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COMPANY ANALYSISXINTELA

NOVEMBER, 2017

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• Analytical summary • About the company • Financials • Board, team and owners • Asset portfolio • Market opportunity • Concluding remarks • About this report

Table of Contents

© 2017 BIOSTOCK AB ALL RIGHTS RESERVED.4

Xintela analYSiS

Swedish biomedical company Xintela is developing therapeutics in the

fields of regenerative medicine and cancer, based on the patented integrin

marker technology XINMARK®. In regenerative medicine, Xintela’s focus is on the

development of Mesenchymal Stem Cell -based products for the treatment of

cartilage damage and osteoarthritis, a condition estimated to be affecting around

333 million people in the US, UK, Germany, France, Spain, Italy and Japan. A key

component of Xintela’s technology platform is the quality assurance assay, XACTTM

(Xintela Assay for Cell Therapy) which is based on antibodies directed to Xintela’s

integrin markers. This assay enables the company to select high quality cell

populations, determine its identity, purity and to predict the potency of the stem

cells used as a cell therapy for cartilage damage and osteoarthritis. This, in turn,

assures safety, efficacy and consistency of the company’s stem cell products.

The lead candidate, XSTEM®R, is an investigational allogeneic mesenchymal stem

cell product, selected by Xintla’s integrin marker technology and characterized

by its high potential to differentiate into chondrocytes (cartilage cells). While not

the focus of this analysis, Xintela also utilizes its integrin marker platform for the

development of immunotherapy products for treatment of glioblastoma, the most

common and aggressive form of brain tumour in humans.

Xintela has with XSTEM® the potential to address two distinct but

intertwined markets characterized by a degradation of cartilage tissue. Traumatic

cartilage injuries, which are most related to sports injuries and Osteoarthritis,

a chronic condition of progressive degenerative joint disease. Pharmacological

alternatives today include analgesics, NSAIDs, corticosteroids and hyaluronic

acid – cheap and generic products for symptomatic relief. For patients with

cartilage injuries, there are different options that can potentially repair the

cartilage damage by introducing autologous (patients own) cartilage cells to

the injured area. Moreover, in severe cases of osteoarthritis, a commonly used

non-pharmacological option, is joint replacement surgery. Compared to current

alternatives, XSTEM® may provide a disease modifying alternative that could

potentially revert and cure the disease. However, cell therapies are usually

associated with higher direct costs than OTC alternatives.

It is therefore encouraging that Xintela has reported positive results from

a pre-clinical study in horses where both safety and efficacy were demonstrated

and the allogeneic (from donor) off-the-shelf concept was tested using selected

horse MSCs named EQSTEMTM. While this study is a significant milestone and initial

verification of the XINMARK® platform, the study was carried out in a small number

of animals and represent only a subgroup of the osteoarthritis market (post-

traumatic of osteoarthritis). Xintela is now setting the stage for a larger clinical

study on horses as well as a clinical study on humans. The company recently

took a large step toward this by announcing that the company would construct

its own facility for GMP production and thereby secure stem cell products for the

upcoming clinical development.

The shift from symptomatic treatments to more advanced disease

modifying treatments are well illustrated by the influx of deals which speak

in favor of Xintela’s allogeneic stem cell direction. An increasingly favorable

regulatory environment, particularly in Japan, has resulted in a range of regional

and substantial deals within the field of stem cell research for the treatment of

osteoarthritis. A recent deal - with some similarities to what a future partnership

may hold for the Lund-based company - is the one between Regeneus and AGC

Ashai. The early stage (Phase I) regional collaboration is centered around the

candidate Progenza, an allogeneic off-the-shelf stem cell technology, which

is being developed for the treatment of knee osteoarthritis. If successful, the

complete deal would amount to $16.5m for Regeneus. It should be noted, however,

that this early stage deal is restricted to the Japanese market.

XSTEM® is regulated as an Advanced Therapy Medicinal Product (ATMP)

in Europe, which puts it in a rather complex regulatory environment with

uncertain development timelines. Conversely, the recent EU approval of Spehrox,

an autologous chondrocyte product, could suggest an upswing for cell-based

therapies in regulatory opinions. Despite this, the main challenge for Xintela to

address will be to produce a robust enough health economic case to convince

national agencies of the products benefits, as the product group has historically

faced difficulties in gaining reimbursement. However, the potential to mass

produce high quality stem cell products could very well be the key combination

that could overcome these challenges and in turn make XSTEM® a herald of the

next generation of cell-based therapies.

Important catalysts for investors to watch:

• Partner identification for the glioblastoma project and XACT™

• Completion of GMP production facility

• Approved GMP manufacturing license (horse and human MSCs)

• Approval granted by the regulatory agencies to conduct clinical trials in

horses and humans

• First clinical trial in horses is expected to start earliest by the end of 2018

• Start of clinical trials Phase I/IIa in humans is expected to start earliest

by the end of 2019

XINTELA ANALYTICAL SUMMARY

© 2017 BIOSTOCK AB ALL RIGHTS RESERVED. 5

Xintela analYSiS

BackgroundIn 1998, Associate Professor Evy Lundgren-

Åkerlund and her research group at Lund University published the discovery of cell surface protein integrin α10β1 – a biomarker that would become an important tool throughout her career. The integrin was detected on cartilage cells and demonstrated to be a collagen type II binding receptor which mainly occurs in cartilage, serving as a biomarker for cartilage cells that produce cartilage typical molecules. Interestingly, the integrin was later also identified on bone marrow-derived mesenchymal stem cells that had the potential to differentiate into cartilage cells.

The biotech company Cartela AB was founded in 2001, with Evy Lundgren-Åkerlund as CEO, to develop and commercialize new therapeutics directed towards these integrin markers in the treatment of osteoarthritis and rheumatoid arthritis. Despite preclinical success, the company however struggled financially and Hansa Medical would eventually acquire all assets in 2008.

However, in 2009, Evy reacquired the intellectual property rights behind the integrin biomarker α10β1 and founded the cell therapy company Xintela based on the integrin technology. The company initially focused on developing stem cell-based products for the treatment of cartilage damage but eventually expanded the company’s portfolio to the cancer field with focus on treatment of glioblastoma. In December of 2015, Xintela increased the integrin portfolio by acquiring intellectual property rights behind integrin α11β1 from Hansa Medical AB. The integrin α11β1 is a biomarker for a type of connective tissue cells (fibroblasts) that have shown to play an important role in wound healing, fibrosis and cancer. Today, the two patented integrins α10β1 and α11β1 are the cornerstones of Xintela’s technology platform XINMARK®, the quality test XACT™, the stem cell platform XSTEM®, the lead stem cell product XSTEM as well as the antibody-based product for treatment of glioblastoma.

XintelaXintela is a biomedical company located in the

innovative life science cluster of Medicon Village in Lund, Sweden. The company is focused on developing cell therapy products for joint disaese-related regenerative medicine and targeted therapies for brain tumors. The company is in an expansive growth phase and currently has 12 full-time employees with several new recruitments of experienced industry professionals during the past year. In 2016, Xintela completed an IPO and is now listed on Nasdaq First North. In addition to growing the headcount, Xintela performed its first large animal study and is now preparing to produce GMP-certified batches of cells to perform clinical studies in horse and human OA patients. By targeting OA, where cheap generics is currently the norm, the company expects to launch a disease modifying alternative based on stem cells for both animals and humans.

Most of its peers on Nasdaq First North, employ a business model where all investments are poured into a lucrative but distant license deal of its lead asset. This is where Xintela’s philosophy is different. Xintela believes that by managing parallel development tracks – at a higher cost in the short-term – it may create multiple revenue streams along the way towards its long-term vision. In the shorter perspective, Xintela’s business strategy is to out-license parts of the XINMARK® technology platform at pre-clinical stage, including XACT™ for quality assurance of chondrocytes in cell therapy and the antibody drug conjugate (ADC) technology for glioblastoma treatment. The company’s long term goal is to find commercial partners for the MSC-based products after clinical proof-of-concept. Additionally, veterinary stem cell product for the horse market is expected to have a shorter way to the market compared to the human stem cell product.

