Anp1204elixir211.doc

I N V E S T M E N T
INTERSUISSE
R E S E A R C H
Antisense Therapeutics Ltd

(ASX CODE: ANP) www.antisense.com.au December 2004
www.elixir-secs.com
Victoria-based Antisense Therapeutics is one of the
leading players in the discovery and development of
second-generation antisense therapeutics. It has an
important 5-year collaboration with the leading
antisense company, Isis Pharmaceuticals. This
collaboration has given the company access to Isis'
proprietary drug discovery technology and
intellectual property.
Antisense Therapeutics has begun a Phase IIa clinical study in multiple sclerosis on its most advanced drug candidate (ATL 1102). This drug targets VLA-4, a VALUATION
strategy that may be validated by the FDA approval of Antegren, a monoclonal antibody that inhibits a sub-set of VLA-4 receptors. A second molecule has recently EPS (Cents)
entered proof-of-concept clinical trials in patients for the EV/EBITDA
The financial markets' image of antisense-based Elixir FCF
therapeutics has been tarnished by a number of recent high profile clinical trial disappointments (Affinitak, Genasense). Despite addressing many of the failings of the first generation molecules with a series of EPS (Cents)
improvements in the second generation, we doubt that the market is sufficiently well informed to discriminate EV/EBITDA
between the two. Consequently, the financial markets are Elixir FCF
unlikely to give the technology credit until it sees positive Clearly the most telling impact on the valuation will be the clinical trial results of the company's own products, EPS (Cents)
however it may also benefit from positive clinical progress of Isis' own second generation molecules. EV/EBITDA
Furthermore, the company will also have to compete with Elixir FCF
emerging competition in the field of RNA interference (RNAi). The prospect of RNA based therapeutics has already generated a great deal of interest (and drawn 52-Week High
parallels with antisense), but the technology still faces 52-Week Low
similar technological challenges to those faced by Percentage Change 1yr
Percentage Change YTD
Percentage Change 6m
In the absence of clinical trial results and meaningful Percentage Change 3m
Relative Index
revenues, the market is likely to focus on the cash 1Yr Rel. Performance
position of the company: As of June 2004 it had 3mo Rel. Performance
AU$14.4m. At the current estimated rate of cash burn, 6mo Rel. Performance
there is a strong possibility that the company will need to return to the market in the near future if it is to move forward with its 3 development projects as planned. Elixir Securities Ltd is an independent investment research company specialising in the biopharmaceutical sector and regulated by the Financial Services Authority in the United Kingdom. In November 2004, Elixir and Intersuisse Limited co-hosted the first Australian Life Sciences Forum in London, presenting ten leading Australian Life Sciences companies. Elixir was commissioned by Antisense Therapeutics to prepare this report for which it received a fee. _________________________________________________________________________________________________________________________ Melbourne - Level 7, 530 Collins Street, Melbourne, Vic, Australia 3000 ASX Market Participant. AFS Licence 246827 Telephone: (+613) 9629 8288 Facsimile (+613) 9629 8882 Sydney - Level 7, 5 Elizabeth Street, Sydney, NSW, Australia 2000 Telephone: (+612) 92332100 Facsimile (+612) 9233 2117 Antisense Therapeutics (ASX: ANP) is a drug discovery The company has a sensible strategy for the and development company that focuses on the creation, development of antisense therapeutics. It has and development and commercialisation of novel antisense intends to gain access to leading antisense technologies therapeutics. It was founded on a strategic collaboration by partnering with key leaders in the field. It is seeking to with Isis Pharmaceuticals. Nasdaq listed and Californian develop therapeutics in markets that are largely and based Isis Pharmaceuticals Inc is a world leader in the poorly served by current therapeutics. It conducts its pre- field of antisense drug discovery and development. clinical early stage clinical research through seasoned Antisense Therapeutics listed on the Australian Stock third party contractors. Like many biotechnology Exchange in December 2001, raising AU$13m in the companies in a similar fi nancial situation, it intends to partner its products to larger pharmaceutical companies. Antisense Therapeutics has access to a broad range of Antisense Therapeutics plans to license certain of its intellectual property through its strategic partnership with products at an early stage of development to generate Isis Pharmaceuticals. Isis has granted Antisense income progress other projects into later stage clinical Therapeutics rights to use Isis technology to development. When commercialised, Antisense commercialise antisense drugs to a number of drug Therapeutics' drugs will compete head-on with a number targets. This partnership provides Antisense of conventional drugs, biologics and other nucleic acid Therapeutics the opportunity to create and progress a portfolio of second generation (MOE) antisense drugs in its development pipeline. Table 2: Key inflexions
