Keynote Session:

How Can Japan Contribute More to Facilitate Global Development?

The 11th Kitasato University-Harvard School of Public Health Symposium

ISAO TESHIROGI, Ph.D. President

Japan Pharmaceutical Manufacturers Association (JPMA)

September 27, 2011

1

Today’s Topics

1. Current Status of the Japanese Pharmaceutical Industry

2. Status of Global New Drug Development

3. What Can Japan Do to Promote Global Drug Development?

2

Today’s Topics

1. Current Status of the Japanese Pharmaceutical Industry

2. Status of Global New Drug Development

3. What Can Japan Do to Promote Global Drug Development?

3

How Is Japan Going to Survive?

Limited in Natural Resources Excelled Particularly in Intellectual Industry Good Medico-scientific Expertise Available

Further Promotion of Intellectual Industry Imperative

4

Outline of Japanese Pharmaceutical Industry

Number of Companies *1 972

Companies with NHI-listed drugs 403 JPMA member companies (R&D oriented) *6 68

Number of Employees*1 158,663 Ratio to the total employees*2 0.25%

Production Value *3 6,620 YBil Ratio to GDP 1.18% Value of ethical pharmaceutical production 993 YBil （90.5%）

※1： MHLW, FY2007 ※2： Ministry of Internal Affairs & Communications ※3： MHLW, FY2008 ※4： Ministry of Finance, FY2009 ※5： MEXT, FY2009 ※6: as of 1 August 2011

5

Three Industries and Tax Revenues in Japan

Compiled from company balance sheets

億円

Top 10 Pharmaceutical Top 10 Electric Top 6 Automobile

X100 JPYM

2007 2008 2009

A total of corporate, residence and business taxes

6

Japan-Origin Innovative Medicines >500 $mil/drug

5 Products in 1997 20 Products in 2008 Rank Generic name Company Rank Generic name Company

3 Pravastatin Sodium Sankyo 16 Rosuvastatin Calcium Shionogi 8 Famotidine Yamanouchi 17 Pioglitazone Hydrochloride Takeda

15 Leuprorelin Acetate Takeda 21 Candesartan Cilexetil Takeda 29 Lansoprazole Takeda 26 Donepezil Hydrochloride Eisai 30 Diltiazem Hydrochloride Tanabe 30 Aripiprazole Otsuka

31 Lansoprazole Takeda 35 Levofloxacin Hydrate Daiichi Sankyo 39 Sodium Rabeprazole Eisai 41 Tamsulosin Hydrochloride Astellas 49 Olmesartan Medoxomil Daiichi Sankyo 58 Leuprorelin Acetate Takeda 61 Tacrolimus Hydrate Astellas

105 Meropenem Hydrate Dainippon Sumitomo 138 Clarithromycin Taisho Toyama 143 Solifenacin Succinate Astellas 146 Ketoprofen Hisamitsu 153 Pravastatin Sodium Daiichi Sankyo 154 Ｓｅｖｏｆｌｕｒａｎｅ Maruishi 168 Irinotecan Hydrochloride Hydrate Yakult 190 Famotidine Astellas

source : OPIR Source: Office of Pharmaceutical Industry Research, JPMA

20/202

Of 202 NCE’s with value of 500 $ Mil or more in 2008, 20 came from Japan.

7

Japan is #3 in providing NCE’s to the global market; very different from other Asian countries. Environment is improving for discovery research in other countries. There are a limited number of venture firms with new technology in Japan.

出所）医薬産業政策研究所

Can Japan maintain the current standing?

The Number of NCEs by County World Top 100 in 2008

US UK Jpn Switz France Israel Germany Swed Others

8

Where Do “Drug Seeds” Come From? Pharmaceutical vs Venture Companies

Of the NCE’s approved in the US by FDA between 1998 and 2007: 65 products are from pharmaceutical companies 97 products are from venture companies

A majority of post-genome-related IP applications

have been made by venture companies in the US, whereas in Japan and Europe, 70% have been submitted by pharmaceutical companies and only a few % by venture companies.

