Personalized Medicine Conference

Boston | November 6, 2013

Accelerating Medical Solutions

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us …”

We are entering a new

“Golden Age of Medicine.”

Precision Medicine,

Immunology, Stem Cells…

Change in Biomedical Research Spending (2012)

Source: OECD – Government Budget Appropriations or Outlays for Research and Development (2012)

-10%

-5%

0%

5%

10%

15%

20% China India

Brazil Korea JapanGermany

Australia UK

France

US Canada

Overview

The Interaction of Financial, Social and

Human Capital … and Technology

The Promise of Bioscience and Public Health

Where We Have Come From

Accelerating Medical Solutions

Berkeley

1964

Los Angeles Under Siege

P = Prosperity

Ft = Financial Technology

HC = Human Capital

SC = Social Capital

RA = Real Assets

P=SFti*(SHCi+SSCi+SRAi)

Universal suffrage

Rule of law

Education and health care

Police and fire protection

Religious freedom

Cultural resources

Property rights

Protection of creditors

Financial reporting standards

Examples of Social Capital

Human capitalis the largest asset class.

Cost of Raw Materials & Energy

1920’sAutomobile

60% <2%

Today’sMicrochip

Education and skills

Immigration

Health and quality of life

Three Ways to Build Human Capital

Each life is priceless…

but in economic terms, over the past two

centuries, as much as 50% of all economic

growth can be traced to advances in health.

The Value of Health

0

20

40

60

80

1955-1960 2011

Life Expectancy in East Asia

Source: United Nations, Department of Economic and Social Affairs, Population Division (2011).World Population Prospects: The 2010 Revision, CD-ROM Edition

2001 -

2010

11.1%

10.5%

10.3%

8.9%

8.4%

8.2%

7.9%

7.9%

7.7%

7.6%

Angola

China

Myanmar

Nigeria

Ethiopia

Kazakhstan

Chad

Mozambique

Cambodia

Rwanda

2011 -

2015

8.6%

8.4%

8.4%

7.8%

7.6%

7.6%

7.2%

7.1%

7.0%

7.0%

Iraq

China

Ghana

Mozambique

Zambia

Rwanda

Uzbekistan

Congo, D.R.

Nigeria

Cambodia

Source: The Economist; IMF (excludes countries with populations<10 million)

Annual Average GDP Growth

World’s Fastest Growing Economies

$2,255

Source: International Monetary Fund (2011 USD)

Do human capital strategies work?

Per Capita GDP

1960

$2,271

Singapore

Jamaica

$5,526

2012

$49,936

Overview

The Intersection of Financial, Social and

Human Capital … and Technology

The Promise of Bioscience and Public Health

Where We Have Come From

Accelerating Medical Solutions

Between 1870 and 1950, Americans added almost ONE YEAR OF EDUCATION EACH DECADE.

By 1960, the highest average grade level in the U.S. EXCEEDED EVERY OTHER NATION BY TWO YEARS.

Since 1960, we have made no progress and several OTHER NATIONS HAVE SURPASSED US.

Source: Claudia Goldin and Lawrence Katz / The Race between Education and Technology

“I believe we can keep the

promise of our founding —

the idea that if you’re

willing to work hard … you

can make it here in

America.”

- Reelection Night

Source: New York Times 11/7/12

Skilled and Unskilled Jobs in the U.S.

60%

20% 20%

Unskilled Semi-skilled Skilled

15%20%

65%

Unskilled Semi-skilled Skilled

1950 Today

Return

Job Training

Preschool

Programs

School

Return on Human Capital Investment

Source: James Heckman, University of ChicagoAge

Share of Government Spending on Education

0% 20% 40% 60% 80% 100%

Finland

France

United Kingdom

Germany

Australia

Mexico

Greece

USA

Source: OECD

Early Childhood Middle Late

Social Capital

60% of Chinese people with assets over

$1.6 million are thinking about

emigrating to the U.S. or Europe.

Source: U.S. Department of Homeland Security (WSJ 2/22/12 “Plan B for China’s Wealthy: Moving to the U.S./Europe)

1. Harvard University

2. University of Cambridge

3. University of Oxford

4. Stanford University

5. Berkeley

6. University of Tokyo

7. Johns Hopkins University

8. MIT

9. Yale University

10. UCLA

World University Ranking

11. Imperial College London

12. UC San Diego

13. National University/Singapore

14. University of Melbourne

15. University College London

16. University of Toronto

17. University of Edinburgh

18. Kyoto University

19. University of Sydney

20. University of British Columbia

Life Sciences and Medicine

329 Scholars since 1989

87 born outside the U.S.

