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Vancouver March 2002 Professor Trevor M Jones Kings College London and Director General The Association of the British Pharmaceutical Industry

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Traditionally strong academic base Cluster of world class expertise / facility in life sciences Pool of skilled graduates Attracts inward investment Rapid growth in Start-up Companies Upside potential for growth

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Pressure on prices of Branded products Price Cuts/Controls High level of Generic dispensing Restrictive Formularies

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Britain 12/25 worlds top medicines are of British Origin $3.5bn positive balance of trade surplus Major inward investment..e.g Pfizer Way out in front in Start-up Biotechs Branded products Drugs Bill grew 14.6% in 2001 Over 70,00 employees..mostly Graduates (>200,000 secondary employment) Home to some of the worlds largest Companies GSK AstraZeneca Freedom to set prices

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Britain Hugh pressure on prices NAPP/OFT, NICE Msdrugsdeals Generics ( Prescribing 75%;Dispensing 54%) Restrictions on prescribers budgets) Demand side Controls PCGs ; HAZs ; PRODIGY; Audits/CHI Waiting lists ;Formularies ;Clinical Governance Manufacture decline..GSK etc Rationalisation Most expensive prices in EU Access to market ..restrictions (NICE) Slow uptake of new products Spend on medicines at the bottom end of EU EU parallel trade >1bn !! Animal activists

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Trade balance in pharmaceuticals, m, 2000 Trade balance m

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Increased spending on medicines as % of GDP 1995-2000

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Index of Pharmaceutical Expenditure, Health Expenditure and GDP Per Capita in 1997 (At Market Exchange Rates) Index = UK = 0 -0.40 -0.20 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 Australia Canada FranceGermanyJapanNetherlandsNew ZealandSwedenUSA Total Health Expenditure Per Capita Total Pharmaceutical Expenditure Per Capita GDP Per Capita

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YesUSA YesUK YesSwitzerland NoSweden NoSpain NoNew Zealand NoNetherlands NoJapan NoItaly YesGermany NoFrance NoCanada NoAustralia Companies free to set the launch prices of new medicines (Y/N) Source: ABPI

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Medicines spend as % GDP, 2000

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Spend on medicines per person, 2000

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Spend on new medicines (less than 5 years old)

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Simvastatin (Zocor) Uptake Chart

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% (by value) of national pharmaceuticals market accounted for by generics, 2000 Source: various trade associations, for Canada PMRPB Generics as a % of total market (value)

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Pharmaceutical industry employment Source ABPI

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Pharmaceutical production for selected countries, m, 1999 Source ABPI

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R&D in the UK (as % of sales) Pharmaceuticals30.3 Aerospace 9.6 Electrical machinery 3.6 Chemicals 2.4 Motor vehicles 2.9 Other manufacturing 0.2

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UK R&D is Concentrated in Pharmaceuticals % share of total country R&D Source OECD

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National origins of leading 75 global medicines - 1992-2000 Source CMRI

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Scientific research paper citations per head Source OST

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22% 52% 59% 60% 83% 85% 91% 113% 133% 150% 176% 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% CANSIFUSACHDNLEJPNUK % first patent filing/% R&D spend Proportion of world first patents filed for marketed NMEs/proportion of world R&D spend 1990-1999 Source CMRI

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Proportion of NMEs, first marketed during 1991-2000, by nationality of marketing company Source CMRI

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Source: UNESCO Statistical Yearbook 1999 Australia for universities only Figures in bold 1997, figures in italics 1995 Notes: 316,686US 47,443UK Switzerland 7,225Sweden 20,084Spain 3,388New Zealand 10,560Netherlands 92,455Japan 20,181Italy 53,836Germany France 31,100Canada 19,948Australia 1996 Number of new graduates with degrees in sciences relevant to the pharmaceutical industry

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R&D Investment - 2,000 4,000 6,000 8,000 10,000 12,000 19901991199219931994199519961997 1998 Australia Canada France Germany Japan Netherlands Sweden Switzerland UK USA m

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Opportunities Producing entirely new science Specific Platform Technologies Partnering Big Pharma to optimise R&D spend

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Global pharmaceutical R&D expenditure (1991 - 2005p) IO0-10028 14/08/01

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Cost of sales is rising at the same rate as cost of R&D and we are delivering fewer and fewer entirely new products

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Trends in R&D expenditure, sales and number of NMEs Source: CMR International Ltd.

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Number of new NMEs launched onto the world-wide market AT1-10003 15/10/01 Source: CMR International Ltd.

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Percentage of biotech-derived NMEs Source: CMR International Ltd.

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the R&D process,although improving, is still highly inefficient

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440.pre/NM Phase III 19961990 Discovery researchDevelopment research Discovery and development of a new medicine Regulations Time (years) Phases of drug development Final patent application Investigational new drug application Marketing application Marketing approval product launch 19871998 Attrition rates Cost Basic research Regulatory review Post-mktng devel Phase I Phase II Synthesis Biological testing & pharmacological screening 50-100 voluts 200-400 patients 3000 + patients Phase IV Clinical phases 5,000 8-154-8 2-311 $450- 600M 0 Chemical development Pharmaceutical development Long-term animal testing Toxicology and pharmacokinetic studies DD2 1150 251197 Source: CMR International

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Current cumulative success rates to market AT1-10003 15/10/01 Cumulative success rates to market based on NASs in development between 1995 and 2000 and are presented as the chance of an NAS in a given phase to reach the market. Source: CMR International Ltd.