9

Where Do “Drug Seeds” Come From? Sources of Drug Discovery in the US

Sources： Nature Reviews Drug Discovery

Discovered by Biotech, or discovered by academia and transferred to Biotech or pharmaceutical industry in the same country/region.

Discovered by academia and transferred to biotech industry in the other country/ region

Discovered by small/mid-sized pharmaceutical company

Discovered by big pharmaceutocal company

Robert Kneller, J.D., M.D., M.P.H. PhRMA Weekly Report 2010. 12. 23

US JPN UK GER SWI FRA Other EU

Canada Australia

ROW

Bio-tech

Academia

Pharmaceutical

Drugs total 252

Originator by country

Scientifically innovative

drugs 118

10

International Publications for Basic and Clinical Research Basic Research Journals Nature Medicine Cell J Exp Med

2003 - 2007 #of papers

US 2677 UK 873 Canada 462 Germany 343 France 300 Netherlands 294 Italy 279 Australia 260 Switzerland 252 Belgium 177 Sweden 166 Scotland 145 Spain 141 Denmark 135 China 102 Norway 86 Finland 79 Japan 74 Brazil 67 N Zealand 67 South Africa 61 Poland 60 Austria 57 Israel 51 India 47

Clinical Research Journals New Engl J Med Lancet JAMA

JPMA News Letter No.128 (2008/11) p28

Japan ranks:

# 3 for basic research # 18 for clinical

2003 - 2007 #of papers

US 2674 Germany 442 Japan 369 UK 314 France 269 Canada 204 Switzerland 166 Italy 155 Netherlands 127 Australia 120 Sweden 85 Austria 67 China 53 Spain 53 Belgium 49 Israel 47 Scotland 47 Korea 39 Denmark 28 Finland 20 Brazil 19 Norway 19 Taiwan 16 Ireland 14 Singapore 14

11

Pharmaceutical Export/Import Trend 11

Source: Finance Ministry, Foreign Trade Statistics

Export Import Balance

¥Bil Excellent basic research does not

necessarily lead to successful product development/exportation

↓ Business-academia alliance is

necessary for target molecule setting, discovery research, and then to PoC.

12

61.1 57.8 52.7 67.7 63.7 65.7 77.0

83.1 149.8

195.6 252.2 274.4 286.9 291.0

83.0

87.3

107.1

171.7 183.3

213.4 235.5

29.7

38.1

42.5

66.8 73.2

88.4

101.7

19.1

23.5

20.9

29.4 34.8

42.8

49.1

280.3

362.8

426.8

601.4

644.9

714.8

773.1

0

100

200

300

400

500

600

700

800

1995 2000 2002 2005 2006 2007 2008

（10億ドル） 世界の医薬品市場の推移

出所：IMS World Review 1998-2009

日本

米国

欧州

ｱｼﾞｱ・

ｱﾌﾘｶ・

ｵｾｱﾆｱ

南米

その他

21.8%15.9% 12.3% 11.3% 9.9% 9.2% 10.0%

29.6% 41.3% 45.8%41.9% 42.6% 40.1% 37.6%

29.6%24.1% 25.1%

28.6% 28.4%29.9% 30.5%

10.6% 10.5% 10.0% 11.1% 11.3% 12.4% 13.2%

6.8% 6.5% 4.9% 4.9% 5.4% 6.0% 6.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995 2000 2002 2005 2006 2007 2008

世界の医薬品市場シェアの推移

出所：IMS World Review 1998-2009

日本

米国

欧州

ｱｼﾞｱ・

ｱﾌﾘｶ・

ｵｾｱﾆｱ

南米

その他

Global Pharmaceutical Market Trends Global Market Value Global Market Share (%) $ Bil

Other S.Am Asia Africa Ocea Eur US Jpn

Other S.Am Asia Africa Ocea Eur US Jpn

Source: Office of Pharmaceutical Industry Research, JPMA (Based on IMS Health: Any copy prohibited)

