Strategy of Successful Alliance for Domestic Biopharma

Transcription

1 Strategy of Successful Alliance for Domestic Biopharma November 14, 2005 Sukwoo (Jeffrey) Oh, J.D. President & CEO SMART Biosciences, Inc. & Managing Director Roberts Mitani, LLC 1

2 Common Biopharma Myths 1. You need to invest billions of dollars in order to succeed. 2. Me-too" drugs are less risky and easier to develop. 3. BT (Biopharma Industry) is just an extension of IT (information technology) in life science field; BT and IT go side-by-side. 4. All you need are a couple of super star scientists in order to succeed in the Biopharma industry. 2

3 Global Biopharma Industry Characteristics Size Largest market size (~$400 billion) Highest average growth rate (8% annually, as compared to 2% of GDP) Largest profit margin (close to 20%) Largest R&D budget (20-30% of revenue) Productivity In decline due to: Pipeline gaps (over 30% of R&D budget on projects with 3 rd parties) Shortage of quality scientists (researchers & decision makers) Lack of management executives with proper skills Chronic shortage in quality IP lawyers and strategists 3

4 Biopharma Industry Characteristics (cont d) Perfect Marriage of basic science, R&D strategy, business strategy, IP strategy, legal & regulatory strategy, financing and risk strategy, and marketing strategy Multi-disciplinary and requires several experts in each discipline Requires an efficient system to recruit, train and promote necessary experts Requires very skilful managers to harmoniously combine available resources 4

5 Biopharma Industry Characteristics (cont d) Require almost perfect corporate structure Good corporate governance is required Transparency is an absolute must Needs flexible yet formal chain of command Delicate balance of power and harmony must be maintained Shareholders vs. Management Short term goals vs. long term goals Science vs. Business One division vs. other division Internal projects vs. external projects Need efficient system to recruit, train, promote, retain, and properly compensate experts 5

6 Conundrum of Biopharma Risk Risk and Cost Analysis of New Drug Discovery Risk Cost Target Identification Target Validation In Vitro, In Vivo HTS/ Lead Discovery ADME/tox Lead Optimization Phase Animal Studies Clinical Trials I II III 6

7 Domestic Biopharma Characteristics Size Small market size Relatively small profit margin Small R&D budget (less than 5% of revenue) Lack of Proper Corporate Structure Usually dominated by owner or owner family members Lack of efficient system to recruit, train, retain, promote, retain, and compensate necessary experts Lack of multi-disciplinary approach Almost no balance of power Lack of innovation in R&D Usual me-too approach Underestimating value of novel approaches due to lack of necessary experts Too many emotional based decisions due to lack of necessary experts 7

8 Domestic Biopharma Characteristics (cont d) Lack of true understanding of the drug discovery process Inappropriate benchmarking against other high tech industries Recruitment of unsuitable personnel from other high tech industries Establishment of inadequate standards & goals Biopharma industry is nothing like IT industry Risk of failure vs. risk of obsolete Novel inventions vs. improvement of existing inventions Science vs. engineering Knowledge & personnel intensity vs. capital & personnel intensity Composition matter patents vs. know-how and/or use patent Long term product cycle vs. short term product cycle Life & death vs. improvement in efficiency and productivity Misunderstanding of Risk Tangible products are not low risk (consequence of prevalent me-too and generic approach Risk of failure does not correspond with the capital risk ( me-too approach can be very expensive) Risk of failure is a lot lower and cheaper than the risk of obsolete (consequence of over capacity in manufacturing infrastructure) 8

9 Prelude to Successful Alliance Understanding the true characteristics of the biopharma industry Understanding the risk and costs of new drug discovery Adopting the international biopharma industry standard of corporate structure Adopting the multiple disciplines & experts approach Devising an efficient system to recruit, train, promote, retain, and properly compensate necessary experts, regardless of nationality Abstaining from attitude that spending like Pfizer is the key to success 9

