Creating Innovation Through Partnering Daisy Rivera-Muzzio Senior Director EPBU Product Licensing December, 2010

2

Agenda

2 Pfizer Established Products Business Unit

1 Impact of Partnering on Innovation

3 Pfizer EPBU Approach to Licensing Activities

4 Lessons Learned While Becoming a Partner of Choice

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Innovation – Pharma vs. Other Industries •  Innovation is the second most important strategic focus for companies,

(first is cost cutting and rationalization) •  Top innovators are 19% more likely to have an open approach to innovation

compared to the average company, such as engaging in collaboration with external partners

•  Top-line growth is the main goal of innovation for most companies

The value form such activities strongly depends on the industry and whether the priority is top-line growth or bottom line optimization Source: Arthur D Little: Innovation Excellence – January 2010; a global cross industry study on innovation

Primary Strategic Value of Innovation Activities

42% 38% 30% 30% 30% 26% 25% 20% 13% 11%

58% 63% 70% 70% 70% 74% 75% 80% 87% 89%

Chemicals & Parma

Automotive Manuf. & Suppliers

Eng., Mach. & High Tech

Financial Inst. & Insurance

Manuf. Goods

Logistics & Services

Energy & Utilities

Electrical Eng. &

Electronics

Time Fast Moving Cons. Goods

& Retail

Top-line Growth •  Intensification of sales •  Enhancement of sales •  Enlargement of sales

Bottom-line Optimization •  Portfolio Clean-up •  Product cost reduction •  Innovation process &

structures

4

Innovation Through Internal Research vs. Licensing

•  Cost per successful drug has risen tenfold since 1980 from $150 million to approximately $2 billion in 2009

•  Regulatory hurdles for new drugs are higher and periods of economic return are shorter (generics)

•  Developing a new medicine takes on average 10–15 years

•  Approximately 40% of R&D spend is in pre-phase II research, where attrition rates are very high (historically, <10% probability of reaching the market)

* Morgan Stanley, January 2010

The Return on Invested Capital for Internal R&D in BioPharma Has Fallen Sharply in the Past 10 Years

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R&D Spend is Climbing, Yet NME Approvals Have Declined, and Requirements for Regulatory/Market Acceptance Are Increasing

Pharma Situation: R&D Productivity Decline

26 2522

28

53

39

30

35

24

1721

31

2022

18

24

1927

$11.5 $12.7 $13.4$15.2 $16.9

$19.0$21.0

$22.7$26.0

$29.8$32.1 $33.2

$38.8 $39.4$43.0

$48.5 $47.4 $45.8*

0

10

20

30

40

50

60

70

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

New

Dru

g A

ppro

vals

(NM

Es)

$0

$10

$20

$30

$40

$50

$60 PhRM

A M

ember R

&D

Spending (Billion U

SD)

New Drug Approvals (NMEs) PhRMA Member R&D Spending

* Estimated Source: Burrill & Company

Pharma Innovation Gap

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Productivity Declines Have Generated a Need for Diversification

Source: Frankel Group Analysis

Competitor Drug Biotech Regen Med Consumer Dx Vaccine Device Generic

J&J ● ● ● ● ● ● Pfizer ● ● ● ● ● ● ● GSK ● ● ● ● ●

Novartis ● ● ● ● ● ● Abbott ● ● ● ● ● Roche ● ● ● ● Merck ● ● ● ● Teva ● ● ● ●

Medtronic ● ● ● ●

Con

verg

ence

Com

petit

ors

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Unless the Probability of an In-House Molecule Reaching the Market is >30%, the

Risk-Adjusted Economic Value Added (EVA) is 3 Times Higher Under the External

Research Model with a Greater Predictability

Morgan Stanley January 2010

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Reliance on Licensing: View in 2008 Steady Deal Flow, Rising Values

* Recap.com ** Top-20 biopharma defined using Pharma Exec's 2008 ratings, based on 2007 branded global pharma sales

Source: EvaluatePharma; BCG analysis

With a Steady-Flow of Deals Licensed Out…

…And Slightly More Deals Licensed in by the Top 20…

…Deal Values Are on the Rise

Total # of Biotech Out-Licensing Deals with Biotech and Pharma*

Number of In-Licensing Deals by Top-20 Biopharma**

Deal Value* ($B)

