Claudia Karnbach Head - Global Business Development & Licensing Specialty Medicine

Bayer HealthCare

What The Future Holds For Pharma

• Quo vadis HealthCare?

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Industry Big Picture Perspective

Goldman Sachs: „Two roads to travel“

Disease-focused powerhouses/innovators:

• Split, divest, consolidate and re-emerge as disease focused innovators

Healthcare consolidators, cash flow generators, and cost

efficiency producers:

• consolidate, remove redundancies and focus on lowering the cost of healthcare

by providing more cost-effective products to payors/consumers (e.g., generics,

OTC)

Source: Broker Report Goldman Sachs –September 22, 2014 - “global Pharma get better not bigger”

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The Option Space Defined by GS

“We think businesses focused on both ends of the spectrum are likely to

succeed, but it is those in the middle of the road with no strong direction that

have the potential to underperform long-term“

Source: Broker Report Goldman Sachs – September 22, 2014 - “global pharma_get better not bigger”

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Industry Challenge NOVARTIS CEO:

Big Pharma Has To Move Beyond Just 'Selling The Pill‘

Fundamental dynamics the industry faces that are reshaping the pharmaceutical

marketplace:

• Chronic disease is soaring

• Healthcare policy makers and payers are increasingly mandating what doctors

can prescribe

• Pay-for-performance is on the rise

• The boundaries between different forms of healthcare are blurring

• The markets of the developing world, where demand for medicines is likely to

grow most rapidly over the next 13 years, are highly varied

• Governments are beginning to focus on prevention rather than treatment

• Regulators are becoming more risk-averse

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Industry Challenge Drivers of healthcare change grouped into four key categories

Appliance of Science

• Science and technology is fuelling a greater understanding of medical profile of the

individual and its impact on their health

Industry Squeeze

• The bar is being set higher for the industry on all levels: regulatory approval,

demonstration of clinical cost effectiveness and requirements for trust and transparency

New World Order

• The growth of populations and income in emerging markets is increasing economic

power but also increasing issues of resource sustainability

Wealth to Burden of Health

• The advances of the 20th century are leading to real issues now for care for the elderly

and management and prevention of chronic disease

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Industry Challenge: R&D In the next five to ten years, the pharmaceutical industry will begin to experience

major changes in R&D

The revolution in science will transform the pharmaceutical marketplace with

advances in biological and genetic sciences

• Increasing power of the consumer in the health care marketplace will be the primary drivers of these

changes.

Two broad themes emerge in the pharmaceutical marketplace

• Increase in the segmentation of products and markets

• Importance of relationships

Advances in science will allow innovative new drugs to treat specific populations

based on their genetic makeup.

• Industry will deliver these drugs to patients based on their preferences and will tailor specific

treatment regimens supporting their lifestyles and behaviors.

• Consumers will receive highly targeted and specific marketing messages based on their use of

technology, health status, ethnic and racial background, gender, age, and interests and activities.

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Industry Challenge: Commercial Pharma and Biotech will need to stop the aggressive marketing focusing only

on the product of the current model

• Recognize the interdependence of the payer, provider and pharmaceutical

value chains

• Invest in developing medicines the market wants to buy

• Adopt a more flexible approach to pricing

• Develop plans for marketing and selling specialist therapies

• Manage multi-country launches and live licensing

• Form a web of alliances to offer supporting services

• Create cultures that are suitable for marketing specialist healthcare packages

• Develop marketing and sales functions that are fit for the future and a

knowledge based commercial organization

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Industry Challenge How to ensure sustainability…….in a changing environment

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Industry Challenge Key Trends Identified in Biopharma M&A Activity Over The

Last Five Years

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Industry Challenge Are M&A Replacing R&D In Pharma?

Since 2013, the concentration and consolidation in the industry has been its main source of growth. In

2013, there was $174 billion spent on M&A. In April 2014, $118 billion was spent in just one month. The

numbers for Q1 2015 are just as impressive, reaching over $95 billion for the year already.

• In 2015, Pharmacyclics was a hot commodity in the lifesciences arena. Three major companies,

including Pfizer, made pitches to purchase the organization. What is notable about this incident of

pharmaceutical M&A? Pharmacyclics had only few products that were under development. This

cancer drugmaker was able to secure a $21 billion bid in shares and cash, a 60% premium, for just

one major marketed asset.

• Roche just paid a little over $1 billion to gain a controlling stake in Foundation Medicine for the

privilege of investing an additional $150 million to advance their personalized cancer therapy research

• Johnson & Johnson recently signed a licensing deal with a Swiss agency, AC Immune, that is

reportedly worth over $500 million. The deal allows Johnson & Johnson to collaborate on research into

new Alzheimer's disease treatments that have potential

The strategy is simple: secure strategic assets backed by solid science now so that there is still hope for

the future. Pfizer has led this M&A bandwagon with over $200 billion in activity since 1994. Large

drugmakers are taking big gambles on biotech companies that face regulatory approval because tlarge

drugmaker’s products are still in the experimental stage.

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Industry Challenge Development Stage Biopharma Deal Activity Has Increased

Significantly in The Last Three Years

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Industry Challenge US Large Cap M&A Strategies

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Industry Challenge US Large Cap M&A Strategies

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Thank you!