MagnoThermBusiness Plan04-15-2013

Heather GoodwinManasa JillellaShuang Zhang

Table of Contents

1. Table of Contents……………………………………………………………...2

2. Executive Summary………………………………………………...…………3

3. Business Description and Vision……………………………………………...5

4. Market Analysis………………………………………………….……………7

5. Description of the Products and Services……………………………………11

6. Organization & Management………………………………………………...16

7. Anticipated Marketing and Sales Strategy…………………………………...21

8. Financial Plan………………………………………………………………...25

9. Appendices…………………………………………………………………...28

10. References……………………………………………………………………31

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Executive Summary

The Company:HMZ Pharmaceuticals was developed in Boston, Massachusetts at Northeastern

University. It is a limited liability company containing three members, Ms. Goodwin, Ms. Jillella, and Ms. Zhang. These members have developed MagnoTherm, a thermal magnetic chemotherapeutic, for the treatment and diagnosis of castration-resistant prostate cancer. All general lab work is completed at a company rented facility in Cambridge, Massachusetts, but Dana-Farber Cancer Institute serves as the company’s contract research organization for animal models and MRI testing.

The company hopes to provide an additional, and more effective, treatment option for patients suffering from cancer. HMZ Pharmaceuticals ultimately seeks to increase the quality of life in patients, while decreasing their risks for serious adverse effects.

The Market: In the United States and Western Europe, prostate cancer incidence is on the rise

as a result of the increased life expectancy. The mortality rates of prostate cancer have remained stable over the past 40 years, demonstrating that current treatments do not meet the needs of patients. This has allowed the members to conclude that there is definitely room for improvement within the field and that prostate cancer drugs will definitely be necessary in the future. Recent reports have revealed that chemotherapeutics hold approximately 30% of prostate cancer drug market and that the sales of prostate cancer drug products should exceed $8.1 billion by 2020. Because of our state-of-the-art technology and advantages over current treatment options, the members definitely see potential to share in the market.

Competitive Analysis:Currently, hormone therapy drugs and chemotherapy treatments dominate the prostate cancer market. However, these treatments are not effective when treating castration-resistant prostate cancer. We see potential to share in the market because our system utilize magnetic field-induced heat to release cytotoxic drugs and not androgen receptor signaling, like the current dominant treatments. For drugs that can compete with MagnoTherm, our technology has better targeting effects, less cytotoxicity, and better biocompatibility. Therefore, MagnoTherm may be a more effective and safer option for patients.

The Product: MagnoTherm consists of doxorubicin-loaded iron oxide nanoparticles, which are approximately 25 nanometers in diameter. MagnoTherm is a thermal magnetic chemotherapeutic that has shown promising results in the treatment and diagnosis of castration-resistant prostate cancer. These iron oxide nanoparticles are loaded with doxorubicin and possess unique properties that allow for increased localization at the disease site. Controlled drug release can be achieved by using a specific radio frequency and amplitude in an alternating magnetic field, while their superparamagnetic properties allow for enhanced contrast that open potential for magnetic imaging. Results from in

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vitro studies in two cell lines have confirmed that MagnoTherm is biocompatible and does not cause cytotoxicity.

Value Proposition:The biggest advantage of MagnoTherm is its ability to serve as multifunctional carrier for the targeting, imaging, and controlled drug release. The simultaneous diagnosis and treatment of tumors reduces the risk for systemic reactions and adverse effects. Its ability to accumulate and concentrate drug dosages at the site of interest gives it another advantage over current treatment options for prostate cancer. Lastly, its PEGylated coating increases biocompatibility and dispersibility, making MagnoTherm a safer and possibly more effective alternative to current drugs on the market.

Marketing and Sales Plan:HMZ Pharmaceuticals recognizes three potential customers, including prostate cancer patients, physicians, and insurance companies. The members hope that results from both in vitro and in vivo studies will demonstrate the benefits of MagnoTherm over other treatments and encourage these customers to utilize the product. Even though our technology requires expensive MRI machines and other magnetic field machines during treatment, the decreased risk of adverse effects and better accumulation may result in less required treatments over the long term, suggesting it could still be a more cost-effective option. Once FDA approved, marketing and sales promotions will be achieved by using a variety of methods, such as conferences, tradeshows, advertisements on health websites, and free drug samples, specifically in three regions with dense populations and numerous hospitals.

Management and Organization: At the current stage, the three members, who are all students in the Pharmaceutical Science Program at Northeastern University, serve as the governing board for all decisions regarding the development and direction of MagnoTherm. All decisions are based on a voting system, where the majority vote decides the direction of the product.

In the coming years, before clinical trials in human subjects are conducted, a board of managers will be organized to ensure future success, because the members lack experience in finance, business, and marketing. In addition, a scientific advisory board will be organized to facilitate with decisions regarding the research and development.

Financial Summary: The necessary funding for the preclinical and clinical trials will be raised from a variety of sources. The three members will cover the start-up cost of approximately $90,000. In the future, when the member-managed limited liability company converts to a manager-managed company, the members will seek funding from friends and family, non-profit organizations, angel investors, and venture capitalists. Successful and significant data in preliminary studies will hopefully encourage a second and third round of funding from supporters. Revenue is expected beginning in 2022.

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Business Description and Vision

Cancer is the leading cause of disease worldwide, with approximately 12.7 million new cases occurring in 2008 alone1. The World Health Organization (WHO) estimates that there will be nearly 22.2 million new cancer cases diagnosed annually by 20302. Even with the large amount of new cases and death rates associated with the disease, the treatment options are not as effective as desired. The most common types of cancer treatments are chemotherapy, radiation therapy and surgery, which may be used alone of in combination with each other. However, most of these treatments, particularly chemotherapy and radiotherapy, are accompanied by severe side effects, which greatly impact the patients’ quality of life.

