The Cape Fear Capital Connection News Hour: Tuesday, September 30, 2014 A Live Broadcast on TalkMedia TV of News About Technology, Capital Markets, and Business In The Cape Fear Valley With Thomas Vass The Private Capital News Network Presents

Understanding The Incredible Potential Economic Impact of Small Molecule Drug Research in The Cape Fear. Insight Into The News Story With Frank Vinluan, Reporter with Xconomy, based in Raleigh, North Carolina Segment One: The Lead Story: PPD Acquires Boston Company X-Chem, Inc. Why Is This Important to the Cape Fear Economy?

PPD helps other companies conduct research. PPD is a drug research and development company. With offices in 46 countries and more than 13,000 professionals worldwide, PPD applies innovative technologies, therapeutic expertise and a commitment to quality to help clients and partners accelerate the delivery of safe and effective therapeutics and maximize the returns on their R&D investments.

PPD was founded by Fred Eshelman in 1985 PPD business model based on two revenue streams in the pharmaceutical business. the growth in clinical trials, where companies pay PPD to conduct the trials. the outsourcing of this complex work over the past 30 years, where PPD manages the overseas research. In other words, PPD started out doing research for other companies, and then moved into doing its own research, where X-Chem comes into the picture.

X-Chem Owns a proprietary DNA-encoded small molecule library in excess of 100 billion distinct compounds X-Chem makes money from milestone payments and royalties achieved as the compounds picked up by pharmaceutical partners make progress toward becoming commercialized drugs. The partners include Roche, AstraZeneca, Bayer, Pfizer, among many others.

PPD Owns The X-Chem Library for $85 million. PPD paid $15.5 million to acquire 60 percent ownership of X-Chem in PPD had the option to acquire the remaining 40 percent at a company valuation of $70 million, as long as it exercised that option by Oct. 31, 2014, filings show.

Diagram of Research Relationships Big Pharma Owns Certain Chemicals Big Pharma Turns To Companies, like X-Chem, to test their chemicals against certain types of diseases. If the chemicals looks promising, Big Pharma retains a CRO, like PPD, to do the clinical trials Other companies, related to PPD, conduct regulatory science on getting the drug approved.

Segment 2: What The News Means In Terms of Economic Growth in The Cape Fear What is small molecule research? Every small molecule in the X-Chem library has a unique DNA barcode attached to it. Molecules in the library that bind to the target can be “fished out,” while the rest of the molecules wash away. DNA sequencing methods are then used to detect molecules that are enriched when bound to the target.

The DNA Bar Codes Point the Way To The Most Effective Chemicals To Treat Diseases Molecules that selectively bind to the desired biological target and are further tested for their effect upon a particular disease, like cancer. Optimization of molecules for further optimal potency, selectivity, pharmacokinetics (PK) and pharmaceutical properties.

Companies Conducting Small Molecule Research Like to Be Located Close To Each Other North Carolina is the CRO epicenter of the world. North Carolina is home to 128 CRO companies employing over 21,000 people within the state and tens of thousands around the world. One of the world’s largest CROs is headquartered in Wilmington, named PPD.

All the other related companies like to be located close to the CROs. Economists call this affinity between firms that like to be located close to each other a “cluster.” The important economic factor that causes economic growth is technology innovation that occurs in the firms in the cluster. X-Chem converts the research into products and gets the potential products into the market better, faster, cheaper.

Segment 3: What Are The Gaps In Economic Strategy For Making The Cape Fear A Small Molecule Research Cluster? First barrier is the capital market gap. From 1995 through 2013, biotechnology companies in North Carolina raised $2 billion of venture-backed money. During that same time, similar companies in the New England area took in more than $13 billion and those in Silicon Valley took in more than $17 billion – six and eight times more than in North Carolina.

North Carolina Has A Gap In Converting Research Into Products In 2012 North Carolina took in more than $1 billion in NIH funding, but only $132 million in life sciences venture funding “That reflects the fact that companies here are not doing as well at converting NIH funding to venture capital. It’s staggering and unfortunate. Companies here have to be more creative about identifying funding sources.” Peter Ginsburg, N.C. Biotechnology Center’s vice president of business and technology development.

Solutions To The Capital Market Gap and the Product Commercialization Gap Forget about the venture capital model. They are never going to change, and their investment strategy is not linked to long term economic prosperity. Visualize small companies in the entire cluster as if they were really parts of a big corporation, as if they were a Big Pharma. In other words, see the Cape Fear biotech cluster as if it was really a company. Deploy X-Chem as the hub of the cluster.

Segment 4. What Other Regions Are Doing About The Capital Market Gap. InvestNextDoor Bets on Community Impact with CrowdLending With New Regional Crowdfunding Website. In the first 6 weeks of operations, InvestNextDoor has experienced impressive interest in their new peer to peer lending platform that helps small business skip the banking bureaucracy. More than 50 new listing applications are in process at InvestNextDoor.

Tennessee Crowdfunding sites turn ideas into products James Fields, For The Tennessean, September 12, James Fields is owner and president of IT service provider Concept Technology and IT staffing company Scout Staffing.

Helping Local Companies Connect to Local Investors With a 2012 Kickstarter campaign, a pair of Chattanooga-based graphic designers raised more than $11,000 to create a new font for thenew font for the city. The Pebble Smartwatch, In 2013, PebblePebble raised over $10 million with 68,929 backers.

Equity Crowdfunding and Regions CROWDFUNDBEAT NEWS DESK, by PAUL NIEDERER on SEPTEMBER 18, The Australian Model. Reviewed on the Cape Fear Capital Connection TV show last week. Same idea would work in the Cape Fear Region.

The Economic Goals: More companies that look just like PPD. Grow them from scratch, and stop obsessing about industrial recruitment. A full cluster of small molecule research firms. The military tech cluster as the primary customer for the research. A regional capital market infrastructure that targets capital to regional firms.

The Cape Fear Capital Connection Has Offered A Better Model of Regional Innovation For The Cape Fear Economy Generation 1 Deal Mapping for Ideas Deal Creation Deal funding Deal Exits Profit Re-investment in Regional Companies Generation 2 Deal Mapping Deal Creation Deal funding Deal Exits