GTX-001: A Risk Worth Taking Victoria Clark, Kelly Fitzgerald Minji Kim, Frederick Wang Juliana Mastronunzio 2009 YBPS Case Competition November 20, 2009

Licensing Proposal from Gastrex Two drug candidates for inflammatory bowel disease: GTX-001 and GTX-002 RECOMMENDATION: License only GTX-001 Targets relevant inflammatory pathways in Crohn’s disease and ulcerative colitis Addresses unmet needs of patients with moderate and severe disease Larger potential market share than GTX-002 Positive net present value even when accounting for long-term risk

Symptoms: Abdominal pain, diarrhea, rectal bleeding, loss of appetite, growth, extraintestinal inflammatory conditions Small intestine and colon Transmural inflammation and ulceration, fistulae Colon and rectum Inflammation and ulceration of mucosa and submucosa Crohn’s Disease Ulcerative Colitis Inflammatory Bowel Disease (IBD) Prevalence of IBD (US and EU 2008) No treatment 5’ASA Steroids + 5’ASA Steroids + Immunomodulator Biologics Refractory Mild Moderate Severe Target patients for GTX-001 and GTX-002

Immunomodulators Oral or IV Effective for maintenance Affects actively cycling cells High risk for secondary infections Ex. 6-MP, methotrexate Biologics IV or subcutaneous injection Effective for induction and maintenance Increased risk for tuberculosis, serious infections, lymphoma Ex. infliximab, adalimumab, natalizumab Current Therapies for Moderate/Severe Cases Unmet Needs Tolerance develops to infliximab Average time to flare is approximately equal for all treatments Peyrin-Biroulet L, et al. Lancet 2008;372:67-81.

PROS Novel biologic that may prevent leukocyte extravasation and migration Potentially treats both CD and UC Potentially blocks activated T cells, natural killer cells, monocytes, and macrophages CONS Not specific to the gut Not specific to immune cells Limited preclinical data Potential side effects on gut epithelial cell adherence GTX-001 VLA-1 Collagen GTX-001: Anti-VLA-1 Antibody Janeway's Immunobiology. Seventh Edition. pp

Podolsky DK. N Engl J Med 2002;347: Eckmann L et al. Proc Natl Acad Sci U S A 2008;105: TLR IL-1R TNFR IKKs Interleukins Cytokines Chemokines Survival GTX-002 NF-κB GTX-002: IKK Inhibitor PROS Targets signaling hub of NF-κB pathway Oral bioavailability Decreased T-cell survival Effective in rodent IBD model CONS Nonspecific immunomodulation Susceptibility to bacterial infection Exacerbates acute inflammation Limited preclinical data Multiple drugs under development

Phase I -$30 Phase 2 -$99 Phase 3 -$171 Marketing Failure Biologics: 80% NCE: 73% Biologics: 41% NCE: 45% Biologics: 74% NCE: 58% $15 milestone $45 milestone $140 milestone Modeling the Risk of Clinical Trials Trial Success Determinants Lack of major adverse events Mild side effect profile Efficacy parameters include number of stools, stool frequency, abdominal pain, rectal bleeding, hematocrit, and functional assessment by the patient Per drug per disease R&D cost: $300MM Milestones: $200MM Biologics overall success rate: 24% New Chemical Entity (NCE) overall success rate: 19%

$8.3 bn GTX-001GTX-002 Target SegmentBiologics & RefractoryImmunomodulator & Refractory Price per patient$7,000 - $17,000$3,500 - $10,000 Target Patient Population1.6% - 10%2.4% % Potential Market Share7% - 50%2% - 20% Potential Sales$0.6bn - $4.2bn$0.2bn - $1.7bn Higher efficacy & willingness to pay drive higher sales revenue for biologics IBD Market Analysis and Projections

GTX-002 Chance of success is 29% for GTX-001 and 22% for GTX-002 Conditions 10,000 Monte Carlo simulations performed Total rNPV = valuation of CD market and UC market Prices adjusted with 3% annual inflation rate 10% discount rate GTX-001 Total rNPV Mean (rNPV) = $590MM Mean (rNPV) = $139MM Positive Risk-Adjusted Valuations

GTX-001: A Risk Worth Taking Scientific Recommendation Preclinical data insufficient to differentiate between potential GTX-001 and GTX-002 clinical efficacies GTX-001 has fewer adverse events in the rodent than GTX-002 Optimal GTX-001 therapy must be fully humanized, easy to administer (subcutaneous delivery), effective for induction and maintenance Financial Recommendation Both GTX-001 and GTX-002 have positive rNPV, but rNPV value is higher in GTX-001 Drugs would not be co-administered and may compete for moderate/severe IBD markets Biologics market is 60% of IBD drug market

Acknowledgements Victoria Clark, Kelly Fitzgerald Minji Kim, Frederick Wang Juliana Mastronunzio Yale Biotechnology and Pharmaceutical Society Boehringer Ingelheim Covidien Saul Ewing LLP Vion Pharmaceuticals Taro Pharmaceuticals McKinsey & Company Yale Center for Customer Insights

Phase I: ZP1848 – GLP-2 peptide analogue KLH-TNFα kinoid – vaccine C326 – IL-6 Inhibitory Avimer protein Phase II: AIN457 – anti IL-17 Mab KLH-TNFα kinoid – vaccine rhIGF – recombinant IGF OPC-6535 – superoxide anion production inhibitor Ustekinumab – anti-IL-12, IL-23 human Mab HMPL004 – multiple cellular targets SC12267 – inhibits pyrimidine synthesis Phase III: Vedolizumab – anti-integrin α4β7 Phase I: rhuMAb Beta7 – anti-integrin α4β7 and αEβ7 Phase II: Golimumab – anti-TNFα Mab Rituximab – anti-CD20 Mab SC12267 – inhibits pyrimidine synthesis HMPL004 - multiple cellular targets Phase III: Budesonide-MMX – corticosteroid Golimumab – anti-TNFα human Mab Vedolizumab – anti-integrin α4β7 Abatacept – binds B7 T cell receptor Crohn’s Disease Ulcerative Colitis Currently Recruiting IBD Clinical Trials

Monte Carlo Simulations IF the drug is more effective, the model incorporates a higher market capture and price charged Probabilities for market size and price modeled with beta-PERT distributions Manufacturing costs not included due to incomplete data; the higher cost of producing monoclonal antibodies will lower the predicted rNPV Determination of relative effectiveness to current drugs was based on historical FDA classification of drugs by therapeutic value; system stopped in 1992

5’ASA Oral, mild side effects, but limited efficacy in severe IBD Ex. Asacol, Liada, Colazal Steroids Oral or IV injection, rapid onset of action, severe side effects limit use for maintenance therapy Ex. Predisone, methylprednisolone IM Oral, effective for maintenance, high risk for secondary infections Ex. 6-MP, methotrexate Biologics IV or subcutaneous injection, effective for induction and maintenance, but increased risk of infection Ex. Infliximab, Natalizumab ? 7.85% CD and 4.21% UC cases are refractory to treatment For any existing treatment, average time to flare is 25 months +/-2 for CD and 30 +/- 2 months for UC Goal for new therapy: significantly increase time between flares, minimize side effects, use for induction and maintenance