The Pharma/Biotech Conundrum: R & D Spending Up, No. of Drugs Down INFORMS October 13, 2009

1. LIG The Pharma/Biotech Conundrum: R & D Spending Up, No. of Drugs DownINFORMSOctober 13, 2009 Tom Hill The Leverage Innovation Group thill@leverageinnovation.com

2. Agenda LIG • Introduction • Purpose • Innovation Deficit: Major Business Issues • Biotech/Pharma Companies Seeking Total Solutions • The Knowledge Management Challenge • Process Scientist Challenge and Solution • Medicinal Chemist Challenge and Solution • Identification of Business Opportunities - Discussion • LIG – Consulting Process • Next Steps • Appendix - New Innovation Business Model T. Hill, LIG-Confidential - Sept., 2009

3. Introduction – Thomas P. Hill LIG • Proven track record as a strategic scientific business leader and problem solver • Principal – The Leverage Innovation Group – a set of executive consultants focused on solving scientific business problems in innovation, transformation and productivity • Former Director – Knowledge Management - Genentech • Executive Management Consultant – VP of Informatics – Roche • For over 20 years, prior to biotech/pharma industry leadership roles, drove marketing, and development of IT ‘solutions’ services, support systems at Hewlett-Packard, Tandem and Compaq • Led key initiatives resulting in significant cost reductions, increase in productivity including: • Development for process scientists – research business ‘dashboard’ software application reducing experiment duplication, speeding design of new experiments • Development for medicinal chemists – a guided search semi-automated software application reducing search time by 20 – 40 % T. Hill, LIG-Confidential - Sept., 2009

4. Purpose LIG • Offer insights into the innovation challenges based on experience at Genentech and Roche • Share observations on trends in integrated informatics • Characterize a sustainable competitive position via new continuous innovation processes • Outline several examples of leading edge informatics applications services • Identify research opportunities T. Hill, LIG-Confidential - Sept., 2009

5. Key Trends: Pharma/Bio Tech Innovation LIG • R & D Cycle – Long – 7 to 10 yrs, Costly $1.2 B Avg. (Tufts CSDD 2007) • Regulatory – FDA increasingly focused on reducing patient risk • Efficacy - Most therapies work on average of 40 % of patients • Science – Discovering the ‘right’ biotech therapy to increase efficacy • Safety – Sophisticated therapies are high risk causing drug complications, interactions • Pricing - increased patient, provider and government scrutiny • Competition – 10 Major Pharma/Biotech Companies – in Oncology last year there were almost 400 new therapies announced in Phase 1 – 3 trials • Clinical Research – US clinics are saturated with trials, ltd capacity • Innovation Deficit – R & D investment is not producing NMEs at the rate of investment T. Hill, LIG-Confidential - Sept., 2009

6. LIG The Innovation Conundrum: R & D Spending Up 2x, Drugs Launched Down 50 % T. Hill, LIG-Confidential - Sept., 2009

7. LIG The Innovation Deficit : Major Business Issues for Pharma • Scientific Issues : Better understanding of the human body to be understood at the molecular level, and the pathophysiology of disease • Regulatory Issues: Understanding the patient point-of-view, in providing a a cost/benefit perspective, shift from ‘batch’ communication with regulators to ‘parallel’ continuous dialog. • Technology Issues: Greater use of technology to virtualize the research and development process, integration of global content – seeking a total vendor solution with value engineering • Data Overload Issues: Explosion of data from LIMS, instruments and testing systems, with limited intelligence or view of the pattern of data • Collaboration Issues: Increase collaboration, expertise sharing, ‘how to’ knowledge – between scientists, academics, government, to accelerate R & D processes T. Hill, LIG-Confidential - Sept., 2009