The company has several antisense drug development projects at various stages of completion. The two most advanced of these are potential drugs against multiple sclerosis (ATL1102) and psoriasis (ATL1101), two ATL1101 Psoriasis cream trials commenced conditions for which there are large, unmet needs for Key Shareholders
Source: Company, Elixir Securities Its key shareholders include PolyChip Pharmaceuticals (20.4%, a 100% subsidiary of Circadian Technologies Limited - a leading Australian biotechnology commercilisation firm), Syngene (15.3%, of which Antisense Therapeutics has sufficient cash to cover its Circadian controls 42%), Isis Pharmaceuticals (11.4%) current projected outflows until the middle of 2005. At 30 and Queensland Investment Corporation (4.5%). June 2004 it had cash reserves of AU$14.4m. Syngene is focused on commerically exploiting During the financial year 2004, Antisense raised inventions and patents in the area of hybridisation AU$10.4m through the issue of new shares, of which histochemistry (DNA therapeutics and diagnostics). AU$5m was raised in a private share placement to Polychip is controlled by Circadian, a listed vehicle on the Australian institutions and professional investors. The Australian Stock Exchange that provides management balance of AU$5.4m was raised through an issue of and funding for the development and commercialisation 41.5m shares to eligible shareholders at AU$0.13 per of Australian biomedical research which includes share, pursuant to the Company's Share Purchase Plan. maintaining its own research and development programmes. In October 2004 the company announced that it had accepted a proposal from the Bank of New York to In addition to private and institutional investors, Antisense establish a Level 1 American Depository Receipt Therapeutics has received funding from Australian program. The aim of the ADR programme is to promote Government programmes (Start Grant and R&D tax diversity in the shareholder base and give access to a far concession). The company operates on a virtual larger capital market, with the prospect of increasing infras tructure principal which minimises overheads. It out- sources much of the discovery and development work to experienced third party contractors. Whilst we consider We estimate that Antisense Therapeutics' current burn this structure appropriate for a drug discovery company rate is some AU$10.5m per annum, approximately the with limited funds, the discovery and development same amount as its estimated cash reserve of around programmes are exposed to third-party risks. AU$11m. Therefore, it is highly probable that Antisense will need to raise more funds in the near future. Further Table 1: Key Shareholders
capital will be required to accelerate current programmes and exploit new opportunities, as and when they arise. %Holding
Consequently, investors should expect considerable differences between forecast cash outflows and actual results. However, the volatility created by material differences in the financial results is likely to be less important than that caused by the progress of its clinical trial programmes. Although it is possible that milestone payments and other one-offs will push the company towards breakeven in 2006, Antisense Therapeutics is likely to reinvest these revenues into the future development of the pipeline. Consequently, sustainable more predictable profitability may not occur until significant royalty income flows in. We would expect Drawbacks of Antisense
sustainable profitability late in the decade, when The development of antisense therapeutics has been Antisense Therapeutics' first molecule is expected to be dogged by several concerns; particularly the efficient delivery of the antisense therapeutic and the presence of Phosphorothioate oligonulcleotides can, in certain Antisense Therapeutics licensed ISIS 107248 (it is now cirucumstances, induce immune system elevations and known as ATL1102; a second generation antisense other effects that are not associated with the mRNA the inhibitor of VLA-4 in development for MS), from Isis antisense is designed to knock out. In certain before the company was listed. In addition to the circumstances, these ancilliary effects may be beneficial licensing agreement, Antisense Therapeutics and Isis - such as in the case of Vitravene which exhibits have a five-year antisense drug discovery and antisense and non-antisense effects. Isis has spent a development collaboration that gives Antisense considerable amount of money (estimated at US$1bn) on Therapeutics access to Isis' proprietary antisense the development of antisense oligonucleotides. It intellectual property. Antisense Therapeutics pays Isis for believes that its second generation molecules can be access to its expertise, and for research and designed to include or exclude non-antisense effects. Isis manufacturing services associated with the collaboration. believes that second generation antisense molecules This collaboration provides Antisense Therapeutics with have sufficient oral bioavailability to permit oral dosing of access to the rapid generation of second generation its antisense drugs. In this respect, Isis Pharmaceuticals is planning to test an oral TNF-a antisense in Phase II antisense lead compounds to its therapeutic targets. Antisense Therapeutics has agreed a list of research targets with Isis and can, during the research and Market perception of Antisense technology
