Funding Full Development of the Emerging Pipeline in Tb

1. Funding Full Developmentof the Emerging Pipeline in Tb Paul L Herrling Head of Corporate ResearchNovartis International AG Geneva, 11 April 2008 MSF

2. THE DRUG DISCOVERY PROCESS: phases target validation D0 D1 D2 D3 D4 PhI PhII-IV O D0: basic science target discovery D1: assay development HTS: high throughput screening D2: HTS ligand finding proprietary libraries, commercial libraries D3: lead optimization medicinal chemistry animal models D4: final preparation for human testing, PK,ADME, tox, PhI: Proof of concept/mechanism in man; tolerance in human PhII-III: dose finding, efficacy, registration studies PhIV: post marketing studies

3. Historic funding has built a portfolio that is moving towards clinical trials Historic funding . . . …has created the pipeline of today R&D Funding Received – PDPs (USD M) PDP Compounds by Disease – including industry ** 447 12 Private Entities 3% Chagas 450 HAT Malaria VL TB 400 Gov 21% VL HAT 350 9 TB Chagas Clinical funding needs 8 Other 300 250 200 5 5 Private Non Profits 76% 4 4 150 Malaria 100 1 50 2 * 1 1 1 0 1999-2007 - by disease 1996-2005 Early stage D0/1 Lead id D2 Lead op D3 Preclinical D4 Phase 1 Phase 2 Phase 3 Reg Phase 4 *Chagas, HAT & VL are sourced from DNDi through 2006; Does not include IOWH **Some projects have not been included in graph due to uncertainty of stage in pipeline Sources: DNDi Business Plan, "Independent Review MMV" DIFID, MMV Annual Report 2006, Focus on Finances MMV.org; The New Landscape of Neglected Disease Drug Development, Wellcome Trust (2005); "TB DRUGS: Where We Are Today, The Vision For Tomorrow" CEO GATB (Jan 2007); WHO Draft “Global plan of action on public health innovation and intellectual property” (August 2007)

4. THE DRUG DISCOVERY PROCESS: phases target validation D0 D1 D2 D3 D4 PhI PhII-IV O not financed EXPENSIVE Existing pipeline, already financed

5. % Funding needs – drugs - Underestimate Funding needs for Neglected diseases R&D drugs – 2008-2017 USD B Total 10.3 4.4 5.9 100% 1.1 Other diseases 2.0 90% 0.9 80% 0.4 HAT/ VL/ Chagas 0.6 0.2 70% 0.4 1.3 Malaria 1.7 60% 50% 40% 2.9 30% 3.1 TB 6.0 20% 10% 0% Discovery Development Sources: Global plan to stop TB 2006-2015; Tuberculosis research and development: a critical analysis, Treatment Action Group; MMV financial plan; DNDi Business plan 2007-2014; The new landscape of neglected disease drug development, Wellcome trust; “How much does it cost to develop a new drug?” Biomedical Industry advisory group; Dalberg interviews and analysis

6. % Portfolios are fragmented across players – even in key diseases 39 54 5 16 12 3 3 Public 100% Novartis Public 90% Public Public GSK1 Public 2 80% Public 24 Sanofi-aventis5 TDR1 GSK1 Pfizer1 70% TDR 2 • Fragmentation between Industry Public, and PDPs for malaria and TB • Fragmentation between public and PDPs for smaller diseases TDR1 60% Sanofi-aventis 1 Pfizer 1 50% Astrazeneca3 40% MMV24 DNDi11 Other12 DNDi6 30% DNDi3 TDR1 20% IOWH 1 GATB11 10% Public Only DNDi2 IOWH1 IOWH1 Industry Only 0% PDPs Malaria TB Chagas HAT VL Other Dengue Notes: Number of public projects is estimated based on interviews and research; Surface area does not depict size of projects, which vary significantly by stage of discovery and development Source: The New Landscape of Neglected Disease Drug Development, Wellcome Trust (2005); TB Alliance Portfolio.ppt (October 2007); (www.ifpma.org/clinicaltrials); Industry R&D for Diseases Primarily Affecting Developing Countries (company response to IFPMA survey); Working Group on New TB Drugs (Oct 2006)

7. Improved management of the neglected disease portfolio a key challenge • The emerging portfolio of neglected disease compounds is fragmented across PDP, industry and public entities – with limited or no coordination and oversight • Improved approaches to portfolio management will be key to making the case for the expanded financing. The techniques and experience of pharmaceutical companies will be key in this respect • Prioritization of funding across diseases is going to be necessary, even in a scenario with sufficient funding. This is politically sensitive area, some donors are hesitant to delegate this responsibility • The portfolio management challenges are still less well recognized among the product development partners. However, there is a broad support for continuing to work through these partnerships

8. FUND FOR NEGLECTED DISEASES R+D Board [strategy, diseases, tools] Funders: current + new ie BMGF, WT etc plus Developed countries governments as well as Developing world governments $ royalties, milestones $$$ Portfolio management Team Medical, Scientific, Technical Professionals (fund only to next go/no go decision) money for development to next stage projects and exclusive licenses to neglected disease Academia PPPs Industry IP In case of profits made using data paid by fund:

9. Alternative model – Neglected Diseases Fund • 1. Create a major pool of funds by mechanisms similar to Global Fund, GAVI, International Finance Facility fed by Governments, both of developed and developing world (latter must contribute as they are responsible for the health of their citizens ), charities (Welcome, BMGF, others) - Major problem might not be finding money but how to make it efficiently available to entities discovering and developing medicines for neglected diseases • 2. Establish a portfolio management committee nominated by funders but fulfilling stringent professional criteria. Their task would be to evaluate submitted projects and fund the selected ones to the next decision point in development (phase transitions), monitor the progress and make funding decisions for next phases as well decide development strategy - This is identical to the process currently used in Pharma, the same decision criteria (scientific, technical feasibility, medical need, target product profile etc.) should be used with the exception of commercial viability.

10. 3. Companies alone or in conjunction with PPPs who want to access these funds would protect their IP (see why below) BUT would legally and bindingly commit to make their products available at cost for poor patients and where no markets exist as a condition to obtain funds from the pool (exclusive license to fund) • 4. Wherever markets allowing returns for these products emerge as is eventually to be expected, WHOEVER sells the products in these markets will commit to pay royalties on those sales back into the pool for refinancing if they used Fund financed data. The IP protection mentioned above is needed to allow this mechanism as it incentivises and protects the innovators' investment (including the pool entity) • This mechanism might address the gray zones where the current returns are insufficient today for big Pharma to invest, but that do need big Pharma contributions

11. Neglected Diseases Fund Model • This draft of a model might be sufficiently attractive to Pharma companies as some of them have already shown their interest to contribute to the access to medicines problem. It does not threaten the IP protection essential for innovation. This model would remove a major hurdle to their investment in the R&D of neglected diseases, short term they would gain in reputation by contributing, long term (very) new markets may emerge • This model might be combined with others such as advanced market commitments, for late stage developments e.g a vaccine /medicines in late Phase 3 clinical trials