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

2. 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.
2

3. Copyright © 2012 Capgemini Consulting. All rights reserved.
3

4. 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
Copyright © 2012 Capgemini Consulting. All rights reserved.
4

5. Analysts predict that oncology will be the largest therapeutic area, in terms of
worldwide revenue, by 2016
% of Total Biopharma Sales and Anticipated Growth % from 2011 – 2106 by Therapeutic Area
25% +18%
+2%
-27%
20%
+6% 2016
15%
+27% 2011
-47%
+36%
10% -1%
5% +9%
0%
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
Copyright © 2012 Capgemini Consulting. All rights reserved.
5

6. Breast, Lung and Colorectal cancers dominate in terms of prevalence
and global market potential…
$40,000 Global Market Potential and New Patients by Tumor Type 800,000
$35,000 700,000
# of New Patients per Year
$30,000 600,000
Global Market Potential ($M)
$25,000 500,000
$20,000 400,000
$15,000 300,000
$10,000 200,000
$5,000 100,000
$- -
Global Market Potential New Patients
NHL: Non-Hodgkin's Lymphoma; CTCL: Cutaneous T-Cell Lymphoma; GBM: Glioblastoma Multiforme; CLL: Chronic Lymphocytic Leukemia
…However niche indications are becoming increasingly crowded and drive more competition per
patient than is seen in tumors that affect larger patient populations
Source: “Oncology Market” JP Morgan, June 2008; “Pharm Exec 50” Pharmexec.com, May 2010
Copyright © 2012 Capgemini Consulting. All rights reserved.
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7. MAbs / Targeted Therapies dominate the oncology market, as they offer
validated MOAs in a TA where probability of success is lower than average…
Global Oncology Market by Therapy Type Number of Cancer mAb partnering deals
80 2007-2012* (Q1)
1%
1%
60
2011
Mabs/Targeted 40
23% Therapies
44% 20
Chemotherapeutics 0
31%
2007 2008 2009 2010 2011 2012*
Source: Current Partnering, Cancer mAb Partnering Terms and Agreements, April 2012
Blood Cell Factors
Cancer mAb partnering deals by dvpt stage
0% 0% Chemopreventatives Discovery
2016E Preclinical
16% 80%
Phase I
Other Therapies Phase II
Phase III
27% 57% Regulatory
Marketed
Formulation
Source: Total revenue, “Therapeutic Categories
Outlook”, Cowen and Company, Feb 2012 0 50 100 150 200
Source: Current Partnering, Cancer mAb Partnering Terms and Agreements, April 2012
…driving steady number of partnering deals over the past few years (over 330 deals since 2007)
Copyright © 2012 Capgemini Consulting. All rights reserved.
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8. Major trends will re-shape the oncology market and potentially impact asset
valuation and Partnering decisions
Drivers
Drivers Barriers
 Population Demographics  Decreasing R&D productivity
 Healthcare Reform  Healthcare Reform
– Affordable Care Act / Individual mandate – Biosimilars
 Oncolytics Business Model – Comparative Effectiveness Research
– Price premium associated to high cost of burden  Increased pressure on reimbursement and
– Typical DOT between 4 to 12 months utilization management for oncolytics
 Innovation:  Providers
– Targeted therapies – Pressure on oncology community business and
margins, leading to consolidation
– Companion Dx
– Shift of Site of Care
– Antibody-Drug Conjugates
– Decreased Providers access
– Administration (e.g. nanotechnologies)
 Access to capital
– Therapeutic Vaccines
– Broken VC model
 Emerging Market Growth
– Better IRR and lower capital intensity in other
sectors
Copyright © 2012 Capgemini Consulting. All rights reserved.
8

9. Valuing Oncology Assets:
Strategies in an evolving clinical and commercial landscape
What Partnering Strategy? How to Execute?
 What areas of oncology have the greatest  Where is the “smart money” in the current
unmet needs today? oncology environment?
 Which players (big or small) currently possess  What are some the “best-in-breed” techniques
the most potential in fulfilling those needs? used to value an early stage product / company?
 What novel technologies present significant  What factors are considered when determining
opportunities? whether to in-license, JV, or acquire?
 What trends are shaping the market and  What are the innovative partnering approaches?
partnering in oncology?
Their Perspective
Copyright © 2012 Capgemini Consulting. All rights reserved.
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10. Benoit Berthoux
Head of LS West Coast
Practice
San Francisco, CA
Mob.: +1 415 200 9859
Benoit.Berthoux@capgemini.com
Copyright © 2012 Capgemini Consulting. All rights reserved.
10

