Our presentation for Pharma Sector. Problem statement: You are Pfizer and your major blockbuster drug, Lipitor ($12 bn in sales in 2008, ~20% of your total revenue), is going off-patent in 2011. A decline in the sales of Lipitor is inevitable and you are looking to make a major move into emerging economies where growth in pharma sales is the highest. How would you go about doing this?

1. Sectorifics – Pharma
IIM Ahmedabad

2. Table of Contents
 About Us
 Our Approach
 Pfizer-Lipitor
 2011 Patent Cliff
 Therapeutic Segments
 Cardiovascular Market
 Cancer Market
 CNS Market
 Pharmerging Markets
 Benchmarking
 Case Studies
 Course of Action
 Acquisition of Bio-pharmaceuticals
 Opportunities across the Value Chain
2

3. About Us
Akshay Gautam
Education: B.Tech IIT Delhi, Computer Sc. & Engineering
Interned at: Nomura Investment Banking , Mumbai
Work Exp: 10 months at IBM
Worked on: Worked with the DCM and the M&A team. Sectors covered include Pharma,
Retail, Consumer, Solar Energy, IT and Ports in India
Siddhartha Bhargava
Education: B.Tech IIT Roorke, Chemical Engineering
Interned at: JPMorgan Chase Investment Banking, Mumbai
Work Exp: 3 years in Royal Dutch Shell
Worked on: Worked with the ECM and the M&A team. Sectors covered include
Infrastructure, Metals &Mining, Industrials and Power, Pharma and Real Estate in India
3

4. Our Approach
Therapeutic  Cardiovascular
Segments  CNS
 Oncology
Opportunities  Acquire Bio-tech firms to enhance
Therapeutic
Segments across Pharma pipeline
Value Chain  Acquire distribution & marketing
firms with presence in EMs
Case Studies Value Chain Pharmerging  India
Countries  China
 Brazil
 Russia
Course
Benchmarking  R&D Expenses
of Action Pfizer and its  Sales & Marketing Expenses
Competitors  Top 5 selling drugs
Strategy in  Revenues by therapeutic areas
Pharmerging
Emerging  Revenues by Geographic areas
Countries
Markets
Pfizer and its  Revenue from Emerging Markets
Competitors  Presence in Emerging Markets
Financial in Emerging  Strategy in Emerging Markets
Benchmarks Markets
Case Studies  How companies such as Takeda,
Merck and Bristol-Myers Squibb have
responded to their block buster
drugs going off patent
4

5. Pfizer - Lipitor
Overview Global Sales of Lipitor
 Lipitor is global no. 1 selling drug, with 2010 sales of US$ 10.7 billion
 Lipitor to face patent cliff on Nov 30, 2011
US$ Billions
 Indian drug maker Ranbaxy was “First-to-File” for production of 14.0 12.9 12.7 12.4
12.2
generic Lipitor and will introduce Lipitor in the US market with 10.9 11.4
12.0 10.7
180-days exclusivity from November 2011 and an early entry in
10.0 9.2
other select markets
 Pfizer has granted Watson Laboratories, Inc., the exclusive right 8.0
to sell the authorized generic version of Lipitor in the U.S. for a
period of five years, which is expected to commence in 6.0
November 2011 4.0
 Ranbaxy’s ability to manufacture generic Lipitor has become unclear 2.0
owing to safety concerns raised by the FDA and therefore, Pfizer
may look to manufacture its generic version of Lipitor 0.0
 Pfizer is pursuing pediatric extension in EU, extending it to May 2012 2003 2004 2005 2006 2007 2008 2009 2010
Pfizer - Existing Pipeline Pfizer’s Product Portfolio
 We conduct research internally and also through contracts with  Lipitor – LDL cholesterol
third parties, through collaborations with universities and  Enbrel – Rheumatoid Arthritis
biotechnology companies and in cooperation with other  Lyrica – Postherpetic Neuralgia
pharmaceutical firms Biopharmaceuticals  Prevnar – Pneumococcal Disease
 Viagra – Erectile Dysfunction
 Effexor XR – Antidepressant
 Startect – Animal Health
Phase I Phase II Phase III 

Advil – Pain Management
Robitussin – Respiratory
Diversified  S26 Preterm Feeding System – Nutrition
 Centrum – Dietary Supplements
116 programs 234 programs 24 programs
Source: Pfizer, Ranbaxy. 5

