1. GLOBAL BIOPHARMA
OUTLOOK 2012

2. LARGE-CAP PHARMA
Vishal Manchanda, B.E., MBA vishal@mpadvisor.com
Ripple Mehta, B.Pharm, MBA ripple@mpadvisor.com
Vijayakannan, PhD vijay@mpadvisor.com
+1.646.657.3787

3. Outlook - 2012
• Patent Cliff - ~ $50b of patented sales to be genericised – AZN, PFE,
NVS, SAN, BMY, LLY to bear the pain
• Innovation to foster growth in several therapeutic areas
– HCV
– Metastatic Melanoma
– New Generation Oral Anti-coagulants
– Alzheimers
– Multiple Sclerosis
– GLP-1’s therapy areas
• Patent Expiry and Pricing Pressures will intensify M&A activity
• LLY, AZN, and BMY would go for deals to fuel their topline
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4. Patent Expiry Pressures will be at its Peak
2011 Products Sales going off patent
Cum ve
ulati
Sales in$m Cum veulati
C pany
om Sales Erosion
(2011) 2011 2012 2013 2014 2015 2016 Company Sales Erosion
11-16 as %of
11-16 ($b)
2011 R evenues
LLY 22,225 4,637 6,345 1,069 302 LLY 12,353 56%
N O
OV 11,831 3,842 914 NO VO 4,756 40%
AZN 31,711 1,191 5,725 995 7,538 6,539 AZN 21,988 69%
PFE 57,522 13,556 4,317 1,171 2,877 1,268 350 PFE 23,539 41%
BM Y 21,398 8,200 1,434 3,908 689 BM Y 14,231 67%
SAN 38,286 264 6,845 232 5,632 637 SA N 13,610 36%
NVS 48,565 923 8,188 2,703 922 5,665 NV S 18,401 38%
M RK 41,018 6,295 1,368 1,670 1,905 407 M RK 11,645 28%
GSK 43,328 9,154 589 1,179 GSK 10,922 25%
RO G 44,735 1,485 747 649 ROG 2,881 6%
Total ($) 360619 22056 49471 14837 23550 16125 8287 134326 37%
With growth in Western Markets Crumbling to Patent Expiry
Pressures, Will Emerging Markets offer some respite??
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5. Emerging Market – An Oasis or just a
Mirage?
• China, so far has been the pillar of Emerging Market Growth for Large
Pharma, but it is also giving away to policy pressures
– The EDL is expected to double in size, putting pressure on MNC
growth
– Reimbursement norms to be tightened
– Price cuts
• Global recessionary pressures have put Emerging market growth
forecasts down and should impact the pace of healthcare spending
A Select few Large Cap Companies are immune to these
pressures and also offer the promise for growth
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MP Advisors

6. Our Top and Bottom Picks in the Large Cap
Space for 2012
Top Picks
• Roche
• GlaxoSmithKline
Bottom Pick
• Bristol-Myers Squibb
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MP Advisors

7. Strong double digit EPS growth together with +ve news-flow on
late stage pipeline will put Roche back in flavor
Positive clinical data on T-DM1 and approval of Pertuzumab will ease concerns related to
patent expiry
HERA study exploring 2 year adjuvant use of Herceptin versus 1 year Adjuvant use
Interim Analysis from DAL-OUTCOME Study, if positive will lead to a run up in the stock
price much above our PT of CHF 180
Avastin may add a couple of more indications – Ovarian Cancer, while we will see pivotal
data on first line Glioblastoma multiforme, triple negative breast cancer and Treatment
through multiple lines in colorectal cancer. The late stage trials are supported by clinical
evidence
Head to Head study comparing Actemra to Humira – Cross trial comparison suggests non-
inferior outcome
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MP Advisors

8. GlaxoSmithKline – Upgrade to Outperform
We anticipate positive data on its Oncology and Respiratory pipeline, which should
lead to a revision in long term growth forecasts for GlaxoSmithKline
On Tykerb, ALTTO study exploring Tykerb in combination with Herceptin in
Adjuvant use in breast cancer will report data and we expect a positive outcome –
The indication will add £1b pound in peak sales
GSK’s melanoma pipeline (BRAF inhibitor, MEK inhibitor) is best in class and we
will see PhIII data
On the respiratory pipeline, we expect a positive outcome from a host of studies
exploring Relovair and LABA/LAMA FDC in PhIII trials
In the rare disease Pipeline Migalastat for Fabry disease is promising and looks
better than available treatment options (Repligal and Fabrazyme). Head to head
study comparing Migalastat with Repligal and Fabrazyme should also reveal data
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MP Advisors

9. Bristol-Myers – Bottom Pick
Valuations are rich, patent expiry pressures are peaking and pipeline expectations
build in more than a bull case
We see restricted uptake of Eliquis as we believe Eliquis label in SPAF will be no
better than other approved anticoagulants. Patients adequately controlled on
warfarin are unlikely to switch as twice daily dosing will be a dampener
Yeryoy ramp up has been impressive, but the sales will soon plateau as competitors
will enter and physician will be discouraged to use Yer yoy owing to serious side
effects and very low response rate. European uptake will be very slow due to
reimbursement hurdles
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MP Advisors

10. Japan Pharma 2012
日本の製薬会社
Summary Of Japan Section From ‘Global Bio-Pharmaceutical Outlook-2012’
Bio- Outlook- 2012’
Top Picks : Chugai, Daiichi Sankyo, Torii, Towa
Pos. Invest. Alert: Dainippon Sumitomo
Bottom Pick : Eisai
Devesh Singh, Pharmacist, MBA Vrunda Shah, CFA, MS (Fin)
devesh@mpadvisor.com vrunda@mpadvisor.com
+1.646.657.1016 +1.646.657.1016
! 10
MP Advisors
!

11. Key Take Away
• Drivers to promote generics are likely to intensify generics pick up from April 2012.
• 2012 price cuts least affecting foreign cos, while Japanese cos are more exposed largely due higher contribution of long-listed drugs and
variation in innovations premium.
• Generic growth is inevitable; even after rapid penetration, huge untapped opportunity exists for generic companies.
• Innovation will continue to drive growth of Japanese majors while only a few promise positive news flow in next 1-2 years.
• Major Japanese's innovators are not targeting generic opportunities – their focus remains on – innovation & going global. But this trend
could change in near future.
• Hybrid pharma began from 2010; and will start playing major role in reshaping Japanese pharma soon. Daiichi Sankyo currently is the only
company in Japan in hybrid pharma.
• Consolidation activities in Japan generic will spur: foreign/ non-generic companies have started taking japan generic as one of the growth
drivers.
• Japanese majors have poured massive ~$50b in acquiring innovation – next 2-3 years will unfold their success potential.
• Majority of Japanese pharma cos still struggling with patent expiries; in next 3 years more than ¥900b drugs going to expire.
• Despite several odds, Japan pharma offers opportunities for both long & short term investors.
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12. Coverage & Top-Picks
Market EPS 4yr
ROE ROCE EV/EBI
Company Rating Price SOS Cap. EV-12 CAGR P/E-12 TP
03/12 03/12 TDA
( ¥b) (11-15)
Daiichi Sankyo Outperform 1562 709.0 1107.5 1089.1 4.9 2.3% 10.3% 16.0 5.3 1850
Dainippon Pos. Inv Alert 1141 335.1 382.3 346.8 1050
5.8 7.0% 9.1% 16.5 6.4
Sumitomo
Eisai Underperform 870 397.9 346.2 341.3 5.5 6.3% 6.6% 32.2 5.2 950
Takeda Market Perform 3365 285.1 959.4 1033.3 (9.1) 11.6% 11.5% 17.1 6.7 2500
Astellas Market Perform 3770 789.4 2975.9 3345.7 (11.0) 5.8% 8.8% 23.5 7.5 3500
Shionogi Market Perform 3435 470.0 1614.5 1373.1 8.4 7.1% 11.6% 22.9 6.6 3200
Global 6.7% 9.6% 21.4 6.3
Chugai Outperform 1474 544.8 803.0 625.4 11.2 10.8% 15.1% 15.6 6.2 1700
Mitsubishi Tanabe Market Perform 1152 561.4 646.7 511.5 5.4 5.4% 8.5% 16.4 5.6 1350
Kyowa Hakko Market Perform 882 576.5 508.5 428.5 3.5 5.0% 7.7% 16.9 5.3 950
Kyorin Market Perform 1570 74.9 117.6 90.4 0.5 8.7% 12.0% 11.1 4.9 1500
Domestic 7% 11% 15.0 5.5
Towa Outperform 3790 17.2 65.1 71.1 5.4 12.6% 14.7% 10.7 5.5 4100
Sawai Market Perform 8660 15.7 136.0 143.7 10.9 14.1% 14.9% 14.0 7.9 8200
Nichi-Iko Market Perform 1832 30.9 56.6 68.5 12.6 17.2% 22.5% 10.6 6.1 NA
Nippon Chemiphar Market Perform 495 38.2 18.9 25.7 36.0 7.9% 10.6% 12.9 7.4 320
Generic 13% 16% 12.1 6.7
Average 9.0% 12.0% 16.1 6.2
Price as on 23rd March, 2012
Source: MP Advisors; Company Reports
Opportunities Exist For Both Long & Short Term Investors
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MP Advisors

