Pharma, Biotech, Healthcare Outlook 2015: Global Harmonization Trend

Pharma, Biotech, MedTech, MedImaging,
Diagnostics, Healthcare IT Outlook 2015
a complete guide
Copyright of this business insight and content belongs to Vizor International Pte Ltd, Singapore. Necessary credits must be given, if you are using information
from this business insight. For further details, please feel free to contact Jay - vizorint@gmail.com
a j series publication

Global Harmonization is the trend to watch in Healthcare
 VUCA (Volatility, Uncertainty, Complexity, Ambiguity) is the best word to describe the current phase of business environment around us. Whatever the turmoil, we
may be going through, there are two industries that will always top the list of evergreen industries, which are, Healthcare and Financial Services.
 The golden period for patent-protected market opportunity is ending soon, and the top pharma companies are managing this shift well. 20% of the revenue of top
pharma companies now come from Biologics, and it is expected to increase up to 50% by 2020. It will be a golden period now for new biologic developers, who have
the support of universities/institutions or are backed by funds. Top pharma companies will be hungry to expand their Biologic portfolio. With the availability of
government support for R&D initiatives and infrastructure, the SME sector, especially in Singapore, must make good use of this opportunity.
 Sanofi has appointed Boehringer Ingelheim to handle the contract manufacturing of mAb(Biologics) in Europe. Korean companies who are building capacity for
Bio-pharma must take note that, proximity to market and regulatory environment are important factors. There is tremendous push for the use of good quality
Generics in developed markets, so competition among innovator brands, most sold brands and low priced brands will intensify, especially in Asia.
 Like many others, I thought that Diagnostics or IT companies would one day control the pharma industry. Looking at companies like Valeant, some held the notion
that top pharma companies would become ‘shell’ companies. The reality is that, this is an unlikely scenario as long as pharma companies continuously and
consistently spend on R&D, or acquire new molecules to remain relevant in the business. 72% of Sanofi’s R&D expenditure is in Biologics, half of which in mAb.
There are initiatives from governments to encourage collaborative R&D ventures, to deal with old age related diseases and cost burdens.
 Rising costs of R&D are a concern. Tuft reported in a recent article that the cost of R&D worldwide may rise up to US$2.5billion, including the post-marketing study
costs. IT solution providers can play a significant role in reducing this cost, by building bio-informatics/analytics in line with guidelines laid down by the USFDA and
EMA for the capturing of both commercial and clinical data. IT will also play an important role in digital marketing, but these efforts would need to comply with
professional transparency regulations.
 Developed countries are moving towards value-based pricing regulations. Implementation is a challenge, but drug manufacturers would have to justify their cost
efficiency. Since drug companies would have to establish comparative efficacy studies, post-marketing clinical study volumes for CRO businesses are likely to see an
increase. Companion diagnostics can play an important role to overcome some of the business challenges.
 R&D investments of Med-tech Industries are in the range of US$25 billion. We can foresee that more complex, closed loop devices, wearable technologies will
dominate and would create abundant data for analytics.
 Large scale M&A will continue to happen in the market for various reasons, such as, tax savings in recent times. For example: Medtronic vs Covidien. Apart from
that, there is good scope and potential for new biologics, cell line, bio-similar developers. Similarly, meaningful analytics integrators are likely to be in demand.
 Japan, Australia, China, South Korea & India continue to offer great opportunities, but the success of ASEAN harmonization is an important factor for SEA.
Copyright of this business insight and content belongs to Vizor International Pte Ltd, Singapore. Necessary credits must be given, if you are using information from this business
insight. For further details, please feel free to contact Jay - vizorint@gmail.com

