Innovative Mid-Cap Biotechnology Benchmark Report Financial Benchmarking, Pipeline Assessment & Competitive Analysis of Innovative Biotechs

GDHC001SAC / Published January 2013

Executive Summary

The increase in biotech revenues will not translate Below figure shows the combined peer group revenue into positive margins for some time and average operating margin.

The combined peer group revenue for these 15 Combined Peer Group Revenue ($m) and Average Operating Margin, 3Q11–3Q12 innovative biotech companies was $2.0 billion in 3Q12, a 31.8% increase from the $1.5 billion the same companies $2,500 0.0% $2,038.8 posted in the year-ago quarter. GlobalData attributes the -10.0% $2,000 $1,913.9 $1,744.6 $1,681.9 majority of the increase to the surge in revenue from $1,546.6 -20.0% $1,500 -19.3% Regeneron’s [REGN] commercialization strategy for its -28.5% -30.0% $1,000 -33.7% -38.3% -40.0% injectable wet AMD drug Eylea (aflibercept) which helped $500 -50.0% -54.6% to drive the company’s revenue by 315.9% to $427.7m in $0 -60.0% 3Q11 4Q11 1Q12 2Q12 3Q12 the third quarter. Regeneron is continuing its worldwide Revenue Avg. Op Margin roll-out of Eylea, snagging approvals in Japan, Brazil, and Europe. Regeneron has partnered with Santen Source: GlobalData & Company SEC filings Combined peer group revenue = $2.0bn Pharmaceutical and Bayer Yakuhin to aid in driving

adoption and penetration in the Japanese ophthalmology In addition to Regeneron’s growth, the total peer group market, a significant opportunity for Regeneron as wet revenue for these 15 biotech companies was positively AMD is the fourth most-common cause of acquired impacted by the business combinations of both Jazz blindness, with 1.2% residents over the age of 50 having [JAZZ] and Alexion [ALXN] following each of their wet AMD in at least one eye. (Source: GlobalData; acquisitions. Jazz’s purchases of Azur Pharma and Regeneron, press release, September 28, 2012). EUSA grows the biotech’s footprint overseas to markets Regeneron’s territory expansion drove Eylea sales by in developed Europe and expands the company’s 26.0% on sequential basis to $244.4m in 3Q12. As a product line to include higher-margin cancer therapies. result, the successful launch of Eylea has led to Meanwhile, Alexion added to its ultra-rare disease Regeneron posting its first profitable full-year since the portfolio with its acquisitions of Enobia and Orphatec, company’s inception in 1988. both privately held clinical-stage biotechnology companies with promising rare disease candidates. Alexion’s ‘bolt-on’ acquisitions of these specialty players in the orphan drug market led to Alexion posting record revenue of $294.1m in the third quarter. These transactions, combined with higher marketed drug sales from Jazz and Alexion, contributed approximately $200m to the total peer group’s revenue in 3Q12.

Executive Summary

While the combined peer group revenue for these biotech Below figure depicts the combined peer group R&D and companies grew year-to-year, this came at a very high S,G&A spending. opportunity cost for these companies. The combined Combined Peer Group R&D and S,G&A Spend ($m), peer group operating expenses grew to $1.35 billion in 3Q11–3Q12 3Q12, a 26.0% increase from the $1.07 billion spent in $800 $746.8 $715.0 the same period last year. As a result, the 3Q12 average $700 $654.8 $673.4 $621.1 $579.2 $599.5 peer group operating margin was negative at -54.6%, a $600 $545.4 $550.0 $500 $447.0 decline of 20.9 percentage points when compared to $400

3Q11. GlobalData believes the ever-increasing expense $300

of developing innovative medicines and bringing them to $200 market is the driving force behind the negative margin, as $100 $- many of these firms operate in the red until drugs are 3Q11 4Q11 1Q12 2Q12 3Q12 R&D S,G&A approved and begin to generate sales to offset the profit erosion. Source: GlobalData & Company SEC filings

Total op-ex spending will continue to grow, especially for commercialization efforts outside the S,G&A Expenses: Total peer group S,G&A spending US grew by 34.1% year-on-year, from $447.0m in 3Q11 to $599.5m in 3Q12. GlobalData attributes the increase in R&D Expenses: Total peer group R&D expenses S,G&A-related expenses to these biotech companies increased 20.2% year-to-year, from $621.1m in 3Q11 to ramping up headcount and marketing spend to drive the $746.8m in 3Q12. GlobalData attributes the rise in R&D sales efforts for their recently approved drugs. The rise in expenses to the heavy investment these biotech S,G&A spending was also attributed to M&A-related companies have made to advance their drug candidates activities and to these biotech companies expanding their through their respective clinics. At the time this report footprints to markets outside the US in search of new was written, there were 24 candidates in Phase III trials opportunities to grow revenue. across these biotech companies, accounting for 29.3% of all entities under development. ViroPharma [VPHM] was the expense management leader in 3Q12 due to a 27.9% decrease in R&D spending when compared to the year- ago quarter. However, GlobalData attributes the decline to the FDA’s suspension of two of the companies’ clinical trial studies evaluating Cinryze (C1 esterase inhibitor) over safety concerns and not due to any cost-cutting measures.

Executive Summary

Below figure displays the combined peer group total op- Despite its high cost, oncology franchise will ex spending. continue to experience increased R&D investment

Combined Peer Group Total Op-Ex Spending ($m), Across the pipelines of these 15 innovative biotech 3Q11–3Q12 companies, four therapy areas accounted for nearly 75%

$1,600 of all the drugs in clinical development and were as $1,346.3 $1,400 $1,294.2 $1,200.1 $1,223.4 follows: oncology 28.9%, CNS 19.3%, immunology $1,200 $1,068.2 15.7%, and metabolic disorders 10.8%. Clearly, the high $1,000

$800 cost of developing cancer drugs, along with associated $600 recruitment hurdles in designing oncology clinical trials $400 has not impeded R&D spending in this franchise, despite $200 the limited financial resources of some of these biotech $- 3Q11 4Q11 1Q12 2Q12 3Q12 companies. For instance, San Francisco-based Exelixis Total Op-Ex [EXEL] spent $30.7m in R&D in the third quarter of 2012, Source: GlobalData & Company SEC filings almost a three-fold increase above the company’s Combined peer group op-ex spend = $1.3bn revenue for the quarter. In July 2012, Exelixis reported

that the FDA had accepted the company’s New Drug Resource Management: GlobalData believes the Application (NDA) evaluating its lead candidate, landscape for investing capital to expand plants and cabozantinib, as a treatment for patients with metastatic operations is becoming increasingly clearer for these Medullary Thyroid Cancer (MTC). This NDA filing was biotech companies. With revenues beginning to come based on the company releasing the results from its online in a more predictable fashion, we expect these Phase III EXAM trial that cabozantinib met the primary biotech companies will increase their investments in endpoint of significantly improving progression-free physical, human, and financial resources to position survival in patients suffering from MTC when compared themselves competitively moving forward. These biotech to placebo. GlobalData expects Exelixis’ R&D expenses companies are using a variety of strategies in how they will continue to rise in the future, as the company is allocate their financial capital, including paying down concurrently evaluating cabozantinib across a number of outstanding debt and buying back their stock to reinvest oncology indications, which will lead to its R&D expenses funds back into their clinical projects. continuing to outpace its revenue.