ABOUT THE COMPANY

“The market for cartilage injuries is huge and growing. An estimation of 630 million people, across the world, are

affected by osteoarthritis and this figure is expected to increase as the general population is ageing and becoming

more overweight.Evy Lundgren-Åkerlund, CEO Xintela


Xintela analYSiS

ABOUT THE COMPANY

Strategic partnershipsXintela’s many applications of the two proprietary

biomarkers - α10β1 and α11β1, collectively referred to as XINMARK® – include the selection of high quality stem cells and quality control of cartilage cells. By adressing these two aspects via the quality control test, XACT™, an controlled production of high-quality cell cultures are made possible. While XACT™ is useful for Xintela’s own selection and quality assurance of stem cells when developing XSTEM® products, it is also an attractive asset for companies developing various products based on cartilage cells in need of a way to quality control their products. For this reason, Xintela aims to partner with chondrocyte product developing vendors by offering a quality test that can improve and control the quality of their choncrocyte products. This is also why Xintela, since a few years back, has an ongoing research collaboration with CO.DON AG - a European leader within autologous cartilage treatment. The German company is well established on its home market, which together with the UK is an important market within the regenerative field, and is believed to become a leading player in the European autologous space. So far the collaboration has been synergistically beneficial and has generated data signifying a positive validation of Xintela’s quality assurance assay, XACT™. As a natural continuation of this ongoing collaboration, the two companies signed a Memorandum of Understanding in May of 2017. While the agreement is no partnership nor licensing agreement, this formal version of a “gentlemen’s agreement” could be an indication of commercial interest from the German

collaborator and clearly an interest in the XINMARK® technology platform.

Another partnership that is generating a small revenue stream, is one where Merck Millipore has obtained an exclusive license, with the option to sublicense, to sell antibodies against integrin α10β1 as research tools (the license does not cover Xintela’s own antibodies). Several early collaborations around Europe are ongoing with the use of XACT™ for preclinical identification and quality assurance of cartilage and stem cells.

Xintela recently announced that the company will participate in a project to establish an international research center for the development and production of ATMP in cell and gene therapy. This project is funded by Vinnova and Vetenskapsrådet (48MSEK) and involves the collaboration of actors such as AstraZeneca, GE Healthcare, Pfizer, all Swedish universities, healthcare regions and research institutions. Xintela’s initial role will be as an advisor for the development of the center, but expects to gain knowledge and international leading companies and researchers.

In relation to this, the company recently announced that it had decided to advance the construction of its own facility a head of planned schedule for the GMP (Good Manufacturing Practice) production of stem cell-based ATMPs. The company listed issues with lack of available units in Sweden that could produce horse stem cells in parallel with their production of human stem cells, as the primary reason for not currently outsourcing production. This custom-designed facility will be located in close proximity to the company in Medicon Village and will offer, according to Xintela, increased flexibility and control, with lower costs, even in the short term.

CO.DON AG – market leader in autologous cell therapyCO.DON AG is a German tissue engineering company with two marketed products for treating articular cartilage and vertebral discs

with autologous cells. The autologous cell transplants produced by CO.DON AG have been used since 1997 to treat circumscribed,

traumatic and degenerative cartilage defects in joints and vertebrae. Over 9,000 patients have been treated with autologous

chondrocyte transplants (as of April 2016). Products from CO.DON AG are actively sold on the German market and have been

successfully used over 7,200 times to treat patients. According to the latest figures, CO.DON has steadily grown its revenue every

year from €2.14 million (in 2010) to €5.16 million (in 2015).

In July 2017, the company received a significant milestone where its articular cartilage product distributed under the name

of Spherox, was granted EU marketing authorization for the treatment of degenerative and traumatic cartilage defects in the

knee. Spherox contains spheroids of human autologous matrix-associated chondrocytes suspended in isotonic sodium chloride

solution, that is implanted into the knee joint. This product is carefully prepared by taking a small sample by arthroscopy from the

patient’s own knee cartilage followed by growing the cells for such suspension.

The co.don AG share is listed on the Frankfurt stock exchange in the General Standard and is also traded on the open

market in Berlin-Bremen, Düsseldorf, Stuttgart, Hamburg and Hannover. More information on: codon.de


Xintela analYSiS

FINANCIALS

Financial summaryXintela, like many of its industry peers, is financed by its shareholders. According to Xintela’s mid-year financial report from January to June 2017, the company reported 1 KSEK in income and up to 10.4 million SEK in development costs and upkeep (70% in R&D, 18% in sales expenses and 12% in administrative costs). The estimated burn rate of 1.73 million SEK per month while liquid assets equal to 17.7 million SEK. In 13th of November 2017, Xintela announced a directed share issue of approximately 10 million SEK and borrowing of 7 million SEK to strengthen its working capital for investment in Xintela’s development programs. Based on this data, BioStock predicts that the theoretical company survival time is more than 12 months from the date of the Q2 report. This does however not taking into account the increased costs as per the monthly 2% interest in connection to the loan.

estimated current cash in bank

17.7 million SEK

current burn-rate per month

1.73 million SEK

estimated cost, next 12 months

18.84 million SEK

Major shareholdersAs of March 22, 2017, the company is listed on First North

Nasdaq Stockholm. The company’s current major shareholders include the CEO/founder Evy Lundgren-Åkerlund (15,15%), Fredrik Olsson (14,83%), ALMI Invest Småland (9,98%), Avanza (4,89%), Oldentoft Holding (4,26%), Nordnet Pensionsförsäkring (4,19%), Six Sis and W8IMY (2,46%), and Chairman Gregory Batcheller (2,28%).


Xintela analYSiS

FINANCIALS

Summary of balance sheet (half year report January - June 2017) ASSETS

[kSEK] 2017-06-30 2016-06-30 2016-12-31

Total fixed assets 4 501 3 413 4 260

Current assets

Other claims 518 929 550

Prepaid costs 101 1 60

Cash and cash equivalents 17 691 26 562 18 979

Current assets total 18 310 27 492 19 589

TOTAL ASSETS 22 811 30 905 23 849

EQUITY AND LIABILITIES

[kSEK] 2017-06-30 2016-06-30 2016-12-31

Total equity 20 596 28 644 20 983

Total liabilities 2 215 2 261 2 866

TOTAL EQUITY AND LIABILITIES 22 811 30 905 23 849

Summary of comprehensive income (half year report January - June 2017)

[kSEK] Apr-Jun, 2017 Apr-Jun, 2016 Jan-Jun, 2017 Jan-Jun, 2016

Operating expenses

Research and development costs -3 557 -4 085 -7 307 -7 257

Selling expenses -945 -775 -1 883 -1 398

Administrative expenses -514 -378 -1 236 -800

Total operating expenses -5 015 -5 238 -10 424 -9 455

Earnings before interest and taxes -5 016 -5 238 -10 425 -10 418

THE RESULT OF THE PERIOD -5 016 -5 238 -10 425 -10 418


Xintela analYSiS

BOARD OF DIRECTORS

CurrentCompany engagements

Past • Chairman of the Xintela’s

board of directors • CEO of Stanbridge

Corporation • Executive Chairman of

NeuroVive Pharmaceutical AB • Chairman of Monocl AB • Partner at P.U.L.S

• Chairman of A1M Pharma AB • CEO of Pulsetten AB

Strategic advisor and chairman of the board since 2011. Extensive experience from the pharmaceutical, biotechnical

and medical technical industries.

GREG BATCHELLER LL.M. J.D. EXECUTIVE CHAIRMAN

• Vice President andDevelopment Head for thegene therapy department ofGlaxoSmithKline (GSK)

• Senior Director of GlobalMedical Affairs at GenzymeBiosurgery

• Senior Associate MedicalDirector at GenzymeTherapeutics

• Medical and regulatorypositions at Geistlich Pharma

Board member since 2014. Extensive experience in cell therapy and currently Vice President and Development Head

for the gene therapy department of GlaxoSmithKline (GSK).

SVEN KILI M.D. BOARD MEMBER

• Member of the board ofDirectors Xbrane BioscienceAB, Adenovir Pharma AB,Friskis & Svettis Riks, SwecureAB and P.U.L.S AB

• Global Head forAstraZeneca’s ClinicalResearch

Board member since 2014. Advisor in the life sciences industry. Previously

Global Head for AstraZeneca’s Clinical Research.

KARIN WINGSTRANDBOARD MEMBER

• Assoc. prof. in Pharmacologyand Anaesthesiology, atUppsala University

• Board Member ofApotekarsocieteten, BerzelliCenter at Uppsala University,Gradientech AB andAddBio AB

• VP Preclinical Research atAstra Pain Control & Draco

• Senior VP Preclinicaland Clinical Research atPharmacia and PharmaciaUpJohn

• CEO at Aprea AB • CEO at Gastrotech A/S

Board member since 2013. Extensive experience with investment activities

from several venture capital companies. Has experience from several small life

science companies .

