Oncology Pipelines

www.exanebnpparibas-equities.
com

Please refer to important disclosures
at the end of this report.

Bionest Partners Exane BNP Paribas

Frdric Desdouits Sbastien Berthon
Stphane Parnis Vincent Meunier
Alain Gilbert Valrie Moulle
Claude Allary Franois Schmitt

frederic@bionest.com pharma@exanebnpparibas.com
Drug development is increasingly risky
We estimate that the chances of success for cancer products starting clinical trials are 3%, three
times less than in other therapeutic areas (average 10%), and are steadily declining. We calculate
that, statistically, 83 new molecules are due for approval by 2012 whereas only 200 have been
approved to date.
Rising barriers to market access
Oncology is wrongly perceived as a collection of niches accessible to small players; large
companies have a growing advantage. The development of cancer drugs is increasingly complex
and market access ever more difficult. Standards of care are evolving fast and there is a clear first-
mover advantage forcing the development of compounds in several indications at once. This blitz
approach demands ever more expertise, breadth and financing power.
Hope still drives the oncology segment
Due to the high medical need and despite a low success rate and mounting competition, almost
every mid-size or big pharma company has a clinical programme in cancer. Over the last ten years,
the number of molecules tested in cancer has multiplied by 2.4x and 70% of the molecules in phase
II or III are developed by small companies.
Success does not always breed success among European players
Roche will retain its leadership in the next 5-6 years, but challenged by GlaxoSmithKline, the
potential Merck/Schering and, to a lesser extent, Novartis. AstraZeneca and Sanofi-Aventis face a
high generic risk, the latter being in a better situation with a larger and more diverse pipeline.
Newcomers such as Serono, Novo Nordisk, UCB and Merck KGaA stand-alone, will have to gain
critical mass through acquisitions given their limited financing power and the rising cost of
development in oncology.
Oncology Pipelines: Searching is not Finding

Sector review - March 2006
Bionest Partners
19 rue du Gnral Foy
75008 Paris
France
Tel : +33 1 58 05 14 00
Fax : +33 1 58 05 14 09

535 West 34th Street
New York, NY 10001
Tel: +1 646 792-2240
Fax: +1 646 792-2244

2 Pharmaceuticals
Contents
Executive summary ______________________________________ 3
Oncology - the gold rush is not over ________________________ 8
Unmet medical need remains high________________________________________ 8
Very active research and development ____________________________________ 9
Knowledge is everywhere: low entry barriers in research _____________________ 12
High prices target unmet medical need _________________________________ 14
Areas left to explore __________________________________________________ 16
Success rates: three times lower than pharma average, and getting worse _______ 19
Developing cancer drugs is all about managing complexity ___ 22
Product positioning with or against competitors ? ___________________________ 22
One bullet for several targets? __________________________________________ 25
Oral drug approaches vs biologicals: who will win? __________________________ 27
Centralised vs decentralised marketing organizations ________________________ 29
No place for slow players ________________________________ 32
A strong first-mover advantage _________________________________________ 32
Price pressure will soon weigh on cancer _________________________________ 39
European oncology players ______________________________ 43
Companies ____________________________________________ 49

Exane BNP Paribas
Sbastien Berthon Valrie Moulle
+33 1 44 95 68 61 +33 1 44 95 53 81
sebastien.berthon@exanebnpparibas.com valerie.moulle@exanebnpparibas.com

Vincent Meunier Franois Schmitt
+33 1 42 99 24 42 +33 1 44 95 41 86
vincent.meunier@exanebnpparibas.com franois.schmitt@exanebnpparibas.com
Bionest Partners
Frdric Desdouits Claude Allary
+33 1 58 05 14 05 +33 1 58 05 14 02
frederic@bionest.com claude@bionest.com

Stphane Parnis Alain Gilbert
+33 1 58 05 14 21 +33 1 58 05 14 01
sparnis@bionest.com alain@bionest.com

3 Pharmaceuticals
Executive summary
Cancer is a growing area of interest in the pharmaceutical industry, in which late-stage
products have doubled in the last ten years. But, according to our calculations, the
probability of success for a phase II product in oncology is close to only 6% and is
declining. Our detailed analysis of more than 800 products currently in pipelines shows
therapeutic areas where innovation will probably rise in the coming years and where
competition will become even stronger. But our understanding is that the barriers to
entry are rising very quickly in favour of large players with strong investment capacities.
At the same time, we find that market conditions are becoming more difficult with a
strong first-mover advantage and mounting price pressure.
Statistics tell us that around 83 products should reach the market by 2012. As there are
around 200 products approved today, either the market will change completely or
success rates will decline sharply.
Looking at European pharmaceutical companies, Roche/Genentech appears to be a
clear future leader. GlaxoSmithKline appears as a potential challenger, together with
Novartis and potentially the merged Merck-Schering group. Sanofi-Aventis and
AstraZeneca are facing generic risks in the foreseeable future, the former having a
broader pipeline to protect its franchise. Newcomers such as Serono, Novo Nordisk, UCB
and Merck KGaA stand-alone, will have to gain critical mass through acquisitions given their
limited financing power and the rising cost of development in oncology.
Cancer: A very active sector in clinical development
Oncology represents about 10% of the current pharmaceutical market but nearly 30%
of the drugs in clinical development and is the primary focus of 20% of the publicly
listed European Biotech companies. The number of drugs in clinical development has
increased 2.4 times in ten years and almost every single mid- to large-sized company
now has an ongoing oncology programme in clinical development.
Several factors have contributed to this onco-boom. On the demand side, although the
average survival after diagnosis has improved dramatically, cancer remains the
second-highest cause of death in developed countries and a strong research effort is
still needed to improve the survival of patients in many cancers. On the feasibility side,
the main factor is certainly the technological advances with the omics revolution and
the understanding of the biology of several cancers, as well as the development of
preclinical models.
The development of the biotechnologies has enabled small companies to identify drug
candidates and develop them up to early clinical stages (phases I/II). We estimate that
70% of cancer products tested in humans today are from small Biotech companies.
The reality favours these small companies even more if we include those that have
been acquired by big pharma companies. The numbers are particularly striking for
recombinant proteins (89%) and biological peptides/proteins (84%).
In this report, we review more than 800 molecules in phases II and III and analyse their
characteristics, their expected indications and their owners. We have grouped the
different cancers according to their incidence, the probability of five-year survival and
the intensity of clinical research. As an example, we show the relative number of
products in development in the different pathologies in the following graph.

4 Pharmaceuticals
Chart 1: Relation between number of drugs in phase II or III, incidence and 5-year
survival
Source: Bionest Partners, Exane BNP Paribas
The factors underpinning the above matrix are analysed in detail in this report. For
instance, below, we have used it to represent the number of molecules that could be on
the market by 2012 in each pathology divided by the number of registered drugs in the
same pathology.
This metric gives us a picture of the intensity of the competition coming from the
pipelines to replace existing drugs. Interestingly, two zones are being investigated more
than others: the Improvable niches and the Challenging niches. Those are the areas
where the medical need is still high or relatively high and where there are few marketed
drugs. Surprisingly, the lung area does not show up as a very intense zone.
Chart 2: Relation between number of projected new drugs and marketed drugs
Breast
Leukemias
Lymphoma and multiple myeloma
Ovarian
Tracheal bronchus lung
Colorectal
Testicular
Prostate
Renal
Pancreas
Bladder
Head & Neck
Corpus uterus
Skin and Melanoma
Liver
Stomach
Cervix uteri
Brain
Oesophagus
0
50
100
1 10 100 1000
Incidence (Log scale)
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
Low population High population
CROWDED WITH UNMET NEED
IMPROVABLE NICHES
1 new projected drug
for 2 existing drugs

L
a
t
e

S
t
a
g
e

P
i
p
e
l
i
n
e

Breast
Leukemias
Ovarian
Testicular
Prostate
Pancreas
Corpus uterus
Skin and Melanoma
Liver
Stomach
Cervix uteri
Colorectal
Brain
Renal
Bladder
Head & Neck
Oesophagus
0
50
100
1 10 100 1000
Incidence (log scale)
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
15 projects

5 Pharmaceuticals
Success rates: three times lower than pharma average, and getting
worse
We have calculated attrition rates in oncology by following the compounds entering
phase 1, 2 or 3 each year since 1996. As shown below, oncology drug candidates have
much lower average success rates than other therapeutic areas in late stage
development (phases 2 and 3).
A cancer product entering phase II has about a 6% chance of making it to market
(industry average: 16%) and around 3% when it is entering phase I (industry average:
10%).
We have calculated, based on our estimated attrition rate, the number of molecules
that could reach the market by 2012 (molecules that are already in phase II). We
estimate that around 83 new molecules should be launched while there are only
around 200 approved today.
But this calculation might turn out to be overly optimistic as we believe success rates
are declining in oncology. Between 1996 and 2000, the cumulative success rates from
first-in-man to registration decreased by 23%, from 4.1% to 3.2%. This increasing
failure rate is due to a sharp decline in phase II productivity and, to a lesser extent, to
phase III productivity.
Chart 3: Change of success rate in oncology by phase of development between
1996 and 2000
45.1%
38.3%
41.7%
57.1%
4.1%
52.2%
21.0%
34.8%
83.3%
3.2%
0%
20%
40%
60%
80%
100%
Phase I Phase II Phase III Pre-registration Phase I to launch
S
u
c
c
e
s
s

r
a
t
e
1996 2000
+46%
+16%
-45% -17%
-23%

Developing cancer drugs is about managing complexity
Oncology is one of the main science-driven specialties in medicine, with highly
technical products and complex patient management. This makes research in this area
particularly complex and unpredictable. To make matters worse, many teams are
competing not only on similar targets but also on different approaches to the same
targets (for instance, chemicals and biologicals on certain membrane receptors) and on
different approaches to the same disease (for instance, there are 92 molecules in
phase II and III in breast cancer).

6 Pharmaceuticals
To balance the risk of development and because the understanding of the biology has
increased significantly, companies are now trying to test their compounds in several
indications in parallel. But this strategy makes development highly complex as standard
therapies are evolving very quickly and are sometimes becoming fragmented, i.e. there
can be several equivalent treatment options for the same patient. The products are now
often developed with competitors products and can sometimes strengthen competitors
positions.
This makes it difficult to define a marketing strategy as how the clinical trials are
designed includes a portion of the risk in the choice of the reference treatment and
requires a close and sustained presence in hospitals and with key opinion leaders. At
the same time, clinicians profiles are also changing, evolving into a more prominent
role for organ specialists versus traditional oncologists. As a consequence, cancer
marketing and sales forces will have to adapt to physicians with a less academic profile
and deliver a more GP-oriented marketing promotion.
Tougher market conditions
There is clearly a strong first-mover advantage in cancer, as illustrated by the taxane,
aromatase inhibitors and LHRH agonists markets, where the first entrant maintained a
50-70% market share against its competitors. This requires that products be clearly
differentiated within the scope of approved indications, in terms of organs and
therapeutic lines, and also that these indications be obtained as fast as possible.
Given the increasing competition in cancer research, being first to market requires very
fast development. As a result, companies have adapted their approach with what we
call the blitz strategy, which consists of testing new drugs in parallel in a large number
of indications and sometimes in several settings. A good example presented in this
report is Avastins clinical development. The emergence of this strategy contrasts with
the more traditional step-by-step Domino strategy, presented in this report with the
Rituxan example.
The very high unmet medical needs of the cancer market have thus far allowed
companies to obtain high prices for their drugs, but this will not last forever. Two factors
will contribute to the growing pressure on the prices of cancer drugs in particular: 1) the
very fast growth of spending for cancer treatments as part of total healthcare spending
and 2) increased competition amongst a higher number of players. Some price
pressure is already at work through an increasing use of generics, as is the case in
other therapeutic areas.
European cancer players: who will win?
We have analysed how European cancer players (AstraZeneca, GSK, Merck KGaA,
Novartis, Roche, Sanofi-Aventis and Schering AG) are positioning themselves to tackle
the opportunities and challenges of the cancer market over the next five years and how
their positions will evolve.
We have identified four success factors: in-licensing attractiveness, size of the pipeline
vs size of the current cancer franchise, diversity of therapeutic approaches and
exposure to generic risk.
Table 1: Winners/losers by success factor
Success factor Strong position Weak position
In-licensing attractiveness Roche, Sanofi-Aventis, AstraZeneca, Novartis Serono, Novo Nordisk, UCB
Pipeline depth vs current franchise Roche, GSK, Merck/Schering AstraZeneca
Diversity of therapeutic approaches Roche, GSK, Sanofi-Aventis AstraZeneca, Serono, Novo Nordisk, UCB
Exposure to generic risk Roche, Merck/Schering, Serono, Novo Nordisk, UCB Sanofi-Aventis, AstraZeneca
Source: Company, Bionest Partners, Exane BNP Paribas

7 Pharmaceuticals
The superstar is Roche/Genentech, which is in a strong position in all four success
factors. GlaxoSmithKline and Merck/Schering (if the combination is successful) are
the rising stars. Novartis should maintain its recently developed cancer franchise.
AstraZeneca is in the toughest situation, with high generic risk and a concentrated
pipeline. Maintaining its leadership in cancer will require higher-than-average success
rates and possibly acquisitions. Sanofi-Aventis also faces a challenge given its
generic risk exposure, but enjoys a deeper and more diversified pipeline than
AstraZeneca.
For the newcomers, Serono, Novo Nordisk and UCB, it will take time and major
investments to build a cancer franchise. Given their limited financing power and the
rising costs of development, gaining scale through acquisitions will likely be necessary
to be successful in this segment.
Chart 4: Cancer franchise in 2005 vs potential new drug launches by 2011
GSK MRK
NOVN
ROG
SAVE
SCH
AZN
NOVO
UCB SEO
MRK-SCH Newco
0
2
4
6
8
10
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Number of projected new drugs
2
0
0
5

c
a
n
c
e
r

s
a
l
e
s

(
U
S
D
b
n
)
Rising stars
Declining players
Super star
Emerging players
Established players


8 Pharmaceuticals
Oncology - the gold rush is not over
Unmet medical need remains high
The oncology market, which accounted for nearly 10% of the global pharmaceutical
market in 2005, is expected to keep on growing faster than the rest of the industry with
average annual turnover growth of around 10% in the coming years. This growth will be
driven by the development of new blood cell factors, targeted therapies and novel
chemotherapeutics. According to the National Cancer Institutes estimates, cancer
treatment cost around USD70bn in the USA in 2004 and has grown 75% over the last ten
years.
Chart 5: Evolution of worldwide market for oncology
0
20
40
60
80
2004 2009e
O
n
c
o
l
o
g
y

d
r
u
g

s
a
l
e
s

(
U
S
D
b
n
)
CAGR: +10%

Despite the stabilisation of incidence rates and the steady increase of survival rates for
some tumours (i.e. prostate, breast, colorectal), cancer remains one of largest cause of
deaths in industrial nations. Cancer is the second cause of mortality in the USA, with
approximately 570,000 deaths and 1.4m new cases diagnosed in 2005. However, the
survival and incidence rates vary strongly according to the site of the cancer, as shown
in the following chart.
Prostate, breast, lung and colorectal cancers are still the most common forms. In 2005,
they accounted for more than half of all new cancers. It was projected that there would
have been 1,372,910 new cancer cases in 2005, 17% of which would have been
prostate cancer; 15% female breast cancer, 13% lung cancer and 11% cancer of the
colon. Although therapies for prostate and breast cancer have helped increase
five-year survival rates, it is not the case for pulmonary and pancreatic cancers.

9 Pharmaceuticals
Chart 6: Five-year survival and incidence rates of cancers
Breast
Prostate
Renal
Bladder
Testicular
Lung
Leukaemia
Lymphoma and
multiple myeloma
Pancreas
Stomach
Liver and biliary
Colorectal
Uterine
Cervical
Ovarian
Head & neck
Brain
Melanoma
Oesophagus
0
10
20
30
40
50
60
70
80
90
100
1 10 100 1,000
Incidence (per 100,000)
5
y

s
u
r
v
i
v
a
l
Breast
Prostate
Renal
Bladder
Testicular
Lung
Leukaemia
Lymphoma and
multiple myeloma
Pancreas
Stomach
Liver and biliary
Colorectal
Uterine
Cervical
Ovarian
Head & neck
Brain
Melanoma
Oesophagus
0
10
20
30
40
50
60
70
80
90
100
1 10 100 1,000
Incidence (per 100,000)
5
y

s
u
r
v
i
v
a
l

Source: American Cancer Society, National Cancer Institute
Very active research and development
Between 1995 and 2005, the number of oncology products under development
(corresponding to phase I, II or III clinical trials) increased by 138% from 299 to 713.
This increase was approximately 1.5x higher than the overall pharmaceutical pipeline
growth, which rose by 88% from 1,268 drug candidates to 2,375 during the same
period. The oncology pipeline particularly increased in phase II and phase III.
Chart 7: Oncology and pharmaceutical pipeline growth between 1995 and 2005
Pharmaceutical pipeline* Oncology pipeline
0
200
400
600
800
1,000
Ph I Ph II Ph III
N
u
m
b
e
r

o
f

d
r
u
g
s
1995 2005
+172%
+247%
+111%

0
100
200
300
400
Ph I Ph II Ph III
N
u
m
b
e
r

o
f

d
r
u
g
s
1995 2005
+239%
+229%
+160%

* Oncology products are excluded from the pharmaceutical pipeline
Source: Pharmaprojects

10 Pharmaceuticals
Oncology: roughly a quarter of the scientific interest
Several of the factors that we have analysed highlight the great interest in oncology
and the importance of research in this therapeutic area (scientific publications,
preclinical alliances, intensity of research in biotech companies, etc.).
Firstly, at the research level, oncology is the main focus of interest. Between 2000 and
2005, oncology was the subject of almost 40% of scientific publications and was
awarded almost twice as much print space than cardiovascular disease, the second
most investigated therapeutic area.
Chart 8: Scientific publications by therapeutic area for the 2000-2005 period
Cardiovascular
diseases
23%
Infectious diseases
16%
Neurodegenerative
diseases
14%
Metabolic diseases
8%
Oncology
39%

Publication distribution over the period 2000-2005 was obtained using the Pubmed database and its Mesh
search engine. This system allows a wide research with occurrences based on concepts
Source: Pubmed
Oncology is believed to represent 25%-33% of all the alliances and preclinical
transactions in the sector. Of the 152 firms currently listed EU biotech companies
analysed, 20% have a clear focus on oncology (33 firms) and account for roughly 25%
of the market capitalisation.
Oncology research benefited strongly from omics
In our view, the oncology pipeline boom in the mid-1990s is a direct result of scientific
and technological improvements that occurred in the early-1990s. We have identified
several factors that have driven oncology pipeline growth:
development of "omics" technologies in the 1990s, resulting in the identification of
many novel potential therapeutic targets. Genomic and proteomic development were
made possible by molecular biology improvements and have strongly contributed to the
identification/development of new therapeutic mechanisms (i.e. apoptosis,
anti-angiogenesis, pathway inhibition, etc.);
improvements to chemical synthesis, molecule library and formulation have
motivated high throughput screening of molecules and lead identifications;
advances in preclinical and toxicity studies have enabled more molecules to be
turned into medicines;
progress in the characterisation and production of biological molecules has
accelerated the emergence of very promising molecule types, such as monoclonal
antibodies and recombinant proteins.

11 Pharmaceuticals

Chart 9: New cancer drug compounds and uses approved per year (1949- 2005)
New cancer drug compounds approved per year New cancer drug uses approved per year
0
2
4
6
8
10
12
14
16
18
20
1
9
4
9
1
9
5
7
1
9
6
5
1
9
7
3
1
9
8
1
1
9
8
9
1
9
9
7
2
0
0
5

0
2
4
6
8
10
12
14
16
18
20
1
9
4
9
1
9
5
7
1
9
6
5
1
9
7
3
1
9
8
1
1
9
8
9
1
9
9
7
2
0
0
5

Source: FDA, Bionest Partners, Exane BNP Paribas
This wave of innovations led to the late-1990's clinical evaluation of many novel agents
that targeted growth factor receptors and signal transduction pathways: the targeted
therapies. At this time, there was massive therapeutic potential. It was assumed that
these agents would be so specific that their effects would be limited to cancer cells and
spare normal cells. It was also assumed that these drugs would be so effective that
they would largely supplant non-specific cytotoxic agents.
Over a decade later, broad-acting therapies remain. They account for 35% of total drug
candidates under phase II or III whereas targeted therapies represent 39%.
Chart 10: Breakdown of current phase II and phase III drugs by therapeutic class
Phase II products Phase III products
Antimitotic/Cell-
cycle modulator
36
12%
Other anticancer
agent
15
5%
Hormonal
modulator
17
6%
Pathway inhibitor/
Apoptose
activator
42
14%
Antimetabolite
36
12%
Alkylating
7
2%
Angiogenesis
inhibitor
20
7%
Therapeutic
vaccine
29
10%
Other cytotoxic
agent
18
6%
Immunomodula-
tor
46
17%
Radio/chemosen-
sitizer
11
4%
Prophylactic
vaccine
1
0%
Radio/chemopro-
tective
14
5%

Antimitotic/Cell-
cycle modulator
8
13%
Other anticancer
agent
3
5%
Hormonal
modulator
4
6%
Pathway
inhibitor/
Apoptose
activator
10
15%
Antimetabolite
3
5%
Alkylating
3
5%
Angiogenesis
inhibitor
3
5%
Therapeutic
vaccine
8
12%
Other cytotoxic
agent
7
11%
Immunomo-
dulator
4
6%
Radio/chemosen-
sitizer
6
10%
Prophylactic
vaccine
1
2%
Radio/chemopro-
tective
3
5%

Light-grey: broad-acting; dark-grey: targeted therapies
It appears that there is still strong interest in broad-acting therapies as opposed to
targeted ones.

12 Pharmaceuticals
Knowledge is everywhere: low entry barriers in
research
Targeted therapies are changing the landscape of cancer treatment and are likely to be
used for the majority of cancer patients within five to ten years, according to the
specialists we interviewed. One direct outcome of the development of targeted
therapies is the paradigm change occurring in oncology: cancer is transforming from a
uniform collection of organ-based diseases into subsets of biologically differentiated
patients. This change is fuelled by the greater understanding of the molecular
mechanisms of cancerogenesis that leads to a development of large variety of
therapeutic approaches.
In this context, many therapeutic strategies are pursued to cure a same cancer type,
spreading knowledge between many players and thereby increasing competition.
The following chart shows that biotechs are fuelling oncology innovation more than
ever. Over 70% of drugs currently under development in phase II or III clinical trials
come directly from biotech labs. In reality even more come from small companies as
some of them have been acquired by big players and therefore their research effort is
accounted as if it had been discovered in a big pharma laboratory.
The early development of some molecule types could be tagged "biotech specific". For
example, 89% of recombinant proteins or 84% biological peptides/proteins currently
under phase II/III clinical trials have been discovered by a biotech company,
highlighting the specific positioning of biotech for biological development.
Chart 11: Contribution of biotech companies to innovation in oncology
Originator of current phase II/III drugs
Breakdown of phase II/III drugs by molecule type and
originator
Chemical
71%
Synthetic
peptide
5%
Monoclonal
antibody
12%
Gene therapy
1%
Biological
peptide/
protein
1%
Other
2%
Recombi-
nant protein
8%

80
6
1
14
9
1
2
159
15
8
36
35
14
9
16
17
0% 20% 40% 60% 80% 100%
Chemical
Synthetic peptide
Biological peptide/protein
Monoclonal antibody
Recombinant protein
Cellular therapy
sIRNA
Gene therapy
Other
Pharma Biotech

Of the 360 drugs under phase II or III development we analysed, 268 (75%) come from biotech labs whereas 88 (<25%) originate from
pharmaceutical companies
Source: Pharmaprojects, Bionest Partners, Exane BNP Paribas
The impact of biotechs on oncology innovation should be confirmed if siRNA (small
interfering RNA), gene and cellular therapies deliver their potential. These promising
therapies exclusively originate from biotechs. We believe that after kinases and VEGF
inhibitors, gene and cellular therapies could be the next "revolution" in cancer.

13 Pharmaceuticals
All major pharma players are betting on oncology
We have analysed the late-stage pipelines (phase II and phase III portfolios) of major
pharmaceutical players. The facts are striking; all major players have drugs under
development for oncology.
The following chart illustrates that chemicals still represent the majority of drug
candidates. However, some companies are absent from the chemical arena: mainly
biotech-like companies such as Biogen Idec, UCB or Novo Nordisk, but surprisingly
one large company is also missing, Merck & Co.
On the other hand, some other companies have a "purely" chemical approach like
AstraZeneca or Wyeth.
Chart 12: Development programmes of the major oncology players by nature of product
0 5 10 15 20 25 30 35 40 45 50
Abbott
AEterna Zentaris
Amgen
AstraZeneca
Baxter International
Bayer
Biogen Idec
Bristol-Myers Squibb
Eli Lilly
Genzyme
GlaxoSmithKline
Johnson & Johnson
MedImmune
Merck & Co
Merck KGaA
Novartis
Novo nordisk
Pfizer
Pierre Fabre
Roche/Genentech
Sanofi-Aventis
Schering AG
Schering-Plough
Serono
UCB
Wyeth
Chemical Peptide/protein Cellular therapy Gene therapy Monoclonal antibody Others


14 Pharmaceuticals
High prices target unmet medical need
We believe that the prices of cancer drugs follow the same overall rules as for other
therapeutic areas. Efficacy and medical need are the two main criteria driving prices.
Based on the assumption that it is mainly drugs targeting unmet medical diseases that
are subject to accelerated approvals, we assessed the links between accelerated
approval gain and the price of the drug. In order to do so, we examined a study
conducted by the NCI and Bethesda NIH demonstrating that the average wholesale
price (AWP) obtained by the 22 cancer drugs approved by the FDA between December
1992 and June 2003 amounted to USD17,488 per cycle of treatment
1
.
Table 2: Price of 22 oncology products approved by the FDA between 1993 and 2004
Product Molecule Molecule type Therapeutic class Company Date of FDA
approval
Months Accelerated
approval
AWP / cycle
(USD)
Bexxar Tositumomab* Monoclonal antibody Pathway inhibitor /
Apoptose activator
GlaxoSmithKline
7 Jun. 03
64 Yes 32,400
Velcade Bortezomib* Chemical Pathway inhibitor /
Apoptose activator
Millenium 13 May 03 89 Yes 3,378
Iressa Gefitinib Chemical Pathway inhibitor /
Apoptose activator
AstraZeneca 5 May 03 105 Yes 1,747
Eloxatin Oxaliplatin Chemical Alkylating Sanofi Aventis 9 Aug. 02 116 Yes 6,424
Zevalin Ibritumomab Monoclonal antibody Pathway inhibitor /
Apoptose activator
Schering AG 19 Feb. 02 46 Yes 30,662
Glivec Imatinib Chemical Pathway inhibitor /
Apoptose activator
Novartis 18 Apr. 01 59 Yes 2,290
Campath Alemtuzumab* Monoclonal antibody Pathway inhibitor /
Apoptose activator
Genzyme /
Schering AG
5 Jul. 01 90 Yes 199,332
Trisenox Arsenic trioxide Chemical Pathway inhibitor /
Apoptose activator
Cephalon 25 Sep. 00 13 No 19,743
Mylotarg Gemtuzumab Monoclonal antibody Pathway inhibitor /
Apoptose activator
Wyeth 17 May 00 160 Yes 15,723
Temodar Temozolomide Chemical Alkylating Schering Plough 11 Aug. 99 105 Yes 11,029
Valstar Valrubicin Biological
peptide/protein
Antibiotic Anthra 25 Sep. 98 219 No 13,296
Herceptin Trastuzumab* Monoclonal antibody Antimitotic/Cell-cycle
modulator
Roche/Genentech 25 Sep. 98 28 No 3,672
Xeloda Capecitabine Chemical Antimetabolite Roche/Genentech 30 Apr. 98 113 Yes 1,470
Mabthera /
Rituxan
Rituximab* Monoclonal antibody Pathway inhibitor /
Apoptose activator
Roche/Genentech 26 Nov. 97 66 No 15,048
Intron A Interferon a2b recombinant protein Immunomodulator Schering Plough 6 Nov. 97 103 No 3,570
Camptosar Irinotecan Chemical Antimitotic/Cell-cycle
modulator
Pfizer 14 Jun. 96 106 Yes 5,100
Hycamtin Topotecan* Chemical Antimitotic/Cell-cycle
modulator
GlaxoSmithKline 28 May 96 90 No 3,000
Gemzar Gemcitabine Chemical Antimetabolite Lilly 15 May 96 107 No 3,591
Taxotere Docetaxel* Chemical Antimetabolite Sanofi Aventis 14 May 96 106 Yes 3,580
Vesanoid Tretinoin* Chemical Other anticancer
agent
Roche 22 Nov. 95 39 No 6,925
Leustatin Cladribine* Chemical Antimetabolite Johnson &
Johnson
26 Feb. 93 71 No 2,268
Taxol Paclitaxel Chemical Antimitotic/Cell-cycle
modulator
BMS 29 Dec. 92 165 No 1,945
* Products with the shortest approvable time; AWP (Average Wholesale Price) per unit and per cycle (man 1.7m tall, weight of 75kg, body surface
area of 2m) ; Prices taken from the US Red Book, except for Paclitaxel and Cladribine for which reference prices come from the US Blue Book
(prices of the generics)
NB. The authors excluded growth factors (pegfilgrastim, darbopoietin) and hormonal modulators (anastrozole) from the scope of their analysis,
although they were approved during the period
Source: Journal of Clinical Oncology, December 2005, American Cancer Society, Bionest Partners, Exane BNP Paribas estimates

1
Nevertheless, there are significant disparities between products. For example, the price obtained for Xeloda (Roche) was USD1,470 per cycle vs a
massive USD199,332 per cycle for Campath (Schering AG / Genzyme)

15 Pharmaceuticals
The authors proved a link between the price obtained and the time required by the FDA to
give its green light. Among the approved drugs, the 11 fastest approvals during the period
(59 months on average) obtained an AWP of USD28,975 per cycle, and USD6,791 per
cycle when eliminating the two radio-labelled monoclonal antibodies Bexxar and Zevalin
(for which the very high prices integrate some logistics costs and are therefore hardly
comparable). This level of price was significantly higher than for the 11 slowest drugs
(127 months on average, with an average price of USD6,000 per cycle).
Several observations reinforce this view:
the price is not directly linked to the incidence of the cancer: a rare cancer does not
automatically deserve a high price. However, the relation between price and incidence
appears clearer for biologics (indicated by a circle in the chart below) than for
chemicals;
product prices are more or less in a defined range for each indication;
there is no clear link between the range, the date of approval, the chemical/biologic
origin or the therapeutic class of the products.
Chart 13: Price and cancer incidence relation for chemicals and biologics

Iressa
Eloxatin
Trisenox
Temodar
Valstar
Camptosar
Hycamtin
Vesanoid
Taxol
Mylotarg
Erbitux
Mabthera/Rituxan
Sutent
Nexavar
Herceptin
Velcade
Glivec
Xeloda
Gemzar
Leustatin
Alimta
Tarceva
Avastin
Taxotere
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
0 20 40 60 80 100 120 140
Incidence of approved indication
A
v
e
r
a
g
e

W
h
o
l
e
s
a
l
e

P
r
i
c
e

(
U
S
D
)
Colorectal
Lung cancer
Breast

We compared the prices of 25 cancer drugs approved from 1992 to 2005 vs the incidence of their cancer
indication. In addition to the list of drugs used by NCI and NIH researchers, we included six drugs that were
approved more recently: Erbitux (cetuximab, Merck KGaA), AWP per cycle USD7,800; Alimta (pemetrexed,
Lilly), AWP per cycle USD1,912; Avastin (bevacizumab, Roche / Genentech), AWP per cycle USD4,523;
Tarceva (erlotinib, Roche / Genentech, AWP per cycle USD1,772; Sutent (sunitinib, Pfizer) , AWP USD4,725 per
month; Nexavar, AWP USD4,333 per month
Source: American Cancer Society, US red book, Bionest Partners, Exane BNP Paribas estimates.
but pricing is under scrutiny
Cancer drugs are expected to be under pressure in the future. This is a general trend
affecting the whole of the pharmaceutical industry, since healthcare cost containment
policies have been conducted in most industrialised countries. Two factors will
contribute to the growing pressure on prices: 1) the very fast growth of cancer
treatment spending as part of the total healthcare spending; and 2) increased
competition amongst a greater number of players.
Price pressure is already at work through an increasing use of generics, like in other
therapeutic areas. On the one hand this would leave room for branded drugs, allowing
expensive biologics and pathway inhibitors to resist. But on the other hand, the
increase in patient access to these new therapies will not permit healthcare systems
public or private to sustain such levels a long time.

