Alliance Pharma plcProject Byron

John Dawson Maddy Scott

October 2004

Contents

1. Brief Alliance Update

2. Alliance Interims (Aug 2004)

3. Project Byron (2 brand acquisition projects)

4. Appendix on Alliance Management Sources of growth Growth product – Nu-Seals Growth product – Symmetrel Growth project – APL 202 Growth project APL 510 Flotation Dec 2003 Current capital structure

Alliance Project Byron

Speciality pharma co exploiting

niche prescription opportunities in

UK and Ireland

Grown to £11m+ sales via six

brand acquisition deals since 1998

Ongoing profitability with growth

opportunities from

• current portfolio

• future brand acquisitions

• in-house developments for launch

In-house: transformational project

(APL 510 for sleep disorders)

• £500m EU prescription market

Two brand acquisition projects which transform Alliance

Immediate and significant boost to P&L (£3.1m sales at 70+% gross margin)

High long-term growth potential

Greatly develops Alliance’s international reach

Alliance has agreed contracts on each

Total consideration £8.8m

Bank debt secured £5.2m

Apr

1998

Jan

1999

Aug

2001

Oct

2001

Apr

2002

Sep

2002

Feb

2004

Oct

2004

Oct

2004

Fostering arrangement

£2.1 M £0.5 M £9 M£4 M £2.1 M £0.9 M

16 brands

Rheumatoidarthritis

Parkinson’s

disease

Potassiumdeficiencies

Creams for dry skin and

eczema

Enteric coated aspirin

Alphaderm

Slow-K

SymmetrelDistamineBroflex

Biorphen

Pragmatar

Naseptin

Aquadrate

Nu-Seals Acnisal

Meted

Pentrax

Occlusal

Alliance Acquisitions

4 Derma Brands

ForcevalPeriostat

Periodontitis Rx Multi-Vitamin

£1.8 M £7.0 M

Project Byron

Alliance Brands – Sales Progression

MAT Cash 28 + 56

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4,000

4,500

Acquisition from

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Nu-Seals (Ireland) Symmetrel Dermatology (8 brands)

PROMOTED BRANDS GROWING

NON PROMOTED BRANDS (17) STABLE

Eur

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00s

£ ‘0

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£ ‘0

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Alliance - performance

0

2000

4000

6000

8000

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Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 InterimResults to

Aug-04

BrokerForecastFeb-05

Sales Gross Margin EBITDA

21.5%

27.7%30.9%

43.7%

48.4%

52.3%

25.9%

49.6%

Alliance interims (August 2004)£000 Feb-03 Feb-04 Aug-03 Aug-04 Variance

Sales Nu-Seals 880 3,200 1,410 1,775 25.9%

Symmetrel 993 1,138 541 619 14.4%

Derma 1,170 1,303 664 693 4.3%

Other 5,284 4,776 2,319 2,481 7.0%

Total 8,327 10,416 4,933 5,568 12.9%

Gross Margin%

3,64143.7%

5,03948.4%

2,34947.6%

2,91052.3%

23.9%

S G & A 1,486 2,243 833 1,756 110.9%

EBITDA 2,155 2,796 1,516 1,154 (23.9%)

Depreciation 67 83 42 44 3.0%

Interest 1,079 1,502 745 795 6.6%

EBAT 1,008 1,210 729 316 (56.6%)

Amortisation 1,400 902 524 598 14.1%

Adjusted EBT (392) 308 205 (282) (237.7%)

Exceptional Items 339 2,460 0 110

Reported EBT (731) (2,153) 205 (391)

Additional SG&A

£’000

Plc 141

Mktng 587

Dev 100

Total 828

Project Harriercosts

Project Byron - Two separate brand acquisitions

One provides instant boost to P&L; the other long term growth

Forceval Specialist multivitamin and

mineral product used for AIDS, cancer patients etc

Brand has remained solid despite historical sub-optimal management

Sales stable at £2.8m Gross margin 70% Upside potential through revival of

brand and overseas distributors Alliance has agreed contract for

worldwide rights, excluding China (1st option for later acquisition)

Consideration £7m

Periostat Enzyme suppressor as a novel

adjunctive therapy for serious gum disease (periodontitis)

Developed by CollaGenex (US)

Sales currently £347k (£281k UK)

High growth potential – UK sales currently based on 6,000 patients from pool of 3.2m

US sales $45m after 5 yrs

Alliance has agreed contract for EU, Switzerland, Israel, Australia, NZ and S. Africa

