Clinical Trial Costs in Emerging Geographies China R

Clinical Trial Costs in Emerging Geographies: China R. Stephen Porter, Pharm. D President, CEO and Chairman VDDI Pharmaceuticals Director & Co-founder Dragon Bio-Consultants, Ltd. Hong Kong, SAR

VDDI Pharmaceuticals • As its name suggests, VDDI Pharmaceuticals utilizes a virtual business model. • Virtual drug development entails: (i) a small core group of employees responsible for strategic management, regulatory strategy, and financial control, (ii) outsourcing all non-core business functions, including preclinical and clinical drug development, and (iii) electronic data capture and data submission to regulatory authorities.

Xemilofiban Summary • Product has already been studied in both Phase II and Phase III clinical trials 12 K patient experiences • Proven safety and efficacy • Advantages over existing products • Growing total market flattening sales with expanded indications • Advantage of IV to oral conversion PROPRIETARY 3

Strategy for Development • Secure Local Operating Company agreement • Meet with s. FDA for Guidance – Translation key documents • CMC tech transfer – PO and IV Formulation • Phase II III Multi-Center Trials China and Then US PROPRIETARY 4

Dragon Bio-consulting: Services Currently Being Provided Clinical Trial Management Services - MASH™ Preclinical translational and toxicology services Bioprocessing & Engineering Consulting Inspection and diligence services for c. GCP, c. GLP, and c. GMP Business and commercial development services in the Asia. Pacific pharmaceutical and biotechnology sectors • Regulatory and resource mobilization services in the Asia. Pacific markets • Partnering and M&A • Import Export services for Branded and Generic Pharmaceuticals ( Green Channel Logistics) • • •

Why China Market: China is expected to become the world's 3 rd-largest prescription drug market in 2011, and the market in China may be doubled by 2013 (IMS data) Special SFDA Regulations: • Clinical trials are required for all imported drugs before marketing. So, trials for marketing registration will be greatly increase • Data generated from Chinese sites in a global trial can be used for an import drug registration, so that the clinical trial can be exempted if the data comply with SFDA’s requirements. This may save 2 -4 years for a new drug to be marketed in China. More global trials are anticipated as more and more pharmaceutical companies become aware of this regulatory strategy.

Why China Trends of Drug Development : There have been increasing number of R&D centers set up by major global pharmaceutical companies in China in the last three years. As a consequence, more and more global trials for new drugs are predicted to be led from China

CRO’s – clinical development ASIA • Mainland China – Local; Kendle, Tiger. Med , – MNC or JV; Accelovance, Covance, Excel (PPD), ICON (Fountain Medical), Quintiles • Taiwan – DCB • India – Local; Biocon (Clinigene), – MNC • Singapore (Malaysia, Thailand, Vietnam) – Local; Gleneagle (pan-Asian and Australia) – MNC; Covance, Parexcel, etc • South Korea – MNC and local

Business environment - China • Perceived market – true market – – – Pharma market expected to grow 17% in 2010, becoming 3 rd largest in 2015. Resources needed to penetrate the many diverse markets Pricing; Biologics 50 – 90% below west, so far sub-standard drugs Ability/Inability to pay for a treatment Public health insurance, pricing practices and change! • Hidden / “Unaccounted” costs – HR; turn-over, training, efficiency, foreign staff as local employees (rent, schools, corporate credit cards, foreign currency exchange …) – Unpredictable and changing regulations – Corruption – State sponsored industrial espionage

Business environment - China Ø Tax incentive for new and high tech R&D o Exempt of import duty and VAT for equipment and reagents. o 1000 Talents program o 5. 85 B USD investment by PRC in Biotech and HC and Pharmaceuticals Ø Price pressure on pharmaceuticals. o New “Measures for the Administration of Drug prices” announced June 2010, offpatented originator pricing will go down Ø Legal and Regulatory hurdles: o Product registration 6 -9 months minimum for approvals to begin trials often 1 year of more o Clinical trial data acceptance, 1601 trials have been conducted in China by MNCs since 2008. Mostly Phase III-IV o Levies and import duties o Competition watchdog ; M&A (In 2010 Pfizer forced to sell animal vaccine to local company) Force foreign business to set-up manufacturing and operations in China.

Regulatory environment • Formal regulatory frame work – – • • SFDA moving towards PIC/S KFDA moving towards USFDA ASEAN’s mutual recognition scheme 2012 Central Drugs Standard Control Organization (CDSCO), India, Directorate General of Health Services, Ministry of Health and Family Welfare, Government of India (WHO CGMP) 200 Reviewers at SFDA, 2000 at USFDA Enforcement/Graft Generic- & TCM-traditions Vs. NCE & NBE CRO/CMO; Mindset and level of understanding

Market Attractiveness Matrix for Asia 12 Country Patient Access Cost Market Opportunity Regulatory Approval timelines Australia ++ + +++ 2 - 3 months India +++++ ++ 3 -4 months China +++++ 10 - 12 months Korea +++ ++ ++++ 3 - 4 months Taiwan ++ ++ ++ 3 – 4 months Singapore + ++ + 1 - 2 months Indonesia ++++ + 3 – 4 months Malaysia ++ ++ 3 – 4 months Thailand +++ + 3 – 4 months Philippines ++++ + 3 - 4 months Vietnam +++++ + 4 – 5 months N o r t h A m e r i c a • E u r o p e • A s i a / P a c i f i c • L a t i n A m e r i c a • A f r i c a

