We've helped investors navigate the dynamic BioPharma industry for decades. Our flagship Global Pharmaceutical and Biotechnology Outlook maps the highs and lows of the year, assessing the critical success factors that can shape the industry's future.
Based on extensive research and comprehensive data analysis, this volume is a ready reference for monitoring new developments and their investment and strategic implications. From the macro analysis of over 200 companies arise ~60+ actionable capsules categorized into Global Pharma, Japanese Pharma, Mature Biotech, Rising Stars (unprofitable biotech) and Indian Pharma.
2. Global Pharmaceutical & Biotechnology
Outlook 2013 –Large Cap Pharma
Vishal Manchanda, B.E., MBA vishal@mpadvisor.com
Vijayakannan, PhD vijay@mpadvisor.com
+1.646.657.3787
3. 3
MP Advisors
GLOBAL PHARMACEUTICALSGLOBAL PHARMACEUTICALS –– 20132013
OUTLOOKOUTLOOK
Opportunities - New drug approvals will transform the standard of
care in several therapy areas, Outcome studies to transform market
potential of drugs, Restructuring/deconsolidation, Discipline in M&A,
Enhanced insurance penetration in the US to improve drug penetration
Challenges - Fiscal pressures to reduce healthcare spend will translate
into higher rates of therapeutic and generic substitution,
Investigational studies in high risk therapy area may continue to
disappoint
Global Pharma’s Cutting Cost to Manage the Gap
4. 4
MP Advisors
HIGHLIGHTS FOR 2013HIGHLIGHTS FOR 2013 –– GLOBAL PHARMAGLOBAL PHARMA’’SS
Ramp up of potential blockbusters drugs that were approved in 2012
Will Large Cap Pharma get aggressive with M&A
Strength of Innovation Vs Fiscal Pressures
Cost containment and growth focus from Value added Innovation
Europe – Regulatory Pressures and Increasing Pro Generic Stance
Will US fall to Pricing Pressures?
Outcome from Major Clinical Studies/Events expected to reshape
Competitive Dynamics across several therapy classes
Potential New Drug Approvals in 2013
5. 5
MP Advisors
WE MIGHT SEE A NEW STANDARD OF CAREWE MIGHT SEE A NEW STANDARD OF CARE
IN MANY THERAPY AREAS GOING FORWARDIN MANY THERAPY AREAS GOING FORWARD
New Generation Oral anticoagulants
Dyslipidemia – PCSK9 antibody
Respiratory COPD and Asthma –novel combinations and once daily LABA+ICS
Alzheimer’s – BACE Inhibitors
Diabetes –DPP4 inhibitor and Once weekly GLP-1 agonists
Metastatic Melanoma –BRAF+MEK inhibitors
Multiple Sclerosis – Novel Oral and Injectable options
Breast cancer
Prevalence, Market Expansion Opportunities and upcoming late
stage pipelines have been discussed
7. 7
MP Advisors
GROWTH DRIVERSGROWTH DRIVERS -- POTENTIAL DRUGPOTENTIAL DRUG
APPROVALS IN 2013APPROVALS IN 2013
Source: MP Advisors, Company Reports
8. 8
MP Advisors
GLOBAL PHARMA DIVIDEND YIELD AND NETGLOBAL PHARMA DIVIDEND YIELD AND NET
CASH POSITIONSCASH POSITIONS
Source: MP Advisors, Company Reports
9. 9
MP Advisors
Patent Exposure: Global PharmaceuticalsPatent Exposure: Global Pharmaceuticals
Source: MP Advisors, Company Reports
10. 10
MP Advisors
GLOBAL PHARMA & BIOTECHNOLOGYGLOBAL PHARMA & BIOTECHNOLOGY
OUTLOOK 2013OUTLOOK 2013
Japan PharmaJapan Pharma
日本の製薬会社日本の製薬会社
!
!
Ripple Mehta, Pharmacist, MBA
ripple@mpadvisor.com
+1.646.657.1016
Devesh Singh, Pharmacist, MBA
devesh@mpadvisor.com
+1.646.657.1016
11. 11
MP Advisors
JAPAN PHARMAJAPAN PHARMA -- TABLE OF CONTENT (TOC)TABLE OF CONTENT (TOC)
I. Japan Pharma: Looking forward in 2013 and beyond
Stand on individual companies
Changing political scenario is likely to accelerate the peace of reforms
II. Analysis on Innovators Companies – Innovation and consolidation continue to serve as catalyst
Rich Looking Pipeline Could be delusive
Key R&D catalysts from Japan pharma
Key upcoming milestones
Expected upcoming launches from global companies in implications
Likely implications of recent consolidation activities
Sustainability thru increasing overseas base
III. Analysis on Generic Companies
2012 – price cuts & implications
New layer for reforms playing out well
Dominance of big players in dispensing pharmacy
Shrinking general practitioners market
DPC hospitals are new growth avenue
IV. Analysis on Drug Chain Stores
Macro forces favoring Drug Chain Stores
Success story from a few, likely to be replicated by followers
V. Analysis on Biogeneric Companies
Evolving Biogenerics space in Japan
12. 12
MP Advisors
LARGE PHARMALARGE PHARMA –– RICH PIPELINE (?)RICH PIPELINE (?)
