3 30% 20.0 30% 20% Marketing 20% 10.4 20% 7.4 8.4 8.4 10.0 10% 10.0 10% 10.0 10% Expenses 0.0 2007 2008 2009 2010 0% 0.0 2007 2008 2009 2010 0% 0.0 2007 2008 2009 2010 0% Marketing Expenses % Expenses Marketing Expenses % Expenses Marketing Expenses % ExpensesNumber of  1,16,500 (2010)  98,854 (2010)  73,000 (2010)Employees  Prescription pharmaceuticals,  Vaccines, prescription drugs,  Pharmaceuticals, nutritionals, Principal non-prescription self-medications OTC medicines, health related diagnostics and vascular products and animal health products consumer products areas of  Primary Care, Specialty Care,  Therapeutic areas include business Established Products, Oncology and Emerging Markets respiratory, anti-virals, CNS, cardiovascular, metabolic, biopharmaceutical products oncology and vaccines  Lipitor – US$5,272 Million  Advair Diskus – US$3,655 Million  Tricor – US$1,016 Million Top 5 US  Lyrica – US$1,478 Million  Flovent – US$705 Million  Niaspan – US$794 Millionselling drugs   Celebrex – US$1,350 Million Viagra – US$1,029 Million   Lovaza – US$683 Million Valtrex – US$534 Million   AndroGel – US$594 Million Humira Pen – US$515 Million (2010)  Geodon Oral – US$ 960 Million  Ventolin – US$497 Million  Synthroid – US$ 507 MillionSource: Company Websites. Street Research. 17
  18. 18. Benchmarking Pharma MNCs Merck Astra Zeneca Novartis 30.0 US$ Billions 40% 30.0 US$ Billions 40% 30.0 US$ Billions 40% Sales & 20.0 13.2 30% 20.0 30% 20.0 13.3 30% 20% 11.3 11.9 12.1 Marketing 10.4 10.9 10.4 20% 11.1 20% 7.6 7.4 8.5 10.0 10% 10.0 10% 10.0 10% Expenses 0.0 2007 2008 2009 2010 0% 0.0 2007 2008 2009 2010 0% 0.0 2007 2008 2009 2010 0% Marketing Expenses % Expenses Marketing Expenses % Expenses Marketing Expenses % ExpensesNumber of  1,00,000 (2010)  15,500 people are employed in  62,700 (2010)  99,834 (2010)Employees R&D (2010)  Drugs for elevated cholesterol,  Pharmaceutical and medical  Cardiovascular, respiratory and Principal and treatments for hair loss, products for gastrointestinal, infectious diseases, Oncology, osteoporosis, hypertension and oncology, cardiovascular, neuroscience, transplantation, areas of allergic rhinitis respiratory, central nervous dermatology, arthritis, business system, pain control, anesthesia and infection gastrointestinal and urinary conditions, vaccines, diagnostics, vision and animal health products  Singulair – US$3,325 Million  Nexium – US$5,276 Million  Diovan – US$1,444 Million Top 5 US  Januvia – US$1,294 Million  Seroquel – US$3,222 Million  Diovan HCT – US$1,316 Millionselling drugs   Vytorin – US$953 Million Janumet – US$459 Million   Crestor – US$2,923 Million Symbicort – US$708 Million   Gleevec – US$518 Million Femara – US$477 Million (2010)  NuvaRing – US$349 Million  Arimidex – US$404 Million  Focalin – US$416 MillionSource: Company Websites. Street Research. 18
  19. 19. Benchmarking Pharma MNCs Pfizer GSK Abbott  2010 Lipitor sales in EMs were  EMs contribute £3.6 billion or  Strong presence in emerging Revenue approximately US$900 million 15% to global pharma sales markets in generics segments from  EMs contributed 13% to the overall global sales  The Company grew across all three sectors – patented, non  The Company expects roughly 33% of global pharmaceutical Emerging  Strategy is based on acquisitions and alliances patented drugs and vaccines  Innovative pricing in Ems sales to come from EMs within five years, up from 25 % today Markets  India: Alliance with Biocon to for  India: Opened an Oral  India: No.1 pharma company in exclusive worldwide Healthcare Research Centre in India post the acquisition of commercialization of Biocon’s India Piramal Domestic Healthcare biosimilar versions of insulin and  China: Reported 25% sales force Formulations and Solvay insulin analog products increase in 2008 Pharmaceuticals  Brazil: Partnered with  Brazil: GSK sealed a €1.5bn  China: Company is looking toStrategy in Laboratório Teuto Brasileiro S.A. contract with Brazil Govt. partner with governments, health Emerging to develop and commercialize generic medicines both within and guaranteeing sales of its pneumococcal vaccine over the care professional organizations  Brazil: Conducted training Markets outside Brazil  China: Goal is a 25% CAGR for entire life of the product  Russia: Entered into alliance workshops and initiated public- private partnerships in numerous sales in China Expand coverage of with Binnopharm to enable local markets Chinese cities manufacture of vaccines  Pfizer has favored acquisitions  To offset lower revenues from  Currently, no