Masters of the UniverseModerated By: Panel Participants:

Masters of the Universe The R&D Conundrum: Grow via Internal Investment or

External Development?

Jim Mazzo

Chairman & CEO AcuFocus

Executive Chairman, Neurotech

Pathways to Innovation

M & ALicensing/ Partnerships

Internal R&D

Total R&D Spending 2014: Panel

0

5000

10000

15000

20000

25000

R&D ($USD inmillions)

Zeiss

Santen

Allergan

J&J

Novartis

NEARLY

$20 INVESTED IN R&D

BILLION

Average R&D Cost per New Medical Device

Venture capital firms invested $2.7 Billion in U.S. med tech (device) companies in 2014

$50-90PER PMA

MILLION $3-5PER 510k

MILLION

Median R&D Cost per New DrugBy # of new drugs the company has brought to market in 10 years

$351 M

$4.2 B

$5.3 B

1 Drug >3 drugs >4 drugs

Pharma: % of Pipeline Compounds Originated Externally

3440 3838

47

62

Phase I Phase II Phase III

2002

2010

Source: EvaluatePharma database, February 2010 and May 2002; McKinsey analysis.

EXHIBIT 1: OUTSIDE IN

% of reported compounds originated externally

R&D Intensity (% of Sales)Leading Medical Products Companies

Lin J, Horn H, Henry J. In Vivo: The Business & Medicine Report. Elsevier, March 2010.

3

5

8

10

Bottom quartile

3rd quartile

2nd quartile

Top quartile

MEDICAL PRODUCTS

Average: 7.0% 21.3%

Median: 5.8% 20.1%

15

20

22

30

Bottom quartile

3rd quartile

2nd quartile

Top quartile

PHARMA PRODUCTS

2014 R&D Intensity (% of Sales) Ophthalmic Companies

45%

19%

17%

17%

14%

11%

11%

11%

8%

7%

3%

Regeneron

Roche/Genentech

Novartis/Alcon

Allergan

Shire

J & J

Carl Zeiss Med

Santen

Actavis (pre-Allergn)

Abbott/AMO

Valeant/B+L

Accelerating the Innovation Cycle? or Cutting Off Resources?

Companies

commercializing

medical products

Companies developing new drug molecules and device innovations

R&D Is an Easy Target

“Spending more on R&D won’t

drive results. The most crucial

factors are strategic alignment

and a culture that supports

innovation.”

─ Strategy& (formerly Booz & Co)

The Global Innovation 1000 ─

“The trouble is that it’s hard to measure

strategic alignment & culture, let alone link

them to profitability or market value.”

─ Harvard Business Review ─