Global Generic

Pharmaceutical Industry
Review
CORPORATE RESEARCH (NY)
FEBRUARY 2016

Andreas J. Dirnagl
TEL: (1) 212-782-5694
adirnagl@us.mufg.jp

Myrvet A. Cocoli
TEL: (1) 212-782-4826
mcocoli@us.mufg.jp

Bank of Tokyo-Mitsubishi UFJ

A member of MUFG, a global financial group
Table of Contents
I. Fundamentals & Background III. Major Global Generic Pharmaceutical Markets
1) Defining Generic Pharmaceuticals (p. 2) 1) Characteristics by Market (p. 17)
2) Overview & Drivers (p. 3) 2) An Overview of the US Generic Pharmaceutical
3) Top 10 Global Generic Companies (p. 4) Market (p. 18)

4) Top 10 Products (p. 5) 3) An Overview of the European Generic

Pharmaceutical Market (p. 19)
5) Generic R&D: Hatch-Waxman (p. 6)
4) An Overview of the Japanese Generic
6) Understanding Bioequivalency (p. 7) Pharmaceutical Market (p. 20)
7) Generic Drug Research & Development Process 5) An Overview of the Indian Generic
(p. 8) Pharmaceutical Market (p. 21)
II. Trends, Opportunities & Strategy 6) An Overview of the Chinese Pharmaceutical
1) Generics Drive Global Pharma Growth (p. 9) Market (p. 22)

2) Market Exclusivity & Paragraph IV Challenges IV. Strategic Summary

(p. 10) Outlook for Global Pharmaceutical Players –
3) Market Share & Price Erosion After Generic Branded & Generics (p. 23)
Entry (p. 11)
4) The Biosimilar Opportunity (p. 12)
5) Update on the Global Biosimilars Market (p. 13)
6) Competitive Strategies: Branded Pharma (p. 14)
7) Competitive Strategies: Generic Pharma (p. 15)
I. Fundamentals & Background
1) Defining Generic Pharmaceuticals

 Generic drugs are officially approved copies of originals and have the same active ingredients as the branded drug

 US Food and Drug Example: Branded, Branded Generic and Generic Labels
Administration Definition
 “A drug product that is
comparable to a reference
listed [branded] drug product
in dosage form, strength,
route of administration, quality
and performance
characteristics and intended
use.”
 Generics can only be
produced after expiration of
the branded drug’s patent
(usually 20 years)
 The same company that
makes the branded drug
may also produce the
generic Source: Corporate Research
 Alternatively, a different
company might produce it Similarities and Differences Between Branded and Generic Pharmaceuticals
 Regulatory authorities have
established standards for
generic drugs that might
seem complicated, but the
differences between the two
types of drugs are relatively
simple to understand

2
Source: US FDA and Corporate Research
I. Fundamentals & Background
2) Overview & Drivers

 The global pharma industry is large, driven by broad demographics, moderated by governments focusing on costs

 Size: Large and expected to Global Pharma Market, 2010-2020 Global Population Aging, 1950-2050
achieve total global sales of
$1 trillion in 2014
 While generics represent
only 9% - 11% of the total
value of global pharma
sales – it represents the
volume majority (est. 55%)
 Given a cost-savings focus,
generic pharma spending
growth is above the
branded and overall
industry average
Source: IMS Health, EvaluatePharma and Corporate Research Source: UN World Population Prospects: The 2012 Revision
 Branded Growth Est.: 4.8%
 Generic Growth Est.: 8.0% Global Chronic Disease Prevalence Gov’t Debt as a % of GDP, 2008-2015
 Broad demographic drivers • Cardiovascular diseases (CVDs): #1 cause of
 Aging population death / 30% of all global deaths
 Increasing prevalence of • Cancer: #2 cause of death / 13% of all global
chronic diseases deaths
o Disease incidence • 347 million people worldwide have diabetes
increases with age.
• Worldwide obesity has nearly doubled since 1980:
 Gov’t focus on costs 35% of all adults >20 year old were overweight in
 Increasing gov’t budget 2008 / 11% obese
deficits and higher gov’t debt
burdens mean there is an 70% - 80% of all deaths from chronic diseases
increased focus on reducing occur in low- and middle-income countries
healthcare spending/pricing
Source: World Health Organization Source: OECD and Corporate Research

3
I. Fundamentals & Background
3) Top 10 Global Generic Pharmaceutical Companies

 Top 10 Generic Pharmaceutical Companies: large with a great deal of regional diversity