Business environment The herd mentality in Pharma industry: May 06 Jan 07 Dec 06 Feb 07 Mar 07 Apr 07 Jun 07 Astra. Zeneca $100 M investment, R&D Center Novartis $100 M investment, R&D Center in shanghai, 400 FTEs Roche plans to expand R&D center in Shanghai GSK plans to establish a fully integrated R&D center Astra. Zeneca China R&D center will be located in Shanghai GSK sets up a R&D center (CEDD) in neurodegenerative disease in Shanghai Lilly $100 M investment in 5 years Amgen sets up clinical development center in Mumbai Merck / Advinus risk sharing deal on metabolic disease target Eli Lilly / Nicholas Piramal $100 M risk sharing partnership Astra. Zeneca sets up process R&D lab in Bangalore GSK / Ranbaxy $100 M risk sharing partnership BMS/ Biocon / Accenture $300 M partnership GSK / Tata Consultancy Service partnership China India Nov 06

Recommended Second Tier Cities 2 nd Tier Cities • Changchun • Chengdu • Hangzhou • Hefei • Kunming • Taizhou • Tianjin • Xian • Zhenghou

Blood Draw Procedure Country Blood Draw Flag Low (USD) Medium (USD) High (USD) USA 22 26 33 China 5 6 7 Hong Kong 7 7 10 Korea 5 6 7 Thailand 2 3 4 Taiwan 10 11 12 Source: Grant. Plan® (www. ttc-llc. com)

ECG Procedure Country EC G Flag Low (USD) Medium (USD) High (USD) USA 99 103 128 China 38 42 56 Hong Kong 32 47 49 Korea 14 21 34 Thailand 17 23 30 Taiwan 32 47 49 Source: Grant. Plan® (www. ttc-llc. com)

Initial Physical Exam (~60 min. ) Procedure Country Initial Physical Exam Flag Low (USD) Medium (USD) High (USD) USA 202 239 260 China 61 97 151 Hong Kong 111 162 204 Korea 87 91 108 Thailand 53 67 80 Taiwan 55 98 101 Source: Grant. Plan® (www. ttc-llc. com)

Physical Exam (~15 min. ) Procedure Country Physical Exam Flag Low (USD) Medium (USD) High (USD) USA 130 151 152 China 36 50 60 Hong Kong 63 88 105 Korea 40 48 55 Thailand 39 56 89 Taiwan 51 73 94 Source: Grant. Plan® (www. ttc-llc. com)

Keys to Success Factors : China • Talent – “Hai Gui” • Regulatory and compliance • Communication and client interface • Supporting mechanism – infrastructure and funding • Training – start with a clean slate – Leadership – recruitment and retention – Technical expertise – Clinical, industrial R&D, and regulatory experience – Communication with international sponsors – GLP and c. GMP training and practice enforcement – IND, NDA, ANDA experience – Working language – English and Chinese, notebook, verbal and written communication – Recognizing culture differences on both sides (“fee for service” and “guaranteed results”) – Need greater support – Ease of procuring patients, sample shipping and etc. – c. GCP, c. GLP, c. GMP – Technical training ( Cato, Beckloff Associates etc…. ) – Compliance training needs time

Risks: China • Dynamic / fluid Environment – Economics, work force training & retention • (high cost of living & poaching in 1 st Tier Cities) – SFDA regulatory uncertainties • leading to reluctant clients • Delayed programs – Governmental oversight / monitoring (Internet) • Repatriating monies out of country • Internet privacy data corruption • Conflicts between different cultures, traditions, as well as value systems. – Goal mis-alignment between partners – Moral Hazard Situations • Ethical concerns & corruption is endemic – There are “no secrets” in China – Contract law – “Red Envelop mentality”

香港中環 Central, Hong Kong SAR 雪廠街 10 號 HK Registered Company No. : 1429099 新顯利大廈5 樓 55 室 SKYPE: virtualdoc 77 +86. 15021242314 (Cell China) 香港公司註冊號碼： 1429099 Contact Information +1(615)445 -5761 (Cell USA) http: //dragonbio-consultants. com

R. Stephen Porter, Pharm. D. , FCP MRCP Dragon Bio-Consultants, Ltd. Suite 55, 5/F New Henry House, 10 Ice House Street Central, Hong Kong SAR HK Registered Company No. : 1429099 SKYPE: virtualdoc 77 +86. 15021242314 (Cell China) +1(615)445 -5761 (Cell USA) Steve. P@dragonbio-consultants. com http: //dragonbio-consultants. com 香港中環 雪廠街 10 號 新顯利大廈5 樓 55 室 香港公司註冊號碼： 1429099 VDDI Pharmaceuticals Chairman, President and CEO 115 Penn Warren Drive Suite 300 -389 Brentwood, TN 37027 (615)445 -5761 (cell) +86. 15021242314 (Cell China) virtualdoc@gmail. com http: //www. virtualdrugdevelopment. com