First in class targets like TLR7 & PPARy can
be attractive
Diabetes &
Immunological
Disorders
056
Dainippon
Sumitomo
Novel validated targets for cancer, working on
Raf/MEK pathway
Cancer7413Chugai
Has two first in class targets, Chemokine
receptor 4 antagonist & A33 for cancer
Cancer489
Kyowa Hakko
Kirin
Neuropeptide Y Y5 receptor, a very attractive
target for obesity, but success rate low
Metabolic &
Infectious
Diseases
3126Shionogi
R&D portfolio consisting of antibodies for
cancer, with some good target like PPARy
Cancer &
Infectious
Diseases
51317Daiichi Sankyo
Good novel targets in different therapeutic
class
Diabetes,
Neurology,
Cardio &
Immunology
3911Mitsubishi Tanabe
Antibody against folate receptor alpha,
targeting cancer, can be a useful anticancer
agent
Neurology &
Cancer
8100Eisai
R&D portfolio with some novel first in class
targets, like surviving suppressant, GPR119
agonist
Cancer &
Metabolic
71420Astellas
Novel, varied targets for cancerCancer19419Takeda
CommentsMajor FocusPhIII CandidatesPhII CandidatesPhI CandidatesCompany
First in class targets like TLR7 & PPARy can
be attractive
Diabetes &
Immunological
Disorders
056
Dainippon
Sumitomo
Novel validated targets for cancer, working on
Raf/MEK pathway
Cancer7413Chugai
Has two first in class targets, Chemokine
receptor 4 antagonist & A33 for cancer
Cancer489
Kyowa Hakko
Kirin
Neuropeptide Y Y5 receptor, a very attractive
target for obesity, but success rate low
Metabolic &
Infectious
Diseases
3126Shionogi
R&D portfolio consisting of antibodies for
cancer, with some good target like PPARy
Cancer &
Infectious
Diseases
51317Daiichi Sankyo
Good novel targets in different therapeutic
class
Diabetes,
Neurology,
Cardio &
Immunology
3911Mitsubishi Tanabe
Antibody against folate receptor alpha,
targeting cancer, can be a useful anticancer
agent
Neurology &
Cancer
8100Eisai
R&D portfolio with some novel first in class
targets, like surviving suppressant, GPR119
agonist
Cancer &
Metabolic
71420Astellas
Novel, varied targets for cancerCancer19419Takeda
CommentsMajor FocusPhIII CandidatesPhII CandidatesPhI CandidatesCompany
13. 13
MP Advisors
KEY CATALYSTS FOR 2013KEY CATALYSTS FOR 2013
Edoxaban (DAIICHI SANKYO) - Though The Last Entrant In The Market – Has Key Differentiating Features To
Become The Market Leader In the Factor Xa Space: We are very bullish on Edoxaban which is the focal point of
our Investment thesis for Daiichi Sankyo and we are confident that, – 1) It will show positive data in PhIII, 2) Gain
US approval, 3) Differentiate itself sufficiently among factor-xa inhibitors market and can generate ~$2.5b, and 4.)
All concerns around Edoxaban are well addressable.
Dolutegravir (SHIONOGI) - approval likely in 2013 – A $2.5b opportunity: this is the first drug showing superiority
of this extent to current standard of care Atripla (Gilead, FY 11 sales $3.2b); though the competitive landscape is
rapidly changing in anti-HIV regime, we expect dolutegravir has potential to cross $2.5b.
Canagliflozin (MITSUBISHI TANABE- MT) - Emerging As Best In Class SGLT-2 Inhibitor: Based on the data
available so far and our talks with MT, we are extremely positive about the commercial success of the candidate. At
this time, we are expecting a moderate peak sales potential of ~$1b while assuming 80% probability of success.
KRP-108 (KYORIN) – Redesigned LABA/ICS combo Is poised well to Leverage Japanese market potential: It is a
combination of two best selling LABA/ICS combinations i.e. Advair and Symbicort. The two generated ¥40b and
¥20b respectively in Japan in 03/12 and are growing; the overall trend of Rx combination drugs in Japan is expected
to grow further in COPD/ASTHMA class.
TAK-875 (TAKEDA) – A Trump Card: our current understanding suggests that, if successful, it can replace the use
of sulfonylureas initially and then can also be used concomitantly with DPPIV inhibitors or even as substitute to
them. TAK-875 is also positioned well for first line therapy to metformin refractory patients– each of these segments
carries ~$1b opportunity for Takeda.
A Few Candidates Carry Potential To Impact Overall Therapy Paradigm And
Investment Scenarios For Their Originators!
14. 14
MP Advisors
UPCOMING KEY MILESTONES IN 2013UPCOMING KEY MILESTONES IN 2013
Edoxaban (PhIII, Stroke Prevention in Atrial Fibrillation, Daiichi-Sankyo) Top line data
From ENGAGE AF study by mid 2013
TA-7284- Canagliflozin (UR, Type 2 diabetes, Mitsubishi Tanabe/JNJ) outcome at FDA
advisory committee meeting in Jan 2013 and Global approval
Dolutegravir (UR, HIV, Shionogi) and its combo approval in US
SYR-322+ Actos (UR, Diabetes, Takeda) combination - US approval in January’13
TAK-875 (PhIII, Diabetes, Takeda) clinical data with Sitagliptin
Latuda (UR, Bipolar I disorder, Dianipon Sumitomo) US approval in bipolar I disorder
KRP-108 (UR, Asthma, Kyorin) JP approval: KRP-108
Some Of the Approaching Milestones Are Important To Watch out For – They DO not
Only determine the success of the candidates but may give direction to long term strategy
of their originator!
