Final Presentation May 14 th 2014
Final Presentation May 14th 2014
• Project Scope
• Executive Summary
• Market Access
• Valuation
• Deal Structures
• Final Recommendations
Agenda
Project Scope
Come up with strategies to take anti-CTLA4 through FDA approval
Sell or License Market Access Valuation
• Unmet needs • Driver and barriers for
breast cancer biological therapy
• Oncologists survey
• Identify big Pharma companies to sell or license the new therapy
• Identify an optimal deal structure
• Determine risk adjusted net present value
• We provided analysis of market access as well as valuation for anti-CTLA4, and recommended strategies to finance the cost to FDA approval.
• Methods of analysis include literature review, primary research, economic modeling and identification of deal structures using business databases.
• Our research have shown that
1. there are significant unmet needs in metastatic breast cancer.
2. once in the market anti-CTLA4 could have a maximum annual revenue of $1.9B.
3. The best deal structures for Premier Biomedical are a) venture capital funding followed by selling to a big pharmaceutical company b) out-licensing.
Executive Summary
Market Access Unmet needs, drivers and barriers for adoption of biological therapy for breast cancer
Market Access- guidelines for breast cancer therapy
Mode of therapy Unmet needs
Hormone Receptor Positive
Primary therapy - hormonal therapy (HT) • Additional line of HT until refractory
Efficacy, 50 % refraction, resistance
Secondary therapy - chemotherapy • Visceral metastasis • Refractory to HT
Efficacy, toxicity, resistance
Hormone Receptor Negative
Her2 positive – chemotherapy plus monoclonal antibody for Her2
Side effects, very high cost
Her2 negative- chemotherapy (combination or sequential single-agent)
Efficacy, toxicity
Oncologist Survey Challenges of existing drugs: 1. What are the biggest challenges oncologists face when treating breast cancer? – In what ways can the drug industry help to alleviate this issue? 2. What instances or subclasses of breast cancer are most lacking effective treatment strategies? – What obstacles do you foresee for novel therapeutics to address these concerns? Potential of new therapy: 3. What if any concerns do you have about biologics-based therapies? – What existing biologics do you currently prescribe regularly? – What types of complications have you run into with these biologics – Do you have any insights into cause (e.g. target-specific reaction or immune reaction to biologic agent)? – In what ways are biologics an improvement over alternative therapies? – In what ways are they still inferior? 4. What information is critical to convince you of the safety and efficacy of a new breast cancer drug? – How are you informed of a novel therapy? – What details go into your decision to adopt its use? – How does your previous criteria change, if at all, when the therapy is a biologic?
Unmet needs and market access for breast cancer therapy
• Early prediction • Survival vs. Tumor
Stage/Grade
Drug resistance • Triple-negative
• Adaptation to single-target Rx
Metastatic disease • Bone, brain, liver, lung
• Leptomeningeal disease
Cancer recurrence • Rate: disease type, treatment
type
• Treatment: location, profile of recurrence
Therapeutic side effects • Quality of life
• Cost of treatment
Drivers for anti-CTLA4 success
1. Ipilimumab (anti-CTLA4) precedent in metastatic melanoma.
2. Shows potential against triple negative and metastatic disease.
3. Potential combination therapy with current standard therapy.
4. Clinician’s openness to biologics.
• Ease of patient enrollment
• Notification of new trials
5. Crossing the blood-brain barrier with T-cell targeted biologics.
6. Less likelihood of immunosuppression and alopecia.
Barriers for adopting anti-CTLA4
• Higher costs of development.
• Limited Bioavailability.
• Government regulations (current and projected).
• Evaluating products that don’t have enough precedent in the system.
• Could be required to demonstrate cost-effectiveness measured in cost per
quality adjusted life year.
• Immune reactions.
• Skin rashes, stomatitis, diarrhea.
• Cardiac Toxicity (trastuzumab/Herceptin).
• HER2 dimerization inhibitors (Pertuzumab).
• Competition: anti-proliferative biologics in clinical trial for metastatic breast
cancer in combination with aromatase inhibitors.
Valuation Valuation of a novel biological therapy for breast cancer
Valuation: Risk adjusted Discounted Cash Flows
DCF have to be corrected to take into account the probabilities of success in each stage:
𝑟𝑁𝑃𝑉 = 𝐶𝐹𝑖(1 + 𝑟)𝑖
𝑅0𝑅𝑖 ,
𝑖
• 𝐶𝐹𝑖 is the CF at time 𝑖.
