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Moving Beyond the Commodity Market: What Future is there in added Value Generics, Niche

Products and Biosimilars?

Dr. Brian W Tempest

www.briantempest.com

14th EGA Annual Conference – Paris, France

June 3rd 2008

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www.briantempest.com

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Healthcare pressures to 2050

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Healthcare Reform & Transition is Everywhere

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Healthcare Reform & Transition is Everywhere

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Big Pharma R&D Productivity is Falling

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Big Pharma Sales Concentration...

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But the Product Pipeline is not with the top 10

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Big Pharma Generic Exposure

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A 20- Year Historic Low

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45,000 Pharma Jobs

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double digit growth to single growth focus on 7 developed markets to 7 emerging markets

primary care to specialists small molecules to biotech molecules

a slump in R&D innovation - the next 5 years being similar

$84b patent expiries in 2010, 2011, 2012

48 M&As in 2007 at a value >$50m 15 out of 18 top companies have announced restructuring

Big Pharma in Transition

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Generic Competition is Rising CPHI Attendees, Milan, 2nd – 4th Oct’07

1. China 467 – 33%

2. India 189 – 13%

3. Germany 96

4. Italy 80

5. USA 75

6. UK 55

7. France 55

8. ROW 387

Total 1404

As registered on July 25, 2007

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Generics – USA Filings

USA ANDA filings by India % Share of USA DMF filings

India China 2004 27% 9% 2005 37% 10% 2006 44% 14%

Q1’07 48% 17% Q4’07 48%

Source: US FDA / J P Morgan, 2 may 2007

Source: US FDA, Credit Suisse

0

50

100

150

200

250

300

2002 2003 2004 2005 2006

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Indian Healthcare’s 1987 Companies

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Asia roaring Ahead

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A Recent M&A Success

Hale & TempestSources: 1. IMS Midas, March 20052. Earth Trend Data Tables 2005

82% of the world population accounts for only 12% of the Global pharmaceutical sales

Region Pharma Sales Population

North America

Europe

Japan

$255 b 47%

$158 b 30%

$59 b 11%

332 5%

725 11%

128 2%

Asia/Africa/Aus

Latam

88%

$41 b 8%

$20 b 4%

18%

4711 73%

558 9%

12% 82%

Worldwide $533 b 100% 6454 100%

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Competition is rising, India feels confidant and strong Cost containment in European countries Importance of Branded Generic countries Focus in the hospital Injectables sector

Zhejiang Huahai Pharma Co –first tentative ANDA

FTC deals in 06/07 at 45 are double 05/06 & 04/05

M&A - 30% of added value from synergy

Indian Manufacturing units to double 2010 on 2000

Generics Sector in Transition

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Germany Reimbursement Uncertainty

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South Europe Investment

Hale & TempestSources: Goldman Sachs 2007

Top 5 Global Pharmaceutical Markets 2020

Rank Country Size

1.

2.

3.

4.

5.

USA

China

Japan

France

India

$ 475b

$ 125b

$ 61b

$ 51b

$ 43b

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Wholesaler Brand Ranked 2nd in UK

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Pharmacy Chains

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KSR vs. Teleflex USA Supreme Court decision USA Bilateral FTAs amended –Columbia, Peru, Panama

Compulsory Licensing by Thailand, Canada under WTO German reimbursement review, UK PPRS, Poland, Hungary

FDA setting up 5 offices in China & then India, ME, SA,EU

Brazil generics booming , Japan generics rising

Impact of wholesaler brands and pharmacy chains West Europe vs. Central/East Europe vs. South Europe

Pharma Markets in Transition

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In this Era of Transition

there is a Serious Search

for Profitable Sectors

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Impact of Competition on Price

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Added Value Generics, Niches & Biosimilars

Branded Generics Recombinant DNA technology/Biosimilars - 20% of CTs Injectables & Hospitals OTC - brands last forever NDDS - once a day technology Chemistry e.g. hormones, penems, peptides - 5% of CTs Natural Products - 5% of CTs Fermentation technology, China power costs- 8% of CTs Aerosols, Implants, Patches Para 4 180 days USA exclusivity/first day EU launches CRAMS - $24b global market in 2006, $48b in 2010 with

India forecasting $1b and $3b share

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Branded Generics- the analyst’s view

“Branded Generics are the most profitable place to be in generics and there are a few markets with better branded characteristics than those of …”

Frances Cloud Nomura September 14 2007

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Different Global Generic Market Sizes $bn

Region Sandoz

2006

IMS

2008USA 23 68

West Europe 14 19

East Europe 13 NA

Japan 3 3

Latam/Canada 10 3 (Canada only)

ROW 37 7

Total 100 100

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Europe’s largest Branded Generic market

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Biologics Share of Patent Expiries

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Biotech Share of Patent Applications

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Biosimilars

•Most Companies expect Europe to be the stepping stone to the USA. Clarity on EPO,GCSF, HGH,I with Interferon, LMW Heparin to comeMonoclonals next on the agenda

• USA regulations will not be clear until at least 2009. Biosimilars are expected not to be AB rated so field forces will be required for marketing.

•Generics market size $30b USA & $25b Europe. Indian Companies will be active players . Chinese & Korean Companies are already active .

•Some Big Pharma Companies are interested in this sector

• The earlier Biosimilar products may not be as profitable as some forecast owing to hospital discounts. Monoclonals will probably be more profitable.

• Need to be there

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Irinotecan – 7 first day launches in USA

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In Summary

Big Pharma, Generics & Pharma Markets are all in Transition - with lots of Change

Relatively easy to achieve Generic Sales

But Profits and Cash are Challenging

Everybody will be looking for profitable niches

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Thank You