Understand how IP synergy indices can help effective decision-making for M&A investments.

1. Confirming M&A Sustainability
ANALYZING EFFECTIVE INVESTMENT VOLUMES
THROUGH IPSYNERGY INDICES
Dr. Tatsuo Nakamura
CEO & FOUNDER
VALUENEX Seminar @
21 September, 2017

2. © VALUENEX 2017
Agenda
2
Determining Adequate Investment Values for M&As
Verifying M&A Valuation: Pharma Cases Studies
Conclusion
intellectual innovator
Novartis - Alcon
Pfizer - Hospira
Teva - Allergan
Johnson&Johnson - Actelion

3. DETERMINING ADEQUATE INVESTMENT
VALUES FOR M&As
3

4. © VALUENEX 2017
View Points for Successful M&As
CATEGORY VIEW POINT CURRENT DUE DILIGENCE
NEW MODEL WITH
PANORAMIC VIEW
ANALYSIS
Management Synergy
Management Policy
Corporate culture
●
Business Synergy
Business size
Market field
Market share
● ●
Technological Synergy
R&D size
Technological field
Technological portfolio
〇 ●
Investing in Tech Companies requires thorough evaluation of technological
synergy.
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5. © VALUENEX 2017
Methodology for Estimating Investment
Amount
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Data Collection
Making Indices
15 largest M&As in the pharmaceutical industry (2007-2017):
Deal value of M&As, Sales per year
Indices for Sales and for R&D activity
Multi-Correlation
Analysis
Multi-Correlation Coefficient, Parameter per Factor
Estimating
Investment Value
Proofing
5

6. © VALUENEX 2017
15 Largest Pharmaceutical M&As
since 2007
intellectual innovator
NO. NAME BIDDER TARGET
YEAR
OF
DEAL
DEAL VALUE
(USD M)
1 Merck & Co/Schering-Plough Merck & Co Schering-Plough 2009 43,198
2 Pfizer/Wyeth Pfizer Wyeth 2009 65,016
3 Roche/Genentech (44.2% Stake) Roche
Genentech (44.2%
Stake)
2009 44,291
4 Novartis/Alcon (52% Stake) Novartis Alcon (52% Stake) 2010 25,750
5 Sanofi/Genzyme Sanofi Genzyme 2010 19,479
6 Abbott Laboratories/AbbVie Abbott Laboratories AbbVie 2012 54,376
7 Actavis/Allergan Actavis Allergan 2014 63,199
8 Allergan/Forest Laboratories Allergan Forest Laboratories 2014 23,126
9 AbbVie/Pharmacyclics AbbVie Pharmacyclics 2015 19,045
10 Baxter International/Baxalta (80.5% Stake) Baxter International Baxalta (80.5% Stake) 2015 17,895
11 Pfizer/Hospira Pfizer Hospira 2015 16,323
12 Teva/Allergan (generics) Teva Allergan (generics) 2015 39,633
13 Valeant Pharmaceuticals/Salix Pharmaceuticals
Valeant
Pharmaceuticals
Salix Pharmaceuticals 2015 15,302
14 Shire/Baxalta Shire Baxalta 2016 35,219
15 Johnson & Johnson/Actelion Johnson & Johnson Actelion 2017 29,592
6

7. © VALUENEX 2017
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
RealDealValue
Estimated Value
Multiple Correlation Result
7
Multiple Correlation Coefficient: R = 0.893
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Over-valued Under-valued

8. © VALUENEX 2017
R&D Activity Factor
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Common Area Rate for Bidder = A2 / (A1 + A2)
Common Area Rate for Target = A3 / (A1 + A3)
Synergy Rate = A2 / (A1 + A2 + A3)
Acquired Area Rate = A3 / (A1 + A2 + A3)
8
r1
r2
A1 A2 A3
Bidding Company
R&D area size = r1
Target Company
R&D area size = r2
Common R&D = A2
Acquired R&D Area = A3

9. © VALUENEX 2017
#2 • Pfizer / Wyeth
9intellectual innovator
Target's R&D Area Size 1.1935
Common Area Rate for Bidder 92.0%
Target's Sales Average from 2007-2016 22,616
Sales Differential Rate: Bidder/Target 2.13

