NANOLEK - R U S S I A N PHARMACUETICAL COMPANY - OVERVIEW November, 2014 SUMMARY NANOLEK aimed to become one of the leading Russian pharmaceutical companies by 2018 NANOLEK is a biopharmaceutical company that sets up a state-of-the-art manufacturing facilities with portfolio focus on prescription drugs for high disease burden and priority therapeutic areas: vaccines, oncology, rheumatology, orphan drugs, antiretroviral products Portfolio structure Manufacturing facility Sales pattern, 2018, forecast 2014 . Full compliance with best industry practice in respect to labour and environmental standards . Full EU GMP compliance Well-balanced portfolio: • Vaccines; • Biosimilars; • Orphan drugs; • ARV and others; Ownership structure The company is 51% owned by Russian private shareholders and 49% - by state investment fund JSC Rusnano. 2 CONTENT Russian market overview Portfolio Strategy Manufacturing Sales & Distribution Team Value proposition 3 In 2014 Russian pharmaceutical market is about to reach USD18 bln. level. M A R K E T Key market drivers: new categories expansion, OVERVIEW demand for modern treatment, governmental programs. USD Bln. Insurance 6% Medicines DLO/7N 28.0 insurance (2018) 6.6 Hospital segment 22.2 3,0 Retail 10% 2,7 5,0 7N 4.8 introduction 4,8 13.0 18,0 DLO introduction 3,3 14,7 4.0 1.7 0,8 7,7 0,3 1.3 2,3 2000 2005 DLO 2010 DLO/7N 2016 2020 4 MARKET TRENDS: LOCALIZATION AND R&D Government wants to grow local … as well as increase the share manufacturers … of innovative drugs 100% = 100 100 100% = 100 100 Branded 50 generics Foreign 80 Generics 50 Local 20 Originals 2010 2020 2010 20201 LOCAL MANUFACTURING LOCAL R&D • Reduce share of import • Establish innovative local • Develop exports based on pharmaceutical industry perception of high quality and • Support competitiveness effectiveness of domestic companies 15% margin preference + blocking governmental purchases for international products with domestic competition / 30% in terms of full-cycle production SOURCE: Russia Ministry of Trade and Finance “Strategy for development of pharmaceutical sector 5 to 2020" MARKET OVERVIEW: SUMMARY • Government will continue investing into healthcare, despite the financial turbulence • “PHARMA 2020” localization push will create new Russian pharmaceutical manufacturing infrastructure • Federal and private investment into R&D will keep growing • Government investment in healthcare will go along with cost control measures • Standards of production and quality of drugs tend to rise constantly • Industry consolidation (production, distribution, retail): future belongs to large companies. 6 CONTENT Russian market overview Portfolio Strategy Manufacturing Sales & Distribution Team Value proposition 7 N A N O L E K STRATEGY Low share of Less than 10% Russian products: manufacturing facilities imported drugs sales are fully or partially MARKET deliver 70% of the GMP compliant market value in 2012 OPPORTUNITIES Government Low share of innovative purchasing sector drugs to grow by 2017 Branded generics – 50% up to 40% of Generics - 25% market Originals – 25% • Increase share of Russian products: 50% in 2020 GOVERNMENT • Oblige GMP compliance starting Jan 1, 2014 PHARMA 2020: SUPPORT • Increase financing of healthcare programs • Increase the share of innovative drugs: 50% in 2020 WIN-WIN SITUATION Focus on government Unique GMP sector. manufacturing FOR NANOLEK NANOLEK Revenue 2017: facility in Russia government purchase 45% hospital segment - 43% retail – 12% 8 RUSSIAN VACCINE MARKET OVERVIEW Substantial growth • Annual vaccine market is Russia is about • The Russian vaccine market is expected to 100-110 mln doses or 400 USD mln grow 10-12% annually and reach the volume of 600-700 USD mln by 2017 • Russia has a large number of locally +14% mln 421 produced vaccines, but most of it are being 408 389 manufactured not according to GMP 350 standards 312 Vaccination Calendar Russia • Tuberculosis • Diphteritis • Pertussis • Flue • Tetanus • Hepatitis В • Measles • Poliomyelitis 11 • Parotiditis • Haemophilus influenzae VACCINES Russian vaccine market,USD vaccine Russian 2009 2010 2011 2012 2013 Germany USA • Spectacular growth rate: 10-15% per year • Pneumococcus • Hepatitis A 17 • Meningococcal 15 • Rotavirus versus 5-7 % for pharmaceuticals (WHO, • Varicella Worldwide) • HPV VACCINES VACCINES 9 R U S S I A N BIOLOGICALS MARKET Substantial growth • Russia is at par with rest of Europe in terms • In 2008 the introduction of the “Seven of evolution of Specialty medicine, but still is nosologies” program further increased 8%-10% behind by structure; access of the most expensive specialist treatment like hemophilia, cystic fibrosis, $3.6 bln. $18.3 bln. Gaucher disease, myeloid leukemia and 12% multiple sclerosis Specialty 