11 March 2013

Astex Pharmaceuticals is a research client of Edison Investment Research Limited

Astex’s investment case has advanced considerably in recent months with its

significant expansion of studies with its second-generation hypomethylating agent

SGI-110, and it Hsp90 inhibitor AT13387. Astex now has six Phase I/II studies

underway with these two focus products and should present final results from the first

– a Phase I/II study of SGI-110 in MDS/AML – at ASH. We have revised our valuation

to reflect these developments and now indicate a value of $599m, equivalent to

$6.42/share basic or $5.50/diluted share.

Year end Revenue ($m)

PBT* ($m)

EPS* ($)

DPS ($)

P/E (x)

Yield (%)

12/11 66.9 10.5 0.18 0.0 25.1 N/A

12/12 83.2 12.7 0.28 0.0 16.1 N/A

12/13e 55.0 (23.3) (0.19) 0.0 N/A N/A

12/14e 21.0 (62.7) (0.58) 0.0 N/A N/A

Note: *PBT and EPS are normalised, excluding intangible amortisation and exceptional items.

SGI-110: Phase II data will determine Phase III indication Astex is conducting three Phase II randomised controlled trials (RCTs) in AML/MDS,

ovarian and HCC, respectively. Various data points at medical meetings such as

ASCO and ASH from these trials may define the scope of the drug’s efficacy and its

Phase III registration strategy, most likely in a haematological indication initially based

on results from the AML/MDS trial.

AT13387: Aiming high AT13387 is in three Phase II studies, including two RCTs, one in CRPC and the other

in ALK+ NSCLC. These may show proof of concept efficacy data of the drug alone, or

in combination with standard of care drugs, namely Gleevec (for GIST), Zytiga (for

mCRPC) and Xalkori (for ALK+ NSCLC), over the next 12-18 months, setting the

stage for Phase III trials.

Dacogen royalty to continue The EU approval of Dacogen for elderly AML means Astex will continue to receive a

reduced royalty after the expiry of the drug’s exclusivity for MDS in the US in May this

year. There is upside to the company’s guidance in 2013 and our forecast beyond

2013 if J&J’s launch in Europe exceeds our expectations.

Valuation: Significant upside remains We value Astex at $599m (including cash), equivalent to $6.42/share basic or

$5.50/diluted share, on the basis of Dacogen, SGI-110 and AT13387 with

conservative assumptions. We see significant potential value increases as SGI-110

and AT13387 advance into later stages of development in the next 12-18 months.

Astex Pharmaceuticals CRPC study initiation

Focus shifts to ’110 and ’13387

Price US$4.52

Market cap US$422m

Shares in issue 93.3m

Free float 100%

Code ASTX

Primary exchange NASDAQ

Other exchanges N/A

Share price performance

% 1m 3m 12m

Abs 33.3 67.4 136.6

Rel (local) 30.5 53.0 108.4

52-week high/low US$4.52 US$1.60

Business description

Astex Pharmaceuticals is a US-UK oncology-focused drug discovery company. Its lead programmes are AT13387 (Hsp90 inhibitor) and SGI-110 (hypomethylating agent). It also has collaborations with pharma companies.

Next events

SGI-110 data May (ASCO); and Dec (ASH)

New IND Q413

SGI-110 Phase III indication selection

Q413

Analysts

Jason Zhang, PhD +1 646-653-7027

Robin Davison +44(0)20 3077 5737

healthcare@edisoninvestmentresearch.co.uk

Edison profile page

Pharma & biotech

Astex Pharmaceuticals | 11 March 2013

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Investment summary: Focusing on SGI-110 and AT13387

Astex Pharmaceuticals is a US-UK oncology-focused drug discovery company. It has one approved

drug, Dacogen, for myelodysplastic syndromes (MDS) and elderly acute myeloid leukaemia (AML).

Astex receives royalties on global Dacogen sales from partners Eisai and J&J. Its pipeline includes

SGI-110, a hypomethylating agent (HMA), and AT13387, an Hsp90 inhibitor, and both are in multiple

Phase II trials. It has licensed four drug candidates to large pharma companies, including Novartis,

AstraZeneca and J&J. It utilises the Pyramid fragment-based drug discovery platform to discover drug

candidates. Astex Pharmaceuticals was formed by the July 2011 merger of SuperGen in the US with

Astex Therapeutics Ltd in the UK. It employs c 140 staff based at locations in Dublin, California and

Cambridge, UK.

Valuation: $599m, or $5.51/diluted share We value Astex at $599m (including cash), equivalent to $6.42/share basic or $5.51/diluted share, on

the basis of Dacogen, SGI-110 and AT13387 with conservative assumptions. We forecast a slow

Dacogen ramp up in Europe for elderly AML, while we assume rapid revenue loss in the US and other

territories. We ascribe a very modest probability of success (35% and 25%) to the possible lead

indications of SGI-110 and AT13387, leaving other indications as upside for our model. We see

significant potential valuation increases as SGI-110 and AT13387 advance into later stages of

development in the next 12-18 months.

Sensitivity: Dacogen revenue; SGI-110 and AT13387 data read-outs Astex is subject to the risks typically associated with biotech company drug development, including

the possibility of unfavourable or ambiguous outcomes in clinical trials, the success of competitors and

commercial decisions by partners or potential partners. Since the company’s revenue mainly consists

of Dacogen royalties, its shares are subject to the drug’s MDS data exclusivity status in the US and its

launch trajectory in Europe. The clinical data read-outs of SGI-110 and AT13387 can, based on the

outcome, significantly affect the company’s valuation positively or negatively. Furthermore, Astex can

be negatively affected if its corporate partners delay or discontinue developments of Astex’s out-

licensed drugs.

Financials: Well-financed Astex reported net income of $8.2m, based on total revenue of $83.2m and total operating expenses

of $91.5m in 2012. It ended the year with cash, cash equivalents, and current and non-current

marketable securities at $138.3m. The company has guided that 2013 royalty revenue from Dacogen

would be $55m and total operating expense would be $90m. We expect the cash burn in 2013 to be

approximately $36m, ending 2013 with cash at c $102m. After several years of producing a profit, the

company will swing back to losses because of R&D investment in its maturing pipeline and reduced

Dacogen royalty. However, the company is well financed with enough cash to support its operation

until a major product partnership is established or one of the two key products is approved, starting

from possibly 2016.

Astex Pharmaceuticals | 11 March 2013

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Update: Investment case now rests on SGI-110 and AT13387

Astex’s investment case has advanced considerably in recent months with a significant expansion of

studies with its two “focus products”, second-generation hypomethylating agent (HMA) SGI-110 and

Hsp90 inhibitor AT13387. Astex is now running six Phase I/II or II studies with these two compounds

and should see various results in the next 12-18 months. Most importantly, the company could move

SGI-110 into a pivotal trial in 2014 based on data from the drug’s Phase II trial in AML/MDS.

The approval of Dacogen for the treatment of elderly AML patients in Europe will soften the blow of the

drug’s expiration of US orphan drug status in May this year, by providing reduced but still significant

royalty revenue. Astex also has an economic interest in four drug candidates that are licensed to large

pharma companies, including Novartis, AstraZeneca and J&J. Advancement of these drug candidates

into later stages of development could also bring Astex milestone payments, and ultimately value

recognition, which in our opinion is not captured in the share price.

SGI-110

SGI-110 is a second-generation HMA for the treatment of haematological malignancies and solid

tumours. The compound is a pro-drug of decitabine, the active ingredient of Dacogen, but has a

fourfold longer plasma half-life (it is resistant to degradation by cytidine deaminases) and can also be

given subcutaneously, which represents a key advantage over Dacogen or Vidaza (although Celgene is

developing an oral version of Vidaza). It has lower decitabine Cmax (Cmax, the highest concentration of

the drug, is related to a drug’s toxicity) and therefore potentially less toxicity than decitabine. Preclinical

studies done by the company have shown that it is more potent than decitabine at inhibiting gene

methylation, the proposed mechanism of action of HMAs including Dacogen and Vidaza.

