1. IP status – the partner’s view Yael Weiss Medical Director MSD Israel

2. 2 Rules of thumb Strong IP (not use patents, ability to expand and maintain IP) Novelty Ability to incubate and mature project in house because of “The later the better” concept: mandatory – proof of concept in vivo Partnership for collaboration and further/future development (depending on type of deal) Strategic fit (less relevant in case of VC’s)

3. 3 Collaboration with Emerging Scientific Markets Objectives Identify ex-U.S. markets with high potential for I.P assets, entities and technologies in pharma-related R&D: –NCEs: novel chemistry; known MOA (is highly preferred, but not essential); proof of concept; validated in vivo –NBEs: proof of concept; validated in vivo –Platforms: HTS; assays; informatics; drug delivery; molecular profiling Source: MRL External Scientific Affairs - Strategy for Growth (Presentation by Dr. Lew Mandel)

4. 4 Projects at MRL: Product Types New Chemical Entity (NCE) – Small molecules: Novel chemistry - single enantiomer with Mol. Wt. 200-800 Product patent (vs. use) & worldwide Defined biochemical mechanism (potent & specific) Proof-of-concept in at least one animal model (oral activity, low dose) Favorable PK & few metabolites First- in-class or best-in-class is ideal New Biological Entity (NBE) – Therapeutic proteins: Characteristics (fully human, high binding affinity, low toxicity/immunogenicity) Patent (composition and use) Targets (ID, Cancer, Inflammation); or, where small molecules do not work Flexibility (antagonist or agonist, single chain, may be bispecific) Administration (IV or SC, minimal infusion reactions) Manufacture (ease of production, reasonable cost of manufacture) Source: MRL External Scientific Affairs - Strategy for Growth (Presentation by Dr. Lew Mandel)

5. 5 Collaboration with Emerging Scientific Markets Factors Considered Include: Research centers with strongest scientific disciplines Publications and patents Number of scientists engaged in academia and industry Level of government support & R&D incentives Local on-the-ground support Potential Interactions Include: Acquire new lab methodologies Purchase sample collections Establish basic research collaborations Chemistry Outsourcing Optimize an early lead compound License-in a specific NCE or NBE Source: MRL External Scientific Affairs - Strategy for Growth (Presentation by Dr. Lew Mandel)

6. 6 Academic Environment: Knowledge Capital Notes: * Leading magazines; Nature, Science, The Cell Source: Monitor Report, PubMed/Medline Database, “Technology Profile Report, Patent Examining Technology Center Groups, 1630-1660, Biotechnology” US Patent & Trademark Office, 2001 Publications of Life Science Research in Leading Magazines* per 100, 000 Inhabitants (1999) US Patents Granted in Biotechnology by Origin of Inventor per 100, 000 Inhabitants (1999)

7. 7 Academic Environment: Knowledge Capital Total of 210 projects. Source: Technology Transfer Companies web sites and company web sites Applied Research Projects in the Academia & Hospitals Available for the Industry (2003)  86% of the projects are in the academia  14% of the projects are in the Hospitals  Yissum of the Hebrew University & Yeda of the Weizmann Institute hold almost 60% of all the available projects.  In the Biotechnology industry in Israel, especially in the therapeutics and bioinformatics segments, almost 50% of all the companies and projects are based on knowledge created in the academia and transferred to the industry. The rest of the industry is mostly based on independent ideas of local and newly immigrating scientists  Alternative sources of knowledge can be found mainly in the medium/big companies, where some knowledge is created in-house or in-licensed from foreign companies  Companies created by spin-offs are very few

