Presentation to

IB Analytics
Regarding Healthcare

January 2007
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Table of Contents
Section
1 Bear Stearns Health Care Group Overview
2 Pharmaceutical Sector Overview
3 Specialty Pharmaceutical Sector Overview
4 Medical Technology Sector Overview
5 Healthcare Services Overview

CONFIDENTIAL 9936149, v1
Section 1

Bear Stearns Health Care Group

Overview
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Leading Health Care M&A Franchise

Global Health Care M&A Transactions ($ in billions)

$250 $200

$200
150

150

100

100

50
50

0 0
Goldman Bear Merrill Morgan Rothschild Lazard BNP JP Morgan Banc of UBS
Sachs Stearns Lynch Stanley Paribas SA America

Source: Securities Data Company. Deals completed between January 2003 and December 2005.

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Entrusted with Some of the Most Important Health Care M&A Deals
Top Global Health Care M&A Transactions(1)
Transaction Bear Stearns
Rank Target Acquiror Advised

Advised on $17 billion Advised on $27 billion €14.6 billion Unsolicited 1 Warner Lambert Pfizer √
Sale of PCH to Acquisition of Takeover Offer for
Johnson & Johnson Guidant Schering AG 2 SmithKline Beecham Glaxo Wellcome
3 Aventis Sanofi-Synthelabo √
December 2006 April 2006 Withdrawn
4 Pharmacia Pfizer √
5 Guidant Boston Scientific √
IDD IDD 6 Monsanto Pharmacia & Upjohn √
7 Pfizer Consumer Health Johnson & Johnson √
8 Immunex Amgen √
Advised on $63 billion Advised on $60 billion Advised on $11 billion
9 ALZA Johnson & Johnson
Sale to Acquisition of Acquisition of
Sanofi-Synthelabó Pharmacia Corp. Immunex 10 Amersham General Electric
October 2004 11 DuPont Pharmaceuticals Bristol-Myers Squibb
April 2003 July 2002 12 IVAX Teva
13 Knoll AG Abbott Laboratories
14 Biogen IDEC Pharmaceuticals
IDD
15 Chiron Novartis AG
16 Hexal AG Novartis AG
17 Mallinckrodt Tyco International Ltd. √
Advised on $3.8 billion Advised on $26 billion Advised on $90 billion
18 Renal Care Group Fresenius Medical Care AG
Acquisition of Merger-of-Equals with Merger with
BioChem Pharma Monsanto Company Pfizer 19 BioChem Pharma Shire √
July 2000 June 2000 20 Jones Pharmaceutical King Pharmaceuticals
May 2001 21 SICOR Teva √

IDD
= Investment Dealers’ Digest deal of year.
(1) Source: Securities Data Company. Includes US and European Pharma and MedTech transactions since 2000.

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Building Client Relationships That Result in Successful Repeat Transactions
„ $338M Secondary Offering
„ $868M Secondary Offering
„ $163M Secondary Offering
„ $195M Secondary Offering
„ $258M Secondary Offering
„ Acquisition of Solgar Vitamin
& Herb
„ Sale of Quinton Instrument
„ $35B Terminated Merger with
Monsanto
„ $55B Merger discussions with
SmithKline Beecham
„ $2B Senior Notes
„ $200M Animal Health Swap
with Roche
„ $380M Sale of Storz
Instrument to Bausch & Lomb
CONFIDENTIAL
„ Mandated Lead Arranger for
€11.5B Credit Facility to fund
€9.7B Acquisition of Serono
„ €14.6B Unsolicited Takeover
Offer for Schering AG
„ $1.7B sale of VWR
International to Clayton,
Dubilier & Rice
„ $370M Private Placement of
Public Equity (Merck KGaA’s
stake in Par Pharmaceutical)
„ JV of European Orthopedics
with Biomet
„ Filed $250M Initial Public
Offering for Dey Lab
subsidiary
„ $150M acquisition of CN
Biosciences, Inc.
„ $63B Sale to Sanofi-
Synthelabo
„ $133M ADR offering for
Rhône-Poulenc
„ $400M Sale of OTC business
to Ciba-Geigy for Rhône-
Poulenc
„ Advised Rhône-Poulenc on
$3B Animal Health Joint
Venture with Merck
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„ $120M sale of vaccines
business to ID Biomedical
Corp.
„ $72M sale of US OTC
products portfolio to Purdue
Pharma L.P.
„ Merger of CADx subsidiary
with Qualia Computing, Inc.
„ $400M Convertible Debt
Offering
„ $4B Acquisition of BioChem
Pharma
„ $265M Spot Secondary for
Yamanouchi
„ $1B Merger with Roberts
Pharmaceutical
„ $121M ADR Offering
„ Acquisition of Richwood
Pharmaceuticals
Watson Pharmaceuticals
„ $980M Acquisition of Schein
Pharmaceuticals
„ $300M Acquisition of
TheraTech
„ $99M Acquisition of Royce
Labs
„ Acquisition of Rugby
Pharmaceutical
„ $67M Follow-on
„ $50M IPO
„ Acquisition of Optivar from
Viatris
„ Advised on $70M Sale of
Wampole Laboratories
„ Acquisition of JV stake from
Asta Medica
„ $225M Senior Credit Facilities
„ $408M acquisition of Carter-
Wallace Pharmaceutical
division
„ $90B Merger with Pfizer
„ Formation of $4B
„ 3-way JV with Glaxo and
Wellcome
„ Advised on $1B Repurchase of
Glaxo Wellcome Joint Venture
„ $150M Senior Notes
„ $500M Medium Term Notes
„ Sale of Warner-Chilcott to
Nalé Labs (Elan plc)
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„ $16.6B sale of Consumer
Healthcare business to
Johnson & Johnson
„ Pfizer’s $126M acquisition of
CSL Animal Health
„ Pfizer’s $60B acquisition of
Pharmacia
„ $700M IPO of Monsanto
„ Pharmacia’s $26.2B Merger
with Monsanto
„ $2B Offering of Volvo’s
Secondary Shares of
Pharmacia & Upjohn
„ $2 billion sale to Cardinal
Health
„ $511 million bond tender
„ $131 million Follow-on
„ $175 million Sr. Sub Notes
„ $275 million Sr. Secured
Credit Facility
„ Acquisition of Instromedix
„ Advanced Medical merger
with IVAC
3
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Endo Pharmaceuticals Case Study

