A Review of Virtual Drug Development Models: two decades of ...

A Review of Virtual Drug Development Models: two decades of ...

A Review of Virtual Drug Development Models: two decades of perspective R. Stephen Porter, Pharm.D. CEO, Chairman VDDI Pharmaceuticals 02/24/2020 1 PROPRIETARY Agenda 02/24/2020 2 The Distributed Partnering Model for Drug Discovery and Development; is this the salvation of Big Pharmas or the last gasp of a dying dinosaur Virtual Drug Development: Examples of wildly successful and failure to launch companies Shared Risk Shared Reward models: Winners and losers

Chorus: Autonomous Experiment Drug unit: Lillys successful paradigm copy of Protodigm 1993 Hudson Bay fur trapper model vs. the Colonialist Model in China CROs as drug development partners and stake holders; conflict of interest or motivated PROPRIETARY Virtual Outsourcing models Fully Loaded full service Fully Subordinated Models Deep Channel/Level Collaboration Shared Risk Shared Reward Cost plus 10% overhead, end loaded and milestone based Discount cost plus equity for profit margin and overhead 02/24/2020 3 PROPRIETARY Designing the Virtual

Enterprise Bernhard R. Katzy1, Vincent Obozinski2 1University BW Munich, Werner-von-Heisenberg-Weg 39, 85577 Neubiberg, Germany,[email protected] 2European Commission, 200 rue de la loi, 1049 Bruxelles, Belgium, [email protected] 1. 2. 3. 4. 5. 6. 7. Virtual organizations are a solution for turbulent business environments Agile behavior towards market opportunities is the end to which virtual organizations are designed. As smaller companies lack the power of large multinationals, they have to seize the opportunity to substantially improve their competitiveness by creating, leading and sharing win-win constellations with their partners. Essential element is strong advanced management talent cross trained and visionary In the virtual enterprise, value is created, not added. The virtual enterprise is a temporary co-operation to achieve objectives. Voodoo Lounge Tour Why was the Virtual Enterprise Created?

02/24/2020 5 The virtual enterprise is designed to create value of a business opportunity. The value is the force that drives continuous restructuring of the virtual enterprise. How can the value be created? Value is created with the virtual enterprise, as business processes are adapted to the requirements of the short-term business opportunity. Who are the potential partners? The potentially participating partners of the network will in most cases be related parties; independent companies, but also decentralized profitPROPRIETARY centers or strategic Innovation Open Innovation The best people in our field work for us To profit from R&D, we must discover, develop,

market and follow up on it ourselves If we discover ourselves, we will have a first-mover advantage Closed Innovation Not all smart people work for us so we must identify and tap into expertise outside our company External R&D can create significant value; internal R&D is needed to claim some portion of that value 02/24/2020 6 PROPRIETARY Pros and Cons Vertical integration Pros:

Reduced risk of sharing information. Improve supply chain coordination. Provides more opportunities to differentiate by means of increased control over inputs. Higher profit margins. Increased entry barriers to potential competitors. Gains access to downstream distribution channels that otherwise would be inaccessible. Lead to expansions of core competencies. Pros and Cons Vertical integration Cons: Capacity balancing issues. For example, the company needs to be sure that the pipeline is big enough. Potentially higher costs due to low efficiencies. Developing new core competencies may compromise existing competencies. Increased bureaucratic costs.

Pros and Cons Virtual integration Pros: Focused on core competencies. Low investments in facilities. Risk sharing, if the research fails. Innovative, can have huge pipeline with less resources. Cost savings, need less employees and Facilities. Calibrations drive innovation; can get access to huge number of scientists. High efficiency, can focus on promising compounds Pros and Cons Virtual integration Cons:

Risk of loosing IP rights when sharing information. Companies can copy the research. Share the profit. Difficult to manage, few people and many projects. Lower bureaucratic costs. Quality of work, CRO qualities vary. The Sea Change Worlds economic environment is messy Obamas administration in power and moving priorities Reimbursement/payment environment reprioritized Regulatory: priorities/policies/regulations Outsourcing/off-shoring, go virtual young man Capital markets permanent restructuring the cost of capital broke the system Business Models are permanently

