Weekly Barometer 25 janvier 2012

Biotechnology Certificate – New Technologies For Health

April 2017

ATONRÂ PARTNERS SA 12, Rue Pierre Fatio – 1204 GENEVA – SWITZERLAND - Tel: + 41 22 310 15 01 http://www.atonra.ch

2

Investment Case

➢ After two very tough years marked notably by political rhetoric on drug pricing and a very low

level of drug approvals by the FDA in 2016, we believe Biotechnology is ripe for a rerating in 2017

✓ as some important drug approvals might change the perception around the sector and

valuations are undemanding, a catalyst for M&A

➢ Specifically, the first drug to be potentially approved using genes as medicines (Spark

Therapeutics) and the first potential approval for the CAR-T drug (Kite Pharmaceuticals) could

support sentiment as we move towards mid-2017

➢ We also believe that personalized medicine is not far away from becoming ubiquitous as prices

for new testing (including DNA analysis) and analysis are coming down sharply

➢ Against this backdrop, we favor Biotech companies exposed to gene therapies, antibodies and

rare diseases over the larger market cap names which benefited more from rising drug prices

than from volume growth

Biotechnology Certificate details

✓ Issuing bank: UBS AG Zurich, Calculation agent: UBS AG, London Branch

✓ ISIN: CH0275762380

✓ Currency: USD

✓ Fees: 1.6% management fee

Biotechnology Certificate

3Biotechnology Certificate

Personalized

Medicine

Cardiovascular

Immunotherapy

Rare

diseases Neurology

Biotechnology Certificate

➢ The term has appeared for the first time with the discovery of DNA

➢ Modern biotechnology involves the use of live organisms or their products (bacteria or enzymes)

to manufacture drugs

➢ Biotechnology products have wider applications than classic pharma

➢ A completely different business model than pharma:

➢ Today lines are blurred between pure biotech and pharmaceutical companies as these industries

are partially consolidating

4

Smaller sizeR&D intensive

Entrepreneurial

High risk, high reward profile

What Is Biotechnology?

Solution To A Global Social Issue - The "Hope Offering"

5

Entrepreneurial, knowledge intensive

High risk, high reward profile, strictly regulated

R&D dependent, high capital requirements (private and public funding)

Reimbursement and pricing – important success factors

Computing power is an underlying fundamental of the industry

Constant business model evolution

Biotechnology Certificate

6

$ 358 bn$ 383 bn

$ 416 bn

$ 452 bn

$ 491 bn

$ 533 bn

0

100

200

300

400

500

600

2015 2016 2017 2018 2019 2020

$ b

illio

n

Year Source: MarketLine Industry Profile

Global Biotechnology Market Expected To Grow By 8% CAGR Through 2020

Biotechnology Certificate

7

Geography 2015 (in $ Bn) Market share (%)

United States 147.0 41.1%

Europe 73.8 20.6%

Asia-Pacific (ex.

Japan)49.2 13.8%

Japan 39.4 11.0%

Middle East 6.5 1.8%

Rest of the World 42.0 11.7%

Total $357.9B

Source: AtonRâ Partners & MarketLine

➢ Why? An entrepreneurial ecosystem, more active venture capital, M&A and IPO

market

United States Dominate The Biotechnology Market

Biotechnology Certificate

8

Communicable, maternal, neonatal, and

nutritional 6%

Chronic liver 2%

Digestive 2%

Neurological and mental4%

Diabetes, urogenital, blood, and endocrine

6%

Other1%

Injuries8%

Global Mortality Causes In 2015 (nb. of cases)

Cardiovascular

32%

Cancer

16%

Infections

16%

Chronic respiratory

7%

Biotechnology Certificate

➢ Oncology cases have increased by 17% worldwide during the last 10 years

✓ due to the aging of the population (probability increases with age)

➢ Neurological Diseases are affecting more and more people (+35.2% growth from 2005)

✓ due to: Aging, Obesity, Smoking and Genetic Predisposition

➢ Diabetes and chronic kidney diseases increased worldwide by 30% from 2005

✓ due to: Obesity, High Blood Pressure, Smoking, Environmental, Inactivity

9

New Challenges For A New World (I)

Biotechnology Certificate

➢ Infection cases have decreased by 10% during the last 10 years led primarily by decreases in

HIV/AIDS and tuberculosis cases

➢ Cheaper gene sequencing trigger the development of personalized medicine notably in oncology

➢ Rare diseases are more and more “attractive” due to governmental support and high profit margins

10

Orphan drug sales could

reach $178 bn by 2020

(2015-20 CAGR 12%)

In the last 5 years

of all new drug approvals

were for rare diseases

Rare diseases affect

That’s 1 in 10!

