Strategic Portfolio Management Session

CBI’s Bio/Pharma Strategic Portfolio

Management Summit

August 8, 2017

2

Regulatory Submission

Phase I Phase

IIa Phase

IIb Phase IIa Phase IIb Phase III

Go/No-Go? Go/No-Go? Go/No-Go? Go/No-Go?

Resources &

Investment

Resources &

Investment

Resources &

Investment

Resources &

Investment

Resources &

Investment

Decision Making

Pressures

• Culture & Governance

• Individual Agendas / Organizational Alignment

• Operational Impacts

Feasibility & Risks

• Clinical & Commercial

• Technical & Operational

• Regulatory

Valuation

• NPV

• Budgeting

• Degree of Innovation

Str

ate

gic

Po

rtfo

lio

Man

ag

em

en

t

Objective: Identify and share lessons learned to advance

and enhance strategic portfolio management

3

Session Construct

Identify and share lessons learned

to advance and enhance strategic

portfolio management

Presentation by panelists on

current strategies deployed

Interactive question and

answer session

Group brainstorming and

perspective sharing

4

Participants

Panelists:

Ivan Kugener, MD

Vice President, Global Head of Portfolio Management, Valuation and Analytics

EMD Serono

Chris Franco, PhD

Director, Global Portfolio Strategy

Takeda

Soomin Park

Managing Director, Lilly Chorus

Eli Lilly and Company

Daniel Rosan

Director, R&D Resource and Performance Management

Biogen

Moderator:

Rob Liebman

Managing Director

Converge Advisory Group

Ivan Kugener, MD MSc MBA

VP, Head of Global Portfolio Management, Valuation & Analytics

Ranking andPrioritization ofpipeline projects

2

A well-defined Portfolio Strategy is essential in achieving the goals of our Healthcare Strategy

IncreaseOpportunity

DecreaseRisk

ReduceUncertainty

IncreaseOpportunity

OurPortfolioStrategy

Decrease RiskReduce Uncertainty

Pipeline (non-financial)

Pipeline(Financial)

Existing business

StrategicInitiatives

CST assessment

Commercial assessment

Non-financial value assessmentNFVA

calibration

Ranking

&

Priority

Commercial assessment

Commercial assessment

Financial assessment

Final P&L

submission

Financial assessment

Financial assessment

CA review

CSTcalibration

Strategy Development and Pipeline Review process overview

3

4

Portfolio Analysis

Data Quality Control and

Calibration

▪ Quality control process with key

stakeholders

▪ Input data calibration and

approval by Governance

▪ External views

Data Analysis by PfM

▪ Financial :

Risk Reward Index

Productivity Index (Return Ratio)

Monte Carlo and others

▪ Strategic imperatives

▪ Non-financial: Qualitative

scoring of scientific robustness

and commercial attractiveness

Portfolio Review Process (PfR)

Project-level information is analyzed by the Portfolio Group

Once calibrated asset-level evaluation compiled in portfolio view

Evaluation drives value/risk tracking and management

V

O

UR

5

▪ RANKING

FLT proposes to the DOC a ranking of its projects based on a combination of strategic and financial considerations

DOC reviews/adjusts and endorses a final ranking that combines all franchises per phase of development

Rank order is a guiding framework to adress resource conflicts (budgetary framework), i.e. in case of budget limitations the lowest tierof projects could be considered for alternative financing or outlicencing or could be put on hold.

▪ PRIORITY

Priority status has immediate operational implications, providing guidance to functions for resource allocation

High Priority projects have priority over Continue and Clarify projects, when it comes to operative resource conflicts

Projects with high priority status are ranked in the upper tier of the biopharma portfolio (per respective phase)

OBJECTIVES of RANKING and PRIORITIZATION

200 400100 500450300250150 350 550

100

0

200

700

800

600

300

400

900

1.000

500

1.200

1.300

1.100

0 50

C

Cum

ula

ted e

NPV

[m €

]

A

B

Cumulated eDC [m €]

E

F

D

650

400

150

350

600

550

250

200

500

450

2015107 306

300

0

100

25

700

5

50

Net

Pre

sent

Valu

e [

EU

RM

]

Probability of Success [%]

F

B

C

A

E

D

6

Phase X Post POC Project Ranking & Priority

Cross-franchise integration

€200M

NRA remaining development costs

PoS benchmark TA1.

