BioCentury: Picturing Biopharma ROI in the U.S. (April 1, 2015)

Picturing Biopharma ROI in the U.S.China Healthcare Investor Conference, Shanghai, April 1, 2015

BioCentury®; The BioCentury 100™; and BCIQ™ are trademarks of BIOCENTURY PUBLICATIONS, INC. Copyright © 2015 ALL RIGHTS RESERVED. 3/18/2015

BioCentury’s Business Intelligence Platform

2

“Betting on China or the U.S.?”

BioCentury®; The Bernstein Report on BioBusiness; The BioCentury 100™; and BCIQ™ are trademarks of BIOCENTURY PUBLICATIONS, INC. Copyright © 2015 ALL RIGHTS RESERVED. 3/18/2015 ‹#›

Wide Eyes: ROI based on the scale of opportunity

“Betting on China or the U.S.?”


Eyes Open: ROI based on market conditionsLiquidity: The ability to buy or sell a financial or strategic asset

Monetary policy

Policy innovation

Regulatory innovation

Commitment to science

Today’s Discussion


The current U.S. biopharma market in historical perspective

Current demand for biopharma equities

Current demand for biopharma assets

How the pictures could change

Implications for ChinaPublished in BioCentury October 6, 2014

Picturing biopharma ROI in the U.S.

Historical Perspective

BioCentury 100 Index: The top U.S.-listed biotech and specialty pharma by market cap

1993 bear: down 30%

2000 bear: down 41%

BioCentury®; The BioCentury 100™; and BCIQ™ are trademarks of BIOCENTURY PUBLICATIONS, INC. Copyright © 2015 ALL RIGHTS RESERVED. 3/18/2015 6

0

2,000

4,000

6,000

8,000

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

BC10

0 in

dex

BC100 since 1993

Data as of March 20, 2015 Source: BCIQ: BioCentury Online Intelligence.

CAGR = 10%

Current Events

CAGR of BioCentury 100 since March 2009 bottom is 3X the long-term rate


0

2,000

4,000

6,000

8,000

3/5/09 2/26/10 2/18/11 2/10/12 2/1/13 1/24/14 1/16/15

BC

100

Inde

x

BC100 current bull

CAGR =34%

Data as of March 20, 2015

0

1,000

2,000

3,000

4,000

5,000

0

100

200

300

400

Feb-

01Se

p-01

Apr

-02

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-02

Jun-

03Ja

n-04

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04M

ar-0

5O

ct-0

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ay-0

6D

ec-0

6Ju

l-07

Feb-

08Se

p-08

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-09

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10Ja

n-11

Aug-

11M

ar-1

2O

ct-1

2M

ay-1

3D

ec-1

3Ju

l-14

Feb-

15

Avg daily volin 000s

IBB

pric

e

iShares NASDAQ Biotechnology (IBB)

IBB avg daily vol IBB adj close*

*Adjusted for dividends; data as of March 20, 2015

Picturing Momentum

2007: 71M shares

2014: 84M shares

Few instances of falling price on rising volume


Relative Momentum

Demand for biotech has easily outpaced market benchmarks coming out of the meltdown


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g-10

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g-11

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g-12

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g-13

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g-14

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Avg daily vol in 000sIn

dex

pric

e*

IBB vs. S&P 500 & NASDAQ

IBB avg daily vol IBB adj close** S&P 500 NASDAQ

*Indexed to 1,000 as of Feb. 16, 2001; **Adjusted for dividends; data as of March 20, 2015

Comparing Bubbles and Bulls

Genomics bubble: 237 weeks round trip

Current bull: 316 weeks from bottom

10BioCentury®; The BioCentury 100™; and BCIQ™ are trademarks of BIOCENTURY PUBLICATIONS, INC. Copyright © 2015 ALL RIGHTS RESERVED. 3/18/2015

0

1,000

2,000

3,000

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7,000

1 11 21 31 41 51 61 71 81 91 101

111

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171

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191

201

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231

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251

261

271

281

291

301

311

BC

100

Inde

x*

Weeks

1998-2000 Bubble vs. 2009-2015 Bull

*BC100 indexed to 1,000 as of start date of each bull market; data as of March 20, 2015

1998-2000 Bull[CAGR = 236%]

2009-2015 Bull[CAGR = 34%]

2000-2003 Bear[CAGR = -41%]

Follow the Money


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Rai

sed

$BGlobal biotech financing 2000-2014

Other

Follow-on

IPO

Venture

Source: BCIQ: BioCentury Online Intelligence

Venture Drought?

At least $5B raised in every year of this century save for 2001-2003

U.S. biotechs have raised at least $3.7B annually since meltdown

Strategic venture has been key to sustaining capital inflows


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Rai

sed

$B

Global bioventure investments 2000-2014

U.S.

Ex-U.S.

