1. Know Your End-Market! Medical & Pharmaceutical Trends Impacting the Chemicals and Materials Industry A panel discussion with Frost & Sullivan's leading Chemicals & Materials analysts: Hariharan Ramasubramanian, Dr Leonidas Dokos 27 February 2009

2. Focus Points Introduction Impact of Economic downturn Key Medical & Pharmaceutical Trends Materials for Medical Devices Product Segmentation Challenges, Drivers and Growth Chemical Excipients Product Segmentation Challenges, Drivers and Growth Major Industry Participants Conclusion 2

3. Introduction 3

4. The Integrated Industry Perspective Healthcare represents a crucial downstream end-user Coatings, Plastics Adhesives Performance Specialty and Packaging and Materials Chemicals Polymers Sealants Aerospace Aerospace Automotive & Automotive & Automotive & & Defense & Defense Transportation Transportation Transportation Automotive & Automotive & Electronics Environment Electronics Transportation Transportation Electronics Electronics Healthcare Healthcare Environment Healthcare Healthcare Food Construction Energy Construction Construction Healthcare Source: Frost & Sullivan Source: Frost & Sullivan 4

5. The Medical and Pharmaceutical end-use markets for Materials and Chemicals Healthcare Medical & Pharmaceutical Materials in Chemicals Excipients for Healthcare Pharmaceutical Drugs Materials in Materials in Medical Devices Medical Packaging 5

6. Economic Downturn Impact on Medical and Pharmaceutical Markets 6

7. Impact on Sectors of the Economy Market Indices as an Indicator for Industry Prospects The effects of the downturn has disproportionately affected different segments of the economy The healthcare sector has outperformed the broader market US Market Indices 16,000 14,000 Indices value (units) 12,000 10,000 8,000 Healthcare Indices, while 6,000 declining, have still 4,000 outperformed Dec-07 Feb-08 Mar-08 May-08 Jul-08 Aug-08 Oct-08 Nov-08 the broader Dow Jones Industrial Average NasDaq Biotech market NasDaq Financials NASDAQ Transportation S&P HEALTHCARE INDEX PHLX SEMICONDUCTOR SECTOR INDEX This implies that investors expect that, while the healthcare sector will be affected by the downturn, it will still out-perform the general economy 7

8. Winners and Losers High Elite: Companies which have Elite Winners high cash reserves, but Big Pharma unable to do much to improve their business because of the unfavorable situation Big imaging companies Winners: Companies which Financial Leverage Big device have high cash reserves and companies are able to leverage this Big IVD situation successfully through Losers Opportunists strategies like M&A / Small device alliances. companies Discretionary product manufacturers Generic Opportunists: Companies manufacturers which have the best Home care opportunity to grow during the companies economic downturn Low Losers: Companies likely to High Business risks in economic downturn Low loose their revenues due to economic downturn Source: Frost & Sullivan 8

9. What is the way forward ? Medical devices becomes a more attractive segment for plastics suppliers facing declines in their other key end user segments. The prospects for higher margins and a stable demand acts as a major incentive for companies to invest. However, a focussed - rather than piecemeal approach to the market will be important for companies looking for long term growth in this segment. Plastics in Medical devices to grow at a CAGR of 5.4% in the period 2009-2015. Companies such as Invibio (Victrex) and LyondellBasell that have built up a separate brand image and identity for their medical products are well placed to grow in this segment 9

10. What is the way forward ? (contd) As the era of blockbuster drugs continues to approach its end, the smaller and specialist companies are better placed for survival. The pharmaceutical industry is more apprehensive about the upcoming expirations of patented drugs than the global economic contraction. The expiration of patents means that manufacturers of excipients need to be prepared to do business with a larger number of companies in a wider geographical spread and at a more cost-driven supply basis. Strategic partnerships and alliances will become more In over 23 years in the industry, crucial than ever. I've never really seen pharma Even amidst the current sales being affected by an challenging economic climate economic downturn in the the market for pharmaceutical western world. We're probably excipients will perform better one of the industries that will be than other chemicals markets affected the last and the least.quot; with a forecast CAGR CEO of one of worlds top 30 between 2009-2015 of 3.3%. pharma companies. 10

11. Key Medical & Pharmaceutical Drivers and Trends Doctor, I feel a pain in 11

12. Pharmaceutical trends with Respect to Chemicals & Materials what lies ahead In 2000, 10% (606 million) of the global population was aged 60+. By 2050 this will be more than 21% (2 billion). The aging of population and the need for more medical devices and sophisticated drugs will create undisputedly more demand for materials, active ingredients and chemical excipients. There is increasing competition from low-cost manufacturers. These are located in Asia, especially in India and China, and are continuously enlarging their capacity while improving at the same time the quality, credibility and reliability. Source: Frost & Sullivan 12

