BioBusiness Network 2006 Geneva 20 th September 2006

1. Acquisition versus Partnering BioBusiness Network 2006Geneva20th September 2006 Dr. D RogerLloyd Executive Director Strategic Planning & Business Development AstraZeneca

2. Acquisition versus Partnering Promise Exposure - front loading versus titrated risk Strategic value and valuation Acquisition risks Acquisition - a better option?

3. Acquisition versus Partnering BUILD 75-85 LICENSE 85-95 ACQUIRE >05 95-05 PARTNER Pharma – Biotech Eras PHARMA ‘Huddle and Invent’ BIOTECH FIPCO • PHARMA • Cash Rich • Control • Strategic consolidation • BIOTECH • Investor exits • Serial entrepreneurs • Seller’s market • Complex co-dependent Alliances • Marriage of Unequals • PHARMA • Access and exploit new products • and capabilities • BIOTECH • Product action; POP and Partner • Specialist Biopharma Co PHARMA Gap Filling BIOTECH Platform Technologies

4. Acquisition versus Partnering BUILD 75-85 LICENSE 85-95 ACQUIRE >05 95-05 PARTNER Pharma – Biotech Eras PHARMA ‘Huddle and Invent’ BIOTECH FIPCO • PHARMA • Cash Rich • Control • Strategic consolidation • BIOTECH • Investor exits • Serial entrepreneurs • Seller’s market • Complex co-dependent Alliances • Marriage of Unequals • PHARMA • Access and exploit new products • and capabilities • BIOTECH • Product action; POP and Partner • Specialist Biopharma Co PHARMA Gap Filling BIOTECH Platform Technologies

5. Acquisition versus Partnering Trends • Alliances • Biotech secures more money, more rights • More complex and costly • Greater co-dependency, greater value sharing • Challenging Governance • Acquisition vulnerability • Acquisition • Cash-rich Pharma • More valuable investor exits than IPO for Private Biotech • $38bn Deals in 05 • Pharma – Biotech at all time high in 05 • Biotech – Biotech at second highest in 05

6. Acquisition versus Partnering DEALS Source: ReCap

7. Acquisition versus Partnering DEALS Source: ReCap

8. Acquisition versus Partnering Significant Premium % Premium Abbott – Therasense 34 Abbott – Vysis 39 Amgen – Abgenix 54 AZ – CAT 67 GSK – Corixa 52 J&J – 3D 86 J&J – Scios 35 Lilly – AME 48 Merck – Rosetta 80 Pfizer – Esperion 55 Pfizer – Vicuron 80 Roche - Igen 41 --- Av. 56 --- Source: Windhover

9. Acquisition versus Partnering Some recent AZ Deals Strategic Alliances AZ – Abgenix; AZ – CAT • MAb entry strategy; all diseases • 80 Discovery Programs; 150 expert scientists • Leading exponents of leading technologies • Significant Equity component • Co-development; co-exploitation • Option structure; CAT 15 Licensing events 10 Sets of terms • Success Payments • Maximising opportunity; sharing risk & value Deliberate choice over Build or Acquisition

10. Acquisition versus Partnering Some recent AZ Deals Alliance Issues • Strategic alignment • Co-dependence and independence • Governance • Alliance Management • Duration and future proofing • Risk tolerance and financial flexibility • Value sharing and quality of business • Sales management complexity • Staff volatility • Newsflow needs • Complex and vulnerable to strategy variance and Acquisition

11. Acquisition versus Partnering Some recent AZ Deals Acquisition of KuDOS Pharmaceuticals • Private UK Biotech • Cash Purchase $210m. • PARP Inhibitor; early development portfolio • New oncology discovery platform Acquisition of CAT • Public UK Biotech • Cash Purchase £702m. • Cornerstone of AZ Biologicals

12. Acquisition versus Partnering KuDOS Acquisition – Partner choice • PARP; PhI licensing project • Months of discussions • Multiple suitors; Due Diligence done • AZ Deal Terms on table • KuDOS advisors invite Acquisition offers • Board supported • Further Due Diligence • New Investment Proposition • Strategic Valuation • Tight timeline - 6 weeks from invitation to signing

13. Project Juno ACQUISITION ISSUES Acquire? • Based predominantly on PARP • High risk – early PhI: competitive market • Platform and early products have significant potential but low current value • May be required to secure PARP How much? • Guide price $250m appears soft • AZ model appears to match in eNPV terms • Value creation at guide price requires success of PARP and generation of new drugs • GS valuation .. .. .. .. • Not achievable by IPO

14. Acquisition versus Partnering CAT Acquisition – AZ Choice • Driven by AZ Biologicals strategy • < 25% Development Candidates • Natural build on successful alliance

15. Acquisition versus Partnering Valuation and Risk Product Value : Drives Licensing Business Assumptions: Competitive positioning NPV of future cashflows Risk captured and titrated in • Discount rate • PoS assumptions • Deal structure Exposure is upfront plus investment to next key decision Basis of Acquisition case NPV, eNPV of Product / Business components Compare with market cap industry multiples previous financing rounds Asset Value :

16. Acquisition versus Partnering Valuation and Risk PRICE Shareholder, Investor expectations Relate to recent and expected performance Premium precedent Competitive pressure Value to Acquirer - strategic, financial Value creation potential above market Value realisation must be secured STRATEGIC VALUE

17. Acquisition versus Partnering Valuation and Risk Acquisitions driven by strategic value Deal structure options • Significant partial • Event driven • Outright purchase Define and quantify strategic value • People, culture, motivation • Practices, novelty, delivery • Positive synergies, ‘power up’ • New value creation potential Acquisition Portfolio • Not all the same • Sensitive to differences

18. Acquisition versus Partnering Secure the Strategic Value • Establish the Vision, Strategy, Governance, Identity, Leadership and Parent Interface for the company post-acquisition before the Announcement • New Leadership to develop, agree and present these to all employees on Announcement Day • Clear messages to all personnel on compensation, benefits, careers • Clear strategy and communication for the Partner Companies

19. Acquisition versus Partnering Value Realisation Post Acquisition model examples • Integration • Research Centre • Independent Business AZ Examples • KuDOS - Research Centre • CAT - Independent Business

20. Acquisition versus Partnering Post - Acquisition Model - KuDOS • Oncology Research Centre; augments Discovery • Reports into Oncology Leadership • Retains identity and Terms and Conditions • Augmented and supported by AZ functions • Wholly-owned Subsidiary • Speed of Transaction - Limited Preparation • Longer to settle in

21. Acquisition versus Partnering Post – Acquisition Model - CAT • Wholly-owned autonomous Subsidiary Company • Distinct name and corporate identity • Reports to AZ Executive • Strategy, Budgets, Performance • Separate companies working collaboratively • Discovery and early Development of MAbs • Board and Leadership Team • Own BD & L • Own Terms and Conditions

22. Acquisition versus Partnering Summary • Acquisitions are now a significant part of the deal mix • May be the only option to secure the asset • Command a significant premium • Driven by Strategic Value • Securing the Strategic Value is essential