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  • NC-DKM003-1198Kessl-RC
  • NC-DKM003-1198Kessl-RC
  • NC-DKM003-1198Kessl-RC
  • NC-DKM003-1198Kessl-RC
  • Dkm003 0399 kessl-rc

    1. 1. CONFIDENTIAL Basic Facts About Clinical Trials Rob Glassman – NY Marla Kessler – NC Prat Kumar – AT PD document March 1999 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company.NC-DKM003-0399Kessl-RC
    2. 2. CLINICAL TRIALS FACT PACK • What is a clinical trial and who are the key players? • What are the key trends and issues of the industry? • What are the important terms to know? 2NC-DKM003-
    3. 3. DEFINITION OF A CLINICAL TRIAL Carefully designed scientific investigation of the effect of a drug, medical treatment, or device on a group of patients. The purpose of a trial is to find new and/or better ways to prevent a disease or disorder. During clinical trials, key questions are answered • Is the drug safe? • Is the drug effective for its intended treatment? • What is the appropriate does to prescribe for the targeted population? • What side effects, if any, does it cause? 3NC-DKM003-
    4. 4. CLINICAL INVESTIGATION COMES IN SEVERAL FLAVORS Types of activities • Physiological trials: disease understanding • Outcome trials: cost-effectiveness of standard tests/therapies Ways to collect data Types of analyses • Clinical trials: treatment algorithms • Retrospective studies • Qualitative Types of clinical areas • Prospective studies • Quantitative • Interventional trials – Statistical analyses • By therapeutic area: respiratory, – Meta-analyses cardiovascular, surgical, oncology, infectious diseases, rheumatology, etc. • By care setting: emergency room, intensive care, outpatient, inpatient, etc. • By type of illness: acute, chronic, etc. 4NC-DKM003-
    5. 5. OVERVIEW OF CLINICAL PART OF DRUG DEVELOPMENT Clinical Phase Preclinical Clinical Scale-up/ market Development Full Product launch Exploratory Basic research and Process Phase Phase Phase discovery Preclinical 1 2 3 Manufacture Marketing/ Phase 4 Formulation Key regulatory checkpoints IND* NDA** * Investigationaly new drug application ** New drug approval 5NC-DKM003-
    6. 6. ELEMENTS OF DRUG DEVELOPMENT PROCESS Pre-clinical Phase 1 Phase 2 Phase 3 Phase 4 Subjects • Rodents, dogs, • 20-100 healthy • 100-300 patients • 300- • 300+ patients primates, in vivo volunteers 3,000 patients studies Objective • Toxicology to • Establish safety • Establish • Confirm efficacy, • Widen spectrum of identify risks for in humans, study effectiveness of dosage regime, patients and humans; gathering how the drug drug and optimal and safety profile indications, gain early pharmaco- works, how it is dosage further study safety kinetic data metabolized, data, pharma- interactions with coeconomic data other drugs Key require- • Animal testing and • High occupancy • Data • Data • Data management; ments lab facilities test beds management; management; global operations; therapeutic area global operations; therapeutic area expertise therapeutic area expertise expertise Comments • Low margins, high • Low margins, • Lower resource • Higher • Recent upsurge in (profitability fixed costs. high fixed costs. intensity, higher profitability. Long use because of FDA refers to CRO) Overcapacity, Relatively slow margins. contracts requirements. especially in U.S. growth. Growing more Higher profitability Profitable in Companies often slowly than later specialty areas. overbook phases Regulatory changes facilities (like may shrink demand airlines) Source: CenterWatch 6NC-DKM003-
    7. 7. TIMING AND COST OF THE DRUG DEVELOPMENT PROCESS Submission OTC Preclinical Phase 1 Phase 2 Phase 3 Phase 4 to NDA submission IND NDA OTC approved Timing 1.6 1.5 1.5 2.5 1.5 5.0 1.5 drug Years Cost* 5.9 7.3 18.9 43.3 1.0 12.5 1.0 $ Millions Attrition rate 10.0 5.0 3.5 1.5 1.0 1.0 ? Compounds required for each approved drug * Does not reflect ~$10 million for manufacturing and processing research throughout Phases 1-3 and opportunity cost of capital Source: PERI study of 117 development projects of 20 pharmaceutical companies; Nature Biotechnology 12/15/97; McKinsey data 7NC-DKM003-
    8. 8. OVERVIEW OF THE CLINICAL OPERATIONS PROCESS FLOW: CONCURRENT STREAMS OF WORK Planning phase Start-up phase Enrollment Close-out Analysis Design trial Project management and review Enlist/scout sites Site management and monitoring Site relationships/training and clinical hotline Dispose unused Pharmacy prepares and distributes medications medications Enrollment*/randomization Clinical events review and adjudication and core lab Final statistical Interim statistical analysis analysis Present findings * Includes follow-up visits 8NC-DKM003-
