$SNGX National Securities Feb 2010

1. Fundamental Research:
Biotechnology
NATIONAL
SECURITIES
February 1, 2010 Established 1947, Member FINRA/SIPC
Soligenix Investment Thesis
We are initiating coverage of Soligenix with a Buy rating. We see the company’s
:
Ticker: lead product, orBec® (oral belcomethasone dipropionate or BDP) as a low risk,
high reward proposition in acute, prophylactic and chronic GI GvHD (graft-versus-
SNGX host disease), as well as for the prevention of acute radiation enteritis (cancer
patients). The localized (oral) administration of this corticosteroid (through a
Current Price: proprietary drug release formulation) has demonstrated efficacy in prior clinical
$0.24 trials. The company is now running a confirmatory Phase 3 trial with data
expected in the first half of 2011. We view the outcome of this trial as low risk
Recommendation: given its design and the prior clinical history demonstrated with orBec®.
BUY Highlights
orBec® for GI GvHD: Now in a confirmatory Phase 3 trial: orBec® is an oral,
Price Target: $1.50 locally acting therapy tailored to treat the gastrointestinal (GI) manifestations of
GVHD. We believe the prior clinical record (Phase 2 and Phase 3) have set the
Time Frame: stage for a positive outcome with the current pivotal trial.
12 Months
Is there Clinical Risk? In our opinion this has been minimized. Based on data
from the prior Phase 3 study of orBec®, the upcoming confirmatory Phase 3
clinical trial will be a highly powered, double-blind, randomized, placebo-
Jason Kolbert controlled, multi-center trial with a target enrollment of 166 patients. The primary
(212) 417-8287
jkolbert@nationalsecurities.com endpoint on the new study is the treatment failure rate at study day 80. This
endpoint was successfully measured as a secondary endpoint (p-value 0.005) in
LAST $0.24
the previous Phase 3 study which enrolled 129 patients. This clinical trial has now
ANNHIGH $0.38 begun with results expected in the first half of next year.
ANNLOW $0.09
Shares O/S-Diluted (model) 185,687
Market Capitalization (mln) $44
Soligenix has reached agreement on the design of the current confirmatory Phase
100-Day Average Daily Volume 453 3 clinical trial evaluating orBec® for the treatment of acute GI GVHD with both the
FDA and EMEA. The agreement with the FDA was gained via the FDA's Special
Protocol Assessment (SPA) procedure. An agreement via the SPA procedure is
an agreement with the FDA that a Phase 3 clinical trial design (e.g., endpoints,
sample size, control group and statistical analyses) is acceptable to support a
regulatory submission seeking new drug approval. The agreement with the EMEA
was obtained via the procedure for requesting Protocol Assistance.
Source:BigCharts.com
Is GvHD an Unmet medical Need? Acute GI GvHD is a debilitating and painful
disease and constitutes an unmet medical need. It is a common disorder among
immunocompromised cancer patients and occurs after these patients receive
hematopoietic cell transplantation (HCT). Unlike organ transplants where the
patient's body may reject the organ, in GvHD it is the donor cells that begin to
attack the patient's (host's) body, most frequently the gastrointestinal tract, liver
and skin. Patients with mild-to-moderate GI GvHD typically develop symptoms of
anorexia, nausea, vomiting and diarrhea. If left untreated, GI GVHD can progress
to ulcerations in the lining of the GI tract, and, in its most severe form, can be
fatal. Current treatments include immunosuppresive therapies which themselves
have a lot of side-effects and which can be suppressive to the graft itself. The idea
of localized administration of steroid keeps systemic exposure low while delivering
the drug in a targeted manner where it’s needed the most.
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2. Fundamental Research:
Biotechnology
February 1, 2010
Beyond Acute GvHD: Soligenix currently has an NIH supported grant to study orBec®’s
use in the prevention of Acute GvHD. In addition, the company is also studying orBec® for the
treatment of chronic GI GvHD. The active ingredient in orBec®, belcomethasone dipropionate or
BDP, is also in early stages of development for radiation enteritis (SGX201), where it has been
granted fast track status and as SGX203 (Crohn’s Disease) where it has orphan status in the
pediatric Crohn’s population.
What is the Size of the Market Opportunity for orBec®? We believe the market opportunity in
GvHD in all of its various forms represents a significant opportunity between $150 and $300
million, with a 35% royalty back to Soligenix for North America (half the worldwide GvHD
marketplace). These estimates do not include the potential in radiation enteritis (SGX-201) or in
Crohn’s Disease (SGX-203) which is substantially larger than GvHD.
Soligenix is developing orBec® using the 505(b)(2) regulatory pathway: We view this as a
lower risk approach to re-tasking already approved drugs in new indications. In this case, orBec®
is formulated for oral administration as a single product consisting of two tablets: one tablet is
intended to release BDP in the proximal portions of the GI tract, and the other tablet is intended to
release BDP in the distal portions of the GI tract. BDP has been marketed in the U.S. and
worldwide since the early 1970s as the active pharmaceutical ingredient in nasal sprays and in
metered-dose inhalers for the treatment of patients with allergic rhinitis and asthma. Its properties
and safety profile are well known.
Special Protocol Assessment (SPA): Soligenix has negotiated a “SPA” with the FDA and has a
similar agreement with the EMEA. Positive results in the current confirmatory Phase 3 study
should lead to market approval in both the US and all 27 EU member states. We note that
Soligenix has not yet partnered orBec® in the EU or ROW. In our model we assume a
partnership will occur with 35% royalty back to Soligenix. We do not, however, project any
partnership milestones in Europe (for the sake of conservatism).