13. Segments Specific ‘Key Success Factors’
Segment Key Success Factors Top/Bottom Picks
Innovators
Domestic focused Low % sale coming from long listed products
Late stage R&D – own as well as in-licensed.
Chugai,
Internationalization capabilities Torii
Willingness to consolidate
Strong marketing abilities in Japan such that it improves the chances of licensing-in good products
Global Higher overseas exposure
Daiichi Sankyo,
Lower long listed drugs contribution Eisai
Rich PhIII pipeline
Generics
GP1/DP2 Strong marketing infrastructure with sales force and rapport with GP / DP
Oral formulations etc.
Towa
DPC3 Distribution capabilities
Injectable facilities, availability of all strengths of drug
Cost effectiveness, stable supply
1. General Practitioner; 2. Dispensing Pharmacy; 3. Diagnostic Procedure Combination
Source: MP Advisors
JP Specific Drivers Will Continue To determine Success
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MP Advisors

14. Japan Pharma – Market Model
Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
Total Rx Market 7,802 8,036 8,277 8,526 8,781 9,045 9,316 9,596 9,883 10,180 Every year new patent
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% expiries keep on
New pt Exp. (¥b) 294.0 387.5 331.9 341.7 195.0 466.0 443.0 522.0 400.0 450.0 increasing potential
Total Long Listed Products Price Adj 3,358.6 3,712.5 3,970.1 4,272.1 4,125.4 4,550.1 4,629.1 5,104.8 5,096.4 5,495.5 target market for
Long Listed drugas as % of Total DO Market 43% 46% 48% 50% 47% 50% 50% 53% 52% 54% generic cos. This leads
TOTAL Market Available for Generics 3,359 3,713 3,970 4,272 4,125 4,550 4,629 5,105 5,096 5,495 to higher generic
Hospital Market (DPC Affiliates ) opportunity despite
No of DPC Hospitals 1393 1452 1496 1525 1556 1587 1619 1651 1684 1718 robust generic growth.
# of beds in DPC hospt. In Japan ('000) 494 504 514 524 534 545 556 567 578 590
Total # of beds in Japan ('000) 913 913 913 913 913 913 913 913 913 913
% of total beds in Japan 54% 55% 56% 57% 59% 60% 61% 62% 63% 65%
% of total beds in Japan 47% 48% 49% 49% 50% 50% 51% 51% 52% 52%
% Change 2% 2% 2% 1% 1% 1% 1% 1% 1% 1%
Total NRx generated as % of Total Market 37% 38% 38% 39% 39% 39% 40% 40% 41% 41%
Total DPC Market size (available for generics) 1235 1393 1519 1651 1611 1794 1844 2053 2070 2255
Drivers of Generics use Increase in DPC
Cost saving measures 10% 10% 13% 14% 17% 17% 20% 20% 23% 25% hospitals will be a
Due to Co-payment 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% largest Generic growth
Others factors 2% 2% 3% 2% 6% 6% 7% 5% 7% 4% catalyst in future.
Consolidate impact of all Drivers 15% 15% 19% 19% 26% 26% 30% 28% 33% 32%
Total Generics Sales at DPC Hospitals 185.3 208.9 288.7 313.8 418.8 466.5 553.1 574.9 683.3 721.6
% Change 10% 13% 38% 9% 33% 11% 19% 4% 19% 6%
DPC Hospt Generics Sales as % of Total sales 2.4% 2.6% 3.5% 3.7% 4.8% 5.2% 5.9% 6.0% 6.9% 7.1%
15% 15% 19% 19% 26% 26% 30% 28% 33% 32%
Various growth catalyst
Non-DPC Market
together boost Generics
Total Non-DPC Market (GPs/Clinics/small hopt/ 2,123 2,320 2,451 2,621 2,515 2,756 2,786 3,051 3,026 3,241
penetration.
Total GP's/dipensing/clinics Market 516.6 598.0 717.6 803.7 932.3 1034.9 1210.8 1356.1 1559.5 1715.5
% Change due to Reforms/ Drivers 22.5% 15.8% 20.0% 12.0% 16.0% 11.0% 17.0% 12% 15% 10%
% of total Non-DPC generic market 24% 26% 29% 31% 37% 38% 43% 44% 52% 53%
% of Total Rx market 6.6% 7.4% 8.7% 9.4% 10.6% 11.4% 13.0% 14.1% 15.8% 16.9%
Years from FY 03/12 0 1 2 3 4 5 6 7 8
Total Generic market (by value in ¥b) 702.0 807.0 1006.3 1117.5 1351.1 1501.4 1763.9 1931.1 2242.8 2437.1
Despite high growth,
% change 19.0% 15.0% 24.7% 11.0% 20.9% 11.1% 17.5% 9.5% 16.1% 8.7% penetration will remain
Generics as % of Total Market 9.0% 10.0% 12.2% 13.1% 15.4% 16.6% 18.9% 20.1% 22.7% 23.9% as low as <12% (by
15 val) in GP/DP market
GP/DP to DPC Market Share Ratio 1.7 1.7 1.6 1.6 1.6 1.5 1.5 1.5 1.5 1.4 by 2016.
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Despite Rapid Penetration, Huge Untapped Opportunity Exists for Generic Companies

15. Major Japanese M&A in Last 4 Yrs
Premium to
Acquired Acquisition Cash paid
Company 3m. Avg
Company date ($b)
price. (%)
Takeda Nycomed 19-May-11 13.50 NA
Takeda Millennium 10-Apr-08 11.00 71.00
Daiichi Sankyo Ranbaxy 11-Jun-08 4.60 50.00
Astellas OSI 17-May-10 4.00 55.00
Eisai MGI 10-Dec-07 3.90 37.48
Dainippon Sumitomo Sepracor 3-Sep-09 2.60 37.86
Shionogi Sciele 1-Sep-08 1.42 57.55
Daiichi Sankyo Plexxikon 28-Feb-11 0.80 NA
Hisamitsu Noven 14-Jul-09 0.43 43.00
Taisho Pharma BMY’s Units 16-Sep-09 0.31 NA
Eisai AkaRx Inc 18-Dec-09 0.26 NA
Nipro Pharma Home Diag. 17-Mar-10 0.18 NA
Total Cash Paid 43.00
Source: MP Advisors; Company Reports
Massive Money Poured Overseas Remain Questionable For Most -
Takeda Biggest Looser!
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16. Average Price Cuts And Reforms 2012
Yakka-Sa vs. Price Cuts
Price Cuts Came As Expected: 25.0
23.1
• ~6% overall and Additional price cut for 20.0
off-patent brands 17.8
15.0
% Value
14.5
13.1
• Premium for New Drug Development 8.4
will continue in 2012 reforms 10.0 9.7 9.5
6.7 8.4
6.6 6.8 7.0 7.1 6.9
6.3 6.3 5.8
5.0 6.5 5.2
4.4 6.2
• Lower price cuts for Original Drugs 4.2
0.0
2012 E
1992 A
1994 A
1996 A
1998 A
2000 A
2002 A
2004 A
2006 A
2008 A
2010 A
• High Yakka-sa for Vasodolators (11.6%),
Peptic ulcer drugs (10.8%) and Anti-
Year
allergic drugs (10.5%)
Price Cuts Yakka Sa
• Foreign cons are least affacted while
Source: MP Advisors; MHLW
Eisai is most affacted with >11% price
cuts
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MP Advisors