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1.7 5.4 15 7.2 701997 2.4 6.2 15 9.4 661998 4.3 9.4 19 10.0 561999 3.1 8.3 17 9.1 612000 3.4 5.0 27 11.0 532001 Pre-Registration Phase III Phase II Phase I PreclinicalYear Percentage of drugs dropped at each stage of development, 1997-2001 Source : SCRIP February 2002

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Despite all the re-engineering or R&D and the harmonisation of regulatory requirements its taking LONGER to get ideas into practice

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Figure 3 Development time for NMEs launched onto their first world market (1994-1999) Mean Development time (years) 3 year moving average IO4 1040 31/7/00

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Major spends are in developmentparticularly clinical development

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Breakdown of aggregated R&D expenditure by activity in 2000 IO0-10034 14/08/01 Source: CMR International Ltd.

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Contemporary clinical development times are decreasing Composite development profile of means for each interval completed by NASs in each year. (n)= number of NASs analysed to calculate the value for each interval Each interval represents a different cohort of NASs BUT a common cohort of companies for all years. Source: CMR International Ltd.

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Trend in breakdown of R&D expenditure on clinical activities 1997-1999 for 15 companies Total clinical activitiesPremarketing activitiesPostmarketing activities IO2 1270 31/7/00

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Estimated number of NASs in development in 2000 reaching the market over the next six years Phase I 20% success to market 321 NASs currently in Pipeline* for 15 Major companies 114 NASs reaching market Phase II 29 % success to market Phase III 62% success to market Presubmission & submitted 90% success to market IO0-10014 14/08/01 `

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IO0-10013 14/08/01 Estimated number of NASs in development in 2000 reaching the market over the next six years

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Change is not a Choice

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Exploratory Research Target identification Target validation Screening Lead identification Lead generation Lead optimisation Candidate selection:

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BC is Canadas 3rd largest biotech community according to revenue, and the 16th largest in North America BCs biotechnology sector includes over 90 private-sector biotech companies, employing about 3,300 people 70% of companies are the result of spin-offs from BC universities Total market capitalization of public biotech companies exceeded $6 billion in December 2000 R&D expenditures are expected to total approximately $120 million in 2001 (18% of Canadas total R&D expenditures) BC firms forecast R&D employment growth at 76% between 1998 and 2001 BC Biotech represents more than 200 member companies, which includes 206 Corporate Members, 59 Individual Members, and 15 Student Members Over 60% of BC biotech companies are involved primarily in health care, generating approximately $310 million in annual revenues. Growth in Number of Biotech Companies in BC 1993 41 1994 53 1997 70 2000 82 2001 90+

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British Columbia Collaborations in Pharmaceuticals and Biopharmaceuticals Big Pharma and Start-ups (SMEs) Drug Hunting Drug Development Clinical Evaluation and Trial Population Genomics and Health Care Bioinformatics New Manufacture

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PICTF.PICTF.PICTF.PICTF.PICTF.PICTF.PICTF

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) Why was it formed ? For a major SUCCESSFUL industry why so many problems Market Access... Relenza..NICE..the last straw Single Market issues not favourable to UK PPRS Price cut UK track record on Clinical trials (comparative costs v Europe and delay to start due to bureaucracy) and Animal Procedure licence delays Animal activism rampant and affecting businesses Poor Biotech Manufacture capability whilst rapid growth in start-ups

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) Features High Level (Ministers / CEOs ) Clear Brief Time Limited Commitment..particularly..Prime Minister

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) High Level Government* Health (chair) Industry Treasury Education and Science * Note Various Departments Industry British(GSK and AZ)..CEOs Euro (Novartis..President ABPI) USA (Merck..Chair APG) ABPI D-G Richard Sykes Tom McKillop Bill Fullagar Vincent Lawton Trevor Jones

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) Clear Brief To identify the steps that may need to be taken to retain and strengthen the competitiveness of the UK business environment for the innovative pharmaceutical industry

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P.I.C.T.F COMPETITIVENESS Access Parallel Trade Clinical Research Infrastructure Biopharmaceutical R&D / Manufacture EU Licensing Economic Climate

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) Commitment..particularly..Prime Minister (perhaps seen as a useful support to Government from a major industry Balance of Trade contribution > 3.5 bn !!

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) Prime Ministers Statements The UKs pharmaceutical industry has an outstanding tradition..etc We must work together to ensure that the future of the UK pharmaceutical industry is even brighter. I am committed to ensure that the UK retains the features that have made it an attractive location..etc I look forward to future partnership..

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) Quotable Compliments !!!! The UK based pharmaceutical industry is world class and a jewel in the crown of the UK economy

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P.I.C.T.F (Pharmaceutical Industry Competitiveness Task Force) Follow up Agreed Benchmarks e.g Competitiveness and Performance indicators in Science and Technology

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British Columbia Collaborations in Pharmaceuticals and Biopharmaceuticals Big Pharma and Start-ups (SMEs) Drug Hunting Drug Development Clinical Evaluation and Trial Population Genomics and Health Care Bioinformatics New Manufacture

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BENCHMARKING

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Business perceptions of labour market regulations Source: DTI competitiveness Indicators 2001

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Total hourly labour costs in UK versus comparator countries Source Economist Intelligence Unit

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average time elapsed between first world application in any market and launch in particular market

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% marginal rate of corporation tax Headline marginal rate of corporation tax Netherlands: from Jan 200 30% rate applies to first 50k guilders. For 1999 and 2000 German rate applies to retained profits Source KPMG