Mixed Signals: Understanding the Outlook for Pharma R&D Spending Through

Transcription

1 Mixed Signals: Understanding the Outlook for Pharma R&D Spending Through

2 Presenters Jim Miller President and Founder, PharmSource Saul Richmond, PhD Director of Market Intelligence, PharmSource 2

3 Overview Objectives To enhance participants understanding of the factors that drive R&D spending To enhance participants business planning by forecasting market conditions for contract R&D services for the period Agenda Mixed signals Analytical framework Prospects for selffinancing companies Prospects for externally financed companies Outlook for R&D spending Final thoughts 3

4 Mixed signals R&D spending, financing are up Amount Raised-$B Bio/Pharma Financing Activity $60 $50 $40 $30 $20 $10 $0 R&D Spend $ billion Bio/Pharma R&D Spending $130 $128 $126 $124 $122 $120 $118 $116 $114 Self Financed Bio/Pharma Externally Financed Bio/Pharma $112 FY10 FY11 FY12 FY 13 Source: PharmSource Lead Sheet Source: PharmSource analysis of public data 4

5 Mixed signals But clinical trial activity declining 3,500 3,000 2,500 2,000 1,500 1, IND Filings 6,000 5,000 4,000 3,000 2,000 1,000 Clinical Trial Registrations Commercial Non Commercial P 3 P 2 P 1 Source: PharmSource analysis of FDA data Source: PharmSource analysis of data from clinicaltrials.gov 5

6 Analytical framework Segmenting the bio/pharma universe Self-Funded Companies Externally Funded Companies Type Revenue R&D % Sales Example Type Revenue R&D % Sales Example Global Biopharma >$ 5 billion >10% Pfizer Early Commercial >$0 >20% < 200% Seattle Genetics Mature Biopharma $1-5 billion >10% Forest Labs Emerging Biopharma NA Tetraphase Specialty Biopharma <$1 billion 10-20% Salix Generic/ Consumer No threshold <10% Teva 6

7 Analytical framework R&D competes with other uses of funds Sources of Funding Company Types Uses of Funding Operating Profits Public/Private Equity Licensing + Milestone Fees Venture Capital Self Funding: Global/Mid size/ Generic Externally Funded: Early Commercial Externally Funded: Emerging Dividends/ Buy backs Company Acquisitions Product licensing and acquisition R&D Capital Expenditure Commercial Infrastructure 7

8 Global bio/pharma dominates spend by growth R&D Spend CAGR Early Comm/Emerging Generic/OTC Specialty Early Comm Emerging Mature+ Specialty R&D Spend by Company Type Generic/ OTC Global Partnering Global Mature Global 0.0% 5.0% 10.0% 15.0% At least 20% of global bio/pharma spend going to partners Source: PharmSource analysis of public data 8

9 Self financing companies Global bio/pharma account for trial decline Number of trials registered 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Phase 2 & 3 Trials Registered in CT.gov 500 All others Top 14 Bio/Pharma Global bio/pharma registrations down by almost half Others down by just 8% Factors: Portfolio retrenchment: exiting therapeutic areas and discontinuing candidates Killing compounds faster in early development Greater dependence on partners Source: PharmSource analysis of data from clinicaltrials.gov 9

10 Self financing companies M&A depresses R&D R&D spend of acquirer relative to combined spend pre Impact of M&A on R&D Spending R&D savings a big factor in acquisition rationale Continuing acquisition activity will depress R&D growth 84 Y0 Y+1 Y+2 Years Post Acquisition Global BioPharma Smaller Transactions Source: PharmSource analysis of public data 10

11 Self financing companies Global bio/pharma strategies differ Change in R&D Spend (horizontal axis) Change in Revenue (vertical axis) Pfizer 10.0% Novartis Pharma Merck Sanofi Roche Pharma Amgen JnJ Pharma 0.0% 35.0% 25.0% 15.0% 5.0% 5.0% 15.0% 25.0% 35.0% 45.0% GSK Lilly Retrencher 30.0% 20.0% 10.0% AstraZeneca 20.0% Abbvie BMS Biogen Idec Novo Nordisk Allergan True Believers Rich Pipelines Source: PharmSource analysis of public data 11

12 Externally funded bio/pharma Early stage Biopharma well funded $ Raised (bn) Debt & mixed Private equity placement Secondary public offering IPO completed Venture capital investment VC and PE have remained consistent IPO way up but overall contribution is small IPO significance is access to secondary offerings and bolstering VC confidence Global partnering funds equal external financing When externally funded companies are confident they can get more funding, they will spend Source: PharmSource Lead Sheet 12

13 Externally funded bio/pharma IPO and SPOs raise R&D and SG&A Spend ($M) Spending Impact of IPO $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Spend ($M) Spending Impact of SPO R&D SG&A R&D SG&A Source: PharmSource analysis of public data 13

14 Externally funded bio/pharma Declining number of early VC deals a concern Follow on VC Deals First Round VC Deals VC Investments $ (M) $4,000 $3,600 $3,200 $2,800 $2,400 $2,000 $1,600 $1,200 $800 $400 $ Number of Deals VC Investments $ (M) $4,000 $3,600 $3,200 $2,800 $2,400 $2,000 $1,600 $1,200 $800 $400 $ Number of Deals Value ($m) Number Value ($m) Number Source: PharmSource Lead Sheet 14

15 Externally funded bio/pharma Global bio/pharma depends on emerging bio/pharma % of Global Bio/Pharma NMEs from Licenses or Acquisitions 40.0% 30.0% Growing share of approvals come from partnered and acquired candidates % NME derived from 20.0% external source 10.0% 0.0% Global bio/pharma allocating major share of R&D spend to partnering to maintain flow of NMEs Source: Data from HBM Partners 15

16 Outlook Modest growth for most segments to 2015 Normalized R&D spend R&D Spend F 2014F 2015F Global Biopharma Mature Biopharma Emerging Biopharma Early Commercial Early commercial to grow 10 15% p.a. as product revenues grow Global bio/pharma R&D only 1 2% p.a. but wide variation Others at 5% rate Assumes continued favorable financial markets Speciality Biopharma Generic/Consumer Source: PharmSource analysis 16

17 Outlook External environment can change outlook Downside risks Mega acquisitions Slow decision making Pipeline consolidation Continued restructuring by global bio/pharma Increased pricing pressure leading to more cost cuts Financial markets turn unfavorable Emerging companies afraid to spend Upside opportunities Continued boom in public equity finance Increased early round VC funding for externallyfinanced companies Price and reimbursement stability Run of success in new line therapies, e.g., ADCs and immunotherapy 17

18 Final thoughts An especially good time for bio/pharma R&D thanks to the Federal Reserve and global bio/pharma efforts to restock pipeline But market can turn quickly due to external financial shocks and clinical failures Service providers will benefit differently Pipeline is 50% biologics, less small molecule opportunity Clinical CROs will do well in late development, but CMOs may do less well as manufacturing outsourcing not increasing Less spending at early phases thanks to POC More on discovery and preclinical to rebuild pipeline 18

19 Q & A 19

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