Technology:

Commercialization of discovery research

Aurigene: Bio Malaysia
November, 2011
CSN Murthy, CEO

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Context setting

A brief overview of the Pharma R&D challenges

The Asian context for R&D

The challenges and opportunities in Asia for commercialization
Emerging business models
Some suggestions for Asian Biotechs
Overview of Aurigene

Drug Discovery: Background

Ref: www.phrma.org
FDA

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Biotech/ Pharma: Brief statistics

Mkt size $bn
$97

$245

$127

$180

Increasing
share of
emerging

$53
$335

N America

Europe

Increasing R&D spends

$47.6 bn in 2004
$67.4 bn in 2006

Declining approvals
36 approvals in 2004
21 approvals in 2010

Japan

Asia/ Africa/ Australia

FY 1975 $138 Mn

Latin Am

Increasing drug
development costs

FY 1987 $318 Mn

FY 2001 $802 Mn

FY 2005 $1,300 Mn
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New Drug Discovery:

Complex & expensive - long gestation/ high costs.

Ref: www.phrma.org

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New Drug Discovery:

Complex & expensive - long gestation/ high costs.

Ref: www.phrma.org

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R&D spends in the biotech/ pharm industry is 1.7x that of the near highest spending sector
communications/ semiconductors
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Several successes despite these challenges:

Top 10 discovery deals in 2010
Researcher

Investor

Date
announced
October

Deal value ($
millions)
2,160

Macrogenics

Boehringer
Ingelheim
Cephalon

December

2,050

1,723

Isis

Boehringer
November
Ingelheim
GlaxoSmith Kline March

Arena

Esai

July

1,400

Rigel

AstraZeneca

February

1,200

Aileron

Roche

August

1,100

Orexigen

Takeda

September

1,100

Reata

Abbott

September

800

Mesoblast

f-star

1,500

Ref: Nature Biotechnology 29,585591(2011)

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Details
Discover, develop and commercialize
bispecific antibody therapeutics
Develop and commercialize products
derived from Mesoblast's adult stemcell
technology
Discover and develop antibody-derived
therapeutics using f-star's technology
Discover and develop RNA-targeted
therapeutics for rare and
infectiousdiseases
Marketing rights in the US for lorcaserin
for obesity and weight management
following FDA approval
In-licensed fostamatinib for rheumatoid
arthritis following phase 2
Discover, develop and commercialize
stapled peptide drug candidates against
up to five undisclosed targets
Marketing rights for obesity drug,
Contrave, in North America
Develop and commercialize bardoxolone
methyl for chronic kidney disease except
in US and certain Asian markets
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Cellzome

GlaxoSmithKline

March

692

Develop and commercialize drugs for

Innovation in the Asian Context

Sustainable drug discovery

Asian pharma market: Where are we today?

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Near-term growth in the segment will be driven by three main factors:

Increase in # of
big ticket generic
opportunities
between now and
2014

Increasing
opportunities for
biosimilars

Big pharmas
appetite for
generics and
emerging
markets

Well-defined path, based on Manufacturing excellence & cost-arbitrage

However, declining opportunities post-2014 and increased competition will challenge the
growth in the long run

Without innovation, where would future growth come from?

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Biotechnology/ Drug Discovery Research in the Asian context

Pre/1980s
Chemical
s/ API

Early 1990s
Branded
formulation
s

Late 1990s
Branded
generics/
Drug
discovery
services

Early2000s
Emergenc
e of
biotech
companie
s focused
on new
drug
discovery

R&D spend of US/Europe is 76x of Asian companies

but.. changing global landscape has created new

opportunities

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Large Pharmacos challenges

About 3-4x higher
cost of innovation due
to higher scientific
personnel cost &
research
infrastructure costs

Stringent FDA
regulatory
environment, longer
approval timelines
and few approvals

Increasing threat of
patent cliff
especially between
2010 & 2014

Pricing and other

government
pressures

Opportunities for Asia:

Substantial innovation is sourced externally, with large number of partnerships with

global discovery/ biotechs

However, companies need to develop innovative models to meet the emerging

market demands

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The Asian paradox

Challenges in commercializing innovation

Few biotechs, fewer

exceptions
Only 764 biotech
companies in Asia
vs. >2800
companies in the
US & EU
combined
Historical lack of
success limits
future
opportunities

Scientific
challenges:
Novel target (lack
of no proof-ofconcept) vs. Fast
follower approach
(establishing
differentiation)
Choosing the right
therapeutic area
(orphan vs. wide
spread disease
Translation from in
vitro to in vivo and
finally to humans

Early-stage
Biotechs still rare as
VCs still find lowhanging
opportunities as
against having to
deploy patient
capital needed for
Biotech

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Lack of ecosystem
to drive innovation
Inter-relationship
between Govt/
regulatory bodies
Industry
University
Funding agencies
-- does not exist

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Asian biotechs: Changing landscape

Positive developments driving biotech innovation

Government Initiatives:
Biotech policy has emerged only in the last decade

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2000: National
Biotechnology
Strategy

1990: First policy,

most programs
are under 863
plan

1990: First policy

2007: National
Biotechnology
strategy

1990: First policy

2004:
Subsequent
policies

2002: BioStrategy focus

on 4 sectors

Australia

China

India

Indonesia

Japan

2004: National
Bio Industry
Action Plan

2003: National
Biotechnology
Strategy

Korea

New
Zealand

No specific
National
Biotechnology
Policy
2006: Science &
technology Plan
Singapore

2004: National
Strategy with
specific
objectives
Thailand

Some Examples:
Large Pharmacos R&D Investments in Asia

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Company

Year

Country invested

Comments

Astrazeneca

2001

India

$25 million investment in TB research

2006

China

$100 mil investment

Roche

2004 & 2007/10

China

Pfizer

2005

China

First investment in 2004, followed by additional

in 2007/10
research centre in Shanghai

2007

S Korea

$300 mil investment over 5 years;

Glaxosmithkline

2007

China

$40 mil investment

Novartis

2009

China

$ 1 bn R&D center

Abbott Laboratories

2009/10?

