21 Gnostam Pharma Report 26th March 2012 1 Performance Through Independent Research Changes in the Global Pharma Market: new drug launches and drugs coming off patent EXECUTIVE SUMMARY: makeup. Pharma blockbuster drug sales make up more There are several block-buster drugs that of the overall sales of the large Pharma groups are being developed by the major than ever before, as the winner takes all nature Pharma companies’ world wide that will of the blockbuster drugs squeezes the rest of substitute the current existing top 10 drug the market and intensifies the competition in earners. Pfizer will loose its dominant the “generic drug” area. The rate of growth of position in the industry because its prescription blockbuster drugs now accounts biggest drug, the cholesterol drug, Lipitor for ¾ of the entire prescription drug market. currently worth $10.9 is off patent since November 2011. The new frontier for Pharma is so called Pharmacogenomics. Pharmacogenomics aims However this trend is changing. As can to develop rational means to optimize drug be seen in the table below, Roche in therapy, with respect to the patients Genotype, 2014 will be the biggest beneficiary of to ensure maximum efficacy with minimal global drug sales, with the cancer drugs adverse effects. Such approaches promise the being the biggest drugs in the world. This advent of "personalized medicine"; in which is partially because of the loss of patents drugs and drug combinations are optimized by Pfizer’s Lipitor and Bristol Myers for each individuals unique genetic Plavix, both cholesterol drugs, and Source: IMS Health forecast, World Drug Situation, WHO
2 Individual Investments in Companies with high prospective Mega Drug Potential March 26th 2012 Gnostam Pharma Report Subject to Change at any time: 26th March 2012
43 Gnostam Pharma Report 26th March 2012 3 partially a result of the shift away from small Sclerosis. molecule drugs of the past to the larger protein biologicals such as cancer and HIV drugs, The companies with the best drug which are significant both for their ability to pipelines’ are Roche, Glaxo Smith Kline, slow the rate of progress of cancer and other Biogen, Gilead, and several smaller debilitating diseases, [HIV] and for their cost companies like Qiagen, Questcor, which tends to be 10 times that of the early Spectrum Pharmaceuticals, and Vertex. cancer drugs like Taxol, breast cancer. We will discuss the opportunities for investment in more detail in this paper. Introduction: The other great area of growth is that of vaccines. Prevnar, a conjugate This report examines the growth of Biotech drugs relative to their more pneumococcal vaccine, and Gardasil, for tradition molecule drugs, which have prevention of cervical cancer, are the first produced some of the greatest gains for two blockbuster vaccines investors in the Pharmaceutical Industry As mentioned, the greatest innovation in new over the last 20 years. drugs has been in the area of Cancer The double promise of biotechnology and treatment, which will become the biggest genomics, especially if delivered through selling market for drug companies. This is molecule nanotechnology has been because Cancer has proven to have endless perhaps oversold, as is usually the case in mutations and can be treated effectively as for emerging technologies. HIV, with cocktails of drugs that “tell” the DNA in the affected cells to stop growing, reducing This paper attempts to lay out some more if not completely arresting the disease. The sensible strategies that an investor might other areas of development for drugs are pursue in this space. Diabetes, Hepatitis-C, HIV, and Multiple Source: IMS Health forecast, World Drug Situation, WHO
65 Gnostam Pharma Report 26th March 2012 Exhibit 1. Drugs of major Pharma Co.’s off, or coming off patent 4 Source: WHO, IMS Health BIOTECHNOLOGY DRUG industrys fastest-growing market. The DEVELOPMENT: costs of preventing and treating the condition worldwide are forecast to rise Biggest Markets for Drug Research: from $376 billion in 2010 to $490 billion by 1. Cancer: There have been very substantial 2030, says new research. gains in the knowledge of how cancer actually 285 million people, or 6.4% of the worlds evolves. As cancer is a DNA disorder, the adult population, are currently estimated to research into the evolution of the disease inside be living with diabetes, and this figure is the cells that are affected has been the key to set to explode to 438 million (7.8% of the detecting the changes in each patient. The global adult population) by 2030, Frost & trigger of the DNA damage in a cancer cell can Sullivan has reported. be random, a genetic weakness of the patient, as well as external influences. The new drugs The worlds biggest diabetes populations that have been developed work on a cellular are in India, where 50.8 million live with the level, and therefore cam be personalized, condition, and China (43.2 million). 70% of aimed at particular changes taking place in cases are currently found in low- and cells. In order for the genetic evolution in middle-income countries, with prevalence cancer cells not to lead to cancerous cells that ranging from 10.2% in the western Pacific are resistant to drugs, these new drugs, to 3.8% in the African region, according to [Vemurafenib~Roche, Glaxo~Dabafenib] target K Srinivas Sashidar, research analyst at a mutation in a gene called B-Raf, present in Frost & Sullivan. more than ½ of malignant melanomas, inhibiting growth beyond the point of healthy As well as the significant global burden of cells, [reducing abnormal growth as with treating and preventing diabetes, the cancerous cells]. These new dugs have condition imposes a number of economic absolutely huge economic potential, dwarfing burdens, including lost productivity and the Cholesterol Drugs from Pfizer and Astra foregone economic growth, he adds. Zeneca. The 40-59 age group is currently most 2. Diabetes: represents the pharmaceutical affected by diabetes, but by 2030 this
87 Gnostam Pharma Report 26th March 2012 5 dominance is expected to shift to 60-79-year- evidence on new drugs, we are taking olds. An increase in the number of patients with an important step toward that goal." the type 2 form of the disease, plus the (FDA News PO3-89, 2003) emergence of a number of potential new drug treatments, is expected to raise competition in The pharmaceutical industry is using the marketplace, says the report. pharmacogenomics in its drug- development pipeline by correlating The main segments of the market are insulin and oral anti-diabetes treatments. While quantitative measures derived from metformin remains the first line of choice treatment-specific diagnostic testing among the latter segment, new forms of co- and the associated therapeutic therapies, glucagon-like peptide (GLP) outcome, allowing for FDA Phase agonists, dipeptidyl peptidase (DPP)-IV IIA/IIB of clinical trials with the aim of inhibitors and sodium-dependent glucose (co) accelerating and facilitating the transporter (SGLT) inhibitors are expected to development of new molecules. This become strong competitors in the near future. has reduced costs, as there is less need for defining diagnostic markers ECONOMICS OF DRUG DEVELOPMENT: to select or predict individual patients who will respond to therapies. Tests “Pharmacogenomics holds great promise to based on the genotype of an shed scientific light on the often risky and individual can be considered as a costly process of drug development...we intend type of biomarker test. The term to do all we can to use it to promote the biomarker can be referred to any development of medicines. By providing characteristic that can be measured practical guidance on how to turn the explosion as an indicator of a normal biologic of pharmacogenomic information into real
90 Gnostam Pharma Report 26th March 2012 6 process, a pathogenic process or a effective method due to, accessibility pharmacologic response to a therapeutic and management of data agent. Biomarkers have been proposed as implementation into clinical practice. powerful tools, given their capability of bridging animal and human data, guiding The main criticism of the drug dose and adjustments, increasing Pharmagenomics model is that it safety in animal models and in early clinical creates more opportunities for high development, and establishing initial proof of returns on capital for the “owners” of efficacy in proof-of-concept studies. the discovery process, but it does little in terns of disease prevention. To be successful tools in clinical practice, In fact there is almost no incentive to biomarkers should present high-positive and prevent disease, just find a negative-predictive values, be simple, easy patentable cure for bad diseases that to repeat, sourced from easily accessible arise from bad patient habits. body fluids and tissues, and cost effective. Cancer Drugs: The predictive nature of biomarkers can be translated in the field of pharmacogenomics. Cancer is very heterogeneous, Contrast this with testing in human patients, varying both genetically and which might reach a high level of accuracy phenotypically among patients who and precision, but will be a less cost– have identical types and stages of
21 Gnostam Pharma Report 26th March 2012 7 the disease. Furthermore, a significant under development. proportion of breast cancer patients are Currently-available DPP-IV inhibitors include not responding to chemotherapy Merck & Cos Januvia (sitagliptin), Bristol- uniformly, something that is likely to be Myers Squibb/AstraZenecas Onglyza genetically determined. Individualized (saxagliptin) and Novartis Galvus therapies for various types of solid (vildagliptin), and others are in tumors are now a reality. The first steps development. Also, numbers of SDLT2 have involved the evolution of tumor inhibitors and glucokinase activators - new classification, disease prognosis, classes of investigational drugs for the molecularly targeted treatment and treatment of type 2 diabetes - are currently response to therapy based on molecular in clinical testing, says the study. features. In this regard, diagnostic tests Turning to the insulin market, which is have been developed and are now dominated by modern insulin’s and readily available for several treatment analogues, Mr Sashidar says he expects procedures in cancer patients. effective insulin analogues and long-acting insulin’s to raise their market share in future, with competition likely to increase with the Diabetes Drugs: introduction of biosimilars. The first drug from the GLP-1 pathway to The biggest gain in this market will accrue receive European Commission approval was most likely to Novo Nordisk, which is set to Eli Lilly/Amylins Byetta (exenatide), while benefit the most from the huge epidemic of Novo Nordisks Victoza (liraglutide) is the diabetes, especially in emerging markets. first GLP-1 analogue with 97% similarity to natural gut hormone. Various longer-acting Hepatitis C: formulations of GLP-1 analogues are now
