Arana Therapeutics Limited Level 2, 37 Epping Rd Macquarie Park Sydney NSW 2113 Australia P +61 2 8061 9900 F +61 2 8061 9999 ABN 98 002 951 877 Company Announcements Office Australian Stock Exchange Limited 4 th Floor, 20 Bridge Street Sydney NSW 2000 14 February 2008 Dear Sir/madam, Attached are the following documents in relation to the Annual General Meeting being held today: • Chairman’s address • CEO presentation Yours sincerely Niall Henderson Company Secretary For personal use only
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Arana Therapeutics LimitedLevel 2, 37 Epping Rd
Macquarie Park Sydney NSW 2113
Australia P +61 2 8061 9900 F +61 2 8061 9999 ABN 98 002 951 877
Company Announcements Office Australian Stock Exchange Limited 4th Floor, 20 Bridge Street Sydney NSW 2000 14 February 2008
Dear Sir/madam, Attached are the following documents in relation to the Annual General Meeting being held today:
• Chairman’s address • CEO presentation
Yours sincerely
Niall Henderson Company Secretary
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Annual General Meeting14 February 2008
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Board of Directors
Mr Robin BeaumontChairman of Select Vaccines Ltd and Primegro
Dr John ChiplinChief Executive
Dr Lincoln CheeManaging Director of Quality Healthcare Medical Services
Mr Chris HarrisChairman of Argo Investments Limited
Dr George JessupChairman of Start-up Australia
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Annual General Meeting14 February 2008
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Agenda
• Chairman’s address
• CEO presentation
• Formal resolutions
• Shareholder general questions
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Annual General Meeting14 February 2008
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Chairman’s Address
We have come a long way over the past year and the company you have owned in the past is a very different one today as a result.
These changes have brought significant challenges – and also significant opportunities for you as the owners of the company.
I welcome both EvoGenix and Peptech shareholders to this meeting – the first annual general meeting of Arana Therapeutics – a company that as a result of the merger is one of Australia’s leading biotechnology companies.
With the changes to the company, we have also seen significant changes to the Board. The Board changes are partly a result of the merger and some members have found it necessary to move on due to changed external commitments.
As you are probably aware, I hold my position of Chairman on an interim basis, and we are seeking an appropriate recruit to fill the position permanently. We are also in the process of seeking a further director to ensure a majority of independent directors.
I would like to start today with a quick overview of where we’ve come from – with the merger of Peptech and Evogenix – and the establishment of Arana.
Peptech was probably Australia’s most successful biotech after CSL in terms of delivering commercial outcomes.
Excellent science led to the development of anti-TNF international patenting activity in the 1990’s. The anti-TNF’s have given rise to a whole class of important drugs against auto-immune diseases.
At a time when it had negligible resources, Peptech negotiated licensing deals with two major companies marketing blockbuster drugs drawing on the science described in its patents.
Peptech recognised the potential of domain antibodies and invested in the UK start-up company Domantis, to get access to this technology.
That prescient investment led to this year’s profit of $136 million when we finally sold our equity in Domantis.
The Domantis investment was not only successful in terms of immediate financial returns, it also gave us the rights to the technology behind our leading compound - ART621 - which is going into Phase II clinical trials this year. As well as that we have access to two further therapeutic targets for future development.
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Prior to the merger, Peptech was seeking to bulk up its therapeutic pipeline, mainly in the antibody space, through acquisition of companies with near-clinic drug candidates.
Evogenix was also a very successful biotech company
EvoGenix was founded in 2001 to develop and commercialise a protein optimisation technology originated by the CRC for Diagnostics/CSIRO.
The company narrowed its focus to antibodies and acquired a US-based company, Absalus Inc., which had a complementary antibody humanisation technology. That resulted in (as far as we know) the only independent company in the world with proprietary technologies that can humanise and optimise a research antibody to be ready for human clinical development.
EvoGenix successfully floated on the ASX in 2005 and its value continued to rise as successes were reported. Shareholders in EvoGenix saw their investment at listing increase more than four times.
EvoGenix went on to sign contracts to humanise/optimise antibodies with three companies, including GlaxoSmithKline and CSL. These projects strongly validated the technologies – and will also potentially provide milestone payments and royalties if/when these companies progress the antibodies developed through clinical trials and into the market.
At the same time, EvoGenix used its technologies to develop in-house antibodies with desirable properties, and started to progress them towards clinical trials.
The merger made eminent sense for both companies.
Peptech had cash, a good pipeline – although a small pipeline - and good people.
Evogenix had a good pipeline – again a small pipeline - plus an “antibody engine” to continue generating prospective pipeline candidates, and good people but it needed cash to progress its pipeline to clinical trials.
Both companies had a significant profile in the antibody field, and had decided to focus there.
Before the merger, the value of the two companies was around $470 million. With cash of $175 million, that clearly implied a significant value for our technologies.
With market capitalisation of around $250 million now, the market is currently valuing our technologies at minimal levels – and this is despite the success of the Phase I clinical trial of ART621.
