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CONFIDENTIAL Funxional Therapeutics Ltd.

Peritoneal AdhesionsDevelopment Plan Overview

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Strategic Focus

Rapid and efficient identification of proteins andpeptides with therapeutic potential throughfunctional screening, coupled with proprietarymethods of generating small moleculepharmaceuticals which mimic the function of

these lead proteins and peptides.

Unique mixture of corporate and academiccultures, enabling rapid progression of productcandidates from concept to lead candidate andthrough clinical proof of concept demonstration

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Founding Assets

Novel family of broad spectrum chemokine inhibitors(BSCIs) demonstrating potency in multiple animal modelsof inflammation

Clinical development plan defined and being implementedfor lead product candidate for prevention of peritoneal

adhesions Second BSCI suitable for large pharma partnering

Unique family of apoE mimetic compounds, designed totreat brain disorders, including Alzheimers Disease

GAEL Technology - a library enriched in agonists for G-protein coupled receptors, ideal for use in our functionalscreening programmes for diseases such as diabetes

Broad IP portfolio contributed by parent entities

Seed funding from Ipsen

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FXT Organizational Chart

Board of DirectorsCEO

J. Avery

VP of Business & Strategy

R. Schroff

Chief Scientific Officer

D. Grainger

VP of R&D

C. Campbell

Laboratory Staff Medical Staff

Administrative Staff

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FXT Management

David J. Grainger, PhDChief Scientific OfficerBritish Heart Foundation Senior Research

Fellow, Dept of Medicine, Cambridge

UniversityOver 75 publications, including premierjournals like Science,Nature,Nature Medicine109 patent & patent applications

Director, Papworth Hospital TranslationalResearch UnitFounder: TCP Innovations Ltd, FingerPrint

Diagnostics Ltd.

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Initially founded in 1994 to provideconsulting services to thepharmaceutical industry

TCP Innovations Ltd

Network of more than 30 Cambridge-based

academics with expertise in chemistry, biologyand pharmacology

Incorporated as a UK limited liability corporationin 2001, wholly owned by Dr Grainger

Continues to provide consultancy, but also acts asrepository of all Dr Graingers intellectualproperty either directly or through licenseagreements with Cambridge University

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Founded in 2002, but moves into 300 sq.m (3000sq.ft) of purpose-built lab and office space Jul 05

15 staff with capability to run large phase II trialsor multiple phase I studies, as well as participate

in multi-centre pivotal trials Experienced team, under the directorship of Dr

Grainger

Papworth Hospital NHS Foundation Trust

translating the best basic science into real benefits for pa

Translational Research Unit

Dedicated clinical trials unit, based atUK premier cardiothoracic hospital

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FXT Management

Robert W. Schroff, PhD, MBAVP of Business & Strategy

Schroff Consulting Services

Ipsen Group Peptide Unit HeadProject Manager

NeoRx VP & General Manager,Cardiovascular Products

National Cancer Institute Senior StaffScientist

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FXT Management

Jason Avery, MBAChief Executive Officer

Senior VP Business Development with CAT,negotiated multiple partnering deals with large pharma,including Eli Lilly, Pfizer, Amgen, Wyeth and Merck

Responsible for successful IPO in 1997, raising 41mand for 93m in follow-on offering in 2000 with listingon Nasdaq

Overseen completion of 7 clinical trials

Previous experience as CEO of biotech start-upsStrong accountancy background: Director of Ernst &

Young in Palo Alto, CA., advising biopharmaceuticalson corporate finance and business development

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FXT Management

Callum Campbell, PhDVP of Research & DevelopmentDirector of Proprietary Discovery Programmes

Cambridge Antibody TechnologyManaged in-house research programAdvanced 5 therapeutic antibody candidates to

preclinical stage in 2 yearsActive in product and alliance steering committees

Senior R&D Manager, Glaxo and Glaxo Wellcome

Established Vascular Biology DepartmentOver 30 scientists and techniciansExperience from discovery through clinical trials

and registration

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An Experienced Team

Active participants in:

5 start-up organizations

2 IPO and multiple private financings

21 corporate alliances

17 technologies entered into clinical

trials

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Functional Screening For New DrugsPre -1980s Today Tomorrow

Select compounds which have adesirable effect on the function ofthe individual

Optimise the lead candidates

How do I find new leadcompounds?

