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Opal Biosciences Limited(ACN 605 631 963)

INFORMATION MEMORANDUM

OPAL BIOSCIENCES | 1

Opal Biosciences Limited(ACN 605 631 963)

INFORMATION MEMORANDUM

For the capital raising of $3.5m through the issue of 17,500,000 shares at $0.20 per share (with the possible issue of a further 2,500,000 shares at $0.20 per share to raise up to a further $0.5m to satisfy over-subscriptions) and the issue of up to 15,000,000 options with an exercise price of $0.26. The Opal Biosciences Information Memorandum is issued by Opal Biosciences Ltd ACN 605 631 963.

For Further Information please contact:Melanie Leydin – Company Secretary Tel: +613 9692 7222 email: [email protected]

Important Notice

This information memorandum is dated 15 May 2015.

This information Memorandum has been prepared by Opal Biosciences Limited (“Opal”) for the purpose of providing certain financial and business information to potential investors on a private and confidential basis for use solely in connection with their consideration of investing in 17,500,000 fully paid ordinary shares in Opal Biosciences Limited at an issue price of $0.20 per share to raise $3,500,000 with the possibility of a further issue of up to 2,500,000 fully paid ordinary shares at an issue price of $0.20 per share to satisfy over-subscriptions. Opal will also issue 1 option for every 2 shares subscribed, to applicants whose valid application forms together with all application money are received on or prior to 15 July 2015, and 1 option for every 4 shares subscribed, to applicants whose valid application forms together with all application money are received after 15 July 2015 and prior to the offer closing. The maximum number of options Opal will issue assuming the maximum over-subscription amount is also achieved and all applications are received prior to 15 July 2015 is 15,000,000. The option exercise price is $0.26 and the option expiry date is 15th May 2017.

2 | OPAL BIOSCIENCES

The offer of shares and options pursuant to this Information Memorandum is only available to investors to whom an offer can be made without the need for a Disclosure Document to be provided under the Corporations Act 2001 (Cth). The Information Memorandum is not a prospectus or product disclosure document under the Corporations Act and has not been lodged with ASIC. By retaining this Information Memorandum, you represent that you are not an investor to whom disclosure is required to be made under the Corporations Act. Accordingly, the Information Memorandum may not be copied or reproduced, in whole or part, for any purposes other than that for which it is intended and none of its contents may be divulged to third parties without the prior written consent of Opal Biosciences Limited.

The offer of shares in Opal is being made in Australia only and has not been lodged with any regulatory authority outside Australia. This Information Memorandum does not constitute an offer of shares in any jurisdiction in which, or to any person to whom, it would be unlawful to make such offer or invitation. It is the responsibility of overseas applicants to ensure compliance with all laws of the country in which they reside in relation to any application made for shares in Opal.

This Information Memorandum does not purport to be all inclusive or contain all of the information which its recipients may require in order to make an informed assessment of whether to invest in Opal Biosciences Limited. Accordingly, this Information Memorandum does not take into account the investment objectives, financial situation and particular needs of the individual investor. Before making an investment in Opal Biosciences Limited, the investor, or prospective investor, should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult an investment, tax or legal adviser if necessary.

This Information Memorandum contains forward looking statements. Statements about Opal’s future operations, projections and forecasts are based on assumptions about future events and management actions which may not necessarily take place and are subject to uncertainties which may be outside the control of Opal. Opal makes no guarantees, representations or warranties regarding whether projections or forecasts will be achieved or whether they represent the most likely outcomes.

Opal Biosciences Limited and each of its agents, directors, officers and employees:

a) does not warrant or represent the origin, validity, accuracy, completeness or reliability of, or accept any responsibility for errors or omissions in this Information Memorandum;

b) disclaims and excludes all liability for all claims of whatever nature that may arise in any way from or in connection with the provision of this Information Memorandum and any inaccuracy or incompleteness, or any reliance by any person on it; and

c) does not, by this Information Memorandum, provide any recommendation, service or advice.


Table of Contents1 Executive Summary ..................................................................................................5

2 Key Features of This Offer ........................................................................................7

2.1 Overview ............................................................................................................................7

2.2 Offer Under This Information Memorandum ...............................................................7

2.3 Investment Potential ........................................................................................................8

3 The Global Market Opportunity .................................................................................9

3.1 Market Overview ...............................................................................................................9

3.2 Key Industry Players ...................................................................................................... 12

4 The Company ..........................................................................................................14

4.1 Establishment of Opal Biosciences Limited .............................................................. 14

4.2 Transfer of Assets .......................................................................................................... 14

5 Opal’s Intellectual Property and Opportunities .......................................................15

5.1 Intellectual Property ...................................................................................................... 15

5.2 Opportunities for Opal’s Products ............................................................................... 15

6 Opal’s R&D and Commercialisation Strategy ...........................................................17

6.1 Research and Development ......................................................................................... 17

6.2 Expected Exit .................................................................................................................. 19

6.3 Commercial Deals in the Anti-infective area ............................................................. 19

7 Reasons For This Offer ...........................................................................................23

7.1 Major Goals for 2015 – 2017 ...................................................................................... 23

7.2 Use of Funds Raised Under This Offer........................................................................ 23

7.3 Company Management ................................................................................................ 23

8 Board, Management and Corporate Governance .....................................................24


8.1 Board of Directors .......................................................................................................... 24

8.2 Management .................................................................................................................. 25

9 Risk Factors ...........................................................................................................25

9.1 Uncertainty of Research: Project Risks ...................................................................... 26

9.2 Intellectual Property ...................................................................................................... 26

9.3 Dependence on Key Personnel .................................................................................... 26

9.4 Competition .................................................................................................................... 27

9.5 Commercialisation ......................................................................................................... 27

9.6 International Agreements ............................................................................................ 27

9.7 Funding Requirements .................................................................................................. 28

9.8 Unlisted, illiquid Shares ................................................................................................. 28

9.9 General Economic Climate ............................................................................................ 28

9.10 Market Conditions ......................................................................................................... 29

9.11 Government Policy Changes ........................................................................................ 29

9.12 Foreign Currency and Exchange Rate Fluctuations .................................................. 29

9.13 Future Performance of Business Activities ............................................................... 29


1 Executive SummaryUnder this Offer, Opal Biosciences Limited (“Opal”) seeks to raise A$3,500,000 by the issue of 17,500,000 fully paid ordinary shares to support the next stage of development of its technology. Opal reserves the right to accept over-subscriptions of up to a further 2,500,000 fully paid ordinary shares at an issue price of $0.20 per share to raise up to a further $500,000. Opal will also issue 1 option for every 2 shares subscribed, to applicants whose valid application forms together with all application money are received on or prior to 15 July 2015, and 1 option for every 4 shares subscribed, to applicants whose valid application forms together with all application money are received after 15 July 2015 and prior to the offer closing. The maximum number of options Opal will issue assuming the maximum over-subscription amount is also achieved and all applications are received prior to 15 July 2015 is 15,000,000. The option exercise price is A$0.26 and the option expiry date is 15 May 2017.

Opal technology targets the treatment of infections, primarily serious human infections. The unmet need for new anti-infectives is due to increasing resistance to existing antibiotics, more widespread and common difficult-to-treat infections, and the paucity of upcoming new treatments. This need has spurred the EU and US to introduce significant financial incentives to encourage development of new anti-infectives.

The funds raised will be used to acquire the anti-infective technology from Opal’s parent company, Biodiem Limited (ACN 096 845 993) and to develop further:

• Opal-I, an injectable product, and

• Opal-T, which can be applied to the skin.

