1 2 Cross-Border R&D in China Understanding the Regulatory Challenges 1
Panelists Moderator: Paul A. Stewart, Silicon Valley Office Managing Partner, Foley & Lardner LLP Speakers: David Rosen, Partner, Foley & Lardner LLP Sofie Qiao, Ph.D, President, CEO and Co-Founder, LINQ Pharmaceuticals Jimmy Z. Zhang, Ph.D., M.B.A, Vice President, Synergenics, LLC The New Drug Development Process 2
China Healthcare Market Update Jimmy Z. Zhang, PhD, MBA SYNERGENICS CHINA OUTLOOK 7th largest pharmaceutical market in 2005, 5th largest in 2008 ($25B), 3rd largest by 2013 ($73B), and largest by 2050 3rd largest single-country medical device market $2.3B IVD in 2010 Largest market by population Total population 1.34B (mainland, 2010), 5.84% over 2000 Dramatically shifting demographics: > 60 yr: 13.26% ( 2.93%) < 14 yr: 16.60% ( 6.29%) Sources: IMS, National Bureau of Statistics, industry publications 3
Total Healthcare Expenditures in China Is Low, But Growing Fast $3,500.0 US: CAGR 2.5% 20.0% 18.0% $3,000.0 Per Capita: $7,381 16.0% $2,500.0 14.0% $2,000.0 12.0% $1,500.0 $1,000.0 CAGR 8.0% Per Capita: $183 China: CAGR 10% 10.0% 8.0% 6.0% 4.0% $500.0 2.0% $0.0 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E2011E 2020E 0.0% China Healthcare Spending (US$ Billion) US Healthcare Spending (US $ Billion) China Healthcare As % GDP US Healthcare As % GDP 2 Sources: Chinese Department of statistics & MOH, BEA database, Piper Jaffray estimates China Healthcare Reform (2009-11) RMB 850B Objectives: To expand basic medical insurance programs including: to insure 90% of its population by 2011 to increase government insurance subsidy RMB120/person from RMB20-40/person To improve healthcare service infrastructure in grassroots medical facilities (RMB100 billion) To establish essential drug list (EDL) and its distribution system To promote public medical service equity and establish a nationwide standard "health record" for the entire population To reform public hospitals (2011 nation-wide implementation): separation of pharmacies from hospitals 4
China 12th 5-Year Plan 12th 5-year plan goal Improve R&D capability and encourage development of innovative drugs Enhance international footprint Strengthen medicine quality assurance system and technology Support transformation of leading local pharmaceutical companies Central government funding for biomedical USD in millions 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 4.0 31 125 7.5 936 6.5 6,070 9th Five (1996-2000) 10th Five (2001-2005) 11th Five (2006-2010) 12th Five (2011-2015) Sources: McKinsey & Company, CHIC 2011 presentation China Is Reforming Intellectual Property Laws Third Patent Law Amendment: One Step Closer To International Standard (effect on October 1, 2009) adoption of an absolute novelty bar definition of invention made in China From Copied In China new chemical entities (NCEs) not protected until 1993 To Engineered In China doing the same things cheaper and better, To Invented In China Major Differences between China and US Patent Laws First to file No one year grace period on publication No patents on methods of treatment No CAFC (Court of Appeals for the Federal Circuit) No case law Sources: Piper Jaffray; SIPO 5
LINQ Pharmaceuticals Sofie Qiao, Ph.D. LINQ Pharmaceuticals Mission to deliver best-in-class small molecule therapeutics cost-effectively and great shareholder returns time-efficiently Strategy trans-pacific approach Optimally accessing resources/capabilities in Asia and the US Focused on best-in-class programs Team experienced co-founders Sofie Qiao, Ph.D. Kewen Jin, M.D. 6
LEAD Recap Vision - Turn drug discovery NPV positive Mission Generate best-in-class and differentiated drug candidates Strategy Headquartered in Bay Area with a small office in Shanghai, utilizing Chinese CRO capabilities to conduct small molecule discovery against validated targets for which the scientific team have unique insight Execution Team with a business plan decided on 2 initial targets (i.e. no licensing) to conduct patent-busting chemistrydriven discovery Result Raised Series A of $17 million, generated 2 preind candidates (cancer and antibiotics) in 2 years, and acquired by BioMarin in less than 3 years for up to $97 million LINQ LEAD 2.0 Improve Capital Efficiency Smaller team and entirely virtual Expand Asia Exposure Fundraising in China as well as US PreIND deal-making possibly in Asia Refine Target Selection Focus on therapeutic areas with huge global potential Select targets which are recently validated Create more value preind stage deal followed by M&A 7