Decision making Project Valuation 1 vs 2 Continuation

신약개발의 과정 각 개발단계 별 Decision making: Project Valuation 필요 1. 식당개업 vs. 신약개발 (시작단계) 2. Continuation vs. Drop (각 milestone 단계) 3. Licensing out vs. In house 개발 (각 milestone단계) 4. 직접 판매 vs. 판매 Alliance (허가 후)

Case Study I - 시장의 unmet need에 따른 개발전략: Antibiotics

항생제 성분별 특징 Class 작용 기전 특징 기타 Penicillins Cell wall 합성억제 (Cross-linking of peptidoglycan) Broad spectrum, 안전성 우수 Cephalosporins Cell wall 합성억제 (Cross-linking of peptidoglycan) Broad spectrum, 안전성 우수 내성증가, 복용횟수 Rocephin, Zinnat, Cefzil Quinolones DNA gyrase 저해 Broad spectrum, 우수 한 효능, 복용편리, 짧 은 치료기간 부작용, 높은 가격 Ciproxin, Levaquin Macrolide /Ketolides 단백질합성억제 (50 S ribosome) Broad spectrum, 복용 편리, 짧은 치료기간 내성증가, Poor eradication Zithromax, Biaxin Carbapenems Cell wall 합성억제 (Cross-linking of peptidoglycan) Broad spectrum (원내감염에 주로 사용 ) Oral 제형 無 Imipenem, Meropenem Glycopeptides Cell wall 합성억제 (Disaccharide pentapeptide억제) G(+)에 효과적, 내성균에 효과 G(-) 효과 약함, only infusion, 부작용 심함 Vancomycin, Teicoplanin Aminoglycosides 단백질합성억제 (30 S ribosome) G(-), aerobic에 효과 G(+) 효과 약함, Toxic Gentamicin, Streptomycin Tetracyclines 단백질 합성억제 (30 S ribosome) Broad spectrum 내성 증가 Doxycycline Oxalzolidonones 단백질합성억제 (New class) G(+)에 효과적, 내성균에 효과 G(-) 효과 약함 Zyvox Oligosaccharides Toxin의 인간세포 내 침투 저해 내성균 문제 해결 - Peptides Inhibitors of physiological pathway Target specific, 부작용 적음 대량생산에 한계 내성 증가, 긴 치료기간, Augmentin, Amoxil, Unasyn, b 복용횟수 -lactamase 저해제와 혼용

The Maturity of Antibacterial Classes 2000년 2025년 Carbapenems Penicillins Glycopeptides Cephalosporins Quinolones Aminoglycosides Tetracyclines Carbapenems Oxazolidinones, Peptides, Oligosaccharides Lipopeptides, Ketolides, Proteins Maturity of market Oxazolidinones Ketolides Sales Macrolides Peptides, Lipopeptides Proteins, Oligosaccharides Quinolones Glycopeptides Cephalosporins , Penicillins Macrolides Aminoglycosides Tetracyclines Maturity of market

주요 세균 관련 질환 ◊ Respiratory tract infections (RTI) • 대상 질병: 인두염, 후두염, 기관지염, 중이염, 폐렴 등 • 주요 병원균: S. pneumoniae, H. Influenza, M. pneumoniae, C. pnemoniae, K. pneumoniae, L. pneumophilia, S. aeueus, P. aeruginosa, S. pyogenes, M. catarrhalis 등 • Unmet need: - G(+), G(-) 모두 가능한 broad spectrum - 내성출현이 빈번하므로 내성출현이 어려운 약 - 노인 및 소아 대상 임상결과 있는 약 (안정성) - oral 가능한 항생제 ◊ Urinary tract infections (UTI) • 대상 질병: 요도염, 전립선염, 방광염, 신우신염 등 • 주요병원균: E. coli, S. saprophyticus, P. mirabils, E. aerogenes, K. pneumoniae, P. aeruginosa, Enterococcus spp. • Unmet need: - G(+), G(-) 모두 가능한 broad spectrum - Oral 과 parenteral form 동일한 효능 ◊ Skin and soft tissue infections (SSI) • 대상 질병: 농가진, 모낭염, 봉와직염, 당뇨병성 족부 감염 등 • 주요 병원균: Streptococcus pyrogenes, S. aureus, E. coli, K. proteus ◊ Food-Borne infections • 대상질병: 이질, 콜레라, 세균성 설사, 위장관염 등 • 주요 병원균: E. coli, C. difficile, S. aureus, B. cereus, Shigella spp. , Salmonella spp. , V. cholerae. S. dysenteriae, C. jejuni, Y. enterocolitica

