Pharma/Biotech M&A

Home , Celltech, Fisons, MedImmune, Nuvelo, Roussel Uclaf

1 Deborah Dunsire, M.D. President & CEO Millennium Pharmaceuticals, Inc.

Maximizing Long-term Value: Capitalizing on Innovation Through M&A and Strategic Partnering A Biopharmaceutical Perspective

2 Imagine Starting a Company Knowing That……..

Drug Discovery and Development

Genomics HTS Pharmacology Regulatory Biology DMPK Clinical Manufacturing Commercial Approval Toxicology Chemistry

Target IND PhI PhIIa PhIIb PhIII Filing

 ~2% probability  10 - 15 years*  $1B** *PhRMA Pharmaceutical Industry Profile: 2007 **Parexel’s Bio/Pharmaceutical R&D Statistical Sourcebook 2007/2008

3 It’s A Fierce Battle To Become A Leading Biopharmaceutical Company

Amgen ;Genentech

Gilead; Genzyme

OSI Imclone

Onyx

Synta

*Pro forma profitability

4 Big Pharma Industry Consolidation Has Been The Trend…

Rank 1988* 2007** 1 Mereck Sharp & Dohme Johnson & Johnson 2 Wyeth-Ayerst Pfizer 3 Eli Lilly GlaxoSmithKline 4 Smith Kline & French Labs Bayer 5 Schering Novartis 6 The Upjohn Company Sanofi-Aventis 7 Pfizer Laboratories Roche 8 Lederle Laboratories AstraZeneca 9 Ross Laboratories Merck & Co 10 Merrell Dow Pharm Abbott Laboratories

… But economies of scale due to consolidation is not always advantageous in R&D innovation * Med Ad News 1988 **Med Ad News 2007 5 Big Pharma is Turning Towards Biotech Innovation for Sustainable Growth

 Multiple pathways to access innovation – Wholesale acquisition – Serial acquisitions – Key alliances and licensing deals  High cost of entry - competitive environment  No “one size fits all” approach – Dependent on pre-existing expertise

6 An Increasingly High Stakes, Complex Market Has Raised The Ante…

 Capital markets are tightening  Regulatory environment is becoming global  Consolidation has created a smaller playing field of possible big pharma partners  Few possible biotech partners have fully integrated end-to-end capabilities

…An Accurate Assessment Of The Current And Future Environment Shapes And Guides The Correct Approach

7 Innovation Occurs Via Two Possible Pathways Using A Variety Of Tools…

Internal External

Scale M&A Re-org In-Licensing Partnerships …But Success Depends Upon Defining Which Tool To Use And

When It Applies 8 M&A and Partnering for Strategic Value Creation

 Increase value of acquired asset  Create new product combinations  Leverage commercialization infrastructure  Create critical mass and diversification  Choose between buy vs. build capabilities  Access to global markets

9 Global Access to Innovation is Growing In All Directions… INDIA  Partner of choice for CMOs and CROs by Western manufacturers  Acquisitions of Indian companies are increasing while many Indian-based firms are buying European assets to access larger markets  Increasing novel R&D CHINA  Provides drug discovery, R&D, clinical trials for multi-national companies – Talent pool of scientists, low cost, advancements in genomics and gene therapy – Increase in international wholly owned R&D facilities

10 Successful Companies Blend Internal and External Sources of Innovation

Company % in-licensed or acquired Genentech 56% Johnson & Johnson 55% Millennium 50% Hoffman-La Roche 49% Bayer 44% Takeda 41% Novartis 39%

Source: PAREXEL Bio/Pharmaceutical R&D Statistical Sourcebook 2007/2008

11 However, Consolidation and M&A Activity Are Not The Only Long-Term Solutions To Building Shareholder Value

New  Innovation is the Therapeutic only opportunity that Areas creates a near limitless capacity to build value  Strategic synergies via M&A can maximize value of Innovation the innovation  Economies of scale Precision as cost conserving Improved With measures have Patient Targeted diminishing Outcomes Therapies marginal returns over time

12 Development Control

 Early-stage development (Ph I thru IIa) routinely in hands of biotech partner  For late-stage deals, biotech participation increasingly required

Partners Product/Phase US Dvpt Control in Ph 3

Pozen/AZ Naproxen-PPI combo/Ph 2 Pozen Atherogenics/AZ AGIX 1067/Ph 3 Atherogenics Nuvelo/Bayer Alfimeprase/Ph 3 Nuvelo Vertex/J&J VX-950/Ph 2 Vertex GSK/Myogen Ambrisentan/Ph 3 Myogen FibroGen/Astellas FG-2216 & 4592/Ph 2 Shared Affymax/Takeda Hematide/Ph 2 Shared

SOURCE: Windhover’s Strategic Intelligence Systems 13 Millennium: From Genomics to Leading Biopharmaceutical Company

Year 1 Year 14 30 People 1000 People

>$800M Cash Value = $4.2B $8M Cash M&A

– 3 acquisitions Market-leading, novel cancer Value = $13M therapy Alliances

– >$2 billion partnering revenue 10 Molecules Genomics in the clinic Vision funding

14 Successful Partnerships are Complex…

 Collaborative planning  Clear decision making  Culture  Balancing the commonalities and differences of priorities and the partnership

…Yet, Partnerships can drive significant growth….

15 Millennium: From Genomics Startup To Fully Integrated Biopharmaceutical Company

Targets/ Disease Genes Discovery Preclinical Clinical Commercial Bio 1994 Roche Getting Started 1996 Lilly (3), Wyeth, AZ Building critical mass Monsanto ($218M) Leveraging the platform in Agriculture 1997 ChemGenics Moving into discovery 1998 Bayer ($465M) Industrializing drug discovery

1999 Leukosite Moving into the clinic

2000 Abbott, Aventis Building franchises

2001 BZL, Xenova, TDT Adding to the pipeline Moving onto 2002 COR Therapeutics the market 2003 J&J Ex-U.S.

2004 GSK Ex-U.S. Onc. Commercial 2005 SP Focus 2006 Ortho Grow VELCADE

16 Millennium Today and Beyond

 M&A/ partnerships continue as critical focus  Objectives have changed over time – From acquiring downstream capabilities to cost and risk sharing – Accessing external innovation to complement and accelerate growth  Millennium as a Partner of Choice – Extensive successful experience with research, co-development & commercialization partnerships – Fully integrated capabilities to support broad partnerships

17 Profile of A Successful Biotech Company Of The Future

 Maintain innovation and risk-taking  Focus and build on core competencies  Strategic cost and risk-sharing  Flexibility  Access to global resources  Visionary leadership

18 Partnership to Create Value will Continue to Accelerate

 Fostering innovation is the common goal to create sustainable future shareholder value  As a result, accessing innovation in the form of M&A, partnerships and in-licensing will continue to increase…  …Even as increasing marketplace complexity decreases the odds of success

Choose Wisely

19 Breakthrough science. Breakthrough medicine.

20 Millennium – Roche (1994)

The Deal: $70M Collaboration focused on obesity – at the time, the largest disease focused alliance in biotech Millennium Drivers − Validation of company and scientific platform − Equity at a step up in valuation, R&D funding

