Slide 1: Dramatic Changes in the Environment for New Drug Creation and Challenges Facing Japan's Pharmaceutical Industry
Dramatic Changes in the Environment for New Drug Creation and Challenges Facing Japan’s Pharmaceutical Industry Chugai Pharmaceutical Co., Ltd. Chairman & CEO Osamu Nagayama October 30, 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation may include forward-looking statements pertaining to the business and prospects of Chugai Pharmaceutical Co., Ltd. (the “Company”). These statements reflect the Company’s current analysis of existing information and trends. Actual results may differ from
Slide 3: Agenda
Agenda 1. Dramatic changes in the environment for drug discovery research for creating innovation 2. Changing pharmaceutical market 3. Challenges facing Japan’s Pharmaceutical Industry and the direction of solutions toward the continuous creation of innovation 2
Slide 4: Agenda
Agenda 1. Dramatic changes in the environment for drug discovery research for creating innovation 2. Changing pharmaceutical market 3. Challenges facing Japan’s Pharmaceutical Industry and the direction of solutions toward the continuous creation of innovation 3
Slide 5: History of Pharmaceutical Innovations that Changed the World
History of Pharmaceutical Innovations that Changed the World Scientific developments have resulted in innovative medicines Focusing on Application of Application of in vivo post-genome genomics enzymes technology (Genetic modification, etc.) Antibody Drugs and Molecular Focusing on Targeting Drugs
Slide 6: The World has been Transformed Since the Decoding of the Human Genome Sequence
The World has been Transformed Since the Decoding of the Human Genome Sequence Human genome sequence was decoded and published in Nature (15 Feb, 2001) and Science (16 Feb, 2001) Human Genome Information Database (Link to various genome related information) NIH/NCBI（National Center for Biotechnology
Slide 7: Drug Discovery Approach has Changed Dramatically with Genome Drug Discovery Era since 2000
Drug Discovery Approach has Changed Dramatically with Genome Drug Discovery Era since 2000 Genome Drug 2000 Discovery Era Organic Synthetic Small Molecule Drugs Middle Molecule Drugs Chemistry Molecular Targeted Drugs Biological Drugs Biotechnology Cell Therapy Antibody Drugs Gene T herapy Genome An
Slide 8: Clarification of Disease Mechanisms and Advancement of Emerging Drug Discovery Technologies
Clarification of Disease Mechanisms and the Advancement of Emerging Drug Discovery Technologies are Creating Innovative New Drugs Various technologies and multiple discovery approaches require high costs Progress of clarifying the disease Sophistication of pharmaceutical & medical mechanism techno
Slide 9: Drug Development Takes a Long Time and the Process is Based on Advanced Regulatory Science
Drug Development Takes a Long Time and the Process is Based on Advanced Regulatory Science Chemical library Search of target molecules (Hundreds of thousands Clarification of disease GLP: Good Laboratory Practice to millions） mechanisms GCP: Good Clinical Practice Discovery GMP: Good Manufacturing P
Slide 10: Agenda
Agenda 1. Dramatic changes in the environment for drug discovery research for creating innovation 2. Changing pharmaceutical market 3. Challenges facing Japan’s Pharmaceutical Industry and the direction of solutions toward the continuous creation of innovation 9
Slide 11: Seven Out of the World's Top Products are Biopharmaceuticals Now
Seven Out of the World’s Top 10 Products are Biopharmaceuticals Now World Drug Sales Ranking 2005 2016 Rank Product Disease for Sales Rank Product Disease for Sales Company Company 2005 Name treatment ($M) 2016 Name treatment ($M) Pfizer/Yamanouch rheumatoid 1 Lipitor hyperlipidemia 12,963 1 Humira
Slide 12: Global Growth of Biopharmaceuticals
Global Growth of Biopharmaceuticals Sales of biopharmaceuticals Sales ratio of biopharmaceuticals 617 14% (billion USD) 30% 184 388 56 x 3.3 86% 70% 433 332 biopharmaceutical x 1.3 small molecule 2004 2015 2004 2015 Sales increased by 3.3 times Biopharmaceutical sales ratio in 10 years now reached 3
Slide 13: Annual Drug Costs of Biological Drugs are not Always Expensive Compared with Chemical Synthetic Drugs
Annual Drug Costs of Biological Drugs are not Always Expensive Compared with Chemical Synthetic Drugs Annual drug costs of major anticancer drugs approved by FDA Omacetaxine for CML Ibrutinib for MCL Crizotinib for NSCLC Pomalidomide for MM Regorafenib for CRC Sorafenib for TC Ponatinib for CML and
Slide 14: Clinical Development Success Rates (NDA vs BLA)
