CPhI Conferences Global Supplier& partnership Management Kempinski Hotel, Berlin, Germany - December 1-2, 2010

1. Creating Innovation
Through Partnering
Daisy Rivera-Muzzio
Senior Director
EPBU Product Licensing
December, 2010

2. Agenda
1 Impact of Partnering on Innovation
2 Pfizer Established Products Business Unit
3 Pfizer EPBU Approach to Licensing Activities
Lessons Learned While Becoming a Partner
4 of Choice
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3. Innovation – Pharma vs. Other Industries
• Innovation is the second most important strategic focus for companies,
(first is cost cutting and rationalization)
• Top innovators are 19% more likely to have an open approach to innovation
compared to the average company, such as engaging in collaboration with
external partners
• Top-line growth is the main goal of innovation for most companies
Primary Strategic Value of Innovation Activities
Top-line Growth
• Intensification of sales
58% 63% • Enhancement of sales
70% 70% 70% 74% 75% 80% 87% 89% • Enlargement of sales
42%
Bottom-line Optimization
38% 30% 30% 30% • Portfolio Clean-up
26% 25% 20% 13% 11% • Product cost reduction
Chemicals Automotive Eng., Mach. Financial Inst. Manuf. Logistics Energy Electrical Time Fast Moving • Innovation process &
& Parma Manuf. & & High Tech & Insurance Goods & Services & Utilities Eng. & Cons. Goods structures
Suppliers Electronics & Retail
The value form such activities strongly depends on the industry and whether the priority is top-line growth
or bottom line optimization
Source: Arthur D Little: Innovation Excellence – January 2010; a global cross industry study on innovation
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4. Innovation Through Internal Research vs. Licensing
The Return on Invested Capital for Internal R&D in
BioPharma Has Fallen Sharply in the Past 10 Years
• Cost per successful drug has risen tenfold since 1980 from
$150 million to approximately $2 billion in 2009
• Regulatory hurdles for new drugs are higher and periods of
economic return are shorter (generics)
• Developing a new medicine takes on average 10–15 years
• Approximately 40% of R&D spend is in pre-phase II research,
where attrition rates are very high (historically, <10% probability
of reaching the market)
* Morgan Stanley, January 2010
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5. R&D Spend is Climbing, Yet NME Approvals Have Declined, and
Requirements for Regulatory/Market Acceptance Are Increasing
Pharma Situation: R&D Productivity Decline
70 $60
PhRMA Member R&D Spending (Billion USD)
60 $48.5
$47.4
$45.8* $50
53
$43.0
New Drug Approvals (NMEs)
50 $38.8 $39.4
$40
39 $32.1 $33.2
40 $29.8 Pharma
35
$26.0
Innovation Gap $30
30 31
30 28 $22.7
26 25 $21.0
$19.0 24 24
22 $16.9 27 21 22
$15.2 20 19 $20
20 18
$12.7 $13.4 17
$11.5
$10
10
0 $0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
New Drug Approvals (NMEs) PhRMA Member R&D Spending
* Estimated
Source: Burrill & Company
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6. Productivity Declines Have Generated
a Need for Diversification
Regen
Competitor Drug Biotech Consumer Dx Vaccine Device Generic
Med
J&J ● ● ● ● ● ●
Pfizer ● ● ● ● ● ● ●
Convergence Competitors
GSK ● ● ● ● ●
Novartis ● ● ● ● ● ●
Abbott ● ● ● ● ●
Roche ● ● ● ●
Merck ● ● ● ●
Teva ● ● ● ●
Medtronic ● ● ● ●
Source: Frankel Group Analysis
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7. Unless the Probability of an In-House
Molecule Reaching the Market is >30%, the
Risk-Adjusted Economic Value Added (EVA)
is 3 Times Higher Under the External
Research Model with a Greater Predictability
Morgan Stanley January 2010
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8. Reliance on Licensing: View in 2008
Steady Deal Flow, Rising Values
With a Steady-Flow of …And Slightly More Deals …Deal Values Are
Deals Licensed Out… Licensed in by the Top 20… on the Rise
Total # of Biotech Out-Licensing Number of In-Licensing Deal Value*
Deals with Biotech and Pharma* Deals by Top-20 Biopharma** ($B)
$100
600 610 630 135
580 127
106 $80
162 189 208 100 100 46
186 53
54 22 21 29 $60
75 67 126
31 40 $40
32 33 31
384 354
319 296 $20
46 48 44 49 43
$0
2003 2004 2005 2006 2003 2004 2005 2006 2007 2003 2004 2005 2006
Early-Stage Mid-Stage Late-Stage Research Pre-Clinical Clinical