development phase, select those with the most commercial potential to exclusively market and sell. There is a pervasive view, in financial markets, that Antisense Therapeutics is also obliged to pay royalties on antisense technology is a high risk strategy for drug antisense drugs discovered and developed within the development despite the elegance of the underlying science. There have been several late-stage clinical failures with the first generation antisense technology, Due to its access to Isis Pharmaceuticals' proprietary resulting in just one antisense molecule gaining approval drug discovery process, Antisense Therapeutics believes for human use to date. Valuations of antisense it can quickly move candidates from drug discovery to companies are likely to be further negatively impacted by developing therapies. Once a therapeutic goal and gene the decision of Sanofi-Aventis to withdraw from a target has been identified, theoretically a lead antisense development agreement with Genta in November. Whilst compound can be rationally designed within hours. In it is reasonable to argue that second generation contrast, traditional drug discovery approaches can take oligonucleotides appear superior to the first generation, several years to produce lead compounds. investor perception of the technology will be negatively In practice, developing a lead antisense compound can effected if antisense drugs continue to fail in the clinic. be a little m ore complex. Optimisation of the molecule is frequently frustrated by the internal structures of the RNA and associations with cellular proteins that cause ATL1102 is a second generation antisense molecule that physical barriers. Consequently, effective antisense drugs must be selected from a large pool of candidates. targets the CD49d sub-unit of VLA4, an important immune cell protein that is responsible for trafficking of Nevertheless, the experience and intellectual property inflammatory white blood cells into the CNS. In multiple position of Isis Pharmaceuticals should produce sclerosis excessive amounts of VLA4 are thought to meaningful advantages in the discovery and promote the inappropriate migration of autoreactive development of antisense based therapies. lympocytes into the CNS which contributes to the Isis Pharmaceuticals
progression of the disease. ATL1102 was licensed from Isis Pharmaceuticals in 2001, where it was known as Isis Pharmaceuticals is a leading drug discovery and ISIS107248. Isis has a right of first refusal on this development company focused on the development of molecule, when Antisense Therapeutics proposes to out- RNA based therapeutics, primarily antisense, and it has 12 antisense products in development to treat metabolic, cardiovascular, inflammatory and viral diseases, and Clinical Status
cancer. A key achievement since its inception is the In August 2003, Antisense Therapeutics began testing approval of the world's first antisense drug, Vitravene, for ATL1102 in Phase I clinical trials. The 54 member the treatment of eye infections caused by HIV-associated healthy volunteer study was designed as a randomised cytomegalovirus. The drug is approved in the US and Europe, where it is marketed by Novartis. Isis double-blind, dose escalation, placebo-controlled trial. Preliminary data was presented in January 2004 at the Pharmaceuticals has a number of alliances with global Australian Neuroscience Conference Meeting where the pharmaceutical companies including Amgen, Pfizer, company reported that the data indicated a favourable GlaxoSmithKline, Novartis, Eli Lilly and Chiron. safety and pharmacokinetic profile. The final results were It is our understanding that the alliance with Isis will give revealed in June 2004, when Antisense Therapeutics Antisense Therapeutics access to all the key intellectual announced its intention to proceed into Phase II testing property that relates to the commercialisation of second with the 6mg/kg/week dose. The most frequently reported generation antisense molecules. Previously, Isis secured adverse events in the Phase I clinical study were mild certain IP for developing second generation antisense by 'flu'-like symptoms and occasional injection site reactions licensing certain patents from Hybridon. ("ISRs"). ISRs which were generally mild, increased in incidence and severity with increasing doses, particularly A Phase IIa trial was initiated in December 2004 at the negative or have shown only very modest benefit. Also, University of Essen in Germany following approval by the those DMTs that are effective in both the very early and Ethics Committee of the University and authorisation by relapsing-remitting stages of MS, tend to lose efficacy as the Bundesinstitut für Arzneimittel und Medizinprodukte the disease becomes more progressive and in Germany. Antisense Therapeutics