17. Average Price Cuts in 2012
Source: MP Advisors; MHLW
MP Advisors
Foreign Cos are least affected while Eisai is most affected co. 17

18. Long Listed Exposure vs. Overseas Sales
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Company
Long L As % of DO Sales 43.51 38.61 38.39 34.63 47.79 53.24 52.54 46.83 42.63 35.14
Astellas
Overseas Sales % 46.77 45.77 43.49 42.08 39.14 39.66 38.70 39.96 41.93 44.40
Long L As % of DO Sales 32.12 26.80 18.51 22.11 23.93 19.41 16.01 13.34 11.11 9.39
Chugai
Overseas Sales % 9.72 9.70 6.25 7.99 10.92 13.49 14.02 14.16 13.83 13.91
Long L As % of DO Sales 28.98 31.81 47.26 52.22 46.35 41.66 37.43 35.14 33.19
Daiichi Sankyo
Overseas Sales % 38.6 44.7 50.4 49.4 46.1 49.7 48.2 51.6 53.1
Long L As % of DO Sales 43.13 41.04 71.73 70.01 63.92 61.47 57.93 61.98 58.83 55.54
Dainippon Sumitomo
Overseas Sales % 7.31 7.99 7.27 17.80 40.11 36.04 36.38 33.98 29.44 29.35
Long L As % of DO Sales 28.02 26.21 28.69 27.95 42.81 72.55 67.69 65.62 60.16 55.53
Eisai
Overseas Sales % 57.30 58.53 64.26 61.56 54.4 44.7 48.1 47.4 49.7 52.0
Long L As % of DO Sales 41.40 39.32 32.81 29.93 29.09 28.15 26.61 25.27 24.01 22.80
Kyorin
Overseas Sales % 4.15 3.70 2.75 2.38 2.19 2.00 1.85 1.80 1.67 1.55
Long L As % of DO Sales 68.05 65.11 64.89 71.78 42.79 35.69 38.53 49.22 73.68 46.28
Kyowa Hakko Kirin
Overseas Sales % 3.44 4.16 6.32 4.89 5.8 9.4 12.8 13.2 13.6 14.0
Long L As % of DO Sales 65.11 60.68 60.93 58.27 60.03 56.58 55.15 52.34 66.31 67.45
Mitsubishi Tanabe
Overseas Sales % 5.81 6.10 5.65 5.20 5.29 5.87 6.32 6.65 6.80 6.57
Long L As % of DO Sales 44.85 39.67 49.65 42.22 38.13 33.38 29.55 25.97 26.68 23.55
Shionogi
Overseas Sales % 14.44 15.81 24.65 36.33 36.5 31.0 27.2 25.0 25.0 26.0
Long L As % of DO Sales 14.93 19.31 19.55 23.00 32.91 30.44 37.65 36.43 53.33 52.08
Takeda
Overseas Sales % 33.82 49.69 54.86 53.24 49.17 51.26 50.60 50.24 51.04 53.36
Source: MP Advisors; Company Reports
Global Cos Increasing Dependence on Domestic Markets + Long Listed
Products
Makes them Vulnerable to Healthcare Reforms
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MP Advisors

19. Reforms Promoting Both Generic Penetration and
Innovation
Reforms That Will Increase The Use Of Generic Drugs
Near term impact (0-2 years) Long term impact (>2yrs+)
• Higher Dispensing Fee • Patients Co-payment
• Prescription Using Generic Name • Freedom To Stock One Generic Brand
• DPC Expansion • DPC For Out-patients
• Incentive To Physicians • Free Pricing For Generic Drug
• Mandatory Approval Of All Strengths • Incentive To Pharmacies For Generics Drugs Availability
Reforms That Will Foster Innovation
Near term impact (0-2 years) Long term impact (>2yrs+)
Reforms That Will Foster Innovation
• Increased Number Of Reviewers • Cost Based Pricing
• Better Clinical Trials Infrastructure & Support • No Price Cuts During Patent Period
• Free pricing of all drugs
Source: MP Advisors; MHLW 19
MP Advisors

20. Reforms to be Implemented From April 2012
Reform Description Impact Biggest Beneficiary
Companies
Premium for generics dispensing Further increase in incentive for pharmacist; likely to be Higher generic substitution at dispensing pharmacy
in pocket of those who dispensed more than 30% of Sawai, Towa, Nichi-Iko
generic
Higher bonus points to Hospitals for more Awarding higher bonus point to hospitals using atleast More Rx on generic drugs to generate to get more
usage of generics 30% generics (35 points); Hospital using atleast 20% bonus points
awarded points reduced from 30 to 28 points. Sawai, Nichi-Iko
Higher discount to new generic launch First generic version set to be min 40% discount to Increasing discount will make generic drugs more
branded drug instead of current 30% discount. competitive against long listed drugs All generic companies
Reducing the difference in price of Currently there is huge price difference between the two Reducing the gap at lower end will make generic dugs
Generic drugs brands of generics. more competitive to long listed as well as among Towa, Sawai, Nichi-Iko
generic drugs.
Change in Rx-format Removal of ‘no substitution permitted’ column from Increase generic substitution at pharmacy
current Rx format and compulsory writing the generic
name of the drug. All generic companies
Increase in management and guidance fee Points awarded to pharmacies for providing drug history More Rx on generic drugs to generate
management and guidance will rise to 41 points, from 30
points at present All generic companies
Abolition of premium for GE dispensing The abolition of the extra two points awarded to Impact negatively to the sales of newly listed generic
Source: MP Advisors; MHLW
and GE information provision fee pharmacies for dispensing generic drugs and the 15 points drugs
for providing drug information All generic companies
20
MP Advisors

21. Revised Incentives For Pharmacies
Revised Incentive for Pharmacies
Old Generic Rx by Volume 0% - 19% 20%-24% 25%-29% >=30%
Before April 2010 Incentives for Pharmacy / NA NA NA ¥40
Patient
From April 2010 NA ¥60 ¥130 ¥170
New Effective from (April Generic Rx by Volume 0% - 21% 22%-29% 30%-34% >=35%
2012)
Incentives for Pharmacy / NA ¥50 ¥150 ¥190
Patient
Difference ¥10 ¥20 ¥20
Source: MP Advisors; Company Reports
Generics Investment Thesis:
• Increase in incentives for pharmacies has led to a spur in generic sales (~22% increase in
FY 03/11)
• Pharmacies which currently falls under 25%-29% slab will be encourage to boost their
generic uptake to at least 30% to avail higher bonus points.
Revised Incentives Will Boost Generics Uptake To New Level
21
MP Advisors

