Optimer Pharmaceuticals: An Odyssey in Entrepreneurship

OPTIMER PHARMACEUTICALS,INC.PHARMACEUTICALS,INC.

………An Odyssey

ByByMichael N. Chang, Ph.DChairman of the Board, Optimer Pharmaceuticals, Inc.Optimer Pharmaceuticals, Inc.www.optimerpharma.com

A story Starting a biotech company is never easy and is becoming increasingly

more difficult. Venture capitals and strategic/corporate partners are demanding more risk sharing, and moving more towards “later-stage” prospects. Optimer is a 10-year–old public biotech company. Through sharing the experience of Optimer on starting, fund raising, project selection, product development, IPO, and commercialization, we try to highlight some of the challenges, what it takes, the key elements for success, characteristics of entrepreneur, positioning, timing and other earning.

Defining Goal & Success Positioning of the Company – which segment is your

playfield in the “pharmaceutical value chain?” Steady stream of revenue, preferable from sales Being best in what you do – competitive advantage? Defining your “battle field” – where is your market? Value building – bench marking the efficiency of Value building bench marking the efficiency of

investment. Managing risks – intrinsic, global market condition, focus

vs hedging etcvs. hedging, etc. Managing cash burn vs. milestones Managing growth and expansion

Most common causes of biotech Most common causes of biotech startup failures

Key personnel not functioning as a team Pipeline product/technology failurePipeline product/technology failure Run out of money before key milestones, poor

fundingAdverse market environment can’t raise more Adverse market environment, can’t raise more

money Mismanagement, diminishing credibility Poor selection of targets (artificial, forced by

circumstances)

Uniqueness of Optimer

Rise from the ashes Started by two inexperienced Taiwanese High-bar approach – take a product from concept to g ba app oac a e a p oduc o co cep o

commercialization Other complications – Taiwan element

Once upon a time, in P l iPennsylvania………..

In October1993 I quit my job In October1993, I quit my job as the head of discovery at Rhone-Poulenc Rorer (now Aventis)………)

What is the most important pelement in a Start up company?

People!

Our dream team:

Professor Chi Huey Wong, ScrippsProfessor K.C. Nicolaou, ScrippsP f B Sh l MIT (2001 N b l i Professor Barry Sharpless, MIT (2001 Nobel in

Chemistry)Michael N. ChangMichael N. Chang

“FP Pharmaceutical,Inc.” Chemistry driven Strong IP from Scripps and MITStrong IP from Scripps and MIT Strong team Focus on Combinatorial Chemistry Focus on Combinatorial Chemistry

Timing is everything!FP Ph ti l I t t f di FP Pharmaceutical, Inc. cannot get funding

with reasonable valuation, and failed.

1. 1Q1994, bottom fell out in biotech.2 There are at least 4 combinatorial start-2. There are at least 4 combinatorial start

up out there already (Pharmacopea, ArQule, Combichem,…)

3. Michael Chang has no start up experience!

Lesson Number one It is difficult to start a biotech company in the

US. It is particularly difficult for Asian. How “competitive” is your business plan? How competitive is your business plan? Is the timing right? If the timing is right, are you ready? If the timing is right, are you ready? Do you have a “plan B”? A thorough inventory of strength & weakness Identify your own deficiencies and how to

compensate for it

It’s time to pack up and go p p ghome…

1. Shelf the business plan.2. Look for other opportunity – go to

“plan B” ?p

The important thing isThe important thing is…..……….Never give up!

Second encounter

In Nov. 1998, I sold Pharmanex to Nu Skin, and stayed on as CSO, Senior VP R&D…..

CHW approached me for a new idea…..

Stanford incident

In early 1999, I was invited to give a presentation to Stanford in-coming MBA class class……..

Optimer Pharmaceutical IncPharmaceutical, Inc.

US based biotechnology corporation established in 1999 - A Delaware Corp.

Technology licensed from Scripps Research Institute and Memorial Sloan Kettering InstituteKettering Institute

Focus on new drug discovery in infectious diseases cancer vaccine and arthritisdiseases, cancer vaccine and arthritis

Raised 3 4 million seed fund in 2001 Raised 3.4 million seed fund in 2001

Optimer Founders Professor Chi Huey Wong,

Ernest Hahn Chair of Chemistry, Scripps Research Institute

Professor Samuel J. Danishefsky, K i Ch i f Bi i Ch i Kettering Chair of Bioorganic Chemistry, Memorial Sloan Kettering Institute

Michael N Chang Michael N. Chang

Optimer AmbitionOptimer Ambition

To become a premier pharmaceutical company, d i b i ti h i tdriven by innovative chemistry

Optimer’s Platform Technologies

OPopSTM System -OPopS SystemOptimer one-pot synthesis

technologytechnology

Raised 34 million Series B in 2002

By late 2003, Optimer has created an exciting Pipeline

OPT-822 – Metastatic breast cancer, other tumorsOPT 88 O t th iti OPT- 88 – Osteoarthritis

OPT-80 (Fidaxomicin) – C. difficile infection OPT-1068 – CAP and other infection OPT-99 – diarrhea OPT-11 – gram-negative resistance

Still h 25 illi d ll i th b k Still have 25 million dollars in the bank

Fidaxomicin focus and big push

Finished phase 1 trial in the US in 2004Entered directly into phase 2 dose ranging study, but without the comparator – Vancocinp

Optimer now has 17 million in the bank

This aggressive development strategy appeared sound giving the potency and safety of the drug, however……

Cash is burning fast and financial market is bleak

Finished Phase 2a with positive results Big pharmaceutical firms and late-stage ventures wants

phase 2b with vanco VC /private equity market slowed to a halt

Optimer has only 7 million in the bank

The darkest day in Optimer history

In April 2005, we signed a US exclusive license agreement with Par Pharmaceutical on Fidaxomicin. The terms are detrimental to Optimerterms are detrimental to Optimer.Par made a 12 million investment in Optimer.

Optimer has only .67 million in the bank before signing this agreement. We went on to raise additional 30 million in Series D before IPO

Lessen number 2Lessen number 2

h k l1. There are many ways to skin a cat, only time will tell if the right choice was made.

2 Dicipline and focus are most important 2. Dicipline and focus are most important elements for startups.

3. Correct strategy, faced with wrong macro-environment and timing, may have davastating outcome

Optimer went IPO in March, 2007

Barely squeezed in at closing of the IPO window Phase 2b or Phase 3 – Optimer’s decision to

jump in Phaase 3 directly saved 18 months jump in Phaase 3 directly saved 18 months development time, but costed approx. 30% in valuation

Optimer raised 56 million at IPO

Key learning from this experience

Become a better person – more sympathetic, considerate, modest.

Greater understanding on entrepreneurship and Greater understanding on entrepreneurship and biotech industry, global capital market

$$$, most importantly, a more correct attitude , p y,towards it.

Key lesson on start up “There are many ways to skin a cat”. Story of anaconda – not for the faint heart. Managing money vs. milestones.a ag g o ey s es o es Share of a big pie/small pie – economy of scale. Deliver your promise to investors – you only have one

chancechance. Manage/en-power talent. Understand your own limitations, timing on enter/exit.

Formula for the successful Formula for the successful entrepreneur

People is the most important element. Drive and determination Family support and participation is crucial Family support, and participation is crucial. Timing is critical, be patient, don’t give up. Constantly improve and prepare yourself, be

ready when opportunity strikes. Be flexible, not too greedy. Persevere be prepared for a long journey Persevere, be prepared for a long journey.