already had degenerative. However, these patients still benefit from experience dealing with international regulators: its DMTs that help suppress any superimposed relapses. Phase I clinical studies were conducted at Charterhouse The only DMT approved for secondary progressive MS in Clinical Research Unit of the Ravenscourt Park Hospital the US is Serono's immunosuppressor Novantrone. Because of concerns about cardiotoxicity, this drug can The multi-centre, randomized, double-blinded, placebo- only be used up to a lifetime maximum of 140 mg/m2 controlled eight-week clinical trial, over 60 patients with (about 11 doses). Around 30% of all cases of MS can be relapsing-remitting multiple sclerosis, will seek categorized as having progressive disease - a very large preliminary evidence of the drug's effectiveness. The patient population whose current needs are essentially company expects the treatment and patient monitoring stages will be complete by early 2006-subject to the Antegren
rate of recruitment-with results reported by mid-2006. The treatment of multiple sclerosis is likely to be Multiple Sclerosis
revolutionized in the near future by the launch of Multiple sclerosis ("MS") is the most common acquired Antegren, the first in a new generation of therapeutics. neurological disease of young adults with most patients Antegren, an antibody directed against VLA-4, has diagnosed between the ages of 20 to 50. It affects recently been approved by the FDA for marketing in the around 2.5m people worldwide and around 350,000 US, based on one-year interim data from two-year Phase people in the US. The typical patient is a young woman III trials. Clinical evidence suggests that administration of of childbearing age, although men make up 25% to 30% Antegren leads to a reduction in the number of MRI of all cases. A large opportunity lies in the chronic lesions, which is thought to be indicative of efficacy. progressive MS patient population, which constitutes In the next six months, the two-year clinical data around one third of the total MS patient population and assessing the impact of Antegren on the disability of MS lacks specifically approved treatments. The global market patients will become available. We believe that for MS is around USD$3bn, of which USD$1.5bn is Antegren's approval, likely to be endorsed by such generated in the US. We estimate that in the US the market is projected to grow to USD$3.3bn by 2008. further data, effectively validates the therapeutic approach selected by Antisense Therapeutics in MS, i.e. MS is a chronic inflammatory disease of the central targeting VLA-4. It is conceivable that the Antisense nervous system that is thought to be caused when the Therapeutics drug ATL1102, may have efficacy, dosing body's immune system attacks the myelin sheath that route and cost advantages over the antibody product. At insulates the brains nerve fibres slowing the transmission the same time however, the hurdle will be raised. Furthermore, amongst a whole raft of different therapeutic strategies being pursued by many companies The areas where demyelination occurs are called Biogen, one of the developing partners in Antegren, is plaques (scleroses), or lesions, and cause the debilitating known to be developing oral small molecule inhibitors of neurological symptoms which characterise the disease. VLA-4. ATL 1102 will target all types of VL A-4 and unlike Although initially it presents as an inflammatory disorder, Antegren will not produce neutralising antibodies, which the disease develops in time into a degenerative disorder leading to more serious abnormalities that leave the patients chronically disabled. In addition to the VLA4 target, there is a whole raft of development drugs that target other mechanisms, with Although the exact causes are unknown, evidence which ATL 1102 may have to compete once it is suggests an autoimmune reaction in which the body's T- lymphocytes mount an attack on the myelin sheath. It is thought that the initial attack on the myelin may explain Table 3 Selected clinical stage MS development drugs
the occurrence of sporadic exacerbations that often characterise the early, relapsing remitting, nature of the disease. Once the myelin has been stripped-back, it is thought that the neuron fibres themselves become irreversibly damaged and cease to transmit signals at all resulting in the unrelenting decline seen in progressive Treatment of MS