We are now seeing increasing competition among big pharma looking for promising compounds…
– Head of BD, Big Pharma
* Recap.com
** Top-20 biopharma defined using Pharma Exec's 2008 ratings, based on 2007 branded global pharma sales
Source: EvaluatePharma; BCG analysis
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9. Sample Activity
2009 Partnering / Licensing
Deal Value
Month Pharmaceutical Biotech (USD M) Principal Focus
September Roche PTC Therapeutics 1,900 Drug Discovery
September AstraZeneca Nektar Therapeutics 1,500 Pain Therapeutics
December AstraZeneca Targacept 1,240 Neurology
January Bristol-Myers Squibb ZymoGenetics 1,107 Hepatitis C
November Novartis Incyte 1,100 Hematology-Oncology
November Takeda Pharmaceuticals Amylin Pharmaceuticals 1,075 Obesity
November Bristol-Myers Squibb Alder Biopharmaceuticals 1,050 Monoclonal Antibodies
May Sanofi-Aventis Exelixis 1,000 Oncology
June GlaxoSmithKline Concert Pharmaceuticals 1,000 Deuterium Drugs
June GlaxoSmithKline Chroma Therapeutics 1,000 Inflammatory
January Wyeth Pharmaceuticals Santaris Pharma 847 RNA-based Medicine
November Sanofi-Aventis Regeneron 800 Antibodies
October Astellas Pharma (Japan) Medivation 765 Oncology
April Merck Cardiome Pharma (Canada) 700 Cardiovascular
October GlaxoSmithKline Prosensa (Netherlands) 680 RNAs
October Merck Galapagos (Belgium) 596 Cardiovascular
February Novartis Portola Pharmaceuticals 575 Cardiovascular
November GlaxoSmithKline Nabi Biopharmaceuticals 540 Vaccines
October Sanofi-Aventis Merrimack Pharmaceuticals 530 Oncology
June Wyeth Pharmaceuticals Catalyst Biosciences 500 Hematology
November GlaxoSmithKline Astex Therapeutics 500 Drug Discovery
Source: Burrill & Company
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10. Volume of Deals is Shifting to Late Stage
for the Largest Buyers...
Number of Licensing Deals by Top 10 Pharma Co*
30
20
10
0
Phase I Phase II Phase III Pre-App Approval Marketed
2008 2009
* Top 10 Pharma companies as defined by highest sales in 2008 include Abbott, AstraZeneca, Eli Lilly, GSK, J&J, Merck,
Novartis, Pfizer, Roche, Sanofi-Aventis
Source: DataMonitor Pharmaceutical Licensing Overview 2010
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11. ...And Values Had Tempered
Average Deal Value Has Declined... ...But So Has the Number of Deals
Average Deal Values Windhover-Only:
($ M) Total Bio-pharma Licensing Deals
$400
549 547
$350 523
479
$300
$250 370
340
313
$200
$150
$100
$50
$0
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 2010E
Source: Windhover, PharmaDeals; PharmaVentures analysis
Note: As data was obtained from two different sources with different classification of deals, no meaningful results can be obtained
by combining data from the two graphs, 2010 results extrapolated from H1, assuming H2 will experience the same deal volume
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12. 2009 Biotech Acquisitions
Deal Value Principal
Month Acquirer Target
(USD M) Focus
January Pfizer Wyeth 68,000.0 Biopharmaceuticals
March Roche Genentech 46,800.0 Biopharmaceuticals
Dainippon Specialty
September Sumitomo Pharma Sepracor 2,600.0 Pharmaceuticals
July Bristol-Myers Squibb Medarex 2,400.0 Biopharmaceuticals
Elan 18% Stake
July Johnson & Johnson (Ireland) 1,385.0 Neurology
Cougar
May Johnson & Johnson Biotechnology 1,000.0 Oncology
Ovation
February Lundbeck Pharmaceuticals 900.0 Neurology
Fovea
October Sanofi-Aventis Pharmaceuticals 541.0 Ocular Diseases
April Sanofi-Aventis PiPar Sciences 500.0 Oncology
Crucell 18% Stake
September Johnson & Johnson (Dutch) 444.0 Vaccines
Hisamitsu Noven Specialty
July Pharmaceutical Pharmaceuticals 428.0 Pharmaceuticals
Cubist Calixa
December Pharmaceuticals Therapeutics 402.5 Antibiotics
Source: Burrill & Company
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13. Interim Conclusions (from Morgan Stanley)
• In licensing accelerates innovation, de-risking the
investment for the buyer
• NPV lost from higher pay-ways and milestones is
offset by lower risk–adjusted invested capital
• The shift from internal R&D to licensing re-defines the
core competencies of Branded Pharma to late stage
development and commercialization
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14. In-Licensing in Pfizer Established Products Business