PoS benchmark TA2

TA2

TA1

TA3

NA A 1 C

NA B 2 B

NA C 3 F

NA E 4 A

NA F 5 D

NA G NA E

Current DOC Priority (alphabetical, not ranked)

Updated FVA Priority &

Ranking

Key (Priority)Green HighBlue Continue

Project eNPV RR*

C 300 6.3

B 150 6.0

F 450 3.8

A 100 2.9

D 30 2.5

E 150 1.6

Forced Ranking per FLT

TA2

TA3

TA2

6

7

8

9

10

11

12

13

14

5 6 7 8 9 10 11 12 13

J

K

M

N

L

C B

A

H

GE

DI

F

Innovation potential

Scie

nti

fic r

ob

ustn

ess

NFVA Programs

Phase X Pre-POC Programs/Projects

Cross-franchise integration

Key (Priority)

Green High

Blue ContinueTA2

TA1

TA3

Key (Priority)

Green High

Blue Continue

FVA FVA

1 1

2 2

3 3

4 4

5 5

6 6

NA 7

NA 8

NA NA

Current DOC PriorityDraft proposal updated

NFVA Priority & Ranking

7

Achieved DPX

8

A well-defined Portfolio Strategy is essential in achieving the goals of our Healthcare Strategy

IncreaseOpportunity

DecreaseRisk

ReduceUncertainty

IncreaseOpportunity

OurPortfolioStrategy

Decrease RiskReduce Uncertainty

Evolution of Takeda’s Approach to Portfolio Prioritization

Chris Franco, PhD Director, Portfolio Strategy

1

Identification of all anticipated investment decisions

Cross-TA rank with quantitative metrics (e.g., cost, risk, time, value)

Budget exercise at the margins

Takeda used to rank-order project activities based on quantitative criteria to facilitate a budget exercise.

CONFIDENTIAL FOR INTERNAL USE ONLY 2

2014 – Algorithm-based ranking

• False sense of precision • Metrics were inaccurate

• Too much attention on the least important programs in our pipeline

• Not aligned with real-time decision-making (e.g., latest data or new BD)

Strategy over budget exercise

Innovation and rebuilding our pipeline

Budget planning separate

Priority categories meant to inform differential resourcing 2015

Bottom-up 2016

Hybrid: bottom-up / real-time

Communication and culture challenged us when we pivoted to a more strategic program prioritization.

3

2015/16 – Program prioritization

Simplify your categories

Ensure culture supports the intent

Communicate prioritization decisions

Ensure plans reflect priority

Lessons learned

Takeda’s R&D transformation kicked off in 2016 and has informed our approach to decision-making and prioritization.

4

Focus Our Core Therapeutic Areas

Optimize Our Pipeline

Enhance Our Capabilities

Transform Our Culture

R&D Strategy

Patient-centric Science-driven

Externally-facing organization High innovation bar

Differentiated Meaningful clinical benefit Accessible

We are simplifying prioritization by integrating it into individual governance decisions and placing greater accountability on teams.

5

2017 – Individual investment decisions

Assumption: ALL investments are a priority

Governance approves plans in context of pipeline

Multiple investment paths and outcome scenarios

assessed

Teams and TAs are accountable to execute

Target state: on-demand resourcing

Elements for success

Culture of agility and entrepreneurship

Clear accountabilities

Robust strategies and plans

Greater data quality and transparency

Communication process to manage acute resource constraints

Session 2: Strategic Portoflio Management

Lilly Chorus: Value-Driven Alternative Drug Development Engine to Enrich Lilly Portfolio

Soomin Park, Managing Director- ChorusAugust 8, 2017

Lilly Chorus: 15 Years of R&D Innovation

Harv Bus Rev. (2008) 86(3):96-102, 134.

Nat Rev Drug Discov. (2015) 14(1):17-28.

Full-service, autonomous R&D unit within Lilly; Specializes in lean to POC clinical development.

