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Health Advances LLC
BOSTON | SAN FRANCISCO | ZUG | HONG KONG
www.healthadvances.com
Biopharma Sales Resilience
through Economic Recession
Analysis of 2008/9’s Great Recession on the Sales of
Established, Branded Drug Classes
May 2020
Biopharma Sales Resilience
2May 2020
• The biopharma industry is generally more resilient to recessions than the overall
healthcare sector, as witnessed through industry sales and biotech market
capitalizations
• That said, biopharma sales do face pressures from a recession’s economic fallout, as
uninsured and Medicaid populations rise and as private payers more aggressively
manage drug spend
• We hypothesized that a given drug class’ resilience to a recession would be driven by
four key criteria: indication severity, indication acuity, drug effectiveness, and the level of
competition
– These criteria would impact the degree to which patients defer drug treatment and payers restrict
or manage access to the class
– Our resilience index correlates well with sales growth pre vs. post recession, based on our
analysis of sales of 13 branded drug classes during the 2008/9 Great Recession
• Based on our biopharma sales resilience analysis:
– Branded drug classes that are highly effective, treat severe and/or acute indications, and face few
competitors or alternatives are most resilient to recessions
– For those drug classes that address less severe indications or face low-cost alternatives, drug
manufacturers need to work to ensure continued access and adherence. We provide several
recommendations and examples
Overview
Biopharma Sales Resilience
3May 2020
Agenda
• Recession Effects on the Biopharma Industry
• Sales Resilience of Specific Branded Drug Markets
• Implications for Industry
• Notes on Methodology
• Contact Information
Biopharma Sales Resilience
4May 2020
US Recession
The biopharma industry is generally more resilient to economic recessions than other
sectors, including the healthcare sector at large.
Biopharma Industry Resilience
While the global economy contracted
in 2009, pharma continued to grow,
albeit at a slower pace
-50%
-25%
0%
25%
50%
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Performancevs.12/31/2005
Dow Jones US HC
S&P 500
NASDAQ Biotech
Biotech stocks outperformed
the overall market as well as
broader healthcare stocks
Source: Health Advances analysis, EvaluatePharma, Thomson Eikon.
US Recession
9%
11%
9%
2%
4%
7%
4% 4%
2%
-2%
4%
3%
-4%
0%
4%
8%
12%
2006 2007 2008 2009 2010 2011
YOYGrowth
WW Pharma Sales WW GDP
Biopharma Sales Resilience
5May 2020
Lower Deferral Rates of Prescriptions
1 Based on persons responding to the questions, "During the past 12 months was there any time when person needed medical care but did not get it because person couldn't afford
it?" and "During the past 12 months has medical care been delayed because of worry about the cost?"
2 Based on persons responding to the question, "During the past 12 months was there any time when person needed prescription medicine but didn't get it because person couldn't
afford it?
Source: Health Advances analysis, CDC NCHS, Kaiser Family Foundation.
Partly explaining the resilience, consumer surveys suggest lower deferral rates for
prescriptions versus medical services.
9.1% 9.0%
10.4%
11.4%
10.9%
10.3%
7.0% 7.2%
8.0%
8.4% 8.3%
7.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2006 2007 2008 2009 2010 2011
ShareofAmericans
Delay in Medical Care¹ Nonreceipt of needed Rx²
Patients deferred medical services
more than they deferred prescriptions
Potential Drivers
• Procedures may be viewed as more
time-consuming and disruptive than
getting prescriptions
• Some prescriptions have a lower
out-of-pocket cost to patients than
some office visits and procedures
US Recession
Biopharma Sales Resilience
6May 2020
Biopharma does face some fallout from recessions, driven by larger uninsured and
Medicaid populations and more aggressive access restrictions by payers.
Recession Factors Impacting Biopharma
Uninsured and Medicaid
populations increase
Commercial payers more closely
manage access to branded drugs
• Unemployment leaves
many patients without
insurance or causes them
to enroll in Medicaid
• Payer operating margins
decline as they come
under pressure from
employers to contain
premiums
• Medicaid typically pays
lower net prices for drugs
than commercial or
Medicare payers
• As a result, payers seek to
more aggressively manage
utilization of branded drug
therapies
Biopharma Sales Resilience
7May 2020
Medicaid enrollment increases with unemployment. Net prices paid for drugs by Medicaid
are substantially lower than rates paid by other payers.
Increase in Medicaid Enrollment
As unemployment grows, people
lose employer-sponsored
coverage and enroll in Medicaid
43 42 44 47 51 53
4.6% 4.6%
5.6%
9.5% 9.4%
9.1%
0%
2%
4%
6%
8%
10%
0
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011
USAUnemploymentRate
MedicaidEnrollment(MM)
Medicaid Enrollment (MM) Unemployment Rate
Medicaid pays substantially
lower net prices per prescription
than do other payers*
2015
100%
51%
100%
28%
0%
20%
40%
60%
80%
100%
Medicare
Part D
Medicaid Medicare
Part D
Medicaid
Specialty Rx Non-Specialty Rx
NetPriceperRx
$3,800
$1,920
$200
$55
* Weighted average price per prescription for 50 top-selling brand-name specialty and non-specialty drugs. Specialty drugs include four of the following seven characteristics:
cost at least $6,000 per year, be initiated or maintained by a specialist, be administered by a health care professional, require special handing in the supply chain, be
associated with a patient payment assistance program, be distributed through nontraditional channels (such as a specialty pharmacy), or require monitoring or counseling either
because of significant side effects or because of the type of disease being treated.
Source: Health Advances analysis, Kaiser Family Foundation, US Bureau of Labor Statistics, Congressional Budget Office.
US Recession
Biopharma Sales Resilience
8May 2020
Operating margins of large payer organizations declined in the 2008 recession, leading to
more aggressive control of drug utilization and spend.
Tightened Access by Commercial Payers
Payer operating margins1 declined
during the recession
1 Weighted average operating margins of Aetna, UnitedHealthcare, Cigna, Humana.
2 HMO members only.
Source: Health Advances analysis, Sanofi Aventis Managed Care Digest.
Payers used several strategies to
reduce drug costs
Growth of Multi-Tier Plans
• 4- and 5-tier plans enable payers to steer patients
toward lower cost alternatives by creating additional
copayment tiers
• These plans grew from 6.2% of covered lives to
16.1% of covered lives between 2006-20112
Increased Use of Closed Formularies
• Closed formularies enable payers to manage their
drug costs by limiting members to a subset of
therapies
• Closed formularies grew from 38% to 50% of covered
lives between 2005-20102
US Recession
8.1%
8.6%
6.5%
6.1%
7.4%
8.1%
0%
2%
4%
6%
8%
10%
2006 2007 2008 2009 2010 2011
OperatingMargins
Biopharma Sales Resilience
9May 2020
The recession prompted payers to leverage formulary tier design in order to manage
pharmaceutical utilization and cost.
Changes to Formulary Tier Design
The recession accelerated a trend towards multi-
tier and/or restrictive formulary designs
HMO Plans
19.0% 17.8% 18.4% 18.4% 19.8%
26.8%
27.6% 28.1% 24.6% 25.2% 27.8% 16.2%
47.0% 45.2% 45.8% 45.0% 40.2%
40.9%
6.2% 8.1% 10.0% 10.3% 10.5%
10.4%
5.7%
0%
25%
50%
75%
100%
2005* 2007* 2008 2009 2010 2011
Members
1 Tier 2 Tier 3 Tier 4 Tier 5 Tier
4- and 5-tier plans enable payers to
steer patients toward lower cost
alternatives by creating additional
copayment tiers
1-tier plans typically use a
restrictive closed formularies and/or
are generic only
* 2006 data not available.
