Contract Research and Manufacturing (CRAM

)

Mumbai
November 10, 2006

Mahesh Sawant
Program Manager– Biotechnology and Life Sciences Practice (South Asia & Middle East)
1

Agenda Global Scenario Outsourcing across the Value chain Opportunity scan Indian Scenario Case Studies Conclusion 2 .

7 billion by 2011. Established segments API manufacture Clinical research Key trends Shift of full service preference to functional expertise Research – Chemistry based services continue to drive outsourcing – 3 out of top 5 service providers generate revenues from chemistry based contracts Clinical Development – Alternative options for Phase I – Biomarker development & validation – Microdosing Manufacture – API & formulation strengths in niche areas 3 .8%. Frost & Sullivan estimates the market to grow to $72.Global Outsourcing Scenario US$ 37bn growing at a CAGR 10.

7 bn growing at 14.1 percent. midsize pharma is prominent with a share of 37. big pharma is the largest outsourcer. accounting for more than 50 percent of the payouts on an average In the cardiovascular disease segment. 1997-2004 Source: Frost & Sullivan Analysis 4 . respectively Segment-wise Breakup of Total Alliance Payouts (Global).4 percent and 24.7%.Contract Research US$18. Expected to continue growth of over 16% to 2011 Key areas of outsourcing Screening technology platforms Genomics Therapeutics In all the segments. big pharma dominates completely with 92.3 percent share In the autoimmune/inflammation and CNS segments.

hitting $800 million by end 2007.Contract Research Top Drug Discovery outsourcing players.0 billion by 2009.23 billion. 6 7 8 ArQule Tripos ChemBridge . India's drug-outsourcing market 1 2 3 4 5 Millennium Pharmacopeia Albany Molecular Icos Evotec OAI Genomic and Therapeutic Chemistry Based Chemistry Based Therapeutic and Genomic Therapeutic and Chemistry Chemistry Based Chemistry Based Chemistry Based 5 amounted to just $470 million in 2005. the market will move forward at a 15% to 20% growth rate to almost $7.1 billion in 2005. 2004 Rank Company Primary Services Offered Outsourcing in drug discovery market valued at approximately $4. According to Frost & Sullivan forecasts. The top 10 competitors in the space currently account for approximately 30% of the market. But it's expected to grow 30% a year. or an estimated $1.

data management services.2bn in 2005 with a YOY growth rate of 14.S. biomarkers. bio-analytical. 6 . medical writing. Nonetheless. The Clinical research segment currently comprises more than 1. regulatory submissions. based projects. 2/3rd based in US.000 companies. The segment derives most of its revenues from U.Clinical Research Outsourcing The global CRO market was worth US$15. Europe and Asia are also important areas for CRO activity and the trends that affect industry players tend to operate on a global rather than regional basis. and site management services for the four phases of clinical development of a NCE and the bio-analytical / bio-equivalence services for generics. biostatistical.3%. The market includes services such as clinical.

solid and liquid dosage forms spanning across North America. Cardiovascular drugs is the largest among all other application categories with worldwide revenue of about $2. Injectables are expected to show the highest growth during the next few years. Solid dosage forms represented 47. Liquid dosage forms are projected to grow the slowest during the forecast period.56 billion in 2004.7% through the forecast period.9% over the period of five years. Analgesics seem to be rising at the highest pace in the contract manufacturing business with the expected annual average growth rate of 11.0 percent of the global market in 2004. Europe. and Asia. Within the contract manufacturing segment. it is rising at an CAGR of 8. 7 .Contract Manufacturing The global pharmaceutical contract manufacturing market is segmented into injectables.

potential re-profiling • Milestone based.Indian Scenario Clinical Research Organization Pre Clinical Clinical Trials No IPR Custom Chemica l Synthesi s BA/BE Organization Commercialized Growing On Patent Contract Manufacturing Volumes Margins High Low Mature Early to market Late to market Time IPR Status CRAMS Low High Off Patent • High margins Low Scale • High entry barriers • Clinical trial outsourcing opportunity is likely to grow exponentially over the next five years • Early stage licensing.commoditization • High degree of competition • Demand supply gap for select therapy areas / dosage forms •Oncology •Injectables 8 . risk sharing agreements and stage wise revenue flows • Scale • Reasonable margins • High entry barrier – requires dedicated. especially for difficult to make. niche products such as Injectables & biotech • Higher Capex investment • Focus on cost efficiencies as products near patent expiry • Relatively stable revenues. moderate degree of exclusivity • High Volume • Relative low margins especially if company is late to market • Moderate to low entry barrier – for niche generics and biotech • Genericization . approved manufacturing facilities. co-development.