16 Pharmaceuticals
Areas left to explore
We tried to assess the link between the number of products, the frequency of cancer
and the medical need. We therefore compared the number of drugs by therapeutic area
with the incidence and five-year survival rates (see following charts). Our approach
considered both marketed drugs and molecules in late-stage clinical evaluation (under
phase II or phase III).
We identified six main segments of the cancer market, illustrated on matrix.
1) Big and crowded market segments: breast, prostate
This first market segment is the most important in terms of approved drugs, and offers
high margins pharma companies: incidence and survival rates are sufficiently high to
permit long-term use for an important number of patients.
Breast and prostate cancers have comparable incidence and five-year survival rates,
but there are slightly more drugs available for the former. One reason could be that
hormone therapy, surgery (orchiectomy) and cryotherapy provide good stabilisation
prospects for the male patients.
On the pipeline side, the high number of drugs under development for breast cancer
suggests that the prospects for oncology players to develop efficient molecules
showing reduced side-effects are still attractive. The situation is obviously different for
prostate cancer since only one large pharmaceutical player has a molecule for this
indication in phase III (Roche: Avastin).
2) Crowded segment, but with unmet need: leukaemia, lymphoma, ovarian, colorectal
This segment comprises cancers with treatments already available but which still pose
a challenge as five-year survival rates remain low. Leukaemia and lymphoma, with the
highest number of approved drugs, and ovarian cancer belong to this segment. The
latter is the second-most crowded gynaecological cancer, after breast cancer.
Although the incidence rates for colorectal cancer are relatively high, we have included
it in this segment as five-year survival rates are still low. On the pipeline matrix, we can
see that these indications still stimulate players, and could fuel competition on these
markets in coming years.
3) Covered niche market segments: testicular, melanoma
This segment comprises testicular and melanoma cancers associated with high
survival rates and a relatively high number of available drugs. However, some
differences need to be highlighted between these two pathologies.
As testicular cancer patients appear to benefit from efficient therapies, it is not
surprising to see so few products under clinical evaluation.
The situation is different in melanomas. Although excision is the treatment of choice,
about 18% of melanomas are metastatic and remain difficult to cure because of
regional and distant metastases, in which survival rates are 60% and 14% respectively.
The outlook for patients with metastatic melanoma continues to be poor since chemo-
or immune therapies are associated with response rates of 10%-15% and median
survival of about one year.

17 Pharmaceuticals
4) Improvable niche market segments: five cancer types
In this segment, we can identify a series of cancers with a surprisingly low number of
products, despite incidence / survival profiles comparable to more crowded therapeutic
areas: head & neck, renal, cervix uteri, bladder and corpus uterus. It is interesting to
note that competition in renal cancer has increased since the very recent approval of
Pfizers Sutent and Bayer Sorafenib.
This indication is an entry-point in the battle-field before an extension to the "big and
crowded" area where Avastin is currently dominating development (see case study for
more details).
The limited number of drugs for cervix uteri and corpus uterus cancers is partially due
to the large occurrence of surgery procedures in this domain. As such, it is not
surprising to see that very few molecules under development for uterine cancer and
cervix uteri.
As a result we believe that bladder cancer is a sweet spot for newcomers in the cancer
arena as surgery procedures seem to be less frequent than for cancers of the uterus
and cervix. The low number of drugs under development for this indication reinforces
our impression.
5) Challenging niche market segments: five cancer types
This segment groups a series of cancers with relatively low incidence and five-year
survival rates and a limited number of approvals: pancreas, liver, stomach, oesophagus
and, to a lesser extent, brain cancer. We believe this is clearly the consequence of a
choice based on pharmaco-economic considerations. These niche cancers could
theoretically interest newcomers or small players, as the medical need is huge. The
main challenge remains the poor survival rates, making it difficult to prove a therapeutic
efficacy.
However, we believe that pancreas cancer could become a highly competitive segment
in a near future. Many large players have molecules targeting this indication and the
number of products under clinical evaluation is increasing.
6) The big challenge: lung cancer
Tracheal bronchus lung cancer is one of the most frequent indications, with one of the
lowest five-year survival rates, explaining the high number of products approved. It is
worth noting that lung cancer frequency is sharply increasing notably due to smoking
habits and is one of the pathologies with the poorest prognosis. As a result, high
competition and poor improvement from existing drugs make this therapeutic area one
of the most difficult to address, but also one of the most potentially profitable. Because
the disease has usually spread by the time it is discovered, radiation therapy and
chemotherapy are often used, sometimes in combination with surgery.

18 Pharmaceuticals
Chart 14: Relation between number of drugs approved, incidence and 5-year
survival
Chart 15: Relation between number of drugs in phase II or III, incidence and
5-year survival
To address the future evolution of the different therapeutic classes, we have assumed
that the attrition rates (see next section) were the same in all of the segments and
calculated the average number of molecules that could reach the market in each
segment. We have then divided this by the number of marketed molecules in each
segment. This metric gives us an indication of the intensity of the competition that the
existing drugs face from the pipelines.
Interestingly, two zones are more investigated than others: the "improvable niches" and
the "challenging niche". Those are the areas where the medical need is still high or
relatively high and where there are little players. Surprisingly, the lung area does not
show up as a very intense zone.
M
a
r
k
e
t
Leukemias
Breast
Prostate
Ovarian
Colorectal
Skin and Melanoma
Liver
Corpus uterus
Stomach
Bladder
Pancreas
Cervix uteri
Oesophagus
Testicular
Brain
Renal
Head & Neck
0
50
100
1 10 100 1000
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval

L
a
t
e

S
t
a
g
e

P
i
p
e
l
i
n
e

Breast
Leukemias
Ovarian
Testicular
Prostate
Pancreas
Corpus uterus
Skin and Melanoma
Liver
Stomach
Cervix uteri
Colorectal
Brain
Renal
Bladder
Head & Neck
Oesophagus
0
50
100
1 10 100 1000
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
15 projects

19 Pharmaceuticals
Chart 16: Relation between number of projected new drugs and marketed drugs
Breast
Leukemias
Ovarian
Colorectal
Testicular
Prostate
Renal
Pancreas
Bladder
Head & Neck
Corpus uterus
Skin and Melanoma
Liver
Stomach
Cervix uteri
Brain
Oesophagus
0
50
100
1 10 100 1000
Incidence (Log scale)
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 new projected drug
for 2 existing drugs

Success rates: three times lower than pharma average,
and getting worse
Several examples of promising drugs that have encountered regulatory setbacks
indicate the challenges that oncology drug candidates must face. Our analysis shows
that success rates in the development of cancer drugs are three times lower than for
the rest of the industry, and getting worse.
We have calculated attrition rates in oncology. As shown below, the average success
rates of oncology drug candidates are much lower than other therapeutic areas in
late-stage development; phase II and III.
A cancer product entering phase II has about a 6% chance of getting to the market (industry
average: 16%) and around 3% when it is entering phase I (industry average: 10%).
Chart 17: Success rate by phase of development and by therapeutic area
52%
21%
35%
83%
60%
29%
40%
70%
60%
39%
56%
74%
0%
20%
40%
60%
80%
100%
Phase I Phase II Phase III Registration
S
u
c
c
e
s
s

r
a
t
e
Oncology (Exane BNPP & Bionest Partners)
Oncology (Nature Reviews)
Pharma sector (Nature Reviews)

Source: Nature reviews (success rates were determined by the analysis of the success and failure of top ten big
pharma portfolios during 1991-2000), Bionest Partners (based on Pharmaprojects database with products
entered in phase II, II and III in 2000), Exane BNP Paribas

20 Pharmaceuticals
Several factors may explain the low success rates of oncology drug candidates.
On the research side, there are more and more novel approaches to anti-cancer drug
development. For example, more than 40% of cancer drugs under development are
directed against novel mechanisms, and almost 70% of the drug targets that are being
investigated in discovery are innovative. The price to pay for innovation is the risk
attached to it;
There is also a relative lack of adequate preclinical models and translatable preclinical
biomarkers in oncology, which, in some other therapeutic areas, are relied on for early
target validation. In addition, there is often a lack of robust biomarkers that can be used
to obtain proof of concept and gauge whether meaningful therapeutic targeting is
occurring in early-stage clinical evaluations. This is particularly true for drug candidates
targeting innovative mechanisms;
More broadly, oncology is one of the disease areas where the phase II results are of a
different nature than the one necessary for registration. In phase II, products usually
prove their toxicity toward the tumour and the end point is usually the size of the
tumour. The fine-tuning is to find an active toxic dose which not too toxic for the rest of
the body. In phase III, the drug is challenged on its global biological impact and the end
point becomes disease free survival or survival, a much more complex outcome.
An illustration of the higher bar and the increase in the length of clinical trials is in
advanced colecteral cancer, in which improvements coming from new therapies are
making the work harder for new players.
Chart 18: Goals in the treatment of Advanced colorectal cancer

Source: Sanofi-Aventis
Many new molecules are expected to be launched
As we have mentioned, a cancer product entering phase II has about a 6% chance of
getting to the market and around 3% of entering phase I.
We have calculated, based on our estimated attrition rate, the number of molecules
that could reach the market by 2012 (molecules that are already in phase II). We
estimate that around 83 new molecules will be launched while there are "only" around
200 approved today.
But, this makes sense only if the attrition rates measured today remain stable with time.

21 Pharmaceuticals
Table 3: Estimates of the total number of new molecules reaching the market
Tumour site Number of
phase II
programmes
Number of
phase III
programmes
Total number
of late stage
programmes
No. of molecules
reaching the market
by 2012
Number
of currently
approved drugs
Breast 79 13 92 8.6 42
Leukaemia 50 9 59 5.6 42
Lymphoma and multiple myeloma 57 15 72 7.8 22
Ovarian 46 7 53 4.8 12
Tracheal bronchus lung 114 15 129 11.3 18
Colorectal 62 7 69 5.8 12
Testicular 1 0 1 0.1 10
Brain 36 4 40 3.3 6
Prostate 86 9 95 7.8 12
Renal 40 5 45 3.9 6
Pancreas 48 9 57 5.5 3
Bladder 12 3 15 1.6 3
Head & Neck 24 4 28 2.6 3
Corpus uterus 5 5 0.3 2
Skin and Melanoma 61 8 69 6.0 9
Liver 23 5 28 2.8 2
Stomach 12 2 14 1.3 3
Oesophagus 8 4 8 1.6 1
Cervix uteri 13 3 16 1.7 1
Total 777 122 895 83 209
Source: Pharmaprojects, Bionest Partners, Exane BNP Paribas
Success rates are declining in oncology
We have measured success rates in oncology by following each and every new
molecule entering phase I, II or III since 1996. We have analysed the development of
773 drug candidates. On average, compounds spent around three years in phase II
and two in phase III, therefore our analysis stopped with products entered in respective
phases in 2000 (the numbers obtained with the 2001 cohort are similar to 2000).
To illustrate our methodology: the success rate for phase I products in 1996 was
determined by following all of the drugs that entered in phase I in 1996 over a number
of years.
Chart 19: Change of success rate in oncology by phase of development between
1996 and 2000
45.1%
38.3%
41.7%
57.1%
4.1%
52.2%
21.0%
34.8%
83.3%
3.2%
0%
20%
40%
60%
80%
100%
Phase I Phase II Phase III Pre-registration Phase I to launch
S
u
c
c
e
s
s

r
a
t
e
1996 2000
+46%
+16%
-45% -17%
-23%

This approach enables us to clearly demonstrate that hurdles have become higher in
oncology development. Between 1996 and 2000, cumulated success rates from
first-in-man to registration have decreased by 23% from 4.1% to 3.2%. This increasing
rate of failure is due to a sharp decline in phase II productivity and to a lesser extent to
phase III productivity.
However, products that are able to reach the registration stage have a better chance of
success.

22 Pharmaceuticals
Developing cancer drugs is all about
managing complexity
Oncology is one of the main science-driven specialties in medicine, with high technical
products and complex patient management. This makes research in this area
particularly complex and unpredictable. To make things worst, many teams are
competing not only on similar approaches but also on different approaches on the
same targets (for instance chemicals and biologicals on certain membrane receptors)
and on different approaches on the same disease.
To balance the development risk and because the understanding of the biology has
strongly progressed, companies are now trying to test their compounds in several
indications in parallel. But this strategy renders the development highly complex as
standard therapies are evolving very fast and are sometimes getting fragmented, i.e.
there can be several equivalent treatment options for the same patient. The products
are now often developed with competitors products and can sometimes reinforce
competitors position.
This makes marketing strategies difficult as the design of clinical trials contains an
element of risk in the choice of reference treatment and necessitates a close and
sustained presence in hospitals and among key opinion leaders. At the same time the
clinician profile is also changing, evolving to a more prominent role of organ specialists
versus traditional oncologists. As a consequence, cancer marketing and sales forces
will have to adapt to a less academical physician profile and deliver a more GP
oriented marketing promotion.
Table 4: Sources of complexity
Research Development
R&D
More competition on similar targets
More approaches to same targets
Clinical trials run in several indications in parallel
Increasing number of backbone therapies
Marketing
More competition on to access to Key Opinion Leaders
Emergence of organ specialists more GP oriented
Product positioning with or against competitors ?
For obvious reasons, treatment guidelines are lagging behind discovery and local
habits die hard. Consequently, there are usually several reference treatments in each
pathology and there is not always a consensus on the backbone of the treatment, i.e.
the set of drugs used as a standard in a particular cancer. When developing a new
drug to treat cancer, companies are essentially left with two options: either to develop
the compound on top of existing standards, the add-on strategy, or to replace one or
several of the components of a treatment, the switch strategy.
In fact, we are currently assisting at an increase in the number of drugs combinations
within an indication, offering practitioners a very high number of possible treatments.
This is mainly the consequence of the add-on strategy, which consists in testing a new
drug in addition to the backbone in an indication. This phenomenon not only
increases complexity for doctors, it also changes the way pharmaceuticals companies
must address the development of new drugs.

23 Pharmaceuticals
This is because of:
the increase in the number of trials due to the rising number of utilized combinations
of existing drugs;
time constraints, as best practices evolve and companies have to run clinical trials
as fast as possible to reach the market with a setting that is still meaningful to
practitioners.
Another approach to product development is to show superiority to existing treatments,
creating a replacement rather than an add-on. This is the switch strategy.
Clearly, the objective is to move the drug rapidly to the backbone and thus into the
guidelines. Then, new compounds will be tested more often on top of the drug rather
than against it.
The switch strategy is the fastest route to becoming a foundation stone
The switch strategy is supposedly used to replace a conventional treatment with a new,
more efficient one. That way, the new drug enters directly in the backbone of the
treatment by replacing a constitutive element of it. For instance, Sanofi-Aventiss
strategy for Eloxatine in colorectal cancer was to go head-to-head against Pfizers
Camptosar, the gold standard at the time. With better clinical outcomes, Eloxatine
succeeded in moving rapidly from second to first line and in taking over a leading share
of the market.
Another example is Glivec, from Novartis, which was approved in chronic myelogenous
leukaemia in 2001. Prior to the arrival of Novartiss tyrosine kinase inhibitor, the main
treatment options for this rare hematological cancer were interferon (mild- to high
efficacy but important side effects), Hydrea (poor efficacy and low side effects), and
medullar graft (capable of definitive cure, but associated with a very high mortality).
With high efficacy and relatively low safety concerns, Glivec succeeded in this niche
market and is now the gold-standard.
Unfortunately, not all the drugs have the ability to show superiority and, most of the
time, switch strategies are used to replace one of the components of the treatment
setting with a similar product that improve solely safety or convenience.
For instance, three companies are currently playing this strategy to replace a very old
injectable cancer product, 5-FU. The new drugs are more convenient products, oral
versions, and have a better side-effect profile. These drugs are Merck KGaAs UFT,
Taiho S-1 and Roches Xeloda (capecitabine).
Roches reach in the oncology market and rich pipeline has led to the company being
the most aggressive of the three aforementioned companies. Roche includes
systematically in its clinical trials an arm containing Xeloda to replace 5-FU, when this
compound is part of the core-treatment. For example, the rapid development of Avastin
benefits Xeloda as there is often a Xeloda instead of 5-FU arm in the clinical
programmes for Avastin. This is a way of imposing the usage of Xeloda together with
Avastin and replace 5-FU.

24 Pharmaceuticals
The add-on strategy is more complex and involves numerous backbones
Cancer drugs are mostly prescribed in settings combining several compounds. In the
most frequent situations, the backbone of the treatment is composed of two or three
chemotherapy agents. Historically, these compounds belong to therapeutic classes
such as alkylating agents or antimitotic agents or antimetabolites. On top of this
backbone, we have observed the progressive appearance of molecules with more
targeted mechanisms of action: a new generation of chemotherapeutic agents
(antimitotic agents such as taxanes or topoisomerases) and more recently the so-called
targeted disease drugs. This last class covers the pathway inhibitors,
immunomodulators and/or monoclonal antibodies.
The chart below illustrates the evolution of backbones over time in colorectal, breast
cancers and non-Hodgkins lymphomas.
Chart 20: Illustration of backbones and add-on cancer therapies (non-exhaustive)
Colorectal cancer
Avastin Erbitux
Add-ons Oxaliplatin Irinotecan Avastin Avastin
Avastin Avastin Erbitux Erbitux Erbitux Erbitux
Irinotecan Oxaliplatin Oxaliplatin Irinotecan Oxaliplatin Irinotecan Oxaliplatin Irinotecan
5FU 5FU 5FU 5FU 5FU 5FU 5FU 5FU 5FU 5FU 5FU
Backbone LV LV LV LV LV LV LV LV LV LV LV LV
1952 1962 1992 1996 2004 2004
5FULV FOLFOX FOLFIRI FUTURE BACKBONES?
LV = Leucovorin, generics
5FU: Fluorouracile = Adrucil, generics
Irinotecan = Campto
Oxaliplatin = Eloxatin
Breast cancer
Add-ons Doxo 5FU Paclitaxel Docetaxel
Paclitaxel Docetaxel
Doxo Doxo Doxo Doxo
Backbone Cyclo Doxo Cyclo Cyclo Doxo Cyclo Doxo Cyclo Cyclo Cyclo
1959 1974 1994 1996 2002
C A AC FAC AP AC AT TAC NEW BACKBONES
Cyclophosphamide = Cytoxan, generics
Doxorubicine = Adriamycin, generics
Paclitaxel = Taxol, generics
Docetaxel = Taxotere
Non Hodgkin Lymphoma
Add-ons
R: Rituximab
P: Prednisone P: Prednisone P: Prednisone
O: Vincristine O: Vincristine O: Vincristine
H: Doxo H: Doxo H: Doxo
Backbone Cyclo C: Cyclo C: Cyclo C: Cyclo
1959 1979* 2002
C CHOP R-CHOP NEWBACKBONE
C: Cyclophosphamide = Cytoxan, generics
H: Doxorubicin/hydroxydoxorubin, Adriamycin, generics
O: Vincristine = Oncovin, generics
P: Prednisone, generics
R: Rituximab = Rituxan/Mabthera
*: Miller TP, Jones SE, Chemotherapy of localised histiocytic lymphoma, Lancet. 1979 Feb 17;1(8112):358-60
R: Rituximab

The consequence of the widespread use of the add-on strategy is the multiplication of
backbones, as illustrated above. New players now have to multiply clinical trials in
order to be associated with the existing backbones. For most companies, the implied
costs of clinical trials are becoming unsustainable and it is becoming necessary to
make choices.

25 Pharmaceuticals
For example, Avastin (Roche, Genentech) and Erbitux (Merck KGaA, BMS, Imclone)
are each currently under test in 30 clinical trials (see table below).
Table 5: Clinical trials with Avastin and Erbitux in colorectal cancer
Avastin Erbitux
Still recruiting trials 38 29
No more recruiting trials 21 12
Source: Clinicaltrials.gov
The strategic decision of a backbone can be critical for the future of the product.
Avastin and Erbitux in colorectal were first developed with Pfizers irinotecan (in 2000-
2003), which has been swiftly replaced by Sanofi-Aventiss oxaliplatin (after 2003). Had
Erbitux chosen oxaliplatin first, it would probably have had an edge over Avastin.
There are collateral benefits to becoming part of a backbone: not only does the drug
become a standard, its use is also automatically boosted by other drugs in trials
seeking to prove added efficacy. The best illustration is Avastin (see case study) which
is on its way to becoming a backbone drug in several cancers. An increasing number of
trials with other cancer compounds now involve this anti-angiogenesis drug. As
Roches compound is becoming increasingly important, the company could now be in
the situation to get a direct return from competitors by participating in clinical trials: it
would certainly make sense for Sanofi-Aventis to try Taxotere + Avastin in some
settings to secure the use of Taxotere instead of Taxol; the PACCE clinical trial is
another illustration as this phase III trial combines Amgens panitumumab with Avastin
in first line metastatic colorectal cancer.
One bullet for several targets?
Not only is it becoming more complex to access an indication but companies are also
trying to impose their drugs in several indications in parallel. This is due to the added
complexity of backbones and to the need to be faster to the market in several cancers
(the blitz strategy, see below).
In our universe of pharmaceuticals companies (see graph below), we have noticed that
there is an average of one to five programmes per molecule in phase II or III. Our work
suggests that there is no clear correlation between the average number of indications
tested and the nature of the molecule, the size of the group or the indications sought.
Very few companies develop their molecules in a single indication but there seems to
be a trend among smaller companies to explore a smaller number of indications per
molecule. In our universe, only UCB, Novo Nordisk, Serono, Genzyme and Biogen
Idec, all relatively small companies, remain very focused. While we have not found a
clear correlation, it seems that investment capacity is a limiting step in the current
development strategies. For instance, it is striking to see that with about the same
number of molecules AEterna Zentaris is running half the number of programmes
compared to AstraZeneca or J&J.
Most of the companies are running two or three studies in parallel per molecule.
Although we do not have the corresponding data for ten years ago, based on our
interviews, we strongly believe that the increase in development costs over the last
years has a lot to do with this pan-indication strategy.
The benefits from the strategy are highlighted by the recent failure of Wyeths mTOR
inhibitor, temsirolimus, in phase III for metastatic breast cancer and the parallel
announcement that two other phase III programmes were being maintained, in renal
cancer and certain forms of lymphoma.

26 Pharmaceuticals
Chart 21: No correlation between the size of the portfolio and the number of programme per molecule
UCB
Novo nordisk
Novartis
Merck & Co
Genzyme Biogen Idec
AEterna Zentaris
Average
Wyeth
Serono
Schering-Plough
Schering AG
Sanofi-Aventis
Roche/Genentech
Pierre Fabre
Pfizer
Merck KGaA MedImmune
Johnson & Johnson
GlaxoSmithKline
Eli Lilly
Bayer
Baxter
AstraZeneca
Amgen
Abbott
1.0
2.0
3.0
4.0
5.0
6.0
0 2 4 6 8 10 12 14 16 18 20
Total number of molecules in phase 2 or 3
A
v
e
r
a
g
e

n
u
m
b
e
r

o
f

p
r
o
g
r
a
m
s

p
e
r

m
o
l
e
c
u
l
e

i
n

p
h
a
s
e

2

o
r

3

Among the larger companies, it seems that some prefer to spread the risk over several
indications (AstraZeneca, J&J and BMS) while others focus their resources (Pfizer,
Sanofi-Aventis). The vast majority of companies are running more than two studies per
molecule (the average is 2.8 in this sample and 2.3 in our global database) and the
comments made during the interviews convince us that most of the companies are
willing to spend more money in phase II to get some signal in different indications
rather than betting on a single bullet.
Chart 22: Number of programmes per product in phase II and III
0.8 1.2 1.6 2.0 2.4 2.8 3.2 3.6 4.0 4.4 4.8 5.2 5.6
Abbott
AEterna Zentaris
Amgen
AstraZeneca
Baxter
Bayer
Biogen Idec
Eli Lilly
Genzyme
GlaxoSmithKline
Johnson & Johnson
MedImmune
Merck & Co
Merck KGaA
Novartis
Novo nordisk
Pfizer
Pierre Fabre
Roche/Genentech
Sanofi-Aventis
Schering AG
Schering-Plough
Serono
UCB
Wyeth

NB: Black indicates companies with fewer than two studies per molecule on average; white indicates above average.

27 Pharmaceuticals
Lowering the costs. But at what cost?
To keep the cost of clinical development down, companies are tempted to run trials in
eastern Europe ort Asia. However, this is not always possible or appropriate. First, the
standard of care is usually not the same as in western countries and it is difficult to
recruit patient when the clinicians are not familiar with the tested arm and the control
arm. Second, for a study to be accepted it must be supported by globally recognized
key opinion leaders. With rare exceptions, these live in the largest pharma markets.
Oral drug approaches vs biologicals: who will win?
When a company starts work on a project with a tropism toward oncology, it is
sometimes difficult to identify the right pathology. In the past we have seen that most
companies targeted several indications at once in order to increase their chances of
success and so leapfrog competitors.
In addition to this risk of not finding the right indication, or of not identifying it fast
enough, each programme is in competition with:
similar development approaches at other companies (me-toos);
different approaches on the same biological target (monoclonal antibodies,
chemicals, vaccines, etc.);
different approaches on the same pathology (different biological targets).
A good example is the VEGF approach (vascular epithelial growth factor). Among the
eight products listed in the table below, three are biological and five are chemicals.
However, all eight target the same mechanism: blockage of the VEGF pathway either
by blocking the receptor (Avastin and CDP-791) or its functioning (chemicals) or its
ligand (AVE005). Clinically it seems that these molecules have different features and
are finally ending in different indications. For instance, Avastin has been launched in
colorectal cancer but Nexavar and Sutent in renal cancer. PTK 787 did not show great
results in colorectal and is not being investigated in renal.
Table 6: VEGF approaches

Laboratory Nature of molecule Most advance stage of
development
Avastin Genentech/Roche Monoclonal antibody Commercialized
Nexavar Bayer Chemical Commercialized
Sutent Pfizer Chemical Commercialized
PTK 787 Schering/Novartis Chemical Phase III
Zactima AstraZeneca Chemical Phase III
AG-013736 Pfizer Chemical Phase II
AVE005 / VEGF-Trap SAVE/Regeneron Biological inhibitor Phase II
CDP-791 UCB/ImClone Antibody fragment Phase II
Pipelines are still very chemical
To illustrate the situation, we have sorted our 465-drug database of products in phase II
or 3 in oncology (based on Pharmaprojects and other sources) by type and therapeutic
class. In our database, products are referred to according to their most advanced
phase, i.e. a product in phase III and in phase II in other indications is referred as in
phase III. As a result, products on the market or in registration but which are also being
developed for other indications are not included in the following analyses.

28 Pharmaceuticals
Focusing on molecules with phase II or III as most advanced stage, chemicals still
represent the majority of drug candidates in development. With 191 small molecules,
they account for 52% of new phase II/III drugs.
Surprisingly, monoclonal antibodies and recombinant proteins account for only 23% of
new phase II/III therapies under development whereas cellular, gene and SiRNA-based
therapies represent 11%.
Concerning complexity, almost every biological product is challenged by a chemical
approach usually on the same molecular target or on its direct cascade of action. This
means that laboratories developing biologicals have to add to the risk of development
and production, the risk of being leapfrogged by a targeted chemical approach.
Chart 23: New phase II/III drug candidates by molecule type
Phase II products Phase III products
Biological
peptide/protein
7
2%
Chemical
149
51%
Other
19
7%
SiRNA
8
3%
Synthetic peptide
20
7%
Monoclonal
antibody
34
12%
Recombinant
protein
27
9%
Gene therapy
15
5%
Cellular therapy
12
4%

Cellular therapy
2
3%
Gene therapy
2
3%
Recombinant
protein
12
17%
Monoclonal
antibody
8
12%
Synthetic peptide
1
1%
Chemical
42
61%
Biological
peptide/protein
2
3%

Interestingly, on average there are more clinical programmes with chemicals (3.3 per
molecule) than biologicals (around 2). This could be due to the mechanism of action of
some biologicals with limited possible indications as they are usually targeting specific
extracellular biomarkers. One spectacular exception though is Avastin (see case study
below).
Most actors have some presence in either or both peptides/proteins or monoclonal
antibodies; the main exceptions are Wyeth and AstraZeneca. Roche/Genentech has
the most balanced portfolio with an impressive proportion of biologicals in its pipeline.
GSK also has a greater presence in this biological field than is perceived by the
market.
Some companies are not present in the chemical arena. These are mainly biotech-like
companies such as Biogen Idec, UCB or Novo Nordisk but the list also surprisingly
counts one large company, Merck & Co.
Some other companies have a purely chemical approach, for example AstraZeneca
or Wyeth. More surprisingly, Medimmune and Genzyme also have only chemicals in
there oncology pipeline.

29 Pharmaceuticals
Chart 24: Molecules in development by nature of products
0 2 4 6 8 10 12 14 16 18 20
Abbott
AEterna Zentaris
Amgen
AstraZeneca
Baxter International
Bayer
Biogen Idec
Eli Lilly
Genzyme
GlaxoSmithKline
Johnson & Johnson
MedImmune
Merck & Co
Merck KGaA
Novartis
Novo nordisk
Pfizer
Pierre Fabre
Roche/Genentech
Sanofi-Aventis
Schering AG
Schering-Plough
Serono
UCB
Wyeth
Chemical Peptide/protein Cellular therapy Gene therapy Monoclonal antibody Others

Centralised vs decentralised marketing organizations
Even the marketing organization needs to be adjusted to the project. Schematically,
there are two principal types of marketing organization within Pharma companies in
oncology: centralised and decentralised. We have identified a steady shift from the
decentralised (regional) to the centralised pattern. This will continue as:
the number of clinical trials is sharply increasing with a multiplication of indications
(see above);
larger patient samples are required to obtain statistically significant data;
managing clinical trials is becoming more and more complex.
As a result, companies will have to take an increasingly systematic approach, for which
the centralised organization is better suited.
The centralised marketing organization
The centralised marketing organization consists in a top-down decision taking process,
where a corporate-level team defines the rules for all the country subsidiaries. This
approach necessitates a clearly empowered corporate team that drives the relationship
with the KOL and precisely set the framework for clinical trials: clinical trials are
designed at the corporate-level, with few modifications at the local level.

30 Pharmaceuticals
Bristol-Myers Squibb developed this approach, with a catalogue of clinical trials
communicated by the corporate to the subsidiaries that had to execute. Another
example of this approach was the design of Herceptin phase III clinical trial in breast
cancer: Roche / Genentech designed only one trial applied worldwide with no
possibility for physicians to modify the design. This approach is well adapted to a blitz
strategy (see paragraph below) where products are tested in parallel in a high number
of indications (organs) and lines (first and second lines, adjuvant setting).
The decentralised marketing organization
The decentralised marketing organization consists in a locally-driven decision taking
process. Aventis used this approach for the development of Taxotere. This approach
helped Aventis to compete against BMS Taxol and contribute to differentiate in local
markets the two products.
However, this highly decentralised approach does not always allow good control over
the design of trials. For instance, in the ovary indication, this led to mixed results that
were insufficient to battle against well-established Taxol. In addition, Aventis was late in
designing combination trials with innovative targeted therapies due to a lack of global
vision (e.g. combination with Avastin in breast cancer and colorectal cancer, with
Herceptin in breast cancer or even with Iressa in lung cancer).
Table 7: Centralised vs decentralised organization in oncology
Organization Advantages Inconvenient
Centralised
Homogeneity of trials (limits double counting and gaps)
Fast recruitment with large population size
Better identification of strategic opportunities (e.g.
Association with new molecules)
Well adapted to a mosaic strategy
Risk of poor adhesion at the local level if it is only execution
Risk of poor relationship with KOL due to low local
involvement and poor listening to KOL needs
Decentralised
Adhesion of the local level
Close relationship with investigators and KOL
Identification of local opportunities (e.g. Local partnerships,
new regimens)
Heterogeneity of trials
Double counting and gaps
Source: Bionest Partners, Exane BNP Paribas estimates
Prescribers are evolving too
The situation is complicated by the evolution in the profile of prescribers. In Europe, for
some time now, patients are treated by oncologists but also organ specialists. In the
USA, the movement is starting and could change the face or marketing as companies
might have to adopt their marketing strategy per therapeutic segment.
This has been confirmed by interviews with industry managers. These have have
highlighted a difference between the habits of pure oncologists and organ-specialized
physicians. Put simply, in most countries pure oncologists take care of a series of
cancers that are not under the coverage of organ-specialized physicians, for example,
breast cancer, leukaemias and lymphomas, or colorectal cancer. In contrast,
pathologies such as lung, prostate, bladder or renal cancers are more often under the
charge of organ-specialized physicians (pneumologists, urologists).
Things are even more complicated as there are differences in each cancer in each
region. For example, in Germany breast cancer seems to be taken in care by
gynecologists rather than by oncologists; the opposite is true in the USA.

31 Pharmaceuticals
This difference not only has an impact on the organisation of the marketing and sales
forces, it also has an impact on sales. Whereas pure oncologists are used to
integrating new drugs into their practice rapidly, it seems that penetration is slower
among organ-specialized physicians, which necessitates greater marketing efforts.
Consequently, cancer marketing and sales forces would have to adapt to physicians
with a less academically oriented profile and take a more GP-oriented approach to
marketing.
If we make a parallel with other technical therapeutic areas, such as AIDS and
Immunology, we can attest the adaptation of sales forces to GP practitioners: AIDS tri-
therapy is now prescribed in most countries by GPs even if hospital KOLs continue to
play a major role. To a lesser extent, the arrival of sub-cutaneous formulations of
biologic DMARDs in rheumatoid arthritis, e.g. Abbotts Humira, Schering Ploughs
Enbrel or BMSs Abatacept, has opened the door for ambulatory care. Even if GPs are
still not involved in prescribing these drugs, the hospital-to-ambulatory shift contributes
to the modification of the marketing approach in much the same way.

32 Pharmaceuticals
No place for slow players
While we observed in the previous chapter that the current trends in the cancer market
imply a higher level of complexity for existing players and newcomers, we highlight in
this chapter the strong acceleration in cancer drugs lifecycle management.
First, there is clearly a strong first-mover advantage, which means that products must
be well differentiated within the scope of approved indications, in terms of organs and
therapeutic lines, and that these indications must be obtained before competitors.
Drugs that have been able to do so have maintained 50-70% market shares years after
competitors entry.
Second, given the increasing competition in cancer research, being first to market
requires very fast development. As a result, companies have adapted their approach
with what we call the blitz strategy, which consists of testing new drugs in parallel in a
large number of indications and sometimes in several settings. The emergence of this
strategy, as opposed to the more traditional step-by-step Domino strategy, stems from
the recent increase in the number of targeted therapies, mainly for two reasons:
targeted therapies often apply to biological mechanisms that are common to different
cancers, offering the possibility of addressing several of them.
targeted therapies often present lower levels of toxicity compared to traditional
chemotherapy allowing testing in numerous diseases.
Third, in the future, cancer drugs are expected to be under stronger price pressure from
the regulatory authorities and insurance companies as well as directly from
competition. The increasing use of generics in all therapeutic areas is already having
an effect and could influence the development of new guidelines. It is worth noting that
generic entries also free up money that can be used to fund new therapies. EGF-R and
anti-VEGF drugs are the two therapeutic classes that are the best positioned to benefit
from this situation.
In conclusion, as product differentiation is critical for cancer drugs, the main criteria are
the breadth of the indications and how fast they can be obtained. We believe that the
blitz strategy with a centralized organization is more suitable than a domino strategy
with a decentralized organization. In addition, the increasing number of trials in nearly
all therapeutic indications demonstrates that even a niche positioning is not a safe
harbour in the face of greater competitive intensity.
A strong first-mover advantage
There is clearly a strong first-mover advantage, which means that products must be
well differentiated within the scope of approved indications, in terms of organs and
therapeutic lines, and that these indications must be obtained before competitors.
Drugs that have been able to do so have maintained 50-70% market shares years after
competitors entry.
We present three case studies to illustrate the first-mover effects, in different
therapeutic classes with two, three or more competitors:
the taxanes market, with the Taxol vs Taxotere duopoly;
the aromatase inhibitors market, with Arimidex, Femara and Aromasin;
the poorly differentiated and crowded LHRH agonists market.

33 Pharmaceuticals
First-mover case study number 1: Taxol vs Taxotere
This case study illustrates the first-mover advantage in a poorly differentiated duopoly.
BMSs paclitaxel Taxol was approved in 1992 for the treatment of ovarian cancer, four
years before the approval of Sanofi-Aventiss docetaxel Taxotere in breast cancer. The
two drugs have similar chemical structures and are part of the same class of molecule.
In 2000, more than four years after Taxoteres launch, Taxol still had a 72% market
share, demonstrating a strong first-mover advantage. At this time, Taxotere still had not
demonstrated its superiority in terms of efficacy.
Chart 25: Taxol and Taxotere approved indications and sales comparison
Breast adjuvant
Lung 1st line
Ovarian 1st line
Kaposi 2nd line
Breast 2nd line
Ovarian 2nd line
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Breast 2nd line
Lung 2nd line
Lung 1st line
Prostate 2nd line
Breast adjuvant
T
a
x
o
l
T
a
x
o
t
e
r
e

0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1995 1996 1997 1998 1999 2000 2001 2002
Taxol
Taxotere
4 years

Until its generic (see paragraph on generics), Taxol benefited from a four-year lead
over Taxotere:
In breast cancer, Taxol protected its lead for two years for the second line and for
five years for the adjuvant setting.
In lung cancer, BMSs overall lead was one year, but it was four years if we
consider the first-line setting.
BMS did not develop Taxol in Prostate cancer (an indication for which Taxol
generics were already on the market when Sanofi-Aventis received approval). Taxotere
did not obtain approval in ovarian cancer and in Kaposi sarcoma.
First-mover case study number 2: Aromatase inhibitors
This case study illustrates:
The first-mover advantage in a market comprising three comparable drugs in terms
of efficacy/safety ratios. Ten years after its launch and with two competitors, Arimidex
maintains a 60% share of the aromatase inhibitors market.
Obtaining new indications that differentiate the product from competitors has a
direct impact on market share
A second player can win considerable market share if the product has a competitive
labelling
For a third player, the race is even harder if the product has no clear competitive
advantage.

34 Pharmaceuticals
Three aromatase inhibitors are currently approved for the treatment of breast cancer:
AstraZenecas Arimidex (anastrozole), Novartiss Femara (letrozole) and Pfizers
Aromasin (exemestane). This segment of the hormonal modulator therapeutic class
appeared at a time when Astra Zenecas Nolvadex (tamoxifen) was the gold standard
for the treatment of post-menopausal breast cancer.
Chart 26: Arimidex, Femara and Aromasin approved indications in hormonal dependant breast cancer and
market shares
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Advanced 2nd line
Advanced 1st line
Adjuvant 1st line
Advanced 2nd line
Advanced 1st line
Adjuvant 2nd line
Adj. 1st line
Advanced 2nd line
Adj. 2nd line
A
r
i
m
i
d
e
x
A
r
o
m
a
s
i
n
F
e
m
a
r
a

0%
20%
40%
60%
80%
100%
1995 1997 1999 2001 2003 2005
Arimidex
Femara
Aromasin
adjuvant 1st line
adjuvant 2nd line
Market shares

Arimidex benefited from two main advantages versus its competitors:
a two- to four-year lead over Femara and Aromasin, in all indications.
high expertise in hormonal cancers in general and in breast cancer in particular,
notably with Nolvadex dominating the market since its approval in 1977.
The third player, Aromasin, was never able to win a significant market share due to the
late approval in the advanced second-line setting and its absence from the adjuvant
first line setting. As a result, Arimidexs and Femaras market shares mirror one
another.
The positive impact of an approval in the adjuvant setting was clear for Arimidex. The
approval in first line has allowed Arimidex to regain market share over Femara. The
latter gained the second-line setting two years later, allowing it to stem its market share
erosion. Because Novartis applied a domino strategy for Femara, the product finally
obtained the first-line setting one year later, i.e. four years after its rival. We can
imagine how different market shares would have been if Novartis had chosen a blitz
strategy in the early stages of clinical development.
First-mover case study number 3: LH-RH agonists
This case study mainly illustrates a strong first-mover advantage in a poorly
differentiated market: 20 years after its launch in the US, Zoladex retains a 70% market
share despite five other competitors on the market.
The LHRH agonist market is mature, as the major products began to be marketed
during the mid 1980s for prostate cancer (see table below). In terms of efficacy and
safety, all the products have a comparable profile with poor differentiation, with monthly
and quarterly administration.

35 Pharmaceuticals
Table 8: LH-RH agonists me-too drugs in the treatment of prostate cancer
Molecule Brand name Molecule type Therapeutic class Company Year of
approval
Leuprorelin Lupron Synthetic peptide Hormonal modulator (LH-RH agonist) TAP (US)
Takeda (Japan)
Takeda & Abbott (RoW)
1985
Goserelin Zoladex Synthetic peptide Hormonal modulator (LH-RH agonist) Astra Zeneca 1989
Triptorelin Trelstar (US)
Decapeptyl (RoW)
Synthetic peptide Hormonal modulator (LH-RH agonist) Watson (Trelstar)
Ipsen (Decapeptyl)
2001 (US)
1986 (EU)
Leuprorelin Viadur implant Synthetic peptide Hormonal modulator (LH-RH agonist) Bayer 2000
Leuprorelin Eligard Synthetic peptide Hormonal modulator (LH-RH agonist) Sanofi-Aventis (US)
Astellas (RoW)
2004
Histrelin Vantas Synthetic peptide Hormonal modulator (LH-RH agonist) Valera 2004
Chart 27: US LHRH agonist market
US LHRH agonist market (USDm) US agonist market shares
Lupron
Zoladex
Decapeptyl +
Trelstar
Viadur
Eligard
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2000 2002 2004 2006 2008 2010

Lupron /
Leuplin /
Enantone
Zoladex
Trelstar
Viadur
Eligard /
Leuprogel
0%
20%
40%
60%
80%
100%
2000 2002 2004 2006 2008 2010

The US market is dominated by Lupron (TAPs leuprorelin,), with a 70% market share,
followed by Zoladex (AstraZenecas goserelin), with a 12% market share and Eligard
(Sanofi-Aventiss leuprorelin) with a 9% market share. Although Lupron is the leader in
the US and Japanese markets, Zoladex dominates the market in the rest of the world
(with almost 48% of the market).
The blitz strategy is faster than the Domino strategy
There are two types of development strategies: the Domino and the blitz strategies.
There is currently a trend toward the blitz strategy. This approach consists of testing
new drugs in parallel in a large number of indications and even in several settings.
The domino strategy
Pharma companies have traditionally applied the domino strategy. It consists first of
developing the drug in only one indication, which can be either a large one or a niche
(and/or in third-line therapy or recovery therapy) and then, when the product is
marketed, extending the indications (other cancers and/or in higher lines).

36 Pharmaceuticals
This domino strategy offers several advantages, notably for a small company and/or a
newcomer in the cancer field.
Marketing authorization can be obtained first in a market that is less crowded than
the most appealing one, or in an indication for which demand is high.
This approach is supposed to limit risks by focusing resources on the most
promising indication. Furthermore, patient sub-grouping based on biological and/or
clinical profile can facilitate the work.
Clinical development costs are lower than for the blitz approach as patients and
trials are limited in number.
In addition, it can ensure a certain amount of sales, albeit limited.
Rituxans development in NHL is a good example of a domino strategy (see below).
The blitz strategy
Conversely, the blitz strategy consists of addressing in parallel different indications in
first-line, second-line and adjuvant settings. This approach offers multiple advantages,
both in terms of R&D and marketing strategies:
It offers a faster ramp-up in sales.
It increases the number and the level of barriers to entry in the indications: future
competitors would have to demonstrate non-inferiority and recruitment of patients could
be more difficult, notably if the population size is limited.
Companies can leverage their marketing efforts toward physicians through a large
coverage of future indications and/or off-label use of the drug.
To a lesser extent, it increases the level of awareness among physicians and
contributes to the companys science-driven image, as oncologists appear to view this
as a critical criterion for prescription.
The blitz strategy is more risky as it also requires a better understanding of the biology
of the drug, and is more costly as it necessitates a high number of patients: clinical
trials are becoming very large and in some cases comparable to GP trials.
The blitz strategy is quite suitable for drugs with relatively low toxicity. This is for ethical
reasons (a very toxic drug cannot be tested in many patients before it demonstrates
efficacy in at least one indication). Another reason is that when placing their many bets,
companies incur very high costs with this strategy. Therefore, as efficacy is by
definition unknown before testing, this strategy necessitates a minimum acceptable
level of toxicity to work.
Avastins clinical development is the perfect example of a successful blitz strategy.
Table 9: Domino vs blitz strategies in oncology
Strategies Advantages Inconvenient
Domino strategy
Well adapted to small players and newcomers
Well adapted to highly toxic drugs (chemotherapy)
Lower cost
Risk of longer ramp-up
Risk of cornerisation
Blitz strategy
Well adapted to big players
Well adapted to less toxic drugs (pathway inhibitors)
Rapid market penetration and sales ramp-up (gold-standard)
Well adapted to centralized approach
Higher cost
Higher risk

37 Pharmaceuticals
Domino strategy case study: Roches Rituxan in NHL and beyond
One illustration of the domino strategy is the case study of Rituxan/Mabthera from
Roche/Genentech. This monoclonal antibody directs CD-20, an antigen over-
expressed at the surface of Non-Hodgkins Lymphoma (NHL) lymphocytes patients.
NHL is composed of six main segments, corresponding to the first line, relapse line and
maintenance line of the two main stages in the pathology:
indolent NHL (iNHL): incidence is about 7 per 100,000 in the US and EU;
aggressive NHL (aNHL): incidence is about 8 per 100,000 in the US and EU.
In 1997, Rituxan gained approval for the treatment of patients with relapsed or
refractory, low-grade follicular CD20 NHL. After approval in this first niche indication in
second line, Roche developed a series of clinical trials in NHL and adjacent indications,
aiming to cover the broad spectrum of NHL and notably the biggest segments of first-
line aNHL (35% of total patients) and maintenance treatment (see illustration below).
Chart 28: Rituxan/Mabthera from 1997 to 2005
1997/98 1999 2000 2001 2002 2003 2004 2005
R-CVP in 1st line
iNHL (ASH '03)
EU launch in 1st
line iNHL
Maintenance in
relapsed iNHL
(EORTC 20931,
ASH '04)
Maintenance in
1st line iNHL
(ECOG 1496,
ASCO '04)
MInT data in
1st line aNHL
(ASCO '04)
First
maintenance
data in iNHL
EU launch
in 1st line aNHL
Maintenance in
relapsed Inhl &
MCL after
Mabthera
(ASCO '05)
GELA data in 1st line
aNHL
Launch in
relapsed
iNHL- single
arm trial
iNHL
aNHL
Maintenance in iNHL
MabThera milestones
From niche producto to >CHF3.0bn in sales

Source: Roche Company
This approach helped Rituxan to cross the CHF4bn in sales mark in 2005, with strong
market penetration in first-line therapy. Now that Rituxan is the gold standard in most
NHL stages, Roche continues its effort through extension into still uncovered NHL
segments (iNHL maintenance filed in Q4 05 in EU, 25% of total patients), the re-
treatment of previously treated patients and an increase in the number of infusions
(from four infusions in relapsed iNHL monotherapy to 8-24 infusions in maintenance
iNHL)
Furthermore, Roche has extended this strategy to non-cancer indications like
Rheumatoid arthritis, with the REFLEX trial (filed in the US and EU for the treatment of
anti-TNF inadequate responders) and the DMARD inadequate responders p3 trial
(filing expected in 2007).
Blitz strategy case study: Avastin tested in all major solid tumours
An illustration of the blitz strategy is the case study of Avastin. Roche has designed a
very aggressive development plan for its anti-angiogenesis drug, targeting virtually all
the main solid tumours with a vascular network, and directly in the first-line indication
(see table below).

38 Pharmaceuticals
Table 10: Anti-VEGFs in late stage development
Metastatic cancers Colorectal

Breast

Lung

Renal

Pancreatic

Ovarian

Prostate

Melanoma

Avastin
(Genentech/Roche)
Approved
First line
US Feb04,
EU Nov04
Phase III,
First line
Positive data
Apr05
Phase III,
First line
Positive data
Mar05
Phase III,
First line
Recruited

Phase III,
First line
Recruiting

Phase III,
First line
Recruiting

Phase III,
Second line
Recruiting

Phase II,
Second line
Recruiting

Nexavar
(Bayer)
Phase
Second line
Recruiting
Phase II,
Second line
Recruited
Phase III
First line
Recruiting
Approved,
Second line
US Dec 05
Phase II,
First line
Suspended
Phase II,
Second line
Recruiting
Phase II,
Second line
Recruiting
Phase III,
Second line
Recruiting

Sutent
(Pfizer)
Phase II,
Second line
Recruited
Phase II,
Second

line
Recruited
Phase II,
Second line
Recruiting
Approved,
First line
US Jan 06

NA

NA
Phase II,
Second line
Recruiting

NA

PTK 787
(Schering/Novartis)
Phase III,
First line
Recruited
Phase II
First line
Recruited
Phase II,
Second line
Recruiting

NA
Phase II,
Second line
Recruiting

NA

NA

NA

AG-013736
(Pfizer)
NA
Phase II,
First line
Recruited
Phase II,
Second line
Recruited
Phase II,
Second line
Recruited
Phase II,
First line
Recruiting

NA

NA
Phase II
Second line
Recruiting

Zactima
(AstraZeneca)
NA
Phase II,
Second line
Recruited
Phase II,
Second line
Completed

NA

NA

NA

NA

NA

CDP-791
(UCB/ImClone)
NA

NA

Phase II
Recruiting

NA

NA

NA

NA

NA

AVE005 / VEGF-Trap
(SAVE/Regeneron)
NA

NA
Phase II
Second line
Recruiting

NA

NA
Phase II
Second line
Recruiting

NA

NA

Source: Bionest Partners, Exane BNP Paribas, www.clinicaltrials.gov
Avastin made a strong difference on three grounds.
1) Indications searched in parallel. Genentech/Roche developed Avastin in parallel
in most cancer types early on, while most of its competitors have concentrated their
resources on one cancer type before expanding their development programme. Avastin
is in first line clinical trials in seven cancers (including the three main ones) vs three for
Nexavar (only one main cancer) and one for Sutent and PTK787.
2) Full set of combination trials. In addition, Avastin is in a comprehensive set of
combination trials with all current gold standards, with the aim of becoming the
backbone therapy in as many tumour types as possible. Its competitors are usually still
being tested with only one or two gold standards by tumour type.
3) First line rather than second line. Genentech/Roche also went straight into first
line therapy, whereas, in cancer, pharma companies start in later stage patients before
moving up to first line. Avastin is in first line in all cancer types except melanoma and
prostate while its competitors have more than half of their drugs as second line
treatment. This is striking given that: 1) anti-VEGF have so far shown better efficacy in
earlier stages of cancers than in late stages and 2) first-line settings are a much larger
patient pool than second line.
This clearly innovative approach gave Avastin a firm advance versus all of its main
competitors. As a result, renal cancer is today the only indication in which Roches
product could be beaten by other anti-angiogenesis drugs and we do not foresee a
threat from competitors before 2008 in lung cancer and 2009 in colorectal, ovarian,
pancreatic and breast cancers (see below).

39 Pharmaceuticals
After having positioned Avastin on top of the chemotherapy backbone, Roche is now
trying to reverse this situation. Avastin has become the core of the backbone on-top of
which pathway inhibitors are tested. This strategy is illustrated by the series of
combination phase II trials of Avastin plus EGF-R inhibitors in NSCLC, RCC, mBC and
Head & Neck cancers.
Price pressure will soon weigh on cancer
In the future, cancer drugs are expected to come under stronger price pressure from
regulatory authorities and insurance companies but also directly from competition. The
increasing use of generics in all therapeutic areas is already at work and might
influence the development of new guidelines. This price pressure is the result of
multiple effects:
an increase in the number of patients accessing therapies;
the expected increase in the combination of costly drugs;
more competition;
global pressure from generics.
How to pay for more patients at the current price levels?
Recently approved drugs with new mechanisms of actions (pathway inhibitors) and/or
biologicals have benefited from high prices, with an annual treatment cost of
USD20,000-40,000 becoming less and less surprising. With the growing number of
patients taking such therapies, and the high profitability of these drugs (gross margins
for biologicals are often between 80% and 90% of sales), we believe healthcare
systems will not accept to pay these prices for very long.
To illustrate this, we have estimated that, in theory, Avastin sales in 2010 would
amount to about USD26bn in the US alone and USD65bn worldwide, if the product is
successful and marketed in all indications currently sought and if its price is maintained
at the current level (about USD4,512 per month in colorectal cancer, USD13,500 per
month in lung cancer and USD9,023 in breast cancer). Based on market penetration
assumptions, we currently estimate Avastin sales in 2010 will reach about USD4bn in
the US and USD7.7bn worldwide.
Table 11: Avastins theoretical market (at its current price, with 100%
penetration)
USDm First line Relapsed Adjuvant Total
Colorectal 4,039 1,720 5,808 11,568
Breast 4,554 2,277 17,952 24,783
NSCLC 13,664 3,365 1,584 18,613
Pancreatic 2,904 198 0 3,102
Ovarian 4,620 770 0 5,390
Renal 1,540 0 0 1,540
Total 31,321 8,330 25,344 64,996
The expected increase in the combination of costly drugs
Combinations of two biologics and/or of two pathway inhibitors (biologics or chemicals)
are becoming a reality in clinical trials. For example, Avastin is currently being tested in
phase III in combination with Tarceva in lung cancer, and with Erbitux in colorectal
cancer (and even including Roches Xeloda, which is trying to replace 5-FU). If such
combinations are approved, which seems very possible on medical considerations, we
believe the price issue will accelerate the debate, as it clearly will be unsustainable for
health care systems. The table below shows that the latter combination (called XELOX
+ Avastin + Erbitux) would have a treatment cost of USD20,200 per month.

40 Pharmaceuticals
Table 12: Treatment costs in colorectal cancer
Drug / Cocktail Monthly treatment cost (USD)
5FU 15
LV 100
Xeloda 1,500
Camptosar 5,100
Eloxatine 6,400
Avastin 4,400
Erbitux 7,800

FOLFIRI + Avastin 9,615
FOLFOX+Avastin 10,915
XELOX+Avastin 12,400
XELOX+Avastin+Erbitux 20,200
FOLFOX = 5FU + LV + Eloxatine ; FOLFIRI = 5FU + LV + Camptosar ; XELOX = Xeloda + LV + Eloxatine
Increased competition in similar settings
Given the ever-growing number of players developing more and more trials for their
cancer drugs, competition could become acute in some cancer settings.
For example, Avastins cost is competitive in colorectal cancer, but much higher in
other indications where the doses used are two or three times higher.
In breast cancer, Avastins monthly cost is 2.4 times higher than Herceptin and 2.5
times higher than Taxotere. In lung cancer, Avastins monthly cost is 3.7 times higher
than Taxotere and Gemzar.
One could justify the higher cost by the fact that Avastin is first in a new class of drugs
with a competitive clinical profile and stretched production capacities.
However, its recently approved competitors Sutent and Nexavar in renal cell cancer
cost USD4,300-4,700 per month of treatment. This is half of Avastins USD8,800 cost
in the same indication (10mg dose used). It will therefore require Avastin to provide
significantly better results than its two competitors if it wants to capture decent market
share in this segment.
Avastin is no hurry to reduce its price as long as its clinical profile remains unmatched
in the major cancer settings (colorectal, breast, lung). We have seen in the previous
section that Avastin enjoys a 3-4 year lead in these cancers.
This means Roche and Genentech will have no incentive to drive Avastins price down
before 2009-2010, all the more so as their production capacities are stretched until new
capacity comes on stream in 2009e.
This will change in 2009-2010, unless competing anti-VEGF drugs face a high attrition
rate. If a few of them match or even get close to Avastins clinical profile and are priced
at Nexavar and Sutents current levels, the pressure on Avastins price will be high.
The generic risk is direct but also indirect
Generics have already entered the cancer battlefield, with former large products like
Taxol having been largely hit (see case study). But Taxol being a generic facilitates its
use in competitors clinical trials and could reinforce its dominant position in some
market segment, rendering the switch to Taxotere, for instance, more difficult.

41 Pharmaceuticals
The arrival of generics of some large drugs could also benefit new drugs as cancer
therapies are largely composed of two to three drugs, thus replacing one item of the
combination with a generic would lower the overall price of the cocktail. A stable overall
cost of treatment leaves room for a price or dose increase of the other components, or
the addition of a new component.
Concerning the threat from competitors generics, the best defence for companies is to
differentiate their branded products, through two main axes:
- a better efficacy / safety ratio, proven by head-to-head clinical trials (see Taxotere
case study below);
proprietary indications, i.e. indications in which direct competitors are not approved
and therefore generics are not authorized (supposing there is no off-label).
The implications of these conclusions is that once again the blitz strategy seems better
than the domino strategy as it multiplies the number of potential protected indications
and the amount of sales linked to them.
In the past, companies that have reshuffled their pipelines have successfully protected
their franchises despite lost sales. One illustration is AstraZenecas success in
launching the first aromatase inhibitor Arimidex for the treatment of breast cancer (see
the Aromatase me-too case study) after losing Nolvadex tamoxifene in 2003. As a
result of this successful launch, AstraZeneca remains today the global leader of
hormonal cancer therapy.
Chemical cancer drugs that are the most at risk of price pressure are those with high
generic threat, i.e. with poor patent protection. We have identified a series of chemical
cancer drugs losing a key patent by 2011 and tried to point the therapeutic classes that
could benefit from this situation (see table below). EGR-R and anti-VEGF drugs are the
two therapeutic classes the most well positioned to benefit from this situation.
Table 13: Chemical drugs exposed to a generic threat in the coming years
Drug Company
US patent
expiry
2005 sales
(USDm)
Main
indication(s)
Winner
Taxotere Sanofi-Aventis Nov 2010 1.9 Breast, Lung, Prostate anti-VEGF
Campto Pfizer Feb 2008 0.9 Colorectal anti-VEGF, EGF-R
Gemzar Lilly Nov 2010 1.3 Lung anti-VEGF, EGF-R
Eloxatin Sanofi-Aventis Aug 2007-Apr 2013 1.9 Colorectal anti-VEGF, EGF-R
Xeloda Roche Jul 2011 0.8 Colorectal, Breast -
Arimidex AstraZeneca Dec 2009 1.2 Breast -
Femara Novartis Jun 2011 0.5 Breast -
Aromasin Pfizer Apr 2011 0.2 Breast -
Casodex AstraZeneca Oct 2008 1.1 Prostate -
Alimta Lilly Sep 2011 0.5 Lung anti-VEGF, EGF-R
Generic Case study: Taxoteres differentiation vs Taxols generics
This case study illustrates a strategy of differentiation, which consists in positioning the
drugs in an indication for which generics are not approved and/or for which a generics
peer was not approved. Indeed, Taxotere has been approved in prostate cancer and
not Taxol. The consequence is that theoretically Taxol generics cannot be used in this
indication, unless via off-label.
BMSs paclitaxel Taxol was approved in 1992, four years before Sanofi-Aventis
docetaxel Taxotere approval (see case study). Taxol generics were approved in 2001
in the US and 2004 in Europe. Taxoteres US patent on the active compound expires in
2010 (with other manufacturing patent expirations in 2012 and 2013).

42 Pharmaceuticals
Chart 29: Taxol vs Taxotere sales comparison
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Taxol
Taxotere
Taxol US generics
Sales (USDm)
Taxol EU generics
End of Taxol US generics erosion

Source: Exane BNP Paribas, Bionest Partners
Taxols generics first hit the product in the US in 2001. BMS in-part successfully
protected its product thanks to strong European penetration and stabilized sales from
2002 to 2004. The same year, the product lost its last patent protection in Europe,
definitely depressing sales.
As described in the previous case study on the two taxanes, Taxols advance over
Taxotere was approximately four years. After the Taxol generic, Taxoteres sales
continued to grow but the product did not completely benefit from the erosion of Taxol,
for two main reasons.
First, price pressure from Taxol generics significantly limited the room for price
increases. Second, as Taxotere only recently demonstrated a better efficacy/safety
ratio in a head-to-head study, physicians previously had no reason to prefer the
branded drug. This study, reported by Ravdin et al. in 2003 compared 100mg/m2 of
docetaxel with 175mg/m2 of paclitaxel given every three weeks to a group of 449
women with advanced breast cancer and prior anthracycline treatment (see table
below).
Table 14: Docetaxel vs paclitaxel in metastatic breast cancer
Endpoint Docetaxel
TAXOTERE
Paclitaxel
TAXOL
P value
ORR 32% 25% 0.1
Maedian TTP (months) 5.7 3.6 <0.0001
Median OS (months) 15.4 12.7 0.03
Source: European Journal of Exane BNP Paribas estimates
While the difference in the overall response rate (ORR) did not reach statistical
significance, the time to progression (TTP) and overall survival (OS) were significantly
superior for docetaxel. In terms of safety, docetaxel presented significantly higher
events of febrile neutropenia (15% vs 3% for paclitaxel) and non-hematologic adverse
events, but there is still controversy on whether the latter were artificial due to the
design of the study.
Based on indirect comparisons, Taxotere appears more efficient than Taxol. Among
these, Taxotere combined with anthracyclines demonstrated its superiority over
anthracyclines alone in four studies. On the contrary, Taxol combined with
anthracyclines clearly did not prove their superiority over anthracyclines alone. In the
adjuvant setting, both Taxotere and Taxol improve outcomes when added to
anthracycline-based schemes.
Another point making it difficult to compare the two drugs is the dosage scheme and
pharmacokinetics of the two drugs.

43 Pharmaceuticals
European oncology players
In this section we analyse how European cancer players (AstraZeneca, GSK, Merck
KGaA, Novartis, Roche, Sanofi-Aventis and Schering AG) are positioning themselves
to tackle the opportunities and challenges in the cancer market over the next five years.
We have identified four success factors: 1) the attractiveness of in-licensing; 2) the size
of the pipeline relative to the size of the current cancer franchise; 3) the diversity of
therapeutic approaches; 4) exposure to generic risk.
Table 15: Winners and losers by success factor
Success factor Strong Weak
In-licensing attraction Roche, Sanofi-Aventis,
AstraZeneca, Novartis
Serono, Novo Nordisk, UCB
Pipeline depth vs current franchise Roche, GSK, Merck/Schering AstraZeneca
Diversity of therapeutic approaches Roche, GSK, Sanofi-Aventis AstraZeneca, Serono, Novo
Nordisk, UCB
Exposure to generic risk Roche, Merck/Schering Sanofi-Aventis, AstraZeneca
The superstar is Roche/Genentech, which is in a strong position on all four success
factors. GlaxoSmithKline and Merck/Schering (if the combination succeeds) are the
rising stars. Novartis should maintain its recently developed cancer franchise.
AstraZeneca is in the toughest situation, confronted by high generic risk and with a
concentrated pipeline. Maintaining its leadership in cancer will require above-average
success rates and, possibly, acquisitions. Sanofi-Aventis also faces a challenge in its
generic risk exposure but has a deeper and more diversified pipeline than
AstraZeneca.
For the newcomers Serono, Novo Nordisk and UCB, it will take time and heavy
investments to build a cancer franchise. Given their limited financing power and the
rising cost of development, it will probably be necessary to gain scale through
acquisitions.
The temptation to in-licence
We have seen that 70% of cancer drugs in clinical development (i.e. tested on humans)
are coming from small biotech companies. Most of these companies can bring these
products to phase I/II development but usually no further. The ability to in-license the
most promising compounds is a key success factor for the larger players.
Financing power is obviously a critical advantage given the necessity of developing
cancer drugs faster and faster, over a wider set of tumours and with numerous
therapeutic approaches. This favours the largest pharma companies like GSK, Sanofi-
Aventis, Novartis, Roche and AstraZeneca.
However, at least as important is the size and breadth of the current portfolio of
marketed drugs, which ensures deep knowledge of the industry, capacity to manage
complexity and good access to key opinion leaders. In this respect, Roche is a distant
leader, ahead of Sanofi-Aventis, AstraZeneca and Novartis. GSK lags far behind.
The principal reason behind Merck KGaAs offer on Schering AG is the need to gain
greater financing power and a broader portfolio. The two companies are the most
advanced emerging cancer players in Europe.

