Stuck In The Middle ? The Way Forward For Malaysian Pharmaceutical - PowerPoint PPT Presentation

Stuck In The Middle ? The Way Forward For Malaysian Pharmaceutical Industry

Disclaimer: All materials are used by permission. Excerpts of data and statements were taken from:  Pemandu  GBI  IMS  Reuters  BMI  MOPI All the views mentioned in the presentation and in the slides are my own individual and personal opinion and views and do NOT reflect views or opinions of Pharmaniaga Berhad or its affiliates.

Case for change: Current Malaysia Pharmaceutical Snap Shot Import reliance, global dynamics creating opportunity to react 10 of the top 15 Attractive OIC markets, 5:1 ratio of imports to blockbusters face where Malaysia has exports in Malaysia upcoming patent expiry advantage Import / export ratio 07 pharma import-export ratio (%) for pharmaceuticals '08 sales (B$) 27 8 Zyprexa 220 Bahrain olanzapine Algeria 25 Qatar Lebanon 180 Kuwait 20 6 17 Plavix KSA copidogrel Enbrel etanercept 13 15 Morocco Singulair Iran UAE 4 montelukast Nexium 5 6.8 esomeprazole Seroquel 10 5.4 quetiapine Egypt 5.0 Lipitor 4.7 atorvastatin 4 2 Seretide Diovan 5 fluticasone Lovenox valksartan Jordan enoxaparin 0 0 0 2006 2007 2008 2009 2009 2010 2011 2012 2013 2014 2015 0 5 10 15 08-’13 pharma market growth (%) Leverage European mfg. Prioritize local Tap large market for standard and good reputation manufacturers for domestic generic version of drugs among OIC countries to gain market with newly-expired patents market access Source: IMS; BMI; ESPICOM; USAID; Press search; BCG analysis

Pharmaceutical market growing in Malaysia, however is mostly from generics and imports Malaysia Generic market growing at a rate of Imported drugs in Malaysia growing at a rate of 12% vs 9% for patented 14% vs 12% for local USD Bn USD Bn CAGR 2.5 2,000 ('03-'13) Patent CAGR Generics 12 % ('03-'13) 2.0 OTC 1,500 9% +11% 1.5 14% 1,000 1.0 12% 500 0.5 13% 0.0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

MYR 1.45Bn spent in 2009 for imported generics MYR Mn 5,000 4,000 1,100 3,000 1,200 4,400 2,000 800 1,000 650 500 150 0 Private Public Private Public Public Total Private Local Local Import Import Patented Generics

Malaysia global generics strategy Contribution US$4.3Bn to GNI Financial impact (US$ Bn) Context Inputs & support required • Incoming challenge from regional players due to ASEAN harmonization • If drug passes BE • High reliance on imports 8.0 6.3 test, immediately – RM$4B of imports, vs RM$ 0.8B of exports in 2009 place on national • High cost base 3.3 0.7 4.3 formulary – Portfolio overlap across 32 local players 1.8 • Mutual recognition – Low utilization (30%+) – small batches – High raw material cost - small vol. purchase of standards for drug • Archaic facilities (20+ years), resulting in high registration in target Revenue Cost EBITDA Wages Net GNI operating costs to bring up to GMP standards MOH income markets, allowing • Replicated facilities transfer direct sale abroad Proposal Assumptions • Provide access to all • Revenue sources include export, import data for local players Incubate to upgrade; substitution, and higher-value products substitute imports “High risk high reward” • More innovative from existing manufacturers procurement and • Cost and wages based on local and Profitability international benchmark of generic treatment system companies • Net income transfer assuming 40% • Review FTAs foreign investment in new MITI manufacturing clusters MATRADE Job creation • Estimate based on calculation Evolve or perish “Misplaced expansion” of FTEs needed for 60 new “Space Invaders” 12k jobs manufacturing facilities by Footprint 2020

Where we want to be Capable and profitable pharmaceutical and biopharma industry with a large contributes to GNI Extensive R&D capability “Best in class” High performance sales Strong domestic OIC countries share footprint