Executive Summary

Below figure displays the percentage of drug candidates Incyte [INCY] made a splash in the third quarter, by therapeutic area. receiving approval by the European Commission for Jakavi (ruxolitinib), a selective Janus-Associated Kinase Percentage of Drug Candidates by Therapeutic Area, 3Q12 (JAK) 1 and 2 inhibitor, the first and only JAK inhibitor approved for myelofibrosis, a rare form of leukemia

Oncology 28.9% associated with an enlarged spleen. Ruxolitinib received orphan drug status and was approved by the FDA back CNS 19.3% in 2011 under the brand name Jakafi. Approval by the European Commission was based on the results of two Immunology 15.7% pivotal Phase III COMFORT trials, which demonstrated a Metabolic 10.8% reduction in spleen volume and an improved quality of life

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% in patients who were taking Jakavi through 48 weeks

Percentage by Therapy Area when compared to best available therapy. GlobalData

Source: GlobalData, Pharma eTrack, [Accessed on: December 12, 2012]; believes that with the combination of its first-in-class Company Data status and its oral administration, Jakavi will capture a

significant share of the myelofibrosis market. Momenta [MNTA] is another example of a small biotech Big Pharma’s exit from CNS franchise creates a gap company investing in oncology despite having a to be filled by smaller biotechs dwindling revenue base to draw from. In 3Q12 Momenta initiated dosing phase for clinical candidate M-402, the The CNS franchise has a history of failed clinical company’s novel heparin sulfate proteoglycan for treating programs, pulled R&D investment and regulatory hurdles, metastatic pancreatic cancer. M-402 has the ability to which has led many large drug makers to exit the space. bind to multiple growth factors to inhibit tumor We expect this has created an opening for smaller angiogenesis and metastasis with reduced anticoagulant players looking to establish their drug portfolios as next- activity, making the drug attractive for being used across in-line therapies for treating disorders such as a broad range of cancers. Momenta anticipates that M- schizophrenia, depression, epilepsy, and chronic pain. At 402 will be administered in combination with gemcitabine, the time this report was written, the CNS franchise a first-line standard of care chemotherapy. A pre-clinical accounted for 19.3% of drug candidates across all the study with the Cancer Research Institute showed that M- pipelines of these innovative biotech companies, with six 402, in combination with gemcitabine, significantly CNS candidates in Phase III, including two dopamine improved survival and substantially lowered the incidence antagonists in the clinic of Alkermes [ALKS] for the of metastasis compared with groups being treated with treatment of schizophrenia. In June 2012, Alkermes and gemcitabine alone. its marketing partner Janssen Pharmaceuticals, NV, initiated Phase III of its clinical program investigating a three-month formulation of Invega Sustenna (paliperidone palmitate), an injectable therapy for the treatment of schizophrenia.

Executive Summary

Back in 2011, Invega Sustenna was approved as a once- Diazepam is an oral benzodiazepine derivative for monthly injectable medication in the US and in the EU. treating anxiety disorders, muscle spasms and symptoms Two Phase III trials have been initiated by Alkermes – of withdrawal associated with alcohol dependency. one will explore the efficacy, safety and tolerability of the Neuronex was developing a nasal spray formulation of three-month formulation against placebo, while the other diazepam as a rescue treatment for certain seizures, but Phase III trial will compare both three-month and one- will now fold-in to Acorda’s development projects.

month formulations against relapse prevention. The rise in generic competition will cause biotechs to In September 2012, Nektar [NKTR] announced reevaluate their product strategies encouraging data from its Phase Ia ascending dosage Looking over the past 12 months, the branded trial of NKTR-192 candidate for the treatment of biopharmaceutical industry has begun to experience the moderate-severe acute pain. NKTR-192 is the company’s mercilessness of the ‘patent cliff’. The increasing number novel rapid onset, short half-life mu opioid analgesic, of patent expires on blockbuster drugs (e.g.. Lipitor) has which behaves differently than other opioids. Data from created an opportunity for cheaper generic alternatives to the Phase Ia trial demonstrated that NKTR-192 flood the market leading to a decrease in revenues on an preserves the relief of pain, but reduces the feeling of industrywide basis. The influx of generic drugs, combined euphoria by changing the way the drug targets receptors with pricing pressures from customers, healthcare reform and permeates the blood-brain barrier. By manipulating legislation, and fiscal austerity measures, have all this mechanism, NKTR-192 is able to achieve the same compressed corporate margins, leaving drug makers with desired pharmacokinetic results as with other opioids, little choice but to implement rationalization programs to while at the same time limiting the potential for abuse and remain profitable. The biotech companies evaluated in dependency and other unwelcome side-effects like this report are not immune to these challenges, sedation. Source: GlobalData; Nektar, press release, especially the negative effect resulting from generic Sept. 18, 2012. competition. In 3Q12, Momenta [MNTA] saw its revenue Even though Alkermes and Nektar have chosen to decline by 94.2% year-to-year to $5.1m in the third develop CNS drugs internally, Acorda [ACOR] looked to quarter as a result of an introduction of the first bolster its CNS portfolio through acquisition. Acorda unauthorized generic version of Lovenox (enoxaparin currently markets Ampyra (dalfampridine) to improve sodium) being marketed by Amphastar and Watson walking ability in people with multiple sclerosis. In Pharmaceuticals. After a couple of years of court battles, February 2012, Acorda acquired Neuronex, a privately- in January 2012, the US Court of Appeals for the Federal held development stage biotech, for $10m upfront with Circuit denied Momenta’s preliminary injunction to keep additional contingency payments totaling up to $125m if Watson and Amphastar from selling their enoxaparin specified regulatory and manufacturing milestones are sodium product in the US market. achieved with respect to a nasal spray formulation of diazepam (Valium).

Executive Summary

Another company that witnessed significant revenue However, there is hope. These biotech companies, much erosion as a result of a competing generic product was like their larger pharmaceutical brethren, are adapting to ViroPharma [VPHM]. The company’s revenue in the third this generic competition by putting in place strategies to quarter decreased 36.3% year-to-year to $91.0m. This extend the life-cycles of their drugs. This includes label revenue shortfall was the direct result of the impact of expansions to include additional indications and attempts generic oral vancomycin entries into the market. The to extend their currently approved usage to include FDA indicated to ViroPharma that it had approved three alternative methods of administration. GlobalData Abbreviated New Drug Applications (ANDAs) for generic believes both approaches allow these companies to grow vancomycin capsules, and in June 2012, the FDA mind share and market share for their therapies, while at approved a fourth ANDA from Watson. The influx of the same time gain the much-needed IP protection to these cheaper generic alternatives drove ViroPharma’s weather this storm, at least for now.

branded Vancocin (vancomycin) sales lower by 77.0% to Life-cycle expansion will be key to growing future $3.6m in 3Q12. The loss in top-line sales also put revenues and defending asset IP pressure on the company’s operating margin, squeezing The high cost of developing innovative therapies coupled it to -4.6% of total revenue, the first negative operating with an increasingly competitive landscape has caused margin for ViroPharma in over two years. drug makers, large and small, to evaluate their product In February 2012, Cubist [CBST] received a Paragraph life-cycle strategies more carefully. This is especially true IV letter from Hospira, notifying Cubist that it has for these innovative biotech companies, given that their submitted an ANDA to the FDA seeking approval to financial futures are largely tied to only a few marketed market a generic version of its MRSA–fighting drug products, many of which never reach blockbuster status. Cubicin (daptomycin) prior to the drug’s expiration in the With limited resources, the challenge of maintaining a US in June 2016. Following the notice letter, on March competitive advantage while returning value to 21, 2012, Cubist filed a patent infringement lawsuit shareholders becomes incredibly burdensome for these against Hospira in response to its ANDA filing with the biotechs, causing them to squeeze as much potential as FDA. By statute, the FDA is automatically prohibited from possible out of every dollar invested. This is evident by approving Hospira’s ANDA for 30 months unless the these companies’ implementing a number of strategies to court enters a judgment finding the patents are invalid extend or expand the life-cycles of their drugs. These before the expiration of the 30-month period. As a result approaches can take many forms, but the guiding of Cubist’s over-reliance on Cubicin for nearly all of its principle is the same – gain multiple approvals across as revenue, GlobalData believes if an adverse outcome many indications as possible – this not only grows were to occur as a result of this litigation, the influx of a product sales by expanding the potential treatment much cheaper generic alternative would evaporate nearly population, but also provides additional patent protection all sales of Cubicin and negatively impact Cubist’s safeguarding the company against future generic entry. financial position.