Consideration £1.85m

Forceval – resilient cash-generative brand

Forceval• 24 vitamins and minerals in one capsule• The professional and only prescribable brand (not OTC “feel good”

market)• Used by dieticians for AIDS, cancer and convalescence• Brand has been very resilient despite sub-optimal management

Recent history of Unigreg Ltd• Cash extracted by owners• Suppliers unpaid and uncooperative• Into Administration June 2002

Regained confidence of suppliers and distributors Offered assets for sale May 2004

Market research reveals deep prescriber support, but Brand needs major makeover and coherent marketing strategy Overseas distributor network need strengthening and expanding

Alliance acquisition of ForcevalOrganisational Likely termination for current 8 employees (Administrator to cover costs) Recruit Business Unit Head, Export Manager & Supply Chain Manager

UK Marketing Brand makeover Coherent marketing strategy Renew communications with dietetics specialists

Exports Re-energise current distributors with new promotional materials Seek new territories

Prepare for China opportunity Big market in China for a sister product for pregnancy (10m births pa) Current business exists following approach by Chinese government Administrator stabilising situation prior to sale Alliance to have first option

Periodontitis

Periodontitis is a severe form of gingivitis in which the inflammation of the gums extends to the supporting structures of the tooth. Periodontitis results from a long-term accumulation of plaque and tartar between the teeth and the gums.Pockets form between the teeth and gums and extend downward between the root of the tooth and the underlying bone. These pockets collect plaque in an oxygen-free environment, which promotes the growth of aggressive forms of bacteria. The body reacts to the aggressive bacteria with enzymes (collagenases). These enzymes also attack the supportive ligaments and gum tissue holding the tooth in place. The result is loosening and eventually loss of the tooth.

Source: Adapted from the Merck Manual of Medical Information

Role of Periostat

Periostat suppresses the body's own enzymes released as part of the disease process. Conventionally periodontitis is controlled by: Removal of plaque and tartar (scaling and root planing) Reducing infection (antibiotics)

Periostat offers a new third arm in addition to conventional treatments.

Academic Backing Adjunctive sub antimicrobial dose of doxycycline enhances scaling and root planing. It results in statistically significant attachment gains and probing depth reductions over those achieved by scaling and root planing with placebo. Philip M. Preshaw Newcastle University School of Dental Sciences. Journal of Periodontology 2004; 75 1068-1076

American Academy of Periodontology (AAP) 2003 Workshop on contemporary sciences in clinical periodontics concluded the level of evidence rating for Periostat was “Strong”, the highest rating possible.

Periostat is listed on the Dental Practitioners Formulary and is prescribed and reimbursed by the NHS.

Market research

2 studies commissioned, £25k

Findings

7 severe periodontitis patients / wk / surgery (= pool of 3.2m prescribing

opportunities pa)

54% of Users likely to increase prescribing of Periostat

Non-Users did not know enough about the product to prescribe

46% of non-user dentists would use as result of the market research

Conclusions

The potential market is large

Periostat is appreciated by the dentists who use it

Lack of knowledge is preventing the majority of dentists from using it

Periostat sales are likely to respond to promotion

Periostat Sales Potential

Current UK sales represent 6000 patients (0.2% of “pool”)5% of pool would give £6.9m salesCollaGenex promotion has only reached 6% of the 20,000 UK dentists. Periodontologists are a small influential customer groupDentists are readily accessible by representativesUnexploited European markets

Export Sales26%

NHS Sales65%

Direct 9%

2003 £334k

Source: Hillier Hopkins LLP, Extracts from P&L’s 2002-Jul 2004

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1999 2000 2001 2002 2003

US Sales $m

CollaGenex Annual Periostat Sales 99-03

Appendix

Alliance - Management John Dawson, Managing DirectorPharmacist, MSc Finance; 34yrs sector experience, board member, controlling shareholder, 7 yrs with Alliance

Tony Booley, Sales & Marketing DirectorBSc Physiology, MBA, Chartered Marketer; 24yrs sector experience, board member, shareholder, 5 yrs with Alliance

Maddy Scott, Finance Director ACCA; 17 yrs experience across manufacturing and service industries, board member, company secretary, 5 yrs with Alliance

Sam Madden, Technical & Regulatory DirectorBSc Biochem/Toxicol, MSc Biopharmacy, 25yrs sector experience across wide base; board member, shareholder, 7 yrs with Alliance

John Barber, Director of Scientific AffairsBSc Pharmacology, MSc Information Science; 16yrs sector experience, 4 yrs with Alliance

Andrew Dean, Business Development DirectorBSc Chemistry and Business; 11yrs sector experience, marketing & sales management, 2 yrs with Alliance