 Top 10 Global Generic Top 10 Global Generic Pharmaceutical Companies, 2014 (US$bn)
Pharmaceutical Companies
 Large, with companies that
rank among the Top 20 Excl: Branded Companies Incl: Generic Divisions of Branded Companies
Global Pharmaceutical
Companies
o Teva: #9
o Allergan: #17
 Regionally diverse
o India: 5
o EMEA: 3
o US: 2
 Adding divisions of branded
companies that are major
generic players:
o EMEA: 3→5 (+2)
o US: 2→3 (+1)
o India: 5→2 (-3)
 Consolidation will be
furthered by the announced
acquisition of Allergan’s
generic business to Teva

Note: Rankings do not include announced sale of Allergan generics division to Teva
Source: Company Reports and Corporate Research

4
I. Fundamentals & Background
4) Top 10 Products

 Cardiac drugs dominate the Top 10 Generic Products and represent some of the biggest branded blockbusters

 Given their relatively low

price, generic drug ranking Top 10 Global Generic Pharma Products, 2013
is generally not done on
value, rather on the number
of prescriptions written
 Top 10 Products
 Relatively dominated by
cardiovascular drugs (5 out of
10)
o Anti-hypertensives and
anticholinergics
o Cardiovascular diseases
are the #1 cause of death
worldwide
 “Older” generics tend to be
prescribed more
o The longer a drug is
generic, the more
competition, the lower the
price
o Lower price drugs in the
same therapeutic class
are always preferred
o For example, simvastatin
over atorvastatin, lisinopril
over amlodipine

Note: represents US prescriptions as a proxy for global rankings

Source: IMS Health and Corporate Research

5
I. Fundamentals & Background
5) Generic R&D: Hatch-Waxman

 The birth of the modern generic drug industry can be traced back to the US legislation known as the Hatch-Waxman Act

 Passed in 1984, Hatch- Post Hatch-Waxman Steps Involved in the Development of a Potential Generic Drug
Waxman set the global
standard for generic drug
approval and some
variation is used in most
major jurisdictions
 Allowed a manufacturer to Source: USPharmacist and Corporate Research
demonstrate only that its
product does not differ
significantly from the existing
Hatch-Waxman and ANDA Routes for Sales and Marketing Approval
(reference) product and
eliminated the need for
duplicative and expensive
clinical trials
 Liberalized the research
restriction as prior to Hatch-
Waxman, even researching a
drug before its patent had
expired was itself an act of
infringement
 The Abbreviated New Drug
Approval (ANDA) process
offers four routes to
approve generics –
differences revolve around
the status of the underlying
drug’s patent protections
 There is no “global”
approvals process

Source: FTC and Corporate Research 6

I. Fundamentals & Background
6) Understanding Bioequivalency

 Bioequivalency is the proof that pharmacokinetic parameters of a drug (rate & extent of absorption) are the same

 ANDAs must prove that Pharmacokinetic Parameters or an Orally Administered Drug

generic drugs are
bioequivalent to the
branded version
 Bioequivalent products do
not differ significantly in:
 the rate of absorption
 the extent of absorption
 at the site of action
 A pharmacokinetic study is
based on the LADME model
in which it is determined
how long it takes the body
to:
 Liberate or release the drug
 Absorb the drug
 Distribute the substance
 Metabolize the drug
 Excrete the drug
 In pharmacokinetic models
the key parameters are
peak drug concentration
(Cmax) and the Area Under
the Curve (AUC), which
characterize absorption rate
and absorption extent,
Source: Nature and Corporate Research
respectively

7
I. Fundamentals & Background
7) Generic Drug Research & Development Process

 While still complex, the generic R&D cycle is easier, shorter and cheaper relative to the branded R&D cycle

 The generic drug R&D Branded vs. Generic Research & Development Timeline
timeline is significantly
shorter than for branded
 Safety and efficacy are not
being proved
 Steps are less “linear” and
can often be undertaken
simultaneously
 Pivotal Bioequivalence is
where the drug is proven to
be identical
o Key reduction in timeline
as bioequivalence studies
require much smaller
populations and can be
done in a matter of weeks /
months
 Generic manufacturers
themselves estimate that
the cost of successfully
developing a
commercializable generic Branded Pharma R&D – Progression Probability
drug ranges from $10m to
$100m
 The latest estimate for the
• The risk of total failure in the R&D process for generic drugs is
cost of successfully
extremely low because the safety and efficacy of the active ingredient
commercializing a branded has already been established
drug is approximately
US$2.6bn • The “relative simplicity” vs. the branded pharma R&D process is
integral to the low-cost nature of generic drugs
8
Source: Nature and BTMU
II. Trends, Opportunities & Strategy
1) Generics Drive Global Pharma Growth

