1. February the 9th, 20071 biotech & beyond Serono Kelly BROWN Fehd CHAIRA Camille FREYBURGER Fouad ZIANI

2. February the 9th, 20072 Safe Harbor This is an independent study performed by students from the Faculté des Sciences Pharmaceutiques de Lille The opinions expressed are our own and not necessarily those of Serono

3. February the 9th, 20073 SUMMARY I. History II. Presentation of the Company III. Products IV. Pipeline of SERONO V. Problems on the horizon VI. Purchase of SERONO

4. February the 9th, 20074 I. History

5. February the 9th, 20075 Over a century of activity Key Dates: 1906: Cesare Serono founds the Istituto Farmalogico Serono (IFS) in Rome. 1948: The Vatican obtained control of the Istituto. Day-to-day management was in the hands Pietro Bertarelli

6. February the 9th, 20076 1949: isolation of the gonadotrophin, basis for Pergonal®. The beginning of a success story The birth of the world's first test-tube baby drives up sales of Pergonal®.

7. February the 9th, 20077 New perspectives 1989: Serono's first recombinant drug, the growth hormone Saizen®, hits the market. 1965: Fabio Bertarelli begins to take control after the death of his father. 1971: first international subsidiary in Boston. 1977: The IFS relocates to Switzerland, and becomes Ares- Serono

8. February the 9th, 20078 Leaving the boat 09-2006: The German Merck acquires Serono. 1996: Ernesto Bertarelli becomes CEO

9. February the 9th, 20079 II.Presentation

10. 10 SERONO’s importance Number 1 Biotech Company in Europe 3rd in the world !!!

11. February the 9th, 200711 SERONO’s importance REGULAR GROWTH OF THE REVENUES AND SALES

12. February the 9th, 200712 SERONO’s importance

13. February the 9th, 200713 SERONO BIOTECHNOLOGY CENTRE in Corsier-sur-Vevey 4750 around the world Executive headquaters : SERONO INTERNATIONAL SA in Geneva SERONO’s importance

14. February the 9th, 200714 SERONO’s objectives To Reinforce its position as biotechnology leader To Focus on diseases which lack treatment To Favour collaboration and partnerships To Grow through acquisitions « Unmet needs met »

15. February the 9th, 200715 III. Products

16. February the 9th, 200716 serono Neurology Reproductive Health Cetrotide ® Growth & Metabolism Saizen ® Serostim ® Dermatology Raptiva ® Therapeutic areas & main products

17. February the 9th, 200717 2005 Product sales by therapeutic area $M

18. February the 9th, 200718 Reproductive healthGrowth & metabilsmNeurologyDermatology: Rebif ® 98.2 % Gonal-f ® 82.6 % Saizen ® 74.3 % Raptiva ® 100%

19. February the 9th, 200719 Up to 2010 sales perspectives

20. February the 9th, 200720 Neurology Driven by Rebif ® with his extending blockbuster status. Multiple sclerosis Interferon Beta

21. February the 9th, 200721

22. February the 9th, 200722 2005 total revenues 1269,8 $M Rebif ® blockbuster drug 2005: sales increased by 15.1% 2004: increase of 33.1% 33.1% 15.1%

23. February the 9th, 200723 Neurology perspectives Objective : Objective : Improve Serono’s position in this therapeutic area basically by the first MS oral treatment : oral formulation of Cladribine. development of an interferon therapy administered by inhalation. Understanding the genetic basis of MS 2002: Serono aquire Genset and became: Serono Genetics Institute

24. February the 9th, 200724

25. February the 9th, 200725 Reproductive Health One of the world leaders with its unique portfolio. Recombinant versions of the three hormones used in the treatment of infertility. Lutropin alfa Choriogonadotropin alfa Follitropin alfa

26. February the 9th, 200726 Gonal-f r-h FSH market reached $1bn in 2005 lower market growth in volume & reduced average selling price

27. February the 9th, 200727 Growth and metabolism Serostim ® r-h GH * approved for HIV related unintentional weight loss *recombinant Human Growth Hormone Saizen ® somatropin Revenues 206.5 $M