Reduce the organism to a simplecollection of molecules

Choose a molecular target(receptor or enzyme)

Perform a high-throughput screen


How do I validate my moleculartargets?

What happens if no single

receptor/enzyme is responsible forthe function I need to modulate?

Reduce the organism to a simplecollection of functions

Choose a function to modulate

Perform a functional screen


Finds drugs with unexpected orcomplex molecular targets, buthighly desirable functionalproperties

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Enabling Skillsets

Hurdle: Functional assays are not as straightforward to

perform in high-throughput format as molecular assays

Solutions:

(2) Expertise in parallel microtitre format functional assays

(3) Use peptides to aid rational design, rather than rely on

vast random libraries

(4) Well-validated general methods of designing

peptidomimetic small molecules which retain function

(5) Use proprietary small molecule libraries which are not

random, but heavily enriched in bioactive NCEs

FXT has all these skillsets

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Superfamily of structurally-related, small pro-

inflammatory cytokines that direct leukocyte traffic

CXC family CC family

CX3C family C family

IL-8Gro-, - and -

IP-10I-TACSDF-1PF-4

MCP-1, -2, -3 and -4MIP-1, -1, -3 and -3

Eotaxin 1 and 2RANTESTARC6Ckine / SLC

Fractalkine Lymphotactin

A signalling network of more than 50 ligands and 20 receptors

Chemokines

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From the bone marrow through the bloodstream to the periphery, chemokines guide

various leukocyte subsets to their targets.

The redundant chemokine signaling networkprovides sufficient information density to

accurately address many leukocyte subsets

simultaneously.

Chemokines have been implicated in the inappropriaterecruitment of leukocytes that typifies diseases with an

inflammatory component

CHEMOKINES ARE AN ATTRACTIVE TARGET FOR

NOVEL ANTI-INFLAMMATORY THERAPIES

Chemokines Direct Leukocyte Traffic

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Chemokine Receptor Antagonists in the Clinic

Stem cell Tx &

Mult. Myeloma

AMD3100IIAnormedCXCR4

RA, MS,

Transplant

T487ITularikCXCR3

HIVSCH-CSCH-D

IScheringPlough

CCR5

HIVUK-427857IPfizerCCR5

AsthmaDPC-168IBMSCCR3

Asthma,allergic rhinitis

766994IGSKCCR3

RA, MSMLN1202

MLN3897

II

I

Millenium

Sanofi Aventis

CCR2

RA??IIPfizerCCR1

MSBX 471IIBerlexCCR1

IndicationCompoundPhaseCompanyReceptor

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Alignment of different chemokines from more than 10 species

identified regions of homology across the whole superfamily

Alignment Strategy to Identify

Chemokine Inhibitors

AQPDAINAPV TCCYNFTNRK ISVQRLASYR RITSSKCPKE

*****.***. **** ** . * ** **. *****.****

AQPDAVNAPL TCCYSFTSKM IPMSRLESYK RITSSRCPKE

AVIFKTIVAK EICADPKQKW VQDSMDHLDK QTQTPKT

** * * . . *.***** * ** **.

AVVFVTKLKR EVCADPKKEW VQTYIKNLDR NQMR...

PEPTIDE 1 PEPTIDE 2

PEPTIDE 3

human

mouse

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Functional Cell Migration Assay

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NR58-3.14.3 Has Broad Anti-Inflammatory

Effects In Animal Models

Baylor Univ.ALS

Yale Univ.EndometriosisUniv. WashingtonIschemic Lung Injury

Univ. WashingtonBronchiolitis Obliterans

Syndrome

Univ. CambridgeIschemic Stroke

Univ. Camb./NeoRxAtherosclerosis

Univ. Washington/NeoRxAsthma

Univ. Camb./NeoRxDermal InflammationInstitutionIndication

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UNTREATED BSCI

Reversal of Established Pulmonary Lesions

in Mouse Ovalbumin Asthma Model

Potent, no effect on resting immune function,

but not an ideal drug molecule

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BN83250: lead candidate for parenteral administration