Executive Summary

Onyx [ONXX] is one example of a company that is GlobalData believes a company’s ability to implement attempting to extend the life-cycle of its products. In July, effective life-cycle management strategies is one of many the company received accelerated approval by the FDA crucial factors in determining these companies’ financial for Kyprolis (carfilzomib injection), a proteasome inhibitor future. indicated for the treatment of patients with multiple While label expansions are common, they are not myeloma who have received at least two prior therapies. guaranteed. In October, the FDA rejected United Post-approval, Onyx is wasting no time with Kyprolis, Therapeutics’ [UTHR] application for an oral tablet currently examining the drug in several clinical trials version of Remodulin (treprostinil) for the treatment of either as a single-agent therapy or in combination with Pulmonary Arterial Hypertension (PAH). The FDA other drugs. Onyx has completed enrollment in a global questioned whether the drug slowed the progression of Phase III clinical trial, ASPIRE, evaluating lenalidomide the life-threatening lung disease and the lack of a (marketed as Revlimid by Celgene) and bortezomib statistically significant effect on the six-minute walking (marketed as Velcade by Millennium), and low-dose test (6MWT) distance in two of its studies. The FDA’s dexamethasone with or without Kyprolis in patents with Complete Response Letter (CRL) stated that the design relapsed and refractory multiple myeloma who have for the clinical trials did not prove to the US regulator any received up to three prior therapies. particular advantage over currently available In 3Q12, Acorda [ACOR] announced positive top-line subcutaneous delivery. The FDA’s rejection is certainly a results from its post-marketing study evaluating 5mg setback for United, an obstacle the company states could dose of Ampyra (dalfampridine-ER) to progress walking take nearly three years to overcome. GlobalData believes ability in people with multiple sclerosis. Currently, Acorda United will continue to seek approval for an oral version is separately evaluating Ampyra to expand its label to of treprostinil, which we expect would significantly include improving walking ability in patients suffering from expand the market potential for Remodulin, as there are post-stroke deficits and cerebral palsy. no currently approved oral prostacyclins available to PAH patients in the US or in the EU. Meanwhile, on December 4, 2012, Jazz [JAZZ] announced the issuance of a new patent for Xyrem (sodium oxybate) oral solution. The new formulation patent is entitled “Microbiologically Sound and Stable Solutions of Gamma-Hydroxybutyrate Salt for the Treatment of Narcolepsy.” The new patent will expire in December 2019, and is the ninth patent referencing Xyrem to be listed in the Orange Book. Xyrem is the only product approved by the FDA for the treatment of both cataplexy and excessive daytime sleepiness in patients with narcolepsy.

Table of Contents

1 Table of Contents

1 Table of Contents ...... 9

1.1 List of Tables ...... 15

1.2 List of Figures ...... 16

2 Introduction ...... 18

2.1 Report Scope ...... 18

2.2 Report Catalysts ...... 20

2.3 Upcoming Related Reports ...... 20

2.4 Recently Published Reports ...... 21

2.5 GlobalData’s Benchmarking Methodology ...... 21

2.6 GlobalData 3Q12 Biotech Benchmark Leader: Regeneron...... 22

2.7 Regeneron Overtook Alexion in 3Q12 as Benchmark Leader ...... 23

3 Financial Management ...... 25

3.1 Competitive Framework ...... 25

3.2 Overview ...... 26

3.2.1 Biotech companies position themselves for revenue growth with higher sales, but will need to focus on cost containment to improve profit margins ...... 26

3.3 Financial Management: Heat Map ...... 28

3.3.1 Regeneron was the financial management leader in 3Q12, posting significantly higher scores across all metrics compared to its peer group ...... 28

3.4 Financial Metrics ...... 29

3.4.1 Revenue ...... 29

3.4.2 Revenue Growth YtY ...... 30

3.4.3 Operating Income ...... 31

3.4.4 Operating Income Growth YtY ...... 32

3.4.5 Operating Margin ...... 33

3.5 Expense Management: Heat Map...... 34

Table of Contents

3.5.1 ViroPharma was the expense management leader in 3Q12 due to manufacturing issues ...... 34

3.6 Expense Metrics ...... 35

3.6.1 R&D Expense as a Percentage of Revenue ...... 35

3.6.2 R&D Spend Growth YtY ...... 36

3.6.3 S,G&A Expenses as a Percentage of Revenue ...... 37

3.6.4 S,G&A Spend Growth YtY ...... 38

3.6.5 Total OpEx as a Percentage of Revenue ...... 39

4 Pipeline Assessment...... 40

4.1 Overview ...... 40

4.1.1 Despite its high cost, biotech companies are still investing in oncology ...... 40

4.1.2 Big Pharma’s exit from CNS creates an opportunity for smaller players ...... 40

4.2 GlobalData Pipeline Matrix and Competitive Positioning ...... 42

4.2.1 Quadrant Analysis: Best-In-Class Assessment: Regeneron ...... 44

4.2.2 Quadrant Analysis: Challengers Assessment: Jazz ...... 44

4.2.3 Quadrant Analysis: Laggards Assessment: Exelixis ...... 45

4.2.4 Quadrant Analysis: Innovators Assessment: Momenta ...... 45

4.3 Pipeline Development...... 46

4.4 Clinical Highlights by Company ...... 48

4.4.1 Acorda ...... 48

4.4.2 Alexion ...... 49

4.4.3 Alkermes...... 49

4.4.4 BioMarin ...... 50

4.4.5 Cubist ...... 51

4.4.6 Exelixis ...... 52

4.4.7 Incyte ...... 53

4.4.8 Jazz ...... 54

4.4.9 Momenta...... 54

4.4.10 Nektar ...... 55

Table of Contents

4.4.11 Onyx ...... 56

4.4.12 Regeneron ...... 57

4.4.13 Seattle ...... 59

4.4.14 United ...... 60

4.4.15 ViroPharma ...... 61

5 Licensing & Acquisition Strategies ...... 62

5.1 Competitive Framework ...... 62

5.2 Overview ...... 63

5.3 M&A Analysis ...... 65

5.3.1 Alkermes Acquisition of Elan Drug Technology Creates Leadership in CNS Therapeutics ...... 65

5.3.2 Jazz Acquisition of EUSA Pharma Expands its Product Line to Include High- Margin Cancer Therapies ...... 66

5.3.3 Alexion Adds to its Ultra-Rare Disease Portfolio through Acquisition ...... 67

5.3.4 Jazz Purchase of Azur Complements its Pipeline in CNS and Women’s Health ... 68

6 Resource Management Strategies ...... 71

6.1 Competitive Framework ...... 71

6.2 Overview ...... 72

6.3 Operations & Supply Chain ...... 73

6.3.1 Acorda Relocates Corporate HQ to Ardsley Park Life Sciences Campus ...... 73

6.3.2 Cubist Expands Research & Development Facility ...... 73

6.3.3 Jazz Sells Women’s Health Business to Meda ...... 73

6.3.4 Nektar Consolidates Research Assets to its R&D Center in San Francisco, CA ... 74

6.3.5 Regeneron Expands Greenbush Plant to Support its Antibody Clinic ...... 74

6.3.6 ViroPharma Adds Manufacturing Scale to Cinryze Production to Meet Expected Demand ...... 74

6.4 Resource Management: Heat Map ...... 75

6.4.1 Cubist was the resource management leader in 3Q12, balancing spending & headcount with revenue growth...... 75

Table of Contents

6.5 Firm Utilization Metrics ...... 76

6.5.1 Headcount Growth YtY...... 76

6.5.2 Revenue per Employee ...... 77

6.5.3 SG&A Expense per SG&A Employee ...... 78

6.5.4 R&D Expense per R&D Employee...... 79

6.6 Human Capital Leadership Changes ...... 80

6.6.1 Successfully Implement Commercialization Strategies by Retaining Top Talent ... 80

6.7 Capital Management: Heat Map ...... 81

6.7.1 Momenta was the Capital Management Leader in 3Q12 Keeping its Operating Leverage Lower Compared to its Peer Group...... 81

6.8 Capital Structure Metrics ...... 82

6.8.1 Debt/Asset Ratio ...... 82

6.8.2 Quick Ratio ...... 83

6.8.3 Cash Ratio ...... 84

6.8.4 Return-on-Investment Ratio ...... 85

6.8.5 Sales/Assets Ratio ...... 86

6.9 Share Offerings & Debt Restructurings ...... 87

6.9.1 Share Repurchases Increase Working Capital and Provide Cash Flow to Reinvest Back into Internal R&D Programs ...... 87

7 Company Drill-Downs & Forecasts ...... 88

7.1 Acorda SWOT & Forecast ...... 88

7.1.1 With Revenue Flattening, Acorda Looks to Extend Ampyra Labeling to Include Additional Indications and More Regions in the EU ...... 88

7.2 Alexion SWOT & Forecast ...... 90

7.2.1 Alexion Supplements its Orphan Drug Strategy with Bolt-on Acquisitions ...... 90

7.3 Alkermes SWOT & Forecast ...... 92

7.3.1 Alkermes is Well Positioned for Strong Revenue Generation as the Company Focuses on Commercializing Internal CNS Drug Candidates ...... 92

7.4 BioMarin SWOT & Forecast ...... 94

Table of Contents

7.4.1 BioMarin Will Treat PKU Patients Across Their Entire Lifespan with PEG-PAL for Adults ...... 94

7.5 Cubist SWOT & Forecast ...... 96

7.5.1 Revenue Growth Driven by Higher-than-Expected Sales of Cubicin – Cubist Could Take Share from ViroPharma with CB-315 Drug Candidate ...... 96

7.6 Exelixis SWOT & Forecast ...... 98

7.6.1 Exelixis’ Revenue will Remain Flat Until it Maximizes the Commercial Potential of Cabozantinib for Multiple Oncology Indications...... 98