Macro Drivers − Smith Kline Beecham and HGSI alliance Partner Drivers − Concerns about R&D productivity/impact of genomics − Strong interest in building obesity franchise

21 Millennium – Monsanto (1997)

The Deal: $218M technology transfer, exclusive in agriculture field - at the time, the largest alliance in biotech Millennium Drivers – Agriculture not central to mission/strategy – Capture value of platform in non-pharma to fund pharma programs Macro Drivers − Genomics fever hits agriculture Partner Drivers − Transforming into a life sciences company (Solutia spinout) − Needed to establish IP position for trait determining genes − Looking for turn-key genomics solution

22 Millennium – Bayer (1999)

The Deal: $465M focused on large scale genomics and industrialization of drug discovery - the largest technology focused alliance in biotech Millennium Drivers – Capture value of genomics lead to built critical mass in discovery, retain rights to built proprietary pipeline – Equity at a premium, value/performance based funding Macro Drivers – Genomics fever hits pharma Partner Drivers – Strategic review determined need for novel targets

23 Millennium – Aventis (2000) The Deal: $450M alliance – contract JV for joint development and commercialization of products in inflammation field - the broadest alliance ever between biotech and pharma Millennium Drivers – Equity to continue to strengthen balance sheet for investment – Capture value from technology while building inflammation pipeline Macro Drivers – Continuing industry consolidation – Pipeline concerns broadly throughout industry Partner Drivers – Transform culture and process to create leading capabilities post RP/HMR merger

24 Millennium – J&J/Ortho Biotech (2003)

The Deal: $750M development and commercialization of Velcade (novel oncology product) outside the United States – the largest ex-US alliance in biotech Millennium Drivers – Cost and risk sharing vs. retention of US value – Access to capabilities in markets outside the US Macro Drivers – Late stage innovative products are scarce Partner Drivers – Building an oncology franchise ex-US

25 Global Perspective on Consolidation in the Biopharmaceutical Industry

Ed Saltzman President Defined Health

New York Pharma Forum General Assembly 7 December, 2007

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 26 The information in this presentation has been obtained from what are believed to be reliable sources and has been verified whenever possible. Nevertheless, we cannot guarantee the information contained herein as to accuracy or completeness.

All expressions of opinion are the responsibility of Defined Health, and though current as of the date of this presentation, are subject to change.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 27 Introduction of Panelists Deborah Dunsire, MD President & CEO Millennium Pharmaceuticals, Inc. Neal Fowler President Centocor, Inc. Frederick Frank Vice Chairman and Director Lehman Brothers Inc. Yasuchika Hasegawa President Takeda Pharmaceutical Company Limited

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 28 Agenda • Data and Conclusions – Lessons From 25 Years of Big Pharma Consolidation – Lessons From 10 Years of Big Pharma/Big Biotech M&A • Outlook and Predictions – Are We Done With Big Pharma Consolidation? – Will the Current Trend of Pharma Acquiring Pre- Commercial Stage Biotechs Continue?

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 29 The Urge to Merge: Major Pharma M&A 1994 - 1995

Deal Value Date Acquirer Acquiree ($millions) 1995 Hoechst Marion Merrill Dow $7,160 1995 Glaxo Wellcome $14,151 1995 Upjohn Pharmacia $6,500 1994 AHP Cyanamid $9,700 1994 Sanofi Sterling $1,825 1994 Ciba-Geigy Chiron $2,065 1994 BASF Boots $1,360 1994 SmithKline Sterling Winthrop $2,925

Windhover Information.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 30 The Urge to Merge: Major Pharma M&A 1996 - 2002 Deal Value Date Acquirer Acquiree ($millions) 2002 Pfizer Pharmacia $58,966 2001 BMS DuPont Pharma $7,800 2000 Glaxo SmithKline $78,000 2000 Abbott Knoll $6,900 1999 Pfizer Warner Lambert $84,083 1999 Monsanto Pharmacia & Upjohn $26,355 1998 Zeneca Astra $31,155 1998 Sanofi Synthelabo $12,000 1997 Roche Boehringer Mannheim $11,000 1996 Ciba-Geigy Sandoz $27,000 Windhover Information.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 31 The Urge to Merge: Major Pharma M&A 2004 - 2007

Deal Value Date Acquirer Acquiree ($millions) 2007 UCB Schwarz $5,600 2007 Mitsubishi Tanabe $4,300 2007 Schering-Plough Organon $14,430 2007 Merck Serono $13,300 2007 Nycomed Altana $6,100 2006 Bayer Schering AG $21,500 2005 Dainippon Sumitomo $2,200 2004 Sanofi-Synthelabo Aventis $65,000

Windhover Information.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 32 25 Years of Big Pharma Consolidation Have Proven One Thing

• The promised benefits greatly exceeded the reality!

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 33 Justification for Pharma Industry Consolidation Critical Mass for Survival

National Pride

Scale

Short-term Growth/Margin Fix

Economic Inevitability

1980 1990 2000 2007

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 34 Despite Justification, Most Pharma/Pharma M&A has Failed to Produce Benefits • Merger Justification # 1: Consolidation is Economically Inevitable

• Merger Justification # 2: Short Term Growth / Margin Fix

• Merger Justification # 3: The Promise of Scale

• Merger Justification # 4: National Pride

• Merger Justification # 5: Critical Mass for Survival (Japan)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 35 AThe Fragmented “Fragmented Industry Industry” View Theory Promotes Once Made Consolidation Seem Inevitable More M&A

February 8, 2001

Health Bristol-Myers Squibb Names Dolan Currently President, to Post of CEO

Mr. Dolan noted that despite recent mergers in the drug industry, there remains no company with greater than a 7% share of the market. “I think we’re a potential combination partner for a deal that makes sense given how this industry plays out.”

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 36 Few Similarly Sized Industries Were this Fragmented in 2000

Global Market Share of Leading Pharmas in 2000 50% Global Pharma Market = $ US 362 bln

40%

30%

20%

10%

0% Pfizer GSK Merck & CoAstraZenecaBristol-MyersAventis SquibbNovartis Johnson Pharmacia& JohnsonAHP All Others

IMS Health, January 2001.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 37 Pfizer’s Consistent M&A Activity Has Not Resulted inPfizer's Sustained WW Rx Market MarketShare 2000-2012(E) Share Gains 20%

18% Pfizer’s WW Rx Market Share 16% 2000 – 20012 (E) 14%

12%

11% 10% 11%

9% 9% 8% 9% 9% 9% 8% 7% 7% 6% 6% 6% 4% 5%

0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EvaluatePharma.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 38 • Merger Justification # 1: Consolidation is Economically Inevitable

• Merger Justification # 2: Short Term Growth / Margin Fix

• Merger Justification # 3: The Promise of Scale

• Merger Justification # 4: National Pride

• Merger Justification # 5: Critical Mass for Survival (Japan)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 39 Consolidation: Overpromised Benefits and Underdelivered Performance “With Pharmacia, we will have the products, pipeline, scale, and financial flexibility to extend our leadership. Over the next few years, Pfizer anticipates annual growth of 11% in revenues and 14% in net income, excluding merger costs.” Henry A. McKinnell, Pfizer. (Chemical & Engineering News, 7/22/2002)