Data analysis based on company location; Source: BCIQ: BioCentury Online Intelligence

Venture Validation


$0

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$1020

00

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Rai

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$B

Global bioventure IPOs 2000-2014

U.S. IPO

Ex-U.S.

Data analysis based on initial IPO listing; Source: BCIQ: BioCentury Online Intelligence

Demand for Assets


Global Biopharma M&A by Target HQ Region

U.S.286 Deals

$246B

Europe135 Deals

$66B Asia-Pacific(excl. Japan)

40 Deals$8B

49 Deals

26 Deals

8 Deals

$85B

$6B

$5B

$0

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2009 10 11 12 13 14 2009 10 11 12 13 14 2009 10 11 12 13 14

U.S. Europe Asia excl. Japan

Aggr

egat

e D

eal V

alue

($B

)

Num

ber o

f Dea

ls

Financials based on disclosed figures; Excludes acquisitions of large-cap biopharma (>$50B market cap), medical device, diagnostics, tools, services and manufacturing companiesSource: BCIQ: BioCentury Online Intelligence

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Sellers’ Market: M&A During the Bull


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U.S. Domiciled Targets Non-U.S. Domiciled/ROW Targets

1-D

ay S

hare

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e Pr

emiu

m (%

)

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ber o

f Dea

ls

Biopharma M&A Share Price PremiumsU.S. vs. Rest of World Targets

Number of Public Biopharma M&As Offer Price Premium over 1-Day Prior Close (%)

M&A share price premiums are calculated against target company closing share prices one day prior to announcement; Excludes acquisitions of large-cap biopharma (>$50B market cap), medical device, diagnostics, tools, services and manufacturing companiesSource: BCIQ: BioCentury Online Intelligence

Average premium: U.S. = 52%ROW = 35%

Median premium: U.S. = 39%ROW = 28%

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Licensing During the Bull


465385

$-

$10

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$60

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2009 2010 2011 2012 2013 2014

Aver

age

Cas

h U

p Fr

ont (

$M)

Num

ber o

f Dea

ls

Out-Licensing by Asset Origin for U.S. and Rest of World

U.S. Number of Deals Non-U.S. Number of DealsU.S. Average Cash Up Front ($M) Non-U.S. Average Cash Up Front ($M)

Financials based on disclosed figures; Asset origin based on out-licensing company domicile; Excludes 2014 Merck, Bayer $1,000M upfront and 2014 Pfizer, Merck $850M upfrontSource: BCIQ: BioCentury Online Intelligence

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Average upfront: U.S. = $35MROW = $30M

Median upfront: U.S. = $15MROW = $10M

Early Stage Assets During the Bull


107 99

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2009 2010 2011 2012 2013 2014

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f Dea

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Out-Licensing by Asset Origin for U.S. and ROWPreclinical to Phase I

U.S. Number of Deals Non-U.S. Number of DealsU.S. Average Cash Up Front ($M) Non-U.S. Average Cash Up Front ($M)

Financials based on disclosed figures; Asset origin based on the out-licensing company domicileSource: BCIQ: BioCentury Online Intelligence

17

Average upfront: U.S. = $25MROW = $17M

Median upfront: U.S. = $12MROW = $10M

Drivers of ROI in the U.S.


Liquidity

Monetary policy

Policy innovation

Regulatory innovation

Commitment to science

Published in BioCentury October 6, 2014

Pharma vs. the Risk Free Rate

The average yield provided by 13 global pharmas – including dividends and share buybacks – currently is about 4%


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4

DR

G Index

Rat

e %

Fed Funds Rate vs. DRG

Source: U.S. Federal ReserveDRG = NYSE Arca Pharmaceutical Index

Fed Funds rate

DRG

Access to Financial Markets


Venture Validation in Europe


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Avg

rais

ed $

M

Average raised in EU vs. U.S. IPO (all deals)

EU avg U.S. avg

Data analysis by IPO listing; Source: BCIQ: BioCentury Online Intelligence

European companies raise more money in U.S. IPOs

2013:EU listing: $13MU.S. listing: $65M

2014: EU listing: $55MU.S. listing: $70M

Comparative Liquidity

Cannabinoids for pain, epilepsy, cancer

2001: Listed LSE

2013: Dual listed NASDAQ

Current Mcap: $1.7B


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b-13

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Avg daily volume in 000s

Pric

e in

pen

ce

GW Pharmaceuticals plc

LSE avg daily vol NASDAQ avg daily vol GWP price

1 ADR = 1 common share

Regulatory Innovation: 23 Years Later

Total Avg

2000-2004 125 25

2005-2009 112 22

2010-2014 158 32


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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

FDA approvals of NMEs and new BLAs

FDASIA Effect


PDUFA performance since passage of FDA Safety and Improvements Act of 2012 gave FDA an extra two months to review new NDAs and BLAs.

