Worldwide pharmaceutical R&D spend is increasing each year, and the competition for a share of that investment is becoming fiercer. Companies need to demonstrate the potential value of their asset in commercial as well as scientific and clinical terms. The slides in this deck define and identify value from a financial, clinical and commercial perspective while also exploring how to derive value for patients.

1. THE VALUE OF
EARLY ASSET
DEVELOPMENT AND
COMMERCIALIZATION
© CELLO HEALTH

2. © CELLO HEALTH 2
Introduce Cello Health
Discuss Early Asset Development
and Commercialization
Questions
AGENDA

3. © CELLO HEALTH 3
INSIGHT
CONSULTING
COMMUNICATIONS
Cello Health services
the global
pharmaceutical,
biotechnology and
health sectors.
World class
Market research
Strategic Consulting
Medical and scientific
knowledge
With over 400 professionals
world-wide, Cello Health brings
together three core capabilities of
market research, strategic consulting
and scientific communications.

4. © CELLO HEALTH 4
5,995
6,198
6,416
6,994
7,360
7,406
7,737
9,217
9,605
9,737
9,713
10,452
10,479
11,307
12,300
13,718
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Numberofassets
Total WW R&D pipeline size by year 2001–2016
The number of
assets in
development
continues to
grow each year
Sources: 1. Pharmaprojects,
January 2016 2. Analysis Group
Innovation in the Biopharmaceutical
Pipeline: A Multidimensional View,
January 2013.
»
Reaching over
13,000 for 2016

5. © CELLO HEALTH 5
Source: EvaluatePhrma, World
Preview 2015, Outlook to 2020,
PhRMA 2016 profile
Not surprisingly,
the majority of
assets are in early
development
6,061
1,666
2,151
808
169
107
1,140
55
6,861
1,856
2,261
954
197
102
1,273
70
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Preclinical Phase I Phase II Phase III Pre-Reg Registered Launched Suspended
Numberofassets
2015 2016

6. © CELLO HEALTH 6
108
120
129 128 129
136 135 137
142 141
144 147
152
155
160
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
WWpharmaR&Dspend(US$bn)
Worldwide total pharmaceutical R&D spend in 2006–2020
Source: EvaluatePharma,
World Preview 2015, Outlook to
2020, PhRMA 2016 profile
Notes:
1. Global R&D spend by top 20 pharma companies in 2014 was $89.7bn
2. Global R&D spend by all other pharma companies in 2014 was $51.9bn
3. Total US sales make up 40% of the WW pharmaceutical market
R&Dspendgrowth(%)
+16%
+14%
+12%
+10%
+8%
+6%
+4%
+2%
+0%
-2%
-4%
+10.8%
+7.9%
-1.3%
+1.0%
+5.6%
-0.8%
+1.7%
+3.1%
-0.5%
+2.1%
+2.5%
+2.8%
+2.6%
+2.8%
Driving R&D
spending across
the industry to an
all time high
of $144 bn
+3.4% CAGR 2006–14
+2.0% CAGR 2014–20

7. © CELLO HEALTH 7
There are almost
4,000 Pharma
and Biotech
companies
worldwide
1,198
1,313
1,503
1,576
1,621
1,633
1,769
1,965
2,084
2,207
2,387
2,705
2,745
2,984
3,286
3,687
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2001 2006 2011 2016
Numberofcompanies
Source: Pharmaprojects, January 2016
»The US remains the largest pharmaceutical market, housing 48% of pharmaceutical companies worldwide
Total number of companies worldwide
with active pipelines 2001–2016
48%
17%
12%
3%
5%
4%
4%
3%
3% 1%
Distribution of R&D companies by
HQ country / region in 2015 and 2016
48%
17%
12%
3%
5%
4%
4%
3%
3% 1%
USA Rest of Europe
Rest of Asia Pacific China
UK Canada
Japan Germany
France C and S America
48%
18%
9%
4%
5%
4%
3%
3%
3% 2%
2015
2016
57% have only
1 or 2 drugs in
their pipelines

8. © CELLO HEALTH 8
Source: EY, BioCentury, Capital IQ and VentureSource
0
2
4
6
8
10
12
0.0
0.5
1.0
1.5
2.0
2.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Averagedealsize(US$m)
Totalamountraised(US$bn)
Total amount raised Average deal size
Which is driving
an increase in
venture funding
Source: Biotechnology Industry
Report 2015: Beyond Borders
Reaching New Heights by EY
US Venture Capital
0
3
6
9
12
15
18
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Averagedealsize(US$m)
Capitalraised(US$bn)
Total amount raised Average deal size
Source: EY, BioCentury, Capital IQ and VentureSource
EU Venture Capital

9. © CELLO HEALTH 9
Source: Biotechnology Industry Report
2015: Beyond Borders Reaching New
Heights by EY
And has resulted
in some
companies
demonstrating or
creating very high
perceived value
Celator Parlays
Leukemia Drug
Data into $1.5B
Buyout From Jazz
Pharma
Xconomy New York
All it takes to become an acquisition
target in biotech is some promising
data. Take Ewing, NJ, and Vancouver-
based Celator Pharmaceuticals, which
Jazz Pharmaceuticals just agreed to
buy this morning for $1.5 billion
Companies that do not have marketed
products but have achieved market caps
over $1bn
There is a buzz
(and lots of
investment)
in these companies