7.7 Incyte SWOT & Forecast ...... 100

7.7.1 First-in-Class Jakafi Will Capture a Significant Share of the Myelofibrosis Market ...... 100

7.8 Jazz SWOT & Forecast ...... 102

7.8.1 Jazz’s Revenue Grew through Bolt-on Acquisitions – Higher Margin Cancer Therapies Complement Sales Growth of Xyrem ...... 102

7.9 Momenta SWOT & Forecast ...... 104

7.9.1 While Momenta is Feeling Pressure on its Top-Line, the Company is Poised to Capitalize on Opportunities with Heparin Candidates and Biologics ...... 104

7.10 Nektar SWOT & Forecast ...... 108

7.10.1 Nektar Will Continue to Invest Internally on Novel Cancer Therapies While Sub- licensing its PEGylation Technology to Supplement Revenue Growth ...... 108

7.11 Onyx SWOT & Forecast ...... 112

7.11.1 The Approval of Kyprolis Contributed to Organic Sales for Onyx; However, the Company’s High Cost Structure Erodes any Profitability ...... 112

7.12 Regeneron SWOT & Forecast ...... 115

7.12.1 Regeneron Posts its First Profitable Full-Year in History – Eylea Success Continues to Drive Top-line Growth, Clinical Pipeline is Buzzing ...... 115

7.13 Seattle SWOT & Revenue Forecast ...... 118

7.13.1 As Revenue Peaks, Seattle Expands Adcetris Availability to Outside the US, and Gets Creative with Diagnostic Partnership ...... 118

7.14 United SWOT & Forecast ...... 121

Table of Contents

7.14.1 United Will Press Forward with a Plan to Develop an Oral Version of Remodulin, as the PAH Landscape Becomes More Complex ...... 121

7.15 ViroPharma SWOT & Forecast ...... 124

7.15.1 ViroPharma Experienced Significant Erosion from Generic Vancocin; the Company will Now Have to Rely Entirely on Cinryze for Profitability ...... 124

7.16 GlobalData Forecast Summary ...... 127

7.16.1 GlobalData Forecasts vs. Company Reported 3Q12 Results ...... 127

8 Appendix ...... 129

8.1 Research Methodology ...... 129

8.1.1 Coverage ...... 129

8.1.2 Secondary Research ...... 129

8.1.3 Expert Panel Validation ...... 130

8.2 About the Authors ...... 131

8.2.1 Analysts ...... 131

8.3 Director, Healthcare Industry Dynamics ...... 132

8.4 GlobalHead of Healthcare Research & Consulting ...... 132

8.5 About the Industry Dynamics Team ...... 133

8.6 GlobalData ...... 134

8.7 Contact Us ...... 134

8.8 Disclosure Information ...... 134

8.9 Disclaimer ...... 135

Table of Contents

1.1 List of Tables

Table 1: GlobalData Benchmark Rankings, 3Q12...... 22

Table 2: GlobalData Benchmark Rankings, 2Q12 – 3Q12 ...... 23

Table 3: Financial Management Composite Scores, 3Q12 ...... 28

Table 4: Expense Management Composite Scores, 3Q12 ...... 34

Table 5: Recent Merger & Acquisitions, 3Q11 - 3Q12...... 69

Table 6: Recent Licensing Deals, 3Q11-3Q12 ...... 70

Table 7: Resource Management Composite Scores, 3Q12 ...... 75

Table 8: Key Leadership Changes, 1Q12 - 3Q12 ...... 80

Table 9: Capital Management Composite Scores, 3Q12...... 81

Table 10: Share Offerings & Debt Restructurings, 1Q12 - 3Q12 ...... 87

Table 11: GlobalData Forecasts vs. Company Report Results ($m), 3Q12 ...... 127

Table of Contents

1.2 List of Figures

Figure 1: Combined Peer Group Revenue ($m) and Average Operating Margin, 3Q11–3Q12 26

Figure 2: Average Percent Expense by Function, 3Q11–3Q12 ...... 27

Figure 3: Revenue ($m) by Company, 3Q12 ...... 29

Figure 4: Year-to-Year Revenue Growth by Company ...... 30

Figure 5: Operating Income ($m) by Company, 3Q12...... 31

Figure 6: Year-to-Year Operating Income Growth by Company ...... 32

Figure 7: Operating Margin by Company, 3Q12 ...... 33

Figure 8: R&D Expense as a Percentage of Revenue by Company, 3Q12 ...... 35

Figure 9: Year-to-Year Growth in R&D Spending by Company, 3Q12 ...... 36

Figure 10: S,G&A Expense as a Percentage of Revenue by Company, 3Q12 ...... 37

Figure 11: Year-to-Year Growth in S,G&A Spending by Company, 3Q12 ...... 38

Figure 12: Total OpEx as a Percentage of Revenue by Company, 3Q12 ...... 39

Figure 13: Percentage of Candidates by Therapy Area, Through 3Q12 ...... 41

Figure 14: GlobalData Pipeline Matrix ...... 42

Figure 15: GlobalData Pipeline Matrix: Competitive Positioning ...... 43

Figure 16: Number of Clinical Candidates for Each Company by Clinical Phase, through 3Q12 ...... 46

Figure 17: Percentage of Candidates by Clinical Phase, through 3Q12 ...... 47

Figure 18: Headcount Growth YtY by Company, 3Q12 ...... 76

Figure 19: Revenue per Employee (In $ Thousands) by Company, 3Q12 ...... 77

Figure 20: SG&A Expense per SG&A Employee (In $ Thousands) by Company, 3Q12 ...... 78

Figure 21: R&D Expense per R&D Employee (In $ Thousands) by Company, 3Q12 ...... 79

Figure 22: Debt to Asset Ratio by Company, 3Q12 ...... 82

Figure 23: Quick Ratio by Company, 3Q12 ...... 83

Figure 24: Cash Ratio by Company, 3Q12 ...... 84

Figure 25: Return on Investment Ratio by Company, 3Q12 ...... 85

Figure 26: Sales to Assets Ratio by Company, 3Q12 ...... 86

Figure 27: Acorda Six-Month Revenue Forecast ($m) ...... 89

Table of Contents

Figure 28: Alexion Six-Month Revenue Forecast ($m) ...... 91

Figure 29: Alkermes Six-Month Revenue Forecast ($m) ...... 93

Figure 30: BioMarin Six-Month Revenue Forecast ($m) ...... 95

Figure 31: Cubist Six-Month Revenue Forecast ($m) ...... 97

Figure 32: Exelixis Six-Month Revenue Forecast ($m) ...... 99

Figure 33: Incyte Six-Month Revenue Forecast ($m) ...... 101

Figure 34: Jazz Six-Month Revenue Forecast ($m) ...... 103

Figure 35: Momenta Six-Month Revenue Forecast ($m) ...... 107

Figure 36: Nektar Six-Month Revenue Forecast ($m) ...... 111

Figure 37: Onyx Six-Month Revenue Forecast ($m) ...... 114

Figure 38: Eylea Six-Month Sales Forecast ($m) ...... 117

Figure 39: Seattle Six-Month Revenue Forecast ($m) ...... 120

Figure 40: United Six-Month Revenue Forecast ($m) ...... 123

Figure 41: ViroPharma Six-Month Revenue Forecast ($m) ...... 126

Introduction

2 Introduction

2.1 Report Scope

The Innovative Mid-Cap Biotech Benchmark Report applies GlobalData’s proprietary ranking methodology to compare the competitive position of 15 innovative biotech companies on 20 financial metrics. The performances of these companies are analyzed on financial performance, cost-containment, capital structure and firm utilization to illustrate the different strategies these companies are using to increase value for their shareholders. Throughout the report, GlobalData’s analysts provide you with expert insight, expanding on each of the metrics discussed. In addition to the financial metrics, this report discusses each company’s recent pipeline and clinical advancements, along with licensing and acquisition activity, and operations strategy. Lastly, this report provides GlobalData’s viewpoint on each company’s future revenue outlook, and competitive position within the biotech space.

Key Questions Answered

 What are the specific strategies these innovative biotech companies employing to gain market share?

 What specific therapeutic areas are these biotech companies focusing their spending on?

 How does my pipeline and commercialization strategy match up with theirs?

 What particular enabling technologies and drug platforms are these biotech companies developing?

 How are these biotech companies maximizing their capital spending to gain a competitive advantage?

Key Benefits

This report will enable you to:

 Analyze and track the strategies that these successful biotech companies are using to gain share in the increasingly competitive market.

