Overview of the Phase I Market

Ken GetzTufts CSDD; CISCRP

October, 2010

Agenda

• Overview of the Drug Development Landscape

• The Phase I Market

• Key Market Trends

• Optimization Opportunities

2

Commercialization Conditions• Restrictive price controls• Healthcare reform uncertainty

and adverse impact• Depressed global markets• High-level of revenue at risk

R&D Operating Conditions• Low success rates• Declining levels of innovation• Rapidly rising R&D costs• Regulatory conservatism• Public discontent

Overview of the Drug Development Landscape

Declining Rate of Innovation per R&D DollarDeclining Rate of Innovation per R&D Dollar

0

20

40

60

1963 1974 1985 1996 2007

Ne

w D

rug

Ap

pro

va

ls

0

15

30

45

R&

D E

xp

en

ditu

res

(Billio

ns

of 2

00

7$

)

Source: Tufts CSDD Approved NCE Database, PhRMA, 2008R&D expenditures adjusted for inflation

R&D Expenditures

New Drug Approvals

* Trend line is 3-year moving average

R&D Cost DriversR&D Cost Drivers

• Chronic and complex indications

• Clinical trial size

• Protocol design complexity

• Patient recruitment/retention

• High cost discovery/research tools

• Regulatory demands

• Market oriented studies

• Late-stage attrition

Downsizing and Consolidation

Abbott

Amgen

Astra Zeneca

BMS

Lilly

J&J

Merck

Novartis

Pfizer

Sanofi-Aventis

Schering - Plough

1,200

2,600

7,600

4,300

2,500

7,800

7,000

2,500

16,000

1,200

6,000

Source: WSJ

Announced and Planned Layoffs (2008 - 2010)

2001 2003 2005 2007 2009 AnnualizedGrowth

Total Global Development Spending

$27.3 $33.6 $41.5 $49.6 $54.8 9.1%

Total Spending on Contract Clinical Services*

$3.7 $4.9 $6.4 $8.5 $10.1 13.4%

Outsourcing Demand * ($US Billions)

*Note: Does not include pass-through clinical services (e.g., central lab fees, investigator grants)

Source: TCSDD

Distribution of FDA-Regulated Investigators

86%77%

62%53%

9%

10%

13%

14%

5%13%

25%33%

Rest of World Western Europe US-Based

* US and W European sites 50%+ more expensive

* Enroll two-thirds as many subjects as rest of world

Percent of Total1572s Filed

Sources: Tufts CSDD

20011997 2005 2009

11

Protocol Complexity

Phase I Phase II Phase III Phase IV

Unique Procedures (mean) 30.3 29.2 28.4 26.4Growth in Unique Procedures 35.10% 35.60% 42.1% 63.20%

Total Procedures (mean) 221.8 156.3 147.5 93.9Growth in Total Procedures 13.40% -1.30% 10.9% -2.4%

Total Work Burden (mean) 58.4 43.4 43.1 28.4 Growth in Total Work Burden 70.20% 32.80% 59.7% 58.10%

Note: Growth rates reflect the change in mean values of protocols in 2000-2003 and 2004-2007.