Orphan Drug: orBec® has been granted orphan status in the US for acute and chronic GI
GvHD, as well as the prevention of acute GVHD. orBec® also has orphan status in the EU
for GI GvHD. In terms of patent protection, Soligenix has an issued patent on the treatment
and prevention of GI GVHD through 2019. Orphan status provides protection in the US for
seven(7) years and in Europe for ten (10) years (post market exclusivity).
Fast Track Designation: orBec® has been granted fast track designation. From the FDA
website: “Fast track is a process designed to facilitate the development, and expedite the review
of drugs to treat serious diseases and fill an unmet medical need. The purpose is to get
important new drugs to the patient earlier. Fast Track addresses a broad range of serious
diseases”. Once a drug receives Fast Track designation, early and frequent communication
between the FDA and a drug company is encouraged throughout the entire drug development
and review process. In our discussions with Soligenix management, we find that this is the case.
This frequent communication should, in effect, lower risk around trial design and outcomes and
lead to an earlier drug approval.
Sigma-Tau is the Partner: Soligenix licensed rights for North American and Mexico for orBec®
and oral BDP to Sigma-Tau Pharmaceuticals, Inc. Soligenix receives a 35% royalty on all sales,
and stands to receive $9 million in additional milestones over the next several years. Sigma-Tau
will cover the costs of commercialization. Soligenix maintains manufacturing rights.
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3. Fundamental Research:
Biotechnology
February 1, 2010
The Biodefense Platform: Soligenix's biodefense activities are focused on developing
biomedical countermeasures pursuant to the Project BioShield Act of 2004. Specifically,
Soligenix’s lead program is a bioengineered vaccine designed to protect against the deadly
effects of ricin toxin, which is considered a serious bioterrorism threat. There may also be
additional utility in this platform in more traditional vaccines, such as flu.
Soligenix is the world leader in ricin toxin vaccine research. Soligenix has achieved positive
Phase 1 clinical trial results with RiVax™, demonstrating that the vaccine is well tolerated and
induces antibodies in humans that neutralize the ricin toxin, recently shown to be 2,000-fold more
toxic than previously thought. Soligenix can also manufacture RiVax™ at scale and under cGMP
conditions. Having met these clinical and manufacturing conditions, RiVax™ is eligible for
government procurement orders. There are no FDA-licensed vaccines or therapeutics against
ricin toxin.
Drug Delivery Platform: Soligenix has also developed a proprietary Lipid Polymer Micelle
(LPM™) drug delivery technology. This technology is currently being used to enhance the oral
delivery of leuprolide for the treatment of prostate cancer and endometriosis.
Company Background
Soligenix is a late-stage biopharmaceutical company with a significant product in orBec®,
currently in a confirmatory Phase 3 pivotal trial for acute gastrointestinal graft-versus-host disease
(GI GvHD). The development road for orBec® has been long and the company’s trial and
regulatory expertise has grown dramatically since CEO Christopher J. Schaber, PhD took over
operations. Soligenix has two (2) strategic areas of focus: 1. A therapeutics platform dedicated to
the development of products for life-threatening conditions such as GI GvHD and Cancer; 2. A
biodefense platform to develop vaccines for military and civilian applications. We conducted an
in-depth review on the outlook for these programs, the catalysts and associated risks, and the
commercial opportunities ahead. We conclude that Soligenix is undervalued relative to the
opportunities and pipeline potential of the company.
The Biotherapeutics Platform: orBec® (oral beclomethasone dipropionate or BDP) is a potent,
locally acting corticosteroid being developed for the treatment, as well as the prevention, of acute
and chronic gastrointestinal Graft-versus-Host disease (GI GvHD). GI GvHD is a common and
potentially life-threatening complication of allogeneic hematopoietic cell transplantation (HCT).
orBec® fits ideally into a recent trend we have observed: a re-tasking theme that finds new
life for existing therapeutics. A common element in this re-tasking theme is the 505(b)(2)
pathway which has certain inherent advantages: typically a faster pathway to marketplace, which
allows the sponsor to claim an additional period of market exclusivity (three or five years),
depending on the extent of change to the previously approved drug.
orBec® (oral BDP) is designed to be an oral, locally acting therapy tailored to treat the GI
manifestation of GvHD and reduce the need for systemic immunosuppressive drugs (e.g.,
prednisone). BDP is a highly potent, topically active corticosteroid that has a local effect on
inflamed tissue. It is formulated as a single product consisting of two tablets: one intended to
release BDP in the upper portions of the GI tract, and the other in the distal portions.
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4. Fundamental Research:
Biotechnology
February 1, 2010
The Biotherapeutics Platform: (continued):
orBec® is currently in a confirmatory pivotal trial with a Special Protocol Assessment (SPA)
agreement in place with the FDA for Acute GI GvHD. It is also being evaluated in an NIH-
supported Phase 2, randomized, double-blind, placebo-controlled clinical study for the prevention
of acute GvHD. In addition, the company plans to initiate a Phase 2 study for the treatment of
chronic GI GvHD in 2010. We explore each of these markets and the inter-relations that exist
between them. Given orBec® or oral BDP’s utility in GI disease, Soligenix is also investigating its
use for the prevention and/or treatment of other GI disorders that are also characterized by
inflammation. These include its utility in radiation enteritis (SGX201) and Crohn’s Disease
(SGX203), and, on the BioDefense platform, its utility as a countermeasure against radiation
injury (SGX202).