Offering Summary Stock Price Performance
3,000 $30.00
10/5/05: Priced
2,500 at $26.04
28.00

Volume (000s)
2,000
9/22/05: Filed 26.00

Price
$755 million 1,500 at $28.27

24.00
Secondary Offering 1,000
29.0 million shares
22.00
500
Joint Bookrunner
0 20.00
October 2005
5 5 5 5 5 5 5 5 5 5 5 5 5
9/0 0/0 1/0 2/0 3/0 6/0 7/0 8/0 9/0 0/0 3/0 4/0 5/0
9/1 9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/2 9/3 10/ 10/ 10/

Background
„ Endo Pharmaceuticals (ENDP) is a market leader in the research,
development, sale and marketing of branded and prescription drugs
for pain treatment
„ All shares were offered by Endo Pharma LLC, partially owned by
Kelso and current/former management and directors, in their fourth
public offering of shares since July 2003
Highlights
„ After building an order book north of 2x oversubscribed with no
price sensitivity, the deal was upsized by 3 million shares
• 6-day roadshow with 44 1-on-1 meetings and 30 indications
• 81 domestic institutional orders placed
• Approximately 80% of shares placed with new holders

• The selling shareholder reduced its stake from 48% to 19% • 68% hit ratio
„ On the day of pricing, the stock traded up slightly vs. a decline of
• Proceeds to management will be used to fund the exercise price and
related taxes on options set to expire in Jan ’06 1.5% and 2.8% for the S&P 500 and Nasdaq Biotech Index,
respectively
„ Largest Health Care follow-on offering since November 2001
(King Pharmaceuticals) „ The shares were offered at a 0.0% discount to the closing stock
price
„ Represents the fourth Bear Stearns bookrun equity offering for the
Company–total proceeds raised of $1.37B „ The offering represents Bear Stearns largest bookrun follow-on
offering in over 5 years

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Case Study: Sale of betapharm to Dr. Reddy’s Laboratories

Transaction Summary
Target: betapharm Arzneimittel GmbH. (“betapharm”)
Seller: 3i
Acquiror: Dr. Reddy’s Laboratories Ltd.
Purchase Price: €480 million
Form of Consideration: 100% Cash
Announcement Date: February 16, 2006
Expected Closing Date: Early March 2006

Deal Synopsis
„ betapharm, based in Augsburg, Germany, and founded in 1993, is the fourth-largest generic pharmaceutical company
in Germany with a market share of approximately 3.5%. 3i, a UK based leading private equity firm, acquired control
of betapharm in May 2004.
„ Pursuant to substantial in-bound inquiries received by betapharm, 3i retained bankers to review strategic alternatives.
„ Dr. Reddy’s Laboratories (NYSE: RDY) is an emerging global pharmaceutical company with proven research
capabilities. It produces finished dosage forms, APIs and biotechnology products and markets them globally, with
focus on India, US, Europe and Russia.
„ The deal is the largest cross border acquisition ever by an Indian pharmaceutical company and is evidence of the
growing trend of global consolidation in the pharmaceutical industry. The combination of Dr. Reddy’s and betapharm
offers an excellent opportunity to build on the unique strengths of each company to emerge as a leading generics
player in Europe in the long-term.
„ Bear Stearns served as financial advisor to 3i in connection with this transaction.

