ZCUBE: THE NEXT GENERATION OF LIFE SCIENCES INVESTING

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Z-CUBE THE NEXT GENERATION OF LIFE SCIENCES
INVESTING
The link between venture capital and research
synergies and collaboration INSME-UNIDO
Rome, november 30, 2006
Claudio Semeraro CEO Z-Cube srl
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Background Themes

• Drug industry RD expenditures greatly outpacing
  US NCE approvals
• Number of New Biotech Big Pharma Collaborations
  continuously increases
• Biotech companies start to attract VC capitals at
  a more advanced development stage than before
• Significant funding and expertise gaps exist
  for early-stage life science companies
• Public capital market thresholds for liquidity in
  both North America and the EU continue to rise

These factors demand a unique approach to life
sciences investing
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The Primary Problem failure to develop
therapeutics addressing unmet needs

• High candidate drug failure rate
• lt20 of drugs entering human testing get approved
  
• a drug entering phase I in 2000 less likely to
  reach market than one entering Phase I in 1985
• 50 of phase 3 studies fail due to lack of
  efficacy

Source FDA clinical productivity, ACPS Meeting,
October 19, 2004 Rosemberg A.
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Lengthening Clinical Times Have Increased Total
Times for Approval of New Biological Drugs
Tufts Outlook 2003
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Current scenario the pharma innovation gap
The increasing RD costs and the reduced RD
efficiency increase challenges and opportunities
for biotech companies
Source Burrill Co 2006
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Opportunities and challenges for biotech companies
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Number of New Biotech Big Pharma
Collaborations 1993-2005
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Selected Biotech Partnering in the Last 12 Months

• Biogen/Protein Design Labs 800M
• Alnylam/Novartis 700M
• Medarex/BMS 530M
• Pfizer/Coley 505M
• Shire/New River 500M
• Plexxikon/Wyeth 372M
• Nastech/Merck 341M
• Avanir/Astra Zeneca 340M
• Cilag/Basilea Pharma 308M
• Pharmasset/Roche 300M
• CancerVax/Serono 278M
• Astex/AstraZeneca 275M
• GSK/Theravance 252M
• Sirna/Allergan 250M
• GenMab/Serono 215M
• Sucampo/Takeda 210M
• Novartis/Avanir 210M

Source Burrill Co, 2006, all biotech
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Selected Biotech MA in the Last 12 Months

• Medicis/Inamed 2.8B
• Solvay/Fournier Pharma 2.1B
• Pfizer/Vicuron 1.7B
• Shire/TKT 1.6B
• GSK/ID Biomedical 1.4B
• Meda/Viatris 1.0B
• OSI/Eyetech 0.9B
• Genzyme/BoneCare 0.6B
• Danisco/Genencor 0.6B
• Pfizer/Angiosyn 0.5B
• Protein Design Labs/ESP Pharma 0.5B
• GSK/Corixa 0.4B

Source Burrill Co, 2006, all biotech
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The VC gap

• The challenge of early stage financing

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Total Biotech VC Funding

• In spite of the increase in total biotech VC
  funding seed investments are down

Sources for RD costs Pharmaceutical RD
Spending Pharmaceutical Research and
Manufacturers of America, PhRNA Annual Membership
Survey, 2003. NIH Budget National Institutes of
Health, Office of Budget, History of
Congressional Appropriations, 1992-2003,
www.nih.gov 2003
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Seed investments remain low
attrition rate in early financing rounds is high
with less than 50 of companies progressing to
the following round. Attrition in later stages
could be influenced by exits
Source DataMonitor, 2006, only lifescience
therapeutics
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Fewer deals at research stage
Source DataMonitor, 2006, only lifescience
therapeutics
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The equity gap
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The challenges

• Biotech companies start attracting VC capitals at
  a more advanced development stage than before
• Seed investments in early stage companies remain
  low
• Early stage companies increasingly need
  industrial know-how to transform academic
  innovation into a winning industrial project
• Increasing need of industrial management
• Marketable, VC-grade Business Plan
• Significant funding and expertise gaps exist
  for early-stage life science companies

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The VC perspective

• Early stage investing is far from an exact
  science
• Early-stage companies are often comprised of
  little more than an entrepreneur with an idea
• Valuations at the seed stage are generally
  driven by factors that by their nature are
  subjective
• These include
• appraisals of the CEO and management team
• novelty of the value proposition
• evaluation of intellectual property
• expected time-to-market
• expected path to profitability
• estimated capital needs and burn rate
• syndicate risk