Need of the Hour -Success of ASEAN Harmonization Efforts
Country Population 2014 GDP 2014 (US$)
EU 510 Million 16.5 Trillion
USA 322 Million 16.7 Trillion
China 1.393 Billion 9.24 Trillion
Japan 126 Million 4.92 Trillion
Brazil 202 Million 2.25 Trillion
Russia 142 Million 2.09 Trillion
India 1.267 Billion 1.87 Trillion
Australia 23 Million 1.56 Trillion
Indonesia 252 Million 868 Billion
Thailand 67 Million 387 Billion
South Africa 53 Million 350 Billion
Malaysia 30 Million 313 Billion
Singapore 5.5 Million 297 Billion
Hong Kong 7 Million 274 Billion
Philippines 100 Million 272 Billion
Vietnam 92 Million 171 Billion
South Korea 49 Million 1.3 Trillion
Taiwan 23 Million 489 Billion
Ageing Population :
 Globally there are 580 million people over 65 years old
 Europe 20%, Japan 28%, China expected to have 12% by
2020 and it may cost China 23% of healthcare cost to
manage such a large population.
 Alzheimer, Diabetes, Arthritis, Bone Management will
dominate this group of people.
Urban Population :
 High-Income household (those earning over US$25,000 a
year) is expected to rise from 30% to 570 Million.
 Half of such high-income household from Asia
 By 2020, China is expected to move 60% of their
population to Urban area.
SEA- A hot spot:
 Combined population over 500 million
 Combined GDP over US$2.3 Trillion
 Combined GDP higher than Brazil, India, Russia, Australia
 ASEAN Harmonization an important step to make this
geography a real-hot spot
 Indonesia is one of the fastest growing market, Myanmar
following the reform path
 Top priority diseases : Diabetes, Cardio & Hypertension,
Breast Cancer, Cervix Cancer, Colon Rectum Cancer, Lung
Cancer, Liver Cancer

Per-capita Healthcare Expenditure likely to remain high in totally
Welfare Driven Economies
Country Percapita
Income(PI) US$
Percapita HC
Expenditure(PHE)
US$
PHE/PI
%
EU (AVG of
28 Countries)
32,880 2,875 8%
USA 51,863 8,895 17.15%
China 6,663 321 4.8%
Japan 39,048 4,751 12.2%
Brazil 11,139 1,056 9.5%
Russia 14,718 886 6.0%
India 1,476 61.4 4.2%
Australia 67,826 6,140 9.0%
Indonesia 3,444 107 3.1%
Thailand 5,776 215 3.7%
South Africa 6,603 644 9.8%
Malaysia 10,433 418 4.0%
Singapore 54,000 2,426 4.5%
Hong Kong 39,143 1,715 4.4%
Philippines 2,720 118 4.3%
Vietnam 1,859 102 5.5%
South Kore 26,531 1702 6.41%
Taiwan 21,261 1,403 6.6%
 China’s GDP numbers needs to be analyzed further. Such high
GDP number is not correlating with percapita income and
percapita hc expenditure of other successful economies and
regions of the world.
 China would need to build more healthcare infrastructure to
achieve its vision to provide universal healthcare by 2020.
 Among BRICS – India has the highest private spending. 70% of
hc expenditure incurred as out of pocket expenses.
 SEA still emerges as the hot spot. Percapita HC expenditure is
higher than India and closer to China. Percapita Income is higher
than India.
 US incurs the highest HC percapita expenditure 17.15%. It is
much above the current average of other developed economies
from the EU region and Australia, which is in the range of 10%.
 While USA is addressing the rising healthcare expenditure, other
welfare driven economies are inching towards above 10% -
Japan 12.2%, Netherlands 11%.
 Singapore and Hong Kong with its developed nation status is
incurring much lower HC expenditure per capita. 4.5% range is
what developing and emerging countries in ASIA are incurring.
Among the 28 EU nations, only Romania has 4.18% all other
weaker economies there are 5%,6%,8% range and developed are
closer to 10%.