 Understand the underlying financial metrics that differentiate certain companies from the pack in terms of growth and profitability, spending and asset structure.

 Organize your sales and marketing strategy to identify companies with proprietary technologies to maximize opportunities for strategic investment or partnerships.

 Use this information as an independent source for your due diligence and transaction strategy.

Introduction

GlobalData Selection Criteria

After extensive exploratory research and client feedback, GlobalData identified 15 emerging biotech companies based on their revenue growth and/or potential of their clinical pipelines. While not exhaustive, GlobalData believes these 15 mid-cap biotech companies comprise a representative cross-section of drug makers that vary by technology and disease focus, providing a foundation for strategic discussion and analysis. GlobalData’s coverage examines drug makers from a unique company-centric lens – combining financial performance and resources allocation with clinical and licensing activity to assess a company’s overall strategy. This type of coverage is unlike any other analysis available and will deliver a consistent view into the evolution of these companies corporate growth. Moving forward, GlobalData plans to expand this list of biotech companies based on market dynamics and customer feedback to provide our clients with the most current information and analysis on major players in the biotech space to guide their corporate decision-making.

Companies covered: Acorda, Alexion, Alkermes, BioMarin, Cubist, Exelixis, Incyte, Jazz, Momenta, Nektar, Onyx, Regeneron, Seattle, United Therapeutics, and ViroPharma

If there is a specific company you would like GlobalData to cover and include in our next report, please don’t hesitate to contact GlobalData’s Industry Dynamics Team directly and we will make every attempt to add it to our semi-annual coverage.

Introduction

2.2 Report Catalysts

 Regeneron’s global launch of Eylea (aflibercept) injection for wet age-related macular degeneration.

 Regeneron’s approval of Zaltrap (ziv-aflibercept) for the treatment of patients with metastatic colorectal cancer.

 Incyte’s approval of Jakavi (ruxolitinib) in the EU for myelofibrosis.

 Onyx’s approval for Kyprolis (carfilzomib) injection for treatment of patients with multiple myeloma.

 Bayer’s (and Onyx’s) approval of Stivarga (regorafenib) for the treatment of patients with metastatic colorectal cancer.

 Seattle Genetics receiving marketing authorization in the EU for Adcetris (brentuximab vedotin) for patients with Hodgkin lymphoma and systemic anaplastic large cell lymphoma.

 Cubist submitted applications for its lead candidates CXA-201 (ceftolozane) and CB-315, both in Phase III for Gram-negative bacterial infections.

 BioMarin’s completed enrollment for Phase III trial for GALNS for the treatment of Morquio A Syndrome. GALNS is the largest trial in company history.

 Regeneron and Sanofi launch Phase III ODYSSEY trial – the first program of an investigational drug targeting the PCKS-9 pathway to lower LDL-C.

 Alexion adds to its rare disease portfolio with Enobia and Orphatec transactions.

 Alkermes’ acquisition of Elan Drug Technology.

 Jazz’s purchases of EUSA and Azur Pharma.

2.3 Upcoming Related Reports

Report titles are subject to change:

 GlobalData (2013). Academic Tech Transfer Deals and Strategy Analyses, TBD 2013

 GlobalData (2013). Global Generics Manufacturing Strategy Report, TBD 2013

 GlobalData (2013). Contract Research Organizations Benchmark Report, TBD 2013

 GlobalData (2013). Early Stage Biotech Funding and Strategy, TBD 2013

Introduction

2.4 Recently Published Reports

 GlobalData (2012). Biotech Strategy 2012 – Licensing, Collaboration, and M&A Trends, November 2012, GDHC0001MAL

 GlobalData (2012). Pharmaceutical Leaders 2012 – Key Trends, Emerging Strategies and Financial Analysis of Top Performers, July 2012, GDHC0001BR

 GlobalData (2012). Rare and Niche Disease Catalyst Monitor – Key Events Analysis 1H12, May 2012, GDHC001DCM

2.5 GlobalData’s Benchmarking Methodology

GlobalData’s Innovative Mid-Cap Biotech Benchmark Report ranks 15 mid-cap biotech companies on 20 financial metrics. These metrics include company-specific data such as revenues, margins, expenses and balance sheet ratios that are weighted and combined into an aggregate composite score that leads to a rank of each company’s overall financial performance. The ranking scale ranges from 1.00–10.00, with the average being 5.00, and higher rankings representing better overall performance. GlobalData believes one of the many strengths of our proprietary ranking methodology is that company rankings are data-driven and empirical, not subjective or whimsical. It is important to note that these rankings are retrospective and are intended to help illustrate the strategies that companies are using to succeed financially, and should not be considered as an endorsement by GlobalData, or a recommendation to purchase any securities. It is essential to recognize that there are many factors that determine the success of any company, not just financial performance, such as clinical pipeline, leadership of management and organizational structure, which are not accounted for directly in our methodology. The rankings are primarily intended to serve as an impetus for analytical discussion, and for examining a company’s relative competitive position in a very dynamic industry.

Introduction

2.6 GlobalData 3Q12 Biotech Benchmark Leader: Regeneron

Regeneron [REGN] was GlobalData’s Mid-Cap Biotech Benchmark Leader in the third quarter with an overall score of 6.75. Regeneron’s leadership status was driven by the company’s significantly higher financial metrics scores. The company’s aggregated Financial Management (FM) composite score was 9.24, much greater than the peer group average of 5.00. Rounding out the top three companies were Alexion [ALXN] which had an overall score of 5.90, and Cubist [CBST] which had an overall score of 5.43.

Table 1 shows each company’s individual composite scores and overall score for the third quarter.

Table 1: GlobalData Benchmark Rankings, 3Q12 GD Financial Expense Resource Capital Overall Company Rank Management Management Management Management Score 1 Regeneron 9.24 5.80 5.71 6.26 6.75 2 Alexion 6.72 5.51 5.56 5.82 5.90 3 Cubist 5.58 5.53 5.80 4.78 5.43 4 Alkermes 5.27 5.85 5.14 5.17 5.35 5 United 5.61 4.48 5.33 5.46 5.22 6 Acorda 4.41 5.46 5.43 5.34 5.17 7 Seattle 5.30 5.48 5.00 4.90 5.16 8 Jazz 5.90 4.33 5.35 4.81 5.10 9 BioMarin 4.74 5.69 4.99 4.81 5.06 10 ViroPharma 4.15 6.03 3.35 4.93 4.61 11 Exelixis 2.97 4.82 5.38 4.97 4.53 12 Incyte 5.05 5.38 4.61 2.68 4.43 13 Onyx 4.35 4.45 2.95 5.23 4.25 14 Nektar 3.69 4.73 5.40 3.15 4.24 15 Momenta 2.02 1.45 4.99 6.71 3.79 Source: GlobalData Note: Scale (1.00 – 10.00, Avg. Score = 5.00)

Meanwhile, Momenta [MNTA] was GlobalData’s Mid-cap Biotech Benchmark Laggard in the third quarter with an overall score of 3.79. Contributing to the company’s laggard status were very low scores in Financial Management (FM) metrics and Expense Management (EM) metrics. Momenta’s aggregate score was 2.02 for FM and 1.45 for EM, both very low when compared to the peer group average of 5.00. Rounding out the bottom three laggards were Nektar [NKTR] at 4.24 and Onyx [ONXX] at 4.25.

Introduction

2.7 Regeneron Overtook Alexion in 3Q12 as Benchmark Leader

Regeneron’s [REGN] overall ranking increased 0.85 points to 6.75 when compared to the company’s rank in 2Q12. Regeneron’s first-place ranking was largely driven by its exceedingly high (9.24) Financial Management (FM) aggregate composite score. Regeneron posted leading scores on the following metrics: Revenue Growth Year-to-Year (10.49), Operating Income (9.36) and Operating Income Growth Year-to-Year (11.57). These scores, combined with Alexion’s [ALXN] 0.41 drop, helped to vault Regeneron to leadership status.

Alexion’s ranked dropped 0.41 to 5.90, putting the company in second place in 3Q12. Pulling down the company’s rank was its performance in Expense Management (EM), in particular the R&D Expense Growth year-to-year metric. Alexion’s composite score on this metric was 2.52, significantly lower than the peer group average of 5.00.

Table 2 depicts each company’s ranking change from the second quarter.