6 billion in 2004 growing at 10% and is estimated to reach $2.Case Studies Chemistry based services India with its skills in reverse engineering is all set to capture the chemistry based services market. Source: Frost & Sullivan Analysis 9 .3 billion by 2008. There are four major chemistry service categories that CRO’s provide: – – – – Building Blocks Compound Synthesis Process Research Library Design Chemistry is the largest discovery outsourcing segment. representing more than $1.

manufacturing and marketing rights to drug candidates that it accepts for preclinical and clinical development from Vertex.Case Studies : Vertex Pharmaceuticals Kinase Targeted drug candidate (contd. 10 . Vertex has responsibility for drug discovery and identification of potential drug candidates. targeting selected kinases. Royalty on Net sales (& Supply or JV) Vertex will generate eight novel chemical entities. $200 million interest free loan facility for proof of concept studies. loans given on drug candidate acceptance. as amended in February 2004.. development. Vertex entered into an agreement with Novartis Pharma AG to collaborate on the discovery. and commercialization of small molecule drugs directed at targets in the protein kinase family. First Opportunity shall be successful completion by Vertex of Proof of concept studies.) $15 million on signing $200 million in research funding over 6 years $190 million in license fees & $180million in milestones $230 million in clinical cost reimbursements 150% reimb for “Second opportunity” compounds plus supply and JV Option Co Promotion in NA & EC In May 2000. and second opportunity shall be information to commence a Pivotal registration study. Novartis will have exclusive worldwide development. Under that agreement.

BMS shall manufacture. AMRI right to manufacture CON% if BMS outsources. 11 .Case Studies : Albany Molecular Research (contd.) Amine neurotransmitter reuptake inhibitors $8 million upfront $10 million R & D funding over 3 years $66 million in milestone per 1st 2 compounds $22 million milestones per each other compound Tiered royalty on NS < $1 Billion NS $1Billion -$2Billion NS > $2 Billion AMRI has royalty free rights to released compounds BMS previously assigned patent rights to AMRI for CNS field..

12 .165 million init Equity purchase and additional $4.Case Studies : Pharmacopeia (contd. plus $100k/month for 4 months interim funding until signing.) Compounds for FSH & SRF Receptors $835K on signing and additional $835K on 1st Anniversary $4.165 Equity purchase in May 1997 $9 million in R & D over 3 yrs Up to $10 million in milestones 6% royalty on Net sales Organon shall manufacture Pharmacopeia delivers optimized lead compounds Milestone Amounts and discovery/development royalty % payout depend on speed of $835K on signing. plus $835K on first anniversary as tech transfer fee. $3 million per year for 3 yrs (12FTEs @ $250K/FTE)..

hormone APIs & Dosage forms Biotech based APIs & Dosage forms 13 .Conclusion Manufacturing services Contract Manufacturing Organizations Opportunity area Opportunity area Clinical services Clinical Research Organizations Opportunity area Opportunity area Preclinical services Drug Discovery Contract Research Opportunity area Opportunity area Traditional APIs & Dosage forms Cytotoxic. steroids.

Few major pharmaceutical companies already have pilot programs in place or plans to offshore sizeable components of their operations. And very rightly. pharmaceutical off shoring is a phenomenon waiting to happen which could yield high returns for the domestic pharmaceutical companies. Thus. most Indian companies (big and small) have identified the same and are taking steps to project themselves as the best option for attracting off shored activities.Conclusion In order to sustain their profits more and more pharmaceutical companies are outsourcing significant amounts of their operations to lesser developed countries like India and China. driven by robust increases in the span of activities and relocation of both back-office and core processes. Off shoring is expected to increase by 16 percent annually. 14 .

“Then it doesn’t much matter which way you go. A discussion between Alice and the Cheshire Cat from Lewis Carroll's Alice in Wonderland.Conclusion “Would you tell me. “I don’t much care where –” said Alice.” said the Cat.” said the Cat. 15 . which way I ought to go from here?” “That depends a good deal on where you want to get to. please.

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