jeff d. davis global new business development p&g pharmaceuticals mason, ohio “inside...

Jeff D. DavisJeff D. DavisGlobal New Business DevelopmentGlobal New Business DevelopmentP&G PharmaceuticalsP&G PharmaceuticalsMason, OhioMason, Ohio

““Inside P&G’s Innovation Machine”Inside P&G’s Innovation Machine”

• P&G…the world’s largest consumer P&G…the world’s largest consumer packaged goods companypackaged goods company

• Inside P&G’s innovation journeyInside P&G’s innovation journey

• Inside P&G Pharmaceuticals’ new Inside P&G Pharmaceuticals’ new innovation strategyinnovation strategy

AgendaAgenda

Who are we?Who are we?

• Over $68 billion in global salesOver $68 billion in global sales

• 300 brands in over 160 countries300 brands in over 160 countries

• #1 or #2 in 80% of our categories#1 or #2 in 80% of our categories

• 140,000 employees 140,000 employees

billion

P&G’s 22 Billion-Dollar P&G’s 22 Billion-Dollar BrandsBrands

9999%% of US households of US households purchased a purchased a P&G product P&G product in 2005.in 2005.

Three Global Business UnitsThree Global Business UnitsThree Global Business UnitsThree Global Business Units

Household & Family Household & Family CareCare$33.5 Billion$33.5 Billion• Baby CareBaby Care• Family CareFamily Care• Fabric CareFabric Care• Home Care Home Care • Pet Health & NutritionPet Health & Nutrition• Snacks & CoffeeSnacks & Coffee

Beauty & Beauty & Health CareHealth Care $29 Billion$29 Billion•CosmeticsCosmetics• DeodorantsDeodorants• Feminine CareFeminine Care• Hair CareHair Care• Personal CleansingPersonal Cleansing• Skin Care Skin Care • Oral CareOral Care• Personal Health CarePersonal Health Care• PharmaceuticalsPharmaceuticals

GilletteGillette$6.4 Billion $6.4 Billion •Razors & BladesRazors & Blades• DuracellDuracell• BraunBraun

P&G Growth StrategiesP&G Growth Strategies

112233

Core business: leading brands, Core business: leading brands, biggest countries, winning customersbiggest countries, winning customers

Portfolio shift toward faster Portfolio shift toward faster growing, higher margin, growing, higher margin, asset efficient categoriesasset efficient categories

Developing markets andDeveloping markets andlower income consumerslower income consumers

InnovationInnovation

Go-to-Go-to- Market MarketScaleScale

ConsumerConsumerUnderstandingUnderstandingBrandingBranding

8

Leveraging P&G’s Core StrengthsLeveraging P&G’s Core Strengths

10,00010,000market research studies market research studies each yeareach year

Understanding Understanding

ConsumersConsumers

• P&G…the world’s largest consumer P&G…the world’s largest consumer packaged goods companypackaged goods company

• Inside P&G’s innovation journeyInside P&G’s innovation journey

• Inside P&G Pharmaceuticals’ new Inside P&G Pharmaceuticals’ new innovation strategyinnovation strategy

AgendaAgenda

Historically P&G has Grown Through Internal Innovation

What Happens if You Don’t Grow?What Happens if You Don’t Grow?

• Year 2000 wake up callYear 2000 wake up call• >50% drop in stock price>50% drop in stock price

OrganicTarget

thruFY 2010

+4% to +6%

Organic (excludes foreign exchange, acquisition & divestiture impacts)

Acquisitions & Divestitures

Sustainable Sales Growth

innovate

how we innovate

A Call to Action . . .A Call to Action . . .

“We will acquire 50% of our innovations from

outside P&G”

President and Chief ExecutiveThe Procter & Gamble Company

A.G.Lafley

& developresearchconnect

C&D vs R&D…

50%

our labs

from

50%

our labs

through

US Industrial R&D by Size of US Industrial R&D by Size of EnterpriseEnterprise

Company SizeCompany Size

<1000 employees<1000 employees

1,000 – 4,9991,000 – 4,999

5,000 – 9,9995,000 – 9,999

10,000 – 24,99910,000 – 24,999

25,000+25,000+

19811981 19891989 19991999 20012001

4.4%4.4% 9.2%9.2% 22.5%22.5% 24.7%24.7%

6.1%6.1% 7.6%7.6% 13.6%13.6% 13.5%13.5%

5.8%5.8% 5.5%5.5% 9.0%9.0% 8.8%8.8%

13.1%13.1% 10.0%10.0% 13.6%13.6% 13.6%13.6%

70.7%70.7% 67.7%67.7% 41.3%41.3% 39.4%39.4%

Source: Open Business Models: How to Thrive in the New Innovation Landscapeby Henry Chesbrough (Harvard Business School Press, 2006), page 22.

Just a few examples of C&D . . .

Olay VitaminsCrest New TubesTide Stainbrush

Clairol In-Store Shade Selector

Kandoo WipesPantene Sonic Comb

Mr. Clean Magic Eraser

Glad Press N Seal

Charmin Fresh Mates

Swiffer Duster

Mr. Clean Autodry

Olay Daily Facial Pillows Old Spice

Shave Gel Visia Beauty Imaging

Olay Regenerist

Olay White Radiance Facial

Mask

SK-II Facial Mask

SK-II Airtouch Foundation

Prilosec OTC

Crest Scratch N Sniff Pkg.

