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Sirtris Pharma

Key information
Co-founders:
Dr. David Sinclair (Associate prof pathology at Harvard Medical & co-chair of sirtris
scientific advisory board (SAB))
Dr. Christopher Westphal (CEO & VC)
Dr. Michelle Dipp, Sirtriss senior director of corporate development
Garen Bohlin, COO
Location: Cambridge, MA
Charlie Rose, wall street Journal and Newsweek
Saturday, Feb2007, weekend strategy session - $39M of financing, bringing the total
invested capital to $103M,
Business Area: Research into age-related disease such as diabetes, cancer &
Alzheimer, hoping to develop a drug that could treat the diseases of aging and in so
doing had the potential to extend the lifespan of human beings.
Sirtris team established a link between resveratrol, a compound found in winereproducing grapes and sirtuins, newly discovered family of enzymes
Sinclair and Westphal building development of sirtruin-activating drugs for diabetes
market. Team had developed own proprietary formulation of resveratrol, called
SRT501 and was developing new chemical entities (NCEs) that were up to 1000x
more potent activators of sirtruins than resveratrol.
CEO/COO/Dir of CD/SAB meeting to discuss new lab space & 3 strategic issues
In-Licensing: whether to in-license compounds from a biotech company to
diversify sirtriss drug, balanced portfolio as company started to increase
investment in its drug development efforts
Partnership with Pharma: with large pharma with a) what would it mean? B) is it
right point?
Nutraceuticals: off-shelf health supplement , concerns about market opportunity,
commercialization strategies, potential impact of a nutraceuticals offering on the
sitris brand PORTER 5-forces, new entrant large competition, etc

Anti-aging Science
Sirtuins Silent Information Regulators
Sirtriss 90% R&D on one sirtuins called SIRT1 in humans
David Sinclair:
Creative, productive researcher
Sirtruin activating compounds, STACs,
Per Drs DIPP (The General) A compound that could activate sirtuins would increae
the speed of cellular metabolism
September, 2003 Sinclair discovery that resveratrol found in red wine activated
sirtuins in yeast cells, a discovery which indicated that a drug might be possible that
could activate sirtuins enzyme.
One way to activate sirtuin enzyme was to optimize the effects of resveratrol by
giving it in highly purified form
Another way to mimic the effects of resveratrol using an entirely new, more potent
chemical structure. Sirtris was pursing both options thru its SRT501 and new
chemical drug development projects
Christopher Westphal:
Business acumen
Money upfront approach
Successful in launching early stage companies
Launching Sirtris:
Based on Sep2003 article, approach Sinclair
Left behind capital life and high-six figure salary
Scientific Advisory Board (SAB):
World-call SAB with Robert Langer, profile inventor
Impressive list of directors
Garen Bohlin COO & Westphals right aram
Growing Sirtris:

Sinclairs theory that sirtruins played a role in diabetes, cancer, heart disease,
neurodegenerative diseases and mitochondrial disorderOne thing is clear that
there would be no effort to claim anti-aging effects from any drug the firm
produced, since FDA didnt recognize aging as a disease. The firm decided to
develop a drug for diabetes large market in developed/developing countries, orphan
drug for mitochondrial diseases MELAS), a rarely genetically inherited disorder
2004-2005
Sinclair conducting experiments that sought a connection between resveratrol &
sirtuins in mice, getting this actually be a drug, started to hire R&D Team
2006
1. Company created formulation for SRT501 that could get 5 times more
resveratrol into the blood stream than best other preparations currently
available
2. Began clinical trial in india, assessing SRT501 as diabetes therapy, transition
from R&D only company to clinical-stage company
3. Several experiments examining the effects of high doses of resveratrol on
obese mice, lived 30% longer than no reservatrol mice
June, 2006
Completed 85 human subjects in phase1 safety
2006 Nature article discovery that sirtuin activation increased the no. of functional
mitochondira was quite intriguing.

Moving Forward Commercial opportunity represented by their proprietary


formulation of resveratrol SRT501
Nutraceuticals:
Sinclair believed that there would be great pubic demand for this formulation long
before results of clinical studies on SRT501 were completed, and that Sirtris should
start selling SRT501 to public as a nutraceutical. People email him 30-50 emails per
day requesting info on how to obtain resveratrol
A Sirtris Foray (venture) into nutraceutical wouldnt be unprecedented (unique),
e.g., sigma-tau pharmaceutical which had 2 nutra divisions
The opportunity in nutra might be substantial, global nutra market which included
health and nutritional supplements had estimated annual sales of $120 billion and
annual growth rate of 7%. E.g., market for glucosamine chondroitin, a joint-health
supplement exceeded $1Billion, had been expanding at a double-digit rate.

Economics of nut market were compelling. Total manufacturing cost is low 25c per
pill or less. Other costs would include commercialization strategy. Current vendors
that are far less bioavailable than SRT501 were charging price in the vicinity of 1$
per capsule.
Westphal had doubts about whether timing was right for such a venture or whether
a firm should even market a nutraceutical under its corporate brand.
Issues:
Nutra market was unpredictable
By & large unregulated
No FDA approval was necessary for selling supplements
No evidence necessary to prove a products effectiveness or even its
composition
Market differentiation / differentiator will be difficult
Consumer allegations
Sirtris identity concern

Corporate brand damage for prescribed, FDA-approved medicine?


