Apogenix: 1 Apogenix: Financial Aspects of a Drug Development Biotech Company 27.01.2015
Jul 19, 2015
Apogenix:
1
Apogenix:
Financial Aspects of a Drug Development
Biotech Company
27.01.2015
Tabel of Content
• Drug Development
• Financial Aspects
− Profit and Loss Statement
− Balance Sheet
− Cash-Flow Statement
− Milestones
27.01.2015 2
Milestones
− Valuation
− VC Investors
• Apogenix GmbH
BELL Lectures
Drug Development
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Drug Development
BELL Lectures
Drug Development
27.01.2015 4
Source: http://www.vfa.de/de/arzneimittel-forschung/so-funktioniert-pharmaforschung/so-entsteht-ein-medikament.html
BELL Lectures
Drug Development
Cost of preclinical development
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Source: http://advancingcures.org/blog/2013/09/10/how-much-does-it-cost-estimating-drug-development-costs-before-human-studies/
BELL Lectures
Drug Development
Company Ticker Number of
drugs
approved
R&D Spending Per
Drug
($Mil)
Total R&D Spending 1997-
2011
($Mil)
AstraZeneca AZN 5 11,790.93 58,955
GlaxoSmithKline GSK 10 8,170.81 81,708
Sanofi SNY 8 7,909.26 63,274
Roche Holding AG RHHBY 11 7,803.77 85,841
Pfizer Inc. PFE 14 7,727.03 108,178
Cost of clinical development
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Pfizer Inc. PFE 14 7,727.03 108,178
Johnson & Johnson JNJ 15 5,885.65 88,285
Eli Lilly & Co. LLY 11 4,577.04 50,347
Abbott Laboratories ABT 8 4,496.21 35,970
Merck & Co Inc MRK 16 4,209.99 67,360
Bristol-Myers Squibb Co. BMY 11 4,152.26 45,675
Novartis AG NVS 21 3,983.13 83,646
Amgen Inc. AMGN 9 3,692.14 33,229
Source: InnoThink Center For Research In Biomedical Innovation; Thomson Reuters Fundamentals via FactSet Research Systems
� Cost are estimated to be at least 1 - 1.5bn US$
BELL Lectures
Drug Development
Historical probabilities of success in drug development
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Source: BioMedTracker; BIO
BELL Lectures
Financial Aspects
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Financial Aspects
BELL Lectures
Financial Aspects
• Profit and loss statement
• Cash-flow statement
• Balance sheet
• Milestone payments
• Valuation
• Exit
27.01.2015 9BELL Lectures
Financial Aspects
Profit and loss statement
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Financial Aspects
Cash-flow statement
27.01.2015 11BELL Lectures
Financial Aspects
Balance Sheet
27.01.2015 12BELL Lectures
What German Private Companies Have to Publish
27.01.2015 BELL Lectures 13
Tax Loss Carry Forwards
• Tax loss carry forwards can be offset against profits only in a very limited way
• 1 Mio € can be offset immediately
• Profits exceeding 1 Mio € can be offset by up to 60%
• Example:
50 Mio € recognized tax loss carry forwards in years 2008-2014
Germany
27.01.2015 BELL Lectures 14
Milestone payment of 30 Mio € in 2014, operating profit 25 Mio €
⇒ 25 – 1 – 15 (60% of 24 Mio €) = 9 Mio € “taxable” income leading to a tax payment
of approx. 2.7 Mio €
• Austria, Switzerland: No limitations
• Money from financing rounds is normally not transferred entirely to the company´s bank
account
• Payment schedule according to a pre-defined milestone plan with clearly defined goals
and time-points
• Within one financing round, an important goal should be reached:
Financial Aspects
Milestone payments
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− Completion of pre-clinical development
− Completion of clinical phase I
− Break-even
� Cave: Don´t be overly optimistic with regard to both,
financial and time requirements
BELL Lectures
Financial Aspects
Valuation of biotech companies by a variety of methods
• DCF-methods („discounted cash flow“)
− Probability of success to reach market
− Year of market entry
− Market size (number of patients, length of treatment [antibiotics vs. chronic treatment]),
market penetration and uptake considering competitors, reimbursement situation etc.)
