R&D Portfolio PlanningIn- and Out-licensing of Medicines

Portfolio Planning

• Role of portfolio management

• Importance to Industry

• Tools, methods and models –• to make Go/No-Go decisions

• To help Prioritise

Portfolio management:Today, an important senior management function

• Rapidly changing technologies

• Shorter product life-cycles

• Heightened global competition

• A key part of business strategy • for R&D spending

• for Resource alignment

• for efficiencies in business

• for survival

R&D Investments and Portfolio management

• R&D investments (products) are like financial investments (stocks)

• Maximising the value of the portfolio

• Hence product Return on Investment (ROI)

• A balanced portfolio

• A portfolio investment strategy aligned with:• company’s overall business strategy

• therapy area expertise

• perception in the marketplace

• future aspirations.

What is Portfolio management?

• Dynamic decision process

• List of active new and R&D products constantly updated & revised

• New projects evaluated, selected and prioritised

• Projects accelerated, killed or de-prioritised

• Resources allocated and re-allocate to active projects

• Decision process characterised by:• Uncertain and changing information• Dynamic opportunities• Multiple goals and strategic considerations• Interdependence amongst projects• Multiple decision makers and locations.

Portfolio decision process

• Encompasses many and overlapping in-company decision-making processes:

• Periodic reviews of total portfolio (all projects; comparing between)

• Making Go / No-Go decisions on individual projects• Developing new product strategy for the business

• Strategic resource allocation decisions

Why do it?Negative consequences if you do poor portfolio management or not at all.• Strategic

• Projects not aligned with business strategy• Deficient project selection• Too many projects

• Low value projects• Mediocre pipeline projects• Too many extensions, modifications, short term projects

• No focus• Reluctance to kill projects• Too many projects, resources thinly spread

• The wrong projects• Decisions based on politics, opinion, emotion, not facts and objective criteria

Eight reasons why portfolio management is critical to business.• Financial

• Competitive positioning

• Resource allocation

• Strategic issues: ‘Strategy begins when you start spending money’

• Achieving better focus

• Right balance of projects

• Improved communication in organisation (vertically and horizontally)

• Providing objectivity in project selection

Methods used for portfolio management

• Financial

• Business Strategy

• Bubble diagrams or portfolio maps

• Scoring models

• Checklists

• Hybrids

Challenges in portfolio management

• Creating climate, culture and buy-in

• Better allocation of resources, project selection and balance

• Short-term / long-term balance

• Better input data & forecasting estimates

• Better strategy – portfolio linkage

• Better balance and resource allocations across business units, divisions and technologies

• Better balance across functions and level of involvement

• More credible financial metrics and tools

Benefits expected

• Common basis for discussion, discipline and consistency

• Focus on major projects, breakthrough projects

• Better strategic fit of portfolio

• Balances short and long-term goals

• Helps to concentrate on fewer more worthwhile projects

• Achieves improved times to market

• Unifies support and creates better buy-in

• Improves strategic planning

Acknowledgement

Portfolio Management for New Product Development: Results of an industry* practices study. *multiple industries.

Cooper R.G., Edgett S.j. and Kleinschmidt E.J.

R&D Management (Industrial Research Inst Inc.) 2001: Vol.31(4);

Licensing and Medical Due DiligenceIn- and Out-licensing of medicines

In-Licensing Opportunity

• In-licensing increasingly important to fill ‘product gaps’

• In-licensed products make up 25% of total revenue of top 20 companies

• Licensing deals increasingly significant over last 10-15 years• Pfizer and GSK are most active in-licensees

• In 2002 Pfizer generated 53% revenue from in-licensed products, inc. Lipitor, the world’s best selling medicine.

• In 2015 AstraZeneca had 20% of sales from Crestor (rosuvastatin), the company’s #1 product.

Commercial potential of in-licensed product

• Over 3-5 years following launch average Rate of Return for in-licensed product over in-house product:

• 8.2% for in-licensed Phase III product

• 4.0% for in-licensed Phase I/II product

• 3.9% for in-licensed pre-clinical product

• And

• 2.3% for in-house product

Mercer Management Consulting

Commercial potential for In-licensing opportunity• Over 20-year period, situation is different:

• Gross Margin Profit:• In-House product 42%

• Phase III purchase 24%

• In-House products eventually produce higher margins and make business more profitable as have no royalties to pay – but need to wait 14 years for this to happen!

• (which means business has cash tied up for years and is not liked by investors – in-licensed products generate more case in short-term.)

