This is the first in a series of 8 lectures for the newly created course--Drug Development from Discovery to Poat-Approval.

1. Overview of Drug Development:
Discovery to Post-Approval
Georgetown University Medical Center
BCHB 566
April 1, 2016
Stephen J. Sullivan
CRO Advisors LLC

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Course Objectives
 Understand the complete process to help you: make good
career choices, know how to contribute, relate to co-workers in
adjacent functions, maximize your contribution to the firm
 Develop the perspective needed to serve the drug industry as a
service provider, financier, consultant or board member
 Develop the insight required to help improve the process
 Understand the terms, nomenclature, and demarcation lines for
this complex process
 Develop a working knowledge of current issues in drug dev
 Help you become an informed investor

3. Course Outline
 Section 1- Overview and key issues, Today
 Section 2- Drug Discovery. Today
 Section 3- Pre-clinical, Safety, Mfg.- Sat. 4/2
 Section 4- Clinical Development- Sat. 4/2
 Section 5- The Regulatory Process- Fri. 4/8
 Section 6- Commercialization, Post-approval- Fri. 4/8
 Section 7- What lies ahead? –Sat. 4/9
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Course Requirements
Participation – requires being here – 15%
Case assignment – 35%
Final Exam: 50%

5. We are in good company!
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Developed by Eli Lilly & Co.
Available 4/2016
Developed by Terrapin offered 9/2015

6. Why this course?
10,000’ deep, 2’ wide
Perspective
Need for fresh eyes
Massive industry
Infinite choices
Lots of issues
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7. What is a biotechnology company?
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Traditional
Biotech
Evolving
Biotech
Medium &
Large Pharma
Amgen
Genentech
Large Molecules
Small Biopharma
SM and LM
Combinations
Top 50
Pharma

8. R&D spending growth
8
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YOY
% 
15
10
5
0
Total Pharma
2.5%
Top 10 Biotech
15%
Small-Medium
Pharma / Biotech
9%
2009 2010 2011 2012 2013 2014 2015

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My perspective………….
 Founder of CRO Advisors LLC, consulting firm to outsourced
pharma service providers across the DD continuum
 CEO of a large private equity owned CRO
 CEO of a NASDAQ early gene expression company
 CCO of a NASDAQ generic pharma
 Group President NYSE company (several divisions)
 VP / GM of a billion dollar unit of a Fortune 50
 20 years as Adjunct in top MBA program (Kellogg)
 US Marine Officer

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CRO Advisors LLC perspective
Discovery Pre-Clinical Phase I Phase II Phase III Phase IV
Clinical
Support
Services
Logistics / Packaging / Related
2 Boards 2 Boards
1 Board
Clients:
45% Private equity
45% Pharma Services
10% other investors
50 M&A projects
5 M&A projects
3 M&A projects
Negotiating with
Powerful Buyers
Workshops
6 M&A projects

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“All generalizations are false,
including this one.”
Mark Twain

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All generalizations are false……
R & D spending growth 0% or 15%
Revenue growth 0% or 15%
Therapeutic areas (5)% or 17%
Drugs in development 1% or 8%
Employees (1)% or 13%

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Source: Pharmaceutical Industry Profile 2008 (PhRMA, March 2008, p.4)
$31 billion 12 billion $71 billion $26 billion
$141 Billion
Year 0 5 7 9 11 13

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19. BioPharma Income Statement
19
Revenue 100
Cost of Goods 15
Gross Profit 85
Operating Expenses:
R&D 20
S&M 30
G&A 5
Operating Income 30
Revenue 100
Cost of Goods
Gross Profit 99
Operating Expenses:
R&D &D 27
S&M
34
G&A
Operating Income 39
Revenue 5
Cost of Goods 1
Gross Profit 4
Operating Expenses:
R&D 160
S&M 15
G&A
Operating Income (141)
Top 10 Pharma Commercial Biotech Development Biotech

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Pharma / Biotech in context
Healthcare approaching 20% of GDP in the US
Drugs are about 10% of healthcare
88% of prescriptions are generic drugs— 28% of
revenue
Ethical / specialty drugs continue to be the lion’s
share of the market
BioPharma Research is 20% of US industry research

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Critical challenges for the drug industry
R&D Productivity
ROIC for the industry declining
Prices of specialty drugs rising rapidly
US prices are often 2-3x the ROW
Payers and reimbursement
The image of the industry is low………….

