The document discusses trends in the pharmaceutical industry that influence investment decisions. It outlines sectors and subsectors in the pharma industry, macroeconomic factors impacting the industry like an aging population, and trends like increased M&A activity and a shift to biologic drugs. The presentation also examines key factors an investor would consider like clinical trial phases, market growth projections, and financial metrics of potential investments.

1. Industry trends in Pharma
Trends in the sector influencing investment decision
Johan Vanhoyland, Sector Head General Industries & Pharmaceuticals
February 5th 2015
Vlerick Alumni – Meet the Industry

2. • General Industries & Pharma within ING Commercial Banking
• Pharmaceutical Sectors & Sub-Sectors
• Some macro-economics impacting the Pharma-industry
• Trends in the Pharma-industry
• Key factors influencing an investment decision
• Concluding remark
Agenda
9/24/11 2

3. General Industries & Pharma within ING Commercial Banking
Corporate
FInance
Event FInance
Lending
Services
Financial
Markets Transaction
Services
ClientClient
Assistant
RSM
Account
Manager
Relationship
Manager
Senior
Banker
International
Branch
Network &
Local Account
Management
Executive
Involved
Research
• Corporate clients team
centralized in Brussels.
Sector approach, 6
sectors :

4. • General Industries & Pharma within ING Commercial Banking
• Pharmaceutical Sectors & Sub-Sectors
• Some macro-economics impacting the Pharma-industry
• Trends in the Pharma-industry
• Key factors influencing an investment decision
• Concluding remark
Agenda
9/24/11 4

5. Source: Eestimations & company reprots
Pharmaceutical sectors and subsectors
Pharmaceutical Sector
DevicesProducts
Pharma
Industry
BioPharma
Industry
BioTech
Industry
MedTech
Industry
Drugs for Humans
OTC-Drugs
Drugs for Animals
In-vitro Diagnostic
Red-sector
Green-sector
Blue-sector
White-sector

6. • General Industries & Pharma within ING Commercial Banking
• Pharmaceutical Sectors & Sub-Sectors
• Some macro-economics impacting the Pharma-industry
• Trends in the Pharma-industry
• Key factors influencing an investment decision
• Concluding remark
Agenda
9/24/11 6

7. Some macro economics impacting the Pharma-industry
Comments
• Although the health economy shares a tight connection to the overall economy, its cycle is not always
synchronized with the larger economic picture.
• The health economy generally lags behind broader economic fluctuations.
• A recession will decrease health spending up to five years after it ends, with the biggest impact three to
four years post-recession.

8. Some macro economics impacting the Pharma-industry
Comments
• The global population will
constantly rise. The pharma
companies will be able to
benefit from that situation in
the future.
• The aging population will
become more and more
dominant. Because old people
are mainly affected by heart
diseases, cancers, respiratory
diseases and Alzheimer (see
examples in Annex), firms
producing that kind of
medicines will more benefit
from that situation than others
pharmaceutical companies.

9. • General Industries & Pharma within ING Commercial Banking
• Pharmaceutical Sectors & Sub-Sectors
• Some macro-economics impacting the Pharma-industry
• Trends in the Pharma-industry
• Key factors influencing an investment decision
• Concluding remark
Agenda
9/24/11 9

10. Trends in the Pharma-industry
• Highest level in M&A activity in five years
• Pharma companies focus on core activities with high
added value and divest non-core activities
• Revenues eroding due to patent expiry and entrance of generic
competition in the market
• Reimbursement policies of governments forcing Pharma companies
to cut costs
• Regulatory environment for new medicines has become more
stringent
• Shift to biologic based drugs

11. • General Industries & Pharma within ING Commercial Banking
• Pharmaceutical Sectors & Sub-Sectors
• Some macro-economics impacting the Pharma-industry
• Trends in the Pharma-industry
• Key factors influencing an investment decision
• Concluding remark
Agenda
9/24/11 11

12. Key factors influencing an investment decision
• In the Pharma industry, the development of drugs consists of 6 steps.
• The time for the launching of a new drug on the market can vary from 10 to
30 years, depending on the length of each step.
Source: Pfizer, 2013

13. Key factors influencing an investment decision
• An investor entails a later clinical stage as it has a shorter time-to-market and
a higher success rate.
FOCUS

14. Phase I Phase II Phase III
Time ~ 18 months ~ 18 months
2.5 to 4 years
(Sometimes
up to 7 years)
Budget
8.1% of the
total
development
cost
12.8% of the
total
development
cost
36.7% of the
total
development
cost
Importance of
the phase
Security
(Safeness)
Evaluation
“proof of
concept”
Efficacity
Chance of
survival
~ 60% ~ 50% ~ 50-90%
Key factors influencing an investment decision

15. • Expected growth in market share and sales of pharmaceutical product
categories:
2013 2020
Key factors influencing an investment decision

16. Business Angels
Venture Capitalist
Bank Loans
Initial Public Offerings
• Financing cycle of the enterprise
• In general, most of the
time, financing of
startups (or projects for
that matter) starts by
“Family, Friends and
Fools”, followed by
Business Angel and
Venture Capitalist.
• One of the latest to
finance startups are
banks, due to the risk
behavior of the startup.
• Due to this behavior,
banks will only start to
finance projects upon
notice of certainty.
(such as proof of
concept, foreseeable
sales, etc.). The same
can be said for the
clinical phases. Only
projects in a later
phase could be of
interest to banks.
Start-Up Initial Growth Strong Growth
Source: BA of Biotech, VUB
Key factors influencing an investment decision

17. Key factors influencing an investment decision
Scale Revenu
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Business Profile Product and Therapeutic Diversity
Geographic Diversity
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Patents and Pipeline Patent exposures
Pipeline quality
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Leverage and Cash Coverage Debt/EBITDA
(Cash Flow from Operations) / Debt
Cash Coverage of Debt
--------------------------------------------------------------------------------------------
Financial Policy Quality of management

18. • General Industries & Pharma within ING Commercial Banking
• Pharmaceutical Sectors & Sub-Sectors
• Some macro-economics impacting the Pharma-industry
• Trends in the Pharma-industry
• Key factors influencing an investment decision
• Concluding remark
Agenda
9/24/11 18

19. Concluding remark
“Pharma-industry is evolving from research driven and
focussed on improving the quality of life to maximizing
shareholder’s value.”

20. Thanks for your attention
Johan Vanhoyland
johan.vanhoyland@ing.be +32 2 547 84 77
ING Commercial Banking – Corporate Clients