MARCH 2009 NEWSLETTER

Welcome

Dear Colleague,

Welcome to the inaugural edition of the Life Science Strategy Group (LSSG) complimentary e-newsletter, keeping you up-to-date with the latest Life Sciences News and Consulting Insights.

In this issue, we highlight Obama’s Managed Care & Impact on Drug Coverage, Key Opinion Leader Insights on Parkinson’s Disease, as well as VC Funding insights and highlights from our latest survey on 2009 Life Science R&D Spending and Outsourcing Trends.

If there are other specific Life Science topics you’d like LSSG to provide insights on in subsequent e-newsletter editions, please let us know. If you are not interested in receiving our complimentary e-newsletter in the future, please notify us below.

With best wishes,
Life Science Strategy Group

MANAGED CARE STRATEGY

Obama’s Managed Care Policy — What does it mean for your brands’ coverage & reimbursement?

Like every industry in the healthcare sector, drug companies are trying to best position themselves in the coming national healthcare reform under Barack Obama. With the changing administration, OUT - are the Republicans who are generally friendlier to the pharmaceutical industry’s position on issues, and IN - are Democrats, who regularly use the drug industry as a punching bag.

Health plans, in particular, foresee potential drug coverage and reimbursement changes ahead which may impact the pharmaceutical industry. One large national health plan speculates that three new reforms could be on the horizon. “First, Medicaid plans could be exempt from best price – what is not clear is whether this exemption will be similar to a bidding process like Medicare Part D or similar to a preferred drug list (PDL) where the minimum rebate is the Medicare discount and a supplemental becomes part of the game. Second, existing Part D plans with dual-eligibles are likely to be guaranteed the same rebate as when they were in Medicaid; I think this is the low hanging fruit and a formality within the next year. The third and other big possibility could be a Medicare / government-sponsored Part D program which would compete with PDPs and PBMs”. The latter reform will certainly be met with strong resistance from pharmaceutical manufacturers who will likely face increased downward pricing pressures and from PDPs and PBMs who would be at a competitive disadvantage. Both pharmaceutical manufacturers and PDPs and PBMs would oppose the long-term direction of a government-run “Single Payer” model.

With potential prescription drug reform looming, pharmaceutical manufacturers can begin developing managed care strategies to maximize the potential of existing brands and to ensure successful new product launches. For existing therapies, plan for PDL-like pricing to occur as no one wants to see a government-sponsored single payer model. For new therapeutics coming to the market, the mindset of manufacturers must first change from “Tier 2 is good and Tier 3 is bad” to “unrestricted access is good and prior authorization and step therapies are bad.” Formularies are going to get more difficult longer term to obtain open access. This is a direct result of successful generic entry and uptake and therefore any new products will be scrutinized relative to the generic class. Manufacturers need to better understand the current and future therapeutic class, price sensitivities, and in particular what, when and how generics are likely to enter the market.

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THERAPEUTIC MARKETS

Key Opinion Leader Insights on Parkinson’s Disease – Where are the greatest opportunities?

With recent clinical setbacks of products in gene therapy (Ceregene – Cere120) and Adenosine A2A receptor agonists (Kyowa Hakko Kirin – KW-6002), new modes of delivery / combination of existing products continue to be the catalysts to drive near-term changes in the Parkinson's disease market. Neurologists agree however, that “the key unmet medical need is prevention of disease progression and ideally disease reversal. Few of the current drugs or their future incarnations are convincing in terms of disease-modifying ability, most are just treating the disease symptoms.” Although new treatment classes including MAOB inhibitors, AMPA inhibitors, Kinase inhibitors, GABA receptor modulators, and Dopamine agonists, some of which look promising, continue to progress through clinical development, the attrition rate of the Parkinson’s disease development pipeline continues to trend upward.

Leading researchers and opinion leaders note that one the most exciting areas, long-term, in potential Parkinson’s disease treatments are likely to come from cell and gene therapy-based products. “Some are very novel as they are trying to induce regeneration and neuroprotection as there is nothing available that does this now.” Recently at the European Society of Gene and Cell Therapy (ESGCT) 16th Annual Congress in November 2008, Professor Stéphane Palfi, Head of Neurosurgery at the Henri Mondor Hospital in Paris, France reported on a phase I dose escalation trial in Parkinson’s disease. Individuals with Parkinson's disease have been treated, with no adverse events to the injections and no demonstrable immune response. There has been an approximately 30% reduction in the unified Parkinson's disease rating score III (UPDRSIII) in the off state (which measures mobility in the absence of standard-care L-DOPA) within 3 months of injection.

