5th Swedish American Life Science Summit

Transcription

1 5th Swedish American Life Science Summit Opportunities and threats for Life Science companies as Big Pharma transforms Panel discussion Stockholm, August 2 29

2 Our panel William Gedale, Senior Advisor, NGN Capital Peter Sjöstrand, Chairman, Gambro AB Jordan Schreiber, Principal, Princeton Capital Management Anders Ekblom, Executive Vice President, AstraZeneca 1

3 Making right strategic choices in times of change 1 Is Pharma transformation radical enough and what opportunities and threats do you see for investors? 2 What will be important areas of mid/long term industry impact of the economic downturn? 3 What are the implications of the health care value paradigm for Pharma/Biotech and health care investors? 2

4 Unsustainable growth in healthcare spend Index (1992=1) 3 Per capita HC exp 26 2,65 HC Exp 3 Index (1992=1) Per capita HC cost 26 2,25 Index (1992=1) 3 Per capita HC cost 26 1,85 HC Cost GDP 2 GDP Wages 1 2 HC Cost GDP 2 Wages Wages Index (1992=1) Per capita HC cost 26 3,15 Index (1992=1) Per capita HC cost 26 5,351 Index (1992=1) Per capita HC cost 26 3, HC Cost GDP Wages HC Cost GDP Wages 1 3 HC costs 2 GDP Wages Average nominal wage index Note: Index on basis of local currency; Per capita HC cost 26 at exchange rate of 1 USD=,797, 25: 11,22 Yen/US$ Source: OECD Health Data 28; EIU 3

5 1 Pharma response is unprecedented... Innovative collaborations Example Lilly R&D Unprecedented Pharma downsizing Double digit growth in Pharma outsourcing ($B) 6 Worldwide outsourcing ket growth in the pharmaceutical industry CSO CAGR +1% Nova-Quest (Quintiles) Shanghai ChemExplorer (China) Hutchison MediPharma Ltd (China) Lilly Suven Life Sciences Ltd (India) Nicholas Piramal India Ltd (NPIL, India) Chorus Versant 1 Quasi-independent model for fast, cheap PoC 2 Pre-clinical and early development labs sold to Covance for $5M, promise $1.6B in contracts over next 1 years 3 Alzheimer's partnership with NovaQuest and TPG-Axon 4 Chinese CRO chemistry contract 5 Partnering through PoC in Oncology and Inflammation 6 Collaboration for CNS Discover and Preclinical 7 Design and run clinical trials from IND through Ph III # Jobs cut 4. () 3. 3% 4 19% 5 23% 19% 6% 4% 4% 3% 1 4% 2% 1% Announced (by function 26-29) 4 Jobs cut as % of staff Jan 26 2 S&M Manufacturing R&D Unspecified +12% CRO CMO +13% +11% TPG- Axon Covance Greenfields labs SALSS 29_talking points for panel_9814.ppt 2 8 Gastrotech Pharma Jubilant Activity related TA related TA and activity related 9 8 Out-licensing GTP-1 for IBS to Gastrotech Pharma 9 Extension of Chorus model to 5-year 5:5 JV with Jubilant through PoC in Oncology, Met and CV Merck Pfizer SALSS 29_talking points for panel_9814.ppt 15. AZ 8.11 BMS 6. GSK Sanofi- Aventis 4. Novartis J&J SALSS 29_talking points for panel_9814.ppt For J&J and Abbott total staff includes non-pharmaceutical business units, J&J excluding medical devices 2. Includes job cuts after merger with Schering-Plough 3. Includes job cuts after merger with Wyeth 4. Includes employees of Schering-Plough as of Dec28 5. Includes employees of Wyeth as of Dec28 Source: Factiva, Jan 26 Jul 29, BCG analysis Roche To retain historic profitability pharma industry has to cut costs wherever possible Source: Medical Health care Market Guide 24; The Thomson Corporation 26; Sullivan & Frost 25; BCG analysis Lilly Abbott Cost cutting initiatives of pharmaceutical companies driving growth in outsourcing 6 7 4

