Dynamics Impacting the Future of Healthcare

Wendy Mayer & John CusumanoWorldwide Innovation & Business Technology

April 10, 2015

• ‘One size fits all’ medicines• Office-based, primary care

physicians dominate the value chain

• Shots-on-goal R&D model• Fee-for-service treatment

paradigm

• Primary care and specialty medicines

• Large and small molecules• Organized payers, providers

dominate the value chain• Evolution to evidence-based

medicine

• Precision medicine• Real-world and evidence-

based information complements clinical data

• Digitization of healthcare information and dialogue

• R&D collaboration as a core capability

The Biopharmaceutical Industry Continues to Evolve

Yesterday Today Tomorrow

2

Five Key Drivers That Are Shaping Healthcare and Pharma

Future of Healthcare

Medical /

Scientific

Social

TechnologicalPolitical &Economic

Demographic

3

An Aging Population and Growing Emerging Markets Are Shaping the Demographics of the Future

The World’s Population Is Aging at an Unprecedented Rate

Most of the World’s Population Growth Is in Emerging Markets2

= 0.1B people

Developedcountries

Developingcountries

2013

2050

1950 1975 2000 2025 20500

500

1,000

1,500

2,000

2,500Population

Aged 60 or over1(M

)

• Stress on health and pension systems

• Greater emphasis on long-term geriatric care and late-life diseases

• Urban population and middle class growth will change market dynamics

Implications for the future

Sources: 1) United Nations; 2) The World Bank; 3) IMS Health audited sales data and Market Prognosis September 30, 2013.

4

Social Media and Consumerism Are Shaping the Future of Healthcare

Consumers Are Using Social Media for Health-related Matters

Expectations of Accessibilityand Quality of Health Services

Are Rising

Active Internet Searches may be a Thing of the Past

• Patients will be empowered, involved participants

• New tools will continuously find and display relevant information

24%

29%

32%

42%

Other patients’ experiences

Health related videos / images

Health related consumer reviews

Family / friends health experiences

Recommended for YouConsumer Forums

Consumer Ratings Sites

Healthcare Companies

Ratings Agencies

Non-profit Orgs.

Gov’t / StateAgencies

Implications for the future

Sources: 1) PriceWaterhouseCoopers “Social media likes healthcare” April 2012.

5

Social

Trademarks are the property of their respective owners and used for information purposes only

• Pool of partners and competitors is changing

• Mobile health and sensors will shift healthcare from episodic to continuous, vastly increasing the amount of data to inform diagnosis and treatment

Big Data, Sensors Are Shaping the Technology of the Future

The Use of Wearable Devices and Sensors Is Rapidly Increasing

Artificial Intelligence & Cognitive Computing Are Advancing

Data Companies Are Actively Pursuing the Healthcare Ecosystem

2011 2017

21

170

Sources: 1) Mobihealthnews, “ABI research: 30M wearable sensors shipped in 2012”.

6

Implications for the future

CAGR: 49%

Trademarks are the property of their respective owners and used for information purposes only

• Prevention and precision medicine will increasingly be focus areas

• Breaking science will enable new types of therapies

• The ecosystem will operate in a more networked fashion requiring non-traditional approaches to business development

Collaboration, Open Innovation, and Targeted Treatments Are Shaping the Science of the Future

Declining Innovation Productivity Has Led to Increased Collaboration1

New Medical Treatments Are Based on Genetic and Molecular Tests

A Deeper Understanding of Disease Pathways Is Emerging

2002 2004 2006 2008 2010 20120

10

20

30

40

50

60

Pharma Industry R&D SpendingNME Launches

Sources: 1) PhRMA 2013 Industry Profile, Thomson Reuters CMR International Pharmaceutical R&D Factbook, KMR analysis September 2012.

7

Implications for the future

Medical Science

Rising Costs Are Leading to Containment Measures and Healthcare Reforms around the World

US Healthcare Spending1 Policy Makers and Payers Gain Control over Prescribing Decisions

• Value and evidence based healthcare will be standard

• Value based on real world evidence not just clinical trial evidence

• Further consolidation of payers will increase their market power and facilitate greater transparency

Implications for the future

2006

2008

2010

2012

2014

2016

2018

2020

0

1,000

2,000

3,000

4,000

5,000

6,000

($B)

Physician

Pharmacist Patient

HTA Body Payer

Sources: 1) Centers for Medicare & Medicaid Services (CMS) “National Health Expenditure Projections 2011-2021”.