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market penetration and uptake considering competitors, reimbursement situation etc.)
− Patents (supplementary patent certificates, orphan drug designation)
− Cost of clinical development, of production and marketing
• „Peer-group“ comparables
• „Multiples“ (Sales; Earnings; EBIT; EBITDA)
• „Real Options“
BELL Lectures
Financial Aspects
Methods hardly applicable when it comes to recently founded biotech companies
• Valuation is investor-driven
• To be negotiated with the founders
• Example: Basic research project with a development candidate and promising animal data
− „Pre-money“ valuation: 1 Mio €
− Investor commits 4 Mio € and obtains 4/5 of shares
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− Investor commits 4 Mio € and obtains 4/5 of shares
− „Post-money“ valuation: 5 Mio €
BELL Lectures
Financial Aspects
Value Inflection Points: Wilex AG
End of lock-up period:
Delay in clinical development
of Rencarex
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Positive phase II data
Mesupron
Negative phase III data
Rencarex
BELL Lectures
Financial Aspects
There are different types of investors
• „Business Angels“ (e.g., Rainer Christine, ex-CEO of Amaxa)
• „Family Offices“ (e.g., families Hopp, Strüngmann)
• „Seed“-Investors (e.g., High-Tech Gründerfonds)
• „Classical“ VC-Investors (e.g., TVM, LSP)
• „Corporate“ VC-Investors (e.g., Merck KGaA, Roche Ventures…)
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• „Corporate“ VC-Investors (e.g., Merck KGaA, Roche Ventures…)
BELL Lectures
Financial Aspects
Areas of potential conflicts between founders and investors
• Not every founder is a successful entrepreneur
• Disagreement in valuation
• Disagreement in strength of patent portfolio
• „Drag along rights“: All shareholders agree to sell their stakes to the same conditions as
the investor
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the investor
• „Tag along rights“: If one shareholder sells his stakes, the investor is entitled to sell his
stake (pro rata) at the same price
• „Liquidation preference“
• „Anti dilution“
• Additional financing rounds and new investors
BELL Lectures
Financial Aspects
Hypothetical case study
• Novel treatment for cancer with encouraging animal data
• Pre-money valuation: 2 Mio €
• 2x liquidation preference
• First financing round: 10 Mio €
• Post-money valuation: 12 Mio €
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• Post-money valuation: 12 Mio €
• Toxicological problems with drug candidate ⇒ time delay
• Second financing round of 20 Mio € @ pre-money valuation of 6 Mio €
• Good phase I/II data
• Company is acquired for 100 Mio €
• What do you get (before tax !)? Can you retire early or become a business angel?
BELL Lectures
Financial Aspects
Hypothetical case study
• Founder´s participation after 1st financing round; 12 Mio €:
2/12=16,7%
16,667 shares out of 100,000 shares
1 share = 120€
• Founder´s share after 2st financing round:
pre-money valuation is now 6 Mio € instead of 12 Mio €
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pre-money valuation is now 6 Mio € instead of 12 Mio €
1 share = 60€
To raise 20 Mio €, you have to issue 20,000,000/60=333,333 new shares
This results in a total of 100,000 + 333,333 = 433,333 shares
of which the founders own 3,8%
• Exit: 100 Mio €
Two-fold liquidation preference: 30 x 2 Mio € = 60 Mio €
Rest of 40 Mio €: 100%-3,8% = 96.2% for the investor, i.e. 38.48 Mio €
You receive 1.52 Mio € (before tax), considering a tax rate of 40% you´ll get 0.912 Mio €
BELL Lectures
Financial Aspects
What are VCs looking for?