Global Total Healthcare Revenue (GTHR)
Estimate of Global Addressable Opportunities
 2013 US-FDA approved 25 new molecular entities & 10 biologics, potential sales of US$24.4 Billion, Projected value of late-stage pipeline declined from US$1.37
trillion to US$913 Billion
 Tufts (Centre for the study of drug development) believes that R& expenditure for new molecular entities touching US$1.5 billion per drug.; Areas for compliance :
GPV – Good Pharmacovigilance, Digital Marketing regulations, GUDID, IDMP
 Life Sciences R&D expenditure expected to reach US$162 billion (108 new drugs) by 2020, growing @ 2.4%; Cancer, Hep C, HIV, Diabetes still attractive among
the R&D investment portfolio.
 MedTech R&D expenditure expected to increase from US$25Billion to US$30.5 Billion by 2020
 Value Based pricing & cost containment a top priority for drug pricing and buyers
 Global drug safety system with harmonized business process is the trend to watch
2015 Estimate of Global Total Healthcare Revenue
(GTHR): US$1.568 Trillion @ 4.5%
Pharma
 US$872 Billion
 55% of GTHR
Diagnostics
 US$64 Billion
 4% of GTHR
Med.Imaging
 US$29 Billion
 1.85% of GTHR
MedTech
 US$345 Billion
 22% of GTHR
Biologics
 US$218 Billion
 13% of GTHR
 20% of Total
Pharma+Biologic
HIT
 US$40 Billion
 2.5% of GTHR
Pharma+Biotech US$1.09 Trillion
 North America (44%) US$486 Bil
 Western Europe (27%) US$ 289 Bil
 Asia (23%) US$251 Bil
 Brazil(3%) US$36 Bil
 Others (3%) US$29 Bil
Med.Tech+Imaging US$374 Billion
 North America (41%) US$153.34 Bill
 Europe (30%) US$112.2 Bill
 Asia (22%) US$82.28 Bil
 Brazil (2%) US$7.48 Bill
 Others (5%) US$18.7 Bill

APAC Total Healthcare Revenue (ATHR)
Estimate of Asia’s Addressable Opportunities (including Japan & Australia)
 With the growing economies in Asia, all segments are expected to have high 10% growth rates except for Japan and Australia.
 Both China and India increased the list of essential drugs to control price
 China uses hospitals to test certain drugs to reduce the use of innovative drugs
 Japan introducing new health technology assessment to measure the cost effectiveness of innovative drugs
 Asian outsource manufacturing countries can disturb global marketing plans : Gilead’s opportunity to earn US$1000 a pill for Sovaldi was changed by its Indian
contract manufacturer; appeal for patent protection failed.
2015 Estimate of APAC Total Healthcare Revenue
(ATHR): US$353 Billion
Pharma
 US$226 Billion
 64% of ATHR
Diagnostics
 US$11.4 Billion
 3.3% of ATHR
Med.Imaging
 US$6.4 Billion
 1.8% of ATHR
MedTech
 US$76 Billion
 21.5% of ATHR
Biologics
 US$25 Billion
 7% of ATHR
 9% of Total
Pharma+Biologic
HIT
 US$8.2 Billion
 2.3% of ATHR
Pharma+Biotech US$251 Billion
 Japan (9.5%) : 101 Billion
 China (7%) : 76 Billion
 Australia (2.2%) : 24 Billion
 S.Korea (1.3%) : 14 Billion
 India (1.21%) : 13 Billion
 Taiwan (0.5%) : 5 Billion
 SEA (1.56%) : 17 Billion
Med.Tech+Imaging US$82.4 Billion
 Japan (45%) : 37.4 Billion
 China (22.75%) : 18.75 Billion
 Australia (6%) : 5.25 Billion
 S.Korea (7.6%) : 6.3 Billion
 India (3.8%) : 3.15 Billion
 SEA + Taiwan (14.85%) : 11.55 Billion
 Japan (39%) 4.5Bil
 China (32%) 3.7Bil
 Australia (5%)
0.624 Bil
 S.Korea (5%) 0.564
Bil
 India (6%) 0.766
Bil
 SEA+Taiwan (10%)
1.24Bil
 Japan (24%) 2Bil
 China (12%) 1Bil
 Australia (24%) 2
Bil
 Taiwan (14%)
1.2Bil
 S.Korea (4%) 0.4
Bil
 India (10%) 0.874
Bil
 SEA (8%) 0.726Bil

