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BioPharma Outlook 2013 presentation

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We've helped investors navigate the dynamic BioPharma industry for decades. Our flagship Global Pharmaceutical and Biotechnology Outlook maps the highs and lows of the year, assessing the critical …

We've helped investors navigate the dynamic BioPharma industry for decades. Our flagship Global Pharmaceutical and Biotechnology Outlook maps the highs and lows of the year, assessing the critical success factors that can shape the industry's future.

Based on extensive research and comprehensive data analysis, this volume is a ready reference for monitoring new developments and their investment and strategic implications. From the macro analysis of over 200 companies arise ~60+ actionable capsules categorized into Global Pharma, Japanese Pharma, Mature Biotech, Rising Stars (unprofitable biotech) and Indian Pharma.


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  • 1. GLOBAL PHARMACEUTICAL &GLOBAL PHARMACEUTICAL & BIOTECHNOLOGYBIOTECHNOLOGY OUTLOOKOUTLOOK --20132013
  • 2. Global Pharmaceutical & Biotechnology Outlook 2013 –Large Cap Pharma Vishal Manchanda, B.E., MBA vishal@mpadvisor.com Vijayakannan, PhD vijay@mpadvisor.com +1.646.657.3787
  • 3. 3 MP Advisors GLOBAL PHARMACEUTICALSGLOBAL PHARMACEUTICALS –– 20132013 OUTLOOKOUTLOOK Opportunities - New drug approvals will transform the standard of care in several therapy areas, Outcome studies to transform market potential of drugs, Restructuring/deconsolidation, Discipline in M&A, Enhanced insurance penetration in the US to improve drug penetration Challenges - Fiscal pressures to reduce healthcare spend will translate into higher rates of therapeutic and generic substitution, Investigational studies in high risk therapy area may continue to disappoint Global Pharma’s Cutting Cost to Manage the Gap
  • 4. 4 MP Advisors HIGHLIGHTS FOR 2013HIGHLIGHTS FOR 2013 –– GLOBAL PHARMAGLOBAL PHARMA’’SS Ramp up of potential blockbusters drugs that were approved in 2012 Will Large Cap Pharma get aggressive with M&A Strength of Innovation Vs Fiscal Pressures Cost containment and growth focus from Value added Innovation Europe – Regulatory Pressures and Increasing Pro Generic Stance Will US fall to Pricing Pressures? Outcome from Major Clinical Studies/Events expected to reshape Competitive Dynamics across several therapy classes Potential New Drug Approvals in 2013
  • 5. 5 MP Advisors WE MIGHT SEE A NEW STANDARD OF CAREWE MIGHT SEE A NEW STANDARD OF CARE IN MANY THERAPY AREAS GOING FORWARDIN MANY THERAPY AREAS GOING FORWARD New Generation Oral anticoagulants Dyslipidemia – PCSK9 antibody Respiratory COPD and Asthma –novel combinations and once daily LABA+ICS Alzheimer’s – BACE Inhibitors Diabetes –DPP4 inhibitor and Once weekly GLP-1 agonists Metastatic Melanoma –BRAF+MEK inhibitors Multiple Sclerosis – Novel Oral and Injectable options Breast cancer Prevalence, Market Expansion Opportunities and upcoming late stage pipelines have been discussed
  • 6. 6 MP Advisors GROWTH DRIVERSGROWTH DRIVERS -- NEW DRUG APPROVALSNEW DRUG APPROVALS IN 2012IN 2012 Source: MP Advisors, Company Reports
  • 7. 7 MP Advisors GROWTH DRIVERSGROWTH DRIVERS -- POTENTIAL DRUGPOTENTIAL DRUG APPROVALS IN 2013APPROVALS IN 2013 Source: MP Advisors, Company Reports
  • 8. 8 MP Advisors GLOBAL PHARMA DIVIDEND YIELD AND NETGLOBAL PHARMA DIVIDEND YIELD AND NET CASH POSITIONSCASH POSITIONS Source: MP Advisors, Company Reports
  • 9. 9 MP Advisors Patent Exposure: Global PharmaceuticalsPatent Exposure: Global Pharmaceuticals Source: MP Advisors, Company Reports
  • 10. 10 MP Advisors GLOBAL PHARMA & BIOTECHNOLOGYGLOBAL PHARMA & BIOTECHNOLOGY OUTLOOK 2013OUTLOOK 2013 Japan PharmaJapan Pharma 日本の製薬会社日本の製薬会社 ! ! Ripple Mehta, Pharmacist, MBA ripple@mpadvisor.com +1.646.657.1016 Devesh Singh, Pharmacist, MBA devesh@mpadvisor.com +1.646.657.1016
  • 11. 11 MP Advisors JAPAN PHARMAJAPAN PHARMA -- TABLE OF CONTENT (TOC)TABLE OF CONTENT (TOC) I. Japan Pharma: Looking forward in 2013 and beyond Stand on individual companies Changing political scenario is likely to accelerate the peace of reforms II. Analysis on Innovators Companies – Innovation and consolidation continue to serve as catalyst Rich Looking Pipeline Could be delusive Key R&D catalysts from Japan pharma Key upcoming milestones Expected upcoming launches from global companies in implications Likely implications of recent consolidation activities Sustainability thru increasing overseas base III. Analysis on Generic Companies 2012 – price cuts & implications New layer for reforms playing out well Dominance of big players in dispensing pharmacy Shrinking general practitioners market DPC hospitals are new growth avenue IV. Analysis on Drug Chain Stores Macro forces favoring Drug Chain Stores Success story from a few, likely to be replicated by followers V. Analysis on Biogeneric Companies Evolving Biogenerics space in Japan