13. Pharmaceutical trends with Respect to Chemicals & Materials what lies ahead (contd) Global mortality from chronic diseases will increase 50% by 2025. Cardiovascular diseases will remain the main global mortality chronic disease by 2025 with cancer and respiratory diseases increasingly affecting more people. 75% of people aged 60+ have one chronic condition, while 50% have two or more chronic conditions. Chronic diseases account for more than 60% of all health care spending. Source: Frost & Sullivan 13

14. Performance Material Trends in the Medical Devices and Pharma Packaging Markets 14

15. Market Segmentation Plastics in Medical Devices Plastics in Medical Devices Polypropylene Polyethylene PVC Eng Plastics Syringes Syringe Plungers Catheters Surgical Equipment Labware Labware Medical Bags Sterilisation Medical Bags Medical Bags Administration Trays Sets Administration Medical Device Sets Housings Implants 15

16. Key Themes in the Performance Materials Industry Trends of Specific Importance to the Medical Device Industry Performance Materials Market: Impact of Key Industry Themes, Performance Materials Market: Impact of Key Industry Themes, 2009 2009 10 10 Key selling points for Security Conservation of Security Conservation of engineering and high Safety resources Safety resources performance plastics Market Impact Market Impact Performance Performance Lifestyle trends Lifestyle trends Differentiation 5 Differentiation 5 Multiple Technical and Service Multiple functionalities Differentiation functionalities Sustainable Sustainable production production Expansion PVC Replacement Expansion 0 0 0 5 Supply chain 10 0 5 Supply chain 10 Internal Impact Internal Impact Source: Frost & Sullivan Source: Frost & Sullivan Key Trends with High Impact on the Medical Devices Market 16

17. Key Themes in the Performance Materials Industry (Contd) Changing Lifestyle Trends 2005 Patient Driven Secondary Care Available personalised healthcare and choice 2010 Changes in the Patient knowledge through multiple Changes in for demand the Primary Care channels demand healthcare for healthcare diagnostics diagnostics Public pressure on government 2015 One stop shop Home Care/ Self Testing Consumer responsive providers, products and services Source: Frost & Sullivan Implications for Material Selection Demand Volume Unique design principles required Affordability High robustness required off the device Waiting Lists Aesthetics also assume higher Public Anxiety importance Development of demand Opportunities are created therefore for engineering plastics in these management policies and strategies applications e.g. demand driven financing 17

18. European Markets for Plastics in Medical Devices Strong Growth Prospects Revenues forecast to grow at a CAGR of 6.2% in the period 2008-15 Plastics in Medical Devices: Volume and Revenue Forecasts (Europe), 2005-2015 350.0 800.0 300.0 700.0 600.0 250.0 Million 500.0 200.0 kt 400.0 150.0 300.0 100.0 200.0 50.0 100.0 0.0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Frost & Sullivan 18

19. Plastics in Medical Devices Market: For Plastics Suppliers Developing Relationships with Key End User Groups is Crucial to Success Direct supply is Polymer Suppliers LyondellBasell the most preferred route Compounding RTP Compounding Gerresheimer Tier 1 Component Producers Wilden High influence on material selection Pharma Companies and often specify Boehringer materials to be Ingelheim used Note: company names are intended Source: Frost & Sullivan as examples only and do not represent real relationships 19

20. Plastics in Medical Packaging: The Pharmaceutical Blisters Market Excerpt Key Market Segments The Pharmaceutical Blisters Market Example Containers Strong Drivers for Growth Vials & Ampoules Blister Packs Sachets & Strips Blister Market Cost Efficiency Container Tubes of High Growth Pre-fillable Syringes Volume Restraints Containers Key Growth Drivers Growth in Combination Drugs Increase Source: MediSeal in Calendared Increasing Smart Efforts in Packaging Growth in Drug Anti- The pharmaceutical Increasing Counterfeiting Compliance blisters market is Regulations for Efforts Increasing Compliance Drivers expected to grow at a Barrier Requirements CAGR of 6.6% in the period 2008-14 2008 2014 and beyond Source: Frost & Sullivan 20

21. Frost & Sullivan Studies in the Area Plastics in Medical Devices Medical Packaging European Markets for Plastics in European Markets for Pharma Medical Devices M348 - Feb, 09 Packaging M137 Apr, 09 U.S. Markets for Plastics in Medical Materials for Medical Packaging TI Devices N540 Apr, 09 D0E9 Dec, 07 U.S. Polymers in Medical Tubings and Catheters N498 Jan, 09 Western European Medical Silicones Markets M04A Nov, 06 End Market Studies of Interest Medical Devices IRG US Infusion Pumps Market N3A5 - Feb, 09 European Insulin Delivery Devices Market M2CD Oct, 08 Others.. 21