10. © CELLO HEALTH 10
Source:
http://blogs.wsj.com/pharmalot/2015/02/17/th
ere-are-more-orphan-drugs-and-fda-
approvals-than-ever-before/
In addition,
more drugs are
being developed
as specialty or
orphan
There was a
53% increase
in orphan drug
approvals
from 2013 to
2015
In 2015
49 orphan drugs
were approved
by the FDA
293drugs were granted
orphan status by
the FDA
requests
for orphan
designation
467
The orphan drug
market is growing
dramatically and there
is no sign of slowing
requests for orphan
designation345
259 drugs were granted
orphan status by the FDA
32 orphan drugs were
approved by the FDA
In 2013

11. © CELLO HEALTH 11
0
50
100
150
200
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Numberofprojectswithorphandesignationbyyear
Designation year
Orphan disease designation by the FDA over time
Increasing the
number of orphan
designations
Source: FDA website
http://www.accessdata.fda.gov/scripts/
opdlisting/oopd/index.cfm
As of October 2011,
a total of 1,795
projects with the
FDA orphan
designations were in
development

12. © CELLO HEALTH 12
299
326
394
50
157
182
0
50
100
150
200
250
300
350
400
450
2013 2014 2015
Numberofdrugs
Orphan drug status granted
Expidited review status granted
Source: Pharmaprojects, January 2016
| ’13-’15 CAGR: 15%
| ’13-’15 CAGR: 91%
And expedited
reviews Drugs receiving orphan drug status or an expedited review designation
2013–2015
Between 2013 and
2015, the number of
drugs receiving
orphan status and/or
expedited review has
rapidly increased

13. © CELLO HEALTH 13
Putting even
more pressure
on realizing value
Biotech Stock Mailbag:
Sarepta! Always More
Sarepta. And Gilead, Too
TheStreet's Adam Feuerstein answers reader
questions about biotech stocks.

14. © CELLO HEALTH 14
So why are there
failures? Root cause analysis for suspending development during / after Phase III trials
57%
10%
20%
13%
0%
10%
20%
30%
40%
50%
60%
Efficacy Safety Commercial Strategic

15. © CELLO HEALTH 15
How do you
realize the value
from the asset?
Understand the source of value
▪ scientific
▪ clinical
▪ commercial
Manage value actively
Know your limitations
▪ financially
▪ operationally

16. © CELLO HEALTH 16
The sources
of value
Scientific
difference
Patient /
clinical
need
Commercial
relevance
3
Variables

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63
52
10
96 124
23
35
50
12
63
31
8
3 1
0
50
100
150
200
250
300
Phase I Phase II Phase III U.S. filed / approved but
not yet marketed
Numberofscientificstrategies
Transgenic product
Monoclonal antibody (conjugated)
Gene therapy
Cell therapy
Antisense therapies
Source: Innovation in the Biopharmaceutical
Pipeline: A Multidimensional View, Analysis
Group. January, 2013
Scientific
difference:
breakthroughs
and innovations in
the pipeline
Examples of selected breakthrough science
A total of 577 projects
utilizing breakthrough
science that were
initiated five years ago

18. © CELLO HEALTH 18
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Oncology
Alzheimer's
Incontinence
HCV
Osteoporosis
Migraine(prophylaxis)
RheumatoidArthritis
Migraine(acute)
Diabetes
Asthma
CardiacArrythmias
Schizophrenia
Depression(SSRI)
Analgesics(COX2)
Responserates(%)
Patient and
clinical needs:
efficacy, response
and unmet needs
Average response rates to current drug treatments
There is a large unmet
need for new drugs and
better predictive
biomarkers to improve
the response rates of
diseases to currently
available therapies

19. © CELLO HEALTH 19
Sources: 1. Industry Perspectives on
Biomarker Qualification 2. Biomarkers and
Surrogate Endpoints PhRMA 2016
Use of Biomarkers by disease
45
40
35
25
20
15
10
5
0
Autoimmune Cardiovascular Infectious
disease
Metabolic/
endocrine
Neurological Oncological Respiratory
Selection of dose to take to Phase III Disease in progression
Proof of concept Treatment in response
Utilization in study Surrogate endpoint
PK-PD Other
Patient and
clinical needs:
use of
biomarkers
With patient centricity
there is an increase in
Biomarker usage

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Patient needs:
a holistic view
PCPs
Family
members
Advocacy
groups
Specialists Researchers
Being patient-centric
means balancing
multiple constituencies
Patients

21. © CELLO HEALTH 21
Total potential patient volumeEpidemiology
1
Commercial
relevance is
based on seven
key factors Rates that calculate the number of patients diagnosed
with the disease and then treated for the disease
Diagnosis and
Treatment Rates
2
Competitive landscape that may influence market
share post launch (e.g., competitive launch date,
years to max competitive share)
Competitor
Dynamics
3
Maximum rate at which physicians are willing to
prescribe versus other available treatments
New Patient
Capture
4
Maximum utilization based on estimated time to peak
Uptake
Assumption
5
Expected dosing per patient by severityDosing
6
Price per patient per month (as determined by previous
primary research with payers)
Pricing
7