  • 12. 12 MP Advisors LARGE PHARMALARGE PHARMA –– RICH PIPELINE (?)RICH PIPELINE (?) First in class targets like TLR7 & PPARy can be attractive Diabetes & Immunological Disorders 056 Dainippon Sumitomo Novel validated targets for cancer, working on Raf/MEK pathway Cancer7413Chugai Has two first in class targets, Chemokine receptor 4 antagonist & A33 for cancer Cancer489 Kyowa Hakko Kirin Neuropeptide Y Y5 receptor, a very attractive target for obesity, but success rate low Metabolic & Infectious Diseases 3126Shionogi R&D portfolio consisting of antibodies for cancer, with some good target like PPARy Cancer & Infectious Diseases 51317Daiichi Sankyo Good novel targets in different therapeutic class Diabetes, Neurology, Cardio & Immunology 3911Mitsubishi Tanabe Antibody against folate receptor alpha, targeting cancer, can be a useful anticancer agent Neurology & Cancer 8100Eisai R&D portfolio with some novel first in class targets, like surviving suppressant, GPR119 agonist Cancer & Metabolic 71420Astellas Novel, varied targets for cancerCancer19419Takeda CommentsMajor FocusPhIII CandidatesPhII CandidatesPhI CandidatesCompany First in class targets like TLR7 & PPARy can be attractive Diabetes & Immunological Disorders 056 Dainippon Sumitomo Novel validated targets for cancer, working on Raf/MEK pathway Cancer7413Chugai Has two first in class targets, Chemokine receptor 4 antagonist & A33 for cancer Cancer489 Kyowa Hakko Kirin Neuropeptide Y Y5 receptor, a very attractive target for obesity, but success rate low Metabolic & Infectious Diseases 3126Shionogi R&D portfolio consisting of antibodies for cancer, with some good target like PPARy Cancer & Infectious Diseases 51317Daiichi Sankyo Good novel targets in different therapeutic class Diabetes, Neurology, Cardio & Immunology 3911Mitsubishi Tanabe Antibody against folate receptor alpha, targeting cancer, can be a useful anticancer agent Neurology & Cancer 8100Eisai R&D portfolio with some novel first in class targets, like surviving suppressant, GPR119 agonist Cancer & Metabolic 71420Astellas Novel, varied targets for cancerCancer19419Takeda CommentsMajor FocusPhIII CandidatesPhII CandidatesPhI CandidatesCompany
  • 13. 13 MP Advisors KEY CATALYSTS FOR 2013KEY CATALYSTS FOR 2013 Edoxaban (DAIICHI SANKYO) - Though The Last Entrant In The Market – Has Key Differentiating Features To Become The Market Leader In the Factor Xa Space: We are very bullish on Edoxaban which is the focal point of our Investment thesis for Daiichi Sankyo and we are confident that, – 1) It will show positive data in PhIII, 2) Gain US approval, 3) Differentiate itself sufficiently among factor-xa inhibitors market and can generate ~$2.5b, and 4.) All concerns around Edoxaban are well addressable. Dolutegravir (SHIONOGI) - approval likely in 2013 – A $2.5b opportunity: this is the first drug showing superiority of this extent to current standard of care Atripla (Gilead, FY 11 sales $3.2b); though the competitive landscape is rapidly changing in anti-HIV regime, we expect dolutegravir has potential to cross $2.5b. Canagliflozin (MITSUBISHI TANABE- MT) - Emerging As Best In Class SGLT-2 Inhibitor: Based on the data available so far and our talks with MT, we are extremely positive about the commercial success of the candidate. At this time, we are expecting a moderate peak sales potential of ~$1b while assuming 80% probability of success. KRP-108 (KYORIN) – Redesigned LABA/ICS combo Is poised well to Leverage Japanese market potential: It is a combination of two best selling LABA/ICS combinations i.e. Advair and Symbicort. The two generated ¥40b and ¥20b respectively in Japan in 03/12 and are growing; the overall trend of Rx combination drugs in Japan is expected to grow further in COPD/ASTHMA class. TAK-875 (TAKEDA) – A Trump Card: our current understanding suggests that, if successful, it can replace the use of sulfonylureas initially and then can also be used concomitantly with DPPIV inhibitors or even as substitute to them. TAK-875 is also positioned well for first line therapy to metformin refractory patients– each of these segments carries ~$1b opportunity for Takeda. A Few Candidates Carry Potential To Impact Overall Therapy Paradigm And Investment Scenarios For Their Originators!
  • 14. 14 MP Advisors UPCOMING KEY MILESTONES IN 2013UPCOMING KEY MILESTONES IN 2013 Edoxaban (PhIII, Stroke Prevention in Atrial Fibrillation, Daiichi-Sankyo) Top line data From ENGAGE AF study by mid 2013 TA-7284- Canagliflozin (UR, Type 2 diabetes, Mitsubishi Tanabe/JNJ) outcome at FDA advisory committee meeting in Jan 2013 and Global approval Dolutegravir (UR, HIV, Shionogi) and its combo approval in US SYR-322+ Actos (UR, Diabetes, Takeda) combination - US approval in January’13 TAK-875 (PhIII, Diabetes, Takeda) clinical data with Sitagliptin Latuda (UR, Bipolar I disorder, Dianipon Sumitomo) US approval in bipolar I disorder KRP-108 (UR, Asthma, Kyorin) JP approval: KRP-108 Some Of the Approaching Milestones Are Important To Watch out For – They DO not Only determine the success of the candidates but may give direction to long term strategy of their originator!
