Innovation series partnering & valuing oncology assets - may 2012

Valuing Oncology Assets: Strategies in an evolving clinical and commercial landscape May 23, 2012

Many Thanks to the Event Organizers and Sponsors!

Adam Bristol (Aquilo Partners)

Zeenat Petrawala (Medivo)

Mike Iacoviello (Capgemini Consulting)

Thomas Celerier (Capgemini Consulting)

Carol Koch (Capgemini Consulting)

Brittany Howe (Capgemini Consulting)

German American Chamber of Commerce Team

Copyright © 2012 Capgemini Consulting. All rights reserved.

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Agenda

Introduction

Keynote speakers:

– Peter Radovich: Sr. Director, Onyx Pharmaceuticals

– Dave Raksin: Director, Inverness Advisors

– Kevin Sin: Director, Oncology Business Development, Genentech

– Mark Charest: Vice President, New Leaf Ventures Partners

Panel Discussion / Q&A

Wrap-up


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% of Total Biopharma Sales and Anticipated Growth % from 2011 – 2106 by Therapeutic Area

0%

5%

10%

15%

20%

25%

-27%

+18%

+6%

+36% +27%

-1%

-47%

+9%

+2%

Analysts predict that oncology will be the largest therapeutic area, in terms of worldwide revenue, by 2016


5

2011

2016

Source: “Therapeutic Categories Outlook”, Cowen and Company, February 2012

Oncology drugs are estimated to represent close to 20% of the total $678bn worldwide pharmaceutical market in 2016

Breast, Lung and Colorectal cancers dominate in terms of prevalence and global market potential…

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

# o

f N

ew

Pat

ien

ts p

er Y

ear

Glo

bal

Mar

ket

Po

ten

tial

($

M)

Global Market Potential New Patients

NHL: Non-Hodgkin's Lymphoma; CTCL: Cutaneous T-Cell Lymphoma; GBM: Glioblastoma Multiforme; CLL: Chronic Lymphocytic Leukemia

Source: “Oncology Market” JP Morgan, June 2008; “Pharm Exec 50” Pharmexec.com, May 2010

Global Market Potential and New Patients by Tumor Type

…However niche indications are becoming increasingly crowded and drive more competition per patient than is seen in tumors that affect larger patient populations


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Cancer mAb partnering deals by dvpt stage

Number of Cancer mAb partnering deals 2007-2012* (Q1)

Global Oncology Market by Therapy Type

MAbs / Targeted Therapies dominate the oncology market, as they offer validated MOAs in a TA where probability of success is lower than average…

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Source: Total revenue, “Therapeutic Categories Outlook”, Cowen and Company, Feb 2012

44%

31%

23%

1% 1%

Mabs/Targeted Therapies

Chemotherapeutics

Blood Cell Factors

Chemopreventatives

Other Therapies

57% 27%

16%

0% 0%

2011

2016E

…driving steady number of partnering deals over the past few years (over 330 deals since 2007)

0

20

40

60

80

2007 2008 2009 2010 2011 2012*

0 50 100 150 200

Formulation Marketed

Regulatory Phase III Phase II Phase I

Preclinical Discovery

80%

Source: Current Partnering, Cancer mAb Partnering Terms and Agreements, April 2012

Source: Current Partnering, Cancer mAb Partnering Terms and Agreements, April 2012


Major trends will re-shape the oncology market and potentially impact asset valuation and Partnering decisions

Decreasing R&D productivity

Healthcare Reform

– Biosimilars

– Comparative Effectiveness Research

Increased pressure on reimbursement and utilization management for oncolytics

Providers

– Pressure on oncology community business and margins, leading to consolidation

– Shift of Site of Care

– Decreased Providers access

Access to capital

– Broken VC model

– Better IRR and lower capital intensity in other sectors


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Drivers

Population Demographics

Healthcare Reform

– Affordable Care Act / Individual mandate

Oncolytics Business Model

– Price premium associated to high cost of burden

– Typical DOT between 4 to 12 months

Innovation:

– Targeted therapies

– Companion Dx

– Antibody-Drug Conjugates

– Administration (e.g. nanotechnologies)

– Therapeutic Vaccines

Emerging Market Growth

Drivers Barriers

Valuing Oncology Assets: Strategies in an evolving clinical and commercial landscape


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What Partnering Strategy? How to Execute?