significant patent to diversify its business – Wyeth, patent expirations in 2010, or license expirations in the a leader in vaccines, consumer undertook restructuring next three yearsReactions to health and animal health products, program to lower SG&A costs  One of the leading companies in in 2009, King Pharma, a leader in  Divested non-core assets biologics and small molecules Patents pain management, in 2010 and the  Strong pipeline: over 20 assets  Acquired 350 trusted branded Expiry biotech firm FoldRX in 2010  Entered into an alliance with not currently on the market for any indication & by the end of generic products through Piramal  Agreement with Zydus Cadila Biocon to strengthen its product 2012 expect Phase III data on also gave Abbott licenses for 24 portfolio in biologics and diabetes around 15 additional assets branded generic productsSource: Company Websites. Street Research. 19
  20. 20. Benchmarking Pharma MNCs Merck Astra Zeneca Novartis  Company’s goal is to derive 25%  46% of sales and marketing  Strong presence in emerging Revenue of global pharmaceutical and workforce based in EMs markets in biosimilars segment from vaccine revenues from EMs  Expand its low-cost  Revenue in EMs grew to over US$5.1 billion, a 16% increase  Looking at a mix of inorganic growth and local production Emerging manufacturing network and investments in clinical trials in  Portfolio of more than 100 generic products being  Combined net sales in the six priority emerging markets grew at Markets EMs licensed across 30 EMs the more rapid pace of 12%  India: Announced creation of a  India: Operates a TB research  India: Investing in localized JV with Sun Pharma to facility. Signed an agreement products and commercial develop, manufacture and with Torrent to supply AZ infrastructure commercialize branded generics with generics. Signed a licensing  China: Company is pursuing  China: Signed a framework agreement with Aurobindo targeted licensing, acquisition andStrategy in agreement to establish a JV with pharma for supplying formulations alliance opportunities Emerging Simcere Pharmaceuticals for serving Chinas rapidly expanding  China: AZ is also working with the Chinese Ministry of  Russia: Alliances with govt., regions and local companies and Markets health care needs by providing significantly improved access to Health in improving patient health by strengthening the strengthening key account management to expand reach quality medicines in major training of general practitioners  Brazil: Leveraging Novartis brand therapeutic areas portfolio  Several drugs with long periods of  Created a single R&D  Because of recently launched expected market exclusivity organization to improve products with rapid sales growth,  Strategy remains to maximize productivity and secure targeted Novartis is less affected byReactions to the portfolio, deliver the levels of return patent expiries pipeline, manage cost, expand  AZ works closely with external  Strong product pipelines Patents geographically & diversification parties and acts as a partner to  Strong in biosimilars segment Expiry  Invested in biosimilars business and announced a partnership with access the best science  Supplements EM portfolio with  Company expects its broad portfolio with varied business PAREXEL to develop biologics branded generic products sourced cycles to deliver sustainable  Acquisition of Shering-Plough externally & marketed under AZ developmentSource: Company Websites. Street Research. 20
  21. 21. Case Studies
  22. 22. Case Study 1: Takeda’s BlockbusterPrevacid goes off patent in Nov 2009 Before patent expiry (2007) After patent expiry (2010)  Pharmaceuticals = 92%  Pharmaceuticals = 92%Revenue Mix:  Diversified = 8%  Diversified = 8% R&D  R&D Expenses = US$1,638 Million  R&D Expenses = US$3,187 Million  R&D Expenses as a % of sales = 15%  R&D Expenses as a % of sales = 20% Expenses Top 3 Drugs  Prevacid = US$3,315 Million  Actos = US$2,631 Million  Actos = US$2,229 Million  ActoplusMet = US$359 Million (US)  ActoplusMet = US$ 229 Million  Prevacid = US$241 Million  Japan = 65%  Japan = 55% Geographic  North America = 24%  North America = 36% Revenue Mix   Europe = 10% Asia = 1%   Europe = 8% Asia = 1% Sales of Prevacid (2003-2010) Key Elements of Strategy  Enhancement of the R&D pipeline US$ Billions  In-house R&D activities4.00 3.57  In-licensing and alliance activities 3.20 3.33 3.31 3.32 3.30  Product life-cycle management3.00 2.51  Strengthening the global management structure2.00  Enhancement and expansion of the business foundation in the tri- polar markets (Japan, U.S. and Europe)1.00 0.24  Improvement of the corporate governance and internal control0.00 system  Reinforcement of the implementation of the product strategies 2003 2004 2005 2006 2007 2008 2009 2010 Source: Takeda, News Runs. 22