Exhibit 1: Upcoming Potential Catalysts by Time Sequence
Product Indication Event Timing Significance
orBec® GVHD Acute FDA Grants SPA for Phase III trial completed
orBec® GVHD (all) Sigma Tau Partnership for North American - 35% Royalty to Soligenix completed
orBec® GVHD Acute EMEA Agreement of Phase III trial completed
orBec® GVHD Acute Phase III Trial Start completed
SGX-201 Radiation Enteritis Fast Track Status Granted completed
SGX-201 Radiation Enteritis Initiate Phase I/II Radiation Enteritis Starts (4 centers) completed
RiVax™ Ricin Vaccine Complete Phase 1a trial (safety in man); Blood titers efficacious in mice completed
orBec® GVHD - Prevention US PII Prevention Study - Completes & Reports 1H-2010 ++
orBec® GVHD (all) EU Partnership for orBec® 1H-2010 ++
RiVax™ Ricin Vaccine Complete Phase 1b trial 1H-2010 +
orBec® Chronic GVHD Initiate Phase II Study Chronic GVHD 2H-2010 +
SGX-202 Radiation Injury Animal Efficacy Studies 2H-2010 +
LPM Leuprolide (prostate cancer) Initiate Phase I Pka Study: Proof of Concept in Man 2H-2010 +
orBec® GVHD - Prevention US PIII Pivotal Program Begins 1H-2011 +
orBec® GVHD Acute Phase III Trial Completes & Reports 1H-2011 +++
orBec® GVHD Acute NDA Filed (class II Amendment to existing NDA - 6 mos review) 2H-2011 +++
SGX-201 Radiation Enteritis Phase I/II Radiation Enteritis Completes & Reports 1H-2011 ++
LPM Leuprolide (prostate cancer) Proof of Concept in Man : Report Data: ≥15% oral bioavailability in man 2H-2011 +
SGX-203 Crohn's Disease Program Phase II Study 1H-2011 ++
RiVax™ Ricin Vaccine Begin PII in Man: (Safety) & Efficacy (blood titers) in Animal Model 1H-2011 +
SGX-201 Radiation Enteritis Pivotal Study Begins 1H-2012 +
LPM Leuprolide (prostate cancer) Partnership Deal for "LPM Platform" 1H-2012 ++
orBec® GVHD Acute NDA Approved 1H-2012 ++
orBec® GVHD - Chronic Complete Phase II Study Chronic GVHD 1H-2012 +++
orBec® GVHD - Acute US GVHD Acute Launch 1H-2012 +
orBec® GVHD - Acute EU GVHD Acute Launch 2H-2012 +
RiVax™ Ricin Vaccine Report PII Data 2H-2012 +
orBec® GVHD - Prevention Complete & Report Pivotal Prevention Study 2H-2012 ++
orBec® GVHD - Chronic US GVHD Chronic Pivotal Program 2H-2012 +
orBec® GVHD - Prevention US GVHD Prevention Launch 2013 +
orBec® GVHD - Prevention EU GVHD Prevention Launch 2013 +
orBec® GVHD - Chronic US GVHD Chronic Completes & Reports 2014 ++
orBec® GVHD - Chronic US GVHD Chronic Launch 2014 +
orBec® GVHD - Chronic EU GVHD Chronic Launch 2014 +
SGX-201 Radiation Enteritis Pivotal Study Completes & Reports 2014 +
RiVax™ Ricin Vaccine BARDA-DOD- HHS Review: Procurement 2014 ++
SGX-201 Radiation Enteritis Approval & Launch 2015 ++
Stock Significance Scale: + of moderate importance; ++ higher level; +++ highly
Source:National Securities Forecasts and Company reports.
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5. Fundamental Research:
Biotechnology
February 1, 2010
Exhibit 2: Upcoming Potential Catalysts by Product
Product Indication Event Timing Significance
orBec® GVHD Acute FDA Grants SPA for Phase III trial completed
orBec® GVHD (all) Sigma Tau Partnership for North American - 35% Royalty to Soligenix completed
orBec® GVHD Acute EMEA Agreement of Phase III trial completed
orBec® GVHD Acute Phase III Trial Start completed
orBec® GVHD Acute Phase III Trial Completes & Reports 1H-2011 +++
orBec® GVHD Acute NDA Filed (class II Amendment to existing NDA - 6 mos review) 2H-2011 +++
orBec® GVHD Acute NDA Approved 1H-2012 ++
orBec® Chronic GVHD Initiate Phase II Study Chronic GVHD 2H-2010 +
orBec® GVHD - Chronic Complete Phase II Study Chronic GVHD 1H-2012 +++
orBec® GVHD (all) EU Partnership for Orbec® 1H-2010 ++
orBec® GVHD - Acute US GVHD Acute Launch 1H-2012 +
orBec® GVHD - Acute EU GVHD Acute Launch 2H-2012 +
orBec® GVHD - Prevention US PII Prevention Study - Completes & Reports 1H-2010 ++
orBec® GVHD - Prevention US PIII Pivotal Program Begins 1H-2011 +
orBec® GVHD - Prevention Complete & Report Pivotal Prevention Study 2H-2012 ++
orBec® GVHD - Prevention US GVHD Prevention Launch 2013 +
orBec® GVHD - Prevention EU GVHD Prevention Launch 2013 +
orBec® GVHD - Chronic US GVHD Chronic Pivotal Program 2H-2012 +
orBec® GVHD - Chronic US GVHD Chronic Completes & Reports 2014 ++
orBec® GVHD - Chronic US GVHD Chronic Launch 2014 +
orBec® GVHD - Chronic EU GVHD Chronic Launch 2014 +
SGX-201 Radiation Enteritis Fast Track Status Granted completed +
SGX-201 Radiation Enteritis Initiate Phase I/II Radiation Enteritis Starts (4 centers) completed +
SGX-201 Radiation Enteritis Phase I/II Radiation Enteritis Completes & Reports 1H-2011 ++
SGX-201 Radiation Enteritis Pivotal Study Begins 1H-2012 +
SGX-201 Radiation Enteritis Pivotal Study Completes & Reports 2014 +
SGX-201 Radiation Enteritis Approval & Launch 2015 ++
LPM Leuprolide (prostate cancer) Initiate Phase I Pka Study: Proof of Concept in Man 2H-2010 +
LPM Leuprolide (prostate cancer) Proof of Concept in Man : Report Data: ≥15% oral bioavailability in man 2H-2011 +
LPM Leuprolide (prostate cancer) Partnership Deal for "LPM Platform" 1H-2012 ++
RiVax™ Ricin Vaccine Complete Phase 1a trial (safety in man); Blood titers efficacious in mice completed +
RiVax™ Ricin Vaccine Complete Phase 1b trial 1H-2010 +
RiVax™ Ricin Vaccine Begin PII in Man: (Safety) & Efficacy (blood titers) in Animal Model 1H-2011 +
RiVax™ Ricin Vaccine Report PII Data 2H-2012 +
RiVax™ Ricin Vaccine BARDA-DOD- HHS Review: Procurement 2014 ++
SGX-202 Radiation Injury Animal Efficacy Studies 2H-2010 +
SGX-203 Crohn's Disease Program Phase II Study 1H-2011 ++
Stock Significance Scale: + of moderate importance; ++ higher level; +++ highly
Source:National Securities Forecasts and Company reports.