8. 8 Government Support: Many Different Initiatives “Nofar” Pre-Seed Grant for applied Bio-Research in Academia Grant (without Royalties) 90% up to $ 100 K over 1 year “Incubator” Pre-Seed Grant & Infrastructure for Start-ups Grant with Royalties reimburse 85% up to $ 300 K over 2 year “Tenufa” Pre-Seed Grant for Entrepreneurs Grant (without Royalties) 85% up to $ 50 K Academia Industry “Magneton” Technology Transfer from Academia to Industry Grant (without Royalties) 66% up to $ 0.5 M over 2 Years “Magnet” Consortium for Developing Platform Technologies Grant (without Royalties) 66% over 3 years “Haznek” Seed Fund for Start-ups Convertible Bonds ………………….. with option to investor 50% up to $ 1 M over 2 Years “Bio-Incubator” Seed Grant & Infrastructure for Biotech Start-ups Convertible Bonds 75% up to $ 1.35 M over 3 year “Bi-National” & “International” Funds for industrial collaboration Grant with Royalties reimburse 50% up to ~ $ 0.9 M (BIRD-F) Support for R&D based Companies Grant with Royalties reimburse 20-50% Support for Long Term R&D Big-Companies (with manufacturing) Grant (without Royalties) 50% up to $ 15 M Incentive for Approved Factory (in regular & preferred location) Grants with Royalties reimburse Tax exemptions Pre-Seed Seed Mature “Privatized-Incubator” Grant & Infrastructure for Start-ups Convertible Bonds 85% up to $ 500 K over 2 Years Source: Ministry of Industry & Trade (www.moit.gov.il)

9. 9 How are we perceived? UpsideDownside (well recognized)(areas for improvement) GeneralEntrepreneurialCulture difference InnovativeDistance Basic researchHigh qualityMostly very early stage Governmental fundingIP (?) Clinical trialsVery high qualityCosts increasing MarketingReceptive to innovationSmall and limited market IP and data protection issues

10. 10 Projects at MRL: Therapeutic Areas Top Priority includes: Obesity Alzheimer’s disease Cancer Biologics High Interest: Neurological Disorders: anxiety, cognition, depression, schizophrenia, Parkinson's diseases Metabolic Diseases: type II diabetes Infectious Diseases: anti-bacterial, anti-fungal, anti-viral & vaccines Cardiovascular Diseases: atherosclerosis, hypertension, atrial arrhythmia Respiratory Diseases: asthma, chronic bronchitis & COPD Immunological and Inflammatory Diseases: autoimmune diseases, chronic pain, osteoarthritis & rheumatoid arthritis Ophthalmology Osteoporosis Opportunistic: Gastroenterology Also: Imaging techniques to follow response to therapy, animal models of disease, platform technologies Source: MRL External Scientific Affairs - Strategy for Growth (Presentation by Dr. Lew Mandel), phone conversation with GW

11. 11 Backups

12. 12 Merck Research Laboratories: Facts & Figures Merck Research Laboratories (MRL) is the R&D division of Merck operating at multi-locations world wide, with nearly 10,000 employees. Merck had a research budget of $3.2 Billon in 2003. The accomplishments include: –Over 1000 scientific papers published each year –About 250 new patent applications filed each year –16 new drug applications (NDA) approved in past 7 years Actively pursue of external relationships to complement internal research Source: MRL External Scientific Affairs - Strategy for Growth (Presentation by Dr. Lew Mandel)

13. 13 Merck Research Laboratories: Strategy Select major medical targets Select the right target by understanding the mechanism to improve existing therapies Focus on the new chemical entity (NCE) Shorten length of R&D at the research & pre-clinical development Discriminate between projects as they progress through development, with a rapid proof-of-concept tested clinically Establish the best scientific program in the area by either internal research, external collaborations, or both Partner & collaborate with top R&D organizations, to support future growth, by a wide range of relationships: from licensing through joint ventures Source: MRL External Scientific Affairs - Strategy for Growth (Presentation by Dr. Lew Mandel)

14. 14 Projects at MRL: Technology Areas Research Technology Platforms Lead discovery technology: HTS, robotics, assays, imaging, chemistry, structural biology Lead optimization technology: ADME, Pharmacokinetics Drug Delivery Systems: Oral drug delivery for enhanced bioavailability Inhalation delivery Formulation technology - controlled release/ fast dissolve Vaccine adjuvant delivery Molecular Profiling Platforms Informatics and Databases Gene Monitoring Modifying Genes Model Organisms Protein Analysis Samples and Pharmacogenomics Source: MRL External Scientific Affairs - Strategy for Growth (Presentation by Dr. Lew Mandel)

15. 15 The deterioration in Israel’s IP regime 1998 - 2005 1998 – Amendment to the patent law to allow experiments on patent protected products. 2000 – Israel does not adopt data exclusivity despite its commitment under TRIPs 2004 – Government proposes a marketing exclusivity bill which falls far short of international standards. 2005 – The Government proposes to amend the patent law and considerably shorten the patent extension period.