KEYNOTE: Global Challenges & Drivers for Animal Health Markets

1. M E R I A L A N I M A L H E A L T H
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indicative only. It is provided without liability and is subject to change
without notice
GLOBAL
CHALLENGES &
DRIVERS FOR
ANIMAL HEALTH
Jean-Luc Michel, Head of Global
Commercial Development

2. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
5 continents
R&D
locations13
750+ scientists
MERIAL – A DISTINGUISHED LEGACY OF CARE AND INNOVATION
Employees worldwide
+
manufacturing
sites
R&D centers
15
13
6,900
Present in
countries worldwide
150
8 countries
Manufacturing
manufacturing sites15
2,800+ employees>2,5 billion
in sales in 2015
€

3. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
Demographic
Growth
Environmental
Changes
THE GLOBAL TRENDS SHAPING TOMORROW
Sources: United Nations; Grant Thornton International Business Report 2015; OCDE; Roland Berger; McKinsey; World Development Indicators
Social
Health
Wellness
Economic
Increasing
Urbanization
GlobalizationDigitization

4. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
MAJOR DEMOGRAPHIC TRENDS BY 2050
Worldwide Population (in Billions)
Source: INED, World Population Prospects. United Nations. 2015
7,349
2015 2050
9,725+32%

5. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
>6 billion people
66% of global population
>80% of global GDP
41
mega
cities
Contribution to GDP by Type of City (%)Contribution to GDP by Type of City (%)
3,9 billion people
54% of global population
>80% of global GDP
28
mega
cities
Cities Today…
THE LARGEST WAVE OF URBANIZATION IN HISTORY HAS LED TO
RISING ECONOMIC POWER OF METROPOLITAN CENTERS
70%
3%
11%
16%
Developed Economies
Emerging market megacities
Emerging market
middleweight cities
Emerging market small cities
& rural
Source: United Nations – World Urbanization Prospects 2014 ; McKinsey: Urban world: mapping the economic power of cities March 2011 ; the 600 cities
are the top 600 cities by contribution to global GDP growth from 2007 to 2025
…and in 2050
26%
8%
37%
29%
Developed Economies
Emerging market megacities
Emerging market
middleweight cities
Emerging market small cities
& rural
45%
Drivers
90% upper-middle-
income countries
(Asia and Africa)
37%
from:
India (+404 Mi)
China (+292 Mi)
Nigeria (+212 Mi)
Accelerating Migration
Net migration contributes
to population
growth in high-income
countries
80%
‘South-North’ and ‘South-South’ migration
14%

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SHIFTING WORLD TO DEVELOPING ECONOMIES:
DOMINATION OF THE TOP 3 ECONOMIES, RISE OF ASIA
Source: The Economist Intelligence Unit Limited 2015 ;1: The globalist MGI CompanyScope; McKinsey Global Institute Analysis; World Development Indicators, The
World Bank
Top Ten Economies in 2050 at Market Exchange Rate
Rise of Asia Geographical Base of the Fortune 500 Global Companies
0%
20%
40%
60%
80%
100%
2001-10 2011-18 2019-30 2031-40 2041-50
RegionalShareof
GlobalGDP
Africa & Middle East
Europe
Americas
Asia-Pacific
2015 Nominal GDP (US$ Trillions)
Rise of Asia…
• China’s Economy will be larger than
U.S. by 2028 when measured at
market exchange rates(1), but it has
been larger since 2014, when
adjusted for purchasing power (IMF),
real growth average 7%
• India 3rd, real growth average
5%
• Indonesia and Mexico leap into
top ten
Newly Emerging Economies:
• Nigeria, Vietnam, Colombia, Poland,
Malaysia, Chile, Peru, Mexico,
Philippines
…Collectively Rich, Not So
Individually
• Looking at individual spending power,
Western advanced economies are
likely to continue to dominate (2015
GDP/capita USA 54 kUSD vs. China
7,6 kUSD)
US
$17.9
China
$10.8
Japan
$4.1
Germany
$3.3
UK
$2.8
France
$2.4
Brazil
$1.7
Italy
$1.8
India
$2.0
Russia
$1.3
China
$105.9
US
$70.9
India
$63.8
Indonesia
$15.4
Japan
$11.4
Germany
$11.3
Brazil
$10.3
Mexico
$9.8
UK
$9.8
France
$9.7
2050 Nominal GDP (US$ Trillions)
Developed Emerging
415
271
54
120
10
34
8
26
8
11
4
12
1
26
2010 2025
Africa and Middle East
Southeast Asia
South Asia
Eastern Europe & Central Asia
Latin America
China
Developed
Emerging countries: From 85
companies in 2010, up to 230
in 2025
Emerging
Developed
500 500

