Advance Market Commitments Financial Implications & Risk Model Overview

1. Technical Working Group September 7, 2006 Rome, Italy Advance Market CommitmentsFinancial Implications & Risk ModelOverview

2. Advance Market CommitmentsSupplier Perspective • The goal of vaccine suppliers is to recoup their substantial investment in vaccine development within a reasonable timeframe • To make credible investment decisions, suppliers utilize industry best practices that: • Clearly define the investment opportunities • Identify the timing and risks of development • Explicitly assess the costs (e.g., development, manufacturing) • Analyze numerous competitive market scenarios • Consider all investments in the context of their overall portfolio • Suppliers will employ this methodology when considering an AMC 1 AMC-FIRM_Overview_Tech WG_Rome_07Sep06

3. High NPV (Exp. Revenues -Exp. Costs) Success Low Success Fail Go Fail Success Go No Go Cumulative Dev. Cost, at Time of Failure Fail Success Go No Go Fail No Go $0 Development Strategy Market Value Supplier PerspectiveDevelopment Strategy and Market Value Relationship • Suppliers have a well established decision-making process for development investment • Suppliers make a Go/No Go decision at each development step • Each Go/No Go decision is made with forward looking value analysis • Each supplier will evaluatean AMC based on the information availableat the time ofthe currentdecision 2 AMC-FIRM_Overview_Tech WG_Rome_07Sep06

4. Potential Market Scenarios ‘A’ Value Given ‘B’ and ‘C’ also succeed Competitor C Success Competitor B Success PC PB ‘A’ Value Given ‘B’ also succeeds Competitor C Failure Competitor C Success ‘A’ Value Given ‘C’ also succeeds PC Competitor B Failure ‘A’ Value Given ‘B’ and ‘C’ failed Competitor C Failure ‘A’ Cost of Failure $0 Supplier PerspectiveMarket Value and Competition Relationship • In addition to their own success or failure, each supplier must account for the possibility of other new suppliers successfully reaching the market, e.g., Supplier A Success PA Go SupplierA Supplier A Failure No Go 3 AMC-FIRM_Overview_Tech WG_Rome_07Sep06

5. Supplier A Supplier B Supplier C Probability Outcome Success 5% A, B, C 20% Success Fail 20% A, B 50% Success Success 5% A, C 50% 50% 20% Fail Fail 20% A Illustrative Success 5% B, C 20% Success Fail 50% 20% B 50% Fail Success 5% C 50% 20% Fail Fail 20% - AMC ModelAnalysis Frame • The AMC model is designed to explore the level of AMC funding required to provide a neutral or better return on investment given multiple outcomes The AMC needs to be sized to support multiple supplier outcomes 4 AMC-FIRM_Overview_Tech WG_Rome_07Sep06

6. AMC ModelGeneral Structure Analysis Inputs Financial Analysis Parameters Supplier & Product Profile Data Country (“Market”) Data AMC Contract Terms AMC Financial Implications & Risk Model Vaccine Need & Potential Market Forecasts Vaccine Product Availability Capacity & Supply Forecasts Financial Reports (Suppliers, Funders & Countries) Health Impact Reports Analysis Outputs 5 AMC-FIRM_Overview_Tech WG_Rome_07Sep06

7. AMC ModelAnalysis Components Determine Vaccine Need f {population cohort, doses/fully compliant person} f {# of suppliers, vaccine availability, supplier capacity plan} Determine Potential Vaccine Capacity Determine Potential Vaccine Market f {vaccine need, vaccine coverage rate} AMC Investment AMC Price Post-AMC Price Define AMC Terms Determine Potential Vaccine Demand f {vaccine availability, country adoption timing, time to peak coverage} Determine Supply/Demand f {vaccine price, country co-pay, country willingness to pay, country financial sustainability, AMC investment} Determine Supplier, Funder & Country Financials f {supplier costs, capacity utilized, supplier discount rate, funder/country discount rate} iterate 6 AMC-FIRM_Overview_Tech WG_Rome_07Sep06

8. AMC ModelData Input Quality • Each Vaccine Program Team was responsible for ensuring the credibility of their analysis inputs • Credibility was achieved through transparent data gathering processes and multiple external expert reviews • The AMC model was responsible for: • Applying the data in accordance with industry best practice • Providing sensitivity analysis on key input data 7 AMC-FIRM_Overview_Tech WG_Rome_07Sep06

9. AMC ModelAnalysis Objectives • Consistently evaluate all AMC vaccine candidates • Ensure common methodology and data gathering processes • Explore the financial implications of an AMC by providing insight on: • Size of AMC required to create a competitive market capable of supporting multiple suppliers, both multinational and emerging • AMC terms that provide the most robust market support • Given AMC size and vaccine price assumptions, determine: • AMC duration • Donor cost • Health impact 8 AMC-FIRM_Overview_Tech WG_Rome_07Sep06