CLAES POST Ph.D Prof.BOARD MEMBER


Xintela analYSiS

OPERATIONAL TEAM

Chief Executive Officer since 2009. Founder of Xintela, with a long

experience of biomedical research and development. Previous leading roles in

both academia and industry.

EVY LUNDGREN-ÅKERLUND P Assoc. Prof.

CHIEF EXECUTIVE OFFICER

Has held numerous positions as head of economics, both in Sweden and

internationally and has operated his own auditing firm for more

than 10 years.

GUNNAR TELHAMMARCHEIF FINANCIAL OFFICER

Head of Business Development since October 2016. Has broad experience of innovation and business operations. He has been the CEO for Ideon Science Park in Lund.

RICHARD MOSELL LL.M. BUSINESS OPERATIONS MANAGER

Strategic advisor and chairman of the board since 2011. Extensive experience from the pharmaceutical, biotechnical and medical technical industries.

GREG BATCHELLER LL.M. J.D. STRATEGIC ADVISOR

Management teamEvy Lundgren-Åkerlund is the CEO and founder of

Xintela and the inventor of Xintela’s integrin marker α10β1. She has led the company since it was founded in 2009 and has an extensive scientific experience in cell- and molecular biology. Before the inception of Xintela, Evy founded and developed the company Cartela AB between 2000-2007. Moreover, she was also the CEO at Ideon Bioincubator/Lund Life Science Incubator (now called SMiLE) between 2008 and 2012. Evy’s management team also include Gunnar Telhammar, CFO, who has held numerous positions as head of economics, both in Sweden and internationally. The co-founder and previous member of the board, Rickard Mosell, Business Operations Manager, joined the company and the management team in 2016. Before joining Xintela, Rickard has been the

CEO for Ideon Science Park in Lund and the CEO for the business incubator Ideon Innovation. Xintela’s Chairman, Greg Batcheller, is one of the company’s strategic advisors bringing a broad experience from the pharmaceutical, biotechnology and medical technology industries. In addition to Xintela, Greg is involved in a number of companies, including; NeuroVive Pharmaceutical, Monocl Software, AcuCort and Stanbridge Corporation. The company saw a small organizational restructure in March of 2017, when Evy Lundgren-Åkerlund assumed responsibility for the company’s research, de-facto CSO, and Greg Batcheller increased his operational involvement in the company as executive chairman of the board.


Xintela analYSiS

ASSET PORTFOLIO

EQSTEM™ - MSCs for Osteoarthritis in horsesThe company intends to develop a stem cell product to treat cartilage damage and OA in horses, both being very common, especially in racehorses. These injures cause pain, impaired function and eventually forced absence from competition (which results in huge economic losses for stakeholders). The current method of treating these injuries are by offering pain relief, managing inflammation and injections to induce joint lubrication, but there is no approved treatment today that can cure this disease. Regenerative therapies, such as non-quality assured autologous cell therapies, have been used in the past to treat damaged joints in horses with varying degrees of success. Xintela’s lead cell therapy candidate in horses – EQSTEM™ is based on integrin α10β1-selected andquality-assured allogeneic MSCs that have the potential to become a more convenient regenerative therapy due to its off-the-shelf (kept in the freezer until use) profile and competitive pricing model. The product candidate recently completed a preclinical study in horses with cartilage injuries resembling post-traumatic OA in collaboration with Cornell University in Ithaca, New York. The study demonstrated that the stem cells were safe, did not cause pain or other adverse effects. The stem cells also demonstrated a protective effect on the joint cartilage and the underlying bone after injury. The results will be compiled for a publication in an international scientific journal and has provided the company with data of which a larger clinical trial evaluating EQSTEM™ in horses with cartilage damage will be evaluated. Xintela recently revealed that the company would set up its own production unit for MSCs ahead of schedule. With a range of mandatory activates required to be completed prior to the actual production of GMP material for clinical studies,

the larger clinical trial in horses has been belated to the earliest of next year.

Project Milestones for EQSTEM™ in 2018• Completion of GMP production facility• Approved GMP manufacturing license (both horse

and human MSCs)• Approval granted by the regulatory agencies to

conduct clinical trials in horses.• GMP production of EQSTEM™ for clinical trials Phase

I/IIa• First clinical trial in horses is expected to start earliest

by the end of 2018

XACT™ quality testXintela’s assay for cell therapy, known as XACT™, is

based on antibodies that bind to the cell surface proteins integrin α10β1 and integrin α11β1. XACT™ is applied to identify, select as well as predict potency of cells used in cartilage regeneration and repair. Today, this quality assurance method is used in the development of the company’s allogeneic stem cell products XSTEM® and EQSTEM™. In addition, the company can out-license XACT™ for quality assurance to vendors that prepare and sell different chondrocyte products for cartilage repair, which can generate early licensing revenue. The company has not yet announced any sales forecast of the quality assurance test. However, the company has in a successful collaboration with CO.DON during 2016 managed to validate the XACT™ quality test for chondrocytes. .

Project Milestones• Identification of additional collaborators and licensees

during 2017

Technology platform XINMARK®The cornerstone of Xintela is the patented technology

platform XINMARK®, which is based on the cell surface biomarkers integrin α10β1 and integrin α11β1. The platform allows the company to identify, select and predict the potency of the cells used in repair of damaged cartilage in order to assure efficacy and reproducibility of the cell therapy procedure both in current and future cartilage repair technologies. In addition, the technology also provides means to detect and target certain brain tumour cells to specifically kill and eliminate them.

Among the applications of the technology platform that are currently being developed are cell based therapies (e.g. XSTEM® for use in horses and humans),

a quality assurance assay (XACT™) and an antibody-based therapy, ADC (Antibody Drug Conjugate) for brain tumors (glioblastoma). Using targeting antibodies binding to the biomarkers and cell detection methods (including flow cytometry), Xintela can provide quality assurance of cell samples to be used for cartilage repair. This is the basis of the analytical assay XACT™ which is used by the company to develop the proprietary stem cell product for humans XSTEM® and for horses, EQSTEM™. XACT™ is also evaluated by collaborating partners to control the quality of chondrocyte-preparations for cartilage repair.

This analysis will focus on XSTEM® for the treatment of cartilage damage and osteoarthritis.


Xintela analYSiS

Diagnosis and treatment of glioblastomaIn the field of cancer therapy, Xintela is using the

XINMARK® technology to detect and target brain tumor cells. The company is primarily focusing on glioblastoma, the most common and aggressive form of brain cancer, where patients have a short mean survival with the limited existing treatments available today. Analysts has estimated that the expected market value of such a treatment could be around SEK 9.3 billion (2024) (Global Data). The company has successfully constructed an Antibody Drug Conjugate (ADC) directed against one of Xintela’s biomarkers. In preclinical studies, Xintela has successfully demonstrated that the ADC binds to glioblastoma cells and kill these cells and both in vitro and in an animal model for glioblastoma. The ultimate aim of the treatment is to significantly extend the survival time as well as quality of life for patients affected by glioblastoma, and is being designed to be used either alone (monotherapy) or in combination with other treatments to reinforce their respective clinical effects. Xintela has communicated that the additional preclinical studies are ongoing and an Orphan Drug Designation application is being prepared. The goal is to identify a partner at an early stage.

The company has also announced that a companion diagnostic application (CDx) is being investigated in collaboration with an academic partner. The project could ultimately lead to a method of identifying patients who would respond to, or alternatively patients who would not respond to, the ADC treatment (essentially the principles of a companion diagnostics). Xintela has communicated that this part of the project is also progressing well in collaboration with Lund University.

Project Milestones• Identification of collaboration partner for the project.

Expected in 2017

Intellectual property rightsXintela’s technology platform XINMARK® (which

XSTEM®, EQSTEM™ and XACT™ are components of) is protected by over 50 approved patents in important regions. The patents protect the integrins α10β1 and α11β1 sequences, proteins, antibodies and use with broad method-, therapy- and diagnostic claims. The company states that it has not identified patents that may challenge Xintela’s technology platform or products. The company has also registered the brand names XSTEM, XINMARK and XINTELA in EU, USA and Japan. It is however noteworthy to mention that the patents protecting the rights behind the quality test XACT™ are only valid until 2024 and the patent covering the marker for stem cells and its use is expiring in 2023. With no patent protection of XSTEM™ at market launch, this product will have to rely on other mechanisms of exclusivity, or new patents in the pipeline. The company has informed the analyst that additional patents covering aspects of XINMARKTM platform (potential additional protection of the stemcell and glioblastoma projects) have been filed but are still non-public.