The Perfect Storm 1. Biotech Funding and VC investment diminishing 2. Facing a global financial crises 3. Declining productivity and sales 4. Commoditizatio n and downward price pressure Perfect Storm or Perfect Wave Big Pharma: Cultural Armageddon Its their way of surviving in R&D. You hire/fire 120,000 people last year in R&D - how do you replace that? So you either just become a sales and marketing organization, or you acquire biotech development companies or you in-source/outsource them in a virtual way. Big Pharma: Cultural Armageddon So traditionally what has happened is that big pharma has bought the small guys and destroyed the companies and their culture aka Lilly and Hybritech in the 1980s.

You take an entrepreneurial fast moving, fast decision making culture and you put in bureaucracy where it takes weeks to months to make decisions, you can really kill the spirit of the Big Pharma: Cultural Armageddon Hybritech went public in 1981 and, five years later, pharmaceutical giant Eli Lilly and Company paid $480 million for the company. A former employee of Hybritech described the culture clash that followed Eli Lilly's buyout as 'Animal House meets The Waltons. Darwinian Evolutional Pressures on Pharma Lilly Chorus Experiment Independent division to get cpds to POC faster Pursuring only what ist needs to get to POC and eschewing to begin pivotal trials Versant Ventures early looks at Lilly

cpds., and way to use Chorus team to test Portfolio cpds. from versant Lilly Chorus Experiment Transforming Drug Development with a Fully Outsourced Model: Lessons Learned for Biopharmaceuticals Terri A. Roberson, Director - Chorus Operations Neil V Smith, Director - Chorus Regulatory Joel Scherer, Managing Director Chorus Eli Lilly & Co., Inc. Pharmaceutical Outsourcing May | June 2009 Lilly Chorus Experiment Chorus Performance Efficiencies are Attributed to Its Business Model The Chorus Outsource Strategy: Selection of the Right Vendor, at the Right Time, for the Right Project Technology is Essential to Enabling the Implementation of the Outsource Model Lilly Chorus Experiment

Maintain a minimal organizational infrastructure, staffed with experienced drug developers and operations experts, to enable effective decision making with a low fixed operating cost. Outsource the bulk of actual work (e.g., clinical development, toxicology, CM&C) to a global vendor network to decrease direct costs and cycle times versus comparable work conducted internally. Implement a flexible change control process and push decision making down to the lowest appropriate level, removing the need for belabored governance reviews and facilitating decisions in a few days rather than weeks or months. Conduct functional operations on a streamlined set of SOPs and processes, as well as utilize TPPs processes, tools, and templates to minimize imposed sponsor burdens to partners and improve quality of work product. Provide a flexible global technology platform to bring key information together in a comprehensive, accessible format, to enable multiple external parties to collaborate on a project in a virtual global environment. Lilly Chorus Experiment

Chorus has been establishing itself as a wholly independent unit that essentially servesan internal outsourcing function for Lilly Research Labs: assets are transferred to Chorus for proof of concept work, which is done by an external network, and then returned to LRL. Chorus efficiency derives from two principles minimal infrastructure and small experiments, Chorus Chief Operating Officer Neil Bodick Saves 18 months and is 8-10 x more productive Lilly Chorus Experiment end game Flexion is a spin out from originators Michael Clayman Versant got short end of the deal Lilly cpds dominated the efforts Lilly has put maximum number of cpds. Into Chorus Bob Armstrong will clone more Choruss instead of building bigger company. (Stay Virtual) CHINA: THE TRANSFORMATIVE PROCESS HAS BEGUN Many Pharmaceutical Companies and CROs