8

20% of GDP

To Capitalize on These Drivers, Pfizer Developed a Clear Strategic Path Guiding The Journey ahead

Fix the innovative core and generate medicines that profoundly impact

health

1

Create an ownership culture

4

Make the right capital allocation decisions to maximize value and

enhance shareholder return

2

Earn greater respect from society

3

Our Purpose: Innovate to bring therapies to patients that significantly improve their lives…

…we will deliver on Our Mission: To be the premier, innovative biopharmaceutical company

Guided by the Four Imperatives…

9

9

Delivering Against Imperative #1

Fix our innovative core and generate medicines that profoundly impact health

We’ve Transformed Our R&D Model to DeliverKey Elements of Productivity

• Reduced R&D spend

• Focused in core areas

• Research Unit / Business Unit collaboration

• Empowered Chief Scientific Officers

• Centers for Therapeutic Innovation (CTI)

• Development and commercialization partnerships

• Business Development investments

• Precision Medicine capabilities

• Bioinnovation hubs in Cambridge, MA, San Fracisco, CA, San Diego, CA, and Cambridge, UK

Greater Focus & Rigor Strategic Externalization Differentiated Innovation

Quality of Output Probability of Success Speed Cost

11

Delivering Against Imperative #2

Make the right capital allocationdecisions that maximize value and enhance

shareholder returns

Deployment of Capital and Operating Expenses to Highest Value Opportunities

• Advance the highest value R&D programs within defined budget

• Continuous improvement of Pfizer Global Supply to maintain competitive cost of goods

• Drive operational efficiencies and commercial model transformation to increase the value from every dollar spent

• Dividends and buybacks to deliver value to shareholders

Allocation of Vital Resources

13

Evolution of the Commercial Model

Recalibrating Pfizer’s Go-to-Market Model

Past

Rely on High Fixed-cost

Field Force

Use a flexible mix of efficient channels, increasing our digital capabilities

Focus Mostly on Physicians

Engage with the entire healthcare community to support quality outcomes

Communicate Product

Information

Demonstrate evidence of value using real world data and Big Data as well asclinical trial data

Future

14

All content subject to consultations with works councils, trade unions and employee representatives as required by local law

mHealth trends

Global wearables market to reach by 2020$25B

BEYOND THE PILLIntegrated products and services that

work across the care continuum to engage patients/caregivers/providers and deliver improved health outcomes.

Patient Engagement and

Adherence

Making Products Easier to Use and

Understand

Closed Loop Monitoring

Digital Therapies

g

Bigger graph, move arrow right, shrink text left, no mHeALTH under graph, DIGITAL health, new icon for digital therapyIntegrated products and services that

work across the care continuum to engage patients/caregivers/providers and deliver improved health outcomes.

Patient Engagement and

Adherence

Making Products Easier to Use and

Understand

Closed Loop Monitoring

Digital Therapies

BEYOND THE PILL

Delivering Against Imperative #3

Earn greater respect from society

What Is Corporate Responsibility?

Responsible Research andDevelopment

The Environment / Sustainability

Governance and Compliance

ProductQuality

Transparencyand Integrity

Access To Medicines

…the way Pfizer operates and is held accountable for conducting business

responsibly

18

Delivering Against Imperative #4

Create an ownership culture

Our ‘Ownership Culture’ Is Helping to Transform Pfizer

Own the Business

Win in the

Marketplace

No Jerks… Let’s

Discuss Behaviors

Impact ResultsTrust in

One Another

“I believe our culture can become a key sustainable advantage as we work to make Pfizer the premier, innovative biopharmaceutical company.”

– Ian Read, 2012 Annual Review

20

‘Dare to Try’ Program Approach

is about encouraging an entrepreneurial mindset, where all colleagues are empowered to explore and test new ideas via experiments.

EmbedCapability

To foster a culture of entrepreneurship that

goes beyond the training and workshops

LaunchExperiments

To accelerate profitable growth

through ‘Dare to Try’ challenge workshops

21