Global Generic Revenue
Pressure to increase good quality Generics supply in Developed Countries
 Malaysia , Taiwan, Thailand top among the highest percentage of Generic mix in their Pharma Market. 54% , 47% and 38% respectively.
 Philippines still an attractive market for Generics – current ratio is 28%
 Singapore & Hong Kong has only 17% and 10% respectively.
 Japan has only 9% Generic in their total Pharma Market.
2015 Estimate of Global Generic’s Revenue
(GGR): US$206 Billion
 NA 30% of GGR US$61.8Bil
 Western Europe 27% of GGR US$55.62 Bil
 LATAM 12% of GGR US$24.72 Bil
 Eastern Europe 8% of GGR US$16.48 Bil
 ROW 3% of GGR US$6.18 Bil
 APAC 20% of GGR US$ 41.2 Bil
 Japan 4.46% of GGR l US$9.18 Bil (22% of APAC)
 China + India 9.7% of GGR 19.5 Bil (48% of
APAC)
 Australia 0.7% of GGR 1.42 Billion (3.5% of
APAC)
 S.Korea 2.6% of GGR 5.36 Billion (13% of APAC)
 SEA+Taiwan of 2.43% GGR 5.76 Bil (12.14% of
APAC)

Information & Trends:
Know how they might be relevant for your business
 RESEARCH & DEVELOPMENT :
 Among all the industries, healthcare has the highest percentage of R&D expenditure as a percentage of sales. Research based Pharmaceutical
companies spend around 19.4% of their total sales.
 Technology & people a significant portion of the R&D expenditure.
 Tufts (Centre for the study of drug development) believes that R& expenditure for new molecular entities touching US$1.5 billion per drug.;
 Analytics to play an important role for determining early failure rate before reaching Phase III trials, which is the most expensive part of clinical
research.
 Life Sciences R&D expenditure expected to reach US$162 billion (approx. 108 new drugs) by 2020, growing @ 2.4%; Cancer, Hep C, HIV,
Diabetes still attractive among the R&D investment portfolio.
 Novartis, GSK marriage could also be viewed based on the success rate of their R&D dollars spent. According to a Quintiles published article,
between 2007 & 2011Novartis & GSK spent US$29billion and US$28billion dollars respectively . They had the highest number of drugs 15 & 16
respectively. So new drug portfolio combined is much superior to other leading players who have had single digit success between 1 , 3 & 5.
 Singapore needs to spend more BERD (Business Expenditure on R&D) to stimulate the industry.
 Indian universities and government need to create the right kind of infrastructure and conducive environment to tap into R&D FDI into India.
 Patent portfolio creation a great opportunity to generate business. IBM generates close to US$1billion per year from licensing alone.
 Countries are competing to take the innovation route but must know the challenges in developing a productive research environment.
 Collaborative drug development an emerging new force.

 VALUE BASED PRICING:
 Cost is disguised in both Pharma and MedTech industry.
 Countries, Pricing Regulators under tremendous pressure to manage the rising cost.
 Paying for an outcome as against consumption of volume. How do you measure it? What is the math behind value based pricing?
 Incremental improvement offered by pharma and med-tech companies would not be sufficient to support
 How to develop a pricing strategy in this dynamic market
 Securing patent protection in the country where the products are outsourced for manufacturing
 Specific targeted therapy has the potential to penetrate private market (for example Saxenda by NovoNordisk for obesity management)
 REGULATORY & DISCLOSURE :
 Digital marketing has unlimited opportunities especially with the use of social media. It is also an important area of concern for regulatory
authorities.
 Good Pharmacovigilance Practices (GVP) to be embraced by many countries and companies in the world.
 Healthcare Information technology would have to upgrade to capture relevant data values to comply with GUDID(Global Unique Device
Identification Database) and IDMP (Identification of medicinal products)
 Global drug safety norms with harmonized business process will emerge
 USA leading followed by Japan, France and Australia are complying with both business and clinical disclosure to the authorities.
Know how they might be relevant for your business (cont..1)

