Justine DegeuserMorgane DufourPauline DulouardOlivier Héloir23th February 2012

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Summary

From Merck to Merck Serono

Merck Serono nowadays

Merck Serono’s future

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Merck’s history

1668

19141953

Merck is the world’s oldest pharmaceutical and chemical company

morphine codéine

Merck’s history

1668

• Friedrich Jacob Merck: Engel-Apotheke (“Angel Pharmacy”) in Darmstadt

1827

• Plant extracts and other chemicals by Heinrich E. Merck

• Alkaloïdes:

Merck’s history

1887

1900

1914

1925

1933

A subsidiary in New York was created (Georg Merck, a grandson of Heinrich Emanuel Merck)

Merck was represented on all continents

Confiscation : World War I, Merck & Co. became an independent American company

George Merck is giving direction to his son that turns the company of fine chemicals in pharmaceutical company

The Merck Institute of Therapeutic Research is based

Merck’s history

1953After the Second World War merged with Sharp & Dohme = MSD

1953Establishment of Merck KGaA For USA: Merck = EMD

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From Merck to Merck Serono

Chemistry + Primary Care

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34%

66%

Chemicals Pharmaceuticals

Business sector in 2005

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Concor®21%

Glucophage®18%

Erbitux®13%

Duoneb®15%

Others34%

Sales in 2005 - EUR Million

Sales in 2005

Products EUR million

Concor® 348.4

Glucophage® 297.2

Duoneb® 251.5

Erbitux® 218.2

others 573

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Small molecules + Erbitux®

Erbitux® – a first-in-class IgG1 monoclonal antibody targeting the EGFR. Treatment of metastatic colorectal cancer and squamous cell carcinoma of the head and neck.

1998 – Eli Lilly Merck licensed the right to market Erbitux® outside the US and Canada

Development of biological molecules

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Looking for a biotech company

Erbitux® is a recent success of Merck Group

Development of not only new chemical but especially biological molecules

Strategy to grow from a local, mid-sized pharmaceuticals and chemicals company into a leading global biopharmaceuticals player

Focus on specialist and innovative drugs

http://www.annualreports.de/documents/Merck-ar2006en.pdf

Serono for sale

4 therapeutic areas:Fertility treatments : world leader (60%market share) Gonal-f®Growth and metabolic disordersPsoriasisMultiple sclerosis : blockbuster Rebif® is the globalmarket leader

Led since 1996 by billionaire Ernesto Bertarelli

4th largest companies specializing in biotech

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Advantages of SeronoHigh-quality manufacturing

Innovativeand successful products

A well-stockedand promising development pipeline

Access to the important U.S. market

Decision to acquire the pioneering biopharmaceutical company Serono

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Acquisition of Serono – 2007

16,6 milliards CHF= 10,6 milliards d‘ €On February 5th, 2007, Merck held 97% of Serono’s capital and

98% of the voting rights.

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Serono’s pipeline

Serono’s drugs

Neurology

Reproductive Health

Growth & Metabolism Dermatology

Serono’s drugsSerono : BIOTECH

Merck’s drugs

Oncology

Hypertension

DANCOR®

Growth and metabolism Diabetes

Merck’s drugsMerck : CHEMISTRY

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Merck Serono’s drugsMerck Serono : BIOTECH

Merck Serono’s drugs

Neurology

Reproductive Health

Growth & Metabolism Dermatology Hypertension

Dancor®

Oncology Diabetes

+

Merck SeronoMerck had integrated the name Serono and became Merck Serono

In medical biotechnology, Merck Serono is a leader in Europe.