6 1...but ket still lacks faith in future growth of Pharma TSR has gone from outperform to underperform in 1 years while the industry P/E has exhibited a steady and ongoing decline Pharmaceutical industry P/E declining EoY forward P/E S&P ,3 45 Financial Svcs % range of peers 1 Pharma in S&P ,3 35 Median Industrial Cong. Medical Devices Utilities Packaged Foods 1 Auto Comp. 5 Tire & Rubber Steel Abbott; AstraZeneca; BMS; GSK; J&J; Lilly; Merck; Novartis; Pfizer; Roche; Schering-Plough; & Wyeth Source: Compustat; BCG Value Science; BCG analysis 5

7 2 Profound impact of financial downturn Inevitable acceleration of cost containment Recession among the most severe in history Unprecedented debt being taken on by governments exacerbates pressure to reduce healthcare spend eg. UK World industrial output (%) 1 9 June 1929 = 1 April 28 = 1 ($Bn) ( Bn) % Other gov t spending HC spend 87 24% Months Marshall Plan New Deal Vietnam War WWII Obama stimulus plan Budget (28) Budget (29) Financial rescue package 29 Net rescue package Inevitable acceleration of cost containment Source: BCG analysis 6

8 2 Plans for ambitious US Health care reform Source: The Economist 7

9 2 Small Biotech suffer from restricted access to capital Small Biotechs are running out of cash as Biotech access to capital kets impaired making Biotechs attractive targets for Pharma 2 Share of biotech companies (%) n = 97 to 157 Capital raised ($bn) # Biotech deals as % total biopharma aquisitions IPO Follow on Debt e29* ** Q3-8 Q4-8 Q1-9 Q2-9 Q3-9 <6 months cash-on-hand >=6 months cash-on-hand Significant Biotech financing crash could lead to undersupply of new drugs for industry in 5-1 yrs 1. According to Biotechnology Industry Organization (BIO) 2. Completed transaction where Pharma/Biotech is the acquirer and biotech is the target Source: BCG Analysis; EvaluatePharma; Thomson SDC Platinum * Consensus estimates for 29 cash-on-hand ** Data from Jan 29 Aug 29 8

10 3 Value based healthcare emerging new paradigm Pre Scientists Efficacy and safety Administrators Efficiency Clinicians Value Value = Outcome Cost Source: Institute of Strategy and Competitiveness, Harvard Business School; BCG analysis 9

11 3 Outcomes focus & transparency dramatically improves health Less side-effects (astigmatism) in laser eye surgery over time and lower variance Induced astigmatism through laser eye surgery, average and variance (# of dioptres 1 ) 1,5 Significantly lower inflammation levels for rheumatoid arthritis patients and lower variance in outcomes Average RA CRP value (%) , % of values 5% of values (separator indicates median for sample) Average CRP, Sweden (N = 19,27) Average CRP, Falun 3 (N = 5,5) 1. Dipotre = measured as average change of dioptre per clinic based on individual patient data 2. CRP-C = reactive protein level in blood indicating level of inflammation. Lower level of CRP indicate lower level of inflammation short-term as well as lower risk for inflammation long-term 3. National coverage 56% while Falun coverage is 1% for all types of RA-patients. Since 1997 Falun has measured and followed-up all its RA-patients on a monthly basis. Data has been used for regional quality work. Source: Cataract Annual Report 27; RA Annual Report

12 3 Competing in the future Health care industry Payers & Providers Academia Patient Best possible outcome at minimal cost Industry Source: BCG analysis 11

13 Making right strategic choices in times of change 1 Is Pharma transformation radical enough and what opportunities and threats do you see for investors? 2 What will be important areas of industry mid/long term impact of the economic downturn? 3 What are the implications of the health care value paradigm for Pharma/Biotech and health care investors? 12