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For more information be invited to: www.intercell.com Entrepreneurship in Innovation November 24, 2008 Alexander von Gabain THE EIT SHAPING THE KNOWLEDGE AND INNOVATION COMMUNITIES (KICs) Slide 2 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 1 Safe Harbour Statement These materials contain certain forward-looking statements relating to the business of Intercell AG (the Company), including with respect to the progress, timing and completion of the Companys research, development and clinical trials for product candidates, the Companys ability to manufacture, market, commercialize and achieve market acceptance for product candidates, its ability to protect its intellectual property and operate its business without infringing on the intellectual property rights of others, the Companys estimates for future performance and its estimates regarding anticipated operating losses, future revenues, capital requirements and its needs for additional financing. In addition, even if the Companys actual results or development are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of the Companys results or developments in the future. In some cases, you can identify forward-looking statements by words such as could, may, expects, anticipates, believes, intends, estimates, or similar words. These forward-looking statements are based largely on the Companys current expectations as of the date of this presentation and are subject to a number of known and unknown risks and uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by these forward-looking statements. In particular, the Companys expectations could be affected by, among other things, uncertainties involved in the development and manufacture of vaccines, unexpected clinical trial results, unexpected regulatory actions or delays, competition in general, the impact of the global credit crisis, and the Companys ability to obtain or maintain patent or other proprietary intellectual property protection. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements made during this presentation will in fact be realized. The Company is providing the information in these materials as of this date, and we disclaim any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. ENTREPRENEURSHIP IN INNOVATION Slide 3 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 2 Vaccines a visionary mission for the better of our blue planet Novel vaccines, a desperate need for customers in developed and less developed countries The market place of a vaccine biotech player Case study Intercell: from technologies to novel vaccines How to combine innovation and entrepreneurship in biotech ENTREPRENEURSHIP IN INNOVATION Slide 4 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 3 Microbial infections key threat of human life Terminate every 4 th human life 13 million deaths per year in developing countries Three major killers: Malaria, AIDS and Tuberculosis Multi-drug resistant microbes Novel emerging pathogens Bioterrorism Pandemic influenza OVERVIEW Worldwide approx. 500,000 people killed by the annual flu epidemic Estimated 50,000,000 people killed by pandemic flu 1918 NOVEL VACCINES, A DESPERATE NEED FOR CUSTOMERS IN DEVELOPED AND Slide 5 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 4 Vaccines the most successful medical intervention a cost efficient success story Vaccine doses in m Cases per 100,000 EXAMPLE: HIB MENINGITIS CASES AFTER INTRODUCTION OF THE VACCINE IN THE US NOVEL VACCINES, A DESPERATE NEED FOR CUSTOMERS IN DEVELOPED AND Slide 6 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 5 The vaccine field: challenges ahead and new paradigms List of licensed vaccines against infectious diseases is short List of microbial diseases without efficacious vaccine regimen is long FORCES AT WORK Many existing vaccines do not protect important population cohorts (e.g. neonates and elderly), are produced by outdated tools and have unacceptable side effects Novel technologies & scientific progress in micro- and immune- biology re-opened the vaccine field: HBV, Pneumo, HIB, Rotavirus, JEV, HPV Triangle between industry, academia and NGOs has opened an alliance to develop vaccines in parallel for the developed and less developed world: e.g. TB, Malaria, HIV,JEV,Pneumo "Come-back of vaccines" NOVEL VACCINES, A DESPERATE NEED FOR CUSTOMERS IN DEVELOPED AND Slide 7 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 6 Growing knowledge in immunology, host parasite interaction and production technology: enabling factor of novel vaccines ADJUVANT ANTIGEN T-cell immunity (e.g. Hepatitis C, Hepatitis B, Tuberculosis...) B-cell immunity (e.g. Japanese Encephalitis, Polio, TBE, Group A Streptococcus...) Live attenuated Killed whole cell Subunit Polysaccharides Proteins/peptides Aluminium salts LT-Patch, IC31 MF59, MPL and more DELIVERY SYSTEMS NOVEL VACCINES, A DESPERATE NEED FOR CUSTOMERS IN DEVELOPED AND Slide 8 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 7 * sanofi-pasteur World Market Analysis 2007 ** New Players in US/EU and developing countries Vaccines: operating in an attractive market segment with blue chip players US$ bn GLOBAL VACCINE MARKET Traditional and combinations Novel and therapeutic vaccines 199020012003200520072009E 6.8 8.8 11.7 16.6 21.9 2.0 Global vaccine market16% Novel and improved vaccines38% Expected