  23. 23. Case Study 2: Merck’s BlockbusterZocor goes off patent in Jun 2006 Before patent expiry (2005) After patent expiry (2010)  Pharmaceuticals = 94%  Pharmaceuticals = 87%Revenue Mix:  Others = 6%  Others = 13% R&D  R&D Expenses = US$3,848 Million  R&D Expenses as a % of sales = 17%  R&D Expenses = US$11,000 Million  R&D Expenses as a % of sales = 24% Expenses  Zocor = US$4,382 Million  Singulair = US$4,987 Million Top 3 Drugs  Fosamax = US$3,191 Million  Cozaar = US$3,037 Million  Remicade = US$2,714 Million  Januvia = US$2,386 Million  USA = 58%  USA = 44% Geographic  EMEA = 24%  EMEA = 30%  Japan = 7%  Japan = 8% Revenue Mix  Others = 11%  Others = 18% Sales of Zocor (2003-2010) Key Elements of Strategy US$ Billions  Innovation  Advancement of drug candidates through pipeline6.00 5.01 5.20  Diversify 4.38  Supplemented its internal research with aggressive licensing and4.00 2.80 external alliance strategy focused on the entire spectrum of collaborations from early research to late-stage compounds2.00 0.88  Cost Cutting 0.66 0.56 0.47  Initiating cost cutting measures designed to reduce the Company’s0.00 cost structure, increase efficiency and enhance competitiveness 2003 2004 2005 2006 2007 2008 2009 2010  Acquisitions & Alliances Source: Merck, News Runs. 23
  24. 24. Case Study 3: BMS BlockbusterPravachol goes off patent in Apr 2006 Before patent expiry (2003) After patent expiry (2010)  Pharmaceuticals = 71%  One Biopharmaceuticals segment which is engaged inRevenue Mix:  Oncology Therapeutics Network = 11% the discovery, development, licensing, manufacturing,  Nutritional = 10% marketing, distribution and sale of innovative  Others = 8% medicines R&D  R&D Expenses = US$2,279 Million  R&D Expenses = US$3,566 Million Expenses  R&D Expenses as a % of sales = 11%  R&D Expenses as a % of sales = 18%  Pravachol = US$2,827 Million  Plavix = US$6,666 Million  Plavix = US$2,467 Million  Abilify = US$2,565 Million Top 3 Drugs  Taxol = US$934 Million  Avapro = US$1,176 Million  USA = 62%  USA = 62% Geographic  EMEA = 24%  Europe = 18%  Other Western Countries = 6%  Emerging Markets = 4% Revenue Mix  Pacific = 8%  Japan and Asia Pacific = 8% Sales of Pravachol (2003-2010) Key Elements of Strategy  Innovation: US$ Billions  Developing new compounds across major therapeutic categories 2.83 2.64  Selective Integration and external collaboration3.00 2.26  Remain focused on acquisition and licensing strategy known as the2.00 “string-of-pearls” with transactions which could range from 1.20 collaboration and license agreements to the acquisition of1.00 companies 0.44  Continuous Improvement through advancing pipeline, cost savings and 0.200.00 maintaining a strong financial position  Maintain core focus through the sale of various mature brands and 2003 2004 2005 2006 2007 2008 2009 2010 the related manufacturing facilities in various countries Source: BMS, News Runs. 24
  25. 25. Course of Action
  26. 26. Course Of Action Before Patent Expiry After Patent Expiry  Invest heavily in R&D to lessen  Introduction of new products is the impact of the patent cliff by not expected to generate the Innovate increases R&D spending from same magnitude of sales as the 12% to15% of sales products losing exclusivity  M&A before the patent expiry  M&A post the patent expiryMergers and will enable the company to means the company is looking to stave off the loss in sales. E.g.. diversify its business and Alliances Wyeth and King Pharma possibly exit the category  To maintain its market share in  Being one of the generics Invest in Lipitor, Pfizer may look to producers of Lipitor will be develop a generic Lipitor and important to at least maintain Generics leverage its brand name market share E.g. Aurobindo  Develop a new form of Lipitor  Procardia – a drug by Pfizer Product drug (chewable) with different facing patent expiration, was dosage strength or a later marketed as an extendedModification modification of the molecule release form, Procardia XL  Launching NDDS based  Dilacor XR is a good example of formulations 2-3 years prior to a product with a lifecycle that NDDS patent-expiry, will reduce has been extended by a new impact of generic competition formulation and a new indication  Take further steps to  Listerine is still a hot favoritePromotional strengthen the position of the even though its patent expired brand name almost half a century ago ActivitiesSource: Company Websites, Street Research. 26
