1. SAMBa ITT – Portfolio Management Alun Bedding SAMBa ITT 4 Strictly Confidential 31 st May 2016

2. Portfolio Management How can look across diverse drug development portfolio and make the right decisions? Opportunity: Improve the way portfolio decisions are made meaning resource is spent on the most important TAs, drugs and studies. 2

3. Many therapeutic areas Oncology Respiratory Neuroscience Immunology Infectious disease Gastro-intestinal Cardiovascular Dermatology Ophthalmology Types of Drug Small molecule Biologic (large molecule) Patient Population Adults Paediatrics Elderly Male/Female Ethnic 3 Which therapeutic areas should we focus on and which drugs?

4. Is there an unmet need? Is it a rare disease? What is the potential net present value? No other competitors. Easier to justify development. Potential increased return on investment. Limited number of patients. Limited number of investigators. Fast track approval available. Efficiency leads to better return as less cost to develop. 4 What things could we look at in relation to TA?

5. So we have chosen a TA – what drugs??? Lets say we have 5-6 competing drugs – which one should get the most resource?? To be licenced a drug needs to be safe and effective. It needs to work – but what do we mean by work?? It needs to be safe – no use working if it causes too many side effects. To be reimbursed it also needs to be cost-effective. Does it add to a patients quality of life? How much is it going to cost to give to a patient? 5

6. What do we mean by “Does it Work”? If something just works better than a placebo would you take it or would you want a relative/child/parent taking it? Better to look at what is an important effect? Clinical meaningful difference. For example, if a drug improves the peak flow of a patient by 150 ml/min it is effective. 6

7. How do we normally make decisions? Statistical hypotheses testing –H 0 : No treatment difference (Active - Placebo = 0) –H 1 : Treatment difference (Active - Placebo ≠ 0) - two- sided means that placebo could be better –Or –H 1 : Active – Placebo > 0 – One-sided We calculate the power and after we have the data the p-value and confidence interval

8. How relevant may be power and p-values? Assume the clinically significant difference is 10. Power statement - With 20 subject per group the study has 90% power to detect a difference of greater than 10 –It does not mean – Pr(Difference > 10) = 90% –It means – if the true difference was greater than 10 the probability of declaring the difference significantly different from ZERO is 90% P-Value: –The probability of getting a result as or more extreme than the observed result, if the null hypothesis were true (in most cases the null hypothesis is the result is zero)

9. A Couple of Methods Currently Used Discounted Cash Flow Analysis Net present value and internal rate of return computed given values such as cost of development, projected drug sales, manufacturing costs, cost of capital. Question – how applicable is DCF in the flexible environment of Pharma R&D? Real Options Analysis Decision trees to model choices and outcomes. Take into account conditional probabilities of events depending on staged decisions. Defines value in terms worth in the marketplace. 9 Source: M. Ding et al. (eds.), Innovation and Marketing in the Pharmaceutical Industry,International Series in Quantitative Marketing 20, DOI 10.1007/978-1-4614-7801-0_3, Springer Science+Business Media New York 2014

10. A Couple of Optimization Methods Pearson Index Ratio of the expected net value to expected net cost Takes into account final reward, cost in a stage, conditional probability of success given success at the previous stage. Gittins Index Looks at the maximum expected discounted reward per unit of expected discounted time. Associates each project with a priority index and picks the project with the largest current index. Assumes resources are dynamically allocated. 10

11. PTS – this is key to quantify Questions What is the best way to quantify PTS? Our current way in phase II to phase III is to use phase II data to predict efficacy success and build in uncertainty. Linked to the TPP Is this too simplistic? Surely safety needs to be included. But what is safety? Also, external real world data from competitors, potential subgroups. But what about earlier decisions Could include target engagement, PK, bioavailability, toxicity Much more of a multivariate problem. 11

12. Opportunity to Expand the Two Optimisation Methods Idea: Use gaming combined with statistical and decision theory to see how the following parameters might effect the two indices: PTS at each stage of development Time for development Cost of development Potential benefit to patients Is the molecule a biologic or small molecule? What are the competitors in the market? How long is the drug likely to be given to patients? Is it to treat a rare disease – patient population 12

13. Novartis use this type of criteria

14. Confidentiality Notice This file is private and may contain confidential and proprietary information. If you have received this file in error, please notify us and remove it from your system and note that you must not copy, distribute or take any action in reliance on it. Any unauthorized use or disclosure of the contents of this file is not permitted and may be unlawful. AstraZeneca PLC, 2 Kingdom Street, London, W2 6BD, UK, T: +44(0)20 7604 8000, F: +44 (0)20 7604 8151, www.astrazeneca.com 14