• Well-written business plan
• Committed, enthusiastic and experienced team
• Address an unmet medical need
• Great returns at low risk
How to identify and convince a potential investor
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How to identify and convince a potential investor
• Networking
• Attend investor meetings
• Directly approach investors (e.g., HTGF) and take advantage of their networks
• See, e.g., http://www.fiercebiotech.com/special-reports/top-venture-capital-firms
BELL Lectures
Financial Aspects
27.01.2015 24
Source: Ernst&Young, Beyond Borders; Biotechnology Industry Report 2013, 2014
BELL Lectures
� 2013 vs. 2012: increase by 2 bn US$ to 25 bn US$,
� 41 „initial public offerings“ (IPO)
� IPO window remained open in 2014
� European companies chose to go public in the USA (e.g., Affimed)
Financial Aspects
27.01.2015 25
Source: Ernst&Young, Beyond Borders; Biotechnology Industry Report 2013, 2014
� 2013 vs. 2012: increase by 0.9 bn US$ to 4.2 bn US$,
� Germany: decrease by 50 million € to 164 milion €
� Lack of capital jeopardizes innovation of, e.g., EU drug development companies
BELL Lectures
Financial Aspects
Ways to sell company stakes
• Trade sale(z.B. Cellzome/GSK; mtm/Roche; Alantos/Amgen)
• License agreement
• License agreement is sometimes the first step towards an acquisition
(Bayer / Algeta; 1.8 bn US$)
• IPO (Europe vs. US)
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• IPO (Europe vs. US)
BELL Lectures
Financial Aspects
What is big pharma looking for?
• Difficult to predict, following trends and rapidly changing…
• Great returns at low risk
27.01.2015 27BELL Lectures
Apogenix GmbH
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Apogenix GmbH
BELL Lectures
Apogenix GmbH
• Founded in 2005 in Heidelberg, Germany, 26 FTEs
• Focus on development of antibody-like Fc fusion proteins
• Phase II successfully completed for lead compound APG101
• Successful partnering of APG880
Apogenix GmbH
• Founded in 2005 in Heidelberg, Germany, 26 FTEs
• Focus on development of antibody-like Fc fusion proteins
• Phase II successfully completed for lead compound APG101
• Successful partnering of APG880
Status & Outlook for Immunotherapeutic Lead Compound APG101
• Proof of concept in recurrent glioblastoma (GBM) shown:
Status & Outlook for Immunotherapeutic Lead Compound APG101
• Proof of concept in recurrent glioblastoma (GBM) shown:
Company Overview
• Proof of concept in recurrent glioblastoma (GBM) shown:
All endpoints met in a controlled, randomized phase II study
• Dual mode of action: Blocking of invasive growth and overcoming immune
escape of tumors ⇒ broad applicability for treatment of solid tumors
• Proof of principle and ongoing Phase I in myelodysplastic syndromes (MDS)
• Proof of concept in recurrent glioblastoma (GBM) shown:
All endpoints met in a controlled, randomized phase II study
• Dual mode of action: Blocking of invasive growth and overcoming immune
escape of tumors ⇒ broad applicability for treatment of solid tumors
• Proof of principle and ongoing Phase I in myelodysplastic syndromes (MDS)
29BELL Lectures27.01.2015
Finance
• € 55.5m in four financing rounds
• € 8.5m public grants
• Upfront payment through partnering
• Audited IFRS annual financial statements
Finance
• € 55.5m in four financing rounds
• € 8.5m public grants
• Upfront payment through partnering
• Audited IFRS annual financial statements
Focus on development and commercialization of antibody-like Fc fusion proteinsFocus on development and commercialization of antibody-like Fc fusion proteins
CD95 Ligand
