Accelerating Medical Solutions

Accelerating Medical Solutions Personalized Medicine Conference Boston | November 6, 2013 “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us …” We are entering a new “Golden Age of Medicine.”

Precision Medicine, Immunology, Stem Cells… Change in Biomedical Research Spending (2012)

20% China India

15%

Brazil Korea Japan 10% Germany

5% Australia UK 0% France -5% US Canada -10%

Source: OECD – Government Budget Appropriations or Outlays for Research and Development (2012) Accelerating Medical Solutions

 Overview

 The Interaction of Financial, Social and Human Capital … and Technology

 The Promise of Bioscience and Public Health

 Where We Have Come From Berkeley 1964 Los Angeles Under Siege

P=SFti*(SHCi+SSCi+SRAi)

P = Prosperity Ft = Financial Technology HC = Human Capital SC = Social Capital RA = Real Assets Examples of Social Capital

 Universal suffrage  Rule of law  Education and health care  Police and fire protection  Religious freedom  Cultural resources  Property rights  Protection of creditors  Financial reporting standards

Human capital is the largest asset class. Cost of Raw Materials & Energy

1920’s Today’s Automobile Microchip

60% <2% Three Ways to Build Human Capital

 Education and skills

 Immigration

 Health and quality of life The Value of Health

Each life is priceless…

but in economic terms, over the past two centuries, as much as 50% of all economic growth can be traced to advances in health. Life Expectancy in East Asia

0 1955-1960 2011

Source: United Nations, Department of Economic and Social Affairs, Population Division (2011). World Population Prospects: The 2010 Revision, CD-ROM Edition Source: The Economist; IMF (excludes countries with populations<10 populations<10 Economist;million)with countriesTheIMF (excludes Source: 2001 - 2010 World’s Fastest Growing Economies Growing Fastest World’s Chad Kazakhstan Ethiopia Nigeria Myanmar China Angola Rwanda Cambodia Mozambique 7.6% 7.7% 7.9% 7.9% Annual Annual 8.2% 8.4% 8.9% 10.3% 10.5% AverageGDP 11.1%

2011 - 2015 Growth Cambodia Nigeria Congo, D.R. Uzbekistan Rwanda Zambia Mozambique Ghana China Iraq 7.0% 7.0% 7.1% 7.2% 7.6% 7.6% 7.8% 8.4% 8.4% 8.6% Do human capital strategies work?

Per Capita GDP Singapore 1960 2012 $2,271 $49,936

Jamaica $2,255 $5,526

Source: International Monetary Fund (2011 USD) Accelerating Medical Solutions

 Overview

 The Intersection of Financial, Social and Human Capital … and Technology

 The Promise of Bioscience and Public Health

 Where We Have Come From Between 1870 and 1950, Americans added almost ONE YEAR OF EDUCATION EACH DECADE.

By 1960, the highest average grade level in the U.S. EXCEEDED EVERY OTHER NATION BY TWO YEARS.

Since 1960, we have made no progress and several OTHER NATIONS HAVE SURPASSED US.

Source: Claudia Goldin and Lawrence Katz / The Race between Education and Technology “I believe we can keep the promise of our founding — the idea that if you’re willing to work hard … you can make it here in America.” - Reelection Night

Source: New York Times 11/7/12 Skilled and Unskilled Jobs in the U.S.

1950 Today 65% 60%

20% 20% 20% 15%

Unskilled Semi-skilled Skilled Unskilled Semi-skilled Skilled Return on Human Capital Investment

Preschool Programs

Return School

Job Training

Age Source: James Heckman, University of Chicago Share of Government Spending on Education

Early Childhood Middle Late USA Greece Mexico Australia Germany United Kingdom France Finland

0% 20% 40% 60% 80% 100%

Source: OECD Social Capital

60% of Chinese people with assets over $1.6 million are thinking about emigrating to the U.S. or Europe.

Source: U.S. Department of Homeland Security (WSJ 2/22/12 “Plan B for China’s Wealthy: Moving to the U.S./Europe) World University Ranking Life Sciences and Medicine

1. Harvard University 11. Imperial College London 2. University of Cambridge 12. UC San Diego 3. University of Oxford 13. National University/Singapore 4. Stanford University 14. University of Melbourne 5. Berkeley 15. University College London 6. University of Tokyo 16. University of Toronto 7. Johns Hopkins University 17. University of Edinburgh 8. MIT 18. Kyoto University 9. Yale University 19. University of Sydney 10. UCLA 20. University of British Columbia  329 Scholars since 1989

 87 born outside the U.S.