Source: Tufts CSDD

Total Global Phase I SpendingUS $ in Billions

2002 2004 2006 2008 2010P $-

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

$10,000,000,000

$12,000,000,000

$3,300,000,000.0

$5,800,000,000.0

$7,000,000,000.0

$10,300,000,000.0$10,500,000,000.0

Billi

ons o

f US

$

Source: Parexel Sourcebook

CAGR 15.6%

Number of Active Phase I Drugs in Development Worldwide

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1,076 1,139 1,218

1,371 1,539

1,702 1,828

2,064

2,292

2,505

CAGR = 10.2%

Source: Parexel Sourcebook

Clinical Research Phase Comparisons

5 Year Annual Growth Rates (2005 to 2010)

Products inDevelopment

Development Spending

Phase I 10.2% 15.6%

Phase II 8.0% 8.3%

Phase III 5.9% 11.5%

Sources: Parexel International

Development Pipeline by Phase

2002 2004 2006 2008 20100%

20%

40%

60%

80%

100%

34% 36% 39% 40% 42%

Phase IIIPhase IIPhase I

Source: Parexel International

Active Phase I Drugs by Major TA

Therapeutic Area 2003 2007 2010

Oncology 204 340 386

Immunologics 45 112 162

Digestive System Drugs 65 120 147

Endocrine System Drugs 57 93 115

Anti-Infectives 75 96 112

Vaccines & Antidotes 70 122 105

Cardiovascular System Drugs 45 67 83

Analgesics & Anti-Inflammatory Agents 47 99 82

Bone, Cartilage, Connective Tissue System Drugs 49 69 74

Psychotropics & Neuroleptics 36 67 60

Respiratory System Drugs 28 66 57

Dermatomucosal System Drugs 12 44 45

Motor System Drugs 18 29 28

Source: IMS R&D Focus

Distribution of Active Clinical Trials

Phase I Phase II Phase III Phase IV

N. America 76% 64% 38% 47%

WEurope 14% 22% 32% 31%

EEurope 5% 6% 10% 7%

Asia 4% 5% 11% 11%

SC America 1% 3% 9% 4%

Source: Opperheimer 2008 Analysis of Clinicaltrials.Gov,

Market Share in 2009 of Global Phase I Facilities

32%

4%40%

24% CROsPharmaceutical CompaniesAcademic CentersCommunity-based sites

Sources: Tufts CSDD

Facility Locations

3%

15%

12%

30%

38%

2%

Africa Asia CanadaEurope US Middle East

Source: Company Publications

LocationAverage Number

of Beds n

Africa 89 2

Asia 54 9

Canada 154 7

Europe 59 18

US 89 23

Middle East 27 1

Worldwide 81 60

Key Trends Shaping the Phase I Market

• Heightened safety concerns• Emphasis on hospital and in-patient-like settings• Shift to US and Canada for time and cost advantages post EU Directive• Increasing proportion of patients vs. healthy volunteers• Modified and combination protocol designs• Transfer operating risk to CROs• Growing receptivity and entry by for-profit, community-based

investigative sites

Source: Tufts CSDD interviews

Source: PhRMA Industry Profiles

Clinical Personnel Growth

2003 2004 2005 2006 2007 2008 2009 2010

5,338 4,4655,421 5,981

4,738 4,2426,117 6,409

23,125 23,101 23,196 23,79425,716 25,040

28,677

30,882Phase I Phase II/III

Phase I Spending Overall and for Outsourcing(US $ in Billions)

2007 2008 2009 2010P ’07-’10 CAGR

Total Phase I Spending$8.6 $10.3 $10.2 $10.5 6.9%

Phase I Spending on Outsourcing $3.4 $4.0 $4.0 $4.4 9.1%

Source: Jeffries & Company

Total Direct Cost per Patient by Phase(2007-2009)

Phase I Phase II Phase III Phase IV

$19,099

$12,848 $11,436

$6,105

Source:TTC

Two Optimization Opportunities

25

Supporting Investigative Sites for Success

Early Input into Protocol

Familiarity with Sponsor

Protocol Feasibility

Reasonableness of the Study Budget

Scientific Interest in the protocol

Completeness of Information about the Study

Availability of Qualified, Eligible Study Volunteers

20%

29%

32%

34%

49%

55%

63%

Sources: TCSDD Survey of 3,516 Sites, 2010

1991 Committee on Competitiveness

o Pharmaceutical and Biotechnology industries are national treasures

o Most innovative and productive relative to other R&D-intensive industries

o Saves lives and lowers the burden of health care costs

o Most financially healthy (robust revenue and profit)

o Major contributor to the economy

Public Confidence and Trust in the CRE

General Public Attitudes Perceptions of Clinical Research Professionals

70%-83% of Americans believe clinical research is ‘very important’ or ‘essential’ to advancing public health

65% of Europeans believe that clinical research plays an important role in advancing public health

42% of Americans and 36% of Europeans distrust biopharmaceutical companies 31% of Americans believe the FDA is effective at ensuring public/patient safety

25% of Americans and 17% of Europeans believe that PIs and study staff are primarily motivated by greed

Sources: Research!America (JAMA, 2005); Ohmann (2004); HarrisInteractive (2002, 2004, 2007)

By Extension… Study Volunteers

Organ Donor Blood Donor Financial Donor

CT Volunteer

46%

33%

12%9%

Chart Title

‘Who makes a better contribution to mankind?’

Source: CISCRP, 2006; N=900

• Desperate (~29% believe only seriously-ill participate)

• Risk Takers (80% believe participants are ‘gambling’ with their health)

• Ambivalently respected (34% ‘Don’t Admire’ study volunteers)

CISCRP: Collective Public and Patient Outreach

• AWARE for All• ‘Medical Heroes’ PSA• Media Outreach• Science Museums• Speakers Bureau• Search Clinical Trials• Legislation• Social Media Outreach

• CISCRP Membership• Post Trial Communication• Patient Ambassadors

• Site/CTSA Support• HC Provider Education• Pharmacy-directed education• ‘Voice of the Patient’• Medical Community Outreach

Impact of Protocol Complexity and Burden (All TAs, All Phases)

Less Complex Protocols

More Complex Protocols

Difference

Number of case report form pages per protocol (median)

55 180 +38%

Study volunteer enrollment rates 75% 59% -21%

Study volunteer retention rates 69% 48% -30%

Time from Protocol Ready to last patient last visit (LPLV)

413 weeks 714 weeks +72%

Number of Amendments 1.9 3.2 +68%

Source: Tufts CSDD

31

Conclusions

• Current drug development landscape necessitating major changes in how global clinical research will be conducted

• Phase I market an area of unprecedented change and opportunity to improve drug development performance and efficiency– Volume of activity– Economics– Structure

• Opportunities to improve Phase I success– Patient/public outreach and education– Protocol design simplification

Ken GetzSenior Research Fellow, Assistant Professor

Tufts CSDD, Tufts Medical School617-636-3487, Kenneth.getz@tufts.edu

Founder and Board ChairCISCRP

617-725-2750, kengetz@ciscrp.org

THANK YOU!