Until the 1990s there was no treatment for MS. Since 1993, five disease-modifying therapies ("DMTs") have immunomodulators: Interferon-ßs (or IFN-b ) (Avonex, Rebif, Betaseron) and glatiramer acetate (GA / Copaxone) as well as mitoxantrone (Novantrone), an immunosuppressant. All of the DMTs produce multiple effects on the immune system that benefit MS. Although the efficacy of the immunomodulators in relapsing-remitting MS has been firmly established, the results of studies examining their efficacy for patients with secondary progressive MS have either been Source: Companies, Elixir Securities There is no cure for the disease and treatment is focused on reducing the severity of the disease and minimizing its ATL1101 is designed to inhibit skin cell division, which is effect on the patient's life. The disease occurs in various a key characteristic of hyperproliferative skindisorders forms and is divided into three degrees of severity. Plaque psoriasis is the most common form and around such as Psoriasis. It consists of an antisense sequence directed against the IGF-1R gene which encodes a 80% of patients have this form. In moderate to severe protein called Insulin-like Growth Factor-I Receptor, psoriasis, between 2% and greater than 10% of a which is thought to play a pivotal role in the regulation of patients body surface area is covered with the disease. The disease affects 5-7m Americans with an annual incidence of between 150,000 and 260,000 new cases. Insulin-like Growth Factor ("IGF")
However, no more than 1.5m of them seek therapy. This IGF plays an important role in a number of disease states is often because the efficacy of therapy is disappointing through its potential to modulate cell proliferation, and treatment has considerable inconveniences. attachment and migration. It has been implicated in the Estimates of annual outpatient costs range between pathophysiology of psoriasis. The topical application and US$1.6 and US$3.2bn (National Psoriasis Foundation, subsequent penetration of large olignucleotides is 2000). It is thought that 300,000 patients are currently problematic in normal skin. However, the structure and receiving systemic psoriasis treatments. We estimate that integrity of the skin's barrier function is compromised in the current market for psoriasis therapies, which is psoriatic lesions. It is thought that this permits the uptake presently dominated by topical preparations (c.80% of sales), is currently around US$550m, and is growing at 10%. Pre-clinical studies have shown that the intra-dermal injection of antisense molecules into samples of human Current and Future Psoriasis Therapy
psoriatic skin grafted onto mice inhibits the production of IGF-1R and normalises the skin architecture of the Current psoriatic therapy can be grouped in four broad grafted psoriatic tissue. The technology was licensed by categories: topical, phototherapy, systemic treatments, and biologics. Many patients receive a combination of Antisense Therapeutics, on a worldwide exclusive basis, from the laboratory of Professor George Werther and Dr treatments as well as rotational therapy. Only around Christopher Wraight at Melbourne's Murdoch Childrens' 20% of patients have severe enough psoriasis to be Research Institute ("MCRI"). Antisense Therapeutics treated with systemic treatments. Physicians tend to intends to develop the antisense technology as a topical prescribe psoriasis treatments in relationship to a ladder of disease severity and a patients response to treatment: cream. The development of ATL1101 has been supported, in part, by a Commonwealth Government Initial therapies often include topical applications of tar, R&D Start grant of AU$1.1m; most of which has been corticosteroids, and emollients as well as topical retinoids, vitamin D, and anthralin. Additionally, the skin can become resistant to treatment in the longer term, the Clinical Status
preparations tend to be messy an require frequent application, and patient responses vary widely. In July 2003 Antisense Therapeutics announced plans to conduct a proof of concept study in humans suffering There is a significant amount of research activity being from Psoriasis. In these trials, ATL1101 will be applied to conducted in psoriasis, which may emerge onto the areas of psoriatic skin on a limited number of patients in market at the same time as our projected the study known as the small plaque or microplaque commercialization date for ATL1101 in 2010. assay (SPA). The SPA study will compare ATL1101 against placebo and possibly with an active comparator. Table 4: Selected development stage psoriasis drugs
The small plaque assay will generate intrapatient data since drugs can be applied to individual plaques in a given patient. It will not however generate conventional PASI scores because of the nature of the assay. Antisense Therapeutics has completed its current programme of toxicology tests and submitted an application for approval to begin testing in the planned human proof of concept study-in November 2004 approval was received to conduct the study. Having completed the manufacture of the active ingredient and formulation of the cream presentation, dosing of patients is expected to begin in early 2005. The company intends to partner out ATL1101 at the end of the proof-of-concept study. Data from the study is expected in Q3 2005. Psoriasis
Source: Companies, Elixir Securities Psoriasis is a chronic, relapsing skin disease that affects 1-3% of the world population and it is characterised by patches of thick, red plaques on the skin. The disease remits and relapses over time and is caused by an ATL1103 is designed to block the expression of Growth autoimmune process leading to a chronic inflammatory Hormone receptor. Pre-clinical studies have suggested response directed against the skin. Although not life that ATL1103 has utility in a number of diseases where threatening, it leads to significant morbidity and disability there is excessive growth hormone activity. These as well as considerable psychological distress. Between include a condition known as acromegaly and two 10%-40% of patients also develop psoriatic arthritis. diseases that lead to blindness; diabetic retinopathy and wet-age related macular degeneration ("AMD"). ATL1103 has been tested by Professor Michael Waters of the Clinical Status
