- Kusuri Medicine is facing declining revenue due to expiring patents and considers acquiring another company to gain access to biologics which represent a growing market segment. - The presentation outlines a proposed $1.2 billion acquisition of another company that would provide an immediate revenue boost and replenish Kusuri's drug pipeline. - Integration plans include staff reductions, systems consolidation, and reallocating R&D spending, with the goal of launching a new inflammatory bowel disease treatment in early 2016. - Risks of the acquisition include potential clinical trial failures, strong established competitors, intellectual property challenges, and hidden legal or financial issues in the target company.

1. Kusuri Medicine:
Surviving the Cliff
Demetri Greco
Colin Hussey
Cyrus Johannes
Nicholas Norris
Joint Ventures
Kusuri Medicine:
Surviving the Cliff
Demetri Greco
Colin Hussey
Cyrus Johannes
Nicholas Norris
Joint Ventures

2. Our Team
Colin Hussey Cyrus Johannes
Demetri Greco Nicholas Norris

3. Agenda
• Round 1 Overview
• Implementation Timeline
• The Merger
• The Launch Plan
• Potential Risks
• Financial Analysis
Nicholas Norris

4. Round 1
Overview

5. Kusuri Medicines
$21.4B Revenue
Active Pipeline
Facing the Patent Cliff
Move Towards Biologics
Nicholas Norris

6. 7/10
Biologics in the
top 10 overall
sellers (2014)
$6.6B
Average revenue
per year from
biologics (top 20)
$200B*
Biologics market
size in 2014
9%*
Predicted CAGR
Until 2024
Biologics
Market at
a glance
0
50
100
150
200
250
300
350
400
450
500
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Potential Growth of Market for Biologics
(in Billions of USD)
Nicholas Norris
Why Biologics?
*Based on 2014 report from Transparent Market Research

7. Timeline
Nicholas Norris
Contingency agreement
FDA approves NDA
End 2015Mid 2015
Contingency paid
Early 2016
Launch of new IBD drug
Early 2016
SG&A downsize
due to synergy
Mid 2018

8. The Merger

9. The Deal
Nicholas Norris
$1.2B
$1.7B
Merger agreement reached
$1.2B cash payment
$100 per share
$500M contingent
$41.5 per share in a CVR
I
II
III

10. Personnel Integration Targets
Demetri Greco
Retention of key employees
Elimination of redundancies
Creation of new policies

11. Information Systems Integration
Reduce information system staff
Consolidate data centers
Establish efficient,
enterprise-wide
systems
Demetri Greco

12. Impacts on R&D
Demetri Greco
Industry decline in R&D
productivity rates
Acquire to replenish
current pipeline
Reallocate R&D expenses

13. The Launch
Plan

14. Insurance Company Relations
Colin Hussey
Negotiating
Rebates – 20%*
Preferred
Status
Clinical
Benefits
6% Price Increase
Per Year*
*According to Nick Rogers, Director of Strategic Development, UnitedHealthcare

15. Pricing
Colin Hussey
Regular
Wholesale
$5,000*
Per Package
Per Month
Volume-Based
Discounts
Insurance
Rebates
*Market average data based on study conducted by America’s Health Insurance Plans

16. Marketing
Colin Hussey
Detailing to Professionals
Continuing Education
Multimedia Ad Campaign

17. Distribution
Colin Hussey
Specialty Distributor
2nd Largest Globally
Advanced Capabilities
Personalized Handling
Increased Costs
Target Markets

18. Potential Risks

19. Risk: Failing Clinical Trials (Short Term)
Cyrus Johannes
$1.1B Average Loss*
BiomarkersBiomarkers
Companion Diagnostics
*Based on study sponsored by Clinical Leader

20. Risk: Underperforming
Cyrus Johannes
Exaggerated Clinical
Benefits
New Uses
New Competitors
Emerging

21. $12.543B
Varied
Uses
Serious
Infection
21%
Remission
Cyrus Johannes
Risk: Established Competitors (Long Term)

22. Risk: Skeletons in the Closet (Short Term)
Cyrus Johannes
Tax Avoidance
Potential Lawsuits
Access to financials
to perform audit
Extensive legal
analysis
*Based on information from professor Robert Duquette, Lehigh University

23. Biologic
Protections
Complex
New Uses
Barriers
To Entry
Cyrus Johannes
Risk: Patenting (Long Term)

24. Financial
Analysis

25. Revenues
Colin Hussey
0
5
10
15
20
25
30
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Net Revenue without Acquisition Net Revenue with Acquisition

26. Expenses
Colin Hussey
0
0.5
1
1.5
2
2.5
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Kusuri's R&D Biologic's R&D

27. Expenses
Colin Hussey
0
2
4
6
8
10
12
14
16
18
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Costs of Products Sold

28. Net Income
Colin Hussey
-5
0
5
10
15
20
25
30
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Revenue Expenses Net Income

29. Net Present Value
Colin Hussey
$ $1.7B
Investment
R&D returns
3.5%
Stock returns
11.67%
NPV of
$6.4B
NPV of
$13B

30. Thank You!
Q A&

31. Appendix

32. Revenues: Kusuri Only
Colin Hussey
0
2
4
6
8
10
12
14
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Insulinog & Steady Glucose Other Products

33. Revenues: Acquired Company Only
Colin Hussey
0
2
4
6
8
10
12
14
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Acquired Company Revenue IBD Biologic Oncology Biologic

34. Expenses: SG&A
Colin Hussey
0
2
4
6
8
10
12
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Selling General & Administrative

35. Expenses: SG&A
Colin Hussey
-1
0
1
2
3
4
5
6
7
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
BillionsofUSD
Net Cash Inflow from Acquired Compnay