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Section 2

Pharmaceutical Sector Overview

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The 20 Leading Drug Companies With Sales in 1981 and 2004

($ in billions)
1981A 2005A
Name Sales Name Sales
1 Hoechst $2.6 Pfizer $51.3
2 Ciba-Geigy 2.1 Johnson & Johnson 50.5
3 Merck & Co. 2.1 Glaxo 39.3
4 Roche 1.5 Bayer 33.5
5 Pfizer 1.5 Sanofi-Aventis 33.4
6 Wyeth 1.4 Novartis 30.8
7 Sandoz 1.4 Roche 29.7
8 Eli Lilly 1.4 Merck 22.0
9 Bayer 1.2 AstraZeneca 23.9
10 SmithKline Beckman 1.2 Abbott 22.3
11 Boehringer Ingelheim 1.1 Bristol-Myers Squibb 19.2
12 Takeda 1.1 Wyeth 18.8
13 Upjohn 1.0 Eli Lilly 14.6
14 Johnson & Johnson 1.0 Amgen 12.4
15 Bristol-Myers 1.0 Boehringer Ingelheim 11.1
16 Schering-Plough 0.9 Takeda 10.6
17 Sankyo 0.9 Schering-Plough 9.5
18 Rhone-Poulenc 0.8 Schering AG 6.5
19 Shionogi 0.8 Novo Nordisk 5.5
20 Glaxo 0.8 Sankyo 5.0

Source: Wood Mackenzie, and Company Filings.

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Summary of Major Industry Transactions 1994—Present

($ in billions)
Year Purchaser Target Cost of Target
2006 UCB SA(1) Schwarz Pharma AG $4.2
2006 Merck KGaA(1) Serono SA 11.9
2006 Nycomed ALTANA Pharma AG 5.7
2006 Bayer AG Schering AG 19.5
2006 Barr Pliva 2.6
2005 Teva Ivax 8.5
2005 Novartis Hexal AG 5.9
2003 Pfizer Pharmacia 60.0
2002 Amgen Immunex 17.6
2001 Bristol-Myers DuPont Pharma 7.8
2000 Johnson & Johnson Alza 10.8
2000 Abbott Knoll (BASF Pharma) 6.9
2000 Glaxo Wellcome SmithKline Beecham 76.0
2000 Pfizer Warner-Lambert 89.2
1999 Pharmacia Upjohn Monsanto 26.9
1998 Rhone-Poulenc Rorer Hoechst AG 21.2
1998 Sanofi Synthelabo 11.1
1998 Zeneca Astra 34.6
1997 Hoffman-La Roche Boehringer Mannheim 11.0
1996 Sandoz Ciba-Geigy 60.0 (2)
1995 Glaxo Burroughs Wellcome 20.0
1995 Hoechst-Roussel Marion Merrell Dow 7.1
1995 Pharmacia Upjohn 13.0 (2)
1995 Rhone-Poulenc Rorer Fisons 2.7
1995 American Home American Cyanamid 9.2
1994 Hoffman-La Roche Syntex 5.3

Source: PhRMA/Reuters.
(1) Transaction pending.
(2) Value of merged entity.

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Relative Valuation—% of Stock Price Highs

52-Week
110% 110%

100.0% 99.1% Average = 95.0%

98.7%
100 96.8% 95.8% 95.6% 95.6% 100
92.7%
90.0%
90 85.5% 90

80 80
SGP BMY MRK WYE GSK PFE NVS SAN LLY AZN
MVE ($B) $39 $52 $100 $70 $160 $199 $138 $126 $60 $90

3-Year
110% 110%
99.0% 96.8% Average = 88.8%
100 95.8% 95.7% 95.6% 92.9% 100
86.9% 85.5%
90 90
80 69.4% 80
70.1%
70 70
60 60
50 50
SGP WYE GSK SAN NVS MRK BMY AZN PFE LLY

Note: Data as of January 19, 2007.

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Relative Valuation—GAAP P/E

2007E P/E
30.0x 30.0x
23.4x 22.0x Harmonic Mean = 15.9x
20.0 17.5x 17.0x 20.0
15.9x 15.0x 14.8x 13.9x 13.5x 12.4x

10.0 10.0

0.0 0.0
SGP BMY MRK NVS LLY GSK WYE AZN SAN PFE

R&D % of Sales 20.1 % 16.4 % 19.3 % 14.1 % 19.9 % 15.5 % 15.0 % 15.6 % 14.6 % 16.0 %

2008E P/E
30.0x 30.0x
Harmonic Mean = 14.5x
19.8x 18.6x
20.0 16.7x 20.0
15.0x 14.4x 13.9x 13.3x 13.1x 12.5x 11.8x

10.0 10.0

0.0 0.0
SGP BMY MRK NVS LLY GSK WYE AZN SAN PFE

R&D % of Sales 20.6% 16.3% 19.9% 14.0% 15.6% 19.7% 15.7% 16.3% 14.6% 16.3%

Note: Data as of January 19, 2007. EPS estimates per First Call and includes SFAS 123R stock option expense.

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Relative Valuation—Forward P/E (GAAP)(1)

Last 5 Years: One-Year Forward P/E Multiples
25.0x 25.0x

20.0 20.0x

15.0 15.0x

10.0 10.0x
1/02 11/02 9/03 7/04 5/05 3/06 1/07
(2)
Peer Index

Source: FactSet Research Systems. Data as of January 19, 2006.

(1) Based on 12 month forward consensus GAAP EPS estimates.
(2) Peer index includes AstraZeneca, Bristol Myers, Eli Lilly, Glaxo, Merck, Novartis, Pfizer, Sanofi-Aventis, Schering-Plough and Wyeth.

