The Academic Contribution to Drug Development

1. The Academic Contribution to Drug Development Roger M. Perlmutter Executive Vice President, Research and Development

2. An Innovation Deficit in Pharmaceuticals? • The number of new chemical entities produced by the top 50 pharmaceutical companies is too small to sustain the healthy growth of this group • New technologies (e.g. genomics, combinatorial chemistry, etc.) do not appear to have had a major impact on the provision of new drugs by the industry so far • JurgenDrews, DDT 3: 491, 1998 For Internal Use Only. Amgen Confidential.

3. R&D Expenditures in the Biopharmaceutical Industry Have Soared Since 1980. . . CAGR = 12% Source: PhRMA Annual Survey 2009

4. . . .and Fewer New Drugs are Emerging: We are Spending More and Achieving Less Approved Drugs (NMEs) and PhRMA Member R&D Spend PhRMA R&D spend ($B) NMEs Sources: Burrill & Company, Biotech 2008 Life Sciences: A 20/20 Vision to 2020, 22nd Annual Report on the Industry; PhRMA annual membership survey (2009)

5. The Evolving Challenge Profile of the Therapeutics Industry • Few interesting targets • Room for many drugs • Strong intellectual property • Complexity • Challenge • Pace • Thousands of targets • Declining success rates • Rapid generic penetration • Devastating product failures 1980 1990 2000 2010 2020 For Internal Use Only. Amgen Confidential.

6. “Glaxo’s Witty Says Nine Top Drugmakers May Fail”, Times Reports* • Nine of the top 15 drugmakers will “wither” or “get taken out” in the next five years • About half a dozen of the biggest pharmaceutical companies may survive as patents expire and business strategies are “tested to destruction” *Quoted in Bloomberg News, October 2, 2010

7. Contemporary Estimates Paint a Grim Picture of Future Industry Profitability Rx Revenues New Products R&D Spend $230B $387B ’89-’98 ’97-’04 $244B $537B ’99-’08 ’07-’14 Total of 15 BioPharmaceutical Companies Source: Lazard estimates

8. The View from Investment Bankers: “Pharmaceuticals: Exit Research and Create Value” - - Morgan Stanley

9. Since 1980, Biopharmaceutical Companies have Largely Abandoned Discovery Research. . . Percentage of Total PhRMA R&D Expenditures Source: PhRMA Industry Profile Reports

10. . . .but are These Companies Capable of Supervising Drug Development? • Most industry investment in R&D appears to be wasted • The vast majority of industry investment is spent on clinical research (i.e. development) • A 30-year perspective suggests that industry is not solving this problem on its own

11. Industry and Academia: Why We May Need Each Other • Academic investigators cannot easily pursue high-quality clinical development • Teamwork is undervalued in universities • Difficulty in maintaining a compliance focus • Careerism undermines development intent • Little penalty for failure • Industry investigators have their own problems • Inherent conservatism - - the penalty of prior success • Priorities set in the context of commercial assessments • High penalty for failure, hence novel programs suffer No company has proved capable of refilling its pipeline

12. Why Might Academic Organizations Now be Able to Pursue Drug Discovery? • Industry, burdened with P&L considerations, has need to out-license NCEs that do not fit within their central focus • Improved methods of patient stratification offer the promise of increasing efficiency in clinical trials • Skilled contract research organizations can assume the burden of maintaining GCP compliance But – do university physicians really want to develop drugs?

13. Denosumab Blocks Bone Resorption by Binding to a Pivotal Regulator, RANKL CFU-M Denosumab Y Colony-Forming Unit Macrophage OPG Y Pre-Fusion Osteoclast RANKL RANK Growth Factors HormonesCytokines Y Multinucleated Osteoclast RANKL Y Activated Osteoclast Osteoblast Bone Osteoclast Activated Osteoclast Formation, Activation, and Survival Inhibited 11

14. Development of Denosumab Required 15 Years of Investment Discovery of target Selection of a clinical candidate Clinical exploration Registration-enabling studies 1995 2010 Can a university tenure ladder accommodate this sustained commitment? Can staff members be retained throughout this period? 13

15. The Evolving Challenge Profile in Drug Development May FavorAcademic Researchers • Complexity • Pace • Expense • Uncertainty • Observational anecdotes • Low efficacy hurdle • Few targets • Little incentive for improvement • Powerful new research technologies • Many, better targets • High-quality clinical data • Evolving focus on personalized medicine 2020 1980 1990 2000 2010 15

16. The Academic Contribution to Drug Development Roger M. Perlmutter Executive Vice President, Research and Development