Overview of the Phase I Market Ken Getz Tufts CSDD; CISCRP October, 2010

Agenda Overview of the Drug Development Landscape The Phase I Market Key Market Trends Optimization Opportunities 2

Commercialization Conditions Restrictive price controls Healthcare reform uncertainty and adverse impact Depressed global markets High-level of revenue at risk R&D Operating Conditions Low success rates Declining levels of innovation Rapidly rising R&D costs Regulatory conservatism Public discontent Overview of the Drug Development Landscape

Declining Rate of Innovation per R&D Dollar Source: Tufts CSDD Approved NCE Database, PhRMA, 2008 R&D expenditures adjusted for inflation R&D Expenditures New Drug Approvals * Trend line is 3-year moving average

R&D Cost Drivers Chronic and complex indications Clinical trial size Protocol design complexity Patient recruitment/retention High cost discovery/research tools Regulatory demands Market oriented studies Late-stage attrition

Downsizing and Consolidation Source: WSJ Announced and Planned Layoffs ( )

Annualized Growth Total Global Development Spending $27.3$33.6$41.5$49.6$ % Total Spending on Contract Clinical Services* $3.7$4.9$6.4$8.5$ % Outsourcing Demand * ($US Billions) *Note: Does not include pass-through clinical services (e.g., central lab fees, investigator grants) Source: TCSDD

Distribution of FDA-Regulated Investigators Percent of Total 1572s Filed Sources: Tufts CSDD

Protocol Complexity 11 Phase I Phase II Phase III Phase IV Unique Procedures (mean) Growth in Unique Procedures 35.10% 35.60% 42.1% 63.20% Total Procedures (mean) Growth in Total Procedures 13.40% -1.30% 10.9% -2.4% Total Work Burden (mean) Growth in Total Work Burden 70.20% 32.80% 59.7% 58.10% Note: Growth rates reflect the change in mean values of protocols in and Source: Tufts CSDD

US $ in Billions Total Global Phase I Spending US $ in Billions Source: Parexel Sourcebook CAGR 15.6%

Number of Active Phase I Drugs in Development Worldwide CAGR = 10.2% Source: Parexel Sourcebook

Clinical Research Phase Comparisons 5 Year Annual Growth Rates (2005 to 2010) Products in Development Development Spending Phase I10.2%15.6% Phase II8.0%8.3% Phase III5.9%11.5% Sources: Parexel International

Development Pipeline by Phase Source: Parexel International

Active Phase I Drugs by Major TA Therapeutic Area Oncology Immunologics Digestive System Drugs Endocrine System Drugs Anti-Infectives Vaccines & Antidotes Cardiovascular System Drugs Analgesics & Anti-Inflammatory Agents Bone, Cartilage, Connective Tissue System Drugs Psychotropics & Neuroleptics Respiratory System Drugs Dermatomucosal System Drugs Motor System Drugs Source: IMS R&D Focus

Distribution of Active Clinical Trials Phase I Phase II Phase III Phase IV N. America76%64%38%47% WEurope14%22%32%31% EEurope5%6%10%7% Asia4%5%11% SC America1%3%9%4% Source: Opperheimer 2008 Analysis of Clinicaltrials.Gov,

Market Share in 2009 of Global Phase I Facilities Sources: Tufts CSDD

Facility Locations Source: Company PublicationsLocation Average Number of Beds n Africa892 Asia549 Canada1547 Europe5918 US8923 Middle East271 Worldwide8160

Key Trends Shaping the Phase I Market Heightened safety concerns Emphasis on hospital and in-patient-like settings Shift to US and Canada for time and cost advantages post EU Directive Increasing proportion of patients vs. healthy volunteers Modified and combination protocol designs Transfer operating risk to CROs Growing receptivity and entry by for-profit, community-based investigative sites Source: Tufts CSDD interviews

Source: PhRMA Industry Profiles Clinical Personnel Growth

Phase I Spending Overall and for Outsourcing (US $ in Billions) Source: Jeffries & Company

Total Direct Cost per Patient by Phase ( ) Source:TTC

Two Optimization Opportunities

Supporting Investigative Sites for Success 25 Sources: TCSDD Survey of 3,516 Sites, 2010

1991 Committee on Competitiveness o Pharmaceutical and Biotechnology industries are national treasures o Most innovative and productive relative to other R&D-intensive industries o Saves lives and lowers the burden of health care costs o Most financially healthy (robust revenue and profit) o Major contributor to the economy

Public Confidence and Trust in the CRE General Public Attitudes Perceptions of Clinical Research Professionals 70%-83% of Americans believe clinical research is ‘very important’ or ‘essential’ to advancing public health 65% of Europeans believe that clinical research plays an important role in advancing public health 42% of Americans and 36% of Europeans distrust biopharmaceutical companies 31% of Americans believe the FDA is effective at ensuring public/patient safety 25% of Americans and 17% of Europeans believe that PIs and study staff are primarily motivated by greed Sources: Research!America (JAMA, 2005); Ohmann (2004); HarrisInteractive (2002, 2004, 2007)

By Extension… Study Volunteers ‘Who makes a better contribution to mankind?’ Source: CISCRP, 2006; N=900 Desperate (~29% believe only seriously-ill participate) Risk Takers (80% believe participants are ‘gambling’ with their health) Ambivalently respected (34% ‘Don’t Admire’ study volunteers)

CISCRP: Collective Public and Patient Outreach SUSTAIN (Community of Participants and Ambassadors) ENHANCE (General Education and Awareness) RECRUIT & RETAIN ENABLE (Support Network and Tools) AWARE for All ‘Medical Heroes’ PSA Media Outreach Science Museums Speakers Bureau Search Clinical Trials Legislation Social Media Outreach CISCRP Membership Post Trial Communication Patient Ambassadors Site/CTSA Support HC Provider Education Pharmacy-directed education ‘Voice of the Patient’ Medical Community Outreach

Impact of Protocol Complexity and Burden (All TAs, All Phases) Less Complex Protocols More Complex Protocols Difference Number of case report form pages per protocol (median) % Study volunteer enrollment rates75%59%-21% Study volunteer retention rates69%48%-30% Time from Protocol Ready to last patient last visit (LPLV) 413 weeks714 weeks+72% Number of Amendments % Source: Tufts CSDD

Conclusions Current drug development landscape necessitating major changes in how global clinical research will be conducted Phase I market an area of unprecedented change and opportunity to improve drug development performance and efficiency – Volume of activity – Economics – Structure Opportunities to improve Phase I success – Patient/public outreach and education – Protocol design simplification 31

Ken Getz Senior Research Fellow, Assistant Professor Tufts CSDD, Tufts Medical School , Founder and Board Chair CISCRP , THANK YOU!