Nutra retailers

Business case for market entry


How much return?
Market entry?
<<<Porter 5-forces>>
Subsidiary for SRT501 like Sirtris health,
Some of the executives were favoring a wolly owned nutra subsidiary with
a diff name
Long term investors like this option
Retail format? How this would be sold? Own stores or online, supplement
stores etc.
Pharmaceutical deal
Labs around the world confirming Sinclairs hypothesis so several pharma
started conversations about possible drug development partnership

Benefits:
Terms of deal could include upfront cash payment, an equity purchase
agreement, non-milestone-based (guaranteed) R&D support that is likely
to setup over a period of 3-4 years and payment tied to clinical
development milestones. Deals in Exhibit, 51% equity stake in the
company
Drug development deal was often a condition of having a successful IPO,
executives wanted to have company IPO in near future, successful IPO
could deliver financial resources a company need to move drug from lab
thru clinical trials long/short term benefits
Several board members intent on satisfying the companys capital needs ,
voiced their interest in exploring whether a deal could happen on
attractive terms
Westphals friend rules for an IPO
Contemplate (Consider) a deal inexpensive source of additional capital
Drawbacks:
How would that impact co-founders Sinclair & westphal (biasing,
personalism)
Sirtriss promising development of New Chemical Entities (NCE),
Resveratrol in naturally occurred substance, Sirtris developed a chemical
synthesized new compound that could be a much as 1000 times more
potent than resveratrol in activating SIRT1 & is eligible for NCE
composition of matter patents. Partnering would require out-licensing new
compounds without their full value. If Sirtris waited to new license data to
arrive, would have been a more lucrative deal OR Risk could be the otherway around
In-licensing or Expanding the Scientific Base
Internal debating of how much companys resources to focus on SIRT1 vs
Alternative Sirtuin Target. Should diversify and explore with 2 alternatives
1. Investigate other 6 human sirtiuins
2. In-license from another bio-tech firm a compound who is better
known

Overview of drug development process and review. IND - investigational new drug,
NDA - new drug application. Adapted from: The Drug Development Approval
Process. Available at http://www.phrma.org/charts/approval.html
http://www.medscape.com/viewarticle/405869_4

http://www.fda.gov/downloads/AboutFDA/CentersOffices/CDER/WhatWeDo/UCM1217
04.pdf

http://www.druquest.com/training%20&%20presentations.htm

Results of operations
Period from March 25, 2004 (date of inception) through December 31, 2004 and Years Ended December 31, 2005
and 2006

(in thousands)

Revenue
$
Operating expenses:
Research and development
General and
administrative
Total operating expenses

Period from
March 25,
2004 (date of
inception)
through
December 31,
2004

Year Ended December


31,

2005

68

Change from

2004 Period
to 2005

2006

68

2005 to
2006

$(68 )

1,190

7,062

14,242

5,872

7,180

699

3,865

4,340

3,166

475

1,889

10,927

18,582

9,038

7,655

Loss from operations


Interest income
Interest expense
Net loss

(1,889)
45

(1,844)

(10,859 )
1,143

(18,582 )
2,447
(878 )

(9,716 ) $ (17,013 ) $

(8,970)
1,098

(7,723 )
1,304
(878 )

(7,872)

$(7,297 )

Revenue. We recorded no revenue in 2006 compared to $68,000 in 2005. In 2005, our revenue consisted of a
United States Department of Agriculture research grant. We did not record any revenue in the 2004 Period.
Research and development. Research and development expense for 2006 was $14.2 million compared to
$7.1 million for 2005 and $1.2 million for the 2004 Period. The increase from 2005 to 2006 primarily resulted from
an increase of $3.0 million for personnel costs related to an
39

increase in research and development headcount, an increase of $1.5 million in external chemistry costs, consisting
of costs of third party contractors and purchases of compound libraries, an increase of $910,000 in clinical trial
costs, an increase of $579,000 for preclinical studies, an increase of $627,000 in occupancy costs and higher
formulation costs of $442,000. The increase from the 2004 Period to 2005 primarily resulted from higher personnel
costs of $1.5 million as a result of increased research and development headcount, higher preclinical study costs of
$1.1 million, higher external biology costs of $817,000, consisting primarily of costs of a third party for screening
services, higher consulting costs of $708,000, higher external chemistry costs of $612,000, consisting of costs of
third party contractors and purchases of compound libraries, and higher occupancy costs of $414,000. Included in
research and development expense are stock-based compensation charges of $557,000, $61,000 and 13,000 for
2006, 2005 and the 2004 Period, respectively.
General and administrative. General and administrative expense for 2006 was $4.3 million compared to
$3.9 million for 2005 and $699,000 for the 2004 Period. The increase from 2005 to 2006 was primarily due to a
$947,000 increase in personnel costs, which is partly offset by a $469,000 decrease in consulting expenses. The
increase from the 2004 Period to 2005 primarily resulted from higher personnel costs of $1.2 million as a result of
an increase in headcount, higher legal fees of $797,000, higher consulting fees of $660,000 and higher occupancy
costs of $204,000. Included in general and administrative expenses are total stock-based compensation charges of
$201,000, $61,000 and none for 2006, 2005 and the 2004 Period, respectively.
Interest income. Interest income increased to $2.4 million for 2006 from $1.1 million for 2005 and $45,000 for the
2004 Period. The increase in interest income in each year primarily resulted from increases in the average fund
balances available for investment and an increase in interest rates earned on investments.
Interest expense. Interest expense was $878,000 for 2006. We had no interest expense in 2005 or the 2004 Period.
The increase in interest expense from 2005 to 2006 was the result of the drawdown of $10.0 million under a loan
agreement and $797,000 under an equipment loan agreement.

Liquidity and capital resources


Period from
March 25,
2004 (date

Year Ended
December 31,

(in thousands)

2005

Net cash used in operating activities


Net cash used in investing activities
Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

$16,656

2006

(858 ) $(9,402 ) $(15,373 )


(335 ) (26,278 ) (17,793 )
17,849 26,860
32,843
$(8,820 )

$(323 )