39 countries of origin

245 Scholars have parent(s) born outside the U.S.

106 colleges attended

58 are married

72 children of Milken Scholars

64 Harvard

37 Stanford

28 Yale

24 Berkeley

17 Penn

15 Columbia

14 MIT

10 Princeton

9 Brown

5 Cornell

Sources: Vivek Wadhwa, Duke University

More than half of Silicon Valley’s science and

engineering workforce is foreign-born.

More than 15% of Silicon Valley start-up companies

were founded by immigrants from India.

Another 13% have CEOs from China or Taiwan.

Immigrants in Silicon Valley

Sources: Partnership for a New American Economy

Foreign-born scientists in the U.S. are listed among the inventors on…

• More than five out of six information-technology patents

• Almost eight out of 10 pharmaceutical drug patents

• Three out of four patents in molecular biology and microbiology.

Patents

1900: Countries More Than 50% Urban

> 50%

< 50%

2000: Countries More Than 50% Urban

> 50%

< 50%

34

U.S., Japan, and E.U. Make Up More Than 60%

of the World’s Real GDP

0%

20%

40%

60%

80%

100%

United States

Japan

European Union

Other

(GDP in constant 2005 US$)

Sources: World Bank.

Emerging Market vs. Developing Economies

Source: International Monetary Fund.

30

35

40

45

50

55

60

65

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Share of world GDP (%), based on purchasing-power-parity (PPP)

Developed Economies

Developing Economies

Increase in U.S. Corporate Cash Balances

Source: Bloomberg. Data are for cash and marketable securities

1523

1522

7

25

8 8

145

68

5646

34 34

21 18

-15

5

25

45

65

85

105

125

145

Apple+840%

Microsoft+192%

Google+267%

Cisco+108%

Oracle+380%

Pfizer+32%

Chevron+158%

Merck+120

2007 Q2 2013

$ billions

Increase in Corporate Cash Balances 2005 to 2013Cash holdings of publicly listed companies, percent of GDP

Source: Bloomberg and International Monetary Fund. Note: Includes cash and near cash items.

8%9%9%10%12%

14%

23%23%24%

37%40%

7%

1%3%

6%9%

6%4%

8%

17%

7%6%

0%

10%

20%

30%

40%

Germany$95

Russia$171

Italy$127

Brazil$205

U.S. $826S.Korea$107

Spain$266

France$437

Japan$618

U.K. $747China$3,051

Q1 2013 2005

Japanese Companies’ Cash Stockpiles

Source: Bloomberg.

0

5

10

15

20

25

30

35

40

Toyota Softbank Rakuten Sony Mitsubishi Mitsui HondaMotor

Billion USD

2007

2013

Japanese Corporate Cash Larger Than Spain’s GDP

Source: Bloomberg, World Bank.

Note: Corporate cash includes cash & deposits for nonfinancial private companies.

0

500

1,000

1,500

2,000

2,500

Japan corporate cash U.S. corporate cash Spain GDP

Billion USD

Source: SWF Institute, August 2013.

China $1,300

Norway $810

United Emirates – Abu DhabiSaudi Arabia

$800$700

Singapore $458

Kuwait $386

China - Hong Kong $327

Russia $189

Others $946

Largest Sovereign Wealth Funds By Country

(US$ Billions)

Source: Bloomberg.

Country 3/1/2009 10/30/2013 Increase

U.S. (S&P 500) $6.3 T $16.2 T 156%

U.K. (FTSE 100) $1.3 T $3.0 T 138%

Japan (Nikkei 225) $1.6T $2.9T 79%

Germany (DAX) $558 B $1.2 T 121%

Mexico (Bolsa IPC) $108 B $353 B 228%

Equity market capitalization: 2009 to present

The Nature of Credit

1. Credit is what counts, not leverage.

2. Most loans to real estate are not investment-grade.

3. Interest rates are volatile and unpredictable.

4. Credit research is more than ratings.

5. Sovereign debt is historically risky.

6. Debt values underpin all capital markets

Federal Spending Priorities

FDA CDCNIH

Education

Housing Subsidies

$0

$100

$200

$300

Sources: FDA, CDC, NIH, OMB, Pew Charitable Trusts. Education reflects OMB category “Education, Training, Employment, and Social Services” function. Housing subsidies reflect estimated forgone tax revenues from deductions for imputed rent, mortgage interest and property taxes. All data 2012 except housing, which is estimated for 2010.