Biotechnology Certificate

New Challenges For A New World (II)

11

Oncology; 16.30%

Anti-diabetics

Anti-rheumatics

Anti-viralsVaccines

Bronchodilators

Sensory Organs

Anti-hypertensives

Dermatologicals

MS therapies0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16%

WW

Mark

et

Sh

are

(%

), 2

022

Top 10 Therapeutic Areas By 2022 - Market Share & Sales Growth

Oncology treatment sales

are expected to reach

$190bn by 2022

market share

Source: EvaluatePharma 2016% sales growth 2015-2022

Oncology Has The Largest Market Potential

Biotechnology Certificate

➢ Emerging markets will lead “Anti-diabetics” growth

12

➢ A record year for FDA approvals in 2015, followed by an unprecedented low number in 2016 as fewer

applications were submitted and complete response letters (CRLs) were sent due to manufacturing

practice deficiencies (GMP)

➢ 2017 is expected to be much more promising as:

✓ many important drugs in the last stages of development are awaiting approval

✓ the 21st Century Cure Bill is aimed at getting new drugs and devices approved faster

✓ Trump is to overhaul and streamline the FDA → Accelerate the approval process for new drugs

Source: AtonRâ Partners, EvaluatePharma 2016

32

26

35

38

28

29

26

31

34

26

35

43

35

41

45

22

15

20

25

30

35

40

45

50

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Number of new drugs approved by FDA

Biotechnology Certificate

➢ Food and Drug Administration → The first level of decision-making before commercialization

✓ consistent legal and political framework across states

✓ the FDA has the most demanding approval standards in the world

➢ The FDA does not decide on a drug’s reimbursement policy:

✓ insurance companies have the right to decide individually

✓ biotech companies start reimbursement discussions at the earliest stages of research

13

9%

91%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Uninsured

With Health Insurance

7%

49%

56%

Direct purchase

Employment based

Private insurance

2%

14%

20%

36%

Military Health Care

Medicare

Medicaid

Government plan

Source: Census Bureau's March 2014, March 2015, and March 2016 Current

Population Survey (CPS: Annual Social and Economic Supplements).

Biotechnology Certificate

Percentage of People by Type of Health Insurance Coverage in US

14

Growth

Aging population

Chronic diseases

Emerging countries

Nutrition habits

Government support

Orphan drugs

M&A potential

Personalized Medicine

Upcoming Catalysts

Biotechnology Certificate

➢ Treatments targeted to the needs of individual patients

➢ Technological breakthroughs and computer power are giving a boost to this field

➢ Strong government support

15

Find DNA mutation

Identify the best drug against

this mutation

Personalized Treatment

28%

of 2015

FDA Approvals

were

personalized

medicines

Source: 2015 Progress Report: Personalized Medicine at FDA

Personalized Medicine: The Future Of Medicine?

Biotechnology Certificate

Changing Nutrition Habits

➢ Obesity levels (13% of worldwide obese population comes from the U.S.).

➢ The two countries showing the highest growth in obesity are China and India (15% of the worldwide

obese population) leading to:

Emerging Markets: A Real Opportunity For Biotech

✓ huge populations

✓ increasing prosperity and standards of living (growing middle class)

✓ aging population

➢ Global executives are expecting 30% of their biopharmaceutical sales to come from emerging

markets by 2018

16

Cardiovascular

diseasesDiabetes

Musculoskeletal

DisordersCancers

A Fast Changing World

Biotechnology Certificate

Strong pipeline in

high growth therapeutics

Novel technologies

platform

Cheap Valuations

High returns potential

17

2017 Is Expected To Be A Very Strong Year In M&A

2015 worldwide biopharma M&A

Record deal value of $430 billion

Biotechnology Certificate

External growth through M&A

represents an attractive

opportunity

Disclaimer

This report has been produced by the organizational unit responsible for investment research (Research

unit) of AtonRâ Partners and sent to you by the company sales representatives.

As an internationally active company, AtonRâ Partners SA may be subject to a number of provisions in

drawing up and distributing its investment research documents. These regulations include the Directives

on the Independence of Financial Research issued by the Swiss Bankers Association.

Although AtonRâ Partners SA believes that the information provided in this document is based onreliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completenessof the information contained in this report.

The information contained in these publications is exclusively intended for a client base consisting ofprofessionals or qualified investors. It is sent to you by way of information and cannot be divulged to athird party without the prior consent of AtonRâ Partners.

While all reasonable effort has been made to ensure that the information contained is not untrue ormisleading at the time of publication, no representation is made as to its accuracy or completeness and itshould not be relied upon as such.

Past performance is not indicative or a guarantee of future results. Investment losses may occur, andinvestors could lose some or all of their investment.

Any indices cited herein are provided only as examples of general market performance and no index isdirectly comparable to the past or future performance of the Certificate.

It should not be assumed that the Certificate will invest in any specific securities that comprise any index,nor should it be understood to mean that there is a correlation between the Certificate’s returns and anyindex returns.

Any material provided to you is intended only for discussion purposes and is not intended as an offer orsolicitation with respect to the purchase or sale of any security and should not be relied upon by you inevaluating the merits of investing in any securities.

18