Caurnel Morgan, PhD

CEO, President

Executive Summary

Problem

2

Solution

Practice

92% of drugs fail clinical trials. They have “unacceptable toxicity” or

“don’t work” ... Robert Califf, MD, Former FDA Commissioner

Select smarter drug targets.

Increase the quality and quantity of drug candidates.

Our preclinical prototypes have low toxicity and high efficacy

Treat multiple diseases with each drug.

Overview of Akhu Therapeutics

3

Delaware C-Corp, Oct 30, 2015

Startup, Irvine, CA

Spin-out of Texas A&M University

Location

Formation

Origin

Customer Need

Depression

Antidepressant

Market

Unmet Needs

4

o Increases mortality for 350M.

o It is the #1 cause of disability.

o Increases susceptibility to other diseases.

o $15B in 2015

o 30M U.S. users

o Efficacy >> Speed > Duration

o Pipeline is drying up.

>1000

MC5R Blockers

<100K

Compounds

5

Smarter Drug Targeting Reduces Risk

Selective Melanocortin Blockade in Mice

0 1 2 3 4 5

0

20

40

60

80Vehicle

Time (weeks)

Re

wa

rd I

nv

esti

ga

tio

n (

s) Prozac

*

MC5R Blocker

• 4X Efficacy

• 800X Speed

• 250X Potency

0 1 2 3 4 5

0

20

40

60

80Vehicle

Time (weeks)

Re

wa

rd I

nv

esti

ga

tio

n (

s) Prozac

*

Vehicle

MC5R[-]

*

**

**

6

DEPRESSIONDEPRESSION

Turner et al. (2008); Kirsch et al. (2014);

McGirr et al. (2015); Pressaud & Bruggen,

(2015); Chancellor [Forbes] (2016); The

Burrill Report (2015); Serebrin (2013);

Wikipedia (2016); Ehrensing et al. (1994);

Feighner et al. (2001)

Onset

Eff

icacy

Slow Mod Fast

Lo

wM

od

Hig

h

Prozac

Placebo

Trintellix

Botox

Onset

Eff

icacy

Slow Mod Fast

Lo

wM

od

Hig

h

Prozac

Placebo

Ketamine

Trintellix

Botox

Onset

Eff

icacy

MIF1

Prozac

Placebo

Ketamine

Trintellix

Slow Mod Fast

Lo

wM

od

Hig

h

Botox

Nemifitide

Representative Treatments for Depression

7

Melanocortin

Signal

MC3R

MC4R

MC5R

Non-selective

Melanocortin

Release Blocker Selective

MC5R

Blocker

Why Make Selective Melanocortin Blockers?

Eat More

Fight Depression

Store Fat

Fight Depression

And Anxiety

8

Melanocortin

Signal

Potential Adopters – Antidepressant Prescribers

Phone survey of PCPs (33 respondents) Akhu &

KGI Market Analysis Team (2015)

.

Pre

fere

nce (

%)

Yes No0

20

40

60

80

100

79%

21%

Would you consider switching to biologic

for depression treatment?Adult Prescriptions

79% Adopters

$2,000/year

17.8M

2.81M

$5.62B

Agency for Healthcare Research & Quality,

DHHS, 2011; CDC, National Center for Health

Statistics (2014); Ambulatory Care Use

& Physician Office visits, NCHS, CDC,2014

20% Market Share 3.56M

Safe med reduces depression 60% overnight

is worth switch from antidepressants.

.

Pre

fere

nce (

%)

S. A

gree

Agre

e

Dis

agre

e

S. D

isag

ree

0

10

20

30

40

50

60

70

44%41%

11%4%

Potential Adopters Confirm Unmet Needs

10

Twitter Poll; 64 respondents (Akhu, 2016)

30M

6M

$5.28B

Depressed Adults

20% Market Share

2,000/year

CDC, National Center for Health Statistics (2014)

2.64M44% Adopters

Portfolio of Intellectual Property

Licensed IP

9 Patent Applications

Univ Arizona and Texas A&M Univ

1,100 Peptide MC5R Blockers

CNS Disorders

Original IP

Trade Secrets

Akhu Therapeutics, Inc

MC5R & Other Targets

Multiple Disorders

Negotiating IP

58 Patents and 14 Applications

Mimetica Pty, Ltd

1,150 Chemical MC5R Blockers

Multiple Disorders

Bonus IP

5 Patent Applications

University of Arizona

MC1R Activators

Skin Disorders

11

Startup Financing

Founder $50,000

Crowdfund $16,500

Total $66,500

12

Cost of Developing a New Drug: Tufts Center for the Study of Drug Development (2014)