Company History: The idea for MagnoTherm was developed at Northeastern University in 2012. The product’s development is still in the early stages. The members have demonstrated efficacy in in vitro studies, performed at a small rented laboratory space in Cambridge, Massachusetts and have decided to begin animal testing at Dana-Farber Cancer Institute in Boston, Massachusetts. The members hope that successful results in animal models will encourage financial support from a variety of sources, so the transition from laboratory to market can be accomplished.

Company Vision: Our vision at HMZ Pharmaceuticals is to develop and establish MagnoTherm as an additional therapy to treat and diagnose patients suffering from cancer worldwide. We hope MagnoTherm demonstrates obvious benefits over other cancer drugs as a result of its design and technology.

Mission Statement:Our mission is to build a company capable of discovering, developing, and delivering innovative medicines and diagnostics for the treatment and diagnosis of serious illnesses, like cancer. We hope to accomplish this by utilizing groundbreaking science and innovation to make a difference in the health and wellbeing of others.

Business Goals and Objectives: Primary goal of our HMZ Pharmaceuticals is to complete preclinical studies of MagnoTherm by the conclusion of 2015. We hope to apply for Investigative New Drug approval from the Food and Drug Administration (FDA) after completing all pharmacological and toxicological date obtained from animal studies.

Our future goals are: To create value for MagnoTherm in the pharmaceutical market.

1 World Health Organization. (2013). Cancer. Retrieved from <http://www.who.int/mediacentre/factsheets/fs297/en/>

2 World Health Organization. (2013). Cancer. Retrieved from <http://www.who.int/mediacentre/factsheets/fs297/en/>

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To improve the quality of life of patients by providing a safe and effective therapy.

Operate with high standards of integrity. To achieve scientific excellence.

The Keys to Success include: A successful management team, which contains members who are motivated,

entrepreneurial, flexible, committed, and determined. Networking with other entrepreneurs and representatives in the industry to meet

the necessary investors for MagnoTherm.

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Market Analysis

The Critical Needs of the Existing Market:In United States, prostate cancer is the second leading cause of death in men, usually developing after the age of fifty3. Research has shown that the incidence rate of prostate cancer increases with age4 and that almost 80% of men will have prostate cancer by the time they reach age 805. Therefore, the potential patient population for MagnoTherm is quite large.

According to the National Cancer Institute, there will be 238,590 new cases of prostate cancer diagnosed in 2013, and approximately 29,720 deaths attributed to the disease in the same year6. In addition to these statistics, the following chart demonstrates that the prostate cancer mortality rate has remained constant, around 20 to 30 per 100,000, in the United Kingdom since the 1970s. This relatively stable mortality rate has allowed us to conclude that currently available drugs for the disease have not met the needs of prostate cancer patients. Therefore, the demand for a novel anti-prostate cancer treatment that is capable of providing prolonged survival time, increased progression free survival, increased efficiency, at a lower cost definitely still exists.

Age-Standardized Mortality Rates per 100,000 Population in UK7

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Outlook of the IndustryIn 2009, a cancer report revealed that the total worth of global prostate therapeutics was approximately $3 billion. The report also revealed that from 2001 to 2009, the market’s compound annual growth rate (CAGR) was 10.7%8. In addition, the reporters stated that the sales of prostate cancer therapeutics should exceed $8.1 billion, with a corresponding CAGR of 9.3%, by the year 20209.

Recent data, shown in the following diagram, has demonstrated that the United States is the leading market for global prostate cancer therapeutics, with an estimated share of 59%. Germany is the second leading market, with an approximate share of 12%, followed by France, who shares approximately 7%10. This information, in combination for the estimated sales of prostate cancer therapeutics, has allowed us to conclude that the market for a new drug, such as MagnoTherm, is wide and profitable.

Global Market Share of Prostate Cancer Therapeutics11

Hormone therapy drugs and chemotherapy treatments currently dominate the prostate cancer drug market. Hormone therapy drugs, such as Zoladex (gosereline acetate) and Casodex (bicalutamide), are often used during the initial treatment stage. These drugs contribute to approximately 30% of the total prostate cancer therapeutic markets to date12. As for chemotherapy, Taxotere by Sanofi is the leading drug in the field, with an approximate sale worth $820.5 million and a market share of 29%13. However, this market share is expected to change soon as the result of numerous other players, such as Johnson & Johnson (Zytiga, approved in 2011), Bristol Myers-Squibb (ipilimumab, in phase 3 clinical trial) and Teva Pharmaceuticals (Custirsen, in phase 3 clinical trial).

Johnson & Johnson's Zytiga (abiraterone acetate) and Medivation and Astellas' Xtandi (enzalutamide) are becoming the most popular treatments for metastatic

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castration-resistant prostate cancer (mCRPC). mCRPC is an advanced stage prostate cancer, which cannot be cured by surgery or radiation therapy. Also, Bayer and Algeta's Alpharadin (radium-223 chloride) is another promising prostate cancer drug because it is capable of targeting painful bone metastasis. GlobalData predicts that Zytiga and Xtandi will dominate mCRPC market, with an estimated of $1.7 billion for Zytiga and $2.05 billion for Xtanti by 2020.

Growth potential of the market:The incidence rates of prostate cancer are extremely high and strongly correlated with age, as shown in the table below. With developments in modern medicine and healthcare reform, an increase in life expectancy in all individuals is definitely expected. The most troubling news is that over the age 90, 100% men will develop prostate cancer14. Therefore, if other causes of death, such as car crashes or heart attacks, were eliminated, every man would be diagnosed and most likely die as a result of prostate cancer. Therefore, an increase in lifespan will result in an increased incidence of prostate cancer, and in increase in market size for prostate cancer drugs.

