1Confidential – Not for Distribution

State of Clinical Development Costs

TTC, Philadelphia 2011

Kate Tranotti ICON VP Clinical Operations

Ross Pettit AMAG VP Clinical Operations

2Confidential – Not for DistributionFT-15 5/08

Corporate Headquarters

AMAG Pharmaceuticals & ICON Clinical Research

3Confidential – Not for Distribution

Effective CRO Budgeting and cost control

Scope of work

Contract typeMutually beneficial termsUsing incentives, penalties, partnerships

Governance, Communication, meetings, issue escalation and resolution process

Monitoring toolsActual vs. Budget varianceEarned Value Management

Budget Development and Trial PlanningBenchmark dataUnit costs and Unit cost development

Regional, Globalization costs

Reporting and reconciliation of Trial expense data

Management of Direct costs vs. Pass-through

4Confidential – Not for Distribution

Financial Terms

FFP = firm fixed priceFFP = firm fixed price CS = Cost SharingCS = Cost Sharing

FFP/EPA = Firm Fixed price / economic adjustFFP/EPA = Firm Fixed price / economic adjust CR = Cost ReimbursementCR = Cost Reimbursement

FPIF = Fixed Price Incentive FirmFPIF = Fixed Price Incentive Firm CPIF = Cost Plus Incentive FeeCPIF = Cost Plus Incentive Fee

FPR = Fixed Price RedeterminedFPR = Fixed Price Redetermined CPAF = Cost Plus Award FeeCPAF = Cost Plus Award Fee

T&M = Time & MaterialsT&M = Time & Materials CPFF = Cost + fixed feeCPFF = Cost + fixed fee

FFPFFP FFP/EPAFFP/EPA FPIFFPIF T&MT&M CSCS CPIFCPIF CPAFCPAF CPFFCPFFFPRFPR CRCR

LOWLOWLOWLOW

LOWLOWLOWLOWHIGHHIGHHIGHHIGH

HIGHHIGHHIGHHIGHBuyerBuyerBuyerBuyer

SellerSellerSellerSeller

BuyerBuyerBuyerBuyer

SellerSellerSellerSeller

LESSLESSLESSLESS

MOREMOREMOREMORE LESSLESSLESSLESS

MOREMOREMOREMORE

RISKRISKRISKRISK

CONTROLSCONTROLSCONTROLSCONTROLS

5Confidential – Not for Distribution

Financial Terms

Unit price – fixed cost controlTeams (sponsors) must be aware of the make up of a unit – removes unforeseen costs

Flexibility in the use of units by the CRO eg. Using one monitoring visit; extra days on site

Use of penalties and incentives – more commonAgreement when this is applicable

Clear communication and escalation for out of scope approvals

Ensure dispute resolution mechanism in place for all contractual disputesLate payments

6Confidential – Not for Distribution

DEFINING UNITS AND SCOPE

Fully transparent means better control……

7Confidential – Not for Distribution

Estimation and Accuracy

Ball Park 25%

Comparative 15%

Feasibility 10%

Definitive 5%

Annual Annual BudgetBudgetAnnual Annual BudgetBudget

SOWSOWSOWSOW

BenchmarkBenchmarkBenchmarkBenchmark

RFPRFPRFPRFP

8Confidential – Not for Distribution

Scope of Work

Devil is in the details

Functional partitioning

Impact analysis [cross functional]

Milestone driven [A to Z]

Communication Plan

Risk Plan

Governance and Oversight (metrics)Performance indicators

Earned value analysis

9Confidential – Not for Distribution

Keys to Scope Development

Detailed task structure

Shared risks and responsibility

Defined tolerance

Implementing lessons learned

Metric assessment

Goals and expectations

10Confidential – Not for Distribution

DEFINING TOLERANCE

Tolerance around extended use of resource

Too slow

Too expensive

Tolerance must be set up front

Communication of expectations is paramount

Tolerance levels are a shared risk**in a CRO partnershipDecrease in resources may result in release of staff which may not be available when ready. Sponsors need to be prepared for this

CROs need to remain flexible in maintaining resources to maintain consistency and quality

11Confidential – Not for Distribution

Incentives

Incentive Type Positive (reward)

No Reward or Penalty

Negatives (Penalties)

Objective Incentives

|under budget On Budget Over budget |

| early delivery On time delivery Late delivery |

| exceed requirements

Achieve contract requirements

Do not achieve requirements|

Subjective Incentives

Award feeOther special incentives

TOLERANCE

12Confidential – Not for Distribution

Effective CRO Budgeting and cost control

Scope of work

Contract typeMutually beneficial termsUsing incentives, penalties, partnerships

Governance, Communication, meetings, issue escalation and resolution process

Monitoring toolsActual vs. Budget varianceEarned Value Management

Budget Development and Trial PlanningBenchmark dataUnit costs and Unit cost development

Regional, Globalization costs

Reporting and reconciliation of Trial expense data

Management of Direct costs vs. Pass-through