The Power of Partnerships

Lessons from the story of Salix Pharmaceuticals

Your presenter

Lorin K. Johnson, PhDGlycyx Founder, Chairman, Chief Executive OfficerLos Altos, CA & Isle of Man

David TaggartGlycyx Founder, Chief Operating OfficerIsle of Man

LORIN JOHNSON NOT LORIN JOHNSON

Salix Pharmaceuticals: 1989

Founders: Lorin K. Johnson, PhD& Randy W. Hamilton

First Headquarters:Spare room, Sunnyvale, CA (Silicon Valley)

Salix Pharmaceuticals: 1989

Office of CEO Office of Chief Scientist

Salix Pharmaceuticals: 2015

Global Headquarters: Raleigh, NC Digestive Disease Week Conference

• 22 products• Annual Sales: >$1B• 600-strong Specialty Gastroenterology salesforce• Leading company worldwide in gastrointestinal

medicine

Salix Pharmaceuticals: 2015

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NASDAQ Market Capitalization

Mar 30, 2015:

Salix acquired by Valeant Pharmaceuticals International, Inc.

~$15B

Some lessons from the story:

1: It didn’t go at all to plan - improvisation was vital

2: Some brushes with disaster… and some unexpected pieces of good luck

3: None of it would have been possible without partnerships

The original plan:

• Blockbuster Development

– Research 2 yr

– IND enabling preclinical 1 yr

– Phase I/II 2 yr

– Phase III 3 yr

– Approval 1 yr

– Total 9 yr0

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SL1006

SL1005

SL1004

SL1003

SL1002

SL1001

Blockbuster R&D$M

1. Fund development of new blockbuster anti-inflammatory product invented from the proprietary basic science of Dr. Johnson

2. In-license a small (boring) product in the same area (IBD) to help fund R&D and build market presence

What actually happened:1: Fundraising is hard!

Problem: Venture capital firms followed trends and fashions; Salix strategy was NOT haute couture at the time…

+ = $00,000,000.00

Solution: Angel investors and a bootstrap approach – scale back some of the investment planned

What actually happened:2: The support act became the main show

Tight funding Unforeseen delays

HARD CHOICES!

Pursue high-risk innovative science in inflammation

Make sure the ‘sideline’ product gets to market and makes money

What actually happened:3: Had to rely on partners more than expected

Out Sourced

$17M

$5MIn-License

Angel $Equity to Licensor

US Sales&

Marketing

ROWSales &

Marketing

US Sales&

Marketing

Commercial

What actually happened:4: The business plan revenue forecasts were wrong

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$100M:5 years

Some lessons from the story:

1: It didn’t go at all to plan - improvisation was vital

2: Some brushes with disaster… and some unexpected pieces of good luck

3: None of it would have been possible without partnerships

Brushes with disaster…

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US Approval Delay

Company for Sale

SecondaryIPO

Market Capitalization, TSX

…and unexpected good luck

• Aug 1999 - Company for sale for $5M (no buyers)

• Nov 1999 – Astra merges with Zeneca

– Product no longer strategic fit

– Paid milestone payment to Salix and returned all rights

• May 2000 - Europe license re-sold for $24 million to Shire

• July 2000 - USA FDA Approval

…and unexpected good luck

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$U

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US Approval Delay

Company for Sale

Shire Deal

USD

, Mill

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sMarket Capitalization, TSX

FDA Approval

Some lessons from the story:

1: It didn’t go at all to plan - improvisation was vital

2: Some brushes with disaster… and some unexpected pieces of good luck

3: None of it would have been possible without partnerships

A portfolio built on partnerships:Valeant era

Partnering strategies:

Invent Develop Commercialize

Internal

External

Partnering strategies: Big Pharma

Invent Develop Commercialize

Internal

External

In-license

Partnering strategies: Traditional biotech

Invent Develop Commercialize

Internal

External

Out-license

Partnering strategies: Specialty Pharma

Invent Develop Commercialize

Internal

External

In-license

Partnering strategies: ‘Open’ Pharma

Invent Develop Commercialize

Internal

External

In-licenseOut-license

Partnering strategies: Virtual pharma

Invent Develop Commercialize

Internal

External

In-license Out-licenseOutsource

The next chapter…

Glycyx Therapeutics, Ltd.

Simple business model: buy > develop > sell

1. Buy promising pharmaceutical development assets cheaply (or free)

2. Create Isle of Man special purpose vehicles to house each asset

3. Change the value and marketability of the assets by funding generation of new clinical data

4. Advance important therapies for major diseases (i.e., cancer, stroke, Parkinson’s Disease) so that larger pharma companies can bring them to patients

5. Sell them for substantially more than their acquisition price + the cost of the clinical program

6. Realize a capital gain in the Isle of Man domiciled parent company

Partnerships are central

DEVELOPMENT PROGRAMS CORPORATE STRUCTURING ACADEMIC COLLABORATIONS

Four opportunities – continuing partnerships

ExitDevelopStructureAcquireIdentify

TSN Therapeutics

GTL-004

GTL-005

GTL-006

Others in early stages of identification

Relenopride in gastroparesis associated with Parkinson’s Disease – a planned Salix partnership derailed by the Valeant acqusition

Methylnaltrexone(Relistor®) in advanced upper GI cancer – in global collaboration with Salix/Bausch

AJT-240 in dialysis complications – in partnership with EA Pharma (formerly Ajinomoto)

Possible future collaborators?