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Relative Valuation—PEG Ratios (based on GAAP P/E)

2007E PEG

4.0x 4.0x

2.92x
3.0 3.0
Harmonic Mean = 1.89x
2.50x 2.42x
2.20x
2.00x 1.99x 1.91x
2.0 1.84x 2.0

1.31x
1.17x

1.0 1.0

0.0 0.0
MRK PFE GSK BMY AZN SAN LLY WYE NVS SGP

Average
LTG 6.0% 5.0% 6.2% 10.0% 7.0% 6.8% 8.3% 8.0% 13.0% 20.0%
9.0%

Note: Data as of January 19, 2007.

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The Process of Research—Stages and Timing

Compound Success Rates by Stage

Discovery (2–10 years) 5,000–10,000
screened
Pre-clinical Testing (Laboratory and animal testing)

Phase I (20–80 healthy volunteers used 250 enter pre-clinical testing

to determine safety and dosage)
Phase II (100–300 patient volunteers used to 5 enter clinical testing
look for efficacy and side effects)
Phase III (1,000–5,000 volunteers used to monitor
adverse reactions to long-term use)

FDA Review/Approval

Additional Post-marketing Testing

0 2 4 6 8 10 12 14 16 18 1 approved by the FDA

Years

Source: PhRMA 2002.

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Big Pharma’s Adoption of the Blockbuster Model…

% Contribution of Primary Care Physician-Driven Products to Top 10 Pharma Sales Growth

70% 70%
New PCP-Driven Sales/Total New Sales

New PCP-Driven Sales/Total New Sales

60 60

50 50

40 40

30 30

20 20
1993 1994 1995 1996 1997 1998 1999 2000

Includes: AstraZeneca, Aventis, BMS, Eli Lilly, GSK, JNJ, Merck, Novartis, Pfizer, and Roche.
Source: EvaluatePharma; Defined Health Analysis.

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…Created a Number of Products Available for Divestment

Small Drugs—Serving markets deemed as too

King and Altace®
small

Old Products—Modest sized products nearing the

KOS and Azmacort®
end of their patent lives

Under-Developed Products—That had minimal

Medpointe and Astelin®
clinical investment

Neglected Products—That had minimal sales and

ESP and Cardene®
marketing resources applied to them

Damaged Goods—Products that were not

The Medicines Company and Angiomax®
launched well or failed initial clinical trial

A $100 million cast off product for Big Pharma is a “Blockbuster” for Specialty Pharma.

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Section 3

Specialty Pharmaceutical Sector

Overview

Specialty Pharma: Industry Landscape
Convergence is changing traditional market segments.
„ Although much of specialty pharma consists of hybrid players, the sector can be segmented into three sub-
categories
Specialty
Marketing
„ Improve market visibility and branding
of smaller and mid-size proprietary
products, and exploit revenue synergies
„ Strength of sales and marketing
infrastructure drives growth
„ Reduced technology, market, and
litigation risk
„ May be dependant on one or two
products or product platforms
Key Players:
„ Allergan, Axcan, Cephalon, Endo, First
Horizon, Forest, King, Kos, KV Pharma,
Medicines Company, Medicis, Shire
CONFIDENTIAL
Drug
Delivery
„ Create more effective delivery
mechanisms for existing drugs and
solutions for product life cycle
management for branded companies
„ High R&D spend and technology risk
„ Develop strategic alliances and
partnerships for access to pipeline
candidates and therapeutic area
platforms
„ IP drives continued industry leadership
Key Players:
„ Alkermes, Biovail, Connetics, Enzon,
Nektar, Noven, Sepracor
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Generics
„ Market generic versions of branded
drugs
„ Record numbers of drugs coming off
patent
„ First to file—first to market gains all
important 6-month market exclusivity
„ Litigation costs continue to rise
„ Highly regulated industry
Key Players:
„ Andrx, American Pharmaceutical
Partners, Barr, Mylan, Par, Taro, Teva,
Watson
15
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Specialty Pharmaceuticals Company Universe