In addition, both the US and Japan, through the Trans-Pacific Partnership agreements, offer data protection for biologics, up to 12 years (US) and 8 years (JP). Current European regulations provide 8 years of data exclusivity for drugs, running from the first marketing authorization date. No biosimilar or generic drug submission for marketing authorization may be submitted during this time. Data exclusivity is followed by a 2-year market exclusivity period, essentially offering 10 years culminated protection for the product.

Patent portfolio

Title Status Countries Estimated expiry Patent family

An integrin heterodimer and a subunit thereof Granted AU, CA, JP, US, CH, DE, DN,

ES, FR, GB, IR, IT, NL, SE 2019 WO 99/51639

An integrin heterodimer and an alpha subunit thereof Granted US, DE, FR, GB 2020 WO 00/75187

Marker for stem cells and its use Granted AU, CA, JP, US, AT, BE, CH, DE, DN, ES, FR, GB, IR, IT, NL, SE 2023 WO 03/106492

New monoclonal antibody capable of binding integrin α10β1

Granted AU, CA, JP, US, CH, DE, FR, GB, IR, NL, SE 2024 WO 2004/089990

Detection and treatment of malignant tumours in the CNS

Unpublished (PCT-phase) PCT (2036) SE 1550167-7

ASSET PORTFOLIO


Xintela analYSiS

XSTEMXintela has developed a novel stem cell platform

which is built on human allogeneic (from donor) mesenchymal stem cells (MSCs) isolated from donner tissue and then selected, expanded and quality assured using Xintelas integrin marker technology. The first human MSC product is XSTEM® intended for the treatment of cartilage damage and osteoarthritis. XSTEM® is being positioned as an off-the-shelf product aimed to be injected locally into the damaged joint to halt the disease progression and, at early stages of OA, even cure the disease. Through Xintela’s patented quality assay XACT™, Xintela is able to identify, select and predict the potency of the MSCs in XSTEM® and in turn assure safety, efficacy and consistency of the cell therapy procedure. The cells will be stored frozen at the clinic (off the-shelf ), ready to be used and the treatment is a one-step procedure, eliminating the need of any surgery in the treatment process.

Development program The product is currently in pre-clinical stage of

development, but initial results from pre-clinical studies in horses have proven promising. Xintela has had discussions with the Swedish Medical Products Agency (Läkemedelsverket) and EMA (European Medicines Agency) in preparations for GMP production of MSCs as well as preparations of clinical studies in horses and in humans.

Xintela has successfully structured the optimization of culture and expansions protocols for the product and recently presented a plan to initiate the construction of its own facility for the GMP (Good Manufacturing Practice) production of stem cell-based ATMP. Manufacturing of the stem cells for the clinical program is expected to start in 2018. In the same proactive trend, Xintela has addition identified a partner to manage the operative responsibilities of the clinical trials to be conducted in humans.

In the form of data, Xintela has evaluated horse MSCs, named EQSTEM™, in a horse model for post-traumatic OA. This is essentially OA that has developed as a consequence of a prior cartilage injury. The EQSTEMTM

was isolated from horse adipose tissue, selected with the integrin marker technology and expanded in a similar manner as the human product XSTEM®.

The reasoning behind evaluating MSCs in horses is not only to provide pre-clinical results in the development of a veterinarian product but also to provide data to support development of the human XSTEM® product in an appropriate animal model for cartilage damage and OA. The company argues that horse is considered the best preclinical model for humans and that the data from the study supports the approval of a clinical program for XSTEM®. The GLP (Good Laboratory Practice) preclinical study was conducted at Cornell University in the United States and revealed that the horse-product was safe to use, did not cause any pain nor any adverse effects and did not contribute to any negative lesions. Importantly, the study revealed that the stem cells provided a significant protective effect of the cartilage and bone after injury, and interestingly also indicated a repair effect of the cartilage.

While the data does not directily speak for the effect of XSTEM®, the data do speak in favor of the fundamental technology behind Xintela’s MSCs-based products as both a human therapy product and a veterinary medicine.

Xintela has begun the work to construct a dossier to present to EMA, which will include the data from the Cornell study, as an initial step in the clinical development of both EQSTEM™ for horses and, XSTEM® for humans and to ultimately be granted ATMP approvals. The company has stated that due to a well-documented safety profile of mesenchymal stem cells, the initial study could be a combined phase I and IIa proof of concept study instead of a phase I safety study, which would result in an earlier market approval.

XSTEM® is being positioned as a disease modifying alternative in an industry dominated by symptomatic treatments and is exected enter clinical trials in 2019/2020.

Project Milestones XSTEM® during 2019-2020• Approval granted by the regulatory agencies to

conduct clinical trials in humans• GMP production of XSTEM® for clinical trials • Start of clinical trials Phase I/IIa in humans

ASSET PORTFOLIO


Xintela analYSiS

Regulatory pathway and environment in the regenerative medicines space appear to be improving with Japan leading the change

In 2014, Japan formally introduced new legislation governing the development, approval and use of regenerative

medicines as part of a national push to develop world-leading capabilities in the sector. The new laws provide

a legal framework designed to encourage the development of novel regenerative therapies and to speed

up product approvals in the sector. With the new legislation products can be granted conditional approval

based on safety and efficacy data from Phase II clinical trials, rather than randomized full Phase III programs,

severely lowering the time and financial requirements for market approval. Japan is placing much emphasis

on regenerative medicine approaches since Dr. Shinya Yamanaka of Kyoto University won a joint Nobel

Prize in 2012 for his work on induced pluripotent stem cells. The first regenerative medicine products to be

conditionally approved in Japan were JCR Pharmaceutical’s mesenchymal stem cell product Temcell (licensed

from Mesoblast Ltd) for acute graft versus host disease and Terumo Corp’s HeartSheet for cardiac regeneration.

Both were granted reimbursement under Japan’s national health insurance scheme without issues. If regulatory

framework - which have been widely welcomed by firms working in the field prove successful then it is

not impossible to image a scenario where EU and US regulations would follow suit. The market in Japan for

regenerative medicines is projected to grow to 12.7 billion USD by 2030 according to the Japanese government.

Xintela has mentioned Japan as one of the key regions of interest for XSTEM™ and have through local

presence initiated communication with potential collaborators in the region. The company is aware of the

favorable environment in Japan in regards to regenerative medicine, where a conditional market approval

can be obtained after phase II, and is investigating the potential of conducting clinical trials in the region.


Xintela analYSiS

Hyaline articular cartilageHyaline cartilage, covering the ends of bones,

functions as a shock absorber and reduces friction between bones where they meet at joints. Thus, it has an important protective role in joints that are exposed to high levels of pressure (e.g. the knees and hips). Injuries to the hyaline cartilage exposes the bones for friction, compression and sheer forces which leads to pain and impaired function of the joints. Once damaged, the cartilage has a very limited healing capability - unlike other connective tissue – as it does not contain blood vessels. Injuries of the joint cartilage tissue, therefor often leads to a degradation of the articular surface.

Although OA occurs in people of all ages, osteoarthritis is most common in people older than 65. There is currently no treatment that is able to manage the underlying disease and restore the joints function. The majority of the existing treatment options are instead focusing on managing the symptoms, where pain is of the highest priority. Typical treatment is therefore analgesic NSAID (aspirin, ibuprofen, naproxen, etc.), acetaminophen (paracetamol) or opioids.

Early stage osteoarthritis When it is possible to detect and treat osteoarthritis at an early stage OA, patients can be offered a more effective treatment before major structural damage in the cartilage occurs. This naturally makes the patient group a good segment for Xintelas to target with XSTEM as the patient group would see long term benefits of treatment. However, due to the lack of a single method to detect the early stages of OA, these patients could potentially be difficult to access and recruit for clinical trials. Neither the American College of Rheumatology (ACR) criteria of 1986 or the European League against Rheumatism (EULAR) recommendations in 2010 provide criteria for the diagnosis of early OA. There has been research progress in the development of a uniform method to identify this specific patient group and could potential signal a better scenario for affected patients. A research group has proposed classification criteria for early knee OA, with the aim of identifying a subpopulation of patients with signs of emerging joint disease and potentially at a higher risk to develop osteoarthritis of the knee, it however remains to see how broadly the classification will be accepted.

