1. Copyright © 2006 by Applied Strategies Consulting. All rights reserved. Applied Strategies Consulting 400 S El Camino Real, Suite 375 San Mateo, CA 94402 650-401-3000 (MAIN) 650-401-3030 (FAX) www.appliedstrategies.com Advance Market Commitments Financial Implications & Risk Model Overview Technical Working Group September 7, 2006 Rome, Italy

2. 1 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 Advance Market Commitments Supplier Perspective The goal of vaccine suppliers is to recoup their substantial investment in vaccine development within a reasonable timeframe To make credible investment decisions, suppliers utilize industry best practices that: –Clearly define the investment opportunities –Identify the timing and risks of development –Explicitly assess the costs (e.g., development, manufacturing) –Analyze numerous competitive market scenarios –Consider all investments in the context of their overall portfolio Suppliers will employ this methodology when considering an AMC

3. 2 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 Suppliers have a well established decision-making process for development investment –Suppliers make a Go/No Go decision at each development step –Each Go/No Go decision is made with forward looking value analysis Each supplier will evaluate an AMC based on the information available at the time of the current decision Supplier Perspective Development Strategy and Market Value Relationship Success No Go Go Fail Success Fail Success Fail Success Fail No Go Go No Go Go Development Strategy High Low NPV (Exp. Revenues -Exp. Costs) Market Value $0 Cumulative Dev. Cost, at Time of Failure

4. 3 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 Supplier Perspective Market Value and Competition Relationship In addition to their own success or failure, each supplier must account for the possibility of other new suppliers successfully reaching the market, e.g., Supplier A Success PAPA Supplier A Failure Go No Go Supplier A ‘A’ Value Given ‘B’ and ‘C’ also succeed ‘A’ Value Given ‘B’ also succeeds ‘A’ Value Given ‘C’ also succeeds ‘A’ Value Given ‘B’ and ‘C’ failed ‘A’ Cost of Failure $0 Potential Market Scenarios Competitor C Success PCPC Competitor C Failure Competitor C Success PCPC Competitor C Failure Competitor B Success PBPB Competitor B Failure

5. 4 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 AMC Model Analysis Frame The AMC model is designed to explore the level of AMC funding required to provide a neutral or better return on investment given multiple outcomes The AMC needs to be sized to support multiple supplier outcomes Success Fail Success Fail Success Fail Success Fail Success Fail Success Fail Success Fail Supplier ASupplier BSupplier C 50% 20% Probability 5% 20% 5% 20% 5% 20% 5% 20% Outcome A, B, C A, B A, C A B, C B C - Illustrative

6. 5 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 AMC Model General Structure AMC Financial Implications & Risk Model Financial Analysis Parameters Supplier & Product Profile Data AMC Contract Terms Country (“Market”) Data Analysis Inputs Analysis Outputs Vaccine Need & Potential Market Forecasts Vaccine Product Availability Capacity & Supply Forecasts Health Impact Reports Financial Reports (Suppliers, Funders & Countries)

7. 6 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 Determine Vaccine Need Determine Potential Vaccine Market Determine Potential Vaccine Demand Determine Potential Vaccine Capacity Define AMC Terms Determine Supply/Demand Determine Supplier, Funder & Country Financials AMC Investment AMC Price Post-AMC Price f {vaccine price, country co-pay, country willingness to pay, country financial sustainability, AMC investment} f {# of suppliers, vaccine availability, supplier capacity plan} f {vaccine need, vaccine coverage rate} f {population cohort, doses/fully compliant person} f {vaccine availability, country adoption timing, time to peak coverage} iterate AMC Model Analysis Components f {supplier costs, capacity utilized, supplier discount rate, funder/country discount rate}

8. 7 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 AMC Model Data Input Quality Each Vaccine Program Team was responsible for ensuring the credibility of their analysis inputs –Credibility was achieved through transparent data gathering processes and multiple external expert reviews The AMC model was responsible for: –Applying the data in accordance with industry best practice –Providing sensitivity analysis on key input data

9. 8 AMC-FIRM_Overview_Tech WG_Rome_07Sep06 Consistently evaluate all AMC vaccine candidates –Ensure common methodology and data gathering processes Explore the financial implications of an AMC by providing insight on: –Size of AMC required to create a competitive market capable of supporting multiple suppliers, both multinational and emerging –AMC terms that provide the most robust market support Given AMC size and vaccine price assumptions, determine: –AMC duration –Donor cost –Health impact AMC Model Analysis Objectives