Michael Gatenby, Non Executive ChairmanMA. FCA ex-director of Hill Samuel and Co, ex-Vice Chairman of Charterhouse Bank. Holds a number of non executive directorships

Paul Ranson, Non Executive Director LL.B Barrister Solicitor. 20 years sector experience, board member

Alliance – Sources of growth

Promoted products Nu-Seals in cardiovascular prevention Symmetrel in Parkinson’s disease Dermatology (portfolio of 8 brands)

Established Brand acquisitions Immediate cashflow and profit

Launches from in-licensing Dermatology products from Barrier Therapeutics Inc Niche hospital antibiotics from GES

Launches from own developments APL 202 (misoprostol) for induction of labour APL 510 (melatonin) for sleep disorders

Growth product - Nu-Seals in Ireland

Rapidly growing market (28% CAGR)Heart disease No. 1 killer in Ireland Government initiatives

Ageing population

Nu-Seals 75 £2.3m sales in Ireland 15% increase year 02/04 70% of antiplatelet market 84% of low dose aspirin

marketIreland highly branded market

2002: 782k people over 55

2010: 833k people over 55

2020: 1m people over 55

Growth product - Symmetrel

Acquired from Novartis in Oct 2001 Current sales £1.2m

Parkinson’s disease market £80m 120,000 patients

Dyskinesias (large involuntary movements) Niche segment 15,000 potential patients Unmet needs

Symmetrel renaissance in PD 50 papers specifically on amantadine in PD in the

last 5 years The only nmda antagonist for PD

Promotion started Dec 2003 Neurologists endorsing the concept Rolling message out to less specialised physicians

Growth project - APL 202 (misoprostol)

Misoprostol originally introduced to reduce gastric acid secretions and prevent ulcers

Extensive published research in obstetrics (cervical ripening and labour induction)

• Early usage was given orally

• Current preference is for vaginal administration

Local action

Reduced side-effects

• Some trials show greater efficacy than dinoprostone (market leader)

• Published trials unsuitable for registration

High awareness amongst obstetricians

• Already used “off-licence”

• But requires 3 serial cuts to the oral tablet (200mcg to 25mcg)

Unlike dinoprostone, does not require refrigeration

Will compete against dinoprostone (ca £13m EU

sales)

Introduction is eagerly awaited

In 2002 Royal College of Obstetricians &

Gynaecologists called for the development

Specialist marketing – low cost

Alliance to market in UK & Ireland

• Existing Specialist Hospital sales force in UK

• Existing GP / Hospital sales force in Ireland

Intend to license out in rest of EU

Commencing clinical trials at end of 2004

Planned launch in H1 2006

NPV about £2m

Growth project - APL 510 (melatonin)

Melatonin – hormone that regulates circadian rhythm (body clock)Therapeutic melatonin has been shown to promote sleep in many different sleep disorders

• large bibliography, but unsuitable for registration

Seen as a “natural” product

High awareness in GPs (ex market research)• 100% awareness• >50% had been involved in its usage via

specialists

Current prescribers (ex market research)• Are very enthusiastic about its results• Biggest complaint is restrictions imposed by

not having a marketing authorisation• Seek a formulation that is quick acting but

has a prolonged release

GPs (and patients) are reluctant to use current “sleeping tablets”

• Benzodiazepines concerns over habituation and hangover effects seen as unsuitable for children

Melatonin freely available OTC in USA

• Classified by FDA as a nutritional supplement

Melatonin sales banned in EU

• Needs to be registered as a medicine

Melatonin used “off licence” in UK

• Initiated by NHS specialists

• Patient-specific usage continued by GPs

• “Named patient” supply regulated by Dept of Health

manufactured under a “Specials” licence

controlled importation

• Usage estimated at £3-4m per annum

Currently melatonin used mainly for sleep disorders in

• Children with Special Needs ( a wide variety of conditions)

• Blind patients

Growth project - APL 510 (melatonin)

Special release formulation has been developed

Phase 1 trials in human volunteers completed

• Rapid production of therapeutic blood levels

• Blood levels then maintained for 5 hours

Phase 3 clinical trials to commence H2 2004

Regulatory submission planned for H2 2005

Possible introduction H2 2006

Will gain 10 yr data protection in EU regulatory

system

Moderate development costs (£4-5m)

NPV about £18m - £30 m

EU Sleep Disorders market estimated at £500m

Melatonin will expand the market

Alliance to market in UK & Ireland

• To Specialists initially to gain endorsement for

GPs

• Will need UK GP sales force to accompany

Hospital sales force

• Will use existing GP / Hospital sales force in

Ireland

GP marketing – significant investment

License out in rest of EU

• Down payments plus royalty stream