The most advanced Phase II trial of SGI-110 is the ongoing Phase I/II study in AML/MDS. The trial

includes two parts, Part A and Part B. In Part A, 78 relapsed or refractory (r/r) intermediate- (INT) to

high-risk MDS or AML patients were treated with the drug with two schedules: daily subcutaneous

(SQ) for five days of a 28-day course (daily x5) and weekly SQ x 3 of a 28-day course (weekly x3). In

Part B, up to 160 first-line MDS, first-line elderly and r/r AML patients will be treated with the best

regimen identified in Part A.

Results of Part A, presented at the 2012 ASH meeting and updated at TAT 2013 (Exhibit 4), showed

that the dailyx5 regimen is better tolerated. As a result, two dose levels, 60mg/m2 dailyx5 and

90mg/m2 dailyx5, will be further tested in Part B. In r/r AML, patients will be treated with a slightly

modified but a more intense regimen, 60 mg/m2 dailyx10. In the dose escalating Part A, among 44

AML and seven MDS patients, clinical responses were observed1: two CRs, one CRp, and one CRi in

heavily pretreated AML patients; one mCR and one HI in MDS patients previously treated with

azacitidine, for an ORR of 12%. It appeared that response correlated with the drug’s proposed MOA,

as all responses were in patients who achieved >10% LINE-1 hypomethylation. LINE-1 (L1

retrotransposon) constitutes a substantial portion of the human genome, and LINE-1 methylation

correlates with global DNA methylation status. Among the 50 AML patients treated, 17 patients (26%)

who achieved >10% LINE1 demethylation also achieved objective response, whereas 0% of patients

who had <10% LINE1 demethylation achieved response. This, to our knowledge, is the first set of data

directly linking response and demethylation status of a HMA.

1 CR: complete response; CRp: CR with incomplete platelet recovery; CRi: CR with insufficient haematological recovery (platelets or neutrophils); mCR: minor CR; HI: haematological improvement.

Astex Pharmaceuticals | 11 March 2013

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Astex datasheet

Exhibit 1: Astex Pharmaceuticals R&D pipeline (clinical only)

Compound Mechanism Ownership/ partnership

Key indications and trials

AT13387 Hsp90 inhibitor Wholly owned Phase I/II study in ALK+ NSCLC; Phase I/II study in mCRPC ; Phase II study in GIST; various Phase I studies have been supported by a CRADA with the US NCI.

SGI-110 DNMT inhibitor Wholly owned Phase II study in MDS/AML; Phase I/II study in platinum-resistant ovarian cancer; Phase II study in second-line HCC. Eisai has the right of first offer.

AT7519 CDK (1, 2, 7 and 9) inhibitor

Wholly owned Phase I/II study in r/r multiple myeloma; Phase II trial in relapsed mantle cell lymphoma Phase II study in relapsed CLL; Phase I study in advanced/ metastatic solid tumours or refractory NHL. Novartis has option.

AT9283 Aurora (A/B)/ JAK2 inhibitor

Wholly owned Phase II study in r/r MM; Phase I study in paediatric (0.5-18 yrs) r/r ALL.

Amutatinib DNA repair/multi-kinase inhibitor

Wholly owned Phase II study in combination with platinum-etoposide chemotherapy in refractory small cell lung cancer showed evidence of clinical benefit but did not meet hurdle for advancement to second stage. Data to be presented at AACR.

LEE011 CDK 4 inhibitor Novartis Two Phase I/II and two Phase I trials in melanoma and solid tumours sponsored by Novartis (see link).

AZD5363 PKB/Akt inhibitor AstraZeneca One Phase I/II and three Phase I in mBC, mCRPC and solid tumours sponsored by AstraZeneca.

JNJ-42756493 FGFR inhibitor J&J Phase I trial in solid tumour or lymphoma, sponsored by J&J. AT13148 AGC inhibitor CR (UK) Phase I study in solid tumour sponsored by CR UK. AZD3293 BACE inhibitor AstraZeneca Phase I trial for Alzheimer’s disease sponsored by AstraZeneca.

Exhibit 2: Astex key Phase II studies

Compound Indication Study Endpoints

AT13387 ALK+ NSCLC Up to 228-pt study in combination with crizotinib prior/post crizotinib

Part A is a lead-in, single arm, dose escalation in pts receiving crizotinib. Parts B and C will run in parallel afterwards; part B will randomise pts to crizotinib ± AT13387 in pts who continue to respond to C, while Part C will test AT13387/ crizotinib combination in pts who have progressed. Primary endpoints: MTD for A and ORR for B and C (results: May 2014).

mCRPC after failure on abiraterone

Up to 164-pt study alone/in combination with abiraterone

Part A (Phase I) will enrol up to 52 pts to determine the best combination regimen for Part B (Phase II), which will enrol up to 112 pts. Primary endpoints: MTD, response, AR knockdown and CTCs for part A; PSA response and ORR by RECIST 1.1 for part B (results: Sept 2014).

Refractory GIST

36-pt study alone/in comb with imatinib

Three part study mono or combination. Primary: Tumour response (RECIST) at four months (results: May 2013).

SGI-110 MDS/AML 250-pt study of SGI-110 in three regimens (QD SQx5, QD SQx10, or QW SQx3)

Part A in r/r MDS or AML complete. Part B will randomise pts of first-line AML or MDS, r/r AML to 60 or 90 mg/m2 QDx5 or r/r AML to 60 mg/m2 QDx10. Primary endpoints: MTD and biologically effective dose (BED) for part A and overall remission rate for part B (results: Dec 2013).

Platinum resistant ovarian cancer

116-pt study in comb with carboplatin vs treatment choice.

Part A (~20 pts) tests the combination to establish MTD of AT13387; part B (96 pts) randomises pts to SGI-110/carboplatin vs physicians choice (paclitaxel, topotecan or Doxil); Primary endpoint: PFS for part B (results: June 2013).

HCC, Nexavar failure

46-pt study, monotherapy, dailyX5 Q4W

Open-label, single-arm, non-randomised study. Part A (15 pts) will establish MTD and part B (31 pts) will test the drug for efficacy. Primary endpoints: DCR at 16 weeks (results: Oct 2013).

Exhibit 3: Financial terms of key partnerships (valuations at the time of the deal)

Product Partner Commercial terms

Dacogen (decitabine) Eisai (North America)/J&J (EU and RoW).

Licensed globally to Eisai and sub-licensed to J&J (ex-NA). Astex receives a tiered royalty of 20-30% on global sales, with a further $12.5m of milestones due on approvals in Asia. The royalty rate begins at 20% on the first $50m of net sales and increases in 2.5% increments for each additional $50m in net sales up to 30%. Royalties payable for 20 years from date of first sale in each individual jurisdiction.

LEE011/AT7519 Novartis R&D and milestones (£275m), royalties. Option to license AT7519 (included in overall value). AZD5363 +AZD3293 AstraZeneca R&D funding, milestones (up to £150m) and up to high single-digit royalties. FGFr + one onc targets J&J Deal value >£270m; royalties. Multiple targets GSK Deal value >£300m; near-term, non-clinical milestones ~£37m plus royalties.

Source: Edison Investment Research and company reports

Astex Pharmaceuticals | 11 March 2013

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Astex has enrolled 50 of the 160 patients of Part B as of January and expects to fully enrol the trial in

the middle of the year and release full data by the end of the year. The robustness of the drug’s efficacy

data in each group of patients will play a very important role in Astex’s decision on which indication to

design its first pivotal trial for in SGI-110. Other factors to consider include the degree of unmet

medical needs (r/r AML>first-line elderly AML>first-line MDS), the level of competition (first-line

MDS>first-line elderly AML>r/rAML) and hurdle for approval (first-line MDS>first-line elderly

AML>r/rAML). We believe that the most likely first indication is first-line elderly AML, unless data in the

other two groups are exceptionally robust.

