taking a commercial approach to drug development

Taking a Commercial Approach to Drug Development

Target Product Profile Development And

New Product Strategic Planning For Early Stage Pharmas

and Drug Development Cos.

Copyright © 2009 Pharmacision LLC, www.Rapid-Insights.com, [email protected] 2

Pharma/Biotech New Product Strategic PlanningUnderstand the market environmentDevelop therapies to meet unmet medical and realized market needsStart with the end in mind –

Develop target product profile (TPP) to realize unique value proposition–

Understand financial valuations of TPP over product life cycle–

Factor in risk–

Build plan for Exit strategy

Create a drug development plan to reach TPPEffectively utilize advisory board and primary research to develop/support assumptionsEstimate risks and outlicensing valuationsDemonstrate investment value opportunities to support strategic decision making and fund raising support


Goal: Develop Target Product ProfileHypothesisBlueprint for valuations and future planningFrequently “gut-checked” throughout drug development

Indication

Efficacy

Safety/Tolerability

Convenience


Market Mapping/Prioritization

Define Success

Develop Target Product Profile

Clinical Development

Strategy

Manufacturing & formulation

Strategy

Financial Projections

Strategic Planning Approach – How TPP Fits In

Exit strategy

(not covered in this presentation)


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Market Mapping – Define market and map out market landscapePa

tient

s

Target Condition(s)

Patient Prevalence

Patients Diagnosed

and

In Health Care

Un- diagnosed

PatientsChronic 332,936

“High Risk” Patients

Acute 59,633

“Low Risk” Patients

Chronic 61,147

Symptomatic

Symptomatic

Asymptomatic

Asymptomatic

Und

iagn

osed

Dia

gnos

ed

Example


Low Risk, Asymptomati

c

Low Risk, Symptomatic

High Risk, Asymptomati

c

High Risk, Symptomatic

Diagnosed Pts

Patie

nts

Evaluate SOC* and unmet needs – Determine Target segments

“Satisfied” with therapy“Unsatisfied”

with therapy

“Satisfied” with therapy



“Unsatisfied” with therapy



*SOC= standards of care

Example


Understand Key Market Drivers and Barriers to Prescribing For Each Segment

Primary DriversPrimary Drivers Primary BarriersPrimary Barriers

Stricter guidelines calling for lower BP in high risk patientsWant greater ability to control HBPNo longer acceptable for high risk patients to have “borderline” HTNWant greater reduction in the rate of end organ failure (brain, kidney, heart, eyes) in all patientsWant easy to take, well-tolerated therapyNeed to see compelling clinical data before switching to any new products

Concern over cost/managed care reimbursement challengesPush to use genericsPrior authorizations and insurance claim rejections for use of newer high priced antihypertensive drug as initial therapySkeptical of data showing differences in efficacy within RI classEntrenched prescribing habitsComfortable with existing antihypertensive products and regimens

Example


Class IndicationStrengths/Compelling Advantage

Weaknesses/ Unmet Needs

Exp. Future Impact on Mkt

Launch Date/ Anticipated date of generic entry

Current Competitors

Product 1

Product 2

Product 3

Product 4

Product 5

Compounds in Dev. (Future Competitors

Product 6

Product 7

Product 8

Product 9

Evaluate Current and Future Competitor Landscape


Greater target organ protection

Not Different Different

Important

Unimportant

ConvenienceEfficacyOral Rx

Define your unique value proposition for each target market segment

•

Identify Imp/Diff features and benefits that are sustainable and

can drive behavioral change leading to initial product trial and usage

•

Postulate unique value proposition for product based on hypothesized Imp/Diff features and benefits

•

Create target product profile to highlight important differences

•

Target product profile (TPP) should drive clinical development plan to demonstrate unique value proposition


Prioritize Segments For Clinical and Commercial Development

Evaluate and prioritize individual segments using the following eligibility tests:

Total Addressable market

In care for condition

Not satisfied with current therapy

Have symptoms compound can

treat

Willing to switch

Does the segment have adequate size to reach financial targets with modest product market penetration?

Can patients be easily identified and targeted?

Can high volume treaters be easily targeted?

Will your product meet patient unmet needs?

Is unique value proposition in this patient segment sustainable given current and future competition?

Will unique value proposition convince physicians to use your product?

Can clinical trials be easily designed with end points to demonstrate unique value proposition ?

Can clinical trials be designed, approved, enrolled and completed in a timely manner?

