[BLANK_AUDIO]. I'm Barry Quart. I'm currently president and CEO of Ardea Biosciences. I have been in drug development in the pharmaceutical industry for 30 odd years including a long sting at Bristol-Myers Squibb. and then was head of R&D at Agouron Pharmaceuticals here in San Diego. built the company from merely 50 people to over 1,000 in R&D. It's what you now know as the Pfizer Research laboratories used to be Agouron. and we were quite successful at at both discovery and development of an HIV protease inhibitor. that was the reason that we were eventually acquired. and it's a great priv, privelage to be here today and hopefully, people will get something out of this talk. Thank you. So what I thought that, starting, in this discussion, it would be really setting the stage for what is a very difficult process. when it comes to the, the, the course I was asked to give is, is a biotech from start-up to success. I wish that was the normal case, in fact most biotechs unfortunately don't becomes successful. And it's one of the reasons why it has become very difficult to finance these kinds of companies. very few of them achieve an approved NDA on new drug application, in other words marketing approval for a drug. And even though as they do get a an approved NDA many of them never become profitable. So, if you're an investor and you're looking to see some return on an investment these're not good, findings. and as we all know, drug discovery and development is very risky. it takes a great deal of cash, to conduct R&D. large pharma, each, most large pharma has budgets of 3 to $5 billion in terms of the R&D budget just for that company. So, they're very cash intense, estimate range widely. But the best one generally comes from Tuft, which studies this area and and their estimate is bringing the drug to the market. takes over a billion dollar investment. That includes all the failures. So, it doesn't, you don't spend 1.3 billion on that molecule but you've spent that much on all of the other problems to get you there. And it could take upwards of 13 years. again, these are not great statistics when it comes to making an investment. And, and drug discovery a process and moving a program in development is and, and when we talk about risky, you're looking at the rate of, of success. And in from what we can tell and the numbers aren't great, less than 10% of discovery compounds make it to a phase one program. And so these are, these are leads, not just the compounds that we screen. and of those compounds that make it to phase one, the very first stage of human testing, only about 16 percent ever make it to, the market. And, and if you take a look at by phase, you can see that the attrition rate is very high going from phase one into phase two. So here's a, here's a compound that's in phase one, so you've tested it in healthy volunteers, and now you're putting it into patients to see if it works. You'll lose a lot of compounds there. Phase two into phase three, not so many of you demonstrated activity. Then, you know, again you see a very high attrition. In phase two to phase three you continue to see attrition. And we add up the losses, you end up with only about 16% of compounds moving all the way through. Again, just a brief background on myself. After leaving large pharma, I went to very small research boutique here in San Diego, Agouron Pharmaceuticals. we were fortunate enough to discover a molecule, Nelfinavir, which eventually became Viracept. because of the, you know really a combination of being in the right place at the right time. And an FDA that actually wanted to get HIV drugs out there to patients. we were able to take that molecule from the lab bench to marketing approval in just over three years. Which is essentially an impossibility today. We had a two month review at the agency. That just doesn't happen anymore. It takes a, a very strong political push on the FDA to move that fast. So it was a remarkable opportunity. to really hold the world record on drug development. which I doubt seriously will ever come close to, to even being paralleled. we, we decided to sell that drug ourselves. We launched it, became the largest selling HIV protease inhibitor of the world at that time. since then better compounds have come out for HIV. this was one of the first that was used in the so called HIV cocktail. Grew the company here to a very substantial size and was eventually acquired by Warner-Lambert, they were acquired by Pfizer. ended up running the research laboratory here for Pfizer for a year and a half and then deciided to do other things. Eventually decided to start another company, which we named Ardea Biosciences. Started that at the very end of 2006. and just recently sold a company to Astrazeneca, a large London-based, global pharma, for 1.3 billion. And I'll go through the, the reasons why that company was successful. In order to start a, a biotech, or any company really, you need financing. So how do you actually cobble together the money to get going. And then there's a lot of technology that comes out of UCSD, that's why there is over 100 Biotechs here in San Diego. People have great ideas, they have inventions and they want to profit from those. So they want to start a company, how do you do it? Well, certainly one way is you start with friends and family money maybe some angel investor, these are people that invest small aliquots of cash on start ups to get in early And then with NIH grants, you can get SBIR grants, to help fund early stage pre-clinical studies. eventually, if you can get enough data, you go the venture capitalists and bring in now $5 to $10 million that it takes you to do phase one. And phase two in order to demonstrate your drug has some activity, because that's when we generally confine the potential partner. And then that's where, that's where there is a liquidity of that from the VC's. So they are always looking for how do they get out of the company. Even the second thing moving to there is no second thinking how do I get out and of course with the tenax profit but there is a thing how do I get out. so that's a very common approach, more difficult now because the VC's are really looking for very well developed products. They used to put money into start-ups, hardly ever anymore. and taking a company public used to be a fairly attractive approach Agouron was a small boutique, biotech years away from any compound. and yet they were able to take it public back in, in the 80s. Nowadays, things are different, different era. in order to take a biotech, public and an IPO for a biotech, you really have to have well developed technology that investors can see very clearly has a short route to registration. without that, the chances of, of getting value is, is really slim to none. And so what people resort to are other means. You can do a reverse merger. You take your company, your private company, your little start-up. And you basically merge it into a public, company that generally is not, doesn't have any good technology. And so it's a win-win for both sides. Now you have access to public markets, so, you know, why do people take companies public? It's two things. One is that's a liquidity event for shareholders. They can now sell their stock on a public market. And then the second thing is is you can go out and raise money. You sell more stock. If I need another 100 million to develop a product, I got out, I sell stock to investors. I bring in the cash. Much more difficult to do in a private company, because those investors want to be able to get out of your stock, if they're not happy with how things are going. In a private company, they can't get out, they're stuck. So, they like public company that many large funds don't invest in anything but pubic companies. So there's a big benefit to being public from the point of view of raising money. But it's hard to get there. for Ardea we had a slightly different route. which was we took a biotech that had gone under. company had closed down because their phase three program failed and the board of directors said stop burning money, your technology sucks. And, saved the cash, and they closed the company down. Now, it had 48 million in cash, which was not insignificant. That money was going to be returned to shareholders. instead, we went out and found some interesting technology, brought it into that company. And restarted it and changed the name to just kind of move away from the old, the old company. And start something new and the 48 millions then was used to really jump start the R&D program. So was a perfect opportunity to start a company that was kind of immediately funded with enough money to make a progress. And so that from that point of view, it was an ideal opportunity.