Risk Sharing in
Drug Development
September 15, 2011
at BIOCOM
1
Agenda
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Opening Comments:
– Taylor J. Crouch, CEO eStudySite
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Risk Sharing in Patient Recruitment
– Richard “Rick” Malcolm, Ph.D., CEO Acurian
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Program and Company Level Risk Sharing with a CRO
- Thanos Maroglou, Ph.D., Chief Business Officer, Cato Bioventures
Richard “Rick” Malcolm, Ph.D., CEO Acurian
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22 years in healthcare management
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CEO Acurian Inc.
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VP Business Development, ICON Clinical Research
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GlaxoSmithKline:
– Numerous roles in marketing, multiple disease areas
– Head of SBCL Clinical Trials (now Quest Central Labs)
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Management and consulting for The Medicines Company and
Neutris Pharmaceuticals
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B.S. in Microbiology from University of Michigan
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Ph.D. in Pharmacology from USC
Thanos Maroglou, Ph.D.,
Chief Business Officer, Cato Bioventures
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26 years experience in large and small life science companies
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Specializes in building high-performance companies from start-up ventures
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Chief Business Officer, Cato Bioventures
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Symphonia Partners, Dr. Maroglou’s business consulting practice
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Managed or co-founded 8 start-ups with multiple profitable exits
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Multiple roles at DuPont
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Over $1 billion in deals throughout career
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B.Sc. and Ph.D. in Chemical Engineering from the University of
Birmingham, UK
TJC Career Map
Research/Discovery
Development
Commercialization
Pfizer (Mgmt)
Tylyx (CEO)
Ictus (CEO)
Drugs
Schering-Plough (Mgmt)
Ligand (President Int’l)
Variagenics (CEO)
Technologies
Bruker BioSciences (Board)
Discovery Partners
Services
(President/COO)
eStudySite (CEO)
National Research Inst. (Board)
Parexel (SVP)
ESS Business Model
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Dedicated research clinics adjacent to large partner hospitals
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Collaboration agreement provides access to:
– Emergency department patients
– In-patients
– Support services (pharmacy, labs, radiology, etc.)
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Leading enroller in infection studies (skin, pneumonia, influenza,
hepatitis C, vaccines, other infection)
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Outstanding track record in acute and chronic disease studies
including infection, cardiovascular, vaccine, diabetes, pain,
respiratory
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Major sites throughout San Diego and Las Vegas
6
ESS Sites: San Diego
Tri-City Medical Center
ED Census 65,000/year
Sunrise Medical
Las Vegas
ED Census 110,000/year
Palomar/Pomerado
ED Census 100,000/year
Sharp Grossmont
ED Census 110,000/year
Sharp Coronado P1B Unit
Sharp Chula Vista
ED Census 50,000/year
Risk-Sharing
Sharing only risk is not a
good proposition
And… you cover our pension
and healthcare liabilities…
Risk and Reward Sharing
Risks
Rewards
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Performance (patients, data)
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Funding
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Quality (evaluability)
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Milestones and Incentives
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Time
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Equity
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Results (efficacy, safety)
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Royalty
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Mutually Aligned Objectives
Risk-Reward Continuum
Fees
Incentives
Milestones
Equity Royalty
“CRO Classic”
Fee For Service
“CRO Turbo”
Metric Incentives
CRO/Biotech Hybrid
Program Incentives
Biotech/CRO Hybrid
Molecule Incentives
Biotech/Pharma
Commercial Incentives
CROs Already Take Significant Risk
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Fixed/Variable Staffing: Just in time, trained staff
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All projects are “highest” priority
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Bidding process encourages “best case” pricing and plans
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Service companies need to pay their bills on time regardless of
project risk
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CRO profit margins only 5-15% when WELL RUN
 There’s very little room for operational or financial risk
Drug Development Cash Flow
Investigator Sites
Pharma/Biotech risk:
• 50% of sites never enroll a
patient
• 20-30% of sites enroll 80% of
patients
• Non-performing sites still cost
start-up and monitoring
expenses
• Pharma-Investigator
relationship is important asset
Site Cash Flow Risk:
• Typical contract proposal is
payment upon completion of
monitoring
• Patient completed day 30
• Monitor reviews data day 60
• Client approves payment day 90
• Finance makes payment day 120
• Site paid staff day 15 and 30
• Sites provide biotech/pharma a
cash flow loan of 90-180 days
for approx. 35% of the cost of
drug development!
CROs and Venture Risk: Examples
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Cato Bioventures
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Quintiles: Triangle; Medicines Company
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PPD: Furiex
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Discovery: Pharmacopeia, Millennium, Ligand, etc.
Mutually Shared Objectives
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•
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New market entry
– Parexel/Searle Japan
– eStudySite: Early access research sites
Transfer of fixed capacity to variable capacity through “sale lease-back”
– Quintiles: MMD, Syntex
– Covance: Lilly, Sanofi-Aventis
Shared resources
– Most Biotech/Pharma alliances (also Academia-Pharma)
Access to new technologies
– Electronic data capture
– Imaging technologies
– eStudySite: Finding blood from a stone