1. Tools and Strategies for Launching a Successful Generic in Today’s Ultra Competitive Environment KATE KUHRT BERLIN SEPTEMBER 27, 2008

2. BEST OF TIMES… Population all over the world getting older Increase in the size of middle class in many countries Governments and employers promoting use of generic drugs in efforts to slow down increase in health care spending Increased acceptance of generic drugs by patients and physicians A number of blockbusters losing patent protection

3. …AND WORST OF TIMES Innovation drought ANDA backlog and authorized generics Pressure on prices and diminishing margins –Government regulation –Consolidation among wholesalers and retailers –Increased competition Generic filings and approvals at all-time high A number of new entrants, many from India, often with access to low-cost APIs Overcapacity in manufacturing Focus on market share rather than bottom line Authorized generics in the U.S.

4. ANDA APPROVALS BY INDIAN GENERICS Source: Newport Strategies’ Horizon Global system *Through August 15, 2007

5. 2007 YTD FINAL ANDA APPROVALS BY COUNTRY Source: Newport Strategies’ Horizon Global system *Through August 15, 2007

6. ARE THE GENERICS INDUSTRT’S GOLDEN YEARS OVER? Expectation that only the fittest will survive Coping strategies aimed at: –Reducing cost –Reducing risk –Improving speed to market –Differentiation –Achieving critical mass

7. COPING STRATEGIES: CONSOLIDATION Consolidation expected to continue in pursuit of –Top-line growth –Opportunities in new markets –Synergies Example: Barr’s acquisition of Pliva –Biogenerics –New dose forms –Presence in emerging markets –Access to API Result: Industry will likely be dominated by a handful of global players plus many small, focused players

8. LEAGUE TABLES ARE CONSTANTLY SHIFTING Source: TS Research

9. COPING STRATEGIES: GEOGRAPHIC DIVERSIFICATION: EUROPE Recent Examples –Barr-Pliva –Mylan-Merck Generics –Hospira-Mayne –DRL-Betapharm –Matrix-Docpharma –Ranbaxy-Terapia –Aurobindo-Milpharm –Alkem close to buying two firms in UK and Germany Pros –Counterweight to the U.S. market –Some markets still focused on branded generic –Rapid growth of pharma industry in E. Europe and Russia Cons –Some markets as competitive as U.S. –Generic uptake high at the expense of margins

10. COPING STRATEGIES: GEOGRAPHIC DIVERSIFACTION: JAPAN Pros –Japanese generics market seen as having a tremendous growth potential Currently 5% by value, 17% by volume Cons –Some still skeptical about actual market potential Difficult for foreign companies to do it alone –Acquisitions, JVs, and marketing agreements provide ready access to: Manufacturing Marketing Distribution relationships

11. Acquisitions –Zydus Cadila acquired a 100% stake in Nihon Universal Yakuhin in April 2007 Joint Ventures –In November 2005, Ranbaxy increased equity stake in Nippon Chemiphar from 10% to 50% Marketing Agreements –In August 2005, Lupin entered into a long-term marketing agreement with Kyowa Pharmaceutical –In March 2006, Hospira-Taiyo agreement to sell each other’s injection agents Additional companies to watch –Continued speculation that Teva will eventually acquire a Japanese firm –Rumors that one of the three large generics (Nichi-iko, Sawai, Towa) will come under part ownership by a large multinational –Torrent Pharma opened a fully-owned subsidiary in Yokohama in April 2006 –Dr. Reddy's considering setting up an office in Tokyo or Osaka COPING STRATEGIES: GEOGRAPHIC DIVERSIFACTION: JAPAN

12. COPING STRATEGIES: BACKWARD INTEGRATION INTO API Recent examples –Mylan-Matrix –Barr-Pliva Pros –More control over cost and access to API Decreasing number of established API manufacturers still independent due to M&A –Different parts of the value chain may make money in different products –Faster response times Cons –No one plant can make all APIs required by a typical generic –Making just enough for captive use often not economical –Other dose companies wary of buying API from a competitor

13. COPING STRATEGIES: MOVING MANUFACTURING AND R&D TO LOWER- COST COUNTRIES Applies to both API and dose Examples –Sandoz – multiple units in India –Teva – scientists in Faridabad, acquired Regent Drugs (JK) –Apotex – manufacturing and R&D facilities in Bangalore –Ratiopharm – R&D center in Goa –Stada – production sites in Russia, Vietnam (50:50 JV) and China –Perrigo – JV in China for ibuprofen –Actavis – API development facility and CRO in India Pros –Abundance of scientists –Cost savings Cons –Language barriers –Potential for intellectual property theft –Quality control

14. COPING STRATEGIES: ALLIANCES WITH COMPANIES IN LOWER-COST COUNTRIES Applies to both API and dose Manufacturing Examples –Alpharma-Shasun 2005 agreement for 10 finished dose products and undisclosed number of APIs –Actavis-Orchid 2007 agreement involving 9 cephs in Europe Development, manufacturing, and distribution agreement for 10 non-cephs in the U.S. Pros –Cost savings –Access to a diverse talent pool Cons –Longer response time to changes in market dynamics –Potential delays due to regulatory issues –Potential loss of IP –Challenges with managing long-distance relationships