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DIGITAL IS ALSO DRIVING FUNDAMENTAL CHANGES IN OUR
INDUSTRY, ACROSS ALL VERTICALS
Source: WE Forum
Business
New markets (on-line marketplace, car-hire
schemes, vacation like a local, etc.)
Education
Connecting neglected and underserved
communities around the world
Advanced management system
New job, home-based work, connected
plant
Health
Tailor medical approaches to an
individual’s lifestyle and genetic profile
Opportunities
SocialEconomic
Technologic

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DIGITIZATION : AN UNPRECEDENTED TRANSFORMATION!
Happening on the web in 60 seconds…
Any Time
Any Device
Any Content
Any Where
Web sites & Apps:
Responsive Design
Security system for
confidentiality
Infrastructure: cloud
Connected Objects
Referential: Master Data
Management
Exploit Data: Big data
WHO?
GAFA (Google, Amazon, Facebook, Apple), Netflix,
Spotify, Chronodrive, Dropbox…

9. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
ASIA HAS THE LARGEST BASE OF INTERNET USERS

10. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
…… AND THE LARGEST BASE OF SOCIAL MEDIA ACCOUNTS

11. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
ASIA LEADS SMARTPHONE SHARE OF VISITS (2015)
Source: Adobe Digital Insights, based on aggregated and anonymous data from 200 billion visits to 10,000+ US websites, 100 billion to 3,000+ websites in Europe, and
100 billion visits to 3,000+ websites in Asia in 2015

12. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
HOW MUCH ONLINE SHOPPERS AROUND THE WORLD ARE SPENDING
Over the past few years, online shopping has become increasingly popular around the world.
In markets such as the United Kingdom, Japan and Germany, e-commerce penetration has already climbed past 70% of
the adult population, and emerging markets such as Brazil and China are seeing rapid growth in online shopping
adoption.
Source: Statista Digital Market Outlook, Estimated average e-commerce revenue per online shopper in 2015

13. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
End of one-size-fits-all Safer,
Faster, Less invasive,
Cost-Effective
Wellness Program, Consumer
Medicines, Digitized medicine
Adapt life style, Care Delivery
provided in or near the home
Biomarkers, Diagnosis Tools,
Big Data
ALL THESE CHANGES AND TRENDS HAVE RESULTED IN AN EVER-GROWING
PARADIGM SHIFT IN HEALTH – PREVENTION TAKING OVER TREATMENT
Demographic Urbanization Global
Warming
Cultural
Change
Globalization Economic Digitization
The 4P
Predictive Personalized Preventive Participative
Direct Impact of Global Trends

14. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
THE TOP 5 GLOBAL RISKS OF HIGHEST CONCERN:
ANIMAL HEALTH IS IMPACTED BY ALL
Source: Global Risks Perception Survey 2015, World Economic Forum
Methodology: Perceptions of almost 900 members of the World Economic Forum’s multi-stakeholder community between July and September 2014.
39.8%
36.7%
26.5% 25.2%
23.3%
Water crises Failure of climate-change
mitigation and adaptation
Extreme
weather events
Food crises Profound
social instability
Societal
Environmental
For the Next 10 Years

15. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
Demographic
Growth
Environmental
Changes
THE GLOBAL TRENDS SHAPING TOMORROW
Sources: United Nations; Grant Thornton International Business Report 2015; OCDE; Roland Berger; McKinsey; World Development Indicators
Social
Health
Wellness
Economic
Increasing
Urbanization
GlobalizationDigitization

16. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
SOME WILL HAVE GREATER IMPACT ON OUR INDUSTRY
Growing middle
class globally
Increasing demand
for protein
Humanization
of pets
Growing cluster of
animal health start-ups
Regulation and surveillance
of antibiotic use
One Health

17. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
Feed 2.5Bn additional people
Younger population
Growing Middle class
in Emerging markets
Healthier Planet
Sustainable development
Fair trade
Productivity (less waste)
Healthier Animals
Animal Welfare
Prevention rather than cure
Regulatory Excellence (ex. Ab)
Healthier People
Food safety
Transparency (social media)
Regulatory Excellence
Value added services
Globalization
Emergence of new markets
Changing World demographics
Business consolidations
Emergence of different business
models (niche, local)
Emergence of new diseases
Social media
Digital Technology
Information technology
Nano-technology
Bio Technologies
Delivery
Food industry
Product transformation
(convenience / lifestyle)
Customer centric
Services
Productivity enhancing Tech
Lower median income
Industry productivity driven
Price pressure
Constraints of arable land
Animal feed supply
Water shortage
Energy supply
Labor cost and resources
DESPITE CHALLENGES, OUR INDUSTRY IS ADAPTING TO GLOBAL
TRENDS THROUGH IMPROVED ANIMAL HEALTH & PRODUCTIVITY

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OUR INDUSTRY REMAINS BUOYANT – HERE ARE SOME OF THE
REASONS WE CONTINUE TO BE EXCITED ABOUT ANIMAL HEALTH
RECESSION-RESILIENT SECTOR – annual growth of 4–5% near/long term
Need for PROTEIN, growing global MIDDLE CLASS and HUMANIZATION of pets
Climate and shifting prevalence in zoonotic and trans-boundary diseases, supporting ‘ONE
HEALTH’ approach
GROWING CLUSTER OF ANIMAL HEALTH START-UPS in companion animals
and the food animal sector
FIRMS EXPERIENCING GOOD UNDERLYING GROWTH despite currency issues –
boosted by new pet products and existing strong food animal brands
STILL LOTS OF UNMET NEEDS and areas that require next-gen treatments,
e.g., mastitis, pet cancer, biologics
Antimicrobial reduction stoking INNOVATION FOR ALTERNATIVES
1
2
3
4
5
6
7

19. Strictly Confidential – Shared upon request only for information purposes, not for re-purposing or additional dissemination
VALUE DRIVERS AND TRENDS IMPACTING THE INDUSTRY
Value Driver Category Key Value Drivers Key Trends
Innovation
• R&D for new chemical entities (NCE)
• Lifecycle strategies
• Declining R&D productivity has led to highly mature
product portfolios
Portfolio Advantage
& Commercial
Excellence
• Growing demand
• Relative power in AH value chain
• Economies of scale in commercial (direct sales)
• Branding
• Customer loyalty
• Product-portfolio-led economies of scope
(share of wallet)
• Effective channel management
• There are limited opportunities for leading players to
grow through further industry consolidation
• Increased downstream consolidation in the Production
Animal value chain has weakened
AH’s position
• Vets are less influential in purchase decisions
• Technological innovations and growth of new
adjacencies may be considered in growth plans
Competitive Forces
• Industry structure and competitive intensity
• New entrants
• Branded sales could be threatened by growth of
generics and OTC/private label products, driven by
regulatory changes in the U.S. and E.U., plus channel
shift in Companion Animal segment
Operational
Effectiveness
• Manufacturing and supply chain quality and
efficiency
• Profit pressure could be increasing
• Increasingly global food producers require global
operating structures
Regulation • Product exclusivity regulations and regulatory
process
Source: PwC analysis
1
2
3
4
5

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A SHINING OPPORTUNITY FOR ALL TO PARTNER ON - ONE HEALTH
The world's total POPULATION CONTINUES TO CLIMB
Contact between humans and animals introduces the
RISK OF ZOONOSIS
Increasing evidence and understanding of the INTERDEPENDENCY
of the HEALTH OF HUMANS, ANIMALS, and the ENVIRONMENT
The HUMAN-ANIMAL BOND continues to grow throughout societies
~75% of emerging diseases are either ZOONOTIC or
VECTOR-BORNE
VIGILANT PROTECTION of our FOOD AND FEED SUPPLIES is
critical for human and animal health
ENVIRONMENTAL IMPACT of personal care products and
pharmaceuticals