Source Understanding Valuation A Venture
Investors Perspective A. Dana Callow, Jr.
Managing General Partner, Boston Millennia
Partners Michael Larsen, Senior Associate, Life
Sciences
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Filling the gap

• Venture-backed companies need
• greater degree of R D and business development
  expertise than ever before
• easier access to seed financing to progress at a
  stage attractive for VC capitals
• Z-Cube brings both sets of skills with a pharma
  company level of competency

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Z-Cube the venture capital arm of Zambon Group

• Focus life sciences and biopharmaceuticals
• Main therapeutic areas respiratory, pain and
  inflammation, allergy and immunology,
  anti-infectives
• Business activity
• Corporate venture capital, investing mainly in
  early stage.
• NewCos to be developed 12-15
• Expert support
• Strategic Advisory activities for NewCo formation
  and development
• Strategic partnering for NewCo development
• Leverage from pharma company expertise in
  different areas
• Location Bresso (Milan, Italy)

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THE POTENTIAL OF YOUR RESEARCH, CUBED..
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Z-Cube srl An Entreprenurial Corporate Incubator

• Subsidiary of the Zambon Group focused on
  identifying and supporting pharma projects with
  potential to become a NewCo
• Z-Cube provides skilled project coordinators,
  capital and an extensive network of experts and
  relationships to prepare a a validated and
  marketable business plan with maximum financing
  potential
• Z-Cube adds value via the type and quality of R
  D and business support provided

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Z-Cube integrates competencies for NewCo success
Z-CUBE MANAGEMENT TEAM
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Z-Cube from Application to NewCo
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Realizing a Projects Potential
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The Z-Cube Process for Start-up Companies
CAPITAL TO GET UNDERWAY

• Z-CUBE will fund selected projects with a
  preliminary investment to develop the Business
  Plan

EXPERT SUPPORT

• Each project will be assigned a project
  coordinator and professional team from
  Z-Cube/Zambon. This will ensure the development
  of a validate and marketable business plan with
  maximum financing potential

GROWTH CAPITAL AND RELATIONSHIP NETWORK

• Z-Cube designed to invest in and syndicate the
  early financing rounds for the NewCos
• Z-Cube will support the NewCo with growth capital
  and its relationship network going forward.

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Target for incubation start
The proponent

• Dynamic researchers/team of scientists with a
  track record of publications in peer reviewed
  journals
• Strong enterpreneurial attitude and willingness
  to support a NewCo creation
• OR
• Company recently formed

The project

• Innovative projects with potential to become a
  new therapeutic for unmet medical needs with
  significant commercial potential
• Active molecules identified (lead series) and
  supported by at least
• IP filed
• In vitro/in vivo data in relevant models

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Target for NewCo launch at the end of incubation
Z-Cube designed to invest in and syndicate the
early financing rounds for the NewCos with other
VCs The following characteristics are required

• Company created/consolidated
• Minimal staff on board or committed (at least
  CEO)
• Business plan finalized and approved
• IP secured
• Lead project no more than 12-18 months from IND
• Pipeline more than a single product/project

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Track record

• Executive Summary
• About 1000 projects screened
• 8 projects selected for sponsorship (5 in Europe,
  3 in U.S.)
• 3 companies launched and financed
• Elagen Inc. (Boston, USA) HPV replication
  inhibitors
• SuppreMol Gmbh (Munich, Germany) soluble Fc
  receptors
• PharmEste Srl (Ferrara, Italy) TRPV1 antagonists
• and others coming soon

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Z-Cube Adding value to create business
opportunities

• Experienced industrial team with on average 20
  years expertise in all major therapeutic areas
• First class competences in RD, clinical
  developement, project management, strategic
  support for regulatory strategy and market
  positioning, business development
• Leverage from Zambon Pharma key competences in
  intellectual property, legal, finance, strategic
  marketing
• Leverage from DOIT research centre for technical
  assessments, drug optimization and library
  testing
• Delivering of a marketable VC-grade Business Plan
• Granting interim management and leading company
  staffing and financing
• As lead investor, syndicating capitals from third
  party investors

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A unique approach and an efficacious response to
the challenging scenario in life science
investing
Filling the gap