CDMO Market Update Jim Miller President, PharmSource - - PowerPoint PPT Presentation

CDMO Market Update

Jim Miller President, PharmSource PharmSource/PharmTech AAPS Breakfast November 2016

www.pharmsource.com ¡ 1 ¡

Pipeline driving strong CRO/CDMO performance

Company Segment Growth Period

Medpace CRO 18% 6 mo. Covance CRO 12% 6 mo PRA CRO 15% 9 mo. INC Research CRO 16% 6 mo. Lonza Bio API 10% 6 mo. Avid Bio API 66% 12 mo. Patheon DEV 8% 9 mo. Catalent Clin Pkg 10% 12 mo. Metrics DEV 26% 12 mo. SGS Analytical 8% 6 mo. Charles River DEV 11% 6 mo.

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Source: Public company reports

Recent Company Performance (2016)

Development services account for about 45% of industry revenues Development services growing at 10+% annually

– Expanding pipeline – Robust funding for emerging bio/ pharma

Global bio/pharma dominating approvals

24 27 27 38 49 22 25 33 23 28 15 19 13 22 23

20 40 60 80 100 120 140

2011 2012 2013 2014 2015

Number of Approvals

NDA Approvals by Sponsor Type

Global Mid Size Small Generic 3 ¡

PharmSource, CMO Scorecard 2016 Edition

$72 $73 $74 $74 $81 $87

$- $10 $20 $30 $40 $50 $60 $70 $80 $90 $100

2010 2011 2012 2013 2014 2015

US$ Billions

R&D Spending by Top 25 Bio/ Pharma Companies

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Half of global bio/pharma approvals have been in-licensed or acquired Growing biologics pipeline driving up R&D spend

Funding flowing to emerging bio/pharma

$0 $5 $10 $15 $20 $25 $30 $35 $40 $45

2010 2011 2012 2013 2014 2015 2016 6 mo. Funds Raised $ Billion

Funding for Emerging Bio/ Pharma

VC IPO Secondary Upfront

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Source: PharmSource Lead Sheet and public data

500+ companies raised funding in 2015, most are inexperienced drug developers

$2.7 $2.9 $3.0 $3.5 $3.5 $3.6 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 % Companies >2 years of cash R&D Spend ($billion)

Emerging Bio/pharma R&D and Cash Status

R&D Spend ($bn) % Companies with >2 years cash

FDA guidance supports development

Designation Criteria and Regulatory Response

Fast Track

• Data supports potential

for un-met need

• Expedited & rolling

review

Break- through

• Data indicate

substantial improvement over existing therapies

• Intensive guidance,

expedited & rolling review

31 31 32 42

63 64 80 96 20 40 60 80 100 120 140 160 2013 2014 2015 2016

Number of Designations

Fast Track and Breakthrough Drug Designations Breakthrough Fast Track

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Accelerated approval has major implications on CMC timeline

Well-stocked pipeline but more novel therapies

645 426 584 192 689 525 731 300

200 400 600 800 1000 1200 1400 1600

Number of Candidates

Drug Development Pipeline

Biologics Small Molecule

Biologics by Type

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Source: IMS Lifecycle R&D Focus

MAb/

Recomb

Protein

Gene/Cell/ Thera Vac ADCs Source: PharmSource Lead Sheet

Complex Processing Needs Solubility

Powder-in-a-bottle/ capsule raises issues

Potency

May require high containment

Stability

cold chain conditions for manufacturing/distribution

Development demands will drive CDMO consolidation

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Pipeline Growth Globaliza- tion Cost Pressures

Compound Complexity

Accelerated Pathways

Naïve Clients

Investor Expectations

Scale Technology Management

Required CDMO Response

Market forces drive M&A

• Biopharma companies are demanding suppliers

have greater capability as well as capacity

– Trying to simplify vendor management, speed development and reduce costs

• CDMO investors, especially PE, don’t like

greenfield investment

– Don’t want to wait for returns – Don’t want risk of declining demand just as new capacity comes on stream

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Acquisitions add capability and capacity

CDMO/Analytical Lab Buyer Buyer Business

• Micron Technologies
• Pharmatek
• Redwood Bioscience

Catalent Drug product CMO

• Whitehouse Laboratories
• SSCI & Aptuit Glasgow

AMRI Drug product & API CMO

• ABC Laboratories

EAG Analytical services

• Biotec Services
• Penn Pharma

PCI Services Packaging & manufacturing

• Sinesis
• Advantar

Eurofins Scientific Analytical services

• WIL Research
• Blue Stream Laboratories

Charles River Laboratories Preclinical & discovery CRO

• Particle Sciences

Lubrizol Polymers for drug delivery

• BioOutsource and Cellca

Sartorius Manufacturing equipment

Over 50 CMC acquisitions in the past 24 months

Implications of the election?

Outcome Impact Implications for CDMOs Less risk of drug price regulation

+

Better pharma profits, more R&D But PBMs will still fight increases Tax reform > cash repatriation

+/-

More pharma M&A More R&D Let Medicare negotiate drug prices

• Lower profits, less R&D

More pressure on pricing Repeal ObamaCare, 20 million fewer covered lives

• Lower profits, less R&D

More pressure on pricing Anti-immigration policies

• Talent shortages

More offshoring to where talent is

www.pharmsource.com ¡ 10 ¡

Suggested by “Biopharma’s Trump Party is a Little too Raucous,” Bloomberg Gadfly,

Final thoughts

• CMC not likely to go as far with strategic partner

model as clinical research

– Too many technologies and capabilities needed – But general contractor and other innovative models evolving

• Performance is the key differentiator

– KPIs, FDA approvals may be more important than price

• Senior management as a difference-maker

– Who can manage the growing complexity?

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