15. 15
MP Advisors
GLOBAL INNOVATOR COS ACTIVITIES IN JAPANGLOBAL INNOVATOR COS ACTIVITIES IN JAPAN
Amongst Global Companies - Pfizer, Roche, BMY, GSK, Merck Will BE Most Active in Japan –
They may bring surprises in the Coming Year on the Consolidation Front as well!
• Expected launches in 2013-2014 from global companies will increase competition (mainly in
Respiratory, oncology and RA) for domestic companies: Unfavorable macro environment for
global pharma companies in US (High regulatory bar for approval) and EU (pricing pressure) has
pushed global players to focus more on emerging markets and Japan for further growth. In a
comparison of cos. on the strength of their Medical Representatives force in Japan, Pfizer leads
with ~3000 reps with other global companies taking 5 out of the top 10 positions. This
demonstrates global Pharma’s zeal to tap the Japan market through new innovation. Amongst
global pharma giants, Novartis and Pfizer received highest approval in last 5 years followed by
Merck and GSK, while GSK and Pfizer have the highest no. of products in late stage
development or pending approval from PMDA.
• In the next two years, key global pharma innovation getting approval in Japan is Pfizer’s
Tofacitinib (First in class oral JAK inhibitor, RA, Approval expected in 2013), GSK and
Novartis’ respiratory franchisee and Bayer’s Regorafenib. These products have the potential to
challenge the market share of the innovator domestic companies’ key contributors, i.e. Actemra
and Avastin from Chugai, and Mitsubishi Tanabe/Kyorin’s Respiratory franchisee. While
expected launch of SGLT2 inhibitors (BMY- Dapagliflozin), GLP- analogues (Sanofi-
Lixinetide) and Odanacatib (Merck) will expand the diabetes and osteoporosis market in Japan.
16. 16
MP Advisors
MAJOR M&A IN JAPAN IN LAST 5 YEARSMAJOR M&A IN JAPAN IN LAST 5 YEARS
Source: MP Advisors; MHLW
NANA25-Apr-12Boston BiomedicalDainippon Sumitomo
NANA3-May-12Multilab (Brazil)Takeda
NA0.01218-Jul-11Victory PharmaShionogi
NA0.03121-Dec-11IntellikineTakeda
NA0.065-Oct-12LigocyteTakeda
NA0.146-Nov-12Envoy TherapeuticsTakeda
NA0.1817-Mar-10Home Diagnostics Inc.Nipro Pharma
NA0.2618-Dec-09AkaRx IncEisai
NA0.3116-Sep-09BMY’s Indonesian Unit+ Asian RightsTaisho Pharma
38.700.3110-Feb-10SSP CoBoehringer Ingelheim GmbH
43.000.4314-Jul-09NovenHisamitsu
NA0.5016-May-11Taiyo (57% stake)Teva
NA0.8028-Feb-11PlexxikonDaiichi Sankyo
NA0.811-Apr-12URL PharmaTakeda
57.551.421-Sep-08ScieleShionogi
37.862.603-Sep-09SepracorDainippon Sumitomo
37.483.9010-Dec-07MGIEisai
55.004.0017-May-10OSIAstellas
50.004.6011-Jun-08RanbaxyDaiichi Sankyo
71.0011.0010-Apr-08MillenniumTakeda
NA13.5019-May-11NycomedTakeda
Premium to 3m. Avg Price.
(%)
Cash Paid ($b)Acquisition DateAcquired CompanyCompany
17. 17
MP Advisors
JP COMPANIES PERFORMANCE VS. US/EUJP COMPANIES PERFORMANCE VS. US/EU
Source: MP Advisors; Company Reports
0.24%0.40%0.20%0.16%6.15Average
29.6%52.2%15.7%13.3%6.6Pfizer
24.8%43.1%20.7%15.9%4.9Roche
15%37.7%20.0%17.2%6.5Novartis
24%30.6%24.3%17.6%6.6Bristol - Myers
Global Companies
39.2%30.5%6.8%10.5%5.97Average
48.4%22.7%3.0%7.0%4.40Kyowa Hakko
37.6%30.0%7.0%9.0%5.80Dainippon Sumitomo
40.0%34.9%5.5%9.0%5.63Mitsubishi Tanabe
37.8%36.5%8.0%9.9%5.30Shionogi
39.3%26.8%8.8%12.2%8.05Kyorin
31.9%32.1%8.5%15.7%7.12Chugai
Japanese Domestic Companies
37.0%36.1%9.4%12.0%4.94Average
38.9%33.6%8.3%9.8%4.90Eisai
37.9%31.2%11.5%10.9%4.96Daiichi Sankyo
36.6%35.9%8.0%13.0%4.80Astellas
34.4%43.8%10.0%14.4%5.10Takeda
Tax Rate
O M Excluding R&D
expense
ROEROCE
Sales/ R&D
Expense
Company
18. 18
MP Advisors
REFORMS IN 2012 AND IMPLICATIONSREFORMS IN 2012 AND IMPLICATIONS
All generic
companies
Impact negatively the sales of newly listed
generic drugs
The abolition of the extra two points
awarded to pharmacies for dispensing
generic drugs and 15 points for providing
drug information
Abolition of Premium for GE
Dispensing and GE information
provision fee
All generic
companies
More Rx will generate on generic drugs
Points awarded to pharmacies for providing
drug history management and guidance will
rise to 41 points from the present 30 points.
