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Ersnt & Young Pharma 3.0 Business Model

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Ersnt & Young Pharma 3.0 Business Model

  1. Pharma 3.0 Life Sciences Network Basel, 20 May 2010 Frank Kumli
  2. Agenda ► Ernst & Young – Global Life Sciences Center ► Business model transformation ► Pharma 1 0 to 3.0 1.0 3 0 ► Pharma 3.0 ► non-traditional collaborations ► business model innovation ► execution Page 2 Progressions: Pharma 3.0
  3. Who we are Page 3
  4. Ernst & Young’s major lines of business Performance improvement: External audit: ► Finance and performance Financial accounting advisory service: management ► Audit of financial statements, statutory ► IFRS conversions and support ► Supply chain accounts and pension Risk: ► IPO readiness ► Customer funds ► Business process controls auditing ► Accounting support for due diligence ► Controls and process remediation ► Change management services ► Information systems security, ► IT advisory ► Accounting control / process support controls and governance ► Real estate asset planning and External Fraud investigation and dispute services: optimization audit ► Marketing, sales and research compliance Performance ► IT Risk improvement assessments and reviews Financial accounting ► Electronic discovery and document retention advisory ad isor ► Government investigations service IT risk: Risk ► Compliance gap analyses ► IT risk management ► Internal fraud investigations ► Application controls and security Advisory Assurance Fraud investigation ► Litigation and arbitration support IT risk ► Information management and analysis and dispute ► Brand protection, counterfeiting, diversion and services gray markets Client relationships Commercial and financial due Business and indirect tax services: Commercial diligence: Business and financial ► Annuity tax provisioning/ tax accounting and indirect due diligence ► Market and industry research calculations tax services Tax Transaction ► Validation of strategic assessments ► Business tax advisory ► Corporate strategy assessment ► Income tax compliance Transactional International integration ► Assessment of sustainable earnings ► Customs and international trade advisory tax services ► Analysis of key revenue and cost ► VAT/sales tax advisory and compliance drivers Human Valuation capital it l International tax services: Transactional integration: ► Cross boarder corporate tax advisory Human capital: ► Synergies analysis and investment requirements ► Transfer pricing ► Global mobility tax and Valuation: documentation and advisory administration services ► Assess impact to forecast ► Business valuation services ► Assess integration challenges, risks ► Supply/distribution chain ► Global equity advisory compensation planning ► Tangible/intangible asset valuation and resolution strategies and compliance services ► Performance and rewards ► Accretion/dilution analysis Page 4
  5. Ernst & Young’s Global Life Sciences sector The Global Life Sciences sector brings together a worldwide team of professionals with deep industry and technical experience in providing assurance, tax, transaction and advisory services. Our goal: to position Ernst & Young as the trusted advisor for our life sciences priority accounts and their key executives by our active involvement assisting teams to execute for success in their transitions and transformations. Ernst & Young’s Global Life Sciences area contacts As an industry sector center we focus resources on the following Global Pharmaceutical Sector Leader Carolyn Buck Luce key priorities: Global Biotechnology Sector Leader Nordics Glen Giovannetti Denmark Benny Lynge Sorensen ► Building internal and Sweden - Björn Ohlsson Life Sciences EMEIA Leader external networks of key Patrick Flochel Norway - Willy Eidessen y y Finland - Timo Virkilä opinion leaders of the life sciences industry Netherlands Belgium Jules Verhagen Thomas Sileghem CIS Dmitry Khalilov United Kingdom ► Assist our accounts to Pamela Spence/ Germany Elia Napolitano/ Chad Whitehead* provide industry trends and Canada Ireland Siegfried Bialojan* identify appropriate Paul Karamanoukian Edwina Fitzmaurice/ Nick Redmond Redmond* Austria Isabella Schwartz-Gallee/ Korea Yong Sup Hyun* resources globally l b ll Switzerland Erich Lehner* Japan Patrick Flochel/ Poland Hironao Yazaki Mariusz Witalis ► Providing industry relevant United States Carolyn Buck Luce/ Jürg Zürcher* thought leadership and Glen Giovannetti* France Virginie Lefebvre/ CESSA Magdalena Soucek attending or speaking at Mexico Pascale Augé * Turkey Erdal Calıkoglu Frederico Aguilar industry events Southeast Europe Hong Kong/China Spain Themis Lianopoulos Francis Lai/ ► Creating l C ti relevant t Manuel Gi lt H M l Giralt Herrero Cherrie Che* Israel knowledge and learning Italy Yoram Wilamowski Lapo Ercoli programs for Ernst & Young Brazil Singapore Jose Francisco Compagno Swee Ho Tan India professionals Hitesh Sharma Australia ► Solutions development to New Zealand Winna Brown Jon Hooper meet emerging client needs Centers: New Jersey, Boston and Basel * Biotechnology Page 5
  6. Thought Leadership - Life Sciences Annual Reports Surveys Progressions Pharma 3.0 Pharmaceutical Companies and working capital management ► Global pharmaceutical report ► Survey on working capital performance and strategies Business Risk Report 2009 Life Sciences ► Life Sciences focus within the Global Risk Survey Beyond Borders ► Global biotechnology report 2009 global pharma associations sales and marketing code matrix for US and EMEA Pulse of the Industry ► synopsis of selected pharmaceutical ► Global medtech report industry guidance Technical Reports National Reports Prescriptions series Swiss Biotech Report 2009 ► Series of articles on Life Sciences topics Biotech in Denmark 2008 bio*link and medtech*monitor series ► Series of articles on biotechnology and German Biotech Report 2009 medtech topics The Smoke Detector® report ► Series of summarized compilation on Life Sciences topics Page 6
  7. Pharma 3.0 Page 7
  8. Progressions: Pharma 3.0 Global pharmaceutical report 2010 Bayer Meets Nintendo as Drugmakers Seek New Routes to Customers Pharmas Must Tie with Techs February 11, 2010 Medicines not working? There's an app for that PharmaTimes Ernst & Young Puts the Spotlight n Pharma 3.0 Pharma needs to work with non- t ad t o a partners traditional pa t e s to su survive e Pharma Turns to Tech for Marketing Aid Report: Future Drugmakers Must also Deliver Healthy Outcomes Daily Finance Pharma 3.0: Drug Companies Slowly Adapt t the N Ad t to th New T h World Tech W ld Drugmakers look to collaborate with nontraditional partners Pharma 3.0 - Drug Makers Must Adapt To An Outcomes-Focused World, E&Y Reports And the Future for Pharma Looks Like…. ► Based on interviews with 30 executives from the Key themes pharma industry and from “non-traditional” players ► Features quotes from numerous executives and ► Changing ecosystems: Pharma 3.0 over 100 company examples ► Worldwide launch at The Economist Conference, ► Emerging business models London ► Building the future business via innovative collaborations Page 8 Progressions: Pharma 3.0
  9. Pharma 3.0 From drugs to healthy outcomes Drivers of ► R&D productivity ► Health care reform change ► ► Patent cliff Globalization ► ► Health IT Consumerism ► Demographics ► Value mining ► Pricing & reimbursement Business Models Value Pharma 1.0 Pharma 2.0 Pharma 3.0 p p proposition Blockbuster drugs g Diversified drug portfolios Healthy outcomes Customer Payor Physician Patient Page 9 Progressions: Pharma 3.0
  10. Progressions 2008 Pharma 1.0 to 2.0 Patents The R&D productivity Pricing pressure science Personalized medicine Compliance commitments The Globalization customer Customer redefinition The Products vs. services Reduced growth Impact of offer Building brand hange Margins squeezed The ch Reputation in decline Talent pipeline people Celebrating diversity The Enterprise vs. extraprise R&D productivity organization Alternative business models Commercial structure The Return vs. revenue Customer relationships value created Financial strategy Risk management gy Page 10 Progressions: Pharma 3.0
  11. Pharma 2.0 Four strategic pillars Emerging markets Commercial models Product i P d t innovation ti Product di P d t diversification ifi ti Page 11 Progressions: Pharma 3.0
  12. Pharma 2.0 Emerging markets: growth gap The growth gap Pharmerging and tier-2 emerging markets will contribute three quarters of global growth in 2009 Mature Pharmerging Tier-2 Tier 2 emerging Rest of world 100% 9% 10% 10% 11% 90% 17% 2009 market share, US$ 5% 6% 9% 7% 80% 11% 10% 22% Rest of world 70% 19% Tier-2 12% 21% emergin 60% g 6% 50% Pharmerging 11% 51% Mature 40% 79% 73% 71% 30% 61% 52% 20% 10% 16% 0% 2001 2003 2005 2007 2009(f) Source: IMS Health, Market Prognosis, March 2009 Page 12 Progressions: Pharma 3.0
  13. Pharma 2.0 Tailoring commercial models to market Moving towards differentiated „geo-tailored“ commercial models with a tailored value proposition for each market and customer Optimizing resources to address all key stakeholders Integrated key account model in restrictive markets; traditional sales force in open markets I t t dk t d li t i ti k t t diti l l f i k t Share of field force KAM, local manager Pricing, listing Field force ► multibrand ► brand, multibrand Information Value Influencers* Geo-tailored Physician Tools approach proposition Training Pricing • volume • outcome Payors • value Pharma Risk sharing Managed Care Communication E-tools Patient Information Programs Compliance programs Training Retail *employers, providers, academia, government Page 13 Progressions: Pharma 3.0
  14. Pharma 2.0 Innovation ► Targeting new disease areas ► Personalized medicine ► Creating more market-driven pipelines ► Restructuring R&D units to allow greater autonomy ► Splitting up Splitting-up large, monolithic organizations into smaller units ► Virtualization. Incorporating niche players to stimulate innovation, share risks and reduce costs 1.Represents cAGR2008 2013 1 Represents a cAGR2008-2013 2.lndicates probability of entry of generics in the segment Source: Datamonitor, New Approaches to Pharma R&D Page 14 Progressions: Pharma 3.0
  15. Pharma 2.0 Diversification J&J Business line diversification GSK GSK Novartis Pfizer Novartis Sanofi Wyeth y Sanofi Pfizer BMS s Pfizer Roche Astra Astra Roche Zeneca Zeneca BMS Geographic diversification 2006 Target g Source: Societe Generale: Pharmaceuticals Beyond the crisis Page 15 Progressions: Pharma 3.0
  16. Pharma 3.0 From drugs to healthy outcomes Drivers of ► R&D productivity ► Health care reform change ► ► Patent cliff Globalization ► ► Health IT Consumerism ► Demographics ► Value mining ► Pricing & reimbursement Business Models Value Pharma 1.0 Pharma 2.0 Pharma 3.0 p p proposition Blockbuster drugs g Diversified drug portfolios Healthy outcomes Customer Payor Physician Patient Page 16 Progressions: Pharma 3.0
  17. Pharma 3.0 Health outcomes as currency for health care systems Consumerism ► Health literacy ► Empowerment Health care reform ► Access Health Health IT ► Rebates/discounts ► Digital data ► Value-based approach outcomes ► Social data ► Health H lth IT ► Mobile health Value mining ► Value-based P&R ► Comparative effectiveness ► Risk-sharing g agreements Page 17 Progressions: Pharma 3.0
  18. Pharma 3.0 From drugs to healthy outcomes Drivers of ► R&D productivity ► Health care reform change ► Patent cliff ► Health IT ► Globalization ► Consumerism ► Demographics D hi ► Value i i V l mining ► Pricing & reimbursement Business Models Value Pharma 1.0 Pharma 2.0 Pharma 3.0 proposition Blockbuster drugs Diversified drug Healthy outcomes portfolios Customer Payor Physician Patient Page 18 Progressions: Pharma 3.0
  19. Pharma 3.0: non-traditional collaborations Page 19
  20. Pharma 3.0 The healthy outcomes ecosystem Providers IT Information Physicians companies Social media CROs Academia Health records Medical Pharma Patients technology Telecom Biotech Med device Governments Food Insurers Retailers Consumer electronics Pharma 1.0 (drugs) Pharma 2.0 (diversified drug portfolios) Pharma 3.0 (outcomes) Page 20 Progressions: Pharma 3.0
  21. Pharma 3.0 is happening - eHealth Mondobiotech – 23 and me Novartis – Proteus Biomedical Source: www.ft.com Source: www.23andme.com Bayer - Ni t d B Nintendo UCB – patientslike me i lik Source: www.bayerdidget.co.uk/ Source: www.patientslikeme.com Page 21 Progressions: Pharma 3.0
  22. Pharma 3.0 Delivering on health outcomes Building communities Expanding products ► UCB — PatientsLikeMe ► Pfizer — Aurobindo Developing technologies Developing technologies ► Lifescan (J&J and A l ) Lif d Apple) ► Novartis — V d f N ti Vodafone — IBM Measuring outcomes Innovative distribution ► Fresenius Medical Care ► Novartis — Indian Post Office Managing patient outcomes Expanding access ► Driving compliance ► Underserved markets ► Health care delivery ► Emerging markets ► Patient stratification ► Uninsured populations Health outcomes Meeting unmet medical needs ► Complex indications ► Underserved medical fields Leveraging data Public-private partnerships Partnership with payors ► MondoBiotech — 23and Me ► GSK — Global TB alliance ► Novartis — NICE Optimizing R&D R&D risk sharing Creative financing ► GSK — Pfizer ► Eisai — Quintiles ► Eli Lilly — TPG-Axon Capital — Novaquest (a division of Quintiles) Orphan d O h drugs Pre-competitive R&D P titi ► Pfizer — Protalix ► Enlight Biosciences Page 22 Progressions: Pharma 3.0
  23. Pharma 3.0: business model innovation Page 23
  24. Scenario planning Deal simulations Deal A Deal B Partners InfoTechCo PharmaCo InsuranceCo DirectSalesCo PharmaCo FoodCo Understanding of Platform Sales forces Drug portfolio Broad product Resource Drug portfolio risk Personal health Customer intimacy Efficacy insights portfolio capabilities Efficacy insights Patient records and reach Nutrition insights stratification Health outcomes Health outcomes Value Enabling Enabling outcomes/ propositions outcomes access Patients Patients Customers C t Payors Payors P Governments Governments “While high-level business models are easily articulated, the discussion around the execution of the deals reveals a high level of complexity. What creates more value? And what provides more value over time? Who owns the intellectual property?” Source: Ernst & Young 2010 Page 24 Progressions: Pharma 3.0
  25. Business model innovation Commercial trials Commercial trials Stickiness High margins and success of current model make large leaps difficult Pilots Rapid To explore business prototyping opportunities Commercial trials will need to be fast and efficient Upside Unchartered territory Business model Difficulty and risk of developing new offerings innovation has the from scratch with unknown partners Open innovation Flexible control potential for considerable Use of external Alliances structures upside (e.g. compliance) networks that allow quick response to new challenges and opportunities Changing ecosystem Current ecosystem is changing rapidly in Portfolio management unprecedented and unpredictable ways Optimize network value “How do you actually go about the building of new business models from the ground up? How do you pick the right strategies and experiments for your company when the very ecosystem in which you operate is changing in unprecedented, and unpredictable, ways?” Page 25 Progressions: Pharma 3.0
  26. Commercial trials From strategy to commercialization Drug development pt Therapeutic focus Discovery and early y y Late development p Commercialization ct Proof of concep Disease areas s pproved produc development Number of leads P Ap New busine model gments oncept Number of ideas ess Proof of co Market seg Pilots and Scale-up and Strategic/risk assessment Market assessment partnerships larger partnerships Business model development B i d ld l t I. Strategic focus II. Proof of concept III. Development IV. Commercialization Areas and business Ideas that work in Most promising pilots. Service or product models that are a concept. offerings strategic fit for the “Does it work and is it Does “Is it commercially Is “Can it be scaled and Can organization safe?” feasible?” replicated across markets?” Page 26 Progressions: Pharma 3.0
  27. Pharma 3.0: Execution Page 27
  28. Pharma 3.0 Challenges and readiness for executing nontraditional alliances Page 28 Progressions: Pharma 3.0
  29. Challenges every step of the way New ways of partnering Strategy, Accounting Talent and Operations, structure and Due Valuation and financial change Risk supply chain governance diligence and reporting management management management modeling What creates most value? Whose d t is it anyway? data i ? How is success defined? Who owns the intellectual property? IFRS or US GAAP? What are the tax implications? What should the debt and equity mix consist of?? What are the water, power, waste and cleantech approaches? Page 29 Progressions: Pharma 3.0
  30. Guiding principles for Pharma 3.0 Define Co-create Experiment. Prepare your Pharma 3.0 value with partners Think small. Fail fast. for success. Brand and patients patients. The ecosystem is More than ever, There is no one Our survey and becoming more firms will need to right answer. interviews complex. complex combine unique Companies will indicate that Incentives are assets and develop solutions pharma changing. New, attributes to build by experimenting companies aren’t nontraditional relevant offerings with large fully prepared for players are for the healthy numbers of the challenges entering. outcomes “commercial trials” that these ecosystem. — and culling creative new those that don’t alliances will work. bring. Page 30 Progressions: Pharma 3.0
  31. Contact Details Dr. Frank Kumli, MBA Business Analyst - Global Life Sciences Center Tel +41 58 286 86 37 Mobile +41 58 289 86 37 Fax +41 58 286 83 60 Email frank.kumli@ch.ey.com E il f k k li@ h Page 31 Progressions: Pharma 3.0
  32. Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 130,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people our clients and our wider people, communities achieve potential. For more information, please visit www.ey.com. © 2010 Ernst & Young - all rights reserved. Proprietary and confidential. Do not distribute without written permission.