TPP needs to be compelling for this group


Develop Unique Value Proposition HypothesisAntihypertensive market is huge

–

65 million American adults have high blood pressure–

$55 billion spent annually in direct expenditures to treat HBP–

Antihypertensives are #1 prescribed class of drugs for Medicare Part D enrollees with 122 million prescriptions in 2006

–

6 different classes of drugs and over 70 individual drugs on the

market to treat hypertension

Yet still largely uncontrolled –

60% of patients require 2 or more drugs to treat their hypertension–

Poor compliance remains a major factor exacerbating poor HTN control with existing therapies–

70% of patients on therapy still do not have their BP under control (<140/90 mm Hg)–

Hospitalization rates for congestive heart failure continue to increase –

69% of CHF patients are hypertensive

–

Increasing trend in end stage renal disease –

hypertension second only to diabetes as most common antecedent for this condition

–

Higher blood pressures lead to higher risk of death from heart disease or stroke –

77% of first stroke patients have high blood pressure

For patients with uncontrolled HTN on initial antihypertensive regimens, Product X provides an excellent “first switch” agent to add to a second antihypertensive regimen to lower blood pressure while providing proven protection against target organ damage that can cause heart failure, kidney damage and strokes.

Example


Define Commercial Success

Efficacy, safety and convenience performance levels required to drive target segment behavioral change to generate product adoption

Market environmental changes required to capitalize on market drivers and overcome barriers to adoption

Pricing levels needed to meet NPV goals

Adoption and target patient penetration levels needed to meet NPV goals

Make assumptions on all the above

Need Market research and/or medical advisory board feedback to validate assumptions!!

TPP needs to deliver on commercial success drivers!


Problem: Allogeneic BMT patients, and in particular unrelated donor BMT patients are at increased risk for life-threatening airborne infections due to:

–

Immunosuppression for 6 months with calcineurin inhibitors

–

Treatment of acute Graft vs. Host Disease (aGvHD) with increased immunosuppression (high dose steroids)

–

Subsequent extended immunosuppression for more than 2 years

Solution: Prod X aerosol new product concept:–

Coats upper respiratory tract (trachea, big bronchi)

–

Blocks and physically expels viruses / fungi

–

Potential for use as prophylaxis against fungal and viral infections, which have high mortality rate in this patient population

Prod X to prevent infections after Bone Marrow Transplantation

Historical Case Study


Bone Marrow Transplantation Market Landscape

1998: Est. WW procedures 52,00010-40% infection rate 5,200 - 20,800mortality 2-8% 1,040 - 4,160

Overall mortality is about 40% (GVHD, Infection, Relapse)

Primary viral and fungal species implicated in morbidity and mortality are:

–

Virus: CMV, RSV, rhinovirus, Influenza, parainfluenza–

Fungi: Aspergillus fumigatus (mainly pulmonary); Candida sp.

Risk factors for post BMT infectious complications–

GVH Disease, Toxicity of chemotherapy, Steroid therapy for immuno-suppression, Antibiotics (overgrowth of opportunistic fungi), Ganciclovir therapy (late stage CMV and/or fungal infections), donor age, underlying disease morbidity



Target market – Preventing Aspergillus fumigatus fungal infections in allogeneic post BMT patients–

Biggest post BMT infection concern

–

Incidence: 5-10% in allogeneic BMT patients, 30% in unrelated allogeneic BMT patients

–

mortality: 70-90%

–

Current Competition:

•

Amphotericin B, Itraconazole -

modest efficacy against Aspergillus•

issues: nephrotoxicity, Cyt.P450 3A4 inhibition–

Future Competitive Landscape: •

New class of antifungals on the rise: echinocandins (e.g. Cancidas [Merck]) effective and less toxic.

•

Will be strongest competition, but resistance can develop with overuse as prophylaxis.

Commercial Success Criteria - Activity against Aspergillus with lower levels of resistance development than new antifungal class of antibiotics

Target Market and Commercial Success CriteriaHistorical Case Study


Product X Product Profiling/ Gap Analysis•

Key unmet need and physician concern: Aspergillus infection prevention in unrelated allogeneic post-BMT patients

•

Need to demonstrate activity against Aspergillus for commercial success

•

Clinical development efforts need to focus on prevention of Aspergillus infections and seek Aspergillus prophylaxis as a labeled indication

Aspergillus prevention

Not Different Different

Important

Unimportant



Prod X Aerosol Target Product Profile (TPP)Indication Prevention of life-threatening Aspergillus and

Respiratory Virus Infections in allogeneic Bone Marrow Transplant Recipients

Efficacy 1. Reduction of Aspergillus infections within the first 3 12 months after transplantation in unrelated donor graft recipients by 50%

2. Reduction of Respiratory Virus infections in allogeneic BMT patients with an aGvHD history requiring continued high dose immunosuppression or cGvHD by 50% between month 3 and month 9 12 months after Transplantation

Safety/Tolerability Acceptable tolerability. No additional inflammatory activity within the Upper Respiratory Tract and lungs. No increased coughing Enveloped viruses and prion safety comparable to present hyperimmunes. Non-enveloped viruses safety according to PEI standard

