1 2 Cross- Cross-Border R&D in Border R&D in China – China – Und Understand rstanding ing the Reg e Regulat latory ry Ch Challenges allenges 1
Pane Panelists lists Moderator: Paul A. Ste ul A. Stewar art, t, Silicon Valley Office Managing Partner, Foley & Lardner LLP Speakers: David R David Rose sen , Partner, Foley & Lardner LLP Sofie Qiao, fie Qiao, Ph.D Ph.D, President, CEO and Co-Founder, LINQ Pharmaceuticals Ji Jimmy Z. Zhang, Ph.D. mmy Z. Zhang, Ph.D., M.B.A, Vice President, Synergenics, LLC The New Drug D The New Drug Develo velopmen pment Process t Process 2
China Healthcare Ma China H althcare Market rket Up Update date Jimmy Z. Zhang, PhD, MBA S YNERGENICS CH CHINA OUTL INA OUTLOO OOK � 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 H Tota Healthcar thcare Expen Expenditur itures i es in Chin China Is Is Low, Low, Bu But Gr t Growi owing Fa g Fast st $3,500.0 20.0% US: CAGR 2.5% 18.0% $3,000.0 Per Capita: $7,381 16.0% $2,500.0 14.0% 12.0% $2,000.0 10.0% Per Capita: $183 $1,500.0 8.0% China: CAGR 10% 6.0% $1,000.0 CAGR 8.0% 4.0% $500.0 2.0% $0.0 0.0% 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E2011E 2020E China Healthcare Spending (US$ 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 Chin a He Healthc althcare re Refo Reform (2009 (2009-11) -11) – RMB 850 MB 850B Objectives: Objec ives: � 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 nation- wide standard "health record" for the entire population � To reform public hospitals (2011 nation-wide implementation): separation of pharmacies from hospitals 4
China 12th 5-Ye Ch ina 12th 5-Year Plan ar 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 6,070 6.5 × 6,000 5,000 7.5 × 4,000 4.0 × 3,000 2,000 936 1,000 125 31 0 9th Five 10th Five 11th Five 12th Five (1996-2000) (2001-2005) (2006-2010) (2011-2015) Sources: McKinsey & Company, CHIC 2011 presentation Chi China Is a Is Refo form rming Intellectua g Intellectual l Pro Property Law ty 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 LINQ Pharmaceuticals Sofie Qiao, Ph.D. Sofie Qiao, Ph.D. LI LINQ Pharmaceu NQ Pharmaceuticals icals � 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
LEA LEAD Reca 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 chemistry- driven 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 LI LINQ – – LEAD 2.0 EAD 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
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