Increase in management and
guidance fee
All generic
companies
Increased generic substitution at pharmacy
level
Removal of ‘no substitution permitted’
column from the current Rx format and
compulsory writing of the generic name of
the drug.
Change in prescription format
Towa, Sawai,
Nichi-Iko
Reducing the gap at lower end will make
generic dugs more competitive to long
listed as well as amongst generic drugs.
Currently, there is huge price difference
between two brands of generics.
Reducing the difference in price
of Generic drugs
All generic
companies
Increasing discount will make generic drugs
more competitive against long listed drugs
First generic version set to be at a min. 40%
discount to branded drug instead of the
current 30% discount.
Higher discount to new generic
launch
Sawai, Nichi-Iko
More Rx on generic drugs to generate more
bonus points
Awarding higher bonus point to hospitals
using at least 30% generics (35 points);
while awarded points for hospital using at
least 20% reduced from 30 to 28 points.
Higher bonus points to Hospitals
for more usage of generics
Sawai, Towa,
Nichi-Iko
Higher generic substitution at dispensing
pharmacy
Further increase in incentive for pharmacist;
likely for those who dispensed more than
30% generics
Premium for generics dispensing
Biggest
Beneficiary
Companies
ImpactDescriptionReform
19. 19
MP Advisors
DRUG CHAIN STORES: A NEW INVESTMENTDRUG CHAIN STORES: A NEW INVESTMENT
ATTRACTIONATTRACTION -- WARRANTS A CLOSE LOOKWARRANTS A CLOSE LOOK
• Drug chain stores are going to play an important role in Japanese pharmaceutical distribution system
and they also present several opportunities to tap in. New regulations have removed the compulsion of
pharmacies to stock generic brands from several companies i.e. the drug stores can stock generic brand
of their choice and it could be as low as a single brand for one generic product.
• With several hundred outlets nationwide, they can negotiate with generic companies for pricing/
margin and keep products of their choice. But more importantly, if these drug chains enter into the
manufacturing and/or marketing of their own generic products, they could enhance their business
prospects much better.
• So far, only Nihon Chouzai has ventured into its own generic business and has been very successful. It
currently sells ~750 generic products from its own generic subsidiary, Nihon Generics and we expect it
to generate ~¥10b from its generic business. Out of these ~750 products, ~350 are manufactured by
Nihon Generics itself while remaining is manufactured thru Contract Manufacturing Organizations
(CMO’s).
• We do not see any reason that will prevent other leading Drug chain stores to not or will not enter into
the generic business. A low margin drug selling business synergizes well with generic business. A
close look is warranted on the Drug chain stores as a potential investment idea.
Structural reforms increase bargaining power of drug chain stores – a scenario that
could bring novel investment space in Japan!
20. 20
MP Advisors
BIOGENERICS OPPORTUNITY IS OPENINGBIOGENERICS OPPORTUNITY IS OPENING
IN JAPANIN JAPAN
• ¥160b Biologics market is going to open by 2015 in Japan. JP regulators are half
way through compared to US and EU in drafting the biosimilar guideline. As
batch to batch biologic variation is high, JP regulators are not willing to accept
import of biogenerics/biosimilars from outside and hence we expect this
opportunity to be exploited locally. Currently ~ 3 biogeneric’s are available i.e.
Somatropin BS by Sandoz and Epoetin alfa. Recent development in biogeneric
space by the local generic companies is indicative of JP companies’ interest to
exploit these biogenerics opportunities. We think biogeneric penetration would
not replicate the poor generic penetration story of JP Pharma. Pl. refer to our
therapy class report – Biosimilar/biogeneric opportunity in Japan for more details.
Biogeneric are not going to replicate slow generic story – A number of players look
vigorous in exploiting the new market and bring investment opportunity in
biosimilars space!
24. 24
MP Advisors
FAVORABLE OUTLOOK FOR THE NEXT FIVEFAVORABLE OUTLOOK FOR THE NEXT FIVE
YEARS!YEARS!
• Optimism prevails around the future of this sector as a whole which was reflected
in the unprecedented rally in shares in 2012.
• We expect this trend to continue in the next five year driven by launch of
Innovative drugs catering to unmet needs in Alzheimer’s, HCV, osteoporosis,
RA, Psoriasis, MS, Dyslipidemia, Cystic fibrosis, Cancer and orphan diseases.
• Drug approvals and label expansion of existing portfolio of launched drugs and
data from late stage pipeline drugs should maintain the growth momentum and
investors interest in the next five years.