What areas of oncology have the greatest unmet needs today?

Which players (big or small) currently possess the most potential in fulfilling those needs?

What novel technologies present significant opportunities?

What trends are shaping the market and partnering in oncology?

Their Perspective

Where is the “smart money” in the current oncology environment?

What are some the “best-in-breed” techniques used to value an early stage product / company?

What factors are considered when determining whether to in-license, JV, or acquire?

What are the innovative partnering approaches?


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Benoit Berthoux

Head of LS West Coast Practice

San Francisco, CA

Mob.: +1 415 200 9859

[email protected]

Oncology Commercialization Peter Radovich Senior Director, Global Product Strategy Carfilzomib Product Development Team Lead

May 23, 2012

DISCLAIMER

Slides, comments and opinions expressed in this presentation are my own and do not represent

the views of my employer, Onyx Pharmaceuticals.

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What has made the Oncology market interesting for drug development and commercialization?

• Nearly all metastatic solid tumors are uniformly fatal and many opportunities to improve outcomes in earlier stages

• Significant unmet needs remain in many hematologic malignancies, despite progress

High unmet needs

Receptive to Innovation

Favorable Dynamics

• Key actors in market generally have been receptive to innovation (providers, patients, payers, regulators)

• Limited & concentrated provider universe

• Historically favorable pricing, reimbursement & access environment

Global Oncology Market Continues to Grow $35B Today and ~$100+B by 2020

0

5

10

15

20

25

30

35

40

45

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

% G

RO

WTH

SALE

S U

S$B

N

Global oncology Global oncology growth Europe oncology growth

Global pharma growth Japan oncology growth US oncology growth

Global Oncology Annual Sales & Sales Growth

Source: IMS Health, MIDAS, MAT Mar 2010. *Oncology includes both solid & heme tumors and is defined by IMS as L1 (cytotoxics & targeted cytotoxics) and L2 (hormonals). 1

4

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Developed Countries Have Generally Accepted “US Price” Levels for Innovative Products

Oncology Blockbusters: Top 10

1.5

1.7

1.8

2.2

2.5

2.8

4.3

5.2

6.1

6.2

Arimidex

Velcade

Erbitux

Alimta

Revlimid

Taxotere

Gleevec

Herceptin

Rituxan

Avastin

Global Sales 2010 (in billions)

Roche

Roche

Roche

Novartis

Celgene

Sanofi

Lilly

BMS

Takeda

AZ

Company Brand

*

16 Source: IMS Health

In 2010, approximately 40% of Global Sales for the Top 10 came from US

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Successful Oncology Launches in 2011

Source: Kantar Health “The Most Promising Technologies for Unmet Needs in Oncology”

Success Factors

Uniform: •Strong value proposition • High unmet need • First in class

Others: •Small patient population • “Personalized” medicine • Companion diagnostic

What Lies in the Road Ahead??

• Challenging global market access environment leading to increased pressure from payers – Healthcare spend trajectory unsustainable – Oncology becoming chronic; escalating cost burden – Increasing complexity in price negotiations, risk sharing, HTA’s, cost effectiveness, etc. (EU, AP, ROW) – Regional heterogeneity – Increasing financial burden on patients (US)

• Provider, patient & payer desire for stronger value proposition & differentiation

– E.g., increase in H2H trials in oncology

• Impact of generics and biosimilars

• Increasing role of the patient; aided by PR, digital & social media, advocacy

• Emergence of emerging markets

Partnerships: Medivaiton / Astellas (Ph3)

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Partnerships: Incyte / Novartis (Ph3)

20

Partnerships: Seattle Genetics / Takeda (Ph2)

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Partnerships: Pharmacyclics / J&J

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• Development and commercialization of PCI-32765 globally in hematologic malignancies • $150M upfront; up to $825M in additional development and regulatory milestones • Each company leads on specific indications outlined in development plan • Development cost sharing: 40% PCYC / 60% J&J • Both Pharmacyclics and J&J book revenue and co-commercialize PCI-32765.