8. LIG Biotech/Pharma Companies Seeking Total Solutions • Solve scientific business problems • Integrated informatics and knowledge management solutions • ‘Drop into’ the corporate IT network – standards, APIs, plug-ins • Accelerate research and development efforts • Seek collaborative solutions that bring multiple roles, processes into the R & D process • Solutions - modular, user friendly, ‘fast forward’ oriented, rapid prototyping, responsive – in weeks not months • Support ad hoc queries, far more valuable than forms or standard reports • Integrate public and private data, synonym database, see ‘total data’ in business intelligence reports • Separate user interfaces, from databases to easily add/remove modules • Support and change management services are crucial to applications implementation success T. Hill, LIG-Confidential - Sept., 2009

9. LIG The Knowledge Management Challenge: Delivering the right knowledge, to the right people at the right time T. Hill, LIG-Confidential - Sept., 2009

10. Process Scientist Challenge: Capture “How To” Design Knowledge LIG • Knowledge sharing is an informal process that is often done on an ad hoc basis • The organization is effective at capturing and communicating specific versions of manufacturing processes, i.e. the “What” • Experiment Results • Tech References • Process Descriptions • Process Specs • Detailed process versions • Critical parameters • Equip. requirements • However, the “Why” and “How To” information on developing and improving manufacturing processes between versions is not always captured or is captured in many different places • Rationale behind experiments • Process / analytical drivers for improvements • Campaign history / use in clinical program • Lessons learned T. Hill, LIG-Confidential - Sept., 2009

11. Process Scientist Challenge: Knowledge Sharing Solution LIG Today Future T. Hill, LIG-Confidential - Sept., 2009

12. LIG Medicinal Chemist Challenge: Reduce DB Search of 8.3 hrs wk • Need to be continuously ‘horizon watching’ the latest developments in their specialty • Find gaps, bottlenecks, redundancies and limitations that constrain productivity in information flow processes. • Mention these kinds of knowledge sharing issues: tacit to explicit conversion, gaining validity feedback, synchronizing knowledge search information with workflow tool output, locating other experts, collaborating easily using the specifics of a chemistry problem, information flow not dynamic or responsive enough to meet their pace of discovery • Request assistance – looking for search assistance, or semi-automated tools to recommend, link, index, perform preliminary analysis, and cluster relevant ‘hits’ into highlighted easy to find personalized environments. T. Hill, LIG-Confidential - Sept., 2009

13. LIG Medicinal Chemist Challenge: Guided Navigation Solution • Capture search queries via profile for continuous 24/7 ‘horizon watching’ • Map colleagues, research partners and government researchers into a research community • Display social tags of most hits on a topic • Incorporate ‘idea harvesting’ option for difficult scientific questions • Provide expertise location via search of scientist profiles • Integrate robust chemical structure search, display functionality • Combine content on a ‘My Chem’ page for a ‘dashboard’ personal view of all relevant content T. Hill, LIG-Confidential - Sept., 2009

14. LIG Identification of Research Opportunities: Discussion • Research and Development issues: missed discoveries, innovation bottlenecks, duplications, disconnects, unaligned projects, experiment design delays, missed expertise focus? • Others? T. Hill, LIG-Confidential - Sept., 2009

15. LIG Leverage Innovation Group – Consulting Services • Focus on contributing to the value creation processes of its clients by assisting them in solving innovation, transformation or productivity problems during all stages of development from research to patient or end user delivery. • Consulting process • 1 – Meet with management to identify business problem (s) to be solved • 2 – Audit present business processes to take a snapshot of the present business condition • 3 – Develop a future state scenario, in as much detail as possible, event developing a prototype • 4 – Map a path between the present state and future state of steps, development or resources to achieve the future state scenario • 5 – Develop a project plan based on the path map • 6 – Implement the project plan, using metrics for success • Continuous dialog with management is crucial to success T. Hill, LIG-Confidential - Sept., 2009

16. LIG Appendix • New Innovation Business Model T. Hill, LIG-Confidential - Sept., 2009

17. New Model to Accelerate R & D Development Time LIG Re venue Collaborative Innovation Model $0 Traditional R & D Cost/Revenue Curve Time T. Hill, LIG-Confidential - Sept., 2009