SACHS ASSOCIATES, 19TH ANNUAL BIOTECH IN EUROPE FORUM SESSION ON ONCOLOGY BUSINESS DEVELOPMENT Trends in Oncology Business Development September 26, 2019 Presentation by Tim Opler, Ph.D. Partner, Torreya www.torreya.com Securities offered in the United States are offered through Torreya Capital LLC, Member FINRA/SIPC. In Europe such services are offered through Torreya Partners (Europe) LLP, which is authorized and regulated by the UK Financial Conduct Authority. Oncology M&A Transaction Volume by Year 2019 has been by far the most active year in oncology M&A (through mid-September) Oncology M&A Dollar Volume, 2015-2019 $120,000 $100,000 Loxo Daiichi Array $80,000 $60,000 Celgene Dollar Volume($ Millions) $40,000 Kite $20,000 Juno Medivation Ariad Pharma- Tesaro cyclics Stemcentrx $0 2015 2016 2017 2018 2019 Note: Included upfront and near-term milestones only when calculating dollar value of a deal. Source: Torreya M&A database. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 2 Licensing Deals More Common But Much Less Value We count 1,756 transactions in the 2015-2019 period. Less than 5% of these deals were M&A. Total Deal Activity by Transaction Count, Total Deal Activity by Upfront Value 2015-2019 (2019 annualized) 2015-2019 450 120000 400 100000 350 300 80000 250 60000 200 Transaction Count 150 Dollar Value ($mm) 40000 100 20000 50 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Licensing M&A Licensing M&A Source: Licensing Deal Activity Obtained from BioSci and Biopharm Insight Databases, M&A from Torreya database. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 3 M&A Deal Count by Mode of Action of Lead Drug Immuno-oncology and kinase inhibitors/targeted therapies have dominated oncology M&A in the last five years Mode of Action of Lead Drug Immuno-oncology 31 Kinase Inhibitors 29 Chemotherapy 5 Other 5 Radiopharmaceuticals 3 Oncolytic Viruses 3 Epigenetics 2 0 5 10 15 20 25 30 35 Source: M&A from Torreya database TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 4 M&A Payment by Last Completed Stage of Development The average payment rises exponentially as drug candidates approach commercialization Average Payment by Last Completed Phase of Development $12,000 $10,003 $10,000 $8,000 $6,000 $5,100 $4,000 $2,000 $1,396 $518 $192 $0 Preclinical / Discovery Phase 1 (N=19) Phase 2 (N=11) Phase 3 (N=1) Commercial (N=17) (N=30) Source: Torreya M&A database. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 5 Licensing Payments by Stage of Development The average licensing payment rises less sharply as drugs approach commercialization Average Oncology Licensing Deal Economics, 2012-2019 500 450 400 350 300 250 200 Average Payment ($ Average Payment ($ millions) 150 100 50 0 Preclinical (N=58) Phase 1 (N=57) Phase 2 (N=25) Phase 3 (N=58) Approved (N=13) Upfront 42.5 24.9 55.6 117.9 162.4 Total Package 387 305 431 408 246 Source: Torreya Analysis of BioSci and Biopharm Insight data. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 6 Most Active Dealmakers in Oncology, 2015-2019 Merck has been the most frequent acquiror while Bristol, AbbVie and Pfizer have been the highest spenders. Including Licensing, the leaders have been Merck, Roche and BMS. M&A Deal M&A Average Size M&A Total Spend Licensing Deal Company Count ($mm) ($mm) Count Total Deal Count Merck 6 $716 $4,297 65 71 Celgene 4 $2,997 $11,986 35 39 Novartis 4 $1,864 $7,455 20 24 AbbVie 3 $8,960 $26,880 19 22 Bristol-Myers Squibb 3 $25,135 $75,405 40 43 Eli Lilly 3 $3,350 $10,051 15 18 Roche 3 $900 $2,700 41 44 Astellas 2 $433 $866 8 10 AstraZeneca 2 $4,800 $9,600 29 31 Betta Pharma 2 $48 $95 2 4 Boehringer Ingelheim 2 $344 $688 18 20 Gilead 2 $5,255 $10,509 12 14 Ipsen 2 $528 $1,055 8 10 Jazz Pharma 2 $755 $1,510 3 5 Pfizer 2 $12,750 $25,499 15 17 Source: Licensing Deal Activity Obtained from BioSci and Biopharm Insight Databases, M&A from Torreya database. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 7 Deal Outlook for Next Five Years: Activity Level Oncology sector has Pharma sector is been relatively Important to note that consolidating and we sheltered from pricing oncology overall is fairly expect to see the rate pressure. While crowded with emerging of consolidation stay pressure will rise we companies. Thus, it is quite high. This will expect to see the sector more of a buyers continue to impact the continue to have a market than first might oncology sector. privileged position vs appear.* other areas. We expect to see activity levels in immuno-oncology and Continued scientific targeted therapeutics breakthroughs will continue to be high. cause oncology deal- However, the share of making to rise. deals involving these areas will decline due to growth in emerging areas. * See Fig 12 in the Syneos Health survey of Dealmakers Intentions 2019. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 8 Strategic Drivers of Oncology Business Development Oncology BD and M&A revolves around ownership of key “real estate” in various cancers. Merck and Bristol-Myers In breast cancer, Thus, cold tumors and split the PD1 antibody AstraZeneca and Daiichi the rare mutations are market which is teamed up in a giant the places where BD and estimated to be close to collaboration in Breast M&A can make a $50 billion in revenue in cancer with an ADC. difference. 2024. * Merck’s strategy Another key strategic Merck’s Peleton deal is a revolves around area is tumors which do good example. Merck extending Keytruda® to not respond to wants a strong position tumors which are checkpoint antibodies in RCC and are in many responsive to (so-called “cold exploratory checkpoint antibodies. tumors”). collaborations. The targeted therapy Another theme is Bristol-Myers is merging area will stay hot but drugging the with Celgene, in part, to there has to be a undruggable. Amgen’s strengthen its overall targeted population to recent KRAS data are position in oncology. identify with a clear stunning. We expect benefit. more BD in this area. Historically, Roche has * Merck is forecast to control about 50% of Pfizer and Lilly are been the global leader the 2024 $45-$50 billion PD1 market with pursuing the targeted with strong positions in BMY at 25%, Roche at about 12%, AZ at mutations like BRAF targeted therapies such about 9%-10%, Regeneron at 1.5% and the from Array, and Lilly TRK rest— Pfizer, GSK, Novartis, Beigene, Lilly, as Avastin® and and RET from Loxo, etc. etc. sharing about 2%. Note Regeneron Herceptin®. may only achieve about $1.5 billion in sales. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 9 Growth Areas in Oncology Deal-Making IO: Cell Therapy for Solid Tumors IO: Local Therapies IO: Tumor-specific Cell Therapy A key priority has been reaching a Recent oncology scientific meetings The promise of the pipelines of broader set of tumors with CAR-t and have increasingly featured direct delivery companies like Juno, Kite and emerging related therapeutics. There are dozens of therapeutics to tumors through players such as Crescendo biologics is of companies working to design cell intratumoral delivery or other methods the design of tumor specific cell therapy therapies that will be effective in of local delivery. Efficacy from these solutions involving CAR-t, TCRs and combating solid tumors. As these emerging approaches has been TIL’s. By observing the root mutation emerging programs show efficacy we outstanding and safety is often much deterring an immune response, it is expect to see deal activity in this area improved. We expect deal activity to be increasingly possible to design cell take off, particularly for companies that high in these areas. therapies for specific tumors. This area are considering an allogeneic approach. will be highly active. Inflammasome Patient-Specific Targeted Therapies Radiopharmaceuticals Novartis’ CANTOS data showed that Recent deals for Array and Loxo Novartis’ march into radiopharma has treatment of chronic inflammation with highlight the success of therapies that been bold and well-considered. an anti-IL1b drug reduced death from are targeted to specific tumor Companies such as AAA and Endocyte lung cancer by over 75% in a sample of mutations. This success story has been are bringing highly efficacious therapies more than 10,000 subjects. There has more than two decades coming and has to challenging disease states. The next been a surge of interest in this area by fed off the availability of inexpensive step will involve marrying increasingly companies such as Cantargia and sequencing. Whether small molecule or sophisticated radioligands with Inflazome. Deal-making has been brisk in antibody we see no let up in the pace of additional targets. We expect a long- this new area of the inflammasome and deal-making for targeted therapies, term surge in radiopharma deals as new oncology in 2019. especially for hard to drug areas. targets and cancer types are addressed. TORREYA ONCOLOGY BUSINESS DEVELOPMENT TRENDS | SACHS CONFERENCE – SEPTEMBER 2019 10 Appendix: Background on Selected Oncology Deals 11 Top 25 M&A Deals in Oncology by Value, 2015-2019 Last Successful Announcement Modality of Lead Phase of Date Buyer Target Asset Development Deal Size 01/03/2019 Bristol-Myers Squibb Celgene Corporation Small Molecule Commercial $74,000 03/04/2015 AbbVie Pharmacyclics Small Molecule Commercial $21,000 08/22/2016 Pfizer Medivation Small Molecule Commercial $14,000 06/17/2019 Pfizer Array BioPharma Inc.