The company is also conducting a Phase II trial in platinum resistant ovarian cancer, with Part A testing

the combination of SGI-110 with carboplatin and Part B the combination vs physician’s choice

(paclitaxel, topotecan or pegylated liposome doxorubicin, ie Doxil). The trial could enrol up to 116

patients, with ~20 in Part A and 96 in Part B. The rationale for this trial is based on findings in a Phase

II, single arm study2 in platinum-resistant or -refractory ovarian cancer patients, in which the

combination of decitabine (low dose at 10mg/m2 d1-5) and carboplatin produced an ORR of 35%

(N=17), including one CR and five PR. The disease control rate (DCR, CR+PR+SD) was 70% and the

median PFS was 309 days. With the caveat that the trial is a single arm study with only a handful of

patients, this result compared favourably to carboplatin’s historical data (ORR 5.9% and PFS 171

days) in the same setting3 or monotherapy second-line drugs,4 such as liposomal doxorubicin (ORR of

12.3%, PFS of 64 days) and topotecan (ORR of 6.5% and PFS of 95 days). In a systematic literature

review5 published in 2010, it was found that platinum containing double or triple chemo regimen

produced ORR of 20-25% in platinum-resistant ovarian cancer patients. With this background, we

believe that if the SGI-110/carboplatin regimen produce ORR and PFS similar to that of

decitabine/carboplatin, it will be considered an effective regimen for platinum-resistant ovarian cancer

and attract partners. If the data in haematological cancer that shows SGI-110 is more potent than

decitabine at inhibiting methylation can be translated into clinical benefit in solid tumours, we may even

see a clinical result better than that of the decitabine/carboplatin combination.

Astex has also proposed a single-arm, two-part Phase II trial of SGI-110 in hepatocellular carcinoma

(HCC) patients who have failed treatment with Nexavar. The trial will enrol up to 46 patients with the

disease control rate (CR, PR, and SD) as the primary endpoint of Part B.

Exhibit 4: SGI-110 Phase I data in AML/MDS

Daily x 5 regimen Weekly x 3 regimen

AML MDS AML MDS N 36 8 29 6 Response 3 (8%) 3 (38%) 2 (7%) 3 (50%) Prior HMA treatment No prior HMA treatment LINE 1 demethylation level <10% >10% <10% >10% N 25 20 16 6 Response 2 (8%) 5 (25%) 0 3 (50%) In r/r AML <10% LINE1 demethylation >10% LINE1 demethylation N 32 17 Response 0 5 (29%)

Source: ASH 2012. Note: HMA: hypomethylating agent.

2 Matei D., et al., 2011, J Clin. Oncol. 29: (suppl; abstr 5011) 3 See H. T., et al., 2005 Int J. Gynecol Cancer 15: 209-216 4 Gordon A. N., et al., 2001, J. Clin. Oncol. 19:3312-3322. 5 Matsuo K. et al., 2010, Expert Opin Investing Drugs. 19:1339-1354

Astex Pharmaceuticals | 11 March 2013

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Exhibit 5: Competing late-stage developmental therapies for AML

Product/Company Setting Studies/notes

Vidaza (azacytidine)/ Celgene

First-line elderly (de novo/secondary)

480-pt Phase III study (AZA-AML-001) vs physician choice (intensive chemotherapy, low dose cytarabine or BSC) (results: Oct 2013). Primary endpoint: OS.

CC-486 (oral azacytidine)/Celgene

Maintenance in AML pts with CR after induction

460-pt Phase III study (QUAZAR AML-001) comparing CC-486 plus BSC vs BSC (results: Nov 2017). Primary endpoint: OS.

Revlimid (lenalidimide)/Celgene

First-line, elderly (de novo and tAML)

120-pt Phase II study (CC-5013-AML-001) of lenalidomide vs azacitidine→len vs azacytidine (results: Jun 2014). Primary endpoint: 1-yr survival.

Sapacitabine/ Cyclacel

First-line, older (aged >70yrs)

470-pt Phase III trial (SEAMLESS) of sapacitabine alternating with decitabine vs decitabine only (results: Oct 2014). Primary endpoint: OS. 40-pt Phase I/II study of sapacitabine in alternating cycles with decitabine (results due: Jun 2012). Primary endpoint: ORR including CR.

Midostaurin/ Novartis (CALGB-sponsored）

First-line, older (<60 yrs) with FLT3 mutations

714-pt Phase III trial of induction therapy (daunorubicin, cytarabine) ± midostaurin followed by consolidation (high-dose cytarabine in CR pts); maintenance with midostaurin or placebo in CR pts after consolidation; in patients with FLT-3 mutations; (fully recruited, results: Jul 2013). Primary endpoint: OS.

Volasertib/Boehringer Ingelheim

First-line (≥65 yrs) 660-pt Phase III study (POLO-AML-2) low-dose cytarabine ± IV volasertib (results: April 2016). Primary endpoint: CR.

Ceplene (histamine)/ Meda/EpiCept

Maintenance in AML pts with CR1

Conditional approval in the EU on the basis of a 320-pt Phase III study with a 150-pt Phase IV study commitment (results due: Aug 2012). Primary endpoint: MRD.

Vosaroxin/Sunesis AML pts with first relapse or refractory

500-pt Phase III study (VALOR) of cytarabine ± vosaroxin (results: early 2014). Primary endpoint: OS.

Elacyt (elacytarabine)/ Clavis

Refractory or failure on 2/3 prior Rx *

400-pt Phase III study (CLAVELA) of elacytarabine vs investigator’s choice (cytarabine single or combinations, HMA or BSC) (results: Mar 2013). Primary endpoint: OS.

AML pts failed first remission-inducing Rx

50-pt Phase II study of elacytarabine plus idarubicin as second course remission-induction therapy (results: Dec 2012). Primary endpoint: CR.

Crenolanib Besylate/Arog

Relapsed AML with FLT3-D835 mutations

14-pt Phase II study (results: April 2013). Primary endpoint: CR.

Source: Edison Investment Research; Note: MRD: minimal residual disease; *>65 year-olds with poor prognosis, failing one prior therapy can be included. HMA: hypomethylating agents; BSC: best supportive care.

Exhibit 6: Later-stage development programmes for MDS

Product/Company Setting Studies/notes

Rigosertib/Onconova Therapeutics

Relapsing/refractory to HMAs

270-pt Phase III study of BSC ± rigosertib (results: Oct 2013). Primary endpoint: OS

TD, low- or Int-1 risk MDS

60-pt Phase II study of rigosertib (single arm) (results: Apr 2014). Primary endpoint: units of RBC transfusion

Revlimid/Celgene Low- or intermediate-risk MDS with TDA

228-pt Phase III study (MDS-005) of Revlimid vs pbo in MDS Del 5q- (results: April 2016). Primary endpoint: Transfusion independence (TI) rate

CC-486/Celgene Low-risk MDS with TDA and thrombocytopenia

386-pt Phase III study (AZA-MDS-003) of BSC ± CC-486 (results: Feb 2016). Primary endpoint: RBC TI rate

SGI-110/Astex Newly diagnosed or r/r AML or MDS

250-pt, two part Phase I/II study comparing different dosing regimens of SGI-110 (results: Dec 2013). Primary endpoint (part B): overall remission rate

Entinostat/Syndax (NCI-sponsored)

MDS, CML and AML 196-pt Phase II study of azacitidine ± entinostat in MDS, CML or AML (results: Sept 2012).

Panobinostat/Novartis MDS, CMML or AML 111-pt Phase II study comparing azacitidine ± panobinostat (results: Aug 2013). Primary endpoint: CR or CRi or bone marrow CR

Telintra/Telik Low-risk Del 5q MDS r/r to Revlimid

130-pt Phase II study of Telintra monotherapy (results: April 2013). Primary endpoint: Hematologic Improvement-erythroid (HI-E) rate

CPI-613/Cornerstone HMA r/r leukaemia and MDS

30-pt Phase II study of CPI-613 (results: Dec 2013). Primary endpoint: OS

Source: Edison Investment Research; Note: TDA: transfusion dependent anaemia; TI: transfusion independence. Studies of ESA agents are not included in this exhibit.

