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Statitec_Gearing Life Sciences Innovation to Today's Economic Twist_2012

Statitec_Gearing Life Sciences Innovation to Today's Economic Twist_2012

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Published by: statitec on Mar 21, 2012
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Statitec is delivering clinical studymethodology, health economics and trialconduct with an extensive experience inoncology, immunotherapeutics andepidemiology.
2012 perspective, published March 21
st
2012
Gearing up life sciences
innovation to today’s economic twist
 
The previous dramatic pharma
s’
trouble to struggle with wasthe difficulty to rejuvenate products pipelines (patent cliff andinnovation gap). Now, current economic downturn is forcingcountries to contain health care expenditures. This new trend consistsin a new challenge that life sciences innovation companies have toadapt to. The objective of this work using lean modeling methods isto identify dawning responses to this new situation.Seven cases have been analyzed. Each is definedby pipeline profile of 20 projects (frompreclinical to phase III clinical project) withexternal factors as price, trial cost, attrition rateand market drop-out rate. Cases simulation isperformed on a 20 years basis (cf modelingmethod). These cases represent several drugdevelopment strategies and have been analyzedwith
 previous economic model (1990’s) and
current model (2012).
Figure 1 :
Cases mapping by Internal Return Rate (%, EBITDAcomputed as net benefit cash flows) and time to break-event(debt=0, expressed in years).
Impact of changeResults :
when we look at this exploratoryresults (figure 1), life science innovation modelstays attractive. Noticeable issue for biotech isphase II pipeline size regarding current attritionrates. In fact with 7 phases II projects thecompany has great probability to put a producton the market, inversely smaller biotech firmschances are limited to phase II pipeline size. ThePharma, Biotech and Mee-too models are heavilyaffected by new government policies as shownby the slide movement from upper left corner tobottom right corner. It is especially true for theMee-too model of drug development whichseems jeopardized by new measures(comparative trials which lead to huge clinicaltrials, price rebate, and generic competition).
Findings :
To preclude value erosion innovative companies will continue to have cost containment strategies(access to university basic research, CROs, shared protocol)
Me-too development needs new statistical methodology to be attractive again or will shift to life cyclemanagement (me-too development in princeps drug near indications)
Personalized medicine seems a robust model of development despite some limits [1] furthermoremonoclonal antibody strategy has a high success rate with still today an investment barriers (cost of phase III) preventing biosimilars entry.
G. Theze Msc. MBA
Oncology drug development is very effectivenowadays because trials are beginning in phase IIprecluding healthy
volunteers’
trials. In additiononcology product approval rate is stable. The oncologypersonalized medicine seems robust as it really cuts thecost of clinical development. With the idea that aspatient will more benefit of the treatment; usual averagedrug turnover is expected. Biomarker diagnosisdevelopment model has been investigated as well and itappears that this approach is yielding to so much profitsfor oncology drug developments that pharma companiesshould be keen on paying the diagnosis test to patientsin exchange of state treatment reimbursement.
Statitec perspective paper,
March 21
th
2012 
goulven.theze@statitec.com 
 
 
Value based medicine
Payoffs
(Billion €)
 No changeValue basedstrategyNo change -30,9 -20,6Value basedaccessstrategy-20,6 -25,9Pharmaceutical companies
   G  o  v  e  r  n  m  e  n   t
Value based medicine is now a wellunderstood concept [2] . It is encompassing healthbenefit and savings during the full cycle of care. Thequestion towards this concept is what will be thecurrent health
actors’
strategies to respond to thisnew paradigm ?To envision this setting 4 situations have beenanalyzed :First situation : a country invests per year 30 billion
 €
in drugs and pharma industries
earn 9 billion €
profitper year (top left corner).Second : the country applies value access strategyleading to prices drop. Investment in drugs drops 20billon and pharma profits decrease to 6 billion(bottom left corner).Third : the country
doesn’t
change the model thepharma industries adopt value based pricing : drugscost is dropping whereas pharmas strategy change isnot rewarded. Payoff are similar to previous strategy(top-right corner).Fourth situation : country rewards value basedstrategy (specific incentives : pricing, public R&Daccess, taxes credit) thus the country invest directlyand indirectly 25 billion in drugs and pharmas earn 9billion (bottom right corner).As we take a look on this setting noclear coordination appears. Nevertheless if wesolve this equation it is possible to find amixed strategy equilibrium, where pharmas
will play ⅓
of the time the No change strategy
and ⅔
of the time the Value based strategywhereas government will merely play ½ of thetime the No change strategy and ½ of the timethe Value based access strategy.
Results :
Building coordination between government and pharmaceutical companies is a current challenge.Reshaping incentives to converge to a win-win situation will be an important milestone to bolster value inmedicine (as per Porter
’s
definition) and trigger collective intent to tackle huge public health problems. Chronicdiseases increase and healthcare cost ballooning far from behind patient willingness to pay still acute unresolvedissues.
 
Nevertheless in that particular setting a mixed strategy equilibrium emerges where rate in front of different strategies could be used as a pipeline management tool :
of the portfolio will be classically managed(R&D, clinical development
, P&R strategy) and ⅔
managed with a value based mind set (full cycle of care).
 Findings :
Use the policies trends to shape or fine tune innovation model
Policies expectations to be included in clinical development strategy
Sensitivity analyses to policies trends could be used to assess the resilience of an innovation model
Statitec perspective paper
, March 21
st
2012 
goulven.theze@statitec.com 
 
Modeling method
[A] [1]
 
cost/year
M€
duration attritionsuccess rateper yearfailurerate peryearpre-clinical project 10 1 0,2 0,2 0,75Clinical phase I 2 1 0,3 0,3 0,65Clinical phase II 5 2 0,4 0,2 0,25Clinical Phase III 150 4 0,6 0,3 0,15Market 10 5 NA NA 0,1CasesPharma1990Pharma2012Biotech1990Biotech2012Me-too1990Me-too2012OncoOncopersonalizedBiomarkerdiagnosispre clin 10 100 0 0 0 0 0 0P1 5 510 10 0 0 0 0 0P2 5 510 10 10 10 20 20 0P3 0 00 0 10 10 0 0 20Market 0 00 0 0 0 0 0 0Productexpectedturnover/year
800M€
 
700M€
 
800M€
 
700M€
 
800M €
 
500M€
 
700M€
 
700M€
 
100M€
 Marketfailure/year0,1 0,2 0,1 0,2 0,1 0,2 0,2 0,2 0,3Phase IIIcost/year
150M€
 
150M€
 
150M€
 
150M€
 
150M€
 
200M€
 
150M€
 
100M€
 
25M€
 
Statitec perspective paper,
March 21
st
2012 
goulven.theze@statitec.com 

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