The Connecticut Economy: Outlook and Issues for the Pharmaceutical Industry in Connecticut Moderator: Paul R. Pescatello, President & CEO of Connecticut.

The Connecticut Economy: Outlook and Issues for

the Pharmaceutical Industry in Connecticut

Moderator: Paul R. Pescatello, President & CEO of Connecticut United for Research Excellence (CURE)

Panelists: Michael Davis, Associate Director State Government Affairs, Boehringer Ingelheim Pharmaceuticals

Susan Froshauer, President & CEO Rib-X Pharmaceuticals, Inc.

Ricardo Orchoa, Executive Director, Pathology, Pfizer Global Pathology Leadership Team

The Connecticut Convention Center, HartfordFriday, September 9, 2005

• CURE, as an educational organization and trade association, seeks to foster connectedness among pharma companies, biotech firms, colleges & universities, and firms that help core members do business, especially R&D.– Represent the biotechnology and pharmaceutical sectors

before the state legislature and policy makers– Build a critical mass of biotech and pharmaceutical

companies– Foster relationships between academic and industry

research that lead to technology transfer– Be the “go to” source for information about bioscience in

Connecticut

CURE Mission

The Mission, distilled

• Lobbyist

• Critical mass

• Tech transfer

• Resource

Often, the same thing

At Capitol and/or with news media/opinion makers

To companies for state economic development efforts

–Build student interest in science–Relay new scientific techniques to educators

–Show how bioscience is relevant

–Show students bioscience careers other than M.D. and nursing programs

CURE

&

The

BioBus

Programs

Since 2001*:

•318 schools visited

- 75 schools this year

•1,349 experiments

•24,000 students taught

•572 teachers trained

•123 community events

•16,000 people visited

Connecticut’s BioBus Program Statistics

*includes BioConnection

Expanding the Reach: BioConnection

• Launched March 2004• Pilot year funded by

Education Dept. grant and assistance of Rosa DeLauro

• 3 equipment modules loaned to schools for 2 weeks, independent of BioBus

• 4,900 students taught

CURE as BioScience Industry Info Source

• Monthly e-newsletter– Company news– Bioscience industry trends, news and profiles– Upcoming events

• CURE monitors & evaluates best practices in other states & regions

• CURE: the source for lists of bioscience VC’s, biotech and biomedical firms in the state

• Annual Economic Report surveys health of bioscience industry in CT

Recent CURE Events

• 5/18 Capitol press conference: drugs

• 6/17 Guest on CPTV’s “On the Road”

• 6/15 Rell stem cell bill signing

• 6/19 BIO events in Philadelphia

Upcoming CURE Events

September 28

• CURE Annual Meeting at CT Convention Center– Sir Harold Evans speaking– Volunteers recognized– Part of Alliance for Technology event– CURE award to be presented to Governor Rell

• CURE bioscience supplement in CT Business

2005 Legislation Agenda

• Embryonic stem cell research safe haven• Institute rebate to biotechs for half the

amount of personal income taxes paid by any new employee added each year

• Extend same degree of benefits to partnerships, LLPs and LLCs

• Regulation and business taxes: make more rational, user-friendly, transparent & efficient

• Enhance state capital investment in biotech start-ups -- less risk averse

Bioscience Sector in CT2004 Report Card

• R&D Spending: up 7% to $4.4 billion– Up 45% over 5 years

• CT Operations Spending: up 2% to $6.2 billion– Up 178% over 5 years

• Employment: down 1% to 18,086– Up 20% over 5 years

• Lab Space: down 1% to 5.6 million square feet– Up 8% over 5 years

• BioScience Job Multiplier: 3.30 vs. 2.38 (insurance); 2.90 (aircraft); 2.40 (construction); 2.28 (telecommunications; 1.30 (restaurants)

CT Bioscience R&D Spending

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

R&

D S

pen

din

g in

$ B

illio

ns

CT Bioscience Employment

0

4000

8000

12000

16000

20000

1996 1997 1998 1999 2000 2001 2002 2003 2004

YearR&D Employees

All Employees

Connecticut Lab Space – Growth

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Year

Sq

ua

re f

ee

t

Biotech

University

Pharma

Bioscience

• Jobs Multiplier highest of any industry sector

Healthy Financing Window

2003 & 2004 CT Biotech Financings

-50

0

50

100

150

200

250

300

350

400

2003 2004

Year

$ R

ais

ed

in

mil

lio

ns

$185.4M

$433.25M

New Connecticut Biotechs

Pharmaceuticals, Inc.