Table 2: GlobalData Benchmark Rankings, 2Q12 – 3Q12 GD Rank 2Q12 3Q12 3Q12 Rank 3Q12 Rank Chng 1 Alexion Regeneron 6.75 0.85 2 Regeneron Alexion 5.90 (0.41) 3 Acorda Cubist 5.43 (0.16) 4 Cubist Alkermes 5.35 0.04 5 United United 5.22 (0.19) 6 Jazz Acorda 5.17 (0.53) 7 Alkermes Seattle 5.16 0.14 8 Incyte Jazz 5.10 (0.17) 9 Momenta BioMarin 5.06 0.50 10 Seattle ViroPharma 4.61 0.00 11 ViroPharma Exelixis 4.53 1.67 12 BioMarin Incyte 4.43 (0.70) 13 Nektar Onyx 4.25 0.48 14 Onyx Nektar 4.24 (0.23) 15 Exelixis Momenta 3.79 (1.28) Source: GlobalData Note: Scale (1.00 – 10.00, Avg. Score = 5.00)

Introduction

According to our analyses, the largest mover in 3Q12 (based on absolute value) among these biotech companies was Exelixis [EXEL], which increased 1.67 points from 15th in 2Q12, to 11th in 3Q12. However, this drastic increase was largely due to cost-cutting, not revenue generation. Momenta [MNTA] was the largest mover in the negative direction. The company’s ranking fell by 1.28 points to 3.79 in the third quarter, from 9th in 2Q12 to 15th in 3Q12. The combination of the company’s negative revenue growth, margin losses and high cost-structure led to its laggard performance in the third quarter.

Financial Management

3.3 Financial Management: Heat Map

3.3.1 Regeneron was the financial management leader in 3Q12, posting significantly higher scores across all metrics compared to its peer group

Table 3 displays each company’s Financial Management composite scores and overall FM score.

Table 3: Financial Management Composite Scores, 3Q12 GD Revenue YtY Op. Op. Op. Income YtY Overall FM Company Revenue Rank Growth (%) Income Margin Growth (%) Score 1 Regeneron 8.88 9.80 9.36 5.89 11.57 9.10 2 Alexion 6.65 7.10 7.73 5.90 6.98 6.87 3 Jazz 4.66 7.10 5.34 5.67 6.34 5.82 4 United 5.78 5.27 6.03 5.70 5.07 5.57 5 Cubist 5.71 5.24 5.75 5.65 5.40 5.55 6 Incyte 2.74 8.96 3.55 5.02 6.43 5.34 7 Alkermes 3.80 6.07 3.98 5.30 7.40 5.31 8 Seattle 2.54 9.16 3.36 4.76 6.30 5.23 9 BioMarin 3.87 5.16 3.54 5.13 5.82 4.71 10 Acorda 3.02 4.71 4.11 5.43 4.68 4.39 11 Onyx 3.23 5.26 1.86 4.15 7.08 4.32 12 ViroPharma 3.31 4.56 3.71 5.18 3.87 4.13 13 Nektar 2.04 4.48 2.93 2.81 6.13 3.68 14 Exelixis 1.95 3.59 3.13 2.64 3.54 2.97 15 Momenta 1.81 3.52 3.11 (1.73) 3.38 2.02 Source: GlobalData Key: Green represents an area where the company is outperforming its peers Red represents an area where the company is currently challenged versus peers Note: Scale (1.00 – 10.00, Avg. Score = 5.00)

Financial Management

3.4.2 Revenue Growth YtY

3.4.2.1 With a full-year of exclusivity under its belt, Jakafi approval will be a significant revenue driver for Incyte – Seattle reaches milestone

Incyte’s [INCY] revenue grew by 260.5% year-to-year to $60.5m in the third quarter. This growth rate placed INCY second among its peer group, surpassing its group average of 52.3%. GlobalData attributes the revenue increase to Incyte’s approval of Jakafi, a JAK-inhibitor, and the first and only approved drug indicated for the treatment of myelofibrosis.

Figure 4 shows the year-to-year revenue growth by company.

Figure 4: Year-to-Year Revenue Growth by Company

Regeneron 315.9% Incyte 260.5% Seattle 141.1% Jazz 139.5% Alkermes 72.2% Alexion 44.1% United 20.2% 3Q12 Average = 52.3% 3Q12 Std. Dev = 117.5% Onyx 19.3% Cubist 18.1% BioMarin 13.0% -16.8% Acorda -26.5% ViroPharma -32.0% Nektar -89.6% Exelixis -94.2% Momenta

-200% -100% 0% 100% 200% 300% 400% 500%

3Q12 2Q12

Source: GlobalData & Company SEC filings

Seattle Genetics’ [SGEN] revenue grew 141.1% year-to-year to $49.8m in the third quarter. The company’s revenue growth was driven by its July 2012 marketing approval of Adcetris in the European Union by the EMA. The cancer drug was approved for the treatment of relapsed or refractory Hodgkin lymphoma and systemic anaplastic large cell lymphoma in the EU, and will now be available to all 27 member nations. The EU approval triggered two milestone payments totaling $25m to SGEN under the company’s agreement with commercial partner Millennium, the oncology wing of Takeda.

Financial Management

3.6 Expense Metrics

3.6.1 R&D Expense as a Percentage of Revenue

3.6.1.1 The use of CROs keeps Jazz’s R&D expenses in check, but spending in the near term will increase due to acquired in-process R&D programs

Jazz [JAZZ] was the peer group leader in 3Q12, spending only 3.9% of its revenue on R&D. Jazz relies exclusively on contract research organizations and other third parties to assist in the design and monitoring of its clinical trials for its internal product candidates. Jazz experiences substantial cost-savings as a result of outsourcing R&D; however, the company does lose some control of its clinical trial development which could lead to trial failures, and would result in delays in the company’s regulatory filing process. Moving forward, GlobalData expects Jazz’s R&D expenses to be higher in 1H13 compared to 2012 due to the acquisition of in-process R&D activities from its purchases of Azur and EUSA Pharma. Jazz’s development pipeline now includes clinical trials evaluating intravenously administered Erwinaze, and drug candidates Asparec (Phase I) and Leukotac (Phase III).

Figure 8 displays each company’s R&D expenses as a percentage of revenue for the third quarter.

Figure 8: R&D Expense as a Percentage of Revenue by Company, 3Q12

Jazz 3.9% Acorda 15.5% ViroPharma 18.2% Alexion 18.5% United 26.9% Alkermes 28.3% Cubist 29.5% Regeneron 37.0% 3Q12 Average = 87.2% 3Q12 Std. Dev = 107.4% BioMarin 51.7% 3Q12 Average (adj). 41.3% Incyte 82.8% Seattle 87.6% Onyx 95.7% Nektar 184.8% Exelixis 230.5% Momenta 396.6%

0% 100% 200% 300% 400% 500%

3Q12 2Q12

Source: GlobalData & Company SEC filings Note: Excluding data from the bottom three outliers, the 3Q12 peer group average drops to 41.3% for R&D spend as a percentage of revenue

Pipeline Assessment

4.4 Clinical Highlights by Company

4.4.1 Acorda

4.4.1.1 Acorda announces top-line results from post-marketing study evaluating 5mg dose of Dalfampridine-ER

In 3Q12, Acorda [ACOR] announced top-line results from a post-marketing commitment study Acorda will expand Ampyra label to include evaluating a 5mg dose of Ampyra (dalfampridine) to improve walking ability in people with Multiple patients with post-stroke deficits and cerebral Sclerosis (MS). The randomized study included 430 participants across three treatment arms: palsy placebo, 5mg or the currently marketed 10mg of dalfampridine-ER, twice daily. The study failed to confirm the efficacy of the 5mg dose as measured on the primary outcome of improvement in change in walking speed. The average change in baseline in walking speed was significantly greater for the 10mg group compared to placebo but not for the 5mg group over placebo. The company believes the results show that 10mg twice daily is the appropriate, safe and effective dose. The trials reported no new safety signals and no seizures were reported. However, two participants experienced serious adverse events in each of the 5mg and 10mg treatment groups. The occurrence of adverse events was consistent with the product labeling, with urinary tract infection and nausea & dizziness being the most highly recorded. Source: GlobalData; Acorda, press release, August 13, 2012.

4.4.1.2 Acorda acquires nasal spray formulation with purchase of Neuronex

In February 2012, Acorda acquired Neuronex, Inc., a privately-held development stage pharmaceutical company, for $10m with additional milestone payments totaling up to $125m. Neuronex was preparing a New Drug Application for a proprietary nasal spray of Diazepam, or DZNS, as a rescue treatment for certain epilepsy patients. GlobalData believes Acorda’s experience in developing neurological products will be leveraged and combined with its existing sales infrastructure for the sale of DZNS, providing a near-term commercial opportunity for the company. To acquire the technology, Acorda made an upfront payment of $2m and paid $500k of a pre-closing research funding commitment of up to $1.2m to prepare for the DZNS new drug application filing with the FDA. Source: GlobalData; Acorda, press release, February 15, 2012.