Annual, in $ billions

(forgone tax

revenue)

Mortgages Guaranteed by the Government

Source: U.S. Census Bureau

1980

$13B

7%

2013

$4T

90%

New Mortgages Backed by FHA

$0

$100

$200

$300

$400

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Inside Mortgage Finance

(billions)

Change in U.S. Home Ownership

Source: U.S. Census Bureau

1980

65.6%

2013

65.4%

45%

50%

55%

60%

65%

70%

Canada UK Denmark U.S. France Japan Germany

Current Home Ownership Rates

Sources: EuroStat, U.S. Census Bureau, AEI, Milken Institute.

Sources: Robert Shiller, Milken Institute / 8-15-13.

Home prices don’t go up forever

WWI WWII

GreatDepression

70’sBoom

80’sBoom

LatestBoom

Change in home prices in 122 years

-20%

-10%

0%

10%

20%

30%

1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

Transaction Cost Comparison

400 shares of AAPL

Value = $212,000

Cost to sell = $9.99

Residential Mortgage

Value = $212,000

Cost to sell = >$20,000Date: 10/24/13

Source: Global Wealth Databook 2013, Credit Suisse

Wealth Patterns in Selected Countries

Country Average Median <$10K >$1M

Australia $403 $219 6.9% 6.8%

France $296 $142 21.7% 4.6%

Greece $103 $54 20.4% 0.8%

Italy $241 $139 20.0% 3.0%

Japan $217 $110 9.2% 2.5%

United Kingdom $244 $112 18.0% 3.2%

United States $301 $45 30.7% 5.5%

2013 wealth per adult in 1,000 U.S. dollars (rounded)

Source: Global Wealth Databook 2013, Credit Suisse

Wealth Patterns in Selected Countries

Country Average Median <$10K >$1M

Australia $403 $219 6.9% 6.8%

France $296 $142 21.7% 4.6%

Greece $103 $54 20.4% 0.8%

Italy $241 $139 20.0% 3.0%

Japan $217 $110 9.2% 2.5%

United Kingdom $244 $112 18.0% 3.2%

United States $301 $45 30.7% 5.5%

2013 wealth per adult in 1,000 U.S. dollars (rounded)

Average Size of American Houses

1,000

1,500

2,000

2,500

1970 1980 1990 2000 2005 2010 2012

Square feet

Source: U.S. Census Bureau

2,5052,434

Home Sizes: U.S. vs. Asia

-

500

1,000

1,500

2,000

2,500

Hong Kong Japan South Korea India China Singapore U.S.

Square feet

Sources: U.S. Census Bureau; CLSA Asia-Pacific Markets

2,505

1,200

33% Housing

18% Transportation

13% Food

11% Insurance/pensions

6% Healthcare

5% Entertainment

4% Apparel and services

23% Food

10% Housing

8% Clothing

8% Other

6% Transportation

5% Healthcare

5% Communication

Consumer Spending

Source: U.S. Bureau of Labor Statistics/CLSA

U.S. Asia

2% Supplemental Education

15% Supplemental Education

P = Prosperity

Ft = Financial Technology

HC = Human Capital

SC = Social Capital

RA = Real Assets

P=SFti*(SHCi+SSCi+SRAi)

U.S. and Fortune 500 Employment

America Goes to Work

60

80

100

120

140

160

180

200

1970 1975 1980 1985 1990 1995 2000

Modern capital

markets begin

New financial technologies

are fully implemented

U.S. = + 62 million jobs

Fortune 500 = minus 4 million

0%

20%

40%

60%

80%

100%

Banks CLOs Hedge, distressed andhigh-yield funds

Prime rates funds, financialand insurance companies

Institutional Investor Base for Non-investment Grade Loans

Sources: S&P LCD / JPMorgan.

Advancing Technology

Cost

Speed

Storage

Access

1975 $10

Cost of a 1-Minute Phone Call from the U.S. to India

Telecommunications cost to business approaches zero.

Today $.01

Download speed

In 2000: 1.2 megabits per second (Mbps)

Today: 14 megabits

… and faster speeds are coming soon.

Source: PC World

IBM System 370/168 in 1976

8 megabytes for

$8 million

Cost per megabyte:

$1 million

Apple iPad Mini

64 gigabytes for $529

Cost per megabyte:

$0.008

By 2014, there will be more mobile phones –

7.3 billion – than people on the planet.

Source: Silicon India 2/28/13

Mobile Device Penetration in Africa

2000

Source: Mike Obel

2%

2012

78%

2015

84%

Source: Mobile Health 2012, iPew internet and California Health Foundation; Burrill & Company, Capturing Value

In 2010, 17% of

cell phone

owners used

their phones to

look up health

information.

In 2012, 31% of

cell phone

owners used

their phones to

look up health

information.