Note: About twice as many people are in enrolled in PPO plans than HMO plans. However, comparable data is not available for PPO plans.
Source: Health Advances analysis, Sanofi Aventis Managed Care Digest.
US Recession
Biopharma Sales Resilience
10May 2020
Payers increasingly used closed formularies to manage drug utilization following the
recession.
Increased Use of Closed Formularies
* 2006 and 2011 data not available.
Note: About twice as many people are in enrolled in PPO plans than HMO plans. However, comparable data is not available for PPO plans. We assume the larger trends are similar
across the two plan types.
Source: Health Advances analysis, Sanofi Aventis Managed Care Digest.
The recession accelerated a trend
towards closed formularies
HMO Plans
• Closed formularies enable payers to
manage their drug costs by limiting
members to a subset of therapies
– Drugs not on the formulary are not covered
or only covered after a prior authorization
process
– For example, some closed formularies limit
members to a single drug within a class
• Some estimates suggest HMOs save
10% to 25% of their drug expenditures
through closed formularies
62% 58% 57% 55% 50%
38% 42% 43% 45% 50%
0%
25%
50%
75%
100%
2005* 2007* 2008 2009 2010*
Members
Open Closed
US Recession
Biopharma Sales Resilience
11May 2020
We hypothesized that in an environment of stricter payer access and higher uninsured and
Medicaid populations, sales of drugs that uniquely and effectively treat severe and/or acute
diseases are more resilient.
Hypotheses on Drug Sales Resilience
• Payers (and hospitals) need to preserve patient access to
needed therapies for severe, life threatening diseases
(e.g., stroke or cancer) and patients are less likely to defer
these treatments
Drugs indicated for severe
and acute diseases are
more resilient
• Payers are unlikely to restrict access to drugs that provide
strong, differentiated efficacy (e.g., potentially curative)
– In some circumstances, these drugs prevent significant
downstream costs
Highly effective drugs are
more resilient
• When a drug has few competitors or treatment
alternatives, payers have limited ability to restrict access
– When there are alternatives, payers can use tiering and step
edits to encourage lower-cost options
– When there are multiple me-too competitors, payers can
negotiate discounts and reduce costs (and drug class sales)
Drugs with few competitors
and alternatives are more
resilient
Source: Health Advances analysis.
Biopharma Sales Resilience
12May 2020
Agenda
• Recession Effects on the Biopharma Industry
• Sales Resilience of Specific Branded Drug Markets
• Implications for Industry
• Notes on Methodology
• Contact Information
Biopharma Sales Resilience
13May 2020
We assessed a drug class’ resilience index according to four criteria, each scored 1 (low)
to 3 (high).
Resilience Analysis: Resilience Index Methodology
Examples
1 2 3
EGFR TKIs
Parathyroid
Hormone
Indication
Severity
Quality of life
Morbidity impact; no
or little mortality
impact
Mortality Impact 3 2
Indication
Acuity
Chronic Acute 2 1
Drug
Efficacy
Symptomatic
Treatment
Disease-modifying Potentially Curative 2 2
Drug
Competition
>2 Competitors in the
same class OR highly
attractive low-cost
alternatives
1-2 competitors in the
same class OR
moderately attractive
low-cost alternatives
Only drug in the class
AND no low-cost
alternatives
3 2
Scaling Factor -4 -4
Resilience Index 6 3
Resilience Index
HighLow
Source: Health Advances analysis.
Biopharma Sales Resilience
14May 2020
We assessed a drug class’ growth score based on the change in its compound annual
growth rate (CAGR) before and after the recession.
Resilience Analysis: Growth Score Methodology
EGFR TKI sales grew unabated after
the recession, resulting in a positive
growth score
Parathyroid hormone sales
declined after the recession,
resulting in a negative growth score
0.9 Growth Score
= (6.3% ’09-’11 CAGR) – (5.4% ’06-’08 CAGR)
$416
$494 $490
$518 $499
$453
$0
$200
$400
$600
2006 2007 2008 2009 2010 2011
USASales(USDMM)
$418 $426
$465
$486
$507
$549
$0
$200
$400
$600
2006 2007 2008 2009 2010 2011
USASales(USDMM)
-15.0 Growth Score
= (-6.5% ’09-’11 CAGR) – (8.5% ’06-’08 CAGR)
Source: Health Advances analysis, EvaluatePharma.
Examples
5.4% CAGR
6.3% CAGR
8.5% CAGR -6.5% CAGR
Biopharma Sales Resilience
15May 2020
tPA
HER2
EGFR
Parathyroid
hormone
Dornase alfa
GCSF
Gaucher's
ERTs
Insulins
Ophthalmic
cyclosporine
Atypical
antipsychotic
ICS/LABA
aTNFs
PDE5
R² = 0.5976
Our analysis of biopharma sales through the 2008/9 Great Recession shows that drug
classes with high resilience treated severe conditions, offered strong efficacy, and faced
limited competition.
Biopharma Sales Resilience Analysis
High
Low
Growth
Score
HighLow Resilience
Index
Biopharma Sales Resilience
Evaluation of 13 Branded Drug Classes
Note: GCSF = Granulocyte-colony stimulating factor. ICS/LABA = combination inhaled corticosteroid and a long-acting beta-agonist. ERT = Enzyme replacement therapy. tPA =
Tissue plasminogen activator. EGFR = Epidermal growth factor receptor. HER2 = epidermal growth factor receptor 2. aTNF = Anti-Tumor necrosis factor. PDE5 =
phosphodiesterase type 5.
Source: Health Advances analysis.
Growth
accelerated
post-recession
Growth
decelerated
post-recession
Relative
growth pre-
and post-
recession
• Indication Severity
• Indication Acuity
• Efficacy
• Competition
Biopharma Sales Resilience
16May 2020
-10%
0%
10%
20%
30%
40%
'06-'08 '09-'11
USASalesCAGR
Period
tPA (7.0)
Gaucher's ERTs
(5.5)
GCSF (4.0)
EGFR TKI (6.0)
HER2 (7.0)
Atypical
antipsychotics (3.5)
Insulins (4.5)
-10%
0%
10%
20%
30%
40%
'06-'08 '09-'11
USASalesCAGR
Period
Dornase alfa (5.0)
ICS/LABA (2.0)
Anti-TNFs (2.0)
Ophthalmic
cyclosporine (2.0)
Parathyroid hormone
(3.0)
PDE5 Inhibitor (1.0)
Most versus Least Resilient Classes
The recession had little impact on the sales growth of more resilient markets (e.g., oncology
treatments) but it led to growth deceleration for less resilient markets (e.g., erectile dysfunction).
Markets that weathered the
recession generally scored high
on our resilience index
1.5 Average Growth Score -15.2 Average Growth Score
Markets that struggled in the
recession generally scored low on
our resilience index
Note: tPA = tissue plasminogen activator. ERT = enzyme replacement therapy. GCSF = granulocyte colony-stimulating factor. EGFR TKI = Epidermal growth factor receptor tyrosine
kinase inhibitor. EPO = erythropoietin. HER2 = human epidermal growth factor receptor 2. TNF = Tumor necrosis factor. PDE5 = phosphodiesterase type 5.
Source: Health Advances analysis, EvaluatePharma.
Class
(Resilience Index)
Class
(Resilience Index)
5.4 Average
Resilience Index
2.5 Average
Resilience Index
Biopharma Sales Resilience
17May 2020
Herceptin, the only targeted HER-2 antibody, grew steadily through the recession given
the severity of the cancer indication and lack of comparably effective alternatives.
Drug Class Example: Anti-HER2 Antibodies
Source: Health Advances analysis, EvaluatePharma, Wang 2019 Signal Transduct Target Ther, Nan Jiang 2018 Exp Ther Med, Romond 2005 NEJM.