22. © CELLO HEALTH 22
Clinical
Physician acceptance
Medical relevance
TPP (Target
Product Profile)
PDUFA (regulatory
success)
Scientific feasibility
Novel MOA
Value Source
Addresses unmet need
Patient acceptance
Payer policy
PatientCommercial
Revenue Potential
Growth potential
Anticipated market
access
Reimbursability
Competitive
differentiation
Market position
Value is derived
from all three
sources

23. © CELLO HEALTH 23
Launch
And has to be
managed across
the early asset
development
process
▪ Does this asset fit a gap
in our portfolio?
▪ Can this asset be
developed for success?
▪ What is the value
proposition?
▪ What is the proof of
concept?
▪ What is the market
opportunity?
▪ What are the
commercial endpoints?
▪ What are the clinical
endpoints?
▪ Does the market
understand the value
proposition?
▪ Have the clinical and
commercial endpoints
been met?
▪ Epidemiology Models
▪ High Level Forecast
▪ Value Proposition
▪ Target Product Profile
▪ Epidemiology Models
▪ High Level Forecast
▪ Proof of Concept
▪ Value proposition
▪ Commercial Endpoints
▪ Forecast and Valuation
▪ Investment Strategy
▪ Market Assessment
▪ Payor Acceptance
▪ Target Product Profile
▪ Competitive Positioning
▪ Forecast and Valuation
▪ Launch Readiness
▪ Go to Market Plan
▪ Pricing Strategy
▪ Unmet Need
▪ Early Economic Models
▪ Clinical Endpoints
▪ Burden of Disease
▪ Clinical Endpoints
▪ Early Economic Models
▪ Patient Need
▪ Clinical/PRO Endpoints
▪ Core Economic Model
▪ KOL Engagement
▪ Evidence Gap Analysis
▪ Target Product Profile
▪ Disease Awareness
▪ HEOR Evidence
▪ Stakeholder Mapping
▪ Market Models
▪ Patient Segmentation
Asset
Identification or
Acquisition
Phase I Phase IIA and IIB Phase III
Key value
questions
Commercial
Clinical

24. © CELLO HEALTH 24
$200
$400
$600
$800
$1,000
Totalpotentialvalueofcompound(US$mn)
Define
weak TPP
Inadequate
Value
Proposition
Pick wrong
opportunity
Ineffectively
communicate
value and
endpoints
Select wrong
payer targets /
poor cost benefit
Late
market
preparation
Underfunded
Commercialization
We must make
earlier critical
decisions.
Poor decisions
can lead to
significant loss
in value
Full exploration of the future
landscape and patient environment
Strong clinical relevance
Deep foresight into customers needs
of the future
Compelling value proposition
Clinical and health outcomes align
and support commercial strategy
Discovery
Pre- clinical
development
Clinical development
Pre-
launch

25. © CELLO HEALTH 25
Investment and timing
Assetvalue
Or you can always
find a partner
Option
out License out
Commercial
partner
Development
partner
Go
it alone
Low Med High
LowMedHigh

26. © CELLO HEALTH 26
For those that
can’t make it
alone, there are
options, either
before…
11.8
18.1
52.7
46.7
123
7.6
5.6
6.7
10.5
14.2
10.8
13
7.2
14.6
58.9
1.2
19.5
3.7
0.4
0.7
0.2
3.3
0.4
6.3
US$0 US$50 US$100 US$150 US$200 US$250
Q1 2016
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Deal value (US$ bn)
Total closed deal value by industry sector (Q1 2015 – Q1 2016, US$ bn)
Source: PWC Pharmaceutical and Life
Sciences Deals Insights Quarterly
Reports (2Q 2015 – 1Q 2016)
13
32
24
24
19
10
13
14
11
11
11
20
15
8
11
2
7
11
3
2
3
3
2
4
0 10 20 30 40 50 60 70 80
Q1 2016
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Number of deals
Total closed deal volume by industry sector (Q1 2015 – Q1 2016, US$ bn)
123 14.2 58
US$0 US$50 US$100 US$150
Q1 2015
Deal value (USD (bn
Pharmaceuticals Biotechnology
Medical devices Diagnostics
Services
Thomson Reuters numbers may not
equal exact total due to rounding

27. © CELLO HEALTH 27
0
10
20
30
40
50
60
0
15
30
45
60
75
Numberofdeals
Potentialvalue(US$bn)
Pharma-biotech Biotech-biotech
Pharma-biotech megadeals (>US$ 5bn) Biotech-biotech megadeals (>US$ 5bn)
Number of deals
Or after success
US M&As, 2007–2014
2007 2008 2009 2010 2011 2012 2013 2014
Source: EY, Capital IQ, Medtrack and
company news
Chart excludes transactions where
deal terms are not publicly disclosed

28. © CELLO HEALTH 28
IN
SUMMARY
Passion and Profit
Product and Patient

29. © CELLO HEALTH 29
Any questions?
freshthinking@cellohealth.com