44 Pharmaceuticals
Pipeline depth vs current franchise
Based on success rates determined through our analysis and current pipelines of
oncology players, we have projected the number of new molecules and indications that
could be launched by each player by 2012 (see chart below).
The broadest pipeline is that of Roche/Genentech, with a potential for three new
molecules and six new indications by 2012. Next are GSK, Sanofi-Aventis and
Merck/Schering (if the merger goes through) each with around two new molecules and
between three and five indications.
It is interesting to note that Scherings new drug potential is almost as high as that of
Sanofi-Aventis and that Mercks is close to that of Novartis and AstraZeneca, although
the latter two companies have a much broader franchise.
Chart 30: Potential new drug / indication launches by 2012*
0 1 2 3 4 5 6
Astra Zeneca
GlaxoSmithKline
Merck KGaA
Novartis
Roche
Sanofi-Aventis
Schering AG
Novo Nordisk
UCB
Serono
MRK-SCH Newco
New indications New drugs
* Based on cancer average phase II/III attrition rates.
Several categories appear when these data are matched to the existing franchises of
European companies (2005 sales or number of marketed products; see chart below).
The super star. Roche/Genentech, with over USD8bn sales in 2005 and eight
marketed products, is by far the leader in oncology. Its pipeline depth and the potential
for managing Avastins life-cycle should sustain or reinforce this position in the future.
Established players. Novartis and Sanofi-Aventis, which each achieve sales around
USD4bn, both have an attractive pipeline with one or two potential new molecules
reaching the market by 2012.
Declining players. AstraZeneca, with USD4bn in sales in 2005 but fewer than one
potential new molecule launched by 2012, is set to lose market share in cancer, unless
it achieves success rates in development significantly above the industry average.
Rising stars. GSK and Merck/Schering are currently small players in cancer but have
pipelines as deep as those of the current leaders. Consequently, both companies are
set to gain market share in cancer over the next five years if they are prepared to make
the necessary investment and can manage their pipelines efficiently.

45 Pharmaceuticals
The lack of individual financing power at Merck and Schering is the key reason behind
Mercks offer on Schering. We have positioned NewCo on our matrix to demonstrate
the benefits of scale: the new company would have the third most promising pipeline
and the second highest number of products with AstraZeneca.
Emerging players. Neither UCB nor Serono nor Novo Nordisk has a presence in
cancer today but all are committed to building a cancer portfolio. This will take time and
require big investments; given their limited financing power and the rising cost of
development, gaining scale through acquisitions will probably be necessary.
Chart 31: Cancer franchise in 2005 vs potential new drug launches by 2012
GSK MRK
NOVN
ROG
SAVE
SCH
AZN
NOVO
UCB SEO
MRK-SCH Newco
0
2
4
6
8
10
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Number of projected new drugs
2
0
0
5

c
a
n
c
e
r

s
a
l
e
s

(
U
S
D
b
n
)
Rising stars
Declining players
Super star
Emerging players
Established players

Concentrated pipelines versus well-diversified ones
We have described why managing complexity is a major issue and why therapeutic
choices are increasingly complex. A way of reducing risk is to have a broad range of
different therapeutic approaches (i.e. chemotherapy vs pathway inhibitors vs cellular
therapy, etc.) and molecule types (chemical, proteins, vaccines, etc.).
In the chart below, we illustrate the relative diversity of pipelines among European
players according to the heterogeneity of the therapeutic classes and the type of
molecule. We identify three categories corresponding to three distinct approaches to
drug development.
Highly diversified. GSK, Roche and Sanofi-Aventis belong to the group showing the
highest level of diversification. These firms seem to be managing the risks underlying
oncology drug development by balancing targeted vs broad acting therapies, and
chemicals vs biologicals.
Balanced. Schering AG, Novartis and, to a lesser extent, Merck KGaA have
relatively well-balanced pipelines. However, the variety of approaches is more limited
than within the previous group.

46 Pharmaceuticals
Concentrated bets. Astrazeneca, Serono, UCB and NovoNordisk focus on a low
number of therapeutic approaches. However, we have to consider Astrazeneca slightly
apart from the others. Indeed, the low level of diversity shown by Serono, UCB and
NovoNordisk pipelines is mainly the result of the small number of molecules in
development (one for UCB and NovoNordisk, two for Serono). By contrast,
AstraZeneca, with four molecules in development all of which are chemicals, shows a
riskier profile than Novartis or Sanofi-Aventis.
Chart 32: Heterogeneity of large player pipelines
Late stage pipeline
AstraZeneca
GSK
Shering AG
Serono
Merk KGaA
Novartis
Novo Nordisk
Roche/Genentech
Sanofi-Aventis
UCB
Heterogeneity of molecule type
H
e
t
e
r
o
g
e
n
e
i
t
y

o
f

t
h
e
r
a
p
e
u
t
i
c

c
l
a
s
s
Low diversity
Low
diversity
High diversity
High
diversity
Concentrated
bets
Balanced
Highly diversified

Exposure to generic risk
The generic threat to branded cancer drugs is multi-faceted, but chemical drugs are
more exposed than biologics. We believe biosimilars will compete as me-too drugs
when they enter the market and will not lead to a drastic erosion of sales as occurred in
chemicals. The risk is especially remote for monoclonal antibodies given the complexity
of the molecules and of intellectual property estates (see our report Biosimilars take-on
biotech, June 2005). Synthetic peptide generics such as the LHRH agonists
therapeutic class already present this me-too sales erosion profile (see LHRH agonists
case study).
For companies with chemical drugs, a patent expiry can have a drastic impact on the
companys franchise. This was the case with Taxol in 2000, which knocked BMS off a
very solid leadership position in cancer.
Table 16: Historical leaders in cancer (number of approved uses)
Period Rank #1 Rank #2 Rank #3 Rank #4
1970 Eli Lilly BMS GSK Pfizer
1980 BMS Pfizer Eli Lilly Wyeth
1990 BMS AstraZeneca Wyeth Pfizer
2000 BMS AstraZeneca Sanofi-Aventis Roche/Genentech
2005 Roche/Genentech AstraZeneca Sanofi-Aventis Novartis
The only way to fight patent expiries in cancer is to develop next-generation products.
One illustration is AstraZenecas success in launching the first aromatase inhibitor,
Arimidex, for the treatment of breast cancer (see Aromatase me-too case study), after
the loss of Nolvadex tamoxifene in 2003.

47 Pharmaceuticals
At the date of the patents expiry, Nolvadex was the gold standard for the treatment of
hormonal dependant breast cancer, and the ensuing drastic erosion of sales would
have forced the company out of this market if it had not been able to launch Arimidex
rapidly. Thanks to the success of this launch, AstraZeneca remains the global leader in
hormonal cancer therapy. This is a strategy that Sanofi-Aventis is pursuing for
Taxotere, with two next-generation taxanes in development (109,881 in phase III and
XRP6258 in phase II).
The table below lists the main chemical drugs facing a patent expiry by 2011.
Table 17: Major chemical drugs facing patent expiry by 2011
Drug Company US patent expiry 2005 sales
(USDm)
Main indication(s)
Eloxatin Sanofi-Aventis Aug. 2007-Apr 2013 1.9 Colorectal
Campto Pfizer February 2008 0.9 Colorectal
Casodex AstraZeneca October 2008 1.1 Prostate
Arimidex AstraZeneca December 2009 1.2 Breast
Taxotere Sanofi-Aventis November 2010 1.9 Breast, Lung, Prostate
Gemzar Lilly November 2010 1.3 Lung
Aromasin Pfizer April 2011 0.2 Breast
Femara Novartis June 2011 0.5 Breast
Xeloda Roche July 2011 0.8 Colorectal, Breast
Alimta Lilly September 2011 0.5 Lung
Patent expiries are not a concern per se if they can be replaced by new products. In the
chart below, we have depicted the percentage of current oncology sales exposed to
generic risks against the potential number of products that could be delivered by each
company. Projected new drugs were determined by applying the historical success
rates to current phase II/III pipelines.
The data show that four companies are particularly exposed: Lilly, AstraZeneca, Pfizer
and Sanofi-Aventis. They present a high proportion of sales at risk of patent expiry, and
several have poor pipelines. For these companies, replacing the lost sales with new
drugs is both a challenge and a race against time. Novartis should be able to
compensate for patent losses by new drugs. Roche will continue to grow fast. In the
near future, patent expiry should have a minor impact on Roche and Novartis sales.
Chart 33: Part of 2005 cancer sales at risk by 2011 in total cancer sales vs
projected new drugs vs part of 2005 cancer sales in total pharma sales
Pfizer
Roche
AstraZeneca
Sanofi-Aventis
Lilly
Novartis
0
1
2
3
4
0% 20% 40% 60% 80% 100%
%of cancer sales at risk by 2001 (USDBn)
P
r
o
j
e
c
t
e
d

n
e
w

d
r
u
g
s
5 %
% of onco sales
in total pharma
sales
10 %


48 Pharmaceuticals

This page has been left intentionally blank.

49 Pharmaceuticals
Companies
Altana................................................................................................ 50
AstraZeneca...................................................................................... 52
GlaxoSmithKline................................................................................ 56
Merck KGaA...................................................................................... 60
NewCo Merck + Schering.................................................................. 64
Novartis ............................................................................................. 68
NovoNordisk...................................................................................... 72
Roche................................................................................................ 74
Sanofi-Aventis ................................................................................... 78
Schering AG...................................................................................... 82
Serono............................................................................................... 86
UCB................................................................................................... 88

50 Pharmaceuticals
Altana _____________________________________________________
Altana has neither approved products nor pipeline products in the cancer therapeutic
area.

51 Pharmaceuticals
___________________________________________________________________ Financial highlights
Stock rating vs Sector: Neutral ALTANA
Target price: EUR 50.0 / + 1.4% Sector rating vs Market: Outperform Pharmaceuticals - Germany
12-mth high / low (EUR) 53.6 / 39.9
Enterprise value (EURm) 6 731
Mkt cap. / Free float (EURm) 6 677 / 3 332
Performance 1mth 3mths 12mths
Absolute 8% 7% 4%
Rel. (DJ STOXX50) 7% 1% (16%)
Rel. (Sector) 4% 2% (20%)
Reuters/Bloomberg
Analyst: Franois Schmitt
CAGR 1995/2005 2005/2010
EPS restated (*) 20% 1%
CFPS 16% 1%
PER SHARE DATA {EUR) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
No of shares year end, basic, (m) 117.001 117.000 117.000 117.000 140.400 140.400 140.400 139.500 139.500 139.500 139.500 139.500 139.500 139.500
Average no of shares, diluted, excl. treasury stocks (m) 117.001 117.000 116.825 115.690 137.536 136.623 136.286 135.413 135.413 135.413 135.413 135.413 135.413 135.413
EPS restated 0.73 0.93 1.13 1.71 2.11 2.33 2.65 2.88 3.05 3.35 3.68 3.89 4.03 3.14
% change 32.9% 28.1% 21.5% 50.8% 23.4% 10.5% 13.9% 8.7% 5.6% 10.0% 9.7% 5.8% 3.7% (22.1%)
EPS reported 0.07 0.86 1.05 1.56 2.37 2.36 2.53 2.87
CFPS 1.20 1.46 1.70 2.44 2.57 3.10 3.54 3.75 4.13 4.44 4.84 5.12 5.27 4.29
Book value (BVPS) (a) 6.3 6.9 7.6 8.4 8.3 8.9 10.3 11.9 13.9 15.9 18.1 20.5 22.9 24.4
Net dividend 0.00 0.09 0.12 0.15 0.60 0.75 0.83 1.02 1.15 1.26 1.33 1.46 1.55 0.00
STOCKMARKET RATIOS Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
P / E (P/ EPS restated) 27.7x 19.7x 14.9x 15.8x 21.5x 22.4x 18.2x 16.4x 15.2x 14.7x 13.4x 12.7x 12.2x 15.7x
P / E relative to DJ STOXX50 151% 88% 71% 78% 90% 101% 114% 117% 116% 118% 114% 112%
P / CF 16.8x 12.5x 9.9x 11.0x 17.6x 16.8x 13.6x 12.6x 11.2x 11.1x 10.2x 9.6x 9.4x 11.5x
FCF yield 1.1% 3.1% 2.2% 4.6% 1.9% 2.2% 3.3% 3.8% 4.1% 3.7% 4.7% 5.1% 5.9% 5.2%
P / BVPS 3.17x 2.67x 2.24x 3.20x 5.44x 5.86x 4.68x 3.98x 3.34x 3.10x 2.72x 2.41x 2.15x 2.02x
Net yield 0.0% 0.5% 0.7% 0.5% 1.3% 1.4% 1.7% 2.1% 2.5% 2.6% 2.7% 3.0% 3.1% 0.0%
Payout 0.0% 10.0% 10.3% 8.6% 28.5% 32.2% 31.3% 35.2% 37.7% 37.7% 36.3% 37.7% 38.4% 0.0%
EV / Sales 1.55x 1.25x 1.09x 1.54x 2.61x 2.62x 2.29x 2.05x 1.96x 1.82x 1.67x 1.55x 1.50x 1.53x
EV / Restated EBITDA 10.2x 7.6x 5.9x 7.2x 11.1x 10.7x 8.9x 8.3x 8.3x 7.9x 7.1x 6.6x 6.2x 7.3x
EV / Restated EBIT 14.3x 10.4x 7.7x 9.1x 13.6x 13.3x 10.8x 9.9x 10.0x 9.6x 8.6x 7.9x 7.5x 9.1x
EV / OpFCF 25.2x 14.1x 13.2x 10.9x 19.3x 18.2x 14.3x 13.0x 13.0x 13.6x 11.2x 10.3x 9.1x 10.3x
EV / Capital employed (incl. gross goodwill) 3.3x 2.7x 2.1x 2.8x 4.8x 5.2x 4.1x 3.5x 2.6x 2.5x 2.3x 2.1x 2.0x 1.8x
ENTERPRISE VALUE {EURm) 2 084 1 850 1 725 2 972 6 033 6 835 6 256 6 078 6 405 6 731 6 597 6 455 6 269 5 872
Market cap 2,356 2,146 1,975 3,114 6,238 7,133 6,569 6,410 6,276 6,677 6,677 6,677 6,677 6,677
+ Adjusted net debt (518) (543) (521) (401) (473) (576) (571) (554) (92) (167) (301) (442) (629) (760)
+ Other liabilities and commitments 207 213 232 242 245 247 255 264 264 264 264 264 264
+ Revalued minority interests 45 43 43 22 49 46 29 6 5 5 5 5 5 3
- Revalued investments 7 9 4 5 25 15 26 48 48 48 48 48 48 48
P & L HIGHLIGHTS {EURm) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 1,345 1,476 1,586 1,928 2,308 2,609 2,735 2,963 3,272 3,695 3,942 4,170 4,189 3,841
Restated EBITDA (b) 204 243 293 412 546 638 701 735 770 851 927 979 1,008 801
Depreciation (58) (66) (71) (87) (102) (122) (122) (118) (130) (148) (158) (167) (168) (155)
Restated EBIT (b) (*) 146 177 223 325 444 516 579 617 640 703 770 812 840 646
Reported operating profit (loss) 146 169 213 309 424 495 563 617 666 703 770 812 840 646
Net financial income (charges) 18 19 20 21 24 (12) 17 7 15 16 18 20 22 24
Affiliates - - - - - - - - - - - - - -
Other 95 43
Tax (73) (83) (107) (150) (216) (202) (235) (233) (252) (265) (290) (306) (316) (245)
Minorities (5) (5) (3) 2 0 0 0 (1) 0 0 0 0 0 0
Goodwill amortisation 0 (8) (10) (17) (19) (20) (17) 0 - - - - - -
Net attributable profit reported 85 101 123 181 328 324 345 390 429 454 498 527 546 425
Net attributable profit restated (c) 85 101 123 181 270 298 345 390 412 454 498 527 546 425
CASH FLOW HIGHLIGHTS {EURm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 204 243 293 412 546 638 701 735 796 851 927 979 1,008 801
EBITDA adjustment (b) 0 0 0 0 0 0 0 0 (26) 0 0 0 0 0
Other items 0 (1) (2) 0 0 0 0 0 26 0 0 0 0 0
Change in WCR (41) 26 (25) 18 (37) (51) (11) (30) (42) (60) (25) (19) 18 77
Operating cash flow 163 268 266 430 509 587 690 705 753 791 903 960 1,026 878
Capex (80) (136) (136) (157) (196) (212) (254) (237) (262) (296) (315) (334) (335) (307)
Operating free cash flow (OpFCF) 83 131 131 273 313 375 436 468 492 495 587 627 690 570
Net financial items + tax paid (56) (63) (87) (130) (192) (214) (218) (226) (237) (249) (272) (286) (294) (221)
Free cash flow 27 68 44 143 121 161 218 242 255 246 315 341 397 350
Net financial investments 0 0 0 0 111 0 30 16 (560) 0 0 0 0 0
Other 34 (9) (27) (214) (115) 47 (135) (138) 0 0 0 0 0 0
Capital increase (decrease) 0 0 0 0 41 0 0 0 0 0 0 0 0 0
Dividends paid (30) (33) (39) (48) (84) (105) (117) (138) (156) (172) (181) (199) (211) (218)
Increase (decrease) in net financial debt (32) (25) 22 120 (72) (103) 5 18 462 (75) (134) (142) (186) (131)
Cash flow, group share 140 171 199 283 354 424 483 508 559 602 656 693 714 580
BALANCE SHEET HIGHLIGHTS {EURm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Fixed operating assets, incl. gross goodwill 372 418 504 666 824 864 1,022 1,105 1,797 1,945 2,102 2,269 2,437 2,589
WCR 261 270 333 399 445 455 490 627 669 728 753 772 754 678
Capital employed, incl. gross goodwill 632 689 836 1,065 1,269 1,319 1,513 1,732 2,466 2,673 2,856 3,042 3,191 3,267
Shareholders' funds, group share 743 802 884 984 1,170 1,250 1,445 1,661 1,933 2,216 2,532 2,860 3,195 3,402
Minorities 14 16 19 7 9 8 6 2 2 2 2 2 2 2
Provisions/ Other liabilities 392 405 431 436 522 563 553 566 566 566 566 566 566 566
Net financial debt (cash) (518) (543) (521) (401) (473) (576) (571) (554) (92) (167) (301) (442) (629) (760)
FINANCIAL RATIOS {%) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales (% change) 15.6% 9.7% 7.5% 21.5% 19.7% 13.0% 4.8% 8.3% 10.4% 12.9% 6.7% 5.8% 0.4% (8.3%)
Organic sales growth
Restated EBIT (% change) (*) 50.2% 21.6% 25.6% 46.3% 36.3% 16.3% 12.3% 6.5% 3.7% 9.8% 9.6% 5.5% 3.4% (23.1%)
Restated attributable net profit (% change) (*) 32.9% 28.1% 21.3% 49.4% 46.7% 9.8% 13.6% 8.0% 5.6% 10.0% 9.7% 5.8% 3.7% (22.1%)
Personnel costs / Sales 27.2% 24.7% 24.7% 23.5% 21.5% 21.3% 22.2% 22.2% 21.9% 20.8% 19.5% 18.4% 18.3% 19.9%
Restated EBITDA margin 15.2% 16.5% 18.5% 21.4% 23.7% 24.5% 25.6% 24.8% 23.5% 23.0% 23.5% 23.5% 24.1% 20.9%
Restated EBIT margin 10.8% 12.0% 14.0% 16.9% 19.2% 19.8% 21.2% 20.8% 19.6% 19.0% 19.5% 19.5% 20.1% 16.8%
Tax rate 44.9% 42.1% 44.1% 43.5% 38.4% 37.0% 39.4% 37.3% 37.0% 36.9% 36.8% 36.7% 36.6% 36.5%
Net margin 6.7% 7.2% 7.9% 9.3% 14.2% 12.4% 12.6% 13.2% 13.1% 12.3% 12.6% 12.6% 13.0% 11.1%
Capex / Sales 5.9% 9.2% 8.6% 8.2% 8.5% 8.1% 9.3% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
OpFCF / Sales 6.2% 8.9% 8.2% 14.1% 13.5% 14.4% 15.9% 15.8% 15.0% 13.4% 14.9% 15.0% 16.5% 14.8%
WCR / Sales 19.4% 18.3% 21.0% 20.7% 19.3% 17.4% 17.9% 21.1% 20.4% 19.7% 19.1% 18.5% 18.0% 17.6%
Capital employed (excl. gross goodwill) / Sales 42.4% 41.1% 45.8% 45.5% 44.4% 40.8% 43.1% 46.9% 64.9% 63.1% 63.8% 64.7% 68.0% 76.1%
ROE (before goodwill) 11.5% 13.6% 15.0% 20.1% 24.8% 25.4% 25.0% 23.5% 21.3% 20.5% 19.7% 18.4% 17.1% 12.5%
Gearing (68%) (66%) (58%) (40%) (40%) (46%) (39%) (33%) (5%) (8%) (12%) (15%) (20%) (22%)
EBITDA / Financial charges NC NC NC NC NC 53.7x NC NC NC NC NC NC NC NC
Adjusted financial debt / EBITDA NC NC NC NC NC NC NC NC NC NC NC NC NC NC
ROCE, excl. gross goodwill 14.1% 16.9% 17.1% 21.0% 26.7% 30.5% 29.8% 27.8% 19.0% 19.0% 19.4% 19.0% 18.7% 14.0%
ROCE, incl. gross goodwill 12.7% 14.9% 14.9% 17.3% 21.5% 24.6% 23.2% 22.3% 16.3% 16.6% 17.0% 16.9% 16.7% 12.6%
WACC 8.5% 8.2% 8.3% 8.2% 8.8% 8.6% 8.7% 8.8% 7.8% 7.5% 7.5% 7.5% 7.5% 7.5%
Average number of employees 7,780 8,218 8,556 9,122 9,853 10,402 10,783
(a) !ntangibles: EUR237.13m, or EUR2 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
(*) also adjusted for goodwill for pre !FRS years, (c) adj.for capital gains losses, imp.charges, capitalized R8D, exceptional restructuring
Switch to IFRS data from FY ended 12/05
YEARLY AVERAGE PRICES for end Dec. 97 to Dec. 05
ALTG.DE / ALT GY
Price at 16/03/06: EUR 49.3
Price 12.8*CFPS Relative to DJ STOXX50
11.3
80.0
20.0
40.0
60.0
Target Price

52 Pharmaceuticals
AstraZeneca ____________________________________________
From a focus on breast and prostate cancers with chemical hormonal
modulators, to expansion towards all cancer segments except colorectal and
leukaemias with a highly concentrated pipeline
Sales. AstraZenecas sales in oncology amounted to USD3,845m in 2005, i.e. 17% of
the companys total pharma sales.
Product portfolio and pipeline depth. AZNs cancer portfolio comprises six marketed
drugs. AZN has four molecules in phase II/III all tested in many indications. AZNs
cancer pipeline presents the highest number of programmes per molecule among its
US and EU peers.
Molecule type and therapeutic class. The company is focused on chemical-based
hormonal modulators, with only two exceptions in the product portfolio (Zoladex, a
synthetic peptide hormonal modulator and Iressa (a chemical pathway inhibitor). All
pipeline products are chemicals.
Indications. AZN has been historically focused on hormonal treatments for breast and
prostate cancers. The pipeline is targeting all cancer segments except colorectal and
leukaemia.
Chart 34: AZN cancer portfolio approved indications
0
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hormonal modulator Pathway inhibitor/Apoptose activator

Chart 35: AZN cancer portfolio R&D projects
0
2
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Chemical
AstraZeneca
Angiogenesis inhibitor Other anticancer agent
Pathway inhibitor/Apoptose activator Radio/chemosensitizer


53 Pharmaceuticals
Chart 36: AZN cancer portfolio positioning (marketed drugs)
Astra Zeneca oncology portfolio
Breast
Prostate
0
50
100
1 10 100 1000
Incidence
5
y

s
u
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v
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a
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THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval


Chart 37: AZN cancer portfolio positioning (phase II/III projects)
Astra Zeneca oncology pipeline
Breast
Brain
Prostate
Pancreas
Skin and Melanoma
Oesophagus
Ovarian
Renal
Bladder
Head & Neck
Cervix uteri
0
50
100
1 10 100 1000
Incidence
5
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s
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v
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a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


54 Pharmaceuticals
Table 18: AZN cancer sales (USDm)
Drug Drug trade
name
Approved
use
Molecule
type
Therapeutic
class
Most
advanced
stage
Approval
date 00 01 02 03 04 05 06e 07e 08e 09e 10e
Growth
06-10*

Approved drugs
Tamoxifen Nolvadex Breast Chemical hormonal
modulator
30/12/77 576 630 480 178 134 114 94 74 54 34 30 (2%)
Goserelin
acetate
Zoladex Prostate,
breast
synthetic
peptide
hormonal
modulator
1/12/89 734 728 794 869 917 1004 820 730 660 590 530 (10%)
Bicalutamide Casodex Prostate Chemical hormonal
modulator
4/10/95 433 569 644 854 1012 1123 1179 1226 1275 1148 918 (9%)
Anastrozole Arimidex Breast Chemical hormonal
modulator
27/12/95 156 191 331 519 811 1181 1476 1772 2037 2200 1870 13%
Fulvestrant Faslodex Breast Chemical hormonal
modulator
25/5/02 35 77 99 140 163 187 205 216 226 2%
Gefitinib Iressa NSCLC Chemical Pathway
inhibitor/
Apoptose
activator
05/05/03 67 228 389 273 164 131 130 128 127 (1%)

Pipeline drugs
Gefitinib Iressa NSCLC Chemical Pathway
inhibitor/
Apoptose
activator
Launched - - - - - - - - - - -
ZD-6474 Chemical Angiogenesis
inhibitor
Phase III - - - - - - - - - - -
ZD-4054 Chemical Other
anticancer
agent
Phase II - - - - - - - - - - -
Exherin Chemical radio/rhemos
ensitizer
Phase II - - - - - - - - - - -

Other cancer sales 30 28 18 18 14 10 10 10 10 10 10 0%
Total cancer sales 1929 2146 2369 2743 3376 3845 3907 4130 4372 4326 3712 (7%)
% of pharma sales 13% 13% 14% 15% 16% 17% 17% 17% 17% 17% 14%
% change 11% 10% 16% 23% 14% 2% 6% 6% (1%) (14%)

Supportive cancer care - - - - - - - - - - -

Total pharma sales 15408 16057 17343 18318 20866 23303 23563 24642 25163 26036 26490

* Contribution to growth 2006-10
Source: Company, Bionest Partners, Exane BNP Paribas estimates