  27. 27. Course Of Action (Cont’d.) Before Patent Expiry After Patent Expiry  Firms raise prices 3yrs prior to  Merck dropped the price of Zocor to Price patent expiration and only generic levels to maintain sales, but after the entry of generics, margins and net income was crushed Strategies they start reducing their price  Settlements can buy additional  Companies may have to defend its Legal time during which brand intellectual property rights, including retains market exclusivity and initiating patent infringement lawsuitsProceedings delays generic  Pfizer laid out a cost reduction  Pfizer could look to cut down on sales plan in 2005, in anticipation of and marketing costs,, R&D expenses inCost Savings Zoloft’s 2006 patent expiration categories, it doesn’t consider to be core such as Animal Health  Focus on core competence by  Pfizer may look to divest its Animal offloading or divesting non Health Care business and focus on Divest core assets (animal, capsules)  Selling Capsugel to KKR and vaccines, cardio and pain management in the coming years Nutritions business to Nestle  Seeking US FDA regulations to  Selling Lipitor OTC may be a good sell Lipitor OTC, may be a bad idea – even though it will face genericsShift to OTC idea before 2011 and prices will be much lower but at least Lipitor will maintain some share  Can get into contracts with  R&D contracts with governmentGovernment governments to sell near to expiry drugs at discount prices, sponsored institutes E.g.: Pfizer and ChemRar in Russia contracts thereby establishing a relationship. E.g. GSK & BrazilSource: Company Websites, Street Research. 27
  28. 28. Acquisition of Bio-pharmaceuticals Overview No. of US FDA Approved NMEs M&As involving biotech companies are gathering momentum Drivers: Need to fill product pipelines to replace drugs losing patent 50 Number of Approvals protection and gaining access to complementary technologies 40  An attractive product portfolio and focused pipeline 40 37 35  Sales of biotech products are outpacing the total pharmaceutical 30 market, growing 12.5% to $75bn in 2007 30 27 25  Some 22 biotech drugs have reached blockbuster status and the 21 23 strong R&D pipeline of biotech medicines will augment the 20 20 17 18 current portfolio of over 100 commercial products Competition for late-stage candidates will shift the focus to earlier- stage product deals as biosimilars gain market approval, generic 10 players will seek to establish their presence by acquiring products and technology 0 Current economic environment favors an acquisition than an IPO 97 98 99 00 01 02 03 04 05 06 07 Recent Biopharma M&A Deals Potential Opportunities for PfizerAcquirer Target Year Therapeutic Area Company % Leading Biopharma dependence on CompaniesBoehringer Immunology, Oncology,Ingelheim Macrogenics 2010 Respiratory, Cardio, BiopharmaGmbH Metabolic and Infectious Amgen Novo Nordisk 85Cephalon Mesoblast 2010 CNS and Cardiovascular Roche 65 AmylinBristol- ImClone 2008 Oncology Merck 35Myers ImCloneAstra Eli Lilly 30 MedImmune 2007 VaccinesZeneca Bayer 15Schering- Organo Womens healthcare and Teva 2007 Pfizer 15Plough BioSciences Animal care products Source: Datamonitor.. 28
  29. 29. Opportunities across the Value ChainDrug Discovery Phase – I Phase – II Phase – III Launch Post Launch Clinical TrialsIdentify the unmet Studies typically Evaluate effectiveness Studies in a larger Raise awareness of Studies to furthermedical need and involve understanding of the medicine group of patients patient benefit and understand themarket opportunity how the potential to gather information appropriate use safety profile of the medicine is absorbed Lasts from several about medicine in largerUndertake laboratory in the body and months to two years, effectiveness and Market and sell Populationsresearch determine an and involves up to safety of the medicine; record and appropriate dosage several hundred Medicine analyze reported side and side effects patients effects; reviewScope for Contract Outsourcing Outsourcing Outsourcing OutsourcingDrug Discovery Clinical Trials Clinical Trials Clinical Trials Phase-IV TrialsPfizer’s Pfizer’s Novartis’ GSK’s Indiana CTSIcollaboration with collaboration with collaboration with collaboration with partners withWuXi Clinigene EcronAcunova Metropolis GVK Bio Source: Pfizer, Datamonitor.. 29
  30. 30. Thank You

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