All Cancer

Approved ≥ 1 week early 31 24

Approved ≥ 30 days early 19 16

Approved ≥ 60 days early 11 10

24

Approvals as of March 6, 2015. Source: FDA

Breakthroughs under FDASIAOf the 11 applications FDA has approved two months or more before their PDUFA deadlines, seven have breakthrough designation (BD).

Product Indication BDDays early

Blincyto blinatumomab B cell acute lymphoblastic leukemia (B cell ALL) Y 167Zykadia ceritinib ALK-positive non-small cell lung cancer (NSCLC) Y 117Opdivo nivolumab (sBLA) NSCLC Y 110Imbruvica ibrutinib Mantle cell lymphoma (MCL) Y 107Opdivo nivolumab Melanoma Y 98Xofigo radium Ra 223 dichloride Prostate cancer 91Ofev nintedanib Idiopathic pulmonary fibrosis (IPF) Y 79Imbruvica ibrutinib (sNDA) Waldenstrom’s macroglobulinemia 78Avastin bevacizumab (sBLA) Cervical cancer 71Ibrance palbociclib Breast cancer Y 69Lenvima lenvatinib Thyroid cancer 60


Prioritizing the Breakthrough Deluge


244 requests since July 2012. 71 granted. 29 TBD

Reviewer Prioritization Case-by-case Resources required Need for AdCom Need for a REMS Manufacturing issues

How Times Change: 2004


"The purpose of accelerated approval was not accelerated drug company profits. It was accelerated access for people that had desperate illnesses that needed a therapy.

“It wasn't a license to do less, less, less and less to the point now that we have companies coming in asking what is the lowest.“

-- Richard Pazdur, Director of FDA Office of Hematology

and Oncology Products

How Times Change: 2015


“The drugs got better, and that's the bottom line . . .

“We're dealing with drugs that have response rates of 50, 60, 70%. It's a much easier regulatory decision . . . ”

“I really see this as a major foundation change here. It has to do with a better understanding of the drug and the disease.

“What it represents is the fruition of a lot of investigation and basic science that has occurred over the past 20 years.”

-- Richard Pazdur on BioCentury TV

Commitment to Science

At least 47 biotech companies have raised at least $40 million each in seed, series A or series B rounds from 2010-2015 to date


Founded Technology Raised

Adaptimmune 2008 Autologous T cell therapy $134M

Cleave Biosciences 2011 Next-gen proteasome inhibition $54M

Editas Medicine 2013 Gene therapy $43M

Jounce Therapeutics 2013 New immune regulator targets $47M

Nimbus Therapeutics 2010 Computational biology+in silico discovery $67M

Syros Pharmaceuticals 2012 Targeting cancer cell regulatory networks $83M

Can the Momentum Continue?2012 2013 2014 1Q15

NYSE Arca Biotechnology 42% 51% 48% 17%

GreTai - Biotech & Medical Care* NA 27% -11% -6%

BioCentury Europe 42% 39% 24% 12%

NASDAQ Biotechnology 32% 66% 34% 14%

BioCentury 100 26% 59% 28% 18%

NYSE Arca Pharmaceutical 11% 27% 14% 8%

NASDAQ Composite 16% 38% 13% 3%

S&P 500 13% 30% 11% 0%

BioCentury London 15% 62% 16% 1%

DJIA 7% 26% 8% -1%

BioCentury Japan NA 158% -23% -13%

“Valuation metrics in some sectors do appear substantially stretched --particularly those for smaller firms in the social media and biotechnology industries”Fed Chair Janet Yellen, July 2014


Existential Forces

Healthcare austerity defines everything

Access to healthcare is the defining issue of our time

The marketplace defines value

Published in BioCentury March 11, 2013; Broadcast on BioCentury This Week television, Oct. 14, 2012


Implications for China


Focus on market conditions for ROI

The correct market conditions enable the formation of a virtuous circle characterized sustained demand for biopharma assets by both financial and strategic investors

Implications for China


Create conditions for venture validation

Focus on high impact CFDA transformations

Commit to science

Nurture role models

BioCentury Innovations Yield by Region

China 354

Japan 423

RoW 1094

Rest of Europe 1046

U.K./Germany/France 1407

U.S. 6529


China, 3%Japan, 4%

RoW, 10%

Rest of Europe, 10%

U.K./Germany/France, 13%

U.S., 60%

ChinaJapanRoWRest of EuropeU.K./Germany/FranceU.S.

Scientific findings with commercial potential: 2008-2014

Nurture Role Models


The news flow is encouraging

Zai Labs-BMS: Brivanib in-licensed for Chinese HCC patients

WuXi-MedImmune: CFDA accepts IND for IL-6 in-licensed for China

Innovent-Lilly: China-discovered large molecule in-licensed by MNC

Hutchinson-AZ: China-discovered small molecule in-licensed by MNC

35

Published in BioCentury November, 15, 2010

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