• Favorable regulatory environment should finally see biosimilar mAbs entry in
regulated markets in the next five years. The optimism of biosimilar players is
reflected in the maturing pipeline. Para IV Filing from other generic players
continues to pour leaving room for surprises and volatility
25. 25
MP Advisors
MATURE BIOTECHMATURE BIOTECH –– TABLE OF CONTENT (TABLE OF CONTENT (ToCToC))
Macro Analysis
1. Performance of the Mature Biotech companies recommended by MP Advisors in 2012 –
Impressive Report Card; Positive sentiments to prevail in 2013 and beyond
2. Valuation Multiples and Fundamentals- Drivers of Growth.
3. MP Advisors’ Proprietary Sum-of-The-Parts Valuation and Top Picks for 2013
4. Drug Approvals 2012-15
5. Key Milestones During 2013/14
6. Impact on revenue 2012-2017 from Patent Expiry and Strategies deployed to meet the challenges.
7. Pipeline of Biosimilar mAbs
8. Joint Ventures between innovators and biosimilar players
9. Merger & Acquisitions Forecast- 2013-2020
Industry Tables
1. Valuation Snapshots
2. Expected Drug Clinical Milestones
3. MB sector Selected M&A Activities
4. Marketed Products’ Potential
5. Pipeline Potential Thru 2017
6. Patent Expiry – Impact On The Sector
26. 26
MP Advisors
IN-DEPTH COMPANY ANALYSIS AND REPORTS
ToC CONTINUED…
1. Acorda - AMPYRA addresses co-morbidities associated with multiple sclerosis (MS) and
with no competition, future growth in US and EU to sustain the current valuation. Pipeline
remains a free call option.
2. Alexion - Innovative drugs, diversification and focus on orphan diseases will continue to
lend stability. Availability of Soliris (eculizumab, C5a inhibitor) indicated for Paroxysmal
Nocturnal Hemoglobinuria (PNH) and Hemolytic-uremic syndrome (HUS) in other
geographies along with label expansion should drive growth in the next five years.
Pipeline (Asforase alfa, ALXN1102/1103, ALXN1007) beyond soliris is also maturing.
3. Amgen - Sales of denosumab (Prolia: Postmenopausal Osteoporosis, male osteoporosis
and XGEVA: skeletal-related events in patients with bone metastases from solid tumors)
and novel compounds in the pipeline targeting bone health, cancer and
Hypercholesterolemia should sustain Amgen’s reputation as an innovator. Through
acquisitions and collaboration, Amgen is poised to tap the emerging market opportunities.
4. Biogen Idec - Poised to sustain its leadership in MS with the well awaited launch of the
best in class oral therapy BG-12 (dimethly fumerate, R). Diversification in other therapy
area - hemophilia is the future driver.
27. 27
MP Advisors
IN-DEPTH COMPANY ANALYSIS AND REPORTS
ToC continued…
5. Celgene – Leadership in hematological cancers will be sustained with the launch of
pomalidomide. Diversification in autoimmune and inflammatory diseases and label
expansion of marketed drugs will drive growth. Risk of Para IV challenges remain.
6. Gilead - Leading in HIV and poised for a similar feat in HCV. Product pipeline beyond
the Anti-viral is maturing and promising.
7. Grifols – Stable growth in the plasma protein business, while IVIG opportunity in
Alzheimer’s disease remains a wild card.
8. Onyx - Oncology drugs portfolio (Nexavar, Kyprolis, Stivarga) is attractive and places it
high on the acquisition target list. Kyprolis is not restricted to R/R MM (3rd-line) and
label expansion in 1st –line MM could be a blockbuster opportunity.
9. Regeneron – Growth trajectory driven by Eylea in wet Age-related macular degeneration
(AMD), Central Retinal Vein Occlusion (CRVO) and Diabetic macular edema (DME,).
Pipeline targeting Hypercholesterolemia, Cancer and RA promises long term growth.
10. Vertex - Bleak prospects for INICVEK as better drugs for HCV are poised to hit the
market. Kalydeco (CF potentiator) in combination with VX-809/VX-661 (CF corrector)
for larger Cystic Fibrosis opportunity remains a binary event.
28. 28
MP Advisors
VALUATION MULTIPLESVALUATION MULTIPLES
BASED ON PROJECTION THRU 2016BASED ON PROJECTION THRU 2016
19.936.54.30.635.059.125.33071,007Acorda
20.429.47.92.326.711.79.28995,043Vertex
13.934.94.80.830.029.710.5(2,522)7,918*Grifols**
38.187.312.31.245.336.834.074519,046Alexion
42.357.422.40.848.350.635.011720,395Regeneron
14.218.33.30.815.719.412.673934,252Celgene
14.122.94.81.023.323.312.62,23535,688Biogen Idec
14.216.97.40.719.326.214.9(6,071)60,210Gilead
9.011.33.21.513.39.22.4(1,104)68,591Amgen
EV/
EBITDA
P/CP/B
PEG
(12/12-
16)
PE '12
EPS
Growth %
Sales
Growth %
Net Cash
($m)
Mkt Cap*
($m)
Company
* As on 11/23/2012; ** in €; ONXX not considered;
Bold are MP’s 2013 Top Picks
Source: MP Advisors, Company Reports
29. 29
MP Advisors
FUNDAMENTALS TO DRIVE GROWTHFUNDAMENTALS TO DRIVE GROWTH
LowLowLowPlasmaGrifols
LowLowMedHCV, CFVertex
HighLowMedOphthalmic, OncologyRegeneron
LowLowLowCancerOnyx
HighMedHighAnti-ViralGilead
HighLowMed
Hematological, Oncology,
Inflammation
Celgene
MedLowMedMSBiogen Idec
MedHighLow
ESA, Oncology,
Inflammation, Bone
health
Amgen
MedLowHighOrphan DiseasesAlexion
LowLowLowMSAcorda
Diversified
Strategies for
Future growth
Generic threat
(next Five
Years)
Potential of
Late stage
Pipeline
Management and
Overall
Historical
Performance
Focus and
Dominance in a
Therapy Area
Therapy Area- FocusCompany
Bold are MP’s 2013 Top Picks
Source: MP Advisors, Company Reports
30. 30
MP Advisors
RISING STARSRISING STARS
•• Innovation is not Enough!Innovation is not Enough!
