A world leader in allergy immunotherapy General Investor Presentation February 2016 1 I
ALK at a glance Commercial leader and foremost innovator within respiratory diseases World leader in allergy immunotherapy (AIT) ~1.5m patients using ALK products Direct presence and partnerships in all major AIT markets worldwide Near-century long heritage of pioneering allergy innovation; ~300 in R&D ~1.900 employees Shareholder info (ALKB.DC) Main shareholder: Lundbeckfonden Products in all areas of AIT 2015 revenue DKK 2.57 billion SCIT 45% SLIT-tablets 17% Other 11% SLIT-drops 27% Strategic drivers Globalisation of AIT Standardised, evidence-based products Base business growth and simplification Asthma treatment and prevention 2 I
A strong foundation for growth ALK s financials at a glance DKK million 2012 2013 2014 2015 2016E Base business 2,118 2,145 2,219 2,384 ~2,6bn SLIT-tablet partnerships 1) 227 99 214 185 N.A. Revenue 2,345 2,244 2,433 2,569 N.A. (Revenue in USDm) 350 335 363 383 - Gross margin 72% 69% 70% 67% < 67% R&D 511 463 394 407 ~400m (% of revenue) 22% 21% 16% 16% - S, M & A 1,004 954 994 1.033 - EBITDA b.s.i. and excluding milestones/royalties 157 221 273 331 ~450 EBITDA 242 236 404 451 (in USDm) 36 35 60 67 - EPS 21 6 19 35 - CAPEX 243 253 202 199 ~200 Free cash flow (152) (85) 101 18 ~ 2015 Equity ratio 68% 69% 69% 63% - Cash and marketable securities 477 312 289 608 - ~+10% Organic growth in base business (CAGR 2011-15 : 3%) 1) Revenue from SLIT-tablet partnerships in North America and International markets. In years 2009-15, this mainly consists of milestones and service fees 3 I
Towards a global ALK Partnerships to leverage growth SLIT-tablets SLIT-tablets SLIT-tablets and SCIT SCIT products 8% 17% 10% 15% ALK sales 2015 75% Industry sales E2015 75% DKK ~7bn AIT world market ACARIZAX North America Europe International North America Europe International SLIT-tablets AAIs AIT treatment is mainly distributed as finished products in Europe and recently also in the USA and International markets - in North America, also as bulk extracts to allergy specialists 4 I
Highlights Q4: Overall 9% growth; DKK 148m EBITDA Strong demand in Europe 3,000 2,500 2,000 DKKm Revenue and earnings ( 3% avg growth in base business) 20% 15% 1,500 10% FY: 2% growth; DKK 451m EBITDA Tailwind for asthma agenda New partnerships in Asia Pacific Clinical progress in all geographies 2016: Significant news-flow ahead BLA for HDM-SLIT tablet submitted in the USA 1,000 500 0 5% 0% 2011 2012 2013 2014 2015 Base business revenue Partnerships revenue Reported EBITDA Hereof milestones EBITDA -margin 2016: 10% organic growth in base business expected Growth rates are stated in local currencies 5 I
Europe: Strong finish to the year DKK 1,937m revenue (1,858) Q4: 10% revenue growth All product lines advanced Strong demand in France 16% Full-year: 4% growth Progress in major markets GRAZAX, Jext and diagnostics primary promoters of growth DKKm 2000 Revenue in Europe* +4% 1900 1800 1700 1600 1500 2011 2012 2013 2014 2015 * Revenue growth is measured in local currencies 6 I
The situation in France ALK s number one priority is to support doctors, patients and authorities Objective to double capacity in French SLIT-drops production by end Q2 Actions taken so far: SLIT-drops capacity being rapidly scaled up 50 new employees already on-boarded Evidence-based products suggested as alternative for main allergies ALK will initiate dialogue with authorities to make ACARIZAX available ASAP Ramp-up of production of SLIT-tablets 7 I
Europe: Meeting the challenge of change Increased efficiency and focused investments Europe: ALK s strategy Optimisation of product portfolio Product introductions (e.g. ACARIZAX, Jext ) Cost savings and restructuring programmes Investments in market shaping activities Allergy Unlocked 1 2 3 4 5 Establish burden of disease Secure scientific support Obtain market access Increase patient awareness of allergy immunotherapy Facilitate doctor diagnosis and intervention 8 I
