Pharma Outsourcing: The Numbers, Trends, and Partnership Strategies - PowerPoint PPT Presentation

Pharma Outsourcing: The Numbers, Trends, and Partnership Strategies Jim Miller, President PharmSource, A GlobalData Company DCAT Week 2017 www.PharmSource.com 1

Contents • CMO industry performance • M&A trends • Industry outlook Thanks to Saul Richmond, PharmSource Director of Market Intelligence, for his contributions to this presentation www.PharmSource.com 2

CMO Industry Performance www.PharmSource.com 3

CMO industry performance API CMOs are outperforming dose CMOs CMO Organic Revenue Growth FY 2016 45% Revenue Growth 2015-2016 40% 35% 30% 25% 20% 15% 10% 5% 0% Orange bars are dose CMOs; blue bars are API CMOs Source: Public filings www.PharmSource.com 4

CMO industry performance API outsourcing moving in different directions Large Molecule NME Small Molecule NME API Sourcing 2007-16 API Sourcing 2007-16 40 70% 40 70% 56% 64% 57% Share of Approvals Outsourced 35 35 60% Share of Approvals Outsourced 60% 49% Number of FDA Approvals Number of FDA Approvals 30 30 50% 50% 25 25 40% 40% 35% 20 20 30% 30% 15 15 25% 20% 20% 10 10 10% 10% 5 5 0 0% 0 0% 2007-13 2014-15 2016 2007-13 2014-15 2016 Average Average Average average Outsourced In Only Undetermined % Outsourced Outsourced In Only Undetermined % Outsourced Source: PharmSource S TRATEGIC A DVANTAGE database www.PharmSource.com 5

CMO industry performance Drug product outsourcing remains ≈ 50% NME Drug Product Non-NME Drug Product Sourcing 2007-16 Sourcing 2007-16 80 70% 80 70% 63% 70 70 Number of FDA Approvals 60% 60% 52% 53% 50% 60 60 50% 50% 46% 45% 50 50 40% 40% 40 40 30% 30% 30 30 20% 20% 20 20 10% 10% 10 10 0 0% 0 0% 2007-2013 2014-15 2016 2007-13 2014-15 2016 Outsourced In Only % Outsourced Outsourced In Only % Outsourced NDAs account for only 1/3 of dose CMO launches; tech transfers of marketed products account for 2/3 Source: PharmSource S TRATEGIC A DVANTAGE database www.PharmSource.com 6

CMO industry performance Small & Mid-size highly penetrated by CM Drug Product Sourcing Drug Product Sourcing Small Bio/Pharma Mid-Size Bio/Pharma 100% 100% 83% 85% 86% 90% 90% 79% 80% 80% 64% 69% 63% 70% 70% 60% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2011-2015 2016 2011-2015 2016 NME New Forms NME New Forms Source: PharmSource S TRATEGIC A DVANTAGE database www.PharmSource.com 7

CMO industry performance Global Bio/Pharma staying in-house Global Bio/Pharma Global Bio/Pharma Large Molecule NME Large Molecule NME Dose Sourcing 2007-16 API Sourcing 2007-16 9 45% 9 60% 8 40% 8 39% 50% 48% 7 7 35% 6 40% 6 30% 5 5 25% 24% 30% 4 4 20% 18% 3 20% 3 15% 14% 14% 2 2 10% 10% 1 1 5% 0 0% 0 0% 2007-13 2014-15 2016 2007-13 2014-15 2016 Outsourced In Only % Outsourced Outsourced In Only % Outsourced Source: PharmSource S TRATEGIC A DVANTAGE database www.PharmSource.com 8

CMO industry performance Global Bio/Pharma investing heavily in captive capacity Projects Projects Global Bio/pharma Capex Completed Completed 2013-2015 After 2015 $25.0 Total projects identified 75 70 Dose manufacturing 29 29 $20.0 Injectable 12 9 Solid/Semi/Liq 13 17 Capex $ Billion $15.0 Other dose forms 4 3 API-Large Molecule 15 20 $10.0 API-Small Molecule 4 6 Tissue/Gene/Cell Therapy 1 2 Packaging 4 2 $5.0 Global bio/pharma companies have $- spent over $100 billion on capex 2010 2011 2012 2013 2014 2015 Source: public filings and news releases www.PharmSource.com 9

CMC M&A activity 101 deals in past 3 years M&A drivers CMC Acquisitions 2014-1016 • Growth for its own sake Dose • Economies of scale Small API • Capability/process BioAPI technology Analytical • Customer access Formulation Packaging • Buying into CDMO Multi-service market 0 10 20 30 40 Source: PharmSource S TRATEGIC A DVANTAGE database www.PharmSource.com 10

