ANTI PSYCHOTIC DRUG FAMILY : CLOZAPINES

• Clozapine is a member of family of “atypical” anti-psychotic drugs developed by Novartis under “Clozaril”
brand. Expiry of Novartis patent, led to other brands entering the market.
• Regulatory requirements : condition of granting license by MHRA to Clozapines is provision of “patient
monitoring service” by drug manufacturers to
i) monitor potential side effects of drug (reduced white cell count) at required frequencies : FBC
ii) monitor concentration of Clozapine at required frequencies : Clozapine testing

Branded Name Manufacturer Patient Monitoring Service

(run by manufacturer)

Clozaril Novartis CPMS (Clozapine patient

monitoring service)

Denzapine Denfleet DPMS

Zaponex Genthon BV ZTAC

Source:
 REGULATORY REQUIREMENTS : CLOZARIL SET-UP & FUNDING

• Novartis pays for FBC

• Referring Laboratory pays for Clozapine testing
• Novartis controls all UK Clozaril FBC sample flows via contracted courier, but not Clozaril drug
measurement sample flows

NOVARTIS

CPMS (Clozapine patient monitoring service)

Regulatory Current
requirements Supplier Funding Terms/Notes
i) FBC TDL Novartis pays TDL • Contract about to expire shortly (April`07
directly under contract – tbc)
@1 week  every week Small no.
usage for month1  samples • Novartis grants TDL “unique supplier”
biweekly  monthly collected late status
sent from
(progress to lower freq SLaM to BSL • Novartis responsible for FBC samples
testing on condition that (est 5%) logistics (incl payment) to TDL
test is negative; if +ve freq
• Est ~ 75k FBC samples/year
increased)

i) Clozapine NX Referring Lab pays NX • Novartis grants NX “unique

directly supplier” status
• Contract has expired, but
terms are still being honoured

Source:
 CLOZAPINE TESTING SUBSIDISATION BY DRUG MANUFACTURERS

• Objective of Subsidy : To reduce cost of Clozapine testing to referring labs/hospitals

• Complication : For practical (payment to one organisation) & historic reasons (Start-Up funding : Block funding of ca
£100k towards test method development & Yr 1 full test cost funding meant mechanism to transfer funds from Novartis to NX
already established), Novartis subsidy not paid directly to referring lab, but in-directly through reduced price
charged by NX

Branded Name Manufacturer Subsidy : Current Funding route/Notes

status
Clozaril Novartis £10 per test • £10/test paid by Novartis to NX on
paid to NX “gentlemans agreement” (no contract in
place) understanding that NX passes on
saving to Clozaril prescribing hospitals
• Novartis provides free “home service”
(drugs provision & sample collection for
monitoring) for house-bound patients : ~40 -
70 patients @ Maudsley

Denzapine Denfleet ?? • Intelligence is that all Denzapine

samples sent to NX (tbc)

Zaponex Genthon BV £5 per test

paid to JNJ
(tbc)

Source:
 CLOZAPINE TESTING : PRICING

• NX price on basis of “effective” income (ie incl subsidy) of £30/test

Brand NX Price/test Basis for pricing Competition

Clozaril £20 NX receives £30 in None : NX is only testing lab through

effective terms (incl Novartis granted “unique Clozaril test
subsidy) centre” status

Denzapine £20 As above, due to As above : None : Denfleet use same

inadvertent subsidisation drug monitoring set-up as Novartis. NX is
by Novartis (will be unique testing lab for Denzapine
stopped!)

Zaponex £35 BF decision : £5 extra Genthon use different set-up to Novartis

margin vs above
- JNJ Lab (Cardiff)
- JNJ Lab sub-contract Clozapine testing to
another Welsh Lab (based on “intelligence”
– tbc)
- JNJ price/test @ xxx (tbc)
- “intelligence” that rules on patient consent
for obtaining purified human plasma not
observed

Source:
 SLaM & ANTI-PSYCHOTIC DRUGS TESTING

• Currently use Clozaril

- Not charged by NX (SE Thames/SLaM historic agreement)
- Charging will mean £36k extra cost to SLaM (£20/test; assume SLaM accounts 20% total Clozaril w/load)

• SLaM est savings on drugs costs (Pharmacy) of £0.5-1.0m if switched to alternative supplier
- Est spend on Clozaril drug purchase in order of millions

• Novartis thought to have re-entered negotiation with SLaM re. reducing price of Clozaril in line with
competitors : Strongly in Novartis interest to keep SLaM
- SLaM accounts ~20% all UK Clozaril prescriptions
- SLaM accounts ~20% all Clozaril testing
- unclear whether SLaM have already signed a fully binding contract with alternative supplier (intelligence is
that still in discussion stage)

• Potential switching barriers for SLaM : How will/will Denfleet or Genthon take over Novartis “home service”
free of charge? How will results be returned to SLaM?

