1. Confidential 1 Patent Filing Strategies for Pharmaceutical Products Robert Silverman Concert Pharmaceuticals NJIPLA December 2008 *Redacted for public/non-client distribution

2. Confidential 2 Reality of the Future: Success in the Biopharmaceutical Industry 300 – 400 Public 4,000 – 5,000 New Biotech 20 – 30 Product 10 – 20 Profitable 4 – 6 Growth Leading Biopharmaceutical Companies 3-4

3. Confidential 3 Global Filing Strategy – Considerations Need to protect a broad geographic market 2007 worldwide sales about $675 billion Most companies file in 50-70 countries for promising drug candidate Long development time before commercialization Discovery to market = 12-15 years Uncertainty in getting to market 1 in 5 compounds in Phase I obtain FDA approval Lengthy patent applications can be over 100 pages

4. Confidential 4 Patent Timelines Years012.5621 File US Provisional Application File PCT Application PCT National Stage - $$$ Patent Expiration Patent Grant EP Validation Phase - $$$

5. Confidential 5 Patent and Drug Development Timelines Years012.561121 PCT National Stage - $$$ FDA Approval Patent Expiration EP Validation Phase - $$$ Phase Preclinical23FDA Review1

6. Confidential 6 Global Filing Strategy – Basic Approaches Follow conventional wisdom (?) Largest markets approach Disregard cost of filing Relative Cost-Benefit approach Cover the most market per filing dollar Valuation approach

7. Confidential 7 Top Ten Pharmaceutical Markets + IMS Health Services * Based on a 100 page application with 25 claims 2005 Rank2002 RankCountry %World Market (2005) + PCT National Stage Costs (US Dollars)* 11U.S.A.44.40%3,323 22EPO29.13%9,857 33Japan10.61%15,605 44Canada2.38%2,353 56China1.64%8,700 65Mexico1.32%8,406 78South Korea1.30%10,762 87Brazil1.23%6,985 910Australia1.12%3,398 109India0.88%2,640

8. Confidential 8 Second Ten Pharmaceutical Markets + IMS Health Services * Based on a 100 page application with 25 claims 2005 Rank2002 RankCountry%World Market (2005) PCT National Stage Costs (US Dollars)* 1114Russia0.66%7,413 1211Taiwan (non-PCT)0.53%6,725 1316Argentina (non-PCT)0.36%3,834 1415Indonesia0.35%5,628 1513Venezuela (non-PCT)0.33%3,905 1623South Africa0.33%2,180 1719Norway0.28%15,691 18 Philippines0.26%2,220 1921Thailand (non-PCT)0.24%7,142 2017Colombia0.22%3,023

9. Confidential 9 Small Pharmaceutical Markets: 21st and Beyond 2005 Rank2002 RankCountry%World Market (2005) + PCT National Stage Costs (US Dollars)* 2112Saudi Arabia (non-PCT)0.20%7,468 2220Pakistan (non-PCT)0.20%2,334 23NAAlgeria0.18%8,970 2422Egypt0.15%4,799 25 Chile (non-PCT)0.15%2,985 2629New Zealand0.13%1,894 27NAUkraine0.11%9,077 2827Morocco0.10%10,052 2930Hong Kong0.08%1,755 3026Ecuador0.08%2,313 31 Bangladesh (non-PCT)0.07%1,607 3233Malaysia (non-PCT)0.06%1,854 3332Peru (non-PCT)0.06%4,696 3424Israel0.06%1,930 35NALebanon (non-PCT)0.06%7,450 36 Singapore0.05%1,693 + IMS Health Services * Based on a 100 page application with 25 claims

10. Confidential 10 Relative Cost – Benefit Analysis: Methodology Calculate Return Value Score for each country at PCT national stage and for non-PCT countries RVS = (Pharma Sales in Country)  (Patent costs) Normalize scores based on Japan = 100 Use RVS to select groups of countries

11. Confidential 11 Cost – Benefit Analysis: Information Resources World Pharmaceutical Market ($ Sales) IMS Health Services www.imshealth.com Patent Costs IP Global Estimator www.globalip.com 100 page patent application, 25 claims

12. Confidential 12 Relative Cost Benefit Ranking Based on RVS 2005 RankCountry Return Value Score (normalized) 1U.S.A.1964.8 2EPO434.5 3Canada148.7 4Japan100.0 5India48.8 6Australia48.7 7China27.7 8Brazil25.9 9Mexico23.0 10South Africa22.4 11South Korea17.8 12Philippines16.9 13Argentina (non-PCT)13.8 14Russia13.1 15Venezuela (non-PCT)12.6 2005 RankCountry Return Value Score (normalized) 16Pakistan (non-PCT)12.4 17Taiwan (non-PCT)11.7 18Colombia10.7 19New Zealand10.1 20Indonesia9.3 21Chile (non-PCT)7.2 22Hong Kong (non-PCT)6.9 23Bangladesh (non-PCT)6.5 24Ecuador (non-PCT)5.1 25Malaysia (non-PCT)4.9 26Thailand (non-PCT)4.9 27Egypt4.7 28Israel4.5 29Singapore4.3 30Saudi Arabia (non-PCT)4.0