Astex Pharmaceuticals | 11 March 2013

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Exhibit 7: Schematics of SGI-110 Phase I/II clinical trials in MDS/AML and ovarian cancer

Source: Company reports

Competitive landscape in demethylation, AML and ovarian cancer Celgene (through its acquisition of Pharmion) and Astex (in collaboration with Eisai and J&J) are

undisputable leaders in the field of demethylation, with Vidaza and Dacogen as the two approved

drugs in the class. When it comes to the follow-on strategy of the two drugs, Celgene chose to focus

on developing an oral form of azacytidine (CC-486), whereas Astex is focused on SGI-110. In a Phase

I trial (ASH 2011), oral azacytidine produced an ORR of 38% (3/8) in treatment naïve and preciously

treated AML patients. Celgene also found that the extended dosing schedule, QDx14 or QDx21,

resulted in reduction of methylation of -6.4% and -5.2%, respectively, comparing to -8.2% achieved

with SC Vidaza at 75mg/m2 QDx7 (the drug’s approved dosing schedule). In comparison, SGI-110

achieved up to 25% demethylation at the biologically effective dose (60mg/m2 dailyx5). Based on

another Phase I trial in which CC-486 produced an ORR of 42.3% (11/26, QDx14 day) and 37.0%

(10/27, QDx21day) in low-risk MDS patients, receiving either no prior treatment or prior erythropoiesis-

stimulating agents or white blood cell growth factors, Celgene has initiated two Phase III trials

(QUAZAR programme) for CC-496, one in low-risk MDS and one in AML, both as a first-line treatment.

There are currently eight compounds in Phase III trials for various settings of AML (Exhibit 6), including

first-line, refractory/relapsed or during maintenance after induction and consolidation. Several drugs,

including Celgene’s Vidaza, Novartis’s midostaurin, Sunesis’s vosaroxin and Clavis’s elacytarabine,

could produce Phase III results in 2013 or early 2014. Depending on the robustness of SGI-110’s data

in newly diagnosed or refractory/relapsed AML, the company will also have to consider the changing

dynamic of the AML treatment and design its pivotal trial accordingly.

There are currently only three drugs being tested in Phase III trials for MDS (Exhibit 7): Onconova’s

rigosertib, Celgene’s Revlimid and CC-486. Both Revlimid and CC-486 were tested in low-risk MDS, a

setting that Astex is not considering at the moment for SGI-110. Rigosertib, if positive in the ongoing

Phase III trial, could become an alternative choice for patients who have failed or are refractory to

HMAs and become a competitor to SGI-110 if Astex chose to develop the drug in that setting.

In the true platinum-resistant setting, we expect to see Phase III clinical trial data for Amgen’s

trebananib, Roche’s Avastin, Endocyte/Merck’s vintafolide and AstraZeneca’s saracatinib in 2013

(Exhibit 8). Any of these drugs, if data from their respective Phase III trials are positive, could become

another treatment choice in addition to the currently available Doxil and topotecan. Any additional drug

available for the setting would make SGI-110’s path to approval a little more challenging because

these drugs or regimens could become the new reference treatment standard.

Astex Pharmaceuticals | 11 March 2013

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Exhibit 8: Late-stage development programmes for platinum-resistant ovarian cancer

Product/Company Setting Studies/notes

Trebananib/AMG386/ Amgen

Partial platinum-sensitive or resistant

919-pt Phase III study (TRINOVA-1) of paclitaxel ± AMG386 (results; Jul 2013). Primary endpoint: PFS.

Rec partially platinum sensitive or resistant

380-pt Phase III study (TRINOVA-2) of PLD ± trebananib (results: April 2014). Primary endpoint: PFS.

First-line 2,000-pt Phase III study (TRINOVA-3) of paclitaxel/carboplatin ± trebananib (results: May 2016). Primary endpoint: PFS.

Avastin (bevacizumab)/Roche

Platinum-resistant 300-pt Phase III study (AURELIA) of chemo (PLD, paclitaxel, topotecan) ± bevacizumab (results: Dec 2013). Primary endpoint: PFS.

Vintafolide/Endocyte Merck & Co

Platinum-resistant 640-pt (500 folate receptor positive) Phase III study (PROCEED) of Doxil ± vintafolide (EC145) (results: June 2013). Primary endpoint: PFS.

Saracatinib/ AstraZeneca

Platinum-resistant 102-pt Phase II/III study (SaPPrOC) of paclitaxel ± saracatinib (results: Mar 2013). Primary endpoint: PFS at 6-mths.

Nintedanib/BIBF 1120/Boehringer Ingelheim

First-line 1,374-pt Phase III study of Paclitaxel/carboplatin ± nintedanib (results: April 2013). Primary endpoint: PFS.

Multiple-relapsed advanced

124-pt Phase II study (METRO-BIBF) of low dose cyclophosphamide ± nintedanib (results: Sept 2015). Primary endpoint: OS.

Bevacizumab-resistant, persistent, or recurrent

56-pt single arm, Phase II study of nintedanib monotherapy (results: Jun 2014). Primary endpoint: PFS.

Pazopanib/GSK Platinum-resistant or sensitive

54-pt single arm, Phase I/II study of pazopanib + PLD (results: Jun 2013). Primary endpoint: RR and PFS (Phase II).

Platinum-resistant or sensitive

68-pt single arm, Phase I/II study of pazopanib + topotecan (results: Jun 2015). Primary endpoint: PFS.

MM-121/Merrimack Platinum resistant/refractory

210-pt Phase II study of paclitaxel ± MM-121 (results: Dec 2014). Primary endpoint: PFS.

Pertuzumab/Roche Platinum-resistant, low HER3

184-pt Phase I/II study of standard chemotherapy ± pertuzumab (results: Sept 2016). Primary endpoint: PFS.

SGI-110/Astex Platinum-resistant 116-pt Phase I/II study of SGI-110/carboplatin vs treatment of choice (Phase II) (results: June 2013). Primary endpoint: PFS (Phase II).

Veliparib/Abbvie Relapsed ovarian cancer, BRCA- or unkn.

80-pt Phase I/II study of topotecan + veliparib (results: Oct 2014). Primary endpoint: RR (Phase II).

Platinum-resistant or sensitive

33-pt single arm, Phase I/II study of veliparib monotherapy (results: Nov 2013). Primary endpoint: RR.

NGR-hTNF/MolMed Platinum-resistant 124-pt Phase II study doxorubicin ± NGR-hTNF (results: Dec 2013). Primary endpoint: PFS.

Lurbinectedin (PM01183)/Zeltia

Platinum-resistant 60-pt Phase II study (results: H212).

Source: Edison Investment Research; Note: PLD = pegylated liposomal doxorubicin.

AT13387 Hsp90 (heat shock protein 90) is a molecular chaperone protein for some 200 client proteins, including

a large number of oncogenic kinases that are the validated targets of cancer drugs. Inhibition of Hsp90

causes these signalling proteins to breakdown, thereby indirectly inhibiting tumour proliferation and

inducing apoptosis. Targeting Hsp90 offers a way to simultaneously disrupt multiple cancer-promoting

pathways and tumour cells, including when they have mutated to become resistant to kinase inhibitors

or chemotherapy. AT13387 is one of six Hsp90 inhibitors currently in or approaching Phase II (shown

in Exhibit 9). Astex believes AT13387 is differentiated from other members of this class by a more

sustained action (it suppresses client proteins for more than seven days).

All three of the studies with AT13387 are in solid tumour indications – non-small cell lung cancer

(NSCLC), metastatic castration resistant prostate cancer (mCRPC) and gastrointestinal stromal tumour

(GIST). The two new studies with AT13387 are in ALK+6 NSCLC and chemo-naive mCRPC. Both test

AT13387 in combination with newly emerging standard of care drugs, namely Xalkori (crizotinib, Pfizer)

and Zytiga (abiraterone, J&J). The ALK+ NSCLC study consists of three parts: a lead-in dose

6 Anaplastic lymphoma kinase mutation or translocation (EML4-ALK fusion gene). This mutation is present in 3-5% of all NSCLC patients (typically adenocarcinoma) and the disease is more aggressive and is less likely to respond to existing therapies. ALK+ patients are typically 10-15 years younger than other patients with NSCLC and are more likely to be non-smokers.

Astex Pharmaceuticals | 11 March 2013

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escalation segment in patients who have already been receiving crizotinib, followed by two stages in

which patients will be randomised to crizotinib alone, AT13387 alone, or the combination of

AT13387/crizotinib. Thus the study examines whether AT13387 extends and/or restores sensitivity to

crizotinib in ALK+ NSCLC.

The initiation of the ALK+ NSCLC study (Exhibit 9) marks a significant escalation in Astex’s rivalry with

Synta, whose Hsp90 inhibitor, ganetespib, is also in a Phase II study in the same indication. Synta is

testing its drug in crizotinib-naïve patients (and thus may face a challenge recruiting as crizotinib

becomes better established) and has a smaller investigator-sponsored study examining ganetespib in

combination with crizotinib in crizotinib-naïve, chemotherapy-experienced patients. Novartis is

conducting various trials for its Hsp90 inhibitor AUY922 in NSCLC, including one that tests the

combination AUY922 with its direct ALK+ inhibitor LDK378 in crizotinib-naïve ALK+ patients. No other

Hsp90 inhibitors are being tested in ALK+ NSCLC patients.