  • 15. 15 MP Advisors GLOBAL INNOVATOR COS ACTIVITIES IN JAPANGLOBAL INNOVATOR COS ACTIVITIES IN JAPAN Amongst Global Companies - Pfizer, Roche, BMY, GSK, Merck Will BE Most Active in Japan – They may bring surprises in the Coming Year on the Consolidation Front as well! • Expected launches in 2013-2014 from global companies will increase competition (mainly in Respiratory, oncology and RA) for domestic companies: Unfavorable macro environment for global pharma companies in US (High regulatory bar for approval) and EU (pricing pressure) has pushed global players to focus more on emerging markets and Japan for further growth. In a comparison of cos. on the strength of their Medical Representatives force in Japan, Pfizer leads with ~3000 reps with other global companies taking 5 out of the top 10 positions. This demonstrates global Pharma’s zeal to tap the Japan market through new innovation. Amongst global pharma giants, Novartis and Pfizer received highest approval in last 5 years followed by Merck and GSK, while GSK and Pfizer have the highest no. of products in late stage development or pending approval from PMDA. • In the next two years, key global pharma innovation getting approval in Japan is Pfizer’s Tofacitinib (First in class oral JAK inhibitor, RA, Approval expected in 2013), GSK and Novartis’ respiratory franchisee and Bayer’s Regorafenib. These products have the potential to challenge the market share of the innovator domestic companies’ key contributors, i.e. Actemra and Avastin from Chugai, and Mitsubishi Tanabe/Kyorin’s Respiratory franchisee. While expected launch of SGLT2 inhibitors (BMY- Dapagliflozin), GLP- analogues (Sanofi- Lixinetide) and Odanacatib (Merck) will expand the diabetes and osteoporosis market in Japan.
  • 16. 16 MP Advisors MAJOR M&A IN JAPAN IN LAST 5 YEARSMAJOR M&A IN JAPAN IN LAST 5 YEARS Source: MP Advisors; MHLW NANA25-Apr-12Boston BiomedicalDainippon Sumitomo NANA3-May-12Multilab (Brazil)Takeda NA0.01218-Jul-11Victory PharmaShionogi NA0.03121-Dec-11IntellikineTakeda NA0.065-Oct-12LigocyteTakeda NA0.146-Nov-12Envoy TherapeuticsTakeda NA0.1817-Mar-10Home Diagnostics Inc.Nipro Pharma NA0.2618-Dec-09AkaRx IncEisai NA0.3116-Sep-09BMY’s Indonesian Unit+ Asian RightsTaisho Pharma 38.700.3110-Feb-10SSP CoBoehringer Ingelheim GmbH 43.000.4314-Jul-09NovenHisamitsu NA0.5016-May-11Taiyo (57% stake)Teva NA0.8028-Feb-11PlexxikonDaiichi Sankyo NA0.811-Apr-12URL PharmaTakeda 57.551.421-Sep-08ScieleShionogi 37.862.603-Sep-09SepracorDainippon Sumitomo 37.483.9010-Dec-07MGIEisai 55.004.0017-May-10OSIAstellas 50.004.6011-Jun-08RanbaxyDaiichi Sankyo 71.0011.0010-Apr-08MillenniumTakeda NA13.5019-May-11NycomedTakeda Premium to 3m. Avg Price. (%) Cash Paid ($b)Acquisition DateAcquired CompanyCompany
  • 17. 17 MP Advisors JP COMPANIES PERFORMANCE VS. US/EUJP COMPANIES PERFORMANCE VS. US/EU Source: MP Advisors; Company Reports 0.24%0.40%0.20%0.16%6.15Average 29.6%52.2%15.7%13.3%6.6Pfizer 24.8%43.1%20.7%15.9%4.9Roche 15%37.7%20.0%17.2%6.5Novartis 24%30.6%24.3%17.6%6.6Bristol - Myers Global Companies 39.2%30.5%6.8%10.5%5.97Average 48.4%22.7%3.0%7.0%4.40Kyowa Hakko 37.6%30.0%7.0%9.0%5.80Dainippon Sumitomo 40.0%34.9%5.5%9.0%5.63Mitsubishi Tanabe 37.8%36.5%8.0%9.9%5.30Shionogi 39.3%26.8%8.8%12.2%8.05Kyorin 31.9%32.1%8.5%15.7%7.12Chugai Japanese Domestic Companies 37.0%36.1%9.4%12.0%4.94Average 38.9%33.6%8.3%9.8%4.90Eisai 37.9%31.2%11.5%10.9%4.96Daiichi Sankyo 36.6%35.9%8.0%13.0%4.80Astellas 34.4%43.8%10.0%14.4%5.10Takeda Tax Rate O M Excluding R&D expense ROEROCE Sales/ R&D Expense Company
  • 18. 18 MP Advisors REFORMS IN 2012 AND IMPLICATIONSREFORMS IN 2012 AND IMPLICATIONS All generic companies Impact negatively the sales of newly listed generic drugs The abolition of the extra two points awarded to pharmacies for dispensing generic drugs and 15 points for providing drug information Abolition of Premium for GE Dispensing and GE information provision fee All generic companies More Rx will generate on generic drugs Points awarded to pharmacies for providing drug history management and guidance will rise to 41 points from the present 30 points. Increase in management and guidance fee All generic companies Increased generic substitution at pharmacy level Removal of ‘no substitution permitted’ column from the current Rx format and compulsory writing of the generic name of the drug. Change in prescription format Towa, Sawai, Nichi-Iko Reducing the gap at lower end will make generic dugs more competitive to long listed as well as amongst generic drugs. Currently, there is huge price difference between two brands of generics. Reducing the difference in price of Generic drugs All generic companies Increasing discount will make generic drugs more competitive against long listed drugs First generic version set to be at a min. 40% discount to branded drug instead of the current 30% discount. Higher discount to new generic launch Sawai, Nichi-Iko More Rx on generic drugs to generate more bonus points Awarding higher bonus point to hospitals using at least 30% generics (35 points); while awarded points for hospital using at least 20% reduced from 30 to 28 points. Higher bonus points to Hospitals for more usage of generics Sawai, Towa, Nichi-Iko Higher generic substitution at dispensing pharmacy Further increase in incentive for pharmacist; likely for those who dispensed more than 30% generics Premium for generics dispensing Biggest Beneficiary Companies ImpactDescriptionReform