PEPTIDES AMINO-

GLUTARIMIDES

AMINO-

CAPROLACTAMS

YOHIMBAMIDES

NR58-3.14.3

BIM-58171

BIM-58189

Yohimban-

16-amide

NR58,4

NR58,33

Foxamide C16

BN83250

BN83470

Medicinal Chemistry Programs Identified

Four Structurally Distinct BSCI Classes

5-11 natural and

unnatural amino

acids,cyclic

1st small

molecules,

unstable in vivo

Outstanding drug

development

candidates

Complex, less

appealing

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BN83250

Potent BSCI activity in vitro (0.09 nM) Over 30X more potent than NR58-3.14.3

Potent in vivo (0.001 mg/kg s.c.) 30,000X more potent than NR58-3.14.3

Metabolically stable NR58-3.14.3 (sc)

NR58-3.14.3 (oral)

BN83250 (sc)

BN83250 (oral)

0.00001 0.0001 0.001 0.01 0.1 1 10 1000

25

50

75

100

Drug dose (mg/kg)

Orally active

Novel structure

Wide therapeutic

index inpreliminarytoxicology

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Endometriosis

Dr. Aydin Arici, Dept Obstetrics/Gynecology, Yale Univ. Substantial evidence linking chemokines to migration ofendometrial cells into the abdomen (retrograde menses)

Nude mouse human endometrial tissue xenograft model(NR58-3.14.3)

Reduction in total number ofendometriotic lesions by 45% (P=0.03)

0

0.5

1

1.5

2

Num

beroflesions

/an

ima

l

Control 3.14.3

*

Reduction in total volume of endometrioticlesions by 67% (P=0.046)

0

0.5

1

1.5

2

Lesionvo

lume

/an

ima

l

Control 3.14.3

*

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Peritoneal Adhesions

Substantial evidence linking chemokines toadhesions, human and animal model

Published reports inhibiting adhesion development

through inhibition of chemokines Established model of surgical-induced adhesions

Rare example where animal model disease is inducedexactly as in humans

Opportunity to initiate drug therapy before or atthe time of injury

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0

5

10

15

20

25

30

Control 0.330.10.0330.01

Totaladhesionarea(mm

mg/animal/day

Effect of BN -83250 on total adhesion area (Mean SEM)

*

**

0

5

10

15

20

25

30

Control 0.330.10.0330.01

2)

mg/animal/day

*

**

Yale Adhesion Model Studies

NR58-3.14.3 efficacious via daily ip or sc

injections

BN83250 efficacious via daily oral gavage

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Yale Adhesion Model Studies

NR58-3.14.3 administered via single

intraoperative administration

0

10

20

30

Control BIM -58001

Effect of BIM SEM)

*

0

10

20

30

Control NR58-3.14.3-

*

Total

AdhesionArea

(mm2)

Mean+/-SEM

Opens direct delivery opportunity

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Preliminary Toxicology & Safety

>1,000(Mouse endotoxemia model)

>300oral

Unknown>100ip

>667,000(Mouse endotoxemia model)>100sc

Unknown>100iv

Therapeutic WindowEstimated LD50

(mg/kg)

Route

Only known toxicity: transient hypoactivity, iv route

only, duration typically 60 minutes or less

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CONCLUSION:Empirically, BN83250 is an ideal candidate for

subcutaneous development as an anti-inflammatory medication

BN83250: Summary of Available Data

Compositionally novel, inexpensive, readilysynthesized BSCI

Highly potent anti-inflammatory activity in

vivo (

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BSCI Program Publications

10 peer reviewed journal articles

3 articles in press

2 manuscripts submitted

Multiple scientific meeting presentations

The BSCI technology is so unique and so intriguing to

the medical scientific community, we routinely receive

unsolicited offers for collaborations

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Incidence of Adhesions

100%4-6 wksPittaway et al

71%

83%

6-8 wks

>6 mo

Surrey & Friedman

75%

76%

1-16 wks

1-3 yrs

DeCherney & Mezer

86%1-12 wksDiamond et al.