Source: Juniper Research; Burrill & Company, Capturing Value

In 2012, there

were 44 million

healthcare app

downloads.

In 2016, there

will be an

estimated

142 million

healthcare app

downloads.

Price Volatility Increases

Alternative-Fuel Investment Risk

10

30

50

70

90

1975 1980 1985 1990 1995 2000 2005

2000/$barrel 2000/$ gallon

3.0

2.5

2.0

1.5

1.0

Retail Gas

Crude Oil

Defending the Persian Gulf from 1976

to 2012 cost America more than $8 trillion.

Source: Stern, R.J., United States cost of military force projection in the Persian Gulf, 1976–2007.Energy Policy (2010), doi:10.1016/j.enpol.2010.01.013

Aircraft carriers

War on terrorism

Wars in Iraq/Afghanistan

Maintain troops overseas

Foreign aid

Intelligence operations

Oil price volatility

Homeland security

Source: U.S Energy Information Administration.

Major Shale Basins Around the World

Note: Fossil fuels include oil, natural gas and coal. Source: U.S. Congressional Budget Office

Technology Game Changer

Total fossil fuel reserves, % of world total

U.S. now has the largest energy reserves in the world

17 16.6

8.3

5.7 5.5 5.44 3.7 3.2 2.9 2.4 2.4 2.3

1.2 0.9 0.8 0.7 0.7 0.7

PUSH

PULL

Crisis: Deepwater Horizon Oil SpillApril 20, 2010

Crisis: Deepwater Horizon Oil Spill

Oil flowed unabated – 53,000 gallons a day

180,000-square kilometer area

Time needed to cap the well: 5 months

Create a $1.4 Million Prize

7 teams exceeded the previous industry-best recovery rate

Team Vor-Tek: A Top 10 Finalist

Fred Giovannitti

Source: Cowen

Life Sciences Outperforms Indices

1998 to present

627.9% NBI

139.8% NASDAQ

89.2% DJIA

74.7% S&P500

• Challenge: Predict how many days a patient will spend in a hospital in one year

• Prizes: $3 million Grand Prize

Improve Healthcare - Win $3,000,000

www.heritagehealthprize.com

• 1,385 teams

• 23,443 entries

• 39,000 participants from 39 countries

Improve Healthcare - Win $3,000,000

www.heritagehealthprize.com

Overview

The Intersection of Financial, Social and

Human Capital … and Technology

The Promise of Bioscience and Public Health

Where We Have Come From

Accelerating Medical Solutions

• Prevention

• Treatment

• Research

Three Areas of Healthcare Spending

The U.S. spends $0.90 of every health dollar on

treatment...

… and just a dime on prevention and

research.

Health Initiatives: Initial Estimates vs. Reality

Medicare hospital insurance $9B $67B 7.44 to 1

Medicare (entire program) $12B $110B 9.17 to 1

Medicare ESRD program $0.1B $0.23B 2.23 to 1

Medicaid DSH program $1B $17B 17 to 1

Medicare home care benefit $4B $10B 2.5 to 1

Medicare catastrophic coverage $5.7B $11.8B 2.07 to 1

Massachusetts Health Reform $0.725B $0.869B 1.2 to 1

Sources: U.S. Congressional Joint Economic Committee Session (July 2009); Eye on the Market (10/17/13)

Benefit Est. Cost Actual Cost Ratio

U.S. Economy$15.9 trillion

Lifestyle Makes a Difference

Sources: Centers for Medicare and Medicaid Services / CIA World Factbook (2012)

70% of health-care spending –about $2.5 trillion – is spent on lifestyle-related diseases.

30% is spent on hereditary diseases.

> 15%

< 15%

Obesity Prevalence Among U.S. Adults 1991

Sources: Trust for America's Health and the Robert Wood Johnson Foundation

25-30%+

30%+

<25%

Obesity Prevalence Among U.S. Adults 2013

Sources: Trust for America's Health and the Robert Wood Johnson Foundation

“Eating too much has overtaken undernurtrition as a leading risk

factor for illness.”

The Global Burden of DiseaseInstitute For Health Metrics and Evaluation

University of Washington

“18.2% of premature deaths in the U.S. are associated with excessive

body mass.”

Columbia University StudyAmerican Journal of Public Health

August 2013

Only in America

“All member nations of the OECD

have witnessed greater

prevalence of obesity in their

populations over the past two

decades, but the United States

tops the list.”

20022005

Source: World Health Organization / Estimated obesity rates for people aged 15 years and older / 2005

1.5%

1.9%

6.6%

20.4%

24.2%

41.8%

1.8%

1.6%

7.8%

20.9%

21.6%

36.5%

Japan

China

France

Germany

U.K.