• In the US, Pharmacyclics will book sales and take a lead role in US commercial strategy development and both Pharmacyclics and Janssen will share in commercialization activities. • Outside the United States, Janssen will book sales and lead and perform commercialization activities. • Profits and losses from the commercialization activities will be equally split on a worldwide basis.

Dave Raksin – Inverness Advisors

Capgemini Consulting Oncology Discussion

Inverness Advisors is a division of KEMA Partners LLC. Inverness Advisors conducts all securities business through KEMA Partners LLC, a FINRA member and SEC-registered broker-dealer.

May 23, 2012

Dx Transaction Landscape and Valuation Overview

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Oncology Largely Reflects Overall Dx Deal Trends

Agilent-Dako a sign oncology Dx M&A picking up again? ($2.2B, 6.6x/21.1x Rev./EBITDA) – Significant oncology Dx activity late ’10/early ’11, other areas picked up in ‘11 – Q1’12

Significant gap between strategic and public financial market valuations – Dx M&A avg. 35% premium last 18 months, even at moderate 3.6x rev./17.9x EBITDA

Revenue companies dominate: at least 24 of 30 >$15M value Dx deals we tracked – Median $103M revenue. At least 16 of 30 EBITDA positive as well

– Scarcity value on companies with meaningful revenue and earnings (not priced into publics?)

Expanding buyer universe could drive more activity and push Dx valuations upward – Led by Labs, Dx instrumentation, life sciences tools moving into clinical & private equity

• Larger acquirers good access to capital (e.g. LabCorp $560M, LifeTech $750M credit)

• Smaller consolidators some access (e.g. Transgenomic $22M PIPE, Sequenom $62M FO)

– Asian acquisitions in U.S. a notable recent trend: e.g. FUJIFILM-SonoSite, Samsung-Nexus

Pharma/biotech without Dx businesses still opting for partnership over M&A…for now – e.g. Takeda-Metabolon, BMS-Meso, GSK-Epistem, Amgen-Dako companion Dx deals

– GE Healthcare very active and Siemens entering companion Dx

– Strategics also taking advantage of weakened VC market; no IPO window for Dx

• Stepping in alongside stronger remaining financial VCs – e.g. Aviir ($30M, Merck GHI), Auxogyn ($20M Merck Serono), Pronota ($5M, JJDC),

Enterome ($7M Lundbeck), BioCartis ($98M J&J, Debio, Philips), Curetis ($16M Roche)

Data source: Capital IQ, Thomson Reuters and Company websites

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Oncology a Significant Component of Recent Dx M&A: Strong Premiums, Even at Moderate Multiples

Earn-out structure disclosed in 5 of 30 deals; pre-commercial/earlier-stage deal risk sharing mtm-Roche ($180M/$85M), Claros-Opko ($30M/$19M), QuantaLife-BioRad ($162M/undisc.),

Argene-BioMerieux ($53M/$7M), PVT-Roche ($91M/$28M) More common in Rx: 50%+ in comparable-sized deals

Oncology deals: large acquirors & strategic rationale cited at least as important as revenue/earnings

($M, except per share data)Date Implied Value Stock Premium LTM Enterprise Value

Announced Target/Issuer Buyers/Investors Equity Enterprise 1 Month 1 Week 1 Day Revenue EBITDA Revenue EBITDA Target Main Focus

05/17/12 Dako A/S Agilent Technologies $2,200.0 $2,200.0 - - - $330.9 $104.5 6.6x 21.1x Cancer

04/30/12 Gen-Probe Hologic 3,757.9 3,868.8 24.6% 22.1% 20.4% 586.6 183.5 6.6x 21.1x Blood diseases/transplant

04/23/12 CareFusion NeuroDx Natus Medical 58.0 58.0 - - - 96.7 - 0.6x N.A. Critical care

02/13/12 SeraCare Life Sciences Linden LLC 80.8 62.6 30.7% 23.8% 11.7% 44.4 4.7 1.4x 13.4x Research Dx

12/15/11 SonoSite FUJIFILM Holdings 755.8 855.9 27.8% 26.9% 29.2% 308.8 37.1 2.8x 23.0x POC ultrasound10/18/11 Reichert Tech. (from BPO Ametek 150.0 150.0 - - - 55.6 - 2.7x N.A. Eye care devices10/13/11 Claros Dx Opko Health 25.0 49.1 - - - 0.0 (4.1) N.M. N.M. POC urology immunoassay