“We are now seeing increasing competition among big pharma looking for promising compounds…” – Head of BD, Big Pharma

5475 67 126

162 186 189 208

600 580 610 630

384 319 354 296

2003 2004 2005 2006

Early-Stage Mid-Stage Late-Stage

32 31 33 4031

22 21 2946

53100 100 106

135 127

46 48 44 49 43

2003 2004 2005 2006 2007

Research Pre-Clinical Clinical

$0

$20

$40

$60

$80

$100

2003 2004 2005 2006

9

Month Pharmaceutical Biotech Deal Value (USD M) Principal Focus

September Roche PTC Therapeutics 1,900 Drug Discovery September AstraZeneca Nektar Therapeutics 1,500 Pain Therapeutics December AstraZeneca Targacept 1,240 Neurology January Bristol-Myers Squibb ZymoGenetics 1,107 Hepatitis C

November Novartis Incyte 1,100 Hematology-Oncology November Takeda Pharmaceuticals Amylin Pharmaceuticals 1,075 Obesity November Bristol-Myers Squibb Alder Biopharmaceuticals 1,050 Monoclonal Antibodies

May Sanofi-Aventis Exelixis 1,000 Oncology June GlaxoSmithKline Concert Pharmaceuticals 1,000 Deuterium Drugs June GlaxoSmithKline Chroma Therapeutics 1,000 Inflammatory

January Wyeth Pharmaceuticals Santaris Pharma 847 RNA-based Medicine November Sanofi-Aventis Regeneron 800 Antibodies October Astellas Pharma (Japan) Medivation 765 Oncology

April Merck Cardiome Pharma (Canada) 700 Cardiovascular October GlaxoSmithKline Prosensa (Netherlands) 680 RNAs October Merck Galapagos (Belgium) 596 Cardiovascular February Novartis Portola Pharmaceuticals 575 Cardiovascular

November GlaxoSmithKline Nabi Biopharmaceuticals 540 Vaccines October Sanofi-Aventis Merrimack Pharmaceuticals 530 Oncology

June Wyeth Pharmaceuticals Catalyst Biosciences 500 Hematology November GlaxoSmithKline Astex Therapeutics 500 Drug Discovery

Source: Burrill & Company

Sample Activity 2009 Partnering / Licensing

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Volume of Deals is Shifting to Late Stage for the Largest Buyers...

Number of Licensing Deals by Top 10 Pharma Co*

* Top 10 Pharma companies as defined by highest sales in 2008 include Abbott, AstraZeneca, Eli Lilly, GSK, J&J, Merck, Novartis, Pfizer, Roche, Sanofi-Aventis

Source: DataMonitor Pharmaceutical Licensing Overview 2010

0

10

20

30

Phase I Phase II Phase III Pre-App Approval Marketed

2008 2009

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...And Values Had Tempered

Average Deal Value Has Declined... ...But So Has the Number of Deals

Source: Windhover, PharmaDeals; PharmaVentures analysis Note: As data was obtained from two different sources with different classification of deals, no meaningful results can be obtained by combining data from the two graphs, 2010 results extrapolated from H1, assuming H2 will experience the same deal volume

Windhover-Only: Total Bio-pharma Licensing Deals

Average Deal Values ($ M)

$0

$50

$100

$150

$200

$250

$300

$350

$400

2004 2005 2006 2007 2008 2009

549479

547 523

370313 340

2004 2005 2006 2007 2008 2009 2010E

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2009 Biotech Acquisitions Month Acquirer Target Deal Value

(USD M) Principal

Focus January Pfizer Wyeth 68,000.0 Biopharmaceuticals

March Roche Genentech 46,800.0 Biopharmaceuticals

September Dainippon Sumitomo Pharma Sepracor 2,600.0 Specialty

Pharmaceuticals

July Bristol-Myers Squibb Medarex 2,400.0 Biopharmaceuticals

July Johnson & Johnson Elan 18% Stake (Ireland) 1,385.0 Neurology

May Johnson & Johnson Cougar Biotechnology 1,000.0 Oncology

February Lundbeck Ovation Pharmaceuticals 900.0 Neurology

October Sanofi-Aventis Fovea Pharmaceuticals 541.0 Ocular Diseases

April Sanofi-Aventis PiPar Sciences 500.0 Oncology

September Johnson & Johnson Crucell 18% Stake (Dutch) 444.0 Vaccines

July Hisamitsu Pharmaceutical

Noven Pharmaceuticals 428.0 Specialty

Pharmaceuticals

December Cubist Pharmaceuticals

Calixa Therapeutics 402.5 Antibiotics

Source: Burrill & Company

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Interim Conclusions (from Morgan Stanley)