22. Chemical Excipients for the Pharmaceutical Industry Product Segmentation 22

23. Pharmaceutical trends with Respect to Chemicals the expected shift New opportunities in the global pharmaceutical market will appear as the business and market models are evolving. Liposomal technologies have the potential to increase the effectiveness of compounds especially in the anti-cancer, neurological and anti-fungal drug areas. By 2015 opportunities will Pre 2005 be more prominent in niche Blockbuster Model drugs and research and development. 2015 Opportunities By 2020 integrated in the Global Niche Drugs and R&D Pharma packages of products and Market services will focus on patient 2020 monitoring & compliance. Integration & Supply Chain Integration of pharma, diagnostics, medical devices, Source: Frost & Sullivan patient monitoring and healthcare IT. 23

24. Introduction to Chemical Excipients for Pharmaceuticals Excipients are inactive ingredients used to formulate active ingredients into finished dosage forms. Excipients are used to: provide a matrix in which the drug can be handled control rate of dosage aid in the processing of the drug delivery system during its manufacture protect, support or enhance stability, bioavailability or patient acceptability assist in product identification enhance any other attribute of the overall safety, effectiveness or delivery of the drug during storage or use improve comfort when taking drug such ease of swallowing and better taste 24

25. Chemical Excipients - Main Product Types Flavourants & Colourants Disintegrants Glidants & Lubricants Coatings Preservatives & Antioxidants Binders & Fillers Sweeteners Excipients 25

26. Major Challenges The global adoption of Current Good Manufacturing Practices (cGMPs) is the major challenge for this industry representing the required total commitment of a company to a set of regulations, codes, and guidelines for the highest possible quality in manufacture of drugs, medical devices, diagnostic products, food products and Active Pharmaceutical Ingredients (APIs). Asian companies are trying to incorporate cGMPs with various degrees of success. Since 2004, several blockbuster drugs have lost patent protection and this trend is expected to become more prominent up to 2011. Source: Colorcon The active promotion of generics as a high- quality low-expense alternative is expected to widen the market base for these products. Source: Innercap Technologies 26

27. Major Drivers The fastest growing region is Asia, due to its growing economy, and continued improvement in the health care system. The changing attitude of pharmaceutical industry towards excipients considering them more than just inactive ingredients but crucial in improving the performance of the end-product (medicinal drug). The outsourcing of services in the pharmaceutical industry is growing. The reasons include the declining investments in research and development (R&D), increasing generic penetration, and the growing development costs. Modern contract manufacturing organisations (CMOs) offer a wide range of services ranging from pre-clinical development to commercial batch manufacturing to active/non-active manufacturing, as well as packaging and distribution. Smooth delivery of a consistent dosage over time is the objective, with the need for fewer administrations, optimal use of the delivered drug, and increased patient compliance with the treatment programme. 27

28. The global pharmaceutical excipients market will perform better than other chemicals markets The downturn in growth is expected to last throughout 2009 and 2010 affecting at a different degree different regions. The market is expected to return to previous level of activities and growth from 2011. Even amidst the current challenging economic climate the market for pharmaceutical excipients will perform better than other chemicals markets. The CAGR of the period 2009-2015 will be 3.3%. Source: Frost & Sullivan 28

29. Technologically advanced excipients and environmentally friendly products will grow faster than commoditised excipients The Global Pharmaceutical Excipients market is valued at $2.28 billion and was divided among the following excipients market segments as shown below. The market for pharmaceutical excipients will perform better than other chemicals markets. Binders represent the largest market segment, albeit mostly including commoditised products. Disintegrants are expected to exhibit a CAGR of 4.6% during the period 2009-2015. The market for controlled- release pharmaceuticals is growing rapidly with companies increasingly turning to drug delivery technologies as a means of expanding product lifecycles, enhancing drug efficacy and maximizing revenues. Source: Frost & Sullivan 29

30. Major Industry Participants Pharmaceutical Excipients - Materials for Medical Applications 30

31. Conclusion The healthcare sector (medical & pharmaceutical) continues to provide opportunities for innovative companies, even in the current economic scenario Companies willing to enter/strengthen their position in the market will however have to invest in developing the R&D capabilities, and also strong business development and technical service teams to cater to this segment In the pharmaceuticals segment, industry participants need to forge business relationships with generics manufacturers and align accordingly their distribution networks. Individual markets researched by Frost & Sullivan recently including the plastics in medical devices and packaging and the global pharmaceutical excipients are all showing excellent potential for market participants 31

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34. For Additional Information Steve Lee Strategic Account Manager Chemicals, Materials and Food, Asia Pacific (65) 6890 0914 steve.lee@frost.com Medical & Pharmaceutical Trends Impacting the Chemicals and Materials Industry 34