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Expansion in size and number of clinical trials.

The increase in clinical trials has been prompted by regulators seeking more extensive study data to validate drug safety. Greater numbers of postmarketing Phase IV studies and a rising level of drug development activity have also contributed to this trend. . Domestic drug market potential. The rapidly expanding Chinese economy and shifts in medi cal insurance are generating substantial domestic demand for drugs. . Enhanced scientific capabilities.Large numbers of returning Chinese scientists and expanded access to capital are creating a growing pool of scientific expertise in China. Biologics DRIVE DOUBLEDIGIT GROWTH of RA Drug Market The rheumatoid arthritis treat ment market has been held back somewhat in recent years by gener ic competition and the withdrawals ofVioxx and Bextra.But the category is rebounding because of the per formance of immunosuppressants and other biologic treatments, with the market for prescription RAdrugs topping $12 billion in 2006 and expected to grow by more than 11% annually through 2011. The Kalorama Information report, Worldwide Market for Rheumatoid Arthritis and Lupus Treat ments,analyzes the current and potential world mar ket and opportunities for prescription drugs to treat RA and lupus. According to the report, biologic treatments such as Amgen’s Enbrel, Genentech’s Rituxan, and Cento cor’s Remicade represented threequarters of the RA market in 2006. The availability and increased use of biologic drugs have revived growth in the industry, offsetting declines for older nonsteroidal antiinflam matory drug (NSAID) treatments, which tend to have more generic competition. Sales of biologic treat ments will grow 85% by 2011, the report projects. “Any drug market would suffer from having the world’s most wellknown drug withdrawal, but bio logics are changing the story,”says Bruce Carlson,pub lisher of Kalorama Information.“Biologics show better results than the stan dard treatments and, in the nearterm at least, they won’t have com petition from generics. They will represent the lion’s share of growth in the market.” According to the report, the most com drug developers to conduct clinical trials in China, although preclinical testing is set to become increas ingly prevalent as well. The report, Drug Development Opportunities in China, provides a comprehensive review of China’s drug development industry, both in terms of R&D for theexpandingdomesticmarketand the country’s role as a thirdparty provider of outsourced global drug developments.The report examines the methods of expansion adopted by China’s pharma compa nies, biotech developers, and contract research organizations to increase the scale of their drug development operations, in addition to identify ing their therapeutic interests and development cycle focus. It also provides forecasts for drug development trends in China over the next five years. According to the report, Chinese sales of Westernstyle pharmaceuticals were valued at about $13.1 billion in 2006, achieving yearon year growth of 30%, with the country expected to become the world’s leading consumer of phar maceuticals by 2020. In addition, strong govern ment support continues to drive China’s biotech and pharma industries, and will help them to become major components of the global market over the next few years. The report notes that human clinical studies have historically dominated outsourced R&D activities in China, with the country’s relative lack of capital and expertise being insuffi cient to facilitate tech nologically intensive dis covery and preclinical work. However, an influx of Westerntrained sci entists and increasing access to global capital markets are rapidly extending the develop ment opportunities available to China’s expanding base of phar ma and biotech compa nies. The report projects that in the near term pharma ceutical R&D for China’s domestic drug markets will include a range of products, including generics, med ications based upon traditional Chinese medicine, and novel pharmaceutical entities. Generics will con tinue to comprise a large but declining share, as patent laws are increasingly tightened and most of the leading medicines that would make attractive generics havealready beenconverted,the report says. KeyTrends toWatch . Increased drug development costs. The price of procuring leading scientists and sophisticated technologies is rising, and this is being reflected in the growth of drug development costs. . Outsourcing of clinical trials.Growing numbers of clinical trials are being conducted in China in an effort to exploit large, drugnaive patient popula tions, at lower costs than in the U.S., Western Europe, and Japan. China’s R&D Industry CONTINUESTO THRIVE Drug development in the United States and European Union is becoming increasingly expensive and timeconsuming.As a result, China has emerged as an increasingly attractive option for companies aiming to reduce prohibitive investments in time and finance. According to a recent report from Busi ness Insights, CROs can reduce research costs by up to 70% when research is conducted in China, and drug developers can expect typical savings of 30%. These cost advantages will continue to encourage PHARMA TRAX SALES, MARKETING, AND R&D TRENDS AFFECTING THE HEALTHCARE INDUSTRY Biologics show better results than the standard treatments and, in the nearterm at least, they won’t have competition from generics, says Bruce Carlson, publisher of Kalorama Information. Bruce Carlson PROPORTION OFR&D SPENDING BY TYPE OF PRODUCT,2008 AND 2013 CROs can reduce research costs by up to 70%when research is conducted in China,and drug developers can expect typical savings of 30%. RAdrugs topped $12 billion in 2006 and are expected to grow by more than 11% annually through 2011. Generics Traditional Chinese Medicine Novel Pharmaceuticals 60% 50% 40% 30% 20% 10% 0% Proportion of R&DSpending Source:Business Insights, London For more information, visit globalbusinessinsights.com. PV0508 Issue FINAL2 4/23/08 10:39 AM Page 92 PHARMA trax mon biologic approaches to RA involve immunosu pressant drugs that block three actors in the immune system:Tcells, chemical messengers, and white blood cells.The report also discusses novel new therapies that activate suppressor cells, inhibiting the production of inflammation enzymes,suppressing the production of inflammationagents,andpreventing theproductionof Bcell antibodies. Market for Novel Oncology Therapies LIKELY TO EXPAND AS POPULATION AGES Cancer causes about 12.5% of deaths worldwide, and is the secondleading cause of mortality in the United States. Since the risk of cancer increases with age, the burden of the disease is projected to grow in tandem with the aging population. But improvements in the diagnosis and treat ment of cancer have increased the chances of sur viving the disease. According to a recent study by healthcare investment bank Leerink Swann, the growing number of cancer patients, combined with adoption of novel therapies that command premi um pricing, is expected to drive the expansion of the global oncology market in the next decade. Novel Approaches for the Treatment of Cancer, part of Medacorp Reports’ Future in Focus series, evaluates private companies that are developing promising oncology drugs against both new and wellcharacterized targets. In terms of alreadyvalidated cancer targets, the study notes that two new proteasome inhibitors in development by Proteolix and Nereus Pharmaceuti cals aim to challenge Millennium Pharmaceuticals’ Velcade by offering improved tolerability and effica cy. Velcade is indicated as a secondary therapy for patients with multiple myeloma or mantle cell lym phoma,and is currently the only FDAapproved pro teasome inhibitor on the market. The study also found that Hsp90 (heat shock pro tein 90) and Bcl2 inhibitors have the potential to improve the efficacy of standard chemotherapeutics and could work in tandem with some currently mar keted agents. Companies investigating these sub stances include Serenex, which is studying Hsp90 inhibitors; and Ascenta Therapeutics and Gemin X Pharmaceuticals,both of which are developing ther apeutics based on Bcl2 inhibitors. Since publication of the study, Serenex has entered an agreement to be acquired by Pfizer. According to the report,one of the most promis ing new delivery vehicles under investigation appears to be the folate receptortargeted drug, which delivers potent anticancer agents to the tumor with high specificity.This delivery mechanism, which is being developed by companies such as Endocyte, could significantly improve therapeutic efficacy while minimizing side effects. Optimizing patient selection by screening for patients whose tumors overexpress the folate recep tor is likely to increase the probability of success of this therapeutic approach,the study says.Among other factors, oncology drugs have one of the highest attrition rates in the phar ma industry, with an estimated 95% of anticancer drug candidates failing in clinical development. Compared with other therapeutic areas, oncology drugs’ failure rates underscore the poor predictability of animal models. Improving this pre dictability is one possible method for reducing attribution and boosting suc cess rates of oncology drugs. BUSINESS INSIGHTS,London, is a market analysis company.For more information, visit globalbusinessinsights.com. KALORAMA INFORMATION,NewYork,a division of MarketResearch.com, conducts independent market research for Follow up CLINICAL SUCCESS RATE OFDRUGCANDIDATES IN SELECTEDTHERAPEUTIC CATEGORIES Cardiovascular CNS Infectious Disease Oncology All 20% 15% 10% 5% 0% Percentage of Success the lifesciences industry. For more information, visit kaloramainformation.com. LEERINK SWANN,Boston, is an investment bank and financialservices firm focused exclusively on the healthcare industry. For more information, visit leerink.com. Source:Leerink Swann,Boston.For more information, visit leerink.com. PV0508 Issue FINAL2 4/23/08 10:39 AM Page 93 market researcher, to be responsible for com petitive launch planning. This person often works independently, perhaps using the ser vices of a parttime market researcher or an external competitive intelligence firm. “To develop a powerful, insightful counter launch plan, companies need a powerful, insightful multidisciplinary team,” Dr. Bernard advises. “At the least, this team should consist of a senior brand leader; a com petitive intelligence professional; a market researcher; internal professionals representing key stakeholder segments, for example physi cians, consumers, and payers; a medical or sci entific professional; an internal key opinion leader expert; field management; and public relations personnel. The team should have appropriate geographic representation and meet on a regular basis.” COUNTERLAUNCH PROCESS For most brand teams, the professional responsible for “competition” collects market research, orders some competitive intelligence, and prepares a few standard promotional tac tics such as salesforce preparation and training. These minimal steps represent a small fraction of the vast resources — time, money, and per sonnel — that the competition is investing in launch preparation and that the brand team itself is committing to launching its own product. More significantly, this relatively small investment is often miniscule in com parison with the sales revenue an existing product stands to lose from the launch of a competitor. Such limited preparation is unlikely to even slow down a powerful com petitive threat. “To succeed against new competitive threats, brand teams need to take a systemat ic, integrated approach to counterlaunch planning,” Dr. Bernard says. “This approach incorporates three key phases: analysis, simu lation, and planning. The analysis phase is designed to assess external market factors and internal corporate capabilities to identify potential opportunities and threats. Ideally, this phase should be followed by a competitive simulation, a new version of business war games, to explore and enact these opportuni ties and threats. The planning phase captures the key learnings from the first two phases and outlines an integrated set of counterlaunch strategies and tactics.” Surprisingly, many companies only ana VIEW on counterlaunches lyze the competing launch product, Dr. Bernard says. They will typically evaluate a competitor’s product strategy, positioning, messaging, and key tactics, particularly sales force numbers and deployment. This method ology severely limits a company’s field of vision and misses the critically important interdependencies among the competitors, stakeholders, and other market forces. More over, it fails to incorporate a company’s own strengths and weaknesses relative to the com petitor and the market. A more comprehensive approach includes both an external market assessment and an internal corporate analysis. The external assessment consists of a com petitive analysis, a stakeholder analysis, and a market analysis. The competitive analysis should include not only the evaluation of a competitive product’s clinical profile and launch plans, but also a profile of the compet ing company. What are the historical tenden cies of the competing company? How does it typically launch, position, message, and target its products? For example, some companies consistently seek to reshape the market to set the stage for their products; other companies focus on clinical, marketing, or pricing differ entiation; others try to overwhelm their com petition with huge promotional outlays and larger salesforces. Some pharmaceutical companies will eval uate how traditional stakeholders, such as physicians, consumers, and payers, will respond to the launch of a competitive prod uct. But there are many additional stakehold ers who may influence the adoption, use, per ception, or pricing of a launch product. Depending on the products and markets, these stakeholders may include key opinion leaders, healthcare professionals other than physicians, the media, politicians, patient advocacy groups, distributors, and others. Market factors, such as recent regulatory changes or technological developments, may also play a role in the launch of a competing PHARMACEUTICAL EXECUTIVES ANDMARKETERS SHOULDADOPTTHEMINDSET THATTHEBEST DEFENSE IS AGOODOFFENSE. They need to select the best team,process, and plans for counterlaunching. 0408 Layout FINAL MW 3/21/08 11:45 AM Page 81 THE FORUM FOR THE INDUSTRY

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