The Academic Contribution to Drug Development

Roger M. PerlmutterExecutive Vice President, Research and Development

For Internal Use Only. Amgen Confidential.

An Innovation Deficit in Pharmaceuticals?

The number of new chemical entities produced by the top 50 pharmaceutical companies is too small to sustain the healthy growth of this group

New technologies (e.g. genomics, combinatorial chemistry, etc.) do not appear to have had a major impact on the provision of new drugs by the industry so far

- Jurgen Drews, DDT 3: 491, 1998

3

R&D Expenditures in the Biopharmaceutical Industry Have Soared Since 1980. . .

0

10

20

30

40

50

60

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

To

tal R

&D

Sp

en

din

g (

$B

)

Source: PhRMA Annual Survey 2009

CAGR = 12%

4

. . .and Fewer New Drugs are Emerging: We are Spending More and Achieving Less

35

2724

1721

31

18 18 1924

$23$26

$30

$39 $39$43

$49$50

$32$33

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

$0

$10

$20

$30

$40

$50

Approved Drugs (NMEs) and PhRMA Member R&D Spend

NMEsPhRMA R&D spend ($B)

Sources: Burrill & Company, Biotech 2008 Life Sciences: A 20/20 Vision to 2020, 22nd Annual Report on the Industry; PhRMA annual membership survey (2009)

For Internal Use Only. Amgen Confidential.

The Evolving Challenge Profile of the Therapeutics Industry

• Complexity• Challenge• Pace

1980 1990 2000 2010 2020

• Few interesting targets• Room for many drugs• Strong intellectual property

• Thousands of targets• Declining success

rates• Rapid generic

penetration• Devastating product

failures

“Glaxo’s Witty Says Nine Top Drugmakers May Fail”, Times Reports*

Nine of the top 15 drugmakers will “wither” or “get taken out” in the next five years

About half a dozen of the biggest pharmaceutical companies may survive as patents expire and business strategies are “tested to destruction”

6

*Quoted in Bloomberg News, October 2, 2010

7

Contemporary Estimates Paint a Grim Picture of Future Industry Profitability

R&D SpendRx Revenues New Products

Total of 15 BioPharmaceutical Companies

Source: Lazard estimates

$230B $387B

$537B $244B

’89-’98

’99-’08

’97-’04

’07-’14

The View from Investment Bankers:

8

“Pharmaceuticals: Exit Research and Create Value”

- - Morgan Stanley

6353

45

27

3747

55

73

1980 1989 1999 2007

Prehuman/Preclinical Phase 1 thru Approval

Percentage of Total PhRMA R&D Expenditures

Source: PhRMA Industry Profile Reports

Since 1980, Biopharmaceutical Companies have Largely Abandoned Discovery Research. . .

. . .but are These Companies Capable of Supervising Drug Development?

Most industry investment in R&D appears to be wasted

The vast majority of industry investment is spent on clinical research (i.e. development)

A 30-year perspective suggests that industry is not solving this problem on its own

10

Industry and Academia: Why We May Need Each Other

Academic investigators cannot easily pursue high-quality clinical development– Teamwork is undervalued in universities– Difficulty in maintaining a compliance focus– Careerism undermines development intent– Little penalty for failure

Industry investigators have their own problems– Inherent conservatism - - the penalty of prior success– Priorities set in the context of commercial assessments– High penalty for failure, hence novel programs suffer

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No company has proved capable of refilling its pipeline

Why Might Academic Organizations Now be Able to Pursue Drug Discovery?

Industry, burdened with P&L considerations, has need to out-license NCEs that do not fit within their central focus

Improved methods of patient stratification offer the promise of increasing efficiency in clinical trials

Skilled contract research organizations can assume the burden of maintaining GCP compliance

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But – do university physicians really want to develop drugs?

Activated Osteoclast

CFU-M

Pre-Fusion Osteoclast

MultinucleatedOsteoclast

Bone

Osteoblast

Osteoclast Formation, Activation, and Survival Inhibited

Osteoclast Activated

Colony-Forming Unit Macrophage

RANK

Denosumab

RANKL

OPG

Growth Factors HormonesCytokines

11

Denosumab Blocks Bone Resorption by Binding to a Pivotal Regulator, RANKL

Can a university tenure ladder accommodatethis sustained commitment? Can staff members be retained throughoutthis period?

20101995

Discovery of target

Clinical exploration

Selection of a clinical candidate

Registration-enabling studies

Development of Denosumab Required 15 Years of Investment

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• Complexity• Pace• Expense• Uncertainty

1980 1990 2000 2010 2020

• Observational anecdotes• Low efficacy hurdle• Few targets• Little incentive for

improvement• Powerful new

research technologies• Many, better targets• High-quality clinical

data• Evolving focus on

personalized medicine

The Evolving Challenge Profile in Drug Development May Favor Academic Researchers

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The Academic Contribution to Drug Development

Roger M. PerlmutterExecutive Vice President, Research and Development