55 Pharmaceuticals
Stock rating vs Sector: Underperform ASTRAZENECA
Target price: 2850p / - 1.8% Sector rating vs Market: Outperform Pharmaceuticals - United Kingdom
12-mth high / low (p) 2 945.0 / 2 081.0
Enterprise value (USDm) 74 909
Mkt cap. / Free float (USDm) 83 759 / 72 032
Absolute 12% 6% 34%
Rel. (DJ STOXX50) 10% (0%) 8%
Rel. (Sector) 7% 1% 3%
Reuters/Bloomberg
CAGR 1994/2006 2006/2010
CFPS 10% 6%
PER SHARE DATA {p) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
No of shares year end, basic, (m) 967.347 969.388 1 783.133 1 770.000 1 760.800 1 739.800 1 706.000 1 675.000 1 655.000 1 645.000 1 645.000 1 645.000 1 645.000 1 645.000
Average no of shares, diluted, excl. treasury stocks (m) 967.347 969.388 1 783.133 1 770.000 1 760.800 1 739.800 1 710.000 1 675.000 1 625.000 1 625.000 1 625.000 1 625.000 1 625.000 1 625.000
EPS restated 74.12 79.84 93.47 118.85 122.80 123.82 110.83 111.69 159.24 174.74 190.52 200.26 221.64 223.70
% change 2.8% 7.7% 17.1% 27.1% 3.3% 0.8% (10.5%) 0.8% 42.6% 9.7% 9.0% 5.1% 10.7% 0.9%
EPS reported 91.61 117.24 109.11 108.78 109.75
CFPS 98.01 108.28 136.76 178.65 160.73 169.62 161.09 165.61 224.21 232.18 250.79 262.07 285.88 289.41
Book value (BVPS) (a) 223.3 259.3 357.2 355.6 386.0 428.1 473.0 470.2 451.8 570.7 679.5 793.8 920.4 1048.1
Net dividend 37.73 41.16 42.37 46.22 48.40 46.40 48.37 50.75 58.39 74.10 80.80 84.93 94.00 94.87
STOCKMARKET RATIOS Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
FCF yield 2.5% 2.7% 0.7% 3.6% 1.9% 4.9% 2.7% 4.9% 8.6% 6.1% 6.7% 7.0% 7.7% 7.8%
Net yield 2.0% 1.7% 1.7% 1.6% 1.5% 1.7% 2.0% 2.1% 2.4% 2.6% 2.8% 2.9% 3.2% 3.3%
Payout 50.9% 51.6% 45.3% 38.9% 39.4% 37.5% 43.6% 45.4% 36.7% 42.4% 42.4% 42.4% 42.4% 42.4%
ENTERPRISE VALUE {USDm) 29 489 39 992 71 350 73 475 79 989 67 963 65 247 71 296 64 480 74 909 71 764 68 475 64 888 60 908
Market cap 29,287 38,006 72,643 76,169 81,823 71,137 68,193 74,719 70,433 83,759 83,759 83,759 83,759 83,759
+ Adjusted net debt (33) 426 (2,170) (3,605) (2,867) (3,844) (3,496) (3,994) (5,402) (8,289) (11,424) (14,703) (18,322) (21,959)
+ Other liabilities and commitments 1,318 780 754 755 373 362 351 340 330 320 311 301
- Revalued investments 200 242 185 11 23 46 220 262 1,373 1,373 1,373 1,373 1,373 1,373
P & L HIGHLIGHTS {USDm) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 8,502 9,126 18,445 18,103 16,480 17,841 18,849 21,426 23,950 24,305 25,493 26,140 27,160 27,781
Restated EBITDA (b) 2,110 2,224 4,970 5,320 5,016 5,316 5,401 5,917 7,872 8,569 9,268 9,686 10,600 10,705
Depreciation (354) (381) (1,006) (927) (815) (915) (1,231) (1,370) (1,370) (1,644) (1,725) (1,768) (1,837) (1,879)
Restated EBIT (b) (*) 1,756 1,843 3,964 4,393 4,201 4,401 4,170 4,547 6,502 6,925 7,543 7,917 8,762 8,826
Reported operating profit (loss) 1,773 1,817 3,908 4,330 4,156 4,356 4,111 4,547 6,502 6,925 7,543 7,917 8,762 8,826
Net financial income (charges) (21) (17) (11) 126 113 31 91 53 165 170 190 210 230 250
Affiliates 13 3 - - - - - - - - - - - -
Other (59) 0 (1,490) (581) (138) (350) 0 219 0 0 0 0 0 0
Tax (565) (547) (1,263) (1,327) (1,153) (1,177) (1,143) (1,155) (1,943) (2,093) (2,281) (2,398) (2,653) (2,677)
Minorities (10) (2) (1) (10) (11) (24) (23) (19) (18) (18) (18) (18) (18) (18)
Goodwill amortisation 16 (27) (63) (63) (45) (45) (59) - - - - - - -
Net attributable profit reported 1,131 1,255 1,143 2,538 2,967 2,836 3,036 3,645 4,706 4,984 5,434 5,712 6,322 6,380
Net attributable profit restated (c) 1,190 1,255 2,633 3,119 3,068 3,186 3,036 3,426 4,706 4,984 5,434 5,712 6,322 6,380
CASH FLOW HIGHLIGHTS {USDm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 2,110 2,224 4,977 5,320 5,016 5,316 5,401 5,917 7,872 8,569 9,268 9,686 10,600 10,705
EBITDA adjustment (b) 0 0 (7) 0 0 0 0 0 0 0 0 0 0 0
Other items 0 0 7 0 (248) (93) (74) 384 220 0 0 0 0 0
Change in WCR (105) (62) (734) (603) (1,006) 370 (1,101) (67) 332 337 353 362 377 385
Operating cash flow 2,005 2,162 4,243 4,717 3,762 5,593 4,226 6,234 8,424 8,906 9,621 10,048 10,976 11,090
Capex (725) (637) (2,731) (1,426) (1,543) (1,340) (1,597) (1,360) (892) (1,823) (1,912) (1,961) (2,037) (2,084)
Operating free cash flow (OpFCF) 1,280 1,526 1,512 3,291 2,219 4,253 2,629 4,874 7,532 7,083 7,709 8,088 8,939 9,007
Net financial items + tax paid (545) (484) (1,031) (522) (679) (764) (795) (1,193) (1,441) (1,923) (2,091) (2,188) (2,423) (2,427)
Free cash flow 735 1,042 481 2,769 1,540 3,489 1,834 3,681 6,091 5,160 5,618 5,900 6,516 6,579
Net financial investments (321) 0 2,006 740 (1) (199) 65 302 (165) (170) (190) (210) (230) (250)
Other (212) (888) 1,120 (498) (47) 82 37 262 (321) 0 0 0 0 0
Capital increase (decrease) 0 0 0 (334) (994) (1,170) (1,078) (2,192) (2,480) 0 0 0 0 0
Dividends paid (558) (613) (1,011) (1,242) (1,236) (1,225) (1,206) (1,555) (1,717) (2,103) (2,293) (2,410) (2,668) (2,692)
Increase (decrease) in net financial debt 356 458 (2,596) (1,435) 738 (977) 348 (498) (1,408) (2,887) (3,135) (3,280) (3,619) (3,637)
Cash flow, group share 1,552 1,739 3,945 4,783 4,075 4,426 4,499 5,080 6,626 6,622 7,153 7,475 8,154 8,254
BALANCE SHEET HIGHLIGHTS {USDm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Fixed operating assets, incl. gross goodwill 3,326 4,265 11,473 9,598 8,970 9,653 10,742 11,530 8,907 9,256 9,633 10,035 10,465 10,919
WCR 717 780 (477) (914) (281) (295) 1,387 2,854 346 9 (344) (707) (1,083) (1,468)
Capital employed, incl. gross goodwill 4,043 5,045 10,996 8,684 8,689 9,358 12,129 14,384 9,253 9,265 9,289 9,328 9,381 9,450
Shareholders' funds, group share 3,536 4,164 10,302 9,521 9,786 11,172 13,178 14,425 13,597 16,478 19,618 22,920 26,574 30,261
Minorities 52 53 40 21 36 54 79 93 94 112 130 148 166 184
Provisions/ Other liabilities 687 644 1,253 1,068 896 1,773 2,266 3,739 3,740 3,127 3,127 3,127 3,127 3,127
Net financial debt (cash) (33) 426 (2,170) (3,605) (2,867) (3,844) (3,496) (3,994) (5,402) (8,289) (11,424) (14,703) (18,322) (21,959)
FINANCIAL RATIOS {%) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales (% change) 1.5% 7.3% 102.1% (1.9%) (9.0%) 8.3% 5.6% 13.7% 11.8% 1.5% 4.9% 2.5% 3.9% 2.3%
Organic sales growth 13.0% 8.0% 8.0% 9.0% 0.0% 9.0% 11.5% 1.5% 4.9% 2.5% 3.9% 2.3%
Restated EBIT (% change) (*) 6.6% 5.0% 115.0% 10.8% (4.4%) 4.8% (5.2%) 9.0% 43.0% 6.5% 8.9% 5.0% 10.7% 0.7%
Restated attributable net profit (% change) (*) 7.8% 9.2% 110.3% 18.0% (2.2%) 3.8% (4.2%) 10.7% 37.4% 5.9% 9.0% 5.1% 10.7% 0.9%
Personnel costs / Sales - - - - - - - - - - - - - -
Tax rate 32.3% 29.9% 31.9% 29.4% 26.7% 26.6% 26.8% 25.1% 29.1% 29.5% 29.5% 29.5% 29.5% 29.5%
Net margin 13.4% 13.8% 6.2% 14.1% 18.1% 16.0% 16.2% 17.1% 19.7% 20.6% 21.4% 21.9% 23.3% 23.0%
Capex / Sales 8.5% 7.0% 14.8% 7.9% 9.4% 7.5% 8.5% 6.3% 3.7% 7.5% 7.5% 7.5% 7.5% 7.5%
OpFCF / Sales 15.1% 16.7% 8.2% 18.2% 13.5% 23.8% 13.9% 22.7% 31.4% 29.1% 30.2% 30.9% 32.9% 32.4%
WCR / Sales 8.4% 8.5% (2.6%) (5.0%) (1.7%) (1.7%) 7.4% 13.3% 1.4% 0.0% (1.4%) (2.7%) (4.0%) (5.3%)
Gearing (1%) 10% (21%) (38%) (29%) (34%) (26%) (28%) (39%) (50%) (58%) (64%) (69%) (72%)
EBITDA / Financial charges 99.2x 134.3x 451.8x NC NC NC NC NC NC NC NC NC NC NC
Adjusted financial debt / EBITDA NC 0.2x NC NC NC NC NC NC NC NC NC NC NC NC
WACC 10.0% 9.2% 8.2% 8.1% 8.7% 8.5% 8.6% 8.7% 7.7% 7.5% 7.5% 7.5% 7.5% 7.5%
Average number of employees
(a) !ntangibles: USD2,712.00m, or USD2p per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
AZN.L / AZN LN
Price at 16/03/06: 2 901.0p
1,137.0
5,000.0
1,500.0
2,500.0
3,500.0
Target Price

56 Pharmaceuticals
GlaxoSmithKline_______________________________________
From a Chemical-based franchise focused on leukaemias and lymphomas, to a
more diverse approach addressing all solid tumours, with a well furnished but
still early-stage pipeline
Sales. GlaxoSmithKlines sales in oncology amounted to GPB149m in 2005, i.e. 1% of
total pharma sales.
Product portfolio and pipeline depth. GSKs cancer portfolio is composed of ten
approved drugs of which six were approved before the 1970s and four have been
approved since the mid-90s. With 14 drugs in phase II/III, the pipeline is well furnished
but still early-stage (10 drugs out of 14 are in phase II).
Molecule type and therapeutic class. GSKs product portfolio mainly comprises
chemicals with a trend toward biologics and new therapeutic approaches.
Indications. GSK is expanding from leukaemias and lymphomas to all solid tumours,
which are new areas to the company.
Chart 38: GSK cancer portfolio approved indications
0
0.5
1
1.5
2
2.5
Chemical
1952
GlaxoSmithKline
Chemical
1953
Chemical
1954
Chemical
1957
Chemical
1964
Chemical
1966
Chemical
1992
Chemical
1994
Chemical
1996
Chemical
1998
Chemical
2002
MAb
2003
Chemical
2005
alkylating Antimetabolite
Antimitotic/Cell-cycle modulator Other anticancer agent
Pathway inhibitor/Apoptose activator
0
0.5
1
1.5
2
2.5
Chemical
1952
GlaxoSmithKline
Chemical
1953
Chemical
1954
Chemical
1957
Chemical
1964
Chemical
1966
Chemical
1992
Chemical
1994
Chemical
1996
Chemical
1998
Chemical
2002
MAb
2003
Chemical
2005
alkylating Antimetabolite
Antimitotic/Cell-cycle modulator Other anticancer agent

Chart 39: GSK cancer portfolio R&D projects
0
2
4
6
8
10
GlaxoSmithKline
Monoclonal antibody
Angiogenesis inhibitor Antimetabolite
Antimitotic/Cell-cycle modulator Hormonal modulator
Immunomodulator Pathway inhibitor/Apoptose activator
Prophylactic vaccine Radio/chemoprotective
Therapeutic vaccine


57 Pharmaceuticals
Chart 40: GSK cancer portfolio positioning (marketed drugs)
GSK oncology portfolio
Leukemias
Ovarian
Colorectal
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval


Chart 41: GSK cancer portfolio positioning (phase II/III projects)
GSK oncology pipeline
Leukemias
Ovarian
Liver
Stomach
Breast
Colorectal
Prostate
Renal
Bladder
Head & Neck
Skin and Melanoma
Cervix uteri
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


58 Pharmaceuticals
Table 19: GSK cancer sales (GPBm)
Drug Drug trade
name
Approved
use
Molecule
type
Therapeutic class Most
advanced
stage
Approval
date 00 01 02 03 04 05 06e 07e 08e 09e 10e
Growth
06-10*
Approved drugs
Leucovorin Wellcovorin,
Leucovorin
Colorectal Chemical Antimetabolite 20/6/52 NA NA NA NA NA NA NA NA NA NA NA
Mercaptopurine,
6-MP
Purinethol Leukemia Chemical Antimetabolite 11/9/53 NA NA NA NA NA NA NA NA NA NA NA
Busulfan Myleran Leukemia Chemical Alkylating 26/6/54 NA NA NA NA NA NA NA NA NA NA NA
Chlorambucil Leukeran Leukemia Chemical Alkylating 18/3/57 NA NA NA NA NA NA NA NA NA NA NA
Melphalan,
L-PAM
Alkeran Leukemia
lymphoma
and multiple
myeloma
Chemical Alkylating 17/1/64 NA NA NA NA NA NA NA NA NA NA NA
Thioguanine,
6-TG
Thioguanine Leukemia Chemical Antimetabolite 18/1/66 NA NA NA NA NA NA NA NA NA NA NA
Vinorelbine Navelbine NSCLC Chemical Antimitotic/Cell-
cycle modulator
23/12/94 NA NA NA NA NA NA NA NA NA NA NA
Topotecan Hycamtin Ovarian,
SCLC
Chemical Antimitotic/Cell-
cycle modulator
28/5/96 95 90 94 110 99 99 99 99 99 99 77 0%
Tositumomab Bexxar Lymphoma
and multiple
myeloma
Monoclonal
antibody
Pathway inhibitor/
Apoptose activator
Nelarabine Aranon Leukemia
lymphoma
and multiple
myeloma
Chemical Antimetabolite 01/10/05 NA NA NA NA NA NA NA NA NA NA NA
Pipeline drugs
HPV vaccine,
GSK
Cervarix
Recombinan
t protein
Prophylactic
vaccine
Phase III 100 300 400 8%
Lapatinib
ditosylate
Tykerb Chemical
Pathway inhibitor/
Apoptose activator
Phase III 100 2%
Nelarabine Chemical Antimetabolite Phase III - - - - - - - - - - -
Topotecan Chemical Antimetabolite Launched - - - - - - - - - - -
Antignrh
immunogen,
Aphton

Biological
peptide/
protein
Hormonal
modulator
Phase II - - - - - - - - - - -
Ispinesib
mesylate
Chemical
Antimitotic/Cell-
cycle modulator
Phase II - - - - - - - - - - -
GSK-679769 Chemical
Radio/
chemoprotective
Phase II - - - - - - - - - - -
GW-2286 Chemical
Angiogenesis
inhibitor
Phase II - - - - - - - - - - -
Iboctadekin
Recombinan
t protein
Immunomodulator
Phase II - - - - - - - - - - -
Vestipitant
mesylate
Chemical
Radio/chemoprote
ctive
Phase II - - - - - - - - - - -
Mapatumumab
Monoclonal
antibody
Pathway
inhibitor/Apoptose
activator
Phase II - - - - - - - - - - -
Ethynylcytidine Chemical Antimetabolite Phase II - - - - - - - - - - -
Melanoma
vaccine, SB

Recombinan
t protein
Therapeutic
vaccine
Phase II - - - - - - - - - - -

Other cancer sales 124 147 175 117 72 50 35 25 17 17 80 1%
Total cancer sales 219 237 269 227 171 149 134 124 216 416 1237 22%
% of pharma sales 1% 1% 1% 1% 1% 1% 1% 1% 1% 2% 5%
% change 8% 14% (16%) (25%) (13%) (10%) (8%) 75% 92% 197%

Supportive cancer care
Ondansetron Zofran Emesis Chemical Other anticancer
agent
4/1/91 491 601 708 774 763 793 614 182 160 144 121
Allopurinol Zyloprim Other Chemical Other anticancer
agent
Eltrombopag
olamine
Eltrombopag Chemical Other anticancer
agent
Phase II 580 12%



59 Pharmaceuticals
Stock rating vs Sector: Neutral GLAXOSMITHKLINE
Target price: 1660p / + 6.7% Sector rating vs Market: Outperform Pharmaceuticals - United Kingdom
12-mth high / low (p) 1 577.0 / 1 201.0
Enterprise value (m) 89 405
Mkt cap. / Free float (m) 87 603 / 80 945
Absolute 6% 7% 24%
Rel. (DJ STOXX50) 4% 1% 0%
Rel. (Sector) 2% 2% (5%)
Reuters/Bloomberg
CAGR 1995/2006 2006/2010
CFPS 5% 8%
PER SHARE DATA {p) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
No of shares year end, basic, (m) 3 560.000 3 593.000 6 065.000 6 065.000 6 064.000 5 843.000 5 760.000 5 736.000 5 711.000 5 630.000 5 549.000 5 469.000 5 388.000 5 388.000
Average no of shares, diluted, excl. treasury stocks (m) 3 560.000 3 593.000 6 065.000 6 065.000 6 064.000 5 912.000 5 801.000 5 736.000 5 711.000 5 630.000 5 549.000 5 469.000 5 388.000 5 388.000
EPS restated 51.97 51.10 52.63 61.14 72.59 78.65 82.33 68.13 82.11 90.01 97.79 106.23 115.23 124.44
% change (8.3%) (1.7%) 3.0% 16.2% 18.7% 8.3% 4.7% (17.2%) 20.5% 9.6% 8.6% 8.6% 8.5% 8.0%
EPS reported 72.40 78.30 82.10 68.10 82.60
CFPS 59.98 59.61 81.23 83.88 94.40 109.45 105.85 103.13 127.69 107.65 116.60 126.31 136.55 147.16
Book value (BVPS) (a) 71.9 96.4 123.1 161.7 162.8 152.8 129.0 92.5 128.0 157.8 191.3 229.2 272.0 316.6
Net dividend 35.00 36.18 32.82 34.28 38.85 38.69 40.16 42.01 43.97 47.99 52.05 56.46 61.13 66.90
FCF yield 4.0% 1.9% 2.7% 3.0% 3.7% 5.9% 6.2% 6.9% 7.8% 5.4% 5.9% 6.4% 7.0% 7.5%
Net yield 2.9% 2.0% 1.8% 1.8% 2.1% 2.7% 3.3% 3.7% 3.3% 3.1% 3.3% 3.6% 3.9% 4.3%
Payout 67.4% 70.8% 62.4% 56.1% 53.5% 49.2% 48.8% 61.7% 53.5% 53.3% 53.2% 53.1% 53.1% 53.8%
ENTERPRISE VALUE {m) 45 439 65 866 129 083 126 290 122 658 92 785 80 931 68 594 79 310 89 405 87 083 84 588 81 887 80 167
Market cap 43,335 63,517 110,763 113,147 113,146 84,368 71,207 65,766 76,598 87,603 86,342 85,098 83,837 83,837
+ Adjusted net debt 1,360 1,236 2,305 440 1,916 2,174 1,484 849 1,235 326 (737) (1,987) (3,428) (5,148)
+ Other liabilities and commitments 0 0 869 896 945 1,737 1,397 1,397 1,397 1,397 1,397 1,397 1,397 1,397
+ Revalued minority interests 796 1,211 16,950 14,351 9,879 7,627 7,137 3,370 3,370 3,370 3,370 3,370 3,370 3,370
- Revalued investments 52 98 1,804 2,544 3,228 3,121 294 2,787 3,290 3,290 3,290 3,290 3,290 3,290
P & L HIGHLIGHTS {m) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 7,980 7,983 16,164 18,079 20,489 21,212 21,441 19,986 21,660 22,437 23,401 24,422 25,372 26,757
Depreciation (292) (302) (549) (615) (702) (898) (925) (805) (1,103) (1,143) (1,193) (1,247) (1,297) (1,372)
Restated EBIT (b) (*) 2,822 2,683 4,373 5,026 6,053 6,694 6,920 5,756 6,874 7,312 7,778 8,279 8,798 9,483
Net financial income (charges) (136) (12) (157) (29) 79 (54) (68) 23 (142) 52 94 137 184 202
Affiliates 0 0 - - - - - - - - - - - -
Other 0 0 (472) 702 (1,686) (1,031) (402) (2) (2) (2) (2) (2) (2) (2)
Tax (819) (815) (1,218) (1,699) (1,327) (1,461) (1,739) (1,757) (1,916) (2,170) (2,319) (2,479) (2,646) (2,853)
Minorities (17) (20) (110) (120) (97) (110) (94) (112) (125) (125) (125) (125) (125) (125)
Goodwill amortisation 0 0 0 (11) (11) (11) (11) - - - - - - -
CASH FLOW HIGHLIGHTS {m) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 3,114 2,985 5,335 5,926 6,803 7,492 7,723 6,561 7,977 8,455 8,972 9,526 10,095 10,855
EBITDA adjustment (b) 0 0 (413) (285) (48) 100 122 0 0 0 0 0 0 0
Other items (4) 7 1,571 1,321 399 575 231 1,258 1,568 (127) (127) (127) (127) (127)
Change in WCR (194) (517) (582) (297) (67) (98) (395) (317) (323) (335) (349) (365) (380) (402)
Capex (193) (420) (1,128) (1,057) (1,240) (1,167) (1,016) (990) (906) (939) (979) (1,022) (1,061) (1,119)
Net financial items + tax paid (955) (827) (1,375) (1,728) (1,248) (1,515) (1,807) (1,734) (2,058) (2,118) (2,225) (2,342) (2,462) (2,651)
Free cash flow 1,768 1,228 3,408 3,880 4,599 5,387 4,858 4,778 6,258 4,937 5,291 5,670 6,065 6,556
Net financial investments (57) (159) 973 66 (657) (20) (12) (122) (1,066) (533) (533) (533) (533) (533)
Other (69) 26 (3,788) (238) (2,191) (1,105) (871) (2,662) (1,035) 0 0 0 0 0
Capital increase (decrease) 188 284 171 185 (1,130) (2,164) (939) (159) (1,000) (1,000) (1,000) (1,000) (1,000) (1,000)
Dividends paid (1,207) (1,255) (1,833) (2,028) (2,097) (2,356) (2,346) (2,333) (2,410) (2,495) (2,696) (2,887) (3,091) (3,303)
Increase (decrease) in net financial debt (623) (124) 1,069 (1,865) 1,476 258 (690) 498 (747) (909) (1,062) (1,250) (1,441) (1,720)
BALANCE SHEET HIGHLIGHTS {m) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
WCR 1,027 1,395 3,300 2,827 2,541 3,163 4,129 (635) (939) (604) (255) 110 490 892
Minorities 47 66 1,143 1,244 862 807 745 272 259 384 509 634 759 884
Provisions/ Other liabilities 697 468 1,675 1,657 1,810 2,833 3,042 3,465 3,353 4,152 4,027 3,902 3,777 3,652
Net financial debt (cash) 1,360 1,236 2,305 440 1,916 2,174 1,484 1,982 1,235 326 (737) (1,987) (3,428) (5,148)
Sales (% change) (4.3%) 0.0% 102.5% 11.8% 13.3% 3.5% 1.1% (6.8%) 8.4% 3.6% 4.3% 4.4% 3.9% 5.5%
Organic sales growth 8.4% 11.3% 6.5% 5.1% 1.0% 7.9% 1.0% 4.2% 4.4% 3.9% 5.5%
Restated EBIT (% change) (*) (9.9%) (4.9%) 63.0% 14.9% 20.4% 10.6% 3.4% (16.8%) 19.4% 6.4% 6.4% 6.4% 6.3% 7.8%
Restated attributable net profit (% change) (*) (7.4%) (0.8%) 73.9% 16.2% 18.7% 5.6% 2.7% (18.2%) 20.0% 8.1% 7.1% 7.1% 6.9% 8.0%
Tax rate 30.5% 30.5% 29.3% 28.4% 29.5% 26.5% 27.5% 30.4% 28.5% 29.5% 29.5% 29.5% 29.5% 29.5%
Net margin 23.4% 23.2% 18.2% 23.6% 15.4% 19.0% 21.4% 20.1% 22.2% 23.1% 23.7% 24.3% 25.0% 25.5%
Capex / Sales 2.4% 5.3% 7.0% 5.8% 6.1% 5.5% 4.7% 5.0% 4.2% 4.2% 4.2% 4.2% 4.2% 4.2%
OpFCF / Sales 34.1% 25.7% 29.6% 31.0% 28.5% 32.5% 31.1% 32.6% 38.4% 31.4% 32.1% 32.8% 33.6% 34.4%
WCR / Sales 12.9% 17.5% 20.4% 15.6% 12.4% 14.9% 19.3% (3.2%) (4.3%) (2.7%) (1.1%) 0.5% 1.9% 3.3%
Gearing 52% 35% 27% 4% 18% 22% 18% 15% 16% 4% (7%) (15%) (22%) (29%)
EBITDA / Financial charges 22.9x 248.8x 31.4x 194.5x NC 140.6x 115.4x NC 56.2x NC NC NC NC NC
Adjusted financial debt / EBITDA 0.4x 0.4x 0.5x 0.1x 0.3x 0.3x 0.2x 0.1x 0.2x 0.0x NC NC NC NC
WACC 9.7% 9.0% 7.9% 7.9% 8.4% 8.2% 8.2% 8.4% 7.4% 7.2% 7.2% 7.2% 7.2% 7.2%
Average number of employees 52,981 53,887 109,041 108,279 107,494 105,985 102,709 100,469
(a) !ntangibles: L+,079.00m, or L1p per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
GSK.L / GSK LN
Price at 16/03/06: 1 556.0p
732.5
2,400.0
1,200.0
1,600.0
2,000.0
Target Price

60 Pharmaceuticals
Merck KGaA_____________________________________________
A high ambition toward all big cancers but a recently shaped franchise with still
limited capacities.
Sales. In 2005, Mercks sales in oncology amounted to EUR218m, i.e. 6% of the
companys total pharma sales.
Product portfolio and pipeline depth. Merck has two recently approved drugs
(Erbitux and UFT) and six phase II/III pipeline drugs, a high number given the
companys size.
Molecule type and therapeutic class. MRKs pipeline is diversified both in terms of
molecule type and therapeutic class.
Indications. MRKs pipeline addresses all the big markets except the colorectal cancer
where it is already present with Erbitux and UFT.
Chart 42: MRK cancer portfolio approved indications
0
0.2
0.4
0.6
0.8
1
1.2
Monoclonal antibody
2004
Merck KgAa
Chemical
2005
Antimetabolite Pathway inhibitor/Apoptose activator

Chart 43: MRK cancer portfolio R&D projects
0
2
4
6
Merck KGaA
Chemical Monoclonal antibody
Angiogenesis inhibitor Immunomodulator Pathway inhibitor/Apoptose activator


61 Pharmaceuticals
Chart 44: MRK cancer portfolio positioning (marketed drugs)
Merck KGAa oncology portfolio
Colorectal
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval


Chart 45: MRK cancer portfolio positioning (phase II/III projects)
Merck KGAa oncology pipeline
Pancreas
Cervix uteri
Breast
Ovarian
Brain
Prostate
Renal
Skin and Melanoma
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


62 Pharmaceuticals
Table 20: MRK cancer sales (EURm)
Drug Drug
trade
name
Approved
use
Molecule type Therapeutic class Most
advanced
stage
Approval
date 00 01 02 03 04 05 06e 07e 08e 09e 10e
Growth
06-10*
Approved drugs
Cetuximab Erbitux Colorectal Monoclonal
antibody
Pathway
inhibitor/Apoptose
activator
12/02/04 77 218 380 520 640 750 850 33%
UFT UFT Colorectal Chemical Antimetabolite 5 10 20 30 40 2%
Pipeline drugs

Cetuximab Monoclonal
antibody
Pathway
inhibitor/Apoptose
activator
Launched - - - - - - - - - - -
BLP-25 Biological
peptide/
protein
Immunomodulator Phase II - - - - - - - - - - -
Cilengitide Chemical Angiogenesis
inhibitor
Phase II - - - - - - - - - - -
EMD-273063 Monoclonal
antibody
EMD-273066 Monoclonal
antibody
Matuzumab Monoclonal
antibody
Pathway
inhibitor/Apoptose
activator
Phase II 50 100 150 200 14%

Other cancer sales - - - - - - - - - - -
% of pharma sales 0% 0% 0% 0% 2% 6% 9% 13% 15% 17% 19%
% change 182% 77% 51% 31% 22% 17%




63 Pharmaceuticals
Stock rating vs Sector: Neutral MERCK KGAA
Target price: EUR 80.0 / + 2.4% Sector rating vs Market: Outperform Pharmaceuticals - Germany
12-mth high / low (EUR) 87.1 / 53.9
Absolute (6%) 12% 36%
Rel. (DJ STOXX50) (8%) 6% 10%
Rel. (Sector) (10%) 6% 5%
Reuters/Bloomberg
Analyst: Sbastien Berthon
CAGR 1995/2006 2006/2010
CFPS 9% 14%
PER SHARE DATA {EUR) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EPS restated 1.02 1.57 1.88 2.35 2.59 2.20 2.63 2.81 3.02 3.51 4.32 5.20 6.03 6.80
% change (32.8%) 53.4% 19.7% 25.5% 10.1% (15.1%) 19.5% 6.8% 7.7% 16.2% 23.0% 20.3% 16.0% 12.7%
EPS reported
CFPS 4.21 2.99 3.34 5.04 5.92 3.87 4.38 6.59 5.42 5.58 6.50 7.48 8.48 9.40
Book value (BVPS) (a) 10.1 9.8 11.5 12.2 13.3 11.7 12.3 15.1 17.3 20.5 24.5 29.3 35.0 41.4
Net dividend 0.64 0.82 0.85 0.90 0.95 1.00 0.80 1.00 0.90 1.00 1.05 1.10 1.16 1.22
FCF yield 3.5% 0.7% (3.9%) 4.6% 6.3% 0.2% 9.2% 8.7% 4.6% 3.8% 4.8% 5.6% 6.4% 7.4%
Net yield 1.8% 2.3% 2.6% 2.5% 2.3% 3.6% 3.0% 2.3% 1.4% 1.3% 1.3% 1.4% 1.5% 1.6%
Payout 62.5% 52.3% 45.3% 38.2% 36.6% 45.3% 30.4% 35.6% 29.8% 28.5% 24.3% 21.2% 19.2% 17.9%
Market cap 5,945 6,206 5,583 6,182 7,230 4,769 4,881 8,159 12,156 14,788 14,788 14,788 14,788 14,788
+ Adjusted net debt 1,216 1,580 2,769 2,811 2,295 1,998 1,466 (158) (531) (1,038) (1,689) (2,460) (3,352) (4,386)
+ Other liabilities and commitments 718 886 924 937 934 964 931 931 1,230 1,230 1,230 1,230 1,230 1,230
P & L HIGHLIGHTS {EURm) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 4,077 4,149 5,347 6,740 7,528 7,473 7,202 5,340 5,870 6,530 7,095 7,712 8,379 9,011
Restated EBITDA (b) 750 798 950 1,219 1,314 1,111 1,335 1,338 1,263 1,411 1,631 1,869 2,106 2,325
Depreciation (271) (258) (286) (362) (322) (375) (488) (486) (380) (400) (420) (440) (470) (500)
Restated EBIT (b) (*) 479 541 664 857 991 737 847 852 883 1,011 1,211 1,430 1,637 1,826
Reported operating profit (loss) 445 497 596 743 877 616 736 776 883 1,011 1,211 1,430 1,637 1,826
Net financial income (charges) (128) (100) (143) (220) (208) (148) (115) (83) (62) (52) (37) (22) (7) 8
Affiliates - - - - - - - - - - - - - -
Other 247 62 (28) 1 410 (57) (198) 335 72 0 0 0 0 0
Tax (181) (130) (205) (262) (423) (196) (205) (289) (221) (278) (341) (408) (473) (532)
Minorities (10) (9) (8) (15) (26) (12) (9) (13) (14) (16) (16) (16) (16) (16)
Goodwill amortisation (34) (44) (68) (114) (115) (121) (112) (76) - - - - - -
Net attributable profit reported 374 320 212 247 629 203 208 726 659 665 818 983 1,141 1,286
Net attributable profit restated (c) 142 226 254 291 332 258 363 456 572 665 818 983 1,141 1,286
CASH FLOW HIGHLIGHTS {EURm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 750 798 950 1,219 1,314 1,111 1,335 1,338 1,263 1,411 1,631 1,869 2,106 2,325
EBITDA adjustment (b) 0 0 0 (0) 0 0 0 0 0 0 0 0 0 0
Other items 322 (37) (12) 162 395 (81) (209) 312 69 0 0 0 0 0
Change in WCR (204) (115) (413) (131) (91) (266) (45) (300) (182) (163) (139) (152) (164) (156)
Operating cash flow 868 646 525 1,250 1,617 765 1,082 1,349 1,150 1,248 1,492 1,717 1,942 2,169
Capex (348) (373) (405) (471) (523) (412) (306) (255) (300) (350) (400) (450) (500) (537)
Operating free cash flow (OpFCF) 521 274 120 778 1,094 353 775 1,094 851 899 1,092 1,268 1,443 1,632
Free cash flow 212 44 (228) 297 463 9 455 723 568 568 714 837 963 1,108
Net financial investments (192) (178) (964) (136) 145 422 (2) 1,227 (31) 0 0 0 0 0
Other (201) (59) 155 (156) (42) (84) (273) (320) (130) 0 0 0 0 0
Dividends paid 0 (172) (151) (47) (50) (50) (54) (44) (58) (61) (64) (67) (70) (74)
Increase (decrease) in net financial debt 181 364 1,189 42 (516) (298) (531) (1,624) (373) (508) (651) (770) (893) (1,034)
Cash flow, group share 724 514 575 868 1,018 665 790 1,247 1,025 1,055 1,229 1,416 1,604 1,779
BALANCE SHEET HIGHLIGHTS {EURm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
WCR 1,247 1,311 1,817 1,723 1,397 1,505 1,679 1,521 1,514 1,676 1,816 1,968 2,132 2,288
Minorities 23 25 86 76 41 40 29 42 52 68 84 100 116 132
Provisions/ Other liabilities 1,061 1,200 1,390 1,550 1,592 1,624 1,715 1,709 1,709 1,631 1,631 1,631 1,631 1,631
Net financial debt (cash) 1,216 1,580 2,769 2,811 2,295 1,998 1,466 (158) (531) (1,038) (1,689) (2,460) (3,352) (4,386)
Sales (% change) 14.7% 1.8% 28.9% 26.1% 11.7% (0.7%) (3.6%) (25.9%) 9.9% 11.2% 8.7% 8.7% 8.6% 7.5%
Organic sales growth 7.2% 4.7% 8.5% 7.3% 11.7% 3.1% 6.2% 8.8% 9.3% 9.3% 9.9% 11.2% 8.7% 8.7%
Restated EBIT (% change) (*) 3.8% 12.8% 22.8% 29.1% 15.7% (25.7%) 15.0% 0.6% 3.7% 14.5% 19.8% 18.0% 14.5% 11.5%
Restated attributable net profit (% change) (*) (32.8%) 53.4% 19.7% 25.5% 10.1% (15.1%) 25.4% 11.9% 7.7% 16.2% 23.0% 20.3% 16.0% 12.7%
Tax rate 30.2% 25.9% 41.5% 41.1% 35.5% 36.9% 38.4% 26.2% 24.7% 29.0% 29.0% 29.0% 29.0% 29.0%
Net margin 9.4% 7.9% 4.1% 3.9% 8.7% 2.9% 3.0% 13.8% 11.5% 10.4% 11.8% 13.0% 13.8% 14.4%
Capex / Sales 8.5% 9.0% 7.6% 7.0% 7.0% 5.5% 4.3% 4.8% 5.1% 5.4% 5.6% 5.8% 6.0% 6.0%
OpFCF / Sales 12.8% 6.6% 2.2% 11.5% 14.5% 4.7% 10.8% 20.5% 14.5% 13.8% 15.4% 16.4% 17.2% 18.1%
WCR / Sales 30.6% 31.6% 34.0% 25.6% 18.6% 20.1% 23.3% 28.5% 25.8% 25.7% 25.6% 25.5% 25.4% 25.4%
Gearing 69% 92% 134% 129% 98% 97% 62% (5%) (16%) (26%) (36%) (44%) (50%) (55%)
EBITDA / Financial charges 5.9x 8.0x 6.6x 5.5x 6.3x 7.5x 11.6x 16.2x 20.3x 27.0x 43.8x 84.2x 292.6x NC
Adjusted financial debt / EBITDA 1.6x 2.0x 2.9x 2.3x 1.7x 1.8x 1.1x NC NC NC NC NC NC NC
WACC 8.0% 7.5% 6.8% 6.9% 7.7% 7.2% 7.6% 9.2% 8.2% 7.8% 7.8% 7.8% 7.8% 7.8%
Average number of employees 28,808 28,930 30,816 33,121 33,907 34,399 34,355 31,542 22,787
(a) !ntangibles: EUR986.+0m, or EUR5 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
MRCG.DE / MRK GY
Price at 16/03/06: EUR 78.2
17.1
100.0
40.0
60.0
80.0 Target Price