Exhibit 3: Soligenix development pipeline
Development Stage
Product
Preclinical Phase I Phase II Phase III Market
Orbec® GVHD Acute (fast track & orphan)
Orbec® GVHD Prophylaxis (orphan)
Orbec® GVHD Chronic (orphan)
SGX-201 Radiation Enteritis (Fast Track)
SGX-203 Crohn's Disease (orphan)
LPM Platform - DD Program
Source: Soligenix
Exhibit 4: Soligenix BioDefense pipeline
Development Stage
Product
Proof of Concept Animal Efficacy IND Filing Phase 1 Phase 2/3 BLA Filing
RiVax™ (Ricin Vaccine) FDA Animal Rule
SGX-202 Radiation Injury FDA Animal Rule
Source: Soligenix
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6. Fundamental Research:
Biotechnology
February 1, 2010
Financials: We estimate that Soligenix currently has approximately $7 million in cash and
equivalents or about a year’s cash. In February of last year Soligenix out-licensed North
American rights of orBec® to Sigma-Tau. The company also raised an additional $4.4 million via
a common stock/warrant financing. In the initial deal, Soligenix received an initial payment of $6
million with another $9 million in possible milestones over the next several years. Soligenix has
since achieved the first $1 million milestone under the agreement with the recent initiation of the
confirmatory phase 3 clinical trial. Soligenix is also entitled to a 35% royalty (inclusive of drug
manufacture) on all North American and Mexico sales, and retains manufacturing rights to
orBec®. Sigma-Tau will assume all commercialization costs in North America. We note that the
company retains all rights to orBec® outside North America. Soligenix, based on these estimates,
has about a year’s worth of capital. However, we believe the company is in a strong position to
sign additional partnerships for other geographies to generate non-dillutive financing. Lastly, as
we will examine, Soligenix has received capital through multiple grant awards which support
some of its bioterapeutics research and all of its BioDefense research.
Bull Case: Soligenix is undervalued as the potential for orBec® is underappreciated. The prior
trials (Phase 2 & 3) and the current confirmatory Phase 3 trial have effectively de-risked the
outcome. The current confirmatory trial is highly powered (90%) and of the same design (drug,
dose, patient population and expected control group outcomes) as the prior pivotal trial (powered
at 80%) The primary endpoint: Treatment failure rate at Study Day 80, was highly statistically
significant in the previous Phase 3 trial with p-value of 0.005. Market factors suggest orBec® can
acquire significant penetration in the GvHD marketplace as the first approved drug for GI GVHD.
The GvHD market is concentrated and closely-knit and information is disseminated rapidly among
the Key Opinion Leaders (KOL’s). Beyond GvHD (Acute, Prevention and Chronic) a wide range
of other indications, such as Radiation Enteritis and Crohn’s Disease exists. North American
rights are partnered with Sigma-Tau, EU and rest of world, however, are open for partnership.
Soligenix also has an attractive drug delivery platform with Lipid Polymer Micelles (LPM) platform
technology and a very active BioDefense program led by RiVax™ (Ricin Toxin Vaccine). All this,
with a market capitalization of under $50 million.
Bear Case: orBec® is similar to generic enteric-coated budesonide and other steroids which are
cheaply available and used today off-label to treat GvHD. orBec® will not be able to achieve the
price we project even with the pharmacoeconomic justifications, as hospitals will continue to use
cheaper steroids to treat GvHD. Bears may also argue that the clinical risk is being
underestimated in the current orBec® confirmatory trial. Soligenix has given away too much of
the economics in the license deal with Sigma-Tau. The GvHD marketplace is small and treatment
paradigm is shifting away from BMT toward new biologic therapies; as such, the market is
becoming smaller, not larger, over time. The treatment paradigm in GvHD is not likely to shift
towards prevention and that market opportunity is over-estimated. The market opportunity in
chronic is unique in that these patients have a different set of immunological problems. As such,
the clinical risk that a true benefit can be demonstrated in these patients is high. The remaining
opportunities at the company, include the drug delivery platform (Lipid Polymer Micelle -LPM™)
which is unproven and the company lacks the resources to continue to develop this platform.
Lastly, the biodefense platform deserves minimal value as the company is totally dependent on
the US Government as a client. Prior experiences with other companies suggest that the road to
generate meaningful profit Is an arduous and difficult one.