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40 years of prosperity
1970 1975 1980 1985 1990 1995 2000 2005 2010 2012 2013
800
700
600
500
400
300
200
1982-83
DRGs
1994- Clintons
attempt to
nationalize HC
Revenue Billions
R & D
Spending
150
120
100
70
50

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Drug Classifications
 Traditional or “ethical” drugs chemically derived
otherwise called Small Molecule drugs
 Biologics from living organisms (often called Large
Molecules)
 Generics
 Specialty Drugs
 Orphan Drugs
 Biosimilars

25. R&D Productivity: Is it really improving?
The case for:
 FDA approvals
 # of blockbusters
 Targeted therapies
 Robust biotech market
 Huge profits
The case against:
Cost per new $2.6 BN
62% of Big pharma
launches from
elsewhere
Corporate Integrity
Agreements (CIAs)
Inexplicably high prices
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Source: Pharmaceutical Industry Profile 2008 (PhRMA, March 2008, p.4)
$31 billion 12 billion $71 billion $26 billion
$141 Billion
Year 0 5 7 9 11 13

27. Industry Benchmarks - 2015
Average Benchmarks R&D cost allocation R&D Cycle times
Discovery to 1st
tox dose 26% 34%
Preclincal to Phase II 29% 39%
Phase III and submission 46% 27%
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Source: Deloitte LLP and Global Data proprietary data, Measuring the Return from Pharmaceutical
Innovation 2015. p. 28.

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30. Eroom’s Law*
*Nature Reviews Drug Discovery, “Diagnosing the decline in pharmaceutical R&D efficiency” pp191-200, March 2012
The number
of new drugs
approved per
billion of R&D
spending has
halved every
9 years since
1950.

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Quantifying the damage:
Oliver Wyman*
The Age of
Abundance
$275M
The Age of
Scarcity
$75M
*Source: “Beyond the Shadow of a Drought: The need for a new mindset in Pharma R&D,
Oliver Wyman Point of View, November,2011

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Era of abundance----Era of scarcity-----Era of superabund.
35
43
35
2011 2012 2013 2014 2015
50
DEMOCRATS REPUBLICANS DEMOCRATS
57
Clinton Bush Obama
40 per yr. 23 per yr. 42 per yr.

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35. Non--Responders Common and Costly
Source: George Poste
GAvastin Rituxan Herceptin Revlimid Gleevec
Taxotere Alimta Gemzar Tarceva Femara
Erbitux Velcade Xeloda Arimidex Leuplin
R
$3.059B $2.466B $1.526B $1.373B $1.285B
$1.042B $975M $723M $661M $650M
$646M $598M $508M $393M $483M
Responder
Non-responder
Sources: Individual drug labels, FDA
Market and Product Forecast, Top 20 Oncology Therapy Brands, DataMonitor 2011

36. Personalized Medicine Improving Efficacy in
Oncology and other TAs
ALK gene
Cells expressing CD 304
BRAF Mutation 5%
HER-2 HER-2

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Trend
Time

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Jobs Created
2000 2003 2006 2009 2012 2015
Biotech
CROs, CMO
Big Pharma

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Productivity
2000 2003 2006 2009 2012 2015
Cost per
New Drug
10 year IRR

40. 40
Source of innovation
2000 2003 2006 2009 2012 2015
External
62%
Internal

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Critical challenges for the drug industry
R&D Productivity
ROIC for the industry declining
Prices of specialty drugs rising rapidly
US prices are often 2-3x the ROW
Payers and reimbursement
The image of the industry is low………….

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Intangibles such as key soft skills will be
considered
Perspective
Critical Thinking Skills
Values

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Perspective
Critical
Thinking
Skills
Values

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Perspective
Critical
Thinking
Skills
Values
Leadership