64 Pharmaceuticals
NewCo Merck + Schering ___________________________
The combination of Mercks high ambitions with Scherings capabilities would
create a potent player in the cancer battlefield
Sales. In 2005, the pro-forma combined sales of Merck and Schering in oncology
accounted for EUR633m, i.e. 7% of their total combined pharma sales.
Product portfolio and pipeline depth. With a total of seven approved drugs (two from
MRK, five from SCH) and 13 phase II/III pipeline drugs (six from MRK and seven from
SCH), NewCo would more than double the current size of Merck in the cancer.
Molecule type and therapeutic class. NewCos drug portfolio would be well furnished
and diversified, both in terms of molecule types and therapeutic classes, as for the two
companies separately.
Indications. NewCos pipeline would have a broad presence in all big markets.
Chart 46: MRK-SCH cancer portfolio approved indications
0
0.2
0.4
0.6
0.8
1
1.2
Chemical
1970
Merck - Schering
Newco
Chemical
1991
recombinant protein Monoclonal antibody
2001
Monoclonal antibody
2002
Chemical
2003
Monoclonal antibody
2004
Chemical
2005
Antimetabolite hormonal modulator Other anticancer agent Pathway inhibitor/Apoptose activator

Chart 47: MRK-SCH cancer portfolio R&D projects
0
2
4
6
8
Chemical Biological
peptide/protein
Monoclonal antibody Recombinant protein
Angiogenesis inhibitor Antimitotic/Cell-cycle modulator
Hormonal modulator Immunomodulator
Pathway inhibitor/Apoptose activator Radio/chemoprotective


65 Pharmaceuticals
Chart 48: MRK-SCH cancer portfolio positioning (marketed drugs)
Newco oncology pipeline
Leukemias
Colorectal
Prostate
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


Chart 49: MRK-SCH cancer portfolio positioning (phase II/III projects)
Newco oncology pipeline
Brain
Pancreas
Breast
Ovarian
Colorectal
Prostate
Renal
Bladder
Skin and Melanoma
Cervix uteri
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


66 Pharmaceuticals
Table 21: MRK-SCH cancer sales (EURm)
Drug Drug trade
name
Approved
use
Molecule
type
Therapeuti
c class
Most
advanced
stage
Approval
date 00 01 02 03 04 05 06e 07e 08e 09e 10e
Growth
06-10*
Approved drugs
Cetuximab Erbitux Colorectal Monoclonal
antibody
Pathway
inhibitor/
Apoptose
activator
12/02/04 77 218 380 520 640 750 850
21%
UFT UFT Colorectal Chemical Antimeta-
bolite
2005 5 10 20 30 40
2%
Cyproterone Androcur Prostate Chemical hormonal
modulator
1/1/70 103 101 100 99 98 97 96 95 95 95 95
0%
Fludarabine Fludara Leukemias Chemical Antimeta-
bolite
18/4/91 111 131 149 140 103 105 111 118 125 133 141
1%
Sargramostim Leukine Leukemias recombinant
protein
Other
anticancer
agent
5/3/91 96 121 120 70 68 86 92 110 127 142 156
3%
Alemtuzumab Campath Leukemias Monoclonal
antibody
Pathway
inhibitor/
Apoptose
activator
7/5/01 30 46 63 62 68 88 104 120 139 162
3%
Ibritumomab
Tiuxetan
Zevalin Lymphoma
and
multiple
myeloma
Monoclonal
antibody
Pathway
inhibitor/
Apoptose
activator
19/2/02 5 13 35 45 50 50 50
1%
Pipeline drugs
Matuzumab
Monoclonal
antibody
Pathway
inhibitor/
Apoptose
activator
Phase II 50 100 150 200 9%
Cetuximab
Monoclonal
antibody
Pathway
inhibitor/
Apoptose
activator
Launched - - - - - - - - - - -
BLP-25
Biological
peptide/
protein
Immunomo
dulator
Phase II - - - - - - - - - - -
Cilengitide Chemical
Angiogenes
is inhibitor
Phase II - - - - - - - - - - -
EMD-273063
Monoclonal
antibody
Immunomo
dulator
Phase II - - - - - - - - - - -
EMD-273066
Monoclonal
antibody
Immunomo
dulator
Phase II - - - - - - - - - - -
Ibritumomab
tiuxetan

Monoclonal
antibody
Immunomo
dulator
Launched - - - - - - - - - - -
Sargramostim
Recombina
nt protein
Radio/chem
oprotective
Launched - - - - - - - - - - -
Atamestane Chemical
Hormonal
modulator
Phase III - - - - - - - - - - -
Vatalanib Chemical
Angiogenes
is inhibitor
Phase III - - - - - - - - - - -
ZK-EPO Chemical
Antimitotic/
Cell-cycle
modulator
Phase II - - - - - - - - - - -
Paclitaxel,
Sonus
Chemical
Antimitotic/
Cell-cycle
modulator
Phase II - - - - - - - - - - -
MS-275 Chemical
Antimitotic/
Cell-cycle
modulator
Phase II - - - - - - - - - - -

Other cancer sales 40 41 40 48 64 46 27 14 7 4 2 -1%
% of pharma sales 5% 5% 6% 5% 6% 7% 8% 10% 12% 13% 14%
% change 33% 32% 28% 20% 16% 14%

Clodronate Bonefos Other Chemical Other anticancer agent 1/1/03 32 34 46 46 48 57 80 104 124 116 116 4%



67 Pharmaceuticals


68 Pharmaceuticals
Novartis __________________________________________________
A young and ambitious leader in cancer, with a well furnished but still early-stage
portfolio composed of chemical target therapies
Sales. In 2005, Novartis sales in oncology amounted to USD3,608m, i.e. 18% of the
companys total sales.
Product portfolio and pipeline depth. Novartiss cancer portfolio is composed of four
approved drugs and ten phase II/III pipeline drugs, a well-furnished but early stage
pipeline (no phase III).
Molecule type and therapeutic class. The companys product portfolio and pipeline
are mainly composed of chemical targeted therapies.
Indications. From a strong position in breast cancer and leukaemia, the companys
pipeline is targeting big cancers and some selected niche cancers.
Chart 50: NVN cancer portfolio Approved indications
0
0.5
1
1.5
2
2.5
3
3.5
Synthetic
peptide
1988
Novartis
Recombinant
protein
1992
Chemical
1997
Chemical
1998
Chemical
2001
Chemical
2002
Chemical
2004
Chemical
2005
hormonal modulator Immunomodulator
Other anticancer agent Pathway inhibitor/Apoptose activator
0
0.5
1
1.5
2
2.5
3
3.5
Synthetic
peptide
1988
Novartis
Recombinant
protein
1992
Chemical
1997
Chemical
1998
Chemical
2001
Chemical
2002
Chemical
2004
Chemical
2005
hormonal modulator Immunomodulator
Other anticancer agent Pathway inhibitor/Apoptose activator

Chart 51: NVN cancer portfolio R&D projects
0
2
4
6
8
Chemical
Novartis
gene therapy Synthetic peptide other
Antimetabolite Antimitotic/Cell-cycle modulator
Hormonal modulator Immunomodulator


69 Pharmaceuticals
Chart 52: NVN cancer portfolio positioning (marketed drugs)
Novartis oncology portfolio
Breast
Leukemias
Stomach
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval


Chart 53: NVN cancer portfolio positioning (phase II/III projects)
Novartis oncology pipeline
Brain
Pancreas
Breast
Leukemias
Ovarian
Colorectal
Prostate
Renal
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


70 Pharmaceuticals
Table 22: NVN cancer sales (USDm)
Drug Drug trade
name
Approved
use
Molecule type Therapeutic
class
Most
advanced
stage
Approval
date 00 01 02 03 04 05 06e 07e 08e 09e 10e
Growth
06-10*
Approved drugs
Octreotide Sandostatin Other Synthetic
peptide
Hormonal
modulator
21/10/88 393 484 608 695 827 902 916 911 941 988 1037 2%
Aldesleukin Proleukin Renal Recombinant
protein
Immunomodulator 5/5/92 NA NA NA NA NA NA NA NA NA NA NA
Letrozole Femara Breast Chemical Hormonal
modulator
25/7/97 74 124 170 221 386 536 697 836 962 1,058 1,142 7%
Imatinib
mesylate
Gleevec Leukemias
Stomach
Chemical Pathway
inhibitor/
Apoptose
activator
10/5/01 0 152 614 1,128 1,634 2,170 2,496 2,620 2,751 2,889 3,033 9%
Pipeline drugs
Everolimus Chemical Pathway
inhibitor/
Apoptose
activator
Launched - - - - - - - - - - -
Imatinib Chemical Antimitotic/Cell-
cycle modulator
Launched - - - - - - - - - - -
CG-7870 Gene therapy Immunomo-
dulator
Phase II - - - - - - - - - - -
HYB-2055 Other 2 Immunomo-
dulator
Phase II - - - - - - - - - - -
Midostaurin Chemical Pathway
inhibitor/
Apoptose
activator
Phase II - - - - - - - - - - -
Edotreotide Synthetic
peptide
Hormonal
modulator
Phase II - - - - - - - - - - -
Patupilone Chemical Antimitotic/Cell-
cycle modulator
Phase II - - - - - - - - - - -
Gimatecan Chemical Antimetabolite Phase II - - - - - - - - - - -
AMN-107 Chemical Pathway
inhibitor/
Apoptose
activator
Phase II - - - - - - - - - - -
SOM-230 Synthetic
peptide
Hormonal
modulator
Phase II - - - - - - - - - - -

% of pharma sales 4% 6% 10% 13% 15% 18% 19% 19% 19% 19% 19% 0%
% change 63% 83% 47% 39% 27% 14% 6% 7% 6% 6% 0%

Deferoxamine Desferal Other Chemical Other anticancer
agent
01/04/68 96 87 80 84 76 68 61 55 50 45 40 0%
Deferasirox Exjade Other Chemical Other anticancer
agent
02/11/05 100 250 400 500 600 8%
Zoledronate Zometa Lymphoma
and multiple
myeloma
Chemical Other anticancer
agent
22/2/02 0 44 489 892 1078 1224 1346 1454 1527 1603 1683 6%
Pamidronate Aredia Breast Chemical Other anticancer
agent
22/9/98 665 751 276 125 75 - - - - - - 0%



71 Pharmaceuticals
Stock rating vs Sector: Outperform NOVARTIS
Target price: CHF 79.0 / + 9.4% Sector rating vs Market: Outperform Pharmaceuticals - Switzerland
12-mth high / low (CHF) 73.5 / 55.4
Absolute 2% 8% 29%
Rel. (DJ STOXX50) 0% 3% 4%
Rel. (Sector) (2%) 3% (1%)
Reuters/Bloomberg
CAGR 1997/2006 2006/2010
CFPS 8% 10%
PER SHARE DATA {CHF) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
No of shares year end, basic, (m) 2 827.060 2 826.851 2 708.704 2 613.548 2 578.104 2 572.467 2 505.315 2 337.500 2 337.500 2 337.500 2 337.500 2 337.500 2 337.500 2 337.500
Average no of shares, diluted, excl. treasury stocks (m) 2 827.060 2 826.851 2 708.704 2 613.548 2 578.104 2 572.467 2 505.315 2 355.500 2 337.500 2 337.500 2 337.500 2 337.500 2 337.500 2 337.500
EPS restated 1.92 2.16 2.36 2.85 2.88 3.10 2.92 3.27 3.47 4.04 4.61 5.12 5.61 6.11
% change 46.5% 12.5% 9.3% 20.7% 1.2% 7.4% (5.8%) 12.0% 6.1% 16.4% 14.3% 10.9% 9.6% 8.9%
EPS reported
CFPS 2.60 2.72 2.86 3.33 2.98 3.76 3.45 3.59 4.02 5.12 5.78 6.39 7.00 7.61
Book value (BVPS) (a) 9.4 11.6 13.0 14.8 16.7 17.4 16.3 18.0 17.6 21.1 24.2 27.6 31.4 35.4
Net dividend 0.73 0.84 0.93 1.01 1.54 1.46 1.34 1.32 1.41 1.75 2.00 2.21 2.32 2.44
FCF yield 2.3% 2.7% 3.3% 4.2% 3.7% 4.8% 5.5% 5.0% 5.9% 5.8% 6.6% 7.2% 7.9% 8.5%
Net yield 1.5% 1.4% 1.6% 1.7% 2.4% 2.4% 2.6% 2.3% 2.3% 2.4% 2.8% 3.1% 3.2% 3.4%
Payout 37.8% 38.9% 39.3% 35.3% 53.4% 47.1% 46.0% 40.2% 40.8% 43.3% 43.3% 43.3% 41.4% 39.9%
Market cap 96,404 117,189 103,323 93,914 98,361 100,197 97,519 108,082 116,156 130,468 130,468 130,468 130,468 130,468
+ Adjusted net debt (5,068) (7,470) (7,974) (8,955) (8,603) (7,083) (7,289) (7,738) (2,479) (8,047) (14,043) (20,484) (27,424) (34,865)
+ Other liabilities and commitments 2,519 2,699 3,567 3,886 4,545 4,520 4,520 4,520 4,520 4,520 4,520
- Revalued investments 2,662 3,923 4,416 4,416 8,280 11,496 12,338 14,387 14,811 14,811 14,811 14,811 14,811 14,811
P & L HIGHLIGHTS {USDm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 31,180 21,950 21,619 21,224 18,759 20,891 24,864 28,247 32,212 36,066 38,269 41,027 43,785 46,602
Depreciation (926) (1,014) (1,046) (967) (1,117) (1,388) (1,385) (1,447) (1,717) (1,959) (2,116) (2,310) (2,509) (2,717)
Restated EBIT (b) (*) 4,792 4,923 4,810 4,808 4,571 5,421 5,939 6,866 7,348 8,330 9,118 9,957 10,796 11,653
Net financial income (charges) 83 526 528 647 633 612 379 227 167 170 320 470 620 770
Affiliates 31 75 157 59 78 12 69 142 193 332 464 550 615 676
Other 0 11 219 (59) (177) (265) (217) (219) (443) (150) 0 0 0 0
Tax (1,152) (1,303) (1,221) (1,079) (854) (960) (1,008) (1,126) (1,124) (1,378) (1,557) (1,720) (1,884) (2,050)
Minorities (12) (18) (18) (25) (11) (15) (44) (15) (11) (10) (10) (10) (10) (10)
Goodwill amortisation (37) (53) (41) (75) (81) (91) (102) (108) 0 0 0 0 0 0
CASH FLOW HIGHLIGHTS {USDm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 5,718 5,937 5,856 5,775 5,689 6,808 7,324 8,313 9,065 10,289 11,234 12,267 13,305 14,370
EBITDA adjustment (b) 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Other items 444 169 13 (169) (905) (222) (208) (587) (552) 182 464 550 615 676
Change in WCR (1,742) (1,027) (824) (435) (128) (316) 209 (87) 535 (277) (158) (198) (198) (203)
Capex (1,069) (1,076) (913) (802) (801) (1,071) (1,329) (1,269) (1,188) (1,438) (1,641) (1,882) (2,140) (2,418)
Net financial items + tax paid (1,069) (778) (693) (432) (221) (349) (629) (899) (957) (1,208) (1,237) (1,250) (1,264) (1,280)
Free cash flow 2,282 3,226 3,440 3,936 3,634 4,851 5,367 5,471 6,903 7,547 8,662 9,486 10,318 11,145
Net financial investments (28) 444 519 (2,195) (2,414) (1,249) 686 (361) (7,947) 260 0 0 0 0
Other (901) (66) (890) 1,155 (395) (327) (392) (879) (1,944) 0 0 0 0 0
Capital increase (decrease) (230) (13) (1,278) (691) 123 (3,318) (3,731) (1,814) (164) 0 0 0 0 0
Dividends paid (947) (1,189) (1,289) (1,224) (1,301) (1,479) (1,724) (1,968) (2,107) (2,240) (2,665) (3,045) (3,378) (3,704)
Increase (decrease) in net financial debt (176) (2,402) (503) (981) 352 1,520 (206) (449) 5,259 (5,568) (5,997) (6,441) (6,940) (7,442)
BALANCE SHEET HIGHLIGHTS {USDm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
WCR 4,168 5,103 5,294 2,821 1,929 2,887 2,473 3,059 2,317 2,594 2,753 2,951 3,149 3,352
Minorities 156 141 139 48 63 67 90 138 174 184 194 204 214 224
Net financial debt (cash) (5,068) (7,470) (7,974) (8,955) (8,603) (7,083) (7,289) (7,738) (2,479) (8,047) (14,043) (20,484) (27,424) (34,865)
Sales (% change) 19.3% (29.6%) (1.5%) (1.8%) (11.6%) 11.4% 19.0% 13.6% 14.0% 12.0% 6.1% 7.2% 6.7% 6.4%
Restated EBIT (% change) (*) 19.4% 2.7% (2.3%) (0.0%) (4.9%) 18.6% 9.6% 15.6% 7.0% 13.4% 9.5% 9.2% 8.4% 7.9%
Restated attributable net profit (% change) (*) 24.1% 12.6% 1.0% 3.6% (0.1%) 16.1% 6.3% 14.0% 5.0% 12.2% 14.3% 10.9% 9.6% 8.9%
Personnel costs / Sales 16.1% 22.4% 22.1% 21.8% 23.3% 24.6% - - - - - - - -
Tax rate 23.6% 24.3% 22.4% 20.0% 17.0% 16.6% 15.8% 16.4% 15.9% 16.5% 16.5% 16.5% 16.5% 16.5%
Net margin 11.9% 19.0% 20.6% 20.3% 22.2% 22.6% 20.4% 20.5% 19.1% 20.3% 21.8% 22.6% 23.2% 23.7%
Capex / Sales 3.4% 4.9% 4.2% 3.8% 4.3% 5.1% 5.3% 4.5% 3.7% 4.0% 4.3% 4.6% 4.9% 5.2%
OpFCF / Sales 10.7% 18.2% 19.1% 20.6% 20.6% 24.9% 24.1% 22.6% 24.4% 24.3% 25.9% 26.2% 26.5% 26.7%
WCR / Sales 13.4% 23.2% 24.5% 13.3% 10.3% 13.8% 9.9% 10.8% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2%
Gearing (27%) (33%) (34%) (39%) (34%) (25%) (24%) (23%) (7%) (21%) (32%) (41%) (48%) (54%)
EBITDA / Financial charges NC NC NC NC NC NC NC NC NC NC NC NC NC NC
WACC 7.0% 6.7% 8.0% 8.0% 8.5% 8.3% 8.3% 8.4% 7.5% 7.2% 7.2% 7.2% 7.2% 7.2%
(a) !ntangibles: USD13,29+.00m, or USD6 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
NOVN.VX / NOVN VX
Price at 16/03/06: CHF 72.2
21.4
160.0
40.0
80.0
120.0
Target Price

72 Pharmaceuticals
Novo Nordisk ___________________________________________
Novo Nordisk is committed to building a cancer franchise in its search to add a
new leg to its diabetes and coagulation businesses. It hopes to draw upon its
expertise in inflammatory mechanisms and knowledge in proteins to be
successful.
Sales. Novo Nordisk had no sales in cancer in 2005.
Product portfolio and pipeline depth. Novo Nordisk has one product in phase I/II
(IL-21 in metastatic melanoma and renal cell cancer) coming from its biotech partner
(and 39% owned) Zymogenetics.
Chart 54: NOVO cancer portfolio R&D projects
0
2
Recombinant protein
Novo nordisk
Immunomodulator


73 Pharmaceuticals
Stock rating vs Sector: Neutral NOVO NORDISK
Target price: DK 370.0 / - 4.1% Sector rating vs Market: Outperform Pharmaceuticals - Denmark
12-mth high / low (DKK) 386.0 / 288.0
Enterprise value (DKKm) 126 626
Mkt cap. / Free float (DKKm) 133 286 / 65 043
Absolute 8% 13% 19%
Rel. (DJ STOXX50) 6% 7% (3%)
Rel. (Sector) 4% 7% (8%)
Reuters/Bloomberg
CAGR 1998/2006 2006/2010
CFPS 15% 12%
PER SHARE DATA {DKK) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EPS restated 4.84 5.51 6.28 8.92 11.31 11.88 13.94 14.52 16.98 17.63 20.24 22.40 25.10 28.02
% change 13.9% 14.0% 42.0% 26.9% 5.0% 17.4% 4.1% 17.0% 3.8% 14.8% 10.7% 12.0% 11.6%
EPS reported
CFPS 7.12 7.69 8.52 12.45 16.79 16.13 21.40 21.67 26.37 24.25 27.71 30.70 34.24 38.08
Book value (BVPS) (a) 42.8 45.6 58.8 66.1 72.8 76.8 80.0 92.0 106.3 121.9 139.5 159.1
Net dividend 1.15 1.52 1.93 2.62 3.35 3.60 4.40 4.80 6.00 6.30 7.23 8.00 8.97 10.01
FCF yield 5.4% 0.9% 2.7% 3.1% 0.1% 1.0% 4.6% 4.1% 4.1% 3.4% 4.2% 4.8% 5.6% 6.4%
P / BVPS 3.50x 5.78x 5.72x 3.80x 3.13x 3.83x 3.98x 4.20x 3.63x 3.17x 2.77x 2.43x
Net yield 0.9% 0.9% 1.3% 1.0% 1.0% 1.4% 1.9% 1.6% 1.9% 1.6% 1.9% 2.1% 2.3% 2.6%
Payout 23.8% 27.5% 30.8% 29.4% 29.6% 30.3% 31.6% 33.1% 35.3% 35.7% 35.7% 35.7% 35.7% 35.7%
EV / Capital employed (incl. gross goodwill) 3.5x 6.3x 5.8x 3.7x 3.1x 3.9x 4.0x 4.6x 4.2x 3.9x 3.6x 3.3x
ENTERPRISE VALUE {DKKm) 48 798 64 708 52 132 88 956 113 096 85 670 76 664 97 698 105 722 126 626 123 036 118 913 114 052 108 466
Market cap 48,798 64,708 53,679 91,978 115,693 87,113 78,936 101,594 109,850 133,286 133,286 133,286 133,286 133,286
+ Adjusted net debt 0 0 (1,441) (2,074) (1,382) (350) (1,362) (2,264) (2,333) (4,865) (8,455) (12,578) (17,439) (23,025)
+ Other liabilities and commitments 186 186 186 186 179 179 179 179 179 179 179 179
+ Revalued minority interests
- Revalued investments 0 0 292 1,134 1,401 1,279 1,089 1,811 1,974 1,974 1,974 1,974 1,974 1,974
P & L HIGHLIGHTS {DKKm) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 12,585 13,647 16,423 20,811 23,776 25,187 26,158 29,089 33,760 38,668 42,191 45,366 48,463 51,729
Depreciation (848) (959) (916) (1,011) (1,054) (1,308) (1,619) (1,892) (1,930) (2,288) (2,581) (2,866) (3,158) (3,475)
Restated EBIT (b) (*) 2,467 2,960 3,904 4,843 5,641 6,003 6,422 6,980 8,088 9,078 10,215 11,233 12,513 13,905
Net financial income (charges) 385 269 (180) 21 367 294 1,013 594 (173) (183) (33) 17 67 117
Affiliates 0 (26) 2 3 49 27 (59) (117) 319 (200) (200) (200) (200) (200)
Other
Tax (1,053) (1,160) (1,348) (1,753) (2,165) (2,205) (2,543) (2,444) (2,370) (2,608) (2,995) (3,315) (3,714) (4,146)
Minorities 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Goodwill amortisation (27) (27) (27) (27) (27) (24) 0 0 - - - - - -
CASH FLOW HIGHLIGHTS {DKKm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 3,315 3,919 4,470 5,854 6,695 7,311 8,041 8,872 10,018 11,366 12,796 14,099 15,671 17,379
Other items 0 (175) (247) 227 879 193 889 460 1,631 (200) (200) (200) (200) (200)
Change in WCR 0 (408) (218) 909 (1,456) (712) (1,266) 107 (394) (785) (563) (508) (495) (522)
Capex 0 (1,871) (1,390) (2,429) (4,248) (4,038) (2,515) (3,451) (4,163) (3,093) (3,375) (3,629) (3,877) (4,138)
Net financial items + tax paid (668) (891) (1,528) (1,732) (1,798) (1,911) (1,512) (1,850) (2,543) (2,791) (3,028) (3,298) (3,647) (4,029)
Free cash flow 2,647 574 1,437 2,829 72 843 3,637 4,138 4,549 4,496 5,629 6,464 7,452 8,489
Net financial investments 0 132 96 (117) 114 (346) 202 140 284 0 0 0 0 0
Other (2,647) 1,692 1,918 1,084 62 18 35 94 (152) 0 0 0 0 0
Capital increase (decrease) 0 (1,970) (1,448) (2,472) (24) (386) (1,619) (1,982) (3,018) 0 0 0 0 0
Dividends paid 0 (428) (562) (691) (916) (1,161) (1,243) (1,488) (1,594) (1,964) (2,039) (2,341) (2,591) (2,903)
Increase (decrease) in net financial debt 0 0 (1,441) (633) 692 1,032 (1,012) (902) (69) (2,532) (3,591) (4,123) (4,861) (5,586)
BALANCE SHEET HIGHLIGHTS {DKKm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Fixed operating assets, incl. gross goodwill 0 0 10,554 11,072 13,797 16,513 17,151 18,162 20,727 21,533 22,327 23,091 23,809 24,473
WCR 0 0 4,426 3,092 5,613 6,629 7,322 7,017 5,398 6,183 6,746 7,254 7,749 8,271
Capital employed, incl. gross goodwill 0 0 14,980 14,164 19,410 23,142 24,473 25,179 26,125 27,715 29,073 30,344 31,558 32,744
Shareholders' funds, group share 15,185 15,738 20,137 22,928 25,224 26,504 27,634 31,756 36,704 42,099 48,173 54,945
Minorities 0 0 0 0 0 0 0 0 0 0 0 0
Provisions/ Other liabilities 1,258 1,493 1,899 1,775 1,597 2,461 2,461 2,497 2,497 2,497 2,497 2,497
Net financial debt (cash) 0 0 (1,441) (2,074) (1,382) (350) (1,362) (2,264) (2,333) (4,865) (8,455) (12,578) (17,439) (23,025)
Sales (% change) NS 8.4% 20.3% 26.7% 14.2% 5.9% 3.9% 11.2% 16.1% 14.5% 9.1% 7.5% 6.8% 6.7%
Restated EBIT (% change) (*) NS 20.0% 31.9% 24.1% 16.5% 6.4% 7.0% 8.7% 15.9% 12.2% 12.5% 10.0% 11.4% 11.1%
Restated attributable net profit (% change) (*) NS 13.6% 9.9% 38.7% 25.0% 5.8% 17.3% 3.7% 17.0% 3.8% 14.8% 10.7% 12.0% 11.6%
Tax rate 36.9% 36.2% 39.9% 36.0% 35.7% 34.9% 34.5% 32.8% 28.8% 30.0% 30.0% 30.0% 30.0% 30.0%
Net margin 14.1% 14.8% 12.2% 14.8% 16.3% 16.3% 18.5% 17.2% 17.4% 15.7% 16.6% 17.1% 17.9% 18.7%
Capex / Sales NC 13.7% 8.5% 11.7% 17.9% 16.0% 9.6% 11.9% 12.3% 8.0% 8.0% 8.0% 8.0% 8.0%
OpFCF / Sales 26.3% 10.7% 18.1% 21.9% 7.9% 10.9% 19.7% 20.6% 21.0% 18.8% 20.5% 21.5% 22.9% 24.2%
WCR / Sales NC NC 27.0% 14.9% 23.6% 26.3% 28.0% 24.1% 16.0% 16.0% 16.0% 16.0% 16.0% 16.0%
Capital employed (excl. gross goodwill) / Sales NC NC 89.0% 67.2% 80.9% 90.7% 92.3% 84.5% 75.1% 69.6% 67.0% 65.2% 63.5% 61.8%
ROE (before goodwill) NC NC 14.8% 19.8% 19.3% 18.0% 19.2% 18.9% 21.2% 19.2% 19.0% 18.4% 18.0% 17.6%
Gearing NC NC (9%) (13%) (7%) (2%) (5%) (9%) (8%) (15%) (23%) (30%) (36%) (42%)
EBITDA / Financial charges NC NC 26.8x NC NC NC NC NC 57.9x 62.1x 387.7x NC NC NC
Adjusted financial debt / EBITDA 0.0x 0.0x NC NC NC NC NC NC NC NC NC NC NC NC
ROCE, excl. gross goodwill NC NC 16.0% 22.1% 18.8% 17.1% 17.4% 19.1% 22.7% 23.6% 25.3% 26.6% 28.5% 30.5%
ROCE, incl. gross goodwill 15.7% 21.9% 18.7% 16.9% 17.2% 18.6% 22.0% 22.9% 24.6% 25.9% 27.8% 29.7%
WACC 9.7% 8.5% 7.9% 7.7% 8.2% 8.6% 8.8% 8.9% 7.9% 7.6% 7.6% 7.6% 7.6% 7.6%
(a) !ntangibles: DK+85.00m, or DK1 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
NOVOb.CO / NOVOB DC
Price at 16/03/06: DK 386.0
93.6
600.0
200.0
300.0
400.0
500.0
Target Price