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7. Fundamental Research:
Biotechnology
February 1, 2010
Our Take: We know that while cheaper steroids are a potential commercial threat, multiple
examples of therapeutics that were re-tasked exist in other marketplaces, and once on label, off-
label use of cheap generics was eliminated. In addition, the two tablet system of immediate and
time release makes orBec® unique in treating this disease. We see orBec® as the key driver for
Soligenix. Based on our analysis of the Phase 2 and Phase 3 trials, we see low clinical risk in the
current Phase 3 confirmatory trial. This trial uses a favorable endpoint and greater statistical
powering, while keeping all other variables the same. As such, we see a high likelihood of
success. The best case scenario for Soligenix is a positive outcome in the current confirmatory
Phase 3, Acute GI GvHD trial, followed by positive outcome in the Phase 2 NIH sponsored
prevention trial. Mechanistically, we believe a good outcome in acute GvHD does set the stage
for off- label use in the prevention and chronic marketplaces. Beyond orBec® in GvHD we see
tremendous potential in other GI diseases (Crohn’s), Radiation Enteritis and on the BioDefense
side, Radiation Injury (orBec® as a counter-measure). We view the Biodefense and LPM
platforms as creating a positive upside option for investors. On the BioDefense side, little value is
TM
ascribed for RiVax and/or the vaccine development platform (vaccines stable at room
temperature), but investors should note that Soligenix has recently received a $9.4 million dollar
development award to support the heat stabilization platform.
What is GvHD? Graft-versus-host disease is a frequent complication of allogeneic hematopoietic
cell transplantation (HCT). In GvHD, the donor's bone marrow or stem cells attacks the patient's
organs and tissues, impairing his ability to function, and increasing the patient's susceptibility to
infection. Approximately 50 per cent of patients undergoing an allogeneic HCT with a related
HLA-matched donor develop GI GvHD. GvHD is not usually a complication of autologous BMTs
although there is an approximate 8% incidence after these procedures as well. GvHD is often
thought of as a single disease. In fact, it is two diseases: acute GvHD and chronic GvHD.
Patients may develop one, both or neither. Acute and chronic GvHD are similar in their
symptoms, but different in their clinical signs and time of onset. (Clinical signs are the result of
physical exams, x-rays or lab tests that confirm the existence and extent of a disease.) (See
Exhibit 5.)
GvHD can be a temporary inconvenience or a serious, life-threatening disease. Older
transplantation patients are more likely to develop GvHD than younger patients. The incidence
and severity of GVHD is also higher among patients whose bone marrow donor or stem cells are
unrelated or not perfectly matched. The symptoms of GvHD are many and varied, and the list
may at first be overwhelming.
pp
Exhibit 5: A normal upper GI Mucosa (left side) and one being attacked (Acute GvHD)
Source: Soligenix
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8. Fundamental Research:
Biotechnology
February 1, 2010
How is GvHD treated today? There are no approved therapies to prevent or treat GvHD, but
there are many off-label therapies used to treat the condition. These include the use of
immunosuppressive drugs such as cyclosporine (alone or in combination with systemic steroids,
namely prednisone) and methotrexate prior to the transplant as a preventive measure. These
have proven effective in reducing the severity, but not necessarily the incidence, of GvHD. They
may be administered for several months post-transplant, particularly if acute GvHD progresses to
Stage II, or if the patient develops chronic GvHD. These therapeutics weaken the ability of the
donor's immune system to launch an attack against the patient's organs and tissues and they
have side effects. Cyclosporine can be very toxic to the kidneys. It can cause an increase in hair
growth on the body, especially facial hair on women, and, on rare occasions, can result in
neurological problems such as seizures, confusion, anxiety, and changes in thought processes.
Methotrexate may cause inflammation of the mouth, nose and/or throat. Side effects of
prednisone include weight gain, fluid retention, elevated blood sugar level, insomnia, mood
swings and/or confused thinking. One of the key concerns with using prednisone is that it
suppresses the graft (bone marrow and stem cell transplantation) itself. Additionally, and,
perhaps, most dangerously, prednisone suppresses the immune system and leaves the body
open to opportunistic infections. Multiple studies have shown the positive correlation between
infection rates and increasing doses of prednisone.
Exhibit 6: orBec® - A Targeted Approach to GI GvHD. orBec® is delivered in a two-pill system.
Each tablet contains 1 mg BDP, 1 Immediate Release (IR) tablet designed to release in the upper
GI tract and 1 Enteric Coated (EC) tablet designed to release in the lower GI tract. The total dose
is only 8 mgs BDP per day. We believe that by comparison to traditional systemic steroids
regimens (prednisone), the BDP doses are substantially lower and, thus, safer.
Diagram showing dispersion of
Diagram showing dispersion
IR tablet in the stomach
of IR and EC tablets in small
intestine
Source: Soligenix
Clinical Data – orBec® is currently in a confirmatory Phase 3 trial. In January 2007, Soligenix (at
that time called DOR BioPharma) reported results from the first pivotal Phase 3 trial. The trial was
129 patient, randomized, double-blind, placebo-controlled, and multicenter. In that trial, orBec®
showed statistically significant results, with reductions of risk of treatment failure and mortality
rates compared to control (placebo). Unfortunately, the trial’s primary endpoint was time to
treatment failure through day 50 where statistical significance was not achieved (p=0.1177), but a
positive trend established. A secondary endpoint of time to treatment failure through day 80 was
met (p=0.0226). Additionally, with the secondary endpoint of mortality through day 200 post
transplant, orBec® did show a statistically significant improvement (p=0.014). This statistical
improvement was maintained at one year post randomization (p=0.04), demonstrating that
orBec® not only had an effect on controlling acute GI GvHD, but also had a positive impact on
patients’ underlying cancer.