Annual Growth of Total Revenues- Pfizer Annual Growth of Net Income- Pfizer

14% 35%

12% 12% 30% 29% 11% 28% 10% 10% 25% 8% 20% 6% 18% 15% 16% 4% 10% 2% 2% 5% 0% 4% 2001 2002 2003 2004 2005 2006 0% -2% 2001 2002 2003 2004 2005 2006 -3% -3% -4% -5% -8% -6% -10% Pharmacia Acquisition

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 40 The Bigger the Merger, The Greater the Value Destruction $51B -31% -4%

221B $188B

Company Big PHA Big PFE Pharma values Pharma 2 PFE Index prior to Index years merger -14% after. -28% annouce- $74B ment. 91B $118B

SKB Big Big Pharma GSK Pharma GW Index Index

SEC filings, YahooFinance, DH Analysis.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 41 • Merger Justification # 1: Consolidation is Economically Inevitable

• Merger Justification # 2: Short Term Growth / Margin

• Merger Justification # 3: The Promise of Scale

• Merger Justification # 4: National Pride

• Merger Justification # 5: Critical Mass for Survival (Japan)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 42 The Promise of Scale GlaxoSmithKline to be formed in £114bn "merger of equals" Dr Jean-Pierre Garnier (chief operating officer, SmithKline Beecham, and chief executive designate, GSK) said: "This is a merger of strong with strong, in contrast to some other mergers in this industry." He said that the merger would produce five key competitive advantages for the new company: •Enhanced R&D productivity "Money and scale are important, but you also need quality." The two companies have 13 compounds and 10 vaccines currently in phase III development. Both companies were leaders in genomics and bioinformatics. •Superior marketing power Over 40,000 employees in sales and marketing, including 8,000 representatives in the US, making the company the marketing partner of choice. •Superior consumer marketing skills "These will be much more important than ever before." The market was being changed by direct-to-consumer advertising and e-marketing via the internet. Many of the company's products would be switched to over-the-counter status in the future. •Operational excellence Efficiency savings of over £750m would be achieved over three years, on top of savings of £570m already achieved. Savings of £250m would be made by streamlining research and development. This money would be reinvested. •A talented management team Both sides had previous experience of integrating companies after mergers.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 43 The Reality of Scale?

Glaxo Wellcome + SmithKline Beecham

GSK 26 NMEs Filed and 15 NMEs approved Filed and approved

6 year total 6 year total Pre-merger Post-merger

Drugs@FDA, CDER, DH Analysis; Filing to approval time estimated to 24 months when specific dates not available.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 44 • Merger Justification # 1: Consolidation is Economically Inevitable

• Merger Justification # 2: Short Term Growth / Margin

• Merger Justification # 3: The Promise of Scale

• Merger Justification # 4: National Pride

• Merger Justification # 5: Critical Mass for Survival (Japan)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 45 France Rx The French Get Their Drug Company. Will Foreign Investors Retaliate? By FLOYD NORRIS Published: April 30, 2004 WILL foreign investors punish France? That question arisesthe in Frenchthe wake government'sof the French government's successful successful effort to effort create to create a a French pharmaceuticalFrench giant, pharmaceutical regardless of what giant, shareholders regardless might of havewhat preferred. To engineer the takeover of one French drug company, Aventis, by another, Sanofi- Synthélabo, theshareholders government had might to sidestep have supposed preferred. European rules barring national preferences. It evoked snickers with the disingenuous argument that a non- French company might not provide vaccines after a terrorist attack. But it succeeded, and on terms that let Aventis shareholders do reasonably well, although they could suffer if Sanofi loses a court case involving patent protection on an important drug. Aventis came up with a clever security to protect its shareholders if that happened, but the French government said such a tactic would not be allowed. Nationalism in takeovers is hardly unprecedented, of course. The European Commission is irritated that some European governments retain ''golden shares'' to prevent foreign takeovers of formerly state-owned companies. The United States government reserves the right to bar foreign takeovers of companies that have technology deemed critical for defense. And American law bars foreigners from owning more than 25 percent of a United States airline.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 46 Germany Rx

Bayer to Acquire Schering; German Merck to Sell Stake

Martin Gerten/European Pressphoto Agency The three big German pharmaceuticals makers that announced agreement yesterday. Merck is hoping for a place in future joint ventures.

By CARTER DOUGHERTY Published: June 15, 2006 FRANKFURT, June 14 — The health care giant Bayer clinched its bid for Schering on Wednesday as the rival suitor, Merck of Germany, backed off, agreeing to sell its stake to Bayer in return for a possible joint venture with the combined company. The new company is expected to become a German powerhouse in pharmaceutical research and production. Merck, by acquiring 21.8 percent of Schering over the last week, had raised the prospect of a nasty corporate takeover battle — a rarity in Germany. Bayer had outbid Merck in March for Schering, one of the world's leading contraceptive makers. By early Wednesday, Bayer and Merck appeared to be girding for a protracted fight that would include an initial round of litigation in the United States. Instead,"Today the surprise we three have-way agreement taken gives a majorMerck — basedstep in towardDarmstadt and creating independent a of the American pharmaceuticals maker Merck & Company — a healthy profit and a foot in the door for future ventures with a moreworld powerful-class Bayer. German pharmaceutical company." Bayer's chief executive, Werner Wenning, said in a statement, "Today we have taken a major step toward creating a world-class German pharmaceutical company."

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 47 • Merger Justification # 1: Consolidation is Economically Inevitable

• Merger Justification # 2: Short Term Growth / Margin

• Merger Justification # 3: The Promise of Scale

• Merger Justification # 4: National Pride

• Merger Justification # 5: Critical Mass for Survival (Mr. Hasegawa)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 48 Agenda • Data and Conclusions – Lessons From 25 Years of Big Pharma Consolidation – Lessons From 10 Years of Big Pharma/Big Biotech M&A

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 49 Pharma/Biotech M&A: Historic and Recent Strategies

Pharma buys biotechs with early stage assets

Pharma buys biotechs with marketed or late stage assets

1996 2004 2007

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 50 Pharma/Biotech M&A: Anyone Know of a Good Deal?

Sanofi-Aventis would acquire biotech company if deal good PARIS, Nov. 30, 2007 (Thomson Financial delivered by Newstex) -- Sanofi- Aventis (NYSE:SNY) is prepared to make acquisitions or partnerships with biotech companies as it aims to double or triple by 2012 the proportion of drugs it produces using biotechnology, research chief Marc Cluzel said. If there is a good deal to be done, we will do it,' he told journalists in Shanghai a day after the company announced it will raise its stake in biotech drug producer Regeneron to 19 pct from 4 pct. 'We are very pragmatic.‘ He said Sanofi-Aventis wants to raise the proportion of biotech-derived drugs it makes to 20-30 pct from the current 10 pct. Copyright Thomson Financial News Limited 2007. All rights reserved.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 51 Big Pharma/Big Biotech M&A: Good Deals Harder to Judge

• Historically, few revenue stage biotechs with attractive pipelines limits realistic opportunities • Though a small n, benefit of hindsight suggests most of these deals were financially unsuccessful over the near term but may, nonetheless be financially and strategically valuable over the longer term • AZ / MedImmune: First Pharma acquisition of “Big Biotech” since 2004 – price was “shocking” to some, but by historical standards does not seem unreasonable

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 52 10+ Years of Big Pharma/Biotech M&A • So, Was it a Good Deal? – Warner Lambert / Agouron (1999) – JNJ / Centocor (1999) – JNJ / Alza (2001) – JNJ / Scios (2003)

• So, Will it be a Good Deal? – AZ/Medimmune (2007)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 53 10+ Years of Big Pharma/Biotech M&A • So, Was it a Good Deal? – Warner Lambert / Agouron (1999) – JNJ / Centocor (1999) – JNJ / Alza (2001) – JNJ / Scios (2003)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 54 Warner Lambert / Agouron - 1999

Acquired Products - What Happened to Them?

600 500 400 Pipeline 300 Viracept

$Millions 200 100 0 At Time of Acquisition 5+ Years Later 2012

Pipeline @ Time of Acq 5+ Years Later 2012 Axitinib (AG-13,736) Phase III $512M Sales Pfizer discontinued Phase III trials for lung and AG3340 (Phase III @ Acq) prostate cancer in 2000 N/A Remune (Phase II/III @ Acq) Pre-registration under RTC's pipeline N/A AG2037 No Development Reported N/A AG-24322 Pfizer discontinued program by July 2007 N/A CMV protease inhibitor No Development Reported N/A GnRh antagonist No Development Reported N/A Hepatitis C protease inhibitor No Development Reported N/A HIV Integrase No Development Reported N/A AG-14,699 No Development Reported N/A

Windhover; Recap; ** Assuming 30% net profit margin and 15% discount rate.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 55 J&J / Centocor - 1999

Products Acquired - What Happened 4 to Them? 3

3 Pipeline Retavase 2 ReoPro 2 Remicade $ $ Billions 1

0 At Time of Acquisition 5+ Years Later 2012

Pipeline @ Time of Acq 5+ years Later 2012 Panorex Discontinued N/A

Windhover; Recap; ** Assuming 30% net profit margin and 15% discount rate.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 56 J&J/ ALZA – 2001: No Payoff From the Pipeline "J&J believes that it can push sales of Concerta, Ditropan XL and Doxil not merely beyond what Alza could do but what anybody really expects from these drugs. Putting Concerta into a WW launch and Ditropan XL into J&J's primary care sales force will, they figure, add hundreds of millions of extra growth." (IN VIVO, April 2001, Windhover)

"J&J can probably afford to pay more for Alza than other drug companies since it will now no longer have to pay transfer fees and royalties on the Alza- developed fentanyl patch (Duragesic) or the Duragesic line-extension Alza is working on…." (IN VIVO, April 2001, Windhover)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 57 J&J / ALZA - 2001

Products Acquired - What Happened

1.4 to Them? 1.2

1.0 Pipeline 0.8 Doxil 0.6 Ditropan XL $Billions Concerta* 0.4 Duragesic* 0.2

0.0 At Time of 5+ Years Later 2012 Acquisition

Pipeline @ Time of Acq 5+ years Later 2012 Ionsys $8M Sales $430M Sales OrthoEvra $450M Sales 0 Duragesic Line Extension Discontinued N/A *: Value of retired royalty paid by J&J to ALZA *. Windhover; Recap; ** Assuming 30% net profit margin and 15% discount rate.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 58 So, Was it a Good Deal? • Historical analysis suggests acquirer either overspent on marketed products that failed to achieve growth expectations and/or on pipeline products that failed to reach the market – But! • In some cases, it is not possible to judge pipeline payoff for as long as 10 years post-deal • JNJ/Centocor as case in point » Deal brought JNJ significant pipeline presence in large molecules years before competitors » CNTOs large molecule projects now the “innovation leader” in JNJ’s pipeline

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 59 10+ Years of Big Pharma/Biotech M&A • So, Was it a Good Deal? – Warner Lambert / Agouron (1999) – JNJ / Centocor (1999) – JNJ / Alza (2001) – JNJ / Scios (2003)

• So, Will it be a Good Deal? – AZ/Medimmune (2007)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 60 So, Will it be a Good Deal? By Historical Standards, AZ / MedImmune is Clearly Expensive, but Not Outrageous

Date Acquirer Acquiree Price Sales P/Sales

2007 AZ MedImmune $15,600 $1,277 12.2 2004 UCB Celltech $2,701 $721 3.7 2003 J&J Scios $2,691 $111 24.2 2001 J&J ALZA $10,800 $988 13.2 1999 J&J Centocor $4,900 $317 15.5 1999 WL Agouron $2,100 $467 4.5 Genetics 1996 AHP Institute $1,250 $172 7.3

Windhover Information.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 61 AZ / MedImmune: Why Does Everyone Seem to Have Sticker Shock?

• J&J/Alza -- 2001, $10 bln – Mature products and mature drug delivery platform • Schering-Plough/Organon 2007, $14 bln – Ph III shots on goal but no sure bets – What else to leverage? • Centocor cost $5 bln in 1999

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 62 AZ Also Paid a Premium for Scarcity

Few New Biotechs Reaching Commercial Scale Gilead Genentech MedImmune 2003 2000 2006

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Amgen Celgene Vertex Biogen Idec 1994 2007 2011 Genzyme 2003 2001 Actelion 2007

EvaluatePharma.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 63 AZ / MedImmune: Buying Promise

• Though early, a significant number of pipeline compounds, including several vaccines • A critical mass in biotech projects – Increased total AZ large molecule projects from 7% to 27% of portfolio • A critical infrastructure in protein therapeutics

Life Science Analytics; Company Website; IN VIVO.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 64 Ultimately, Value Will be Determined by the Pipeline

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 65 Agenda • Data and Conclusions – Lessons From 25 Years of Big Pharma Consolidation – Lessons From 10 Years of Big Pharma/Big Biotech M&A • Outlook and Predictions – Are We Done With Big Pharma Consolidation?

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 66 After 25 Years of Consolidation, The Industry’s Productivity Problem Continues to Worsen 140 $45.0

120 NME Non NME R&D Spend $40.0 120 $38.8

$34.5 $35.0

100 $31.0 $30.0 $29.8 87

82 82 78 78 80 $26.0 $25.0 70 71 $22.7 64 65

$21.1 61 Billions $ 60 $20.0 60 54 53 $19.0

Number of of Number Products 51 48 $16.9 48 47 45 $15.2 $15.0 41 40 42 $13.4 39 40 $12.7 33 35 30 30 $11.5 30 30 28 27 $10.0 $9.726 25 24 22 20 21 23 23 $8.4 22 21 $4.1 20 $7.3 20 $6.5 17 $5.5 12 $3.6 $5.0 $3.2 $4.7

0 $0.0 Parexel's Pharmaceutical83 84 85 R&D86 Statistical87 88 Sourcebook89 90 2005/2006;91 92 DH93 analysis.94 95 96 97 98 99 00 01 02 03 04

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 67 Big Pharma’s Current “Situation Analysis” After 25+ Years of Consolidation 300 NME 250 Physicians Reps 200 Cash* 53

150 39 35 30 31 NMEs 28 30 27 (1991=100) 100 26 25 24 22 21 17 18 18 50 Reps, Docs and Cash Index CashIndex Docs Reps,and

0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

American Medical Association; 2007/2008 Parexel R&D Statistical Factbook; Verispan; EvaluatePharma. *: Cash, Cash equivalent and liquid assets.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 68 So Why Do We Keep Talking About More Mergers?

Rumours of Pfizer, Sanofi mega-merger emerge

Bayer stock jumps on Novartis buyout speculation

Report of possible merger lifts Bristol-Myers

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 69 Big Pharma Consolidation: Here We Go Again? • Current indicators suggest not soon and maybe never – Size increasingly recognized as disadvantageous – All major Pharmas have publicly recognized the need to sharpen focus on a limited number of disease areas – GSK and Roche have led the move to decentralize; other Pharmas are watching closely and may follow

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 70 Extreme Scale is Now the Enemy

Scale is not an asset. In today's environment, extreme scale, scale that companies haven't learned to deal with, is something of a handicap. It's a skill-based industry, and our focus is on trying to develop our skills. Being No. 1 in the industry in size just doesn't really matter.

Robert Essner, CEO of Wyeth, January, 2007

Wyeth's CEO on changing sales tactics, TV ads, finding new drugs and consumer resentment; Monday, January 22, 2007; By Scott Hensley, The Wall Street Journal.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 71 Big Pharma Consolidation: Here We Go Again? • Current indicators suggest not soon and maybe never – Size increasingly recognized as disadvantageous – All major Pharmas have publicly recognized the need to sharpen focus on a limited number of disease areas

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 72 New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 73 Big Pharma Consolidation: Here We Go Again? • Current indicators suggest not soon and maybe never – Size increasingly recognized as disadvantageous – All major Pharmas have publicly recognized the need to sharpen focus on a limited number of disease areas – GSK and Roche have led the move to decentralize; other Pharmas are watching closely and may follow

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 74 New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 75 GSK

GSK CEDD Set-up in 2000; CEEDD added later

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 76 Agenda • Data and Conclusions – Lessons From 25 Years of Big Pharma Consolidation – Lessons From 10 Years of Big Pharma/Big Biotech M&A • Outlook and Predictions – Are We Done With Big Pharma Consolidation? – Will the Current Trend of Pharma Acquiring Pre- Commercial Stage Biotechs Continue?

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 77 Pharma Needs to Deal Earlier by Necessity, Not Choice!

• Late-stage in-licensed products fed the 1990s Pharma growth • Since then no blockbuster has been in- licensed at Ph II or > since 1998! • Pharma has been forced to set its sights earlier!

EvaluatePharma, DH Analysis.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 78 In-Licensed Late-Stage Blockbusters: Gone with the Century! Year Company Product 2006 Status on Deal Date 1987 GlaxoSmithKline Coreg IR/Kredex $1,436 Phase II 1989 Merck & Co Cozaar 3,163 Phase II 1993 BMS Avapro 1,097 Phase II 1993 BMS Plavix 3,257 Phase III 1994 AstraZeneca Atacand 1,110 Phase III 1994 BI Flomax/Alna 1,158 Phase III 1994 Sanofi-Aventis Eloxatin 2,127 Phase III 1995 Sanofi-Aventis Copaxone 1,343 Phase III 1995 Genentech Rituxan 2,071 Phase II 1996 Wyeth Protonix 1,795 Phase II 1997 Abbott TriCor 1,048 Filed 1997 J&J Aciphex/Pariet 1,239 Filed 1997 Pfizer Lipitor 11,239 Approved 1998 Schering-Plough Remicade-ex US 1,240 Phase III 1998 AstraZeneca Crestor 2,028 Phase II

EvaluatePharma, DH Analysis.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 79 Prices for Phase II Licensing Deals Are Rising Faster Than Those for Phase III Deals Average Upfront Payments From Major Pharmaceutical Companies 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007

Phase II Deals Phase III Deals

IN VIVO

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 80 Pharma is Now Buying Early-Stage Programs at Yesterday’s Late-Stage Prices

2001-2007 Biotech & Pharma Early Stage Deals… …Milestones Upfront Payments 8000 200 800 40

180 7000 Deal Value 700 Upfront Value 35 Median Value Median Value 160 6000 600 30 140

5000 500 25 120

4000 100 400 20

80 3000 300 15 60 2000 200 10 40

1000 20 100 5

0 0 0 0 2001 2002 2003 2004 2005 2006 3Q07 2001 2002 2003 2004 2005 2006 3Q07 Pharma, Biotech, Discovery, Pre-Clin, Ph 1, Products ($ Millions) Pharma, Biotech, Discovery, Pre-Clin, Ph 1, Products ($ Millions)

4500 300

4000 Milestone Value Median Value 250 3500 …Total Deal Value 3000 200 2500 150 2000

1500 100

1000 50 500

0 0 2001 2002 2003 2004 2005 2006 3Q07 MedTRACK; Defined Health analysis. Pharma, Biotech, Discovery, Pre-Clin, Ph 1, Products ($ Millions)

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 81 Licensing Begets M&A

• Pharma prefers Licensing early stage assets to M&A • VCs prefer a rapid exit via a sale • In the current sellers’ market, VCs win

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 82 Pharma/Biotech M&A: Now a Preferred (and Often Rapid) Exit for Investors

Selected Pharma/Biotech M&A – Early-Stage Pipelines (2006-Sept 2007) Date Company Acquired Founded Acquirer Value Terms Signed Cambridge Antibody 1990 AstraZeneca $1,100 M 08/06 Cash Sirna 1993 Merck $1,100 M 12/06 Cash AnorMED 1996 Genzyme $580 M 11/06 Cash Domantis 2000 GSK $450 M 01/07E Cash GlycoFi 2000 Merck $400 M 06/06 Cash Avidia 2003 Amgen $380 M 10/06 $290+ $90* KuDOS 1997 AstraZeneca $210 M 1Q06 Cash Praecis 1993 GSK $55 M 1Q07E Cash Arrow Therapeutics 1998 AstraZeneca $150 M 02/07 Cash Hypnion 2000 Lilly $315 M 03/07 Cash Morphotek 2000 Eisai $325 M 03/07 Cash THP 2002 Roche $54 M 04/07 Cash Adnexus 2002 BMS $490 M 09/07 Cash Cowen & Company, MedTRACK, Recombinant Capital, Signals Magazine; Defined Health analysis.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 83 Outlook for Continued Pharma/Early Biotech M&A Will Hinge on Ultimate Results from Current Buying Spree

• Few drugs licensed or acquired pre-Ph II have yet made it to market. • Ph II attrition rate now 80%! (Though contribution from internal vs. externally sourced compounds remains unknown). • Increasing Ph II attrition rate argues against continued price escalation for pre-Ph II programs. • Prices rising as fast as attrition.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 84 What’s Next for the Pharma Buyer?

• Will Pharma Continue to “Buy” Early? • Early stage licensing should have its own “proof of concept” moment within 2-3 years. Advance indicators suggest attrition from products in- licensed early is greater than for those discovered internally. Staggering increase in the cost of early-stage deals thus increases overall risk. • For now, Pharma’s fascination with early-stage pipelines in Biotech is driven by an increasing perception that these companies are more innovative than Pharma.

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 85 Pharma Must Solve its Innovation Problem Externally

I’ll be happy to give you innovative thinking. What are the guidelines? http://www.businessinnovationinsider.com/archives/Innovation%20cartoon.jpg

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 86 What’s Next for the Pharma Buyer? • Let’s Discuss!

New York Pharma Forum General Assembly © Defined Health 2007 December, 2007 - Pg. 87 Neal Fowler President Johnson & Johnson Pharmaceuticals Business Johnson & Johnson Pharmaceuticals Business Centocor Timeline

REMICADE® launched in Merger with Centocor Leiden Mfg. Launched Psoriasis Founded Plant Opens ReoPro® (U.S.)

® IPO Raised Centoxin RETAVASE REMICADE® $21 Million; withdrawn from Approved; Launched in ® First Diag. 10 European REMICADE Rheumatoid Product countries Launched in Arthritis Approved by Crohn’s FDA Marketing Alliance with Lilly Distribution Agreement for ReoPro® established with Schering–Plough for Distribution REMICADE® in EU Agreement established with Tanabe for REMICADE® in Japan What has changed since joining J&J?

1999 Today

Number of Employees 1,600 >4000 Sales $500 million > $3 billion Number of Countries where REMICADE is 19 88 approved

REMICADE & other pipeline Focused on products, e.g., ustekinumab R&D Clinical Trial ReoPro and Portfolio (CNTO 1275), golimumab REMICADE (CNTO 148), CNTO 328 R&D Investment $75 million >$625 million

Manufacturing Leiden Malvern; Leiden; St. Louis; Cork Number of Patients 42,000 >1,000,000 treated with REMICADE Value in a Talent Pipeline

Former Centocor Executives exported or promoted to become Johnson & Johnson Elite

• David Holveck • Dominic Caruso • Joe Scodari • Rick Anderson • Robert Sheroff • Julie McHugh • Harlan Weisman • Glenn Mattes

Confidential Presentation to:

The Success Paradoxi

Frederick Frank, Pharma Conference Vice Chairman New York, NY Lehman Brothers, Inc. December 2007 THE SUCCESS PARADOXI

I. Introduction: The Conundrum of Success: Chart A: Transformational History: 1958 – 2007 Table I: The Ascent of Blockbusteritis, The Golden Years II. The Future- The King and I: III. The Past Is Not Prologue. Catching Fish In A Small Pond Is History: IV. Ah, Ha. A savior In The Making Chart B: Spaghetti V. The Dynamics of Interdependence: Table II: The Age of Comparative Advantage: Chart C: Pharma’s Revenues from Biotech Drugs: Two Worlds Become One VI. Summary and Conclusion: Chart D: Interdependency

1 Chart A

Transformational History: 1958–2007

1958–1962 Diversification2

1960–1970 Internationalization – Critical Mass 1970–1985 Competitive Mass – The Consolidation Movement 1976–2000 Chronic Care Therapeutics – The Age of Blockbusters

2000–Present Convergence – Interdependency

2 Chart B: SPEGHETTI

World’s 15 Largest Pharmaceutical Companies – Ranking By Market Value

Rank 1 1 Pfizer 2 2 Johnson & Johnson 3 3 Novartis 4 4 GlaxoSmithKline 5 Sanofi-Aventis 5 6 6 Roche 7 Amgen 7 8 Abbott 8 9 Merck 9 10 Eli Lilly 10 11 AstraZeneca 11 12 Genentech 12 13 Wyeth 13 14 Bristol Myers-Squibb 14 15 Takeda 15 16 Schering-Plough 17 Bayer 1983 1985 1987 1989 1991 1993 1995 2004

3 Table II The age of comparative advantage

 The change of scale Table I Required New Product Introduction 2015 Sales Annual # of 2005 Est. 2015 from Existing 2015 Sales from Required Company Sales Sales(1) Products(2) New Products New Products(3) Pfizer $51,298 $133,054 $46,168 $86,886 11.58 GlaxoSmithKline 39,406 102,209 35,465 66,744 8.90 Merck 22,012 57,093 19,811 37,283 4.97 Bristol-Myers 19,207 49,818 17,286 32,532 4.34 Eli Lilly 14,645 37,985 13,181 24,805 3.31 Amgen 12,022 37,339 10,820 26,519 3.54 Mean 6.11 Median 4.65 ______1. Assumes total revenues increase 10% annually for all companies excluding Amgen which increases at 12%. 2. Existing 2005 product revenues decline 10% over the 2006–2015 interval. 3. Assumes each new product averages $750mn in sales annually during the 2006–2015 interval.

4 Chart C Pharma’s Revenue’s From Biotech Drugs Two Worlds Become One Large Pharmas – Large Molecules vs. Small Molecules Current Pipeline Breakdown by Molecule Size

# of Drugs

450 381 359 345 115 86 68 310 30% 300 84% 20% 37 12% 227 207 200 27 180 29 172 12% 52 160 14% 41 18 142 133 150 26% 37 23% 10% 10 117 93 23% 7% 32 11 24% 11 12% 266 11% 273 277 273 200 178 148 139 154 123 132 101 92 82 70% 76% 80% 88% 88% 86% 74% 77% 90% 77% 93% 76% 89% 88% 0 GSK Sanofi- Novartis Pfizer JNJ AstraZenecaMerck Roche Abbott Wyeth Bristol- Lilly Schering- Takeda Aventis Myers Plough Squibb Small Molecules Large Molecules ______Source: Wall Street research.

5 Chart D: Interdependency Table VI A Mismatch Between Pipelines and Resources is Encouraging a Large Biopharmaceutical Small Biotechnology Companies Network Model Companies (Including the (All But the Top Ten) Top Ten Biotech Companies) % of Worldwide 33 Clinical Pipeline (1) (67)

% of R&D Spending (2) (4) 98

% of Cash (2) (8) 92

% of Market Capitalization (2) (3) 97

(100) (50) 0 50 100

______Source: Lehman Brothers Pharmaprojects; Value Line; BCG analysis. 1. Using Pharmaprojects February 2003 data. 2. Using 2002 end-of-year data for the top 100 biotechnology companies and the top 100 paharmaceutical companies, extrapolated to the full set of biotech and pharma companies using hyperbolic fit to cumulative values. Procter & Gamble, Japan, Tobacco, and Johnson & Johnson were excluded from the market capitalization analysis.

6 “The Ascent of Blockbusteritis” The Golden Years

Table I

1992 1995 1998 2001 2004

Top 20 Pharmaco Total Rx Sales ($bln) 93 133 180 233 308

Top 20 Product Sales ($bln) 23 29 39 59 78

Top 20 Pharmaco Total Rx Growth ($bln) 40 47 53 75

Top 20 Product Sales Growth ($bln) 6 10 20 19 Top 20 Blockbusters’ Contribution to Total Sales Growth 10% 16% 21% 48% 52%

______Source: EvaluatePharma and Defined Health Analysis.

7 Challenge to be a global innovator

Yasuchika Hasegawa President Takeda Pharmaceutical Company Limited

December 7, 2007 General Assembly, New York Pharma Forum

The Waldorf Astoria 103

TakedaTakeda Pharmaceutical Pharmaceutical Company Company2006.7.31 Limited Limited Agenda

1. Future of Pharmaceutical Industry 2. Consolidation trend 3. Our profile

104

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Future of Pharmaceutical Industry Healthcare expenditure / GDP (%) 16 % US 15 14.6 14 13.8 13.3 13.1 12 11.9 11.1 10.6 10.6 10.8 10.9 10 10.1 8.6 9.5 9.3 9.4 9.7 Japan 7.8 7.9 7.9 8 8.5 7 7.6 7.3 7.5 7.7 7.7 6 6.8 6 5.9 France Germany 4 Japan 2 United Kingdom United States 0 1990 1995 2000 2001 2002 2003 1990 1995 2000 2001 2002 2003 Source :OECD HEALTH DATA2005(年度) 105 Note: The figures of France(02,03) and Japan (02,03) are estimations. A figure of UK(03) is temporal data TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Future of Pharmaceutical Industry Comparison of GDP share

Others

10% USA 2% N. America 2% EU 32% 6% Japan Asia Asia 8% 2001 Middle South America Middle East 13% Japan East Europe 27% Others Others N. America Europe 12%

3% 27% 2% 6% 2006 10% Asia

9% 31% Japan Europe 106

Source:Economist 2007.11.27 TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Future of Pharmaceutical Industry Global Pharma Market Trend

N. America 00-05 CAGR: 10.8% Others 17%

2000 43% Japan 16% $363Bill N. America Others N. America 24% 16% Others Europe Japan 11% 18% 2005 44% $605Bill Japan 10% 2010 44% 29% $814Bill

Europe 28% 05-10 CAGR: Source: IMS Market Prognosis Global 2006-2010 - September 2006 6.1% Europe updates/Ex-Manufacturer Price Using Constant Exchange rates 107 TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Future of Pharmaceutical Industry Technology Evolution ～1950 1950～1990 Present Future Gene therapy Total analysis Higher barrier to innovation Regenerative of disease medicine System biology Antibody PGx/ TGx Nucleic-acid drug Read the order of Conquest of acute disease human genome Life science / Genomics・Proteomics HMG-CoA Pharma innovation by using Target molecular /disease related Interferon gene ACE inhibitor Gene therapy βblocker PCR

H2 blocker DNA recombinant technology Chlorpromazine Biochemistry Molecular biology Penicillin Biomedicine Human insulin Medicinal chemistry

108 Aspirin 第・44回日米財界人会議・〔11/5 パネルディ 108 20C～ Medicine Biology Organic chemistry Source:H.スカッション（ヘルスケア）資料 Aoki - 44th Annual US〕Takeda -JapanTakeda PharmaceuticalBusiness Pharmaceutical Conference(Nov. Company Company 2007) Limited Limited Future of Pharmaceutical Industry Evolutions of Drug Discovery Technology

2005 2010 2015 2020 2025

Low molecular 87% 71% 60% Main stream of drug therapy drug ・ Increase of oral preparation by DDS ・ Application of in silico technology ・Low moleculization of antibody ・Low moleculization of nucleic-acid medicine Expansion in oncology and immune Antibody 3% 11% 20% diseases ・Cost minimization ・Targeting cell molecular by low molecularization Expansion of indications by low cost ・Low molecularization ・Increase demands by cost minimization ・ Application to disease such as immediate allergy, diabetes・ obesity and cardiovascular disease Nucleic-acid 0% 1% 4~15% New portion of drug treatment drug ・Nucleic-acid therapy for practical use

Regenerating 0% 1% 3~5% Progress in utilization of cellular therapy and low molecular regenerating medicine drug ・Practical use of cellular therapy ・Low molecular regenerating drug

Vaccine 1% 4% 5~7% Expansion of use from ・Cancer vaccine for ・Continuation of infectious disease cancer vaccine to chronic disease practical use vaccine Better buy insurance policies!

No company can effectively pursue allRed emerging figures represent technologies market share of the in categories parallel in totalinternally sales each year

109

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Japanese origin pharmaceutical products （Top 50 sales in 2005） 2005 $MM Ranking Products Company Sales 7 Prevacid Takeda 4,394 16 Mevarotin Daiichi Sankyo 3,471 24 Blopress Takeda 2,597 25 Cravit Daiichi Sankyo 2,583 26 Actos Takeda 2,562 28 Pariet Eisai 2,480 37 Lupron Takeda 1,957 38 Aricept Eisai 1,956 47 Flomax Astellas 1,705

- 9 Japanese origin products were ranked in top 50, world sales, 2005 - 4 of 9 are Takeda’s products

110

Source : June, 2006, OPIR TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Agenda

1. Future of Pharmaceutical Industry 2. Consolidation trend 3. Our profile

111

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Consolidation trend M&A of the U.S pharmaceutical companies

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 01 02 03 04 Pfizer0 Pfizer

Pharmacia Pharmacia Warner-Lambert

GD Searle Kabi Erbamont Pharmacia & Upjohn Pharmacia Upjohn Monsanto Monsanto

Merck & Co Merck & Co

Banyu Centocor Banyu

Johnson & Johnson & Johnson Johnson DuPont (Pharma dept.) Bristol-Myers Janssen Bristol-Myers Squibb Bristol-Myers Squibb Squibb

American Home Products American Home Products Wyeth American Cyanamid Abbott Abbott

BASF(Knoll) 112

Source:H.Aoki - Press Interview to JPMA President TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Consolidation trend M&A of the EU pharmaceutical companies

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Glaxo Glaxo Wellcome Glaxo SmithKline SK Beckman Wellcome

Beecham SmithKline Beecham Astra AstraZeneca ICI Zeneca Rhone-Poulenc Rhone-Poulenc Rorer

Fisons W.H.Rorer Aventis Hoechst Hoechst sanofiｰ Marion aventis Marion Merrell Dow Roussel-Uclaf Merrell Dow

Sanofi Sanofi SI Sanofi-Synthelabo Sterling Synthelabo

JR Geigy Ciba-Geigy Ciba-Geigy Novartis Novartis Ciba Sandoz Roche Roche 113 Source:H.Aoki - Press Interview to JPMA President Genentech Syntex BoehringerTakedaTakeda Mannheim Pharmaceutical Pharmaceutical Chugai Company Company Limited Limited Consolidation trend Have your own success business model

M&A

Organic growth Diversity / M&A

114

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Consolidation trend M&A in Japanese pharmaceutical companies

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Yoshitomi Yoshitomi Wellfaid (’98) (’00) Midori Mitsubishi Mitsubishi Pharma (’01) Tanabe (’07) Mitsubishi Chem Mitsubishi Tokyo(‘99)

Chugai Chugai (’02) Tokyo Tanabe Roche group Nihon Roche

Yamanouchi Astellas(’05) Fujisawa

Dainippon Dainippon Sumitomo Pharma (’05) Sumitomo Pharma

Sankyo Daiichi-Sankyo(’05) Daiichi Pharma Kyowahakko Kyowahakko - Kirin(’08) Kirin Pharma 115

Source:H.Aoki - Press Interview to JPMA President (revised) TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Consolidation trend Does “Economies of scale” Matter in Pharma Industry?