Unit
• Independent Business Unit with own P&L and
unique entrepreneurial culture
• Forward-looking, focus on creating win-win
collaborations
• Separate Business Development Team
• Strive for agility and quick decision making
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15. Established Products – Our Vision
To Become One of the World s Top
Pharmaceutical Players
in the Post-LOE Marketplace
Our Mission:
To provide patients and payers with medicines characterized
by Pfizer s reputation for quality, safety and innovation
Our Journey:
We will dramatically change Pfizer s portfolio
of Established Products from a significantly shrinking
segment of our business to an
engine of positive growth
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16. Keys to Success
Changes That Enable Growth:
Profit Reinvestment, P&L Responsibility
Entrepreneurial Culture:
Targeted External Talent Added
Fast, Flexible, Focused and Accountable
Partners:
Protalix, Strides, Aurobindo, Biocon
Scope:
Global – Developed Countries and Emerging Markets
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17. The Expanded EPBU Portfolio
A Mix of Brands and Generics
600+ Products
200+ In-licensed Molecules
(glipizide) Extended Release Tablets
30+ Wyeth Products Including:
• Effexor
• Protonix
• Tazocin
Mix of Generics, Post-LOE
and Patent-Protected
Therapeutic Areas Include:
• Central Nervous System 3 of More Than 30 Wyeth Products
• Cardiovascular
• Sexual Health
• Anti-Infectives
• Pain and Inflammation
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18. Our Wish List
• EPBU is actively seeking partnerships
– Post LOE opportunities: generics, reformulated /
branded generics, biosimilars
– Medium size branded products
– Innovation via small companies
– Late stage development
• Key criteria
– Leverage our commercial capabilities
– Speed to market
– Cost efficient opportunities
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19. EPBU Approach to Licensing
• Initiate a commercial assessment and ensure we can
maximize opportunities for the markets
• Perform a cross-functional Due Diligence Process
• Our philosophy is to maintain Pfizer quality / supply
reputation and ensure we can stand behind the
products we license even when manufactured by
third parties
• EPBU seeks to create win-wins via Pfizer s global
capabilities, scale, and technologies
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20. Creating Success Through EPBU Partnerships
• Pairing external technology and IP with our
infrastructure, scale, supply chain, resources
and processes
• Utilize our commercial expertise to maximize
opportunities in the marketplace
– Branded and post-LOE phases
• Leverage agility and entrepreneurial spirit of small
companies with Pfizer s comprehensive approach
to innovation
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21. Pfizer Aims to Be a Partner of Choice Who Creates
Value for Your Product or Technology
Leverage
Our Strengths & Capabilities Our Product
Portfolio
• Reputation for Quality and
Supply Reliability
Pursue Product
• Strong Brand Recognition Enhancements and
Reformulation
• Global Commercial Capabilities
• State-of-the-art Manufacturing
processes and technologies Pursue
Opportunities in
• Strong Alliance Management Niche Markets
• Success in Past Partnerships Intensify
Late Stage
Lifecycle
Planning
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22. Partnering Offers Value and Innovation Through Collaboration and
Convergence of Technologies, Industries and Companies Roles…
• Successful partnering requires:
– Finding a strategic fit and integrating organizational
cultures
– Creating an environment of collaboration by
understanding what each partner needs to achieve
– Welcoming the opportunity to collaborate with
multiple partners
– Establishing a strong Alliance Management program
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23. Our Lessons Learned
Three Keys to Partnering Include:
Cultural Integration, an Environment of Collaboration,
and Strong Alliance Management
Collaborative Partnering Offers
Increased Value and Innovation
Engaging External Organizations and Third Parties
Creates a Wide Range of Opportunities
Innovation Remains a Top Strategic Focus for Growth
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