Clinical Development Success Rates (NDA vs BLA) Success Rate (%) 100 Small Molecule Biologics 88 78 66 61 57 49 50 34 26 11.5 6.2 0 Phase I to Phase II to Phase III to NDA/BLA to Phase I to Phase II Phase III NDA/BLA Approval Approval Source: Clinical Development Success Rate 2006-2015, BIO (2016) C
Slide 15: Competition is Intensifying due to Concentration of Development on the Same Antigens
As Targets of Antibody Drugs are Finite, Competition is Intensifying due to Concentration of Development on the Same Antigens All mega pharma are focusing on antibody drugs due to the success and market expansion of these products More than 730 antibody drugs are currently in clinical developmen
Slide 16: Volume Share of Generic Drugs Increasing at a High Pace Towards the 80% Target
Volume Share of Generic Drugs Increasing at a High Pace Towards the 80% Target in September 2020 Percentage of generic drugs in dispensed 80% target in September 2020 medical expenses (volume basis) (volume basis) 80% 70% 65.5% 59.5% 60% 54.8% 48.8% 50% 40% 2013 2014 2015 2016 Source：Japan Generic M
Slide 17: Domestic Market Share of Long-listed Products Shrinking due to Market Changes
Domestic Market Share of Long-listed Products Shrinking due to Market Changes 9.59.5 trillion 兆円 yen 10.6 10.6trillion 兆円yen Others 11.8% 10.7% (Kanpo, non-NHI listed products) 7.2% 10.8% Generic products 29.3% 21.9% Long-listed products 30.0% Premium brands 25.0% products Standard brands 26.7% 26.7
Slide 18: Agenda
Agenda 1. Dramatic changes in the environment for drug discovery research for creating innovation 2. Changing pharmaceutical market 3. Challenges facing Japan’s Pharmaceutical Industry and the direction of solutions toward the continuous creation of innovation 17
Slide 19: Challenges Facing Japan's Pharmaceutical Industry and the Direction of Solutions
Challenges Facing Japan’s Pharmaceutical Industry and the Direction of Solutions toward the Continuous Creation of Innovation Investment in R&D Comparable to Global Companies Appropriate evaluation of Innovation Promotion of open Innovation Japan as International Arena for Drug Discovery and
Slide 20: Challenges Facing Japan's Pharmaceutical Industry and the Direction of Solutions
Challenges Facing Japan’s Pharmaceutical Industry and the Direction of Solutions toward the Continuous Creation of Innovation Investment in R&D Comparable to Global Companies Appropriate evaluation of Innovation Promotion of open Innovation Japan as International Arena for Drug Discovery and
Slide 21: R&D Expenditure of Global Pharmaceutical Companies Has Expanded 2.5 Times
R&D Expenditure of Global Pharmaceutical Companies Has Expanded 2.5 Times and More than 2.5 Billion Dollars Compared with Previous 10 Years 2,558 R&D Cost per approved new drugs (mil USD) x 2.45 x 2.40 x 2.52 Source: Journal of Health Economics, 47:20-33 (2016) Copyright (C) 2016 Chugai Pharmaceutic
Slide 22: Big Difference between Domestic Companies and Global Leading Pharmaceutical Companies in R&D
There is a Big Difference between the Domestic Companies and the Global Leading Pharmaceutical Companies Investing Huge Costs in R&D (million USD) Pharma Rx Pharma Rx R&D Expen- Pharma Rx Total R&D Sales Ranking Company Sales diture % to Sales Sales Expenditure Growth rate Total Sales 2016 2015 1 1
Slide 23: Difference in Resources between Japan and the World's Pharmaceutical Companies
Difference in Resources between Japan and the World’s Pharmaceutical Companies Huge gaps lay in various factors in addition to R&D costs Major Japanese Global Mega Pharma Pharmaceutical Companies R&D Costs 2 to 10 times higher When this is 1 Number of R&D 3 to10 times higher When this is 1 Personn
Slide 24: Major Pharma Companies Rely Heavily on Top Sellers
Major Pharma Companies Rely Heavily on Top Sellers Top 10 products Top 5 Top 10 Top 5 products Products Products Roche 58％ 71％ Average / product: 3.0 bil USD Novartis 29％ 43％ Average / product: 2.0 bil USD Pfizer 40％ 54％ Average / product: 2.5 bil USD Merck 35％ 54％ Average / product: 1.9 bil USD San
Slide 25: Sales Breakdown of Major Japanese Pharmaceutical Companies
Sales Breakdown of Major Japanese Pharmaceutical Companies Top 10 products Top 5 Top 10 Top 5 products Products Products Takeda 31％ 49％ Average / product: 88.7 bil JPY Astellas 56％ 69％ Average / product: 94.5 bil JPY Daiichi Sankyo 51％ 63％ Average / product: 61.9 bil JPY Eisai 42％ 57％ Average / prod
Slide 26: Challenges Facing Japan's Pharmaceutical Industry and the Direction of Solutions