 IMS predicts global pharma spending will increase by US$300bn through 2018 – half of which will be generics

 Generics are the largest Geographic Distribution of Medicine Generic Penetration in Selected
driver of pharma spend Spending, 2014 – 2018E Countries, 2011 (or nearest year)
everywhere but North
America
 Almost all countries see the
development of generics as
a good opportunity to
increase efficiency in
pharma spending
 Beyond encouraging
takeup, it is also important
to promote the lowest
possible price for generics
if the purpose is to contain
costs
Note: May differ from locally collected data
 For example, the US with one Source: IMS Health and Corporate Research Source: OECD and Corporate Research
of the highest generic
penetration rates in the world Trend in Generic Penetration in Selected Countries, 2000 – 2011
also has one of the largest
branded – generic price gaps
 Regardless of the
methodologies chosen,
governments can have a
fairly quick and significant
impact on generic
penetration

Note: May differ from locally collected data

Source: OECD and Corporate Research 9
II. Trends, Opportunities & Strategy
2) Market Exclusivity & Paragraph IV Challenges

 Generic drug competition continues to intensify with market exclusivity shrinking and ParaIV challenges growing

 A branded drug is granted a Average MEP by Year of 1st Generic Average # of Generic Entrants within
Market Exclusivity Period Entry (in months), 1995-2012 1st year of 1st Generic Entry
(MEP) by the regulatory
authorities, which is the
timeframe in which the
majority of branded
productivity is generated
 Generic manufacturers
have been becoming
increasingly aggressive and
have successfully
shortened MEPs
 Overall the industry is seeing
a gradual decline in MEPs
before generic competition
 This is even lower for higher Source: IMS Health, Journal of Medical Economics and Corporate Research Source: IMS Health, Journal of Medical Economics and Corporate Research
sales drugs
 Better selling branded Paragraph IV Filing Frequency and Timing (3yr moving average)
drugs attract more
competition after the MEP
 ParaIV filing is one in which
a generic manufacturer
sues to invalidate a
branded patent and
therefore the drug’s MEP
 ParaIV filings are becoming
more frequent and coming
earlier

Source: IMS Health, Journal of Medical Economics and Corporate Research

10
II. Trends, Opportunities & Strategy
3) Market Share & Price Erosion After Generic Entry

 Rule of thumb: generic competition will reduce pricing / market share of the branded drug by >80% in <12-18 months

 The erosion in brand-name

drugs’ share (by volume)
for the 12 months following
first generic entry has Average Monthly Brand Share (Volume)
increased dramatically Following 1st Generic Entry
 The impacts of competition
are bigger and coming faster
 On average branded share
erodes to only 16% at 12
months (compared to 51% in Pfizer Lipitor Sales Following Loss of
1999-2000) Patent Exclusivity, 3Q14 – 2Q15
 For larger drugs share erodes
even more to only 11% at 12
months
 Volume loss is driven by
pricing reductions from
generic competitors
 Lipitor is a perfect example
of the dynamics of generic
Source: IMS Health, Journal of Medical Economics and Corporate Research
competition
 Almost 50% sales loss in the
first 6 months
 80% after 12-18 months of
competition
 Sales dropped from Source: Company reports and Corporate Research
~US$10bn annually to
<US$2bn a single year

11
II. Trends, Opportunities & Strategy
4) The Biosimilar Opportunity

 While we have an optimistic outlook on biosimilars, growth is likely to be slower than the most optimistic view

 Biologics are attractive for The Biologics Manufacturing Process

the global pharma industry
given they:
 often provide benefit in
therapeutic areas that are
underserved
 are more difficult and costly to
develop and manufacture
providing differentiation and,
therefore, higher pricing/
profitability
 Given these complexities
biologics are less exposed
to generic (“biosimilar”)
competition
 We view the biosimilar
opportunity as significant
(biologics are almost by
definition high-cost
products) but see growth as
slower than the most
optimistic outlook
 Not least of which, the largest
biologics market in the world
(US) does not have a current
pathway towards a regulatory
approval process and
substitution regulations

12
Source: buildingbiologics.com and Corporate Research
II. Trends, Opportunities & Strategy
5) Update on the Global Biosimilars Market