10. © VALUENEX 2017
Sales Factor
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Target's Sales Average from 2007-2016
Sales Differential Rate: Bidder/Target
NO. NAME BIDDER TARGET
BIDDER
SALES
(USD M)
TARGET
SALES
(USD M)
BIDDER/
TARGET
1 Merck & Co/Schering-Plough Merck & Co Schering-Plough 38,235 15,596 2.45
2 Pfizer/Wyeth Pfizer Wyeth 48,090 22,616 2.13
3 Roche/Genentech (44.2% Stake) Roche Genentech (44.2% Stake) 49,697 12,561 3.96
4 Novartis/Alcon (52% Stake) Novartis Alcon (52% Stake) 47,799 8,036 5.95
5 Sanofi/Genzyme Sanofi Genzyme 37,845 3,944 9.59
6 Abbott Laboratories/AbbVie Abbott Laboratories AbbVie 55,675 18,567 3.00
7 Actavis/Allergan Actavis Allergan 3,879 5,296 0.73
8 Allergan/Forest Laboratories Allergan Forest Laboratories 5,296 3,315 1.60
9 AbbVie/Pharmacyclics AbbVie Pharmacyclics 18,567 181 102.33
10
Baxter International/Baxalta (80.5%
Stake)
Baxter International Baxalta (80.5% Stake) 12,426 5,637 2.20
11 Pfizer/Hospira Pfizer Hospira 53,309 3,935 13.55
12 Teva/Allergan (generics) Teva Allergan (generics) 17,128 5,275 3.25
13
Valeant Pharmaceuticals/Salix
Pharmaceuticals
Valeant Pharmaceuticals Salix Pharmaceuticals 4,361 538 8.10
14 Shire/Baxalta Shire Baxalta 4,837 5,637 0.86
15 Johnson & Johnson/Actelion Johnson & Johnson Actelion 66,819 1,930 34.62
10

11. VERIFYING M&A VALUATION:
PHARMA CASE STUDIES
11

12. © VALUENEX 2017
Actual Deal Value vs. Estimated Value
12intellectual innovator
NO. NAME
DEAL VALUE
(USD M)
ESTIMATED
VALUE
DIFFERENCE
1 Merck & Co/Schering-Plough 43,198 51,657 -8,459
2 Pfizer/Wyeth 65,016 62,193 2,823
3 Roche/Genentech (44.2% Stake) 44,291 38,106 6,185
4 Novartis/Alcon (52% Stake) 25,750 40,067 -14,317
5 Sanofi/Genzyme 19,479 21,397 -1,918
6 Abbott Laboratories/AbbVie 54,376 50,383 3,993
7 Actavis/Allergan 63,199 57,308 5,891
8 Allergan/Forest Laboratories 23,126 24,767 -1,641
9 AbbVie/Pharmacyclics 19,045 20,741 -1,696
10 Baxter International/Baxalta (80.5% Stake) 17,895 26,820 -8,925
11 Pfizer/Hospira 16,323 26,536 -10,213
12 Teva/Allergan (generics) 39,633 29,602 10,031
13 Valeant Pharmaceuticals/Salix Pharmaceuticals 15,302 12,527 2,775
14 Shire/Baxalta 35,219 29,920 5,299
15 Johnson & Johnson/Actelion 29,592 19,421 10,171
under valued
under valued
over valued
over valued

13. © VALUENEX 2017
#4 • Novartis / Alcon (52% Stake)
13intellectual innovator
Deal value (USD m) 25,750
Target's R&D area size 1.243
Common Area Rate for Bidder 0.66
Target's Sales Average from 2007-2016 8,035.71
Sales Differential Rate: Bidder/Target 5.95

14. © VALUENEX 2017
#11 • Pfizer / Hospira
14intellectual innovator
Deal value (US-Mi$) 16,323
Target's R&D area size 0.548
Common Area Rate for Bidder 0
Target's Sales Average from 2007-2016 3,934.74
Sales Differential Rate: Bidder/Target 13.55

15. © VALUENEX 2017
#12 • Teva / Allergan (generics)
15intellectual innovator
Deal value (US-Mi$) 39,633
Target's R&D area size 0.920
Common Area Rate for Bidder 0.4963
Target's Sales Average from 2007-2016 5,275.28
Sales Differential Rate : Bidder/Target 3.25

16. © VALUENEX 2017
#15 • Johnson&Johnson / Actelion
16intellectual innovator
Deal value (US-Mi$) 29,592
Target's R&D area size 0.347
Common Area Rate for Bidder 0.0000
Target's Sales Average from 2007-2016 1,929.83
Sales Differential Rate : Bidder/Target 34.62

17. © VALUENEX 2017
Applying Panoramic View Analysis
for M&A Valuation
17
• Investment amount for M&As are affected by:
1) R&D size, meaning the Target Company’s Technological Area
2) Common area size for Bidder
3) Sales volume of Target Company
4) Sales ratio (Bidder/Target), Multiple Correlation Coefficient indicating
accuracy over 0.89
• R&D indices are also useful for estimation of investing amount
• R&D synergy must be included in the estimation formula to decide the
appropriate level of M&A investments
• When the actual investment deal value is under-estimated, the company
must have extra capital which will be a factor to increase corporate value.
• On the other hand, when real investment deal value is over-estimated, it
will be a factor to decrease corporate value.
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18. CONCLUSION
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19. © VALUENEX 2017
Conclusion
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Panoramic View Analysis allows you to:
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• Reduce costs and save time
• Find emerging fields
• Easily detect white space and future links
• Evaluate relative value of technologies
• Simulate M&A effectiveness
• Estimate corporate value after M&A
• Make decisions regarding M&As

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customer@valuenex.com
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