1. New drug approvals vs.Pharmaceutical R&D expenditures New drug approvals (dots), and pharmaceutical R&D expenditures (shaded area), in the United States from 1963 to 2008. R&D expenditures are presented in terms of constant 2008 dollar value. The trend line is a 3-year moving average. The source of drug approval data is the Tufts Center for the Study of Drug Development (CSDD). The source of R&D expenditure data is the Pharmaceutical Research and Manufacturers of America; Industry Profile 2009; conversion of actual expenses to constant dollars was performed by Tufts CSDD. Only 3 in 10 new products generate revenues equal to or greater than average industry R&D costs

2. Marketed Drugs Past: 500 Targets Discovery Present: 5,000 Targets The Pharmaceutical R&D Funnel Huge influx of new targets from genomics “Genomics Targets” incompletely validated Lead Generation and Target Validation bottleneck – cost-effectiveness problem Can cost $30-50 million to obtain POC Personalized medicine is likely to fragment the market High attrition accounts for high R&D costs: Failure consumes 75% of costs, and most of the “cost of failure” occurs in the laboratory, before the drug gets into the clinic 2 “No more low-hanging fruit”

3.  Pre-symptomatic detection  Pre-emptive action  Active monitoring Predisposition Early Risk Assessment / Screening Diagnosis Therapy Selection Disease / Therapy Monitoring  Targeted differential diagnosis  Pharmacokinetics / ADME  Adverse events  Predictive response  Disease management  Baseline risk – Lifestyle recommendation – Pre-emptive action Future SymptomaticAsymptomatic Prevention / Early InterventionBetter Treatment Outcomes DiagnosisTreatment Symptoms Current  Inadequate disease sub-typing  Misdiagnosis of complex diseases  Reactive  Advanced disease  Trial and error – First / second / third line treatments – Dosing Molecular Medicine changing the way medicine is (and will be) practiced 3 Courtesy Life Technologies, Inc.

4. FIPNet (fully integrated pharmaceutical network) model of drug development Shift from a fully integrated pharmaceutical company model of R&D, in which a sponsor “owns” the entire drug development process from synthesis to marketing, toward a networked model of innovation, sometimes referred to as a fully integrated pharmaceutical network, or FIPNet. FIPNets engage all the major stakeholders in the drug development process, melding the core competencies of each component to leverage capabilities, enhance efficiency, and boost output FROM: Deconstructing the Drug Development Process: The New Face of Innovation, 2010, KI Kaitin, Tufts Center for the Study of Drug Development, Tufts University, Boston, Massachusetts, USA.

5. Adapting to the New Exit Environment: the “Back-End Problem” 5 High Risk Long Timeframe Intermediate Cost ~ $10 MM Intermediate Risk Short timeframe Low Cost ~ $50 MM Lower Risk Intermediate time frame High Cost > $100 MM 6-8 yrs 2-4 yrs5 yrs Discovery/PreclinicalClinical POC/Phase III Ready Late Dev’t/Commercialization 15 yrs (Adapted from Steve Mayer, Former CEO CoGenesys ) Value Recognition The 90’s Model: Quickly moving drugs to the clinic, led to IPO and large increases in value Today’s Reality: Public markets reward late-stage opportunities, while Pharma reward Phase III Ready packages. Venture Fund Focus