Drug Delivery Specialty Marketing

Company Cancer Ophthalmic Respiratory/Allergy
Abrika Company Company Company
Acusphere American Pharmaceutical Partners Advanced Medical Optics Adams Respiratory Therapeutics
Advancis Celgene Akorn Corus Pharma
Aerogen Chiron Alcon Dey Labs
Alexza Molecular Delivery Genitope Allergan Inspire
Alkermes Inc. Inovio Eyetech MedPointe
Altea Therapeutics Ligand ISTA Pharmaceuticals Sepracor
Andrx Corp. MGI Pharma Miravant Tanox
Aradigm Corp. NeoPharm Other
Bioject Medical Technol Pharmion
Company
Cydex Supergen Analgesics/Pain
Access Pharmaceuticals
Cygnus Company Aesgen
DepoMed Urology Adolor Amylin
Dexcel Pharma Company AlgoRx Chesyl Pharma Ltd.
Elite Auxilium Durect Collagenex Pharmaceuticals
Emisphere Technologies Inc. MacroChem Endo Pharmaceuticals Delsys
Eurand Nexmed Epicept D-Pharm
Flamel Technologies SA Pentech IDDS DrugAbuse Sciences
Generex Biotechnology Senetek IOMED Inc. Enzon Inc.
Impax Labs Situs Manhattan Pharmaceuticals First Horizon Pharmaceuticals
Labopharm Vivus NeurogesX Gilead Sciences
Microdose Watson Pozen K V Pharmaceutical
Mistral Pharma Zonagen ProEthic Pharmaceuticals MakScientific
Nastech Pharmaceutical Purdue Frederick Ovation Pharmaceuticals
Nektar Therapeutics (Inhale) Women’s Health Vela Pharmaceuticals Peninsula Pharmaceuticals
New River Pharmaceutical Company Vernalis Questcor
Nobex Barr Pharmaceuticals Wex Pharmaceuticals Savient
NovaDel Columbia Laboratories SciClone
Penwest Insmed
SkyePharma Plc Novavax CNS
Syntonix Noven Pharmaceuticals Gastrointestinal Company
Valera Pharmaceuticals Xanodyne Company Aderis Pharmaceuticals
Dermatology Axcan Amarin
Company Cardiology/Cardiopulmonary Cellegy CeNeS
Barrier Therapeutics Company Prometheus Cephalon
Bradley Pharmaceuticals Biovail Salix Pharmaceuticals Corcept Therapeutics
Chester Valley Pharmaceuticals King Pharmaceuticals Santarus Cypress Bioscience
Connetics Corp. KOS Pharmaceuticals Dov Pharmaceuticals
Ferndale Medicines Company Elan Corp. Plc
Isolagen Myogen Pediatrics Forest Laboratories
Medicis Pharmaceuticals Nitromed Company Guilford Pharmaceutical
OMP Nuvelo Alliant Pharmaceuticals Lundbeck
SkinMedica Reliant Pediamed Neurosearch A/S
Valeant United Therapeutics Verus Pharmos Corp.
Shire Pharmaceuticals
Titan

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US Generic Drug Market Dynamics

Generics will continue to increase their share of the total pharmaceutical market.

US Pharmaceutical Prescriptions US Pharmaceutical Sales

60% 60% 100% 100%

52% 52% 90 86% 86% 90

85% 84%
50% 83%
50 47% 50
45% 45% 80 80

42%
39% 70 70
40 37% 37% 40

60 60

30 30 50 50

40 40

20 20
30 30

11% 11% 11% 11%

10% 20 20
10 10
8% 8% 9% 9% 9%
10 6% 6% 6% 7% 7% 10

0 0 0 0
2000 2001 2002 2003 2004 2000 2001 2002 2003 2004

Brand Generic Branded Generic Brand Generic Branded Generic

Source: Wall Street research.

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Specialty Pharma Key Value Drivers

Key success factors relate to sustainability/growth of both in-line and pipeline products.

Flagship Therapeutic Economies Life Cycle Product Management

Products Leadership of Scale Management Pipeline Team

„ Targeting „ Focus on specialty „ Portfolio that is „ Market intelligence „ Development of „ Operational

sizeable/attractive areas with highly synergistic to identify a deep, visible excellence
niche markets concentrated from a call point commercially pipeline that
prescriber audience perspective viable line could provide „ Exemplary
„ Clear extensions/ sustainable track record
“commercial „ Meaningful SOV „ Demonstrated reformulations growth
proposition” within targeted potential for „ Strong
(i.e., therapeutic operating leverage „ Ability to „ Well balanced network
differentiated categories/ implement picket risk-reward
product profile) indications fence IP strategies profile

„ Exclusivity/ „ Partner of choice „ Infrastructure/

patent life for product network to develop
remaining opportunities concepts to market
products in cost
effective manner

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US Generics Landscape
Common Business Models
Formulation/ Unique/Niche
Breadth of Drug Delivery Paragraph IV
Manufacturing Product
Product Capabilities Expertise
Expertise Offering

Examples of Mylan
Companies Laboratories Inc.

Mylan
Laboratories Inc.

Comments „ Natural barrier to „ Positions as one- „ Barrier to entry „ Enables to „ Exclusivity

entry stop shop for „ Limited competition compete in periods provide
„ Enhanced margins wholesalers and higher-margin enormous source
„ Potentially limited size
other buyers “super generics” of profits
of target market
„ Scale-based „ Adds layer of
„ Potential to establish
commodity strategy unpredictability to
company as “partner of
sales/earnings
choice” in specific
profile
therapeutic area

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US Generic Market Stratification

Latest 12 Month Sales

Format $25–50M $50–100M $100–250M $250–500M $500+M
Ferring & Co Breckenridge Impax KV Pharma Actavis
X Gen Caraco Qualitest Apotex
Lannett Upsher Smith Barr
Paddock URL/Mutual Mylan
Solid Dose Par
Ranbaxy
Taro
Teva
Watson
Akorn Mayne APP
Injectibles Therapeutics
AmphaStar
Pharmaceutical Cypress Morton Grove
Associates Pharmaceuticals
Liquids & Misc
Spear Hi-Tech
Dermatology Pharmacal

Note: In bold—publicly traded companies. Excludes generic division/subsidiaries within larger companies.

