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LOCALIZATION PROJECT

LOCALIZATION PROJECT. Disclaimer : “ Project details are proprietary to the client, specific details have been omitted ” FABIUS Management. FABIUS Consulting. “ Pharma 2020 ” is under reconstruction.

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LOCALIZATION PROJECT

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  1. LOCALIZATION PROJECT Disclaimer:“Project details are proprietary to the client, specific details have been omitted” FABIUS Management FABIUS Consulting

  2. “Pharma 2020” is under reconstruction • “The Russian government will soon adjust the state program "Development of pharmaceutical and medical industry" ("Pharma 2020"), Prime Minister Dmitry Medvedev, said on 21 April, answering questions of members of the State Duma: • We will revise it. I hope that soon I will receive the final text of the document. I hope that in the next months the government will release the document, and I specifically control it • The government has learned to manage the situation ….., but a similar problem on the drug market is much more difficult because a large proportion of drugs and substances are produced abroad • To switch so quickly in our environment will not naturally work, despite the fact that we do not remove benchmark - 80% of drugs should be made on the territory of the Russian Federation • Russia needs to set up production of substances for drugs. In this aspect, we must take all the necessary administrative decisions Dmitry Medvedev, Prime Minister of the  Russian Federation FABIUS Consulting

  3. “Pharma 2020” is now “Import substitution” campaign 2012 2014 2016 2020 2009 2023+ Regulatory and political pressure increasing Pharma 2020 50% of pharma market must be local 1-st wave of Localization: 2 out of 3 major pharmacos (greenf, brownf, CMO) Pharma 2018 90% of EDL* must be local 2-ndary packaging preference: 15% FFF and full cycle preference: 25%/40% “Import substitution” campaign for State procurement “2+1” Tender access rule in place Targeted molecule substitution program Legislation in place If there is 1 local (-ized) full cycle manufacturer, no others with less (2016?) Legislation in draft * EDL – Essential Drug List (600 products mostly eligible for the State funding) Therapeutic referencing (2018+?) State procurement: for fully local only ? FABIUS Consulting

  4. The return on the investments has to be considered in the light of the following mitigating filters Patient needs Treatment Importance of quality/innovation MoH demand approval (budget driven) HCP decision / recommendation Federal Tender / MoH long-term contracting Degree of politics in decision making FABIUS Consulting

  5. Long Term Contracts Long Term contracts Developers: Government Status: approved High risks of rub exchange rate devaluation Allow to save MS • Start of implementation in 2016 • Non competition in unique INN • Period from 3 years up to 7 years • Submission of proposals to MoH • Localization is only the option Baxter Confidential - Highly Restricted - Do not distribute without prior approval FABIUS Consulting

  6. Key areas of impact versus Competition Patient Needs MoH demand approval (budget driven) HCP decision / recommendation Federal Tender / MoH long-term contracting ??? MIU 126MIU 32MIU Company X capabilities ??? MIU 106MIU 62MIU Competition capabilities FABIUS Consulting

  7. Case examples – local production can be game changing Biosimilar Local generics have acquired the capabilities to produce high tech drugs, e.g. biologicals where lack of developed standards on the rapeutical equivalency enables local Gx register and bring products to market rapidly SOURCE: Pharmexpert, FABIUS working team analysis, McKinsey & Company FABIUS Consulting

  8. Case examples – local production can be game changing Imatinib – 7 Nosologies (Federal tender) Epoetin Alfa – ONLS (Regional tender) $ mln $ mln Ciclosporin – 7 Nosologies (Federal tender) Epoetin Beta – ONLS (Regional tender) $ mln $ mln Baxter Confidential - Highly Restricted - Do not distribute without prior approval FABIUS Consulting

  9. Further impact of import substitution strategy Baxter Confidential - Highly Restricted - Do not distribute without prior approval FABIUS Consulting

  10. Summary of the Stand-Alone option: Benefits versus Limitations Benefits: - Full control over investments/decisions/quality etc. - Positive impact expected through select direct investment (subject to overall decision making process) - No profit sharing (assuming success) Limitations: - Weak position with the Government / other key stakeholders - Higher cost and risk of the manufacturing investment - Lower ability to impact the SoC and patient access - Threat of a quicker MS decline FABIUS Consulting

  11. Key players in the localization market and their relevant positioning Biocad/ PHST / Generium Biocad PHST/Gen R-Pharm Business aspect Vero-Pharm ChemRar BinnoPH RosTech RDIF Political aspect FABIUS Consulting Baxter Confidential - Highly Restricted - Do not distribute without prior approval

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