28. February the 9th, 200728 2004 Raptiva's approval for the treatment plaque psoriasis Dermatology 33 $M ?!!

29. February the 9th, 200729 IV. Pipeline

30. February the 9th, 200730 R&D Pipeline

31. February the 9th, 200731 Small molecules Sapropterin dihydrochloride Phenoptin® Phehylalanine ammonia lyase Phenylase®Sapropterin dihydrochloride Phenoptin® Phehylalanine ammonia lyase Phenylase® Oral form: PAH cofactor (BH4= tetrahydrobiopterin) Treatment: Phenylketonuria (PKU) rare inherited disorders Orphan drug Fast track designation

32. February the 9th, 200732 Mecanism of action

33. February the 9th, 200733 To Enlarge others indications BH4 = cofactor for production of NO Developed with

34. February the 9th, 200734

35. February the 9th, 200735

36. February the 9th, 200736 Oncology Zanolimumab Humax-CD4® Fully Human anti-CD4 monoclonal anti-body Phase II & Phase III Cutaneous T-cell lymphoma Mycosis fungoides & Sezary Syndrome Non-cutaneous T-cell lymphoma Co-developed with

37. February the 9th, 200737 Depleting (ADCC) processes Non-depleting (anti-proliferative) processes Clinical response Mecanisms of action of HuMax-CD4

38. February the 9th, 200738 Adecatumumab Fully Human IgG1 antibody Target: EpCAM Development Status: – Phase I&II: hormone Refractory and early stage prostate cancer –Phase I&II: metastatic breast cancer Developed with EpCAM

39. February the 9th, 200739 Recombinant fusion protein Binds and neutralize –BLyS: B-Lymphocyte Stimulator – APRIL: A PRoliferative Inducing Ligand Developed with TACI-Ig Atacicept ®

40. February the 9th, 200740 AI Deases Oncology

41. February the 9th, 200741 Chemicals Proteins vaccines Chemotherapy Patway inhibitor Cellular therapy

42. February the 9th, 200742 V. BUT PROBLEMS ARE ON THE HORIZON…

43. February the 9th, 200743 BIG CHARGES OCTOBER 2005 : 725m$ ! in the issue of the US Attorney’s Office investigation 619.7 -105.3

44. February the 9th, 200744 MARCH 2006 : New complaint from GEHA We don’t know the issue yet  GOAL : always to increase its sales and benefits BIG CHARGES

45. February the 9th, 200745 the sentence indicates the exclusion of the company from all Health Progams in the US for 5 years EXCLUSION That limits the development !!!

46. February the 9th, 200746 SHARE INFORMATION SERONO violates the rules ! Several cases of infraction concerning the transactions’ publication WARNING from SWX

47. February the 9th, 200747 SERONO’s R&D takes 20 to 30 % of the revenues BREAKDOWN OF GROWTH Costs for the development and marketing for a new product : 400 m$ PB : 105 m$ of net loss income, so it’s hard to boost research SERONO is losing ground !

48. February the 9th, 200748 OCTOBER 3, 2005 Serono and Cancervax Corporation discontinue a Phase 3 clinical trial of CANVAXIN® 8.4m$ write-down of investment TIME FACTOR : generics for Rebif in 2 years Concurrence is coming, so prepare the counter-attack ! BREAKDOWN OF GROWTH

49. February the 9th, 200749 THE SOLUTIONS 2005: Goldman sachs has been retained to explore various strategic alternatives - Cede activities - Fusion with an other company - Proceed to acquisitions … To put up the company for SALE

50. February the 9th, 200750 VI. The Purchase

51. February the 9th, 200751 Merck or Merck

52. February the 9th, 200752 Merck KGaA

53. February the 9th, 200753 Merck group Presentation Two business sectors = five divisions Pharmaceuticals Ethicals Generics Consumer Health Care Chemicals Liquid Crystals Performance & Life Science Chemicals

54. February the 9th, 200754 Focus on two therapeutic areas  Oncology Erbitux® (cetuximab) Pipeline  Cardiometabolic disorders

55. February the 9th, 200755 Focus on two therapeutic areas  Oncology Erbitux® (cetuximab) Pipeline  Cardiometabolic disorders Concor® Glucophage® Niaspan® Euthyrox® Pipeline

56. February the 9th, 200756 R&D Pipeline

57. February the 9th, 200757 Cetuximab Erbitux ® Matuzumab EMD72000

58. February the 9th, 200758 BPL25 Liposome vaccine Stimuvax ® Cancer associated marker MUC 1 Generation of a immune response