Convenience Aerosol administration. Low: 50 mg x 2 per day Base: 50 mg x 3 per day High: 50 mg x 5 per day



Phase I Primary: SafetySecondary: Effect on Respiratory Virus Infections; Respiratory BacterialInfections, Effect on Aspergillus InfectionsTiming: 1.1 yr Cost: $0.9 MM Patients: 30

Phase II Primary: Safety and Dose FindingSecondary: Effect on Respiratory Virus Infections; Respiratory BacterialInfections, Effect on Aspergillus InfectionsTiming: 1.1 yr Cost: $3.1 MM Patients: 60

Phase III Primary: reduction of aspergillus lung infections within 12 months post-transplant from 30% to 15% (50% reduction) (unrelated allogeneic pts)Secondary: Reduction of Respiratory Virus Infections; Reduction of BacterialInfections, Mortality ReductionTiming: 3.25 yr Cost: $10.5 MM Patients: 240

Phase III Primary: reduction of RSV/parainfluenza/influenza lung infections 12 monthsafter transplant from 15% to 7.5% (50% reduction) (all allogeneic patients)Secondary: Reduction of other respiratory virus infections (rhino, adeno),reduction of aspergillus infections, reduction of bacterial (pneumococci,hemophilus) infections, Mortality ReductionTiming: 2.25 yr Cost: $26 MM Patients: 600

Clinical phase

TPP Drives Commercially Focused Clinical Development StrategyHistorical Case Study


Estimate Costs and Timelines for Clinical Trials

Drug Development Timeline and RisksIND submission File NDA

Pre-Clinical Testing Phase I Phase II Phase III NDA Review Total

Years 1.5 1.5 2 3.5 1.5 8.5

Expected Costs ($ millions) in 2007$ $2 $13.5 $28.3 $81.2 $2.5 $127

Test Population20 to 100

healthy subjects100 to 500

patients1,000 to 5,000

patients n/a n/a

Purpose

Determine safety and

dosage

Evaluate efficacy, optimal

dosing, side effects

Confirm effectiveness,

monitor adverse reactions from long-term use n/a n/a

Sources: Risks in new drug development: Approval success rates for investigational drugs ; Clin Pharmacol Ther 2001;69:297-307.The Drug Discovery, Development and Approval Process , PHRMA websiteR&D Costs and Returns by Therapeutic Category ; Drug Information Journal, Vol 38, 2004.


Understand Risks and Exit Strategy Considerations

Licensing most feasible exit strategy

Probability of FDA approval ≠ Expected Probability of commercial success in all cases

High risk business – platform strategies and compounds with multiple indication potential much more attractive to investors

In most cases, plan for outlicensing at early human proof of concept stage

Stage Time (Yrs)Prob of

Success*Pre-Clinical 2 40%Phase I/IIa 2 65%Phase IIb 2 44%Phase III 3 65%Approval 1 80%

Cum Total 10 6%

*Sources: DiMasi 2001, Kola 2004, Avance* For Immunology drugs in development


Construct Financial Projections

--

Words of wisdom I received early in my career

Do the best you can without the benefits of having perfect information and a crystal ball!

“You did a great job with your forecast. The only thing I can

say about it with absolute certainty is that it’s wrong.”


Start by Tying Market Assumptions to Financial AssumptionsUse US Census population projections

NHANES data used to estimate % population with HTN

85% of patients with HTN are on therapy

63% to 75% of patients >20 have uncontrolled HTN

Only Pts with uncontrolled HTN are candidates for NewProd X

5% Peak patient shares estimated for % of uncontrolled pts on NewProd X

3% Peak patient shares estimated for % of total HTN treated patients on NewProd X

80% Compliance rate

Pricing estimates based on current Tekturna revenue/Rx + 10%

4% annual price inflation

Launch 2018 with 10 yrs of revenues

0%1%2%3%4%5%6%

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

% Uncontrolled HTN Pts on PH-RI

$0

$1,000

$2,00020

1820

1920

2020

2120

2220

2320

2420

2520

2620

27

US Revenue Forecast ($MM)

Example


Create Pre and Post-Launch Financial CF Projections

2018 2020 2022 2024 2026 2028 2030 2032Yr1 Yr3 Yr5 Yr7 Yr9 Yr11 Yr13 Yr15

Phase Launch Market Market Market Market Market Market MarketRevenues ($000s) $7,872 $97,444 $199,370 $244,342 $263,558 $259,352 $228,576 $185,988

G&A and R&D Expenses $5,376 $0 $0 $0 $0 $0 $0 $0COGS $1,120 $13,870 $28,377 $34,778 $37,513 $36,914 $32,534 $26,472Marketing and Sales $50,656 $53,741 $57,014 $60,486 $60,432 $56,860 $53,500 $50,338Milestones $10,000Royalties $472 $5,847 $11,962 $14,661 $15,814 $15,561 $13,715 $11,159Expenses (for Licensee) $67,625 $73,457 $97,353 $109,925 $113,758 $109,336 $99,748 $87,970