74 Pharmaceuticals
Roche _____________________________________________________
A wide and solid base in rapid expansion, via an aggressive lifecycle
management and a deep and diversified pipeline
Sales. Roche Groups sales in oncology amounted to CHF11,265m in 2005, i.e. 41% of
total group sales (including Genentech and Chugai contributions).
Product portfolio and pipeline depth. Roches cancer portfolio is one of the broadest
(ten approved products) and deepest (19 phase II/III pipeline drugs) in the industry.
Molecule type and therapeutic class. The cancer portfolio is broadly diversified with
both chemical and biological compounds balanced between targeted and broad
therapies.
Indications. The company already covers all major segments and aggressively
expands toward uncovered indications.
Chart 55: Roche cancer portfolio Approved indications
0
1
2
Chem
1964
Roche / Genentech
Chem
1970
Chem
1995
Rec
prot
1996
MAb
1997
Chem
1998
MAb MAb
2000
Chem
2001
MAb MAb
2002
Rec
prot
Chem
2004
MAb
Antimitotic/Cell-cycle modulator hormonal modulator
Immunomodulator Other anticancer agent
0
1
2
Chem
1964
Roche / Genentech
Chem
1970
Chem
1995
Rec
prot
1996
MAb
1997
Chem
1998
MAb MAb
2000
Chem
2001
MAb MAb
2002
Rec
prot
Chem
2004
MAb
Antimitotic/Cell-cycle modulator hormonal modulator
Immunomodulator Other anticancer agent

Chart 56: Roche cancer portfolio R&D projects
0
2
4
6
8
Chemical
Roche/Genentech
Monoclonal
antibody
Recombinant protein Synthetic peptide other
Radio/chemoprotective Radio/chemosensitizer
0
2
4
6
8
Chemical
Roche/Genentech
Monoclonal
antibody
Recombinant protein Synthetic peptide other


75 Pharmaceuticals
Chart 57: Roche cancer portfolio positioning (marketed drugs)
Roche oncology portfolio
Liver
Breast
Leukemias
Colorectal
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval


Chart 58: Roche cancer portfolio positioning (phase II/III projects)
Roche oncology pipeline
Breast
Pancreas
Leukemias
Ovarian
Colorectal
Brain
Renal
Head & Neck
Skin and Melanoma
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


76 Pharmaceuticals
Table 23: Roche cancer sales (CHFm)
Drug Drug trade
name
Approved
use
Molecule
type
advanced
stage
Approval
date 00 01 02 03 04 05 06e 07e 08e 09e 10e
Growth
06-10*
Approved drugs
Dromostanolo
ne propionate
Masterone Breast Chemical Hormonal
modulator
floxuridine FUDR Liver Chemical Antimetabolite 18/12/70 340 303 248 249 247 197 171 150 132 116 102 0%
tretinoin,
ATRA
Vesanoid Leukemias Chemical Other anticancer
agent
Interferon
alfa-2a
Roferon-A Leukemias recombinant
protein
Immunomodulator 1/11/96 260 228 190 158 132 110 92 76 64 53 44 0%
Rituximab Rituxan Lymphoma
and multiple
myeloma
Monoclonal
antibody
Pathway inhibitor/
Apoptose activator
26/11/97 882 1695 2332 2775 3378 4154 4774 5581 6523 231 7701 20%
Capecitabine Xeloda Breast
Colorectal
Chemical Antimetabolite 30/4/98 151 260 444 515 534 796 995 1114 1204 1276 1352 2%
Trastuzumab Herceptin Breast Monoclonal
antibody
Antimitotic/Cell-
cycle modulator
25/9/98 537 806 1007 1177 1435 2146 2914 3414 3870 4257 4642 12%
Peginterferon
alfa-2a
Pegasys Liver recombinant
protein
Immunomodulator 16/10/02 94 942 1562 1810 1950 2027 2108 2194 2283 2%
Bevacizumab Avastin Colorectal Monoclonal
antibody
Angiogenesis
inhibitor
26/02/04 690 1665 3352 5217 7098 8650 10005 44%
Erlotinib Tarceva NSCLC Chemical Pathway
inhibitor/Apoptose
activator
18/11/04 17 387 916 1377 1954 2171 2388 10%
Pipeline drugs
Aldesleukin Recombinant
protein
Immunomodulator Launched - - - - - - - - - - -
Capecitabine Chemical Antimetabolite Launched - - - - - - - - - - -
Tocilizumab Monoclonal
antibody
Rituximab Monoclonal
antibody
Bevacizumab Monoclonal
antibody
Angiogenesis
inhibitor
Launched - - - - - - - - - - -
Trastuzumab Monoclonal
antibody
Pathway
inhibitor/Apoptose
activator
Launched - - - - - - - - - - -
Erlotinib Chemical Pathway
inhibitor/Apoptose
activator
Launched - - - - - - - - - - -
Paclitaxel
polyglumex
cycle modulator
Phase III - - - - - - - - - - -
Interferon,
Genentech
(gamma1b)
Recombinant
protein
Immunomodulator Phase III - - - - - - - - - - -
IGN-311 Monoclonal
antibody
-lapachone Chemical Radio/
chemosensitizer
Phase II - - - - - - - - - - -
AS-1404 Chemical Angiogenesis
inhibitor
Phase II - - - - - - - - - - -
CpG-7909 other 2 Immunomodulator Phase II - - - - - - - - - - -
Synth
erythropoiesis
prot, Gry
Synthetic
peptide
Radio/chemoprotect
ive
Phase II - - - - - - - - - - -
Anti-PTHrP
antibody,
Chugai
Recombinant
protein
Hormonal
modulator
Phase II - - - - - - - - - - -
Diflomotecan Chemical Antimetabolite Phase II - - - - - - - - - - -
Epothilone D,
Kosan
cycle modulator
Phase II - - - - - - - - - - -
LipoVIL12 other 2 Immunomodulator Phase II - - - - - - - - - - -
Pertuzumab Monoclonal
antibody
Pathway
inhibitor/Apoptose
activator
Phase II - - - - - - - - - - -
% of pharma sales 12% 18% 22% 27% 37% 41% 48% 52% 56% 58% 61% 0%
% change 52% 31% 35% 37% 41% 35% 25% 21% 13% 10% 0%

Kytril 490 437 451 437 457 500 504 516 420 357 318 -1%
CERA 50 500 1000 1400 9%
Recormon 650 746 1192 2051 0 2252 0 0 0 0 0 0%


77 Pharmaceuticals
Stock rating vs Sector: Neutral ROCHE
Target price: CHF 220.0 / + 10.2% Sector rating vs Market: Outperform Pharmaceuticals - Switzerland
12-mth high / low (CHF) 206.9 / 122.7
Enterprise value (CHFm) 209 957
Mkt cap. / Free float (CHFm) 171 628 / 145 095
Absolute 4% (0%) 60%
Rel. (DJ STOXX50) 2% (6%) 29%
Rel. (Sector) (0%) (5%) 23%
Reuters/Bloomberg
CAGR 1994/2006 2006/2010
CFPS 11% 13%
PER SHARE DATA {CHF) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EPS restated 5.05 5.25 5.74 6.36 5.23 4.23 4.24 5.52 7.18 8.94 10.97 12.85 14.40 15.62
% change 11.2% 3.8% 9.4% 10.9% (17.8%) (19.0%) 0.2% 30.1% 29.9% 24.6% 22.7% 17.2% 12.0% 8.5%
EPS reported
CFPS 6.25 6.95 5.23 8.02 6.83 7.07 7.13 5.08 9.37 11.46 13.65 15.71 17.43 18.82
Book value (BVPS) (a) 21.2 25.1 31.2 32.0 33.6 24.1 27.3 33.6 41.6 48.0 55.9 65.0 75.3 86.5
Net dividend 0.83 0.84 0.00 0.01 1.30 1.45 1.64 2.00 2.50 3.10 3.64 4.08 4.48 4.93
FCF yield 2.6% 2.3% (0.5%) 2.5% 2.4% 3.2% 2.9% 1.6% 3.1% 2.8% 3.7% 4.6% 5.6% 6.4%
Net yield 0.7% 0.6% 0.0% 0.0% 1.0% 1.3% 1.6% 1.6% 1.6% 1.6% 1.8% 2.0% 2.2% 2.5%
Payout 16.4% 16.0% 0.0% 0.2% 24.9% 34.3% 38.7% 36.2% 34.8% 34.7% 33.2% 31.7% 31.1% 31.6%
EV / OpFCF 48.2x 42.2x NC 47.1x 40.3x 29.3x 21.2x 33.6x 22.7x 23.8x 17.8x 14.0x 11.3x 9.3x
ENTERPRISE VALUE {CHFm) 119 851 139 287 180 458 172 419 129 116 118 012 118 664 141 302 177 863 209 957 204 266 196 940 187 817 177 001
Market cap 118,706 143,846 161,862 150,028 114,414 105,325 97,618 112,622 138,641 171,628 171,628 171,628 171,628 171,628
+ Adjusted net debt (3,071) (7,697) 6,186 970 (818) 6,525 (808) (6,925) (11,215) (15,340) (21,031) (28,357) (37,480) (48,295)
+ Other liabilities and commitments 2,502 2,610 2,926 2,755 2,755 2,755 2,755 2,755 2,755 2,755 2,755
+ Revalued minority interests 7,721 7,629 18,298 24,063 19,326 10,103 22,725 36,476 51,308 54,540 54,540 54,540 54,540 54,540
- Revalued investments 3,504 4,491 5,888 5,143 6,416 6,866 3,626 3,626 3,626 3,626 3,626 3,626 3,626 3,626
P & L HIGHLIGHTS {CHFm) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 18,767 24,659 27,567 27,543 29,163 26,066 28,960 31,273 35,511 40,435 45,599 50,646 54,502 57,341
Depreciation (1,404) (1,940) (2,343) (2,295) (2,476) (2,480) (2,316) (2,273) (2,313) (2,513) (2,713) (2,913) (3,113) (3,313)
Restated EBIT (b) (*) 3,672 4,504 4,981 4,773 5,312 5,224 6,104 7,254 9,025 11,488 14,227 16,775 18,881 20,565
Net financial income (charges) 1,577 1,083 1,134 1,723 1,515 835 (630) 549 296 396 546 696 846 996
Affiliates - - - - - - - - - - - - - -
Other (6,308) (21) 756 23 (1,095) (5,229) (44) (43) (11) 0 0 0 0 0
Tax (830) (965) (1,084) (1,026) (1,473) (1,224) (1,489) (2,345) (2,224) (2,971) (3,693) (4,368) (4,932) (5,390)
Minorities (60) (76) (106) (7) (34) 34 (368) (499) (943) (1,414) (1,878) (2,320) (2,715) (3,063)
Net attributable profit reported (2,031) 4,392 5,470 5,014 3,697 (1,051) 3,292 6,641 5,787 7,499 9,201 10,783 12,081 13,109
CASH FLOW HIGHLIGHTS {CHFm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 5,076 6,444 7,324 7,068 7,788 7,512 8,636 11,831 10,982 14,001 16,940 19,688 21,995 23,878
EBITDA adjustment (b) 0 0 0 0 0 192 (216) (2,304) 356 (0) (0) (0) (0) (0)
Other items (354) (465) (2,766) (841) (1,897) (1,218) 465 (3,013) (321) 0 0 0 0 (1)
Change in WCR (489) (812) (3,448) (367) (760) (322) (791) 227 488 (892) (935) (914) (698) (514)
Capex (1,746) (1,863) (2,037) (2,202) (1,931) (2,139) (2,493) (2,535) (3,668) (4,272) (4,544) (4,704) (4,644) (4,418)
Operating free cash flow (OpFCF) 2,487 3,304 (927) 3,658 3,200 4,025 5,601 4,206 7,837 8,837 11,461 14,071 16,652 18,945
Net financial items + tax paid 747 118 50 697 42 (389) (2,119) (1,796) (1,928) (2,575) (3,147) (3,672) (4,086) (4,394)
Free cash flow 3,234 3,422 (877) 4,355 3,242 3,636 3,482 2,410 5,909 6,262 8,314 10,399 12,566 14,551
Net financial investments (1,138) (10,139) 1,131 4,123 1,245 1,261 1,619 (487) 3,091 0 0 0 0 0
Other (14,769) 11,738 (1,036) (2,789) (2,486) (11,159) 3,502 6,498 (1,189) 0 0 0 0 0
Capital increase (decrease) 0 0 0 (875) 706 20 (15) (822) (1,732) 0 0 0 0 0
Dividends paid (647) (716) (750) (835) (919) (1,101) (1,255) (1,482) (1,789) (2,137) (2,622) (3,073) (3,443) (3,736)
Increase (decrease) in net financial debt 13,320 (4,305) 1,532 (3,979) (1,788) 7,343 (7,333) (6,117) (4,290) (4,125) (5,691) (7,326) (9,123) (10,815)
BALANCE SHEET HIGHLIGHTS {CHFm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
WCR 7,604 6,913 9,999 7,642 7,867 8,996 7,490 6,719 6,430 7,322 8,257 9,170 9,869 10,383
Minorities 1,187 1,149 3,047 4,428 4,894 4,963 5,594 5,070 6,821 8,235 10,114 12,434 15,149 18,212
Net financial debt (cash) 7,722 3,417 4,949 970 (818) 6,525 (808) (6,925) (11,215) (15,340) (21,031) (28,357) (37,480) (48,295)
Sales (% change) 17.5% 31.4% 11.8% (0.1%) 5.9% (10.6%) 11.1% 8.0% 13.6% 13.9% 12.8% 11.1% 7.6% 5.2%
Restated EBIT (% change) (*) 6.7% 22.7% 10.6% (4.2%) 11.3% (1.7%) 16.8% 18.8% 24.4% 27.3% 23.8% 17.9% 12.6% 8.9%
Restated attributable net profit (% change) (*) 11.2% 3.8% 9.4% 10.9% (17.8%) (19.0%) 0.2% 26.6% 29.9% 24.6% 22.7% 17.2% 12.0% 8.5%
Tax rate 15.8% 17.3% 17.7% 15.7% 21.6% 21.0% 26.4% 23.3% 24.8% 25.0% 25.0% 25.0% 25.0% 25.0%
Net margin (10.5%) 18.1% 20.2% 18.2% 12.8% (4.2%) 12.6% 22.8% 19.0% 22.0% 24.3% 25.9% 27.1% 28.2%
Capex / Sales 9.3% 7.6% 7.4% 8.0% 6.6% 8.2% 8.6% 8.1% 10.3% 10.6% 10.0% 9.3% 8.5% 7.7%
OpFCF / Sales 13.3% 13.4% (3.4%) 13.3% 11.0% 15.4% 19.3% 13.4% 22.1% 21.9% 25.1% 27.8% 30.6% 33.0%
WCR / Sales 40.5% 28.0% 36.3% 27.7% 27.0% 34.5% 25.9% 21.5% 18.1% 18.1% 18.1% 18.1% 18.1% 18.1%
Gearing (16%) (34%) 21% 3% (2%) 25% (3%) (21%) (27%) (32%) (37%) (42%) (48%) (53%)
EBITDA / Financial charges NC NC NC NC NC NC 13.4x NC NC NC NC NC NC NC
Adjusted financial debt / EBITDA NC NC 0.8x 0.1x NC 0.8x NC NC NC NC NC NC NC NC
WACC 7.2% 6.9% 8.0% 8.0% 8.6% 8.2% 8.5% 8.6% 7.6% 7.4% 7.4% 7.4% 7.4% 7.4%
(a) !ntangibles: CHF12,388.00m, or CHF15 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
ROG.VX / ROG VX
Price at 16/03/06: CHF 199.7
71.4
400.0
125.0
175.0
225.0
275.0
325.0
Target Price

78 Pharmaceuticals
Sanofi-Aventis__________________________________________
From a highly concentrated chemical-based portfolio focused on high incidence
cancers, to all cancer market segments with a deep and diversified pipeline
Sales. Sanofi-Aventiss sales in cancer amounted to EUR3,260m in 2005, i.e. 12% of
total group sales.
Product portfolio and pipeline depth. The cancer products portfolio is highly
concentrated, with three approved drugs. In contrast, the pipeline is rich with 12 drugs
in phase II/III.
Molecule type and therapeutic class. The most important approved drugs are
chemicals, but Sanofi-Aventiss pipeline is mature and well diversified with the
apparition of biological compounds and targeted therapies.
Indications. Primarily positioned on high incidence cancers, the company is expanding
toward all cancer market segments
Chart 59: SAVE cancer portfolio Approved indications
0
0.5
1
1.5
2
2.5
Chemical
1996
Sanofi-Aventis
Chemical
1999
Biological
peptide/protein
2002
Chemical Chemical
2004
synthetic peptide
alkylating Antimetabolite Antimitotic/Cell-cycle modulator
hormonal modulator Radio/chemoprotective

Chart 60: SAVE cancer portfolio R&D projects
0
2
4
6
8
10
12
Biological
peptide/protein
Sanofi-Aventis
Cellular therapy Chemical gene therapyRecombinant protein other
Alkylating Angiogenesis inhibitor
Therapeutic vaccine


79 Pharmaceuticals
Chart 61: SAVE cancer portfolio positioning (marketed drugs)
Sanofi Aventis oncology portfolio
Breast
Colorectal
Prostate
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval


Chart 62: SAVE cancer portfolio positioning (phase II/III projects)
Sanofi Aventis oncology pipeline
Pancreas
Cervix uteri
Breast
Ovarian
Colorectal
Brain
Prostate
Head & Neck
Skin and Melanoma
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


80 Pharmaceuticals
Table 24: SAVE cancer sales (EURm)
Drug Drug trade
name
Approved
use
Molecule
type
advanced
stage
Approval
date
00 01 02 03 04 05 06e 07e 08e 09e 10e Growth
06-10*
Approved drugs
Docetaxel Taxotere Breast
NSCLC
Prostate
Chemical Antimetabolite 14/5/96 744 1003 1261 1362 1434 1609 1818 1982 2140 2290 1374 -9%
Oxaliplatin Eloxatin Colorectal Chemical Alkylating 9/8/02 141 194 389 824 1203 1564 1877 2170 2396 2530 2672 16%
Leuprorelin Eligard Prostate Synthetic
peptide
Hormonal
modulator
14/12/04 4.0 32.9 58 87 109 120 129 138 124 0%
Pipeline drugs

Oxaliplatin Chemical Alkylating Launched - - - - - - - - - - -
Trilostane Chemical
Hormonal
modulator
Launched - - - - - - - - - - -
Tirapazamine
Chemical,
synthetic
Radio/
Chemosensitizer
Phase III - - - - - - - - - - -
XRP-9881 Chemical
Antimitotic/Cell-
cycle modulator
Phase III - - - - - - - - - - -
AVE-8062A Chemical
Angiogenesis
inhibitor
Phase II - - - - - - - - - - -
IDD-3
Cellular
therapy
Immunomodulator
Phase II - - - - - - - - - - -
Melanoma gene
therapy,
MediGene
gene therapy Immunomodulator
Phase II - - - - - - - - - - -
Meclinertant Chemical Immunomodulator Phase II - - - - - - - - - - -
SR-31747 Chemical Immunomodulator Phase II - - - - - - - - - - -
CEA-TRICOM
Recombinant
protein
Therapeutic
vaccine
Phase II - - - - - - - - - - -
ALVAC-
CEA/B7.1
Other 2
Therapeutic
vaccine
Phase II - - - - - - - - - - -
XRP-6258 Chemical
Antimitotic/Cell-
cycle modulator
Phase II - - - - - - - - - - -
% of pharma sales 4% 5% 7% 9% 11% 12% 13% 14% 15% 15% 12%
% change 35% 38% 34% 21% 21% 17% 12% 9% 6% -16%
Rasburicase Elitek Other Biological
peptide/
protein
Radio/
chemoprotective
Xaliproden
hydrochloride
Chemical
Radio/
chemoprotective
Phase III - - - - - - - - - - -
Epoetin delta
Recombinant
protein
Radio/
chemoprotective
Registration - - - - - - - - - - -


81 Pharmaceuticals
Stock rating vs Sector: Outperform SANOFI-AVENTIS
Target price: EUR 89.0 / + 20.3% Sector rating vs Market: Outperform Pharmaceuticals - France
12-mth high / low (EUR) 78.8 / 62.6
Absolute 0% 3% 18%
Rel. (DJ STOXX50) (1%) (2%) (4%)
Rel. (Sector) (4%) (2%) (9%)
Reuters/Bloomberg
CAGR 1995/2005 2005/2010
CFPS 17% 9%
No of shares year end, basic, (m) 425.459 447.818 731.017 731.161 731.711 715.967 700.000 1 347.480 1 334.800 1 334.800 1 334.800 1 334.800 1 334.800 1 334.800
Average no of shares, diluted, excl. treasury stocks (m) 425.459 447.818 731.587 731.587 731.711 727.700 703.000 1 347.480 1 334.800 1 334.800 1 334.800 1 334.800 1 334.800 1 334.800
EPS restated 0.80 0.87 0.85 1.35 1.88 2.43 2.94 3.73 4.75 5.31 5.62 6.01 6.56 6.80
% change 10.1% 8.7% (1.6%) 57.6% 39.5% 29.3% 21.1% 26.8% 27.3% 11.9% 5.8% 6.9% 9.1% 3.8%
EPS reported
CFPS 1.02 1.18 1.20 1.78 2.47 3.04 3.45 4.03 4.76 5.80 6.14 6.58 7.17 7.47
Book value (BVPS) (a) 8.1 8.5 4.9 5.9 7.9 8.4 9.0 30.5 32.1 34.1 36.2 38.6 41.5 44.4
Net dividend 0.27 0.28 0.32 0.44 0.66 0.84 1.02 1.20 1.52 1.70 1.80 1.93 2.10 2.30
FCF yield 0.2% 1.1% 1.4% 2.0% 2.5% 0.6% 5.1% 4.7% 5.8% 5.9% 6.4% 7.0% 7.6% 8.1%
Net yield 1.2% 1.0% 0.8% 0.9% 1.0% 1.3% 2.0% 2.1% 2.3% 2.3% 2.4% 2.6% 2.8% 3.1%
Payout 33.4% 32.2% 37.2% 32.7% 35.1% 34.6% 34.7% 32.2% 32.1% 32.1% 32.1% 32.1% 32.1% 33.7%
Market cap 9,136 12,870 29,073 37,012 50,740 47,076 36,758 75,233 89,656 98,775 98,775 98,775 98,775 98,775
+ Adjusted net debt 227 (38) (2,046) (2,467) (3,423) (2,049) (2,397) 14,022 9,896 4,873 756 (3,831) (8,838) (14,105)
+ Other liabilities and commitments 846 1,134 1,063 796 763 5,902 5,902 5,902 5,902 5,902 5,902 5,902
+ Revalued minority interests 108 138 268 241 185 133 105 784 1,628 1,688 1,588 1,488 1,489 1,489
- Revalued investments 444 449 530 824 729 693 714 3,878 3,202 3,657 3,534 3,515 3,517 3,622
Sales 3,916 3,955 5,350 5,983 6,486 7,448 8,048 25,199 27,311 29,079 30,571 31,508 33,322 34,085
Restated EBITDA (b) 599 722 1,207 1,798 2,272 2,721 3,182 8,740 10,055 10,777 11,597 12,251 13,193 13,556
Depreciation (160) (171) (236) (236) (236) (236) (236) (1,100) (983) (1,083) (1,183) (1,283) (1,383) (1,483)
Restated EBIT (b) (*) 438 551 971 1,562 2,036 2,485 2,946 7,640 9,072 9,694 10,414 10,968 11,810 12,073
Reported operating profit (loss) 513 616 971 1,597 2,104 2,614 3,075 7,681 9,119 9,994 10,414 10,968 11,810 12,073
Net financial income (charges) (73) (56) (48) (17) 34 (44) 26 (739) (245) (150) (30) 100 240 380
Affiliates 18 5 2 8 14 20 20 534 584 695 781 868 953 1,034
Other (53) (73) 46 281 10 24 0 0 0 0 0 0 0
Tax (72) (102) (292) (611) (842) (746) (1,058) (2,146) (2,774) (3,052) (3,219) (3,431) (3,735) (3,860)
Minorities 8 (1) (8) (14) (1) (87) (3) (305) (349) (399) (444) (482) (514) (546)
Goodwill amortisation (47) (47) 0 (4) (7) (8) (8) 0 - - - - - -
Net attributable profit reported 293 342 625 1,005 1,583 1,759 2,076 5,025 6,335 7,088 7,502 8,023 8,753 9,081
Net attributable profit restated (c) 293 342 625 981 1,367 1,759 2,060 5,025 6,335 7,088 7,502 8,023 8,753 9,081
EBITDA (reported) 673 787 1,207 1,833 2,340 2,850 3,311 8,781 10,102 11,077 11,597 12,251 13,193 13,556
EBITDA adjustment (b) (74) (65) 0 (35) (68) (129) (129) (41) (47) (300) 0 0 0 0
Other items (20) (34) 25 149 341 393 278 (92) (333) 596 337 386 439 489
Change in WCR (133) (95) (64) (96) 86 (595) (163) (800) (230) (452) (456) (419) (553) (441)
Operating cash flow 446 593 1,168 1,851 2,699 2,519 3,297 7,848 9,492 10,921 11,477 12,218 13,079 13,604
Capex (286) (295) (414) (465) (619) (1,435) (371) (1,400) (1,143) (1,745) (1,834) (1,890) (1,999) (2,045)
Operating free cash flow (OpFCF) 160 298 754 1,386 2,080 1,084 2,926 6,448 8,349 9,177 9,643 10,327 11,079 11,559
Net financial items + tax paid (146) (158) (340) (628) (808) (790) (1,032) (2,885) (3,019) (3,202) (3,249) (3,331) (3,495) (3,480)
Free cash flow 14 140 414 758 1,272 294 1,894 3,563 5,330 5,975 6,394 6,996 7,584 8,079
Net financial investments 210 58 1,376 76 506 26 21 (19,225) 0 0 0 0 0 0
Other 6 170 294 (32) (50) 106 1 0 0 0 0 0 0 0
Capital increase (decrease) 8 11 6 3 7 (1,166) (996) 0 0 0 0 0 0 0
Dividends paid (107) (115) (232) (232) (317) (473) (582) (1,370) (1,614) (2,035) (2,277) (2,409) (2,577) (2,811)
Increase (decrease) in net financial debt (132) (265) (1,857) (572) (1,418) 1,213 (338) 17,032 (3,716) (3,940) (4,117) (4,587) (5,007) (5,267)
Cash flow, group share 433 529 880 1,300 1,804 2,215 2,424 5,433 6,353 7,736 8,199 8,778 9,574 9,966
WCR 750 861 628 557 200 793 910 2,255 2,485 2,937 3,393 3,812 4,365 4,806
Minorities 41 41 33 28 21 17 18 428 777 777 777 777 777 777
Provisions/ Other liabilities 429 384 846 1,134 1,063 796 763 17,413 15,525 13,010 11,579 10,148 8,716 7,285
Net financial debt (cash) 227 (38) (1,895) (2,467) (3,885) (2,672) (3,010) 14,022 10,306 6,366 2,249 (2,338) (7,345) (12,612)
Sales (% change) 8.6% 1.0% 35.3% 11.8% 8.4% 14.8% 8.1% 213.1% 8.4% 6.5% 5.1% 3.1% 5.8% 2.3%
Restated EBIT (% change) (*) (11.2%) 25.8% 76.1% 60.9% 30.4% 22.1% 18.6% 159.3% 18.7% 6.9% 7.4% 5.3% 7.7% 2.2%
Restated attributable net profit (% change) (*) 11.9% 14.4% 60.7% 57.6% 39.5% 28.6% 17.0% 143.0% 26.1% 11.9% 5.8% 6.9% 9.1% 3.8%
Personnel costs / Sales 28.0% - - - - - - - - - - - - -
Tax rate 18.7% 20.9% 31.6% 37.6% 34.8% 28.9% 33.9% 30.9% 31.3% 31.0% 31.0% 31.0% 31.0% 31.0%
Net margin 7.3% 8.7% 11.8% 17.0% 24.4% 24.8% 25.8% 21.2% 24.5% 25.7% 26.0% 27.0% 27.8% 28.2%
Capex / Sales 7.3% 7.5% 7.7% 7.8% 9.5% 19.3% 4.6% 5.6% 4.2% 6.0% 6.0% 6.0% 6.0% 6.0%
OpFCF / Sales 4.1% 7.5% 14.1% 23.2% 32.1% 14.6% 36.4% 25.6% 30.6% 31.6% 31.5% 32.8% 33.2% 33.9%
WCR / Sales 19.1% 21.8% 11.7% 9.3% 3.1% 10.6% 11.3% 8.9% 9.1% 10.1% 11.1% 12.1% 13.1% 14.1%
Gearing 6% (1%) (57%) (57%) (59%) (34%) (38%) 34% 23% 11% 2% (7%) (16%) (23%)
EBITDA / Financial charges 8.1x 12.8x 25.1x 105.7x NC 61.8x NC 11.8x 41.0x 71.8x 386.6x NC NC NC
Adjusted financial debt / EBITDA 0.4x NC NC NC NC NC NC 1.6x 1.0x 0.5x 0.1x NC NC NC
WACC 8.6% 8.3% 8.0% 7.9% 8.4% 8.2% 8.3% 7.5% 6.9% 7.0% 7.0% 7.0% 7.0% 7.0%
(a) !ntangibles: EUR60,905.00m, or EUR+5 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
SASY.PA / SAN FP
Price at 16/03/06: EUR 74.0
11.2
120.0
20.0
60.0
100.0
Target Price

82 Pharmaceuticals
Schering AG ____________________________________________
From leukaemias to all big cancers, with still a diversified approach based on a
late-stage pipeline.
Sales. Schering AGs sales in oncology amounted to EUR429m in 2005, i.e. 8% of total
group sales.
Product portfolio and pipeline depth. Scherings product portfolio is composed of five
drugs with a late stage pipeline composed of seven phase II/III drugs.
Molecule type and therapeutic class. Both product portfolio and pipeline are
diversified with chemical or biologics, targeted or broad therapies.
Indications. From a focused positioning on leukaemias, Schering is expanding to all
big cancers while maintaining a diversified approach.
Chart 63: SCH cancer portfolio approved indications
0
0.2
0.4
0.6
0.8
1
1.2
Chemical
1970
Schering AG
Chemical
1991
Recombinant
protein
Monoclonal
antibody
2001
Monoclonal
antibody
2002
Chemical
2003
0
0.2
0.4
0.6
0.8
1
1.2
Chemical
1970
Schering AG
Chemical
1991
Recombinant
protein
Monoclonal
antibody
2001
Monoclonal
antibody
2002
Chemical
2003

Chart 64: SCH cancer portfolio R&D projects
0
2
4
6
Chemical
Schering AG
Monoclonal antibody Recombinant protein
Angiogenesis inhibitor Antimitotic/Cell-cycle modulator Hormonal modulator
Immunomodulator Radio/chemoprotective


83 Pharmaceuticals
Chart 65: SCH cancer portfolio positioning (marketed drugs)
Schering oncology portfolio
Leukemias
Prostate
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 approval


Chart 66: SCH cancer portfolio positioning (phase II/III projects)
Schering oncology pipeline
Colorectal
Skin and Melanoma
Breast
Ovarian
Brain
Renal
Pancreas
Bladder
0
50
100
1 10 100 1000
Incidence
5
y

s
u
r
v
i
v
a
l
THE BIG CHALLENGE
BIG AND CROWDED
COVERED NICHE
CHALLENGING NICHE
Satisfying
treatment
High
unmet
need
IMPROVABLE NICHES
1 project