•• Therapy AreasTherapy Areas-- focus in 2013focus in 2013
Rising starsRising stars -- Innovative Research Driven Unprofitable CompaniesInnovative Research Driven Unprofitable Companies
31. 31
MP Advisors
NO GAIN WITHOUT PAINNO GAIN WITHOUT PAIN
• Innovative and improved drugs therapies developed through novel target
discovery and technology platforms have originated from the backyards of small
research focused companies (Rising Stars, RS, non-profitable biotech companies).
• The universe continues to grow despite the high risk and the long wait to
transform into a successful profitable Mature Biotech .
• 2012 saw new drugs approvals for unmet needs, first in class drugs for Anti-
obesity, Myelofibrosis, cancers and better drug options for HCV, RA, MS,
psoriasis, HCC, dyslipidemia etc.
• We expect approval of “better drugs for bad bugs”, targeted therapies for cancer,
Alzheimer’s, antivirals and orphan diseases in the next five years
32. 32
MP Advisors
RISING STARSRISING STARS –– TABLE OF CONTENTS (TABLE OF CONTENTS (ToCToC))
Macro Analysis- Top Picks for 2013
1. Select Drug Approval in 2011-12 and Drug Launches in 2013-14
2. Select Mid To Late Stage Drug Disappointments
3. Cash Balance of Select RS Companies
4. Challenges and Unmet Need of Innovators - Launched and Pipeline Unpartnered Compounds
5. Resisting resistance – Emergence of Bad Bugs – GAIN Act
6. New Targets And Drugs For Bad Bugs
7. Select Mid To Late Stage Anti-Infective Pipeline For Serious Hospital Infections
8. Retrograde Evolution- Where Innovation is Killed by Innovators
9. Oral vs. Injectables - Select Oral RA Drugs in Development.
Industry Tables
1. Drug Clinical Milestones
2. Drug Launch Table- 2013
3. NPV Valuation
33. 33
MP Advisors
IN-DEPTH COMPANY ANALYSIS AND REPORTS ON
TOC CONTINUED…
1. Cempra – GAIN from Drugs for Bad Bugs
2. Galapagos - GLPG0634 Excels vs. all JAK Inhibitors for RA.
3. Incyte - JAKAFI/ JAKAVI Approved for Myelofibrosis and Drugs in Pipeline –Drivers of Growth
4. MorphoSys - Maturing Pipeline and Partnering/Acquisition in the Offing
5. ArQule - Failure in NSCLC – Disappointing but Not “The End” for Tivantinib
6. Basilea - Ceftobiprole + Early Stage Pipeline Remains A Free Option!
7. Medivir - Simeprevir in the HCV Race - Value Un-Appreciated!
8. Rigel - Be in SyK (for RA)– Positives Coming Ahead
9. SymBio - Novel Oncology Drug Portfolio Available as a Free Call Option!
10. Trius - Partnering or Buy Out on the Cards.
11. Vivus - Marketing Anti-obesity Drugs -Where Being First Has not Helped
12. Amarin - VASCEPA – Left to Fend on its Own!
13. Aveo - Tivozanib – Wait May be Longer!
14. Halozyme - rHuPH20 Benefits for Chronic Use - Still Under Scrutiny
15. Immunomedics - Lack of Catalysts in Near Term
16. ISIS - What More is Left Beyond KYNAMRO?
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PROOF OF RELEVANCEPROOF OF RELEVANCE ……
• VRTX- Retrograde Evolution…
• Arena, Vivus - 2013 will be testing- Will the companies also become slimmer?
• JAK and Syk players- Oral RA drug launch also under test…
Proof of relevanceProof of relevance -- the abilitythe ability to establish differentiated attributes andto establish differentiated attributes and
commercial valuecommercial value of compounds will matter in coming yearsof compounds will matter in coming years
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THERAPY AREASTHERAPY AREAS -- TO WATCH OUT FORTO WATCH OUT FOR
• HCV- IFN-Free drugs and Vaccines
• Alzheimer’s disease- Gammagard and any other surprises!
• Rheumatoid Arthritis - SyK after JAKs?
• Obesity- Arena, Vivus on test - Orexigen may be the winner even if its 3rd to launch!
• Multiple Sclerosis - Great expectations from BG-12 (DMF, R, Biogen Idec),
Lemtrada (Sanofi).
