Chinese DiabetesPharmaceutical Market

August 2013

Chinese diabetes market: a fast growing segmentDe

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Chin

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ese

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3%5%

12%

18%

27%Growth ForecastDifferent Pharmaceutical

Segments 2013-2017

• The diabetes market in China is expected to grow over the Pharmaceutical Market average in the country and is positioned as one of the fastest Pharmaceutical Market Segments Worldwide

• In 2012 the market exceeded USD 3 bn and is expected to achieve USD 7 bn in 2017

• Insulins segment, growing above 30% CAGR in the period 2007-2012 have surpassed by first time the non insulin market segment in size and is expected to keep its position as market driver with higher growth level than non insulin drugs between 2013 and 2017

Source: Emergpharma`s model

Market DriversWhy this market is expected to more than double sales in 5 years

Epidemiology & treated patients

Increase on the prevalence of diabetes

as consequence of more urban population

and lifestyle changes

Increase on the number of treated

patients due to more awareness on diabetes

implications

Socio-Healthcare Economics

GDp per capita and Healthcare Expenses per capita increase,

growth of urban middle class

Diabetes healthcare expenses growth and

increase of its participation in

Healtcare Budget

Trends and new product availability

Increased use of combined therapy and

FDC in particularTrend to treat early

and more aggresively

New drugs available (incretin market)Increased use of

insulin analogs and devices

Diabetes Market Changes 2012-2017 USD(x000.000)

Mar

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1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

3,000

7,000 800

1,000

2,700

-500

Epidemiology of diabetes in China

Patients with

Diabetes in th

e World

Patients with

Diabetes in China

Patients diagnosed w

ith diabetes in

China

Patients on tr

eatment fo

r diabetes in

China

371,778

92,285

38,058 32,349

Data 2012 (x000) • In addition to 92 million of diabetics, 140 million people are living with IGT (Impaired Glucose Tolerance)

• The number of diabetics living in China is expected to achieve 130 million in 2030

• Although 85-90% of diagnosed patients are on treatment, diagnose rates are still low compared with developed countries

2000 2010 2012 2030 E0

40

80

120

2449

92

130Diabetic adults in China

Source: IDF and World Bank

Diabetes Treatment in China

54,227

5,70

9

3,23

5

16,175

8,08

7 3,882 970

Diabetes Patients China 2012 (x000)

Undiagnosed Diagnosed but UntreatedDiet and Exercise MonotherapyCombined non insulin Insulin AloneInsulin combined

• Among diagnosed patients, 10% are on diet and exercise and 15% are not treated

• 15% of the 16 million patients treated on monotherapy are receiving only Traditional Chinese Medicine (TCM)

• Also 10% of patients treated in combined non insulin therapy were receiving TCM + conventional treatment

• In total, from 92 million living with diabetes in China, lesss than 27 million are receiving at least one conventional drug, while 65 million are not diagnosed, not treated, treated on diet and exercise or with traditional medicinal chinese herbal products

• Only 11% of diabetics in China achieve targets according to international guidelines

Source: Emergpharma`s model

Diab-market Monotherapy Dynamics 2012

16.000.000patients

Diet and Exercise

New diagnosed

(Disease Progression)

Combination

Insulin

+2.000.000 / year -1.650.000 / year

Among 16 million patients in monotherapy, only 3.65 million are

expected to change treatment per year

Switch to other monotherapy < 5%

Source: Emergpharma`s model

Diabetes Product Market Leaders 2012 (Values)

Rest of products

37%Novo Human Insulin

17%

Glucobay16%

Novomix9%

Lantus8%

Novonorm7%

Glucophage6%

• Six products represent 2/3 of all market sales

• Among them, 4 are manufactured by the market leader Novo

• Among the 3 insulin market leaders, Lantus and Novomix are comparatively expensive products, and both are growing above the market, near 30% in 2012

• In the forecasted scenario, Novorapid and Levemir will surpase the 100 million $ sales in the next 3-4 years

• The incretin market (GLP-1 agonists and DPP4 agonists) grew nearly 70% in 2012 and is expected to grow even more in 2013-2017 fueled by new products availability and stronger penetration of Januvia and Victoza

Source: Emergpharma`s model based on IMS data, Sanofi and Novo Nordisk published data and Emergpharma`s patient flow

The Healthcare Reform in China

• Chinese Government invested USD 180 billion in healthcare improvements between 2009 and 2011

• More than 95% of citizens now have some form of healthcare coverage and the government hast turned to improving the coverage for major diseases

• The government is turning to cost containment at many levels to balance the healthcare budget

• The current Essential Drug List (EDL) has been expanded to 497 drugs this year (2013). However, only old diabetes products are included in this list

Basic healthcareTo all citizens

Improved basic medical infrastructure

Expansion of public haelth

serivice programs

Separated hospital

supervision and remove

drug mark up

Expansion of medical insurance coverage

Establishment of a National Essential Drug List

Source: Novo Nordisk presentation to investors April 2013

Summary• Chinese Diabetes Market exceeded 3 bn USD in 2013 and is expected to achieve 7

bn in 2017 being one of the fastest pharmaceutical segments Worldwide• Core Market Drivers

– Epidemiology: China is by far the biggest diabetics segment in the world with more than 90 million people affected by the disease and forecasted to be 130 by 2030. 2/3 of patients with diabetes are still undiagnosed or with a suboptimal treatment

– Socioeconomic Development: China is also one of the fastest GDP growth countries in the World and universal healthcare coverage one of the Government priority

– New trends / products availability: although old treatments are still the most popular, new oral therapies (dpp4, GLP-2) and insulin analogues are replacing human and animal cheaper insulins in a growing middle class segment of the population

• Six products represent 2/3 of the market, Glocobay one of the market leaders despite being and old generation product with generics on the market