    9. 9. KEY MILESTONES * May be one step if using remote data entry ** Key milestones for data management and statistical purpose 9NC-DKM003-
    10. 10. KEY MILESTONES (CONTINUED) * Key milestone for data management and statistical purpose 10NC-DKM003-
    11. 11. INTRODUCTION TO KEY PLAYERS AND THEIR ROLES Player Description Role Sponsor The pharmaceutical, biotech,  Discovers, purchases, or identifies the research institution, health drug, treatment, or medical device to be organization, or government that tested pays for the clinical trial  Defines questions to be answered by test  Coordinates and sometimes conducts the clinical trial  Applies for approval of drug, treatment, or medical device from FDA for tested use Food and Drug Government agency charged with  Reviews applications for new drugs or Administration ensuring that “drugs” sold in the U.S. devices or new uses for existing drugs and (FDA) are safe and effective devices to ensure they are significantly better than current options  Approves applications for drugs after animal and clinical testing before they can be sold to the public  Approves language of labels and inserts provided with drugs and devices Contract Organization providing outsourced  Provides a specific service (e.g., drug research product development and related development, toxicology study) organization activities to make the drug  Coordinates (potentially) activities of sites, (CRO) development process proceed sponsor, and/or other CROs more efficiently and cost-effectively, maximizing the benefits in product life cycle and profitability of patent- protected products 11NC-DKM003-
    12. 12. INTRODUCTION TO KEY PLAYERS AND THEIR ROLES (CONTINUED) Player Description Role Principle investigators A medical professional who is  Identifies patients to enroll in trial overseeing the treatment of  Administer treatment/therapy patients in the clinical trial at a site  Provides care for patient during entire trial Study coordinators Individual (e.g., nurse or  Identifies patients to enroll in trial physician’s assistant) who  Fills out the CRF based on patient files manages the conduct of a clinical  Manages paperwork related to trial trial at a site Institutional review A board consisting of health care  Scrutinizes all trial activities including board (IRB) professionals from the institution recruitment, advertising, and potential where the clinical trial takes risks place as well as members of the  Ensure FDA regulations are being local community that must followed approve a protocol before the  Verifies that the study does not present trial can be conducted at the an undue or unnecessary risk to the institution patient Enrolled patients People receiving treatment (or  Agree to be included in study placebo) in a clinical study  Return for follow-up visits as necessary Source: CenterWatch literature search 12NC-DKM003-
    13. 13. CONTRACT RESEARCH ORGANIZATIONS STAND IN THE CENTER OF DRUG DEVELOPMENT $6.5 billion in clinical trials NIH* Pharma, medical Contract research product, and organizations biotech firms $3 billion in revenues Sites (specific $20 billion in physicians at a development hospital or practice) expenditures Multi-site networks • Cooperative groups • Physician consortiums * Includes private funding sources such as Robert Wood Johnson Foundation and the Pew Charitable Trust Source: Analyst reports 13NC-DKM003-
    14. 14. WHY SPONSORS USE CROs Percent Data collection/monitoring Statistical analysis Pharmacoeconomics Patient recruitment assistance Medical writing Negotiating budgets and contracts Site selection CANDA preparation CRF design Protocol design Source: CenterWatch survey of 15 pharmaceutical companies 14NC-DKM003-
    15. 15. SNAPSHOT OF U.S.-BASED CROs When founded Annual revenue Percent Percent $30 million- 69 million 1980-84 Over $70 1985-89 million Before 1980 $10 million- 29 million $0 million- 9 million 1990-94 1995- present Number of employees Foreign offices Units Percent 1-9 10-39 1,000 more 500-999 40-99 100-499 Source: CenterWatch 1998 survey of 158 CROs Europe Asia Australia Central Africa and 15 S. AmericaNC-DKM003-
    16. 16. THE LARGEST PUBLIC CROs $ Millions * Based on November 1998 exchange rate Source: CenterWatch 16NC-DKM003-
    17. 17. CLINICAL TRIALS FACT PACK • What is a clinical trial and who are the key players? • What are the key trends and issues of the industry? • What are the important terms to know? 17NC-DKM003-