U.S.MEN

WOMEN

34.3%

24.0%Mexico

Obesity Rates: U.S. vs. World

Failure to address chronic

diseases adequately costs

the U.S. economy more than

$1 TRILLION annually.

After 20 years of supporting medical

research, I heard these words:

“You have cancer.”

Ca = Cancer

P = Prostate

CURE = All diseases

Cancer = C Change

Prostate = Prostate Cancer Foundation

All diseases = FasterCures

Richard KlausnerDirector, NCI

1995 - 2001

Helene BrownPioneer in cancer

education

National Cancer Summit - 1995

The MARCH: September 1998

National Institutes of Health Budget

Source: National Institutes of Health

0

5

10

15

20

25

30

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$200 billion

An organization dedicated to shortening the

time to find cures and better treatments for

all life-threatening diseases

Partnering for Cures

Patients Helping Doctors

TRAIN

Philanthropy Advisory Service

Philanthropy Advisory Service

Engages with philanthropists, family offices, wealth advisors, and foundations to facilitate

strategic and informed philanthropic investment in biomedical research.

National Institutes of Health Budget

Source: National Institutes of Health

$0

$5

$10

$15

$20

$25

$30

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Inflation AdjustedBillions

Celebration of Science - 2012

DNA Pioneer James WatsonFrancis Collins, NIH

Margaret Hamburg

U.S. FDA

The NIH’s Tony Fauci and Earvin

“Magic” Johnson

Elias Zerhouni, President,

Global R&D, SanofiU.S. Energy Secretary Steven Chu

Overview

The Intersection of Financial, Social and

Human Capital … and Technology

The Promise of Bioscience and Public Health

Where We Have Come From

Accelerating Medical Solutions

One of every five American babies born in 1900 did not live to celebrate a 5th birthday.

Worldwide Life Expectancy Growth

Source: United Nations Development Program

1820 1900 1950 2013

+5

+18

+21+39

26Years

31Years

49Years

70Years

Improved sanitation

Development of antibiotics

Progress against heart disease

Investment in bioscience research

What caused the increase?

Chicken pox

Diphtheria

Invasive flu

Measles

Pertussis

Pneumococcal disease

Polio

Tetanus

Typhoid fever

Yellow fever

Smallpox

Source: Discovery Fit & Health

Deadly Diseases Controlled in the 20th Century

Take precautions . . . no one is immune

“Iron lung hotels” projected to cost billions.

A Grim Outlook

April 12, 1955

“The Salk Vaccine is safe, effective, and potent.

Polio is conquered.”

Elvis gets his shot to promote immunization 1956

Eradicating Disease

1955: The Salk polio vaccine was introduced.

Since then, the vaccine saved the U.S. nearly $1 trillion, avoided 160,000 deaths and prevented one million cases.

Solving Medical Problems

Source: Thompson & Radboud, “Retrospective Cost-Effectiveness Analyses for Polio Vaccination in the United States”

Polio Cases in the U.S.

Source: Centers for Disease Control

-

10,000

20,000

30,000

40,000

54 55 56 57 58 59 60 61 62 63

Elizabeth and

Ariel Glaser

“Research studies now project

that one in five—listen to me,

hard to believe—one in five

heterosexuals could be dead

from AIDS at the end of the next

three years. That’s by 1990.

One in five.”

- Oprah Winfrey

1987

November 7, 1991

With AIDS pioneering researcher Tony Fauci

at Celebration of Science

Earvin “Magic” Johnson at

Global Conference

We are entering a new

“Golden Age of Medicine.”

Precision Medicine,

Immunology, Stem Cells…

National Center for Advancing Translational

Sciences (NCATS)

Transforming the translational

science process so that new

treatments and cures for disease

can be delivered to patients faster.

Christopher AustinDirector

Sequencing the Human Genome

2003:

13 years

$3 billion

Today:

A few hours

Approaching $1,000

3-D Printing

Replicating human body parts

j

Jack Andraka

Jack Andraka@ 15: invents inexpensive diagnostic tool for pancreatic, ovarian and lung cancers that is more than 90% accurate

@ 15: wins $75,000 Intel InternationalScience Award

@ 15: forms Andraka Technologies,and files several patents

Lori Milken and her mother Robin

Mike Milken and his father Bernie and his mother Ferne

Thank you!

Thank you!

Thank you!

Thank you!

Create a legacy that relegates cancer

and other life-threatening diseases to our

children’s history books.

Personalized Medicine Conference

Boston | November 6, 2013

Accelerating Medical Solutions