84 Pharmaceuticals
Table 25: SCH cancer sales (EURm)
Drug Drug trade
name
Approved
use
Molecule type Therapeutic
class
Most
advanced
stage
Approval
date 00 01 02 03 04 05 06e 07e 08e 09e 10e
Growth
06-10*
Approved drugs
Cyproterone Androcur Prostate Chemical Hormonal
modulator
1/1/70 103 101 100 99 98 97 96 95 95 95 95 0%
Fludarabine Fludara Leukemias Chemical Antimetabolite 18/4/91 111 131 149 140 103 105 111 118 125 133 141 4%
Sargramostim Leukine Leukemias recombinant
protein
Other
anticancer
agent
5/3/91 96 121 120 70 68 86 92 110 127 142 156 8%
Alemtuzumab Campath Leukemias Monoclonal
antibody
Pathway
inhibitor/
Apoptose
activator
7/5/01 30 46 63 62 68 88 104 120 139 162 9%
Ibritumomab
Tiuxetan
Zevalin Lymphoma
and multiple
myeloma
Monoclonal
antibody
Pathway
inhibitor/
Apoptose
activator
19/2/02 5 13 35 45 50 50 50 2%
Pipeline drugs
Ibritumomab
tiuxetan
Monoclonal
antibody
Immunomodu
lator
Launched - - - - - - - - - - -
Sargramostim
Recombinant
protein
Radio/chemo
protective
Launched - - - - - - - - - - -
Atamestane Chemical
Hormonal
modulator
Phase III - - - - - - - - - - -
Vatalanib Chemical
Angiogenesis
inhibitor
Phase III - - - - - - - - - - -
ZK-EPO Chemical
Antimitotic/Ce
ll-cycle
modulator
Phase II - - - - - - - - - - -
Paclitaxel,
Sonus
Chemical
Antimitotic/Ce
ll-cycle
modulator
Phase II - - - - - - - - - - -
MS-275 Chemical
Antimitotic/Ce
ll-cycle
modulator
Phase II - - - - - - - - - - -
Other cancer sales 40 41 40 48 64 46 27 14 7 4 2 -3%
% of pharma sales 8% 9% 9% 9% 8% 8% 8% 8% 9% 9% 9%
%
change
21% 7% -8% -5% 4% 8% 8% 8% 7% 8%
Clodronate Bonefos Other Chemical Other
anticancer
agent
1/1/03 32 34 46 46 48 57 80 104 124 116 116 5%


85 Pharmaceuticals
Stock rating vs Sector: Neutral SCHERING
Target price: EUR 77.0 / - 6.7% Sector rating vs Market: Outperform Pharmaceuticals - Germany
12-mth high / low (EUR) 84.6 / 49.6
Absolute 46% 51% 50%
Rel. (DJ STOXX50) 43% 43% 21%
Rel. (Sector) 40% 44% 15%
Reuters/Bloomberg
CAGR 1995/2005 2005/2010
CFPS 7% 6%
PER SHARE DATA {EUR) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05p Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EPS restated 1.27 1.43 1.68 2.11 2.41 2.45 2.35 2.55 3.18 3.41 3.68 3.96 4.19 4.54
% change 18.4% 12.7% 17.9% 25.0% 14.5% 1.8% (4.5%) 8.6% 24.8% 7.1% 8.0% 7.7% 5.8% 8.5%
EPS reported
CFPS 2.47 2.23 2.26 2.88 2.92 3.45 3.60 4.00 4.87 5.28 5.59 5.90 6.00 6.44
Book value (BVPS) (a) 9.5 9.8 10.4 11.5 12.8 14.7 14.6 15.3 17.7 19.8 22.0 24.5 27.0 30.3
Net dividend 0.43 0.44 0.82 1.00 0.83 0.93 0.90 1.07 1.33 1.43 1.54 1.66 1.76 1.91
STOCKMARKET RATIOS Dec. 02 Dec. 03 Dec. 04 Dec. 05p Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
FCF yield 2.6% 2.5% (2.1%) 1.7% 2.3% 8.0% 3.2% 6.6% 6.5% 4.5% 4.8% 5.1% 5.2% 5.5%
Net yield 1.5% 1.3% 2.2% 1.8% 1.4% 1.6% 2.3% 2.3% 2.5% 1.7% 1.9% 2.0% 2.1% 2.3%
Payout 33.6% 31.1% 48.7% 47.5% 34.4% 37.9% 38.5% 41.9% 42.0% 42.0% 42.0% 42.0% 42.0% 42.0%
Market cap 6,017 6,902 7,357 11,077 11,498 11,349 7,971 9,038 10,235 15,970 16,032 15,970 15,970 15,650
+ Adjusted net debt (789) (822) (397) (418) (62) (566) (629) (556) (407) (868) (1,364) (1,880) (2,384) (2,913)
+ Other liabilities and commitments 1,071 1,134 1,201 1,278 1,035 560 560 560 560 560 560 560 560 560
P & L HIGHLIGHTS {EURm) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05p Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 3,194 3,285 3,674 4,493 4,842 5,023 4,828 4,907 5,307 5,647 5,840 6,023 6,192 6,433
Restated EBITDA (b) 656 653 752 879 954 1,059 998 1,066 1,275 1,393 1,475 1,552 1,621 1,709
Depreciation (203) (187) (184) (201) (246) (272) (265) (305) (348) (359) (365) (371) (376) (384)
Restated EBIT (b) (*) 453 466 568 678 708 787 733 761 927 1,034 1,110 1,181 1,245 1,325
Reported operating profit (loss) 422 409 536 640 668 741 686 761 927 1,034 1,110 1,181 1,245 1,325
Net financial income (charges) (36) (11) (74) (24) (87) (93) (8) (9) 42 4 14 24 29 29
Affiliates 18 25 54 97 149 96 0 0 0 0 0 0 0 0
Other (57) (78) (32) 401 23
Tax (167) (175) (181) (290) (270) (276) (255) (249) (346) (374) (405) (434) (459) (488)
Minorities (8) (4) (6) (9) (10) (2) (3) (3) (5) (5) (5) (5) (5) (5)
Goodwill amortisation (32) (35) (32) (38) (40) (46) (47) 0 - - - - - -
CASH FLOW HIGHLIGHTS {EURm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05p Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 656 632 752 879 954 1,059 998 1,066 1,275 1,393 1,475 1,552 1,621 1,709
Other items 53 (7) 137 61 (61) (11) 8 (12) (114) (22) (22) (22) (22) (22)
Change in WCR (38) (122) (356) (180) 17 (165) (140) 139 35 34 33 33 32 31
Operating cash flow 672 524 533 760 910 883 866 1,193 1,195 1,405 1,486 1,562 1,631 1,718
Capex (330) (168) (267) (210) (346) 391 (322) (327) (322) (343) (354) (365) (376) (390)
Operating free cash flow (OpFCF) 341 356 266 550 564 1,274 544 865 873 1,062 1,132 1,197 1,255 1,328
Free cash flow 157 175 (158) 196 263 911 260 601 666 720 772 816 826 869
Net financial investments 1 0 (3) 84 (208) (924) 57 58 (622) 0 0 0 0 0
Other 1 69 (172) (94) (213) 757 (74) (553) 0 0 0 0 0 0
Capital increase (decrease) 0 (123) (1) 0 0 (76) 0 0 0 0 0 0 0 0
Dividends paid (70) (87) (91) (165) (198) (164) (180) (180) (193) (260) (277) (300) (322) (340)
Increase (decrease) in net financial debt (89) (32) 425 (21) 356 (504) (63) 73 149 (461) (496) (516) (504) (529)
Cash flow, group share 507 457 455 571 578 683 717 785 946 1,021 1,086 1,142 1,162 1,221
BALANCE SHEET HIGHLIGHTS {EURm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05p Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
WCR 1,072 1,268 1,426 1,726 1,721 1,909 1,985 1,832 1,797 1,764 1,730 1,698 1,666 1,635
Minorities 45 48 55 92 15 15 16 17 22 27 32 37 42 47
Net financial debt (cash) (789) (822) (397) (418) (62) (566) (629) (556) (407) (868) (1,364) (1,880) (2,384) (2,913)
FINANCIAL RATIOS {%) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05p Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales (% change) 18.5% 2.9% 11.8% 22.3% 7.8% 3.7% (3.9%) 1.6% 8.2% 6.4% 3.4% 3.1% 2.8% 3.9%
Restated EBIT (% change) (*) 30.4% 2.8% 21.9% 19.3% 4.4% 11.2% (6.9%) 3.8% 21.9% 11.5% 7.4% 6.4% 5.4% 6.5%
Restated attributable net profit (% change) (*) 18.4% 12.5% 15.8% 23.1% 14.5% 1.8% (3.9%) 7.0% 23.7% 6.7% 8.4% 7.2% 5.8% 6.4%
Tax rate 40.1% 40.3% 41.4% 50.3% 45.9% 41.3% 34.1% 33.1% 35.7% 36.0% 36.0% 36.0% 36.0% 36.0%
Net margin 7.4% 7.6% 7.6% 7.7% 8.8% 17.3% 9.2% 10.2% 11.7% 11.8% 12.3% 12.8% 13.2% 13.5%
Capex / Sales 10.3% 5.1% 7.3% 4.7% 7.1% (7.8%) 6.7% 6.7% 6.1% 6.1% 6.1% 6.1% 6.1% 6.1%
OpFCF / Sales 10.7% 10.8% 7.2% 12.2% 11.6% 25.4% 11.3% 17.6% 16.5% 18.8% 19.4% 19.9% 20.3% 20.6%
WCR / Sales 33.6% 38.6% 38.8% 38.4% 35.5% 38.0% 41.1% 37.3% 33.9% 31.2% 29.6% 28.2% 26.9% 25.4%
Gearing (39%) (40%) (18%) (17%) (2%) (19%) (22%) (18%) (12%) (22%) (32%) (39%) (45%) (50%)
EBITDA / Financial charges 18.3x 60.8x 10.2x 36.6x 11.0x 11.4x 124.7x 118.4x NC NC NC NC NC NC
WACC 8.4% 8.0% 8.1% 8.0% 8.6% 8.4% 8.5% 8.6% 7.6% 7.3% 7.3% 7.3% 7.3% 7.3%
(a) !ntangibles: EUR678.00m, or EUR3 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
SCHG.DE / SCH GY
Price at 16/03/06: EUR 82.5
15.4
100.0
20.0
40.0
60.0
80.0 Target Price

86 Pharmaceuticals
Serono____________________________________________________
Building a cancer franchise with biological compounds addressing niche
segments and big markets
Sales. Serono had no sales in cancer in 2005.
Product portfolio and pipeline depth. The company has three phase II/III pipeline
drugs:
Humax-CD4 (zanolimumab), a monoclonal antibody in phase III for the treatment of
cutaneous T-Cell lymphoma and in phase II for the treatment of non-cutaneous T-Cell
lymphoma
Adecatumumab, a monoclonal antibody in phase II for the treatment of metastatic
breast cancer and prostate cancer
TACI-Ig, a fusion protein in phase I for the treatment of multiple myeloma and
relapsed/refractory B-Cell malignancies

Chart 67: SEO cancer portfolio R&D projects
0
2
4
Chemical
Serono
Monoclonal antibody
Immunomodulator Other anticancer agent Pathway inhibitor/Apoptose activator


87 Pharmaceuticals
Stock rating vs Sector: Outperform SERONO B
Target price: CHF1 140.0 / + 21.4% Sector rating vs Market: Outperform Pharmaceuticals - Switzerland
12-mth high / low (CHF) 1 088.0 / 757.0
Absolute (1%) (10%) 9%
Rel. (DJ STOXX50) (2%) (15%) (11%)
Rel. (Sector) (4%) (14%) (16%)
Reuters/Bloomberg
Analyst: Vincent Meunier
CAGR 1997/2005 2005/2010
CFPS 16% 11%
PER SHARE DATA {CHF) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EPS restated 8.62 11.08 18.56 27.93 30.76 32.82 34.83 37.57 48.49 55.41 65.46 73.91 79.57 79.92
% change 93.7% 28.5% 67.6% 50.5% 10.1% 6.7% 6.1% 7.9% 29.0% 14.3% 18.1% 12.9% 7.7% 0.4%
EPS reported 8.51 7.37 18.42 32.95 33.28 31.24 33.07 40.20 (9.03) 55.41 65.46 73.91 79.57 79.92
CFPS 19.20 20.23 30.04 37.58 48.08 42.36 50.96 52.34 61.29 71.41 83.23 93.46 100.90 103.02
Book value (BVPS) (a) 64.9 74.6 83.8 211.0 233.2 239.7 244.3 199.1 189.9 239.6 290.9 348.1 408.9 468.5
Net dividend 1.79 1.87 1.78 5.88 6.75 8.35 8.43 10.24 12.33 14.12 16.68 18.83 20.27 0.00
FCF yield 1.3% 0.7% 3.8% 1.4% 2.7% 2.6% 5.1% 4.6% (2.4%) 4.6% 6.2% 7.3% 8.5% 8.6%
Net yield 0.3% 0.3% 0.3% 0.4% 0.5% 0.8% 1.1% 1.3% 1.5% 1.5% 1.8% 2.0% 2.2% 0.0%
Payout 20.8% 16.9% 9.6% 21.1% 21.9% 25.4% 24.2% 27.3% 25.4% 25.5% 25.5% 25.5% 25.5% 0.0%
EV / OpFCF 47.2x 74.9x 21.9x 57.4x 30.9x 28.8x 13.8x 17.1x NC 15.7x 11.3x 9.0x 7.2x 6.5x
Market cap 5,472 5,568 5,860 14,128 13,863 10,818 9,361 9,789 9,764 10,567 10,567 10,567 10,567 10,567
+ Adjusted net debt 68 90 (44) (1,143) (1,265) (945) (856) (386) (23) (370) (868) (1,457) (2,139) (2,823)
+ Other liabilities and commitments
- Revalued investments 79 107 141 165 385 907 1,313 1,261 1,261 1,261 1,261 1,261 1,261 1,261
P & L HIGHLIGHTS {USDm) Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Sales 864 918 1,054 1,147 1,249 1,423 1,858 2,178 2,339 2,604 2,889 3,187 3,319 3,434
Restated EBITDA (b) 206 253 299 409 438 469 576 676 758 885 1,029 1,152 1,233 1,248
Depreciation (71) (97) (75) (86) (99) (101) (134) (145) (160) (180) (200) (220) (240) (260)
Restated EBIT (b) (*) 136 155 224 323 339 368 442 531 597 704 829 932 993 988
Reported operating profit (loss) 134 154 222 322 338 366 435 524 (128) 704 829 932 993 988
Net financial income (charges) (15) (5) 1 50 49 35 24 63 56 39 49 59 74 84
Affiliates - - - - - - - - - - - - - -
Other 0 (44) 0 0 0 (16) 0 0 0 0 0 0 0 0
Tax (32) (29) (40) (70) (70) (63) (69) (91) (33) (119) (140) (159) (171) (171)
Minorities (0) 0 (0) (0) 0 (1) (0) (2) (1) (1) (1) (1) (1) (1)
Net attributable profit reported 88 76 184 301 317 321 390 494 (106) 624 737 832 895 899
CASH FLOW HIGHLIGHTS {USDm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
EBITDA (reported) 206 253 299 409 438 469 576 676 33 885 1,029 1,152 1,233 1,248
EBITDA adjustment (b) 0 0 0 (0) (0) 0 0 0 725 0 0 0 0 0
Other items 39 (10) 40 (45) 41 (5) 70 (2) (725) 0 0 0 0 0
Change in WCR (19) (68) (12) (77) (4) (54) 37 (17) (12) (19) (21) (22) (10) (8)
Operating cash flow 226 175 326 287 474 410 683 657 21 865 1,009 1,131 1,224 1,240
Capex (110) (101) (67) (64) (79) (99) (163) (179) (280) (294) (260) (255) (232) (240)
Operating free cash flow (OpFCF) 116 74 259 224 396 311 520 478 (259) 571 749 876 991 999
Net financial items + tax paid (47) (34) (38) (21) (21) (28) (45) (28) 23 (80) (91) (100) (97) (87)
Free cash flow 69 40 221 203 375 283 475 449 (237) 491 657 776 895 912
Net financial investments (20) (9) (81) (66) (33) 77 (29) (49) 0 0 0 0 0 0
Other 3 (35) 13 28 (166) (509) (421) 31 0 0 0 0 0 0
Capital increase (decrease) 0 0 0 952 0 (106) (29) (801) 0 0 0 0 0 0
Dividends paid (13) (19) (19) (18) (54) (64) (86) (99) (126) (144) (159) (188) (212) (228)
Increase (decrease) in net financial debt (40) 22 (134) (1,100) (122) 319 90 470 363 (347) (498) (589) (683) (684)
Cash flow, group share 198 209 300 343 458 435 601 643 715 804 937 1,052 1,135 1,159
BALANCE SHEET HIGHLIGHTS {USDm) Dec. 97 Dec. 98 Dec. 99 Dec. 00 Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 05e Dec. 06e Dec. 07e Dec. 08e Dec. 09e Dec. 10e
Fixed operating assets, incl. gross goodwill 491 543 551 601 579 780 976 1,111 1,231 1,345 1,405 1,440 1,432 1,412
WCR 248 299 246 306 225 303 156 157 169 188 209 230 240 248
Capital employed, incl. gross goodwill 739 841 797 907 804 1,083 1,133 1,268 1,400 1,533 1,614 1,670 1,672 1,660
Shareholders' funds, group share 671 771 836 2,006 2,219 2,461 2,880 2,448 2,216 2,696 3,274 3,918 4,601 5,272
Minorities 1 1 1 1 1 1 2 3 4 5 6 6 7 8
Net financial debt (cash) 68 90 (44) (1,143) (1,265) (945) (856) (386) (23) (370) (868) (1,457) (2,139) (2,823)
Sales (% change) 7.3% 6.3% 14.8% 8.8% 8.9% 13.9% 30.6% 17.2% 7.4% 11.3% 10.9% 10.3% 4.1% 3.5%
Restated EBIT (% change) (*) 48.5% 14.5% 43.9% 44.5% 4.9% 8.6% 19.9% 20.2% 12.5% 17.9% 17.7% 12.4% 6.5% (0.5%)
Restated attributable net profit (% change) (*) 65.0% 28.6% 61.7% 37.8% 14.7% 15.1% 21.9% 12.5% 22.5% 10.2% 18.1% 12.9% 7.7% 0.4%
Tax rate 26.5% 27.2% 17.7% 18.9% 18.0% 16.3% 14.8% 15.3% NC 16.0% 16.0% 16.0% 16.0% 16.0%
Net margin 10.2% 8.3% 17.4% 26.3% 25.3% 22.6% 21.0% 22.8% (4.5%) 24.0% 25.5% 26.1% 27.0% 26.2%
Capex / Sales 12.8% 11.0% 6.4% 5.5% 6.3% 7.0% 8.7% 8.2% 12.0% 11.3% 9.0% 8.0% 7.0% 7.0%
OpFCF / Sales 13.4% 8.1% 24.6% 19.5% 31.7% 21.9% 28.0% 21.9% (11.1%) 21.9% 25.9% 27.5% 29.9% 29.1%
WCR / Sales 28.8% 32.5% 23.3% 26.6% 18.0% 21.3% 8.4% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2% 7.2%
Gearing 10% 12% (5%) (57%) (57%) (38%) (30%) (16%) (1%) (14%) (26%) (37%) (46%) (53%)
EBITDA / Financial charges 14.2x 53.3x NC NC NC NC NC NC NC NC NC NC NC NC
Adjusted financial debt / EBITDA 0.3x 0.4x NC NC NC NC NC NC NC NC NC NC NC NC
WACC 9.8% 9.8% 10.8% 10.1% 11.4% 11.1% 11.8% 12.0% 10.9% 10.2% 10.2% 10.2% 10.2% 10.2%
(a) !ntangibles: USD290.56m, or USD19 per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
SEO.VX / SEO VX
Price at 16/03/06: CHF 939.0
190.3
2,400.0
600.0
1,000.0
1,400.0
1,800.0
Target Price

88 Pharmaceuticals
UCB________________________________________________________
Establishing a cancer franchise based on phase II drugs acquired through
Celltech
Sales. UCB had no sales in cancer in 2005.
Product portfolio and pipeline depth. The company has no approved cancer
products and two monoclonal antibodies in phase II coming from Celltech acquisition:
CDP791, an anti-GFR antibody fragment in phase II for the treatment of solid
tumours
Inotuzumab ozogamicin (CMC-544), an anti-CD22 monoclonal antibody in phase II
for the treatment of non-Hodgkin lymphoma in collaboration with Wyeth.
Chart 68: UCB cancer portfolio R&D projects
0
2
4
Monoclonal antibody
UCB


89 Pharmaceuticals
Stock rating vs Sector: Neutral UCB
Target price: EUR 45.0 / + 11.4% Sector rating vs Market: Outperform Pharmaceuticals - Belgium
12-mth high / low (EUR) 46.7 / 36.9
Absolute 1% (1%) 9%
Rel. (DJ STOXX50) (1%) (6%) (12%)
Rel. (Sector) (3%) (5%) (16%)
Reuters/Bloomberg
CAGR 1996/2005 2005/2010
CFPS 15% 5%
EPS restated 0.95 1.21 1.68 1.98 2.49 2.63 2.73 3.05 1.85 2.03 2.42 2.45 2.77 2.96
% change 19.8% 26.6% 38.9% 17.7% 26.3% 5.4% 3.6% 12.0% (39.5%) 9.7% 19.1% 1.3% 13.3% 6.7%
EPS reported
CFPS 1.11 1.74 2.11 2.66 3.10 3.07 2.99 2.97 2.98 2.70 3.16 3.21 3.57 3.78
Book value (BVPS) (a) 5.3 5.9 7.0 8.2 9.5 10.7 12.1 13.4 15.3 17.1 18.9 20.7 22.9 25.1
Net dividend 0.24 0.29 0.38 0.48 0.57 0.60 0.62 0.66 0.51 0.61 0.66 0.67 0.76 0.81
FCF yield (2.2%) 1.1% 1.5% 1.7% 3.7% 5.2% 11.2% 6.6% 4.7% 4.7% 5.9% 5.5% 6.9% 7.3%
Net yield 0.9% 0.6% 0.9% 1.2% 1.4% 1.7% 2.5% 1.8% 1.3% 1.5% 1.6% 1.7% 1.9% 2.0%
Payout 24.7% 23.6% 22.3% 24.3% 22.8% 22.8% 22.6% 21.5% 27.5% 30.2% 27.5% 27.5% 27.5% 27.5%
EV / OpFCF NC 43.5x 35.1x 28.7x 17.5x 12.8x 7.1x 10.8x 12.0x 10.3x 8.1x 8.3x 6.4x 5.6x
Market cap 4,021 6,511 6,259 5,719 5,950 5,274 3,661 5,358 5,879 5,894 5,894 5,894 5,894 5,894
+ Adjusted net debt (18) 72 91 132 111 (58) 181 1,798 367 160 (109) (341) (653) (978)
+ Other liabilities and commitments 85 85 95 174 214 185 184 365 365 335 335 335 335 335
- Revalued investments 34 33 32 33 33 45 112 2,166 2,166 2,166 2,166 2,166 2,166 2,166
Sales 1,617 1,773 2,028 2,416 2,700 2,716 3,137 3,268 2,043 2,165 2,410 2,453 2,585 2,676
Restated EBITDA (b) 268 331 397 476 577 620 623 656 529 527 602 588 647 676
Depreciation (65) (74) (83) (94) (106) (125) (136) (149) (92) (98) (109) (110) (116) (121)
Restated EBIT (b) (*) 203 257 314 382 471 495 487 507 437 429 493 477 530 555
Reported operating profit (loss) 199 255 309 377 466 502 487 484 437 429 493 477 530 555
Net financial income (charges) (13) (13) (8) (7) (4) (9) (4) (10) (2) (24) (10) 12 24 36
Affiliates 0 0 (1) 0 0 0 0 (2) - - - - - -
Other 25 (16) (1) 6 (6) (27) (4) 18 0 30 0 0 0 0
Tax (52) (67) (79) (107) (136) (136) (140) (129) (92) (109) (130) (132) (150) (160)
Minorities (3) (2) (1) (1) 0 0 (2) (2) 0 0 0 0 0 0
Goodwill amortisation (4) (1) (5) (5) (5) 7 0 (23) - - - - - -
EBITDA (reported) 268 331 397 476 577 620 623 656 529 527 602 588 647 676
EBITDA adjustment (b) 0 (0) 0 0 0 0 0 0 0 0 0 0 0 0
Other items (37) 5 0 27 16 (27) (41) (82) 0 0 0 0 0 0
Change in WCR (112) (93) (125) (181) (127) (51) 62 103 (72) (25) (16) (44) (14) (19)
Operating cash flow 119 243 273 322 465 542 644 677 457 502 585 544 633 657
Capex (142) (87) (87) (110) (106) (122) (87) (182) (86) (89) (97) (96) (99) (99)
Operating free cash flow (OpFCF) (23) 155 186 212 359 420 557 495 371 413 489 448 535 557
Free cash flow (88) 75 98 97 219 276 413 356 277 280 348 328 409 434
Net financial investments 1 0 14 12 2 2 (395) (1,958) 1,218 0 0 0 0 0
Other 118 (131) (75) (79) (106) (4) (141) 105 0 0 0 0 0 0
Dividends paid (40) (43) (56) (74) (95) (112) (118) (121) (63) (73) (80) (95) (96) (109)
Increase (decrease) in net financial debt 7 90 18 42 (21) (168) 238 1,618 (1,432) (207) (268) (232) (312) (324)
Cash flow, group share 162 253 308 388 452 449 436 433 435 394 461 468 521 552
Fixed operating assets, incl. gross goodwill 476 552 629 736 853 869 1,215 1,324 100 92 80 65 47 26
WCR 351 461 588 770 862 804 966 667 739 763 780 824 838 857
Capital employed, incl. gross goodwill 827 1,013 1,218 1,506 1,715 1,673 2,181 1,991 839 855 859 889 885 883
Shareholders' funds, group share 768 856 1,024 1,189 1,383 1,555 1,772 1,960 2,239 2,493 2,765 3,027 3,336 3,658
Minorities 10 15 18 17 8 10 11 5 5 5 5 5 5 5
Net financial debt (cash) (18) 72 91 132 111 (58) 181 1,798 367 160 (109) (341) (653) (978)
Sales (% change) 19.5% 9.6% 14.4% 19.1% 11.8% 0.6% 15.5% 4.2% (37.5%) 6.0% 11.3% 1.8% 5.4% 3.5%
Organic sales growth 12.3% 6.4% 11.3% 1.8% 5.4% 3.5%
Restated EBIT (% change) (*) 33.2% 26.2% 22.5% 21.4% 23.3% 5.2% (1.7%) 4.2% (13.9%) (1.7%) 14.8% (3.1%) 11.1% 4.7%
Restated attributable net profit (% change) (*) 19.9% 26.6% 38.9% 17.7% 26.3% 5.4% 3.6% 12.0% (39.5%) 9.7% 19.1% 1.3% 13.3% 6.7%
Tax rate 24.2% 29.2% 26.1% 28.1% 29.5% 29.5% 29.2% 25.1% 21.2% 25.1% 27.0% 27.0% 27.0% 27.0%
Net margin 9.8% 9.0% 10.8% 11.1% 11.9% 12.2% 10.8% 11.1% 16.8% 15.1% 14.6% 14.6% 15.7% 16.1%
Capex / Sales 8.8% 4.9% 4.3% 4.6% 3.9% 4.5% 2.8% 5.6% 4.2% 4.1% 4.0% 3.9% 3.8% 3.7%
OpFCF / Sales (1.4%) 8.8% 9.2% 8.8% 13.3% 15.5% 17.7% 15.1% 18.1% 19.1% 20.3% 18.3% 20.7% 20.8%
WCR / Sales 21.7% 26.0% 29.0% 31.9% 31.9% 29.6% 30.8% 20.4% 36.2% 35.3% 32.3% 33.6% 32.4% 32.0%
Gearing (2%) 8% 9% 11% 8% (4%) 10% 92% 16% 6% (4%) (11%) (20%) (27%)
EBITDA / Financial charges 20.2x 25.0x 47.3x 65.8x 146.2x 70.8x 164.0x 68.8x 264.4x 22.0x 60.2x NC NC NC
Adjusted financial debt / EBITDA NC 0.2x 0.2x 0.3x 0.2x NC 0.3x 2.7x 0.7x 0.3x NC NC NC NC
WACC 8.7% 8.3% 7.9% 7.9% 8.3% 8.2% 8.1% 7.1% 7.2% 7.1% 7.1% 7.1% 7.1% 7.1%
(a) !ntangibles: EUR595.06m, or EUR+ per share. (b) adjusted for capital gainsflosses, impairment charges, exceptional restructuring charges, capitalized R8D, pension charge replaced by service cost
UCBBt.BR / UCB BB
Price at 16/03/06: EUR 40.4
9.2
60.0
20.0
30.0
40.0
50.0
Target Price

90 Pharmaceuticals


91 Pharmaceuticals
Rating definitions
Stock Rating (vs Sector)
Outperform: The stock is expected to outperform the industry large-cap coverage universe over a 12-month investment horizon.
Neutral: The stock is expected to perform in line with the industry large-cap coverage universe over a 12-month investment horizon.
Underperform: The stock is expected to underperform the industry large-cap coverage universe over a 12-month investment horizon.

Sector Rating (vs Market)
Outperform: The sector is expected to outperform the DJ STOXX50 over a 12-month investment horizon.
Neutral: The sector is expected to perform in line with the DJ STOXX50 over a 12-month investment horizon.
Underperform: The sector is expected to underperform the DJ STOXX50 over a 12-month investment horizon.

Key ideas
BUY: The stock is expected to deliver an absolute return in excess of 30% over the next two years. Exane BNP Paribas Key Ideas Buy List comprises selected
stocks that meet this criterion.

Distribution of Exane BNP Paribas equity recommendations
As at 13/03/2006 Exane BNP Paribas covered 370 stocks. The stocks that, for regulatory reasons, are not accorded a rating by Exane BNP Paribas are excluded from
these statistics. For regulatory reasons, our ratings of Outperform, Neutral and Underperform correspond respectively to Buy, Hold and Sell; the underlying signification
is, however, different as our ratings are relative to the sector.
35% of stocks covered by Exane BNP Paribas were rated Outperform. During the last 12 months, Exane acted as distributor for BNP Paribas on the 6% of stocks with
this rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 16% of the companies
accorded this rating*.
47% of stocks covered by Exane BNP Paribas were rated Neutral. During the last 12 months, Exane acted as distributor for BNP Paribas on the 1% of stocks with this
rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 5% of the companies
accorded this rating*.
18% of stocks covered by Exane BNP Paribas were rated Underperform. During the last 12 months, Exane acted as distributor for BNP Paribas on the 5% of stocks
with this rating for which BNP Paribas acted as manager or co-manager on a public offering. BNP Paribas provided investment banking services to 11% of the
companies accorded this rating*.
* Exane is independent from BNP Paribas. Nevertheless, in order to maintain absolute transparency, we include in this category transactions carried out by BNP
Paribas independently from Exane. For the purpose of clarity, we have excluded fixed income transactions carried out by BNP Paribas.

Commitment of transparency on potential conflicts of interest
Complete disclosures, please see www.exane.com/compliance

Exane
Pursuant to Directive 2003/125/CE and NASD Rule 2711(h)
Unless specified, Exane is unaware of significant conflicts of interest with companies mentioned in this report.

Novartis
Investment Distributor Liquidity Corporate Analysts Equity stake Disclosure Additional
banking provider links personal interest US Law French Law to company material conflicts
NO NO NO NO NO NO NO YES NO

Roche
Investment Distributor Liquidity Corporate Analysts Equity stake Disclosure Additional
banking provider links personal interest US Law French Law to company material conflicts
NO NO NO NO NO NO NO YES NO

Source: Exane
See www.exane.com/disclosureequitiesuk for details
BNP Paribas
Exane is independent of BNP Paribas (BNPP) and the agreement between the two companies is structured to guarantee the independence of
Exane's research, published under the brandname Exane BNP Paribas . Nevertheless, to respect a principle of transparency, we
separately identify potential conflicts of interest with BNPP regarding the company/(ies) covered by this research document.

AstraZeneca
As of 28/02/2006 BNPP owns 1.9% of ASTRAZENECA PLC
Novartis
As of 28/02/2006 BNPP owns 1.6% of NOVARTIS AG - REG SHS
Roche
As of 28/02/2006 BNPP owns 2.3% of ROCHE HOLDING AG - GENUSSS
Source: BNP Pariba

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