University of Queensland, an international expert on It is envisaged that sufficient bulk material can be growth hormone receptor. The results achieved in these purchased by the end of 2004, so that third-parties can animal studies where comparable to those achieved with the newly approved acromegaly drug Somavert formulate the drug for pre-clinical toxicity studies. These are likely to begin H2 2005, after which human trials will (pegvisomant) in an equivalent animal model. Acromegaly
Acromegaly is a rare hormonal disease that can cause enlargement of the hands, feet and part of the face. It is Bob Moses
mainly caused by the growth of an adenoma (98%). Persons suffering from acromegaly are more likely to Bob Moses is Chairman of the company's Board of develop other diseases such as diabetes and heart Directors and also Chairman of the Remuneration disease. Symptoms appear slowly, and hence the Committee and a member of the Audit Committee. He diagnosis may take years to make. The symptoms are has extensive experience in the lifescience sectors, caused by excessive secretion of growth hormone, having played a central role in the international primarily from the pituitary gland. Growth hormone development of CSL during the 90s. Prior to joining CSL produces another hormone called insulin-like growth in 1993, he was Managing Director of a commercial law firm Freehills, Chairman and CEO of a NASDAQ listed medical service company and Corporate Manager of The diagnosis of acromegaly is confirmed by New Business Development at ICI. He has also spent 17 demonstrating elevated levels of both growth hormone years in a variety of management positions at Eli Lilly. and IGF-1. Once the biochemical markers of Acromegaly Currently, he is non-executive Chairman of Amrad have been confirmed, an MRI of the pituitary should be Corporation, Medtech Research Limited, the National performed to confirm the presence of a pituitary Stem Cell Centrea, the CRC for Chronic Inflammatory adenoma. Acromegaly is traditionally treated with Diseases, and a commercial consultant to the MRCI. surgery, removing the adnoma. The long-term success of surgery is estimated at around 80-85% for small tumours Mark Diamond, Chief Executive Officer
and 50-60% in patients with large tumours. With large or Mark Diamond has worked in the pharmaceutical and invasive tumours, adenoma removal m ay be impractical. biotechnology industry for 18 years, most recently with Pharmacotherapy or radiation therapy is then considered. Faulding. He served Faulding in a number of capacities The goal of Pharmacotherapy is to normalise serum IGF- within business development in Australia, Europe and the In North America, Europe and Japan it is estimated that Kathryn Andrews, Chief Financial Officer
there are approximately 40,000 diagnosed acromegaly patients , of whom about half require drug therapy. There Kathryn Andrews is a Certified Practising Accountant are approximately 3.3 new cases per million persons, per who has over 18 years experience in accounting, year. The market for Acromegaly is currently dominated financial management and consulting primarily in the by Sandostatin (octreotide) which, the published literature mining and resources sector. She joined Antisense states, is effective in about 60% of patients. In 2004, we Therapeutics as Chief Financial Officer in September estimate Sandostatin sales by Novartis of US$805m. Pfizer's Somavert (pegvisomant) is the latest approved Professor Graham Mitchell, Non-Executive Director
drug for acromegaly. It decreases the activity of growth hormone and levels of circulating IGF-1. It is indicated for Professor Mitchell is a non-executive director and treatment of acromegaly in patients that have not member of the Remuneration Committee. He advises the adequately responded to surgery or radiation therapy Victorian Government on Science, Engineering and and/or other medical therapies. ATL 1103 will be Technology. He is one of the principals of Foursight benchmarked directly against Sandostatin and Somavert Associates, who jointly act as Chief Scientist for the for acromegaly. The company believes that the profile of Department of Primary Industries and Department of ATL1103 may have potential cost, dosing route and Sustainability and Environment. Graham is non-executive lower frequency of dosing advantages over these director of Compumedics Limited, AVS Pty Ltd and the Geoffrey Gardner Dairy Foundation. He is also Professorial Associate of the University of Melbourne. Diabetic Retinopathy and AMD
Previously he has acted as Director of Research for CSL and a research scientist at the Walter & Eliza Hall Diabetic retinopathy is estimated to effect over 5m Americans, aged 18 and older. In the US, around 12,000 to 14,000 of these patients lose their eyesight every year. Professor George Werther, Non-Executive Director