Crest Liquid Dentifrice

PuR / Whirlpool

Refrigerator Filters

OTC Drug Registrations

Metamucil Capsules

Pringles Dips

Pantene Hair Styling

Products

““Connect & Develop”Connect & Develop”Inside P&G’s Innovation ModelInside P&G’s Innovation Model

•+35% of new products have elements that +35% of new products have elements that originated from outside P&Goriginated from outside P&GUp Up from 15% in 2000from 15% in 2000

•R&D productivity has increased by nearly 60%R&D productivity has increased by nearly 60%

•Since 2000 stock collapseSince 2000 stock collapseShare price hasShare price has doubled doubled

Our portfolio hasOur portfolio has grown grown to 22 billion-dollar brandsto 22 billion-dollar brands

• P&G…the world’s largest consumer P&G…the world’s largest consumer packaged goods companypackaged goods company

• Inside P&G’s innovation journeyInside P&G’s innovation journey

• Inside P&G Pharmaceuticals’ new Inside P&G Pharmaceuticals’ new innovation strategyinnovation strategy

AgendaAgenda

18871887Vicks VapoRub Vicks VapoRub launched bylaunched byRichardson-VicksRichardson-Vicks

19011901Pepto-BismolPepto-Bismollaunched bylaunched byNorwichNorwich

Over 100 years old . . . Over 100 years old . . .

P&G Pharma’s Strategic ModelP&G Pharma’s Strategic ModelAcquire, Develop & Market…(Connect & Develop)Acquire, Develop & Market…(Connect & Develop)

• Strategic choice to exclusively partner, license or Strategic choice to exclusively partner, license or acquire acquire allall of our new drug candidates of our new drug candidates

• How? Our new drugs will come from a network How? Our new drugs will come from a network of academia, biotech and pharmaceutical of academia, biotech and pharmaceutical industry relationshipsindustry relationships

• Restructured our R&D and commercial Restructured our R&D and commercial organizations to excel at identifying, evaluating, organizations to excel at identifying, evaluating, negotiating and managing long-term, negotiating and managing long-term, mutually beneficial partnerships.mutually beneficial partnerships.

P&G Pharma’s Strategic ModelThe Best of Both Worlds…

You & P&G…Think of the possibilitiesYou & P&G…Think of the possibilities

• Marketing Expertise Marketing Expertise and Unique Insightsand Unique Insights of the world’s largest of the world’s largest consumer companyconsumer company

• Personal TouchPersonal Touch of a of a small pharmaceutical small pharmaceutical company with company with deep deep experience and experience and proven capabilitiesproven capabilities in in our focus areasour focus areas

P&G Pharma’s Strategic ModelP&G Pharma’s Strategic ModelAcquire, Develop & MarketAcquire, Develop & Market

• We We eliminated our Discoveryeliminated our Discovery organization (300 organization (300 people) and most of their laboratoriespeople) and most of their laboratories

• We We retained our complete Developmentretained our complete Development organization (650 people).organization (650 people).

• We We established a Search & Evaluateestablished a Search & Evaluate organization (35 scientists) who have organization (35 scientists) who have responsibility for helping find and screen responsibility for helping find and screen licensing opportunitieslicensing opportunities

Our New R&D Structure (July 2006)Our New R&D Structure (July 2006)

musculoskeletalmusculoskeletal

gastrointestinalgastrointestinal

women’s healthwomen’s health

focus areasfocus areas

Strategically focused on 3 therapeutic areas Strategically focused on 3 therapeutic areas where the patient plays an active rolewhere the patient plays an active role in in

managing their healthmanaging their health

• MusculoskeletalMusculoskeletal Osteoporosis, Rheumatoid Arthritis and OsteoarthritisOsteoporosis, Rheumatoid Arthritis and Osteoarthritis

• GastrointestinalGastrointestinal Ulcerative Colitis, Crohn’s disease, IBS and GERDUlcerative Colitis, Crohn’s disease, IBS and GERD

• Women’s HealthWomen’s Health Overactive Bladder, Incontinence, Menopausal symptomsOveractive Bladder, Incontinence, Menopausal symptoms

P&G Pharma’s Strategic Model Why will it work?

* Corporate interest: hair growth and skin aging* Corporate interest: hair growth and skin aging

Our Pharma Partnering Experience

Recent deals…P&G and NastechRecent deals…P&G and NastechFeb 2006Feb 2006

Nastech Enters Into Supply Agreement with Procter & Gamble

for Parathyroid Hormone (PTH1-34) Nasal Spray

BOTHELL, Wash., June 6 /PRNewswire-FirstCall/ -- Nastech Pharmaceutical

Company Inc. (Nasdaq: NSTK) announced today an agreement with Procter & Gamble

Pharmaceuticals, Inc., a division of The Procter & Gamble Company (NYSE: PG), to

manufacture and supply PTH1-34 nasal spray for the potential commercialization of this

investigational product for the treatment of osteoporosis. This agreement further

strengthens the collaboration between the companies that began with the development and

commercialization agreement for PTH1-34 nasal spray that was announced on February 1,

2006.

Recent deals…P&G and AblynxRecent deals…P&G and AblynxApril 2006April 2006

Recent deals…P&G & ARYxRecent deals…P&G & ARYxJuly 2006July 2006

P&G Pharma Partnering Philosophy

The real test of a successful alliance negotiation is not a The real test of a successful alliance negotiation is not a signed contract signed contract with all desired terms agreed in full…with all desired terms agreed in full…

……it is whether the companies it is whether the companies share ashare a common visioncommon vision,, feel like feel like thethe deal is fairdeal is fair, are, are contractually contractually motivated to do what’s rightmotivated to do what’s right,, and canand can work together over work together over the long termthe long term!!

“Negotiate for Implementation”

thethe

of both worldsof both worldsbestbest