Advanced or late stage osteoarthritisThe cartilage will eventually erode under physical

stress and expose the underlying bones. Patients that develop this most severe form of osteoarthritis, experience great pain, joint deformities and an increased level of disability. The synovial fluid has also decreased dramatically, and it no longer helps reduce the friction in the joint. With the most common symptom of osteoarthritis being joint

MARKET OPPORTUNITY

Osteoarthritis - A progressive disaseThe occurrence of osteoarthritis is due to the failure

of chondrocytes to maintain balance between synthesis (formation) and degradation of the extracellular matrix components that make up the normal adult articular cartilage. The disease progression is most often initiated in one joint area, but can be induced in several locations simultaneously. Patients with osteoarthritis can experience varying degrees of pain, stiffness and decreased mobility in the affected joint. According to the Swedish Rheumatism Association, there are 7-800 000 individuals in Sweden living with osteoarthritis. The most commonly affected area are the joints in the fingers but the disease also affect the toes, jaw, shoulders, knees, hips and the back. A large study published in the medical journal Lancet presented an estimation that around 250 million people worldwide are living with osteoarthritis of the knee and make up around 83% of the total societal burden of the diseases.

Around 250 million people worldwide have osteoarthritis of the knee and make

up around 83% of the total societal burden of the diseases


Xintela analYSiS

pain which is amplified in severe cases, patients with advanced forms of the disease are naturally more commonly diagnosed compared to patients with early staged forms.

Symptomatic treatments dominate OAThere are currently no available treatments that can

hinder or block the development of OA, so called disease modifying treatments. Whilst the treatment algorithm of osteoarthritis might differ in different geographies, it is generally focused on alleviating the disease induced symptoms and to improve affected muscle function. The cornerstone of the management of OA is therefore physical activity supplemented with, if necessary, weight loss. Non-pharmacological options for pain relief is transcutaneous electrical nerve stimulation (so called TENS), ultrasound, heating / cooling, mobilization of neighboring joints and various forms of orthopedic aids (such as orthopedic bandages, orthotics). Local injections of anti-inflammatory cortisone or joint-lubricating hyaluronic acids in the knee are not uncommon for patients with severe symptoms. The final option, if all other treatments do not provide any benefit, is to undergo surgery to the replace the affected joint. While most often sufficient, partial knee or total knee replacements can have a variety of complications (eg. Infections).

Cartilage injuries can progress to OACartilage injuries are common occurrence that can

be very painful, disabling and often leads to continued deterioration of the cartilage, or the early stages of osteoarthritis (post-traumatic osteoarthritis). The hyaline cartilage covers the articular surfaces of the bone-moving joints and this is the most commonly injured area in the event of trauma. Cartilage injuries are in turn often associated with the practice of sports. An extensive 10-year study conducted in Germany revealed that almost 40% of all sport-related injuries, with patients who sought help at a clinic, were in the knee and that 10% of injuries could be classified as injuries to the cartilage. Football and skiing were responsible for the largest amount of patients and injuries, while squash and American football accounted for a higher percentage in relation to the number of active sportsmen in Germany. According to CDC , patients may see development of early OA within the time span of ten years after experiencing a major joint injury. In 2006 a study, published in the Journal of Orthopaedic Trauma, concluded that about 12% of

symptomatic osteoarthritis can be attributed to post-traumatic cases of osteoarthritis of the hips, knees and ankle. In practice, this would mean that approximately 5.6 million individuals in the United States has recently suffered sufficiently serious joint injuries that they have had to seek orthopedic reconstructive (surgical) care.

Restorative options for cartilage injuriesThere is range of treatment options that aim to

restore the cartilage by implementing cells to the injured area, as a method to induce a regenerative process:

• Micro-fracturing: Small holes are fracturedin the nearby bone which produces bleedingin the injured area with the goal of inducing arestorative process.

• Mosaicplasty: An osteochondral graft isunloaded from a healthy region of the kneeand is then implanted in the injured area.

• Cartilage or stem cell (autologous): Cellsharvested from the patient’s cartilage or thethe patient’s own stem cells, or stem cells froma donor which then are cultured and expandedto be transplanted to the injured area.

The location and scope of the cartilage damage is significant in the process of deciding which method to choose. However, leading Swedish clinicians argue that there is lack of evidence to support a clear and distinct decision process. Micro-fracturing is a technically simple and non-expensive procedure and most often applied in the treatment of minor injuries. However, the procedure does result in repair tissue of low quality and durability. The disadvantages of mosaicplasty are related to limited availability of the grafts and the potential risk of transmitting diseases between individuals. Similar drawback may be considered for cell transplantations, but it should be emphasized that the transplantation of patient’s own cartilage cells has been applied for over 25 years. The method of using cartilage cells from the same patient (autologous) requires two surgical procedures, which is expensive and includes the risk that the cells lose the cartilage cell-characteristics when cultured. It is beyond doubt that there exists a medical need for patients with cartilage injuries in the form of safe and effective treatments that can restore joint functionality.

MARKET OPPORTUNITY


Xintela analYSiS

Fragmented marketThe market for OA has long been dominated by

blockbuster pain relievers such as Pfizer’s Celebrex and Eli Lilly’s Cymbalta, both of which have lost their patent protection. Supplements based on the generic agent, glucosamine, have been sold in large volumes despite

Allogeneic cell therapiesAllogeneic cell therapies utilize a donor’s cells

for treatment. In contrast to autologous cells products, allogeneic cell therapies have potential cost and time benefits made possible by a standardized mass production. Also, with the lack of reimbursements for autologous cell products possible due to the high costs of treatment, allogeneic cell therapy could potentially become a better commercial case with a more competitive pricing. Allogeneic cell based therapies focusing on restoring cartilage damage are considered in the following section as potential future competitors for Xintelas XSTEM® product.

However, there are only a handful of companies with allogeneic options for cartilage damage and osteoarthritis that are similar to Xintela’s XSTEM®. Among the few late stage products are Medipost’s product Cartistem which has been marketed in South Korea ever since its approval by the South Korean authorities MFDS (former KFDA) in 2012. The product is an allogeneic MSC therapy (derived from cord blood) intended to treat knee cartilage injuries induced by early stages of OA or repeated trauma. However, it is unclear to which extent Medipost intends to address markets outside Korea, but it is clear that at least one clinical trial is underway in the US. This product is one of the few off-the-shelf stem cell products to be approved by a regulatory agency anywhere in the world and one of the few to be commercially viable in South Korea (domestic sales of Cartistem surged from 2015 to 2016 with an increase of 46%). Whilst the product has a similar product profile as XSTEM, Cartistem appears to be a heterogeneous mixture of stem cells with no selective process for chondrogenic potency.

Another interesting candidate and competitor to XSTEM® is Invossa (TissueGene-C), a genetically modified allogeneic cell therapy involving human chondrocytes that have been genetically modified to produce the therapeutic growth factor, TGF-β1 (induces cartilage regeneration). Invossa is being developed by US/Korean companies TissueGene / Kolon Life Sciences. As of July 2017,

the fact that science does not support its use. Thus, the market is dominated by non-disease modifying therapies and it is in clear need of new therapies.

In 2009, the first cell-based product, ChondroCelect in accordance to the regulations for ATMPs, was approved in Europe for cartilage injuries. TiGenix, the company behind ChondroCelect, however faced a major hurdle in being granted reimbursements in the other European countries despite the market authorization. The product used the patient’s own cartilage cells (autologous from the knee) which then would be expanded to a sufficient number and eventually re-transplanted into the injured area. In 2016, TiGenix announced that they had come to an agreement with partner Sobi for the early termination of the existing commercial relationship and that the company would withdraw the marketing authorization for Chondrocelect. The company listed commercial reasons as the major force behind the market withdrawal, most likely due to the lack of reimbursement in many of the European countries. The CEO of TiGenix Eduardo Bravo, spoke in November of 2015 at conference and explained what they had seen as the root of the companies’ difficulties was the scarcity of large-scale data to convince reimbursement authorities. The withdrawal of ChondroCelect was in line with TiGenix new strategy to focus on its allogeneic stem cell technology platform.

OA has long been dominated by pain killers, selling at blockbuster levels.

MARKET OPPORTUNITY


Xintela analYSiS

Invossa was approved in South Korea and became the first cell and gene therapy approved for OA. The therapy is drawing attention as it is administered via intra-articular injection and could become the world’s first true disease-modifying OA therapy. Through its national ongoing US Phase III clinical trials, TissueGene will be using the results to seek a Disease Modifying Ostearthritis Drug (DMOAD) designation for Invossa from the US Food and Drug Administration which could potentially make Invossa the first and only cell and gene therapy for osteoarthritis of the knee. The data from the, now completed, Korean Phase III study indicate that Invossa provided symptomatic pain relief and disease modifying characteristics. However, the combination of genetically modified and cell based product will mostly likely face a difficult regulatory path in the two major regulated markets, the EU and the US. Each region poses issues specific to the development of gene therapy products that must be considered in each jurisdiction. Invossa may face challenges which are common to gene therapies such as the lack of relevant non-clinical models, difficulties relating to manufacturing, quality control, clinical trial design and special safety issues.

