1 Table of Contents 1 Table of Contents 3 1.1 List of Tables 4 1.2 List of Figures 4 2 Introduction 6 2.1 Increasing Cost of Drug Development 9 2.2 Most Drugs Fail to Recuperate R&D Costs 10 2.3 Contracting Life Cycles for Approved Products 11 2.4 The Case for First-in-Class Pharmaceutical Innovation 13 2.5 Status of Innovation in Rare Diseases 14 2.6 Conclusion 16 3 Assessment of Pharmaceutical Industry Pipeline 17 3.1 Pipeline and Clinical Trials Landscape by Therapy Area 18 3.2 Pipeline by Stage of Development 24 3.3 Pipeline by Molecule Type 26 3.4 Key Therapy Areas by Indication 30 3.4.1 Oncology 30 3.4.2 Infectious Diseases 32 3.4.3 Central Nervous System 34 3.4.4 Immunology 36 3.5 Conclusion 38 4 Assessment of Innovation in the Pharmaceutical Industry Pipeline 39 4.1 First-in-Class Innovation by Stage of Development 42 4.2 Key Therapy Areas by Indication 43 4.2.1 Oncology 43 4.2.2 Infectious Diseases 46 4.2.3 Central Nervous System 49 4.2.4 Immunology 52 4.3 Conclusion 54 5 Appendix 55 5.1 References 55 5.2 Abbreviations 56 5.3 Contact Us 56 5.4 Disclaimer 57

1.1 List of Tables Table 1: Trends in Clinical Trial Protocol Complexity, 2001-2015 9 Table 2: Pipeline Products by Therapy Area, 2015-Q3 2018 20 Table 3: Number of Clinical Trials Initiated by Therapy Area, 2007-2017 23 Table 4: Pipeline Products by Therapy Area and Stage of Development, Q3 2018 26 Table 5: Pipeline Products by Therapy Area and Molecule Type, Q3 2018 29 Table 6: First-in-Class Pipeline Products by Therapy Area, Q1 2015-Q3 2018 41 Table 7: First-in-Class Oncology Pipeline Products by Indication, Q1 2015-Q3 2018 45 Table 8: First-in-Class Infectious Diseases Pipeline Products by Indication, Q1 2015-Q3 2018 48 Table 9: First-in-Class Central Nervous System Disorder Pipeline Products by Indication, Q1 2015-Q3 2018 51 Table 10: First-in-Class Immunology Pipeline Products by Indication, Q1 2015-Q3 2018 541.2 List of Figures Figure 1: US Life Expectancy by Sex, 1950-2017 6 Figure 2: FDA Approvals, 1993-2018 8 Figure 3: Average Cost of Developing a Novel Drug ($m), 1970-2016 9 Figure 4: Projected R&D Returns (%), 2010-2017 10 Figure 5: Drivers of Shortened Pharmaceutical Product Life Cycles, 1970-2011 11 Figure 6: Patent Challenges by Generic Companies 12 Figure 7: FDA Approvals by Innovation Status, 1987-2017 13 Figure 8: Average Sales of First-in-Class and Non-First-in-Class Products After Launch ($m), 2006-2014 14 Figure 9: Average Projected Sales of First-in-Class and Non-First-in-Class Products Launched in 2015 ($m), 2016-2022 14 Figure 10: FDA Orphan Drug Approvals, 1983-2017 15 Figure 11: Pipeline Products by Stage and Molecule Type, Q3 2018 17 Figure 12: Pipeline Products by Therapy Area, Q3 2018 18 Figure 13: Overall Pipeline, Number of Products and Pipeline Growth by Therapy Area, Q1 2015-Q3 2018 19 Figure 14: Number of Clinical Trials Initiated, 2007-2017 21 Figure 15: Number of Clinical Trials Initiated by Therapy Area, 2007-2017 22 Figure 16: Pipeline Products by Therapy Area and Stage of Development (%), Q3 2018 24 Figure 17: Pipeline Products by Therapy Area and Stage of Development, Q3 2018 25 Figure 18: Pipeline Products by Therapy Area and Molecule Type, Q3 2018 27 Figure 19: Pipeline Products by Therapy Area and Molecule Type, Q3 2018 28 Figure 20: Oncology Pipeline Products by Indication, Q3 2018 30 Figure 21: Oncology Pipeline, Number of Products by Indication, Q1 2015-Q3 2018 31 Figure 22: Infectious Disease Pipeline, Number of Products by Indication, Q3 2018 32 Figure 23: Infectious Disease Pipeline, Number of Products and Pipeline Growth by Indication, Q1 2015-Q3 2018 33 Figure 24: Central Nervous System Pipeline, Number of Products by Indication, Q3 2018 34 Figure 25: Central Nervous System Pipeline, Number of Products and Pipeline Growth by Indication, Q1 2015-Q3 2018 35 Figure 26: Immunology Pipeline, Number of Products by Indication, Q3 2018 36 Figure 27: Immunology Pipeline, Number of Products and Pipeline Growth by Indication, Q1 2015-Q3 2018 37 Figure 28: Pipeline Products by Therapy Area and Proportion of Established and First-in-Class Products, Q3 2018 39 Figure 29: First-in-Class Pipeline, Number of Products and Pipeline Growth by Therapy Area, Q1 2015-Q3 2018 40 Figure 30: First-in-class Pipeline Products by Therapy Area and Stage of Development, Q3 2018 42 Figure 31: First-in-Class Oncology Pipeline Products by Indication, Q3 2018 43 Figure 32: First-in-Class Oncology Pipeline, Number of Products and Pipeline Growth by Indication, Q1 2015-Q3 2018 44 Figure 33: First-in-Class Infectious-Diseases Pipeline Products by Indication, Q3 2018 46 Figure 34: First-in-Class Infectious Disease Pipeline, Number of Products and Pipeline Growth by Indication, Q1 2015-Q3 2018 47 Figure 35: First-in-Class Central Nervous System Disorder Pipeline Products by Indication, Q3 2018 49 Figure 36: First-in-Class Central Nervous System Disorder Pipeline, Number of Products and Pipeline Growth by Indication, Q1 2015-Q3 2018 50 Figure 37: First-in-Class Immunology Disorder Pipeline, Number of Products by Indication, Q3 2018 52 Figure 38: First-in-Class Immunology Pipeline, Number of Products and Pipeline Growth by Indication, Q1 2015-Q3 2018 53