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Overview of Specialty Pharma Sector

Category Concept Growth Drivers

Specialty Marketing Focused detailing and marketing of under– „ Large pharma’s increasing focus on
promoted products blockbusters
„ Lengthening “tail” product portfolios
• Implications on overall growth rates

Drug Delivery Improved product formulations „ Life-cycle extension mechanism, especially

• Less frequent dosing for products losing patent protection
• Improved methods of administration (e.g. oral „ May address certain “feasibility” issues
vs. injectible) encountered in drug development
„ Increased barriers to entry

Generics Bioequivalent versions of branded products „ Cost containment

„ Bolus of patent expirations
„ Favorable political climate

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Indian Pharma Universe

($ in millions, except per share data)
Large Pharma Small Cap
Company MCAP 2007E P/E Company MCAP 2007E P/E
Ranbaxy Laboratories $3,490.7 18.3 x Divi’s Laboratories $941.0 23.6 x
Dr. Reddy’s 3,076.7 22.6 Dishman Pharmaceuticals 399.6 15.6
Cipla Limited 4,435.3 21.0 Shasun Chemicals 139.2 12.8
Sun Pharmaceuticals 4,453.9 24.3 Hikal 139.3 9.3
Wockhardt 905.0 13.1
Vimta Labs 93.5 38.7
Mid-Cap Suven Life Sciences 98.5 56.6
Company MCAP 2007E P/E Dabur Pharma 280.3 15.9
Lupin $1,031.4 16.2 x
Elder Pharmaceuticals 167.8 10.0
Ipca Labs 362.6 11.8
Ind-Swift 30.4 30.1
Cadila Health 990.6 15.8
JB Chemicals & Pharmaceuticals 194.2 170.7
Aurobindo 879.6 18.0
Jupiter Bioscience 27.7 23.6
Alembic 210.1 7.7
Kopran 27.9 27.8
Matrix Labs 754.5 12.8
Glenmark 1,681.9 18.6 Natco Pharma 97.8 67.8
Nicholas Piramal 1,257.3 18.7 Panacea Biotec 574.3 480.5
Jubilant 887.2 16.7 RPG Life Sciences 32.3 39.1
Torrent Pharma 396.7 13.6 Strides Arcolab 296.2 48.5
Orchid Chemicals 309.1 7.4 Unichem Laboratories 309.9 261.3
Biocon 961.3 18.3 Venus Remedies 216.2 187.5
FDC 168.5 10.4 Surya Pharmaceuticals 22.1 15.6

Note: Stock price as of January 19, 2007.

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Section 4

Medical Technology Sector

Overview
 Integreon

Overview of Med-Tech Subsectors

The following represents a sampling of Mid-Tech sectors and companies.

Companies Products/Services
„ Alcon „ Contact Lenses
Ophthalmology „ Bausch & Lomb „ Lens care
„ Eyetech „ Pharmaceuticals

„ Dentsply „ Filling materials

Dental „ Sybron Dental Specialties „ Bonding agents
„ Braces, brackets & rubber bands

„ American Medical Systems „ Products to treat urinary incontinence

„ Conmed „ Surgical installments for arthroscopic sports medicine
Medical/Surgical
„ Kinetic Concepts (Drills and Saws)
„ Wound healing and tissue repair systems

„ Respronics „ Sleep therapy systems/Sleep diagnostic systems

Respiratory „ Viasys „ Ventilation systems
„ Vital signs „ Neuro monitoring systems

„ Biomet „ Knee & hip implants

Orthopedic „ Zimmor „ Spinal implants
„ Stryker „ Biologic materials to replace bone

„ Boston Scientific „ Drug-eluting stents

Cardiovascular „ Medtronic „ Implantable defibrillators
„ Thoratec „ Pacemakers

„ Baxter „ Infusion pumps

Conglomerates „ Johnson & Johnson „ Peripheral stents
„ Medtronic „ Neurostimulation devices

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Medical Technology Industry Dynamics

Relative Price Performance—Past Five Years Summary Observations
150% 150%
„ Medical technology stocks have performed in line with
125 125 the broader market over the past five years
100 100
• The Med Tech Index has increased 7% versus 24% for the
75 75 S&P 500, driven by the broader market’s outperformance
in 2006
50 50
1/02 10/02 8/03 6/04 4/05 2/06 12/06 „ Over the last year, Med Tech’s performance has been
(1) negatively impacted by:
Med Tech Index S&P 500
• Increased pricing pressure and scrutiny
Forward P/E Ratios—Past Five Years
• Less favorable regulatory and reimbursement
32.0x 32.0x environments
29.0 29.0
26.0 26.0 „ Looking ahead, Med Tech is increasingly being viewed
23.0 23.0 again as a potential “defensive play” in a volatile market
20.0 20.0
17.0 17.0 • Improving growth and risk profile
14.0 14.0
1/02 11/02 9/03 7/04 4/05 2/06 12/06 • Prospect for continued Med Tech industry consolidation
(1)
Med tech Index S&P 500

Source: ThomsonOne Banker.

Note: Data as of December 31, 2006.
(1) Includes ABT, BAX, BDX, BEC, BMET, BOL, BSX, EW, JNJ, MDT, STJ and SYK.

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 Integreon

Comparative Sector Performance

2-Year 1-Year % of
% Change % Change 52-Week High

(1)
Respiratory 41% 16% 92%
(2)
Dental 29% 17% 91%
(3)
Diagnostics 19% 7% 93%

S&P 500 17% 14% 99%

Diversified Industrials (4) 14% 11% 94%

Large Cap (5) 13% 12% 94%

Mid-Cap Med/Surg (6) 12% 0% 84%

(7)
Cardiovascular 5% (15%) 74%

Orthopedic (8) (1%) 14% 96%

(9)
Ophthalmology (8%) (17%) 72%

Source: ThomsonOne Bank.