  • 19. 19 MP Advisors DRUG CHAIN STORES: A NEW INVESTMENTDRUG CHAIN STORES: A NEW INVESTMENT ATTRACTIONATTRACTION -- WARRANTS A CLOSE LOOKWARRANTS A CLOSE LOOK • Drug chain stores are going to play an important role in Japanese pharmaceutical distribution system and they also present several opportunities to tap in. New regulations have removed the compulsion of pharmacies to stock generic brands from several companies i.e. the drug stores can stock generic brand of their choice and it could be as low as a single brand for one generic product. • With several hundred outlets nationwide, they can negotiate with generic companies for pricing/ margin and keep products of their choice. But more importantly, if these drug chains enter into the manufacturing and/or marketing of their own generic products, they could enhance their business prospects much better. • So far, only Nihon Chouzai has ventured into its own generic business and has been very successful. It currently sells ~750 generic products from its own generic subsidiary, Nihon Generics and we expect it to generate ~¥10b from its generic business. Out of these ~750 products, ~350 are manufactured by Nihon Generics itself while remaining is manufactured thru Contract Manufacturing Organizations (CMO’s). • We do not see any reason that will prevent other leading Drug chain stores to not or will not enter into the generic business. A low margin drug selling business synergizes well with generic business. A close look is warranted on the Drug chain stores as a potential investment idea. Structural reforms increase bargaining power of drug chain stores – a scenario that could bring novel investment space in Japan!
  • 20. 20 MP Advisors BIOGENERICS OPPORTUNITY IS OPENINGBIOGENERICS OPPORTUNITY IS OPENING IN JAPANIN JAPAN • ¥160b Biologics market is going to open by 2015 in Japan. JP regulators are half way through compared to US and EU in drafting the biosimilar guideline. As batch to batch biologic variation is high, JP regulators are not willing to accept import of biogenerics/biosimilars from outside and hence we expect this opportunity to be exploited locally. Currently ~ 3 biogeneric’s are available i.e. Somatropin BS by Sandoz and Epoetin alfa. Recent development in biogeneric space by the local generic companies is indicative of JP companies’ interest to exploit these biogenerics opportunities. We think biogeneric penetration would not replicate the poor generic penetration story of JP Pharma. Pl. refer to our therapy class report – Biosimilar/biogeneric opportunity in Japan for more details. Biogeneric are not going to replicate slow generic story – A number of players look vigorous in exploiting the new market and bring investment opportunity in biosimilars space!
  • 21. 21 MP Advisors SELECT JAPANESE COMPANIES ON MPSELECT JAPANESE COMPANIES ON MP’’SS RADARRADAR 1 Towayakuhin 22 Tanabe Mitsubishi 43 Sato 64 Alfresa Pharma 2 Sawai 23 Nihonyakuhin Kogyo 44 Hisamitsu 65 Mochida 3 Nichiiko 24 Irom 45 Asahikasei Pharma 66 Biotec Bay 4 Nichiiko Pharma 25 Nihon Generic 46 Sankei 67 Essential Pharma 5 Nipro Pharma 26 Sanwakagaku 47 Shioe 68 Elmed Eisai 6 Tatsumi kagaku 27 Aska 48 Nihonkayaku 69 Shionogi 7 Kyowa yakuhin kogyo 28 Maedayakuhin 49 Tohoshinyaku 70 Tatsumi 8 Tsuruhara 29 Wakamoto 50 Kowa 71 Toa eiyo 9 Choseido 30 Yoshida 51 Bio medics 72 hushimiseiyakusho 10 Taishoyakuhin kogyo 31 Otsuka 52 Yutoku 73 Esai 11 Fuji Pharmaceutical 32 Fresenius medical care Japan 53 Toyo Capsul 74 Kissei 12 Takata 33 Meijiseika 54 Fuji 75 Satoyakuhin 13 Kobayashikako 34 Nagase 55 Nihon chemipher 76 Tokai Capsul 14 Yoshindo 35 Chemix 56 Kaken 77 Toho yakuhin 15 Isei 36 Jdolph 57 Nitten 78 Takedayakuhin 16 Kyorin remedio 37 Kyukyu 58 Hizon 79 Fuji Capsul 17 Ohara 38 Teikoku 59 Ikedayakuhin 80 Kyorinseiyaku 18 Iwaki 39 Mayado 60 Santen 81 Kyowairyokaihatsu 19 TeijinPharma 40 Maruishi 61 Sanyu 82 Astellas 20 Terumo 41 Showayakuhin 62 Senju 83 Zeria 21 Nipro Genepha 42 Daikyo 63 Taiho 84 Daiichisankyo
  • 22. 22 MP Advisors GLOBAL PHARMA & BIOTECHNOLOGY OUTLOOK 2013 Rising Stars (Non-profitable) & Mature Biotech (Profitable) Subita Srimal, PhD Khyati Thkrar, M.Sc., PGDBM Sanjeev Mishra, MBA subita@mpadvisor.com khyati@mpadvisor.com sanjeev@mpadvisor.com +1.646.657.3794 +1.646.434.7588 +1.646.434.7588
  • 23. 23 MP Advisors MATURE BIOTECHMATURE BIOTECH –– 2012 WAS GREAT!!!2012 WAS GREAT!!! ““WILL THE PARTY CONTINUEWILL THE PARTY CONTINUE””??