6. 2011 Patent Cliff
Overview Blockbuster drugs going off patent
 Starting in 2011, ~26 blockbuster medicines, worth over US$96bn •Zyprexa - Eli Lilly
will go off-patent in the world’s largest drug market, US (1)
 Majority of losses will occur in 2012 when it is expected that more
2011 •Lipitor - Pfizer
than US$42 Billion in sales revenue will be lost by originator
•Avapro/Avalide - Bristol-Myers/Sanofi
companies (2)
 The pharmaceutical classes set to be most affected–and at risk of 2012 •Plavix - Bristol-Myers/Sanofi
losing 80% or more of their market share–include anti-ulcerants,
anti-depressants, anti-coagulants, Alzheimer’s medications, •Geodon - Pfizer
osteoporosis medications and narcotic analgesics 2012 •Atacand - Astra Zeneca
 Once drugs lose patent protection, lower-price generics quickly
siphon off as much as 90% of their sales •Lovaza - GlaxoSmithKline
 On average, 44% of top 20 company sales are at risk of generic 2013 •Temodar - Merck
competition between 2009–2014
Lifecycle: Branded v/s Generics (3) Loss in sales post patent cliff (3)
US$ Billions
50
42.4
40 37
30 27.4 26.8
18.9 19.3
20 14.7
10
0
2009 2010 2011 2012 2013 2014 2015
1. Source: IIFL Research Report. News Runs.
2. http://www.gabionline.net/Reports/Patent-cliff-and-the-generics-industry 6
3. Source: IMSHealth, Cipla.

7. Therapeutic
Segments

8. Cardiovascular Market
Overview Pfizer cardio portfolio, pipeline
 The global cardiovascular market recorded sales of US$170 billion in Fragmin Compound Expected
2010 and is expected to grow to US$187 billion in 2016 at a CAGR Cardura
2%
Year of
of 1.6% 3% Others
Launch
8%
 US continues to be the largest market, with a share of 40% of the
overall market Revatio
Apibaxan Pre-
 Pfizer retained its position as the market leader with $15.2bn in 3% registration
2011
2010 sales, led by key brands such as Lipitor, Norvasc, Caduet, and Caduet
3%
Viagra Apibaxan Phase-II
 Pfizer(8.9%) was followed by Sanofi-Aventis(6.2%), Norvasc 2011
10%
AstraZeneca(5.5%), Novartis(5.1%), Bristol-Myers Squibb(4.9%)
and Merck(4.4%) PD-348292 Phase-II
 Growth Drivers: Changing disease profiles in the Emerging Markets Lipitor
2014
71%
Cardiovascular sub segments Potential Opportunities for Pfizer
Segment Leading Drugs and their Patent
market share Expires
hypertensives Diovan – Novartis (9.6%) 2012 Alliances with
Acquire to
generic Invest in R&D in
(22%) replenish the
Benicar – Daiichi Sankyo (7.7%) 2016 manufacturers in Russia
pipeline
Russia
dyslipidemics Lipitor – Pfizer (40%) 2011
(18%)
Crestor – Astra Zeneca (22.6%) 2016
Outsource drug
Enter Generics
thrombotics Plavix – Bristol-Myers (50.4%) 2011 manufacturing to
Lipitor Market
(11%) low cost EMs
Lovenox – Sanofi-Aventis (20.1%) 2012
Others Tracleer – Actelion (1.9%) -
Source: Pfizer, Datamonitor.. 8

9. Cancer Market
Overview Pfizer oncology portfolio, pipeline
 The global cancer market in 2010 was valued at US$44 billion, an Compound Expected
increase of 1.9% over the previous year’s sales, and is forecasted to Year of
grow at a CAGR of 6.4% from 2010–16, reaching US$64 billion in Launch
2016
 US continued to dominate the global cancer market, with 2010
sales of US$17.2 billion and a market share of 39.2% Crizonitib Phase III
 Oncology has become one of the major focus areas for
pharmaceutical and biotechnology companies because of the high
unmet need for improved treatments for multiple types of cancer Bosutinib Phase-III
 Roche led the global cancer market with 2010 sales of $19.3bn,
which was mainly based on sales from Avastin, Herceptin, MabThera,
and Xeloda Aromasin Axitinib Phase-III
 Roche was followed by Eli Lilly, AstraZeneca, Sanofi and Takeda 100%
 Growth Drivers: aging population and changing lifestyle
Oncology sub segments Potential Opportunities for Pfizer
Therapeutic Leading Drugs and their Patent
Segment market share Expires
Acquire to
Alliances with
Antineoplastics Avastin– Roche (17.2%) replenish the
generics Invest in R&D
(82%) pipeline with late
manufacturers
Herceptin – Roche (145%) stage molecules
MabThera – Roche (14.3%)
Taxotere – Sanofi (7.8%) Sales and
Outsource drug
Marketing partner
manufacturing to
Cytostatic Arimidex – AstraZeneca (19%) for small pharma
low cost EMs
Hormones players
(18%) Femara– Novartis (17.3%)
Lupron-Depot – Takeda (17%)
Source: Pfizer, Datamonitor.. 9

10. CNS Market
Overview Pfizer CNS portfolio, pipeline
 The global CNS market recorded sales of US$ 71billion in 2010 and Aricept
Compound Expected
Pristiq 6% 0%
is expected contract by a CAGR of -3.9% reaching US$56 billion in 7% Year of
2016 Launch
 US continues to be the largest market, with a share of 40% of the
overall market Bapineuzumab Phase-III
 Eli Lily retained its position as the market leader with US$9.3 billion Zoloft 2013
7%
in 2010 sales, led by key brands such as Zyprexa and Cymbalta Lyrica
 Pfizer(10.8%) was followed by Astra Zeneca(8%), Johnson & 42%
Lyrica Phase-III
Johnson(6.9%), Otsuka(6%), Forest(5.2%) and Eisai(4.8%)
 Growth Drivers: 2013
 Age-linked diseases such as Alzheimer’s disease and Parkinson’s Geodon
disease have the greatest potential. 14% PF-02545920 Phase-II
 Adult ADHD which is largely undiagnosed also has strong growth Effexor
potential 24%
CNS sub segments Potential Opportunities for Pfizer
Segment Leading Drugs and their Patent
market share Expires
Acquire to
Antipsychotics Seroquel – AstraZeneca (23%) 2011 Alliances with
replenish the
(34%) generics Invest in R&D
Zyprexa – Eli Lily (20%) 2011 pipeline with late
manufacturers
stage molecules
Antidepressants Cymbalta – Eli Lily (24%) 2013
(21%)
Lexapro – Forest (16%) 2012 Sales and
Outsource drug
Marketing partner
Anti-epilectics Lyrica– Pfizer (11%) 2013 manufacturing to
for small pharma
(13%) low cost EMs
players
Keppra – UCB (14%) Expired
Others Aricept – Eisai (47%) Expired
Source: Pfizer, Datamonitor.. 10

11. Pharmerging
Markets

12. Pharmerging Markets
India China Brazil Russia
Growth Drivers  Middle Class Pop  Aggressive govt. spend  Large Population  Reimbursement system
 Infra improvement  Chronic drugs demand  Strong domestic  Private, out-of-pocket
 Birth rate  Rising incomes pharma industry spending
 Increasing awareness  Unmet demand  Large, unmet demand
Size of the Pharma
30 70 25 15
Market (2015) (US$ Bn)
CAGR Growth
14.9% 16.9% 29% 14.2%
(2006-2010)
Per Capita healthcare
109 342 765 638
spending (US$)
Healthcare spending
4.9% 4.5% 7.5% 5.3%
as a % of GDP
Presence of strong
R&D base 2 3 2 1
Degree of Price Control
& Regulation 4 4 3 3
Degree of Local
Generic Competition 4 4 3 3
Degree of Patent
Protection 1 1 2 1
Opportunities in Respiratory, HIV Respiratory, HIV Medicines,
Medicines HIV Medicines
Segments Cardiovascular Cardiovascular, Cancer
Source: AnandRathi, Datamonitor. 12

13. Pharmerging Markets: Pfizer’s Focus
India China Brazil Russia
Cardio
CNS
HIV
Respiratory
Oncology
Anti-infection
Diabetes
13