13

Estimated Growth of Pharmaceutical Markets 2008-2013

*1: Eur Top 5 (UK, France, Germany, Italy, Spain) *2: China, Russia, India, Mexico, Turkey, Korea

US

Others

Europe*1 Japan

Emerging Nations*2

Global Market

Size: 325 - 355 $Bil Growth: 2 - 5%

Size: 160 - 190 $Bil Growth: 1 - 4%

Size: 160 - 190 $Bil Growth: 13 - 16%

Size: 97 - 107 $Bil Growth: 1 - 4%

Size: 975 - 1,005 $Bil Growth: 4 - 7%

Size: 185 - 215 $Bil Growth: 5 - 8%

Moving from local to globally standardized NDA package

Source: IMS Health, Sep 2009 (Copy prohibited)

14

Section Summary

Basic science in Japan can be more successful in discovering new drugs.

Clinical development expertise including regulatory science has not yet matured in Japan. Japan-only development does not justify the necessary investment as the isolated market is not large enough to be attractive by itself.

15

Today’s Topics

1. Current Status of the Japanese Pharmaceutical Industry

2. Global Status of New Drug Development

3. What Japan Can Do to Promote Global Drug Development?

16

Status of Global Drug Development Market satisfaction increased, but the

demand for drug safety also increased. The number of patients required for NDA submission data

increased Treatment duration for safety assessment prolonged

Development cost and duration dramatically increased.

In contrast, Success rates from FTIH onward decreased. Needs for biomarker development, appropriate disease modeling

and other novel technologies are apparent.

17

Increasing Development Costs

SOURCE: Windhoven’s in Vivo: The Business & Medicine Report, Bain drug economics model, 2003. Adapted from Figure 2 of FDA whitepaper (Challenge and Opportunity on the Critical Path to New Medical Products, FDA, March 2004)

0

0.5

1

1.5

2

1995-2000 2000-2002

Period

$ B

illio

ns

Discovery Discovery

Phase III/File

Phase III/File Phase II

Phase II

Launch

Launch

PreclinicalPreclinical

Phase IPhase I

CriticalPath

CriticalPath

0

0.5

1

1.5

2

1995-2000 2000-2002

Period

$ B

illio

ns

Discovery Discovery

Phase III/File

Phase III/File Phase II

Phase II

Launch

Launch

PreclinicalPreclinical

Phase IPhase I

CriticalPath

CriticalPath

Discovery Discovery

Phase III/File

Phase III/File Phase II

Phase II

Launch

Launch

PreclinicalPreclinical

Phase IPhase I

CriticalPath

CriticalPath

18

Clinical Timelines and Success Rates

Clinical timelines increasing Success rates deteriorating(2)

Launch Ph I Ph II Ph III

Sub-mit

0

1

2

3

4

5

6

7

8

'60s '70s '80s '90s '00s Cumulative success rate

(Years) Mean clinical development time(1)

1994–

1997 5.6 3.8 1.8 1.2 1 18%

1998–

2000 11.7 6.9 1.9 1.1 1 9%

(1) Tufts Center for Study of Drug Development, DiMasi; E. Schmidt and R. Wong, Nature Reviews, December 2003; CMR data / BCG analysis

(2) CMR data; BCG analysis

Modeled clinical development costs rising from $176M per successful candidate in ‘96-’99 to $340M in ’00-’03

19

Of Total R&D Costs, 75% are Failure Costs

Korn D. and Stanski D.R., (Eds.). Drug development science: Obstacles and opportunities for collaboration among academia, industry and government. Report presented at An Invitational Conference Organized by the Association of American Medical Colleges and the Food and Drug Administration; January 13-14, 2005; Washington, DC.

