1. Managing Medical R&D Defining and Realizing Clinical and Commercial Value David J. Wierz Senior Director Commercial Investment & Pricing Strategy Wyeth-Ayerst Pharmaceuticals

2. 27 February 2001Economics of the Healthcare Industries2 Managing Medical R&D Considerations Can and How Should Medical R&D Be Managed? How Can Investment Decisions be Structured and to Best Use Human and Financial Resources? What Business Model(s) Best Support the Commercial Necessity for Sustainable Medical R&D?

3. 27 February 2001Economics of the Healthcare Industries3 Managing Medical R&D Factors For Managing Internal Medical R&D in Corporate Activities Commercial Process in Medical R&D Integrating Academic and Medical Center Research Working with Virtual or Perpetual Early Stage Firms Creating and Maintaining Shareholder Value Public Health and Disease Prevention Individual Incentives and Compensation

4. 27 February 2001Economics of the Healthcare Industries4 Managing Medical R&D Development The Process of Medical R&D Defining and Realizing Opportunities Commercialization Discussion

5. 27 February 2001Economics of the Healthcare Industries5 The Process of Medical R&D Definition Scope Basic Science and Technology Discovery Feasibility - Toxicology and Pharmacology Development Life Cycle Management Scale Traditional Chemistry and Bio-Chemical Activities Bio-Tech Plus Gene and Protein Therapies Information Science

6. 27 February 2001Economics of the Healthcare Industries6 The Process of Medical R&D Objectives Corporate Identify and Expedite Commercialization of New Therapies Optimize Use of Corporate Resources Deliver Products with High Commercial Value Create Sustainable Processes and Platforms for Ongoing Work Clinical and Social Address Unmet Medical Need Enhance Individuals’ Health Status Affect Prevalence and Progression of Disease

7. 27 February 2001Economics of the Healthcare Industries7 The Process of Medical R&D Traditional Execution Linear Process Screening Discovery Development Commercialization Life Cycle Management Chemical or Bio-Chemical Basis Molecular Orientation Mass Application Ex-Post Commercial Assessment

8. 27 February 2001Economics of the Healthcare Industries8 The Process of Medical R&D Traditional Structure Scientific Model of Research Teams Vertically Integrated Dedicated Resources for All Activities From Screening Through Life Cycle Management (LCM) Focus on Disease States Associated - Not Necessarily Integrated - Commercial Assessment and Guidance on Development and LCM Resource Allocation by Project Employ Total Funding Construct

9. 27 February 2001Economics of the Healthcare Industries9 The Process of Medical R&D Traditional Structure Ramifications Funnel Model of Medical R&D –Emphasis on Maximizing Candidates to Gain Products –Broad Disease-Based or Mass Market Application Science Driven Commercialization –Limited Understanding of Medical Need –Transom Effect Sub-Optimal Investing - People, Funds and Products

10. 27 February 2001Economics of the Healthcare Industries10 The Process of Medical R&D Evolving Structures Objectives Better Target Resources –Practical Unmet Medical Need –Commercial Opportunity –Regulatory Requirements –Practical Considerations - Manufacturing and Use Better Execute R&D Processes –Enhance Candidate Selection in Screening and Discovery –More Closely Link Trials to Desired Profile

11. 27 February 2001Economics of the Healthcare Industries11 The Process of Medical R&D Evolving Structures Objectives Fully Leverage New Technologies –Access to Expanded Chemical –High Through-Put Screening –Gene Targeting –Protein Targeting and Therapy Enhance the Efficiency of the R&D Process –Viable Candidates –Clinically Successful Agents –Commercially Meaning Products

12. 27 February 2001Economics of the Healthcare Industries12 The Process of Medical R&D Evolving Structures Function Focus on Body Systems in Addition to Morbidities Increase Activity in Screening and Discovery –Application of Bio-Markers –Expanded Use of Biological Models Integrate Commercial Assessment into Development –“Early Crafting” of the Product Profile –Apply Scientific & Commercial Marketing Supporting R&D –Focus on Maximizing Life Cycle Revenues

13. 27 February 2001Economics of the Healthcare Industries13 The Process of Medical R&D Evolving Structures Form Traditional –Strategic Business Units –Therapy Area Teams Evolution –Marketing Hybrid –Entrepreneurial Discovery - or - Dynamic Funnel

14. 27 February 2001Economics of the Healthcare Industries14 The Process of Medical R&D Evolving Structures Emerging Effects Clinical –Use of Platform Technologies –Rationalize Screening and Discovery –Leverage Resources Across the Corporation –Application of Gene and Protein Markers –Markers or Surrogates –Diagnostics –Therapeutics –Enhanced Commercialization –Speed to Market –Value of the Product

15. 27 February 2001Economics of the Healthcare Industries15 The Process of Medical R&D Evolving Structures Emerging Effects Commercial –Direct Involvement in R&D Decisions –Unmet Need and Commercial Potential –Target Profile Optimizing Commercial Opportunity –Emphasis on Pre-Launch Marketing –Clinical Education –Therapy Application –Deployment to Mass Customization –Product Marketing –Life Cycle Management

16. 27 February 2001Economics of the Healthcare Industries16 Defining and Realizing Opportunities Resource Allocation Defining Commercial Potential Unmet Need Untreated Need Need Based on Current Practices and Behaviors Defining Investment Strategies Recognize Dynamics in Technology and Product Development Full Investment Context Contingent Investment Model - Real Options

17. 27 February 2001Economics of the Healthcare Industries17 Commercialization Medical R&D Business Model Traditional R&D Team or Franchise R&D Hybrid R&D Variations Commercial Ramifications Role of the Current Pharmaceutical Firm Structure and Function of R&D Effect of Sales and Marketing Integration of Internal and External Resources

18. 27 February 2001Economics of the Healthcare Industries18 Managing Medical R&D Discussion