North America: Growth for legacy products DKK 442m revenue (499) Q4: 3% revenue growth 9% growth for legacy products Full-year: 26% revenue decline 0 milestones from MSD (DKK 162m) DKK 44m (36) other income from MSD DKK 398m sales of legacy products (+12%) 14% growth in allergen extracts (SCIT) 10% growth in sales of other products DKKm 500 400 300 Revenue in North America* -26% 200 100 0 2011 2012 2013 2014 2015 Milestones and services cause revenue to fluctuate * Revenue growth is measured in local currencies 9 I
North America: Parallel growth strategy Merck partnership co-exists with ALK s allergen extracts business USA: ALK s strategy Merck GRASTEK and RAGWITEK approved and launched HDM SLIT-tablet June 2015: Trial meets primary endpoint Biologic License Application submitted in February 2016 ALK North America Allergen extracts and other products delivered to allergists Seasonal dosing begins ~12 weeks ahead of pollen seasons Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dosing for GRASTEK Average grass pollen season Option for year-round dosing Average ragweed pollen season Dosing for GRASTEK 10 I
Intl. markets: First tablet launched DKK 190m revenue (76) Q4: 31% increase in revenue Partner income up, decline in China, progress in Turkey Full-year: 127% revenue growth Significant income from Torii partnership including milestone payment 16% DKKm 250 200 Revenue in International markets* +127% 150 100 50 0 2011 2012 2013 2014 2015 Milestones and services cause revenue to fluctuate * Revenue growth is measured in local currencies 11 I
International markets: Globalising a proven portfolio Expanding beyond established AIT markets International: ALK s strategy Japan with Torii: Development and commercialisation of SLIT-tablets First launch in December 2015 China with Eddingpharm: Sales and distribution of HDM SCIT products Already marketed Russia/South-East Asia with Abbott: Sales and distribution of SLIT-tablets First launches possible in 2017 Australia/New Zealand with Seqirus: Sales and distribution of SLIT-tablets First launches possible in 2017 12 I
Pipeline is key for ALK s global expansion Product GRAZAX Grass ARC GRAZAX Asthma prevention ACARIZAX HDM rhinitis/asthma Tree SLIT-tablet Tree ARC GRASTEK * Grass ARC RAGWITEK TM * Ragweed ARC HDM SLIT-tablet* HDM rhinitis Pre-clinical Phase I Phase II Phase III Filing (exp.) Marketed 2016 TBC*** 2007 2014 2014 MITICURE ** HDM rhinitis Japanese cedar SLIT-tablet Cedar pollen ARC ARC: allergic rhinoconjunctivitis *) Licensed to Merck for North America HDM: house dust mites **) Licensed to Torii for Japan ***) To be communicated 13 I
HDM SLIT-tablet approved in Europe and Japan 14 I
Respiratory diseases Allergic rhinitis (hay fever) is the most common childhood allergy; allergic asthma is the most common chronic lower respiratory disease in children The link between house dust mite (HDM) induced allergic rhinitis & asthma: Allergic asthma and allergic rhinitis frequently coexist in the same person ~50% of HDM allergic rhinitis patients also suffer from allergic asthma ~50% of asthmatic patients are reported to be sensitised to HDM Symptoms of respiratory allergies, which manifest themselves in the upper and lower respiratory tract Eyes Nose Mouth Throat Trachea Bronchus Lungs A. Upper airways Allergic rhinitis Running or blocked nose Itching Sneezing B. Lower airways Allergic asthma Shortness of breath Narrowed airways Coughing Wheezing HDM-allergic patients risk of developing asthma is significantly higher than that of other allergy patients 15 I