Malaysian generics strategy Increase efficiency to : enable exports, substitute imports, and move into higher value products Current Future Established Malaysian players move up value chain to produce higher 'Super' value products, e.g. generics enhanced generics, bio- Enhanced generics, similars Negligible local e.g. combination, new formulation, participation etc. (e.g. Panadol ActiFast [2x+ price Network of facilities to of Panadol]; amlodipine + coordinate and tocotrienol) optimize production of Malaysian players generics largely producing Generics for domestic New export-focused "Me-too" version of prescription drugs that have market lost patent exclusivity manufacturing cluster (e.g. Panadol; amlodipine) to complement existing resources

How do we get there? • Incubate to upgrade • High risk high reward Extensive R&D capabilities Managed risk might fail Adequate R&D capabilities Efficient facility Sales performance “Best in class” Mitigate risk incremental success Sales performance Profitability Moderate domestic Regional footprint share OIC countries Limited R&D capabilities Strong domestic footprint share • Competitive COGS due to best- in-class clustered facilities Sufficient facility Sales performance • Cheaper, better medicine domestically • Competitive for export • Sustainable revenue Weak domestic Domestic footprint • Generate high value jobs and share large GNI impact • Stay put • Misplaced expansion Capacity and capability

Plan to build a differentiated global business model Malaysia generics players • Aggressive expansion • Mostly organic • Mix of organic growth • Globally active, • Initially focused on via acquisition of local growth and acquisitions supported by selected OIC Geographic players • Expansion in Germany acquisitions (eg, countries due to cost expansion • Worldwide coverage via acquisition Basics in Germany) competitiveness and • Focused on Europe • Strong Indian base MY's reputational and Central Asia advantages • Largest operations • Gx drugs largest BU • Pure Gx player • Gx drugs • Initially focused on API and Gx • Cosmetics and animal • 2-label strategy • Development of new blockbusters with Portfolio/ • Some patented drugs health division (Aliud) patent protected recent patent expiries Segments • Animal health division • Health resorts • Acquisitions to drugs strengthen branded Gx segments • Large • Traditional Gx • Focus: patent-free • Attractive Gx pipeline • More focused portfolio/pipeline portfolio APIs • Limited biologics portfolio Products/ • Intense patent • Plan to strengthen • Biosimilars activities activities via (concentrated in Pipeline challenging regulatory and via 15% share on partnerships highest value • Biologicals/Injectables development know- Bioceuticals therapeutic areas) to how gain efficiency • Full coverage incl. • So far focus on • Shift from contact • In-house • Focused on R&D for manufacturing manufacturing to manufacturing, R&D manufacturing, with Value patented/biol. drugs • Investments in M&S vertically integrated • Intense out-licensing upstream and chain • Plan for set-up of and distribution player along value of IP to big pharma downstream direct distribution chain partnerships Multiple activities Lean, focused Diversified, fast- Regional play with and geographies Partnership model model acting global player traditional portfolio (second tier)

Establishment of Centre of Excellence for Pharma R&D can drive innovations Funding options Objectives • Mandatory ploughback of • Pooling resources (financial and talent) to overcome sales by local players coordination failure and high barriers of entry for R&D • Access on pharma sales • Mechanism to drive higher R&D spend to create more • Ploughback from public innovative pharma industry tenders • Natural industry consolidation mechanism by raising the • Self-funding in the mid-term, bar for business from fee-for-service and R&D • Bridge between researchers' focus and industry needs commercialisation Governance and staffing Services • National Center of • Development of overall R&D strategy for Malaysia Excellence pharma industry • Advisory Board comprising • Fomulation and developmental work on enhanced National Center of MOH, MOHE, generics (e.g. combination products, new delivery of Excellence universities, MOPI, WHO systems) for Pharma R&D and international key • Administrative, financial and legal advice (e.g. patent law opinion leaders / scientists advisory, interactions with venture capital • Staffed by key professors • Rental of high-cost equipment (e.g. xx) • Help researchers outside their core competency areas and scientists with relevant knowledge and experience (e.g. grant application) • Potentially a commercialization platform for innovation Requires high-level support from both MOH and MOHE, as well as policy changes (e.g. allowing academics to hold equity stakes in companies)