Whilst the two aforementioned late stage assets do not appear to offer any potency characterization (the procedure of which Xintela can select the most potent cells for its product XSTEM®), two products in early development might offer some similarities, such as a selection process of cells and the use of MSCs.

The first among these come from the Australian company, Mesoblast Limited, which has developed a process to immunoselect allogeneic bone marrow–derived mesenchymal precursor cells for the proliferative capacity (growth potential), production of various

cytokines and growth factors. The company apply this technology for the product, Revascor (rexlemestrocel-L), which is currently in clinical trials for various indications (eg. lumbar degenerative disc disease and myocardial Infarction) however it is uncertain whether the OA candidate MSBCAR001, allogeneic mesenchymal precursor cell product, have a similar selection process. The product is currently in Phase II clinical trials in combination with hyaluronate sodium and is indicated to treat the joint after rupture of the anterior cruciate ligament (ACL) which often occur in connection to sport activates. The product has showcased data on improvement in pain, function, cartilage thickness, and joint structure over 24 months in patients with post-traumatic knee injury and have undergone ACL reconstruction surgery. The results are encouraging for stem cells based products in treating sport related injuries and speak in favor of a potentially more potent candidate. Regeneus is an Australian company that portrays itself as a company differentiating from other MSC therapy companies due to the inclusion of secretions from cells which improve the functionality of the MSCs post-freezing. The company’s lead candidate, Progenza, is an allogeneic off-the-shelf adipose-derived MSC product being developed for the treatment of OA and other musculoskeletal disorders. While it is technically difficult to compare the product with XSTEM®, the product appears not to be characterized for chondrogenic potency as with the case of XSTEM®. Regeneus has positioned Japan as a key market for Progenza but has not mentioned any clear plans for the EU and US.

While Xintela’s XSTEM® is early in development, the product appears to have a relatively unique positioning as an allogeneic product characterized for improved chondrogenic potency.

Clinical competition - allogeneic cell therapies

Candidate Type Status (Region) Company

Cartistem Allogeneic mesenchymal stem cells Marketed (KR) MediPost Co LtdInvossa

(TissueGene-C)Non-transformed chondrocytes and transduced chondro-

cytesMarketed (KR)Phase III (US)

TissueGene / Ko-lon Life Sciences

MSBCAR001 with Hyaluro-

nan

Allogeneic mesenchymal precursor cells with hyaluronate sodium Phase II (AU) Mesoblast Limited

Stempeucel Allogeneic bone marrow derived mesenchymal stem cells Phase II (IN, MY)

Stempeutics Rese-arch Pvt Ltd

Allojoin Allogeneic adipose derived mesenchymal progenitor cells Phase I (CH) Cellular Biomedici-ne Group Inc

Progenza Allogeneic adipose derived mesenchymal stem cells Phase I (AU) Regeneus

Stemchymal Allogeneic adipose derived mesenchymal stem cells Phase I Steminent Biothe-rapeutics Inc

MARKET OPPORTUNITY


Xintela analYSiS

MARKET OPPORTUNITY

Market dynamicsBased on the assumptions made by analysts,

the current OA market is predicted to grow from $3.25 billion USD in 2014 to $10.49 billion USD in 2024 with a compound annual growth rate (CAGR) of 17.8%. Part of the forecasted growth is due to the predicted widespread launch of disease modifying drugs in OA, improvements in imaging techniques and a growing elderly population. An expected trend in the OA market is a slight shift from generic drugs to disease modifying therapies such as cell-based therapies. Already now, the OA field is gradually changing with the first gene and cell therapy for OA being approved in Korea and a spectrum of candidates in clinical development.

Market potentialAn estimation of the market opportunity was

performed on both cartilage damage and OA, as Xintela has communicated that the company is interested in pursuing both indications. Due to the size and extent of the OA market, it is reasonable to assume that Xintela would need to initially narrow its focus on a subtype and not target the whole OA or cartilage injuries populations.

Cartilage injuriesIt is well documented that knee and cartilage injuries

strongly contribute to premature development of knee OA. While OA is a degenerative condition mainly affecting the elderly population, cartilage injuries is predominantly prevalent in young adults. The market segment of patients with cartilage injuries (a well-established risk factor for development of OA) of the knee that will undergo a repair procedure is around 800 000 in the seven major markets (US, UK, Germany, France, Spain Italy and Japan); where this is segmented down into 200 000 cartilage repair procedures performed in the US, 400 000 in EU5 and 200 000 in Japan. Of the patients with a repair procedure in the knee, approximately 60% have chondral injuries and would benefit from XSTEM®. Thus, this would translate to an addressable market of 480 000 patients in the seven major markets.

While the market size is reasonably identifiable, the market uptake of ATMP products is more difficult to determine. A reasonable product to base the estimation for the uptake of ATMP products in the cell-based regenerative market is FDA approved Carticel, an autologous chondrocyte cellular product. Carticel was estimated to have sold for just over $38 million USD in 2016 and the price of Carticel has been identified to around $25 000 USD. With the reported sales and pricing model, this would amount to around 1 500 patients in the United states treated with Carticel. Based on this data, the

estimated uptake of Carticel in the US market during 2016 was 0.75% in 2016. If the uptake of ATMP will increase in the following years, a reasonable market uptake/penetration for XSTEM® would be between 1-5% by the time the product would be approved.

Pricing for ATMP is challenging as the approved products range from thousands to million dollars per treatment. However, an ideal product to benchmark XSTEM would be Carticel or the first and only approved gene therapy for OA, Invossa. Today, Carticel is priced at $25 000 USD while Invossa is expected to be priced anywhere between $3 500 – 4 500 USD in Korea (4 – 5 million South Korean Won). With the lack of reimbursments for autologous treatments such as Carticel and the similarity of product profile compared to XSTEM®, Invossa will be used as a price benchmark.

The market opportunity for cartilage injuries was estimated based on a target population of 480 000 patients in the seven major markets, an assumed market penetration of 1-5% and treatment pricing of $4 500 USD. Thus, the market opportunity of XSTEM® in cartilage injuries to would translate to a market opportunity of $21 million – 105 million USD per per year in the seven major markets if market growth continue the trend. As a comparison, Carticel was estimated to have sold for just over $38 million USD in 2016 and the company, Vericels, saw a surge of 26% increase in revenue from 2015 to 2016. The market for regenerative medicine in cartilage injuries is far from saturated, and increased sales in the segment may indicate that big pharma is beginning to see the benefits of cell-based treatment strategies.

Osteoarthritis For the purpose of this analysis patients with OA

were divided into categories of symptomatic severity by early stage (mild to moderate symptoms) and late stage (moderate to severe symptoms). Early stage OA consists of greater bone spur growth with a relatively healthy size of the cartilage. Also, the bones are not rubbing against each other and there is normal joint motion. As the disease progresses, the cartilage starts to show obvious damage and the space between the bones start to narrow. In late stage OA, the joint space between the bones is dramatically reduced with almost all cartilage vanished. Also, the synovial fluid is decreased and it no longer helps reduce friction among the moving parts of the joint. Therefore, patients with late stage OA experience a lot of pain and discomfort when moving their joint and during other activities such as walking.

The number of prevalent cases of OA in the seven major markets (US, UK, Germany, France, Spain, Italy and Japan) is around 333 million while the number of diagnosed


Xintela analYSiS

MARKET OPPORTUNITY

cases is of 118 million. In terms of knee OA, around 56% of the diagnosed cases correspond to early stage knee OA while 44% of the cases correspond to late stage knee OA, this thus translates to 21.8 people diagnosed with early stage knee OA and 17.2 million people with late stage knee OA. If the same rates of knee OA are applied to hip OA, the diagnosed cases of early stage hip OA will translate to 8.7 million people and the diagnosed cases of late stage hip OA will translate to 6.8 million people. Similarly, for hand OA this would translate to 40.8 million diagnosed cases of early stage hand OA and 63 million diagnosed cases of late stage hand OA.