Herceptin sales remained stable due to its
strong efficacy in a specific tumor type
• Herceptin was the first targeted
therapy for HER-2 positive breast
cancer. It dramatically improved the
treatment of this disease
– Herceptin is indicated for metastatic
breast cancer or as an adjuvant
treatment for breast cancer
– One out of five breast cancer cases is
HER-2 positive, and this type tends to
be more aggressive
– In combination with surgical resection,
treatment with Herceptin may be
curative
• Herceptin’s annual growth rate pre
and post-recession remained stable
at 5-6%
$1,235
$1,289
$1,384
$1,446
$1,530
$1,608
$0
$300
$600
$900
$1,200
$1,500
$1,800
2006 2007 2008 2009 2010 2011
USASales(USDMM)
5.9% CAGR
5.5% CAGR
Biopharma Sales Resilience
18May 2020
As an essential therapy to manage insulin-dependent diabetes, insulin continued its sales
growth through the recession.
Drug Class Example: Insulins
Source: Health Advances analysis, EvaluatePharma, UpToDate, DeWitt JAMA 2003.
An essential therapy for many, insulin
sales growth continued unabated
through the recession
$3,350
$3,964
$4,879
$5,764
$7,099
$8,037
$0
$1,500
$3,000
$4,500
$6,000
$7,500
$9,000
2006 2007 2008 2009 2010 2011
USASales(USDMM)
• Many diabetes patients require chronic
insulin to manage their disease
– For people with type 1 diabetes, there is no
substitute for insulin therapy
– People with type 2 diabetes may manage
their diseases with oral medications and diet
and exercise, but many progress to insulin
dependence
• Insulin sales continued to grow rapidly
through the recession (~20% CAGR),
driven by:
– Strong adoption of newer analog insulin
therapies – Lantus, Novolog and Humalog
– Patient access supported by payers despite
net price increases
21% CAGR
18% CAGR
Biopharma Sales Resilience
19May 2020
Forteo, or parathyroid hormone, struggled to compete against generic bisphosphonates in
the wake of the recession.
Drug Class Example: Parathyroid Hormone
Source: Health Advances analysis, EvaluatePharma, Mayo Clinic, Smith 2008 CNN Money.
• Forteo is a form of parathyroid hormone
used to treat osteoporosis
– Before 2017, it was the only treatment that
catalyzed new bone creation, rather than
slowing degradation
– Forteo is typically reserved for patients more
severely affected by osteoporosis
• Forteo sales dropped post recession, as
patients remained on generic
bisphosphonate therapy
– In 2008, the patent for a leading
bisphosphonate, Fosamax, expired
– While Forteo is more effective than
bisphosphonates, osteoporosis patients don’t
typically experience acute symptoms and may
have chosen to remain on a cheap generic
$416
$494 $490
$518
$499
$453
$0
$100
$200
$300
$400
$500
$600
2006 2007 2008 2009 2010 2011
USASales(USDMM)
Parathyroid hormone sales declined
post recession as patients increasingly
relied on generic bisphosphonates
8.5% CAGR -6.5% CAGR
Biopharma Sales Resilience
20May 2020
Anti-TNF sales growth slowed after the recession, as patients discontinued treatment and
remained on generic orals for their inflammatory conditions.
Drug Class Example: Anti-TNFs
Source: Health Advances analysis, EvaluatePharma, Mangoni 2019 BMC Rheumatol, Fortune, AbbVie 10-K, Abbot equity analyst reports.
• Anti-TNFs are premium-priced biologic
therapies to treat moderate-severe chronic
inflammatory conditions, including
rheumatoid arthritis (RA), Crohn’s disease,
and psoriasis
– Anti-TNFs are typically prescribed in
combination with generic methotrexate or
other oral options
• Payer restrictions and patient
discontinuations slowed sales growth
during the recession
– Increased co-pays and loss of insurance led
to an increased number of
discontinued/deferred treatments
– Payers enacted strict step edits and prior
authorization requirements resulting in a
reduced number of new patients starting on
anti-TNF therapy
$6,267
$7,237
$8,466
$9,037
$9,688
$10,711
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2006 2007 2008 2009 2010 2011
USASales(USDMM)
Anti-TNFs sales growth slowed post
recession as patients deferred
biologic treatment
16% CAGR
9% CAGR
Biopharma Sales Resilience
21May 2020
Agenda
• Recession Effects on the Biopharma Industry
• Sales Resilience of Specific Branded Drug Markets
• Implications for Industry
• Notes on Methodology
• Contact Information
Biopharma Sales Resilience
22May 2020
Implications for Industry
Source: Health Advances analysis.
• Our resilience index can be used as a heuristic to assess a brand or branded class’
sales risk during a recession
– Generally, indication severity, indication acuity, drug effectiveness, and the level of
competition can help gauge a recession’s level of impact on sales growth
– Health Advances can also help with more targeted market evaluations to develop tailored
assessments of sales risk and to develop strategies to mitigate risk.
• For drug classes that are less resilient, drug manufacturers need to facilitate drug
access and adherence for their patients. This may be achieved by:
– Enabling faster and simpler enrollment (and re-enrollment) into patient support programs as
well as relaxing criteria for enrollment (e.g., immediate access for patients recently
unemployed)
– Enhancing programs to reduce patient costs, including providing temporary free therapy for
unemployed patients to ensure continuity of care and reducing barriers to using these
benefits
– Developing solutions to assist patients with prescription fulfillment and adherence
– Working with payers to alleviate prior authorizations and other utilization
management tools, leveraging real-world and health economic evidence
Biopharma Sales Resilience
23May 2020
• Adapted the Merck Patient
Assistance Program for patients
who lost their job or cannot see
their doctor
– Assessing patients’ real-time
financial situations
– Providing assistance with expiring
enrollments
– Offering new options to collect
signatures on enrollment forms
• Expanded other access and
assistance programs
– Temporary $0 co-pay for some
products for eligible privately
insured patients
– Relaxed some refill restrictions
related to coupon use
• Expanded its patient support
programs to help eligible
unemployed patients affected by
COVID-19
• Expanded program offers free
medicine and features include:
– Immediate access for patients
who have lost their employment
and health insurance
– A simple, single point of entry
– Streamlined enrollment process
– Vouchers to assist with continuity
of care for several self-
administered BMS medicines, for
eligible patients
• Enhanced offerings to help
patients experiencing difficulties
from the COVID-19
– Simplified access to free
medicines for eligible patients
– Expanded programs to improve
affordability and patient support
• Free temporary supplies of
certain medications to avoid
treatment gaps
• Expanded in-home
onboarding and
administration support
• Extended fill co-pay card
support
• Where available, extended
refills for free-drug programs
Several large pharma companies recently bolstered their patient support programs to
ensure continuity of care for their patients and limit the impact of COVID-19.
COVID-19 Industry Examples (Publicly Announced)
Source: Health Advances analysis, company website and press releases.
Biopharma Sales Resilience
24May 2020
Agenda
• Recession Effects on the Biopharma Industry
• Sales Resilience of Specific Branded Drug Markets
• Implications for Industry
• Notes on Methodology
• Contact Information
Biopharma Sales Resilience
25May 2020
Health Advances rapidly evaluated ~40 drug classes to select 13 classes that could best
reflect recession impact – e.g. established class, all branded (no generic options).