Oral FACTIVE Clinical Development Program STDs RTI AECB PK, Safety Tolerability RTI Sinusitis LRTI Pneumonia Uncomplicated SSTI Uncomplicated UTI Phase II/III studies (9402 patients) Uncomp/Comp UTI Phase III 5249 received FACTIVE

원내감염 (내성균) ■ 원내감염 항생제 시장 규모 (추정) (단위: $ M) 7, 697 8, 223 성분 7, 115 6, 617 6, 140 M/S 2008 CAGR Others 6% 11. 0% Oral cephalosporins 7% 4% -2. 4% Macrolides/ketolides 9% 9% 3. 8% Penicillin 15% 11% -0. 6% Glycopeptides 7% 11. 1% Quinolones 13% 17% 7. 2% Carbapenems 11% 15% 8. 5% IV cephalosporins 32% 21% -1. 7% • 항생제 병원부분 CAGR은 3. 7 %

원내감염 (내성균) ■ 대표적 Problem Pathogen ◈ Methicilin resistant Staphylococcus aureus (MRSA) ◈ Vancimycin resistant Staphylococcus aureus (VRSA) ◈ Vancomycin resistant Enterococci (VRE) ◈ Multidrug resistant Streptococcus Pneumoniae (MDRSP) ◈ Multidrug resistant Mycobacterium tuberclosis ◈ Multidrug resistant Samonella

Target 선정 시 Spectrum 확인 작업: Genomics ■ Target 선정 시 Genomics를 이용한 spectrum 분석 broad spectrum target vs. narrow spectrum target ◈ Elitra Genomics – Patho. Seq - 63 개의 bacterial genome (19 개의 Elitra genome, 44 개의 public genome) ◈ The institute for Genome Research (TIGR) - 23 개의 bacterial genome ◈ National Center for Biotechnology Information (NCBI) Genebank - Complete genomes are published

Case Study II - 진출 목표 시장의 결정과 개발 timeline의 관리: Antiviral market

HCV 개요 1 5’ 192 C 384 E 1 810 E 2 1027 NS 2 1658 1712 1973 2421 NS 3 Protease Helicase 3011 NS NS 4 B NS 5 A NS 5 B 4 A 3’ -Small positively stranded RNA virus -Discovered in 1989 -Major cause of HCV transmission : blood transfusion (Not screened untill 1991 !!!) - 전 세계 인구 3%가 감염(WHO 추정) Total 170 million China Egypt Vietnam USA Japan France Spain Italy UK Pakistan Russia 50. 8 million 10. 5 million 4. 5 million 2. 8 million 667 000 10 million from 288 000 7 major market 278 000 250 000 20% blood donors 82% HIV+ USA: 10, 000 deaths annually

Timeline Current Sustainable Lead Development Compound Launch Lead 2001 Revised Lead 2001 2005 Development Sustainable Compound Lead 2003 2005 2008 2010 Launch 2008 2010

Case Study III - Project valuation: 1. Benchmarking Method 2. DCF (Discount Cash Flow) Method

Product Valuation Technical Analysis Benchmarking Data Market Analysis Competitive Analysis DCF/ENPV Model Licensor’s preferences for deal type & structure Proposed Deal Terms

Benchmarking • 가정 - ‘fair market rate’이 존재 - 과거의 예가 현재에 적용 가능 • 조건 - 비슷한 deal 존재 - Financial data의 공개 • Benchmarking valuation 순서 1. 2. 3. 4. 5. Feasibility search Information gathering & Analysis Approximate valuation Refinement of valuation DCF-based valuation과 비교 분석

Feasibility Search • Do enough comparable deals exist? - Pharma. Delas - Recombinant Capital - Epsicom - Windhover • If not, value via DCF model etc.

Information Gathering & Analysis • Useful Web Sites - www. Pharmadelas. net - www. Prnewswire. com - www. yahoo. com - www. multexinvestor. com - openaccess. dialog. com/pharma - barrons. ar. wilink. com - www. tenkwizard. com - www. Recap. com - www. Marketguide. com - www. hoovers. com - www. worldpharmaweb. com - yahoouk. ar. wilink. com - www. sec. gov - www. freeedgar. com

Approximate Valuation Term Deal 1 Deal 2 Your deal Up-front $3 M $1 M >$3 M Equity investment - $5 M - Milestones $35 M $30 M >$35 M Royalty N/A 10% >10% Stage Phase I Territory Not Asia Worldwide Drug type Oral, IV IV only Oral, IV

Refinement of Valuation Example: Drug Candidate Decrease Value Greater technical risk Better patent position Increase Value More new products in development More advanced stage of development Intend to retain manufacturing rights Worldwide license on offer

Refinement of Valuation Term Approx. Value Refined Value Up-front >$3 M $4 M Equity investment - - Milestones >$35 M $45 M Royalty >10% 12% Stage Phase I Territory Worldwide Drug type Oral, IV

Example DCF Model: Scenario • 0 year : $1 M for License Fee • year 1 and 2: 임상 3상 Cost $5 M/year • year 3: 허가 milestone $3 M • years 3 and 4: $10 M sales each year $4 M COGs each year $1 M royalty payment (10%) • year 5: 판권 이양 (divestment) $30 M

Example DCF Model – Stage 1 Year 0 1 2 3 4 10 10 5 Total Benefits Sales Divestment Total 0 0 0 10 10 20 30 30 30 50 Costs License -1 Trials -1 -5 -5 -10 Milestone -3 -3 COGS etc -4 -4 -8 Royalty -1 -1 -2 Total -1 -5 -5 -8 -5 0 -24 Contribution -1 -5 -5 2 5 30 26

Example DCF Model: Concepts - Stage 2 • Present Value (현재 가치) FV = PV Ⅹ(1+ⅰ)n Rearrangement gives; PV = FV / (1+ d )n • ⅰ is the interest rate d is the discount rate Discount Rate - 자본 기회 비용 - Lehman Bros. Suggest 13% widely used by pharmas - Risk가 높은 경우 높은 값을 갖게 됨 (벤쳐 회사의 경우 40%까지도 적용) • Net Present Value (NPV) - 전기간의 모든 discount cash flow의 합

Example DCF Model - Stage 2 Assume discount rate of 13% Year 0 1 2 3 4 5 Total Benefit 0 0 0 10 10 30 50 Total Cost -1 -5 -5 -8 -5 0 -24 Contribution -1 -5 -5 2 5 30 26 Discount factors* 1. 0 0. 88 0. 78 0. 69 0. 61 0. 54 Disc. cash flows -1 -4. 4 -3. 9 1. 4 3. 0 16. 2 Net Present Value (NPV) = $11. 3 M * Discount factors = 1 / (1+13%)y y=year (0, 1, 2… 5) 11. 3

Example DCF Model: Concepts - Stage 3 • Attrition Rate - Failure rate in each clinical development - Averaged across all therapy areas, of 100 drugs entering Phase I trials; 75 will make it to Phase II 36 will make it to Phase III 23 will make it to the market - Phase II is the most stringent filter • Probabilities Therapeutic area Probability of success, Phase III All 0. 75 0. 48 0. 64 Anti-infective 0. 78 0. 5 0. 77 CV 0. 64 0. 57 0. 72 NSAID 0. 75 0. 42 0. 71 CNS 0. 9 0. 44 0. 51

Example DCF Model: Concepts - Stage 3 • Decision Tree Analysis (DTA) - DTA in clinical risk adjustment Market P=0. 64 P=0. 36 P=0. 48 P=0. 75 Fail P=0. 52 Fail P=0. 25 Fail PHASE I • PHASE III MARKET Expected Net Present Value (ENPV) - The counter part of NPV based on the summation of discounted cash flows for each time period adjusted for explicit risk using DTA

Example DCF Model - Stage 3 Assume probability of trials success is 50% Year 0 1 2 3 4 5 Total Benefit 0 0 0 10 10 30 50 Total Cost -1 -5 -5 -8 -5 0 -24 Contribution -1 -5 -5 2 5 30 26 Discount factors* 1. 0 0. 88 0. 78 0. 69 0. 61 0. 54 Disc. cash flows -1 -4. 4 -3. 9 1. 4 3. 0 16. 2 Prob. of reaching 1 1 1 0. 5 Disc. cash flows -1 -4. 4 -3. 9 0. 7 1. 5 8. 1 Expected Net Present Value (ENPV) = $1. 0 M 11. 3 1. 0

Division of ENPV Licensor : Licensee 1: 5 Phase I 1: 4 Phase II 1: 3 Phase III 1: 2

Principle Components of Financial Terms • Up-front Payment • Development milestones • License fee/minimum Royalty • Royalties (fixed or stepped) • Equity investment • R&D fund