•  In licensing accelerates innovation, de-risking the investment for the buyer

•  NPV lost from higher pay-ways and milestones is offset by lower risk–adjusted invested capital

•  The shift from internal R&D to licensing re-defines the core competencies of Branded Pharma to late stage development and commercialization

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In-Licensing in Pfizer Established Products Business Unit

•  Independent Business Unit with own P&L and unique entrepreneurial culture

•  Forward-looking, focus on creating win-win collaborations

•  Separate Business Development Team

•  Strive for agility and quick decision making

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Established Products – Our Vision

To Become One of the World’s Top Pharmaceutical Players

in the Post-LOE Marketplace

Our Mission: To provide patients and payers with medicines characterized

by Pfizer’s reputation for quality, safety and innovation

Our Journey: We will dramatically change Pfizer’s portfolio

of Established Products from a significantly shrinking segment of our business to an

engine of positive growth

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Keys to Success

Changes That Enable Growth: Profit Reinvestment, P&L Responsibility

Entrepreneurial Culture: Targeted External Talent Added

Fast, Flexible, Focused and Accountable

Partners: Protalix, Strides, Aurobindo, Biocon

Scope: Global – Developed Countries and Emerging Markets

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The Expanded EPBU Portfolio A Mix of Brands and Generics

•  Effexor •  Protonix •  Tazocin

600+ Products

200+ In-licensed Molecules

30+ Wyeth Products Including:

Mix of Generics, Post-LOE and Patent-Protected

•  Central Nervous System •  Cardiovascular •  Sexual Health •  Anti-Infectives •  Pain and Inflammation

Therapeutic Areas Include:

3 of More Than 30 Wyeth Products

(glipizide) Extended Release Tablets

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Our Wish List

•  EPBU is actively seeking partnerships –  Post LOE opportunities: generics, reformulated /

branded generics, biosimilars –  Medium size branded products –  Innovation via small companies –  Late stage development

•  Key criteria –  Leverage our commercial capabilities –  Speed to market –  Cost efficient opportunities

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EPBU Approach to Licensing

•  Initiate a commercial assessment and ensure we can maximize opportunities for the markets

•  Perform a cross-functional Due Diligence Process

•  Our philosophy is to maintain Pfizer quality / supply reputation and ensure we can stand behind the products we license even when manufactured by third parties

•  EPBU seeks to create win-wins via Pfizer’s global capabilities, scale, and technologies

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Creating Success Through EPBU Partnerships

•  Pairing external technology and IP with our infrastructure, scale, supply chain, resources and processes

•  Utilize our commercial expertise to maximize opportunities in the marketplace

–  Branded and post-LOE phases

•  Leverage agility and entrepreneurial spirit of small companies with Pfizer ‘s comprehensive approach to innovation

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Pfizer Aims to Be a Partner of Choice Who Creates Value for Your Product or Technology

Our Strengths & Capabilities

•  Reputation for Quality and Supply Reliability

•  Strong Brand Recognition

•  Global Commercial Capabilities

•  State-of-the-art Manufacturing processes and technologies

•  Strong Alliance Management

•  Success in Past Partnerships

Leverage Our Product

Portfolio

Pursue Product Enhancements and

Reformulation

Pursue Opportunities in “Niche” Markets

Intensify Late Stage Lifecycle Planning

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Partnering Offers Value and Innovation Through Collaboration and Convergence of Technologies, Industries and Companies Roles…

•  Successful partnering requires:

–  Finding a strategic fit and integrating organizational cultures

–  Creating an environment of collaboration by understanding what each partner needs to achieve

–  Welcoming the opportunity to collaborate with multiple partners

–  Establishing a strong Alliance Management program

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Our Lessons Learned

Engaging External Organizations and Third Parties Creates a Wide Range of Opportunities

Innovation Remains a Top Strategic Focus for Growth

Three Keys to Partnering Include: Cultural Integration, an Environment of Collaboration,

and Strong Alliance Management

Collaborative Partnering Offers Increased Value and Innovation