M&A in CMC Services Business www.PharmSource.com 11

CMC M&A activity Targets are generally small and private Other CMC Acquisitions by Target CMC Acquisitions by Target 3 Revenues Ownership $ million $0-24 Public 12 $25-49 $50-99 Private- Mgmt 49 $100-249 Private Equity 37 $250-499 0 20 40 60 Source: PharmSource S TRATEGIC A DVANTAGE database Small deals still add capability/technology/geographic presence www.PharmSource.com 12

CMC M&A activity Buyers from all industry segments Number of Deals by Buyer Ownership Deals by Buyer Primary Business Public Other 9 PE-backed Multi- Service company Pharma 21 9 Private Equity directly Private Private- Equity 14 Management… Dose 13 0 10 20 30 40 50 60 Small API Pkg/ • Most buyers are “strategic,” i.e., operate 11 Logistics Form 5 Bio API related businesses Analytical 6 8 5 • Private equity have been net sellers Source: PharmSource S TRATEGIC A DVANTAGE database www.PharmSource.com 13

CMC M&A activity Little consolidation from M&A Significant Consolidating Acquisitions Non-Consolidating Acquisitions Buyer Target Segment Buyer Target Patheon DSM Dose + API Lonza Capsugel Piramal Ash Stevens Small API Mylan DPT AMRI Gadea Small API SK Capital Halo AMRI Euticals Small API Pfizer Hospira Catalent Accucaps Dose Trilantic Doppel Recipharm Kemwell Dose Sucampo R-Tech Ueno Asahi Glass Biomeva, CMC Bio Bio API • Consolidation only when segment participant buys another • Only 4.5% of dose CMO industry revenues have actually been consolidated • Only the merger of two large CMOs is likely to have significant effect on industry fragmentation www.PharmSource.com 14

CMC M&A activity Facility acquisitions may be more common CMO Dose Facility Acquisitions 2014-16 Facility Acquisitions 2014-16 Buyer Seller Type Dose Avara AstraZeneca DP Small API Avara Astellas DP Delpharm Sanofi Famar Bayer DP Bio API Frontida Sun Pharma DP Analytical/ Recipharm Alcon, Inc. DP form Recipharm Flamel DP Recro Pharma Alkermes, plc DP 0 5 10 15 Ropack Forest Labs DP Patheon Roche DS Facility acquisitions offer Avara UCB DS • Avara Merck (MSD) DS Capacity to grow Corden Sandoz DS • Immediate new business Source: PharmSource S TRATEGIC A DVANTAGE database www.PharmSource.com 15

CMC M&A activity What’s Next in M&A? • Prime targets – PE-owned companies: at least 15 at the 4+ year holding time – Well-run family-owned companies: especially in Europe • Running out of attractive niche targets? – Few companies left with advanced technology • Large EU-based CMOs have challenges – Some need restructuring – Tender-driven market means tight pricing • Facilities will be an important focus www.PharmSource.com 16

Industry Outlook www.PharmSource.com 17

Industry Outlook Where does the CMO industry go from here? • Small/mid-size pharma highly penetrated – Growth depends on continuing financial support • Global bio/pharma is the great challenge – Have complex needs & capital to address them – Technology and supply chain complexity are windows of opportunity • Organic growth may require accepting more risk unless CMO has high-value proposition • Public policy environment creates uncertainty for entire industry www.PharmSource.com 18

Industry Outlook Near term indicators are holding up NDA Filings and Approvals Equity Funding to Emerging Bio/Pharma $45 160 140 $40 120 $35 100 $30 80 $ billion $25 60 $20 40 $15 20 $10 0 2013 2014 2015 2016 $5 $- 2010 2011 2012 2013 2014 2015 2016 New NDA/BLA Filings at CDER NDA Approvals VC IPO SPO Upfront Source: FDA data Source: PharmSource Lead Sheet www.PharmSource.com 19

CMO industry outlook Manufacturing strategy must address multiple objectives Global Bio/Pharma Manufacturing Decision Matrix Supply chain Financial • • Unit cost Global supply • • Tax planning Security of supply • • Foreign exchange Cost of goods • • Subsidies Complexity • Cost of capital Make? Buy? Consolidate? • • Brand equity IP protection • • Product line Product approvals • • Acquisitions Local content • • Core technologies Labor laws Legal/Regulatory Strategic www.PharmSource.com 20

CMO evolution Next stage: “adaptive manufacturing” Capacity Tailored Solution Provider Provider • One size fits all Process expertise Supply chain mgmt Need for flexibility • New & complex • Shared lines Engineering expertise Procurement technology • Small volumes • Volume drives • Uncertain Tech transfer/scale-up Project management price reimbursement • Utilization focused Shared overhead Financial engineering Regulatory expertise Sales Examples Patheon: “condominium” offering at Swindon Hovione: Vertex continuous manufacturing line Lonza: Alexion dedicated suites, Sanofi JV www.PharmSource.com 21