Andrew Smith

1. Andrew Smith • Consultant, Navitas BioPharma Consulting • Non-Exec. Director : Alliance Pharma. Previously NHS Institute for Innovation and Improvement; Chairman Fishawack Communications • President, Parexel Medical Marketing Division, USA (5 yrs) • Managing Director and SVP, SmithKline Beecham UK (9 yrs) • CEO, Cerebrus (VC funded Biotech start-up, 5 yrs) • Sales and marketing experience at Aventis, Janssen, MSD. Geneticist M.A. (Natural Sciences) • Industry affairs: • Director, British Pharma Group • Vice President and Member of the Board of Management, ABPI • Chairman, LTVPG

2. Clinical Trials within Pharmaceutical Operations What does the company expect?

3. Pharmaceutical market growth • $897 bn by 2011 – CAGR of 7% • By 2020, 719m (9.4%) people will be 65+; 477m (7%) 2006 • Strong growth in Eastern European members of E.U. • E7 countries (China, India, Brazil, Russia, Mexico, Indonesia, Turkey) • spend higher % of GDP on Healthcare • populations will age faster than G7 • China projected to be world’s 2nd biggest market by 2020India in top 10E7 will account for 20%+ global Pharma sales by 2020 • Health expenditure as a % of GDP rising rapidly in all OECD countries

4. Drug development is a key success factor in the business model • Innovative drugs drive sales growth and profitability • Clinical development is resource intensive and one of the most risky elements of development

5. R&D spending has soared but the number of NMEs and biologics approved by the FDA is down

6. R&D productivity independent of scale 3.5 3.5 2002) 2002) 3 3 Lilly Lilly Novartis Novartis Pfizer Pfizer - - 2.5 2.5 Roche Roche launched pa (1997 launched pa (1997 2 2 AHP Abbott Abbott JNJ JNJ Merck Merck NME's NME's 1.5 1.5 Serono Serono Takeda Takeda Schering AG Schering AG AstraZeneca AstraZeneca GSK GSK BMY BMY Altana SGP SGP Akzo Schwarz 1 1 Novo Sanofi Sanofi Average no. of Average no. of B Ingelheim 0.5 0.5 Daiichi Daiichi Bayer Bayer Merck Merck KGaA KGaA 0 0 0 0 200 200 400 400 600 600 800 800 1000 1000 1200 1200 1400 1400 1600 1600 1800 1800 Average annual R&D spend $m (1995 Average annual R&D spend $m (1995 - - 2000) 2000) Source: Lehman Brothers estimates

7. The value of scale in marketing and R&D 0 10 20 30 40 marketing Scale advantage R&D SCH, ALT BMY, LLY WYETH AZN, JNJ, MRK, NOVARTIS, ROCHE SAN-AVE GSK PFE Size (WW pharma sales $bn)

8. Getting further growth from launches remains a top priority for the industry, however launch contributions are deteriorating Top 8: Contribution to country growth from launches in previous 3 years Launch achievement potential is progressively reduced • Fewer launches achieve even 5% therapy market share by value in their first year • The market shares achieved by strong uptake launches is less than in previous years • A combination of payer power and increasing availability of generic alternatives pushes launches out of first line treatment an in to progressively smaller market segments Contribution to Rx-bound brand sales growth Source: IMS Health MIDAS Market Segmentation MAT December 2009. Total market defined as ethical brands only. Chart shows growth contribution from products <=3Years old in period vs the same products in the previous period • 8

9. Major discovery cycle late 70s/early 80s 1st generation 2nd generation 3rd generation genomics / proteomics cell pharmacology/ molecular biology drugs against natural products targets identified genetic engineering and derivatives from disease genes receptors chronic degenerative serendipity disease associated enzyme with ageing, Biotech drugs inflammation, cancer New Therapeutic Cycles lipid lowerers ACE-inhibitors H2-antagonists beta blockers NSAIDS psychotropics penicillins sulphonamides aspirin 1900 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 Source: CMS, Lehman Brothers research

10. The Challenge of RecoupingR&D Spend

11. Key steps in product development • Synthesis • Pre-clinicals: in-vitro and in-vivo • Formulation development • Clinical development • Production scale up • Commercial development

12. Trial objectives • Registration: New products and new indications • Verify previous studies • Monitor safety • Exploration of new uses • Encourage experience and familiarity • Develop relationships with key investigators and research bodies

13. What does good clinical data give us? • Licences - New products - New indications • Publications • Medical education • Publicity • Relationships…Clinicians, research organisations, Patient groups • SALES

14. Product development must give a return on investment (ROI) Key elements: Risk, time and cost • Annual projected revenue with 10 year forecasts • Annual projected costs over 10 years • Free cash flow • Discount rate (risk) • Net present value (NPV)

15. Elements of risk • Negative outcomes • Cost overruns • Timeline delays • Positive outcome that will not support registration • Positive outcome that will not support commercialisation -irrelevant comparator or measure -changing standards of care - missing or inadequate pharmaco-economic rationale

16. Probability of success • Phase I 10% • Phase II 20-30% • Phase III 40-60%

17. Managing risk • Trial design • Solid scientific and statistical design • Patient selection criteria • Stopping rules (Phase III) • Site selection • Clear go/no go criteria at each development phase • Continuous review of trial vs overall program, emerging data, emerging competitors, changing standards

18. The Target Product Profile (TPP) Ensures the company gets what it wants: • Concise summary of expected product characteristics, linked to such documents as Clinical Plan, Marketing Plan, etc. • A contract between the project team, line functions and senior management • A living, reliable document which is constantly updated • Goal: Clear expectations and a product that can be registered and ultimately sold

19. Industry Best Practice • Documentation TPP is a standard summary with detailed documents supporting it - Maintain a concise, high level document - Define clear document requirements to ensure consistency - Increase information transparency - Include pertinent information from all departments • Process TPP is subject to a standard, multidisciplinary process - To ensure a ‘living’ TPP... regular reviews - To ensure quality... formal decision points at multiple levels - Clearly defined roles and responsibilities... including a process owner

20. Elements of the TPP • Product positioning • Indication(s) • Key claims • Data required to support claims - Linked to Clinical Plan, other key functional plans • Competitive differentiation • Expected formulation/presentation characteristics

21. Changing needs: QOL and Pharmaco-economics • Evolved from esoteric side issue to critical data • Increasingly required for reimbursement approval • NICE: Cost/QALY is key to positive decision • Issues: - Methodologies are very specialised and complex - Assumptions required to fill gaps - Output often difficult to interpret - QOL instruments not well developed for some diseases

22. Post approval Phase IV can continue throughout product life-cycle • Experience with product in real life • Expand database * Safety * Patient subsets * QOL * Dosing/scheduling • Evergreening * New combinations * New uses * New presentations

23. Law, regulation and ethics • Pharma is highly regulated and closely scrutinised • Usually see only bad press but most pharma behaviour is ethical • Consequences of non-compliance are severe • Ethical business is good business

24. What your company wants • Return on investment • Positive data that answers the right questions • Budgets and timelines • Managed risk • Ethical behaviour • Commercially aware clinicians

25. What can you offer? • Simple explanations of complex issues • Good management skills • Good interpersonal skills • Good communication skills • Commercial awareness • Flexibility

26. “What’s good for the patient, is good for the profits, but the reverse is never true”GeorgeMerck 1953