11. Oncology Commercialization
Peter Radovich
Senior Director, Global Product Strategy
Carfilzomib Product Development Team Lead
May 23, 2012

12. DISCLAIMER
Slides, comments and opinions expressed in this
presentation are my own and do not represent
the views of my employer, Onyx Pharmaceuticals.
12

13. What has made the Oncology market interesting
for drug development and commercialization?
• Nearly all metastatic solid tumors are uniformly fatal and
High unmet many opportunities to improve outcomes in earlier stages
needs • Significant unmet needs remain in many hematologic
malignancies, despite progress
Receptive to • Key actors in market generally have been receptive to
innovation (providers, patients, payers, regulators)
Innovation
• Limited & concentrated provider universe
Favorable • Historically favorable pricing, reimbursement & access
Dynamics environment

14. Global Oncology Market Continues to Grow
$35B Today and ~$100+B by 2020
Global Oncology Annual Sales & Sales Growth
70 45
40
60
35
50
30
SALES US$BN
40 25
% GROWTH
30 20
15
20
10
10
5
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Global oncology Global oncology growth Europe oncology growth
Global pharma growth Japan oncology growth US oncology 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

15. Developed Countries Have Generally Accepted “US
Price” Levels for Innovative Products
15

16. Oncology Blockbusters: Top 10
Company Brand
Roche Avastin 6.2
Roche Rituxan 6.1
Roche Herceptin 5.2
Novartis Gleevec 4.3
Sanofi Taxotere 2.8
Celgene Revlimid 2.5
Lilly Alimta 2.2
BMS Erbitux 1.8
Takeda Velcade 1.7
AZ Arimidex * 1.5
Global Sales 2010 (in billions)
In 2010, approximately 40% of Global Sales for the Top 10 came from US
Source: IMS Health
16

17. Successful Oncology Launches in 2011
Success Factors
Uniform:
•Strong value proposition
• High unmet need
• First in class
Others:
•Small patient population
• “Personalized” medicine
• Companion diagnostic
17
Source: Kantar Health “The Most Promising Technologies for Unmet Needs in Oncology”

18. 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

19. Partnerships: Medivaiton / Astellas (Ph3)
19

20. Partnerships: Incyte / Novartis (Ph3)
20

21. Partnerships: Seattle Genetics / Takeda (Ph2)
21

22. Partnerships: Pharmacyclics / J&J
• 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.
22

23. Dx Transaction Landscape and Valuation Overview
Dave Raksin – Inverness Advisors
Capgemini Consulting Oncology Discussion
May 23, 2012
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.

24. 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
I NV E R N E S S A DV I S O R S
 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

25. Oncology a Significant Component of Recent Dx M&A:
Strong Premiums, Even at Moderate Multiples
($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
I NV E R N E S S A DV I S O R S
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 ultrasound
10/18/11 Reichert Tech. (from BPO Ametek 150.0 150.0 - - - 55.6 - 2.7x N.A. Eye care devices
10/13/11 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 collection
07/19/11 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 17.9x
Median 34.7% 34.6% 29.2% $103.3 $12.4 3.0x 17.1x
 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

26. 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
I NV E R N E S S A DV I S O R S
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)

27. Investors Will Take a Wait and See Approach Post-IPO For
Dx Companies Until Revenue Trajectory Clearer
I NV E R N E S S A DV I S O R S
($M, except
per share Current/ Current/ Current/ Current/
data) Year 1 Year 5 at Sale Year 1 Year 5 at Sale Year 1 Year 5 at Sale Year 1 Year 5 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%

