The pharmaceutical market in Europe Per Troein VP Strategic Partners, IMS Health April 5, 2016

There is not one Europe 32 separate countries One Medical Agency –EMA Common regulation for GMP, GDP, etc HC “local competency” Funding Pricing What is available All countries has some form of “solidaric” health care system IMS Health Confidential

Health Care system are organized differently Funding can vary Taxation National Local or Mandatory insurance Provision also varies Public hospitals and employed Drs or Private hospitals or Drs IMS Health Confidential

Drug spend varies between countries TOTAL MARKET SALES AT EX-MNF PRICE BEFORE REBATES AND DISCOUNTS (20145 VS. GDP/CAPITA The amount spent on pharmaceuticals is linked to the GDP per capita Very low GDP countries spend also a very low share As GDP growth, pharmaceutical spend growth faster At a certain level, the increase needs declines IMS Health Confidential

Generic Penetration vary by country Protected market includes patent protected branded products. IMS Health Confidential

The way Generics are managed varies Who selects the manufacturer? Patient Prescriber Pharmacy /WHS Payer How are prices set? Tender Free pricing Regulated 1 2 3 4 5 Tender markets Regulated price & dispensing choice Market driven pricing & dispensing choice Regulated price & prescribing choice Out of Pocket markets The issues we need to understand better; Addressable markets; we assume that sales based on tenders, that branded generic sales is not accessible. We also need to understand what AB and Celesio definitely control. But we also need to understand what part is products that we do sell in US – products without purchasing synergies. We also need to have a better insight on who we potentially can play with. Only a limited number of companies actually have registered products in all relevant markets as we saw – and are they even the right partners from a price point of view IMS Health Confidential

Europe has large variation on treatment cost Europe weighted 2014 2015 Cost per treatment day, based on DDD, 2014 vs. 2015 Source: IMS MIDAS 2015; Selected therapy areas: Angiotensin II antagonists, anti-depressants, anti-epileptics, anti-psychotics, anti-ulcerants, cholestrol regulators and oral anti-diabetics. IMS Health Confidential

Price reductions being off-set by volume increases Evolution of therapy volume, price of treatment and overall treatment cost in 7 therapy areas, Rx retail market from Q1 2005-Q4 2015, Normalized to population growth Selected therapy areas: Angiotensin II antagonists, anti-depressants, anti-epileptics, anti-psychotics, anti-ulcerants, cholesterol regulators and oral anti-diabetics. Source: IMS MIDAS, MAT 2015. Population statistics: OECD IMS Health Confidential

Cholesterol regulators are investments in prevention TD per capita in cholesterol regulators, Q4 2015 SOURCE: IMS HEALTH MIDAS YEAR MAT 12 2015, POPULATION STATISTICS: OECD IMS Health Confidential

What is the right use of antidepressants? TD per capita in antidepressants, Q4 2015 SOURCE: IMS HEALTH MIDAS YEAR MAT 12 2015, POPULATION STATISTICS: OECD IMS Health Confidential

High specialty growth is a long term trend Specialty versus traditional medicine market value dynamics (2015 value market share vs. 10 year value growth (MAT 09 2006- 2015) 10 yr value CAGR % Traditional Specialty 3% 11% 1% 12% -1% 7% 1% 10% 2% 14% 0% 8% 1% 10% 1% 8% 0% 8% 0% 9% 2% 8% -4% 1% 0% 10% SOURCE: IMS HEALTH MIDAS MAT 09 2015; *NL Growth is calculated for 2015/11, DK Growth is calculated for 2015/09 IMS Health Confidential

2014 and 2015 was exceptional years for Europe Several countries had an exceptional growth due to innovation – HepC Low level of new generics Updated by Gowri Ramachandran, Oct 2015 Source: IMS Market Prognosis Sept 2015; at ex-manufacturer price levels, not including rebates and discounts. Contains Audited + Unaudited data; $US used for Argentina & Venezuela due to hyperinflation

Oncology is likely to be a future driver Oncology drugs under development according compilation IMS Health Institute IMS Health Confidential

Pricing mechanism of innovative medicine varies Value Based Pricing Internal Reference Pricing International Reference pricing IMS Health Confidential

Correlation between Price Index and GDP Protected non-generic Price Index (Jan 2016) VS. GDP/CAPITA (2014) SOURCE: IMS HEALTH Pricing Insights 2016; GDP/CAPITA FROM EUROSTAT; Protected non-generic includes High Tech + Non High Tech IMS Health Confidential

European PT developed significantly in past years European parallel trade sales value in past 13 years €5.6 €5.6 €5.7 €5.6 €5.5 €5.3 GBP rise €4.8 €4.9 €4.7 Apoteket dereg and SKr gains €4.1 -3,9% PPRS UK €3.8 €3.7 €3.7 € PI Sales (bn) / MNF -7% PPRS UK -1.9% PPRS UK GBP falls Germany 16% rebate Germany 6% rebate Germany introduces PT incentives Year IMS Health Confidential Source: IMS Health MIDAS and local databases

Loss of exclusivity drives biosimilar interest Key products losing protection by 2020 Europe Top molecules sales (MAT 12/2015), € EU expiry date 2018 2028 Expired 2019 2020 IMS Health Confidential

Competition drives down the price The increased competition affects not just the price for the directly comparable product but also the price of the whole product class It can have an almost as large or even a larger impact on the total market price as it has on the biosimilar/reference product price The countries with the highest reduction show reduction of 50-70% In order to achieve long-term savings, there should be a competition with multiple players; however, too high short term savings might preclude this Competition drives down prices; On a macro level, you see similar levels of reductions on; On the biosimilar together with the reference product as On all the accessible market which in addition includes other for example short acting but not reference products . As on the total market - competition drives down the prices also on the patented products If we look on just some of the markets with the highest reduction we see reductions of 50 -70%. The reality is that if we had been allowed and able to show the rebates, we would have found this levels in many markets IMS Health Confidential

Lower prices has the most impact on usage in countries with low initial usage For Epoetins, we can see significant increases in consumption for countries with low starting volumes volume reductions in countries with a high use based on safety warnings Lowered prices impact usage but we also need to be aware of other factors: New indications or restriction of indications (as the EPO safety warnings) General economic conditions Changes in diagnosing and prevalence of diseases You would have liked and also expected to see that lower price increase the volume. This haas actually very much been the case for small molecules. The picture is however more complicated; For EPO we see the increase trend for countries that at time of LOE had a low usage. But we also can see that countries with a high usage actually went down. This has to be seen in the background of the safety warnings for certain use published by the EMA G-CSF shows a much more consistent picture with significant growth in all countries and not the least UK Human Growth Hormones shows growth everywhere – despite sometimes moderate price reductions – but most in countries with low starting usage and high price reduction In countries which used to have low usage/availability in the classes the price reductions seem to have a significant impact on the increased access. IMS Health Confidential

Other observations from Europe A shift from retail to hospital dispensing – this makes pricing to be more business agreements versus regulated Retail is still mostly independent pharmacies – but both chains and virtual chains are growing Falsified Medicine Act being put into action with authentication of all dispensed drugs IMS Health Confidential

The pharmaceutical market in Europe Per Troein VP Strategic Partners, IMS Health April 5, 2016