Inhibitor
APG101
Discovery Preclinical PoP Phase I Phase II PoC Phase III
Pipeline
Glioblastoma (GBM)
Myelodysplastic syndromes (MDS)
CD40 Agonists
E.g., APG1233
TRAIL Receptor
Agonists
APG880
27.01.2015 30BELL Lectures
Solid tumors
Solid tumors (e.g., Pancreas)
Solid tumors Partnered with
Technology PlatformTechnology Platform
27.01.2015 BELL Lectures 31
Technology PlatformTechnology Platform
Technology Platform
• Novel Fc-fusion proteins engineered on the basis of a proprietary technology
platform overcome limitations of agonistic antibodies targeting the TNF-SF
(Tumor necrosis factor super family)
• Conventional antibodies have two binding sites
• Apogenix´compounds have six binding sites
27.01.2015 BELL Lectures 32
• Apogenix´compounds have six binding sites
• Binding of Apogenix´ compounds to receptors induces a spatially well defined
receptor assembly (clustering), thereby triggering a strong intracellular signal
leading to, e.g., apoptosis (programmed cell death)
� Receptor clustering leads to higher efficacy compared to antibodies
TRAIL Receptor
Technology Platform
APG880
TRAIL
Receptor
Antibody
TRAIL
Receptor
27.01.2015 BELL Lectures 33
Cell membrane
• Validated by comprehensive licensing agreement on TRAIL receptor agonists
(e.g., APG880) with
• Increasing deal-making and development activity (see Agenus/Incyte cooperation;
Roche; MedImmune)
• Broadly applicable to, e.g., CD40, OX40, LIGHT pathways
Cell Membrane
Cell Membrane
Company Overview
Success factor: Team
27.01.2015 34BELL Lectures
Company Overview
Success factor: Team
27.01.2015 35BELL Lectures
Company Overview
Success factor: Committed investors
27.01.2015 36BELL Lectures
Company Overview
Success factor: Selection of disease focus
Stroke
Myocardial infarction
Reperfusion injury
AIDS
SCI
27.01.2015 37
SCI
aGvHD
Glioblastoma
BELL Lectures
Success factor: Reliable partners
27.01.2015 38BELL Lectures
Company Overview
APG101
2006
APG101
APG880
Solid Tumors
27.01.2015 39
APG101
GB
BELL Lectures
APG101
MDS
Aggressive brain tumor: Median overall survival 15 months
Standard first line therapy: Surgery, radiation, Temodar
No approved drug treatment in EU for second line therapy
Annual treatment costs, e.g., for Avastin approx. 100,000 US$
Incidence US/EU: 25,000 new cases p.a.; prevalence US/EU: 28,000
APG101 – Indication Glioblastoma Multiforme
APG101 in GB
• Orphan drug designation in US and EU (high unmet medical need)
• Positive feed-back from regulatory authorities (EMA, FDA)
• Support from global KOLs (EU: e.g., Stupp, Weller, Wick; US: e.g., Reardon, Helman, Metha)
• APG101: proof of concept in a randomized, controlled Phase II trial in recurrent GB with 84
patients, all endpoints met, main study centers in Heidelberg, Moscow, Graz
• Sales potential > 750 Mio US$
APG101 in GB
• Orphan drug designation in US and EU (high unmet medical need)
• Positive feed-back from regulatory authorities (EMA, FDA)
• Support from global KOLs (EU: e.g., Stupp, Weller, Wick; US: e.g., Reardon, Helman, Metha)
• APG101: proof of concept in a randomized, controlled Phase II trial in recurrent GB with 84
patients, all endpoints met, main study centers in Heidelberg, Moscow, Graz
• Sales potential > 750 Mio US$
27.01.2015 40BELL Lectures
Ref.: www.trajectoryscifi.com
Recurrence DeathProgression
Second Line Therapy
No established standard therapies
First Line Therapy
Completed Phase II Study Design in Recurrent GB
Surgery/
Temodar/RTFollow-up
Randomization
(2:1)
56 patients Radiotherapy (18x 2 Gray)
+ APG101 weekly i.v.; 400mg
No established standard therapies