10/05/11 Quanta-Life Bio-Rad 162.0 162.0 - - - - - N.A. N.A. Digital PCR

07/26/11 Orasure DNA Genotek 53.0 53.0 - - - 14.0 - 3.8x N.A. DNA and RNA collection07/19/11 mtm laboratories AG Roche Holding 184.3 269.4 - - - - - N.A. N.A. Cervical cancer

07/19/11 Argene SA BioMérieux 53.2 60.3 - - - 14.2 - 4.2x N.A. Autoimmune

07/06/11 Axis-Shield plc Alere 354.0 369.0 40.8% 47.3% 40.3% 162.4 20.8 2.3x 17.7x Diabetes, vitamin, RA

07/02/11 Immucor Inc. TPG Capital 1,902.2 1,653.2 34.7% 34.6% 30.2% 331.5 149.1 5.0x 11.1x Blood transfusion

06/21/11 EraGen Biosciences Luminex 34.0 34.0 - - - 8.0 - 4.3x N.A. PCR in infectious disease

06/15/11 Ipsogen SA Qiagen NV 92.6 86.0 69.7% 72.5% 70.9% 11.9 (4.3) 7.2x N.M. Cancer

05/23/11 Stanbio Laboratory EKF Dx 19.3 25.3 - - - 16.4 3.1 1.5x 8.3x Clinical chemistry devices

05/19/11 Phadia (Cinven PE) Thermo Fisher 3,512.0 3,512.0 - - - 520.0 212.8 6.8x 16.5x Allergy and autoimmune

04/27/11 Rules-Based Medicine Myriad Genetics 80.0 80.0 - - - - - N.A. N.A. Protein chip, CNS

04/06/11 Orchid-Cellmark LabCorp. 85.4 66.7 39.3% 40.7% 36.6% 66.0 1.5 1.0x 44.0x Forensic and family DNA

04/03/11 Cellestis Ltd. Qiagen NV 354.4 331.3 40.9% 37.4% 29.1% 45.8 12.4 7.2x 26.8x Infectious diseases

03/17/11 Celera Corporation Quest Dx 657.2 330.4 23.5% 27.0% 27.6% 128.2 (21.1) 2.6x N.M. Cancer, cardio, infectious

03/15/11 PVT Lab Systems Roche 119.0 90.8 - - - - - N.A. N.A. IVD automation

02/24/11 Athena Dx(Thermo Unit) Quest Dx 740.0 740.0 - - - 110.0 - 6.7x N.A. CNS

02/01/11 Accuri Cytometers Becton Dickinson 205.0 205.0 - - - - - N.A. N.A. Flow cytometry

01/24/11 Genoptix Novartis 442.3 310.9 28.0% 23.0% 26.5% 196.9 47.0 1.6x 6.6x Blood cancers

11/18/10 Genzyme Dx Sekisui Medical 265.0 265.0 - - - 167.0 - 1.6x N.A. Diagnostic intermediaries

11/04/10 ITC Nexus Dx 55.0 55.0 - - - - - N.A. N.A. POC Hemostasis

10/30/10 Standard Dx Alere 276.4 241.4 - - - 76.2 42.9 3.2x 5.6x Korea and India dist.

10/22/10 Clarient GE Healthcare 455.0 585.1 45.8% 39.3% 33.7% 110.1 6.6 5.3x N.M. Cancer

09/13/10 Genzyme Genetic LabCorp. 925.0 925.0 - - - 371.0 - 2.5x N.A. Fetal and oncology

Average 36.9% 35.9% 32.4% $157.2 $50.6 3.6x 17.9xMedian 34.7% 34.6% 29.2% $103.3 $12.4 3.0x 17.1x

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Public Dx Specialty Comparables

($M, except per share data)

Enterprise Value

Price % of 52 Equity Enterprise Revenue EBITDA P/E PEG LT Growth % Price Gain % EV Gain Covering

Company 05/22/12 Wk High Value Value 2012E 2013E 2012E 2013E 2012E 2013E 2012E 2013E Rate Since IPO Since IPO Analysts