China & Singapore

n/a

Asian biotechs: Other factors driving growth

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Partners looking beyond cost-arbitrage

Strong scientific talent pool attracts global

investments/ partnerships

Increasing number of publications from the Asian region

specifically China, India, Korea
Companies seeking ways to reduce costs of failure low
cost of success by partnering with Asian biotechs
Clarity on regulatory environment for clinical trials and
the availability of large patient populations attracts bigger
investments

Opportunity for companies to create value through sustainable business

models

Asian biotechs: Emerging business models

Partnership-focused Biotechs

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Very significant part of the overall innovation space in Asia; over 60

NCE programs run in this model, and growing
Increasing sophistication in Science
Range of successful business models

Critical component for driving innovation because:

Brings partnership companies in close proximity with the sophistication of Big
Pharma
Rapidly adds capabilities and technologies
Opportunities for value-creation in the long term; which in turn could spur patient VC
investment into the sector

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Increasing risk

Partnership-focused Biotechs: Business Models

Early
models:
Servicesbased, low
value, feefor-service/
FTE based
revenues

Outcomebased value
creation:
Milestones in
addition to
research
funding

Risk-sharing
models
Purely
milestonebased
returns

Codevelopment
Partnership
s ranging
from
Discovery to
early clinical
developmen
t, with
significant
upsides to
Partner
upon
success

Increasing value

Early Partnerships: Services Based Models

Advantages:
Leveraging cost arbitrage, and
efficiencies in Asia: aggressively
embraced by Pharmacos in past few
years
Piece-meal Services collaborations:
Chemistry Services is a prime example,
although limited biology (relatively less
scalable) & ADME/ Tox collaborations
Easy entry and scalability

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Disadvantages:
Competitive business, pricing pressures
Not value creating for Asian partner (IP
owned by collaborator)
Fee-for-service/ FTE based revenues
cap value, linked only to profitability &
growth
Limited knowledge sharing between
partners
Linear value creation
Limited growth due to small size of
market opportunity

Outcome-based partnership Models

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Advantages:

Disadvantages:

Leverage both cost arbitrage,

and scientific capabilities in
Asia
Low risk, higher returns for
partner: Research funding
(costs + marginal premium) +
Milestone based payments
Less competitive vs. services
Typically collaborative:
Knowledge sharing between
partners

Relatively less scalable vs.

services business
Not sufficiently value creating
(IP continues to be owned by
external collaborator)

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Are there any prescriptions?

Asian companies can start to move towards the more classical biotech model, in the
coming years
Balanced risk-taking: Combine revenue models either from Services or existing
business, to create a sustainable business
Focused investment into technology, to create competitive advantage
Target Selection
Novel targets vs Fast followers: relative risks to be assessed
Are there means to serve needs of local populations?
Business Model
Can we leverage low costs, versus arbitraging them for short term gains?
Networking relationships
Can we share resources (Universities, other Biotechs, CROs) to create value?
Creative deal structures can we leverage local markets to create value in the long term?
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About Aurigene

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Aurigene: Introduction
Aurigene is a specialized biotech focused on
oncology and
inflammatory disorders
Fully integrated drug discovery engine, over 575 scientists
Pioneering a collaborative drug discovery model: built on leveraging strengths
Experience
in over 35 targets/ programs
with 6 of the top 10 pharma companies and
5 other partners worldwide

Licensed multiple early-stage programs; strong pipeline of differentiated programs

Core technology strengths in Structural Biology
Small molecule and peptide expertise
Based in Bangalore, Hyderabad and Kuala Lumpur
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Collaborations

Business Model
Early-stage
collaborations

Early-licensing
Partnerships

Biotech
Partnerships

Hit Generation to Preclinical development

Aurigene-developed
lead compounds for
targets selected inhouse

Novel& cutting-edge
areas in Oncology and
Inflammation

Partner leverages on
Aurigenes
specialization

Leverages Aurigene
discovery engine,
scale

Flexible business
model, option and IP
sharing

Shared risk, increased

speed to development

Targets suggested by
Aurigene/ partners
Offers scalability, costeffective development,
flexibility and speed
Business model: RF +
Milestones or option
based

Services

Specialized
Services
MedChem, FBDD-based
Lead Generation in novel
targets

Leverage Aurigenes
integrated discovery
expertise,
capabilities
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Pipeline
Target/ TA

Technolgy/ MoA

Oncology

Peptide - Immunomodulator

Oncology

Small molecule - enzyme inhibitor

Oncology

Small molecule - kinase inhibitor

Oncology
Oncology
Inflammation

HIT

Small molecule - protease inhibitor

Hit to Lead Lead Op

Preclinical

ASIA -PACIFIC MARKETS ONLY

NA & ASIA MARKETS ONLY

Small molecule - mutant kinase inhibitor

Small molecule - enzyme inhibitor

Inflammation

Small molecule - kinase inhibitor

Inflammation

Small molecule - Th-17 pathway inhibitor

Inflammation

Small molecule - Tyrosine kinase inhibitor

Bacterial Infections Peptide - Immunomodulator

Bacterial Infections Small molecule - MDR strains
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Select list of partners (excluding large pharma partners)

Other large pharma partnerships not disclosed

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Thank you!