1. Addressing Biosimilars: Federal Legislation for a Pathway May 28, 2009 Kerry A. Flynn Shire Human Genetic Therapies, Inc.

2. 2  Specialty pharmaceutical company with a range of products on the market for Attention Deficit and Hyperactivity Disorder (ADHD), gastrointestinal (GI) and therapies for human genetic diseases  Shire Human Genetic Therapies business unit pursues treatments for patients and families facing such rare (“Orphan” or “Ultra- Orphan”) diseases as Fabry disease, Hunter syndrome, Gaucher disease, hereditary angioedema, and metachromatic leukodystrophy

3. 3 Hot topics:  Data Exclusivity  Regulatory Pathway  Patent Issues

4. 4 Data Exclusivity Periods: Considerations  Biosimilar may be similar enough to a pioneer biologic for regulatory approval purposes, but different enough to avoid the innovator's patents  New therapies will never be developed for some addressable diseases The current orphan incentives mean that the development of a therapy for some diseases will never yield a return  Lower commercial returns for similar development costs Prospective commercial returns for orphan biologics are much lower than for other biologic drugs due to the significantly smaller addressable patient populations. Any future pricing pressure will reduce incentives further Magnifies risk of failure (lower portfolio profits to cover failed products)

5. 5 Data Exclusivity: Considerations (Cont’d)  Large orphan markets have already been addressed Many of the larger orphan markets already have approved and effective therapies (‘low hanging fruit has gone’)  Greater commercial risks in remaining markets Remaining markets include diseases with high morbidity where there is little ability to understand a drug’s impact on life expectancy (a key driver of commercial return) prior to pivotal trials (ie. after much of the investment has been made)  In order to preserve innovation for orphan drugs in the future (and in an environment of tighter pricing), exclusivity periods need to be longer (than for non-orphans) to compensate innovators for increased development and commercial risks in these challenging markets

6. 6 Theoretical market model analysis  Theoretical product development / commercialisation model  Range determined for key variables Peak sales - $100m-$500m COGS – 12%-15% (implicitly captures facility investment) S&M % sales – 10%-20% Total development costs over 9-year period - $150m - $300m  CMR biotech PoS benchmarks  Other assumptions kept fixed Discount rate – 11.5% Tax rate – 30% Working capital – 20% of y.o.y change in sales  Ranges of key variables were simulated using uniform distribution assumption Assumes that each value in the range is equally likely  Simulated eNPV after defined periods of exclusivity assuming terminal perpetuity decline rate of 50% post exclusivity expiry Analysed % of outcomes where eNPVs were positive for different exclusivity assumptions

7. 7 60% of hypothesized outcomes never make a return with 7 years of exclusivity Peak sales range $100m - $500m  Peak sales range ($100m- $500m) Reflects market size for vast majority of small orphan diseases Excludes large orphan markets (>$500m)  ~60% of outcomes never generate a return assuming a 7 year exclusivity period  ~35% of outcomes never generate a return assuming a 12 year exclusivity period

8. 8 *Orphan Drug ** Regulatory Exclusivity in EU until 2017 # Assuming US approval 200020052010201520202025 2013** 2019 ELAPRASE* (500-600) Patent TermRegulatory Exclusivity 2020 2011 REPLAGAL EU* (300-350) FIRAZYR EU* (350-400)# 2018 2009 Peak sales range ($m) Duration of Patent and Regulatory Exclusivity

9. 9 Regulatory Pathways: Considerations  clinical trial evidence and data are fundamental for evaluating and demonstrating the safety and effectiveness of a follow-on biologic, and must be conducted on a product-by-product basis  Avoid constraints on the scientific conclusions FDA can reach in evaluating the similarity or comparability of follow-on biologics  Trade secret and confidential commercial data and information of an innovator must be protected

10. 10 Patent : Considerations  Must not limit constitutional or statutory rights of patent holders to protect against infringement  Patent challenge involving the follow-on biologic product must be litigated prior to marketing approval of the follow-on product  No special patent litigation rules that favor follow-on biologics manufacturers  Interplay between Orphan drug legislation (“Same product”), Biosimilar legislation (“similar product”) and Patent legislation (“literal infringement/doctrine of equivalents”)

11. 11 Patent considerations  Biotechnology processes define product Yeast fermentation  Budweiser  Amstel  Heineken  Molson Are these products equivalent? Similar?

12. 12  Hormone Res. Foundation v. Genentech, 904 F. 2d 1558 (Fed. Cir. 1990) Patent  Accused hGH product differed by two amino acids from claimed product  CAFC held no literal infringement Regulatory  Would product be similar enough to be approved as a Biosimilar? Orphan  Is it the “same drug”? rhGH found to be “different drug” than pituitary derived hGH

13. 13 Amgen v. Hoechst Marion Roussel (EPO cases)  Patent Patent claimed 166 aa mature sequence Accused product had 165 No literal infringement Infringement under doctrine of equivalents  Regulatory Products similar?

14. 14 Conclusion:  Legislation must: Provide adequate incentives for development of orphan biologics Not abrogate the rights of patent holders Rely on scientific evidence