Diabetic retinopathy is caused by new blood vessel formation in the retina or macula, which can break and Professor Werther is a non-executive director and bleed into the eye. This can result in scarring within the member of the Remuneration and Audit Committees. He eye. Similar factors are though to stimulate the formation is a Director of the Department of Endocrinology and of new blood vessels in the eyes of wet AMD patients, Diabetes at the Royal Children's Hospital and Centre for with similar results. Wet AMD is the leading cause of Hormone Research at the MCRI. He has and does serve blindness for people over 50 and affects most people on many national and international scientific committees. over the age of 80. In both indications current treatments He is also a Professorial Fellow at Melbourne University. are inadequate, suggesting that there is a substantial commercial opportunity should ATL 1103 prove an effective treatment. Dr Chris Belyea, Non-Executive Director
Chris Belyea Chairman of the Audit Committee and a < VLA4 gains regulatory validation through approval member of the Remuneration Committee. He holds a PhD in physics and is a registered patent attorney. He was the founding CEO of Antisense Therapeutics in < The product is out-licensed in Phase IIa to a major 2000, remaining in this role until shortly after it was listed pharmaceutical company. Antisense Therapeutics on the Australian Stock Exchange in January 2002. He is currently CEO of Metabolic Pharmaceuticals, of which he receives upfront payments and milestones in the was founding CEO in 1998. Prior to founding Metabolic Pharmaceuticals, Chris was a Licensing and Projects Manager for Circadian Technologies and worked for 5 < Commercialised in major markets during 2009 years at Australian Patent firm Griffith Hack & Co. Dr Stanley Cooke, Non-Executive Director
We estimate peak sales of AU$975m and a royalty rate of 15%. Dr Cooke is a member of Antisense' remuneration committee. He is Founder, Chairman and CEO of Isis < Has to compete with oral VLA4 inhibitors and other Pharmaceuticals, a world leader in the field of antisense oral MS drugs; in addition to incumbent interferons therapeutics. He is also currently a member of the board of EPIX Medical and Idun Pharmaceuticals. He is a member of the IBC Advisory Council, Current Drugs Advisory Board and the Editorial Advisory Board of Journal of drug Target and Antisense Research and < The product is out-licensed after Proof of Concept Development. Prior to founding Isis, he was president of study to a major pharmaceutical company. It Research and Development for SmithKline Beckman and held a senior position at Bristol-Myers. Dr Crooke is also an adjunct professor at the University of California, San < Commercialised in major markets during 2010 Dr Jega Iswaran, Development Director
Dr Iswaran has over 20 years experience in the < We estimate peak sales of AU$520m and a royalty pharmaceutical industry. From 1972 to 1980, he was a pre-clinical scientist at ICI Pharmaceuticals and later held positions of Project Manager and Pathology Section < Has to compete with a new generation of oral Manager at ICI Safety of Medicines. His remit extended psoriasis agents; potentially including drugs like through the UK, Western Europe, North America and Japan. Amongst consulting services, he has most recently worked for CSL as Regulatory Manager for Haemostasis and as Regulatory Practices Manager. Dr Christopher Wraight, Research Director
< Commercialised in major markets during 2011 Dr Wraight has 20 years experience in basic and applied medical research, specialsing in the field of antisense We estimate peak sales of AU$520m, split between delivery and gene silencing. He joined the MCRI in 1991, acromegaly, diabetic retinopathy and AMD. We where he established an antisense R&D programme with envisage that Antisense Therapeutics will receive a Professor George Werther. In addition to directing research at Antisense Therapeutics, Dr Wraight is an Associate Researcher at the MCRI and Head of the < Will compete with current incumbents. Little innovation expected in Acromegaly, although Dr George Tachas, Director Drug Discovery &
diabetic retinopathy is likely to be an active area of Dr Tachas has considerable experience in biomedical < We have increased the discount rate on antisense research and intellectual property law. Following his biological studies at the University of Melbourne, Dr therapeutics to reflect their historical failure rate. Tachas moved to Griffith Hack and Co, a leading Once we have derived a value for the enterprise, Australian intellectual property firm. He is well versed in we add an estimate of the current balance in cash biotechnology patent prosecution, opposition, and debt to arrive at the market capitalisation of the infringement and licensing, portfolio management and The immediate valuation will be driven by the market's Antisense is a tool that can be used to specifically inhibit perception of Antisense technology, whether it believes the expression of selected genes. It is underpinned by the company will need to return to the market and the principle that the sequence of nucleic acids in a progress in the clinical trial programme. The latter is the strand of antisense can bind to the sense strand of critical component in the long-term valuation, since messenger RNA and prevent its translation into a protein. strong clinical science should attract investment from After over 20 years of research, the technology gained a strategic partners and the market. Our valuation model is degree of commercial validation with the approval of Vitravene for the treatment of AMD in the US during Despite the scientific elegance of the antisense approach, turning the science into dollars has been difficult. There are many factors which can affect delivery: Messenger RNA