  • 24. 24 MP Advisors FAVORABLE OUTLOOK FOR THE NEXT FIVEFAVORABLE OUTLOOK FOR THE NEXT FIVE YEARS!YEARS! • Optimism prevails around the future of this sector as a whole which was reflected in the unprecedented rally in shares in 2012. • We expect this trend to continue in the next five year driven by launch of Innovative drugs catering to unmet needs in Alzheimer’s, HCV, osteoporosis, RA, Psoriasis, MS, Dyslipidemia, Cystic fibrosis, Cancer and orphan diseases. • Drug approvals and label expansion of existing portfolio of launched drugs and data from late stage pipeline drugs should maintain the growth momentum and investors interest in the next five years. • Favorable regulatory environment should finally see biosimilar mAbs entry in regulated markets in the next five years. The optimism of biosimilar players is reflected in the maturing pipeline. Para IV Filing from other generic players continues to pour leaving room for surprises and volatility
  • 25. 25 MP Advisors MATURE BIOTECHMATURE BIOTECH –– TABLE OF CONTENT (TABLE OF CONTENT (ToCToC)) Macro Analysis 1. Performance of the Mature Biotech companies recommended by MP Advisors in 2012 – Impressive Report Card; Positive sentiments to prevail in 2013 and beyond 2. Valuation Multiples and Fundamentals- Drivers of Growth. 3. MP Advisors’ Proprietary Sum-of-The-Parts Valuation and Top Picks for 2013 4. Drug Approvals 2012-15 5. Key Milestones During 2013/14 6. Impact on revenue 2012-2017 from Patent Expiry and Strategies deployed to meet the challenges. 7. Pipeline of Biosimilar mAbs 8. Joint Ventures between innovators and biosimilar players 9. Merger & Acquisitions Forecast- 2013-2020 Industry Tables 1. Valuation Snapshots 2. Expected Drug Clinical Milestones 3. MB sector Selected M&A Activities 4. Marketed Products’ Potential 5. Pipeline Potential Thru 2017 6. Patent Expiry – Impact On The Sector
  • 26. 26 MP Advisors IN-DEPTH COMPANY ANALYSIS AND REPORTS ToC CONTINUED… 1. Acorda - AMPYRA addresses co-morbidities associated with multiple sclerosis (MS) and with no competition, future growth in US and EU to sustain the current valuation. Pipeline remains a free call option. 2. Alexion - Innovative drugs, diversification and focus on orphan diseases will continue to lend stability. Availability of Soliris (eculizumab, C5a inhibitor) indicated for Paroxysmal Nocturnal Hemoglobinuria (PNH) and Hemolytic-uremic syndrome (HUS) in other geographies along with label expansion should drive growth in the next five years. Pipeline (Asforase alfa, ALXN1102/1103, ALXN1007) beyond soliris is also maturing. 3. Amgen - Sales of denosumab (Prolia: Postmenopausal Osteoporosis, male osteoporosis and XGEVA: skeletal-related events in patients with bone metastases from solid tumors) and novel compounds in the pipeline targeting bone health, cancer and Hypercholesterolemia should sustain Amgen’s reputation as an innovator. Through acquisitions and collaboration, Amgen is poised to tap the emerging market opportunities. 4. Biogen Idec - Poised to sustain its leadership in MS with the well awaited launch of the best in class oral therapy BG-12 (dimethly fumerate, R). Diversification in other therapy area - hemophilia is the future driver.
  • 27. 27 MP Advisors IN-DEPTH COMPANY ANALYSIS AND REPORTS ToC continued… 5. Celgene – Leadership in hematological cancers will be sustained with the launch of pomalidomide. Diversification in autoimmune and inflammatory diseases and label expansion of marketed drugs will drive growth. Risk of Para IV challenges remain. 6. Gilead - Leading in HIV and poised for a similar feat in HCV. Product pipeline beyond the Anti-viral is maturing and promising. 7. Grifols – Stable growth in the plasma protein business, while IVIG opportunity in Alzheimer’s disease remains a wild card. 8. Onyx - Oncology drugs portfolio (Nexavar, Kyprolis, Stivarga) is attractive and places it high on the acquisition target list. Kyprolis is not restricted to R/R MM (3rd-line) and label expansion in 1st –line MM could be a blockbuster opportunity. 9. Regeneron – Growth trajectory driven by Eylea in wet Age-related macular degeneration (AMD), Central Retinal Vein Occlusion (CRVO) and Diabetic macular edema (DME,). Pipeline targeting Hypercholesterolemia, Cancer and RA promises long term growth. 10. Vertex - Bleak prospects for INICVEK as better drugs for HCV are poised to hit the market. Kalydeco (CF potentiator) in combination with VX-809/VX-661 (CF corrector) for larger Cystic Fibrosis opportunity remains a binary event.
  • 28. 28 MP Advisors VALUATION MULTIPLESVALUATION MULTIPLES BASED ON PROJECTION THRU 2016BASED ON PROJECTION THRU 2016 19.936.54.30.635.059.125.33071,007Acorda 20.429.47.92.326.711.79.28995,043Vertex 13.934.94.80.830.029.710.5(2,522)7,918*Grifols** 38.187.312.31.245.336.834.074519,046Alexion 42.357.422.40.848.350.635.011720,395Regeneron 14.218.33.30.815.719.412.673934,252Celgene 14.122.94.81.023.323.312.62,23535,688Biogen Idec 14.216.97.40.719.326.214.9(6,071)60,210Gilead 9.011.33.21.513.39.22.4(1,104)68,591Amgen EV/ EBITDA P/CP/B PEG (12/12- 16) PE '12 EPS Growth % Sales Growth % Net Cash ($m) Mkt Cap* ($m) Company * As on 11/23/2012; ** in €; ONXX not considered; Bold are MP’s 2013 Top Picks Source: MP Advisors, Company Reports
  • 29. 29 MP Advisors FUNDAMENTALS TO DRIVE GROWTHFUNDAMENTALS TO DRIVE GROWTH LowLowLowPlasmaGrifols LowLowMedHCV, CFVertex HighLowMedOphthalmic, OncologyRegeneron LowLowLowCancerOnyx HighMedHighAnti-ViralGilead HighLowMed Hematological, Oncology, Inflammation Celgene MedLowMedMSBiogen Idec MedHighLow ESA, Oncology, Inflammation, Bone health Amgen MedLowHighOrphan DiseasesAlexion LowLowLowMSAcorda Diversified Strategies for Future growth Generic threat (next Five Years) Potential of Late stage Pipeline Management and Overall Historical Performance Focus and Dominance in a Therapy Area Therapy Area- FocusCompany Bold are MP’s 2013 Top Picks Source: MP Advisors, Company Reports
  • 30. 30 MP Advisors RISING STARSRISING STARS •• Innovation is not Enough!Innovation is not Enough! •• Therapy AreasTherapy Areas-- focus in 2013focus in 2013 Rising starsRising stars -- Innovative Research Driven Unprofitable CompaniesInnovative Research Driven Unprofitable Companies
  • 31. 31 MP Advisors NO GAIN WITHOUT PAINNO GAIN WITHOUT PAIN • Innovative and improved drugs therapies developed through novel target discovery and technology platforms have originated from the backyards of small research focused companies (Rising Stars, RS, non-profitable biotech companies). • The universe continues to grow despite the high risk and the long wait to transform into a successful profitable Mature Biotech . • 2012 saw new drugs approvals for unmet needs, first in class drugs for Anti- obesity, Myelofibrosis, cancers and better drug options for HCV, RA, MS, psoriasis, HCC, dyslipidemia etc. • We expect approval of “better drugs for bad bugs”, targeted therapies for cancer, Alzheimer’s, antivirals and orphan diseases in the next five years
  • 32. 32 MP Advisors RISING STARSRISING STARS –– TABLE OF CONTENTS (TABLE OF CONTENTS (ToCToC)) Macro Analysis- Top Picks for 2013 1. Select Drug Approval in 2011-12 and Drug Launches in 2013-14 2. Select Mid To Late Stage Drug Disappointments 3. Cash Balance of Select RS Companies 4. Challenges and Unmet Need of Innovators - Launched and Pipeline Unpartnered Compounds 5. Resisting resistance – Emergence of Bad Bugs – GAIN Act 6. New Targets And Drugs For Bad Bugs 7. Select Mid To Late Stage Anti-Infective Pipeline For Serious Hospital Infections 8. Retrograde Evolution- Where Innovation is Killed by Innovators 9. Oral vs. Injectables - Select Oral RA Drugs in Development. Industry Tables 1. Drug Clinical Milestones 2. Drug Launch Table- 2013 3. NPV Valuation
  • 33. 33 MP Advisors IN-DEPTH COMPANY ANALYSIS AND REPORTS ON TOC CONTINUED… 1. Cempra – GAIN from Drugs for Bad Bugs 2. Galapagos - GLPG0634 Excels vs. all JAK Inhibitors for RA. 3. Incyte - JAKAFI/ JAKAVI Approved for Myelofibrosis and Drugs in Pipeline –Drivers of Growth 4. MorphoSys - Maturing Pipeline and Partnering/Acquisition in the Offing 5. ArQule - Failure in NSCLC – Disappointing but Not “The End” for Tivantinib 6. Basilea - Ceftobiprole + Early Stage Pipeline Remains A Free Option! 7. Medivir - Simeprevir in the HCV Race - Value Un-Appreciated! 8. Rigel - Be in SyK (for RA)– Positives Coming Ahead 9. SymBio - Novel Oncology Drug Portfolio Available as a Free Call Option! 10. Trius - Partnering or Buy Out on the Cards. 11. Vivus - Marketing Anti-obesity Drugs -Where Being First Has not Helped 12. Amarin - VASCEPA – Left to Fend on its Own! 13. Aveo - Tivozanib – Wait May be Longer! 14. Halozyme - rHuPH20 Benefits for Chronic Use - Still Under Scrutiny 15. Immunomedics - Lack of Catalysts in Near Term 16. ISIS - What More is Left Beyond KYNAMRO?
