copyright © 2007 biocentury publications, inc. all rights

Copyright © 2007 BioCentury Publications, Inc. ALL RIGHTS RESERVED.

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15th Year of Service

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Trends in the Global Biopharmaceutical Industry

Karen Bernstein, Ph.D.Chairman & Editor-in-chiefBioCentury Publications Inc.

BioInvest 2007Mumbai


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Value-added business information & analysis for life sciencecompanies, investors, academia and government on the strategic issues essential to the formation, development & sustainability of life science ventures.

www.biocentury.com

About BioCentury


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India in the Global Economy

The State of the Global Biopharmaceutical Industry


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Part I: The State of the Global Biopharmaceutical Industry


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Growth and Innovation

Pricing and reimbursement

Safety

Rising efficacy hurdles

The Challenges to Big Pharma


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*Data as of the end of 3Q07; 2008 EPS used to calculate P/E

Company P/E Annual growth rate over next 5 yearsAbbott 16.7 12%AstraZeneca 11.6 6%Bayer 14.5 10%Bristol-Myers 17.1 14%Eli Lilly 15.1 8%GlaxoSmithKline 12.9 5%Johnson & Johnson 15.0 8%Merck 16.0 11%Novartis 15.2 14%Pfizer 10.5 4%sanofi-aventis 11.3 4%Schering-Plough 18.7 22%Wyeth 11.7 7%RX median 15.0 8%RX average 14.3

Growth in Revenues


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Big Pharma M&A

Big pharma Year Merger between

Astrazeneca 1999 Astra & Zeneca

Bristol-Myers Squibb 1989 Bristol-Myers & Squibb

GlaxoSmithKline 1989 Beecham & SmithKline Beckman1995 Glaxo & Wellcome2000 GlaxoWellcome & SmithKline Beecham

Novartis 1996 Ciba-Geigy & Sandoz

Pfizer 1995 Pharmacia & Upjohn2000 Pfizer & Warner-Lambert2003 Pfizer & Pharmacia

sanofi-aventis 1990 Rhone-Poulenc & Rorer1999 Rhone-Poulenc Rorer & Hoechst Marion Roussel1999 Sanofi & Synthelabo2004 Aventis (formed from Rhone-Poulenc & Hoechst merger) & Sanofi-

Synthelabo


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Big R&D

Big pharma tries to create industrial-scale R&D building on the genomics revolution


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Research & ReturnAnnualized R&D/ R&D

Company return (A) Rev (5 yrs) (5 yrs)(B)

Big pharmaPfizer 1% 16% $37.8Johnson & Johnson 6% 12% $27.6GlaxoSmithKline 11% 14% $27.4sanofi-aventis 7% 16% $26.0Roche 25% 16% $21.1Novartis 12% 15% $20.9Merck 3% 17% $18.6AstraZeneca 13% 16% $17.6Eli Lilly 1% 20% $13.3Bristol-Myers 11% 14% $12.8Wyeth 13% 14% $12.5Abbott 12% 9% $8.9Schering-Plough 11% 18% $8.6

Annualized R&D/ R&DCompany return (A) Rev (5 yrs) (5 yrs)(B)

BiotechAmgen 4% 20% $10.5Genentech 43% 20% $5.3Biogen Idec 11% 29% $3.1Serono 10% 23% $2.6 Genzyme 19% 20% $2.2MedImmune 19% 26% $1.5Cephalon 13% 25% $1.3Shire 35% 18% $1.3 Gilead 43% 16% $1.2Sepracor 44% 31% $0.9Celgene 74% 37% $0.8

(A) Annualized return = Avg annual stock price increase 2002-06; (B) R&D = Total R&D spend 2002-06; $B


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Handcrafted R&DCompany R&D breakdown

AstraZeneca Aligned its discovery research along therapeutic units of 600-800 people each.

GlaxoSmithKline Divided the company's discovery component from lead molecule selection to Phase I trials into Centers of Excellence for Drug Discovery (CEDDs). Each CEDD is therapeutically aligned or devoted to a technology platform, with 240-400 people per therapeutically defined CEDD and 60-150 people per technology defined CEDD. Also has Center of Excellence for External Drug Discovery (CEEDD) for managing discovery alliances.

J&J Split pharma activities into three business units: biologics group focused on hematology,

oncology and immunology; virology group focused on HIV and HCV; and CNS IM, which focuses on CNS, infection and metabolic diseases and cardiology.

Roche Created research units focused on specific disease biology areas (DBAs), which are virtual clusters of related molecular mechanisms or biological systems. Each DBA has 300-500 people.