Licensing & Acquisition Strategies

5.3 M&A Analysis

5.3.1 Alkermes Acquisition of Elan Drug Technology Creates Leadership in CNS Therapeutics

5.3.1.1 Alkermes purchases Elan unit for $960m

Alkermes [ALKS] reached a deal to acquire Elan Drug Technologies (EDT) from Irish drug-maker Alkermes strengthens its drug delivery business Elan [ELN] for approximately $960m in cash and stock. The deal included an upfront cash payment with EDT purchase of $500m and 31.9 million Alkermes shares valued at approximately $462m at time of purchase. EDT’s intangible assets accounted for $689.8m of the total acquisition cost and included collaboration agreements, in-process R&D and the company’s NanoCrystal drug delivery platform. As a result of the purchase, Alkermes will create a new holding company, Alkermes, PLC, headquartered in Dublin, Ireland. Meanwhile, Elan received a 25% stake in the newly minted company. EDT generated $261m in revenue in 2010 and will fold-in to Alkermes, approximately doubling its annual revenue to more than $450m.

GlobalData believes the deal joins two companies whose primary business focuses on technologies that improve the delivery of drugs made and licensed by other companies. Both companies possess proprietary technologies to make drugs remain stable for longer periods of time in the bloodstream, thereby requiring less-frequent injections, improving the pharmacokinetics of their products. EDT formulates Invega Sustenna (paliperidone palmitate), the once-monthly schizophrenia drug sold by Johnson & Johnson [JNJ], and Ampyra (dalfampridine), which is developed by Acorda Therapeutics [ACOR] and used to improve walking ability in people who have multiple sclerosis; whereas Alkermes is the drug-delivery technology partner for Bydureon (exanatide injection), marketed by Eli Lilly [LLY] and recently acquired Amylin Pharmaceuticals [AMLN], and continues to receive royalties from this partnership. The deal makes sense for both parties involved – Elan has been trying to divest its EDT unit for many years and even considered spinning it off as a separate entity. The sale of EDT will allow Elan to cut its debt and focus on drug development. Meanwhile, we see Alkermes taking advantage of EDT’s NanoCrystal injection technology used for Xeplion, another schizophrenia drug developed by J&J, and applying this injectable platform for projects in its clinic – ALKS-9070, ALKS-33, and ALKS-5461 – which are being investigated for schizophrenia and alcohol and cocaine dependencies. Source: GlobalData; Alkermes, press release, September 16, 2011.

Resource Management Strategies

6 Resource Management Strategies

6.1 Competitive Framework

The Resource Management (RM) section discusses how each company is deploying its physical, human and financial resources. GlobalData benchmarks each of the company’s performance on several utilization and balance sheet metrics. We use our proprietary ranking system to illustrate which companies are performing the best on each metric, and discuss what specific drivers and strategies each of the three top-performing companies are implementing to remain leaders on each indicator.

A company’s physical resources include the expansion of manufacturing plants, R&D facilities and supply agreements; human resources includes changes to executive leadership, headcount attrition and employee utilization; capital management consists of the company’s debt structure, working capital and return-on-investment.

Key Questions Answered

 Is the company investing in R&D capacity to grow inventory to meet demand of the market?

 Is the company experiencing any manufacturing issues that could disrupt its supply chain and increase delivery time for its products?

 Is R&D and S,G&A headcount being used efficiently to maximize the company’s bottom line?

 Is headcount rationalization contributing to margin growth?

 What is the company’s operating leverage?

 Is the company paying down its debt to improve its cash flow?

 If an unforeseen event occurs, does the company have enough cash on hand to sustain operations for the next twelve months?

Resource Management Strategies

6.5.4 R&D Expense per R&D Employee

6.5.4.1 Onyx invests heavily in Kyprolis R&D, which will begin to pay-off in 1H13 when the company begins to recognize higher Kyprolis sales

Onyx [ONXX] posted $85.7m in R&D expenses in the third quarter, almost entirely accounting for its $89.5m the company reported in revenue. GD estimates that Onyx spends approximately $465k per R&D employee, significantly higher than its peer group average of $203k. We estimate the company’s R&D headcount to be at 184 FTEs, a 16.5% increase from the 158 FTEs we approximate for 3Q11. GlobalData attributes the company’s laggard status on this metric to clinical trial costs, which include several Phase III studies evaluating Kyprolis injection either as a single agent therapy or in combination with other drugs.

Figure 21 shows the R&D expense per R&D employee by company for 3Q12.

Figure 21: R&D Expense per R&D Employee (In $ Thousands) by Company, 3Q12

Jazz $63.4 Alkermes $68.9 Nektar $105.0 Seattle $122.1 Alexion $129.2 $158.3 Acorda 3Q12 Average = $203.2k ViroPharma $200.4 3Q12 Std. Dev = $105.4k Momenta $204.1 Incyte $206.0 BioMarin $225.2 Regeneron $238.8 Exelixis $261.9 Cubist $271.0 United $328.4 Onyx $465.6 $- $100 $200 $300 $400 $500

3Q12 2Q12

Source: Company data and GlobalData estimates

Resource Management Strategies

6.8.5 Sales/Assets Ratio

6.8.5.1 The combination of revenue growth with an expanding asset base allows Regeneron to be efficient at generating sales

Regeneron [REGN] was the peer group leader on sales to asset ratio at 0.26, which was higher than its group average of 0.11. The company had a total asset base of $1.6bn on sales revenue of $427.7m in the third quarter. As mentioned, the combination of the company’s revenue growth with an increase in net accounts receivables contributes to the company being very efficient at utilizing its assets to generate sales.

Figure 26 displays the sales-to-assets ratio by company for 3Q12.

Figure 26: Sales to Assets Ratio by Company, 3Q12

Regeneron 0.26 Incyte 0.20 Acorda 0.19 United 0.15 Cubist 0.12 Seattle 0.12

Alexion 0.12 3Q12 Average = 0.11 Jazz 0.10 3Q12 Std. Dev = 0.07 Alkermes 0.09 BioMarin 0.08 ViroPharma 0.07 Onyx 0.07 Nektar 0.03 3Q12 2Q12 Exelixis 0.02 Momenta 0.01

0.00 0.05 0.10 0.15 0.20 0.25 0.30

Source: GlobalData and company SEC filings

Company Drill-Downs & Forecasts

7 Company Drill-Downs & Forecasts

7.1 Acorda SWOT & Forecast

7.1.1 With Revenue Flattening, Acorda Looks to Extend Ampyra Labeling to Include Additional Indications and More Regions in the EU

Strength: Lean on Collaborators to Drive Ex-US Revenue Growth. Acorda [ACOR] has licensing agreements with Biogen Idec and Watson Pharmaceuticals [WPI] which allows the company to leverage its partners’ commercial capabilities. Acorda’s agreement with Biogen [BIIB] led to the approval of Ampyra (marketed as Fampyra outside the US) in the EU, Canada and Australia. The drug is expected to be launched in the remaining European countries by the end of 2012. Acorda’s agreement with Watson Pharma enables it to manufacture generic versions of its own drug, Zanaflex (tizanidine), in response to potential launches of generic versions of the drug in the coming months.

Weakness: Overdependency on Ampyra to Sustain Operations. The company is heavily dependent on Ampyra for most of its revenue. Consequently a sharp decline in Ampyra sales would result in poor financial performance by the company.

Opportunity: Pipeline Development. Acorda currently has two new drugs in late-stage development, in addition to investigating the safety and efficacy of Ampyra in multiple MS indications. Furthermore, the company has other candidates in Phase I and in preclinical discovery which could potentially be first-in-class treatments for heart failure, stroke, and spinal cord injury.

Threat: Increasing Generic Competition for Zanaflex. In February 2012, Apotex launched a generic version of Zanaflex, which resulted in a decline in Acorda’s Zanaflex sales. Apotex’s launch and possible other launches of generic versions of Zanaflex will even further erode Acorda’s top- line revenue. In May 2012, Acorda received a Paragraph IV letter from Mylan Laboratories [MYL] informing it of the company’s filing an ANDA to manufacture generic versions of Zanaflex.

Company Drill-Downs & Forecasts

Figure 27 shows Acorda revenue from 3Q11 to 3Q12 and a six-month forecast.