22. Segment Specific ‘Key Success Factors’
Lupin
Self/Agencies
• All generic companies position
Towa
themselves into two broad segments
and distribution channels M.
Sawai
Tana
be
• For Generics, Marketing/Branding Nichi
capabilities in GP/Dispensing pharma DPC
Iko
market, and distribution capabilities Nippo
n
GP/Dispensing
into DPC/large hospitals segment will Kyorin
Chemi Pharma
phar
determine success. Meiji
DSE
Elmed N.
• Near term opportunity lies in Kayaku
GP/Dispensing Pharma segments, and
Towa & Sawai appeared best
positioned to leverage benefits from
pro-generic reforms.
Wholesalers
Positioning of Japanese generics Cos*
*Illustrative only
Source: MP Advisors, Company Reports
22
MP Advisors

23. Approaching Generic Opportunities in Next
3 Years
FY 03/11 Sales
Product Generic name Marketed by in ¥b
2012
Leuplin leuprorelin acetate Takeda 64.3
Nu-lotan losartan MSD 40.08
Paxil Paroxetine GSK 39.35
TS-1 NA Taiho 38.31
Myslee Zolpidem Astellas 31.69
Allelock olopatadine hydrochlorid Kyowa Hakko Kirin 29.23
Seroquel quetiapine Astellas 25.7
Gasmotin mosapride citrate Dainippon Sumitomo 20.06
Arimidex anastrozole AstraZeneca 19.23
Norditropin somatropin(genetical recoNovo Nordisk 17.66
Lantus INSULIN GLARGINE Sanofi Aventis 12.17
Humalog Insulin Lispro Eli Lilly 12.15
Funguard micafungin sodium Astellas 12.11
Total Key Products Expiry in 2012 362.03
2013
Diovan valsartan Novartis 110.59
Remicade infliximab Mitsubishi Tanabe 63.25
Livalo Pitavastatin Kowa 31.54
Loxonin Tape loxoprofen Daiichi Sankyo 22.02
Valtrex Valaciclovir GSK 19.37
Ceredist taltireline Mitsubishi Tanabe 18
Zithromac azithromycin Pfizer 15.29
Taxol paclitaxel Bristol 13.88
Flolan Epoprostenol GSK 11.11
Total Key Products Expiry in 2013 305.06
2014
Blopress Candesartan Takeda 119.93
Allegra fexofenadine Sanofi Aventis 48.66
Glivec imatinib Novartis 38.09
Rituxan Rituxicimab Chugai 24.69
BI Sifrol NA Boehringer 13.1
Oxarol maxacalcitol Chugai 13.06
Mearubik measles & rubella vaccineMitsubishi Tanabe 12.46
Source: MP Advisors
Claritin Loratadine Shionogi 10.16
Total Key Products Expiry in 2014 280.14
23
MP Advisors Total Key Products Expiries in next three years 947.23

24. Foreign Companies Entry In Japan Generic
Market
Foreign Domestic Company Year Comment
Company
Sandoz Nippon Hexal 2006 First to launch generic recombinant in 2009
Hospira Taiya Yakuhin 2006 Developed injectable generics
Lupin Kyowa Pharma 2007 Lupin acquired majority stake in Kyowa
pharmaceuticals industries
Zydus Nippon Universal 2007 Launched Zydus Pharma Inc. in 2006 and stared
Pharma operation with acquisition of Nippon Universal
Pharma in 2007
Mylan – 2008 Acquired generic business of Merck
Ranbaxy Daiichi Sankyo 2008 Daiichi acquired Ranbaxy
Teva Kowa Pharma 2009 Established joint venture
GSK JCR Pharma 2009 Signed agreement with GSK for manufacturing
Bio-similar, launched generic EPO in Japan
Actavis Aska Pharma 2009 Established joint venture
PharmaForce Luitpold (Daiichi Sankyo) 2010 Daiichi Sankyo subsidiary acquired PharmaForce,
a generic injectable maker in US
Sanofi-Aventis Nichi-Iko Pharma 2010 Established joint venture
Teva Taiho Pharma 2011 Teva acquired majority stake in Taiho Pharma
Dr. Reddy’s Fuji Film 2011 JV announced. Fuji is new in pharma business
Lupin India I’rome 2011 Acquired. I’rome has Injectables facility
Source: MP Advisors, Company Reports
Expect More Consolidation Activities in Coming Days! 24
MP Advisors

25. Investment Ideas -2012
Outperforms :
Chugai
Daiichi-Sankyo
Torii
Towa
PIA:
Dainippon Sumitomo
Underperform:
Eisai
25
MP Advisors

26. CHUGAI (4519, ¥1,237) – Outperform
2012 Going to Be Happening!
Fiscal Year Total % Gross Op. % Op. EV/ Net EPS % PE CFPS PCF
(¥ b) Rev. Chg. Margin Profit Chg. Margin EBITDA Profit (¥) Chg. (x) (¥) (x)
2010 A 379.5 (11.5) 57.20 66.2 (19.7) 17.4 6.0 41.4 75.9 (26.1) 16.4 (11.8) (105)
2011 E 394.2 3.9 57.98 71.9 8.7 18.2 5.6 43.6 80.0 5.4 15.5 111.8 11.1
2012 E 416.6 5.7 58.65 82.2 14.4 19.7 4.9 51.6 94.7 18.4 13.1 76.3 16.3
2013 E 430.9 3.4 59.22 88.2 7.3 20.5 4.6 55.5 102.0 7.6 12.2 89.9 13.8
2014 E 449.2 4.2 60.10 100.0 13.4 22.3 4.1 63.2 116.0 13.8 10.7 101.5 12.2
2015 E 471.4 4.9 61.22 115.6 15.6 24.5 3.6 73.3 134.5 15.9 9.2 117.6 10.6
2016 E 498.1 5.7 62.56 135.6 17.3 27.2 3.2 86.1 158.0 17.5 7.9 138.4 9.0
SOS (m): 544.8 Dividend: 40.0 Cash + Inv (¥b): 160.9 4 yr EPS CAGR (12/10-12/14): 11.2
Mkt Val (¥ b): 677.2 Yield (%): 3.22 LT Debt (¥ b): 0.0 4 yr EPS CAGR (12/11-12/15): 13.9
Mkt Val ($ b): 7.96 forex ¥ /$: 80.0 PEG (2011/2011-2015) 1.41 12 Month Target (¥): ¥ 1,500
Investment Thesis:
2012 will unfold a number of important catalysts and bring upside to this ‘least risk carrying company’ of Japan – these are –
1. Data that will claim Actemra’s label expansion and its likely filing for 1st line RA in the US
2. Positive news flow from Roche’s multinational studies, especially around its growing breast cancer franchise i.e. pertuzumab and T-DM1
and their filings in Japan
3. Safe domestic business and sales ramp up of newly launched products in Japan - Mircera (approved April-11, peak sales pot. ¥40b) and
Edirol (launch April-11, peak sales pot. ¥15b), and
4. A likely increase of Roche’s stake in Chugai as the basic agreement that prevented Roche from increasing its stake will expire in Oct-12.
26
MP Advisors

27. Upcoming Milestones
Price
Impact
Period
Year
If Expect
Drug Event Description If
Neg ation
Posi
ativ
tive
e
Clinical Head to Head study vs.
Actemra 1Q 2012 High Med Positive
data Humira (ADACTA study)
PhIII data from overseas
Clinical
T-DM1 EMILIA study 2nd line HER 1H 2012 Low Low Neutral
data
2+ BC
Metastatic breast cancer HER
T-DM1 US filing 2+ second-line based on 1H 2012 High Low Neutral
EMILIA study
Corporate Roche may increase its stake
NA Oct 2012 High Low Positive
event in Chugai
US approval in mBC HER2+
US
Pertuzumab firstline based on PFS data 2H 2012 High Low Positive
approval
with Herceptin
Pertuzumab JP Filing As adjuvant to Herceptin 2H 2012 Med High Positive
Actemra US filing DMARD IR first line filing 2H 2012 Low low positive
Actemra US filing For SC formulations 2H 2012 High High Positive
Tarceva JP Filing Filing for 1st line NSCLC 2H 2012 Med Med Positive
Clinical SC vs. IV (SUMMACTA Any
Actemra 2012 Low Low Positive
data PhIII study) time
T-DM1 JP Filing JP filing 1H 2013 Med Med Positive
Source: MP Advisors, Company Reports
27
MP Advisors