1. Age 2. Incidence Rate3. 50 4. 30%5. 60 6. 35%7. 70 8. 40%9. 90 10. 100%

The Correlation Between Age and Prostate Cancer Incidence15

Targeting the Market’s ClientsMagnoTherm’s target consumers are patients diagnosed with Metastatic Castration-Resistant Prostate Cancer (mCRPC), which is the hardest form to treat. As describe earlier, early state prostate cancer cases are most commonly treated with surgery, radiotherapy, and hormonal therapies. Hormonal therapies are effective as a result of castrations, which lowers androgen levels in patients. In reducing these levels, a decrease in androgen receptor signaling is observed, and prostate cancer progression is more difficult. However, this treatment option becomes ineffective when the patients develop resistance as they progress to mCRPC. At this point MagnoTherm may be a more effective option. Because our system specifically to the diseased area, it does not rely on androgen receptor signaling to perform anti-cancer effects, like all other cytotoxic drugs systems. In addition, MagnoTherm’s effective targeting effect can offer better cytotoxic profiles than other cytotoxic drugs, such as Taxotere.

Our clients may be patients themselves, physicians, and insurance companies. MagnoTherm’s technology enables our system to have better targeting effects and a more controllable drug release, so less side effects are experienced. The features also give our

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product an important insurance benefit because there is a decreased risk for complications that could require other procedures or combined therapies.

Anticipated Market Share: MagnoTherm is a doxorubicin formulation, so it will share the market of chemotherapeutics with a wide array of companies and corporations. Today, chemotherapeutics hold about 30% of the market and this number will not change drastically, regardless of new companies or players within the prostate cancer field, because the majority of new drugs are hormone-related therapeutics. These new drugs are often used in earlier stages of treatment and act through different mechanisms. Therefore, there are very few overlapping competition areas between hormone-related therapeutics and chemotherapeutics and the 30% market share should remain constant for a considerable amount of time. In addition, the other drugs that can compete with MagnoTherm have extremely cytotoxic drug formulations, as in Taxotere, or radiation formulations, like Radium-223 Chloride. Due to the enhanced targeting effects and controllable release, MagnoTherm has unique technical advantages over other competing chemotherapy drugs. Conservatively, our anticipated share of prostate cancer market is 3 to 7%.

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Description of Products and ServicesProduct and services:The goal of our company was to develop a drug delivery system, with high efficacy and less adverse effects, for the treatment of mCRPC. With these goals in mind, we have developed MagnoTherm, a thermal magnetic chemotherapeutic. While the aim of our product was to treat prostate cancer via magnetic hyperthermia, we also believe that the product may be useful in the treatment of cervical cancer and pancreatic cancer in the near future.

MagnoTherm consists of Doxorubicin (DOX) loaded superparamagnetic iron oxide nanoparticles, which are approximately 25 nm in diameter. They have a feasibility to trigger encapsulated Doxorubicin release by the application of a specific radio frequency and amplitude in an alternating magnetic field. The use of external oscillating magnetic field ensures the localized release of drug only at the site of accumulation, thus minimizing damage to adjacent areas. Their superparamagnetic nature allows for enhanced contrast properties that open potential applications for magnetic resonance imaging. Therefore, in using the concept of magneto-chemotherapy, MagnoTherm can be used as an efficient multifunctional nanocarrier for combined therapy and imaging.

Features and benefits:MagnoTherm serves as a theranostic agent that is they can be used both for diagnosis and the treatment of the disease. Simultaneous diagnosis of the tumor during the treatment helps in reducing the frequency of drug administration, which in turn helps reduce systemic toxic reactions. MagnoTherm’s ability to accumulate and concentrate at the targeted site also helps avoid adverse side effects, commonly seen with other anti-cancer drugs. In addition to these benefits, the PEGylated coating on the nanoparticles are soluble in water, so they show better dispersibility and enhanced long circulation.

Value proposition Novel technology. Serves as multifunctional carriers for targeting, imaging, and controlled

release of drug. Biocompatible and safer than other treatment.

Proof of concept:Several scientific literature studies have supported the concept that these superparamagnetic iron oxide nanoparticles serve as a novel approach in the diagnosis and treatment of the cancer. These studies have shown that the nanoparticles deliver drugs to the targeted site with minimal cytotoxic effects. Apart from the literature, results obtained from cytotoxic studies in HeLa cell lines and PC3 cell lines have confirmed that these nanoparticles are biocompatible and do not cause cytotoxicity. These studies have also shown that when placed in an external oscillating magnetic field, these particles trigger drug release that result in decreased cell viability.

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Stage of development:HMZ Pharmaceuticals is a small start-up company that was founded in Boston, Massachusetts, with an aim of developing novel cancer therapy to treat patients suffering from mCRPC. The primary goal was to design a technology that was not only cost efficient, but had less adverse effects when compared to other treatment options currently on the market. Currently, our research and development team is performing preclinical studies with MagnoTherm to evaluate the effectiveness and safety of the product. Results obtained from the in vitro studies gave promising results, and encouraged us to perform the in vivo studies. Our future goal is to obtain good pharmacokinetic profile in the animal studies, which will allow us to started clinical trials. We ultimately hope to gain FDA approval so the product can reach eventually the market.

Intellectual property:Intellectual property is the core for every pharmaceutical or biotechnology company. To protect all results and developmental techniques pertaining to our research, we are planning to apply for the required patents in 2014. The patents will help protect our intellectual property and enable commercialization of MagnoTherm, while keeping its competitors at bay. In addition to these benefits, the patent protection will also help in recovering the cost of out research and development. As earlier stated the aim of MagnoTherm is to treat prostate cancer. The occurrence and mortality rates of this particular cancer is higher is Western Europe, with 93.1%, and North America, at 85.6%16. Therefore, we are planning to apply for patents in the United States first, then in Europe in due time. We feel that these two regions will increase the selling of our product, and that revenue can be utilized for the application process of other international patents.