Examination of Clinical Trial Costs & Barriers for Drug Development: DHHS, ASPE (2014)

Path to New Drug Application

13

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total

Phase Preclinical Phase 0 Phase 1/2 Phase 3

Patients 15 80 1,000

Milestone IND Safety POC Efficacy & Dosage NDA

Cost $0.6M $0.7M $5.3M $90.3M $96.9M

Akhu’s Management

Caurnel Morgan, PhD

CEO & President

Neurobiology & Physiology

27 years

Stanley Watson, MD, PhD

Scientific Consultant

Psychiatry Research

40 years

James Gibbs, MD

Medical Consultant

Psychiatry and Research

40 years

14

Assumption: Price point is $2,000 per year

Five-Year Financial Projections

15

Year 1 Year 2 Year 3 Year 4 Year 5

Sales $298M $570M $939M $1,254M $1,532M

Expenses $8.5M $8.8M $9.1M $9.5M $9.8M

Net Profit $284M $550M $913M $1,223M $1,495M

Customers 148,901 284,723 469,328 626,965 765,816

Summary

Products

Market

Need

Team

Competitive

Advantages

MC5R blockers lead our alternative treatments.

Unmet needs plague depression and other areas.

Alternative treatments are severely limited.

We have the highest level of domain expertise.

Our prototypes have potential for high efficacy,

tolerability, and ROI.

16

Caurnel Morgan, PhD

CEO, President

Address: 383 Shadow Oaks, Irvine, CA 92618

Tel: 949-545-9972

Email: camorgan@akhutherapeutics.com

Website: http://akhutherapeutics.com

Preclinical Studies, Akhu Therapeutics;

Health News (2016)

Clinical Trials:

JNJ-10229570, Janssen, NCT01492647 (2013)

MTC896, Mimetica, NCT02395549 (2016)

18

More Attributes of MC5R Blockers

Anxiety: 50M in USA

Unmet Needs: Efficacy; Safety

USA Market: $1B (2016)

Mostly generics

Acne: 40-50M in USA

Harris Williams & Co (2016)

Unmet Needs: Efficacy; Safety

USA Market: $10B (2013)

$13B (2017)

MC5R Blocker for Pet Separation Anxiety

Twitter Polls, Akhu (2016); Federal Trade

Commission (2015); Dodman, Tufts University

Veterinary School (2016); Braitman, Salon (2014);

Pollack, New York Times (2014); AVMA (2015)

Unmet Need: Efficacy

First Movers:

Clomicalm (clomipramine) Novartis

Reconcile (fluoxetine) Elanco/Eli Lilly

SILEO (dexmedetomidine) Pfizer/Zoetis

Distribution: 44,000 U.S. Veterinarians

for companion animals

SOM: $100M

SAM: $14.4B (24M x $600/year)

R&D Remaining: $2M over 2 years

19

Disloyalty to Antidepressants

.

Pre

fere

nce (

%)

One

Two

Three

Four

0

10

20

30

40

50

60

70How many times do depressed people switch

medicines in 1 year?

20

Twitter Poll: 50 respondents (Akhu, 2016)

.

Pre

fere

nce (

%)

Effe

ctiv

eFas

tM

ild

Lastin

g

0

10

20

30

40

50

Unmet Needs – Antidepressant Users

Most important feature of new medicine for

depression or anxiety:

Twitter Poll; 78 respondents (Akhu, 2016)

Value of New Alternative

If brand name antidepressants cost $4000/year,

effective, fast, safe alternatives are worth:

.

Pre

fere

nce (

%)

$2K/y

r

$4K/y

r

$8K/y

r

$10K

/yr

0

10

20

30

40

50

60

70

Twitter Poll; 35 respondents (Akhu, 2016)

.

Pre

fere

nce (

%)

Effi

cacy

Onse

t

Dura

tion

Pric

e

0

20

40

60

80

100

Physicians Confirm Unmet Needs

Causes of antidepressant discontinuation.

23

Phone survey of PCPs (33 respondents);

Akhu & KGI Market Analysis Team (2015)

Phone Interviews of KOLs (4 respondents)

Akhu & KGI Market Analysis Team (2015)

“Remission & response rates are lower than what we would like.”

“Of the 60% … that somewhat respond …, half are almost having a full

remission and … half are getting a 50% benefit.”