Opal is well positioned strategically and has the potential to provide investors with substantial returns for the following reasons:

1. Large and growing market: The market for successful anti-infectives is large and growing due to the emergence of germs with resistance to many antibiotics.

2. Few competitors: The pipeline for potential competitor anti-infective drugs in development is weak compared to other diseases.

3. Facilitated path to market: EU and US incentives assist development of anti-infective products and reduce risk and development costs.

4. Opal technology’s potential: Opal’s technology has already demonstrated significant activity against some of the highest threat germs where there is a need for new treatments. A product development plan has already been established in respect of the Opal technology. An extensive international team is already involved in the company’s development program, including University of Western Sydney, Griffith University, various US and European specialist development companies and a number of US government-funded institutions.

The commercial objective is to outlicence or sell the technologies to a larger pharmaceutical company for clinical trials and marketing (or beforehand). The growth in number and value of acquisitions of anti-infective technologies internationally is driven by larger companies being drawn back to the anti-infectives market segment by its growing attractiveness, and the need to buy innovation with R&D pipelines dry. The most recent was the acquisition of Cubist Inc by Merck & Co in November 2014 in a deal reported as $US8.4bn.


This Offer represents an opportunity for investors to acquire a shareholding at a pivotal time.

In 2014 the WHO Report “Antimicrobial Resistance: Global Report on Surveillance” was released. In its opening pages it states “Antimicrobial resistance (AMR) within a wide range of infectious agents is a growing public health threat of broad concern to countries and multiple sectors. Increasingly, governments around the world are beginning to pay attention to a problem so serious that it threatens the achievements of modern medicine. A post-antibiotic era—in which common infections and minor injuries can kill—far from being an apocalyptic fantasy, is instead a very real possibility for the 21st century.”

Opal technology could provide a wide range of treatments for serious (and less serious) infections, many of which could be life-saving. The team behind the development of this technology is dedicated to making this a reality for future patients and to reward investors on the development of a successful Opal technology franchise.

Table One: Summary of the offer, key features and dates

Profile

Company name Opal BioSciences Ltd ACN 605 631 963.

Share Issue Price A$0.20

Investment amount A$3,500,000

Maximum oversubscription amount

A$500,000

Options to be issued 1 option per 2 shares subscribed to be issued to applicants whose valid application forms together with all application money are re-ceived on or prior to 15 July 2015.

1 option per 4 shares subscribed to be issued to applicants whose valid application forms together with all application money are re-ceived after 15 July 2015 and prior to the offer closing.

The maximum number of options Opal will issue is 15,000,000.

The option exercise price is A$0.26 and the option expiry date is 15 May 2017

Maximum Total shares on issue

45,000,000 post capital raising on a fully diluted basis (assuming the maximum oversubscription amount is also achieved and all applica-tions are received prior to 15 July 2015)

Indicative Offer Timetable

Opens 15 May 2015

Closes 15 May 2016 or earlier if subscriptions are received up to the maxi-mum oversubscription amount


2 Key Features of This Offer2.1 Overview

This summary is not intended to provide full information on the shares described in this Information Memorandum. Before deciding to apply for Shares this Information Memorandum and the Constitution of Opal should be read in their entirety.

Opal Biosciences Limited is a public company focused on development of products targeting treatment of infections.

Opal’s main asset is the BDM-I technology which is in development targeting the treatment of serious human infectious diseases:

• Opal-I, an injectable product, and

• Opal-T, which can be applied to the skin.

Opal Biosciences Ltd was incorporated in May 2015 and is based in Melbourne, Australia. Opal is a wholly-owned subsidiary of BioDiem Limited (ACN 096 845 993) and the BioDiem directors are the current directors of Opal. Opal seeks to raise $3.5m in equity funding to develop the products Opal-I and Opal-T towards sale or licensing of the technology or possible IPO of the company.

The fund raising will reduce BioDiem’s percentage ownership and continue the development of BDM-I.

Opal‘s commercial strategy for the next 2-3 years is to conduct studies of BDM-I as an anti-infective agent and commercialise through an outlicence or sale to a larger biotech or pharmaceutical company.

2.2 Offer Under This Information MemorandumThis Offer is for the subscription of ordinary shares and the issue of options in Opal Biosciences Limited.

If the investment amount of $3.5million is raised prior to 15 July 2015, the new shareholders will own 64% of the fully diluted capital of Opal Biosciences Limited, with BioDiem Limited owning 36%. If the maximum oversubscription amount of $0.5m is also raised prior to 15 July 2015, the new shareholders will own 67% of the fully diluted capital of Opal Biosciences Limited, with BioDiem Limited owning 33%.

The Offer is open from 15 May 2015 and will close on 15 May 2016 or earlier if the maximum oversubscription amount has been fully subscribed. These dates are indicative only and Opal reserves the right to change the dates, including to close the offer early without prior notice or to accept applications after the closing date.

Terms of Options

Opal will issue 1 option for every 2 shares subscribed, to applicants whose valid application forms together with all application money are received on or prior to 15 July 2015, and 1 option for every 4 shares subscribed, to applicants whose valid application forms together with all application money are received after 15 July 2015 and prior to the offer closing. The maximum number of options Opal will issue assuming the maximum over-subscription amount is also achieved and all applications are received prior to 15 July 2015 is 15,000,000.

Each option entitles the holder to be issued one fully paid ordinary share in Opal if the optionholder exercises the option and pays the option exercise price to Opal before the option expiry date.

The option exercise price is A$0.26 per option and the option expiry date is 15 May 2017.


Jun ‘15

OPAL-‐I Injectable product development; animal disease model

result

Jun ‘19 Jun ‘16

OPAL-‐T Topical product development

**FDA Orphan Drug

Approval**

Jun ‘17 Jun ‘18

Conduct compassionate

use and extended indica2on studies under Treatment

IND

Complete IND-‐enabling studies

**FDA Approval to commence

trials **

Ini2al raising 2nd Raising 3rd raising for clinical trials

CLINICAL TRIALS

commence

If life-‐saving results expect revenue within

1-‐2 years

2.3 Investment PotentialAny investment in this emerging sector must be considered speculative. Returns on this investment are not likely to correlate with returns on the overall stock market.

The board of Opal believes that Opal is well positioned strategically in a very attractive market and has the potential to provide investors with substantial returns for the following reasons:

1. Large and growing market: The market for successful anti-infectives is large and growing. Recent corporate transactions have heralded the return of some multinational pharmaceutical companies back to this sector (see Section 3.1). This trend is due to the emergence of antibiotic resistance germs with resistance to many decades-old generic (inexpensively produced) antibiotics.

2. Few competitors: The pipeline for potential competitor anti-infective drugs in development is weak compared to other diseases. Big pharma has wound back its R&D pipelines to save costs and this is fuelling the growth in values in the early-stage deal market (see Section 3.2).

3. Facilitated path to market: EU and US incentives to assist development of anti-infective products reduces risk and development costs, and increases the attractiveness of this market segment (see Section 3.2).

4. Opal technology’s potential: Opal’s technology has demonstrated significant activity against some of the highest threat germs where there is a need for new treatments. Opal has already established and commenced plans for product development

5. Investment opportunity: Opportunity for investors to acquire a share-holding at a pivotal time.

Figure One: Development Plan (indicative assuming no outlicence/trade sale)

There are a number of possible methods of valuing a technology portfolio. One such method, by way of example only, is to consider the value of the potential market for the technology and to make assumptions in relation to the market share which may be obtained by the new technology. Comparison to recent deals of similar technologies at a similar stage of development can also assist in the value assessment. This is covered in Section 6.3

As Opal’s technology has not yet reached the commercialization stage, the board of Opal cannot definitively value Opal or its technology at this time. For the purposes of this Offer, the Opal board considers that the pre-money valuation of Opal Biosciences Limited is A$2.5m. However, investors should reach their own conclusions as to the value of Opal and its technologies.


3 The Global Market Opportunity3.1 Market Overview

The Medical Need

Why is there an opportunity for BDM-I in the anti-infectives market?

The medical need for new effective anti-infective agents is growing. This is due to a number of well-established factors:

A) The increasing resistance seen to existing antibiotics. This is giving rise to “super bugs” which are no longer as responsive or are completely resistant to existing treatments. For example, this has been seen with the germs that cause infections such as tuberculosis, gonorrhea and also blood and wound infections.

B) Hard-to-treat infections that used to be rare are now more common. Because of advances in medical management of cancers, HIV, cystic fibrosis and organ transplants, as examples, there is a larger pool of people with weakened immune systems or having had intensive antibiotic treatment who can be susceptible to the unusual infections such as invasive fungal infections.

C) Resistant disease is more widespread. There is a rise in resistance among the germs that cause common infections such a urinary tract infections, bloodstream infections and pneumonia. Similarly, resistant germs are an increasing problem in tuberculosis and malaria.

In 2012 there were about 450,000 new cases of multi-drug resistant tuberculosis (MDR TB) and now extensively drug-resistant tuberculosis (XDR-TB) has been identified in 92 countries. An even more extensive comprehensive drug-resistance category for bacteria has now been defined which is reflective of the extent and the escalating severity of anti-infective microbial resistance. The term pandrug-resistant (PDR) bacteria has been defined1 which details the lack of susceptibility of groups of specific germs to all agents in all antimicrobial drug categories. These groups of specific germs include two potential targets of BDM-I. The global public health risk posed is recognized by many organisations such as the World Health Organisation2 and the Centers of Disease Control3 and Prevention (CDC) and many governments.45

D) Few new treatments are in development. The lead time to develop any new drug is long, generally 12 or more years, and few new anti-infective drugs have been brought to market in the last 25 years (see Fig. 2).

1 A.-P. Magiorakos Multidrug-resistant, extensively drug-resistant and pandrug-resistant bacteria: an international expert proposal for interim standard definitions for acquired resistance Clin Microbiol Infect 2012; 18: 268–281

2 http://www.who.int/mediacentre/factsheets/fs194/en/3 http://www.cdc.gov/drugresistance/4 USA: National Strategy for Combating Antibiotic-resistant Bacteria (http://www.cdc.gov/drugresistance/pdf/carb_national_strategy.pdf)5 UK: Review on Antimicrobial Resistance (http://amr-review.org/)


As reported by Silver (2011)6 about antibacterials at that time, “…there have been no successful discoveries of novel agents since 1987.” There have however been drugs introduced which are “modifications” of other agents. The large pharmaceutical companies have not been developing new antibiotics, partly because the old ones were so highly effective and antibiotics became low-priced commodities (generics). With very few patented products currently available, the market is dominated by generic manufacturers. In December 2014, the Pew trust published its study7 of the number of new antibiotics in development and found that “there are too few drugs in development to meet current and anticipated patient’s needs”.

Figure Two: Illustration of the “discovery void.” Dates indicated are those of reported initial discovery or patent.6

The Market

BDM-I has shown activity against germs in the fungal as well as bacterial categories. Both these market segments are growing in value. The frequency and value of deal transactions are increasing. These deals are driven by a number of factors:

• larger companies exited the anti-infectives sector due to the previous low value of the market, and

• larger companies have wound back their own R&D programs and so need to buy innovation. This is on the back of the rising potential profitability of anti-infectives, the growing unmet market need and recognition of the dire global public health consequences of antibiotic resistance. Most recently the G7 group of nations has called for action on antibiotic resistance.8

6 Silver, L. (2011) “Challenges of Antibacterial Discovery” Clinical Microbiology Reviews, Vol 24 (1) 71-109.7 http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2014/03/12/tracking-the-pipeline-of-antibiotics-in-development8 http://globalbiodefense.com/2015/05/04/g7-nations-antibiotic-resistance-tropical-diseases/

number of years, as the most common antibiotics (naturalproduct-derived antibacterials) were discovered and rediscov-ered rapidly. The prevalence of production of “common” an-tibiotics among standard Actinomycetes has been estimated byBaltz (22). To efficiently discard such previously describedcompounds, methods of so-called “dereplication” were quicklydeveloped to identify them (1, 104, 352).

In an effort to make dereplication easier, starting by theearly 1960s (126), screening methods were modified in order tolimit the hits to subsets of all possible antibiotic compounds.For example, many screens were developed over the years todetect inhibitors of the pathway of peptidoglycan (cell wall)synthesis (126, 278, 333). Each time a hit in such a screen wasdetected, it could be compared for biological and chemicalsimilarity to the previously discovered cell wall synthesis inhib-itors. Thus, pathway- or rudimentary target-based screeningarose in part for dereplication purposes but also because cer-tain pathways (cell wall and protein synthesis) appeared to becommon targets for useful antibiotics. Furthermore, it wasearly recognized that cell wall inhibition was a very selectiveantibacterial target. The only clinically useful antibacterialclasses discovered through directed screening thus far(monobactams, carbapenems, and fosfomycin) were discov-ered in these cell wall pathway screens.

Importantly, in 1977, at a time when the output of novelantibiotic classes had decreased, the low-hanging fruit having

been found, Cohen proposed rational chemotherapy of infec-tious organisms through a search for inhibitors of specific en-zymes in the target organism (77). This, along with the growingability to clone genes and manipulate bacterial strains to en-hance whole-cell phenotypic screens for inhibitors of specifictargets (and eventually allow the production of purified pro-teins which could be used for in vitro screening and assays),turned the whole of antibacterial discovery toward more tar-get-directed screens.

Much of early industrial antibacterial screening was carriedout by cohesive groups that did natural product fermentationand both designed and ran the screens. The scientific directionand prioritization of resources were done within the group. Butchanges in the pharmaceutical industry led, in many cases, to amodularized system that is still more or less in effect. Drugdiscovery programs for different therapeutic areas (such asinfectious diseases, cardiology, oncology, immunology, etc.)are generally organized such that biology and sometimeschemistry are committed to that area, but other functions(screening, animal testing, pharmacology, structural biology,etc.) may be shared. Since resources are always limiting, theirallocation became a relatively high-level management decision(often at a remove from bench science), weighing the valueto the company of a therapeutic area, the probability of suc-cess, the proximity to the “cutting edge” of current technology,and the ability of the scientists and their managers to push

FIG. 1. Illustration of the “discovery void.” Dates indicated are those of reported initial discovery or patent.

VOL. 24, 2011 CHALLENGES OF ANTIBACTERIAL DISCOVERY 73


Growing concern about antibiotic resistanceIn 2014 the WHO Report “Antimicrobial Resistance: Global Report on Surveillance” was released. In its opening pages it states “Antimicrobial resistance (AMR) within a wide range of infectious agents is a growing public health threat of broad concern to countries and multiple sectors. Increasingly, governments around the world are beginning to pay attention to a problem so serious that it threatens the achievements of modern medicine. A post-antibiotic era—in which common infections and minor injuries can kill—far from being an apocalyptic fantasy, is instead a very real possibility for the 21st century.”The foreword to CDC’s “Antibiotic Resistance Threats in the Unites States, 2013” states “Antimicrobial resistance is one of our most serious health threats. Infections from resistant bacteria are now too common, and some pathogens have even become resistant to multiple types or classes of antibiotics (antimicrobials used to treat bacterial infections). The loss of effective antibiotics will undermine our ability to fight infectious diseases and manage the infectious complications common in vulnerable patients undergoing chemotherapy for cancer, dialysis for renal failure, and surgery, especially organ transplantation, for which the ability to treat secondary infections is crucial.When first-line and then second-line antibiotic treatment options are limited by resistance or are unavailable, healthcare providers are forced to use antibiotics that may be more toxic to the patient and frequently more expensive and less effective. Even when alternative treatments exist, research has shown that patients with resistant infections are often much more likely to die, and survivors have significantly longer hospital stays, delayed recuperation, and long-term disability. Efforts to prevent such threats build on the foundation of proven public health strategies: immunization, infection control, protecting the food supply, antibiotic stewardship, and reducing person-to-person spread through screening, treatment and education.”

Figure Three: Forecast Market Sizes 20

Antifungal market size:

The global antifungal therapeutics market reached $US11.8 billion in 2013. It is expected to grow to nearly $US13.9 billion by 2018 with a compound annual growth rate (CAGR) of 3.2% over the five-year period from 2013 to 20189.

Antifungals market,US$13.9 billion9

by 2018(CAGR 3.2%)

Global antibacterials market, US$45 billion

by 201911

Global Anti-infectives market US$103 billion

by 201510

9 Global Antifungal Therapeutics Market: Trends and Opportunities (2014-2019) Daedal Research, August 2014


In the US alone, this market reached nearly $US4.9 billion in 2013 and is forecast to grow to $US5.5 billion in 2018 with a CAGR of 2.7% over the five-year period from 2013 to 2018. Whereas in Europe the human antifungal therapeutics market reached $US3.9 billion in 2013 and is projected to grow to $US4.4 billion in 2018 with a CAGR of 2.6% over the five-year period from 2013 to 2018.

Antibacterials global market

The global antibacterial drugs market was $US43.55 billion in 2012 and is expected to grow at a CAGR of 0.3% from 2013 to 2019, to reach an estimated value of $45.09 billion in 201911.

3.2 Key Industry Players

With very few patented products currently available in this market, the market is dominated by generic manufacturers. According to the Pew Charitable Trust report7 only five of the top 50 pharmaceutical companies as ranked by sales are still pursuing antibiotic development.

With respect to the key revenue generating drugs (branded and generic) of this market, Pfizer accounted for the largest market share in 2012, followed by Merck and GlaxoSmithKline. 11

However recently there has been a resurgence of interest with major deals transacted between small to medium size biotech companies and big pharma. The most recent was the acquisition of Cubist Inc by Merck & Co in November 2014 in a deal reported as $US8.4bn. Sales for Cubist’s product Cubicin is expected to reach $US1b.

Roche has been rebuilding capability in the anti-infectives area in recent years. In January 2015, Roche announced a $US750m deal with Japan’s Meiji Seika Pharma and Canada’s Fedora whereby Roche gains the right to develop and commercialise OP0595 (beta-lactamase inhibitor) outside of Japan. In November 2013 Roche licensed Polyphor’s Phase II product for approx.$US550m. Roche acquired rights to Spero Therapeutic’s lead program in April 2014 and acquired rights to Discuva’s platform resulting in $US175m per drug on achievement of milestones.

The dire need for new treatments has led to the introduction of attractive incentives in the US. These incentives are also fueling transactions and growth in the anti-infectives sector.

US Incentives

Already, 23,000 people die yearly directly from antibiotic-resistant bacterial infections in the U.S. and more than 2 million fall ill, according to the Centers for Disease Control12.

But as many as 10 million people a year could die from antimicrobial-resistant infections worldwide by 2050 if there is a continued rise in resistance and new treatments are not discovered, according to a recent report from the Review on Antimicrobial Resistance13.

In 2014, President Barack Obama committed $1.2 billion in his annual budget proposal to a five year plan to fight life-threatening infections caused by antibiotic-resistant bacteria – a doubling of the existing federal funding allocation.

10 Anti-infectives – A Global Strategic Business Report, Global Industry Analysts, Inc. MCP-6156, February, 2010. 11 Antibacterial Drugs Market- A Global Industry Analysis, Size, Share, Growth, trends and Forecast, 2013-2019,

Transparency Market Research, March 2014. 12 http://www.cdc.gov/drugresistance/threat-report-2013/


Relevant US Incentives now in place include:

1. The GAIN (Generating An tibiotic Incentives Now) Legislation

2. FDA’s Priority Review: A Priority Review designation means FDA’s goal is to take action on an application within 6 months (compared to 10 months under standard review).

3. Orphan Drug designation: qualifies the sponsor of the drug for various development incentives, including tax credits and extended market exclusivity.

4. FDA’s Fast Track Process: a process designed to facilitate the development, and expedite the review of drugs to treat serious conditions and fill an unmet medical need. The purpose is to get important new drugs to the patient earlier.

The GAIN (Generating Antibiotic Incentives Now) LegislationOn 9 July 2012 the US government passed the “Generating Antibiotics Incentives Now” (GAIN) legislation. The GAIN Act was passed in an attempt to incentivise the development of new antibiotics—a response to both growing rates of microbial resistance to antibiotics and a dearth of new antibiotic products in manufacturers’ pipelines.

In recognising the medical need for new antibiotics, the legislation• extends market exclusivity for certain life-saving antibiotics

• speeds development and review of new antibiotics through the FDA by fast track and priority status

• requires the FDA to issue guidance and advice on the necessary development pathway, and

• requires the FDA to develop a list of “qualifying pathogens” that have the potential to threaten public health.

One of the GAIN Act’s main provisions is Section 505E, which grants companies an additional five years of market exclusivity if they develop an antibiotic intended for a “qualified infectious disease”.14

Relevance to BDM-I

Included in the FDA’s list of “qualifying pathogens” are those which have shown susceptibility to BDM-I e.g. Mycobacterium tuberculosis, Neisseria gonorrhoeae, Streptococcus pneumoniae, Streptococcus pyogenes, Staphylococcus aureus, Candida species, Coccidioides species, Cryptococcus species, Enterococcus species etc, in the laboratory.

In addition to the benefits of the GAIN Act, there are additional benefits related to Orphan Drug designation. The benefit for the Orphan Drug designation varies between markets. In the US there is 7 years of marketing exclusivity, bringing the total to 12 years for antibiotics targeting qualifying pathogens and diseases.

The opportunity to access US Incentives, particularly extended market exclusivity for one or more pathogens and fast track designation for expedited FDA review will drive the attractiveness of the development plan for potential acquirers.

13 http://amr-review.org/sites/default/files/AMR%20Review%20Paper%20-%20Tackling%20a%20crisis%20for%20the%20health%20and%20wealth%20of%20nations_1.pdf

14 http://www.raps.org/regulatory-focus/news/2014/06/19395/FDA-Final-Rule-On-Qualifying-GAIN-Act-Pathogens/


4 The Company4.1 Establishment of Opal Biosciences Limited

Opal is a public company, which is a wholly owned subsidiary of BioDiem Ltd (ABN 20 096 845 993) “BioDiem”, established on 4 May 2015. Subject to BioDiem shareholder approval, the BDM-I technology will be transferred to Opal in consideration for the issue by Opal to BioDiem of 10 million fully paid ordinary shares and 5 million options with an exercise price of $0.26 and an expiry date of 15 May 2017 and payment of cash consideration of $500,000. If Opal achieves equity investment into Opal of at least $1.5million pursuant to this capital raising, $500,000 of funds raised will be used to pay the cash consideration for the transfer and the balance will be used to develop the BDM-I technology and the percentage ownership by BioDiem will reduce accordingly.

4.2 Transfer of Assets

The BDM-I technology which is the main asset of Opal, has been assigned from the Institute of Experimental Medicine, St Petersburg, to BioDiem, under a Commercialisation Agreement dated 1 Nov 2001. This technology will be assigned to Opal.

Two permissions are required to undertake this:

1. BioDiem Shareholder approval:

A shareholders meeting will be held to approve the transfer of the BDM-I technology into Opal, a wholly-owned subsidiary of BioDiem Ltd. The subsequent equity investment into Opal will be used to pay the A$500,000 consideration for the transfer and to develop the BDM-I technology and the percentage ownership by BioDiem will reduce accordingly.

2. The Institute of Experimental Medicine has been asked for their approval for the assignment of BDM-I to Opal.

If both the required permissions are not received by 15 July 2015, the share issue will not proceed and all application money will be returned (without interest) to applicants.


5. Opal’s Intellectual Property and Opportunities5.1 Intellectual Property

Opal will acquire all global rights to BDM-I from BioDiem. All Opal’s intellectual property management is undertaken by patent attorney firm, Davies Collison Cave in Melbourne.

The intellectual property of BDM-I covers three patent families:

The parent patent Antimicrobial and Radioprotective Compounds covers the method of treatment and/or prophylaxis of a microbial infection using BDM-I.

The second patent Method of treating Scedosporium spp. Infection is specifically directed at the invasive fungal condition caused by Scedosporium spp.

A third provisional patent is being prepared, which could expand the infections for which Opal products, based on BDM-I, would be used.

The following Table Two shows the patent status for Opal’s BDM-I technology.

Table Two: BDM-I Patent Status as at April 2015

Title Granted Pending

Antimicrobial and radioprotective compounds

Australia, Canada, China, France, Germany, HK, Japan*, Singapore, South Africa, UK, USA**

Europe, HK, Malaysia, USA

Method of treating Scedosporium spp. infection

Australia, Canada, China, Europe, Japan, New Zealand, Singapore, South Africa, USA

Nitro-styrene derivatives having antimicrobial activity

Hong Kong

* Japan granted for vulvovaginitis, resistant Golden Staph infections, skin & soft tissue infections and gastrointestinal tract, and protozoal infections.

**USA granted for skin and soft tissue infections, protozoal infections, vulvovaginitis.

5.2 Opportunities for Opal’s Products

Of the nine new antibiotics approved by the FDA in the last decade, few have been novel and most have been directed towards very narrow or specific infections. This means that only a fraction of the treatments needed to provide the everyday solutions that the general public needs are being made and marketed.

With the rise in antibiotic resistance, new effective treatments have the potential to be life-saving.


5.2.1 Intravenous Use (Injection) “Opal-I”

Invasive fungal infections

Devastating life threatening infections can be caused by fungus germs that invade the bloodstream, lungs and other body cavities e.g. the sinuses. Opal I, an injectable formulation of BDM-I, will be aimed at these conditions.

Systemic bacterial infection (injection)

Similarly bacteria germs can cause blood poisoning, urinary tract infections, pneumonia and deep infections. These infections can be more of a problem in patients with weak immune systems such as cancer patients, who are unable to fight infections. Opal-I will also be aimed at these conditions.

5.2.2 Topical Use (ointment, cream, spray, dusting powder, varnish) “Opal –T”

BDM-I shows activity against germs associated with skin, soft tissue and mucous membrane infections, such as those that cause tinea, conjunctivitis and external ear infections. There is an opportunity for a wide range of topical products which would be aimed at treatment of these infections, including use for burns.

5.2.3 Oral Use (tablets, capsules, syrup, mouthwash) “Opal –O”

A range of germs can infect the human gut causing problems such as gastroenteritis. While some go away on their own, other infections are more troublesome and make people very sick. BDM-I has shown activity against a number of germs (non-virus) which cause gut problems. Opal-O, oral formulations of BDM-I, would be directed towards use in such infections.

5.2.4 Lung (inhalation) “Opal –L”

In chronic diseases such as cystic fibrosis, antibiotic treatment has an important role and has significantly improved life expectancy of patients with this disease. The emerging increase in resistance to antibiotics is of major concern for these patients where lung infection is a major cause of illness and death. Opal-L, an inhalation formulation of BDM-I, could be directed towards use in such patients. A number of the problem germs in cystic fibrosis have been shown to be sensitive to BDM-I in laboratory studies.

5.2.5 Other Uses

BioDiem currently has agreements with the U.S. Army Medical Research Institute of Infectious Diseases (USAMRIID) to assess its potential as a biological weapons counter-measure, and with the U.S. National Institute of Allergy and Infectious Diseases’ (NIAID’s) in which BDM-I has progressed to pre-clinical animal studies to assess its potential as a treatment for the fungal disease, pneumocystosis and tuberculosis infection. The later studies are conducted under the U.S. National Institute of Allergy and Infectious Diseases’ (NIAID’s) preclinical services program Animal Models of Infectious Disease Service15.

Under NIAID’s preclinical services program16, internationally recognised researchers, Professors Melanie Cushion and Thomas Patterson tested BDM-I’s activity against a range of fungi which can cause serious human infection. This was expanded testing following on from an earlier assessment.

15 http://www.niaid.nih.gov/labsandresources/resources/dmid/animalmodels/Pages/default.aspx16 http://www.niaid.nih.gov/LabsAndResources/resources/dmid/invitro/Pages/invitro.aspx NIAID Contract Number * HHSN272201100018I


Comple'on of animal studies

for Opal-‐I Product formula'on Tolerability

studies

Opal-‐I manufacture

Pharmacokine'cs

Animal efficacy studies

Jul 2015

Product formula'on

Mechanism of ac-on studies

Skin penetra'on studies and stability tes'ng

Opal-‐T manufacture

Comple'on of Opal-‐T – Final

Product

OPAL -‐ I

OPAL -‐ T

Jan -‐ Jun 2017

Nearly 70 different strains of opportunistic or hospital-acquired fungi have been assessed for sensitivity to BDM-I. These microorganisms can all cause illnesses which are difficult to treat. Examples include life-threatening bloodstream infections and pneumonia. In these bench-top studies, Opal’s BDM-I demonstrated activity against several of the Cryptococcus species as well as endemic fungi such as Blastomyces dermatitidis, Coccidioides immitis/posadasii and Histoplasma capsulatum. Marked activity was also demonstrated by BDM-I against Pneumocystis carinii and murina. It was noted by the researchers Professors Cushion and Patterson that “further studies are warranted to determine the potential of this broad-spectrum antifungal agent”.

6 Opal’s R&D and Commercialisation Strategy

6.1 Research and Development

The funds raised under this Information Memorandum will be used to progress BDM-I development towards approval to conduct clinical trials (IND approval – US regulatory system).

Figure Four: Development Plan summary (indicative)


This will be done through

• Additional formulation studies (including topical products) or deliver BDM-I by different routes of administration

• Dose-range finding pilot toxicology studies (to assist dose choice and treatment schedule and point to future toxicology studies needed)

• Pharmacokinetics studies using additional formulations

• In vivo preclinical efficacy studies to show the effect of BDM-I on actual infections in an animal model.

Following the successful completion of this stage (by approx. June ’17), the results will be used to seek Orphan Drug Designation from the FDA. Opal expects there will be a significant value uplift once Orphan Drug Designation is obtained. Through the publication and promotion of successful results potential acquirers will be made aware of BDM-I’s results and a preclinical phase deal would be possible. In any case, the development plan will be pursued so that Opal will have the option of continuing development to IND submission and Phase I clinical trial in the absence of a suitably profitable deal.

Significant work has been undertaken to date to produce:

• Manufacture/synthesis of raw material (GLP) and stability testing (highly stable)

• Mechanism of action studies to investigate how BDM-I kills germs (University of Western Sydney and Griffith University)

• Pathogen (germ) screening to determine which germs and diseases are potential targets for commercial development (NIAID, USAMRIID, Monash University, QIMR, University of Sydney, UWS)

• Initial studies on propensity of pathogens to develop resistance upon repeated exposure to BDM-I at sub-lethal concentrations

• Physicochemical profiling and preliminary drug formulation studies so that BDM-I can be given by injection and by mouth (iv and oral administration)

• Pharmacokinetics, assay development (rat, mouse; oral, ip and iv) to show how BDM-I is absorbed into the body, where it goes, how long it takes, and how it is excreted

• Early stage toxicology studies (GLP and non-GLP, single and repeat dose, rat) to show dose-limiting effects


6.2 Expected Exit

The development focus and plan will be to US FDA standards because the US is seen as the most attractive market for a commercial transaction (outlicence of BDM-I technology or sale). Indications of potential technology value uplift points is shown in Figure Five.

Figure Five: Potential Exits (indicative)

The BDM-I technology is in a high growth commercially attractive market segment. The development path assumes progress towards FDA approval and product launch, however based on recent transactions of successful similar technologies the opportunity for trade sale or licence of the technology is highly probable. At each value uplift point (conclusion of preclinical efficacy, IND approval, clinical trial results, etc) an assessment will be made as to the best gain for shareholders.

Following successful conclusion of the first phase of development studies, an Initial Public Offering (IPO) of Opal Biosciences will be considered in light of the then market conditions.

6.3. Commercial Deals in the Anti-infective area

A study by analysts, Avance in 2007,17 of deals in which it had been involved found the value share for discovery deals, to be 17.6% for the licensor and 20.1% for preclinical deals. These analysts also report average royalty rates to be around 4% for discovery deals and 6% for preclinical deals. Avance reported average upfront payments for discovery deals of US$0.9 million in the range zero to US$5.5 million; and for preclinical deals US$1.9 million, ranging from $0.1 million to US$10 million.

17 Anon. Discovery in Preclinical License Deals: What’s Realistic. News in Avance, Dec 2007(http://www.avance.ch/newsletter/docs/avance_on_deals.pdf)


Some transactions in the anti-infective area over the last 10 years are shown in Table Three18 below.

Table Three: Investments or Partnerships by Big Pharma in the Antibiotics Sector

Company Investment/Partnership Detail

Astellaswww.astellas.us

Licensed Theravancin from Theravance in 2005.

AstraZenecawww.astrazeneca.com

In 2009, partnered with Forest Laboratories to co-develop and commercialize ceftaroline, currently in Phase III studies.

Forest Laboratorieswww.frx.com

Acquired Cerexa for around $500 million in 2007.

GlaxoSmithKlinewww.gsk.com

Acquired UK based Domantis in 2005 and entered next-generation antibiotic field.

Inked alliance with MPex Pharmaceuticals in 2008 to develop efflux pump inhibitors against Gram-negative infections.

Johnson & Johnsonwww.jnj.com

Signed licensing agreement with Basilea for Ceftobiprole in 2005. Legal battles in 2009 resulted in rights being handed back in 2010. Acquired Peninsula Pharmaceuticals and its lead product doripenem, a broad-spectrum antibiotic, in 2005.

Novartiswww.novartis.com

Paid $569 million for NeuTec Pharma in 2006, take included an antifungal drug and an antibiotic active against MRSA. Bought Protez for an initial payment of $100 million in 2008, with the potential for up to $300 million of additional payments contingent upon the success of PZ-601, an antibiotic in Phase II development.

Pfizerwww.pfizer.com

Acquired Vicuron for $1.9 billion in 2005. Its pipeline drugs include an antifungal drug and Dalbavancin, active against Gram-positive infections including MRSA in Phase III stage. (Durata Therapeutics acquired Vicuron from Pfizer in 2009.)

Partnered with MicuRx Pharmaceuticals and Cumencor Pharmaceuticals to develop antibiotics for drug-resistant TB in 2010.

Sanofi Pasteurwww.sanofipasteur.com

Collaborated with KaloBios Pharmaceuticals to develop vaccines against drugs against P.aeruginosa in 2010.

No representation is made that Opal will be able to enter into a deal with a third party investor in relation to the Opal (BDM-I) technology and no guarantee is given that the size of any deal would be comparable to any of the deals listed in this table.

18 http://www.genengnews.com/Media/images/Article/UGENWebsitepictures2010GEN15_Sep0110BioMarketTrendsBCCResearchGEN_Sep0110 _BioMktTrnds_Table5411812318.jpg


Table Four:19 Drug Licensing deal in Q1 2015

Licensor Licensee Therapy Area Product/Technology Indication Phase Potential total value ($m)

Upfront value

Bavarian Nordic Bristol-Myers Squibb Oncology Prostvac Prostate

cancer Phase III 975 60

Intrexon MERC KGaA Oncology CAR-T platform Preclinical 941 115

Voyager Sanofi CNS Adeno-associated virus (AAV) gene therapy Pre-clinical 845 65

Isis J&J Autoimmune RNA-targeted platform Pre-clinical 835 200

AstraZeneca Daiichi Sankyo Gastro-intestinal MovantikOpioid-induced

constipationMarketed 825 200

Aduro Biotech Novartis Oncology STING platform Pre-clinical 750 200

Meiji Seika Pharma/Fedora Pharmaceuticals

Roche Infectious diseases OP0595 Bacterial infections Phase I 750 n/a

Hanmi Eli Lilly Autoimmune HM71224 Rheumatoid arthritis Phase III 690 50

Kite Pharma Amgen Oncology CAR-T platform Pre-clinical 585 60

AC Immune J&J CNS ACI-35 Alzheimer’s disease Phase I 509 n/a

Neuropore UCB CNS NPT200-11 Parkinson’s disease Phase I 480 20

Phenex Gilead Hepatology Farnesoid X Receptor NASH Pre-clinical 470 n/a

Innovent Eli Lilly Oncology Various Phase I 456 56

NGM Bio-pharmaceuticals Merck & Co. Various Biologic therapies Pre-clinical 450 94

ImmunoGen Takeda Oncology Antibody drug conjugates Pre-clinical 440 20

Souce: FirstWord Pharma PLUS

FirstWord Pharma has reported the largest drug in-licensing deals in the first quarter of 2015, showing an emphasis on early stage collaborations.

No representation is made that Opal will be able to enter into a deal with a third party investor in relation to the Opal (BDM-I) technology and no guarantee is given that the size of any deal would be comparable to any of the deals listed in this table.

19 http://www.firstwordpharma.com/node/1275104#axzz3ZtvLWT1v


Figure Six:20 Median Upfront Payments in deals versus stage of development.

This graph shows the number of world-wide or major market deals disclosing an upfront payment at the time of signing and the median upfront payment amount. No representation is made that Opal will be able to enter into a deal with a third party investor in relation to the Opal (BDM-I) technology and no guarantee is given that the size of any deal would be comparable to any of the deals listed in this chart.

20 http://www.sharevault.com/resources/white-papers/valuation-of-your-early-drug-candidate/

Data Source: Deloitte Recap LLC’s DEAL builderTM


7 Reasons For This Offer7.1 Major Goals for 2015 – 2017

Opal Biosciences Limited’s goals for the next two years are:

• Completion of the acquisition of the BDM-I technology

• Development of two products:

o Opal-I (injection formulation) and

o Opal-T (topical product)

• Outlicence or sale of the technologies, or

• Continued development leading to potential IPO (depending on prevailing market conditions to give best return to Opal shareholders).

7.2 Use of Funds Raised Under This Offer

The use of funds is categorised below in Table Five:

Table Five: Use of funds

2015 - 2017

$ (‘000’s)

Consideration payable to BioDiem for acquisition of BDM-I technology 500

Research and Development - Opal - I (injection)- Opal - T (topical)- Opal platform development

1,400

Patents (approx.) 400

Other costs (management & corp services, facilities & admin) 1,200

Total $3,500

7.3 Company Management

The management, facilities and services used by Opal are supplied by BioDiem Ltd under a services agreement. This minimizes costs and ensures efficient development under an existing commercialization plan (see Section 8).


8 Board, Management and Corporate Governance8.1 Board of Directors

Mr Hugh Morgan AC

Non-Executive Chairman – LLB, BCom

Mr Hugh Morgan is Principal of First Charnock. He is a member of the Lafarge International Advisory Board; an Emeritus Trustee of The Asia Society New York; Chairman Emeritus of the Asia Society AustralAsia Centre; President of the National Gallery of Victoria Foundation and Chairman of the Order of Australia Association Foundation. He is a Non-Executive Director of Hexima Limited. He was a Director of the Board of the Reserve Bank of Australia for 14 years. From 2003–2005 he was President of the Business Council of Australia. He is also immediate Past President of the Australia Japan Business Co-operation Committee and a Past Co-Chair of the Commonwealth Business Council and continuing Emeritus Director. He is a graduate in Law and Commerce from the University of Melbourne and was Chief Executive Officer of WMC Limited from 1986 to 2003. He was a Director of Alcoa of Australia from 1977 to 1998 and a Director of Alcoa Inc from 1998 to 2001. He is Chairman of BioDiem Ltd.

Ms Julie Phillips

Chief Executive Officer – BPharm, DHP, MSc, MBA

Ms Julie Phillips was appointed to the position of Chief Executive Officer of BioDiem Ltd on July 14, 2009 and was appointed a Director on May 7, 2010. She has a strong background in the biotech and pharmaceutical industry, having worked as the CEO and Director of start-up Australian biotechnology companies operating in the life sciences sector. Her technical background in clinical trials, regulatory affairs and pharmacoeconomic assessment/pricing of therapeutics was gained in multinational pharmaceutical companies with responsibility for market entry of new products in Australia and New Zealand. She is currently CEO and Director of BioDiem Ltd and Chairman of AusBiotech Ltd, the peak biotechnology industry association in Australia.

Prof. Larisa Rudenko

Non-Executive Director – MD, PhD, DSc

Professor Larisa Rudenko is Head of the Virology Department in the Institute of Experimental Medicine, St. Petersburg, Russia. Professor Rudenko worked with Academician Smorodintsev and has been responsible for the development and clinical trials of the live attenuated influenza vaccines in Russia. She is recognised as one of the world’s leading experts in live attenuated influenza vaccines and as such has worked closely over the past 20 years with scientists at the Centers for Disease Control and Prevention, Atlanta, USA in developing effective influenza prophylaxis programs for use in children and in the elderly. She has published in excess of 225 scientific papers and 42 patents. Under her supervision, 11 PhD and 2 DSc theses have been prepared. In 1999 her contribution to medical science was recognised with the award of the title - 47 - of Honoured Scientist of the Russian Federation. Professor Rudenko is currently leading the WHO and PATH programs, developing a new pandemic LAIV. Professor Rudenko is a Director of BioDiem Ltd.


8.2 Management

A services agreement is in place with BioDiem Ltd whereby management and services will be provided by BioDiem to Opal. Additional key staff include:

Ms Melanie Leydin CA

Company Secretary – BBus, CA

Melanie Leydin CA was appointed to the position of Company Secretary of BioDiem Ltd in November 2012. Ms Leydin has 23 years’ experience in the accounting profession and is a director and company secretary for a number of oil and gas, junior mining and exploration entities listed on the Australian Securities Exchange. She is a Chartered Accountant and a Registered Company Auditor. She graduated from Swinburne University in 1997, became a Chartered Accountant in 1999 and since February 2000 has been the principal of chartered accounting firm, Leydin Freyer specialising in outsourced company secretarial and financial duties for resources and biotechnology sectors.

Ms Cathy Cropp – Projects Manager

Ms Cropp was appointed Projects Manager of BioDiem Ltd in 2010 and is responsible primarily for managing the LAIV vaccine projects and Opal projects. Cathy is a microbiologist with over 20 years experience in international quality/compliance, manufacturing and drug, biologicals and vaccine development management in both the international and domestic pharmaceutical and biotech sectors.

Her core skills include Good Laboratory, Manufacturing and Clinical Practice compliance on an international level. She has considerable knowledge in regulatory affairs and drug development including the development of manufacturing processes for investigational new therapeutic agents appropriate for clinical use.

9 Risk FactorsOpal Biosciences Limited’s future value is reliant on the success of its existing and future intellectual property and its ability to protect that intellectual property.

This section outlines the risks associated with investing in Opal. There are a number of risks, both specific to Opal and of a general nature, which may either individually or in combination, materially and adversely affect the future operating and financial performance of Opal and the value of the Shares.

While the Company seeks to manage the risks to prevent adverse outcomes to shareholders, many of these risks are outside the control of the Company, its Directors and management.

Applicants should be aware that this is not an exhaustive list of the risks associated with an investment in the Company. Applicants should consider these risk factors in conjunction with other information disclosed in this Information Memorandum and consult their stockbroker, accountant, lawyer or other professional advisor before deciding whether to invest in the Company and apply for Shares.


9.1 Uncertainty of Research: Project Risks

The success of the Company is dependent on the quality of the research it has under development, its results and its acceptance in the market. There are risks related to the successful research and development of any technology and ensuing commercialisation. Product development involves lengthy processes and is subject to evaluations by external groups such as the United States Food and Drug Administration (“FDA”) and Australian Therapeutic Goods Administration (“TGA”). There is a risk inherent in activities of this nature that obtaining approvals may be affected by factors outside the control of the Company and its partners, including but not only that government agencies may not process applications in a timely manner or that their activities may be interrupted or delayed due to government policy changes or funding not being available.

Additionally, new products must also find acceptance in a competitive marketplace. Market acceptance will depend on many factors, including convincing potential customers and alliance partners that the Company’s product is more attractive than other alternative products and the ability to manufacture products in sufficient quantities with acceptable quality at an acceptable cost. Because of these and other factors, our products may not gain market acceptance and will mean that it is unlikely that the Company will become profitable.