Quest Diagnostics (DGX) $57.45 92% $9,114.4 $12,888.6 1.7x 1.6x 7.8x 7.4x 12.5x 11.4x 1.2x 1.1x 10.7% 14

LabCorp (LH) 85.11 84% 8,238.6 10,230.1 1.8x 1.7x 7.6x 7.2x 12.3x 11.3x 1.0x 1.0x 11.8% 19

Myriad Genetics (MYGN) 25.78 95% 2,187.8 1,850.5 3.5x 3.2x 9.4x 8.1x 18.6x 16.2x 1.8x 1.6x 10.1% 15

VCA Antech (WOOF) 21.07 81% 1,843.6 2,427.7 1.4x 1.3x 8.1x 7.3x 14.5x 12.9x 1.2x 1.1x 12.2% 10

Genomic Health (GHDX) 32.98 94% 991.1 889.3 3.7x 3.3x N.M. N.M. N.M. N.M. N.A. N.A. 37.0% 174.8% 283.3% 13

Exact Sciences (EXAS) 10.27 91% 586.8 504.3 N.M. N.M. N.M. N.M. N.M. N.M. N.A. N.A. 23.3% -26.6% 145.3% 13

Bio-Reference (BRLI) 20.29 78% 563.6 575.4 0.8x 0.7x 6.1x 5.0x 13.6x 11.2x 0.8x 0.7x 17.3% 5

Sequenom (SQNM) 4.38 50% 501.7 399.2 4.6x 2.5x N.M. N.M. N.M. N.M. N.A. N.A. 27.5% -83.2% -12.8% 10

MEDTOX Scientific (MTOX) 19.89 88% 178.4 171.4 1.4x 1.3x 9.8x 8.2x 25.4x 20.4x 1.3x 1.0x 20.0% 2

Neogenomics(NGNM.OB) 1.65 90% 74.0 74.3 1.2x 1.0x 17.8x 16.2x 55.0x 15.7x 0.6x 0.2x 86.0% 2

Response Genetics (RGDX) 1.50 49% 37.2 31.5 1.6x N.A. N.A. N.A. N.M. N.M. N.A. N.A. N.A. -78.6% -36.9% 1

Vermillion (VRML) 1.82 32% 27.2 14.3 5.0x 2.2x N.M. N.M. N.M. N.M. N.A. N.A. N.A. 3

Mean 77% 2.4x 1.9x 9.5x 8.5x 21.7x 14.2x 1.1x 0.9x 25.6% 9

Median 86% 1.7x 1.7x 8.1x 7.4x 14.5x 12.9x 1.2x 1.0x 18.6% 10

MID-CAP BIOTECH

Mean 76% 8.9x 6.6x 12.2x 10.5x 27.8x 33.2x 0.8x 0.7x 38.0% 14

Median 91% 8.5x 6.9x 12.2x 10.5x 22.0x 36.8x 0.3x 0.9x 36.3% 15

Comments: Financial valuations on average lag strategic (M&A) valuations On PEG basis, Dx actually slightly richer than comparable Rx (Mid-Cap biotech)

Growth numbers may be more reliable than Rx which still have many binary events priced in Premium multiples to peers for “critical mass” revenue companies, e.g. Genomic Health & Myriad

Sequenom in hot area, relatively rich valuation despite travails Big labs need higher margin products and growth, trade at low multiples

Very large gap in research coverage between ~$500M market cap. companies and smaller Wider gap than in Rx; Smaller names tend to “pop” on good news. Strategics interested earlier.

Dx IPO companies from the last two windows have not fared well from group, with exception of Genomic Health (much higher than expected dilution in tough markets and product setbacks)

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Investors Will Take a Wait and See Approach Post-IPO For Dx Companies Until Revenue Trajectory Clearer

($M, except

per share

data) Year 1 Year 5

Current/

at Sale Year 1 Year 5

Current/


Current/


Current/

at Sale

Market Cap. 113.8$ 267.8$ 1,489.5$ 222.6$ 426.4$ 2,430.0$ 234.4$ 592.0$ 991.1$ 180.3$ 151.1$ 155.0$