27% $3.6 bln. $18.3 bln. 9% Biologics 22% 88% 73% Traditional 91% 78% None- Biologics 2004 2014 • The introduction of DLO in 2005 has resulted 2004 2014 in the higher access of expensive specialist medicine like those for Oncology; • Very limited number of producers are trying to play on the Russian biosimilars market leaving wide scale of opportunities. SOURCE: IMS Health MIDAS Jun 2014, Rx bound 10 P O R T F O L I O P R O D U C T S Highly potential drugs in several therapeutic categories Therapeutical Key drugs in the Launch Total number of category category year products - HEP B - Y2015 (MA obtained) Vaccines - IPV - 4Q2015 (Clinical trials) 7 - Cell-based FLUE - Y2018 (Pre-clinical trials) - Filgrastim - Y2015 (MA obtained) - Rituximab - Y2018 (Clinical trials) Biosimilars 5 - Interferon beta 1A - Y2018 (Clinical trials) - Idursulphase - Y2016 (Clinical trials) Orphan drugs 3 - Tenofovir - Y2016 (Clinical trials) 5 ARV - Leviteracetam - Y2015 (MA obtained) - Clopidogrel - Y2015 (MA obtained) - Y2015 (MA obtained) CNS & CVS - Nebivolol 17 - Rosuvastatin - Y2015 (MA obtained) - Pregabalin - Y2015 (MA obtained) 11 F U T U R E P O R T F O L I O DEVELOPMENT Combining R&D and manufacturing potential of Kirov region Science Production «core» of cluster «core» of cluster Research & Biological Development center faculty of Vyatskiy state Biopharmaceutical university complex NANOLEK R&D Institute of Microbiology of Defense Ministry Biopharmaceutical veterinary complex «AGROVED» Kirovskaya Potential members medical academy . ALSI Pharma . АВВА RUS . Kirovskiy Bio-Chemical factory Production of . Omutninskaya science-industrial immuno biology Vyatskaya state factory drugs agricultural . «PHARM Defense» academy Kirovsky R&D Institute of hematology and blood transfusion . ROSPLAZMA 12 CONTENT Russian market overview Portfolio Strategy Manufacturing Sales & Distribution Team Value proposition 13 PRODUCTION FACILITY SNAPSHOT Main parameters: • Location: Russia, Kirov Region (1000 km East of Moscow) • Total investment: USD 100 MM • Total land area: 14 hectares • Total facility area: 28,000 sq.m. • Number of employees in 2015: 250 Annual output: • 1 bln. tablets/capsules • 35 mln. vials; • 42 mln. prefilled syringe; Localization options: • Primary & Secondary packaging • Fill & Finish • Fermentation synthesis of biopharmaceutical products 14 FULL - C Y C L E GMP - C O M P L I A N T FACILITY • Design was made by leading European engineering company GMproject • All production buildings are already constructed; inner engineering systems are being installed • Solid dosage forms manufacturing license – 4Q 2014. • Biologicals manufacturing license – 2Q 2015 QUALITY ASSURANCE QUALITY CONTROL PHARMACEUTICAL QUALITY SYSTEM 15 SCHEDULE OF INSTALLMENTS Facilities installment is synchronized with schedule of portfolio registration, sales growth and state requirements to localization . Stage 3: Full cycle of Stage 1: Set up of production Stage 2: Stage 0: biologicals Full cycle of Construction Phase 1 Phase 2 Phase 1 Phase 2 Solid forms – full cycle Fill finish bilologicals solid forms July 2012 – Dec. 2013 - Feb. 2014 - 2016 - 2018 - 2020 - Dec. 2013 Dec. 2014 June 2015 2017 2020 2022 Full cycle production Full cycle production – line №1 line №2 and №3 Solid . Granulation . Granulation . Tabletizing and . Tabletizing and dosage Site Preparation : forms capsule filling capsule filling . Purchase of ground . Labelling, pre- . Labelling, pre- plot and its formation packing, packaging packing, packaging . Engineering site preparation, incl Full cycle of solid internal and external forms: . Granulation networks (canalization, Full cycle of injection Secondary packaging of . Tabletizing and Cytotoxic energy) dosage forms solid and injection forms capsule filling . Construction of . Labelling, pre- production workshops packing, packaging . Construction of none- production workshops Fill finish . Spray freeze drying Full cycle – Full cycle – . Construction and start . Filling in flasks line № 1 line № 2 Biological of energy generating . Filling in prefilled unit forms syringes . Inspection . manufacturing of cell-based vaccines . Labelling, filling, . manufacturing of recombinant proteins packaging . protein purification Soft 16 dosage Outsourced manufacturing forms CONSTRUCTION: PHOTO UPDATE 3Q2012 1Q2014 Pension Fund of Russia 3Q2014 17 MANUFACTURING FACILITY FOR SOLID FORMS A few days before operations. Licence acquisition - December 2014; mass production Q2 2015 Stages Q2 2015 • Granulation Full cycle production • Tableting and Capsule filling Line #1 • Labeling, Pre-packing, Packing Capacity: 500 mln tablets and 100 mln capsules Q3 2016 • Granulation Full cycle production • Tableting and Capsule filling Line #2 & #3 • Labeling, Pre-packing,