  • 34. 34 MP Advisors PROOF OF RELEVANCEPROOF OF RELEVANCE …… • VRTX- Retrograde Evolution… • Arena, Vivus - 2013 will be testing- Will the companies also become slimmer? • JAK and Syk players- Oral RA drug launch also under test… Proof of relevanceProof of relevance -- the abilitythe ability to establish differentiated attributes andto establish differentiated attributes and commercial valuecommercial value of compounds will matter in coming yearsof compounds will matter in coming years
  • 35. 35 MP Advisors THERAPY AREASTHERAPY AREAS -- TO WATCH OUT FORTO WATCH OUT FOR • HCV- IFN-Free drugs and Vaccines • Alzheimer’s disease- Gammagard and any other surprises! • Rheumatoid Arthritis - SyK after JAKs? • Obesity- Arena, Vivus on test - Orexigen may be the winner even if its 3rd to launch! • Multiple Sclerosis - Great expectations from BG-12 (DMF, R, Biogen Idec), Lemtrada (Sanofi). • Niche - Amyotrophic lateral sclerosis (ALS), Duchenne Muscular Dystrophy (DMD, SAREPTA), Cystic Fibrosis (KALYDECO, VX-809, Vertex), Marquibo (vincristine sulfate liposome injection, Ph- ALL) • Biosimilars/Biobetters….. • Regenerative /Stem cells
  • 36. 36 MP Advisors RECOMMENDATIONS FOR 2013RECOMMENDATIONS FOR 2013 • Incyte - 2013 will be a decisive year for INCY, as JAKAFI / JAKAVI’s (ruxolitinib, JAK 1/2 inhibitor, PhII/III in PV/ET, partnered with Novartis for Ex-US rights) growth trajectory in US and uptake in EU. • MorphoSys - Clinical data from several PhII partnered/ unpartnered compounds and licensing of unpartnered programs to further bring upside in coming years. • Galapagos - GLPG0634 (PhII, JAK 1 inhibitor, partnered with Abbott) offers best efficacy and safety among all JAKs/ oral drugs in RA, and we expect it to achieve blockbuster sales • Cempra – Favorable wind due to the GAIN Act for companies focused in developing anti- infective; Two unpartnered products which address Serious hospital infections, demonstrated favorable efficacy, safety, and tolerability profiles comparable to current ‘gold standard’ therapy (levofloxacin and linezolid) in PhII trials. Unpartnered products offer an attractive investment and alliance opportunity.
  • 37. MP Advisors India Pharma Growth Drivers:India Pharma Growth Drivers: Consolidation in India Market andConsolidation in India Market and Complex Generics in USComplex Generics in US Vivek Agrawal, CFA vivek@mpadvisor.com +1.646.657.3787 Nimish Mehta, CFA nimish@mpadvisor.com +1.646.657.3787
  • 38. 38 MP Advisors US GENERICSUS GENERICS –– WHAT AFTER THEWHAT AFTER THE PATENT CLIFFPATENT CLIFF 1. In CY 2012, products worth ~$30b in annual sales ( small molecule ) have lost patent in US. 2. Conversely, 2013 is likely to witness patent expiry of ~$10b only. 3. It is almost impossible for the generic companies to sustain the high base created so far in the US generic market from Para IVs or me-too generics. Complex GenericsComplex Generics –– The Only Answer For GrowthThe Only Answer For Growth
  • 39. 39 MP Advisors COMPLEX FORMULATIONSCOMPLEX FORMULATIONS –– THE NEXTTHE NEXT LEAP FORWARDLEAP FORWARD Non Systemically Acting Generic Drugs Require Clinical TrialsNon Systemically Acting Generic Drugs Require Clinical Trials Complexities in synthetic generic drug development and manufacturing can be categorized into: • Difficulty in characterization of drug substance, e.g. Copaxone • Formulation related complexities like modified release drugs • Non-systemically acting drugs. These drugs usually require clinical trials to prove bioequivalence. • Drugs that require device or a patch Of the above, Non Systemically Acting Drugs and Drugs with Device or Patch together offer the largest opportunity currently.
  • 40. 40 MP Advisors NON SYSTEMCIALLY ACTING AND DRUGSNON SYSTEMCIALLY ACTING AND DRUGS WITH DEVICEWITH DEVICE Non Systemically Acting Drugs further may be divided into: • Locally Acting and • Targeted Drug Delivery. Below are the drug technologies that act non-systemically in the body: • Liposomal • Colon Targeted • Topical • Inhalers Transdermal drugs are non non-systemic, but are drugs with device that too requires clinical trials before generic approval in US. Market Size is $25Market Size is $25--30b of Patented Sales in US With Low30b of Patented Sales in US With Low CompetitionCompetition
  • 41. 41 MP Advisors TOPICAL DRUGSTOPICAL DRUGS –– THE MOST NEAR TERMTHE MOST NEAR TERM OPPORTUNITYOPPORTUNITY Entry Barriers • Clinical Trial requirement • Cosmetic Acceptability Opportunity in US – About $8b in patented sales with patents of products worth $5b having expired. Patent expired products still witness low competition. With need for various dosage forms (like gels, lotion etc) in topicals, this also offers opportunities for branded generics. Global Acquisitions in Topical Space: Topical segment has witnessed many M&A activities as it remains the most near term opportunity. Acquisitions in Dermatology Segment 640Oct-06ConnectisStiefel 400Oct-07BradleyNycomed 420Feb-08CollagenexGalderma 148Jun-08 Barrier TherapeuticsStiefel 95Sep-08Coria LabsValeant 3,600Apr-09StiefelGSK 320Sep-10Taro Sun Pharma 425Jul-11 Dermic DermatologyValeant 1,500Jul-12FogeuraSandoz 2,600Sep-12MedicisValeant 230Dec-12Dusa Sun Pharma Value (US$m)DateTargetAcquirer
  • 42. 42 MP Advisors DOMESTIC MARKETDOMESTIC MARKET –– GROWTH STAGESGROWTH STAGES • Till 2005, growth was in single digit growth – despite robust economic growth. Growth remained largely driven by new product introductions. • From 2006 onwards, growth went up to 13-15% growth till 2010. Growth driven by new products as well as volume increase in existing products. • 2011 too is witnessing similar growth albeit slightly below the average so far. Source: MP Advisors, IMS India Market Survey Annual Growth of Indian Pharma Market in Value, Volume, and New Products Growth Picked Up After 2005Growth Picked Up After 2005 8 5 7 9 18 13 13 18 17 15 18 0 2 4 6 8 10 12 14 16 18 20 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Grow th (%)
  • 43. 43 MP Advisors REGULATORY REFORMS POST 2005REGULATORY REFORMS POST 2005 Stricter Manufacturing Norms: Introduction of “Schedule M” in the ‘Drug & Cosmetics Act’ that mandates all pharmaceutical units to comply to WHO GMP standards. This was strictly implemented from June 2005 despite several pleas by SMEs. As per the new manufacturing norm, the incremental average capital expenditure required was ~Rs.20-30m – significant for most of the SMEs. This also added to their operational costs. Reforms Evened Out The Cost Differences Between Big and Small CoReforms Evened Out The Cost Differences Between Big and Small Cos.s. • Changes in Excise Duty Structure: A new law in 2005 required, excise duty calculation on the retail price unlike the cost of production earlier. Further the excise duty was reduced to 8%. • Setting up of Excise Free Zone: These reforms coincided with many states setting up excise free zones. Consequently, most of the big pharma cos. Shifted their manufacturing base to these zones. • All these reforms leveled the cost of production between SMEs and big pharma cos.
