Patrick Vallance Head of Drug Discovery GlaxoSmithKline A Pharma perspective on healthcare needs and innovation in drug discovery Patrick Vallance Head of Drug Discovery GlaxoSmithKline

“We need to adopt a new mindset. We in big pharma should never take for granted our right to exist; our business model is not written into any country’s constitution. So we should be turning up to work every day with the mindset that we are earning the right to exist. We are earning it by meeting the expectations of society. When you start to think like this, you see the world differently.“ Andrew Witty, CEO, GlaxoSmithKline – Harvard, February 2009

Public trust is low Science in Society – DTI MORI 2005

The Challenges are Significant In the past 20 years modern drugs have revolutionised the practice of Medicine and the outlook for patients The unmet need remains high The bar is also high placebo changing expectations cost the public health agenda

Fabry’s Disease Pain throughout the body Impaired sweating Heat/cold intolerance Skin rashes (angiokeratomas) Corneal whorling Hearing problems Gastrointestinal problems Heart problems Kidney problems Nervous system problems Psychological issues

Large improvement in pain in Fabry’s Disease

Large improvement in pain in Fabry’s Disease Placebo Active

The Challenges are Significant In the past 20 years modern drugs have revolutionised the practice of Medicine and the outlook for patients The unmet need remains high The bar is also high placebo changing expectations cost the public health agenda

Scale-Up to Manufacture Post-Marketing Surveillance R&D for a New Medicine: 10+ years, $1 bn+ … a big challenge for addressing both developed and developing world diseases Drug Discovery Regulatory Review Scale-Up to Manufacture Post-Marketing Surveillance Preclinical Clinical Trials Phase I Phase II Phase III ~ 5,000 – 10,000 250 5 Compounds 1 Approved New Medicine Pre-Discovery IND Submitted NDA Submitted Number Of Patients / Subjects 20 – 100 100 – 500 1,000 – 5,000 0.5 – 2 Years 3 – 6 Years 6 – 7 Years Indefinite Sources: Drug Discovery and Development: Understanding the R&D Process, www.innovation.org; CBO, Research and Development in the Pharmaceutical Industry, 2006

R&D Productivity Gap Source: Burrill & Company; US Food and Drug Administration. Note: NMEs do not include BLAs

The realities of having the best pipeline Lehman Brothers PharmaPipelines (Sept 2007) Pharma Replacement Power – NPV Pipeline renews 60% of sales GlaxoSmithKline Merck Bristol Myers Squibb Novartis Johnson & Johnson Sanofi-Aventis AstraZeneca Pfizer Wyeth Eli Lilly Roche Abbott Labs Schering Plough AVERAGE LB Method: [NPV of recent launches (06-07) + NPV of pipeline opportunities from ‘08-’13] / NPV of products marketed before 2006. 11

Scale-Up to Manufacture Post-Marketing Surveillance R&D for a New Medicine: 10+ years, $1 bn+ … a big challenge for addressing both developed and developing world diseases Drug Discovery Regulatory Review Scale-Up to Manufacture Post-Marketing Surveillance Preclinical Clinical Trials Phase I Phase II Phase III ~ 5,000 – 10,000 250 5 Compounds 1 Approved New Medicine Pre-Discovery IND Submitted NDA Submitted Number Of Patients / Subjects 20 – 100 100 – 500 1,000 – 5,000 0.5 – 2 Years 3 – 6 Years 6 – 7 Years Indefinite Sources: Drug Discovery and Development: Understanding the R&D Process, www.innovation.org; CBO, Research and Development in the Pharmaceutical Industry, 2006

A disconnect between discovery and invention? New Medicines Scientific publications in biomedicine The opportunity has never been greater

Reintroduce Scientific Judgement

Evolution From Monolith External Resources CEEDD Virtualization of Drug Discovery CEDDs Pharma Internal Resources Centralized Control/Management De-Centralized Control/Management

How should we choose where to invest discovery effort? External Internal Scientific Opportunity Market size Pipeline strength Organisational structure Patient need

The Market 2006 Estimated Global Sales 90,000 80,000 The Lehman Brothers analysis of predicted global sales for 2006 does not include generic drugs and estimates that their database captures 80% of branded drug sales. 70,000 60,000 50,000 Global Sales $m 40,000 76,850 65,275 30,000 20,000 43,928 39,910 26,875 10,000 18,808 15,337 11,549 17,793 19,481 Diabetes Cancer CNS Inflammation Dermatology Genito-Urinary Haematology Respiratory Sexual Dysfunction Immune System Ophthalmic Drugs 2005 - 2010 Market Growth p.a. 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Diabetes Cancer Inflammation Dermatology Metabolism/Endocrinology Drugs Genito-Urinary Haematology Sexual Dysfunction Immune System Ophthalmic Drugs CNS Hormone Control Cardiovascular Respiratory Gastrointestinal Anti-Infectives Metabolism/Endocrinology Drugs Diabetes, cancer and inflammation projected to be the biggest growth opportunities Source: Pharma Pipelines – Strategic Analysis and Conclusions 2006 – Lehman Brothers

Public Funding

How should we choose where to invest discovery effort? External Internal Scientific Opportunity Market size Pipeline strength Organisational structure Patient need

Small integrated, empowered teams

Corporate Venture Fund Pharma partnerships New/expanded in 2008/2009 YTD 35 external engines 35 internal engines Corporate Venture Fund

Scale-Up to Manufacture Post-Marketing Surveillance R&D for a New Medicine: 10+ years, $1 bn+ … a big challenge for addressing both developed and developing world diseases Drug Discovery Regulatory Review Scale-Up to Manufacture Post-Marketing Surveillance Preclinical Clinical Trials Phase I Phase II Phase III ~ 5,000 – 10,000 250 5 Compounds 1 Approved New Medicine Pre-Discovery IND Submitted NDA Submitted Number Of Patients / Subjects 20 – 100 100 – 500 1,000 – 5,000 0.5 – 2 Years 3 – 6 Years 6 – 7 Years Indefinite Sources: Drug Discovery and Development: Understanding the R&D Process, www.innovation.org; CBO, Research and Development in the Pharmaceutical Industry, 2006

Leading the pack – ATM Index Source: Access to Medicines Index (Innovest) 23

DDW Partners – Tres Cantos