National Securities Corporation Please refer to important disclosures at the end of this document
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9. Fundamental Research:
Biotechnology
February 1, 2010
Exhibit 7: orBec® - Previous Phase 3 Study Results
Key Results orBec n=62 Placebo n=67 p-value
Time to Treatment Failure
through Day 50 (primary
endpoint) 0.118
Treatment Failure Rate at
Day 50 18 (31%) 30 (48%) 0.051
Time to Treatment Failure
through Day 80 0.023
Treatment Failure Rate at
Day 80 22 (39%) 39 (65%) 0.005
Mortality Rate at 200 Days 5
Post-Transplant (8%) 16 (24%) 0.014
Source: Soligenix
Exhibit 8: orBec® - Kaplan-Meier Survival Curves: Time to Treatment Failure through Day 80
p=0.0226. The curve shows a clear separation between control arm and ?
Source: Hockenbery et al. 2007. Blood
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10. Fundamental Research:
Biotechnology
February 1, 2010
Exhibit 9: orBec® - Comprehensive Mortality Data
Percentage
Long-Term Survival p-value orBec reduction in
Outcomes orBec Placebo vs. placebo mortality
Mortality Rate at 200 days
post transplant - Pivotal
Phase 3 study 5 (8%) 16 (24%) 0.013 66%
Mortality Rate at 200 days
post transplant - Prior
Phase 2 study 3 (10%) 6 (21%) 0.18 55%
Mortality Rate among
mismatched donors at 200
days post transplant Pivotal
Phase 3 study 1(4%) 10 (42%) 0.02 94%
Mortality Rate at 1 year post
randomization - Pivotal
Phase 3 study 18 (29%) 28 (42%) 0.04 46%
Mortality Rate at 1 year post
randomization - Prior
Phase 2 study 6 (19%) 9 (31%) 0.26 45%
Mortality Rate at median
time periods at 3.5 years –
Both studies combined 37 (40%) 49 (51%) 0.03 37%
Source: Hockenbery et al. 2007. Blood
What is the Clinical Development Path Forward for orBec®? A Special Protocol Assessment
(SPA) for confirmatory, pivotal Phase 3 clinical trial has been cleared by FDA. This confirmatory
trial is highly powered and of similar design to the previous Phase 3 study with a targeted
enrollment of approximately 166 patients, (powered at 90% to detect the treatment failure rate at
day 80), which was highly statistically significant in the previous Phase 3 trial (p-value of 0.005).
This provides us with a strong basis for our confidence in the efficacy of the outcome of the
current confirmatory trial. In addition, there is EMEA agreement on the Phase 3 protocol for
potential EU approval. The trial has been initiated, and completion is targeted for 1H 2011.
Exhibit 10: Confirmatory Phase 3 Replicates Prior Study: Improvements in design include
changing the primary endpoint to time to treatment failure at day 80 (achieved in the prior trial
with a p-value of 0.005) which should increase the likelihood of success. Other key factors; drug,
dose, patient population and expected control group outcomes have remained constant from the
prior Phase 3 study.
Prior Phase 3 Confirmatory Phase 3
Number of Sites Multicenter Multicenter
Number of patients 129 166
Allogenic transplant patients with
Patient Population Grade 2 GI GvHD Same
Powering 80% 90%
Treatment Failure Rate at
Time to Treatment Failure Through Day 80 (p-value of 0.005 in
Primary endpoint Day 50 prior Phase 3)
8 mg beclomethasone / 1mg BDP
Delivered dose and per table / 2 tablets 4 times per day /
frequency of dose 50 days Same
2 Randomized groups: High dose
prednisone for 10 days with rapid
taper with 50 days on placebo or
Design drug Same
Source: Soligenix
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11. Fundamental Research:
Biotechnology
February 1, 2010
Soligenix – Intellectual Property
Orphan Drug: orBec® has been granted orphan status in the US for treatment of acute and
chronic GI GvHD, as well as for the prevention of acute GvHD. orBec® also has orphan status in
the EU for GI GvHD. In terms of patent protection, Soligenix has an issued patent on the
treatment and prevention of GI GvHD through 2019. Orphan status provides protection in the US
for seven (7) years and in Europe for ten (10) years (post market exclusivity). Orphan status
should extend patent protection for orBec® in the prevention markets in the EU through 2023,
and in the US / EU chronic marketplace through 2020, 2024 respectively.
Model Assumptions: orBec® : In Figures 11 and 12 we present annual and quarterly sales
projections for orBec® in the Acute, US and European markets, in the Prevention, US and
European markets and in the Chronic, US and European markets for GvHD.
We have built into these models several assumptions that are critical to the Soligenix story.
1. We assume that the size of the annual allogenic stem cell transplant marketplace in the
US is approximately 10,000 patients per year and is growing at just over 3% per year.
Approximately 50% of these patients will develop acute GvHD, typically within the first
100 days of treatment.
2. Prevention versus Acute GvHD. A critical element in our thesis is our position that the
treatment paradigm for GvHD will rapidly shift from treating acute patients to prevention.
As such, the prevention market essentially cannibalizes the acute marketplace. Our
thesis is based on conversations with thought leaders and market research data that
Soligenix’s partner, Sigma-tau, has performed. The driving force behind prevention will
be a combination of the benign nature of orBec® (small dose, local delivery) versus
alternative treatments such as methotrexate, cyclosporine or prednisone.
3. Market Share Penetration. We assume a modest penetration rate of 4% in the acute
marketplace (beginning in 2012), versus a much more rapid penetration in the prevention
marketplace (beginning in 2H-2013) which rises to 66% by 2016. We have noted that in
the US, 15 centers represent more than half of all the transplants, so market penetration
can occur rapidly as key opinion leaders adopt a new treatment regimen.