Have Announced New R&D Investments and Risk Sharing Partnerships in Asia May06 China India AstraZeneca $100 M investment, R&D Center Amgen sets up clinical development center in Mumbai Nov06 Novartis $100 M investment, R&D Center in shanghai, 400 FTEs Feb07 Roche plans to expand R&D center in Shanghai Merck / Advinus Eli Lilly / risk sharing deal Nicholas Piramal

on metabolic $100M risk disease target sharing partnership Note: Singapore Dec06 Jan07 Captive R&D center Mar07 GSK plans to establish a fully integrated R&D center AstraZeneca sets up process R&D lab in Bangalore AstraZeneca China R&D center will be located in Shanghai GSK / Ranbaxy $100 M risk sharing partnership

R&D partnership Apr07 Jun07 GSK sets up a R&D center (CEDD) in neurodegenerative disease in Shanghai Lilly $100M investment in 5 years BMS/ Biocon / Accenture $300M partnership GSK / Tata Consultancy Service partnership Lilly expands R&D center in Singapore, $150M investment 25 AstraZeneca R&D Investments in China

Development / R&D In China For China $100 M investment in 3 years, focus on oncology, build China R&D Center 2004 & Earlier 2005 Research collaboration with Shanghai Jiaotong University on neuropsychiatric genetics Apr01 Dec06 May06 Research Licenses cubicin from Cubist for China and

other Asian countries for $10.25M In China For Global Mar07 Jun07 Innovation Centre China (ICC) will be located in Shanghais Zhangjiang hi-tech Park 2006 Opens API sourcing center, target $100M API sourced from China by 2010, eventually 90% of API from China Establishes clinical pharmacology unit at Peking University 3rd Hospital for infections, diabetes, and cardiovascular diseases.

2007 $14M outsourcing partnership with Wuxi Pharmatech in chemistry Sep06 AstraZeneca Sep07 2008 Innovation Centre China (ICC) 70 plus staff grown to over 100 Focus on translational research (e.g. biomarker study) in oncology Headed by Dr. Xiaolin Zhang, Vice President and head of ICC 2009 2010 & Beyond The development opportunity is enormous in China. China plays an increasingly important role as an emerging market in AstraZeneca's global strategy. We've got a longer-term view of what China can be that we started investing in a few years ago, so India's not there yet - AstraZeneca CEO Dan Brennan

- Sep, 2007 Captive R&D center R&D partnership 26 GSK R&D Investments in China Mar07 Development / R&D Jul07 Sets up a R&D center (CEDD) in neurodegenerative disease in Shanghai, appoints Dr. Jingwu Zang as head 2004 & Earlier 2005 Established research collaboration with Shanghai Institute of Materia Medica (SIMM) in the field of combinatorial chemistry

Research Since 1997 2006 2007 GSK China CEDD Announces 2007 investment $40M and long term growth target of 1,000 scientists in 10 years 2008 $40M in 2007 50 to 100 staff in 2007 Eventually grow to 1,000 scientists in 10 years Focus on neuro-degenerative disease Headed by Dr. Jingwu Zang, SVP, who reports directly to GSK global head of R&D, Dr. Moncef Slaoui 2009 2010 & Beyond We are entering an exciting period of expansion for our R&D organization as it builds on the strength of the superb science now being conducted in China. We intend to be part of a future in which the phrase discovered in China is heard as often as made in China is heard today.

Our initiative in China reflects our commitment to ally GSK with talented researchers wherever we can find them and to further encourage within R&D the contest of ideas needed to create new medicines. It shows as well our commitment to the neurosciences, where many of the greatest challenges in drug discovery and development are to be found. Indeed, as we create a centre in China to focus on neurodegenerative disorders, we will re-focus our largely UK-based neurology drug-discovery efforts on finding new therapies for pain, epilepsy, and brain injury. - GSK, Chairman, R&D, Moncef Slaoui - Mar 24, 2007 Captive R&D center R&D partnership 27 Eli Lilly R&D Investments in China Lilly ChemExplorer Partnership Jun07 Development / R&D 2004 & Earlier Established partnership with Shanghai ChemExplorer, focus on chemistry 2005 Plans to invest $100M in R&D

in 5 years through Chinese local partners such as ChemExplorer 2006 2007 Established partnership with Hutchison China MediTech (Hutchison Medipharma) on cancer and inflammatory diseases drug candidates, with potential milestone payments of $20-29M per candidate Jun02 Research Aug07 Started in 2002 250 plus staff Managed by ChemExplorer, dedicated to Lilly Focus on chemistry, with additional capabilities in biology and process R&D being built Invests $10M in BioVeda, China biotech VC firm, through Lilly