Merck Serono

Merck Serono Vs EMD SeronoDivisions for innovative prescription drugs of MerckIn North America (U.S. and Canada), the activities of Merck Serono are conducted under the name EMD Serono. EMD: Emanuel Merck, Darmstadt

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Merck relocated on the premises of Serono

Headquarters in Geneva (Switzerland)

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Merck Serono becomes Serono

Strategy focused on delivering innovations to patientsTherapeutic areas: neurodegenerative diseases

oncology fertility endocrinology rheumatology

Bring cardiometabolic care products in emerging markets

Develop and scale biologics

Merck generics for sale

Mylan acquired Merck's genericsThe divested Generics business represents EUR 1,802 million of sales in 2006 and sells products in more than 90 countries

13/05/07 4.9 billion €

http://news.merck.de/N/0/7BDAC02AD85D7D39C125730500286E43/$File/Generics_e.pdf

Theramex for sale

10/28/2010 265 million€

Merck KGaA's European Based Women's Health Businessrevenues = 100 million € in 2009

Teva Pharmaceutical has acquired Merck's TheramexTeva Pharma take over the distribution rights of Theramex's products sold in several countries.

http://www.worldpharmanews.com/merckkgaa/1451-merck-kgaa-sells-theramex-to-teva-for-eur-265-millionhttp://www.merckgroup.com/en/media/extNewsDetail.html?newsId=A52969A174686390C12577CA003EB758&newsType=1

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Merck Serono nowadays

What’s Merck group and Merck Serono now?

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Merck Serono92%

Consumer Health Care 8%

Sales of Merck KGaA - 2011Pharmaceuticals : 63%

282007 2008 2009 20100

1000

2000

3000

4000

5000

6000

Sales

2007 2008 2009 20100

500100015002000250030003500400045005000

Gross margin

Regular increase of the activity Increase of sales

+29% +27%

Merck Serono

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2007 2008 2009 20100

200

400

600

800

1000

1200

R&D

2010 : 1167 millions €2007-2010 : increase of 32%

Merck Serono – R&D expenses

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Patent cliff

http://www.merckgroup.com/company.merck.de/en/images/IR_2012_01_09_JPM_EN_tcm1612_85236.pdf?Version=http://www.ema.europa.eu/docs/fr_FR/document_library/EPAR_-_Summary_for_the_public/human/000071/WC500023742.pdf

Revenues lost due to patent expiries - a % of 2010 revenueKey products protected for next three years -patent expiries:Rebif ® : EU 2015, US 2022Erbitux ® : EU 2014, Japan 2016 Gonal-f ® : EU 2009, USA 2015

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Pipeline & Products

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Strategy of Merck Serono

Strategic focusEnhance the productivity of our drug discovery activities with innovative and emerging technologies Expand upon our Multiple Sclerosis franchise to enter other neurodegenerative disease areas Expand our pipeline in Rheumatology with complementary product opportunities offering a broad indication potential

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Strategy merck serono

Assessment of Therapeutique Areas

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31%

15%

12%

6%

36%

Neurodegenerative diseases

Oncology

Fertility

Endocrinology

Cardiometabolic Care / Others

Sales - 2010 Products % Sales

Eur Million

Rebif® 31% 1 668

Erbitux® 15% 820

Gonal-f® 9% 504

Concor® franchise 7% 373

Glucophage® franchise 6% 316

Other products 32% 1 727

~60% of portfolio based on biologically manufactured products

Biologics

Small molecules

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Phase I In RegistrationPhase IIIPhase II

Erbitux® (cetuximab)Anti-EGFR mAbNSCLC (1st line therapy)EMA: Application submitte

Rebif® HSA-free formulation (interferon beta-1a) for patients with early signs of MS (REFLEX) EMA: Approved

Erbitux® (cetuximab)Anti-EGFR mAb (PETACC-8*)Adj colon cancer

Erbitux® (cetuximab)Anti-EGFR mAb (EXPAND)Gastric cancer

CilengitideIntegrin inhibitor (CENTRIC)Glioblastoma

Stimuvax®Cancer immunotherapy (START, INSPIRE)NSCLC

Hypoxia-targeted drug (TH-302)Soft tissue sarcoma

Kuvan Sapropterin dihydrochloride (SPARK****)PKU in pediatric patients < 4year

ONO - 4641Oral S1P receptor modulatorMultiple sclerosis

CilengitideIntegrin inhibitorSCCHN

CilengitideIntegrin inhibitorNSCLC

Anti-integrin mAb (DI17E6)Metastatic colorectal cancer

Anti-integrin mAb (DI17E6)Metastatic prostate cancer (mCRPC), setting prior to chemotherapy

Hypoxia-targeted drug (TH-302)Pancreatic cancer

Fibroblast Growth Factor 18Cartilage injury repair

ARX 424 Long-acting interferonMultiple sclerosis

ATX-MS-1467Immune tolerizing agentMultiple sclerosis

Extended-release formulation of interferon beta-1aMultiple sclerosis

PI –2301Second-generation peptide copolymerMultiple sclerosis

MEK inhibitor (AS703026/MSC1936369B)Solid tumors and hematological malignancies

Novel combinations of MEK inhibitor (AS703026/MSC1936369B) with one of two sanofi-aventis PI3K inhibitors**Solid tumor

MEK inhibitor (AS703988/MSC2015103B)Solid tumors

c-Met kinase inhibitor (EMD 1214063)Solid tumors

NHS-IL12***Cancer immunotherapySolid tumors

Fibroblast Growth Factor 18OsteoarthritisAtaciceptanti-Blys/anti-APRIL fusion protein Lupus nephritis

Endocrinology

Rheumatology

Neurodegenerative Diseases

Oncology

Ataciceptanti-Blys/anti-APRIL fusion protein Systemic lupus erythematosus

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Oncology

Neurodegenerative

Diseases

Fertility

Endocrinology

CardioMetabolic care and others

Therapeutic areas

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Colorectal cancer CRC

Oncology

The third most deadly cancer among women and the fourth in men. Worldwide, it is responsible for around 529,000 deaths per year.

Metastatic bowel or mCRC : start in colon or rectum but has spread to another part of the body - metastasizes. About a quarter of people diagnosed with CRC already have metastatic CRC.

Head and Neck cancerFlat "squamous" cells that line the surfaces in the head and neck area, such as the mouth, nose and throat, and are thus termed "squamous cell carcinomas of the head and neck" (SCCHN).

Significant increase in the worldwide incidence of SCCHN over the past decade, particularly among women.Globally, there are almost 650,000 new cases of head and neck cancer each year, and over 350,000 deaths.

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Erbitux® Cetuximab

Oncology

IgG1 monoclonal antibody targeting EGFR.Approved in many countries all over the world for KRAS wild-type mCRC with chemotherapyApproved in squamous cell carcinoma cancer of the head and neck – SCCHN in combination with radiation therapy or chemotherapy.Erbitux® - Product of Eli Lilly, rights to commercialize Erbitux outside US and CanadaIn 2010, sales of Erbitux® rose by 18% to 820 million €.Strenghts : Strong position in niche markets in Europe

High market share in metastatic colorectal cancerStandard of care in head & neck cancer

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Oncology

Erbitux competitors - CRC

Avastin® – Bevacizumab Roche / Genentech, USA + EUApproved for mCRC, Advanced nonsquamous NSCLC,Metastatic kidney cancer when used with interferon alfa, Glioblastoma.

Vectibix® – Panitumumab Amgen, USA + UEApproved for mCRC with disease progression on or following fluoropyrimidine-, oxaliplatin-, and irinotecan-containing chemotherapy regimens

Xeloda® – Capecitabine Roche / Genentech, USA + UEApproved for mCRC, cancer of colon after surgery , breast cancer

43http://www.medscape.com/viewarticle/725271_5http://www.ncbi.nlm.nih.gov/pubmed/20068568

Application submitted to EMAFirst line therapy in NSCLC in combination with chemotherapy

NSCLC accounts for 80%–85% of all lung cancer cases.

Erbitux ® - in registration

Gastric cancer in combinaition with chemotherapy – EXPANDErbitux + FUFOX : high response rate in metastatic gastric cancer.

Adjuvant treatment in stage III colon cancer - PETACC-8 The final report with the official results of this trial is Dec.2014

Erbitux ® - Phase III

Oncology

Strong product in an expanding market

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Cilengitide : the integrin inhibitorsControl tumor growth. Action : attacking the tumor cells directly in a targeted manner and stopping angiogenesis that feed the tumor.

Phase III : Cilengitide in glioblastoma CENTRICEstimated Primary Completion Date : Sept.2012

Phase II : SCCHN & NSCLC

Cilengitide

Cancer immunotherapy that is designed to stimulate the body’s immune system to identify and target cells expressing MUC1.

Phase III : unresectable stage III NSCLC - START & INSPIRE Estimated Primary Completion Date : Sept. 2015

Stimuvax ®

http://www.oncothyreon.com/pipeline/vaccines/stimuvax/collaboration.html

Oncology

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In 2010, Merck KGaA signed a worldwide research and development agreement with Sanofi-Aventis U.S. Inc.

Two novel experimental combinations of the MEK inhibitor AS703026/MSC1936369B with one of two compounds of sanofi-aventis.

PI3K/mTOR inhibitor SAR245409 (also known as XL765), is under the responsibility of Merck Serono

Class I PI3K inhibitor SAR245408 (also known as XL147), is under the responsibility of Sanofi-Aventis.

Phase I

Oncology

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Therapeutic areas

Oncology

Neurodegenerative

Diseases

Fertility

Endocrinology

CardioMetabolic care and

others

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Multiple sclerosis

Neuro degenerative Diseases

MS is a complex, multifaceted disease of the central nervous system (CNS) with multiple pathways. Approximately 400,000 people in the U.S. have MS. (2.5 million worldwide)

MS interferes with the brain’s ability to control such functions as seeing, walking & talking. It is unpredictable and every person with MS will have his or her unique set of symptoms.

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Rebif ® Interferon beta-1a

Neuro degenerative Diseases

Rebif is indicated for the treatment of patients with relapsing forms of multiple sclerosis.

Rebif is a purified glycoprotein, which is produced by recombinant DNA technology using genetically engineered Chinese Hamster Ovary cells into which the human interferon beta-1a gene has been introduced.

Rebif decreases the frequency of clinical exacerbations and delays the accumulation of physical disability.

Rebif was approved by the U.S. FDA on March 7, 2002 is available in over 80 countries worldwide. Blockbuster with €1.7bn sales in 2010

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Rebif ® Perfect Life Cycle Management Strategy

Neuro degenerative Diseases

Life cycle management improves patient convenience and protects key franchises

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Rebif ® Ready-to-use syringes

Neuro degenerative Diseases

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Rebiject II ® auto-injector

Neuro degenerative Diseases

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RebiSmart® New Formulation

Neuro degenerative Diseases

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Rebif ® Major Competitors

Neuro degenerative Diseases

Tysabri is approved as monotherapy treatment for relapsing forms of multiple sclerosis. Administered by infusion (intravenous) (Biogen Idec and Elan )

Copaxone (glatiramer acetate injection) is indicated for the reduction of the frequency of relapses in relapsing-remitting multiple sclerosis. (Teva Pharmaceuticals)

Avonex (interferon beta-1a) is approved by the FDA to treat relapsing forms of MS. (Biogen Idec) It is the leading MS therapy in the US, with around 40% of the overall market, and in Europe, with around 30% of the overall market.

Betaferon/Betaseron is approved as monotherapy treatment for relapsing-forms of multiple sclerosis. (Bayer)

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Therapeutic areas

Oncology

Neurodegenerative

Diseases

Fertility

Endocrinology

CardioMetabolic care and

others

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Gonal-F® Follitropin alpha for Injection

Fertility

The Gonal-f® RFF Pen is a gonadotropin hormone produced by recombinant DNA technology (rDNA).

It is used in ovulation induction (OI) and in vitro fertilization (IVF)

Market position/ StrengthsPioneer and market leader

Comprehensive portfolio of complementary products

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Luveris® lutropin alfa for injection

Fertility

The first and only recombinant human luteinizing hormone (r-hLH) approved in the world

Cetrotide® cetrorelix acetate Gonadotropin releasing hormone antagonist

Crinone® progesterone gel Indicated for progesterone supplementation as part

of an Assisted Reproductive Technology (ART)

Ovidrel® hCG The first and only recombinant human chorionic

gonadotropin (r-hCG)

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Therapeutic areas

Oncology

Neurodegenerative

Diseases

Fertility

Endocrinology

CardioMetabolic care and

others

Saizen® somatropin for injection

Endocrinology

Recombinant human growth hormone made by DNA technology.

Market position/ StrengthsAmong Top 5 in growth hormones“only in class”products for selected niche indications

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Endocrinology

Serostim® somatropin for injection Indicated for the treatment of HIV wasting in patients

receiving antiretroviral therapy

Egrifta® tesamorelin for injection First treatment indicated to reduce excess abdominal

fast in HIV-infected patients with lipodystrophy

Kuvan® sapropterin dihydrochloride First treatment indicated in Europe for the treatment of

hyperphenylalaninemia

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Therapeutic areas

Oncology

Neurodegenerative

Diseases

Fertility

Endocrinology

CardioMetabolic care and

others

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246 million people with type 2 diabetes around the worldGlucophage : 1st first-line treatment for type 2 diabetesGlucovanceMetformine : was the Molecule of Merck

DiabetesLeading market positions with gold standard products that have high brand equity

Excellent track record in life cycle management (i. e. formulations)

Strong position in Emerging Markets

Market position/ Strengths

CardioMetabolic Care

CardioMetabolic care and others

CV diseases are responsible for one in every three deaths which translates into 17 million people worldwide each year Bisoprolol : 1st-line treatment of hypertension

Cardiovascular diseases

200 million people worldwide suffer from hypothyroidism20% of this population is currently receiving treatmentLevothyroxine sodium

Thyroid disease

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Rheumatology

CardioMetabolic care and others

Phase II : Systemic lupus erythematosus (SLE)Phase I : Lupus nephritis

Atacicept - anti-BLyS/anti-APRIL fusion protein

Phase II : Cartilage injury Phase I : Osteoarthritis

Fibroblast growth factor 18

Exclusive worldwide license to Merck Serono to develop and commercialize Fibroblast Growth Factor 18, and the genetic fusion molecule Atacicept.

Partnership with BMS

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Merck Serono’s future

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Merck Serono’s future

Expand their fast growing presence in China and other Emerging MarketsGrow their U.S. business with specialist-focused therapiesExpand their ongoing presence in the Japanese market

Strategy focus

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Development programs discontinued

Cladribine tablets for use in Multiple Sclerosis (Phase III)

Safinamide for treatment of Parkinson indications (Phase III)

New Formulation of Rebif in the U.S.

Neuro- degenerative Diseases

Erbitux for use in metastatic triple-negative breast cancer (Phase II)

Clinical development for IMO-2055, currently in development for squamous cell carcinoma of the head and neck (Phase II)

Oncology

ARX-201 for use in growth hormone deficiencies (Phase II)

Endocrinology

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Redefining the R&D organization

One executive for separated R and D functions

Leaner organization with clear responsibilities on individuals rather than on committees.

New R&D Organization

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Merck Serono’s future

Mendor signed a distribution agreement with Merck Serono for the meter Mendor Discreet ™

Merck Serono + Threshold = global agreement to co-develop and commercialize phase III Hypoxia-Targeted Drug TH-302

February 2012

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Merck Serono’s future

Merck Serono will increase tenfold its annual donation of praziquantel tablets which will increase from 25 to 250 million units - schistosomia

To return all rights to Safinamide at Newron Pharmaceuticals SpA

But continue co develepment for Pruvanserine & Sarizotan

April 2012

2012

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Future growth trends

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2006-2011 Future growth trend

Neurodegenerative Disease 7.9%

Oncology 24.2%

Fertility 5.9%

Endocrinology 8.9%

CardiometabolicCare/Others

5.5%

Strategy for the future

They want to become the leader in oncology by 2015

Merck Serono’s SWOTSTRENGTHS

Erbitux ® standard of care

Rebif® performance benefiting from

volume growth and price/Life cycle management

New R&D hub in Beijing

Efficient patent cliffLeader in fertilityGreat reputation

WEAKNESSES

50% of sales held by Rebif® et Erbitux®

Failure in gaining regulatory approvals

forcladribine tablets

Lack of new products in the portfolio

Licence for Erbitux®OPPORTUNITIES

Expand Merck Serono’s oncology

pipeline and product portfolio

Several patenerships (BMS-Sanofi)

Possible expansion in Asia

THREATSIncreasing

competition from biosimilar

Increasing competition in

multiple sclerosis-oncology market

Competitors=Avastin® for Erbitux® and

Avonex®-Tysabri® for Rebif®

Generics²

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Thank you for your attention