 39 countries of origin

 245 Scholars have parent(s) born outside the U.S.

 106 colleges attended

 58 are married

 72 children of Milken Scholars  64 Harvard  37 Stanford  28 Yale  24 Berkeley  17 Penn  15 Columbia  14 MIT  10 Princeton  9 Brown  5 Cornell Immigrants in Silicon Valley

 More than half of Silicon Valley’s science and engineering workforce is foreign-born.

 More than 15% of Silicon Valley start-up companies were founded by immigrants from India.

 Another 13% have CEOs from China or Taiwan.

Sources: Vivek Wadhwa, Duke University Patents

Foreign-born scientists in the U.S. are listed among the inventors on…

• More than five out of six information-technology patents

• Almost eight out of 10 pharmaceutical drug patents

• Three out of four patents in molecular biology and microbiology.

Sources: Partnership for a New American Economy 1900: Countries More Than 50% Urban

> 50% < 50% 2000: Countries More Than 50% Urban

> 50% < 50% U.S., Japan, and E.U. Make Up More Than 60% of the World’s Real GDP (GDP in constant 2005 US$) 100%

80% United States 60% Japan

40% European Union Other 20%

Sources: World Bank. 34 Emerging Market vs. Developing Economies

Share of world GDP (%), based on purchasing-power-parity (PPP) 65

60 Developed Economies 55

45 40 Developing 35 Economies

30 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Source: International Monetary Fund. Increase in U.S. Corporate Cash Balances

$ billions 145 145 125 2007 Q2 2013 105

85 68 65 56 46 45 34 34 23 22 25 21 25 15 15 18 7 8 8 5

-15 Apple Microsoft Google Cisco Oracle Pfizer Chevron Merck +840% +192% +267% +108% +380% +32% +158% +120

Source: Bloomberg. Data are for cash and marketable securities Increase in Corporate Cash Balances 2005 to 2013 Cash holdings of publicly listed companies, percent of GDP

40% 40% 37% Q1 2013 2005

30% 24% 23% 23%

20% 17% 14% 12% 10% 10% 8% 9% 9% 9% 8% 6% 7% 6% 6% 7% 4% 3% 1% 0% China U.K. $747 Japan France Spain S.Korea U.S. $826 Brazil Italy Russia Germany $3,051 $618 $437 $266 $107 $205 $127 $171 $95

Source: Bloomberg and International Monetary Fund. Note: Includes cash and near cash items. Japanese Companies’ Cash Stockpiles

Billion USD 40 35 30 25 2013 20 15 10 5 2007 0 Toyota Softbank Rakuten Sony Mitsubishi Mitsui Honda Motor

Source: Bloomberg. Japanese Corporate Cash Larger Than Spain’s GDP

Billion USD 2,500

2,000

1,500

1,000

500

0 Japan corporate cash U.S. corporate cash Spain GDP

Source: Bloomberg, World Bank. Note: Corporate cash includes cash & deposits for nonfinancial private companies. Largest Sovereign Wealth Funds By Country (US$ Billions)

China $1,300 Norway $810 United Emirates – Abu Dhabi $800 Saudi Arabia $700 Singapore $458 Kuwait $386 China - Hong Kong $327 Russia $189 Others $946

Source: SWF Institute, August 2013. Equity market capitalization: 2009 to present

Country 3/1/2009 10/30/2013 Increase U.S. (S&P 500) $6.3 T $16.2 T 156%

U.K. (FTSE 100) $1.3 T $3.0 T 138%

Japan (Nikkei 225) $1.6T $2.9T 79%

Germany (DAX) $558 B $1.2 T 121%

Mexico (Bolsa IPC) $108 B $353 B 228%

Source: Bloomberg. The Nature of Credit

1. Credit is what counts, not leverage. 2. Most loans to real estate are not investment-grade. 3. Interest rates are volatile and unpredictable. 4. Credit research is more than ratings. 5. Sovereign debt is historically risky. 6. Debt values underpin all capital markets Federal Spending Priorities

Annual, in $ billions $300 Housing Subsidies

$200 (forgone tax revenue) $100 Education NIH FDA CDC $0

Sources: FDA, CDC, NIH, OMB, Pew Charitable Trusts. Education reflects OMB category “Education, Training, Employment, and Social Services” function. Housing subsidies reflect estimated forgone tax revenues from deductions for imputed rent, mortgage interest and property taxes. All data 2012 except housing, which is estimated for 2010. Mortgages Guaranteed by the Government