10 Strategy of Successful Alliance for Domestic Biopharma Industry There is more than one way to skin a cat approach the biopharma industry from risk and cost analysis standpoint Big pharma does not license only phase III compounds (e.g., Merck acquiring Aton) Big pharma does license-in me-too drugs and/or improved generics (e.g., GSK s collaboration with Bayer on Levitra) (See APPENDIX) Early stage novel targets can be accessed at a relatively low price and those with early stage lead chemical compounds can be quite valuable Be selective in advancing improved me-too compounds, may have high costbenefit ratio Need for constant competitive intelligence Unmet industry needs Hot/novel targets The main ingredient for successful alliance is good and solid science Leverage off international and domestic academia 10

11 Acknowledgements Natalie Landman Tae-Wan Kim, Ph.D. Laboratory Head, Columbia University Scientific Founder, SMART Bioscience, Inc. Hideki Mitani Bruce Roberts Managing Directors, Roberts Mitani, LLC 11

12 APPENDIX Successful Alliance Deals of Domestic & Foreign Biopharma Companies Pharmaceuticals Top Ten M&A Deals in 2004 Biotech Top Ten M&A Deals in 2004 Industry Trends in

13 Successful Alliance Deals of Domestic & Foreign Biopharma Companies Early stage unvalidated target research collaboration: Acuman Phamaceuticals s collaboration with Merck for its monoclonal antibody and a small molecule assembly blocker (2004); LGLS s collaboration deal with Elitra for novel anti-bacterial targets (2000) Early stage validated target deal: Merck acquiring Aton for novel target, HDAC inhibitor (2004) Pre-clinical stage compound licensing deal: LGLS licensing of its oral Thrombin inhibitor to Warner Lambert (1997) Phase I-II clinical phase novel mode of action compound licensing deal: Yuhan s licensing of its reversible proton pump inhibitor to GSK (2000) Phase I-II clinical phase me-too compound with better efficacy licensing deal: LGLS s FACTIVE to SB (1997) Phase III clinical phase me-too compound with better efficacy co-marketing deal: Warner Lambert s co-marketing deal with Pfizer for Lipitor (1996) Phase III clinical phase me-too compound without any distinction comarketing deal: GSK s collaboration deal with Bayer for Livitra (2003) Improved generic compound formulation licensing deal: Dong-A s license of its improved generic anti-fungal compound formulation technology to Jassen of J&J (2000) 13

14 Pharmaceuticals Top Ten M&A Deals in 2004 Rank Value ($m) Target Country Bidder Country 1 60,243 Aventis France Sanofi-Synthelabo France 2 7,940 Fujisawa Pharmaceuticals Japan Yamanouchi Pharmaceuticals Japan 3 2,961 Roche OTC Business Switzerland Bayer Germany 4 2,948 Warner Chilcott UK Private Equity Consortium 5 2,747 Celltech UK UCB Belgium 6 2,196 Sumimoto Pharmaceuticals Japan Dainippon Pharmaceuticals Japan 7 1,457 Tularik (79%) Amgen 8 1,050 ILEX Oncology Genzyme Agis Industries Israel Perrigo Atrix Laboratories QLT Canada Source: Corporate Finance Insights, Pharmaceutical Sector 2004/2005, PCW 14

15 Biotech Top Ten M&A Deals in 2004 Rank Value ($m) Target Country Bidder Country 1 2,747 Celltech UK UCB Belgium 2 1,457 Tularik (79%) Amgen 3 1,050 ILEX Oncology Genzyme Atrix Laboratories QLT Canada Pfizer's Nerviano R&D Centre Congregazione dei Figli dell' Immacolata Concezione Italy Ascent Pediatrics BioMarin Pharmaceuticals Bioglan Pharma Bradley Pharmaceuticals Shire Biologics Canada ID Biomedical Canada 9 80 Dharmacon Fisher Scientific Grelan Pharmaceuticals Japan Teikoku Hormone Manufacturing Japan Source: Corporate Finance Insights, Pharmaceutical Sector 2004/2005, PCW 15

16 Industry Trends in 2005 Continuing M&A, especially in the Asia Pacific region: Drugs licensed from biotech firms now account for 30% of pharma revenues. Due to increased competition and licensing costs big pharma is now acquiring biotech firms. So far in 2005, drug companies have acquired 16 biotech companies, compared to three during the first six months of 2004 Creation, by consolidation, of big biotech companies 16