Growth 135.3% 456.2% 91.6% 469.9% 152.6% 67.4% -16.2% 2.6%

Share Price 8.88$ 18.37$ 97.27$ 8.44$ 10.15$ 37.05$ 9.58$ 20.69$ 32.98$ 54.75$ 16.80$ 4.55$

Growth 106.9% 429.5% 20.3% 265.0% 116.0% 59.4% -69.3% -72.9%

Revenue 2.9$ 28.2$ 309.0$ 7.1$ 53.0$ 294.7$ 5.2$ 146.6$ 240.3$ 7.5$ 36.8$ 61.7$

Growth 872.4% 995.7% 646.5% 455.9% 2719.2% 63.9% 390.7% 67.7%

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Inverness Active as Advisor in Capital Raising and Strategic Advisory in Dx/MedTech, as Well as Rx

28 Note: Technology banking group, additionally, has two completed financings & one M&A in past 12 months.

Completed Transactions On-going Transactions

Up to $30MM capital raise

Led by Merck Global Health Innovation Fund

$10MM capital raise

Fund comprehensive POC diagnostic launch in China and U.S.

Strategic investment by Smith & Nephew

Includes co-marketing rights for lead product

Sell-side M&A

System for real-time , ultra sensitive rapid pathogen detection

Public company asset sale

Fairness opinion

~$30MM transaction value

Expedited timetable – engagement in October 2010 and signed definitive agreement in January 2011

$20MM capital / strategic process

Preclinical Parkinson’s therapeutic

Therapeutic asset sale

Cross-border

$15MM capital raise

Phase IIb onychomycosis therapeutic

Merger with ITC

Private equity buyout funded by Warburg Pincus

~$55MM transaction value

$20MM capital / strategic process

Phase II pain therapeutic

Sale of Therapeutic Royalty

Leading health care venture capital firm sale to a hedge fund

Partnering antibody platform and Huntington’s Disease drug candidate

Valuing Oncology Assets

A view from Sand Hill Road

Mark G. Charest, PhD Vice President

New Leaf Venture Partners

CONFIDENTIAL Slide 30

What Influences a Venture Investor’s Return on Investment? It’s Just Math….

Investment Valuation Exit Valuation

Money Required (Dilution)

Probability of Success

Required Return

Valuation primarily function of: 1. Potential exit valuation

2. A “required return” which is related to the “probability of success”

3. Expected cash needed to reach an “exit”

4. Type of exit (IPO or M&A)

Fundamental valuation also plays an important role

This is the valuation that a company gets once it’s “through the gate” and can be acquired

– Strategic Reasons for a Deal (Most Important)

– Precedent Transactions

– Discounted Cash Flows / Fundamental Value

– Comparable Company Analysis

– Viewpoints of Wall Street

Return To Investors (Expressed as IRR or Cash-on-Cash Return)


Compared to Some Therapeutic Areas, Cash to Reach an Exit Is Low for Cancer Companies

Acquirers willing to buy cancer drugs at earlier stages in development, and as a result often require less capital to reach an exit

Companies focused on cancer can obtain much more data from early development work than companies focused on other therapeutic areas

‒ Phase I in patients – especially useful if Phase I is in a selected/sensitive population

‒ Clinical endpoints such as tumor shrinkage make it relatively easier to prove efficacy at an earlier stage than longer term survival-type of endpoints

‒ Biomarkers are more relevant, which can provide useful data on whether a drug is or is not working or which patient population is the most relevant

‒ Targeted therapies have a greater chance of success in development because they are going after validated mechanisms of action

Generally, less patients needed to show drug effect (so less cash is required to generate the data)

Acquirer interest due to high unmet need generally within oncology


Probability of Success: In The Drug Development Casino, Some Games Have Better Odds…

Source: Overall Success Rates – BioMedTracker.