• Niche - Amyotrophic lateral sclerosis (ALS), Duchenne Muscular Dystrophy (DMD,
SAREPTA), Cystic Fibrosis (KALYDECO, VX-809, Vertex), Marquibo (vincristine
sulfate liposome injection, Ph- ALL)
• Biosimilars/Biobetters…..
• Regenerative /Stem cells
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RECOMMENDATIONS FOR 2013RECOMMENDATIONS FOR 2013
• Incyte - 2013 will be a decisive year for INCY, as JAKAFI / JAKAVI’s (ruxolitinib, JAK
1/2 inhibitor, PhII/III in PV/ET, partnered with Novartis for Ex-US rights) growth
trajectory in US and uptake in EU.
• MorphoSys - Clinical data from several PhII partnered/ unpartnered compounds and
licensing of unpartnered programs to further bring upside in coming years.
• Galapagos - GLPG0634 (PhII, JAK 1 inhibitor, partnered with Abbott) offers best efficacy
and safety among all JAKs/ oral drugs in RA, and we expect it to achieve blockbuster sales
• Cempra – Favorable wind due to the GAIN Act for companies focused in developing anti-
infective; Two unpartnered products which address Serious hospital infections,
demonstrated favorable efficacy, safety, and tolerability profiles comparable to current
‘gold standard’ therapy (levofloxacin and linezolid) in PhII trials. Unpartnered products
offer an attractive investment and alliance opportunity.
37. MP Advisors
India Pharma Growth Drivers:India Pharma Growth Drivers:
Consolidation in India Market andConsolidation in India Market and
Complex Generics in USComplex Generics in US
Vivek Agrawal, CFA
vivek@mpadvisor.com
+1.646.657.3787
Nimish Mehta, CFA
nimish@mpadvisor.com
+1.646.657.3787
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MP Advisors
US GENERICSUS GENERICS –– WHAT AFTER THEWHAT AFTER THE
PATENT CLIFFPATENT CLIFF
1. In CY 2012, products worth ~$30b in annual sales ( small molecule ) have lost
patent in US.
2. Conversely, 2013 is likely to witness patent expiry of ~$10b only.
3. It is almost impossible for the generic companies to sustain the high base created
so far in the US generic market from Para IVs or me-too generics.
Complex GenericsComplex Generics –– The Only Answer For GrowthThe Only Answer For Growth
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MP Advisors
COMPLEX FORMULATIONSCOMPLEX FORMULATIONS –– THE NEXTTHE NEXT
LEAP FORWARDLEAP FORWARD
Non Systemically Acting Generic Drugs Require Clinical TrialsNon Systemically Acting Generic Drugs Require Clinical Trials
Complexities in synthetic generic drug development and manufacturing can be categorized into:
• Difficulty in characterization of drug substance, e.g. Copaxone
• Formulation related complexities like modified release drugs
• Non-systemically acting drugs. These drugs usually require clinical trials to prove
bioequivalence.
• Drugs that require device or a patch
Of the above, Non Systemically Acting Drugs and Drugs with Device or Patch together offer the largest
opportunity currently.
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MP Advisors
NON SYSTEMCIALLY ACTING AND DRUGSNON SYSTEMCIALLY ACTING AND DRUGS
WITH DEVICEWITH DEVICE
Non Systemically Acting Drugs further may be divided into:
• Locally Acting and
• Targeted Drug Delivery.
Below are the drug technologies that act non-systemically in the body:
• Liposomal
• Colon Targeted
• Topical
• Inhalers
Transdermal drugs are non non-systemic, but are drugs with device that too requires clinical trials before
generic approval in US.
Market Size is $25Market Size is $25--30b of Patented Sales in US With Low30b of Patented Sales in US With Low
CompetitionCompetition
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MP Advisors
TOPICAL DRUGSTOPICAL DRUGS –– THE MOST NEAR TERMTHE MOST NEAR TERM
OPPORTUNITYOPPORTUNITY
Entry Barriers
• Clinical Trial requirement
• Cosmetic Acceptability
Opportunity in US – About $8b in patented sales
with patents of products worth $5b having
expired. Patent expired products still witness low
competition.
With need for various dosage forms (like gels,
lotion etc) in topicals, this also offers
opportunities for branded generics.
Global Acquisitions in Topical Space: Topical
segment has witnessed many M&A activities as it
remains the most near term opportunity.
Acquisitions in Dermatology Segment
640Oct-06ConnectisStiefel
400Oct-07BradleyNycomed
420Feb-08CollagenexGalderma
148Jun-08
Barrier
TherapeuticsStiefel
95Sep-08Coria LabsValeant
3,600Apr-09StiefelGSK
320Sep-10Taro
Sun
Pharma
425Jul-11
Dermic
DermatologyValeant
1,500Jul-12FogeuraSandoz
2,600Sep-12MedicisValeant
230Dec-12Dusa
Sun
Pharma
Value
(US$m)DateTargetAcquirer
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MP Advisors
DOMESTIC MARKETDOMESTIC MARKET –– GROWTH STAGESGROWTH STAGES
• Till 2005, growth was in single digit
growth – despite robust economic
growth. Growth remained largely
driven by new product introductions.
• From 2006 onwards, growth went up
to 13-15% growth till 2010. Growth
driven by new products as well as
volume increase in existing products.