Source:
 ATYPICAL ANTI PSYCHOTIC DRUG FAMILY : FUTURE MARKET

• Clozapine : 1st of the family of atypical anti-psychotic drugs to enter market

- 1st entrant : Clozaril (Novartis)
- New entrants : Denzapine (Denfleet), Zaponex (Genthon), Others @ lower drug price vs. Novartis
• Other drugs now on the market include : Olanzapine, Quitiapine, Amisulpride, Aripiprazole (monitoring for
these also carried out at NX)

• Future market (1-5 yrs)

- Novartis drops Clozaril price to competitive levels
- Est Clozapine family @ a% share, of which Est Clozaril @ x% share; Other Clozapines @ y% share
- Est non-Clozapine families @ b% share total anti-psychotics : Could remove need for FBC if no white cell
count reduction side effects (Aripiprazole appears to be as effective as Clozapine – no FBC needed)

Critical Success Factors for testing Lab

 Ability to test for all anti-psychotic drugs families with LCMSMS (more sophisticated analysis vs.
conventional liquid chromatography, which suffices for Clozaril but not adequate for other anti-psychotic drug
families)
 Should establish relationships with all major drug manufacturers to test all Clozapines and other drug
families : Novartis (Clozaril) & Denfleet (Denzapine) currently send all drug testing to NX; Majority of
Zaponex (Genthon) testing currently sent to JNJ Laboratory

Source:
 NEXT STEPS

• Switching from NX to KCH

- tapered or “all in one go”?
- other consequences : confidence in retaining current NX customer base (100% Novartis, others?)

• Novartis discussions with KingsPath

- “wish to continue relationship w/ BF”
- “If KingsPath establishes Clozapine measurement service over next 3-6 months, happy to transfer support
& subsidy to KingsPath”
- “prefer quick switch (over 3-6 months) – not over long period of time”
- “Novartis will inform Clozaril customers”
- “all terms under contract” – period tbc
- “possibility of tendering for FBC contract on expiry of current terms with TDL” (ROL, all sample flows paid
for and controlled by Novartis ie. no cost to referring labs of logistics for Clozaril monitoring)

Source:
 BUSINESS PLAN : MARKET SIZE

Market Size for Atypical Anti-Psychotic drugs

NX price NX W/load (#) Income Subsidy Notes Shares

Unknown supplier 35 140 4,900 1%
clozaril 20 9,026 180,520 90,260 60%
denzapine 20 4,590 91,800 45,900 inadvertently paid by Novartis 31%
zaponex 35 1,191 41,685 8%
Total 14,947 318,905 136,160
Grand Total 455,065
Excl £45.9k 409,165

JNJ
zaponex unknown

NX
Other atypical antipsychotic drug families 2,242 est 15% based on SLaM usage (RS) 15%

Source:
 BUSINESS PLAN : P&L SCENARIOS (CLOZAPINES ONLY)

Assumptions
OH 35%
consumables 5.00
LCMS MS 25,000 Equipment : lqd chrom mass spec available @ £25k/year depreciated over 5 yrs (capex £120-£160k)
Extra costs SOP, standards, licenses (est £1-2k Yr 1 cost)

Staffing requirements
BF 52,000 80% FTE (20% of BF time for training of regional funded clinical scientists) x £65k
Band 7 35,000 £35k - BMS 2 or snr clin scientist
Total 87,000

Source:
 BUSINESS PLAN : P&L SCENARIOS (CLOZAPINES ONLY)

Sc 1 : Best Case : Total NX w/load; £30 "effective income"/test

per test total

Income 30.00 448,410
consumables 5.50 82,209
staff 7.22 107,880
equipment 1.67 25,000
OH 4.45 66,531
Total Costs 18.84 281,619
Margin 11.16 166,791
% Margin 37% 37%

# samples 14,947

Sc 2 : Worst Case : Genthon move all samples to JNJ and get SLaM contract; £30 "effective income"/test
NB : However, no reason why we couldn`t enter into discussion w/ Genthon: What are JNJ charging? High possibility of retaining SLaM Zaponex testing

per test total

Income 30.00 358,524
consumables 5.50 65,729
staff 9.03 107,880
equipment 2.09 25,000
OH 5.08 60,763
Total Costs 21.70 259,373
Margin 8.30 99,151
% Margin 28% 28%

# samples 11,951 loss of Zaponex, SLaM Clozaril (20% total)

Note : Undertaking total anti-psychotic w/load (non-clozapines) from NX would

require additional staff member : Additional Income @ £78.5k; Margin £18.4k (23%)

Source:
 BUSINESS PLAN : P&L SCENARIOS (CLOZAPINES ONLY)
KingsPath USP
Strong clinical technical
expertise
Reference Methodology
Potential Risks
New testing labs enter market
Price pressure on £30
“effective price” charge
Source:
Notes
BF renowned as expert
“Gold Standard” : Compliance with GLC
Assessment
Highly unlikely
- High set-up costs
- High clinical/technical expertise required
Unlikely
- Competitor testing laboratories unable to carry out test more cost
effectively
- Novartis withdrawal of subsidy in due course likely. However, we will
increase charge to meet £30 “effective” income/test.
- Current lack of competitors and assessment of low chance of new
testing laboratories entering market suggests price pressure will not
be significant