28. DAIICHI SANKYO (4568, ¥1,466) – Outperform
‘Hybrid Tree’ Is Ready to Give Fruits!
Fiscal Year Total % Gross Op. % Op. EV/ Net EPS % PE CFPS PCF
(¥ b) Rev. Chg. Margin Profit Chg. Margin EBITDA Profit (¥) Chg. (x) (¥) (x)
MAR-11 A 967.5 1.6 70.9 122.3 28.1 12.6 5.4 70.3 99.2 68.0 14.8 158.6 9.2
MAR-12 E 945.4 (2.3) 71.1 114.8 (6.1) 12.1 5.4 20.5 29.0 -70.8 50.6 19.5 75.3
MAR-13 E 1,009.4 6.8 70.6 127.6 11.2 12.6 5.0 69.1 97.4 236.5 15.0 74.0 19.8
MAR-14 E 1,095.2 8.5 70.8 141.7 11.1 12.9 4.7 80.8 114.0 17.0 12.9 126.7 11.6
MAR-15 E 1,133.9 3.5 70.7 150.2 5.9 13.2 4.6 85.1 120.0 5.3 12.2 146.8 10.0
MAR-16 E 1,190.5 5.0 70.9 161.2 7.4 13.5 4.4 90.6 127.9 6.5 11.5 150.1 9.8
MAR-17 E 1,198.0 0.6 70.8 162.2 0.6 13.5 4.3 90.2 127.2 -0.5 11.5 171.4 8.6
SOS (m): 709.0 Dividend: 60.0 Cash + Inv (¥b): 287.95 4 yr EPS CAGR (3/11-3/15): 4.9
Mkt Val (¥ b): 1,039.4 Yield (%): 4.09 LT Debt (¥ b): 227.53 4 yr EPS CAGR (3/51-3/16): 45.0
Mkt Val ($ b): 12.92 forex ¥ /$: 80.0 PEG (3/11 / 3/11-3/15): 3.03 12 Month Target (¥): ¥1,850
Investment Thesis:
• R&D attractiveness – Pipeline is full of late stage candidates which will fetch attention in 2012. Edoxaban (Ph III, factor Xa inhibitor, AF), ARQ 197
(Ph III, c-met inhibitor, NSCLC), Denosumab (Approved in JP in 2012, bone metastatase), Vemurafenib (US approval in Aug-11, Approved in EU in
2012, BRAF inhibitor, meladnoma) and CS-8958 (approved in JP, Ph III for prophylaxis anti-influenza) remain growth drivers.
• RBXY’s Solid Growth Prospects Beyond Near Term Concerns: 2012-14 brings a number of First-to-File (FTF) opportunities for RBXY, together they
translate into $1.2b opportunity and a number of Para IV milestones will again bring RBXY in forefront in 2012. We find that near term concerns are
overly built regarding compromised Lipitor generic opportunity and probable FDA penalty (DS made provision of $500m).
• Ability to exploit Japanese generic growth – with Daiichi Sankyo Espha, it is the only Japanese major well positioned to encash Japan generic
opportunity
• Geographic diversity and Revenue Sustainability – DS has major geographic presence which is likely to increase with time; DS is able to maintain
~90% of its current revenue base thru FY 03/17 i.e. excluding R&D pipeline contribution - a feature that most of JP peers lack.
• Upside From Onetime Cash Flow: Coming quarters may unfold some agreements with global giants on its PhII onco candidates, global rights of
Edoxaban etc.
28
MP Advisors

29. Key Pipeline Candidates
Development Drug Class Indications Market Stage Origin
code
PLX4032 BRAF inhibitor Melanoma EU Approved Plexxikon
US Approved
Anti-RANKL Bone metastases of JP Approved
AMG-162 antibody cancer Amgen
Osteoporosis JP Filed
RA JP PhI
Anti-platelet Acute coronary US/EU P3
CS-747 agent syndrome-MM
Prasugrel In-house
Acute coronary JP P3
syndrome-PCI
Factor Xa Atrial fibrillation US/EU/JP P3
DU-176b inhibitor
Venous US/EU/JP P3 In-house
thromboembolism
ARQ-197 c-Met inhibitor anti-cancer US/EU P3 ArQule
Neuraminidase Anti-Influenza US/EU P1
CS-8958
inhibitor In-house
JP Approved
Anti-DR5 Target tumor cells US/EU/JP P2
CS-1008 In-house
antibody
PPAR gamma NSCLC US/EU P2
CS-7017
activator In-house
JP P1
Anti-HER3 US/EU P2 U3
U3-1287
antibody Pharma
Fms/Kit/Flt3-ITD US P2
PLX3397 inhibitor Plexxikon
Anti EGFR JP P2 CIMYM
DE-766
Bioscience
Chymase Atopic Dermatitis US P2 Asubio
SUN 13834 inhibitor Pharma
29
MP AdvisorsSource: MP Advisors; Company Reports

30. TOWA (4553, ¥3,395) – Outperform
Performance Will Outcast New ‘Mid Term Plan’
Fiscal Year Total % Gross Op. % Op. EV/ Net EPS % PE CFPS PCF
(¥ b) Rev. Chg. Margin Profit Chg. Margin EBITDA Profit (¥) Chg. (x) (¥) (x)
03/11 A 46.1 18.2 53.7 9.7 24.6 20.9 4.5 5.8 339.3 26.7 9.8 (271.2) (12.3)
03/12 E 50.2 8.8 53.7 9.9 2.5 19.7 4.4 5.9 342.5 0.9 9.7 (12.3) (270.5)
03/13 E 56.7 12.9 52.5 10.3 3.8 18.1 3.9 6.1 355.5 3.8 9.4 (512.2) (6.5)
03/14 E 61.9 9.1 52.6 11.2 9.1 18.1 3.6 5.9 388.3 9.2 8.6 196.1 17.0
03/15 E 66.4 7.4 52.7 12.1 8.0 18.2 3.4 6.7 419.5 8.0 8.0 459.6 7.3
03/16 E 71.1 7.1 52.8 13.1 8.2 18.4 3.2 7.2 454.3 8.3 7.3 501.9 6.6
SOS (m): 17.2 Dividend: 65.0 Cash + Inv (¥b): 9.5 4 yr EPS CAGR (3/11-3/15): 5.4
Mkt Val (¥ b): 58.3 Yield (%): 1.91 LT Debt (¥ b): 10.4 4 yr EPS CAGR (3/12-3/16): 7.3
Mkt Val ($ b): 0.686 forex ¥ /$: 80.0 PEG (3/11 / 3/11-3/15): 1.35 12 Month Target (¥): ¥ 4,100
Investment Thesis:
Mid-Term Plan (MTP) announced on Nov-11 projects single digit revenue growth vis. a vis. larger increase in R&D and depreciation. Our analysis
suggests that management has negated key positive components in its MTP and see several reasons why actual results will exceed these projections
• In its Assumptions, Towa Does not Expect Any ‘New Major Reform’ Enhancing Generics Uptake In Next 3-Years – our take is that there would be
a few ‘major changes’ in April-12 and April-14.
• MTP Assumes No Fundamental Reform On NHI Pricing System: Chuikyo’s chemist survey results came after Towa MTP find that current Yakka-sa
is ~8.4%. Early signals suggest that general price cuts would be ~6% while there may be additional price cuts on long listed drugs.
• Investment Plans – Capex plans indicate good capicity to meet demand in future.
• Towa Has always exceeded its MTP: management has been conservative unlike its peers
• Besides the above, we find the following catalysts to also support valuation:
1. Acquisition Target
2. Relative Standing vs. Peers on Valuation
3. Healthcare Reforms in April-12: Incentive to Pharmacies, Change in Generic Pricing Policy etc. 30
MP Advisors

