FINAL EXAM - FUNDING A NEW BIOTECH VENTURE (AS ) Javier Conde vancells, PhD

Scenario The M&A squad for Illumina has spotted a british company that produces aptamers called ApBio APTAMERS Small biomolecules capable of binding to specific targets with high affinity and specificity Like antibodies, aptamers have numerous applications in both basic and clinical research. However: greater efficacy relatively inexpensive and rapid production Do not pose a risk of triggering unwanted immune responses

Scenario ApOZY: ApBio’s lead compound for the treatment of small-cell lung carcinoma. Results from phase 1 clinical trial No significant change in life expectancy Good safety profile Some patients showed significant control of pre-existing type 2 diabetes Bald patients regrew hair Patient groups for new indications are discoverable based upon genomic testing

Scenario Series A: Pre-money valuation: $2.3M Post-money valuation: $3.3M Investor: Nextbio Ventures (30%) Series B: Pre-money valuation: $2M Post-money valuation: $4M Investor A: Nextbio Ventures ($1M) Investor B: Illumina ($1M)

Milestones 1) Complete the bioinformatic analysis 2) Develop the genetic test 3) Find a partner to conduct the phase 2 clinical trial 4) Recruit CFO

Option A: Illumina plays along Illumina acts as lead investor in Series B round ApBio benefits from Illumina’s expertise in DNA sequencing

Option A: Terms 1X exit preference Staging of the investment Broad-band weighted average anti-dilution Nextbio Ventures do not exercise their antidilution rights One seat in the BOD A seat for the new CFO in the BOD Founders and option holders shareholding is subject to vesting over five years Management team will have to sign a non-compete agreement Voting rights in case of change of control 10% pool of stock options

Option A: Capitalization table Nextbio Ventures does not exercise their anti-dilution rights 10% option pool is created before the series B round

Option B: Convertible loan Convertible into the same class of shares purchased by a third-party investor on an investment of at least $2M. Converted at a 25% discount. Repayable on demand after 1 year. Illumina would take security over the assets of the business

Future directions Phase 2 clinical trial Partner up with pharmaceutical or contract research organization: OnCRO as a potential candidate OnCRO would exploit IP rights on aptamers Upfront payment by ApBio to OnCRO might be negotiated