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Disclosure:Our limited liability company, HMZ Pharmaceuticals, follows the stringent policies and procedures that are essential to protect the results of our research and development activities and also to ensure that all its intellectual property is protected prior to any public disclosure of its new products.

Barriers to Reengineering:To develop a new product and apply for approval from numerous government agencies requires an immense amount of time, energy, and money. Considering the cost of production, it is unlikely that other companies will re-engineer our product. Apart from these factors, our company’s policies and patents will protect the concept of our new technology from being used by others to produce the same product.

Product or service limitations:Customers should consult physicians before considering the product. Patients should report any adverse reactions such as nausea, vomiting, diarrhea, stomatitis, and/or potential neutropenic complications while using the drug. Patients should also inform their health care providers about any other medications in order to prevent drug interactions. Physicians should take caution when considering the dose of MagnoTherm because over-dosage enhances toxic effects. In addition, cumulative dosage increases the risk of cardiomyopathy and congestive heart failure. The use of MagnoTherm requires a magnetic hyperthermia device and MRI machine. Therefore, MagnoTherm can only be used in hospitals with these devices.

Government approvals:Government approvals are required in various stages of drug development

process. Approvals are needed when applying to conduct clinical trials, during the clinical trials, when applying for marketing authorization, and during post- marketing studies. Different countries have different regulatory requirements for the approval of new drugs, which are enforced by regulatory authorities.

Because our project is still in preclinical stage, we do not have any government approvals at this time. However, once the preclinical studies are completed, and promising laboratory results are observed, we will apply for an investigational new drug (IND) approval from the center for drug evaluation and research (CDER). After we receive IND approval, we will begin our clinical studies, which will generate the safety and efficacy profiles for our product. With the results from preclinical trials and animal studies, along with manufacturing and production information, we will apply for a new drug application (NDA), which will permit sales and marketing in the United States. After successful sales in the United States, we are also planning on applying for the European regulating agencies for marking approval in Europe.

Along with these major approvals we will also ensure that our company meets all cGMP, cGLP regulations, and ISO 9000 standards for implementing modern quality systems. We follow all the regulations and policies in maintaining safe working conditions, good laboratory conditions, and proper disposal of hazardous waste. In following these guidelines, we have lower risks of manufacturing problems, and assurance that MagnoTherm is safe and effective for patients.

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Liability insurance:Because our product is still in the early stages, and not tested in humans, we do not need any product liability. For the next few years, we will be using rented lab space, which offers general lab equipment. Therefore, at the current time the equipment and other assets will be protected from sudden accidents, fire, or disaster, through the renting’s insurance. Once we begin conducting clinical trials, purchase our own facility, and establish our management team we will need cost effective liability insurance to protect our assets in the event of an emergency. Once the clinical trials begin we will also seek product liability. Employee insurance will also need to be considered.

Suppliers:All the glassware, chemicals and the plastic supplies are obtained from Fischer Scientific, Sigma-Aldrich, Avanti Polar Lipids, Ocean Nanotech, Neoptix, and Paul Scientific Corporation. We currently have a yearly purchasing contract from all these leading suppliers, which entitles us to a price reduction upon purchasing in bulk. We hope to continue these contracts in the future when our own facilities are established.

Production:Small-scale production:Production of MagnoTherm was done in a sterilized lab space in order to prevent contamination. The first step in the manufacturing process requires the synthesis of the core magnetic nanoparticles through a modified co-precipitation method. The ferric chloride is weighed and dissolved in 15 ml of deionized water to produce ferrous chloride. An addition 15 mL of deionized water is added to the solution, while stirring, to form a clear liquid. The stirring process allows for the passage of inert gas. The solution is then heated to 80°C.

Once the desired temperature is reached, 5M ammonium hydroxide and 0.1M oleic acid is added to the solution, while stirring for 30 minutes. At this time, the nanoparticles will precipitate in the presence of ethanol. A ratio of 1:10 nanoparticle to ethanol is used to remove any excess oleic coating. In order to make the nanoparticles water-soluble and dispersible, they are combined with DSPE-PEG (1:10).

The next step requires the loading of the drug, which in this case is Doxorubicin. Hydrophobic DOX (2mg/ml) is added into the DSPE-PEG coated nanoparticle solution and kept overnight in stirring apparatus to ensure that the iron oxide nanoparticles are loaded with DOX. After the drug loading is completed, the nanoparticles are spin filtered to remove any excess drug. They are then placed in a freezer for preservation. The representative samples can be removed from the freezer to perform hyperthermia, fluorescence, and cytotoxicity studies.

All chemical waste generated during this production process is discarded according to the government regulations regarding waste disposal. In addition, all significant health and safety risks are taken into consideration during the production process.

The Large-scale production method will be developed in 2015.

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Facilities: At this stage in the company, animal studies will be performed at Dana Farber Cancer Institute in Boston, Massachusetts. This was the agreed upon mode of action because our revenue is limited at this point in our research and they are able to provide us access to mice and the needed MRI machines. We think it would be best to use all funding on research supplies and studies, rather than a high-end facility.

However, we hope to become an established and organized company within the next three years. When this occurs, we will rent 4,000 square feet of laboratory space near Cambridge, Massachusetts. This location is ideal for an emerging innovative company like HMZ Pharmaceuticals, because it is located in close proximity to universities, venture capital firms, law and accounting firms, and many other hospitals and biotechnology companies. Our company will not own the facility, but will take a sub lease of a second-generation space, which is equipped with all the necessary research and development requirements. We will have all required equipment, such as fluorescence instruments, Brookhaven DLS for measuring particle size and zeta potential, hyperthermia units for in vitro studies, weighing machines, ultracentrifugation equipment, rotary evaporators, sonicators, water baths, and cell culture room. We will use contract manufacturer for manufacturing process in order to controlling our budget before generating revenue.

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Organization and Management Plan

Owners/Members:MagnoTherm’s management team will be comprised of three members, all students from Northeastern University’s Masters of Pharmaceutical Science Program. Heather Goodwin, Manasa Jillella, and Shuang Zhang all have varying levels of experience in laboratory research and cancer research.

Heather Goodwin. Ms. Goodwin received her Bachelor of Arts in Biology from College in 2011. She also holds a minor in mathematics and chemistry. Ms. Goodwin is currently a candidate for her Masters of Science in Pharmaceutical Sciences from Northeastern University, hoping to graduate in May of 2013. Her experience in cancer research dates back to 2010, when she began working in the Vidal laboratory at Dana-Farber Cancer Institute in Boston, Massachusetts. As a student researcher she studied Epstein-Barr virus associated cancers by examining disruptions in normal protein interactions.

Manasa Jillella. Ms. Jillella developed the idea of the magnetic thermal drug delivery system while working in a nanomedicine laboratory at Northeastern University. She has been working on iron oxide nanoparticles for triggered drug release for the past year since developing the idea. She is currently a graduate student in the Pharmaceutical Science Program at Northeastern University, and is expecting to graduate in May 2013. In 2011, she completed her bachelors in pharmacy from India’s Jawarhal Nehru Technological University. There she gained laboratory experience in the research and development, but has worked on numerous cancer research based projects as well.

Shuang Zhang. Ms. Zhang received her Bachelor of Science in Pharmaceutical Preparation from China Pharmaceutical University and is expecting to receive her Master in Pharmaceutical Sciences from Northeastern University. She also holds a minor in Business Administration from China Pharmaceutical University. She has engaged in multiple cancer research projects both in China and the United States. Currently, she works in Northeastern University's Center for Pharmaceutical Biotechnology and Nanomedicine. Her specialty is in nanosystems for cancer drug and siRNA delivery. She has an extensive understanding on anticancer drug market and marketing strategy.

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Current Management Process at HMZ PharmaceuticalsHMZ Pharmaceuticals is a relatively new member-managed limited liability company, currently containing three members. Ms. Goodwin, Ms. Jillella, and Ms. Zhang, decide upon all decisions regarding the development and direction of MagnoTherm at this time. All decisions are made through a voting system, with each member holding one vote. The majority vote always decides the direction of the product.

All general lab work up to this point has taken place in a small rented laboratory space in Cambridge, Massachusetts. However, the members have decided to complete in vivo animal experiments at Dana-Farber Cancer Institute because the facility can provide the necessary equipment and lab space. As the results prove effective and useful to the field of prostate cancer, we hope to convert from a member-managed limited liability company to a manger-managed limited liability company. Within the next three years, the members hope to have board of managers and advisory board who will delegate all decisions regarding the research and development of MagnoTherm. The outlined structure of the company when it reaches this stage is outlined below.

Anticipated Management and Organization

Board of Managers: Ms. Goodwin, Ms. Jillella, and Ms. Zhang are not particularly skilled in any form of management, so a manger-managed company limited liability company, with a board of mangers was chosen as the future business structure. These five members will serve as the governing body of the company and will have the authority to authorize business decisions and actions. Their authority to authorize decisions will be delegated by an operating agreement. Members will have extensive experience in pharmaceutical regulatory affairs, research and development, finance, human resources, and sales and marketing. Their broad knowledge and experience in each discipline will ensure them qualified to make decisions on behalf of the company

Scientific Advisory Board: Eight members will sit on the advisory board in the future. Each member will come from a variety of backgrounds and offers expertise in numerous disciplines of pharmaceutical science, drug development, and oncology. Each member will have expertise in one of the listed clinical or scientific areas, including pharmacokinetics and pharmacodynamics, drug development, clinical pharmacology, drug metabolism, drug development, and toxicology. An individual experienced with FDA laws and regulations will be one of the most important assets to the board. He or she will be able to ensure that the required data is present and that unnecessary information is omitted, in turn saving the company time, money, and energy.

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Business Structure:

MagnoTherm will function as a manager-managed limited liability company. A limited liability structure was the chosen business structure as a result of numerous advantages, such as protected assets, pass-through taxation, and limited compliance requirements. Because all members are first time business starters it is important that personal assets, such as homes and savings accounts, are protected in the event of business debts and liabilities. In addition, this business structure will ensure that the company will not pay taxes at the business level, but instead on the personal level. Since this company is newly developed, the advantage of avoiding double taxation is important.

A manager-managed limited liability company was chosen in order to allow the members to concentrate on building business, instead of addressing the needs of the company on a daily basis. Ms. Goodwin, Ms. Jillella, and Ms. Zhang will be more passive investors, only to be consulted for advice regarding the company. However, they do not have the power to bind the company, like the mangers. The members’ advice can be disregarded if the board decides to do so. The board of managers will have the authorization to make all decision regarding the sale, distribution, and lease of the company’s assets. In addition, they can also decide on the purchase of additional assets, use of the company’s assets, and payments of the company’s funds. They will be

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authorized to make decisions regarding the hiring of employees, financing agreements, and licensing agreements.

Manager’s Powers17

Future managers will have the power to: Purchase liability and other insurance to protect the company’s property and

business.Hold and own any company real and/or personal properties in the name of the

Company.Oversee the management to ensure compliance with the easement and terms of

other management agreements.Invest any Company funds temporarily in time deposits, short-term governmental

obligations, commercial paper, or other investments;Employ on behalf of the company such persons, firms or corporations as the

Manager, in its discretion, shall deem advisable, for or in connection with the operation and management of the business of the Company and for the performance of forestry, land management, accounting and legal services.

Recommend when and in what amounts distributions shall be made. Estimate the amount needed for the Management Reserve Fund and recommend

when an assessment or loan is needed. Execute on behalf of the Company all instruments and documents, including,

without limitation: checks, drafts, loans, notes and other negotiable instruments, financing statements, documents providing for the acquisition, mortgage or disposition of the Company’s property; bills of sale; leases; and any other instruments or documents necessary, in the opinion of the Manager, to the business of the Company.

Members Powers: After the formation of the company, the members will have power to delegate any other decisions, not outlined above. If that situation arises the decision will be made through a voting system, where each member holds one vote. The decision will be based off the majority vote.

Removal of a Manger: A person in the board of managers may be removed from the position with or without probable cause. This must be a result of the affirmative vote of the three members, each of which holds one vote.

Addition of a Manger: The three members, Ms. Goodwin, Ms. Jillella, and Ms. Zhang, will be the only individuals authorized to appoint a new manger. The position will be fulfilled by

17 Little Hogback Community Forest, LLC. (n.d). Limited liability company operating agreement. Retrieved from < http://www.familyforests.org/research/documents/LHCFLLCOperatingAgreement5.10.07.pdf>

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affirmative vote from the members. Each member will hold one vote in the decision making process.

Recruitment and Selection of EmployeesThe board of mangers has the authority to recruit and select the employees of the company. An educational background in health, science, or technology is required.

Permits and Licensing:The company will operate with both federal and state licenses and permits, in accordance with the FDA and state of Massachusetts. All procedures will be conducted by following the FDA’s good manufacturing practice guidelines.

Meetings/Communication:Ms. Goodwin, Ms. Jillella, and Ms. Zhang will meet as often as necessary, but no less than once a quarter. The board of managers will meet once every week, for as long as necessary. The board of advisory will meet four times a year, for three to five hours, to offer advice on a wide variety of issues.

Ownership:The profits of the company will be divided based on the chart below. Dilutions will occur depending on the number of future investors. Individual Percent EquityMs. Goodwin 25.3%Ms. Jillella 25.3%Ms. Zhang 25.3%Board of Managers 20% = 4% for each board of managers

member Advisory Board 4% = 0.5% for each advisory board

memberTotal = 100%

Exit Plan:If advised by the financial advisor on the board of managers, HMZ Pharmaceuticals will attempt to merge with another company. While disadvantages include lack of control for existing staff members and difficulties in blending the companies’ two cultures, some advantages do apply. First, the members, board of mangers, and advisory board may still receive cash and/or stock, have access to resources from both companies, and some company staff may still hold the same job titles. The members feel that the therapy will be extremely useful in treating prostate cancer, if it is able to get to market. Therefore, the efforts to expand and better the therapy should not be wasted, but facilitated by other interested individuals.

BSD Medical Corporation is a potential cooperation partner. They are developing a 3-dimensional magnetic hyperthermia system, which also has MRI imaging function. It could be useful in directing MagnoTherm to target sites, for inducing drug release, and for giving real-time imaging through MRI.

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Anticipated Marketing and Sales Strategy

Company image:MagnoTherm is based on state-of-the-art technology, which utilizes magnetic

thermo-sensitive nanoparticles. The company is specifically built to develop the applications of this technology and has the ability to propel the development process from bench side to market through the strict regulation standards of FDA. After the patent is approved, the company will be glad to answer any possible technique questions and provide research data for physicians, patients, and whomever it may concern.

Customers and demands:

Process of Introducing Pharmaceutical Products to Customers

For pharmaceutical products, especially for cancer drugs, the concept of reaching consumers is more complicated than for other products. While patients are the actual users of the product, they are usually not able to choose the treatment option. In addition, most patients are not paying out of pocket for the drug because of insurance company protection. Therefore, MagnoTherm recognizes three different customers: the doctors who prescribe the drug, the insurance companies, who pay for the drug, and the patients who consume the drug. Therefore, all three customers will be covered in our marketing and sales plan.

The usual parameters a doctor will consider when choosing a chemotherapy drug are the response rate, response duration, and the patient's tolerance18. Using the results of our company’s clinical research, we will confine MagnoTherm's indication to the group of patients who demonstrate the best response during the trials. We will utilize the thermal release nature of the technology, with a simultaneous monitor feature, as our main marking strategy to physicians. These two combined features of the technology allow for an effective targeting of cancer cells and a decreased toxicity profile. To our knowledge, there is no other cancer technology on the market, which possesses these two features, so we hope physicians will be encouraged to try a new form of treatment.

As for patients, they are typically concerned with the efficacy of the treatment, side effects, average survival rate, and recovery rate. We hope that successful MagnoTherm clinical trials, which demonstrate an increase in efficacy, survival rate, and 18 Chemocare. (2013). How do doctors decided which chemotherapy drugs to give?

Retrieved from < http://chemocare.com/chemotherapy/what-is-chemotherapy/how-do-doctors-decide-which-chemotherapy-drugs-to-give.aspx>

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recovery rate, with a decrease in side effects, will increase patient’s interest in the technology.

As for the insurance companies, their primary concern is the cost of the product. We understand that the use of magnetic materials in our technology requires challenging preclinical research and the use of MRI machines in treatment, meaning that the cost of MagnoTherm will definitely be higher than other prostrate cancer chemotherapies. However, with the better targeting effect and decrease toxicity profile, MagnoTherm may cost less in the long run because other treatments required for complications experienced with other treatments may be less. In addition, the combined features of MagnoTherm may result in fewer treatment sessions when compared to other prostate cancer drugs. Therefore, the overall cost of MagnoTherm could cost less for an individual patient, when compared to other treatment options currently on the market.

Distribution team:In order for the administration of HMZ Pharmaceuticals to be effective it needs to

be lead by magnetic force. In order to acquire the real-time image of drug distribution, the theranostic requires the facilitation of MRI machine. It is a relatively complicated administration process. It requires the training of both physicians and technical specialists, who can answer the physician’s questions whenever necessary and travel to hospitals when drug administration is in the early stage of marketing.

To achieve this goal with limited funding, the sales representatives will also fit the roles as technical specialists. A science background is required for the position and a three-month training program will be conducted to inform them about the technique details, clinical cases, and sales skills.

The vice president of marketing and sales will first approve the general marketing strategies, before reviewed by the five-member management board. The major distribution channel of MagnoTherm will be hospitals and physicians. In early stage, three areas have been chosen to start MagnoTherm's market. There will be three regional marketing and customer service managers in charge of each region. They will develop region-specific marketing strategies under the guideline of general marketing strategy and ask for approval from the vice president of marketing & sales. Those region-specific strategies should be established in compliance with laws and regulations of each state and several sales representatives will be working under regional manager's supervision in each region. These regions were chosen because they have the top healthcare centers and hospitals in the United States and they also have dense populations. Therefore, success in these three marketing areas will have the highest impact for sales and may propel MagnoTherm’s success across the nation.

In the future, we will explore many more regions, but we will continue of utilize internal distribution, because of the high technical requirements of our sales team. The complete structure of the sales team is shown below.

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Market Penetration and Growth Strategy:Future general marketing strategies are outlined below. The regional marketing and

sales manager will be responsible for the development of the marketing strategies according to local regulations and other conditions.

Our vice president of research and development will give presentations at major prostate cancer conferences about the technique of magnetic thermo-sensitive systems. At this stage, the goal is to increase the awareness about MagnoTherm's technology, rather than advertisement.

Top prostate cancer physicians will be involved in the clinical trials of MagnoTherm, if the funding allows. Once the clinical trials succeed, they will be the first group of physicals who understand our product and are willing to prescribe it. Their professional influence will help us to establish MagnoTherm into mCRPC's routine treatment list.

MagnoTherm’s website will be managed by a website team. They will be responsible for the maintenance of the website and in time updating of information. They will also collect and forward questions being left on the website by physicians and customers to relevant personnel

Once MagnoTherm receives FDA approval, advertisements will be placed on major health websites, at trade shows, and in conferences in order to peak the interest of physicians and patients.

Free drug samples will be dispensed to well-known physicians. This will help to establish relationships between our sales representatives and physicians. And once treatment starts, patients and physicians will be willing to continue treatment with MagnoTherm.

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Case collection surveys will be conducted and analyzed by relevant sales representatives. They will give further instructions to physicians and report important feedback to their supervisor. It is a new way to instruct physicians on how to prescribe drugs correctly. Participation in this survey could also be compensated to stimulate the sale of MagnoTherm.

Physician's travelling expenses to prostate cancer conferences will be sponsored. In doing so, presentation about the benefits and effectiveness of MagnoTherm will be shared. If physicians are willing to share their experiences and successes with MagnoTherm they will be compensated.

Presentations will be held in the three marketing regions, respectively. In addition, a sales representative will do presentations in each hospital about the use of MagnoTherm.

After the markets of first three marketing regions demonstrate stable growth, more marketing regions will be developed.

Regional and national networking events for prostate cancer physicians will be host or sponsored by MagnoTherm.

Because of the short patent protection window, starting promotion before FDA approval is necessary. Therefore, the first few marketing strategies will be initialized right after the acquisition of patents in major markets. During the process, surveys will be conducted about effectiveness of each strategy and adjustments of general marketing strategies will be made accordingly.

Communication and Customer service:As described before, our sales team will also act as technical specialists, where they

will help facilitate drug administration in the hospitals. Every representative will complete a three-month training program before they are qualified. These individuals will also receive additional training periodically, to ensure they are experts on MagnoTherm. These individuals will provide customer service by answering patients and physicians question about MagnoTherm. In addition to this, patients and physicians will also be able to ask questions on MagnoTherm’s website, or call the toll-free phone number.

On the other hand, we will also have active communication, where we obtain advice through case-collection surveys or by inviting physicians to attend out presentations. We believe advice from practice is the key for MagnoTherm's further development.

Financial Plan

Financial Summary

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HMZ Pharmaceuticals was formed in Boston, MA to develop, license and market its magnetic hyperthermia drug delivery system. The first product will be MagnoTherm, a doxorubicin formulation for the treatment of prostate cancer. The current financial plan is focused on the first few years of the company’s development, and a pipeline with projected expenses and expected timelines is shown below. A start-up cost of 90,000 is expected. HMZ Pharmaceuticals will expand preclinical research and start clinical trials gradually after receiving monetary funds and revenue is expected to grow beginning in 2022.

Start-Up CostsThe start-up costs are estimated in the table below. The total start-up costs, approximately $90,000, will be covered by the three members’ investments. At this point, only a lab facility will be needed and $17,000 will be used to purchase start-up materials and chemicals. In addition, $6,000 will be used during animal testing trials at Dana-Farber Cancer Institute. We are renting a fully established laboratory in a biotechnology incubator, therefore no expenses for equipment will be required. The cost of the operating expenses for a six-month period is also included in the start-up cost. Because employee wages are one of the biggest operating expenses for a stat-up company, the three members will serve as the only employees until the needed funding is received. During this period, the three members have agreed to work without payment. After the appropriate funding is available, the hiring process for employees will commence.