Drug Class Selection
~40 Drug Classes
Assessed
13
• 5-HT3 antagonists
• Acetylcholinesterase
inhibitors
• Alteplase/tPA
• Alpha Blockers
• Aminoketone
antidepressants
• Amphetamines
• Antimigraine triptans
• Anti-TNFs
• Atypical
Antipsychotics
• Contraceptive
Implants
• DPP-4 inhibitors
• EGFR
• EPO
• Gaucher's ERTs
• GCSF
• HER2
• HIV combo therapies
• ICS/LABA
• Insulins
• Isotretinoin for Acne
• Nasal
Corticosteroids
• Non-Barbiturate
Hypnotics
• Parathyroid
hormone
• PDE5s
• Clopidogrel
• PPIs
• Pregabalin
• Prostaglandin
analogs
• Dornase alfa
• Ophthalmic
cyclosporine
• SNRI
• Statins
13 Classes Chosen
(in bold)
Classes were excluded primarily due to generic entry or because they were early in their growth trajectory
Biopharma Sales Resilience
26May 2020
Classes Evaluated (1 of 2)
Market/
Drug Class
Example
Therapeutic
First Drug
Launch/LOE
Resilience
Score
CAGR
Description
’06-’08 ’09-’11
HER2
Therapies
Herceptin 1998 / 2019 7 6% 5%
• Effective and highly targeted treatment for
metastatic breast cancer patients
• Potentially curative in a potentially fatal disease
Tissue
Plasminogen
Activator
Activase 1987 / 20251 7 5% 11%
• Effective treatment for acute ischemic stroke
• High mortality impact, critically acute treatment
EGFRs Tarceva 2004 / 2019 6 5% 6%
• Effective targeted treatment for lung cancer
• High mortality impact
Gaucher
ERTs2
Cerezyme 1991 / 2013 5.5 11% 15%
• Enzyme replacement therapy for Gaucher Disease
• High mortality impact
Cystic Fibrosis
Mucolytics
Pulmozyme 1994 / 2015 5 14% 7%
• Rare and severe disease
• Single drug in the class, however limited efficacy
Insulins Lantus 2000 / 2015 4.5 21% 18%
• Essential treatment for type 1 and some type 2
diabetes patients
GCSFs Neupogen 1991 / 2013 4 5% 8%
• Bone marrow stimulant following chemotherapy
• Limited competition
1 Patents expiring in 2025 are related to manufacturing techniques.
2 Note that Genzyme also struggled with manufacturing challenges during this period, but sales growth still persisted.
Note: HER2 = human epidermal growth factor receptor 2; EGFR = epidermal growth factor receptor; GCSF = growth colony stimulating factor; ERT = enzyme replacement therapy.
Source: Health Advances analysis.
Specialty drug classes received higher resilience scores because these drugs tended to
have greater efficacy impact and fewer competitors.
Biopharma Sales Resilience
27May 2020
Classes treating less severe, chronic diseases with multiple competitors or alternatives
generally scored lower.
Classes Evaluated (2 of 2)
Market/
Drug Class
Example
Therapeutic
First Drug
Launch /
LOE
Resilience
Score
CAGR
Description
’06-’08 ’09-’11
Atypical
antipsychotics
Abilify 1993/20081 3.5 6% 6%
• Therapy for schizophrenia and other psychological
disorders
• More than 15 competitors in the drug class
Parathyroid
Hormone
Forteo 2002/2019 3 8% -7%
• Treatment for osteoporosis
• Single drug in the class, but strong competition
from bisphosphonates
Ophthalmic
Cyclosporine
Restasis 1994/2019 2 28% 11%
• Treatment for dry eye
• Strong competition from low-cost alternative
treatments
Adrenergic
Inhalants
Advair 2001/20102 2 11% 4%
• Inhaled therapy for asthma and COPD
• Chronic treatment, low disease acuity
Anti-TNFs Humira 1998/2017 2 16% 9%
• Anti-inflammatory immunosuppressant
• Multiple low-cost oral classes also used in
indications
PDE5 Inhibitors Viagra 1998/20173 1 32% 1%
• Treatment for erectile dysfunction
• Low medically necessity
1 Clorazil was an early atypical psychotic. Generics for it were already available by 1990, but those effects were already established in the market place.
2 Inhaled formulations of these drugs have been difficult to replicate and generics did not enter the market in this period.
3 Lower dose generic versions of Viagra (sildenafil) became available in 2012 but were only approved for pulmonary arterial hypertension. This analysis only looks at PDE5
inhibitors that treat erectile dysfunction (ED).
Note: TNF = tumor necrosis factor; PDE5 = phosphodiesterase type 5. Adrenergic inhalants have historically been difficult to replicate into generics.
Source: Health Advances analysis.
Biopharma Sales Resilience
28May 2020
Small Sample Size
• Only evaluated 13 drug classes which were predominantly mature markets in
2006-2011
• Drug classes were selected because they were less affected by confounding
factors, like new market approvals or in-class generic entry
Limited Explanatory Variables
• The resilience score is a composite of readily-available explanatory variables
(e.g., efficacy, number of competitors)
• However, other data not available on a product-level basis (e.g., net price
increases) could also serve as explanatory variables
• This approach also may not account for market-specific nuances, like
evolving treatment paradigms and new clinical practices, innovative
diagnostic technologies, etc.
While the resilience score provides a framework to rapidly assess the risk to a given
market during a recession, it is not a substitute for a comprehensive analysis.
Limitations of Analysis
Biopharma Sales Resilience
29May 2020
Agenda
• Recession Effects on the Biopharma Industry
• Sales Resilience of Specific Branded Drug Markets
• Implications for Industry
• Notes on Methodology
• Contact Information
Biopharma Sales Resilience
30May 2020
Authors
Sheela Hegde, Partner and Managing Director
• 20 years of experience in advising senior executive teams
on corporate strategy
• Leader in BioPharma Practice, focusing on new product
commercialization, lifecycle planning, and M&A strategy
• Strong experience in metabolic, autoimmune, and CNS
therapeutic areas; leader of Diabetes/Metabolics and
Autoimmune Sub-Practices
• Novartis Pharmaceuticals, Associate, Cardiovascular
Business Franchise
• The Advisory Board Company, Senior Research Manager
• Harvard Business School, MBA
• Stanford University, BA with distinction, Human Biology, phi
beta kappa
Michael Davitian, Director
• Experience in system economics analyses, facilitating
strategic transactions through due diligence, market
research analyses, and prioritizing applications and
indications for new technologies
• Inverness Advisors, LLC, Healthcare Investment Banking
Analyst
• Stanford Financial Group, Healthcare Investment Banking
Analyst
• Thomas Weisel Partners, Healthcare Investment Banking
Analyst
• Williams College, BA, Biology and Economics
Mansi Shinde, PhD, Engagement Manager
• Experience in market opportunity assessment, early
stage commercialization, product and portfolio strategy,
revenue forecasting, M&A due diligence, and corporate
strategy across the biopharma and diagnostic industries
• Therapeutic area expertise includes autoimmune
disease, oncology, cardiovascular, and kidney disease
• Penn Center for Innovation, IP and Marketing Fellow
• Perelman School of Medicine at University of
Pennsylvania, PhD in Pharmacology
• New York University, BA, Biology, minor in Business
Nishanth Krishnamurthy, PhD, Consultant
• Expertise in medical devices, diagnostics and health IT with
a focus on market assessments, competitive analyses and
supply chain
• Past Experience in hardware engineering and development
for clinical research applications focused on breast and
brain hemodynamics
• Tufts University, PhD, Biomedical Engineering
• Cleveland Clinic Foundation, Lerner Research Institute,
Research Associate
• Rensselaer Polytechnic Institute, BS, Biomedical
Engineering, Cum Laude
Angela Wang, Senior Analyst
• Strategic Health Care, Legislative and Policy Intern
• Dartmouth Institute for Health Policy and Clinical
Practice, Research Assistant
• Dartmouth College, BA, Government, Minor in Health
Policy
Rebecca Podolsky, Senior Analyst
