This document discusses an analytical methodology called RxOI2 that aims to de-risk investment decisions in early-stage drug development by predicting the likelihood of success for emerging drug targets. RxOI2 uses a weighted scoring system to evaluate scientific, commercial, and strategic factors for a target and predicts its true value proposition. It provides more reliable forecasts than other analytics that focus on later stages of drug development. The document demonstrates RxOI2's approach through a case study on predicting success likelihoods for emerging targets in chronic hepatitis B treatment.

1. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 1
De-Risking the Science for
Investment Decisions

2. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 2
Time, Cost and Compound Attrition
Preclude Early Entry and Late Exits
Source: PhRMA, the Pharmaceutical Research and Manufacturers of America
<0.01% of drugs in development will
ultimately make it to market

3. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 3
• Biopharma industry trend to early-stage deals
Identifying Early-Stage Assets for
Investment Decisions
Our target and therapy-specific methodology translates scientific,
commercial and strategic determinants into a single metric value proposition
to instantly identify early-stage targets with high likelihood of success
Evolution of S&D (search and develop) Big Pharma strategy
to identify external early-stage assets
Increased competition among Biotech Companies for
investor capital and in-licensing agreements (pipeline fill)
Investors increasingly interested in early-stage
targets/companies with IPO potential
• Currently available analytics focus on later-stage drug development and
are unreliable in forecasting success or risk at an early stage of drug
development

4. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 4
10%
30%
41%
IPOs for Preclinical and Phase 1 Assets
Shorten Time to Big Exits
IPOs by Stage 2012 2013 2014
Preclinical 1 1 8
Phase 1 0 8 18
Phase 2 3 12 26
Phase 3 6 8 6
Commercial 0 1 5
*Stage defined as last completed clinical trial.
Source: VentureSource, CB Insights, SEC Filings, and SVB proprietary data.

5. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 5
The Earlier the Asset, the More Stringent
the Analysis to Accurately Predict Success
Select
competitor
targets for
comparison
Assess
scientific and
clinical data
Predict
likelihood of
success
among
targets
Invest in the
early-stage,
market-leading
asset
Identify key
disease
target
Identify Select Assess Predict Decide
EFFORT
TIME

6. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 6
The RxOI2 Difference
Other Available Reports The RxOI2 Strategic Approach
Based on late-stage
clinical attributes
Mainly focused on late-stage
drug development
Forecasts based on historical averages;
not reflective of current market
Generalized; not customized
to target or therapy
Heavy reliance on stakeholder
opinions; not evidence-based
Static; boilerplate reports
Lengthy reports with non-relevant
fillers
Based on multiple determinants including
scientific, strategic and commercial attributes
Accounts for technical risk at an early stage
of drug development
Predicts the true value of innovative medicines
in the post-ACA health care paradigm
Dynamic scoring system with target- and
therapy-specific weighted attributes
Unbiased and quantitative
Validated methodology provides bold
conclusions on a target’s likelihood of success
Converts multiple dimensions of benefit and
risk into a single metric of value proposition

7. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 7
CHB Competitive Landscape
Rating Criteria
Scoring Process
Final Scores and Conclusions
Case Study: Predicting Likelihood of Success
of Emerging Targets in Chronic Hepatitis B

8. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 8
Rating Criteria Scoring Process Final Scores and ConclusionsCHB Competitive Landscape
Case Study: Predicting Likelihood of Success
of Emerging Targets in Chronic Hepatitis B
Relevant targets in preclinical,
phase 1, 2, 3 and launched
categories are researched
CHB COMPETITIVE LANDSCAPE

9. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 9
Case Study: Predicting Likelihood of Success
of Emerging Targets in Chronic Hepatitis B
Rating Criteria Scoring Process Final Scores and ConclusionsCHB Competitive Landscape
Therapy-specific rating criteria
and weighted attributes are
determined
RATING CRITERIA

10. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 1 0
Rating CriteriaCHB Competitive Landscape Scoring Process Final Scores and Conclusions
Each compound is
extensively
researched
SCORING PROCESS
Case Study: Predicting Likelihood of Success of
Emerging Targets in Chronic Hepatitis B (cont’d)
Data applicable to
target-specific scoring
of the various
attributes are
captured and
evaluated

11. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 1 1
Case Study: Predicting Likelihood of Success of
Emerging Targets in Chronic Hepatitis B (cont’d)
Rating CriteriaCHB Competitive Landscape Scoring Process Final Scores and Conclusions
Final scores for emerging
drugs in preclinical or
phase 1, 2, or 3 stages
are calculated using our
therapeutic area-specific
methodology
FINAL SCORES AND CONCLUSIONS

12. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 1 2
RxOI2 in Action: Clonidine, Birinapant
and EBI-005
Recent Drug
Development Failures
RxOI2
Critical Findings
Impact on the
RxOI2 Value Proposition
BioDelivery Sciences’
clonidine topical gel fails
phase 3 study for painful
diabetic neuropathy
Mar 30, 2015
• Analgesic effect of clonidine
analgesic effect is dependent on the
presence of functional capsaicin-
responsive nociceptors in the skin
(phase 2)
• Biomarkers (Efficacy and Safety):
The clonidine phase 3 study did not
include the functional biomarker,
lowering the scoring metric for
success in the pivotal trial
TetraLogic halts phase I study
of birinapant in chronic
hepatitis B because of safety
concerns of cranial nerve
palsy
May 6, 2015
• Safety signal (Bell’s palsy--, a
dysfunction of the cranial nerve )
reported with high dose of birinapant
(phase 1*)
• Rare instances of Bell’s palsy and
other cranial nerve involvement in
hepatitis E infections and as a
complication of hepatitis B
vaccination (published literature)
• Earliest Clinical Data and Disease
Research: High dose safety concerns
in cancer patients and predisposition
of CHB patients to cranial nerve
palsy lowered the scoring metric for
success in CHB
Eleven Biotherapeutics’
EBI-005 fails phase 3 study in
patients with dry eye disease
(DED)
May 18, 2015
• Lack of statistically significant
difference in clinical effects of
EBI-005 in patients with DED
(phase1b/2)
• False-discovery Rate: Lack of
statistical significance in earlier trials
lowered the scoring metric for
success in pivotal, large-scale phase
3 study
*A phase I study using single agent birinapant in patients with relapsed myelodysplastic syndrome and acute myelogenous leukemia.

13. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 1 3
Our Methodology is Validated in the Most
Active Areas of New Drug Development
NumberofProductsinDevelopment*
Medicines in Development (2013–2014)
*Some medicines are being explored in more than one therapeutic category.
SOURCE: Pharmaceutical Research and Manufacturers of America. "Medicines in Development:
Biologics—Overview." Washington, DC: PhRMA; 2013.

14. R X O I 2 │ C O N F I D E N T I A L │ S L I D E 1 4
The RxOI2 Difference:
De-Risking the Science of Drug Development
UNIQUE
methodology
We consider what the data mean in the context
of the disease and the competitive environment
SPECIFIC
evidence
We utilize our expertise in a broad range of
therapeutic areas to synthesize evidence
specific to the disease category
data
ANALYSIS
We leverage our unbiased analyses
on science-driven data, not trends
or opinions
We use our proprietary
methodology to make
scientifically validated
recommendations
BOLD
conclusions