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SUCCESS FACTORS IN THE PHARMACEUTICAL MARKETPLACE BRIAN A. MARKISON Chairman, President and Chief Executive Officer CAREER SUMMARY July 2004 – Present • • • • 1982 - 2004 • • • • • • • • • • • • • • • • • • • King Pharmaceuticals, Inc. Chairman, President and Chief Executive Officer President and Chief Executive Officer Acting President and Chief Executive Officer Chief Operating Officer Bristol-Myers Squibb President, MBSOV / OTN President, BMSOV / OTN, DuPont Integration Vice President, Operational Excellence and Productivity Senior Vice President, Licensing & External Development President, Neuroscience, Infectious, Dermatology/Apothecon U.S. Managed Care President, Neuroscience / Infectious Disease / Dermatology Senior Vice President, Neuroscience / Infectious Disease Vice President, Northeast Sales Vice Present, Strategy & Economics General Manager, Netherlands Vice President, Marketing & Advanced Medical Services Vice President, Marketing & Business Development Senior Director, Marketing & Business Development Director, Marketing & Commercial Development Group Product Director Director, Business Development and Planning Senior Manager, Strategic Planning Product Manager Sales Representative, Oncology, Primary Care CRITICAL SUCCESS FACTORS Focused expertise and resources, “trends” toward a higher probability of success. Industry metrics for predicting the probabilities associated with each stage of drug development are useful but may not be reliable. Life cycle management is essential. Licensing and acquisition talent needs to be “best in class”. The ability to generate meaningful free cash flow is the ultimate predictor of sustainability. WHAT’S GOING ON IN PHARMA Intellectual property is under siege. Managed care and the Government are continuing to exert stronger controls over pricing. Innovation within Big Pharma is not keeping pace with expectations for growth. Biotechnology will emerge as the fastest growing segment. Regulatory environment is increasingly more difficult to navigate. PROJECTED US PHARMA MARKET, 2007-12 Market (US$ billions) 2007 2008 2009 2010 2011 2012 Source: Datamonitor 349.1 379.1 411.7 447.1 485.6 527.4 % of Healthcare Expenditure 16.1 16.2 16.5 17.3 17.6 18.2 SWOT OF THE US PHARMA MARKET Strengths •The world’s largest market due to population • Highest per capital GDP • Strong manufacturing & R&D capabilities Weaknesses • High prices • Highly litigious market • Enormous cost of developing new drugs • Poor R&D pipelines Opportunities • Patients and physicians demand best treatments • Increasing cost awareness offers good opportunities for generic manufacturers Threats • Parallel imports from Canada, EU, Israel ‘• ‘Big Pharma’ has a poor public image • Drug safety issues in the wake of Vioxx • Competition from low cost manufacturing/R&D companies in India/China • 2006 Medicare reform • Forthcoming patent expiries for major drugs BIG PHARMA GROWTH RATES FROM LAUNCHES AND EXPIRIES, 2005–11 SELECTED COMPANY GROWTH RATES 2005-2011 BLOCKBUSTER US PATENT EXPIRIES 2004-2011 CRITICAL SUCCESS FACTORS 1. Focused expertise and use of resources . . . Research and Development Therapeutic area(s) Technology platform(s) Sales / Marketing / Market Research Managed Markets Regulatory Legal CRITICAL SUCCESS FACTORS 2. Industry metrics for predicting success are useful but may not be reliable. Preclinical First human decision dose The R&D Process Research First submission First approval Early Development Phase II Late Development Phase III-NDA Other Activities Lead optimization Lead discovery Clinical evaluation Duration (median) Probability of Success (%) 3.4 yrs 1.5 yrs ≥15% 2.9 yrs <35% 2.0 yrs 1.0 yr <65% <85% INNOVATION GAP IN PHARMA R&D 1999-2004 CRITICAL SUCCESS FACTORS 3. Life cycle management is essential ■ ■ ■ ■ Requires a continuous R&D focus A willingness to invest (even on the down slope) Demands creativity Pediatric exclusivity tends to have the highest NPV associated with any life cycle program CRITICAL SUCCESS FACTORS 4. Business Development Talent must be best in class Companies tend to leverage core capabilities - however - Companies are: moving to earlier technologies and even discovery tools looking globally for assets hoping that novel delivery approaches can provide meaningful differentiation CONCLUDING THOUGHTS… Commercial R&D CONCLUDING THOUGHTS (CON’T) If you do not feel passionately about what you do… Goal achievement becomes less likely Your personal values and your environmental values (culture) need to resonate.