 There are a number of patent expiries on blockbuster biologics coming up

 Patents will expire on Patent Expiries of Key Branded Biologics

approximately $63bn in
biologics sales between
now and 2022
 Biologics now represent
approximately 70% of the
value of the global Top 10
Pharma Products
 Most analysts estimate
biosimilars could grow to
be a $35bn sector by 2020
 We view this as “optimistic”
 Lack of a full competitive
environment
 Lack of trust – biosimilar is
not bioequivalent and
physician prescribing of
Source: BioPharm International and Corporate Research
biosimilars has been slow
 To date biosimilar competition Major Countries with Approved Biosimilars, 2015
in Europe, Japan and the US
has shown an overall brand
share / price reduction of
~30% vs. ~80% for chemical
drugs

13
Source: BioPharm International and Corporate Research
II. Trends, Opportunities & Strategy
6) Competitive Strategies: Branded Pharma

 There are a number of branded strategies that generic pharma companies have to face in order to compete

 Divest: cutting all Impact of Divest Strategy Impact of Innovate Strategy

promotional and research
expenses once a brand
faces direct generic
competition – maximizing
remaining profitability
 Innovate: launching new
forms, doses and
indications – offers
additional and extended
patent protection
 Evergreening: make small
incremental changes to the
underlying product and Source: International Journal of Medical Marketing and Corporate Research Source: International Journal of Medical Marketing and Corporate Research

filing for extension of

patent exclusivity
Impact of Evergreening Strategy Impact of Flanking Strategy
 Flanking: calls for the
branded company (either
directly or in partnership
with a generics firm) to
allow early competition in
the form of an “authorized
generic”

Source: International Journal of Medical Marketing and Corporate Research Source: International Journal of Medical Marketing and Corporate Research

14
II. Trends, Opportunities & Strategy
7) Competitive Strategies: Generic Pharma

 The Hallmarks of Success for generic pharma are identical to those of branded pharma

 Focus on areas of strength Hallmarks of a Successful Pharmaceutical Company

while striving for higher
complexity portfolios and
pipelines are the core
strategies we have
previously outlined for
success in the branded
pharmaceutical space
 For generic companies the
strategies are similar –
leverage R&D and
Source: Corporate Research
manufacturing expertise to
innovate and launch into Hallmarks of a Successful Pharmaceutical Company
more complex generics
 For some of the larger
companies these strategies
have led into the
SpecPharma sector
 Growing R&D at generics
companies supports this
thesis

Source: R&D Taxsavers and Corporate Research 15

II. Trends, Opportunities & Strategy
7) Competitive Strategies: Generic Pharma

 Innovative strategies that reduce costs and increase efficiencies are crucial to maintaining generics profit margins

 Safety and Performance Safety and Performance Innovation Incremental Innovation

Innovation – assuring
products are safe and
perform inline with
expectations
 Incremental Innovation –
adjustments to off-patent,
brand-name drugs
 Re-innovation – build upon
a product’s branded
success by improvement
and innovation
• Process innovation is crucial to the
generics industry
• Safety remains a significant concern
with a 2012 survey revealing 42% have
misgivings when it comes to generics
• Significant R&D investments will be
necessary to fully analyze the risk profile
of each generic product
• Vital to consumer sentiment
• Generic manufacturers’ understanding
of patient and pharmacist needs have
led to innovative solutions that help
patients and reduce dispensing errors
• Examples of incremental innovation
include enhancing delivery systems,
developing alternative dosages and
finding solutions to patient compliance
issues
• Differentiation = higher pricing / profit

Re-Innovation Risk / Return in Pharma

• “Super generics” or New Therapeutic High
Entities (NTEs) are enhanced versions of Branded

RISK / TIME / COST
off-patent branded drugs increasing
quality and efficiency with fewer risks,
side effects and toxicity
Products
• Examples include drugs that: (i) can from NTE 
avoid previously verified hypersensitivity Generic
process
through the use of nanoparticles, (ii) Low
offer more predictable clinical responses Low High
or (iii) oral version of previously RETURN
injectable drugs Source: Teva and Corporate Research

16
III. Major Global Generic Pharmaceutical Markets
1) Characteristics by Market

**

Source: IMS Health, various sources and BTMU

* Estimates by IMS Health
** Includes Israel-based Teva
17
III. Major Global Generic Pharmaceutical Markets
2) An Overview of the US Generic Pharmaceutical Market

 Largest Pharma market in the world with high generic penetration. World’s only free-market based drug pricing system.