13. Confidential 13 US, Europe, Canada and Japan Plus India, Australia, Brazil, Mexico and China Cost vs Market Coverage for Non-PCT National Stage

14. Confidential 14 Impact of Translation Costs Translations account for 46-72% of filing costs for 100 page patent application Translation savings do not greatly improve low RVS scores Thailand RVS = 4.9 Thailand RVS (with 50% lower translation costs) = 7.7 Norway RVS = 2.6 Norway RVS (with 50% lower translation costs) = 4.1

15. Confidential 15 PCT Filing Costs vs Market Coverage

16. Confidential 16 Millennium’s “A” List in 2005 US, Europe, Japan, Canada, China, Brazil, Mexico, South Korea, India, Australia, Russia, the Philippines, South Africa, Israel, Norway, Taiwan and Argentina “A” List represented 94.5% of 2002 world pharma market Country list is flexible

17. Confidential 17 2003 MPI Study. For important A patent applications, the benchmark group filed in countries representing 97.2% of the world pharma market, while Millennium filed in 94.5% of the world market. At the PCT national phase, MPI’s costs were 60% of the benchmark group costs, which was about $83,000 less per application. % Millennium Market Coverage and Costs vs Industry Average

18. Confidential 18 Where should we protect in Europe? European Union expansion from 15 to 25 countries (May 2004) Central and Eastern European Countries: Poland, Hungary, Czech Republic, Slovakia, Slovenia, Bulgaria, Ukraine, Lithuania, Belarus, Latvia and Estonia Combined market of 11 CEE countries < Spain Parallel imports and interdependence of markets 10 years marketing exclusivity in EU

19. Confidential 19 Country2005 Rank% World Market EP Validation Cost Return Value Score (normalized) France35.76%9,23892 Germany45.50%9,96981 Italy53.45%9,50653 United Kingdom63.42%1,122449 Spain72.64%10,38037 Turkey131.22%8,41621 Belgium160.80%1,30990 Poland170.78%8,59413 Netherlands190.65%13,2897 Greece200.62%8,22211 Switzerland210.59%1,36564 Sweden220.57%17,3145 Austria240.53%3,23724 Portugal250.51%10,3297 Hungary260.40%11,7585 EP Countries with Largest Market Size

20. Confidential 20 Country2005 Rank % World Market EP Validation Cost Return Value Score (normalized) Finland270.37%15,0364 Denmark320.31%14,6023 Czech Republic330.29%7,2806 Ireland380.23%1,45424 Slovak Republic470.12%6,9873 Bulgaria490.10%1,6539 Slovenia510.09%1,5089 Lithuania550.07%1,8806 Latvia650.03%1,2534 Luxembourg660.03%9865 Estonia680.03%8,353<1 No market data for Cyprus, Iceland, Liechtenstein, Monaco and Romania No market data for Albania, Bosnia and Herzegovina, Croatia, Serbia and Montenegro Small Market EP Countries

21. Confidential 21 Small Market Countries in the EU: Does Membership in the EU Matter? Parallel Trade within the EU No evidence that patent protection affects parallel trade Economic Growth Patent protection may be required to protect a growing market EU Pharma Legislation Less need for patent protection because EU pharma law requires 10 years of market exclusivity

22. Confidential 22 Using Net Present Value (NPV) PV =  CtCt (1 + r t ) t PV is present value C t is the cash flow in year t r t is the discount rate for year t NPV = PV – Patent Cost

23. Confidential 23 NPV Inputs Drug sales during window of patent-only exclusivity Window begins after regulatory exclusivity Country sales estimated from projected worldwide sales % Royalty (or margin) on sales Probability of success % Loss in sales due to generic competition Cost at EP Validation Phase

24. Confidential 24 Window of Patent-Only Exclusivity in the EU Patent Expiration and End of Marketing Exclusivity are independent events, but roughly coincide Years0611 21 European Marketing Authorization Patent Expiration EP Validation Phase - $$$ 26 End of Marketing Exclusivity Supplementary Protection

25. Confidential 25 Conservative Assumptions for NPV Analysis 5-Year window of patent-only exclusivity starting at year 15 after EP validation phase Annual worldwide sales = $1 billion 3% Probability of success (POS) 20% Royalty on Sales 80% Loss of sales due to generic competition Discount rate = 12%

26. Confidential 26 NPV (in $ thousands) of patent investment at the EP validation phase for a worldwide billion dollar drug NPV for Small European Markets

27. Confidential 27 Sensitivity Analysis for NPV of EP Patent in Slovakia

28. Confidential 28 Other Considerations Projecting Future Sales New drug will not reach market for many years Specific Disease Indications Market size varies depending on disease Obesity market not the same as HIV market Enforceability Difficult to factor Other Patents Covering the Product Interdependence of Some Markets Free trade may effect value of patent in some EU countries

29. Confidential 29 Robert Silverman Concert Pharmaceuticals 99 Hayden Ave, Suite 500 Lexington, MA 02421 RSilverman@concertpharma.com Thanks! Certain information has been redacted from this presentation to make it suitable for distribution to the public. Clients may obtain an unredacted copy on request.