59. February the 9th, 200759 Other R&D developments Failed: Sarizotan = treatment for dyskinesia in Parkinson’s Deases, stopped in phase III

60. February the 9th, 200760 The main acquisition criteria Achieve competitive scale in R&D Additional therapeutic areas focused on specialist markets Strengthen Oncology Expanded geographic reach with entry into US market and japan Criteria

61. February the 9th, 200761 Achieve competitive scale in R&D Additional therapeutic areas focused on specialist markets Strengthen Oncology Expanded geographic reach with entry into US market ans japan Adds R&D resources to get to EUR 1bn target Serono’s contributionCriteria The main acquisition criteria

62. February the 9th, 200762 Achieve competitive scale in R&D Additional therapeutic areas focused on specialist markets Strengthen Oncology Expanded geographic reach with entry into US market ans japan Adds R&D resources to get to EUR 1bn target Strong MS franchise and leading position in Reproductive Health Serono’s contributionCriteria The main acquisition criteria

63. February the 9th, 200763 Achieve competitive scale in R&D Additional therapeutic areas focused on specialist markets Strengthen Oncology Expanded geographic reach with entry into US market ans japan Adds R&D resources to get to EUR 1bn target Strong MS franchise and leading position in Reproductive Health Expertise in biologic process development and innovative biologic research pipeline Serono’s contributionCriteria The main acquisition criteria

64. February the 9th, 200764 Achieve competitive scale in R&D Additional therapeutic areas focused on specialist markets Strengthen Oncology Expanded geographic reach with entry into US market ans japan Adds R&D resources to get to EUR 1bn target Strong MS franchise and leading position in Reproductive Health Expertise in biologic process development and innovative biologic research pipeline Significant commercial presence in the US with sales of USD 767mio in2005 Serono’s contributionCriteria The main acquisition criteria

65. February the 9th, 200765 Achieve competitive scale in R&D Additional therapeutic areas focused on specialist markets Strengthen Oncology Expanded geographic reach with entry into US market ans japan Adds R&D resources to get to EUR 1bn target Strong MS franchise and leading position in Reproductive Health Expertise in biologic process development and innovative biologic research pipeline Significant commercial presence in the US with sales of USD 767mio in2005 Serono’s contributionCriteria The main acquisition criteria

66. February the 9th, 200766 Competitive scale in R & D €442m€471m 1216 R&D Investment (2005) Compounds in R & D 28 €931m

67. February the 9th, 200767 Oncology Diabetes Merck Additional therapeutic areas & Strengthen Oncology Oncology Repro. health Auto- immune Serono Neurologie Oncology Repro. health Diabetes Merck Serono Auto- immune Neurologie

68. February the 9th, 200768 Serono (36%) Merck Serono (20%) Entry into US market Merck Ethicals (2%)

69. February the 9th, 200769 The New Merck Serono SA

70. February the 9th, 200770 The begining The Transaction Bertarelli family: 64.5% of the capital and 75.5% of the voting rights The pricipale source of serono’s earnings is Rebif Any new drug in the market between 2007 and 2009

71. February the 9th, 200771

72. February the 9th, 200772

73. February the 9th, 200773 Merck Announces the acquisition The Transaction 09/2006 CHF 1,100 per share in cash Public tender offer at the same price to follow Acquisition price values Serono at CHF 16.6 bn (€10.6bn) value

74. February the 9th, 200774

75. February the 9th, 200775 Funding the acquisition The Transaction 09/2006 Merck KGaA mandated as Mandated Lead Arrangers for the €10.6bn Syndicated multi- currency loen. 01/2007 Merck raises the capital more than 2 billion euros 13.28 million new shares at 78.00 euros each Merck seeks buyer for its generics division

76. February the 9th, 200776 Official launch of The Transaction 01/2007 Official launch of Merck Serono S.A. & integration process begins: 25 integration teams consisting of about 170 integration managers Erbitux® production to be consolidated in Corsier-sur-Vevey

77. February the 9th, 200777 Conclusion Elmar Schnee : “Love wedding” Bertarelli : Winner of a Big transaction Merck have to realize its ambitions to ensure its future.

78. February the 9th, 200778 Have you got any questions