PHARMA LICENSEEEffective Tax Rate 0% 26% 26% 26% 26% 26% 26% 26%Risk adjusted CF ($13,671) $5,488 $23,341 $30,755 $34,274 $34,324 $29,476 $22,427Discount 53% 43% 35% 29% 23% 19% 15% 12%Risk adjusted net DCF ($7,309) $1,762 $6,083 $6,505 $5,884 $4,783 $3,333 $2,058

rNPV

BIO-TECEffective Tax Rate 26% 26% 26% 26% 26% 26% 26% 26%Risk Adjusted CF $2,396 $1,338 $2,737 $3,354 $3,618 $3,560 $3,138 $2,553Discount 53% 43% 35% 29% 23% 19% 15% 12%Risk Adjusted DCF $948 $430 $713 $710 $621 $496 $355 $234

Example

Factor in probabilities of success and risk adjustments at each milestoneMake financial projections for company and for any anticipated future alliance or licensing partners who complete development and launch product


Cash flow projections provide early estimate of licensing valueLicense deal at start of phase IIb Milestones/Upfronts

Phase I Phase II Phase III NDA Approval RoyaltiesDCF $5,000 $5,000 $8,000 $10,000 6.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Yr1

Phase Phase I/IIa Phase I/IIa Phase IIb Phase IIb Phase III Phase III Phase III NDA LaunchTransition probability 100% 44% 100% 100% 65% 80% 100%Probability 100% 100% 44% 44% 44% 29% 23%Revenues ($000s) $0 $0 $0 $0 $0 $0 $7,872

G&A and R&D Expenses $4,386 $4,386 $12,200 $12,200 $12,200 $2,000 $5,376COGS $0 $0 $0 $0 $0 $0 $1,120Marketing and Sales $0 $0 $0 $0 $0 $25,328 $50,656Milestones $5,000 $5,000 $8,000 $10,000Royalties $472Expenses (for Licensee) $9,386 $4,386 $17,200 $12,200 $12,200 $35,328 $67,625

PHARMA LICENSEEEffective Tax Rate 0% 0% 0% 0% 0% 0% 0%Risk adjusted CF ($9,386) ($4,386) ($7,568) ($5,368) ($5,368) ($10,104) ($13,671)Discount 100% 90% 81% 73% 66% 59% 53%Risk adjusted net DCF ($9,386) ($3,952) ($6,142) ($3,925) ($3,536) ($5,996) ($7,309)

rNPV $17,460

BIO-TECEffective Tax Rate 26% 0% 26% 0% 0% 26% 26%Risk Adjusted CF $5,000 $0 $2,200 $0 $0 $2,288 $2,396Discount 100% 90% 81% 73% 66% 59% 53%Risk Adjusted DCF $3,700 $0 $1,321 $0 $0 $1,005 $948

rNPV in 2012 $14,071 Value of license for US rights

Value share 45%Total Milestone and Royalty Payments ($000s): $202,029 $4

Initial Valuation Assuming Outlicensing at start of Phase I/Iia2008 2009 2010 2011 2012

Cash FlowsProb 100% 100% 40% 40% 26%rCFs ($775) ($775) ($340) ($340) $3,658Discount Rate: 100% 85% 72% 61% 52%PV Cash Flows ($775) ($657) ($244) ($207) $1,887Total Value rNPV ($000s) $4

(18% discount rate used)

(11% discount rate used)

Construct business plans and financial projections with potential licensing valuations in mind.

Example


Exit Strategy Considerations –

“Typical”

Deal TermsLook for comparable deal terms to draw fromDevelop strategic target outlicensing partner “short list”


SummaryUnderstand your market environmentDevelop therapies to meet unmet medical and realized market needsStart with the end in mind –

Develop target product profile to realize unique value proposition–

Understand financial valuations–

Factor in risk–

Anticipate exit strategyCreate a drug development plan to reach TPPEstimate risks Construct financial projections linking market assumptions to financial assumptions Develop partnering strategy and demonstrate investment value opportunities to potential investors


Pharmacision LLC Service OfferingsStrategic Planning–

Business strategy and plan development –

In/out-licensing commercial due diligence assessments/preparation–

Business partnering support–

New product planning–

New market and competitive landscape assessments–

Qualitative Market Research–

Market modeling –

Demand forecasting and financial NPV analyses

Marketing Initiatives–

Brand strategy and marketing plan development–

Positioning and message development–

Targeting strategy development–

Professional and patient advertising campaign development


Contact Information

Pharmacision LLCThomas Marten

President(734)895-3670

[email protected]