20

Increase in Success Rate and Improved Development Productivity Mandated

Various Approaches to Increase Success Rate Establishment of animal models reflecting clinical responses Search for biomarkers (using CT, MRI, PET and other diagnostic

modalities) Modeling and simulation Novel technologies to be developed

Promotion of Clinical Development Efficiency Early-phase studies to be done in the region with high

quality basic science and advanced chemistry technology to evaluate developability of molecules

Late-phase studies to be done in geographic areas with an abundance of patients reflecting post-marketing target population

21

Today’s Topics

1. Current Status of the Japanese Pharmaceutical Industry

2. Status of Global New Drug Development

3. What Can Japan Do to Promote Global Drug Development?

22

Policies which can potentially help the pharmaceutical industry in Japan

play a more global role in drug development

Economic Measures Readjustment of corporate tax (R&D cost deduction) Maintenance of “the premium for promotion of new drug

creation” system Readjustment of the remuneration system for invention

Infrastructure Building for Research & Development From basic research to PoC Business-academia collaboration Development of human resources

Globalization of Drug Approval System Development of human resources

Promotion of Development Productivity

23

Net Sales

Pre-tax Income & Minority Interests

Corporate Tax

Net Income

Normal Effective Statutory Tax Rate

Overseas (Average of 10 companies ※１ )

39,212

10,375

2,185

8,936

21.1%

Domestic (Average of 4 companies※２)

11,280

2,081

704

1,350

33.8%

※ Top 10 companies of pharmaceutical products sales overseas (weighted average) in 2009 Top 4 companies of pharmaceutical products sales in Japan (weighted average) in 2009

Comparison of Performance Overseas vs Domestic Pharmaceutical Companies

（1$ mil ）

Source： Office of Pharmaceutical Industry Research NEWS No. 31.2010.10

In Japan, a pre-tax income of 100 YBil would produce a net income which would be 12.7 YBil smaller than overseas. This would not encourage investment in Japan.

Reduction of Corporate Tax Necessary

24

Concept of the premium for promotion of new drug creation and resolution of unapproved drugs/indications

Sales amount Reinvestment to research and development of new drugs and unapproved drugs/indications

Patent period

By maintaining the price (premium pricing) of the forerunner product in the patent period, the resource for next development can be secured earlier, enabling promotion of development of new drugs and unapproved drugs/indications and earlier responses to needs of patients and healthcare professionals.

☆ Acceleration of innovative new drug development

☆ Response to unmet medical needs ☆ Resolution of unapproved

drugs/indications and drug lag

Earlier recovery of research/development costs

Prompt shift to generic product after expiration of patent period

Launch of generic product Time

Current drug pricing system Reformed drug pricing system

Maintenance of attractiveness of the Japan market ↓

Decent prices for innovative new drugs ↓

Maintenance of the “premium for promotion of new drug creation” system

25

United States of America Employers have no obligation to pay any remuneration for employee’s invention (*practically, 120,000 yen – 210,000 yen at employer’s discretion)

Different Schemes for Remunerations to Employee’s Invention

* by Japan Patent Office materials

France Employers have an obligation to pay remuneration for employee’s invention (*Mediation Committee, 150,000 yen – 10,800,000 yen in 1994-1998)

Germany Employers have an obligation to pay remuneration for employee’s invention (*Mediation Committee, 10,000 yen - 2,000,000 yen in 1991-1998)

Japan Employers have an obligation to pay remuneration for employee’s invention (Case laws: 45,000,000 yen - 600,000,000 yen in 2005-2008)

Risks associated with Japan-origin products ↓

The remuneration system should be adjusted

26

26

Utilize state-of-the-art technologies (biomarkers, micro-dosing, PGX) in clinical trials or exploratory studies (PK/PD, POM, POC, DFS) to make Japan the focus of early-phase clinical research and trials.

Establishment of Centers for Clinical Research and Trials

Five sites selected as the centers of early-phase, exploratory clinical research/trials by subsidizing up to 500 YMil for 5 years from FY2011: National Cancer Center Hospital East, Osaka University Medical School Hospital, National Cerebral and Cardiovascular Center, Tokyo University Medical School Hospital and Keio University Medical School (25 July 2011 reported by Nikkan Yakugyo)

27

Human Resource Development by Collaboration of Industry, Government and Academia

Industry Government Academia

Good at science but weak at business

Good at budget but doesn't know the field

Realistic but short-sighted.