• 𝑟 is the cost of capital.
• 𝑅0 is the likelihood that the drug gets to the market.
• 𝑅𝑖 is the probability after 𝑖 years being successful.
• 𝑅0/𝑅𝑖 is the likelihood of the cash flow actually materializing.
[1] Stewart JJ, Allison PN, Johnson RS. Putting a price on biotechnology. Nature Biotechonology 2001; 19. [2] Bogdan B, Villiger R. Valuation in Life Sciences. Springer-Verlag 2008.
Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Preclinical
Clinical I
Clinical II
Clnical III
FDA Review
Revenues
IND Submission NDA Filing
Patent
Expires
Timeline
Failure rate Likelihood of reaching
revenue
Preclinical Passed 18%
Clinical I 13% 18%
Clinical II 60% 21%
Clinical III 43% 51%
Filing 10% 90%
Projected failure rates for developing anti-CTLA4
[1] Monoclonal Antibodies Market in Breast Cancer to 2019, GBI market research report. [2] Oncology Clinical trials: Drug Development Resources and Case Studies. Cutting edge reports.
Phase I Phase II Phase II
Cost per patient $45200 $69700 $74800
Number of Patients
75 155 1300
Overhead 500k 1M 1.5M
Total 3.89M 11.8 M 97.2M
Cost of clinical trial
Name of the drug Price Description
Herceptin $7430 Very expensive
Avastin $8333 Little not worthy
Kadcyla $2954 Expensive
Perjeta $4337 HER2 receptor antagonists
Xgeva $1793 Also used for giant cell tumor of
bone
Range: $1793~$8333
Revenue: Pricing
Low High
Patient Distribution Range 150,000 160,000
Monthly Drug Price Range $1,793 $8,333 Expected Treatment Range
(months) 12 12
Market Share Range (%) 5 35
Revenue: $1,886,851,945
Revenue: Monte Carlo Simulation
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
550,000
600,000
0 2 4 6 8 10 12
rNp
v($
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s)
Year
Start of Phase III
Start of Phase II
Summary: rNPV
Deal Structures Trends in M&A and Alliances Deals and Proposed Exit Strategy
Deals and strategic alliances in oncology
Thomson Reuters Therapeutic Area Insights – Oncology Deal Making & Development Trends, 2008 – 2012
• Oncology is one of the largest and fastest growing therapeutic areas in terms of drug development activity
• 131 oncology M&A transactions worth a total disclosed value of $92 billion
• 569 oncology license and joint venture deals worth a total of $44.7 billion
• Phase II oncology assets earned the largest step-up in committed cash for license and joint venture deals: Phase II assets earned a median upfront fee of $31.5 million for Sellers, a 142% jump from the $13 million paid for Phase I assets. Thomson Reuter’s data suggested that no other stage confers a comparable premium.
Oncology remains to be the perennial licensing favorite
Strategic Transactions; Data set includes all deals by major acquirers (large pharma and biotech companies with marketed products)
There are two main strategic options to keep in mind
Venture capital
funding and acquisition
Out-licensing
Venture Capital How venture capitals have adopted to newer trends
Venture Capital flow of money is disconnected
Quaker Partners
How VCs decide on picking a portfolio to invest
Quaker Partners
Venture fund investment criteria “Operate according to the Rule of Threes: Invest in Phase III drugs and target a 3x return in three years”
- Jim Healy, General Partner of Sofinnova Ventures -
Superior Technology • Breakthrough technology, product or services
• Solid intellectual property
Large Market(s) or Clearly Defined Specialty Market • Attractive to wide range of potential co-development and marketing partners
• Attractive to multiple acquirers
• Clear strategy of product and company development
Capital Efficient • Clear development and regulatory milestones
• Reasonable clinical trial and manufacturing costs
Financially Attractive • Appropriate valuation
• Ability to form strong investment syndicate
• Multiple exit possibilities
Quaker Partners
Venture capitals are hanging on longer until the trade sale
HBM Pharma, Biotech M&A Report
Avalon Ventures: Discovery-Deal-as-Exit
• Afraxis Pharmaceuticals (January 2013) • Alliance with Genentech – undisclosed upfront plus up to $187.5 million in
milestones for kinase-inhibitor discovery program
• Zacharon Pharmaceuticals (January 2013) • $10 million plus undisclosed earn-outs to buy glycosylation technology
biotech
• RQx Pharmaceuticals (February 2013) • Alliance with Genentech to discover novel antibiotics
• Undisclosed upfront plus $111 million in potential milestones
Avalon/GSK: scaling the model
• Pharma needs innovative pipeline candidates. VCs need faster, cheaper and easier exits.
• Avalon Ventures spends up to $30mm and GSK up to $465mm to fund up to 10 single-asset biotech companies.
• GSK can exercise an option to acquire each company at IND stage.
• Each acquisition would return 3-4x to Avalon, and earn-outs could take returns to 14x.
Most active life science venture capital firms in 2013 • Domain Associates
• HealthCare Ventures
• Polaris Venture Partners
• MPM Capital
• Alta Partners
• ARCH Venture Partners
• Flagship Ventures
• SV Life Sciences Advisers
• Sanderling Ventures
• Kleiner Perkins Caufield & Byers
• InterWest Partners
• Sofinnova Ventures
• Burrill & Company
• New Enterprise Associates
• OrbiMed Advisors
• Quaker BioVentures
• Venrock Associates*
National Venture Capital Association, FierceBiotech
Corporate Venture Capital The investment of corporate funds directly in external start-up companies
The Impact of CVC on the Atlas Venture Portfolio
Bruce Booth, Atlas Venture; Blue in pie chart represents percentage of portfolio companies with corporate venture investors.
CVC may be an another option
Impact on acquisition prices • Building relationships, accessing technology early • Filling the void left by traditional VC
START-UP, October 2012; Acquisitions of VC-backed biotechs from Jan 2006-Aug 2012
Pharma As Strategic LP
Lilly Mirror Portfolio Merck Research Venture Fund
venBIo Index Life IV
Previous Alliances and Acquisition Transactions
Date Big Pharma Revenue
(million $) Startup
(location) Stage of the
product Product name, lab code
or generic name Deal Value
Upfront (million)
Details on the deal
Mar012010 Novartis $58,831.00mm Institut Merieux Phase II TG4010; MVAMUC1IL2 $10.00mm $10.00mm Total Milestones (pre and postsales): $955.90mm
Jul012011 Roche $52,531.70mm mtm Laboratories AG $265.00mm $180.00mm
Dec012011 Amgen Inc. $18,676,000,000 Watson Pharmaceuticals Inc. N/A Biosimilars to Herceptin, Avastin, Rituxan, and Erbitux 400,000,000 N/A
Apr012012 Celgene Corp. $6,493,900,000 Epizyme Inc. Pre-Clinical DOT1L HMT Inhibitor 90,000,000 90,000,000
Development Milestones = $25,000,000; Milestones = $160,000,000
Jul012012 Eisai Co. Ltd. $8,035,180,000 Verastem Inc. Pre-Clinical Salinomycin (VS507) N/A N/A
Verastem owns the analogs generated in the 12-month collaboration. Eisai receives royalties on commerical sales of identified products. During the term of the agreement, Eisai has a right of first negotiation for products that are created through the collaboration.
Jun012013 Amgen Inc. $18,676,000,000 Onyx Pharmaceuticals Inc. Phase III Nexavar (sorafenib) 9,167,350,000 9,167,350,000
Jun012013 Johnson & Johnson $71,312,00mm Arnolherapeutlcs Inc.
Research, Preclinical
Onapristone N/A N/A
Jun012013 Johnson & Johnson $71,312,00mm Aragon Pharmaceutlcals Inc. Phase II ARN509 $1,000.00mm $650mm
Aug012013 Bayer HealthCare LLC $10,143.50mm Compugen Ltd. Research; Preclinical N/A, "Immune checkpoint inhibitor" $40.00mm $10.00mm
Total Milestones (pre and postsales): $500.00mm
Date Big Pharma Revenue
(million $) Startup
(location) Stage of the
product Product name, lab code
or generic name Deal Value
Upfront (million)
Details on the deal
Sep012013 Novartis $58,831.00mm Regenerex LLC Research; Discovery Facilitating Cell Therapy N/A N/A
Sep012013 Roche $52,531.70mm Heidelberg Pharma GMBH Research; Preclinical ADC technology N/A N/A
Sep012013 Teva Pharmaceutical Industries Ltd. $20,314.00mm
Cancer Research UK’s Cancer Research Technology Ltd. (CRT)
Research Discovery N/A N/A N/A
Oct012013 AstraZeneca $25,711.00mm Taris Biomedical Inc. Clinical Taris N/A N/A
Oct012013 Johnson & Johnson $71,312,00mm DCPrime BV Pre-Clinical DCOne N/A N/A
Nov012013 Clovis Oncology 0 EOS SPA Phase II Lucitanib 420,510,000 200,500,000
Dec012013 Takeda $18,338.30mm Natrogen Phase II Naturaalpha N/A N/A
Dec012013 Johnson&Johnson $71,312,00mm CSL Ltd. Clinical Development Phase I CSL362 N/A N/A
Jan012014 AriadPharmaceuticalsInc. $45.56mm
Specialised Therapeutics Australia Pty. Ltd. marketed Ponatinib N/A N/A
Jan012014 Johnson & Johnson $71,312,00mm Scholar Rock Inc. Research; Discovery N/A, autoimmune disease and cancer immunotherapies N/A N/A
Jan012014 Johnson & Johnson $71,312,00mm Adaptive Biotechnologies Corp. Research; Preclinical immunoSEQ; The Drug: N/A, for Cancer Immune Disorders N/A N/A
Jan012014 Johnson & Johnson $71,312,00mm BiocerOX Products BV Research; Discovery N/A, for Tumor, Solidtype N/A N/A
Jan012014 AstraZeneca PLC $25,711.00mm Probiodrug AG Research; Preclinical N/A, for Cancer Inflammation N/A N/A
Jan012014 Novartis AG $58,831.00mm Eureka Therapeutics Inc. Research; Discovery N/A, ESK antibodies for all indications N/A N/A
Jan012014 AstraZeneca PLC $25,711.00mm Flanders Institute for Biotechnology Research; Preclinical
N/A, small molecule MALT1 protease inhibitors N/A N/A
Jan012014 Johnson & Johnson $71,312,00mm Nodality Research; Discovery SCNP N/A N/A
Feb012014 Novartis $58,831.00mm CoStim Phamaceuticals Inc N/A, drugs for Cancer Immune Disorders
100% Equity purchase N/A
Feb012014 Pfizer $51,584.00mm Ichor Medical Systems Inc. Research; Preclinical TriGrid intramuscular electroporation technology N/A N/A
Mar012014 Johnson & Johnson $71,312,00mm Genmab AS Phase I Daratumumab $135.03mm $135.03mm Total Milestones (pre and postsales): $1,100.00mm
Mar012014 BristolMyers Squibb Co. $16,385.00mm Five Prime Therapeutics Inc. Research; Discovery N/A, for cancer immunotherapeutics $50.50mm $41.00mm
Total Milestones (pre and postsales): $300.00mm
Apr012014 Roche $52,531.70mm Oryzon Genomics SA Phase II ORY1001 $21.00mm N/A Total Milestones (pre and postsales): $500.00mm
Apr012014 Celgene Corp. $6,493.90mm Forma Therapeutics Holdings LLC Research; Discovery N/A, for cancer $225.00mm $225.00mm
Total Milestones (pre and postsales): $375.00mm
Celgene Corporation An example of an active big pharma in the alliances deals
Celgene deal making strategies
• Shaping of its future pipeline by signing early-stage deals with a variety of innovative biotechnology companies. This is backed by billions of dollars off lenalidomide (Revlimid) for multiple myeloma and its capability to run late-stage clinical trials.
• Structural flexibility by molding a specific deal, in a specific way, for a specific company
“Celgene stands out in my mind as being very willing to say ‘Ok, how do you approach drug discover? Ok, we buy into that. We do it a little bit differently, but let’s let you try your approach”
- Steven Tregay, CEO of Forma Therapeutics -
• Hands-off method by allowing its partners to manage and operate.
• Approaches • Build-to-Buy: Upfront payment to collaborate on certain programs and gaining of the exclusive option to buy the
company down the road. (Quanticel Pharmaceuticals, VentiRx Pharmaceuticals)
• Large per-drug check tied to various milestones (Concert Pharmaceuticals)
• Extendable option to license and develop any of the pipeline drugs (Agios Pharmaceuticals)
Celgene in preclinical testings
Company Location Date of Deal Scientific Niche Size of Upfront Payment
GlobeImmune Louisville, CO May, 2009 Cancer immunotherapy $40m
Agios Pharmaceuticals Cambridge, MA April, 2010 Cancer metabolism $130m
Foundation Medicine Cambridge, MA May, 2011 Cancer diagnostics, patient stratification Undisclosed
Acceleron Pharma Cambridge, MA August, 2011 Anemia drug development $25m
Quanticel Pharmaceuticals San Francisco, CA November, 2011 Identifies biomarkers for drug discovery $45m over three years
Epizyme Cambridge, MA April, 2012 Epigenetics $90m
AnaptysBio San Diego, CA April, 2012 Antibodies for cancer & inflammation Undisclosed
Inhibrx San Diego June, 2012 Undisclosed antibody drug candidate undisclosed
VentiRx Pharmaceuticals Seattle Oct., 2012 Immunotherapy $35m
PharmAria San Diego Oct., 2012 Small molecules for cancer, fibrotic disease undisclosed
Sutro Biopharma South San Francisco Dec., 2012 Antibody-drug conjugates, bispecific antibodies
undisclosed
Bluebird Bio Cambridge, MA Mar., 2013 Gene Therapy $75m
Presage Biosciences Seattle Mar., 2013 Cancer drug discovery technology $13m
Forma Therapeutics Watertown, MA April, 2013 Small-molecule drug discovery $200m (includes research payments)
Concert Pharmaceuticals Lexington, MA May, 2013 Deuterium-modified drug candidates undisclosed
Morphosys Germany June, 2013 Antibodies for myeloma, leukemia $92m
Tengion Winston-Salem, NC July, 2013 Regenerative medicine for kidney disease $15m equity investment
Acetylon Pharmaceuticals Boston July, 2013 Histone deacetylase inhibitors $100m
Array Biopharma Boulder, CO July, 2013 Inflammation drug discovery $11m
Source: Company reports, Celgene regulartory filings
Big
gest
Bio
tech
IPO
s o
f 2
01
3
Recommendation Potential Exit Strategies
Royalties Sales
Milestones (Go/No go) Phase III NDA Filing FDA Approval
Sold post-Phase II for >5x to Large Pharma
$ 16 M raised for Early Development Phase I and Phase II
Financing by Early Stage Venture Capital Firm
Royalties
Sales
Milestones (Go/No go)
Phase III NDA Filing FDA Approval
Financing by out-licensing
Strategy to take anti-CTLA4 to FDA approval
A B
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Sell to Big Pharma
A. Strategy to take anti-CTLA4 to FDA approval
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Outlicensing
B. Strategy to take anti-CTLA4 to FDA approval
Recap
Come up with strategies to take anti-CTLA4 through FDA approval
Sell or License Market Access Valuation
• Huge unmet needs in metastatic breast cancer
• Venture capital entry followed by acquisition
• Out-licensing
• At the end of Phase II, anti-CTLA4 has a value of $400 M
Acknowledgment
Director Bridgin Lee [email protected] Project Manager Mahlet Abera [email protected] Team Members Sean Arlauckas [email protected] Rong Guo [email protected] Han Hu [email protected] Don Lee [email protected] Hernan Piragua [email protected] Bihui Xu [email protected]
1. Monoclonal Antibodies Market in Breast Cancer to 2019, GBI market research report 2. Bogdan B, Villiger R. Valuation in Life Sciences. Springer-Verlag 2008. 3. Drug prices: http://www.goodrx.com/breast-cancer/drugs 4. MBC statistics: http://mbcn.org/developing-awareness/ 5. MBC statistics: http://ww5.komen.org/BreastCancer/MetastaticBreastCancerHome.html 6. Metastatic Breast Cancer - Statistics, Diagnosis, Treatment Options:
http://breastcancer.about.com/od/types/a/mets_bc_gradish.htm 7. Valuation model uses the rNPV method developed by Jeffrey J. Stewart (J. Stewart. Biotechnology
Valuations for the 21st Century. Milken Institute Policy Brief 2002. In press; J. Stewart et al. Putting a Price on Biotechnology. Nature Biotechnology 2001. 19:813).
8. Strategic transaction database
Appendix