31. Reforms to be Implemented in April-2012 and
Implications
Reform Description Impact Biggest
Beneficiary
Companies
Premium for generics dispensing Further increase in incentive for pharmacist; Higher generic substitution at dispensing
Sawai, Towa,
likely to be in pocket of those who dispensed pharmacy
Nichi-Iko
more than 30% of generic
Higher bonus points to Hospitals Awarding higher bonus point to hospitals More Rx on generic drugs to generate to get
for more usage of generics using atleast 30% generics (35 points); more bonus points
Hospital using atleast 20% awarded points Sawai, Nichi-Iko
reduced from 30 to 28 points.
Higher discount to new generic First generic version set to be min 40% Increasing discount will make generic drugs
All generic
launch discount to branded drug instead of current more competitive against long listed drugs
companies
30% discount.
Reducing the difference in price Currently there is huge price difference Reducing the gap at lower end will make
Towa, Sawai,
of Generic drugs between the two brands of generics. generic dugs more competitive to long listed as
Nichi-Iko
well as among generic drugs.
Change in prescription format Removal of ‘no substitution permitted’ Increase generic substitution at pharmacy
column from current Rx format and All generic
compulsory writing the generic name of the companies
drug.
Increase in management and Points awarded to pharmacies for providing More Rx on generic drugs to generate
guidance fee drug history management and guidance will All generic
rise to 41 points, from 30 points at present companies
Abolition of Premium for GE The abolition of the extra two points awarded Impct negatively to the sales of newly listed
Dispensing and GE information to pharmacies for dispensing generic drugs generic drugs All generic
provision fee and the 15 points for providing drug companies
information
31
MP Advisors MHLW
Source: MP Advisors;

32. TORII PHARMA (4551, ¥1,462) – Outperform
A Bet That Offers Only Upside!
Fiscal Year Total % % Gross Op. % % Op. EV/ Net EPS % PE CFPS PCF
(¥ b) Rev. Chg. Mgn Profit Chg. Mgn EBITDA Profit (¥) Chg. (x) (¥) (x)
MAR-11 A 45.34 6.9 59% 1.85 (69.8) 4% 9.4 0.93 33.0 (74.3) 44.3 8.7 167.1
MAR-12 E 49.26 8.7 59% 1.68 (9.3) 3% 9.2 1.10 38.8 17.5 37.7 28.4 51.6
MAR-13 E 51.66 4.9 59% 2.63 56.9 5% 7.5 1.65 58.3 50.4 25.1 38.7 37.8
MAR-14 E 53.39 3.3 60% 3.32 26.3 6% 6.6 2.05 72.5 24.3 20.2 45.4 32.2
MAR-15 E 59.84 12.1 60% 5.24 57.8 9% 4.7 3.17 111.9 54.3 13.1 78.7 18.6
MAR-16 E 70.64 18.0 61% 6.90 31.7 10% 3.8 4.13 145.9 30.4 10.0 107.8 13.6
MAR-17 E 85.42 20.9 61% 9.53 38.0 11% 2.8 5.65 199.7 36.9 7.3 157.5 9.3
FD SOS (m): 28.3 Dividend: 40.0 Cash + Inv (¥ b): 12.3 5-yr EPS CAGR (11-16): 27.6
Mkt Val (¥ b): 41.1 Yield (%): 2.74 LT Debt (¥ b): 0.1 4-yr EPS CAGR (11-15): 39.3
Mkt Val ($ m): 517.2 forex ¥ / $: 80.0 PEG (11/11-15): 1.6 12-month Target Price (¥): 2,400
Investment Thesis:
Our Outperform rating is largely based on gain from expected positive news flow on dalcetrapib (JTT- 705, PhIII -US, CETP modulator,
dyslipidemia). It is a Japan Tobacco Inc. (JTT) candidate which is partnered with Roche for global rights (Ex-JP) and aspiring for ‘first in
class’ drug for increasing HDL, and carries a multi-billion global potential. Torii being the marketing partner of JTT for pharma in Japan will
be selling it and is a natural beneficiary of the dalcetrapib success. It is currently under PhII trials in Japan.
Elvitegravir (JTK 303, filed for combination therapy and PhIII for mono-therapy in US/EU, integrase inhibitor, partnered with Gilead, HIV)
is next such candidate which will be commercialized in Japan thru Torii (Preparing for registration in Japan).
32
MP Advisors

33. CETP Inhibitors at A Glance
33
MP Advisors

34. CETP Inhibitors at A Glance
34
MP Advisors

35. DAINIPPON SUMITOMO (4506, ¥820) – PIA
Latuda Story Is Not Over Yet!
Fiscal Year Total % Gross Op. % Op. EV/ Net EPS % PE CFPS PCF
(¥ b) Rev. Chg. Margin Profit Chg. Margin EBITDA Profit (¥) Chg. (x) (¥) (x)
03/11 A 379.5 28.1 71.0 30.9 (13.2) 8.1 3.1 16.7 42.0 (20.1) 19.5 (47.0) (17.5)
03/12 E 355.6 (6.3) 71.1 23.3 (24.7) 6.5 4.9 13.6 34.2 (18.6) 24.0 (15.4) (53.3)
03/13 E 353.8 (0.5) 70.6 34.2 47.1 9.7 4.2 19.2 48.3 41.1 17.0 95.1 8.6
03/14 E 343.2 (3.0) 71.6 30.3 (11.3) 8.8 4.6 16.8 42.2 (12.5) 19.4 99.4 8.3
03/15 E 321.5 (6.3) 71.7 34.5 13.8 10.7 5.7 19.3 48.5 14.9 16.9 81.1 10.1
03/16 E 324.1 0.8 71.5 50.4 45.9 15.5 4.4 28.8 72.3 49.0 11.4 77.4 10.6
03/17 E 331.1 2.2 71.6 48.5 (3.8) 14.6 4.5 27.7 69.2 (4.2) 11.9 80.3 10.2
SOS (m): 397.9 Dividend: 18.0 Cash + Inv (¥b): 112.2 4 yr EPS CAGR (3/11-3/15): 3.7
Mkt Val (¥ b): 326.7 Yield (%): 2.19 LT Debt (¥ b): 133.0 4 yr EPS CAGR (3/12-3/16): 20.6
Mkt Val ($ b): 4.1 forex ¥ /$: 80.0 PEG (3/10 / 3/10-3/14): 5.3 12 Month Target (¥): 950.0
Investment Thesis:
A number of approaching milestones for its sole catalyst Latuda will unfold positive in the next 6-months and bring additional upside
that was built following its US approval in Feb-11 and satisfactory Rx uptake thereafter.
• Latuda Rx share since launch indicates its acceptability at psychiatrists’ level that faces limitations with the available anti-schizophrenia
drugs. With its manageable extra-paramedical SEs, impressive metabolic SE profile along with its comparable efficacy to leading drugs
Zyprexa (Lilly, FY11e US sales ~$2.0b, US pt. ex. Oct-11) and Seroquel (AZN, FY11 WW sales ~$5.7b) is establishing itself as an
unavoidable switch option for managing schizophrenia. Latuda’s NRx pick up vs. recently launched anti-schizophrenia drugs also
indicate its better acceptability.
• Our PIA now looks ahead to positive outcomes from ‘Bi-polar disorder’ trials, where the opportunity is huge (~1.5x to Schizophrenia in
value and 2x in growth, chart 2). A number of trials will unfold with their detailed or interim data thru mid-12 and fetch attention.
35
MP Advisors