The application processes for SBIR funding and other non-profit organization funding will begin right after the company is formed. If the monetary funds from the three owners run out before additional funding is received, the owners will provided an

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Preclinical Research

3 years20 million

Patents

Phase 1 Clinical Trail

IND

1 year10 million

2 years30 million

Phase 2 Clinical Trail

Phase 3 Clinical Trail

3 years60 million

NDA

Post-marketResearch

additional round of funding for the company. We will also consider other way to keep the company operating in this event, such as recruiting other owners and/or performing experiments for customers as a contractor research lab. However, in that case, additional licensing fees may apply.

Start-up CostsLicenses and Fees 3,000 Office Supplies 500 Rent 60,000 Telephone 500 Utilities 1,000 R&D expense (without wages) 23,000 Wages 0Total 88,000

Research and Development CostsIn 2013, a fully established lab space will be rented at 120,000 a year, but animal testing will be performed in animal facility at Dana Farber Cancer Institute. The total cost for animal testing is estimated at $10,000. Other expenses, including materials and chemicals, are approximately $36,000. If external grants are obtained, five research and development staff will be hired for $40,000 a year, totaling an expense of $200,000. Therefore, the total expense on wages for research and development staff will total approximately $33, 300 for the last two months of 2013. In addition, an external regulatory affair agency will be contracted and paid $30,000 a year.

In 2014, five more staff will be hired to perform the Food and Drug Administration’s required toxicity and pharmacokinetics tests. The total expenses on materials, chemicals and animal testing will increase to approximately $180,000.

In 2015, a contracting manufacturer will be hired to ensure MagnoTherm’s GMP compliance for human use in clinical trials. A $1 million expense is projected for scaling up the product and $10 million is projected for manufacture.

Sales ProjectionsSales are projected to begin in 2022. The projected sales in for MagnoTherm in 2022 is estimated to be around $200 million, while the annual growth should remain at 20% for the next five years.

Income ProjectionsThe company is projecting increasing profitability from 2022, once MagnoTherm is approved. Cash RequirementsA capital infusion of $1 million is needed to fund FDA required preclinical tests in 2014. In 2015, an additional $20 million will be required for scale up and manufacturing MagnoTherm for clinical trials.

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Sources of Financing:The three owners will cover the start-up costs for HMZ Pharmaceuticals. Additionally, government funded and non-profit organization grants will be sought to support the preclinical research in 2013 and the first few months of 2014. Venture capital investments are going to be sought after those funds are spent. At that time, equity will be offered to investors. The first round of $1 million will continue to facilitate preclinical research in 2014 and a second round of $20 million will be required in 2015. After the company received IND approval, a third round required tens of millions will be required for the clinical research.

Appendices

[HMZ Pharmaceuticals]Cash Flow Statement

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For the Year Ending 12/31/13 12/31/14Cash at Beginning of Year - 214,060

Operations    Cash receipts from customers - - Cash paid for

General & Administrative 166,500 176,500 Compliance, Regulatory, Reimbursement 30,000 65,000 Sales and Marketing - 5,000 R&D, Clinical Trial, Pre-Production Engineering 79,440 580,500

Net Cash Flow from Operations (275,940) (827,000)

Investing Activities    [42] Cash receipts from

Sale of property and equipment - - Collection of principal on loans - - Sale of investment securities - -

Cash paid forPurchase of property and equipment - - Making loans to other entities - - Purchase of investment securities - -

Net Cash Flow from Investing Activities - - [42]Financing Activities    Cash receipts from

Owners 90,000 - SBIR 150,000 500,000 Non-profit organization 250,000  Venture capital   1,000,000

Cash paid forRepurchase of stock (treasury stock)    Repayment of loans - - Dividends - -

Net Cash Flow from Financing Activities 490,000 1,500,000

Net Increase in Cash 214,060 673,000

Cash at End of Year 214,060 887,060 {42}

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References:

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4 Stangelberger, A., Waldert, M., & Djavan, B. (2008).. Prostate cancer in elderly men. Reviews in Urology 10(2): 111–119.

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9 Research and Markets. (2011). Global prostate cancer therapeutics market (2010 – 2020) (opportunity analysis, pipeline assessment & market forecast). Retrieved from<http://www.researchandmarkets

10 Research and Markets. (2011). Global prostate cancer therapeutics market (2010 – 2020) (opportunity analysis, pipeline assessment & market forecast). Retrieved from<http://www.researchandmarkets.com/reports/1957286/global_prostate_cancer_therapeutics_market_2010>

11 Research and Markets. (2011). Global prostate cancer therapeutics market (2010 – 2020) (opportunity analysis, pipeline assessment & market forecast). Retrieved from<http://www.researchandmarkets.com/reports/1957286/global_prostate_cancer_therapeutics_market_2010>

12 Research and Markets. (2011). Global prostate cancer therapeutics market (2010 – 2020) (opportunity analysis, pipeline assessment & market forecast). Retrieved from<http://www.researchandmarkets.com/reports/1957286/global_prostate_cancer_therapeutics_market_2010>

13 BioSpectrum Bureau. (2012). Zytiga, Xtandi to dominate prostate cancer market. Retrieved from < http://www.biospectrumasia.com/biospectrum/news/123103/zytiga-xtandi-dominate-prostrate-cancer-market#.UWT7545qbzI>

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16 Cancer Research UK. (2013). Prostate cancer incidence statistics. Retrieved from <http://www.cancerresearchuk.org/cancer-info/cancerstats/types/prostate/incidence/uk-prostate-cancer-incidence-statistics>

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