Exhibit 9: Competing drugs in development for ALK+ NSCLC/cancers

Product/Company Setting Development stage/notes

Xalkori (crizotinib)/ Pfizer

first line 200-pt Phase III study in East Asian pts (results: Sept 2015). 334-pt Phase III study (PROFILE 1014) of crizotinib vs pemetrexed + cisplatin or carboplatin (non-squamous only) (results: Oct 2013).

second line (after failure on platinum)

1,100-pt Phase II study (results: June 2013) 50-pt Phase II study in East Asian pts (results: June 2014).

LDK378/Novartis post criz + chemo 137-pt Phase II study (results: Jul 2014). crizotinib naïve 105-pt Phase II study of LDK378 + crizotinib (results: Jul 2014). N/A 65-pt Phase Ib study of LDK378 + AUY922 (results: May 2016).

AP26113/Ariad ALK+ or EGFR mutant 130-pt Phase I/II study as monotherapy (results: Sept 2015). AUY922/Novartis crizotinib-naïve 65-pt Phase Ib study in combination with LDK378 (results: May 2015).

post-crizotinib 20-pt Phase I/II study, monotherapy (result: Jan 2015). third-line 150-pt Phase II study, monotherapy includes ALK+ cohort (results: Dec 2013).

AT13387/Astex first/second line Up to 228-pt Phase I/II study of AT13387, crizotinib or combination in pts who are stable on crizotinib or have progressed (results: May 2014).

Ganetespib /Synta crizotinib-naïve ALK+ 100-pt Phase II study (CHIARA) of G monotherapy (results: Sept 2013). treatment-naïve ALK+ 55-pt Phase I/II study of G+crizotinib (results: April 2015).

RG7853/AF802/ CH5424802/Roche

naïve/post crizotinib 94-pt Phase I/II trial (results: Sept 2014).

X-396/Xcovery N/A 60-pt Phase I study in advanced solid tumour (results: June 2013). ASP3026/Astellas N/A 54-pt Phase I study in advanced solid tumours/B-cell lymphomas (results: March

2013). 54-pt Phase I study in solid tumours (results: March 2014).

Source: Edison Investment Research. Note: All of the competing agents, with the exception of AT13387, are ALK inhibitors.

The mCRPC study initially tests two different regimens of AT13387 (once weekly, or QW and twice

weekly, or BIW) with abiraterone/prednisone to establish the best regimen. It then moves to a Phase II

stage when patients will be randomised to AT13387 alone or with abiraterone. Notably, the study

enrols pre-chemotherapy patients (ie docetaxel naïve) who have failed on abiraterone, effectively a new

type of patient within the mCRPC setting.7 This study tests whether AT13387 is active as

monotherapy and/or restores activity in combination, to abiraterone in pre-chemotherapy mCRPC

patients who have progressed on this drug. Astex also has a co-operative research agreement

(CRADA) with the US NCI that will support a number of planned Phase I/II studies of AT13387 as

monotherapy, and in combination with existing agents, in breast, lung, multiple myeloma and

myeloproliferative disorders.

7 Zytiga is now approved for prior pre-chemo use as well as after failure of docetaxel-based chemotherapy.

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Exhibit 10: Competing Hsp90 inhibitors and selected trials

Compound Indication Notes

Ganetespib/Synta Pharmaceuticals

NSCLC, second-line 500-pt Phase III trial of docetaxel ± ganetespib (results: 2014). Primary endpoint: OS. ALK+ NSCLC, crizotinib-naïve

100-pt Phase II study monotherapy (results: Sept 2013). Primary endpoint: ORR. 55-pt Phase I/II study of ganetespib + crizotinib, chemo experienced (results: April 2015). Primary endpoint: ORR.

Retaspimycin HCl/ Infinity Pharmaceuticals

NSCLC, second-/third-line; heavy smoker

226-pt Phase II study with docetaxel ± retaspimycin (results: Dec 2013). Primary endpoint: OS.

K-ras mutant, second-line NSCLC

70-pt Phase I/II study in combination with everolimus (results: Oct 2013). Primary endpoint: ORR.

AUY922/Novartis NSCLC, third-line 150-pt Phase II study of AUY922 monotherapy with stratification for EGFR mutant, KRAS mutant and EGFR/KRAS wild type (results: Nov 2013). Primary endpoint: ORR.

NSCLC, failed EGFR TKI second-line

43-pt Phase I/II study in combination with erlotinib in adenocarcinoma (results: Dec 2014). Primary endpoint: ORR.

NSCLC, EGFR mt, failed EGFR TKI

120-pt Phase II study of AUY922 vs pemetrexed or docetaxel (results: Nov 2014). Primary endpoint: PFS.

mBC, HER2+ or ER+ 45-pt Phase I/II study with trastuzumab in trastuzumab-failures (results: Aug 2013). second-line pancreatic 37-pt Phase II study, (results: Aug 2013). r/r lymphoma 42-pt Phase II study (results: Apr 2015).

KW-2478/KHK r/r MM 101-pt Phase I/II study in combination with bortezomib (results: Dec 2013). SNX-5422/Serenex Haem/solid tumours 12-pt Phase I study (results: Nov. 2012) and 15-pt Phase I study (results: Nov 2012).

Debio 0932/ Debiopharm

NSCLC, first-/second-line

36-pt Phase I/II study (results: Apr 2013).

DS-2248/Daiichi Adv solid tumour 88-pt Phase I study (results: Aug 2014); part 2 will be for ALK+ pts who failed crizotinib or chemo-treated but crizotinib naïve.

XL-888/Exelixis B-raf melanoma 36-pt Phase I study with vemurafenib (results: Jan 2015).

Source: Edison Investment Research

Exhibit 11: Competing programmes for metastatic CRPC (Phase II or later)

Compound Setting Notes

Xtandi (enzalutamide)/ Astellas/Medivation

Chemo-naïve 1,680-pt Phase III study (PREVAIL) of Xtandi vs pbo (fully enrolled, results: Sep 2014). Neoadjuvant 50-pt Phase II study of Xtandi ± leuprolide/dutasteride (results: Jun 2013). Primary

endpoint: pathological CR. Asympt. or mildly sympt. Failed primary ADT

400-pt Phase II study (STRIVE) of Xtandi vs bicalutamide (results: Jul 2013). Primary endpoint: PFS. 370-pt Phase II study of Xtandi vs bicalutamide (results: Jul 2013). Primary endpoint: PFS.

Zytiga (abiraterone)/J&J

Asympt. or mildly sympt. 290-pt Phase III study of Zytiga vs pbo (results: Feb 2014). Primary endpoint: TTTP. Docetaxel failure, 200-pt Phase III study of Zytiga vs pbo (results: Aug 2015). Primary endpoint: TTTP.

Tasquinimod/Active Biotech/Ipsen

chemo-naïve 1,200-pt Phase III study of tasquinimod vs pbo (results: Jan 2016). Primary endpoint: PFS.

Yervoy (ipilimumab)/ BMS

chemo-naïve 600-pt Phase III study of Yervoy vs pbo (results: Jan 2016). Primary endpoint: OS. 54-pt Phase II study of Yervoy ± GM-CSF (results: Dec 2014). Primary endpoint: PSA.

Orteronel /Takeda chemo-naïve 1,454-pt Phase III study of pred. ± orteronel (results: Jun 2013). Primary endpoint: rPFS. Prostvac/Bav Nordic Asympt. or mildly sympt. 1,200-pt Phase III study (Prospect) of Prostvac ± GM-CSF vs pbo (results: Dec 2014). Cabozantinib (XL-184)/Exelixis

failed docetaxel and Zytiga or Xtandi

960-pt Phase III study (COMET-1) of cabozantinib vs prednisone (results: Mar 2014). 246-pt Phase III study (COMET-2) of cabozantinib vs mitoxandone (results: Jun 2014).