36. LATUDA : Ongoing Clinical Studies
36
MP Advisors

37. EISAI (4523, ¥3,060) – Underperform
‘HAYABUSHA’ Is Difficult To Achieve!
Fiscal Year Total % Gross Op. % Op. EV/ Net EPS % PE CFPS PCF
(¥ b) Rev. Chg. Margin Profit Chg. Margin EBITDA Profit (¥) Chg. (x) (¥) (x)
03/11 A 768.9 (4.2) 78.2 113.1 31.4 14.7 5.7 67.4 236.5 68.1 12.9 527.9 5.8
03/12 E 658.9 (14.3) 73.7 99.6 (12.0) 15.1 6.1 63.5 222.7 (5.8) 13.7 397.0 7.7
03/13 E 647.9 (1.7) 74.2 91.4 (8.2) 14.1 6.3 58.1 203.8 (8.5) 14.9 522.8 5.8
03/14 E 595.9 (8.0) 73.7 74.0 (19.1) 12.4 7.0 46.6 163.3 (19.9) 18.6 116.1 26.2
03/15 E 595.3 (0.1) 74.7 76.3 3.1 12.8 6.8 48.1 168.7 3.3 18.0 213.5 14.3
03/16 E 602.1 1.1 74.3 74.7 (2.0) 12.4 6.7 47.1 165.1 (2.1) 18.4 193.8 15.7
03/17 E 611.5 1.6 74.5 77.1 3.2 12.6 6.4 48.7 170.7 3.4 17.8 204.0 14.9
SOS (m): 285.1 Dividend: 150.0 Cash + Inv (¥b): 180.1 4 yr EPS CAGR (3/11-3/15): (8.1)
Mkt Val (¥ b): 868.2 Yield (%): 4.93 LT Debt (¥ b): 399.9 4 yr EPS CAGR (3/12-3/16): (7.2)
Mkt Val ($ b): 10.85 forex ¥ /$: 80.0 PEG (3/11 / 3/11-3/15): (1.6) 12 Month Target (¥): 2,500
Investment Thesis:
Management’s Mid Term Strategic Plan ‘HAYABUSHA’ embarked from April-11, aims to achieve ¥800b sales and ¥200b OP in 03/16
(Annexure 1) – which we find too optimistic. We doubt management’s projections of ~20% ROE and find their expectations from Aricept’s line
extension and new products unrealistic. Eisai revenue is slated to drop following key products patent expiry i.e. Aricept and Aciphex (Pt. exp in
Nov-10 and May-13 respectively); together they contributed ~¥427b (or ~56% of revenue in FY 03/11). This will lead Eisai’s EPS to fall by ~8%
CAGR in 03/11-03/15. Though pipeline looks decent and can bring positive surprises, when seen in contrast to expected value built in current
price Eisai does not appear to be a stock offering good risk-return profile.
• Pipeline Potential Overly Built: One of its key candidate, Halaven (eribulin, microtubule growth inhibitor, 3rd line metastasis breast cancer)
received FDA approval in Nov-10. Following this, Eisai has three late stage candidates – E-2007/ perampanel (Filed, AMPA receptor
antagonist, epilepsy), E7080/ lenvatinib (PhIII, VEGF receptor, Thyroid cancer) and MORAb-003/ farletuzumab (PhIII, Humanised IgG1 mAb,
Ovarian cancer) ) –None of these will have enough potential to nullify the loss of Aricept and Aciphex even in their best case scenarios.
• Domestic Challenges will Surface Soon: 75%+ FY03/12 revenue is long listed and exposed to price cuts and generics threats. A proposed
reform for April-12, suggests that premium given for new products developments on some products will be returned, hits Aricept.
37
MP Advisors

38. Key Pipeline Candidates
Exp.
Product MoA Indication Market Stage Launch
US Filed (2012) 2012
E2007 (perampanel) AMPA receptor antagonist Epilepsy EU Filed (May-11) 2012
JP PhII 2013
MORAb-003 Humanised IgG1 mAb Ovarian cancer US/EU/JP PhIII 2013
E7080 VEGF receptor Thyroid cancer US/EU/JP PhIII 2014
Microtubule growth
Halaven (E7389) Sarcoma & NSCLC US/EU PhIII / II 2015
suppressor
E5564 (eritoran) Endotoxin antagonist Severe sepsis US/EU PhIII 2015
Thrombopoietin receptor Idiopathic
E5501/AKR-501 US PhII 2015
agonist thrombocytopenic purpura
Thrombin receptor
E5555 ACS US/EU/JP PhII 2016
antagonist
MORAb-009 Humanised IgG1 mAb Pancreatic cancer US PhII 2016
38
MP Advisors

39. RISING STARS - OUTLOOK 2012
Subita Srimal, Ph.D Khyati Thkrar, M.Sc., PGDBM Sanjeev Mishra, MBA
subita@mpadvisor.com khyati@mpadvisor.com sanjeev@mpadvisor.com
+1.646.657.3794 +1.646.657.3787 +1.646.434.7588
39
MP Advisors

40. • What is Going Right For the sector?
• What Are the Challenges?
• Therapy Areas- Witnessing a Turn Around
• Value creation: Recommendations
RISING STARS - INNOVATIVE RESEARCH DRIVEN
UNPROFITABLE COMPANIES
40
MP Advisors

41. “RIGHT” IN 2011
• INCIVEK/ VICTRELIS – HCV - First Protease Inhibitors
• Benlysta- Lupus- First Drug after more than two decades –Unmet Need
• Yervoy and Zelboraf- mMelanoma- First Drug after more than two
decades –Unmet Need
• Xa Inhibitors- Bleeding, Cardio- Eliquis, Brilinta, Pradaxa, Xarelto- ACS,
DVT – Better Options than Warfarin (old drug)
• Soliris - aHUS - Unmet Need
• Jakafi- MPN- first time unmet need
• Xalkori- NSCLC- ALK+ve - first personalized drug and diagnostic
approved together
• Adcetris- HL, ALCL - Better Option - More Potent
2011 Was a Tribute to Innovation - New drugs for Unmet Needs/
First-in-Class were Approved
41
MP Advisors

42. Will The Trend Continue in 2012?
• Drug Launch in Select Therapy Areas
• Oral RA
• Genetic Diseases
• Anti-obesity
• Cancer
• Gout
• Dyslipidemia
42
MP Advisors

43. SELECT DRUG LAUNCHES: 2012
Expected Drug Launch From Rising Star Companies
Approval/ PDUFA
Drug Company Indication
Date
Bydureon Amylin Diabetes type II 28-Jan-12
Vismodegib Roche/ Curis advanced BCC 8-Mar-12
Peginesatide Affymax/ Takeda Anemia in CKD 27-Mar-12
Qnexa Vivus Obesity 17-Apr-12
KALYDECO Vertex Pharma Cystic Fibrosis 18-Apr-2012
Contrave Orexigen / Takeda Obesity 1Q12
UPLYSO Protalix / Pfizer Gaucher disease 1-May-12
Lorcaserin Arena / Eisai Obesity 27-June-12
Ilaris Novartis/ REGN Gouty arthritis 1H12
HyQ (rHuPH20+ Ig) Halozyme/ Baxter Pri immunodeficiency 1H12
Arcalyst Regeneron Gout 30-Jul-12
AMR-101 Amarin MARINE - High 26-July-2012 (T)
Ridaforolimus Ariad / Merck Sarcoma/ Osteosarcoma 8-Aug-12 (T)
cabozantinib Exelixis Medullary thyroid C 2H12
Kynamro ISIS/Sanofi Ho FH 2H12
MP Advisors
The Impact Will not Be as Great as in 2011 43

44. But…
Better Drugs For The Patients is not = to the Best Future For the Innovators!
MP Advisors

45. The Challenges?
• SALES
• REIMBURSEMENTS
• PRICING PRESSURE
• BETTER DRUGS IN THE MAKING
Patent Are Essential But do not Guarantee Longevity or Cash Flow
45
MP Advisors