Mercer Management Consultancy

• Reasons for Licensing Agreements

• In-licensing

– To fill a pipeline gap

– To further enhance therapeutic focus

– As part of a strategic pre-launch plan

– To leverage expertise

• Out-licensing/divestment

– Lack of strategic fit or expertise

– A condition of Merger & Acquisition activity

– To fully realise commercial potential

Types of agreement

• Science agreements

– Research collaborations

– Contract research

• Co-development

• Marketing agreements

– Co-marketing

– Co-promotion

• Product Fostering

• Product Acquisition & Licensing

• Corporate Alliances

– Joint Ventures

– Mergers and Acquisitions

• Advantages

• Can fuel rapid growth by ‘buying’ turnover

• Usually gain access to trade name

• Disadvantages

• Usually only available for smaller & older products locally

• Acquisition of major brands as a result of M&A usually extremely expensive

Marketing Agreements – Product Acquisition

•Where a company 'purchases' an existing product licence fromanother company, obtaining the right to market an existing fullydeveloped product

Factors to consider for in-licensing target

• Portfolio fit

• Company Strength

– Corporate equity & competency

– Therapeutic expertise

– Available resource

• Market Attractiveness

– Level of unmet medical need

– Level of generic activity

– Price

– Market growth potential

– Competitive Intensity (number, barrier to entry, promotional noise)

– Long term profitability

• Agreements

– European, Global

– Short, medium or long-term

– Marketing agreement or other

– Size, growth and dynamic component (opportunities)

– Segmentation

– Persistence

• Competitive Environment

– Competitive Intensity (number, barrier to entry, promotional noise)

– Competitors – lifecycle stage

– Level of ‘ownership’ e.g. asthma

– Recent launch successes and response to innovation

• Product Potential

– Level of unmet need in the market

– Existing products, ‘competitors’ and Products in development

– ‘Target’ profile and likelihood of realisation

• Promotional Strategy– Segmentation, Positioning, Targeting

– Promotional spend and projected share of voice

• Lifecycle stage and patentlife

Evaluating PotentialSales Forecasts – Factors to Consider

• Market Size and Structure

Role of medical / medicines development in licensing and due diligence process

Overview of the Pharmaceutical Licensing Process

• Review Development Programmes

– Manufacturing

– Pre-clinical Results

– Clinical Results

– Product Safety

– Compliance with Regulations

– Regulatory Strategy and Contacts

– Publications

Medical Due Diligence‘Data Room’• Manufacturing Investigative product

• Manufacturing Finished Product

• Pharmacology

• Toxicology

• Pharmacokinetics

• Clinical Trials

• Drug Safety

• Regulatory

• Commercial analysis

• Patents

• Publications and Media

Manufacturing Investigational Product

• supply of substance on hand for future research (GMP)

• cost of goods, bulk drug and final formulation

• final synthetic route, purity (impurity profile) and yields of steps

• enantiomers resolved

• scale-up and largest batches made currently

• any potential difficulties sourcing raw materials (see patents)

• stability of final products acceptable, reports available

• route of synthesis is ‘optimized’ with sufficient ‘due diligence’

• cost of supply of compound for R&D and its implications for future

pricing

• specifications and analytical procedures

• identification of routes used for different toxicology studies

• Obtain documentation from all studies - conducted / ongoing /

planned

• Are protocols applicable for WW regulatory agencies

• Trials completed / ongoing: has GCP been followed?

• Numbers of patients studied, ethnic group and/or sub-groups as appropriate

• Reports outstanding with dates and reports completed

• Reports in English, date and time for translation

• Mechanism from animal models consistent with data from humans

• Dose ranging study(ies) appropriate for dose used in clinic

• Human pharmacology including PK / metabolism

Clinical Trials 1

• Clinical investigation

• QA of studies already conducted

• Data handling / transferability to company

• Meet / interview clinical investigators

• Ethical considerations

• Identification of future studies required for registration and commercial

purposes, along with approximate dates for completion and reporting

• Estimate of development time-line (including both pre-clinical and

clinical)

• Outline plan with timings

Clinical Trials 2

• Which company holds recognised safety database (if more than one company, how

will differences in details be minimised)

• Responsibility for reporting

• Responsibility for follow-up

• Responsibility for scanning literature

• Reporting responsibilities to Agencies (who is responsible in which country)

• Preparation of Periodic Safety Update Reports

• Company core data sheet (CCDS) maintenance

• Responding to safety related or product-related Regulatory enquiries

• Handling of product complaints

• Who are contacts in each company – who is QPPV

• Signatories (one for each company ?)

Drug Safety

• General compliance

• Interactions with Regulatory Authorities documentation

• Check documentation for acceptability to authorities

• Are there any deviations to opinions obtained

• Are there regulatory / registrations / or compliance clauses that

require review by legal

• Strategy and timelines – is this consistent with clinical

development plans

Regulatory