No for the company cleared followings – Sales > $ 5B Company of this size / level reaches minimum – R&D 20% of net sales critical mass to globalize – Profit After Tax 20% of net sales its operation Yes If the company hasn’t reached to above mentioned level, you’d better hurry up in scaling up your operation! What’s happening in Japanese market now : Sum of sales of top five pharmaceutical companies* in Japanese market represents about 30 percent of total market in FY2006. However, even 5th largest company can not clear above critical mass *Members of JPMA More consolidation is inevitable in Japan! 116 TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Consolidation trend Where are Japanese companies going?

(Global market)

Pharma Bio

Bio

(Japanese market)

70 JPMA member companies

117

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Agenda

1. Future of Pharmaceutical Industry 2. Consolidation trend 3. Our profile

118

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Takeda’s performance

(Billions of Yen) (Billions of Yen) To achieve consecutive increased income for 17 years 1,400 600

Net Sales 1,200 500 Operating Income 1,000 Ordinary Income 400 800 300 600 200 400

200 100

0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07(E) 119

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile 2006-2010 Medium-Term Plan Strategic Goals

Growth toward a World-class Pharmaceutical 2015 US$ 20 billion Sales Company with Japanese Origin, based on Takeda-ism 3% market share world-wide

Enhancement of Improvement of Recruit and develop R&D pipeline geographical presence high-caliber people

Take full advantage of high performing Japanese companies’ strengths

 Establish precise strategies based on the long term perspective and execute them in perfection  Continue to improve productivity and efficiency throughout organization 120

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Strategy

Basic strategy is Organic Growth However when we have remaining gaps between status quo and aspiration in any aspects of our business,we fill those gaps such as followings – Geographical coverage – Pipeline – Research & Development capability – Manufacturing capability We either outsource or M&A to fill gaps so that we can buy time. 121

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile MPDRAP system

President

Operation Committee

Strategic Product Planning Department

Franchise I Committee by Franchise Marketing

Metabolic diseases (Virtual Cross-functional Organization) Production  Long term Franchise Strategy Franchise II

Oncology and Urology Development  Aspiration - Status = GAP Filling Strategy Franchise III Research

CNS, Bone/joint  Potential Maximization plan / Alliance Franchise IV for each key pipeline product GI and Others / optimal LCM plan Patent 122

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Research Productivity Improvement

2011-15: Launch of 5 new products including the projects currently in clinical development 2016 and thereafter: Launch of one new product every year from in-house research

2006-10: Start of clinical development for priority projects Creation of potential projects

Re-establishment of research strategies Reform of research procedure and cross Cultural Change toward open functional collaboration format Prioritization and delegating (Therapeutic area and projects W/I the Area) Target Research Profile

Transparent key Mile Stone decision Target Product Profile marking Product Strategic Team

IND engines addition Translational Medicine Unit (Takeda San Diego, Takeda Cambridge, ?) Solve the bottle neck capacity shortage (Medicinally chemist, Animal model production etc,)

123

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Research Productivity Improvement

Multi-Cylinder IND Engine Model For superior drug discovery productivity - Healthy Competition / Collaboration among IND engine cylinders

Creation of own INDs CNS IND  SYR - 322 SYR-XXX Oncology AAA-YYY

Cardio, Diabetes

Takeda Takeda TSF TCB/TSP Oncology Target search San Diego Antibody Animal CNS Target evaluation Structural model Lead compounds chemistry Candidates Efficacy evaluation ・Cardio, DM PK/Safety ・Oncology

124

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Development Productivity Improvement

General Manager Pharmaceutical Development Division HQ function (SDD, GPV, QA)

President TGRD General Manager Japan Development Center Biostatistics Biostatistics & Data Management GDT TGRD JDC Project Management Pharmacovigilance Regulatory Regulatory Affairs Clinical Clinical Operation Clinical Operation SYR-322 Quality Assurance Clinical Clinical Science Clinical Science

TAK-475 ・・

・・・・・・

TGRD（EU)

Key Strategic Goals in 06-10 MRP - File NDA within 5 years after Phase I initiation. - Establish one of hindering factors in deal making Faxtor XA the strong Clinical Team for the challenging therapeutic areas, CNS and Oncology. 125

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Business Development Our profile Global One Team

General Manager, Global Licensing & B.D.

Europe TPNA B.D. B.D. Japan TRI U.S. Global Licensing & B.D. Dept.

Pharmaceutical Research Division 126

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Sales force productivity

3500 2250 2000 3000

1750 Sales(000$)/MR 2500 1500 2000 1250

1500 1000

750 1000 500 500 250 0 0

127

Source：Monthly MIX 2007 June，IMS Japan KK World Review Analysis 2006 TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile The competitive edge

Knowledge Multi products promotion Management Primary care focus

Metabolic syndrome franchise

Lupron Prevacid / Takepron Atacand / Blopress Actos for Prostate cancer for Peptic ulcer for Hypertension for Diabetes

128

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile United States Operations

Takeda Pharmaceutical Company Limited Osaka, Japan

Takeda Pharmaceuticals Takeda Global Research and TAP Pharmaceutical North America, Inc. Development Center, Inc. Products, Inc. Deerfield, Illinois Deerfield, Illinois Lake Forest, Illinois

JV with Abbott

Takeda San Takeda Research Takeda San Diego Francisco San Diego, California Investment, Inc. San Francisco, California Palo Alto, California 129

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Takeda’s Sales & Marketing Presence in Europe Our profile Takeda Pharmaceuticals Europe (TPEU) Business Structure

Functions Role • Marketing • Enhance affiliate

• Medical Affairs Performance • FF Effectiveness. • Expand Geographic. Coverage • Finance • HR

130

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Takeda’s Challenge in Europe

Market Share Organic growth / M&A/ Alliance More coverage! Europe Enhancing Takeda’s presence in current six countries

Expansion of Geographical Coverage

Europe

6 countries Coverage 131

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Our profile Takeda-ism

Takeda-ism: Integrity = Fairness, Honesty and Perseverance

Mission: We strive toward better health for individuals and progress in medicine by developing superior pharmaceutical products.

132

TakedaTakeda Pharmaceutical Pharmaceutical Company Company Limited Limited Forward-Looking Statements

This presentation contains forward-looking statements regarding the Company's plans, outlook, strategies and results for the future. All forward- looking statements are based on judgments derived from the information available to the Company at this time. Certain risks and uncertainties could cause the Company's actual results to differ materially from any projections presented in this presentation. These risks and uncertainties include, but are not limited to, the economic circumstances surrounding the Company's business; competitive pressure; relative laws and regulations; product development programs; and changes in exchange rates. We assume no obligation to update or reverse any forward-looking statements or other information contained in this presentation, whether as a result of new information, future events, or otherwise.