Asian Ventures 2008 2009 2010 & Beyond We'll expand our activities in those areas where we can continue to draw on the country's talent-rich base of researchers and scientists," "Lilly has already invested nearly $200 million in the country. We are committed to China - Lilly, President & CEO, John Leichleiter - Jun 7, 2007 Captive R&D center R&D partnership 28 Pfizer R&D Investments in China (Including both publicly disclosed and unannounced activities) Development / R&D Nov04 Oct05 Dev Ops pilot started in Shanghai

Pfizer China R&D Center was established, $25M investment in 5 years 2004 & Earlier Established outsourcing contracts with WuXi PharmaTech: - Template compound (Dec 01) FTE contract (Oct 02) Research 2005 Jul06 Pfizer China R&D Center new facility opened in Zhangjiang hi-tech park 2006

Established additional outsourcing contracts with other Chinese CROs such as Medicilon to explore vendor base China is an important market for Pfizer and it offers a large number of highly skilled and talented scientists. The Research and Development Center were setting up in Shanghai is not only an investment to expand Pfizers R&D capability, it is also an investment in Chinas knowledge based industry and infrastructure. - Dr. Joe Feczko, CMO, Pfizer - Oct 31, 2005 2007 Asia Research Office was established, focusing on implementing CGA pilots and developing R&D partnerships 2005 Aug06 Established

collaboration with Tsinghua University Established collaboration with Peking University, Chinese Academy of Sciences Dec06 2008 Established partnerships with five CROs in Shanghai to conduct R&D pilot programs Jan Apr 07 Pfizer China R&D Center (CRDC) $25M in 5 years (starting in 2005) 170 staff as of Sep 2007 Focus on clinical data management, programming, report publishing, statistics, and safety and risk management, etc. Headed by Dr. Lingshi Tan, executive director, reporting to global head of Dev Ops 2009 Captive R&D center

Publicly Announced 2010 & Beyond R&D partnership Not Publicly Announced 29 Major MN Pharmaceutical Investments in China AstraZeneca BMS GSK Johnson & Johnson Eli Lilly Virtual Merck Virtual Novartis Pfizer Virtual Roche Wyeth

Virtual Vs Vertical Natural order for doing business in China is virtual Vertical is more a colonialist approach from MNCs Hudson's Bay Company HBC is the oldest commercial corporation in North America and one of the oldest in the world. The company was incorporated by British royal charter in 1670 as The Governor and Company of Adventurers of England trading into Hudson's Bay. Once to largest private land owner in the world A network of French and Indian first nation collaborations 02/24/2020 32 PROPRIETARY Virtual Outsourcing models Fully Loaded full service Fully Subordinated Models Deep Channel/Level Collaboration

Shared Risk Shared Reward Cost plus 10% overhead, end loaded and milestone based Discount cost plus equity for profit margin and overhead 02/24/2020 33 PROPRIETARY Porters 8 point Rx for Darwinian Survival Patience If you are patient in one moment of anger, you will escape a hundred days of sorrow. Persistent Pick the flower when it is ready to be picked. and The journey is the

reward Positive Set yourself as the standard. Proactive If you don't go into the cave of the tiger, how are you going to get its cub? Porters 8 point Rx for Darwinian Survival People A single conversation across a table with a wise man is worth a month's study of books. Products There are many paths to the top of the mountain, but the view is always the same. Processes The arrogant army will lose the battle for sure. Payments If you have money you can make the ghosts and devils turn your grind stone.