14. Benchmarking

15. Benchmarking Pharma MNCs
Pfizer GSK Abbott
80.0 US$ Billions 67.8 20% 60.0 US$ Billions 30% 60.0 US$ Billions 20%
45.4 45.1 44.3 44.0
60.0 48.1 48.3 50.0 15% 35.2 15%
40.0 20% 40.0 29.5 30.8
25.9
40.0 10% 10%
Financials 20.0 5%
20.0 10% 20.0
5%
0.0 0% 0.0 0% 0.0 0%
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010
Revenues Profit Margin Revenues Profit Margin Revenues Profit Margin
4% 3%
5% 9% 9%
Biopharmaceuticals
Pharmaceuticals Pharmaceuticals
Revenue by Animal Health
11%
Nutritional
11%
Nutritional
Nutrition
Segments 16% Diagnostics 16% Diagnostics
57% 57%
Consumer Vascular Vascular
87%
Healthcare
18% 15%
Revenue by
33%
43% USA USA 43%
USA
Others Others
International
Geography 39%
Emerging Markets
52%
Emerging Markets 57%
10.0 US$ Billions 9.4 20% 4.5 US$ Billions 15.5% 4.0 US$ Billions 3.7 11%
9.0 15% 4.0 4.0 3.5 10%
8.1 7.9 4.0 14.5%
7.8 3.7
R&D 8.0 10%
3.5 3.3 13.5%
3.0
2.5
2.7 2.7 9%
7.0 5% 2.5 8%
Expenses 6.0 0% 3.0 12.5% 2.0 7%
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010
R&D Expenses % R&D Expenses R&D Expenses % R&D Expenses R&D Expenses % R&D Expenses
Source: Company Websites. Street Research. 15

16. Benchmarking Pharma MNCs
Merck Astra Zeneca Novartis
60.0 US$ Billions 60% 60.0 US$ Billions 30% 60.0 US$ Billions 30%
50.3
46.0 44.3
38.1 41.5
40.0 40% 40.0 31.6 32.8 33.3 20% 40.0 20%
27.4 29.6
24.2 23.9
Financials 20.0 20% 20.0 10% 20.0 10%
0.0 0% 0.0 0% 0.0 0%
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010
Revenues Net Income Revenues Net Income Revenues Net Income
12% 12% 13%
Revenue by Pharmaceuticals Pharmaceuticals 18% Pharmaceuticals
Vaccines
Segments 88%
Others
88%
Others 63% Sandoz
6%
9% US
18% 19% Americas
Revenue by
33%
44% 20% Europe
8% USA EMEA 50% Europe
Geography 29%
Japan Others
31% Asia, Africa &
Australia
Asia, Africa &
Australia
39% Canada & Latin
America
15.0 US$ Billions 26% 6.0 US$ Billions 20% 10.0 US$ Billions 9.1 19%
11.0
24% 5.5 5.3 15% 18%
5.2 5.2 7.2 7.5
10.0 8.0
18%
R&D 5.0
4.9 4.8
5.8 22% 5.0
4.4
10%
6.0
6.4
17%
20% 4.5 5%
Expenses 17%
0.0 18% 4.0 0% 4.0 16%
2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010
R&D Expenses % R&D Expenses R&D Expenses % R&D Expenses R&D Expenses % R&D Expenses
Source: Company Websites. Street Research. 16

17. Benchmarking Pharma MNCs
Pfizer GSK Abbott
US$ Billions US$ Billions US$ Billions
30.0 40% 30.0 40% 30.0 40%
Sales & 20.0 15.6 14.5 14.9
19.6 30%
20.0
13.9 14.2 15.0 14.3
30%
20.0
30%
20%
Marketing
20% 10.4 20%
7.4 8.4 8.4
10.0
10% 10.0 10%
10.0
10%
Expenses 0.0
2007 2008 2009 2010
0% 0.0
2007 2008 2009 2010
0% 0.0
2007 2008 2009 2010
0%
Marketing Expenses % Expenses Marketing Expenses % Expenses Marketing Expenses % Expenses
Number of
 1,16,500 (2010)  98,854 (2010)  73,000 (2010)
Employees
 Prescription pharmaceuticals,  Vaccines, prescription drugs,  Pharmaceuticals, nutritionals,
Principal non-prescription self-medications OTC medicines, health related diagnostics and vascular products
and animal health products consumer products
areas of  Primary Care, Specialty Care,  Therapeutic areas include
business Established Products, Oncology
and Emerging Markets
respiratory, anti-virals, CNS,
cardiovascular, metabolic,
biopharmaceutical products oncology and vaccines
 Lipitor – US$5,272 Million  Advair Diskus – US$3,655 Million  Tricor – US$1,016 Million
Top 5 US  Lyrica – US$1,478 Million  Flovent – US$705 Million  Niaspan – US$794 Million
selling drugs 