 US accounts for about 1/3rd US Pharma Spend/Growth , 2010-2018E US Generic Penetration, 2010-2018E
of global pharma sales
 4.5% branded projected top
line growth through 2018
 6.4% generic projected top
line growth through 2018
 US has one of the highest
generic penetration rates in
the world
 By volume: >80% (2015
estimate at over 88%)
 By value: ~12% reflecting low
pricing of generics
Source: IMS Health and Corporate Research Note: by # of prescriptions
 Generic substitution driven by Source: IMS Health and Corporate Research
commercial insurance and
cost-savings benefits US Generic Savings (US$bn) 2004-2013 US Generic Savings by Area, 2013
 World’s only free-market
based drug pricing system
 US subsidizes WW pharma
consumption as low prices
associated with non-US
government price controls are
inadequate to support R&D
 It is estimated that generics
saved the US almost a
quarter of a billion dollars
in 2013

Note: “Anti-Inf” = Anti-Infective. “CNS” = Central Nervous System. “GU” = Genitourinary. “Musc” = musculoskeletal. “Resp” = Respiratory.
Source: Generic Pharmaceutical Association and Corporate Research

18
III. Major Global Generic Pharmaceutical Markets
3) An Overview of the European Generic Pharmaceutical Market

 2nd largest global pharma market. Cost-containment, value-based & reference pricing make it increasingly challenging.

 In 2014, generic drugs EU5 Generic Drug Market Share Global Biosimilar Sales by Region, 2012
account for 55% of volume
but only 21% of pharma
value in Europe
 The largest market for
regulated biosimilars,
occupying 44% of the 2012
global biosimilars market
 Differences in local
healthcare systems have
caused some inter-country
variation in uptake of
biosimilars across Europe
Source: OECD and Corporate Research Source: Frost & Sullivan and Corporate Research
 France, Italy and Spain
have the greatest scope to EU5 Biosimilar Uptake, 2007-2013 Example: Generics Promotion in France
increase use of generic
drugs. This is due to their Announcement The French Ministry of Health presented the country's 'national plan to 
current penetration rates of promote generic drugs' on March 24th 2015
generics (by volume) being Objectives • Increase generic prescribing by five percentage points in the three‐
   year period 2015–17, with particular focus on increasing prescribing 
considerably lower than    in hospitals and retirement homes
those in Germany and the • Deliver savings of €350m (US$393m) by 2017
UK. Measures to be  • Implement protocols to encourage the prescription of medicines 
taken    within the 'Répertoire' (the French substitution list)
 In March 2015, France • Deliver educational programme about safety, efficacy, and quality
launched a national plan to    of generic medicines for doctors in training
promote the use of generics • A national advertising campaign targeted at the general public and 
as part of the country’s cost    health professionals will be launched at the end of 2015 to build 
   confidence in generic medicines
containment efforts
Source: Corporate Research Source: Government reports and Corporate Research

19
III. Major Global Generic Pharmaceutical Markets
4) An Overview of the Japanese Generic Pharmaceutical Market

 3rd largest pharma market expanding as volume growth offsets pricing declines. Profitability increasingly challenged.

 Japanese generic pharma Japanese Generics Usage (US$bn) Japanese Generics Usage (Volume)
industry has estimated
revenues of $9bn, growing
at a FY2009–FY2014E
CAGR of 9.6%
 Generic penetration is
improving, having reached
32.6% of all prescriptions in
FY2014
 This growth is driven by
government policy
measures to promote the
use of generics, as well as
successive patent Source: Japan Generic Medicines Association (JGA), Ministry of Health, Labour and Welfare (MHLW) and Corporate Research

expirations of blockbuster
drugs
 In order to contain
healthcare spending, the
national government has
been implementing
measures to promote the
use of generics since 2002.
 Despite this, generic
penetration (volume) in
Japan at approximately 33%
remains significantly lower
than the US (88%) and
Europe (UK: 75%) in 2014E
Gov’t Promoting Use of Generic Drugs Generic Pricing Methodology at Launch
FY Dispensing Pattern Changes
2002 -Pharmacies awarded 2 points for reimbursement when dispensing generic drugs
-Pharmacies awarded 4 points for additional reimbursement if generic drugs
2008
>30% to total drugs dispensed
-Incentives which correspond to percentage of generic drugs dispensed were
2010 introduced for pharmacies (additional points awarded based on generic volumes:
≥20% / <25%, 6pts., ≥25% / <30%, 13pts., ≥30%, 17pts.)
-Adjustment to generic volume points: ≥22% / <30%, 5pts., ≥30% / <35%, 15pts.,
2012
≥35%, 19pts.
2014 -Adjustment to generic volume points: ≥55% / 65%, 18pts., ≥65%, 22pts.
Source: Motilal Oswal and Corporate Research Source: Bloomberg and Corporate Research