46. Innovators Suffered …
• Devastating in some cases- VRTX, HGSI, DNDN, etc.
• Reasons were different for each co.- In some cases it was better data
= shorter life span of innovation- IP may give no protection!
• Others- High price or ???
• Most cases – the drop followed approval- Investors are uncertain
about sales and betting more on “hope” than “reality”?
• Testing times ahead in 2012 for INCY, REGN, VRTX, AMRN,
SGEN, HGSI, DNDN etc.
• So…….?
46
MP Advisors

47. Multiple Options Ahead
• Choosing between a shining star and profitability!
• Paradigm shift in investing pattern-: Tap Them Young Or mid-late stage
• Selective Targeting vs. Pan Drugs – A Dollar ($) war
• Hope Delivered but Reality bites- GARAGE SALE= Opportunity?
• Technology Platforms will continue to attract
47
MP Advisors

48. Score Card- 2011
TP YoY Hit /
Companies Rating Comments
(LC) chg (%) Miss/ Ok
Initially on robust data in HCV and partnering and
Pharmasset NA 441% NA H
later on acquisition
Current price presents a good investment
opportunity as catalysts- uptake of Eylea and clinical
Regeneron $70 84% OP H
data of its pipeline products will keep the
momentum in 2012.
Approval of INCIVEK for HCV and unexpected
positive data from KALYDECO in cystic fibrosis
Vertex $34 62% OP H were the highlights for 1H11. Data from various
competitive drugs in HCV lead to decline in latter
part of 2011.
Drug targets high risk ACS pts and data and
Anthera $12 30% OP H
safety so far favors high risk reward opportunity
Targets niche indication, pivotal trial ongoing.
*Micromet $8 23% OP H
Value of tech platform not realised.
Clinically impressive but may not meet commercial
AVEO Pharma $18 19% MP Ok
success due to competition.
Lack of milestone in 2011. Balanced business model
of partnered programs and positive cash flow service
Morphosys €23 0% OP Ok
segment. Value of tech platform and pipeline should
unfold in 2012-13.
Lack of milestones and macro condition pulled the
ArQule $7 -1% OP Ok
stock down.
Solely dependent on the success of fostamatinib and
Rigel $8 -3% MP Ok
no milestones in near term.
Approval of Jakafi for MF did not please the
Incyte $18 -6% OP Ok investors as concerns on reimbursement,
commercial success remain.
Slow but steady development. Couple of program
Immunomedics $6 -8% OP Ok
reached into PhIII.
* Price as on the day when we initiated the coverage after Outlook'11; PoC = Proof-of-Concept ………….continued
………….continued
Dark Red indicates 2011 top picks; Bold are our 2012 Top Picks
Source: MP Advisors, Company Reports
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MP Advisors

49. Score Card- 2011 …continued
Hit /
TP YoY
Companies Rating Miss/ Comments
(LC) chg (%)
Ok
Pipeline lacks critical mass or catalysts which could
Galapagos €8 -12% MP Ok
move the stock. Return of compounds by GSK
Promising PhIIb data but the delays in start of PhIII
Ardea Biosci. $28 -20% OP Ok and no partnership announcement lead to decline in
2H11.
ISIS $8 -27% MP M No milestones or new prog to drive the company.
Question over the patent life of key drug
*Amarin $8 -55% MP M
overshadows the advantages of marketed options.
Though PhIIb of HCV compounds data were
*Medivir SEK59 -49% MP M positive, change in management, increasing
competition in HCV lead to the decline.
MXUS0HC 4.6% MSCI USA/Health Care
MXUS0PB -0.4% MSCI US Pharma & Biotech
* Price as on the day when we initiated the coverage after Outlook'11; PoC = Proof-of-Concept
Dark Red indicates 2011 top picks; Bold are our 2012 Top Picks
Source: MP Advisors, Company Reports
49
MP Advisors

50. RS- Recommendations for 2012
• MITI (acq. By AMGN)
• INCY
• VRTX
• REGN
50
MP Advisors

51. Focus on Therapy Areas in 2012
• Last year was most eventful for HCV, Melanoma, Lupus and Anti Coagulants.
• Exciting Data, Approvals, Spectacular Launch and Astounding Acquisitions! GILD-VRUS
• This Year Also Started with a Bang for HCV- BMS-INHIBITEX acquisition
• Data in HCV “oral IFN free combinations” will decide the wisdom of the “Premium Paid”.
• 2012- A year to Remember for Alzheimer's – Key PhIII drug data –Make or Break
• More oral options in MS and First in RA
• Cancer Vaccines- DNDN rose from the graves in 2012 with good sales. Data from other Cancer
vaccines will decide whether its “Hope or Hype”
• Anti obesity drugs may finally see the light – though with a Narrow Label.
• Biosimilars/Better Biologics- Regulatory Pathway- an Evergreen area of interest.
51
MP Advisors

52. Garage Sale-Tech Focus
• ALNY
• ABLX
• ICLL
• IMMU
• DVAX
• IDRA
• VNDA
Many Trading Close at Their Cash Value!
52
MP Advisors

53. MATURE BIOTECH –WATCH OUT
FOR….
• VALUATIONS
• SALES/EARNINGS EXPECTATIONS
• GENERIC THREAT
“Only Green – No Red” – Entering 2012 with High Expectations
53
MP Advisors

54. Score Card- 2011
Hit / Miss/
Companies Target Price YoY chg. (%) Comments
Ok
World wide sales growth of Soliris in PNH and label expansion. Focus on
Alexion $75 74% H orphan and rare diseases make it most eligible of an acquisition target after
Genzyme.
Increased focus on MS therapy area. Volume growth of Tysabri and sales
Biogen Idec $60 69% H growth of Avonex (due to price increase) along with unexpected positive PhIII
data from BG-12, an oral MS drug, took the stock to a new high
Settlement with Bayer for regorafenib and acquisition rumor. FDA decision of
Onyx Pharma $35 32% H not granting priority review in Dec ‘11 for Carfilzomib’s hampered the positive
sentiment of investors.
Revlimid’s malignancy related issue and generic threat from Natco Pharma
Celgene $72 9% H overweigh the sales ramp up + Japan launch of Revlimid and positive pipeline
news flow.
Share repurchases, dividend payments and denosumab ramp-up hedges the
Amgen Inc $63 9% H
sales decline of ESA franchise- and blankness of pipeline.
Did not perform as expected due to maturing sales growth from HIV franchise
and lately announcement of VRUS’ acquisition news; however, we see it as a
Gilead Sci. $45 6% Ok
perfect move to gain the leadership position in HCV market using its vast
experience in anti-viral therapy.
54
MP Advisors Bold are MP’s 2012 Top Picks

55. VALUATION SNAPSHOT
NPV of NPV of Cash & Part A Part
Value of Mkt
Mkt Late Stage Other Price** to A+B+C+
Company Intangibles Cap
Products Pipeline Cash ($) Price** Net Cash to
(Part C)* ($m)
(Part A)* (Part B)* Flows* (%) Mkt Cap
Gilead# 44.6 10.2 6.7 (13.0) 40.2 111% 31,286 121%
Celgene 60.0 6.3 9.8 (3.7) 61.3 98% 28,174 118%
Biogen
96.1 16.3 21.6 (4.1) 111.8 86% 27,429 116%
Idec
Alexion 51.7 9.7 17.3 (3.4) 65.1 79% 12,622 116%
Amgen 70.3 1.4 2.0 (11.7) 57.5 122% 47,668 108%
Onyx 15.2 22.2 9.2 (2.8) 44.0 34% 2,796 100%
* $/share; ** as on 12/05/2011; # including impact of Pharmasset acquisition; Bold are MP’s 2012 Top Picks
Source: MP Advisors, Company Reports
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MP Advisors