“STAR*D revealed ~50% better, but the problem … is relapse.”

24

Key Opinion Leaders Confirm Unmet Needs

FDA Fast Track: superior characteristics;

imminent need (6-months vs 12-18 months)

Source: www.fda.gov

2008 FDA First Cycle Review

Performance

.

1st

Cycle

Ap

pro

val (%

)

Nonlife Life Nonlife Life0

20

40

60

80

100 2003-2007

Follow-On Novel.

1st

Cycle

Ap

pro

val (%

)

Chemicals Biologics0

20

40

60

80

100 2003-2007

Regulatory Hurdles

25

Abilify

Cymbalta

Lexapro

Pristiq

Viibryd

Trintellix0 1 2 3 4 5

0

300

600

900

1200

1500

Time (years)

Us

ers

(1

00

0s

)

Akhu

Predicted Market Performance

0 1 2 3 4 50

1

2

3

4

Time (years)

Sa

les

($

B)

Pri/Vii/Tri

0 1 2 3 4 50

1

2

3

4

Time (years)

Sa

les

($

B)

Abi/Cym/Lex

Pri/Vii/Tri

National Center for Health Statistics

(2011); Statistica (2012); Drugs.com

(2016)

0 1 2 3 4 50

300

600

900

1200

1500

Time (years)$

Millio

ns

Sales

Costs

Break-Even

26

Responses to Antidepressants

NormalDepressedTreatment for 6 WeeksDiscontinuation 1 Week

Responses to Non-selective Melanocortin Blockers

NormalDepressedTreatment for 2-5 daysTreatment for 2-5 daysDiscontinuation 100 DaysDiscontinuation 100 Days

Poorly Defined Drug Targets for Depression

Low efficacy

Slow onset

Low tolerability

Best Defined Drug Target for Depression

High efficacy

Fast onset

High tolerability

Depression Treatment Efficacy

Hamilton Scale

.

Pa

tien

t S

co

re

Null

Pla

cebo

SSR

I

Ket

amin

e

MIF

1

0

5

10

15

20

25

30

Normal

Mild

Moderate

Severe

Very Severe

Hamilton Scale

.

Pa

tien

t S

co

re

Null

Pla

cebo

SSR

I

Ket

amin

e

MIF

1

0

5

10

15

20

25

30

Normal

Mild

Moderate

Severe

Very Severe

Hamilton Scale

.

Pati

en

t S

co

re

Null

Pla

cebo

SSR

I

Ket

amin

e

MIF

1

0

5

10

15

20

25

30

Normal

Mild

Moderate

Severe

Very Severe

Hamilton Scale

.

Pa

tien

t S

co

re

Null

Pla

cebo

SSR

I

Ket

amin

e

MIF

1

0

5

10

15

20

25

30

Normal

Mild

Moderate

Severe

Very Severe

Sources:

Turner et al., 2008

Kirsch et al., 2014

McGirr et al., 2015

Ehrensing et al., 1994

Hamilton Scale

.

Pa

tien

t S

co

re

Null

Pla

cebo

SSR

I

Ket

amin

e

MIF

1

0

5

10

15

20

25

30

Normal

Mild

Moderate

Severe

Very Severe

3 d

Hamilton Scale

.

Pa

tien

t S

co

re

Null

Pla

cebo

SSR

I

Ket

amin

e

MIF

1

0

5

10

15

20

25

30

Normal

Mild

Moderate

Severe

Very Severe

6 d

Hamilton Scale

.

Pa

tien

t S

co

re

Null

Pla

cebo

SSR

I

Ket

amin

e

MIF

1

0

5

10

15

20

25

30

Normal

Mild

Moderate

Severe

Very Severe

13 d

Potential for Acquisition

Naurex acquired by Allergan, 2015

$560M upfront Undisclosed milestones

Phase II injectable antidepressant adjuvant

CNS Therapeutics, 2005-12

$205M upfront $153M milestones

Phase II

Healthcare Report, Silicon Valley Bank (2013);

FierceBiotech (2015)

32

Assumptions Year 1 Year 2 Year 3 Year 4 Year 5

Customers Targeted 4,024,354 4,326,180 4,650,644 4,999,442 5,374,400

Customer Acquisition Rate (%) 4% 4% 6% 6% 6%

Customer Retention Rate (%) 100% 75% 75% 75% 75%

Customers Acquired 148,901 284,723 469,328 626,965 765,816

Annual Price $2,000 $2,000 $2,000 $2,000 $2,000

Assumptions for Financial Statements

33