4. We assume the European marketplace will follow the US market with approximately a
year’s lag time. We assume US pricing in the Acute GvHD marketplace of $15,000 base
cost of therapy with annual price increases, and assume that EU pricing will be
approximately 75% of US pricing. Prevention pricing is modeled at $20,000 based on 80
days of therapy) versus 50 days in Acute. In the chronic marketplace, we assume a
course of therapy of between 2 and 50 days, or $30,000 annual cost of therapy.
5. Pricing assumptions have been based on our discussions with Soligenix management,
and our understanding of the pharmaco-economic value that orBec® brings to the over-
all cost of treating transplant patients. It is critical to note that some may argue that there
is some treatment today off label with other oral steroids such as budesonide which is
generically available at a cost of a few dollars per day. We believe the combination of
orBec’s® novel two pill deliver system and an approved label will eliminate the use of
cheaper non approved oral steroids. There are a number of examples of this dynamic
occurring in the marketplace.
6. We assume a 35% royalty will be paid to Soligenix from partner Sigma-Tau and we
further assume a 35% royalty to Soligenix for European sales based on a new
partnership. We have not included any other milestones or upfront payments for
European rights to be conservative in our model assumptions.
7. We have not included any sales projections outside of the European and US
marketplaces. Please see our models for detailed forecasts presented in Exhibits 11 and
12.
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12. Fundamental Research:
Biotechnology
February 1, 2010
SGX201 (Radiation Enteritis): SGX201 (oral beclomethasone dipropionate – BDP) is in
development for the treatment of radiation enteritis, a side effect of radiation therapy used to treat
certain cancers which involve treatment to the abdomen, pelvis or rectum. During delivery of
treatment, some level of radiation is also delivered to healthy tissue, including the bowel. This can
result in acute and chronic toxicities. The large and small bowel are very sensitive to radiation.
The larger the dose of radiation, the greater the damage to normal bowel tissue. Radiation
enteritis is a condition in which the lining of the bowel becomes swollen and inflamed during or
after radiation therapy to the abdomen, pelvis or rectum. Most tumors in the abdomen and pelvis
need large doses of radiation, and almost all patients receiving radiation to the abdomen, pelvis
or rectum will show signs of acute enteritis.
Patients with acute enteritis may experience nausea, vomiting, abdominal pain, diarrhea and
bleeding, among other symptoms. Some patients may develop severe dehydration and require
hospitalization. With diarrhea, the gastrointestinal tract does not function normally, and nutrients
such as fat, lactose, bile salts, and vitamin B12 are not well absorbed.
Symptoms usually resolve within two (2) to six (6) weeks after therapy is completed. Radiation
enteritis is often not a self-limited illness, as over 80% of patients who receive abdominal
radiation therapy complain of a persistent change in bowel habits. Moreover, acute radiation
injury increases the risk of development of chronic radiation enteropathy, and overall 5% to 15%
of the patients who receive abdominal or pelvic irradiation will develop chronic radiation enteritis.
Patients today are typically treated with antidiarrheals, pain killers, or enzymes which essentially
treat the symptoms and not the underlying cause. In severe cases, systemic steroids are used;
however, their use often leaves patients vulnerable to other forms of infection, as these steroids
are known to weaken the immune system.
SGX201 is entering a Phase 1/2 multicenter, open-label, sequential, dose-escalation study of
approximately 36 patients. Patients with rectal cancer who are scheduled to undergo concurrent
radiation and chemotherapy prior to surgery will be enrolled in four (4) dose groups. The
objectives of the study are to evaluate the safety and maximum tolerated dose of escalating
doses of SGX201, as well as the preliminary efficacy of SGX201 for prevention of signs and
symptoms of acute radiation enteritis. In support of the Phase 1/2 study, Soligenix has received a
Small Business Innovation Research (SBIR) grant award of approximately $500,000 over a two
(2) year period from the National Institutes of Health (NIH) . The FDA has also designated
SGX201as a “Fast Tracked Product”. Top line data from the study is expected in 1H 2011.
Model Assumptions: We assume commercialization of SGX201 in 2015 in our model. We
assume a lower cost of therapy at $2,000 per cycle with an average of two (2) cycles per
treatment. We further assume Soligenix will partner out this product and receive a 25% royalty.
We have not included milestone or upfront payments for the sake of conservatism. Market share
penetration rates for SGX201 begin at 10% in 2015.
