What next for Life Sciences? Vir Lakshman CEO&CFO Gipfel BioDeutschland Reutlingen, Germany 3 rd December 2015
Big pharma is making deals, not drugs FINANCIAL TIMES November, 25th 2015
Life Sciences M&A completed deals 2005 2015 (US$ bn) 202 4 Amgen Onyx Pharmaceuticals $9.7 bn Perrigo Elan $8.5 bn Alexion Synageva $8.4 bn 252 2 23 52 Roche InterMune $8.3 bn 64 55 6 4 11 7 44 47 96 7 33 55 51 8 9 35 146 51 2 9 40 85 10 25 50 Gilead Pharmasset $11.0 bn 60 15 23 22 73 16 12 46 108 6 16 87 227 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 OCT 2015 Pharma Acquirer - Pharma Target Pharma Acquirer - Bio Target Bio Acquirer Source: Thomson One November 2015, KPMG Analysis All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 2
Life Scienes M&A # of completed deals 2005 2015 (by acquirer) 319 78 41 305 101 33 367 357 89 74 41 35 339 321 91 67 35 39 292 295 62 61 33 33 272 49 28 317 68 42 231 37 24 200 171 237 248 213 215 197 201 195 207 170 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 OCT 2015 Pharma Acquirer - Pharma Target Pharma Acquirer - Bio Target Bio Acquirer Source: Thomson One November 2015, KPMG Analysis All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 3
Biotech M&A # of completed deals 2005 2015 (by region) 99 21 24 106 103 16 20 30 39 101 94 17 28 32 22 87 19 22 78 74 19 14 64 8 19 26 16 86 17 32 Increase in Europe/ASPAC share 55 9 21 54 57 47 45 51 46 40 34 40 37 25 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 OCT 2015 Americas Europe ASPAC, Africa Source: Thomson One November 2015, KPMG Analysis All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 4
Acquisitions of Emerging Therapeutic and R&D Stage companies Number of acquisitions* Deal value in US$ bn (up-front payments only)* 46 45 16 10 30 35 39 7 32 51 15 36 39 40 42 10 13 15 29 27 27 40 16 24 49 44 17 11 32 33 17.2 17.6 19.9 11.3 9.4 12.6 8.2 8.6 4.6 25.9 19.7 14.6 9.6 11.6 6.2 4.9 5.8 Gilead Pharmasset $11 bn 15.3 23.0 Roche InterMune $8.3 bn 31.3 29.3 17.4 18.6 25.1 19.3 3.4 16.4 6.6 6.2 10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Preclinical to Phase III Marketed Preclinical to Phase III Marketed * Only deals > US$ 10m Source: Biotechnology Industry Organization June 2015, KPMG Analysis All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 5
Biotech IPOs on Western Exchanges $ raised & number of IPOs 2,5 Amount raised in US$ billion Count 31 35 2,0 30 24 25 1,5 1,0 0,5 0,0 19 15 17 16 16 13 2.1 1.8 1.8 1.4 7 6 6 1.2 5 5 4 1.1 0.9 3 3 0.8 2 2 0.5 0.2 0.3 0.3 0.3 0.1 0.2 0.2 0.1 0.1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 2015 20 15 10 5 0 Source: Evaluate Pharma July 2015, KPMG Analysis All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 6
FDA approvals and projected US$ sales 5 years after launch 30 25 20 15 28 29 26 31 Prevnar 13 (Pfizer Inc.) Victoza (Novo Nordisk) Prolia/Xgeva (Amgen) 34 26 35 Eliquis (BMS/ Pfizer) Stribild (Gilead) Xarelto (J&J / Bayer) Eylea (Regeneron / Bayer) 43 Sovaldi (Gilead) Tecfidera (Biogen) 35 Opdivo (BMY) Harvoni (Gilead) Orkambi (Vertex) Ibrance (Pfizer) 50 50 60 50 40 30 10 5 0 7 9 4 6 6 9 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 EST. Sales 5 years after launch (US$ Bn) 11 No of FDA Approvals 14 24 22 19* 20 10 0 * $11 bn YTD (July), $18.6 bn Potential Biotechnology companies are italicized Source: Evaluate Pharma July 2015, KPMG Analysis All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 7
Development of regional Life Sciences indices 2005-2015 Index (base year 2010 = 100) 275 250 225 200 175 150 125 100 75 EM: 171% US: 152% Europe: 141% World: 54% EM: -12% US: -3% Europe: -10% World: -5% 50 01/2005 01/2006 01/2007 01/2008 01/2009 01/2010 01/2011 01/2012 01/2013 01/2014 01/2015 MSCI World Index MSCI Europe Pharma Biotech&Life Sci Index MSCI US Pharma, Biotech&Life Sci Index MSCI Emerging Markets Pharma, Biotech&Life Sci Index Source: Bloomberg November 2015 All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 8
All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 9
Value-based pricing reforming Life Sciences FFS VBP FEE FOR SERVICE VALUE-BASED PRICING Traditional volume-based fee-for-service payment Payment for visit Payment for prescription Outcome and patient-centric metrics for payment All-inclusive care packages (e.g. a year of diabetes care) Payment for surgery All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 10
Value-based pricing in context of The New York State DSRIP DSRIP Delivery System Reform Incentive Payment Transformation of the NYS Medicaid Healthcare Delivery System Improve core population Improve patient outcomes 90% value-based payments by 2020 All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 11
When is VBP appropriate? FFS VBP Evidence-based, outcome-focused disease management No generic versions Need to differentiate products Reimbursement challenges require innovative pricing strategy All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 12
VBP needs Real World Evidence 1 2 3 All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 13
Real World Evidence along the Life Sciences value chain REVISITING FAILED DRUGS BUSINESS INTELLIGENCE PERSONALISED MEDECINE 3-D PRINTING Population Discovery and Development Manufacturing Sales & Marketing Patient PRODUCT PERFORMANCE ADVANCED ANALYTICS BETTER TRIAL DESIGN AND ANALYSIS PREVENTIVE MEDECINE All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 14
Making drugs, and deals Deal drivers Market consolidation Asset swaps Portfolio shifts / optimization Patent cliff Strong valuations Geographic expansion Cheap funding Tax inversion All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International. 15