Figure 27: Acorda Six-Month Revenue Forecast ($m)

$80 $77.5 $78 $75.7 $76 $74.3 $74 $72.6 $72.2 $72 $71.3 $71.3 (In $m) $70 $68.0 $68 $66 $64 $62 3Q11 4Q11 1Q12 2Q12 3Q12 3Q12 4Q12 1Q13 Actual GD Est. GD Est. GD Est.

Source: Company data and GlobalData estimates

Appendix

8 Appendix

8.1 Research Methodology

GlobalData’s dedicated research and analysis teams consist of experienced professionals with marketing, market research and consulting backgrounds in the pharmaceutical industry, and advanced statistical expertise. GlobalData adheres to the codes of practice of the Market Research Society (www.mrs.org.uk) and the Strategic and Competitive Intelligence Professionals (www.scip.org). All GlobalData databases are continuously updated and revised. The following research methodology is followed for all databases and reports.

8.1.1 Coverage

The objective of updating GlobalData’s coverage is to ensure that it represents the most up-to-date vision of the industry possible. Changes to the industry taxonomy are built on the basis of extensive research of company, association and competitor sources. GlobalData aims to cover all major news events and deals in the pharmaceutical industry, updated on a daily basis. Company coverage is based on three key factors: revenues, products, and media attention/market potential.

 The estimated revenues of all major companies, including private and governmental, are gathered and used to prioritize coverage.

 Companies which are making the news or which are of particular interest due to their innovative approach are prioritized.

The coverage is further streamlined and strengthened with additional inputs from GlobalData’s expert panel (see below).

8.1.2 Secondary Research

The research process begins with exhaustive secondary research on internal and external sources being carried out to source qualitative and quantitative information relating to each market. The secondary research sources that are typically referred to include, but are not limited to:

 Company websites, annual reports, financial reports, broker reports, investor presentations, and US Securities and Exchange Commission (SEC) filings

 Industry trade journals, scientific journals, and other technical literature

 Internal and external proprietary databases

 Relevant patent and regulatory databases

 National government documents, statistical databases, and market reports

 Procedure registries

Appendix

 News articles, press releases, and web-casts specific to the companies operating in the market.

8.1.3 Expert Panel Validation

GlobalData uses a panel of experts to cross-verify its databases and forecasts.

GlobalData’s expert panel comprises marketing managers, product specialists, international sales managers from pharmaceutical companies; academics from research universities, KOLs from hospitals, consultants from venture capital funds, and distributors/suppliers of pharmaceuticals and supplies.

Historic data and forecasts are relayed to GlobalData’s expert panel for feedback and adjusted in accordance with their feedback.

Appendix

8.2 About the Authors

8.2.1 Analysts

Adam Dion, MSc

Mr. Dion is an Analyst in the Healthcare Industry Dynamics Team at GlobalData. Mr. Dion is an author of GlobalData’s PharmaSphere benchmark reports which rank the competitive positions of the top companies in the pharmaceutical, biotech, and medical device and CRO sectors. Adam is the lead author of Pharmaceutical Leaders 2012: Key Trends, Emerging Strategies and Financial Analysis of the Top Performers. Adam also provides coverage of trends in the healthcare IT space, including mHealth and cloud computing. Prior to joining GlobalData, Mr. Dion was an Analyst with Technology Business Research, a leading market research and consulting firm. In this role, he was responsible for coverage of the leading blue-chip hardware and software and BPO companies, such as Dell, Apple, SAP, Acer, Wipro and Tata Consultancy, analyzing these companies’ go-to- market and vertical integration strategies, financial forecasting and competitive benchmarking. Adam also has been involved in a number of primary market studies in the consumer space, analyzing the market penetration of tablets, Netbooks, e-readers and mobile devices. His analytical commentary has been quoted by leading sources, such as the Wall Street Journal, Forbes, Financial Times, The Guardian, ComputerWorld and eWeek. Adam received his B.S. in Neuroscience from Merrimack College, and M.S. in Marketing from the University of New Haven. Adam can be reached by email at: [email protected].

Adefemi Adenuga, MBS

Mr. Adenuga is a key strategic and financial analyst in the Healthcare Industry Dynamics Team at GlobalData. Mr. Adenuga is an author of GlobalData’s PharmaSphere strategy reports covering: trends in emerging markets, mergers and acquisitions, generic drug manufacturers, and contract manufacturing organizations. Femi is the lead author of Biotech Strategy 2012 – Licensing, Collaboration and M&A Trends. Prior to joining GlobalData, Mr. Adenuga held an analyst position with the Global Planning and Materials Management Team at Gilead Sciences. Mr. Adenuga also held an associate position covering business development, credit structuring, international trade, and financial analysis at Guaranty Trust Bank. He has a strong interest and background in mergers and acquisitions as well as global manufacturing and corporate strategy. Adefemi has also been involved in a number of primary and secondary market studies in the US medical devices space analyzing the dynamics and competitive landscape of the in-vitro diagnostics segment. Adefemi holds a B.S.in Cell Biology and Genetics from the University of Lagos (Nigeria) and a Masters in Bioscience Management (M.B.S.) with an emphasis in business administration from the Keck Graduate Institute of Applied Life Sciences, a member of the Claremont University Consortium. Femi can be reached by email at: [email protected].

Appendix

8.3 Director, Healthcare Industry Dynamics

Joshua Owide, BS

Mr Owide is the Director of Healthcare Industry Dynamics Team at GlobalData. Prior to joining GlobalData, Mr. Owide was a senior pharmaceutical company analyst at Datamonitor, covering large-cap companies from the US, EU and Japan. Prior to joining Datamonitor, Joshua undertook a bioinformatics studentship at the Ludwig Institute for Cancer Research where he analyzed a genome wide RNAi screen identifying the importance of specific proteins in cell morphology. Joshua holds a B.S. in Physiology for the University of Leeds where he conducted and published research in renal physiology.

8.4 GlobalHead of Healthcare Research & Consulting

Bonnie Bain, Ph.D

Bonnie Bain, Ph.D. is Global Head of Healthcare Research & Consulting for GlobalData, managing the Medical and Pharmaceutical arms of the business. Prior to this role, she was Vice President and Global Research & Analysis Director for Informa where she oversaw the global strategy and operations for Datamonitor Healthcare’s syndicated research business. Dr. Bain has over 15 years’ experience in the healthcare sector and a proven track record of developing innovative solutions on both the client and vendor sides of the business. Prior to joining Informa, Bonnie was Director of Product Development at Wood Mackenzie where she oversaw development and management of two product lines. Bonnie also worked for several years at Decision Resources as an Analyst and Project Manager. On the client side of the industry, Bonnie worked for several years as a Senior Manager in Marketing Strategy and Analytics at Boston Scientific where her work contributed to the successful commercialization of the first ever Access and Visualization Platform at the company. She has a Ph.D. in Biochemistry and Molecular Biology from Purdue University and was a Post- Doctoral Fellow in Molecular Pharmacology at The University of Miami School of Medicine.

Appendix

8.5 About the Industry Dynamics Team

The Industry Dynamics Team strives to provide an in-depth series of reports based on solid financial and strategic analysis to help clients make informed decisions. Our PharmaLeaders and PharmaSphere portfolios gives clients’ access to company, sector and industry-wide information on the established and emerging players within the global pharmaceutical marketplace.

Pharma eTrack gives you the key information to drive sales, investment and deal making activity in your business. It includes the following information:

 4,400+ market size data tables across 100+ Indications for 11 countries with historic data from 2002 and forecasted till 2017

 35,000+ pipeline products

 110,000+ clinical trials

 10,000+ marketed products

 30,000+ deals

 20,000+ company profiles

Appendix

8.6 GlobalData

GlobalData is a leading global provider of business intelligence in the Healthcare industry. GlobalData provides its clients with up-to-date information and analysis on the latest developments in drug research, disease analysis, and clinical research and development. Our integrated business intelligence solutions include a range of interactive online databases, analytical tools, reports and forecasts. Our analysis is supported by a 24/7 client support and analyst team.

GlobalData has offices in New York, Boston, London, India and Singapore.

8.8 Disclosure Information

GlobalData is a product of GlobalData Ltd, a UK registered company. GlobalData Ltd has no current or intended investment banking or corporate finance relationships or operations. The material presented in this report is provided for information purposes only and is not to be used or considered as a recommendation to buy, hold or sell any securities or other financial instruments. No GlobalData Ltd directors, officers or employees are on the Board of Directors of a covered company and no one at a covered company is on the Board of Directors of GlobalData Ltd.

Appendix

8.9 Disclaimer

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData.