Biotechnology Certificate Investment Case On the therapeutic front, - - PowerPoint PPT Presentation

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Investment Case

➢ On the therapeutic front, we believe that genes therapies and personalized medicine will be on investors’ agenda as we move into 2019 as newer technologies (including mobile wearables) are now able to capture, analyze, and share clinical data in a very short timeframe. ➢ We also believe that personalized medicine is not far away from becoming ubiquitous as prices for new testing (including DNA analysis) and analysis are coming down sharply ➢ We see M&A as a very powerful catalyst to support sector's undemanding valuations. A huge consolidation will take place in the healthcare sector. ➢ With the new US tax code and the huge incentive it has on investments (expense of amortizations), Capex is likely to get a boost and is likely to benefit the "hardware" players. ➢ Against this backdrop, we favor Biotech companies exposed to cell and gene therapies, antibodies and rare diseases over the larger market cap names which benefited more from rising drug prices than from volume growth

Biotechnology Certificate details

✓ Issuing bank: UBS AG Zurich, Calculation agent: UBS AG, London Branch ✓ ISIN: CH0275762380 ✓ Currency: USD ✓ Fees: 1.6% management fee

Biotechnology Certificate

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Biotechnology Certificate

➢ The term has appeared for the first time with the discovery of DNA ➢ Modern biotechnology involves the use of living organisms or their products (bacteria or enzymes) to manufacture drugs ➢ Biotechnology products have wider applications than classic pharma ➢ A completely different business model than pharma: ➢ Today lines are blurred between pure biotech and pharmaceutical companies as these industries are partially consolidating

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Smaller size R&D intensive Entrepreneurial High risk, high reward profile

What Is Biotechnology?

Biotechnology Certificate

Solution To A Global Social Issue - The "Hope Offering"

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Entrepreneurial, knowledge intensive High risk, high reward profile, strictly regulated Computing power is an underlying fundamental of the industry Reimbursement and pricing – important success factors R&D dependent, high capital requirements Constant business model evolution

Biotechnology Certificate

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Global Biotechnology Market Expected To Grow By 8% CAGR Through 2020

Biotechnology Certificate

$ 358 bn $ 383 bn $ 416 bn $ 452 bn $ 491 bn $ 533 bn

100 200 300 400 500 600

2015 2016 2017 2018 2019 2020

$ billion

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Communicable, maternal, neonatal, and nutritional 6% Chronic liver 2% Digestive 2% Neurological and mental 4% Diabetes, urogenital, blood, and endocrine 6% Other 1% Injuries 8%

Cardiovascular 32% Cancer 16% Infections 16%

Chronic respiratory

7% Global Mortality Causes In 2015 (nb. of cases)

Biotechnology Certificate

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Oncology; 16.30% Anti-diabetics Anti-rheumatics Anti-virals Vaccines Bronchodilators Sensory Organs Anti-hypertensives Dermatologicals MS therapies 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 16%

WW Market Share (%), 2022

Top 10 Therapeutic Areas By 2022 - Market Share & Sales Growth Oncology treatment sales are expected to reach $190bn by 2022

market share

Source: EvaluatePharma 2016 % sales growth 2015-2022

Oncology Has The Largest Market Potential

➢ Emerging markets will lead “Anti-diabetics” growth

Biotechnology Certificate

➢ Oncology: a 232 bn market by 2025 (CAGR 8%) ➢ Cancers together with heart diseases are responsible for two thirds of all deaths worldwide ➢ New cases have increased by 17% worldwide during the last 10 years ✓ The accumulation of mutations on the DNA lead to the development of a tumor, the biggest factor risk: aging ✓ Increased DNA damage and replication error can also be due to environmental carcinogens (UV, Smoking…) ➢ Targeted therapy and immunotherapy are taking their place alongside conventional treatments ➢ Immunotherapy is the use of medicines to stimulate a patient’s own immune system to recognize and destroy cancer cells more effectively. ➢ Combination between several kind of therapies as immuno-chemotherapy agents will be the key as chemotherapy stimulates the immune system ➢ The industry consolidation is a key driver of growth (several big M&A deals in this sector since January 2019: GSK, Bristol Myers, Ely Lilli)

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New Challenges For A New World (I)

Biotechnology Certificate

➢ Diabetes and chronic kidney diseases increased worldwide by 30% from 2005 ✓ due to: Obesity, High Blood Pressure, Smoking, Environmental, Inactivity

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New Challenges For A New World (II)

IMPACT OF DIABETES

Biotechnology Certificate

➢ Infection cases have decreased by 10% during the last 10 years led primarily by decreases in HIV/AIDS and tuberculosis cases ➢ Cheaper gene sequencing trigger the development of personalized medicine notably in oncology ➢ Rare diseases are more and more “attractive” due to governmental support and high profit margins

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Orphan drug sales could reach $178 bn by 2020 (2015-20 CAGR 12%) In the last 5 years

• f all new drug approvals

were for rare diseases

Rare diseases affect That’s 1 in 10!

New Challenges For A New World (III) 30 millions AMERICANS

Biotechnology Certificate

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➢ The innovation in the development of new kind of drugs was supported by the FDA. 2018, as last year, was again a record year for FDA approvals! ➢ The next 5 years outlook will also be promising as: ✓ Many important drugs in the last stages of development are awaiting approval. ✓ The FDA is providing scientific and regulatory advice needed to bring new type of treatments into the market. The FDA is reshaping current regulations to speed up approvals of new drugs. ✓ The FDA and the Center for Biologics Evaluation and Research expect more than 200 Investigational New Drug applications per year by 2020 for cell and gene therapeutic candidates. They predict 10 to 20 approvals each year by 2025 for these kind of treatments.

Source: AtonRâ Partners, FDA.gov

32 26 35 38 28 29 26 31 34 26 35 43 35 41 45 22 46

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15 20 25 30 35 40 45 50 55 60 65 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Number of new drugs approved by FDA

Biotechnology Certificate

➢ Food and Drug Administration → The first level of decision-making before commercialization ✓ consistent legal and political framework across states ✓ the FDA has the most demanding approval standards in the world ➢ The FDA does not decide on a drug’s reimbursement policy: ✓ insurance companies have the right to decide individually ✓ biotech companies start reimbursement discussions at the earliest stages of research

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9% 91%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Uninsured With Health Insurance 7% 49% 56% Direct purchase Employment based Private insurance 2% 14% 20% 36% Military Health Care Medicare Medicaid Government plan

Source: Census Bureau's March 2014, March 2015, and March 2016 Current Population Survey (CPS: Annual Social and Economic Supplements).

Percentage of People by Type of Health Insurance Coverage in US

Biotechnology Certificate

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Growth

Aging population Chronic diseases Emerging countries Nutrition habits Government support Orphan drugs M&A potential Personalized Medicine Upcoming Catalysts

Biotechnology Certificate

➢ Treatments targeted to the needs of individual patients ➢ Technological breakthroughs and computer power are giving a boost to this field ➢ Strong government support: 16 new personalized medicine therapies approved in 2017 for target cancer, orphan diseases, infectious disease, two CAR-T gene therapies.

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Source: 2018 Progress Report: Personalized Medicine at FDA

Personalized Medicine: The Future Of Medicine?

Biotechnology Certificate

30%

Of 2017 FDA approvals were personalized medicine

A Real Opportunity For Biotech and Pharma due to: ➢ huge populations ➢ increasing prosperity and standards

• f living (growing middle class)

➢ aging population ➢ The two countries showing the highest growth in obesity are China and India (15% of the worldwide

• bese population) leading to:

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A Fast Changing World: Emerging Markets

Biotechnology Certificate

Source: McKinsey & Company

Pharma emerging-market revenues projections ($bn)

Strong pipeline in high growth therapeutics Novel technologies platform

Cheap Valuations High returns potential

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2019 Is Expected To Be A Very Strong Year In M&A

Biopharma sector M&A upturn in 2018 after a quiet year in 2017. External growth through M&A represents an attractive

• pportunity

Biotechnology Certificate

An estimated value of $265 bn in M&A activity in 2018, +26% compared to 2017 (source: Informa Pharma) Pharma and Biotech companies in order to stay competitive are becoming bigger and bigger Pharma and Biotech companies to get highly specialized on big markets or highly diversified to create synergies

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• n the Independence of Financial Research issued by the Swiss Bankers Association.

Although AtonRâ Partners SA believes that the information provided in this document is based on reliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completeness

• f the information contained in this report.

The information contained in these publications is exclusively intended for a client base consisting of professionals or qualified investors. It is sent to you by way of information and cannot be divulged to a third party without the prior consent of AtonRâ Partners. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performance is not indicative or a guarantee of future results. Investment losses may occur, and investors could lose some or all of their investment. Any indices cited herein are provided only as examples of general market performance and no index is directly comparable to the past or future performance of the Certificate. It should not be assumed that the Certificate will invest in any specific securities that comprise any index, nor should it be understood to mean that there is a correlation between the Certificate’s returns and any index returns. Any material provided to you is intended only for discussion purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any security and should not be relied upon by you in evaluating the merits of investing in any securities.

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