• Experience in commercial strategy, market research and
analysis, and due diligence within the biopharma and
diagnostics industries
• Global Prior Art, Intellectual Property Analyst
• Brandeis University, Research Assistant, Synthetic
Inorganic Chemistry
• Brandeis University, BS, Chemistry, Minor in Business
Biopharma Sales Resilience
31May 2020
Contact Information
Sheela Hegde
Partner and Managing Director
shegde@healthadvances.com
Michael Davitian
Director
mdavitian@healthadvances.com
Health Advances LLC
275 Grove Street
Suite 1-300
Newton, MA 02466
781-647-3435
www.healthadvances.com

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Biopharma Sales Resilience through Economic Recession

  • 1. Health Advances LLC BOSTON | SAN FRANCISCO | ZUG | HONG KONG www.healthadvances.com Biopharma Sales Resilience through Economic Recession Analysis of 2008/9’s Great Recession on the Sales of Established, Branded Drug Classes May 2020
  • 2. Biopharma Sales Resilience 2May 2020 • The biopharma industry is generally more resilient to recessions than the overall healthcare sector, as witnessed through industry sales and biotech market capitalizations • That said, biopharma sales do face pressures from a recession’s economic fallout, as uninsured and Medicaid populations rise and as private payers more aggressively manage drug spend • We hypothesized that a given drug class’ resilience to a recession would be driven by four key criteria: indication severity, indication acuity, drug effectiveness, and the level of competition – These criteria would impact the degree to which patients defer drug treatment and payers restrict or manage access to the class – Our resilience index correlates well with sales growth pre vs. post recession, based on our analysis of sales of 13 branded drug classes during the 2008/9 Great Recession • Based on our biopharma sales resilience analysis: – Branded drug classes that are highly effective, treat severe and/or acute indications, and face few competitors or alternatives are most resilient to recessions – For those drug classes that address less severe indications or face low-cost alternatives, drug manufacturers need to work to ensure continued access and adherence. We provide several recommendations and examples Overview
  • 3. Biopharma Sales Resilience 3May 2020 Agenda • Recession Effects on the Biopharma Industry • Sales Resilience of Specific Branded Drug Markets • Implications for Industry • Notes on Methodology • Contact Information
  • 4. Biopharma Sales Resilience 4May 2020 US Recession The biopharma industry is generally more resilient to economic recessions than other sectors, including the healthcare sector at large. Biopharma Industry Resilience While the global economy contracted in 2009, pharma continued to grow, albeit at a slower pace -50% -25% 0% 25% 50% Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Performancevs.12/31/2005 Dow Jones US HC S&P 500 NASDAQ Biotech Biotech stocks outperformed the overall market as well as broader healthcare stocks Source: Health Advances analysis, EvaluatePharma, Thomson Eikon. US Recession 9% 11% 9% 2% 4% 7% 4% 4% 2% -2% 4% 3% -4% 0% 4% 8% 12% 2006 2007 2008 2009 2010 2011 YOYGrowth WW Pharma Sales WW GDP
  • 5. Biopharma Sales Resilience 5May 2020 Lower Deferral Rates of Prescriptions 1 Based on persons responding to the questions, "During the past 12 months was there any time when person needed medical care but did not get it because person couldn't afford it?" and "During the past 12 months has medical care been delayed because of worry about the cost?" 2 Based on persons responding to the question, "During the past 12 months was there any time when person needed prescription medicine but didn't get it because person couldn't afford it? Source: Health Advances analysis, CDC NCHS, Kaiser Family Foundation. Partly explaining the resilience, consumer surveys suggest lower deferral rates for prescriptions versus medical services. 9.1% 9.0% 10.4% 11.4% 10.9% 10.3% 7.0% 7.2% 8.0% 8.4% 8.3% 7.7% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2006 2007 2008 2009 2010 2011 ShareofAmericans Delay in Medical Care¹ Nonreceipt of needed Rx² Patients deferred medical services more than they deferred prescriptions Potential Drivers • Procedures may be viewed as more time-consuming and disruptive than getting prescriptions • Some prescriptions have a lower out-of-pocket cost to patients than some office visits and procedures US Recession
  • 6. Biopharma Sales Resilience 6May 2020 Biopharma does face some fallout from recessions, driven by larger uninsured and Medicaid populations and more aggressive access restrictions by payers. Recession Factors Impacting Biopharma Uninsured and Medicaid populations increase Commercial payers more closely manage access to branded drugs • Unemployment leaves many patients without insurance or causes them to enroll in Medicaid • Payer operating margins decline as they come under pressure from employers to contain premiums • Medicaid typically pays lower net prices for drugs than commercial or Medicare payers • As a result, payers seek to more aggressively manage utilization of branded drug therapies
  • 7. Biopharma Sales Resilience 7May 2020 Medicaid enrollment increases with unemployment. Net prices paid for drugs by Medicaid are substantially lower than rates paid by other payers. Increase in Medicaid Enrollment As unemployment grows, people lose employer-sponsored coverage and enroll in Medicaid 43 42 44 47 51 53 4.6% 4.6% 5.6% 9.5% 9.4% 9.1% 0% 2% 4% 6% 8% 10% 0 10 20 30 40 50 60 2006 2007 2008 2009 2010 2011 USAUnemploymentRate MedicaidEnrollment(MM) Medicaid Enrollment (MM) Unemployment Rate Medicaid pays substantially lower net prices per prescription than do other payers* 2015 100% 51% 100% 28% 0% 20% 40% 60% 80% 100% Medicare Part D Medicaid Medicare Part D Medicaid Specialty Rx Non-Specialty Rx NetPriceperRx $3,800 $1,920 $200 $55 * Weighted average price per prescription for 50 top-selling brand-name specialty and non-specialty drugs. Specialty drugs include four of the following seven characteristics: cost at least $6,000 per year, be initiated or maintained by a specialist, be administered by a health care professional, require special handing in the supply chain, be associated with a patient payment assistance program, be distributed through nontraditional channels (such as a specialty pharmacy), or require monitoring or counseling either because of significant side effects or because of the type of disease being treated. Source: Health Advances analysis, Kaiser Family Foundation, US Bureau of Labor Statistics, Congressional Budget Office. US Recession
  • 8. Biopharma Sales Resilience 8May 2020 Operating margins of large payer organizations declined in the 2008 recession, leading to more aggressive control of drug utilization and spend. Tightened Access by Commercial Payers Payer operating margins1 declined during the recession 1 Weighted average operating margins of Aetna, UnitedHealthcare, Cigna, Humana. 2 HMO members only. Source: Health Advances analysis, Sanofi Aventis Managed Care Digest. Payers used several strategies to reduce drug costs Growth of Multi-Tier Plans • 4- and 5-tier plans enable payers to steer patients toward lower cost alternatives by creating additional copayment tiers • These plans grew from 6.2% of covered lives to 16.1% of covered lives between 2006-20112 Increased Use of Closed Formularies • Closed formularies enable payers to manage their drug costs by limiting members to a subset of therapies • Closed formularies grew from 38% to 50% of covered lives between 2005-20102 US Recession 8.1% 8.6% 6.5% 6.1% 7.4% 8.1% 0% 2% 4% 6% 8% 10% 2006 2007 2008 2009 2010 2011 OperatingMargins