Custirsen/Teva OncoGenex

First-line chemo 1,000-pt Phase III study (SYNERGY) of docetaxel/pred ± custirsen (results: Dec 2013). Second-line chemo 630-pt Phase III study (AFFINITY) of cabazitaxel/pred ± custirsen (results: Dec 2015).

OGX-427/ OncoGenex

failed Zytiga 72-pt Phase II study (PACIFIC) of OGX-427 vs Zytiga (results: Jun 2015). Primary endpoint: PFS.

EMD525797/Merck KGaA

Asympt. or mildly sympt. 216-pt Phase II study of EMD525797 vs pbo (results due: Jan 2013). Primary endpoint: PFS.

ARN-509/Aragon Pharma

Tx-naïve non-met., or chemo-naïve mCRPC,

123-pt three cohort Phase II study of ARN-509 monotherapy (results: Jun 2013). Primary endpoint: PSA response.

PX866/Oncothyreon failed Zytiga 40-pt Phase II study of PX-866 monotherapy (results: Aug 2013). Primary endpoint: PFS. CFG920/Novartis Zytiga-naïve or resistant 100-pt Phase I/II study monotherapy (results: Nov 2014). Panobinostat/ Novartis

Second-line hormonal therapy

78-pt Phase I/II study of panobinostat/bicalutamide (results: Jun 2013). Primary endpoint: PFS.

BEZ-235/Novartis N/A 74-pt Phase I/II study of Zytiga + BEZ235 (results: Jan 2015). Primary endpoint: PSA. GTx-758/GTx on ADT 75-pt Phase II study monotherapy (results: Apr 2013). Primary endpoint: PSA. Tivantinib/Arqule/ Daiichi/KHK

chemo naïve (Zytiga ok) 78-pt Phase II study of tivantinib vs pbo (results: Jul 2014). Primary endpoint: PFS.

Source: Edison Investment Research. Note: Primary endpoint is OS unless shown otherwise. TTTP: Time to prostate specific antigen (PSA) progression; ADT: Androgen Deprivation Therapy; rPFS: radiographic progression-free survival.

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CDK inhibitors and other pipeline drugs

AT7519 is one of two inhibitors of cyclin-dependent kinases in Astex’s pipeline (the other being the

Novartis-partnered compound LEE011). Recently a competing CDK4/6 inhibitor, Pfizer’s PD-0332991,

demonstrated an 18.6 month PFS advantage (26.1 vs 7.5 months) when combined with letrozole

(Femara, Novartis) vs letrozole alone in ER+/HER- breast cancer patients. A Phase III trial is about to

start. Astex’s focus is currently in haematological cancers, with two single-agent Phase II trials initiated

in chronic lymphocytic leukaemia and mantle cell lymphoma, respectively, sponsored by the NCIC

Clinical Trials Group in Canada.

Astex’s other pipeline drugs include AT9283, a JAK/aurora inhibitor currently in Phase I/II trials for r/r

MM and leukaemia, and amuvatinib (MP470), an oral dual inhibitor of mutant kinases and DNA repair

that was tested in combination with chemotherapy drugs in refractory small cell lung cancer. Astex has

completed a Phase II trial and is considering partnerships for MP470. In addition, the company has a

four discovery programme from which one investigational new drug (IND) will be announced this year.

Exhibit 12: Competing CDK inhibitors (Phase II or later)

Product/company Disease setting Development stage/notes

Dinaciclib/MK-7965/Merck

refractory CLL 466-pt Phase III study (P07714 AM2) of dinaciclib vs ofatumumab (results: April 2016). Primary endpoint: PFS.

PD-0332991 /Pfizer/Onyx

ER+/HER2- mBC, first-line

450-pt Phase II/III study of letrozole ± 991 (results: Mar 2015). Primary endpoint: PFS. 177-pt Phase II study of letrozole ± 991 (results: Dec 2012). Primary endpoint: PFS.

Alvocidib/ (flavopiridol)/Sanofi

Newly diagnosed AML

165-pt Phase II study (FIAM) of FLAM (flavopiridol, Arac and mitoxantrone) vs 7+3 (results: April 2013). Primary endpoint: CR after induction therapy.

P276-00/Piramal mTNBC 140-pt Phase II study of gem/carboplatin ± P276-00 (results: Dec 2013). Primary endpoint: PFS. LEE011/Novartis/Astex

NRAS mutant melanoma

58-pt, single arm Phase I/II study of LEE011 + MEK162 (MEK inhibitor/Array) (results: April 2015). Primary endpoint: ORR.

BRAF mutant melanoma

150-pt Phase I/II study of LEE01+LGX818 vs LGX818 (RAF inhibitor) (results: Dec 2015). Primary endpoint: PFS and ORR.

AT7519M/Astex rMCL 30-pt Phase II, single arm study of AT7519M (results: Aug 2014). Primary endpoint: ORR. r/rCLL 30-pt Phase II, single arm study of AT7519M (results: July 2014). Primary endpoint: ORR.

LY2835219/Lilly rMCL 20-pt Phase II, single arm study of LY2835219 (results: Oct. 2014). Primary endpoint: ORR. Milciclib/Nerviano Medical

thymic carcinoma

35-pt, single arm Phase II study (results: Feb 2013). Primary endpoint: PFS at three-month. 60-pt, single-arm Phase II study (results: May 2013); Primary endpoint: PFS at three months.

Source: Edison Investment Research

Dacogen Dacogen was approved in the EU in September 2012 as an induction therapy for AML patients who

are not candidates for standard induction chemotherapy. Licensed to Janssen-Cilag through Eisai,

Dacogen was launched October 2012 in Europe, which resulted in a $5m milestone payment to Astex

via Eisai. Dacogen is priced at €1,600 ($2,083)/vial (50mg), excluding VAT, in Germany. In the US, the

drug is priced at c $1,500/vial currently.

Astex is entitled to significant royalties (20-30%) on worldwide Dacogen sales under its licensing

agreements with Eisai, resulting in ~$70m in 2012 from sales of $282m by its partner Eisai in North

America and Janssen in the rest of the world. Since the majority of the sales of Dacogen are from the

US, where the drug’s exclusivity expires in May 2013,8 Astex’s royalty revenue from the US market

could decrease dramatically. The approval of Dacogen in the EU, where Dacogen will benefit from 10

years of market exclusivity from the date of first launch, as a result of the data protection provisions

arising from its orphan drug status in AML, therefore, will partly offset the royalty decline due to

revenue loss in the US. Astex’s guidance for Dacogen royalty revenue in 2013 is $55m, vs $70m in

2012, which reflects the expiration of orphan protection in the US and the drug’s approval in the EU.

8 Data protection arising from the orphan drug status for MDS expires in the US in May 2013.

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Dacogen is currently approved in the US and c 30 other countries for myelodysplastic syndromes

(MDS),9 a haematological condition that is a common precursor to AML. Although not specifically

approved in the US for AML, it is widely used off-label and has specific reimbursement codes for this

indication (and indeed is considered to be the standard of care). However, the FDA issued a complete

response letter (CRL) to Eisai in March 2012 on its US application for AML.

We expect Dacogen to become the first choice for patients with AML that are not eligible for standard

induction therapy in the EU, estimated to be around 10,000. Although Celgene’s Vidaza is approved in

the EU for MDS, usage of that drug for AML is limited because of lack of approval for AML and

therefore lack of direct reimbursement. However, Celgene has recently finished enrolment of its 480-pt

Phase III study (AZA-AML-001), which compares Vidaza to physician choices, which include intensive

chemotherapy, low-dose cytarabine or best supportive care (BSC), and expects top-line results in

October 2013. The inclusion in the control arm of intensive chemotherapy and low-dose cytarabine, in

addition to BSC, may pose a high hurdle for this trial. However, if this trial meets its primary endpoint of

overall survival, we expect Celgene to quickly file for approval in the EU and other territories where

Vidaza generics are not available. That would become a main competition to Dacogen in the EU and

further strain Astex’s royalty stream.