Celebrex – US$1,350 Million
Viagra – US$1,029 Million


Lovaza – US$683 Million
Valtrex – US$534 Million


AndroGel – US$594 Million
Humira Pen – US$515 Million
(2010)  Geodon Oral – US$ 960 Million  Ventolin – US$497 Million  Synthroid – US$ 507 Million
Source: Company Websites. Street Research. 17

18. Benchmarking Pharma MNCs
Merck Astra Zeneca Novartis
30.0 US$ Billions 40% 30.0 US$ Billions 40% 30.0 US$ Billions 40%
Sales & 20.0
13.2
30%
20.0
30%
20.0
13.3
30%
20% 11.3 11.9 12.1
Marketing 10.4 10.9 10.4 20% 11.1 20%
7.6 7.4 8.5
10.0
10% 10.0 10%
10.0
10%
Expenses 0.0
2007 2008 2009 2010
0% 0.0
2007 2008 2009 2010
0% 0.0
2007 2008 2009 2010
0%
Marketing Expenses % Expenses Marketing Expenses % Expenses Marketing Expenses % Expenses
Number of  1,00,000 (2010)
 15,500 people are employed in  62,700 (2010)  99,834 (2010)
Employees R&D (2010)
 Drugs for elevated cholesterol,  Pharmaceutical and medical  Cardiovascular, respiratory and
Principal and treatments for hair loss, products for gastrointestinal, infectious diseases, Oncology,
osteoporosis, hypertension and oncology, cardiovascular, neuroscience, transplantation,
areas of allergic rhinitis respiratory, central nervous dermatology, arthritis,
business system, pain control, anesthesia
and infection
gastrointestinal and urinary
conditions, vaccines, diagnostics,
vision and animal health products
 Singulair – US$3,325 Million  Nexium – US$5,276 Million  Diovan – US$1,444 Million
Top 5 US  Januvia – US$1,294 Million  Seroquel – US$3,222 Million  Diovan HCT – US$1,316 Million
selling drugs 

Vytorin – US$953 Million
Janumet – US$459 Million


Crestor – US$2,923 Million
Symbicort – US$708 Million


Gleevec – US$518 Million
Femara – US$477 Million
(2010)  NuvaRing – US$349 Million  Arimidex – US$404 Million  Focalin – US$416 Million
Source: Company Websites. Street Research. 18

19. Benchmarking Pharma MNCs
Pfizer GSK Abbott
 2010 Lipitor sales in EMs were  EMs contribute £3.6 billion or  Strong presence in emerging
Revenue approximately US$900 million 15% to global pharma sales markets in generics segments
from  EMs contributed 13% to the
overall global sales
 The Company grew across all
three sectors – patented, non
 The Company expects roughly
33% of global pharmaceutical
Emerging  Strategy is based on acquisitions
and alliances
patented drugs and vaccines
 Innovative pricing in Ems
sales to come from EMs within
five years, up from 25 % today
Markets  India: Alliance with Biocon to for  India: Opened an Oral  India: No.1 pharma company in
exclusive worldwide Healthcare Research Centre in India post the acquisition of
commercialization of Biocon’s India Piramal Domestic Healthcare
biosimilar versions of insulin and  China: Reported 25% sales force Formulations and Solvay
insulin analog products increase in 2008 Pharmaceuticals
 Brazil: Partnered with  Brazil: GSK sealed a €1.5bn  China: Company is looking to
Strategy in Laboratório Teuto Brasileiro S.A. contract with Brazil Govt. partner with governments, health
Emerging to develop and commercialize
generic medicines both within and
guaranteeing sales of its
pneumococcal vaccine over the
care professional organizations
 Brazil: Conducted training
Markets outside Brazil
 China: Goal is a 25% CAGR for
entire life of the product
 Russia: Entered into alliance
workshops and initiated public-
private partnerships in numerous
sales in China Expand coverage of with Binnopharm to enable local markets
Chinese cities manufacture of vaccines
 Pfizer has favored acquisitions  To offset lower revenues from  Currently, no significant patent
to diversify its business – Wyeth, patent expirations in 2010, or license expirations in the
a leader in vaccines, consumer undertook restructuring next three years
Reactions to health and animal health products, program to lower SG&A costs  One of the leading companies in
in 2009, King Pharma, a leader in  Divested non-core assets biologics and small molecules
Patents pain management, in 2010 and the  Strong pipeline: over 20 assets  Acquired 350 trusted branded
Expiry biotech firm FoldRX in 2010
 Entered into an alliance with
not currently on the market for
any indication & by the end of
generic products through Piramal
 Agreement with Zydus Cadila
Biocon to strengthen its product 2012 expect Phase III data on also gave Abbott licenses for 24
portfolio in biologics and diabetes around 15 additional assets branded generic products
Source: Company Websites. Street Research. 19