Many experts believe that gene therapy has a high “bar” to pass, with preliminary analyses pointing to the benefit as being predominantly in motor function and not in areas of non-motor or levodopa-resistant symptoms (depression, sleep, gait, communication, etc.). Still, studies have shown that gene therapy is successfully used in humans with Parkinson’s disease, and that this success may open the door to future gene therapies, as well as to combination therapies (genes plus stem cells or genes plus medications, or genes plus deep brain stimulation). Yet, until gene therapies are commercial alternatives, new drug treatment classes will be near-term therapeutic options. Drug manufacturers should clearly identify the clinical benefit of their new drugs relative to existing treatment mechanisms and algorithms; “Is the drug more like L-Dopa which works well but wears off after 5-7 years, or a MAOB inhibitor which has limited efficacy but is well tolerated, or a dopamine agonist which is important adjunctively?” Only after strong data-driven assessments of the benefits and limitations, prescriber adoption and potential limitations and restrictions of new Parkinson’s disease therapeutics, can the true product opportunity be determined; and the potential impact on a market that has high unmet need and patients who desperately need better treatment alternatives.

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2009 R&D BUDGET TRENDS & CRO UTILIZATION – WHERE ARE THE R&D DOLLARS GOING?

R&D spending is shifting – and to where may surprise you. According to new research conducted by Life Science Strategy Group with nearly 115 R&D decision makers at leading pharmaceutical and biotechnology companies in the US, Europe and Asia Pacific regions, approximately 50% of respondents anticipate shifts in R&D budgets from preclinical to clinical development over the next 2–3 years. Less than 10% of respondents report R&D budget shifts from clinical to preclinical development.

While budgeting shifts are taking place, respondents report future, continued investment in both preclinical and clinical R&D budgets. Within both preclinical and clinical development, respondents anticipate positive annual budget growth over the next 2–3 years. Rationale for the shifts reflects a variety of reasons that include maturing pipelines and corporate strategies to maximize near–term revenue and improve access to equity investment.

These reported trends are further reinforced by strategies to maximize the value of R&D spend. In particular, respondents state their companies are placing greater scrutiny on R&D spending. While many respondents report continued reductions in internal resources and capabilities, it is likely that CROs will be a key beneficiary, with pharmaceutical and biotechnology respondents indicating continued growth in utilization of CROs for both preclinical and clinical development.

"It will be a tight environment for pharmaceutical / biotechnology companies and they will be looking to streamline costs and establish preferred provider relationships with CROs."

You can learn about these and more key findings, gain in–depth insight into specific areas of budget growth and estimated rates, as well as a better understanding of specific areas of increased CRO utilization in LSSG´s Q1 2009 Life Science R&D Spending Trends & CRO Utilization Report.

To download complimentary sample pages or to purchase the full comprehensive report, please visit www.lifesciencestrategy.com/publications.

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LIFE SCIENCE INVESTMENT

2009 Life Science Funding – What are VCs saying and is it all bad?

New investments in life science companies are still frozen with venture capitalists wanting to wait until second quarter 2009 to re-evaluate how the potential Obama Stimulus Package is likely to impact the economy. Even when presented with a small, lower-risk investment opportunity, and the need to put their funds to work, VCs at the JP Morgan Conference commented, “Sounds interesting, but now is a really bad time to do it. Wait a few months and let’s see if things start to improve.”

Still, even with the “wait and see” attitude by many investors, analysts predict that the biotechnology industry in particular is likely to outperform other healthcare sectors and the rest of the market. Further, many reports note that an increase in M&A and licensing activity is also very likely as larger pharmaceutical and biotechnology companies buy up smaller companies in order to supplement dwindling pipelines and hindered product development efforts. Given that pharmaceutical and biotechnology companies are eyeing numerous product candidates and product line alternatives for in-licensing or acquisition strategies, it is vital for them to have at their disposal quick yet thorough due-diligence reports which can provide an assessment of competitive products’ (marketed and in-development) preclinical & clinical data review, development plan and lifecycle strategy, regulatory & reimbursement hurdles, patent life, SWOT analysis including strategic fit, and financial analysis. With this information in hand, business and corporate development teams gain a competitive advantage and have the ability to make strong and data-driven strategic decisions.

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Copyright © 2009. Life Science Strategy Group, LLC.