  • 9. Biopharma Sales Resilience 9May 2020 The recession prompted payers to leverage formulary tier design in order to manage pharmaceutical utilization and cost. Changes to Formulary Tier Design The recession accelerated a trend towards multi- tier and/or restrictive formulary designs HMO Plans 19.0% 17.8% 18.4% 18.4% 19.8% 26.8% 27.6% 28.1% 24.6% 25.2% 27.8% 16.2% 47.0% 45.2% 45.8% 45.0% 40.2% 40.9% 6.2% 8.1% 10.0% 10.3% 10.5% 10.4% 5.7% 0% 25% 50% 75% 100% 2005* 2007* 2008 2009 2010 2011 Members 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 4- and 5-tier plans enable payers to steer patients toward lower cost alternatives by creating additional copayment tiers 1-tier plans typically use a restrictive closed formularies and/or are generic only * 2006 data not available. Note: About twice as many people are in enrolled in PPO plans than HMO plans. However, comparable data is not available for PPO plans. Source: Health Advances analysis, Sanofi Aventis Managed Care Digest. US Recession
  • 10. Biopharma Sales Resilience 10May 2020 Payers increasingly used closed formularies to manage drug utilization following the recession. Increased Use of Closed Formularies * 2006 and 2011 data not available. Note: About twice as many people are in enrolled in PPO plans than HMO plans. However, comparable data is not available for PPO plans. We assume the larger trends are similar across the two plan types. Source: Health Advances analysis, Sanofi Aventis Managed Care Digest. The recession accelerated a trend towards closed formularies HMO Plans • Closed formularies enable payers to manage their drug costs by limiting members to a subset of therapies – Drugs not on the formulary are not covered or only covered after a prior authorization process – For example, some closed formularies limit members to a single drug within a class • Some estimates suggest HMOs save 10% to 25% of their drug expenditures through closed formularies 62% 58% 57% 55% 50% 38% 42% 43% 45% 50% 0% 25% 50% 75% 100% 2005* 2007* 2008 2009 2010* Members Open Closed US Recession
  • 11. Biopharma Sales Resilience 11May 2020 We hypothesized that in an environment of stricter payer access and higher uninsured and Medicaid populations, sales of drugs that uniquely and effectively treat severe and/or acute diseases are more resilient. Hypotheses on Drug Sales Resilience • Payers (and hospitals) need to preserve patient access to needed therapies for severe, life threatening diseases (e.g., stroke or cancer) and patients are less likely to defer these treatments Drugs indicated for severe and acute diseases are more resilient • Payers are unlikely to restrict access to drugs that provide strong, differentiated efficacy (e.g., potentially curative) – In some circumstances, these drugs prevent significant downstream costs Highly effective drugs are more resilient • When a drug has few competitors or treatment alternatives, payers have limited ability to restrict access – When there are alternatives, payers can use tiering and step edits to encourage lower-cost options – When there are multiple me-too competitors, payers can negotiate discounts and reduce costs (and drug class sales) Drugs with few competitors and alternatives are more resilient Source: Health Advances analysis.
  • 12. Biopharma Sales Resilience 12May 2020 Agenda • Recession Effects on the Biopharma Industry • Sales Resilience of Specific Branded Drug Markets • Implications for Industry • Notes on Methodology • Contact Information
  • 13. Biopharma Sales Resilience 13May 2020 We assessed a drug class’ resilience index according to four criteria, each scored 1 (low) to 3 (high). Resilience Analysis: Resilience Index Methodology Examples 1 2 3 EGFR TKIs Parathyroid Hormone Indication Severity Quality of life Morbidity impact; no or little mortality impact Mortality Impact 3 2 Indication Acuity Chronic Acute 2 1 Drug Efficacy Symptomatic Treatment Disease-modifying Potentially Curative 2 2 Drug Competition >2 Competitors in the same class OR highly attractive low-cost alternatives 1-2 competitors in the same class OR moderately attractive low-cost alternatives Only drug in the class AND no low-cost alternatives 3 2 Scaling Factor -4 -4 Resilience Index 6 3 Resilience Index HighLow Source: Health Advances analysis.
  • 14. Biopharma Sales Resilience 14May 2020 We assessed a drug class’ growth score based on the change in its compound annual growth rate (CAGR) before and after the recession. Resilience Analysis: Growth Score Methodology EGFR TKI sales grew unabated after the recession, resulting in a positive growth score Parathyroid hormone sales declined after the recession, resulting in a negative growth score 0.9 Growth Score = (6.3% ’09-’11 CAGR) – (5.4% ’06-’08 CAGR) $416 $494 $490 $518 $499 $453 $0 $200 $400 $600 2006 2007 2008 2009 2010 2011 USASales(USDMM) $418 $426 $465 $486 $507 $549 $0 $200 $400 $600 2006 2007 2008 2009 2010 2011 USASales(USDMM) -15.0 Growth Score = (-6.5% ’09-’11 CAGR) – (8.5% ’06-’08 CAGR) Source: Health Advances analysis, EvaluatePharma. Examples 5.4% CAGR 6.3% CAGR 8.5% CAGR -6.5% CAGR
  • 15. Biopharma Sales Resilience 15May 2020 tPA HER2 EGFR Parathyroid hormone Dornase alfa GCSF Gaucher's ERTs Insulins Ophthalmic cyclosporine Atypical antipsychotic ICS/LABA aTNFs PDE5 R² = 0.5976 Our analysis of biopharma sales through the 2008/9 Great Recession shows that drug classes with high resilience treated severe conditions, offered strong efficacy, and faced limited competition. Biopharma Sales Resilience Analysis High Low Growth Score HighLow Resilience Index Biopharma Sales Resilience Evaluation of 13 Branded Drug Classes Note: GCSF = Granulocyte-colony stimulating factor. ICS/LABA = combination inhaled corticosteroid and a long-acting beta-agonist. ERT = Enzyme replacement therapy. tPA = Tissue plasminogen activator. EGFR = Epidermal growth factor receptor. HER2 = epidermal growth factor receptor 2. aTNF = Anti-Tumor necrosis factor. PDE5 = phosphodiesterase type 5. Source: Health Advances analysis. Growth accelerated post-recession Growth decelerated post-recession Relative growth pre- and post- recession • Indication Severity • Indication Acuity • Efficacy • Competition
  • 16. Biopharma Sales Resilience 16May 2020 -10% 0% 10% 20% 30% 40% '06-'08 '09-'11 USASalesCAGR Period tPA (7.0) Gaucher's ERTs (5.5) GCSF (4.0) EGFR TKI (6.0) HER2 (7.0) Atypical antipsychotics (3.5) Insulins (4.5) -10% 0% 10% 20% 30% 40% '06-'08 '09-'11 USASalesCAGR Period Dornase alfa (5.0) ICS/LABA (2.0) Anti-TNFs (2.0) Ophthalmic cyclosporine (2.0) Parathyroid hormone (3.0) PDE5 Inhibitor (1.0) Most versus Least Resilient Classes The recession had little impact on the sales growth of more resilient markets (e.g., oncology treatments) but it led to growth deceleration for less resilient markets (e.g., erectile dysfunction). Markets that weathered the recession generally scored high on our resilience index 1.5 Average Growth Score -15.2 Average Growth Score Markets that struggled in the recession generally scored low on our resilience index Note: tPA = tissue plasminogen activator. ERT = enzyme replacement therapy. GCSF = granulocyte colony-stimulating factor. EGFR TKI = Epidermal growth factor receptor tyrosine kinase inhibitor. EPO = erythropoietin. HER2 = human epidermal growth factor receptor 2. TNF = Tumor necrosis factor. PDE5 = phosphodiesterase type 5. Source: Health Advances analysis, EvaluatePharma. Class (Resilience Index) Class (Resilience Index) 5.4 Average Resilience Index 2.5 Average Resilience Index