20. Benchmarking Pharma MNCs
Merck Astra Zeneca Novartis
 Company’s goal is to derive 25%  46% of sales and marketing  Strong presence in emerging
Revenue of global pharmaceutical and workforce based in EMs markets in biosimilars segment
from vaccine revenues from EMs
 Expand its low-cost
 Revenue in EMs grew to over
US$5.1 billion, a 16% increase
 Looking at a mix of inorganic
growth and local production
Emerging manufacturing network and
investments in clinical trials in
 Portfolio of more than 100
generic products being
 Combined net sales in the six
priority emerging markets grew at
Markets EMs licensed across 30 EMs the more rapid pace of 12%
 India: Announced creation of a  India: Operates a TB research  India: Investing in localized
JV with Sun Pharma to facility. Signed an agreement products and commercial
develop, manufacture and with Torrent to supply AZ infrastructure
commercialize branded generics with generics. Signed a licensing  China: Company is pursuing
 China: Signed a framework agreement with Aurobindo targeted licensing, acquisition and
Strategy in agreement to establish a JV with pharma for supplying formulations alliance opportunities
Emerging Simcere Pharmaceuticals for
serving China's rapidly expanding
 China: AZ is also working with
the Chinese Ministry of
 Russia: Alliances with govt.,
regions and local companies and
Markets health care needs by providing
significantly improved access to
Health in improving patient
health by strengthening the
strengthening key account
management to expand reach
quality medicines in major training of general practitioners  Brazil: Leveraging Novartis brand
therapeutic areas portfolio
 Several drugs with long periods of  Created a single R&D  Because of recently launched
expected market exclusivity organization to improve products with rapid sales growth,
 Strategy remains to maximize productivity and secure targeted Novartis is less affected by
Reactions to the portfolio, deliver the levels of return patent expiries
pipeline, manage cost, expand  AZ works closely with external  Strong product pipelines
Patents geographically & diversification parties and acts as a partner to  Strong in biosimilars segment
Expiry  Invested in biosimilars business
and announced a partnership with
access the best science
 Supplements EM portfolio with
 Company expects its broad
portfolio with varied business
PAREXEL to develop biologics branded generic products sourced cycles to deliver sustainable
 Acquisition of Shering-Plough externally & marketed under AZ development
Source: Company Websites. Street Research. 20

21. Case Studies

22. Case Study 1: Takeda’s Blockbuster
Prevacid goes off patent in Nov 2009
Before patent expiry (2007) After patent expiry (2010)
 Pharmaceuticals = 92%  Pharmaceuticals = 92%
Revenue Mix:  Diversified = 8%  Diversified = 8%
R&D  R&D Expenses = US$1,638 Million  R&D Expenses = US$3,187 Million
 R&D Expenses as a % of sales = 15%  R&D Expenses as a % of sales = 20%
Expenses
Top 3 Drugs  Prevacid = US$3,315 Million  Actos = US$2,631 Million
 Actos = US$2,229 Million  ActoplusMet = US$359 Million
(US)  ActoplusMet = US$ 229 Million  Prevacid = US$241 Million
 Japan = 65%  Japan = 55%
Geographic  North America = 24%  North America = 36%
Revenue Mix 

Europe = 10%
Asia = 1%


Europe = 8%
Asia = 1%
Sales of Prevacid (2003-2010) Key Elements of Strategy
 Enhancement of the R&D pipeline
US$ Billions  In-house R&D activities
4.00 3.57  In-licensing and alliance activities
3.20 3.33 3.31 3.32 3.30
 Product life-cycle management
3.00 2.51  Strengthening the global management structure
2.00  Enhancement and expansion of the business foundation in the tri-
polar markets (Japan, U.S. and Europe)
1.00 0.24  Improvement of the corporate governance and internal control
0.00 system
 Reinforcement of the implementation of the product strategies
2003 2004 2005 2006 2007 2008 2009 2010
Source: Takeda, News Runs. 22