$4T 90%

$13B 7%

1980 2013 Source: U.S. Census Bureau New Mortgages Backed by FHA

(billions) $400

$300

$200

$100

$0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Inside Mortgage Finance Change in U.S. Home Ownership

65.6% 65.4%

1980 2013 Source: U.S. Census Bureau Current Home Ownership Rates

70%

65%

60%

55%

50%

45% Canada UK Denmark U.S. France Japan Germany

Sources: EuroStat, U.S. Census Bureau, AEI, Milken Institute. Home prices don’t go up forever Change in home prices in 122 years

30% Great 70’s 80’s Latest WWI Depression WWII Boom Boom Boom 20%

10%

-10%

-20% 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Sources: Robert Shiller, Milken Institute / 8-15-13. Transaction Cost Comparison

400 shares of AAPL Residential Mortgage Value = $212,000 Value = $212,000

Cost to sell = $9.99 Cost to sell = >$20,000

Date: 10/24/13 Wealth Patterns in Selected Countries

2013 wealth per adult in 1,000 U.S. dollars (rounded)

Country Average Median <$10K >$1M Australia $403 $219 6.9% 6.8% France $296 $142 21.7% 4.6% Greece $103 $54 20.4% 0.8% Italy $241 $139 20.0% 3.0% Japan $217 $110 9.2% 2.5% United Kingdom $244 $112 18.0% 3.2% United States $301 $45 30.7% 5.5%

Source: Global Wealth Databook 2013, Credit Suisse Wealth Patterns in Selected Countries

2013 wealth per adult in 1,000 U.S. dollars (rounded)

Source: Global Wealth Databook 2013, Credit Suisse Average Size of American Houses

Square feet 2,505 2,500 2,434

2,000

1,500

1,000 1970 1980 1990 2000 2005 2010 2012

Source: U.S. Census Bureau Home Sizes: U.S. vs. Asia

Square feet 2,500 2,505

2,000

1,500 1,200

1,000

500

- Hong Kong Japan South Korea India China Singapore U.S.

Sources: U.S. Census Bureau; CLSA Asia-Pacific Markets Consumer Spending

U.S. Asia 33% Housing 23% Food 18% Transportation 15% Supplemental Education 13% Food 10% Housing 11% Insurance/pensions 8% Clothing 6% Healthcare 8% Other 5% Entertainment 6% Transportation 4% Apparel and services 5% Healthcare 2% Supplemental Education 5% Communication

Source: U.S. Bureau of Labor Statistics/CLSA P=SFti*(SHCi+SSCi+SRAi)

P = Prosperity Ft = Financial Technology HC = Human Capital SC = Social Capital RA = Real Assets America Goes to Work U.S. and Fortune 500 Employment

200 U.S. = + 62 million jobs 180 New financial technologies 160 are fully implemented 140

120

100 Modern capital 80 markets begin Fortune 500 = minus 4 million 60 1970 1975 1980 1985 1990 1995 2000 Institutional Investor Base for Non-investment Grade Loans

Banks CLOs Hedge, distressed and Prime rates funds, financial high-yield funds and insurance companies 100%

80%

60%

40%

20%

Sources: S&P LCD / JPMorgan. Advancing Technology

 Cost

 Speed

 Storage

 Access Cost of a 1-Minute Phone Call from the U.S. to India

1975 $10

Today $.01

Telecommunications cost to business approaches zero. Download speed

In 2000: 1.2 megabits per second (Mbps)

Today: 14 megabits

… and faster speeds are coming soon.

Source: PC World IBM System 370/168 in 1976

 8 megabytes for $8 million

 Cost per megabyte: $1 million Apple iPad Mini

 64 gigabytes for $529

 Cost per megabyte: $0.008 By 2014, there will be more mobile phones – 7.3 billion – than people on the planet.

Source: Silicon India 2/28/13 Mobile Device Penetration in Africa

84% 78%

2000 2012 2015

Source: Mike Obel In 2010, 17% of In 2012, 31% of cell phone cell phone owners used owners used their phones to their phones to look up health look up health information. information.

Source: Mobile Health 2012, iPew internet and California Health Foundation; Burrill & Company, Capturing Value In 2012, there In 2016, there were 44 million will be an healthcare app estimated downloads. 142 million healthcare app downloads.

Source: Juniper Research; Burrill & Company, Capturing Value

Price Volatility Increases Alternative-Fuel Investment Risk

2000/$barrel 2000/$ gallon 90 3.0 Retail Gas 70 2.5

50 2.0

30 1.5 Crude Oil 10 1.0 1975 1980 1985 1990 1995 2000 2005 Defending the Persian Gulf from 1976 to 2012 cost America more than $8 trillion.

 Aircraft carriers  Foreign aid

 War on terrorism  Intelligence operations

 Wars in Iraq/Afghanistan  Oil price volatility

 Maintain troops overseas  Homeland security

Source: Stern, R.J., United States cost of military force projection in the Persian Gulf, 1976–2007. Energy Policy (2010), doi:10.1016/j.enpol.2010.01.013 Major Shale Basins Around the World

Source: U.S Energy Information Administration. Technology Game Changer U.S. now has the largest energy reserves in the world

Total fossil fuel reserves, % of world total 17 16.6

8.3 5.7 5.5 5.4 4 3.7 3.2 2.9 2.4 2.4 2.3 1.2 0.9 0.8 0.7 0.7 0.7

Note: Fossil fuels include oil, natural gas and coal. Source: U.S. Congressional Budget Office PUSH PULL Crisis: Deepwater Horizon Oil Spill April 20, 2010 Crisis: Deepwater Horizon Oil Spill

 Oil flowed unabated – 53,000 gallons a day

 180,000-square kilometer area

 Time needed to cap the well: 5 months Create a $1.4 Million Prize

7 teams exceeded the previous industry-best recovery rate Team Vor-Tek: A Top 10 Finalist Fred Giovannitti Life Sciences Outperforms Indices

1998 to present

627.9% NBI

139.8% NASDAQ 89.2% DJIA 74.7% S&P500

Source: Cowen Improve Healthcare - Win $3,000,000

• Challenge: Predict how many days a patient will spend in a hospital in one year

• Prizes: $3 million Grand Prize

www.heritagehealthprize.com Improve Healthcare - Win $3,000,000

• 1,385 teams • 23,443 entries • 39,000 participants from 39 countries

www.heritagehealthprize.com Accelerating Medical Solutions

 Overview

 The Intersection of Financial, Social and Human Capital … and Technology

 The Promise of Bioscience and Public Health

 Where We Have Come From Three Areas of Healthcare Spending

• Prevention

• Treatment

• Research The U.S. spends $0.90 of … and just a dime on every health dollar on prevention and treatment... research. Health Initiatives: Initial Estimates vs. Reality

Benefit Est. Cost Actual Cost Ratio Medicare hospital insurance $9B $67B 7.44 to 1 Medicare (entire program) $12B $110B 9.17 to 1 Medicare ESRD program $0.1B $0.23B 2.23 to 1 Medicaid DSH program $1B $17B 17 to 1 Medicare home care benefit $4B $10B 2.5 to 1 Medicare catastrophic coverage $5.7B $11.8B 2.07 to 1 Massachusetts Health Reform $0.725B $0.869B 1.2 to 1

Sources: U.S. Congressional Joint Economic Committee Session (July 2009); Eye on the Market (10/17/13) Lifestyle Makes a Difference

U.S. Economy 70% of health-care spending – $15.9 trillion about $2.5 trillion – is spent on lifestyle-related diseases.

30% is spent on hereditary diseases.

Sources: Centers for Medicare and Medicaid Services / CIA World Factbook (2012)

Obesity Prevalence Among U.S. Adults 1991

> 15% < 15%

Sources: Trust for America's Health and the Robert Wood Johnson Foundation Obesity Prevalence Among U.S. Adults 2013

<25% 25-30%+ 30%+

Sources: Trust for America's Health and the Robert Wood Johnson Foundation “Eating too much has overtaken undernurtrition as a leading risk factor for illness.”

The Global Burden of Disease Institute For Health Metrics and Evaluation University of Washington “18.2% of premature deaths in the U.S. are associated with excessive body mass.”

Columbia University Study American Journal of Public Health August 2013 Only in America “All member nations of the OECD have witnessed greater prevalence of obesity in their populations over the past two decades, but the United States tops the list.” Obesity Rates: U.S. vs. World

2002 MEN 36.5% U.S. 2005 WOMEN 41.8% 24.0% Mexico 34.3% 21.6% U.K. 24.2% 20.9% Germany 20.4% 7.8% France 6.6% China 1.6% 1.9% 1.8% Japan 1.5%

Source: World Health Organization / Estimated obesity rates for people aged 15 years and older / 2005 Failure to address chronic diseases adequately costs the U.S. economy more than $1 TRILLION annually. After 20 years of supporting medical research, I heard these words: “You have cancer.” Ca = Cancer P = Prostate CURE = All diseases Cancer = C Change

Prostate = Prostate Cancer Foundation

All diseases = FasterCures National Cancer Summit - 1995

Helene Brown Richard Klausner Pioneer in cancer Director, NCI education 1995 - 2001 The MARCH: September 1998 National Institutes of Health Budget

25 $200 billion 20

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: National Institutes of Health An organization dedicated to shortening the time to find cures and better treatments for all life-threatening diseases  Partnering for Cures  Patients Helping Doctors  TRAIN  Philanthropy Advisory Service Philanthropy Advisory Service

Engages with philanthropists, family offices, wealth advisors, and foundations to facilitate strategic and informed philanthropic investment in biomedical research.

National Institutes of Health Budget

Billions Inflation Adjusted $30

$25

$20

$15

$10

$0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: National Institutes of Health Celebration of Science - 2012

Francis Collins, NIH DNA Pioneer James Watson

The NIH’s Tony Fauci and Earvin “Magic” Johnson

Elias Zerhouni, President, Margaret Hamburg Global R&D, Sanofi U.S. FDA U.S. Energy Secretary Steven Chu Accelerating Medical Solutions

 Overview

 The Intersection of Financial, Social and Human Capital … and Technology

 The Promise of Bioscience and Public Health

 Where We Have Come From One of every five American babies born in 1900 did not live to celebrate a 5th birthday. Worldwide Life Expectancy Growth

+39 +21

+18 70 Years +5 49 Years 31 26 Years Years

1820 1900 1950 2013

Source: United Nations Development Program What caused the increase?

 Improved sanitation  Development of antibiotics  Progress against heart disease  Investment in bioscience research Deadly Diseases Controlled in the 20th Century

 Chicken pox  Pneumococcal disease  Diphtheria  Polio  Invasive flu  Tetanus  Measles  Typhoid fever  Pertussis  Yellow fever  Smallpox

Source: Discovery Fit & Health Take precautions . . . no one is immune A Grim Outlook

“Iron lung hotels” projected to cost billions. April 12, 1955 “The Salk Vaccine is safe, effective, and potent. Polio is conquered.” Elvis gets his shot to promote immunization 1956 Solving Medical Problems Eradicating Disease

1955: The Salk polio vaccine was introduced. Since then, the vaccine saved the U.S. nearly $1 trillion, avoided 160,000 deaths and prevented one million cases.

Source: Thompson & Radboud, “Retrospective Cost-Effectiveness Analyses for Polio Vaccination in the United States” Polio Cases in the U.S.

40,000

30,000

20,000

10,000

- 54 55 56 57 58 59 60 61 62 63

Source: Centers for Disease Control Elizabeth and Ariel Glaser

“Research studies now project that one in five—listen to me, hard to believe—one in five heterosexuals could be dead from AIDS at the end of the next three years. That’s by 1990. One in five.” - Oprah Winfrey 1987 November 7, 1991 Earvin “Magic” Johnson at With AIDS pioneering researcher Tony Fauci Global Conference at Celebration of Science We are entering a new “Golden Age of Medicine.”

Precision Medicine, Immunology, Stem Cells… National Center for Advancing Translational Sciences (NCATS)

Transforming the translational science process so that new treatments and cures for disease can be delivered to patients faster.

Christopher Austin Director Sequencing the Human Genome

2003:  13 years  $3 billion

Today:  A few hours  Approaching $1,000 3-D Printing

Replicating human body parts j Jack Andraka @ 15: invents inexpensive diagnostic tool for pancreatic, ovarian and lung cancers that is more than 90% accurate @ 15: wins $75,000 Intel International Science Award Jack@ 15: formsAndraka Andraka Technologies, and files several patents Lori Milken and her mother Robin Mike Milken and his father Bernie and his mother Ferne Thank you! Thank you! Thank you! Thank you! Create a legacy that relegates cancer and other life-threatening diseases to our children’s history books. Accelerating Medical Solutions Personalized Medicine Conference Boston | November 6, 2013