Good at clinical but doesn’t know development

Good at development but profit-oriented

Drug Discovery

Drug Development

Good at review but doesn’t know clinical practice

28

Globalization of Regulatory Review System

Increasing the influence of the Japanese regulatory authorities on other regions is essential in improving the standing of Japan in global development of innovative medicines

Fostering experts with decision making ability Promoting the English language proficiency

29

Increase in Success Rate and Improved Development Productivity Mandated

Various Approaches to Increase Success Rate Establishment of animal models reflecting clinical

responses Search of biomarkers (using CT, MRI, PET and other

diagnostic modalities) Modeling and simulation

Promotion of Development Efficiency Early-phase studies to be done in the region with high

quality basic science and advanced chemistry technology to evaluate developability of molecules

Late-phase studies to be done in geographic areas with an abundance of patients reflecting post-marketing target population

30

Strength of Japan in Early-Phase Clinical Research

First-Time-in-Human studies can be initiated earlier with less CMC documentation in Japan than in other countries.

The numbers of CT, MRI and other medical and diagnostic units and devices in Japan are the highest within the OECD region, allowing for clinical trials which require such sophisticated medical instrumentation.

It is possible to recruit comparatively homogeneous and compliant study populations with narrow standard deviations, enabling clinical trials of high quality.

31

Timing to Enter Ph1

1.5-2 months

US IND

Japan IND

Ph1 (SD/MD)

Ph1 (SD/MD) IND

Manufacturing

Manufacturing

IND

12 months 12 months

IND Documentation in Japan IND documentation in US

Administrative Documents Administrative Documents

Documents to justify the initiation of clinical trials mainly based on non clinical study data

Module 2, 4, (5; if available ) ・Summary document ・Non clinical study reports

CMC: Not Required CMC documents, stability data

IB, Protocol, ICF, CRF

32

32

The Number of CT Scanners per million of population; developed countries

Source: OECD Health Data 2010, Release version, June 2010 Data for France and Germany are from OECD Health Data 2009, June 2009

(Year)

Japan Canada France Germany Italy UK US

(Units)

Break in series: 1987 in France

33

Innovative Approach PET study in Depression

-25

-20

-15

-10

-5

0

Nomifesen

Imipramine

Placebo

Study A B C D E F Effect Poor

Good

Change of HAMD score

Estimation of clinical dose in early Phase with PET

Relationship between Dose and Transporter occupancy

(J.Clin. Psy, 45;1984,et al)

34

CV

(%)

of

AU

C

0

10

20

30

40

50

Japanoutside Japan

Coefficient of Variation (%) of AUC Japan and Overseas Studies Compared

35

Development in Early Stage: Reliable evaluation of drug efficacy by means of high-quality clinical trials

Lower drop-out rate from clinical trial protocols Good medication compliance/adherence Homogeneous patient populations

Smaller sample size for clinical efficacy assessment Placebo Drop Outs JP vs US

0

5

10

15

20

25

30

35

3or4Wk 12Wk 24Wk

Days

Dro

p O

uts（

%）(F

AS)

Japan

US

PK not detected in an active group

0

2

4

6

8

10

12

3or4Wk 12Wk 24Wk

Days

PK n

ot

dete

cte

d（%）

Japan

US

36

Japan’s Role in Late-Stage Drug Development

Japan-only Phase III studies are impractical in these days of global drug development

Multi-national clinical trials are essential Japan has increased participation but English

language is still a hurdle Expensive Japanese subjects may be too homogeneous

Japan’s participation in multinational clinical trials

is necessary but a large number of Japanese subjects are not needed for late-stage clinical trials.