15. COPING STRATEGIES: SOURCING API FROM LOWER-COST COUNTRIES Examples –Teva, Apotex, Watson has been sourcing from India for years –Indian companies increasingly sourcing out of China Pros –Cost savings –Many qualified API sources to choose from Cons –Many API sources with limited track record –FDA inspections more lax overseas? –Language barrier –QA costs –Potential shortages due to stricter enforcement of local environmental laws

16. COPING STRATEGIES: SOURCING API FROM LOWER-COST COUNTRIES (cont) Source: Newport Strategies Horizon Global ™ +2 +4 +2 +7 +33 Change from 2006

17. COPING STRATEGIES: FOCUS ON NICHE PRODUCTS Examples –Ranbaxy, DRL eyeing Bradley Pharmaceuticals (dermatology) Pros –Less competition –Margins in difficult formulations likely to remain higher Inhaled products, certain injectables, controlled release Cons –Even $20M products attracting interest –If multiple generics get involved, may not recoup investment –Costly barriers to entry for certain products

18. COPING STRATEGIES: INNOVATION New formulations –Andrx – Altoprev (controlled-release lovastatin) –Ranbaxy – Riomet (metformin oral solution) New molecules –Best known examples: Pliva – Zithromax (azithromycin), Teva – Copaxone (glatiramer) –Ranbaxy expects to be the first Indian pharma co to launch a new NCE (exp. 2011) Pros –Potential for big returns during patent and exclusivity period Cons –Original R&D very expensive and risky: It may take 1000s of failures before a successful NCE –Possible reimbursement issues and higher marketing costs for “generic plus” products

19. COPING STRATEGIES: PARAGRAPH IV PATENT CHALLENGES Pros –Generic companies can make a considerable amount of money during the 180-day exclusivity period –First-to-market generic company often maintains a big market share even after the end of the exclusivity Cons –Expensive and risky –Authorized generics and shared exclusivity reduce the potential payoff from the initial 180 days

20. PARAGRAPH IV PATENT CHALLENGES As of September 7, 2007, challenges on products encompassing –341 unique brand names –282 unique molecules or molecule combinations –48 unique dose forms In 2006, 27 molecules (or new combinations) first were exposed to patent challenges So far in 2007, 17 molecules (or combinations) have seen their first patent challenges Source: FDA, Newport Strategies Horizon Global ™

21. TOP 10 COMPANIES BY NUMBER OF PATENT CHALLENGES Source: Newport Strategies Horizon Global ™

22. IMPORTANCE OF API IN PATENT CHALLENGES Risk of supplier failure is high for companies involved with patent challenges –Even one day of delay can cost the company FTF status Risk is also high for API manufacturers –Generics may settle with innovators or do deals with other generics who use other API sources –If dose company is backward integrated into API, may switch to internal API source when convenient –If development starts too early, product may be withdrawn from market Backward integration into API may provide crucial advantages –Coordinated API and dose development –Coordinated regulatory submissions –Speedy addressing of any issues –Improved knowledge of polymorphs

23. INDIAN COMPANIES (*) ARE CLEARLY BASING THEIR PARAGRPH IV STRATEGY ON BACKWARD INTEGRATION Source: Newport Strategies Horizon Global ™

24. COPING STRATEGIES: SOPHISTICATED PRODUCT SELECTION Companies need to pick products for development very carefully –It is not enough to look at sales data! Pharmacodynamics Toxicity Country Regulations Pack Pricing Reimbursement Data Needs during Product Selection Approvals API Sources Company Data Manufacturing Capabilities Bioequivalence Stability Sales Dose Form and Strength Patents, Patent Challenges Labeling Chemistry, Synthesis Data Exclusivity Market Exclusivity Targeting Evaluation Deal Making Formulation Dev’t Registration & Review Launch L – 18 months L – 8 yearsL – 7 yearsL – 6 years

25. COPING STRATEGIES: SOPHISTICATED PARTNER SELECTION Companies need to pick partners and acquisition targets carefully Data Needs during Partner Selection Patent portfolio Patent challenge experience Approvals Backward/forward integration Current alliances Location Product portfolio Product pipeline Geographic reach Financials Regulatory experience Manufacturing capabilities

26. TOOLS TO TH RESCUE! Access global market, intellectual property and product info Predict key data in advance (e.g. competitiveness, generic launch date) Flexible, fast searching across multiple, exacting criteria Identify early, viable source of API supply and backup sources Spot in- and out-licensing capabilities Identify potential partner companies with multiple, exacting criteria Keep a watchful eye on potential acquisition targets and track competitors

27. THANK YOU! Kate Kuhrt Newport Strategies Thomson Reuters 215 Commercial Street Portland, Maine 04101 USA + 1 (207) 871-9700 x26 kaire.kuhrt@thomsonreuters.com