  • 44. 44 MP Advisors Impact of Reforms Post 2005 =Impact of Reforms Post 2005 = SMEsSMEs SufferingsSufferings • Reforms took away the cost advantages (in the form of low quality and excise evasion) of SMEs. • Most of the SMEs had to bear the additional capex of Rs.20-30m as they were GMP non-compliant. As against that, big cos. were mostly GMP compliant. • Big cos. shifting manufacturing to excise-free zones gave them an edge over small cos. that could not shift due to family issues (being individual driven). A Highly Fragmented Market Is Now GettingA Highly Fragmented Market Is Now Getting ConsolidatedConsolidated
  • 45. 45 MP Advisors Post 2010Post 2010 –– Reforms ContinueReforms Continue • New Laboratory Practice Norms Effective Nov 2010: Introduction of GLP (Good Laboratory Practices) with effect from 1 Nov 2010. • Our talk with the chairman of CIPI (Confederation of Indian Pharma Industry) – an SME pharma association suggested that the impact of GMP was immediate and long lasting with an incremental capex of Rs.20-30m • GMP + GLP increases the operational expenditure by 5-7% on an average. • Bar Coding on Packaging Effective Oct 2011: With an intention to improve the ‘Brand India’, govt. has made bar coding compulsory for all export items in a phased manner. From Oct 2011, it is made compulsory on Tertiary packing, from Jan 2013 on Secondary Packaging and Primary packaging from July 2013. • With ~50% of SMEs involved in exports, this will further escalate the overall operational costs making it even more uncompetitive. Ongoing Reforms Further Adds To the Burden onOngoing Reforms Further Adds To the Burden on SMEsSMEs
  • 46. 46 MP Advisors New Draft Drug Pricing PolicyNew Draft Drug Pricing Policy –– Neutral ToNeutral To PositivePositive • The new policy puts 30% of the drugs under price control, i.e. all the drugs listed under the National List of Essential Medicines (NLEM). • Ceiling Price (CP) to be decided based on simple average price of drugs with more than 1% market share and to be revised annually as per Wholesale Price Index (WPI) of manufactured goods. Other than that, revision only once in 5 years. • The Impact: Price increase to the extent of Manufactured Products Inflation will help most of the impacted brands to recover its price in 2- 3 years. • Exemption from price control on combination products may encourage manufacturers to shift its impacted product to an innocuous combination to blunt the price control. Market & Inflation Based Pricing May Blunt Any Price ControlMarket & Inflation Based Pricing May Blunt Any Price Control
  • 47. 47 MP Advisors GLOBAL PHARMA & BIOTECHNOLOGY OUTLOOK 2013 THERAPEUTIC CLASS REPORTS Subita Srimal, PhD Vishal Manchanda, B.E., MBA Devesh Singh, Pharmacist, MBA subita@mpadvisor.com vishal@mpadvisor.com devesh@mpadvisor.com +1.646.657.3794 +1.646.657.3787 +1.646.657.1016
  • 48. 48 MP Advisors THERAPEUTIC CLASS REPORTS INCL.THERAPEUTIC CLASS REPORTS INCL. 1. Emergence of Biogeneric Era in Japan - The opportunity to be exploited locally 2. Herceptin Biosimilar - Risk Reward of Developing a Herceptin Biosimilar – A Thorough Assessment 3. Rituximab –Risk Reward of Developing Rituxan Biosimilars and Biobetters 4. Future of GPR agonist for treatment of Type 2 diabetes 5. HCV- Market Dynamics within the Oral IFN free therapy Options, Emerging Market Opportunities and HCV vaccines 6. Hemophilia- New Therapies and Changing Market Dynamics
  • 49. MP Advisors Thank YouThank You +91-265-2327096 +1.646.499.4569 mp@mpadvisor.com www.mpadvisor.com (o) (e) w) Contact us: MP Advisors B-203, Alkapuri Arcade, R C Dutt Road, Vadodara – 390007 Address: