Building a New Biotech Enterprise Pravin R Chaturvedi

Building a New Biotech Enterprise Pravin R. Chaturvedi, Ph. D. Pivot Pharmaceuticals, Inc. Woburn, MA 01801 October 2016 Pivot Pharmaceuticals 1

Biotech Entities Must Evaluate Multiple Risk Factors to Ensure Impact & Success for All Stakeholders Enterprise Risk • Scientific (bio, chem, pharm, clin, reg) • Commercial (partners, market, competition) • Reimbursement challenges Management Risk • Team (wrong mix of scientists and business) • Inexperienced board & executive leadership • Wrong kind of investors and shareholders Patient Impact October 2016 • Defines Overall Success of the Enterprise • For patients, physicians, employees, partners, shareholders & society Pivot Pharmaceuticals 2

The Economics of Drug Development October 2016 Pivot Pharmaceuticals 3

Pharmaceutical R&D Expenditures to Develop New Prescription or Generic Drugs From: World Review 2013 -2018, Evaluate Pharma, June 2013 October 2016 Pivot Pharmaceuticals 4

Worldwide Total Market for Prescription Drugs From: World Review 2013 -2018, Evaluate Pharma, June 2013 October 2016 Pivot Pharmaceuticals 5

Growth in Global Biopharma Sales (billions of 2013 dollars) Has Slowed CAGR (2001 -2008): 8. 1% CAGR (2008 -2013): 3. 3% CAGR = compound annual growth rate Source: Statista (url: http: //www. statista. com/statistics/263102/pharmaceutical-market-worldwide-revenue-since-2001/) October 2016 Pivot Pharmaceuticals 6

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R&D Cost per Approved Molecule Compared: Biotech vs. Pharma Source: Di. Masi & Grabowski, Managerial Decision Econ, 2007; 28: 469 -79 October 2016 Pivot Pharmaceuticals 8

New Drug and Biologics Approvals and R&D Spending R&D Expenditures New Compound Approvals R&D expenditures are adjusted for inflation; curve is 3 -year moving average for NMEs Sources: Tufts CSDD, Ph. RMA, 2014

Net Returns Relative to R&D Cost for New Compounds by Sales Decile (millions of 2000 $) Source: Grabowski et al. , Pharmaco. Economics 2002; 20(Suppl 3): 11 -29 October 2016 Pivot Pharmaceuticals 10

Summary of Drug Development & Evaluation October 2016 Pivot Pharmaceuticals 11

Clinical Development Times Vary Across Therapeutic Classes, 2000 -2013 * excludes AIDS antivirals Source: Tufts CSDD October 2016 Pivot Pharmaceuticals 12

Regulatory Approval Times Vary Across Therapeutic Classes, 2000 -2013 * excludes AIDS antivirals Source: Tufts CSDD October 2016 Pivot Pharmaceuticals 13

FDA Review Decisions and Phase 4 Studies FDA Review Outcomes Phase 4 Studies • If not approvable, FDA sends Sponsor a Complete Response Letter • If approvable, the FDA requests additional information from the sponsor to ensure appropriate labeling • The NDA is again reviewed to specify label indication and dose levels • Following drug approval, sponsors of the drug will be required to continually assess the safety of the drug October 2016 • Post-market surveillance of the drug to continually assess the safety of the drug • FDA may request following the risk-mitigation (REMS) strategies • May include evaluation of incidence and severity of rare adverse reactions, costeffectiveness analyses, comparative trials, and quality of life studies Pivot Pharmaceuticals 14

Pipeline & Revenue Challenges for Large Pharmaceutical & Biotech Companies October 2016 Pivot Pharmaceuticals 15

Rationale for Networked Model of Innovation for New Drug Development October 2016 Pivot Pharmaceuticals 16

Building Successful Biotech Enterprises October 2016 Pivot Pharmaceuticals 17

Common themes in Successful Biotechs • • • Setting big ambitious goals Assembling the right team members Alignment of goals and incentives Leveraging the right technologies Perseverance through failures Adapting to changing market climates Respecting discontent towards seeking excellence Culture of open and honest communication Rapid decision making Accountable leadership October 2016 Pivot Pharmaceuticals 18

Successful New Biotech Ventures Leverage Innovation and Translate them into New Products October 2016 New Technology Partners Target profiles Founders Validate $$$$ Seed Capital Core Team Translation to Product Pivot Pharmaceuticals 19

Successful Biotechs harness the “Restless Discontent” of Entrepreneurs coupled with Networking Academic & Business Interface New Technology Mavens “Spillover & Brownian” Effects New Biotech Ventures October 2016 Pivot Pharmaceuticals 20

Bigger is Definitely Not Better • • • Biotech initiatives require a small, committed teams Disruption + chaos + discontent = Creativity Key discussion topic: What to do? Make decisions, but open-minded about expectations Non-bureaucratic and fluid execution Impact-oriented philosophy – not career-oriented Debate and disagreements welcomed Core team members define the culture Key members of the team become future leaders October 2016 Pivot Pharmaceuticals 21

Biotech Alliances with Large Pharmaceutical Companies October 2016 Pivot Pharmaceuticals 22

The Funding Climate (or Lack Thereof) October 2016 Pivot Pharmaceuticals 23

Funding challenges for therapeutic biotech entities with available sources of investment Choice of Investors Experience of Interaction Expected Outcome Family & Friends Divorce? ? Lose family & friends? Insufficient investment capital to fund therapeutic biotech entities; seed capital at best Patient Foundations; NIH, NSF “Rare diseases”-focused foundations more efficient; size of grants not usually sufficient to fund biotech Limited source of non-dilutive capital; provided that there is already huge support from NIH or other funding; good source for seed funding HNIs; Angel investor groups Too diversified and lack of focus; afraid of regulatory approval uncertainty; need proof of principle Limited availability of capital and not suited for therapeutic biotech entities due to their inability to participate in future funding rounds Venture capitalists Accede total control and incentives for founders; inadequate capital resources requires syndication; investor board not always aligned Require (their) focus on selected therapeutic areas and possibility of early exit (preferably M&A); partnership with large pharma increases likelihood of financing; need to ensure future fund availability Private equity Usually fund growth-stage biotech companies; need product to be approved to have their attention Not much different than public investors that will focus on the bottom line (profits) and not (generally) support new product development Strategic (pharma) partners Best alignment of incentives with biotech entities; symbiotic in nature; experienced and focused partners Leveraging knowledge- and capital-resources from strategic partners expands bandwidth and increases likelihood of success for the new drug October 2016 Pivot Pharmaceuticals 24

Venture Financing Deals & Total Venture Financing Values October 2016 From: World Review 2013 -2018, Evaluate Pharma, June 2013 Pivot Pharmaceuticals 25

From: GLG Pharma - Diagnostics and Drugs October 2016 Pivot Pharmaceuticals 26

Biotech Investment Timeline (of the Past and Today) R&D Preclinical Phase III Market Family & Friends Angel Investors Venture Capital Funds Foundations Private Equity Large Pharma & Biotech Companies R&D Preclinical Phase III Market Family & Friends Angel Investors Venture Capital Funds (Extremely Limited) Family Offices, Foundations, Venture Philanthropy, Patient Groups Private Equity and Hedge Funds Large Pharma & Biotech Companies, Corporate Ventures October 2016 From Fundraising Manifesto, Ed. Dennis Ford, Life Science Nation, 2014 Pivot Pharmaceuticals 27

Successful Biotech Enterprise Rationale: Address Unmet Medical Needs Time People Potential Leverage New Technologies & Innovations + Global Economy Build the Right Team in a Networked Setting Address Needs of the Patient Translation to New Products for Commercialization Biologist, Chemist, Pharmacologist, Physician, Reg Affairs, Business Improve Wellness and Reduce Hospitalization October 2016 Pivot Pharmaceuticals 28

Building a New Biotech Enterprise Pravin R. Chaturvedi, Ph. D. Pivot Pharmaceuticals, Inc. Woburn, MA 01801 October 2016 Pivot Pharmaceuticals 29

Pravin Chaturvedi Background: Drug Development & Biotech Entrepreneurship Current Portfolio of Biotech Enterprises My Role(s) Development Program Focus Pivot Pharmaceuticals* President, CEO & BOD Women’s Health – Oncology/Urology Oceanyx Pharmaceuticals Co-founder, BOD Cancer, Bone, Neurodegeneration Cellanyx Diagnostics Chairman, BOD Cancer Phenotypic Diagnostics Previous Portfolio of Biotech Enterprises My Role(s) Participation in Drugs Developed and Commercialized Napo Pharmaceuticals** President & CSO Crofelemer (GI) Scion Pharmaceuticals*** President, CEO & BOD (Neuropathic pain, atrial fib) Vertex Pharmaceuticals Head, Lead Evaluation Telapravir (HCV), Fosamprenavir (HIV), Amprenavir (HIV) Alkermes Pharmacokinetics (Brain targeting, drug delivery) Parke-Davis/Warner. Lambert (now Pfizer) Product Development Scientist Gabapentin (Epilepsy), Fosphenytoin (Epilepsy), Tacrine (Alzheimer’s) *Acquired Ind. US Pharmaceuticals in 2015; **Acquired Ind. US Pharmaceuticals in 2007 ***Acquired by Wyeth (now Pfizer) in 2005 May 2016 Pivot Pharmaceuticals Inc. 30