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13. Fundamental Research:
Biotechnology
February 1, 2010
Exhibit 11: Soligenix (annual) model: orBec® Estimates
Acute GI GVHD US 2012 2013 2014 2015 2016
10,000 US Allogenic stem cell transplants 11,486 11,898 12,309 12,716 13,121
Market Size Growth (Annual) 3.6% 3.4% 3.3% 3.2%
% Develop GvHD within 100 days post-transplant 50.0% 50.0% 50.0% 50.0%
Target Market Acute GI GVHD 5,949 6,154 6,358 6,560
No. of Patients on Prevention 0 864 3,274 5,671 8,153
Market Share Penetration 3.8% 11.6% 13.1% 13.2% 8.8%
Number of Patients Procedures 434 1,380 1,617 1,679 1,154
Cost of Therapy - (1-50 day course) $ 15,455 15,630 $ 16,104 16,593 $ 17,096
Price Growth 1% 3% 3% 3%
U.S. Annual Sales $ 7 $ 22 $ 26 $ 28 $ 20
% Growth (qtrly) 216% 21% 7% -29%
Royalty Rate 35% of Net Sales $ 2 $ 8 $ 9 $ 10 $ 7
Acute GI GVHD EU 2012 2013 2014 2015 2016
10,000 US Allogenic stem cell transplants 11,486 11,898 12,309 12,716 13,121
Market Size Growth (Annual) 3.6% 3.4% 3.3% 3.2%
% Develop GvHD within 100 days post-transplant 50.0% 50.0% 50.0% 50.0%
Target Market Acute GI GVHD 5,949 6,154 6,358 6,560
No. of Patients on Prevention 0 0 1,944 4,298 6,826
Market Share Penetration 0.6% 8.5% 12.2% 13.6% 14.6%
Number of Patients Procedures 73 1,012 1,498 1,725 1,920
Cost of Therapy $ 11,591 11,722 $ 12,078 12,444 $ 12,822
Price Growth 1% 3% 3% 3%
EU Annual Sales $ 1 $ 12 $ 18 $ 21 $ 25
% Growth (qtrly) 1320% 52% 19% 15%
Assume an EU Partnership - Royalty Rate 35% of Net Sales $ 0 $ 4 $ 6 $ 8 $ 9
Prevention GI GVHD US 2012 2013 2014 2015 2016
10,000 US Allogenic stem cell transplants 11,486 11,898 12,309 12,716 13,121
Market Size Growth (Annual) 3.6% 3.4% 3.3% 3.2%
% of GVHD Market where Prophylaxis is Desirable 90.0% 90.0% 90.0% 90.0%
Target Market Prevention GI GVHD 10,708 11,078 11,445 11,809
Market Share Penetration 7.3% 26.6% 44.6% 62.1%
Number of Patients Procedures 864 3,274 5,671 8,153
Cost of Therapy (80 days - Prevention) $ 24,728 33,344 $ 25,766 26,548 $ 27,354
Price Growth -23% 3% 3%
U.S. Annual Sales $ - $ 22 $ 84 $ 151 $ 223
% Growth (qtrly) 288% 78% 48%
Royalty Rate 35% of Net Sales $ - $ 8 $ 30 $ 53 $ 78
Prevention GI GVHD EU 2012 2013 2014 2015 2016
10,000 US Allogenic stem cell transplants 11,486 11,898 12,309 12,716 13,121
Market Size Growth (Annual) 3.6% 3.4% 3.3% 3.2%
% of GVHD Market where Prophylaxis is Desirable 90.0% 90.0% 90.0% 90.0%
Target Market Prevention GI GVHD 10,708 11,078 11,445 11,809
Market Share Penetration 0.0% 15.8% 33.8% 52.0%
Number of Patients Procedures 1,944 4,298 6,826
Price per procedure $ - $ 19,373 19,961 $ 20,566
Price Growth 3% 3%
EU Annual Sales $ - $ 2 $ 38 $ 86 $ 141
% Growth (qtrly) 127% 64%
Assume an EU Partnership - Royalty Rate 35% of Net Sales $ - $ 1 $ 13 $ 30 $ 49
Chronic GI GVHD U.S. 2012 2013 2014 2015 2016
10,000 US Allogenic stem cell transplants 11,486 11,898 12,309 12,716 13,121
Market Size Growth (Annual) 3.6% 3.4% 3.3% 3.2%
2,500 = 3 years Annual Chronic GvHD patients 2,687 2,497 2,134 1,738 1,416
Growth Rate of Chronic Prevalance 93% 85% 81% 81%
% of GVHD Market that develops chronically post 100 days 25.0% 25.0% 25.0% 25.0%
Target Market Chronic GI GVHD: New & Existing 2,975 3,077 3,179 3,280
Market Share Penetration 7.8% 27.5% 47.5%
Number of Patients procedures 960 3,503 6,239
Cost of Therapy (assumes 2-50 day courses) $ - $ 32,208 33,185 $ 34,192
Price Growth 3% 3%
U.S. Annual Sales $ - $ - $ 31 $ 116 $ 214
% Growth (qtrly) 275% 83%
Royalty Rate 35% of Net Sales $ - $ - $ 11 $ 41 $ 75
Chronic GI GVHD EU 2012 2013 2014 2015 2016
10,000 EU Allogenic stem cell transplants 11,486 11,898 12,309 12,716 13,121
Market Size Growth (Annual) 3.6% 3.4% 3.3% 3.2%
2,500 = 3 years Annual Chronic GvHD patients 2,748 2,652 2,428 2,027 1,651
Growth Rate of Chronic Prevalance
% of GVHD Market that develops chronically post 100 days 25.0% 25.0% 25.0% 25.0%
Target Market Chronic GI GVHD: New & Existing 2,975 3,077 3,179 3,280
Market Share Penetration 1.8% 18.5% 38.5%
Number of Patients procedures 218 2,359 5,058
Cost of Therapy (assumes 2 50 day courses) $ - $ 12,168 24,889 $ 25,644
Price Growth 3%
EU Annual Sales $ - $ - $ 5 $ 59 $ 130
% Growth (qtrly) 121%
Royalty Rate 35% of Net Sales $ - $ - $ 2 $ 21 $ 45
Radiation Enteritis SGX201 2012 2013 2014 2015 2016
50,000 US & EU Radiation Enteritis Cases 54,693 56,659 58,613 60,554 62,480
Market Size Growth (Annual) 3.6% 3.4% 3.3% 3.2%
Market Share Penetration 0.0% 10.5% 26.0%
Number of Patients procedures 0 6,378 16,266
Cost of Therapy $ - $ 2,023 2084 $ 2,147
Number of Cycles 2 2 2
Price Growth 3% 3%
U.S.& EU Annual Sales $ - $ - $ - $ 27 $ 70
% Growth (qtrly) 162%
Royalty Rate 25% of Net Sales $ - $ - $ - $ 7 $ 17
US orBec® Soligenix Royalties $ 39 $ 50 $ 103 $ 160
EU orBec® Soligenix Roylaties $ 0 $ 5 $ 21 $ 58 $ 103
Radiation Enteritis SGX201 $ - $ - $ 7 $ 17
Source: National Securities Estimates
National Securities Corporation Please refer to important disclosures at the end of this document
120 Broadway, 27th Floor
New York, NY 10271
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