    18. 18. EVOLUTION OF SPONSORED CLINICAL RESEARCH INDUSTRY Cottage industry Mature hi-tech industry Several small players in The once fragmented market is consolidating into full- niche therapeutic areas to Consolidation service CROs and small niche playes complement pharma/ • The top four CROs now have 55% of the market biotech’s internal capacity • The top six CROs have been gaining about 4-6% market share each year from small and mid-sized CROs • Successful smaller players are often niche players with highly specialized skills without large-scale production “Manual yellow legal pad to Technology-enabled scale advantage where many manual Sophistication spreadsheet” based processes are replaced by large systems that can be operations justified only with scale. Some believe that increasing IT capacity and capabilities are fundamental for success • The FDA encourages the use of computer-assisted filings in an effort to expedite the approval process • As regulatory requirements have become more complex, the pharmaceutical and biotechnology industries are increasingly outsourcing to CROs to take advantage of their data management expertise, technological capabilities and global presence • Several large CROs have purchased remote data entry companies/technologies and/or have formed alliances with such companies In-house operation Professional Professional management includes key players from management pharma/biotech industry 18NC-DKM003-
    19. 19. SCALE APPEARS TO PLAY A ROLE IN THE CRO INDUSTRY. . . EBIT/sales 0.20 Kendle Covance 0.10 Icon Parexel Quintiles PPDI 0.00 Chrysalis -0.10 ClinTrials -0.20 Premier -0.30 CCR -0.40 0 100 200 300 400 500 600 700 800 900 Sales $ Millions Source: Public financial statements 19NC-DKM003-
    20. 20. . . . AND MAY BE DRIVEN BY THE ADMINISTRATIVE COSTS OF RUNNING THESE BUSINESSES (ESPECIALLY IT) SGA/sales 0.80 0.70 Premier 0.60 CCR 0.50 0.40 ClinTrials 0.30 Icon PPDI Quintiles Kendle 0.20 Parexel Covance 0.10 0.00 0 100 200 300 400 500 600 700 800 900 Sales $ Millions 20NC-DKM003-
    21. 21. ALLOCATION OF DOMESTIC U.S. RESEARCH AND DEVELOPMENT BY FUNCTION Percentage of overall research and development in 1994, 100% = $35.0 billion Other Synthesis and extraction Bioavailability 3.0 Process development for manufacturing and quality Biological Regulatory IND and NDA screening and pharmacological Clinical evaluation Phase 4 Toxicology and safety testing Clinical evaluation Pharmaceutical Phases 1, 2, and 3 dosage formulation and stability Source: Pharmaceutical Research and Manufacturers of America, 1996 21NC-DKM003-0399Kessl-RC
    22. 22. OUTSOURCED CLINICAL RESEARCH BY THERAPEUTIC AREA ESTIMATE Flow of pharma/biotech R&D funds Outsourced clinical research $ Millions Percent, 100% = 3,200 ($ Millions) 35,000 30,40 0 Other Neurology/ (480) psychiatry (608) Dermatology (64) GI/GU (128) Internal R&D Respiratory CV* (384) (192) Outsourced basic research Infectious Endocrinology diseases (480) (256) Total R&D Outsourced Outsourced Rheumatology spending R&D clinical Oncology (96) research (512) * Not including stroke Source: PhRMA 1996 annual survey; analyst reports 22NC-DKM003-
    23. 23. The CRO industry is likely to grow moderately to rapidly.OUTLOOK FOR CRO INDUSTRY$ Billions Estimated CAGR Projected CRO revenues by for outsourcing 2003 Percent 6.5 51.5 Scenario 1** 45.01996 U.S. R&D • Share of R&D outsourced to CROs 8spending continues at current 13% 4.4 35.0 30.6 8.5 51.5 Scenario 2** 43.0 • Continued capacity shortfalls force 14 increase in outsourcing of R&D to 17%, but falls short of expectations Total Outsourced Total in-house to CRO R&D* 11.0 51.5 Scenario 3** 40.5 • Based on analyst estimates 20 • Portion of R&D outsourced increases significantly (as per industry expectations) to 21% Total Outsourced Total * Or outsourced to academia in-house to CRO ** All scenarios assume that total R&D spending will grow at historical rate of 8% R&D Source: Pharmaceutical Research and Manufacturers of America; analyst reports; interviews 23NC-DKM003-
    24. 24. MIXED PERFORMANCE OF PUBLIC CROs ON WALL STREET Ranked by annual return on stock price Change Average annual Highest Price on since IPO change since IPO Return in 1998 IPO Price price 8/14/98 Percent Percent Percent Quintiles 4.88 (4/94)1 53.50 44.94 821 185 15 Parexel 7.50 (11/95)2 44.75 32.88 338 119 -12 Kendle 14.00 (8/97) 35.00 28.25 102 102 69 Phoenix3 5.00 (11/94) 16.50 10.95 119 31 16 Icon 18.00 (5/98) 32.25 28.00 55 n/a 55 Covance 19.75 (1/97) 27.25 26.06 32 19 31 PPD 18.00 (1/96) 47.75 23.25 29 11 51 ClinTrials 9.00 (11/93) 33.66 4.50 -50 -11 -43 Bioreliance 15.00 (7/97) 26.50 9.75 -35 -32 58 Collaborative 13.50 (6/96) 15.50 3.50 -74 -34 -31 Premier 17.00 (2/97) 26.25 4.00 -76 -48 -66 Research Chrysalis n/a4 8.75 1.31 n/a n/a -39 BioAnalytical 8.00 (11/97) 10.25 6.75 -16 n/a -10 1 Adjusted for two-for-split on 11/95 and two-for-one split on 12/97 2 Adjusted for two-for-one split on 2/97 3 Chrysalis was formed through a merger of biotechnical company and a CRO and thus there is no IPO price for Chrysalis 4 Phoenix is traded on the Toronto exchange; amounts are in Canadian dollars Source: CenterWatch 24NC-DKM003-
