The Academic Contribution to Drug Development Roger M. Perlmutter Executive Vice President, Research and Development

An Innovation Deficit in Pharmaceuticals? The number of new chemical entities produced by the top 50 pharmaceutical companies is too small to sustain the healthy growth of this group New technologies (e.g. genomics, combinatorial chemistry, etc.) do not appear to have had a major impact on the provision of new drugs by the industry so far Jurgen Drews, DDT 3: 491, 1998 For Internal Use Only. Amgen Confidential.

R&D Expenditures in the Biopharmaceutical Industry Have Soared Since 1980. . . CAGR = 12% Source: PhRMA Annual Survey 2009

. . .and Fewer New Drugs are Emerging: We are Spending More and Achieving Less Approved Drugs (NMEs) and PhRMA Member R&D Spend PhRMA R&D spend ($B) NMEs Sources: Burrill & Company, Biotech 2008 Life Sciences: A 20/20 Vision to 2020, 22nd Annual Report on the Industry; PhRMA annual membership survey (2009)

The Evolving Challenge Profile of the Therapeutics Industry 4/16/2017 Few interesting targets Room for many drugs Strong intellectual property Complexity Challenge Pace Thousands of targets Declining success rates Rapid generic penetration Devastating product failures 1980 1990 2000 2010 2020 For Internal Use Only. Amgen Confidential. Amgen 2007 D&O Template

“Glaxo’s Witty Says Nine Top Drugmakers May Fail”, Times Reports* Nine of the top 15 drugmakers will “wither” or “get taken out” in the next five years About half a dozen of the biggest pharmaceutical companies may survive as patents expire and business strategies are “tested to destruction” *Quoted in Bloomberg News, October 2, 2010

Contemporary Estimates Paint a Grim Picture of Future Industry Profitability Rx Revenues New Products R&D Spend ’89-’98 $230B ’97-’04 $387B ’99-’08 $537B ’07-’14 $244B Total of 15 BioPharmaceutical Companies Source: Lazard estimates

The View from Investment Bankers: “Pharmaceuticals: Exit Research and Create Value” - - Morgan Stanley

Since 1980, Biopharmaceutical Companies have Largely Abandoned Discovery Research. . . Percentage of Total PhRMA R&D Expenditures Source: PhRMA Industry Profile Reports

. . .but are These Companies Capable of Supervising Drug Development? Most industry investment in R&D appears to be wasted The vast majority of industry investment is spent on clinical research (i.e. development) A 30-year perspective suggests that industry is not solving this problem on its own

Industry and Academia: Why We May Need Each Other Academic investigators cannot easily pursue high-quality clinical development Teamwork is undervalued in universities Difficulty in maintaining a compliance focus Careerism undermines development intent Little penalty for failure Industry investigators have their own problems Inherent conservatism - - the penalty of prior success Priorities set in the context of commercial assessments High penalty for failure, hence novel programs suffer No company has proved capable of refilling its pipeline

Why Might Academic Organizations Now be Able to Pursue Drug Discovery? Industry, burdened with P&L considerations, has need to out-license NCEs that do not fit within their central focus Improved methods of patient stratification offer the promise of increasing efficiency in clinical trials Skilled contract research organizations can assume the burden of maintaining GCP compliance But – do university physicians really want to develop drugs?

Denosumab Blocks Bone Resorption by Binding to a Pivotal Regulator, RANKL CFU-M Denosumab Y Colony-Forming Unit Macrophage OPG Y Pre-Fusion Osteoclast RANKL RANK Growth Factors Hormones Cytokines Y Multinucleated Osteoclast RANKL Y Activated Osteoclast Osteoblast Bone Osteoclast Activated Osteoclast Formation, Activation, and Survival Inhibited 11

Can a university tenure ladder accommodate this sustained commitment? Development of Denosumab Required 15 Years of Investment Discovery of target Selection of a clinical candidate Clinical exploration Registration-enabling studies 1995 2010 Can a university tenure ladder accommodate this sustained commitment? Can staff members be retained throughout this period? 13

The Evolving Challenge Profile in Drug Development May Favor Academic Researchers 4/16/2017 Complexity Pace Expense Uncertainty Observational anecdotes Low efficacy hurdle Few targets Little incentive for improvement Powerful new research technologies Many, better targets High-quality clinical data Evolving focus on personalized medicine 1980 1990 2000 2010 2020 15 Amgen 2007 D&O Template 15

The Academic Contribution to Drug Development Roger M. Perlmutter Executive Vice President, Research and Development