Furthermore, due to AMTPs being in its early days, it is not unreasonable to expect that a stem cell therapy would have an initial slow uptake. To address this, Xintela should initially focus on a subtype of OA with the strongest clinical data that remain an easily identifiable patient segment. With the promising data from Xintela’s preclinical studies in models of the knee it is assumed that this would be the primary OA segment for the product. An approval within this specific subgroup, could potentially open up the door for the larger indications of in both early and late staged form of hand and hip OA.

Xintela has also communicated that XSTEM® would be more effective in treating patients with early stage OA as it could potentially hinder the progression of the disease. However, the identification of patients with early stage OA is challenging due to limited diagnostic products/methods that exist today. This could also limit the recruitment process for clinical trials. Based on previous calculations, it is assumed that XSTEM™ could see a similar price point of Invossa in both variants of OA at $4 500 USD per patient treated. Taking into account the competitive landscape of early stage OA, with XSTEM™ positioned against cheap symptomatic treatments, the market penetration in this segment is deemed to be half of the earlier calculated AMTP market penetration, landing at around 0.5-2.5%. By taking into account that 21.8 million people in the seven major markets are diagnosed with early stage knee OA, a market opportunity for early stage knee OA would be between $490 million - $2.5 billion USD.

Late stage OA is characterized by a patient population with clear symptoms and disabling progressed disease. As with cartilage injuries, a pricing of $4 500 USD for XSTEMTM is deemed valid with a conservative market penetration (for ATMPs) of 1- 5%. Taking into consideration that there are 17.2 million cases of diagnosed late stage OA of the knee, the market opportunity would roughly translate to $774 million – $3.9 billion per year. As a comparison, TissueGene has communicated that Invossa holds a potential market opportunity of $2 billion USD (mainly treating patients with late stage OA.

Market opportunity XSTEM®

Indication (Knee) Potential

Cartilage injuries $21 million – $105 million

Early stage of osteoarthritis $490 million -$2.5 billion

Late stage of osteoarthritis $774 million – $3.9 billion

Comparable DealsA deal analysis was performed to find relevant

comparable deals to what Xintelas could one day see with XSTEM® in the cartilage damage and/or OA space. Some of the criteria that were taken into consideration during the analysis were the type of product being developed (e.g. stem cell therapy), number of assets in the company and development stage.

The recent deal between Regeneus and AGC Asahi Glass share many characteristics could reflect a potential deal that Xintela with XSTEM® could strike. The deal involved an early staged (Phase I) cell therapy candidate being developed for the treatment of OA. The two companies entered into a strategic collaboration and licensing agreement for the commercialization of Progenza in Japan. Under the terms of the agreement, Regeneus will receive a total of $16.5 million USD that is divided into a $5.5 million USD upfront payment and $11 million USD in milestone payments. Additionally, since Regeneus has 50% interest in the joint venture, the company is entitled to received upfront and milestone payments on any sublicenses for the development of Progenza in OA and other indications in Japan.

Late last year, Mitsubishi Tanabe and TissueGene/Kolon Life Science of Korea entered into an interesting licensing agreement for the, at the time, phase III gene therapy candiate, Invossa, being developed for the treatment of knee OA. Under the terms of agreement, TissueGene was eligible to receive a total deal value of $434 million USD that included an upfront of $24 million USD and up to $410 million USD in development, regulatory and commercialization milestone payments. Additionally, TissueGene is eligible to receive double digit royalties on sales. While the deal is not comparable to Xintelas current situation, as a preclinical company, it does speak in favour of grander deals beyond a longer time horizon.

Another interesting recent deal in the OA space involving a small molecule that could potentially become the first disease modifying molecule, in contrast to cell therapy, for the treatment of OA is the $348 million


Xintela analYSiS

aggrement between Galapagos and Servier. Under the terms of the agreement, both companies will join forces to develop the lead candidate GLPG1972/S201086 (currently in Phase 1b). From the license agreement, Galapagos will receive an upfront payment of $7 million USD and up to

$348 million USD in success-based milestone payments. Also, Galapagos will have the rights to commercialize GLPG1972/S201086 in the US and receive royalties in commercial sales outside the US.

Comparable deals

DateLicensee

(Licensor)

Indication; treatment type (phase at deal

signing)# assets

(# indications) Deal value

Deals in companies developing stem/cell therapy in OA

29.12.2016Regeneus Ltd

(AGC Asahi Glass)

OA; stem cell technolo-gy platform

(phase I)

1 asset (1 indication)

$16.5M ($5.5M upfront + $11M in milestone pay-ments); also 50% share in upfront license fees,

milestone payments and royalties on sublicenses in other indications in Japan

01.11.2016

TissueGene Inc/Kolon Life Science of

Korea(Mitsubishi Tanabe)

Knee OA; gene therapy

(phase III)

1 asset(1 indication)

$434M ($24M upfront + $410M in development, regulatory & commercialization

milestone payments) & double digit royalties on sales

04.11.2008Osiris Therapeutics

(Genzyme Corp)OA; adult stem cell

(phase III)2 assets

(6 indications)

$1.39B ($130M upfront + $1.25B in developme-nt, regulatory & commercialization milestone

payment)

Deals in companies developing DMM (disease modifying molecule) for OA

27.07.2017Galapagos(Servier)

OA; potential disease modifying drug

(phase Ib)

1 asset (1 indication)

$348M ($7M upfront + $341M in development, regulatory & commercialization milestone pay-

ments) & royalty on sales

MARKET OPPORTUNITY


Xintela analYSiS

Comparable companies

Company HQDrug portfolio: no. of assets, indications

Highest development phase; product

Market cap (Aug 31, 2017) Stock market

Cryosite Limited

Australia 1 asset, 1 indicationPhase I; allogeneic mysenchymal

stem cell therapy in OA$6.6 million ASX

Cytori Therapeutics

US 6 assets, 18 indicationsPhase II; autologous cell therapy

in OA$12.6 million ECCO50

US Stem Cell US 2 assets, 8 indications Phase I; stem cell therapy for OA $13.8 million OTCMKTS

StemCells Inc US 2 assets, 5 indicationsPreclinical; stem cell therapy in

neurodegenerative diseases$20.8 million NASDAQ

Txcell France 8 assets, 8 indicationsPreclinical; cellular immunothe-rapy in autoimmune diseases

$33.8 million EPA

Fibrocell US 3 assets, 5 indicationsPreclinical; stem cell therapy in

arthritis$49.4 million NASDAQ

TiGenix Belgium 5 assets, 8 indicationsPhase I; allogeneic mysenchymal stem cell therapy in autoimmune

disorders$236 million NASDAQ

Comparable CompaniesA market cap benchmark assessment was

performed in order to compare Xintela’s market cap to other publicly listed companies with a similar profile. This assessment involved public companies that are currently developing some type of cell-based therapy in degenerative diseases, mainly OA and cartilage damage. As of August 31, 2017, Xintela’s market cap was of $12.5 million USD which is an equitable value compared to many of its peers. The companies with most synergies shared with Xintela are US Stem Cell (market cap: $13.8

million USD) and StemCells Inc (market cap: $20.8 million USD) since these companies are developing early stage stem cell therapy in OA or neurodegenerative diseases and have two assets that are tested in several indications. The market cap benchmark assessment indicated that the market cap values from each company correlates with the number of assets and indications that company is pursuing. However, this correlation does not apply for Cytori Therapeutics as the company’s stock is in an all-time low because the company priced a stock offering at a very high discount.

MARKET OPPORTUNITY


Xintela analYSiS

CONCLUDING REMARKS

Xintela is a fascinating company that combines a broad portfolio

of projects with a dual near and long-term business strategy in

regenerative medicine and cancer therapy. With a scientifically

experienced management team led by founding CEO Evy Lundgren-

Åkerlund, who is also the inventor of its fundamental technologies,

investors can rest assured that the technical development is being

managed professionally. Evy is also a large shareholder in the

company, which speaks in favor of her long-term commitment,

incentives and confidence in the technology and company. Like

many of its peers on Nasdaq First North, Xintela is a company

with a candidate in the early stages of development and intends

to licensee out the technology in a future deal with Big Pharma.

In the meantime, the commercialization of XACTTM as well as the

glioblastoma project at an early stage can potentially provide a

financial income that can support part of the development of the

lead candidates in regenerative medicine. While there may be many

challenges (e.g. costs, multistream focus, resources and multiple

competences required) with this technology driven strategy, it is

a refreshing take on the traditional biotech model that may attract

another type of investor category. Xintela clearly recognizes the

regulatory hurdles in the US and Europe, and is currently exploring

a potentially exciting window of opportunity in Japan.