    25. 25. CLINICAL TRIALS FACT PACK • What is a clinical trial and who are the key players? • What are the key trends and issues of the industry? • What are the important terms to know? 25NC-DKM003-
    26. 26. KEY TERMS USED IN CLINICAL TRIALS Term Description Analytical lab services  Laboratory tests/assays on biological samples, e.g., blood, collected during clinical trials  A specialized service with high entry barriers; can be quite profitable Biostatistics  Consulting for statistical design and planning of trials  Well qualified experts in short supply Case report form  A form that contains data that needs to be collected directly from the patient (CRF) based on information contained in the patient’s hospital/physician records (e.g., patient’s blood pressure 10 minutes after treatment is administered) Database  The electronic database where all the data collected from patients on the CRFs are collected, stored, and later analyzed Data management  May include development of CRFs, database design and management, and systems for rapid reporting of adverse drug reactions Drug formulation and  Pharma companies often are reluctant to interrupt production lines to packaging manufacture material for clinical trials; lack of synthesized product a frequent cause of development delays FDA application  Application for permission to conduct tests on human patients or to sell the product once these tests are complete Source: CenterWatch; literature search 26NC-DKM003-
    27. 27. KEY TERMS USED IN CLINICAL TRIALS (CONTINUED) Term Description Investigator and patient  Lining up investigators (the doctors and research centers who conduct recruitment clinical trials) is another frequent cause of delays, particularly in specialized patient populations  CROs can maintain databases of experienced, high-quality investigative sites for specific therapeutic areas Pharmacoeconomics  Determine cost effectiveness of new medical therapies to support regulatory submissions, pricing, and reimbursement strategies  High-growth area which can be leveraged to broader managed care applications Pre-clinical laboratory  In vitro and animal models to establish toxic effects and potential to cause cancer or birth defects  Some niches, e.g., continuous infusion facilities for primates and immunotoxicology, can be profitable Protocol  A protocol defines the medical issues that a clinical study seeks to examine and the statistical tests that will be conducted. Accordingly, the protocol defines the frequency and type of laboratory and clinical measures that are to be tracked and analyzed.  The protocol also defines the number of patients required to produce a statistically valid result, the period of time over which they must be tracked and the frequency and dosage of drug administration.  The study’s success depends on the protocol’s ability to predict correctly the requirements on the regulatory authority. 27 Source: CenterWatch; literature searchNC-DKM003-
    28. 28. KEY TERMS USED IN CLINICAL TRIALS (CONTINUED) Term Description Query  Process where data provided on CRFs are checked for consistency, feasibility, and completeness with the person that completed and submitted the CRF Randomization  Process where patient is enrolled in trial and assigned a treatment to be given (i.e., tested therapy, placebo, or currently accepted treatment/”standard of care”), usually randomly through a predetermined algorithm Regulatory  Pulling the package together: data, statistical analysis, medical writing for submissions IND and NDA submissions  Some companies, e.g., IBAH, particularly experienced in NDA process Study design  Poor protocol design is a frequent cause of delays in drug development (e.g., unrealistic inclusion/exclusion criteria for study populations), or prolonging development efforts of duds (e.g., spurious positive Phase 2 trial results followed by therapeutic failure in Phase 3) Study monitoring  Interviewing investigators, supervising, trouble shooting, and maintaining quality control in clinical trials which may span hundreds of sites over several years Source: CenterWatch; literature search 28NC-DKM003-