Bringing US & EU mid-tier and niche drugs to the untapped Chinese market

Marinus Pharmaceuticals, Inc.

Pursuing the discovery, development and in-licensing of pharmaceuticals, with an initialfocus on neuropsychiatric diseases

RainDance Technologies, Inc.

A microfluidics startup company working at the interface of biology, fluidics, and optics

In-licensing, developing & commercializing novel cancer drugs

Commercializing a proprietary automated molecular imagingtechnology for tissue and tissue microarrays

Providing preclinical drug development consulting, project management and contract research

VICUS BIOSCIENCE, LLC

Providing life science technologies with dual use for military and civilian populations

2005 Legislative Report Card

• Landmark stem cell legislation passed

• R&D Tax Credit Exchange program and NOL protected

• Pharma unfriendly legislation dies

Messages . . . Location, location, location . . .

Messages . . . The Clarity of Voice of Other Clusters

CT vs San Diego County

ConnecticutSan

Diego

State House Members 168 8

State Senate Members 36 4

U.S. House Representatives

5 5

Messages . . .

Reimportation =

Symbol for high cost of health care

Side effect worse than cure:

– Importation of price controls

– Innovation stagnation

(Current) Canadian Drug Supply Impossibly Small to Have a Real Impact in the US

Source: Year: 2001. IMS (sales, US prescriptions); Epsicom Business Intelligence (Canada prescriptions)

0%

25%

50%

75%

100%

Total Sales Total Prescriptions

U S C an ada

Canadian Market Relative to US MarketCanadian Market Relative to US Market

$170 billion

$6.5 billion

> 3 billion

280 million

Message . . .

Healthcare costs are rising.

– But share of healthcare dollar attributable to medicines has held steady at 10%

U.S. Annual NationalHealth Care Spending

$1.6 TRILLION$1.6 TRILLION

1.41.4

1.21.2

1.01.0

0.80.8

0.60.6

0.40.4

0.20.2

00‘‘6565 ‘‘7070 ‘‘7575 ‘‘8080 ‘‘8585 ‘‘9090 ‘‘9595 ‘‘0000 NOTE: 2001 AND 2002 DATA PROJECTEDNOTE: 2001 AND 2002 DATA PROJECTED

RESEARCH AND CONSTRUCTIONRESEARCH AND CONSTRUCTION PERSONAL MEDICAL EQUIPMENT PERSONAL MEDICAL EQUIPMENT AND NON-PRESCRIPTION DRUGSAND NON-PRESCRIPTION DRUGS

NURSING HOME AND HOME NURSING HOME AND HOME HEALTH CAREHEALTH CARE

PRESCRIPTION DRUGSPRESCRIPTION DRUGS

NET COST OF PRIVATE HEALTH NET COST OF PRIVATE HEALTH INSURANCE, ADMINISTRATIVE COSTS, INSURANCE, ADMINISTRATIVE COSTS, AND PUBLIC HEALTH PROGRAMSAND PUBLIC HEALTH PROGRAMS

HOSPITAL CAREHOSPITAL CARE

DOCTORS, DENTISTS, AND OTHER DOCTORS, DENTISTS, AND OTHER PROFESSIONAL SERVICESPROFESSIONAL SERVICES

Source: Health And Human Services DepartmentSource: Health And Human Services Department

Centenarians in US Population

300300

250250

200200

150150

100100

5050

0019001900 19201920 19401940 19601960 19801980 20002000

Source: Caplow, Theodore, et al. The First Measured Century, Wash DC: AEI, 2001:9; PfizerSource: Caplow, Theodore, et al. The First Measured Century, Wash DC: AEI, 2001:9; Pfizer

Number Per MillionNumber Per Million

Year 1900 Year 1900 46 Centenarians46 Centenarians

Year 2000Year 2000262 Centenarians262 Centenarians

Medicines Have Extended LivesDrop In Death Rates For Diseases 1965-1996

57%

62%

72%

74%

21%

0% 20% 40% 60% 80%

57%

62%

72%

74%

21%

0% 20% 40% 60% 80%

Statins, ACE inhibitors, beta blockers, nitratesStatins, ACE inhibitors, beta blockers, nitrates