43 Gnostam Pharma Report 26th March 2012 8 Hepatitis C is one of the most serious chronic hepatitis C virus infection, and infectious diseases in the world. Hepatitis C leads to long-term eradication of the virus infects an estimated 170 million virus in approximately 54% of people. people worldwide. It is a major cause of Treatment response is dependent on the liver cirrhosis, end-stage liver disease and infecting genotype, with 76 to 80% of hepatocellular carcinoma. It is also a those with genotypes 2 and 3, but only leading cause of liver transplant in the approximately 40% with genotype 1 or 4 USA. The virus is primarily transmitted achieving a sustained virologic parenterally, but there is significant response. The company that has the best mother-to-child transmission. Partly due to patentable pipeline for the treatment of this the viruss genetic diversity, it evades the global epidemic is Vertex Pharamceutcals, host immune response and it has been [VRTX]. difficult to identify candidate vaccines. However, significant advances have been CONCLUSI ONS: made in the treatment of chronic hepatitis As molecule drugs come off patent, the C virus infection. Currently, the traditional Pharma blockbusters are combination of pegylated interferon-alpha becoming more and more difficult to and ribavirin is the standard treatment for substitute. The effect of this reduction I
65 Gnostam Pharma Report 26th March 2012 9 “patentable” molecules, has been the rise of 2007 there was a 22% reduction on drug generics which have significantly impacted the costs as competition from generics has cost of prescription drugs. It has been had a major influence on what patients estimated that had Lipitor not lost their patent, consume, and their health outcomes. overall prescription drugs, sales for Pfizer would have 12% higher just for Lipitor in 2007, see 4. There will probably be more pressure Exhibit 5. on FDA to relax some standards on experimental drugs developed by new The United States is the leader in medical start ups, and more focus on a “venture research, including pharmaceutical approach to drug development, [as with development. U.S. drug prices are among the Bristol Myers Squibb, buying into late highest in the world, and drug innovation is stage Phase II pipelines of niche busters, correspondingly high. In 2000 U.S. based firms that can be used in “drug cocktail developed 29 of the 75 top-selling drugs; firms approaches” for serious diseases such from the second-largest market, Japan, as HIV, Hepatitis and most of all cancer. developed eight, and the United Kingdom contributed 10. France, which imposes price 5. The focus on the reduction of the controls, developed three. growth in healthcare spending costs, suggests that since the greatest Murray Aitken of IMS Healthcare Insight, the component of new costs in healthcare premier economic research body in Pharma arise from specialists driven healthcare economics has suggested that: and relative equipment, that the pressure will be increasingly placed by private 1. Overall spending in drugs is going to rise healthcare insurers on specialist less than 8% pa for period to 2017, as generics networks to justify the explosion of become far more available. However an treatments which not always result in increasing amount of the benefits to drug better patient healthcare results, which is companies will come from very few blockbuster most cases are best if preventative drugs. measures are used, rather than the latest and most expensive technologies 2. This implies hard times for small molecule developed by specialist networks. manufacturers. Sales growth us likely to slow and put pressure on research budgets and force many mergers. Reduced revenues are constraining innovation. 3. Greater use of generics will bring costs savings to the healthcare industry. From 2003- Sources & References: IMS Healthcare Insight, Norwalk Connecticut, Murray Aitken. Ernst Berndt, MIT Professor in Applied Economics. Professor David Cutler, Economics Dept, Harvard University. Caves, M. Whinston, and M. Hurwitz, “Patent Expiration, Entry, and Competition in the U.S. Pharmaceutical Industry,” Brookings Papers on Economic Activity 1 (1991): 1–48 ; E. Berndt, I. Cockburn, and Z. Griliches, “Pharmaceutical Innovations and Market Dynamics: Tracking Effects on Price Indexes for Anti-depressant Drugs,” Brookings Papers on Economic Activity: Microeconomic 2 (1996): 133–188 ; and E. Berndt, M. Kyle, and D. Ling, “The Long Shadow of Patent Expiration: Generic Entry and Rx-to-OTC Switches,” in Scanner Data and Price Indexes, ed. R. Feenstra and M. Shapiro (Chicago: University of Chicago Press, 2003), 229–267.
Gnostam Pharma Report 26th March 2012 Most common transmission method of Hepatitis C 10 Area of the world most affected by increased mortality from hepatitis C . The dark red are >100 occurrences for 100,000 inhabitants. The orange > 30 for 100,000 inhabitants
Gnostam Pharma Report 26th March 2012 11 Gnostam LLC performance Graphs Gnostam was established February 4th 2004. Since inception the annualized rate for return for a client portfolio managed by Gnostam LLC has returned a total 8.4%% to February 29th 2012.
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