2CHORUS Confidential © 2017 Eli Lilly and Company

Evolution of Chorus Strategy

2002 Chorus 1.0

Focused on internal Lean-to-POC, mostly low p(TS) asset development

2009 Chorus 1.1

Became a development arm for external assets via capital fund strategy

2016 Chorus 2.0

External Innovation –Inbound and Outbound

White/grey space, novel targets, disruptive science & emerging technology

CHORUS Confidential © 2017 Eli Lilly and Company 3

Lilly’s Focus Area: Diabetes, Oncology, Immunology, Neurodegeneration, Pain

♦ L2PoC assets• Novel targets with uncertain clinical indications

(First-in-class vs Best-in-class)• Gray/White Space: projects outside of Lilly’s core

area of interest• Can answer key questions with a limited budget

and timeline (e.g. <250 patients, <$15M, <3-4 years)

♦ Pilot new development models/technology ♦ Capacity play

Chorus Internal Portfolio

4CHORUS Confidential © 2017 Eli Lilly and Company

Chorus External Innovation OpportunitiesIllustration of Inbound Case

5

Capital Fund StrategyExternal

molecule (in Lilly’s core areas or in grey space)

De-risk potential inbound assets

Alternative development engine for in-licensed assets

oo

o

Company Confidential Copyright © 2016 Eli Lilly and Company

Working with External Companies

External Company(Strategic Interest

to Lilly)

Lilly CHORUS

Development

Lilly Corporate Business

Development

Capital Funds

Deal Alignment Development Potential Acquirer

6CHORUS Confidential © 2017 Eli Lilly and Company

Chorus Progress and Portfolio Flow

2002 2004 2006 2008 2010 2012 2014 2016 2018

Chorus launched as a pilot

Capacity increased to 15 molecules

Work initiated on external assets with

external funding

Piloting new working models

with Lilly

10th asset acquired

20th asset acquired

50th asset acquired

5th

POP/POC

POP: Proof of PharmacologyPOC: Proof of Concept

1st asset to matriculate to Phase 3

2nd asset to matriculate to Phase 3

20th

POP/POC

67th asset acquired

Portfolio mix: 50/50 int./ext.

7Company Confidential Copyright © 2016 Eli Lilly and Company

♦ Clear understanding and alignment of the Chorus model by TA leadership• e.g. serial process

♦ Clearly defined asset placement process♦ Asset exit process

Challenges

8Company Confidential Copyright © 2016 Eli Lilly and Company

1

“Just make the place run better” Implementing a lean resource, portfolio, and performance management capability in times of change

August 8th 2017

Daniel Rosan

Director of R&D Resource & Performance Management

daniel.rosan@biogen.com

2

Forward-Looking Statements

This presentation contains forward-looking statements, including statements relating to: Biogen’s strategy and plans; potential of our commercial

business and pipeline programs; plans relating to clinical trials and the potential safety and efficacy of our pipeline products; the status of current

and anticipated regulatory filings, the potential for regulatory approvals and the timing thereof, and statements relating to timing for potential

commercial launches. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “could,” “estimate,”

“expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “will” and other words and terms of similar meaning. You should not place

undue reliance on these statements.

These statements involve risks and uncertainties that could cause actual results to differ materially from those reflected in such statements,

including those risks and uncertainties that are described in the Risk Factors section of our most recent annual or quarterly report and in other

reports we have filed with the SEC.

These statements are based on our current beliefs and expectations and speak only as of the date of this presentation. We do not undertake any

obligation to publicly update any forward-looking statements.

Note regarding trademarks: ALPROLIX®, AVONEX®, BENEPALI®, ELOCTATE®, FLIXABI®, PLEGRIDY®, RITUXAN®, TECFIDERA®, TYSABRI®,

and ZINBRYTA® are registered trademarks of Biogen. SPINRAZATM is a trademark of Biogen. The following are trademarks of the respective

companies listed: FAMPYRATM – Acorda Therapeutics, Inc., GAZYVA® and OCREVUS® – Genentech, Inc. Other trademarks referenced in this

presentation are the property of their respective owners.