Note: Data as of December 31, 2006.
(1) Includes ARRO, RESP, RMD, VAS, VITL and FPH.
(2) Includes NOBE, STMN and XRAY.
(3) Includes BEC, DADE, BIO, GPRO and CYTC.
(4) Includes GE, DHR, SMIN, PHIA, SIE, MMM, TFX and TYC.
(5) Includes ABT, BAX, JNJ and MDT.
(6) Includes AMMD, BCR, CNMD, HB, ISRG, MNT, STE, ARTC, IVC and KCI.
(7) Includes BSX, EW, STJ and THOR.
(8) Includes BMET, SNN, SYK, SYST, ZMH and WMGI.
(9) Includes ACL, EYE, BOL and COO.

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 Integreon

Medical Technology Historical IPO Activity

1990–2006 YTD(1) ($ in millions)

$3,000 $3,000
$2,732

2,500 2,500

2,000 $1,941 2,000

$1,582
1,500 1,500

$1,178

$997
1,000 1,000

$685 $727
$663

Alcon ($2,302M)
$573
$498 $441
500 $392 500

KCI (540M)
$147 $171
$86 $0
$0
0 0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

# of Transactions: 4 9 24 7 10 13 32 7 2 0 10 7 6 0 18 12 12

Source: SDC and Dealogic.

(1) As of December 31, 2006.

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 Integreon

Medical Technology M&A Environment

„ Medical technology consolidation activity continues to be robust
• Driven by acquirer’s strong valuations, historically low financing costs and need to accelerate growth

„ Activity is broad-based covering all main medical technology sub-sectors (e.g., cardiovascular, orthopedics,
medical/surgical & others)

„ Valuations remain strong for companies with superior market positioning and robust growth prospects

1995–YTD 2006(1) ($ in billions)

$60 $60
$54.2
50 50
$45.3
40 40
$28.2
30 30
12 18
20 $14.6 20
$11.9 14 $12.9 $10.8 $12.2
$7.6 $9.8 $10.0
10 8 10
$3.5 5 6 3 5
1 7 1
26 29 26 32 31 42
25 21 20 28 29 37
0 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Transaction Value < $500 Million Transaction Value > $500 Million

Source: Medical Device Daily and company press releases.

(1) Represents announced transactions where value was disclosed; data as of December 31, 2006.

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Section 5

Healthcare Services Overview

 Integreon

Managed Care Overview—Sizing of US Health Insurance Market

Of the approximately $1.9 trillion in Health Care spending in the US in 2004, 44% was
Government funded.
2005 US Health Insurance Coverage(1) 2004 US Health Care Spending(2)
70% 70% Other
Government
59.5% Programs
60 60 7.8%
Consumer Out-
50 50 of-Pocket
15.1%
Medicaid
40 40 17.4%

30 30
Private Health
Insurance
Medicare
20 20 36.1%
15.9% 19.2%
13.7% 13.0%
9.1%
10 10
3.8%

0 0
Employment- Direct- Medicare Medicaid Military Uninsured Other Private
Based Purchase 4.4%
Commercial Government

Total: 293.9 million Total: ~$1.9 trillion

(1) Source: US Census Bureau. Does not add to 100% as individuals may covered by more than one type of health insurance during the year.
(2) Source: Kaiser Family Foundation.

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 Integreon

Relative Stock Price Performance

Managed care companies with a concentration in government-funded programs have out-
performed the large cap companies in the past five years.

For the Last Five Years

900% 900%

11/07/06: Democrats take

over House and Senate

07/06/05: UNH/PHS announced

600 600

11/02/03: Bush defeats Kerry

12/08/03: MMA signed to law

300 300
03/20/03: MMA announced

0 0
12/01 10/02 8/03 6/04 4/05 1/06 12/06
(1) (2) (3)
Medicare Medicaid Large-Cap

(1) Consists of PHS, HUM, SIE, WCG and HS (PHS includes 4/24/01 to 12/20/05; HS from 2/06/2006 to present; WCG from 7/1/04).
(2) Consists of AGP, CNC and MOH (CNC from 1/31/02; MOH from 7/3/03).
(3) Consists of AET, CI, UNH and WLP.

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 Integreon

Managed Medicare Penetration

„ Managed Medicare has a very low penetration on an absolute and relative basis

„ Penetration has already increased to 18% of eligibles as of 11/06 from 12% in 2005

„ In the next 6–7 years, 8.1 million additional Medicare beneficiaries are expected to enroll in Medicare
Advantage plans
Share of Medicare Beneficiaries
Enrolled in Medicare Advantage Plans Relative Managed Care Penetration
40% 40%
Actual (1) Projected (2) 100% 100%
86%

30 30 75 75
61%
18%
16% 50 50
20 20

30%
5%
25 18% 25
10 10
11%

0 0
0 0 2004 2006 (3) 2013(11) Commercial Medicaid
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Managed Managed
Medicare Managed Care
Care (5) Care (6)

(1) CMS, Medicare Managed Care Contract Plans Monthly Summary Report.
(2) President’s FY 2006 Budget, Office of Management and Budget (February 2005).
(3) CMS as of November 2006.
(4) Wall Street Research Estimates.
(5) Medicaid Managed Care Penetration Report (December 2004). Includes PCCM programs.