ACARIZAX for allergic rhinitis and allergic asthma First product for both indications so far launched in Denmark and Germany Approved by 11 European countries, ACARIZAX is indicated in adults (18-65 years) diagnosed by a clinical history and a positive test of HDM sensitisation, with at least one of the following conditions: Persistent moderate to severe HDM allergic rhinitis despite the use of symptom-relieving medication HDM allergic asthma not well controlled by inhaled corticosteroids and associated with mild to severe HDM allergic rhinitis and where patients' asthma status has been carefully evaluated In Japan, ACARIZAX under the name MITICURE is indicated for the treatment of allergic rhinitis caused by HDM in adults and adolescents (12-64 years). MITICURE was launched by Torii in December 2015. 16 I
Improving quality of life for patients House dust mites (HDM) are the most common cause of allergy globally HDM allergy appears early in life and is present year-round ACARIZAX works by addressing the cause of the respiratory disease Reduces days impacted by severe allergic rhinitis symptoms by 50% ACARIZAX furthermore offers better asthma control Reduces the risk of moderate to severe asthma exacerbations by 34% Reduces risk of nocturnal awakenings by 36% 17 I
The unmet medical need in Europe ACARIZAX for patients not well-controlled with symptom relieving medication HDM respiratory allergy patients ~35m adults and ~9m children and adolescents Potential HDM AIT-eligible patients* ~3m adults and ~1m children Approx. 50% have access to AIT ~1.5m adults and ~0.5m children Patients currently treated with AIT 400-450,000 patients, DKK 1.5 2.0bn industry sales 18 * Moderate-severe, not well-controlled patients 18 I
Globalising ACARIZAX Approvals granted EU-11 and Japan Filings USA, Australia, Turkey and Switzerland Preparations for filing Canada, Russia and South-East Asia Nextwave Registrations * ACARIZAX is the trade name for ALK s HDM SLIT-tablet in Europe 19 I
GRAZAX Asthma Prevention 20 I
GRAZAX Asthma Prevention (GAP) trial First large, multinational placebo-controlled trial with AIT (GRAZAX ) in asthma prevention 812 children with a clinical history of grass pollen allergy, but no signs of asthma 3 years with daily intake of GRAZAX or placebo; 2-year follow-up to monitor effects post-treatment Objective: To investigate GRAZAX effect on children s risk of developing asthma Encouraging top-line results Significant reduction in proportion of children experiencing asthma symptoms or using asthma medication; effect sustained 2 years after treatment Significant reduction of allergic rhinoconjunctivitis symptoms; effect sustained 2 years after treatment GRAZAX disease-modifying effect confirmed 2010 2011 2012 2013 2014 Screening Trial design Randomisation End of treatment End of trial GRAZAX Placebo Treatment period Follow-up The trial showed no effect in terms of time to first diagnosis of reversible impairment of lung function. 2015 21 I
GAP: Symptoms and usage of medication Next step to discuss results with authorities I
Forward-looking statements This presentation contains forward-looking statements, including forecasts of future revenue and operating profit, as well as expected business-related events. Such statements are subject to risks and uncertainties as various factors, some of which are beyond ALK s control, may cause actual results and performance to differ materially from the forecasts made in this presentation. Without being exhaustive, such factors include general economic and businessrelated conditions including legal issues, uncertainty relating to demand, pricing, reimbursement rules, partners plans and forecasts, fluctuations in exchange rates, reliance on suppliers, as well as changes to market structures. An additional factor would be the consequences of potential side effects from the use of ALK s products, as allergy immunotherapy may be associated with allergic reactions of differing extents, duration and severity. 23 I