CAGR 2003 - 2009 Novartis GSK Wyeth Merck & Co. sanofi- pasteur Others** Industry landscape % of market share THE MARKET PLACE OF A VACCINE BIOTECH PLAYER Slide 9 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 8 The innovation gap of the established pharma and vaccine industry - a fact Source: Phar- maceutical Research and Manu- factures of America, FDA, Burill & Co. bn US$ Number of new FDA approved drugs Pharma R&D spending DIFFICULT TO CLOSE WITHOUT INSOURCING THE MARKET PLACE OF A VACCINE BIOTECH PLAYER Slide 10 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 9 Phase I 1st year Phase II 1 - 2 year Phase III 3 - 4 year Clinical development 10 - 2020 - 5050 - 90 Pharma and biotech products take time, need significant investments and are not risk free Likelihood of success (percent) Research Development (pre-clinical) Product licensing 51099 WITHOUT RISK AND INCENTIVES NO NOVEL DRUGS Submission of license 90 - 95 20 - 20050 - 175100 - 125Cost (m US$) 10 - 25020 - 2255 - 1010 - 15 215 - 1.000 Time (years) 4 - 61 - 24 - 61 THE MARKET PLACE OF A VACCINE BIOTECH PLAYER Slide 11 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 10 Drug and vaccine development needs gigantic investments If you think research is expensive, try disease Mary Lasker (1901-1994) NO NEW DRUGS WITHOUT ENTREPRENEURSHIP THE MARKET PLACE OF A VACCINE BIOTECH PLAYER Slide 12 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 11 Biotech industry provides hope: major part of product pipeline comes from smaller biotech Others (mainly biotech) Top 100 Pharma players COMPOUNDS IN DEVELOPMENT BY COMPANY SIZE Source: PharmaProjects, BCG Number of compounds 68% 69% 67% 55% 32% 31% 33% 45% THE MARKET PLACE OF A VACCINE BIOTECH PLAYER Slide 13 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 12 People: Key Management:G. Zettlmeissl (CEO), A. v. Gabain (CSO and founder), T. Lingelbach (COO) & W. Lanthaler (CFO) Supervisory board: M. Grco (Chair), E.G. Afting, S. Bakali, D. Ebsworth, J. Sulat, H. Wigzell SAB: R. Ahmed, H. Blum, S. Cohen, F.X. Heinz, S. Kaufmann, S. Normark, H. Wigzell Intercell, an international biotech player, a spin off from a public/private research center of excellence History: Spin off from the Campus Vienna Biocenter, IMP and University 1999. Today 388 employees from 33 nations in Vienna, Edinburgh & Washington DC Partners: Merck (USA), Sanofi Aventis, Novartis, Wyeth, Kirin, SSI, Biological E, EC, NIH, CDC, WRAIR, AERAS foundation, Karolinska, MPI, GBF and many more academic organizations Products: Therapeutic & prophylactic vaccines and antibody treatments based on cutting edge R&D Funding: Since 2005 listed at the ATX (ICLL): Todays Market cap: approx. $ 1.5 bn. Since 2007 profitable CASE STUDY INTERCELL: FROM TECHNOLOGIES TO NOVEL VACCINES Slide 14 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 13 History and strategic development of the company Start up"First steps""Growth" AN AUSTRIAN BIOTECH PLAYER MOVES INTO THE EUROPEAN TOP LEAGUE 1998 - 20022002 - 20042004 - 2008Time Academic excellence Visionary technologies Efficient product development Implementation of core technologies JEV clinical success (Novartis) AIP and IC31 (Merck, Sanofi, Kirin, Wyeth) Core assets Transformation from academia to industry Risk diversifi- cation Acquisition of further technology platforms (IOMAI) Stra- tegy CASE STUDY INTERCELL: FROM TECHNOLOGIES TO NOVEL VACCINES Slide 15 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 14 Combination of complementary innovative technology platforms Antigen Identification Program (AIP ) Vaccine Improvement Program (VIP) Needle Free Vaccine Patch Technology ANTIGEN ADJUVANTSDELIVERY Protective antigens for novel vaccines S. aureus Pseudomonas Pneumococcus Borrelia and more B-cell and T-cell adjuvants IC30 IC31 and more INTERCELL LEVERAGING TECHNOLOGIES CASE STUDY INTERCELL: FROM TECHNOLOGIES TO NOVEL VACCINES Three complementary technology platforms enable the company and its partners to deliver novel vaccines Slide 16 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 15 Vaccine innovation building a pipeline INTERCELL TODAY IC31 New vaccine adjuvants AIP Technology generating novel vaccine and antibody products ~10 targets Vaccine patch Technology for needle free vaccine delivery New global travelers' vaccines Japanese Encephalitis vaccine expected market approval US/EU/AUS 2008, India 2009 Travelers' Diarrhea vaccine patch expected start of Phase III H1 2009 Hospital-acquired infections (vaccines & antibodies) Approach for vaccines & antibodies S. aureus vaccine in Phase II Pseudomonas vaccine expected start of Phase II/III in 2008 Strong Partnerships: ProductsTechnologies Products for Therapeutic Hepatitis C vaccine in Phase II Patch / Pandemic Flu vaccine in Phase I/II IC31 / Seasonal Flu vaccine in Phase I/II Protein-based Pneumococcus vaccine expected start of Phase I early 2009 IC31 / TB vaccine in Phase I/II Innovation- driven company for vaccines, antibodies and delivery technology CASE STUDY INTERCELL: FROM TECHNOLOGIES TO NOVEL VACCINES Slide 17 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 16 Entrepreneurship a forbidden city for a professor? HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 18 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 17 Academia and Commerce how to combine them in a company HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Gabain & Lanthaler in EMBO reports 2003, Vol. 4, No. 7, p. 642 - 646 Slide 19 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 18 Understanding the first step towards mutual respect DRIVING FORCE AT LEADING UNIVERSITIES AND ACADEMIC INSTITUTIONS Lead to basic understanding of biomedical principles that pave the way for new technologies Driving force: "curiosity and prestige Best of class teachers and scientists Education of top class students Documented competence in science or in high tech services (e.g. academic hospitals) High impact publications, awards, etc Successful funding of the programs Good performance and historical record Respect of the international peers HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 20 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 19 Understanding the first step towards mutual respect DRIVING FORCE AT COMPANIES Lead to sustainable companies and products Driving force: "value creation" Talented scientists with managing skills merge with business developers, financial and marketing experts Scientific ideas with product potentials approved by respected senior scientists, but also by the need of the market Strong IP position Investors who want a return of their investment Validation of the technologies/ products by established pharma players Successful positioning of the companys mission, achievements and products HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 21 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 20 The competence triangle of biotech companies Strategic Pharma Top KNOW-HOW FINANCING & BUSINESS DEVELOPMENT R&D BioTech Innovation GREAT TALENTS IN THREE AREAS MAKE GOOD COMPANIES HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 22 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 21 How to form an efficient team with strong individuals in the biotech triangle? Source: Science, Vol. 308, p. 640 Go for the best but with social intelligence Make sure they understand the masterplan & the risk to fail Make sure they form a strong team Create respect for the involved competence areas Encourage everybody to balance the strength/weakness profile of the other team members ACADEMIC RESEARCHCOMPANY R&D HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 23 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 22 Building biotech: market the company, its technology and underpinning science to investors and the public Source: TVM Cash flow Time Friends, family Incubators Early stage VCs Business angels Private equity/ late stage VCs Mezzanine investors banks Corporate buyer, IPO Public seed Public listing Value 50 100 500 100 300 CREATE MORE VALUE THAN INVESTED CASH HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 24 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 23 THE ART OF BIOTECH BUILDING * Gross proceeds in m Grants from: WWFF FGG AWS EU NIH PATH VC investors: TVM Apax Nomura MPM NIB Capital GLSV 98/99 A 99-02 Austrian technology investors 2000 B 2003 C 2005 IPO 2006 SPO Total 12 Grant income Novartis Invest- ment Company value (in bn) ~10~40~65~45~160~400~1.200~800 Financing history of Intercell - Investors' trust is a building block for biotech R&D Products HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 25 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 24 Market cap Biotech Companies USA In US$ bn Revenue Biotech Companies Europe Amgen Genentech Genzyme Total 49.23 70.42 20.14 139.79 14.77 11.72 3.81 20.30 Actelion Intercell Total 5.77 1.78 7.55 1.32 1.39 2.71 Biotech success: create value with relatively low revenues Accumulated value of US Biotech: $ 350 bn European Biotech: $ 30 bn USA VERSUS EUROPE A LONG WAY TO GO 2007 HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 26 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 25 Europe has strong assets to support a strong entrepreneurial-driven biotech industry High level of education Solid academic base Top science at many historical power houses of research: EMBO, Pasteur, Karolinska, Cambridge, Oxford, Max Planck, IMP etc.. Increasing number of Centers of Excellence Long tradition of pharma development Excellent clinical institutions with the potential to carry out studies Growing interaction between the national bio-medical scenes Scientific output in biotech is even larger than in the USA HOW TO CAPITALIZE ON THE ASSETS HOW TO COMBINE INNOVATION AND ENTREPRENEURSHIP IN BIOTECH Slide 27 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 26 Lessons to be learned for Europe Accept the financing tools that have built the US Biotech industry (VCs, stock markets, etc) there is no European way to create Biotech industry Make our continent attractive for international VCs Prepare incentive structures in legal and tax regulations that encourage investment and entrepreneurship Stop the incentive structure for half professor/half entrepreneur players in protected academic shelters Stop subsidizing biotech industries with more public money than private investment Accept failures without moral attitude and recognize the value of company built up per se Expand the horizon of life science students towards biotech industry ITS NOT TOO LATE Slide 28 1st EIT SEMINAR, Bratislava - NOVEMBER 24, 2008PAGE 27 Why do polar bears not hunt for birds but for seals? What bioenergetics is teaching us! FOCUS TIME, ENERGY AND INVESTMENTS ON WORTHY TARGETS