37

同一デザイン：第II/III相試験（6試験） Study Cost Comparison

6 Phase II/III studies of the same design

Sourcde: Conference on CRC and Clinical Trials （16 Oct 2005）

Higher Yen makes the cost difference even larger

Domestic Overseas

Total cost per patient 3,001 2,146

Hospital Grant 1,646 54.9% 759 35.3%

SMO 433 14.4% 0

CRO 249 8.3% 1,307 60.8%

Others 673 22.4% 81 3.9%

% Delivered 80.5% 99.0%

Unit: 1,000JPY， 105 JPY/USD in 2004

38 38

Ratio of Multi-National Clinical Trials to All Clinical Trials in the World

K Ichimaru, et al. Clinical Pharmacology & Therapeutics 27 January 2010

Total number of CTNs

Number of CTNs for MRCT

39

Ranking of Countries with Clinical Trial Sites in Global Studies

rank country/area rank country/area rank country/area

1 America 16 Hungary 31 Slovenska

2 Germany 17 India 32 Greece

3 Canada 18 Mexico 33 Switzerland

4 France 19 South Africa 34 Japan

5 Spain 20 Sweden 35 Portugal

6 Italy 21 Denmark 36 Bulgaria

7 United Kingdom 22 Austria 37 Chile

8 Poland 23 Ukraine 38 Turkey

9 Australia 24 Fin land 39 Philippines

10 Russia 25 Norway 40 Puerto Rico

11 Belgium 26 Israel 41 Peru

12 Holland 27 Korea 42 Lithuania

13 Argentina 28 China 43 Colombia

14 Czech 29 Taiwan 44 New Zealand

15 Brazil 30 Romania 45 Thailand

source : OPIR Source: Office of Pharmaceutical Industry Research’s analysis

40

Section Summary

Japan’s strength is in high quality basic science and advanced chemistry technology.

Understanding the profile of new drugs in early phases is very important.

Japan has great advantages in being able to conduct clinical trials of high quality and high compliance.

41

Conclusion

Japan can contribute greatly to the enhancement of medicines development by focusing on existing intellectual strength.

A national endeavor by the government, academia and industry is needed to accomplish this.

Success will allow Japan to be a key player in developing new and important medicines.

42

Japan Pharmaceutical Manufacturers Association (JPMA) Member Companies

Source : JPMA

68 Companies August. 1. 2011

ABBOTT KAKEN OTSUKA AJINOMOTO KISSEI PFIZER ASAHI KASEI KOWA POLA ASKA KRACIE Sanofi-Aventis ASTELLAS KYORIN SANTEN AstraZeneca KYOTO SANWA KAGAKU KENKYUSHO BAXTER KYOWA HAKKO KIRIN SEIKAGAKU BAYER MARUHO SENJU BRISTOL-MYERS MARUISHI SHIONOGI CELGENE MEIJI SEIKA TAIHO CHEMO-SERO-THERAPEUTIC MINOPHAGEN TAISHO CHUGAI MOCHIDA TAKEDA DAIICHI SANKYO MSD TEIJIN DAINIPPON SUMITOMO MYLAN TEIKOKU EISAI NIHON TERUMO ELI LILLY NIPPON BOEHRINGER INGELHEIM TOA EIYO FUJIMOTO NIPPON CHEMIPHAR TORII FUSO NIPPON KAYAKU TOYAMA CHEMICAL GENZYME NIPPON SHINYAKU UCB GlaxoSmithKline NIPPON ZOKI WAKAMOTO HISAMITSU NOVARTIS YAKULT

ZERIA JANSSEN NOVO NORDISK JAPAN TOBACCO ONO

43

Thank you for your attention!

44

What Pharmaceutical Industry Can Do for Economic Growth of Japan

Excellent Basic Research but ・・

Researcher Brain Drain

Closing of Research Laboratories

Declining Clinical Development

Lagging Behind the Global Competition

All Country Activity

Industry-government-academia cooperation

Driving Force for Economic

Growth of Japan

Creation of innovative medicines to make Japan the top class medicines country

Areas in need of change Politico-economic policies

Foundation of R&D

Globalization of regulatory review system

Concern that Japan will be left behind in

Pharmaceutical Industry

Status

New Growth Strategy

Stop R&D Hollowing Out

Recover the Position as a Leading Nation

Bring in R&D and Science from within and outside of

Japan to promote new drug development