Strategic priorities in 2016 Base business ACARIZAX in Europe ACARIZAX Rest of world Secure organic growth Simplify business structure Acceptance and advocacy Product of choice Significant capture rate Market access and reimbursement Paediatric development Significant capture rate in Japan Regulatory reviews in USA, Australia and Turkey Filings in Canada, Russia and South East Asia 24 I
Major pipeline events in 2016/17 Pivotal news-flow concerning all five SLIT-tablets Events Europe Launches of ACARIZAX in EU-11 2016 USA Canada Registration of ACARIZAX in additional countries 2016 Paediatric development of ACARIZAX 2016 Initiation of Phase III clinical trial with tree SLIT-tablet 2016 Exp. timing Submission of BLA for ACARIZAX Q1 2016 Submission of NDA for ACARIZAX 2016 Japan Phase III trial with MITICURE in paediatric patients 2016/17 Approval of SLIT-tablet for Japanese cedar pollen 2016/17 Russia Approvals of GRAZAX and ragweed SLIT-tablet 2016/17 Regulatory filing of ACARIZAX Australia Approvals of ACARIZAX and GRAZAX 2016/17 Rest of world Turkey: Approval of ACARIZAX 2016/17 25 I
2016 Outlook Base Case Strong H1 growth expected following market disruptions gradual normalisation expected hereafter 2016 Outlook Comments 2015 ~DKK 2.6bn base business revenue Revenue from SLIT-tablet partnerships ~DKK 450m EBITDA before special items, sales royalties and milestones ~10% organic growth Double-digit growth for SLIT-tablets No guidance on sales royalties, product supply, services and milestone payments DKK 75m potential milestones 2016-17 Revenue growth Higher production costs Operational efficiencies and cost savings 2,384bn 185m 331m ~DKK 200m CAPEX SLIT-tablet capacity, tree AIT, Jext 199m Free cash flow largely on level with 2015 +18m 26 I
APPENDIX 27 I
Europe: A market in transition ALK s core platform Europe: Market profile Mature, diverse markets under regulatory transformation Mainly legacy and named patient products Restricted market access SLIT-tablets fully-documented and registered 40% 30% 30% France Others Germany 30% 34% 36% ALK Others Stallergenes ~1.3m patients on AIT ~EUR 675m total industry sales 28 I
North America: A significant opportunity High allergy prevalence; introducing a new treatment option with SLIT-tablets USA: Market profile Self-mixing and compounding of SCIT by allergists common >6m severe patients eligible for AIT SCIT: low take-up and high drop-out rate 50% refuse treatment, 84% drop out 45% 30% 25% ALK Others Greer ~2.5m patients on AIT $2-3bn billing $150m industry revenue 29 I
Merck partnership for North America Co-exists with ALK s allergen extracts business Terms of partnership Merck is responsible for development, registration and commercialisation of SLITtablets ALK responsible for product supply Up to DKK 1.6bn (USD 290m) in milestones USD 100m upfront and in milestones USD 90m paid 2007-2015 USD 190m in sales milestones Revenue from royalties an product supply 2007 2009 2011 2013 2014 2016 Partnership signed with Schering- Plough Schering- Plough acquired by Merck FDA establishes new efficacy requirements Merck submits BLAs for grass and ragweed SLIT-tablets GRASTEK and RAGWITEK approved and launched Merck submits BLA for HDM SLIT-tablet 30 I
Japan: A new opportunity Addressing the national affliction Japan: Market profile Allergy prevalence higher than EU and USA AIT currently almost non-existent as a treatment option ~3,000 specialists ~50m allergy patients Japan: ALK s strategy Partnership with Torii MITICURE launched in December 2015 for treatment of HDM allergic rhinitis Positive Phase II/III results from Cedar SLITtablet in August 2015, registration application submitted in December 2015 SCIT HDM licensed for market-building Main allergies: HDM and Japanese cedar 31 I