The message your new Board has taken from this is that the market is sceptical of the ability of the company to turn the promise of the technology into shareholder value.
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We recognise there has been dissatisfaction among some former Peptech shareholders and, in the short time since the merger, we have started to address the issues as we understand them.
As with any merger, extracting efficiencies is one of our key goals – and challenges. These efficiencies we hope will not only flow onto an improved share price, but also focus us on developing our core scientific assets.
Two weeks ago the animal heath subsidiary was sold. The long selling process established that the value ascribed to the business was not in fact able to be realised and the board instituted a new sale process with no constraints or expectations.
The result is that the business has been sold – freeing us of losses that would have to be incurred to develop the businesses into a viable operation.
We estimate that, in addition, it would also have taken at least two years – and cost around $3 million to $5 million – to register the key product Suprelorin in the USA.
We are now free of these costs and instead we will be paid a reasonable royalty on actual sales – and that should provide us with modest revenues.
On top of that a major management distraction on a non-core activity is gone.
The merger brought two management teams together. One of the Board’s challenges has been - and remains - how to motivate our key people and align their interests strongly with those of shareholders.
We are in the process of developing a new long term incentive scheme that we hope will ensure the rapid development of our key drug candidates remains on track and new opportunities are developed. Attracting and retaining high quality staff is key to our success.
This new scheme will be put to shareholders when finalised. We consider it very important to have it in place as soon as possible.
Over the next year the Board will be working with management to ensure overheads are minimised, systems are efficient and resources are focused on maximising the prospects for clinical success from our pipeline.
The most value-adding decisions a biotech company makes are those to kill off a project that is likely to fail, and to kill it off at the earliest possible stage.
As the majority of projects do in fact fail – and the cost of progressing increases exponentially through the development stages – it is vital that we focus our resources on only those assets we consider core assets.
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Arana’s senior management team has been reviewing and prioritising the company’s pipeline of drug candidates. We are focusing our resources on the candidates that offer the greatest potential to add shareholder value.
Candidates that do not receive resources in the short term will be assessed for whether they should be licensed or sold to other parties for development, whether they should be held in reserve, or simply abandoned.
Our strong cash balance is one of our key assets. As you know, the clinical development process is a lengthy and costly process. The constant struggle for funding to keep development programs alive is a major feature of our industry. It is also a major contributor to the failure of many potentially successful biotechnology companies. Our successful investments and strong revenue streams set us apart from many other companies in the drug development field.
Your Board is focused on ensuring that this significant asset is best deployed.
This asset will allow us the time needed to develop our core drug candidates to the optimal commercialisation point. It also allows us to develop multiple candidates – that gives us multiple chances of commercial success.
We have a great advantage here – and one that promises to deliver significant shareholder gains at the point of commercialisation.
We have come a long way over the past year. Our pipeline is focused, we have a significant cash reserve – which is all the more valuable in these times of market volatility - and I believe we have the management talent to develop our core assets into exciting therapeutic products and shareholder value.
Significant challenges remain - but your board is confident that our combined resources will lead to the further development of Arana Therapeutics as one of Australia’s leading biotechnology companies.
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Annual General Meeting14 February 2008
John ChiplinCEO
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“We have now divested all our non-core assets –
the shareholding in Domantis (for a profit of $136 million), the joint venture with Biosceptre and the animal health business. We are now a company ready to move forward solely focused on developing next generation human therapeutics.”
Robin Beaumont, Chairman, Arana Therapeutics –
1st
February 2008
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Assets to focus on (January 2006)
• Globally significant expertise in Antibody and Protein Engineering
• Collaborative relationship with Domantis (4 targets)
• Good future cash flows from revenues on Humira and Remicade (Q1 2011)
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Assets to Divest
1.
Animal Health Division (February 2008)•
established 1995, loss making
2.
Biosceptre Joint Venture (June 2007)•
topical polyclonals, diagnostics, imaging agents
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‘Venture Capital’
style investment in Domantis ($40m, sold for $176m)
(December 2006)
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Net Result (if no other activity)
ART621
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Strategy
Simultaneously divest non-core assets and acquire complementary assets to broaden pipeline and technology platform (2 years)
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Promics (May 2006)
• Suite of 200 peptides (target: anti-complement)
• Lead compound (PMX53) had been in Phase I and Phase II clinical trials
• Reprofile/reformulate for possible applications in AMD
• $4M (shares) plus $7M (shares/cash) success fee
• First deal of its kind in 10 years
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Scancell (December 2006)
•
Suite of around 20 anti-cancer antibodies with direct cell killing properties/novel modes of action
•
$4M (cash) plus $7M success fee (cash/shares)
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Good interest by third party
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EvoGenix (May –
August 2007)
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Suite of novel antibodies/fusion proteins targeting very large markets
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Humanisation/Optimisation technologies with ‘validated’
commercial partnerships
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Acquired US Antibody company Absalus ($8M, all share deal, April
2005)
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71M shares and $21M cash
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Summary
Over the course of 25 months
• 3 assets divested• 3 assets acquired (merged)
has created one of the strongest biotechnology companies in Australia*