Probability of Success

Across TAs

Probabilities of Success

within Oncology

41%36%

30%

24%

32%28% 29%

55%60%

63% 61%

55%

46%

34%

Infectious Diseases Endocrine Autoimmune Respiratory Neurology Cardiovascular Oncology

Phase II Phase III

Moving from Phase II to

Phase III may be less

meaningful

Overall Probability of Success at Phase II and Phase III

Overall Total Success Rates

2%

3%

3%

4%

6%

6%

7%

7%

8%

15%

19%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

NSCLC

Colorectal Cancer

MDS

Prostate Cancer

HCC

CLL

Breast Cancer

Multiple Myeloma

Ovarian Cancer

RCC

Head & Neck


Targeted therapies have a greater chance of success in development

52%

44%

77%

85%

69%

80%

0% 25% 50% 75% 100%

Phase 3-

Registration

Phase 2-3

Phase 1-2Kinase inhibitors

All drugs

Sample size. All drugs, n=974; Kinase inhibitors, n=137; Source: Nature Reviews Drug Discovery

Phase transition probability of oncology drugs (1995-2007)

# of drugs that have to enter Phase 1 to get one

new drug approved

5.5 for oncology overall vs.

2.1 for kinase inhibitors


Consideration

Announce Target Acquiror Company Focus Stage Upfront Milestones Total

Preclinical, Phase 1, and Phase 2 Oncology M&A

1/26/2012 Avila Therapeutics Celgene Corporation AVL-292 - A Btk inhibitor for oncology Phase I $350 $575 $925

1/26/2012 Micromet Amgen Inc. Blinatumomab - drug for leukemia / NHL Phase I $1,116 $0 $1,116

12/20/2011 Intellikine, Inc. Takeda America INK128 - TORC1/2 inhibitor, PI3K selective inhibitor Phase I $190 $120 $310

3/20/2011 Gemin X Pharma Cephalon Inc. GX15-070 to reinitiate apoptosis; GMX1777 Phase II $225 $300 $525

12/19/2010 Arresto Biosciences, Inc. Gilead Sciences Inc. AB0024 - Solid Tumors and Idiopathic Fibrosis Phase I $225 Undisclosed $225

8/17/2010 Trubion Pharmaceuticals Emergent BioSolutions SCORPION technology, B-cell cancer, autoimmune Phase I $97 $39 $136

6/23/2010 CGI Pharmaceuticals, Inc. Gilead Sciences Small molecule kinase inhibitors Pre-clinical $120 $0 $120

6/30/2010 TargeGen, Inc. Sanofi-Aventis JAK2 Inhibitor for lymphona, leukemia, myelofibrosis Phase II $75 $485 $560

2/4/2010 LEAD Therapeutics, Inc. BioMarin Pharma LT-673 in oncology (also has MRSA product) Pre-clinical $29 $68 $97

Mean $270 -- $446

Median $190 -- $310

Phase 3 Oncology M&A

3/29/2011 Chemgenex Pharma Cephalon Inc. Chronic myelogenous leukemia Phase III $154 $0 $154

2/28/2011 Plexxikon, Inc. Daiichi Sankyo Oncogenic BRAF mutant melanoma / solid tumors Phase III $805 $130 $935

2/21/2011 Calistoga Pharma Gilead Sciences PI3K target - hematological cancers / autoimmune Phase III $375 $225 $600

1/24/2011 BioVex, Inc. Amgen Inc. Virus engineered to kill cancer - melanoma $ head & neck Phase III $425 $575 $1,000

Mean $440 -- $672

Median $400 -- $768

Rewards are High for Drug R&D Products That Can Finish the Marathon (Get Sold)

Appendix / Additional Slides Created


Current Reality in R&D and Venture Funding of Drug Development: Things Are Difficult

VC Dollars Invested Into Biopharma & Devices Declining ($ in billions)

$6.3

$4.8

$4.3

$3.4$3.9

$3.6

$3.0

$2.4

2007 2008 2009 2010

Biopharmaceuticals

Medical Devices

The current situation for funding drug discovery and development is challenging Venture dollars invested are declining and pharma is cutting earlier stage R&D programs, due to

several factors:

– Poor productivity of the pharma R&D

– Weak returns for many life science VCs

– Macro factors: less capital for PE/VC

Other sources of funding gaining prominence now – grants, foundations, etc

Source: Venturesource, PhRMA.

Total Industry R&D Spending in the U.S. ($B)

$37 $40$43

$48 $47 $46$49

$48

$52

$56

$63 $64$66 $67

$20

$30

$40

$50

$60

$70

2004 2005 2006 2007 2008 2009 2010E

PhRMA Members

Declining in 2011

and 2012

Health & Medicine

Innovation series partnering & valuing oncology assets - may 2012