Torii partnership for Japan Terms of partnership Torii is responsible for development, registration and commercialisation of SLITtablets All potential upfront and development milestone payments totalling DKK 450m (EUR 60m) now received ALK is entitled to royalty payments, sales milestones and payment for product supply 2011 2015 2015 2015 2015 Partnership signed Torii Torii submits registration applications for HDM SLIT-tablet MITICURE approved MITICURE launched Torii submits registration applications for JP Cedar SLIT-tablet 32 I
Australia, China and South-East Asia Abbott for Russia and South-East Asia Supply and Marketing of ALK s SLIT-tablet portfolio in Russia Supply and marketing of ACARIZAX in seven Asian countries Abbott and ALK will share revenue generated. Abbott will purchase products from ALK at agreed prices Seqirus for Australia and New Zealand Rights to sell and promote ACARIZAX and GRAZAX Seqirus will purchase products from ALK at agreed prices reflecting a split of the final in-market revenues Eddingpharm for China Sales and distribution of HDM SCIT products 2014 2014 2015 2016 ALK supplies products, medical and scientific support Eddingpharm will purchase products from ALK at an agreed price structure reflecting a split of the in-market revenues generated Abbott for Russia Eddingpharm for China Seqirus for Australia/ New Zealand Abbott for South-East Asia 33 I
Healthcare reforms Current landscape DE 2009: Allergen decree implemented to regulate NPP* 2010: Intro of price moratorium & mandatory rebate up to 16% (6%) 2011: AMNOG: Price & reimbursement regulation 2014: Rebate eased to 7%. Price moratorium extended to 2017 FR 2014: APSI decree on price and reimbursement for NPP NL 2013: Patient co-payment increased by 52% 2014-15: Reimbursement gradually removed from NPP Spain UK IT 2010: Mandatory rebate of 7.5% on registered products 2013: Reimbursement lowered. High patient co-payment Very limited reimbursement for AIT 2014: UK Pharmaceutical Industry agreed a new 5 year Pharmaceutical Price Regulation Scheme introducing value-based pricing and enhancing the role of NICE in drug pricing National healthcare system responsible for regional budget allocations. Pricing pressure on regional hospital tenders and general decrease of NPP reimbursement FIN/SE 2013: Mandatory price reductions (5% and 7%) CH USA Japan China 2014: Price reductions due to reference pricing 2014: Reform ongoing. AIT primarily covered by commercial insurance plans. Payers to focus on outcomes rather than activity From 2016 formal health technology assessments to be implemented 2014: Multi-country trials no longer accepted for registration. EMA/FDA approval followed by local clinical development now required. AIT not reimbursed, covered by out-of-pocket payments *NPP: Named patient product 34 I
Sponsored ADR Programme ALK has a sponsored Level I ADR programme in the USA. The ADRs trade on Over-The-Counter ( OTC ) market in the USA. Details are as follows: Ticker Symbol AKABY CUSIP 001628 106 Ratio 5 ADR : 1 Ordinary Share ADR depositary Deutsche Bank Share price information www.adr.db.com Please contact the Deutsche Bank s dedicated ADR broker desks: Jay Berman (New York) Simon Davies (London) Tel: +1 212 250 9100 Tel: +44 20 7547 6500 Email: jay.x.berman@db.com Email: simon.davies@db.com 35 I
ALK Equity and shareholder structure ALK (ALK B) listed on NASDAQ Copenhagen (Reuters: ALKB.CO / Bloomberg: ALKB.DC) Number of shares outstanding: 10.1m Two share classes (A / B) Market Cap: ~EUR 1.1bn Daily turnover: Approx. EUR 1m (last six months) Largest shareholder groups: Lundbeckfonden (40%), since 1987 ATP, Danish Labour Market Pension Fund (>5%) ~13,000 retail investors (~25%) 36 I
Thank you for your attention Read more: www.alk.net Investor Relations: Per Plotnikof Head of Investor Relations Phone: +45 4574 7576 E-mail: ppidk@alk.net 37 I