Company (founded) CEO URL (New Corporate Name) Cohen http://www.acorda.c om/ Celladon Krisztina M. Zsebo CollabRx Jay M. Tenenbaum http://www.celladon. net/ http://collabrx.com/ Conatus Pharmaceuticals, Inc. (2005) CardioPolymers, Inc. (2003) Stephen J. Mento http://www.conatusp harma.com/

Rayman W. Cohen http://www.symphon ymed.com/index.ht ml http://investing.busi nessweek.com/resea rch/stocks/private/s http://www.caryphar napshot.asp?privcap ma.com/ Id=9118933 Medical Device for postop Conduction disturbances and CHF Acute Heart Failure http://www.chorusp harma.com/index.ht ml http://www.chorusp harma.com/about-us .html Various Chorus Pharma (2002) Stan Abel Doug Cary Joel Scherer Joel Scherer 02/24/2020 36

Spinal cord injury (SCI), multiple sclerosis (MS) and related conditions of the nervous system Gene and molecular therapies for heart failure Acorda Therapeutics (1995) Corthera, Inc. (2003) Cary Pharmaceuticals (1994) Chorus (2001) Ron Therapeutic area PROPRIETARY Molecular Disease Model in CA therapeutics Liver Disease: hepatitis C (HCV) Hypertension Neuroscience, Endocrine, Oncology, Womens Health Bone/Inflammation,

Cardiovascular Company (founded) Concordia Pharmaceuticals (2003) EuMederis Pharmaceuticals, Inc. (2009)1 Faron Pharmaceuticals, Ltd. (2003) Therapeutic area Mark Watson http://www.concordi apharma.com/ Targeted Cancer therapeutics John Nestor http://www.eumeder is.com/about_us Markku Jalkanen Michael Clayman Galera Randy Weiss

Metabolic Solutions Development, Inc. 37 URL (New Corporate Name) Flexion Therapeutics Jasco Pharmaceuticals Innovative NeuroTechnologies, Inc. (2005) Limerick BioPharma (2004) 02/24/2020 CEO Shawn Mojtahedian Wendye Robbins Robert A. Beardsley Pain, osteoporosis, and metabolic disorders http://www.faronpha metabolic syndrome rmaceuticals.com/ related vasculopathies, inflammatory diseases, and cancer metastasis http://www.flexionth Tinnitus, Ulcerative erapeutics.com/inde Colitis, and

x.php Autoimmune disease http:// Radiation protection www.galeratx.com/ and CA therapeutics http://www.jascopha Oncology rma.com/index.html http://www.innovneu Alzheimers and rotech.com/index.ht Neurodegenerative ml disorders http://www.limerick Immunosuppression bio.com/ and disorders of lipid accumulation http://www.msdrx.co Metabolic Disease m/ mitochondrial targets PROPRIETARY Company (founded) Protodigm (1996) CEO URL (New Corporate Name) John Court Product development to a CRO

http://www.regenthe Neutriceuticals for rapeutics.com/regen Alzheimers and plc/home/ other Neurodegenerative disorders http://www.sirtrisph Metabolic Disease, arma.com/pipeline.h aging, Cancer tml ReGen Therapeutics (1998) Percy Lomax Sirtris Pharmaceuticals (2004) Speedel George P. Vlasuk Stromedix (2005) Michael Gilman Syndax Pharmaceuticals, Inc. (2005) Tragara Pharmaceuticals (2007) Vernalis (2003) Joanna Horobin

http://www.syndax.c om/ Thomas M. Estok http://www.tragarap harma.com/index.ht m Oncology Ian Garland http://www.vernalis. com/ Oncology and CNS Andrin Oswald http://www.speedel. com/ http://www.stromedi x.com/index.html 02/24/2020 38 Therapeutic area (Fulcrum Pharma Developments) PROPRIETARY

Hypertension and metabolic Disorders Interstitial fibrosis and Tubular atrophy in kidney transplant recipients Oncology 02/24/2020 39 PROPRIETARY R. Stephen Porter, Pharm.D., FCP, MRCP VDDI Pharmaceuticals Chairman, President and CEO 115 Penn Warren Drive Suite 300-389 Brentwood, TN 37027 (615)445-5761 (cell) +86.15021242314 (Cell China) http://www.virtualdrugdevelopment.com

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