  • 17. Biopharma Sales Resilience 17May 2020 Herceptin, the only targeted HER-2 antibody, grew steadily through the recession given the severity of the cancer indication and lack of comparably effective alternatives. Drug Class Example: Anti-HER2 Antibodies Source: Health Advances analysis, EvaluatePharma, Wang 2019 Signal Transduct Target Ther, Nan Jiang 2018 Exp Ther Med, Romond 2005 NEJM. Herceptin sales remained stable due to its strong efficacy in a specific tumor type • Herceptin was the first targeted therapy for HER-2 positive breast cancer. It dramatically improved the treatment of this disease – Herceptin is indicated for metastatic breast cancer or as an adjuvant treatment for breast cancer – One out of five breast cancer cases is HER-2 positive, and this type tends to be more aggressive – In combination with surgical resection, treatment with Herceptin may be curative • Herceptin’s annual growth rate pre and post-recession remained stable at 5-6% $1,235 $1,289 $1,384 $1,446 $1,530 $1,608 $0 $300 $600 $900 $1,200 $1,500 $1,800 2006 2007 2008 2009 2010 2011 USASales(USDMM) 5.9% CAGR 5.5% CAGR
  • 18. Biopharma Sales Resilience 18May 2020 As an essential therapy to manage insulin-dependent diabetes, insulin continued its sales growth through the recession. Drug Class Example: Insulins Source: Health Advances analysis, EvaluatePharma, UpToDate, DeWitt JAMA 2003. An essential therapy for many, insulin sales growth continued unabated through the recession $3,350 $3,964 $4,879 $5,764 $7,099 $8,037 $0 $1,500 $3,000 $4,500 $6,000 $7,500 $9,000 2006 2007 2008 2009 2010 2011 USASales(USDMM) • Many diabetes patients require chronic insulin to manage their disease – For people with type 1 diabetes, there is no substitute for insulin therapy – People with type 2 diabetes may manage their diseases with oral medications and diet and exercise, but many progress to insulin dependence • Insulin sales continued to grow rapidly through the recession (~20% CAGR), driven by: – Strong adoption of newer analog insulin therapies – Lantus, Novolog and Humalog – Patient access supported by payers despite net price increases 21% CAGR 18% CAGR
  • 19. Biopharma Sales Resilience 19May 2020 Forteo, or parathyroid hormone, struggled to compete against generic bisphosphonates in the wake of the recession. Drug Class Example: Parathyroid Hormone Source: Health Advances analysis, EvaluatePharma, Mayo Clinic, Smith 2008 CNN Money. • Forteo is a form of parathyroid hormone used to treat osteoporosis – Before 2017, it was the only treatment that catalyzed new bone creation, rather than slowing degradation – Forteo is typically reserved for patients more severely affected by osteoporosis • Forteo sales dropped post recession, as patients remained on generic bisphosphonate therapy – In 2008, the patent for a leading bisphosphonate, Fosamax, expired – While Forteo is more effective than bisphosphonates, osteoporosis patients don’t typically experience acute symptoms and may have chosen to remain on a cheap generic $416 $494 $490 $518 $499 $453 $0 $100 $200 $300 $400 $500 $600 2006 2007 2008 2009 2010 2011 USASales(USDMM) Parathyroid hormone sales declined post recession as patients increasingly relied on generic bisphosphonates 8.5% CAGR -6.5% CAGR
  • 20. Biopharma Sales Resilience 20May 2020 Anti-TNF sales growth slowed after the recession, as patients discontinued treatment and remained on generic orals for their inflammatory conditions. Drug Class Example: Anti-TNFs Source: Health Advances analysis, EvaluatePharma, Mangoni 2019 BMC Rheumatol, Fortune, AbbVie 10-K, Abbot equity analyst reports. • Anti-TNFs are premium-priced biologic therapies to treat moderate-severe chronic inflammatory conditions, including rheumatoid arthritis (RA), Crohn’s disease, and psoriasis – Anti-TNFs are typically prescribed in combination with generic methotrexate or other oral options • Payer restrictions and patient discontinuations slowed sales growth during the recession – Increased co-pays and loss of insurance led to an increased number of discontinued/deferred treatments – Payers enacted strict step edits and prior authorization requirements resulting in a reduced number of new patients starting on anti-TNF therapy $6,267 $7,237 $8,466 $9,037 $9,688 $10,711 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2006 2007 2008 2009 2010 2011 USASales(USDMM) Anti-TNFs sales growth slowed post recession as patients deferred biologic treatment 16% CAGR 9% CAGR
  • 21. Biopharma Sales Resilience 21May 2020 Agenda • Recession Effects on the Biopharma Industry • Sales Resilience of Specific Branded Drug Markets • Implications for Industry • Notes on Methodology • Contact Information
  • 22. Biopharma Sales Resilience 22May 2020 Implications for Industry Source: Health Advances analysis. • Our resilience index can be used as a heuristic to assess a brand or branded class’ sales risk during a recession – Generally, indication severity, indication acuity, drug effectiveness, and the level of competition can help gauge a recession’s level of impact on sales growth – Health Advances can also help with more targeted market evaluations to develop tailored assessments of sales risk and to develop strategies to mitigate risk. • For drug classes that are less resilient, drug manufacturers need to facilitate drug access and adherence for their patients. This may be achieved by: – Enabling faster and simpler enrollment (and re-enrollment) into patient support programs as well as relaxing criteria for enrollment (e.g., immediate access for patients recently unemployed) – Enhancing programs to reduce patient costs, including providing temporary free therapy for unemployed patients to ensure continuity of care and reducing barriers to using these benefits – Developing solutions to assist patients with prescription fulfillment and adherence – Working with payers to alleviate prior authorizations and other utilization management tools, leveraging real-world and health economic evidence
  • 23. Biopharma Sales Resilience 23May 2020 • Adapted the Merck Patient Assistance Program for patients who lost their job or cannot see their doctor – Assessing patients’ real-time financial situations – Providing assistance with expiring enrollments – Offering new options to collect signatures on enrollment forms • Expanded other access and assistance programs – Temporary $0 co-pay for some products for eligible privately insured patients – Relaxed some refill restrictions related to coupon use • Expanded its patient support programs to help eligible unemployed patients affected by COVID-19 • Expanded program offers free medicine and features include: – Immediate access for patients who have lost their employment and health insurance – A simple, single point of entry – Streamlined enrollment process – Vouchers to assist with continuity of care for several self- administered BMS medicines, for eligible patients • Enhanced offerings to help patients experiencing difficulties from the COVID-19 – Simplified access to free medicines for eligible patients – Expanded programs to improve affordability and patient support • Free temporary supplies of certain medications to avoid treatment gaps • Expanded in-home onboarding and administration support • Extended fill co-pay card support • Where available, extended refills for free-drug programs Several large pharma companies recently bolstered their patient support programs to ensure continuity of care for their patients and limit the impact of COVID-19. COVID-19 Industry Examples (Publicly Announced) Source: Health Advances analysis, company website and press releases.