In addition, Celgene is conducting a Phase III trial of CC-486 (oral azacitidine, N=460) in AML as a

maintenance treatment in patients with CR after induction therapy. The success or failure of CC-486 is

unlikely to affect Dacogen’s position at the induction phase. Other drugs that are tested for newly

diagnosed AML include Cyclacel’s sapacitabine and Novartis’s midostaurin. Cyclacel’s sapacitabine is

moving slowly in the Phase III trial because the company’s update of data release has recently been

pushed into October 2014. Midostaurin was not in Novartis’s list of pivotal study read-outs in the next

12-24 months, suggesting development of the drug for this indication is terminated. As a result, the

main competing drug to watch for in terms of Dacogen’s AML indication is Celgene’s Vidaza.

Partnered programmes Astex has five Phase I programmes that are partnered with large pharmaceutical companies (two with

AstraZeneca, one with Novartis, and J&J) or research institutions. Among them (Exhibit 13), the most

advanced is LEE011, which is partnered with Novartis. A CDK4/6 inhibitor, LEE011, is in four, including

one ongoing and three planned, Phase I trials, as a monotherapy or in combination with other novel

cancer drug candidates, for lymphoma, melanoma and neuroblastoma. The Phase I monotherapy trial

in advanced solid tumour or lymphoma patients could yield clinical data in May 2014, thus providing

first evidence of whether this drug has anti-tumour activity in humans.

Two drugs are licensed to AstraZeneca, AZD5363 and AZD3839. AZD5363, an inhibitor of protein

kinase B (PKB, also known as Akt), is in four trials in patients of advanced breast cancer, prostate

cancer and others and could yield clinical data from a monotherapy trial as early as December 2013.

AZD3839 is an inhibitor of beta secretase converting enzyme (BACE), a potentially attractive new

approach to the treatment of Alzheimer’s disease (AD). It appears to be one of three such compounds

in clinical development, the others being MK-8931 (Merck & Co), now in a large Phase II/III study for

AD, and LY2886721 (Lilly), now in a Phase I/II trial for in mild cognitive impairment. J&J has recently

moved JNJ42756493, a FGFR (fibroblast growth factor receptor) inhibitor, into a Phase I study in

advanced solid tumour or lymphoma. Early results could be available in August 2014.

9 MDS covers a number of bone marrow diseases characterised by production of abnormal, poorly functioning and immature blood cells. The majority of cases are seen in patients over 60 years of age. Over time, MDS often progresses to AML. Patients receiving chemo/radiotherapy are at an increased risk of developing MDS following treatment, in which case it is referred to as secondary MDS. Secondary MDS usually develops rapidly and advances into AML.

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Exhibit 13: Clinical trials of Astex’s partnered compounds

Product Indication Development stage/notes

LEE001 /Novartis

Advanced solid tumour or lymphoma

105-pt Phase I study of LEE001 monotherapy (results: May 2014). Primary endpoint: MTD.

NRAS mutant melanoma 58-pt Phase I/II study of LEE001 and MEK162 (results: April 2015). Primary endpoint: MTD and ORR (Phase II).

BRAF mutant melanoma 150-pt Phase I/II study of LEE001 and LGX818 (results: Dec 2015). Primary endpoint: MTD and ORR (Phase II).

MRT and neuroblastoma 64-pt Phase I study of LEE001 monotherapy (results: Sept 2014). Primary endpoint: MTD. AZD5363/ AstraZeneca

Advanced breast cancer 110-pt Phase I/II study (BEECH, two parts) of AZD5363 and paclitaxel (results: April 2014). Primary endpoint: safety and ORR (part 2 in ER+ pts, pbo controlled).

Advancer tumour (PIK3CA mutant or mBC)

107-pt Phase I study monotherapy (results: Dec 2013). Primary endpoint: MTD.

Pre/post chemo CRPC 60-pt Phase I study (PYRUS) monotherapy (results: May 2014). Primary endpoint: PSA response.

Advanced tumour (Japan) 39-pt Phase I study monotherapy (results: April 2013). Primary endpoint: safety. JNJ42756493 /J&J

Advanced solid tumour or lymphoma

48-pt Phase I study monotherapy (results: August 2014). Primary endpoint: safety.

AZD3293/AZ Healthy volunteers 96-pt Phase I study single dose (results: May 2013). Primary endpoint: safety.

Source: Edison Investment Research; Note: MRT: Malignant rhabdoid tumours.

A profile of Astex’s Pyramid fragment-based technology appears in Exhibit 14.

Exhibit 14: Pyramid fragment-based drug discovery: a profile

What it is The Pyramid technology consists of a number of high-throughput biophysical and computational techniques to characterise interactions of very low molecular weight compounds (fragments) with target proteins. The fragments are optimised into lead compounds using iterative medicinal chemistry and informed by structure-based design.

Advantages Using very small, low molecular weight drug fragments (MW 150-250 kDa) in drug discovery should lead to the selection of better (in terms of binding efficiency and potency) lead candidates than are available from conventional high throughput screening (MW 300-500kDa). Fragments should have fewer interactions with target proteins than larger, more complex molecules, but the interactions are of a higher quality with the protein, giving high ligand efficiency. Hence, drug candidates should have greater target selectivity, be more soluble, have reduced metabolic liability and be easier to synthesise chemically. The fragment-based approach has been successful for targets that have proved to be intractable to conventional high-throughput approaches such as allosteric pockets.

Challenges Traditional bioassays used in high-throughput screening are unable to detect small drug fragments because of their relatively low potency binding to the protein target. The platform addresses this challenge by combining high throughput X-ray crystallography, NMR spectroscopy, calorimetry and other biophysical methods with advanced computational techniques, to allow the identification of low molecular weight compounds with binding affinities in the micro molar range.

Approach The aim of Pyramid is to identify multiple fragment starting points, allowing several lead series to be identified, often by synthesizing only small numbers of compounds. The technique allows ligand efficiency and logP to be monitored during the optimisation process to assess whether gains in potency are significant enough to justify increases in molecular size and lipophilicity.

Source: Edison Investment Research

Sensitivities

Royalties on Dacogen sales, which account for almost all of the company’s revenue in the last few

years, are expected to fall as a result of the expiration the drug’s regulatory exclusivity in the US in May

2013. Revenue is guided at $55m in 2013, which was lowered from $60m previously guided. If

Dacogen revenue falls more precipitously in the US and the drug’s ramp-up in Europe slows, Dacogen

royalty could come below the company’s guidance and negatively press the share price. Astex is also

subject to risks typically associated with biotech company drug development, including the possibility

of unfavourable outcomes in clinical trials, success of competitors and commercial decisions by its

partners and potential partners. More specifically, if the Phase I/II SGI-110 MDS/AML trial fails to

generate robust clinical data that can lead to a clear path for the drug’s approval, Astex’s valuation

could take a significant hit. Astex is obligated to pay a further deferred consideration of $18m (in cash

or shares) to former shareholders of Astex Therapeutics over 2013, an obligation that broadly reflects

the value of milestones expected from former Astex Therapeutics partnerships. However, these sums

remain payable whether or not the milestones are received as projected.

Astex Pharmaceuticals | 11 March 2013

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Valuation

Our model suggests Astex has a firm value of $599m, equivalent to $6.42/share basic or $5.5/diluted

share. This overall figure includes Dacogen at $168m, or $1.54/diluted share, SGI-110 at $148m, or

$1.36/diluted share, AT13387 at $96m, or $0.89/diluted share, other pipeline assets at $85m, or

$0.78/diluted share, and cash (end of 2013) at $102m, or $0.94/diluted share.

We forecast declining Dacogen royalty revenue in the US due to genericisation, and future revenue

mainly from the drug’s sales in Europe for elderly AML and sales from other territories. For SGI-110, we

have chosen only elderly AML as the lead indication and given a probability of success of only 35%,

which would be increased once the Phase II results are released. Our model considers only the ALK+

NSCLC indication for AT13387, given that other Hsp90 inhibitors have shown interesting activity at this

setting. Our probability of success is only 25%, appropriate for a Phase I/II drug candidate. We

assume a nominal $85m for all other pipeline assets, including the four licensed to pharmaceutical

partners (net of the $12m remaining deferred obligation to former Astex Therapeutics shareholders).

We consider our valuation assumptions very conservative on Dacogen, SGI-110 and AT13387, and

therefore believe there is significant upside in valuation once the latter two drugs move into later stages

of clinical development. We use a 12.5% WACC, the same as for all companies we cover, for our rPV

calculation.