20
III. Major Global Generic Pharmaceutical Markets
5) An Overview of the Indian Generic Pharmaceutical Market
 Despite a small (but rapidly growing) domestic market – Indian Pharma companies are major players on the global stage

 The US generics business Indian Pharma Revenue Breakdown (%) Indian Share of US Generics (US$bn)
is now the largest segment
for top Indian generics
players and is expected to
expand further
 Opportunity from new
patent expirations in the
simplex generics segment
lower in the next five years
as compared to previous
five years, resulting in
lower growth outlook
 Indian companies continue
Source: ICRA Research and Corporate Research Source: IMS Health, broker reports and Corporate Research
to file ANDAs both in
simplex and complex
generics to participate in
Cumulative ANDA Filings – Indian Cos. R&D Spend of Indian Pharma Cos.
the longer term opportunity
 Like the rise of simplex
generics in 2008, complex
generics present equivalent
opportunities as large
patent expirations are
expected through 2020
 High R&D spend over the
past 4–5 years, coupled
with M&A improved
positioning of Indian
players in the complex Source: Motilal Oswal and Corporate Research Source: Bloomberg and Corporate Research

products market

21
III. Major Global Generic Pharmaceutical Markets
6) An Overview of the Chinese Pharmaceutical Market

 Rising demand for healthcare and expanded supply of institutions has fueled development of the pharma market

 Sector revenue growth has Pharma Market Size, 2013–1H15 (US$bn) Pharma Market Breakdown, 2014
decelerated due to prices
pressures
 Generic drugs constitute
the majority of the total
Chinese pharmaceutical
market
 Expansion of the Essential
Drugs List (EDL) is a benefit
for generic drugs
 Stringent quality controls
on generics implemented
 Policy changes have a Note: Includes western drugs: API, chemical drugs, biologics and TCM Source: CEIC, China Healthcare Yearbook and Corporate Research
Source: CEIC and Corporate Research
mixed impact on the
generic pharmaceutical Chinese Pharma Growth, 2014-2020E “Western Drug” Growth, 2013-2020E
industry in China
 We expect 7% – 9% industry
growth for the Chinese
pharma market over the next
5 years
 Generic drugs on the EDL will
see the strongest growth, with
forecasts of a 2013 – 2020
CAGR of 21%
 Branded generics not on the
EDL will continue to post
robust growth, driven by
looming patent expirations Source: IBIS, BCG and Corporate Research Source: IBIS, BCG and Corporate Research

22
IV. Strategic Summary
Outlook for Global Pharmaceutical Players – Branded & Generics
① Fundamentals & Drivers ② Issues & Trends
Positive: ◊ Aging population Negative: ◊ Gov’t focus on cost Global Pipeline: Focus on biologics, quality improving
◊ Growth of chronic ◊ Patent Cliffs Pharmerging Markets: High growth to come in emerging markets 
diseases  ◊ R&D long & costly Big Pharma’s Big Growth Gap: Declining share leads to M&A need

③ Opportunities & Strategies
Risk Sharing / Collaboration Expand Laterally Expand Vertically
“The dominance of the protected, product  Large Molecules Theranostics
dependent, research‐based [pharma] 
• Differentiated as more difficult/costly to  • Targeting specific patient populations
company model in the Top 10 will be 
develop/manuf. leading to higher pricing • Still nascent
broken in the next 5‐10 yrs.” – IMS Health
• Less exposed to “generic” competition Vaccines
• Risk sharing          R&D Outsourcing
●

Pharmerging Markets • Proj. growth higher than overall market
• Alliances and JVs
• Projected to double global share by ‘16 • High demand in Pharmerging Markets
• M&A to fill company pipeline gaps

④ Hallmarks of Success for Pharmaceutical Companies

“EMBRACE CHANGE”: THE INDUSTRY IS CHANGING AND COMPANIES MUST CHANGE WITH IT

Smaller Companies:  Leveraging up the “Foodchain” Larger Companies:  Break the proprietary R&D model
◊ Continue to follow larger players up in complexity ◊ Leverage R&D & manuf. expertise into more complex drugs (biologics)
◊ Specialty Pharma → Branded, Generics → Specialty Pharma, etc. ◊ Increase alliances and M&A  ◊ Focus on fast‐growing Pharmerging

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