From the analysis standpoint, it is clear that there is a great unmet

clinical need for disease modifying treatments to treat OA. This

is not only from the physician’s standpoint, but also from the

commercial perspective as this market is flooded with drugs and

generics that only treat symptoms, such as pain. Patients with

traumatic cartilage injuries (especially those with rupture of the

anterior cruciate ligament) and late stage OA seem like a strategic

target segments, as these patients are most likely easier to recruit

compared to those patients with early stages of disease. However,

it is deemed that the cost-benefit ratio compared to symptomatic

treatments would speak in favor of a commercial case in the

former patient segment. While the introduction of Invossa, another

allogeneic product for OA, is going to improve the situation for

patients with advanced stages of the disease, an segment with

room for multiple actors, the product does not appear to target

patients with early stage or post-traumatic induced OA. This

creates an edge for XSTEM® and it appears, mainly due to its

emphasis on selection of MSCs with high chondrogenic potential,

that the product is relatively unique in this segment with the focus

on cartilage quality. It is clear from the financial estimation of the

three adressable markets, that the market opportunity shows good

potential if the product manages to deliver substantial benefits

to affected patients and, more importantly, a convincing health

economic case. While there is still some time left, the clinical

design (eg. selection of endpoints) will be essential to convince

regulatory agencies of the patient benefits compared to cheap

NSAIDs. It will therefore be particularly interesting to see how

Xintela will attempt to position the product in regards to Invossa

and symptomatic treatments.

Based on the result from our deal analysis, it is clear that Xintela

is positioned well to possibly become the subject of a lucrative

licensing deal for XSTEM®. Naturally this hinges on the fact that

the product can produce significant clinical results, which still

are many years away. If the company’s selection process of

chondrogenic potency can prove to be a superior approach to

develop disease modifying treatments, deals of substantial value

could be expected on the horizon which could dwarf the company’s

current market cap. Regional deals, specifically in the Japanese

region, speak of a substantial localized market interest in these

region. A deal of that magnitude is however the result of rigorous

active partnering efforts and continuous contact, by attendance at

partnering conferences, with potential partners. It is encouraging

to see Xintelas attendance at BIO in US in June and recently at BIO

Europe. With a range of products and indications Xintela seems

to be relatively well positioned, but somewhat undervalued,

compared to market caps of other similar companies.


Xintela analYSiS

Tobias ThornbladCEO & Partner,

Monocl Strategy Services AB

Director of Analytics & Partner, BioStock AB

Adam NiklassonBusiness analyst,

Monocl Strategy Services AB

In general, some of the key challenges that Xintela will need to

overcome are related to its business model. It is difficult for a

small team to run successful development with one product, let

alone several. While multiple revenue streams are attractive, many

companies developing both human and veterinary products decide

to do this in separate companies by different teams as different

brands. Among many other reasons, this minimizes the risk for

negative animal-specific events to spill over to the human product,

and vice versa. Further highlighting the diversion between the

segments is the announcement that Xintela would construct its

own production facility as no production unit in Sweden could

do this in parallel. This in turn delayed the initiation of clinical

studies on horses until at the earliest at the end of 2018, which non-

surprisingly disappointed investors. However, Xintela expects this

decision to accelerate the start of the clinical evaluation of XSTEM®

in humans, which is obviously very positive.

As long as Xintela does not plan to enter the cartilage repair space

using autologos chondrocytes, out-licensing XACTTM to improve

a chondrocyte-based autologous product will not cannibalize

the future market of XSTEM®. The question is thus whether

CO.DON’s strategic interest of Xintela’s technology is limited to

the improvement of internal autologous products or if there is

an interest to expand into the allogeneic space. Regardless of

strategy, patent protection of XSTEM® needs to be high on Xintela’s

agenda well in time for clinical studies to start and prior to serious

partnering discussions can be held. Xintela has communicated

that the company is actively working to strengthen the intellectual

property portfolio and that new patent applications have been filed.

Finally, our overall conclusion is that Xintela is an interesting

investment case with a seldom seen diverse portfolio. While the

initial preclinical results behind the cell therapy concept are

encouraging for investors, it should be taken into account that the

candidate is positioned in a complex regulatory environment with

uncertain development timelines and commercial potential. With

eyes set on a substantial market opportunity with XSTEM® , Xintela

is certainly a bold and ambitious company. It will be interesting

to follow the company’s journey toward clinical trials and the

outcome from upcoming partnering conventions.

We will be following the milestones below closely.

Upcoming milestones for XSTEM® under 2019-2020:

• Approval granted by the regulatory agencies to conduct

clinical trials in humans

• GMP production of XSTEM® for clinical trials

• Start of clinical trials Phase I/IIa in humans

Upcoming milestones for rest of the XINMARK® platform

• Partner identification for the glioblastoma project and

XACT™ in 2017-2018

• First clinical trial for EQSTEM™ in horses is expected to start

earliest by the end of 2018

CONCLUDING REMARKS


Xintela analYSiS

• Xintela Mid-year report January - June 2017 • J.L. Cook et al., Bone Joint Res. 2014 Apr; 3(4): 89–94. • M. Majewski et al., 2006, the Knee, Volume 13, Issue 3, June 2006, Pages 184–188. • CDC: A National Public Health Agenda for Osteoarthritis (2010). • Brown et al., J Orthop Trauma. 2006 Nov-Dec;20(10):739-44. • Reumatikerförbundet • Vos T et al., Lancet. 2012 Dec 15;380(9859):2163-96. • Hensor MAE, et al., Arthritis Care Res (Hoboken). 2015 Jan; 67(1): 40–47. • Luyten FP, nee Surg Sports Traumatol Arthrosc 2012;20:401–6 • Alexander M. Weinstein, et al., J Bone Joint Surg Am. 2013 Mar 6; 95(5): 385–392. • Internetmedicin • EMA. ChondroCelect. EPAR summary for the public. 2014. • FDA approval letter – MACI.2016. • FDA approval letter & Label – Carticel. 1997. • Press release TissueGene/Mitsubihishi. • Phase 3 data, Conference coverage. • Jay S. Skyler, Diabetes Care. 2015 Sep; 38(9): 1742–1749. • Clinical Trial: MSBCAR001, NCT01088191. • Regeneus, Company Pipeline. • Collaboration Announcement, Regeneus and AGC Asahi Glass. • Gelber AC Ann Intern Med. 2000 Sep 5;133(5):321-8. • Tigenix annual report 2014 (p. 44). • Tigenix annual report 2013 (p. 129). • FORM 10-Q, VERICEL CORPORATION, 2016 • Associated Orthopedists of Detroit presentation 2016. • Vericel Company Presentation. • Medipost Financial information. • Brown et al., J Orthop Trauma. 2006 Nov-Dec;20(10):739-44. • Frank McCormick Division of Sports Medicine, Department of Orthopedic Surgery. • Mor A Scand J Med Sci Sports. 2015 Aug;25(4):e400-7. • Corporate website of described companies, products and development candidates. • Clinicaltrials.gov • The World Bank. Population growth (annual %). 2015 data. • Reports from Monocl Strategy Services internal database.

KEY REFERENCES

For reprinting and permission requests, please contact:

BioStock AB is responsible editor and publishing entity of this report, and Monocl Strategy Services AB was responsible for performing the analysis, writing this report and creating the design.

For content questions and data requests, please contact:

ABOUT THIS REPORT

[email protected]

[email protected]

JONAS SÖDERSTRÖMEDITOR IN CHIEF, CEO & PARTNER BIOSTOCK

TOBIAS THORNBLADCEO & PARTNER MONOCL STRATEGY SERVICESDIRECTOR OF ANALYTICS & PARTNER BIOSTOCK

BioStock is a news and analysisservice focused on the NordicLife Science sector and catersto individuals, organizations andcompanies. Content publishedby BioStock may be sharedbut the source must alwaysbe stated. Official informationabout companies mentioned byBioStock can be found on therespectiv company’s website.BioStock is based in Lund,Sweden.

Learn more on biostock.se

Monocl Strategy Services is a strategy consulting firm specialized on the Life Science industry. Our core business is to support management and company board decisions by creating tailored solutions to challenging business issues and by crafting strategies to drive business development. Whether it is strategy execution, asset valuation or communication, we partner with small and medium sized biotech companies to provide a competitive edge with a lasting business impact. Monocl Strategy Services is part of the Monocl group, a Life Science strategy consulting and intelligence analytics group improving decision-making for executives and professionals.

Learn more on monocl.com

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