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 Integreon

Medicaid Managed Care Enrollment Trends(1)

Medicaid managed care has enjoyed significant unit growth in the past two years as states have
embraced managed care as a way to control expanding medical costs.

Medicaid Managed Care Enrollment(1) ($ in millions) Top 15 States by Enrollment(1)(2)

State Enrollees % of Total % Penetration
35.0 70%
62% California 3,290,851 15.3% 50.2%
30.0 60 New York 2,555,173 11.9 54.4
Ohio 1,400,000(2) 6.5 81.8
25.0 50 Michigan 1,290,240 6.0 89.9

% Penetration
Pennsylvania 1,261,704 5.9 74.3
Enrollees

20.0 40 Georgia 1,057,297(2) 4.9 76.7

Texas 992,093 4.6 35.9
29%
15.0 29 30 Arizona 885,204 4.1 77.6
25 27
Puerto Rico 865,299 4.0 99.9
23
10.0 21 20 Washington 812,470 3.8 84.4
18 19
15 17
13 Florida 782,326 3.6 34.8
5.0 10 10 New Jersey 553,461 2.6 69.0
Maryland 482,749 2.2 67.4
0.0 0 Missouri 427,615 2.0 40.7
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Indiana 415,315 1.9 51.2
Top 15 17,071,797 79.4%

Source: CMS and Kaiser Family Foundation.

(1) Pro Forma for Georgia and Ohio expansions based on CMS website data.
(2) Excludes PCCM arrangements and other state-managed programs as well as ancillary service-only programs.

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 Integreon

Geographic Concentration of Medicaid Opportunities

ND
WA MT
MN

ME
SD WI
OR ID VT
WY MI NH
NY
IA MA
NE
NV PA CT
OH RI
IL IN
NJ
UT CO KS MO WV DE
KY VA
MD
CA TN NC
OK AR DC
AZ NM
SC
MS AL
GA
TX LA

Tier I: Large Population(1)

High Penetration FL
Tier II: Medium Population(2)
High Penetration
Tier III: Large Population(3)
Puerto Rico
Low Penetration

(1) Tier I defined as having >500,000 Medicaid enrollees and >500,000 managed care enrollees.
(2) Tier II defined as having >500,000 Medicaid enrollees and <500,000 managed care enrollees.
(3) Tier III defined as having between 200,000 and 500,000 Medicaid enrollees and between 200,000 and 500,000 managed care enrollees.

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 Integreon

Valuation Trends
Although the recent Democrat takeover of both the House and the Senate is seen as a negative
for Medicare Advantage, these specialized companies are still trading at a premium largely due
to lack-luster expected growth in the Commercial sector.

Comparative Valuation—2008 P/E Research Commentary

„ We view participation in government-funded healthcare
15.0x 15.0x
14.3x programs to be a strategic disadvantage...as yields
13.0x
11.9x
12.4x decelerate and focus shifts to enrollment growth.
11.4x 11/06/06
10.9x

10.0 10.0
„ Government-focused companies have led the large caps
and have shown strong recoveries from 2005, with
Amerigroup leading the pack, up 74.6%, followed by
WellCare and Molina, which posted returns of 58.8% and
25.6%, respectively. 12/05/06
5.0 5.0
(1) (2)
AET WLP CI UNH Medicare Medicaid

Large-Cap

(1) Consists of PHS, HUM, SIE and HS (PHS includes 4/24/01 to 12/20/05; HS from 2/06/2006 to present).
(2) Consists of AGP, CNC, MOH and WCG (CNC from 1/31/02; MOH from 7/3/03; WCG from 7/1/04).

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 Integreon

Overview of the Medicare Market

Population growth trends underlying Medicare Advantage will be favorable for the foreseeable
future.
Significant Number
„ Aging of US population of Medicare Beneficiaries (In millions)

• People aged 65+ are expected to reach 20% of 75 75

population by 2030 (72 million) 12% CAG
R
53
47
• Comprise over 39% of total health care expenditures 50 42 50

25 25
„ Medicare expenditures growth of over 9% per
year (excluding Part D) 0 0

• Part D expected to comprise 20% of Medicare 2005 2010 2014

spending by 2010
Rapidly Growing
„ Medicare as a percentage of GDP is expected to Medicare Expenditures ($ in billions)
grow from 2.7% in 2004 to 4.2% by 2014
$1,000 $1,000
$817
AGR
750 9% C 750
$573
500 $336 500

250 250

0 0
2005 2010 2015

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 Integreon

Healthcare Facilities Overview

Long-Term
Intensive Care

„ High Acuity

Hospital Assisted Living

„ High Acuity „ Low Acuity

„ Most
sophisticated

Skilled Nursing Home Health Home

„ Medium-Low „ Cheaper
Acuity Alternative
„ Medicare/
Medicaid Certified

Most Expensive Least Expensive

CONTINUUM OF CARE

Source: Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (2006).

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