H2 blockers, proton pump inhibitorsH2 blockers, proton pump inhibitors

ACE inhibitors, beta blockers, nitratesACE inhibitors, beta blockers, nitrates

Anti-Inflammatories, bronchodilatorsAnti-Inflammatories, bronchodilators

Anti-Hypertensives, Anti-Hypertensives, diureticsdiuretics

AtherosclerosisAtherosclerosis

Ulcer of Stomach Ulcer of Stomach and Duodenumand Duodenum

Ischemic Ischemic Heart DiseaseHeart Disease

EmphysemaEmphysema

HypertensionHypertension

DEATH RATEDEATH RATE

Source: Lasker/Funding First; PfizerSource: Lasker/Funding First; Pfizer

DiseaseDisease TreatmentTreatment

Growing Access

C om ponents o f O verall D rug Spending G row th , 1993-2001

Utilization Increases

77%

Price Increases23%

Key Drivers of Volume Growth,1993-2001

• Over 280 new drugs, many that address previously untreated or undiagnosed conditions • US median age increased by over 2 years, increasing demand for all health care services, including drugs• Expert and government panels recommended expanded utilization for new populations• Consumer awareness of treatment options increased dramatically as information sources became more accessible (eg Internet health sites, DTC ads)

Source: IMS, CMS; utilization increases include volume growth and new product introductions

Drug Development - A Risky and Expensive Proposition

Source: Tufts Center for the Study of Drug DevelopmentSource: Tufts Center for the Study of Drug Development

5,000–10,000Screened

5,000–10,000Screened

250Enter Preclinical

Testing

250Enter Preclinical

Testing

5Enter

Clinical Testing

5Enter

Clinical Testing

1Approved by

the FDA

1Approved by

the FDA

Compound Success Rates by Stage

Compound Success Rates by Stage

16

14

12

10

8

6

4

2

0

Phase II100–300 Patient Volunteers Used to Look for Efficacy and Side Effects

Phase II100–300 Patient Volunteers Used to Look for Efficacy and Side Effects

Phase III1,000–5,000 Patient Volunteers Used to

Monitor Adverse Reactions to Long-term Use

Phase III1,000–5,000 Patient Volunteers Used to

Monitor Adverse Reactions to Long-term Use FDA Review ApprovalFDA Review Approval

Additional Post-marketing

Testing

Additional Post-marketing

Testing

Phase I 20–80 Healthy

Volunteers Used to Determine Safety and

Dosage

Phase I 20–80 Healthy

Volunteers Used to Determine Safety and

Dosage

Preclinical TestingLaboratory and Animal Testing

Preclinical TestingLaboratory and Animal Testing

Discovery(2–10 Years)

Discovery(2–10 Years)

YearsYears

Net Cost: $802 million

invested over 15 yrs

Impact of Drugs on Spending and Mortality for HIV/AIDS

Source: Costs - Bozette et al., New England Journal of Medicine Vol. 344, No. 11, March 15, 2001; Mortality - Centers for Source: Costs - Bozette et al., New England Journal of Medicine Vol. 344, No. 11, March 15, 2001; Mortality - Centers for Disease Control; data on drug development from PhRMA and the NIH Office of Technology transfer; Pfizer.Disease Control; data on drug development from PhRMA and the NIH Office of Technology transfer; Pfizer.

HIV Mortality Declined Dramatically HIV Mortality Declined Dramatically after Introduction of First after Introduction of First

“Expensive” Antiretrovirals . . .“Expensive” Antiretrovirals . . .

0

3

6

9

12

15

18

82 86 90 94 98

Year

Dea

ths

per

100

,000

P

op

ula

tio

n

First new Drugs First new Drugs Introduced, 1995Introduced, 1995

Highly Active Highly Active Antiretroviral Antiretroviral Therapy (HAART) Therapy (HAART) introduced, introduced, 1996-971996-97

Total: $1804Total: $1804

Total: $1521Total: $1521

Drug Drug Costs Costs IncreaseIncrease by 34%by 34%

Other Other Costs Costs DecreaseDecrease by 41%by 41%

. . . While Monthly Costs for AIDS . . . While Monthly Costs for AIDS Patients Decreased by 16% after Patients Decreased by 16% after

HAART IntroducedHAART Introduced

What are we really talking about?

An international relations/trade issue.– Motivating other developed economies to pay more for

the R&D that makes up the price of prescription drugs

– Figuring out a way to spread the cost of healthcare across the entire population

Hint #1: Greatest cost components of healthcare are the 1st and last six months of lifeHint #2: The annual tab for a daily cup of Starbucks is $1,003.75