23. Case Study 2: Merck’s Blockbuster
Zocor goes off patent in Jun 2006
Before patent expiry (2005) After patent expiry (2010)
 Pharmaceuticals = 94%  Pharmaceuticals = 87%
Revenue Mix:  Others = 6%  Others = 13%
R&D  R&D Expenses = US$3,848 Million
 R&D Expenses as a % of sales = 17%
 R&D Expenses = US$11,000 Million
 R&D Expenses as a % of sales = 24%
Expenses
 Zocor = US$4,382 Million  Singulair = US$4,987 Million
Top 3 Drugs  Fosamax = US$3,191 Million
 Cozaar = US$3,037 Million
 Remicade = US$2,714 Million
 Januvia = US$2,386 Million
 USA = 58%  USA = 44%
Geographic  EMEA = 24%  EMEA = 30%
 Japan = 7%  Japan = 8%
Revenue Mix  Others = 11%  Others = 18%
Sales of Zocor (2003-2010) Key Elements of Strategy
US$ Billions  Innovation
 Advancement of drug candidates through pipeline
6.00 5.01 5.20  Diversify
4.38  Supplemented its internal research with aggressive licensing and
4.00 2.80 external alliance strategy focused on the entire spectrum of
collaborations from early research to late-stage compounds
2.00 0.88  Cost Cutting
0.66 0.56 0.47  Initiating cost cutting measures designed to reduce the Company’s
0.00 cost structure, increase efficiency and enhance competitiveness
2003 2004 2005 2006 2007 2008 2009 2010  Acquisitions & Alliances
Source: Merck, News Runs. 23

24. Case Study 3: BMS Blockbuster
Pravachol goes off patent in Apr 2006
Before patent expiry (2003) After patent expiry (2010)
 Pharmaceuticals = 71%  One Biopharmaceuticals segment which is engaged in
Revenue Mix:  Oncology Therapeutics Network = 11% the discovery, development, licensing, manufacturing,
 Nutritional = 10% marketing, distribution and sale of innovative
 Others = 8% medicines
R&D  R&D Expenses = US$2,279 Million  R&D Expenses = US$3,566 Million
Expenses  R&D Expenses as a % of sales = 11%  R&D Expenses as a % of sales = 18%
 Pravachol = US$2,827 Million  Plavix = US$6,666 Million
 Plavix = US$2,467 Million  Abilify = US$2,565 Million
Top 3 Drugs  Taxol = US$934 Million  Avapro = US$1,176 Million
 USA = 62%  USA = 62%
Geographic  EMEA = 24%  Europe = 18%
 Other Western Countries = 6%  Emerging Markets = 4%
Revenue Mix  Pacific = 8%  Japan and Asia Pacific = 8%
Sales of Pravachol (2003-2010) Key Elements of Strategy
 Innovation:
US$ Billions  Developing new compounds across major therapeutic categories
2.83 2.64  Selective Integration and external collaboration
3.00
2.26  Remain focused on acquisition and licensing strategy known as the
2.00 “string-of-pearls” with transactions which could range from
1.20 collaboration and license agreements to the acquisition of
1.00 companies
0.44  Continuous Improvement through advancing pipeline, cost savings and
0.20
0.00 maintaining a strong financial position
 Maintain core focus through the sale of various mature brands and
2003 2004 2005 2006 2007 2008 2009 2010
the related manufacturing facilities in various countries
Source: BMS, News Runs. 24

25. Course of Action

26. Course Of Action
Before Patent Expiry After Patent Expiry
 Invest heavily in R&D to lessen  Introduction of new products is
the impact of the patent cliff by not expected to generate the
Innovate increases R&D spending from same magnitude of sales as the
12% to15% of sales products losing exclusivity
 M&A before the patent expiry  M&A post the patent expiry
Mergers and will enable the company to means the company is looking to
stave off the loss in sales. E.g.. diversify its business and
Alliances Wyeth and King Pharma possibly exit the category
 To maintain its market share in  Being one of the generics
Invest in Lipitor, Pfizer may look to producers of Lipitor will be
develop a generic Lipitor and important to at least maintain
Generics leverage its brand name market share E.g. Aurobindo
 Develop a new form of Lipitor  Procardia – a drug by Pfizer
Product drug (chewable) with different facing patent expiration, was
dosage strength or a later marketed as an extended
Modification modification of the molecule release form, Procardia XL
 Launching NDDS based  Dilacor XR is a good example of
formulations 2-3 years prior to a product with a lifecycle that
NDDS patent-expiry, will reduce has been extended by a new
impact of generic competition formulation and a new indication
 Take further steps to  Listerine is still a hot favorite
Promotional strengthen the position of the even though its patent expired
brand name almost half a century ago
Activities
Source: Company Websites, Street Research. 26