28. Inverness Active as Advisor in Capital Raising and Strategic
Advisory in Dx/MedTech, as Well as Rx
Completed Transactions On-going Transactions
 Up to $30MM capital raise  $10MM capital raise
I NV E R N E S S A DV I S O R S
 Led by Merck Global Health Innovation Fund  Fund comprehensive POC diagnostic
launch in China and U.S.
 Strategic investment by Smith & Nephew  Sell-side M&A
 Includes co-marketing rights for lead product  System for real-time , ultra sensitive
rapid pathogen detection
 Public company asset sale  $20MM capital / strategic process
 Fairness opinion  Preclinical Parkinson’s therapeutic
 ~$30MM transaction value
 Expedited timetable – engagement in October
2010 and signed definitive agreement in January
2011
 Therapeutic asset sale  $15MM capital raise
 Cross-border  Phase IIb onychomycosis therapeutic
 Merger with ITC  $20MM capital / strategic process
 Private equity buyout funded by Warburg Pincus  Phase II pain therapeutic
 ~$55MM transaction value
Sale of Therapeutic  Leading health care venture capital firm sale to a  Partnering antibody platform and
Royalty hedge fund Huntington’s Disease drug candidate
Note: Technology banking group, additionally, has two completed financings & one M&A in past 12 months.
28

29. Valuing Oncology Assets
A view from Sand Hill Road
Mark G. Charest, PhD
Vice President
New Leaf Venture Partners

30. What Influences a Venture Investor’s Return
on Investment? It’s Just Math….
Investment Valuation Exit Valuation
Money
Required Probability
Required
Return of Success
(Dilution)
 Valuation primarily function of:  This is the valuation that a company gets
1. Potential exit valuation once it’s “through the gate” and can be
2. A “required return” which is related to the “probability acquired
of success”
– Strategic Reasons for a Deal (Most Important)
3. Expected cash needed to reach an “exit”
– Precedent Transactions
4. Type of exit (IPO or M&A)
– Discounted Cash Flows / Fundamental Value
 Fundamental valuation also plays an – Comparable Company Analysis
important role – Viewpoints of Wall Street
Return To Investors
(Expressed as IRR or Cash-on-Cash Return)
CONFIDENTIAL
Slide 30

31. 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
CONFIDENTIAL
Slide 31

32. Probability of Success: In The Drug Development
Casino, Some Games Have Better Odds…
Overall Probability of Success at Phase II and Phase III
Moving from
63%
60% 61% Phase II to
55% 55% Phase III may
be less
46%
meaningful
Probability of 41%
36% 34%
Success 30% 32%
28% 29%
24%
Across TAs
Infectious Diseases Endocrine Autoimmune Respiratory Neurology Cardiovascular Oncology
Phase II Phase III
Overall Total Success Rates
Head & Neck 19%
RCC 15%
Ovarian Cancer 8%
Probabilities Multiple Myeloma 7%
of Success Breast Cancer 7%
within
CLL 6%
HCC 6%
Oncology Prostate Cancer 4%
MDS 3%
Colorectal Cancer 3%
NSCLC 2%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Source: Overall Success Rates – BioMedTracker.
CONFIDENTIAL
Slide 32

33. Targeted therapies have a greater chance of
success in development
Phase transition probability of oncology drugs (1995-2007)
Kinase inhibitors 80%
Phase 1-2 # of drugs that have to
All drugs 77% enter Phase 1 to get one
new drug approved
69%
Phase 2-3
44% 5.5 for oncology overall
vs.
2.1 for kinase inhibitors
Phase 3- 85%
Registration 52%
0% 25% 50% 75% 100%
Sample size. All drugs, n=974; Kinase inhibitors, n=137;
Source: Nature Reviews Drug Discovery
CONFIDENTIAL
Slide 33

34. Rewards are High for Drug R&D Products That Can
Finish the Marathon (Get Sold)
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
CONFIDENTIAL
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35. Appendix / Additional Slides Created

36. Current Reality in R&D and Venture Funding of Drug
Development: Things Are Difficult
 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
Total Industry R&D Spending in the U.S. ($B) VC Dollars Invested Into Biopharma & Devices Declining
($ in billions)
$70 $66 $67
PhRMA Members $63 $64 $6.3
Biopharmaceuticals
$60 $56 Medical Devices
$52 $4.8
$48 $4.3
$50 $3.9
$3.6
Declining $3.0
$3.4
$40 in 2011
$2.4
$49 and 2012
$48 $47 $46
$43
$30 $37 $40
$20
2004 2005 2006 2007 2008 2009 2010E 2007 2008 2009 2010
Source: Venturesource, PhRMA.
CONFIDENTIAL
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