27.01.2015 BELL Lectures 41
Centralized, blinded data analysis
(Magnetic resonance imaging, pathology)
Temodar/RT
Biomarker
analysis
Follow-up(2:1)
28 patients
Radiotherapy (18x 2 Gray)
No further treatmentTumor
Tissue
Recurrent GB – Overall Survival Data from Phase II
Su
rviv
al
(%)
100
80
60
Radiotherapy + APG101
Radiotherapy
APG101/RT RT
Mean 16.3 12.7
Median 11.5 11.5
HR (p) 0.6 (p=0.056)
95% Conf. Interv. 0.36-1.01
27.01.2015 BELL Lectures 42
Su
rviv
al
Time (Months)
At the time of the analysis, 10 patients were still alive (1 in RT, 9 in RT+APG101 group)
40
20
0
3528211470 42
• Genome analysis of tumor tissue from patients of the APG101 PII study identified an epigenetic
biomarker linked to the CD95L gene (CpG2)
• Treatment with APG101 significantly improved progression free survival and overall survival in
patients carrying this new epigenetic biomarker
Predictive Biomarker Identified in Glioblastoma
CG CG CG CG
CD95L Promoter CD95L Gene
CG
Survival in biomarker positive patients(low methylated CpG2)
27.01.2015 BELL Lectures 43
Survival in biomarker negative patients(high methylated CpG2)
Time
0 10 20 30 40 50 60
Sur
viva
l
0,0
0,2
0,4
0,6
0,8
1,0apg osrt os
APG101+RT RT only
Median OS
(months)
16.1 7.3
P value (log
randk)
0.005
Time
0 10 20 30 40 50 60
Sur
viva
l
0,0
0,2
0,4
0,6
0,8
1,0apg osrt os
APG101 for Treatment of Myelodysplastic Syndromes
(Low-Intermediate I Risk Disease)
Myelodysplastic Syndromes (MDS) = Disease of blood stem cells
characterized by ineffective hematopoiesis, resulting in anemia,
fatigue, life-threatening infections
Limited treatment options (best supportive care, e.g., blood transfusions)
No approved drugs for low-intermediate I classified patients
Standard of care: Transfusions; annual treatment costs ca. 70,000 US$
Incidence US/EU: 35,000 new cases p.a.; prevalence US/EU >100,000
27.01.2015 BELL Lectures 44
http://nonbloodmedicalmanagement.blogspot.de/
Incidence US/EU: 35,000 new cases p.a.; prevalence US/EU >100,000
APG101 in MDS
• APG101 improves hematopoiesis
-> reduction of transfusion frequency in an ongoing phase I study
• Interim data have been presented at ASH (American Society of Hematology, December 2014)
• Orphan drug designation in US (high unmet medical need)
• Peak sales potential > 800 Mio US$
APG101 in MDS
• APG101 improves hematopoiesis
-> reduction of transfusion frequency in an ongoing phase I study
• Interim data have been presented at ASH (American Society of Hematology, December 2014)
• Orphan drug designation in US (high unmet medical need)
• Peak sales potential > 800 Mio US$
• Phase I data shows clinical efficacy of APG101 in low – int1 risk MDS patients
APG101 Increases Erythropoiesis in MDS Patients
BFU-E*
Arb
itra
ry u
nit
s (%
)
Changes in BFU-E and CFU-G
during the course of the study
Nu
mb
er
of
tra
nsf
usi
on
s/8
we
eks
10
Changes of transfusion frequency
during the course of the study
27.01.2015 BELL Lectures 45
Start of
Study
Week 13
(EoT)
Week 25 Week 37
(EoS)
BFU-E*
CFU-G*
Arb
itra
ry u
nit
s (%
)
*BFU-E= "Burst forming unit erythrocyte"
*CFU-G= “Colony forming units granulocyte“
Treatment period (12 weeks)
Start
of
Study
Nu
mb
er
of
tra
nsf
usi
on
s/8
0
2,5
5
7,5
10
End of
Study
• Interim data were presented at annual meeting of ASH (Dec 2014)
Contact Information
Apogenix GmbH
Im Neuenheimer Feld 584
D-69120 Heidelberg
Germany
Telephone +49 (0)6221 586080
Fax +49 (0)6221 5860810
Apogenix GmbH
Im Neuenheimer Feld 584
D-69120 Heidelberg
Germany
Telephone +49 (0)6221 586080
Fax +49 (0)6221 5860810
46BELL Lectures27.01.2015
GermanyGermany
www.apogenix.com