A Pharma perspective on healthcare needs and innovation in drug discovery

1. A Pharma perspective on healthcare needs and innovation in drug discovery Patrick Vallance Head of Drug Discovery GlaxoSmithKline

2. A New Mindset “We need to adopt a new mindset. We in big pharma should never take for granted our right to exist; our business model is not written into any country’s constitution. So we should be turning up to work every day with the mindset that we are earning the right to exist. We are earning it by meeting the expectations of society. When you start to think like this, you see the world differently.“ Andrew Witty, CEO, GlaxoSmithKline – Harvard, February 2009

3. Public trust is low Science in Society – DTI MORI 2005

4. The Challenges are Significant • In the past 20 years modern drugs have revolutionised the practice of Medicine and the outlook for patients • The unmet need remains high • The bar is also high • placebo • changing expectations • cost • the public health agenda

5. Fabry’s Disease • Pain throughout the body • Impaired sweating • Heat/cold intolerance • Skin rashes (angiokeratomas) • Corneal whorling • Hearing problems • Gastrointestinal problems • Heart problems • Kidney problems • Nervous system problems • Psychological issues

6. Large improvement in pain in Fabry’s Disease

7. Large improvement in pain in Fabry’s Disease Placebo Active

8. The Challenges are Significant • In the past 20 years modern drugs have revolutionised the practice of Medicine and the outlook for patients • The unmet need remains high • The bar is also high • placebo • changing expectations • cost • the public health agenda

9. R&D for a New Medicine: 10+ years, $1 bn+ … a big challenge for addressing both developed and developing world diseases RegulatoryReview Drug Discovery Post-MarketingSurveillance Scale-Up to Manufacture Preclinical Clinical Trials PhaseIII PhaseI Phase II ~ 5,000 – 10,000 250 5 1Approved NewMedicine Compounds Pre-Discovery IND Submitted NDA Submitted Number Of Patients / Subjects 20 – 100 100 – 500 1,000 – 5,000 0.5 – 2 Years Indefinite 3 – 6 Years 6 – 7 Years Sources: Drug Discovery and Development: Understanding the R&D Process, www.innovation.org; CBO, Research and Development in the Pharmaceutical Industry, 2006

10. R&D Productivity Gap Source: Burrill & Company; US Food and Drug Administration. Note: NMEs do not include BLAs

11. The realities of having the best pipeline Pipeline renews 60% of sales Lehman Brothers PharmaPipelines (Sept 2007) Pharma Replacement Power – NPV GlaxoSmithKline Merck Bristol Myers Squibb Novartis Johnson & Johnson Sanofi-Aventis AstraZeneca Pfizer Wyeth Eli Lilly Roche Abbott Labs Schering Plough AVERAGE LB Method: [NPV of recent launches (06-07) + NPV of pipeline opportunities from ‘08-’13] / NPV of products marketed before 2006.

12. R&D for a New Medicine: 10+ years, $1 bn+ … a big challenge for addressing both developed and developing world diseases RegulatoryReview Drug Discovery Post-MarketingSurveillance Scale-Up to Manufacture Preclinical Clinical Trials PhaseIII PhaseI Phase II ~ 5,000 – 10,000 250 5 1Approved NewMedicine Compounds Pre-Discovery IND Submitted NDA Submitted Number Of Patients / Subjects 20 – 100 100 – 500 1,000 – 5,000 0.5 – 2 Years Indefinite 3 – 6 Years 6 – 7 Years Sources: Drug Discovery and Development: Understanding the R&D Process, www.innovation.org; CBO, Research and Development in the Pharmaceutical Industry, 2006

13. New Medicines A disconnect between discovery and invention? Scientific publications in biomedicine The opportunity has never been greater

14. Reintroduce Scientific Judgement

15. Evolution From Monolith CEEDD CEDDs External Resources Virtualization of Drug Discovery Pharma Internal Resources Centralized Control/Management De-Centralized Control/Management

16. How should we choose where to invest discovery effort? External Internal Scientific Opportunity Market size Pipeline strength Organisational structure Patient need

17. Anti-Infectives Cardiovascular Gastrointestinal Hormone Control 2005 - 2010 Market Growth p.a. 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% CNS Cancer Diabetes Respiratory Dermatology Inflammation Haematology Anti-Infectives Genito-Urinary Cardiovascular Immune System Gastrointestinal Hormone Control Ophthalmic Drugs Sexual Dysfunction Metabolism/Endocrinology Drugs The Market 2006 Estimated Global Sales 90,000 80,000 The Lehman Brothers analysis of predicted global sales for 2006 does not include generic drugs and estimates that their database captures 80% of branded drug sales. 70,000 60,000 50,000 Global Sales $m 40,000 76,850 65,275 30,000 43,928 39,910 20,000 26,875 19,481 18,808 10,000 17,793 15,337 11,549 0 CNS Cancer Diabetes Respiratory Dermatology Inflammation Haematology Genito-Urinary Immune System Ophthalmic Drugs Sexual Dysfunction Metabolism/Endocrinology Drugs Diabetes, cancer and inflammation projected to be the biggest growth opportunities Source: Pharma Pipelines – Strategic Analysis and Conclusions 2006 – Lehman Brothers

18. Public Funding

19. How should we choose where to invest discovery effort? External Internal Scientific Opportunity Market size Pipeline strength Organisational structure Patient need

20. Small integrated, empowered teams

21. Pharma partnerships New/expanded in 2008/2009 YTD 35 external engines 35 internal engines Corporate Venture Fund

22. R&D for a New Medicine: 10+ years, $1 bn+ … a big challenge for addressing both developed and developing world diseases RegulatoryReview Drug Discovery Post-MarketingSurveillance Scale-Up to Manufacture Preclinical Clinical Trials PhaseIII PhaseI Phase II ~ 5,000 – 10,000 250 5 1Approved NewMedicine Compounds Pre-Discovery IND Submitted NDA Submitted Number Of Patients / Subjects 20 – 100 100 – 500 1,000 – 5,000 0.5 – 2 Years Indefinite 3 – 6 Years 6 – 7 Years Sources: Drug Discovery and Development: Understanding the R&D Process, www.innovation.org; CBO, Research and Development in the Pharmaceutical Industry, 2006

23. Leading the pack – ATM Index Source: Access to Medicines Index (Innovest)

24. DDW Partners – Tres Cantos