27. Course Of Action (Cont’d.)
Before Patent Expiry After Patent Expiry
 Firms raise prices 3yrs prior to  Merck dropped the price of Zocor to
Price patent expiration and only generic levels to maintain sales, but
after the entry of generics, margins and net income was crushed
Strategies they start reducing their price
 Settlements can buy additional  Companies may have to defend its
Legal time during which brand intellectual property rights, including
retains market exclusivity and initiating patent infringement lawsuits
Proceedings delays generic
 Pfizer laid out a cost reduction  Pfizer could look to cut down on sales
plan in 2005, in anticipation of and marketing costs,, R&D expenses in
Cost Savings Zoloft’s 2006 patent expiration categories, it doesn’t consider to be
core such as Animal Health
 Focus on core competence by  Pfizer may look to divest its Animal
offloading or divesting non Health Care business and focus on
Divest core assets (animal, capsules)
 Selling Capsugel to KKR and
vaccines, cardio and pain management
in the coming years
Nutritions business to Nestle
 Seeking US FDA regulations to  Selling Lipitor OTC may be a good
sell Lipitor OTC, may be a bad idea – even though it will face generics
Shift to OTC idea before 2011 and prices will be much lower but at
least Lipitor will maintain some share
 Can get into contracts with  R&D contracts with government
Government governments to sell near to
expiry drugs at discount prices,
sponsored institutes E.g.: Pfizer and
ChemRar in Russia
contracts thereby establishing a
relationship. E.g. GSK & Brazil
Source: Company Websites, Street Research. 27

28. Acquisition of Bio-pharmaceuticals
Overview No. of US FDA Approved NMEs
 M&As involving biotech companies are gathering momentum
 Drivers: Need to fill product pipelines to replace drugs losing patent 50 Number of Approvals
protection and gaining access to complementary technologies 40
 An attractive product portfolio and focused pipeline 40 37
35
 Sales of biotech products are outpacing the total pharmaceutical 30
market, growing 12.5% to $75bn in 2007 30 27
25
 Some 22 biotech drugs have reached blockbuster status and the 21 23
strong R&D pipeline of biotech medicines will augment the 20
20 17 18
current portfolio of over 100 commercial products
 Competition for late-stage candidates will shift the focus to earlier-
stage product deals as biosimilars gain market approval, generic 10
players will seek to establish their presence by acquiring products
and technology 0
 Current economic environment favors an acquisition than an IPO '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07
Recent Biopharma M&A Deals Potential Opportunities for Pfizer
Acquirer Target Year Therapeutic Area Company % Leading Biopharma
dependence on Companies
Boehringer Immunology, Oncology,
Ingelheim Macrogenics 2010 Respiratory, Cardio, Biopharma
GmbH Metabolic and Infectious Amgen
Novo Nordisk 85
Cephalon Mesoblast 2010 CNS and Cardiovascular
Roche 65
Amylin
Bristol-
ImClone 2008 Oncology Merck 35
Myers
ImClone
Astra Eli Lilly 30
MedImmune 2007 Vaccines
Zeneca
Bayer 15
Schering- Organo Women's healthcare and Teva
2007 Pfizer 15
Plough BioSciences Animal care products
Source: Datamonitor.. 28

29. Opportunities across the Value Chain
Drug Discovery Phase – I Phase – II Phase – III Launch Post Launch
Clinical Trials
Identify the unmet Studies typically Evaluate effectiveness Studies in a larger Raise awareness of Studies to further
medical need and involve understanding of the medicine group of patients patient benefit and understand the
market opportunity how the potential to gather information appropriate use safety profile of the
medicine is absorbed Lasts from several about medicine in larger
Undertake laboratory in the body and months to two years, effectiveness and Market and sell Populations
research determine an and involves up to safety of the medicine; record and
appropriate dosage several hundred Medicine analyze reported side
and side effects patients effects; review
Scope for Contract Outsourcing Outsourcing Outsourcing Outsourcing
Drug Discovery Clinical Trials Clinical Trials Clinical Trials Phase-IV Trials
Pfizer’s Pfizer’s Novartis’ GSK’s Indiana CTSI
collaboration with collaboration with collaboration with collaboration with partners with
WuXi Clinigene EcronAcunova Metropolis GVK Bio
Source: Pfizer, Datamonitor.. 29

30. Thank You