In order to continue the Company’s research and development of its projects and investments, the Company may from time to time enter into new business initiatives. Such arrangements will expose the Company to risks commonly associated with such ventures including amongst others assimilation of the new operations and personnel into the Company. There can be no assurance that any potential venture will not have a material adverse effect on the Company’s business, financial conditions and operations.

9.2 Intellectual Property

Obtaining, securing and maintaining rights to technology and patents are an integral part of securing potential product value in the Company’s activities. Competition in retaining and sustaining protection of technology and the complex nature of technologies can lead to patent disputes. The Company’s success depends, in part, on its ability to obtain patents, maintain trade secret protection and operate without infringing the proprietary rights of third parties. Additionally, success may depend on the Company enforcing and defending its intellectual property against third-party challengers. Because the patent positions of biotechnology and pharmaceutical companies can be highly uncertain and frequently involve complex legal and factual questions, neither the breadth of claims allowed in biotechnology and pharmaceutical patents nor their enforceability can be predicted. There can be no assurance that any patents which the Company may own, access or control will afford the Company commercially significant protection of its technology or its products or have commercial application, or that access to these patents will mean that the Company will be free to commercialise its technology.

9.3 Dependence on Key Personnel

The Company is dependent on the principal members of its scientific and management team, the loss of whose services could materially and adversely affect the Company and might impede the achievements of its research and development objectives. Because of the specialised nature of the Company’s business, the Company’s ability to maintain its program effectively will depend in part on its ability to attract and retain qualified research personnel either within the Company or via its contracted activities. There can be no assurance that the Company will be able to retain sufficient qualified personnel on a timely basis, retain its key scientific and management personnel or maintain its relationships with its collaborators. The failure to retain such personnel and develop such expertise could materially adversely


affect the Company’s prospects for success. The ability of the Company to maintain and develop the competence and skills of its key responsible managers is affected by its size. Extensive ongoing training opportunities are not feasible for small biotechnology companies such as Opal.

9.4 Competition

The biotechnology and medical technology industries are characterised by rapid and continuous technology innovation. The Company faces high competition as new and existing companies enter the market and advances in research and new technologies become available. The Company’s technology, services and expertise may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by the Company or one or more of its competitors.

The Company’s success will depend on strategic partnering and the extent to which these partners are interested in pursuing licensing and further development of the Company’s research outputs. The number of the Company’s potential strategic partners is diminishing as the current trend towards consolidation continues. Accordingly, the Company expects that an increasingly small number of partners will account for a substantial portion of our licensing and partnering opportunities with third parties.

9.5 Commercialisation

The commercialisation of technology developed by the Company could require the licensing of technology to or from other entities. The Company cannot give an assurance that such licences will be obtained or, if obtainable, will be on commercially acceptable terms. Furthermore there is always the risk that licensing arrangements, once negotiated, could be terminated for reasons that may be beyond the Company’s control.

Commercialisation may also depend on obtaining and/or maintaining government approvals for production, marketing and sales. The Company and its partners are dependent on government agencies having funding for their functions, and being able to perform their roles without undue delay. A delay in an application being processed may result in a product not being able to be marketed or distributed, or to obtain or maximise sales, in a particular market.

9.6 International Agreements

The Company has contractual relations with parties that are domiciled in foreign jurisdictions. There is scope for change in the areas of contract law, property and in particular intellectual property in developing foreign jurisdictions which is outside the Company’s control. Where possible, the Company will seek to have contracts that are entered into with foreign entities governed by the laws of Western jurisdictions such as Australia, the United States of America or European countries in order to attempt to minimise any risks in this regard.


9.7 Funding Requirements

Operating costs and net losses and negative cash flow from Company operations may increase for the foreseeable future, due primarily to increases in expenses for research and product development, should the research prove successful. The time required for the Company to reach or sustain profitability is highly uncertain and the Company may not be able to achieve or maintain profitability. Also, if the Company does achieve profitability, the level of any profitability cannot be predicted and may vary significantly. The Company may need additional funds in the future to continue to develop and fund its business. However, to the extent that the Company’s capital resources are insufficient to meet future capital requirements, the Company may have to raise additional funds to continue the development of its technology.

The Company may not be able to raise funds on favourable terms or at all. The Company’s current operating plan could change as a result of many factors and the Company may require additional funding sooner than anticipated. The Company’s requirements for additional capital may be substantial and will depend on many factors, some of which are beyond the Company’s control, including:

• Slower than anticipated progress in research;

• Requirement to undertake additional research;

• Competing technological and market developments;

• The cost of protection of patent and other intellectual property rights;

• Progress with commercialisation.

Technology development is inherently high risk and the above risks are not exhaustive. Other risks may become evident with further development of the technology and commercial relationships. The Company can give no assurance that all of the Company’s objectives can be satisfactorily achieved.

9.8 Unlisted, illiquid Shares

The Company and its securities are not listed or quoted on ASX or any other securities exchange. Accordingly there is no liquid market for the Company’s Shares or other securities, and shareholders would be entirely reliant on off-market buyers being able to be identified and private arrangements for sales to be made if they wish to trade their Shares.

Prospective investors should be aware that the price (if any) they may be able to sell Shares at may be less than the Offer price. There is no guarantee that Shares will be able to be traded or in respect of profitability, dividends, return of capital or the price at which the Shares may be able to be traded.

External factors such as general economic outlook, movements in interest or inflation rates, currency fluctuations, commodity prices, investor confidence and other factors, may affect whether, and if so what, Share prices may be able to be obtained.

Other Risks

9.9 General Economic Climate

Factors such as inflation, currency fluctuations, interest rates, legislative changes, political decisions and industrial disruption have an impact on the Company’s operating costs. The Company’s future income, asset values and Share price can be affected by these factors and, in particular, by the market price for any services or products that the Company may sell.


9.10 Market Conditions

The price of the Company’s securities may be subject to a variety of unpredictable market influences in general and relating to biotechnology and life sciences stocks in particular. These market conditions may affect the value of the Company’s securities regardless of the Company’s performance.

9.11 Government Policy Changes

Any material adverse changes in government policies or legislation of any countries in which the Company operates or may operate in may affect the viability and profitability of the Company.

9.12 Foreign Currency and Exchange Rate Fluctuations

Revenue and expenditure of the Company may be domiciled in currencies other than Australian dollars and as such expose the Company to foreign exchange movements, which may have a positive or negative influence on the Australian dollar equivalent of such revenue and expenditure.

The Company will appropriately monitor and assess such risks and may from time to time implement measures, such as foreign exchange currency hedging, to assist managing these risks. However the implementation of such measures may not eliminate all such risks and the measures themselves may expose the Company to related risks.

9.13 Future Performance of Business Activities

The value of the Company’s business activities is subject to the various and unpredictable influences of the market it operates in and the economy in general. Accordingly, adverse economic and market conditions may be experienced by the Company which are outside of its control and may have an adverse effect on the Company.

General

The above list of risk factors should not be taken as exhaustive of the risks faced by the Company or by investors in the Company. The above factors, and others not specifically referred to above, may in the future materially affect the financial performance of the Company and the value of Shares offered under this Information Memorandum.

Therefore, the Shares to be issued pursuant to this Information Memorandum carry no guarantee with respect to the payment of dividends, returns of capital or the market or other value of the Shares. Potential investors should consider that the investment in the Company is speculative and should consult their professional advisors before deciding whether to apply for Shares in the Company.

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