  • 24. Biopharma Sales Resilience 24May 2020 Agenda • Recession Effects on the Biopharma Industry • Sales Resilience of Specific Branded Drug Markets • Implications for Industry • Notes on Methodology • Contact Information
  • 25. Biopharma Sales Resilience 25May 2020 Health Advances rapidly evaluated ~40 drug classes to select 13 classes that could best reflect recession impact – e.g. established class, all branded (no generic options). Drug Class Selection ~40 Drug Classes Assessed 13 • 5-HT3 antagonists • Acetylcholinesterase inhibitors • Alteplase/tPA • Alpha Blockers • Aminoketone antidepressants • Amphetamines • Antimigraine triptans • Anti-TNFs • Atypical Antipsychotics • Contraceptive Implants • DPP-4 inhibitors • EGFR • EPO • Gaucher's ERTs • GCSF • HER2 • HIV combo therapies • ICS/LABA • Insulins • Isotretinoin for Acne • Nasal Corticosteroids • Non-Barbiturate Hypnotics • Parathyroid hormone • PDE5s • Clopidogrel • PPIs • Pregabalin • Prostaglandin analogs • Dornase alfa • Ophthalmic cyclosporine • SNRI • Statins 13 Classes Chosen (in bold) Classes were excluded primarily due to generic entry or because they were early in their growth trajectory
  • 26. Biopharma Sales Resilience 26May 2020 Classes Evaluated (1 of 2) Market/ Drug Class Example Therapeutic First Drug Launch/LOE Resilience Score CAGR Description ’06-’08 ’09-’11 HER2 Therapies Herceptin 1998 / 2019 7 6% 5% • Effective and highly targeted treatment for metastatic breast cancer patients • Potentially curative in a potentially fatal disease Tissue Plasminogen Activator Activase 1987 / 20251 7 5% 11% • Effective treatment for acute ischemic stroke • High mortality impact, critically acute treatment EGFRs Tarceva 2004 / 2019 6 5% 6% • Effective targeted treatment for lung cancer • High mortality impact Gaucher ERTs2 Cerezyme 1991 / 2013 5.5 11% 15% • Enzyme replacement therapy for Gaucher Disease • High mortality impact Cystic Fibrosis Mucolytics Pulmozyme 1994 / 2015 5 14% 7% • Rare and severe disease • Single drug in the class, however limited efficacy Insulins Lantus 2000 / 2015 4.5 21% 18% • Essential treatment for type 1 and some type 2 diabetes patients GCSFs Neupogen 1991 / 2013 4 5% 8% • Bone marrow stimulant following chemotherapy • Limited competition 1 Patents expiring in 2025 are related to manufacturing techniques. 2 Note that Genzyme also struggled with manufacturing challenges during this period, but sales growth still persisted. Note: HER2 = human epidermal growth factor receptor 2; EGFR = epidermal growth factor receptor; GCSF = growth colony stimulating factor; ERT = enzyme replacement therapy. Source: Health Advances analysis. Specialty drug classes received higher resilience scores because these drugs tended to have greater efficacy impact and fewer competitors.
  • 27. Biopharma Sales Resilience 27May 2020 Classes treating less severe, chronic diseases with multiple competitors or alternatives generally scored lower. Classes Evaluated (2 of 2) Market/ Drug Class Example Therapeutic First Drug Launch / LOE Resilience Score CAGR Description ’06-’08 ’09-’11 Atypical antipsychotics Abilify 1993/20081 3.5 6% 6% • Therapy for schizophrenia and other psychological disorders • More than 15 competitors in the drug class Parathyroid Hormone Forteo 2002/2019 3 8% -7% • Treatment for osteoporosis • Single drug in the class, but strong competition from bisphosphonates Ophthalmic Cyclosporine Restasis 1994/2019 2 28% 11% • Treatment for dry eye • Strong competition from low-cost alternative treatments Adrenergic Inhalants Advair 2001/20102 2 11% 4% • Inhaled therapy for asthma and COPD • Chronic treatment, low disease acuity Anti-TNFs Humira 1998/2017 2 16% 9% • Anti-inflammatory immunosuppressant • Multiple low-cost oral classes also used in indications PDE5 Inhibitors Viagra 1998/20173 1 32% 1% • Treatment for erectile dysfunction • Low medically necessity 1 Clorazil was an early atypical psychotic. Generics for it were already available by 1990, but those effects were already established in the market place. 2 Inhaled formulations of these drugs have been difficult to replicate and generics did not enter the market in this period. 3 Lower dose generic versions of Viagra (sildenafil) became available in 2012 but were only approved for pulmonary arterial hypertension. This analysis only looks at PDE5 inhibitors that treat erectile dysfunction (ED). Note: TNF = tumor necrosis factor; PDE5 = phosphodiesterase type 5. Adrenergic inhalants have historically been difficult to replicate into generics. Source: Health Advances analysis.
  • 28. Biopharma Sales Resilience 28May 2020 Small Sample Size • Only evaluated 13 drug classes which were predominantly mature markets in 2006-2011 • Drug classes were selected because they were less affected by confounding factors, like new market approvals or in-class generic entry Limited Explanatory Variables • The resilience score is a composite of readily-available explanatory variables (e.g., efficacy, number of competitors) • However, other data not available on a product-level basis (e.g., net price increases) could also serve as explanatory variables • This approach also may not account for market-specific nuances, like evolving treatment paradigms and new clinical practices, innovative diagnostic technologies, etc. While the resilience score provides a framework to rapidly assess the risk to a given market during a recession, it is not a substitute for a comprehensive analysis. Limitations of Analysis
  • 29. Biopharma Sales Resilience 29May 2020 Agenda • Recession Effects on the Biopharma Industry • Sales Resilience of Specific Branded Drug Markets • Implications for Industry • Notes on Methodology • Contact Information
  • 30. Biopharma Sales Resilience 30May 2020 Authors Sheela Hegde, Partner and Managing Director • 20 years of experience in advising senior executive teams on corporate strategy • Leader in BioPharma Practice, focusing on new product commercialization, lifecycle planning, and M&A strategy • Strong experience in metabolic, autoimmune, and CNS therapeutic areas; leader of Diabetes/Metabolics and Autoimmune Sub-Practices • Novartis Pharmaceuticals, Associate, Cardiovascular Business Franchise • The Advisory Board Company, Senior Research Manager • Harvard Business School, MBA • Stanford University, BA with distinction, Human Biology, phi beta kappa Michael Davitian, Director • Experience in system economics analyses, facilitating strategic transactions through due diligence, market research analyses, and prioritizing applications and indications for new technologies • Inverness Advisors, LLC, Healthcare Investment Banking Analyst • Stanford Financial Group, Healthcare Investment Banking Analyst • Thomas Weisel Partners, Healthcare Investment Banking Analyst • Williams College, BA, Biology and Economics Mansi Shinde, PhD, Engagement Manager • Experience in market opportunity assessment, early stage commercialization, product and portfolio strategy, revenue forecasting, M&A due diligence, and corporate strategy across the biopharma and diagnostic industries • Therapeutic area expertise includes autoimmune disease, oncology, cardiovascular, and kidney disease • Penn Center for Innovation, IP and Marketing Fellow • Perelman School of Medicine at University of Pennsylvania, PhD in Pharmacology • New York University, BA, Biology, minor in Business Nishanth Krishnamurthy, PhD, Consultant • Expertise in medical devices, diagnostics and health IT with a focus on market assessments, competitive analyses and supply chain • Past Experience in hardware engineering and development for clinical research applications focused on breast and brain hemodynamics • Tufts University, PhD, Biomedical Engineering • Cleveland Clinic Foundation, Lerner Research Institute, Research Associate • Rensselaer Polytechnic Institute, BS, Biomedical Engineering, Cum Laude Angela Wang, Senior Analyst • Strategic Health Care, Legislative and Policy Intern • Dartmouth Institute for Health Policy and Clinical Practice, Research Assistant • Dartmouth College, BA, Government, Minor in Health Policy Rebecca Podolsky, Senior Analyst • Experience in commercial strategy, market research and analysis, and due diligence within the biopharma and diagnostics industries • Global Prior Art, Intellectual Property Analyst • Brandeis University, Research Assistant, Synthetic Inorganic Chemistry • Brandeis University, BS, Chemistry, Minor in Business
  • 31. Biopharma Sales Resilience 31May 2020 Contact Information Sheela Hegde Partner and Managing Director shegde@healthadvances.com Michael Davitian Director mdavitian@healthadvances.com Health Advances LLC 275 Grove Street Suite 1-300 Newton, MA 02466 781-647-3435 www.healthadvances.com