Percentage of Patients

with Adhesions

Time from Initial

Laparotomy Procedure

Study

Cadaver Studies (Am. J. Surg. 1973, 126:345) 28% in individuals without prior abdominal surgery

50% with minor abdominal surgery

76% with major abdominal surgery

93% with multiple abdominal surgery

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Adhesion-Related Complications

Intestinal Obstruction

>40% of all cases

30-60% require surgical intervention

Infertility

A major cause of tubal factor infertility (40% of allinfertility)

Adhesions covering ovarian surface inhibit fertility

Chronic Pelvic Pain (CPP)

40% of laparoscopies due to CPP

80% improvement in CPP following adhesiolysis

Death

>2,200 US deaths/yr from intestinal obstruction due toadhesions

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Treatment of Peritoneal Adhesions

Pharmaceutical OptionsNone

Intraoperative Films and Gels

2-3 products actively sold

Marginal perceived valueDelivery restricted to selected sites at time of surgery

Sales of Seprafilm (Genzyme Biosurgery) $55-58M in2003

FDA accepted endpoint of inhibition of adhesionsPivotal Phase III trial sizes: 265-277 patients, 6-12

week endpoint

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Proposed Clinical Indication

Treatment involves extensive surgery High degree of adhesion formation, frequently

involving ovaries and fallopian tubes, resulting ininfertility

Opportunity to initiate drug treatment at the timeof injury

2nd look laparoscopy to lyse adhesions common,provides opportunity to assess efficacy

Short-term therapy (1-14 days), lower costs, rapidtime to market

Prevention of adhesions in women undergoing

surgical treatment for severe endometriosis

Off I di i S d I di i

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Off-Indication or Secondary Indication

Opportunities

Endometriosis

Women currently being treated for

endometriosis:

1.4 million US

284,000 France

A product with a unique mechanism of action

and efficacy benefits without severe side effectswill quickly dominate the market Datamonitor

2002

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Off-Indication/Secondary Indication

Opportunities

Myomectomy (uterine fibroids)

62,500 myomectomies per year

(Intl Council on Infertility)80% by open laparotomy

Same physicians and surgeons

Many pivotal studies for adhesion devices

included myomectomy patients

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BN83250 Product Development Plan

Formulation

SC injectable, preferably in a pen configuration

Manufacturing

Lab-scale process in place

Scale-up development ready to begin

Initial estimates: 1-3 K/kilogram

ADME/PK

Ready to be initiated

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BN83250 Product Development Plan

Tox/Safety Pharmacology

All preliminary studies complete

GLP studies ready to commenceTox studies: ~ 9 months

Teratogenicity: ~9 months

Safety Pharmacology: ~6 months

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BN83250 Clinical Development Plan

Phase I single dose in healthy volunteers Phase I repeat dose in healthy volunteersConsidering use of a dermal inflammatory test

during Phase I trials

Phase IIa proof of concept in women undergoinglaparoscopic surgery for moderate and severeendometriosis (n=24) or for adhesiolysis w/oendometriosis (n=24)

Adhesion status 12 wks post surgery18 months total study duration

Decision Point out-license, co-develop orcontinue development

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BN83250 Late-Stage Clinical Development

Phase IIb dose finding study in patientsundergoing laparoscopic surgery

3 doses and/or regimen + placebo

96 patients (24 pts per arm)

18 months total duration

Phase III pivotal studies (2 in parallel)

10 endpoint: adhesion status @ 12 wks

Active:placebo ratio 2:1180 patients per study (120 test, 60 placebo)

24 months

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Outstanding Issues

Where best to conduct Phase II POC trial?

US versus UK PI Per patient cost for adhesion study? 12 week adhesion incidence rates in target populations to

support a power calculation?

Is 12 test agent & 12 placebo per disease group adequate? Number of centers required for Phase II POC? How difficult to standardize follow-up laparoscopy? Will CDER support same clinical endpoints as Device Branch? Include myomectomy patients or leave as a separate study? Rate of laparotomy versus laparoscopy for target populations? Appropriate to limit to laparotomy in order to achieve highest

adhesion incidence rate while most gynecologic procedures areperformed by laparoscopy?

Off-indication potential of laparoscopy and endometriosis?

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