 BLOOD PLASMA PRODUCTS :
 Market dynamics will change in Asia and ME; Stovi Tel Sdn Bhd in technical collaboration with LFB established a plant in Malaysia, which can
produce 100 batches of plasma amounting to 300,000 liters. Malaysia might use the Halal label to make it more attractive for the ME markets.
 Nusep Singapore introducing PRIME separation technology , which will create the possibility of small batch fractionating facilities. Blood banks
will be empowered with these technologies
 Thailand Red Cross in collaboration with Korea’s Green Cross is planning to design & build a blood plasma fractionating facility in Chon Buri
province.
 Current leading suppliers of blood plasma products CSL, Baxter, Grifols, Octa Pharma, LFB,Bio-Prod Lab, Bio-test would be closely monitoring
these developments as some potential M&A and technology adoption opportunities might arise.
 BIOLOGICS :
 Cell line Research & development will dominate the Biologic industry. For the growth of Biologics, Bio-betters & Biosimilars regular supply of
differentiating cell line an important factor to succeed.
 R&D on different fermentation and purification is another area of growth, which can be beneficial for the Biosimilar’s market growth in Asia.
 Currently Biologics is dominating 20% of the Big Pharma’s business. By 2020, it could touch almost 50%. Most of these revenues are coming from
USA and Western Europe. CROs will continue to enjoy good business.
 Some of the biosimilar requirements for Asian countries are : Rheumatoid Arthritis, Lupus, Diabetes Mellitus, Cancers such as Colorectal, Breast &
Lymphoma.
 Contract manufacturing for BioSimilars scope in Europe better than Asia.

 MEDTECH:
 Largely classified intro three categories : Complex Medical Devices, Combination Devices & Home Health.
 Trends : Wireless devices, implantable devices, wearable technology, closed loop devices, big data will emerge from these technologies
 Need to follow 4 important economics to remain relevant and successful in this industry
 Need to cope with short product lifecycle management
 Implantable devices – USFDA approved the first implantable weight management device, great opportunity for CROs as well.
 M&A:
 2014 first half saw US$700 billion dollars worth of M&A transactions
 Actavis acquired Forest Lab for US$25 billion; Actavis acquired Allergen for US$66 billion
 Medtronics acquired Covidien for US$43 billion
 Thermo Fisher Scientific acquired LifeTechnologies Corp for US$13.6 billion
 Carlyle group acquired J&J ortho clinical diagnostics for US4 billion
 Zimmer acquired Biomet for US$13.4 billion
 GSK, Novartis and Eli Lilly deal was worth US$27 Billion (14.5+7.1+5.4) ; Pfizer made attempts to takeover AstraZeneca

Contact
[Author: Jay Chandran K (a management consultant
by profession, held positions as Director, Vizor
International Pte Ltd (present), Board of Directors,
Transwarranty Finance Ltd. India (present), Assoc.
Director-Healthcare, Frost & Sullivan, Singapore,
Director/GM United American Engineers Pte Ltd,
Singapore, Unisys(Oman)]
[Disclaimer :This is part of a j series insight/article
written and produced by the author. All the
interpretations and inferences made in this article are
his own and do not intend to defame or mislead any
institutions or individuals. It should be treated as an
opinion and for reading purposes only]
Expect more from j series soon
If you need any further details,
please contact Jay :
vizorint@gmail.com

Pharma, Biotech, Healthcare Outlook 2015: Global Harmonization Trend

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