Exhibit 15: Astex valuation model ($m except for per share data)

Product Main Indication Stage Probability Launch year Peak sales rPV

Dacogen MDs, AML Market 100% On market $221 $168

SGI-110 AML, MDS, Ovarian, HCC Phase II 35% 2016 $569 $148

AT13387 ALK+ NSCLC, mCRPC, GIST Phase I/II 25% 2017 $442 $96

Other pipeline, Phase I 15% >2018 N/A $85

Total $497

Cash and cash equivalents (YE'13)* $102

Total firm value $599

Total diluted shares (m, YE'13) 108.7

Firm value per diluted share $5.51

Source: Edison Investment Research. Note: * No cash valued assumed for options.

Financials

Astex reported net income of $8.2m in 2012, based on total revenue of $83.2m and total operating

expenses of $91.5m. It ended the year with cash, cash equivalents, and current and non-current

marketable securities at $138.3m. The company has guided that 2013 royalty revenue from Dacogen

would be $55m and total operating expense at $90m. We expect the cash burn in 2013 to be

approximately $36m, ending 2013 with cash at c $102m. After several years of producing a profit, the

company will swing back to losses because of R&D investment in its maturing pipeline and reduced

Dacogen royalty. However, Astex is well financed with enough cash to support its operation until a

major product partnership is established or one of the two key products is approved, starting from

possibly 2016.

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Exhibit 16: Financial summary US$'000s 2009 2010 2011 2012 2013e 2014e Year end 31 December IFRS IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue 41,253 52,972 66,914 83,159 55,000 21,000 Cost of sales 0 0 0 0 0 0 Gross profit 41,253 52,972 66,914 83,159 55,000 21,000 Research and development

(29,689) (28,394) (43,895) (60,419) (67,000) (72,000)

General and administration

(8,994) (9,442) (16,842) (15,661) (15,500) (16,500)

EBITDA 5,426 18,636 12,097 11,974 (21,965) (61,465) Operating profit (before GW and except.) 5,426 17,436 10,660 10,439 (23,500) (63,000) Intangible amortisation (106) (300) (4,465) (8,005) (8,000) (8,000) Exceptionals 595 750 (700) (6,126) 0 0 Share-based payment (2,750) (2,000) (3,083) (3,360) (4,000) (4,500) Operating profit 3,165 15,886 2,412 (7,052) (35,500) (75,500) Net interest 686 426 (158) 2,267 250 250 Other 0 0 0 0 0 0 Profit before tax (norm) 6,112 17,862 10,502 12,706 (23,250) (62,750) Profit before tax (reported)

3,851 16,312 2,254 (4,785) (35,250) (75,250)

Tax 886 (39) 3,288 13,031 5,000 8,001 Profit after tax (norm) 6,998 17,823 13,790 25,737 (18,250) (54,749) Profit after tax (reported) 4,737 16,273 5,542 8,246 (30,250) (67,249) Average number of shares outstanding (m)

59.3 60.3 75.1 93.3 94.0 94.0

EPS - normalised (c) 11.8 29.6 18.4 27.6 (19.4) (58.2) EPS - FRS 3 (c) 8.0 27.0 7.4 8.8 (32.2) (71.5) BALANCE SHEET Fixed assets 11,266 12,475 140,378 131,589 122,854 114,119 Intangible assets 731 731 130,992 122,987 114,987 106,987 Tangible assets 4,205 3,932 7,013 6,278 5,543 4,808 Restricted cash & marketable securities

5,825 7,258 1,819 1,819 1,819 1,819

Trade investment & others

505 554 554 505 505 505

Current assets 99,251 116,623 136,570 146,507 110,410 56,396 Stocks 0 0 0 0 0 0 Debtors 0 0 0 0 0 0 Cash/near cash 97,197 115,253 126,232 138,223 102,126 48,112 Other 2,054 1,370 10,338 8,284 8,284 8,284 Current liabilities (6,573) (5,039) (34,670) (20,034) (17,821) (11,425) Creditors (5,771) (5,548) (13,466) (13,933) (13,933) (13,933) Other creditors 0 0 (3,342) (3,379) (3,379) (3,378) Short-term borrowings 0 0 (17,353) (2,213) 0 0 Deferred income (802) 509 0 0 0 0 Long-term liabilities (1,958) (1,429) (21,356) (18,582) 0 0 Long-term borrowings 0 0 0 0 0 0 Other long-term liabilities (1,958) 0 (21,356) (18,582) 0 0 Net assets 101,986 122,630 220,922 239,480 215,443 159,090 CASH FLOW Operating cash flow 5,092 18,859 (13,174) 26,647 (19,752) (61,465) Net interest 686 426 (158) 2,267 250 250 Tax 886 (39) 3,288 13,031 5,000 8,001 Capex (989) (927) (800) (800) (800) (800) Purchase of intangibles 0 0 0 0 0 0 Acquisitions/disposals 500 0 0 0 0 0 Financing 5,000 336 434 0 0 0 Net cash flow 11,175 18,655 (10,410) 41,145 (15,302) (54,014) Opening net debt/(cash) (86,695) (97,197) (115,253) (87,523) (117,428) (102,126) Other (673) (599) (17,320) (11,240) 0 0 Closing net debt/(cash) (97,197) (115,253) (87,523) (117,428) (102,126) (48,112)

Source: Edison Investment Research, Astex Pharmaceuticals

Astex Pharmaceuticals | 11 March 2013

16

Contact details Revenue by geography

4140 Dublin Blvd., Suite 200 Dublin, CA 94568 US +1 925.560.0100 www.astx.com

N/A

CAGR metrics Profitability metrics Balance sheet metrics Sensitivities evaluation

EPS 2010-14e N/A

EPS 2012-14e N/A

EBITDA 2010-14e N/A

EBITDA 2012-14e N/A

Sales 2010-14e N/A

Sales 2012-14e N/A

ROCE 13e N/A

Avg ROCE 2010-14e N/A

ROE 13e N/A

Gross margin 13e N/A

Operating margin 13e N/A

Gr mgn / Op mgn 13e N/A

Gearing 13e N/A

Interest cover 13e N/A

CA/CL 13e N/A

Stock turn 13e N/A

Debtor days 13e N/A

Creditor days 13e N/A

Litigation/regulatory

Pensions

Currency

Stock overhang

Interest rates

Oil/commodity prices

Management team

Chairman and CEO: James S.J. Manuso, PhD, MBA President and director: Harren Jhoti, PhD

Chairman and CEO of Astex since Jul 2011, chairman, president and CEO of SuperGen from Jan 2004. Formerly president and CEO of Galenica Pharmaceuticals, general partner of PrimeTech Partners (1998-2002). Board director of BIO, Novelos Therapeutics and KineMed. Holds BA in economics and chemistry from New York University and PhD in experimental psychophysiology from The New School University.

President since Jul 2011, CEO of Astex Therapeutics (Nov 2007-Jul 2011), chief scientific officer (1999-Nov 2007) and co-founder in 1999. Previously head of structural biology and bioinformatics at GlaxoWellcome (1991-1999). Holds BSc in biochemistry and a PhD in protein crystallography from the University of London.

Chief medical officer: Mohammad Azab, MD, M Sc, MBA Chief financial officer: Michael Molkentin, CPA

Joined SuperGen as CMO in July 2009. Previously worked at Intradigm, QLT, AstraZeneca and Sanofi. Holds MD from Cairo University and has practiced as a medical oncologist. Has received post-graduate training and degrees in oncology research and statistics from Universities of Paris-Sud and Pierre et Marie Curie.

Joined SuperGen as chief financial officer and corporate secretary in Oct 2003. Previously, interim chief financial officer at Aradigm (May 2000 to Sept 2002), division controller for a subsidiary of Thermo Electron (Jan 1995-Apr 2000). Holds a CPA and received a BBA in accounting from Bernard M. Baruch College in New York City.

Principal shareholders (%)

Blackrock 7.1 Apax partners Inc 5.2 Abingworth LLP 4.8 Segall Bryant & Hamill 3.2 NB Public Equity Komplementar 2.3 Vanguard Group Inc. 2.2

Companies named in this report

Eisai (TSE:4523), J&J (JNJ), Celgene (CELG), Synta (SNTA), Pfizer (PFE), Novartis (NVS), AstraZeneca (AZN), GSK (GSK), Amgen (AMGN) and Roche (ROG.VX))

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