Success Stories of Globalization in Korean Pharma 2006. 11. 17

Contents I. Current Status of Korean Pharma II. Strategies for the Global Market Entry III. A Success Case : LG Life Sciences

I. Current Status of Korean Pharma

Korean pharma industry Size Market: $7B (~ 1% of the global market) No. of KGMP-compliant pharmaceutical companies : 270 85% of these are small-cap companies with less than $10M in revenue Product focus Mostly generics and in-licensed products Lack of proprietary global product R&D Small R&D expenditure compared to advanced countries Lack of innovation in R&D No. of new drugs approved in Korea : 11 (KFDA), 1 (US FDA) 1/14

Increased needs for the entry into the new market Recent environmental changes and challenges Separation of Dispensary from Medical Practice (’00.8) Increase in imports : $1.8B (’99)  $3.7B (’04) Increased market share by MNCs: 10% (’99) → 30% (’04) Korea - US FTA Negotiations Adoption of a Positive Listing System Increased needs for the entry into the new market 2/14

II. Strategies for the Global Market Entry

Requirements for the global development CAPABILITIES RESOURCES Clinical development Regulatory affairs Marketing infrastructure Manufacturing facilities Long development time High development cost Sharing the development risks through strategic alliances 3/14

Strategic alliances Maximize the value of the product through partner’s expertise Research, clinical development and regulatory affairs Marketing and manufacturing infrastructure Lower the R&D risks by sharing the expenses & resources Build internal capability and expertise through partnership Research, clinical development and marketing Profit Short term : milestones & royalty Long term : global market entry by co-promotion 4/14

License-out by domestic pharmas Since early ’90s over 25 licensing deals were closed between domestic and global pharmas Year Company Partner Country Product ’97. 07 LG Life Sciences Warner Lambert US Anti-coagulant ’99. 11 Dong-A Stiefel NSAID ’00. 10 Yuhan SKB UK Anti-ulcer ’00. 11 SK J&J Anti-depressant ’02. 11 GeneSoft Antibiotics ’04. 02 Pacific Pharm. Schwarz Germany Painkiller Source : KDRA, 2004 5/14

III. A Success Case : LG Life Sciences

Key milestones LG Life Sciences has been the leading player in paving the way in Korean pharmaceutical industry Initiation of biotech research (1983) First launch of biopharmaceuticals (Intermax™-①) in Korea (1990) Approval of FACTIVE™② from US FDA (2003) Approval of Valtropin™③ from EMEA④ (2006) ① Intermax-g (recombinant interferon-g) ② Factive : Quinolone antibiotics approved for the used against pneumonia and bronchitis ③ Valtropin (recombinant human growth hormone) ④ EMEA (European Agency for the Evaluation of Medical Products) 6/14

R&D Focus Bio-Pharmaceuticals New Chemical Entities Equipped with key functions for lead discovery and optimization Increased focus on metabolic disease and liver disease Efficiency and speed Accumulated expertise through development and launching of key products recombinant human growth hormone, hepatitis B vaccine, interferon a, erythropoietin Proprietary formulation technologies 7/14

Global market entry through strategic alliances with major pharmas R&D strategies Global market entry through strategic alliances with major pharmas Research Preclinical Clinical Regulatory Global Market LG Life Sciences Partners Innovation Speed Focused therapeutic area Distinguished product pipelines Expertise : clinical development, RA Marketing & sales infrastructure 8/14

History of Alliances LB20304a, Novel Fluoroquinolone LB30057, Oral Thrombin Inhibitor Biogeneric Drugs LB71350, HIV infection 1997 Anti-viral Research Program 1998 Anti-cancer Research Program 2000 Anti-obesity/Anti-hyperlipidemia 2001 Factive™, Novel Fluoroquinolone 2002 LB80380, HBV infection 2004 9/14

Products ① Factive TM Factive TM : A novel quinolone antibiotics Korea’s 1st FDA approved drug Out-licensed to SmithKline Beecham after Phase I Marketing alliance with GeneSoft (now Oscient) for US & EU market Research Initiated NDA Filed (’99) FDA Approval (’03) US launch Phase I LG GSK OSCIENT 1991 1997 2002 10/14

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② EutropinTM / ValtropinTM Recombinant human growth hormone Indication: Growth hormone deficiency Co-development in alliance with BioPartners (Switzerland) First recombinant hormone in Korea Market Leader (M/S >65%) Domestic Approved in Europe (May, 2006) 2nd biogenerics to receive an approval Approval from US FDA expected (4Q, 2006) Overseas 12/14

Globalization through utilization of the core technology ③ SR-hGH SR② Technology SR-hGH hGH① Once weekly injection ↑ patient compliance due to lower frequency of injection Multinational Phase 3 trial Once a day injection Globalization through utilization of the core technology ① hGH : human growth hormone ② SR : Sustained-Release 13/14

Lessons R&D Network Competency Focused research Establishment of efficient R&D process More focus on increasing the effectiveness of R&D Building distinguished product pipelines R&D Global market entry through strategic alliances Active investment into areas of innovation Building networks with complementary organizations (ventures, academia...) Network Identification and strengthening of the core competency Procurement of global competitiveness Establishment of development infrastructure (clinical, regulatory...) Competency 14/14

Thank You LG Life Sciences, Ltd. 20, Yoido-dong, Youngdungpo-gu, Seoul, 150-721, Korea