All opinions expressed in this presentation are those of the speaker only and do not necessarily reflect the views of Biogen

3

There is a clear need for a global leader in neuroscience

Our goal is to be that leader

4

Consistent R&D Focus On Transformative Neurological Treatments

4

2004 2011 2012 2013 2014 2016 1996 2017 and Beyond

PARKINSONS

ALZHEIMERS

MS REPAIR

2006

ALS

Restructure oncology partnership Divest hematology

5

Building a Neuroscience Leader

It is our belief that no other area of medicine holds as much

promise with as much need as neuroscience.

Significant Opportunities in Neuroscience

Core Growth Areas Emerging Growth Areas

Acute

Neurology

Neuro-

psychiatry

Ophthal-

mology Pain

Neuro-

muscular

Disorders

Movement

Disorders

Alzheimer’s

Disease &

Dementia

Neuro-

immunology

& MS

6

The Program Lifecycle

•How important is the asset relative to other internal or external options?

•What does it take to execute?

•Is the data sufficient to progress the asset?

•How do we best generate new data?

Execution Governance

Prioritization Resourcing

7

Governance Approach

R&D Program Leader

• Peer leader

• Single point of accountability for each asset

Research Units (RUs)

• Combining clinicians and biologists

• TA-aligned

• Responsible for internal and external innovation

Stage Gate Governance

• Committees by stage (not by TA)

• Budget authority

• Small, closed discussions

Decisions broadly communicated within 24 hours

Execution

Governance

Prioritization

Resourcing

8

Quarterly Prioritization Approach

Force Rank Prioritization

• Crisper decision making

• Reduces temptation that “everything is a priority”

Individual Accountability & Portfolio Mindset

• RU Heads prioritize across their portfolios, then collectively across research units

• Assets assessed by those closest to the work

Prioritization Drives Resourcing

• Prioritize before budgeting, so resourcing follows strategy

• Discretionary investments follow governance: prioritization then drives day to day trade offs

No Algorithms

• Qualitative criteria to support expert judgment

• Evolution of criteria as assets progress through stages

Execution

Governance

Prioritization

Resourcing

9

Resource & Execute

Foundational Infrastructure

Provided by annual operating plan

Maintaining world class neuroscience drug development capabilities

Incremental External Spending

Authorized by governance committees

Marginal investment to develop an asset:

• Preclinical & clinical studies

• Manufacturing • Partner milestones

People Resources

Feedback loop between program and functional leadership

Goal: field the best team given asset priority and development needs

Deliver for

patients

Execution

Governance

Prioritization

Resourcing

10

The Clarity Business Process & System

I M P R O V E

User Experience

Integration of employee

& project metadata

reduces administrative

burden

Improved performance

reduces time needed to

manage data

C O N T R O L

Vocabulary &

Timelines

Builds on Master Data

Management of program

metadata

Consolidates R&D

program & functional

timelines into single,

accessible, authoritative

source

P R O V I D E

Portfolio

Transparency

Collect & actively

manage program

status, timeline, &

resource data

Improve governance

decision-making

E N A B L E Scenarios &

Portfolio Analytics

Through new

functionality & robust

resource algorithms,

enable scenario

modeling

Program, functional, &

portfolio level analysis

to support investment

decisions

F O R E C A S T Internal FTEs &

Costs Better

Biogen program P&Ls

will have more

meaningful internal cost

estimates

Systematically capture

resource assignments,

in addition to resource

demand & supply

11

Program 360° Dashboard

Our goal is to provide visibility into portfolio progress by consolidating data from multiple

sources in an asset-centric approach

12

What We’ve Learned, So Far

Leaders must lead

People before process

Process before technology

Problems are solvable:

dilemmas are not

Prioritize the portfolio

Communicate more

Free the data

1

Interactive Q&A

Ivan Kugener, MD

Vice President, Global Head of Portfolio Management, Valuation and Analytics

EMD Serono

Chris Franco, PhD

Director, Global Portfolio Strategy

Takeda

Soomin Park

Managing Director, Lilly Chorus

Eli Lilly and Company

Daniel Rosan

Director, R&D Resource and Performance Management

Biogen

2

Group Brainstorming: What lessons can you share?

Your experience prioritizing current assets and projects

What has worked well in your organization?

What challenges do you face and what has been done to address them?

How do you drive or help to influence organizational alignment?

Has you approach changed over time, and if so how?