Donald P. Francis, MD, DSc

Entrepreneurial Thought Leaders Seminar

Presentation Outline

I. Myself – a brief description

II. Vaccines – Social need, business challenge

III. The company/mechanisms to develop vaccines

IV. Lessons, reality, future directions

An Entrepreneur by Necessity

• California physicians: Grandfather, mother, father• Trained in pediatrics and infectious diseases• 21 years with CDC as infectious disease epidemiologist

• Cholera Nigeria• Smallpox Sudan, India, Bangladesh• Ebola Sudan• AIDS everywhere

• Since 1992, an AIDS vaccine “Entrepreneur”• Co-founded what became Int’l AIDS Vaccine Initiative• Genentech• Co-founded VaxGen (1995)• Now developing a not-for-profit for developing country vaccines.

How Do Vaccines Work?

• Vaccines “fake out” the immune system

• Without causing disease, they induce a “post-infection” immune status

• Protection from subsequent infection or disease

0

Mor

talit

y ra

te p

er 1

00,0

00/y

ear

DiptheriaPertussisMeaslesPoliomyelitisAIDS

Year1900 1920 1940 1960 1980

10

20

30

40

Infectious Disease Mortality Rates in the U.S.

Source: UNAIDS, AIDS Epidemic Update, Dec. 1998

North America 890,000 Caribbean 330,000

Latin America 1,400,000 N. Africa, Middle East 210,000

Western Europe 500,000

Total: 33.4 million

Sub Sarahan Africa 22,500,000 South and South-East Asia 6,700,000

Eastern Europe, Central Asia 270,000 East Asia and Pacific 560,000

Australia and New Zealand 12,000

People Living with HIV/AIDS

AIDS Orphans in Sub-saharan Africa

"By the year 2010, one in seven

children under 15 years will

have lost a parent to AIDS."

Annual Direct Medical Costs of HIV for the World

$18 billion in 1997*

*Modified from AIDS in the World II, ed. Mann & Tarantola

An HIV/AIDS Vaccine

The only way to stop the AID epidemic is with a vaccine

ChallengesBusinessScientificSocial value

How Many Candidate HIV Vaccines Could BeFunded by One Year's Direct Medical Costs?

$ 18.0 billion (medical costs)

$ 0.3 billion (develop. costs)

61 candidate vaccines

HIV-1 Vaccine Development

Pipeline or pipette?

Phase I 27 candidates Phase II 2 candidates Phase III 1 candidate

"Maybe in the next 10 years if we work very hard, there may be 3 candidate vaccines in Phase III."

Dr. Jose Esparza, UNAIDS March, 1999

300

200

100

0

400

Years0 2 4 6 8 10

Investorscost

Companyrevenue

Cost of HIV Vaccine Development

Opportunity Costs

Huge social need

Questionable return ? Market (esp developing

countries)? Social value (demand?)

Why Vaccines Fail to CompeteVaccine/TherapeuticMarket Comparison

Note: Vaccine market data 2000, pharma sales 2001

Development of Vaccines vs Anti-viral Agents for HIV

Anti-viral Anti-viralVaccines Drugs

Historical Many FewDev Time Longer ShorterSocial Demand Low HighNum Available None Many

HIV Prevalence vs GNP

VaxGen’s Vaccine

Almost 20 years

$280MM invested

A long way to go

84 85 86 87 97 9888 89 90 91 03Genentech, Inc. VaxGen, Inc.

99 00 01 0292 93

Antibodies Inhibit binding to CD4

Antibodies to rgp 120neutralize HIV

IIIB producedChimps protected (IIIB)

IIIB Phase I

AIDSVAX research begins

Nucleotide squence of HIV determined

MN Produced

MN Phase I

MN Phase II

Chimps protected (MN)

B/B and B/E produced

B/B Phase I/II

B/E Phase I/II

B/B Phase III Trial

B/E Phase III Trial

AIDSVAX Development History

AIDSVAX –Cost of Development

Investment:

Genentech $ 50M

VaxGen $130M

Celltrion $100M ______ Total $280M

Capital Sources:

Private capital: $269M

US Government: $11M1

NGO $0 _____

Total $280M

1 Includes CDC and NIH

Efficacy Trial Results

Thai trial – no efficacy

US/Europe Trial – Low efficacy

AIDSVAX B/B - Efficacy by Subgroups

50%

100%

0%5.8%

65.7%77.6%

86.5%

Volunteers (vacc + plcbo)

Overall Black Women

Effi

cacy

Observed infections (vacc)

5009 498 314 268 194 33 17 8 191 12 4 1

*Expected infections, VE=0

Weighted cohort

Black Asian

Other

*Adjusted for 2:1 vaccine:placebo

NS <0.01 <0.02 NSp-value (unadjusted)

VaxGen – Built a Company with Value

• > 120 highly-skilled vaccine developers

• Excellent team spirit

• Flexible

VaxGen - Looking Ahead

• Company following “social value” - Priority shift to anthrax and smallpox

• Future AIDSVAX development will require outside funding/partnerships NIH/CDC collaboration to complete analysis

NIH - Subtype C vaccine – early stage NIH - Thailand prime-boost Phase III

trial

The Next Venture

• Three VaxGen senior executives stepping out of company

• Will establish a not-for-profit foundation

• Pursue vaccine development for the less-developed parts of the world

• Dependent on outside (Gates) funding