• 2011 too is witnessing similar
growth albeit slightly below the
average so far.
Source: MP Advisors, IMS India Market Survey
Annual Growth of Indian Pharma Market in
Value, Volume, and New Products
Growth Picked Up After 2005Growth Picked Up After 2005
8
5
7
9
18
13 13
18
17
15
18
0
2
4
6
8
10
12
14
16
18
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Grow th (%)
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MP Advisors
REGULATORY REFORMS POST 2005REGULATORY REFORMS POST 2005
Stricter Manufacturing Norms: Introduction of “Schedule M” in the ‘Drug & Cosmetics
Act’ that mandates all pharmaceutical units to comply to WHO GMP standards. This was
strictly implemented from June 2005 despite several pleas by SMEs.
As per the new manufacturing norm, the incremental average capital expenditure required
was ~Rs.20-30m – significant for most of the SMEs. This also added to their operational
costs.
Reforms Evened Out The Cost Differences Between Big and Small CoReforms Evened Out The Cost Differences Between Big and Small Cos.s.
• Changes in Excise Duty Structure: A new law in 2005 required, excise duty
calculation on the retail price unlike the cost of production earlier. Further the excise
duty was reduced to 8%.
• Setting up of Excise Free Zone: These reforms coincided with many states setting up
excise free zones. Consequently, most of the big pharma cos. Shifted their
manufacturing base to these zones.
• All these reforms leveled the cost of production between SMEs and big pharma cos.
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MP Advisors
Impact of Reforms Post 2005 =Impact of Reforms Post 2005 = SMEsSMEs
SufferingsSufferings
• Reforms took away the cost advantages (in the form of low quality
and excise evasion) of SMEs.
• Most of the SMEs had to bear the additional capex of Rs.20-30m as
they were GMP non-compliant. As against that, big cos. were
mostly GMP compliant.
• Big cos. shifting manufacturing to excise-free zones gave them an
edge over small cos. that could not shift due to family issues (being
individual driven).
A Highly Fragmented Market Is Now GettingA Highly Fragmented Market Is Now Getting
ConsolidatedConsolidated
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MP Advisors
Post 2010Post 2010 –– Reforms ContinueReforms Continue
• New Laboratory Practice Norms Effective Nov 2010: Introduction of GLP (Good
Laboratory Practices) with effect from 1 Nov 2010.
• Our talk with the chairman of CIPI (Confederation of Indian Pharma Industry) – an SME
pharma association suggested that the impact of GMP was immediate and long lasting with
an incremental capex of Rs.20-30m
• GMP + GLP increases the operational expenditure by 5-7% on an average.
• Bar Coding on Packaging Effective Oct 2011: With an intention to improve the ‘Brand
India’, govt. has made bar coding compulsory for all export items in a phased manner.
From Oct 2011, it is made compulsory on Tertiary packing, from Jan 2013 on Secondary
Packaging and Primary packaging from July 2013.
• With ~50% of SMEs involved in exports, this will further escalate the overall operational
costs making it even more uncompetitive.
Ongoing Reforms Further Adds To the Burden onOngoing Reforms Further Adds To the Burden on SMEsSMEs
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MP Advisors
New Draft Drug Pricing PolicyNew Draft Drug Pricing Policy –– Neutral ToNeutral To
PositivePositive
• The new policy puts 30% of the drugs under price control, i.e. all the
drugs listed under the National List of Essential Medicines (NLEM).
• Ceiling Price (CP) to be decided based on simple average price of drugs
with more than 1% market share and to be revised annually as per
Wholesale Price Index (WPI) of manufactured goods. Other than that,
revision only once in 5 years.
• The Impact: Price increase to the extent of Manufactured Products
Inflation will help most of the impacted brands to recover its price in 2-
3 years.
• Exemption from price control on combination products may encourage
manufacturers to shift its impacted product to an innocuous
combination to blunt the price control.
Market & Inflation Based Pricing May Blunt Any Price ControlMarket & Inflation Based Pricing May Blunt Any Price Control
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MP Advisors
GLOBAL PHARMA & BIOTECHNOLOGY
OUTLOOK 2013
THERAPEUTIC CLASS REPORTS
Subita Srimal, PhD Vishal Manchanda, B.E., MBA Devesh Singh, Pharmacist, MBA
subita@mpadvisor.com vishal@mpadvisor.com devesh@mpadvisor.com
+1.646.657.3794 +1.646.657.3787 +1.646.657.1016
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MP Advisors
THERAPEUTIC CLASS REPORTS INCL.THERAPEUTIC CLASS REPORTS INCL.
1. Emergence of Biogeneric Era in Japan - The opportunity to be exploited
locally
2. Herceptin Biosimilar - Risk Reward of Developing a Herceptin Biosimilar –
A Thorough Assessment
3. Rituximab –Risk Reward of Developing Rituxan Biosimilars and Biobetters
4. Future of GPR agonist for treatment of Type 2 diabetes
5. HCV- Market Dynamics within the Oral IFN free therapy Options,
Emerging Market Opportunities and HCV vaccines
6. Hemophilia- New Therapies and Changing Market Dynamics
49. MP Advisors
Thank YouThank You
+91-265-2327096
+1.646.499.4569
mp@mpadvisor.com
www.mpadvisor.com
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