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Biotech Takeouts by Big PharmaYear Acquired Acquirer Value (A)

2007 MedImmune AstraZeneca $15.62001 Alza J & J $14.72007 Serono Merck KGaA $13.22006 Chiron (B) Novartis $5.21999 Centocor J & J $5.02006 Kos Abbott $3.72003 Scios J & J $2.42007 Icos Eli Lilly $2.32005 Vicuron Pfizer $1.92004 Esperion Pfizer $1.32006 Sirna Merck $1.12006 Cambridge Antibody AstraZeneca $1.0

(A) Value at time of completion; (B) Paid about $5.2B for the 56% it didn't already own; price in $B


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Next-Generation Takeouts

Year Acquired Acquirer Value (A)

2007 Adnexus (B) Bristol-Myers $505.02007 Domantis GlaxoSmithKline $450.02006 Avidia Amgen $290.02007 BioRexis Pfizer ND

(A) Value at time of completion, includes milestone payments; (B) Proposed


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Pricing and Reimbursement

Most healthcare systems use a combination of price and rationing to control healthcare costs


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NICE & Velcade: Pay for PerformanceScenario I Scenario II Scenario

IIINo rebate [low end](A) [Velcade+dex](A) [high end]

(B)

No. of pts in U.K. potentially taking Velcade 5,000 5,000 5,000 5,000

% pts reaching 25% reduction in M-protein at NA 45% 55% 70%4 cycles [Janssen-Cilag proposal]

% pts reaching 50% reduction in M-protein at NA 30% 40% 50%4 cycles [NICE proposal]

Pts who could be covered under NA 2,250 2,750 3,500 Janssen-Cilag’s program

Pts who could be covered under NICE’s program NA 1,500 2,000 2,500

NHS spending [no rebates](C) £125.0M NA NA NA

NHS spending [Janssen-Cilag proposal](C)(D) NA £56.3M £68.8M £87.5M

NHS spending [NICE proposal](C)(D) NA £37.5M £50.0M £62.5M(A) Estimates of % of patients reaching the 25% and 50% thresholds in reduction of M-protein at 4 cycles from Paul Richardson, lead investigator of the APEX trial; (B) Estimates of % of patients reaching the 25% and 50% thresholds from Myeloma U.K.; (C) Assumes cost of eight cycles of treatment of about £25,000 per patient; (D) Accounts for rebates; NA=Not applicable


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Patient Pushback

Patients will not be silent forever about being denied access to drugs


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Safety

Drug Indication Issue Outcome

Vioxx Osteoarthritis CV risks Withdrawn from the market

Other COX-2 inhibitors Osteoarthritis CV risks Bextra withdrawn from the market; Arcoxia received a not approvable letter from FDA

Avandia Diabetes CV risks FDA panel voted 22-1 to keep on the market; boxed warning added to the label

Pargluva Diabetes CV risks FDA panel recommended approval; received approvable letter requesting additional data; Bristol-Myers dropped compound

Zimulti Obesity Seizures and FDA panel voted 14-0 against approval; Sanofi suicidality withdrew NDA


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The Issues

Safety only vs. risk/benefit

% risk vs. absolute risk

Patient choice

Politics


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The New Safety Regime

Active postmarket risk identification system

Risk Evaluation and Management Strategies (REMS)

Postmarket study requirements

Mandate label changes

Joint meetings of drug and drug safety offices


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Efficacy Hurdles

Superiority: NSAIDs, antibiotics

Comparative effectiveness


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Big Biotech Becomes Big Pharma

As biotech companies grow, they will face the same problems as big pharma


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P/Es & Revenue Growth

Company P/E Annual growth rate over next 5 years

Amgen 13.0 11%

Biogen Idec 20.3 14%

Celgene 42.4 45%

Genentech 22.3 25%

Genzyme 15.9 18%

Gilead 22.5 17%

ImClone 26.5 14%

Shire 24.5 25%

UCB 27.6 NA

BT median 22.5 18%

BT AVG 23.9*Data as of the end of 3Q07; 2008 EPS used to calculate P/E


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Lightning Rods on Pricing

Avastin: $46,000 for 5 added months of life

Avastin vs. Lucentis in AMD

ESAs: Medicare’s largest line item


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Medicare Pushes Back

Old: Hemoglobin of 10-12 g/dl

New: Don’t treat until Hb is <10 g/dl

Limit duration of treatment


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Amgen Restructures

Reducing headcount

Cutting capital expenditures

Cutting R&D


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Mid-Tier Biotech

Grow or be aquired(or maybe just be aquired)


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Mid-Tier TakeoutsYear Acquired Acquirer Value (A)

2007 Tanox Genentech $919.0

2000 Medeva Celltech $912.0

2003 Powderject Chiron $878.0

2005 Eyetech OSI $829.7

2005 Bone Care Genzyme $719.0

2000 PathoGenesis Chiron $700.0

2000 Liposome Co. Elan $699.2

2004 Atrix QLT $642.2

2006 Connetics Stiefel Labs $640.0

2001 Aurora Bio Vertex $616.0

2006 NeuTec Novartis $605.0

2003 Sangstat Genzyme $600.0

2006 AnorMed Genzyme $584.0

2005 Angiosyn Pfizer $527.0

2003 Cima Cephalon $515.0Biotech takeouts for $500M-$1B since 2000. (A) Value at time of completion


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Biosimilars

Biosimilar EPOs hit Europe


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Part II: India in the Global Economy

Industrialized countries

Middle income/ developing countries

NCEs GenericsNCEs for tropical diseases

Generics

Outsourcing


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Marking our 15th Year of Serviceto the Biotechnology Industry

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