< Nucleases. Naturally occurring enzymes that It is estimated that the human genome comprises of approximately 30,000 genes which can be transcribed degrade nucleic acids. This leads to a short half-life into approximately 85,000 different mRNA. Each mRNA is used as an instruction set or template to synthesise a different protein. Genes consist of a series of functional < Endosomes. Large macromolecules such as unit called Exons that are separated by regions of DNA antisense can be internalised by the cell in packets that do not appear to play a direct role in the formation of known as endosomes. These may be trafficked the encoded protein. When the messenger RNA is directly to lysosomes that degrade the contents or copied from the DNA in the cells chromosomes, it copies both the Exons and Introns. Special enzymes then process the mRNA, excising the Introns (splicing). The mRNA contains the code for a specific protein that is Non-antisense effects. The backbone of the dependent on the order and frequency of which exons antisense avidly binds to proteins and can induce are spliced together. Once generated, the mRNA is then non-antisense effects. This is particularly exported from the nucleus to specific cell substructures pronounced in unmethylated CpG rich sequences. that produce the protein in a process known as translation. This takes place at a structure known as the < Diseases are polygenic. Many diseases involve the ribosome, which is essentially a protein factory. dysunction of more than one gene. Antisense The process can be disrupted at a number of stages. agents have traditionally focused on individual Antisense blockade can prevent the mRNA leaving the nucleus by targeting a structure that is known as the 5' methylated guanosine cap that is involved in the Antisense researchers have addressed these issues with transport of the gene from the nucleus. Once out of the a number of solutions in the second generation of nucleus, Antisense DNA can bind to mRNA and inhibit antisense molecules. They have replaced the backbone protein synthesis by preventing the cells ribosomes from of the antisense structure with one that resists nucleases 'reading' the RNA. Finally, the RNA component of a and improves half-life. These changes also appear to antisense/mRNA double strand can be degraded by reduce the affinity of antisense for proteins. Different RNase H, which is a group of naturally occurring types of nucleotides (building blocks of nucleic acids) enzymes in every cell. In total, at least 12 known have been shown to improve the strength of the binding. mechanisms can be induced once antisense binds its A number of strategies are being adopted to improve the delivery of antisense, at a micro and macro level. Isis has recently started large-scale human trials with the first oral The Challenges of Antisense
Table 5: Select Clinical Stage Antisense Agents
Indication
Source: Company, Elixir Securities Antisense Therapeutics
Forecast Financials
2003A 2004A H105E 2005E H106E 2006E H107E 2007E Profit & Loss: Top
Total Revenues
Operating Profit
Carried Forward
Cashflow
Brought Forward
Non -Cash Operating/non-operating Charges Operating FCF
Elixir FCF
Cashflow
Net Cash & liquid assets closing
Profit & Loss: Bottom
Operating Profit
Pre- Exceptional, Pre-tax profit
Net Income
Fully Diluted EPS
Fully Diluted EPS Excl. Amortisation
INTERSUISSE
This document is for the confidential use of the recipients only and is not to be reproduced without the authority of Intersuisse Limited. The persons involved in or responsible for the preparation and publication of this report believe that the information herein is accurate but no warranty of accuracy is given. It is important to note that recommendations are of a general nature and are based on a consideration of the securities alone, and as such are conditional and must not be relied upon without advice from a securities adviser as to the appropriateness to you given your individual investment objectives, financial situation and particular needs. Whilst this document is based on information and assessments that are current at the date of publication, Intersuisse Limited has no obligation to provide revised assessments in the event of changed circumstances. Intersuisse Limited, its directors and associates disclose that they may have a relevant interest in the securities mentioned in this document.

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