Challenges Facing Japan’s Pharmaceutical Industry and the Direction of Solutions toward the Continuous Creation of Innovation Investment in R&D Comparable to Global Companies Appropriate evaluation of Innovation Promotion of open Innovation Japan as International Arena for Drug Discovery and
Slide 27: Japan's Issues with the Valuation of Innovation
Japan’s Issues with the Valuation of Innovation Drug pricing rules change suddenly when the scale of sales is the only factor for evaluation Introduction of Special Expansion Repricing Rule Sovaldi, Harvoni, Plavix, Avastin Decision by Prime Minister’s Office on measure to halve drug prices Opdi
Slide 28: Reform of the Drug Pricing System
Reform of the Drug Pricing System Maintenance of drug price NHI price calculation • Maintaining the price during the • Assess the diverse value of patent period promotes faster a new drug, realize a price recovery of development costs and that reflects the value encourages the pursuit of new challen
Slide 29: Challenges Facing Japan's Pharmaceutical Industry and the Direction of Solutions
Challenges Facing Japan’s Pharmaceutical Industry and the Direction of Solutions toward the Continuous Creation of Innovation Investment in R&D Comparable to Global Companies Appropriate evaluation of Innovation Promotion of open Innovation Japan as International Arena for Drug Discovery and
Slide 30: Necessity of Open Innovation
Necessity of Open Innovation 1. Decline of R&D productivity in the pharmaceutical industry (million) (billion) 36 $515 $125 $430 22 1996-2004 $65 2005-2010 No. of new drugs Average R&D cost／year ／year annual sales Source：Hewitt, J., et al., Beyond the Shadow of a Drought: The of products Need for a
Slide 31: Future Direction of Academia-Industry Cooperation
Future Direction of Academia-Industry Cooperation Before Cooperative Cooperative Academia research Company research Company Academia •Idea • Practical application •Basic • Funding (Seeds) License • Development or research Completely within the company Going forward: Cooperation utilizing mutual stre
Slide 32: Chugai's Technology Driven Approach
Chugai’s Technology Driven Approach Select best approach to target diseases with an arsenal of technologies including antibody engineering, small molecule and the next generation middle molecule Gain innovative drug seeds with enhanced research capabilities in oncology and immunology Next genera
Slide 33: Med-term Comprehensive Collaboration with Osaka University IFReC
Med-term Comprehensive Collaboration with Osaka University Immunology Frontier Research Center (IFReC) Create innovation from the fusion of IFReC’s cutting-edge Immunology and Chugai’s Drug Discovery Technology Mid-long term support for basic research in academia IFReC Chugai Great source of dru
Slide 34: Challenges Facing Japan's Pharmaceutical Industry and the Direction of Solutions
Challenges Facing Japan’s Pharmaceutical Industry and the Direction of Solutions toward the Continuous Creation of Innovation Investment in R&D Comparable to Global Companies Appropriate evaluation of Innovation Promotion of open Innovation Japan as International Arena for Drug Discovery and
Slide 35: Specific Actions for Continuous Creation of Pharmaceutical Innovation in Japan
Specific Actions that Industry, Government and Academia should Promote towards Continuous Creation of Pharmaceutical Innovation in Japan Review/ Manufacturing/ Reinvestment, Discovery Pre-clinical Clinical Increase Approval Selling capital Empirical Recovery of Discovery Feasibility profit for of se
Slide 36: Special Features of U.S. Industry Clusters Leading to the Creation of Innovation
Special Features of U.S. Industry Clusters Leading to the Creation of Innovation Characteristics of industrial San Diego Research Cluster clusters in Japan (differences (No.1 Bio-cluster in the US) with U.S.） Cluster formations stay in the administrative districts of prefectures and city governmen
Slide 37: Japan as International Arena for Creating Innovation and World Healthcare Center
Japan as International Arena for Creating Innovation and World Healthcare Center through Innovative Drugs Creation Investment Diversity（Nationality/expertise）・Excellent Talent （W-major etc.） Research base U.S.A Europe Asia Infrastructure development Investment in technology development • Further dev
Slide 38: Contacts: Corporate Communications Dept.
Contacts: Corporate Communications Dept. Media Relations Group Tel: +81 (0)3-3273-0881 Fax: +81 (0)3-3281-6607 e-mail: pr@chugai-pharm.co.jp Koki Harada, Hiroshi Araki, Sachiyo Yoshimura, Chisato Miyoshi, Yayoi Yamada 37
Slide 39: Innovation all for the patients
Innovation all for the patients (G)- CHUGAI PHARMACEUTICAL CO, LTD. A member of the Roche group 38