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Biotie Therapies
22 September 2014
The wizard of tOz Biotie's share price has underperformed the biotechnology sector over the last
12 months, we believe as a result of concerns over UCB returning rights to its
key pipeline drug, tozadenant for Parkinson's disease. However, the return of
Market capitalisation rights was for portfolio reasons. Indeed, UCB paid $20 million to exercise its
Enterprise value option on tozadenant and approximately a further $20 million on development
having reviewed the Phase IIb data. The challenge now for management is to
EUR 0.36 / EUR 0.18 raise the capital to complete Phase III development. Tozadenant could be the
Avg. daily volume second drug in this class to reach the market, with Kyowa Hakko Kirin's
Bloomberg / Reuters BTH1V FH/BTH1V.HE istradefylline's successful Japanese launch validating the commercial
opportunity. While in our view tozadenant is the key value driver, Biotie is now
receiving royalties on Lundbeck's sales of SelincroTM for alcoholism. This is a
large, but challenging market that needs to be developed. Even with our
conservative peak sales forecast (EUR 130 million), we value the royalty
Next results (Q3) stream alone at EUR 0.07/share. Beyond these assets, Biotie has a number of
pipeline drugs which are, to a large extent, being progressed through non-
dilutive grant income. In collaboration with the National Institute on Drug
Abuse, Biotie is developing nepicastat to treat cocaine dependence with Phase
Top 5 Shareholders IIb data due around the end of this year. In addition, Biotie has SYN120 for
Parkinson's disease dementia and BTT
-1023 for primary sclerosing cholangitis
(a rare disorder of the liver). We initiate coverage with a BUY rating and fair
Versant Ventures value of EUR 0.32/share.
Illmarinen Mutal Pension  Tozadenant could achieve peak sales of $500 million per annum in the late-
stage Parkinson's disease setting alone – there are over 400,000 late-stage
Parkinson's disease patients in the US. We anticipate a Phase III trial commencing in 2015 and reporting results in 2018. Our forecasts would rise substantially if use could be extended to earlier-stage patients. +44 (0) 207 087 4512 [email protected]  Biotie also has three proprietary drugs that we consider as free options –
we only include tozadenant and SelincroTM in our valuation analysis at this stage. We have taken a conservative approach with regards to three proprietary clinical assets – SYN120, BTT-1023 and nepicastat. Should any of these drugs generate positive results in ongoing proof-of-concept trials we would incorporate them in to our valuation. Share price performance (1 year)
Key financial data (EUR'000) - IFRS
Profit before Tax Price (EUR) 0.2
Source: RX Securities estimates Euro Biotech Index Source: R Securities Consensus
Source: Bloomberg RX Securities (www.rxsecurities.com) is an Appointed Representative of Whitman Howard This document is a marketing communication and is not independent research prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to a prohibition on dealing ahead of the dissemination of investment research. Please see disclaimer on page 36 for further information.

22 September 2014 Biotie Therapies
Company Description . 3 Investment Positives . 3 Investment Risks . 5 Financials (yearly) . 6 Financials (interims) . 7 Forecast News Flow . 8 Board and Management . 9 Tozadenant for Parkinson's disease . 10 SelincroTM for Alcoholism . 17 SYN120 for Parkinson's Disease Dementia . 22 BTT-1023 – VAP-1 mAb . 24 Nepicastat for Cocaine Addiction . 26 Valuation – Our Fair Value is EUR 0.32/share . 28

22 September 2014 Biotie Therapies
Company Description Biotie is a Finnish biotechnology company developing drugs for neuro-degenerative disorders, addiction and Orphan fibrotic disorders. Headquartered in Finland, the Company also has operations in Switzerland (Basel) and the US (San Francisco) employing 38 people in total. Biotie's most advanced product is nalmefene (SelincroTM), an oral opioid antagonist for the treatment of alcohol dependence that was launched in Europe by partner Lundbeck in April 2013. The drug has been shown to reduce the number of heavy drinking days and represents a novel approach to combating the addiction. Biotie has historically built its drug portfolio through acquisition. It acquired elbion GmbH in 2008 (for EUR 21.1 million) and Synosia in 2011 (for an enterprise value of EUR 67.8 million). The Synosia acquisition brought the key clinical assets, tozadenant for Parkinson's disease (originally licensed from Roche and subsequently partnered with UCB), SYN120 (licensed from Roche) and now being developed to treat dementia in Parkinson's disease (PD) and nepicastat for the treatment of cocaine dependence. We consider tozadenant to be Biotie's most valuable asset. Following the generation of positive Phase IIb data in December 2012, UCB paid Biotie $20 million to exercise its option on the product and then approximately a further $20 million on development, but following a strategic portfolio review handed back the drug in March 2014. Biotie is now planning a Phase III trial in late-stage PD patients with a view to completing development of the product itself. Nepicastat is being developed in collaboration with the National Institute on Drug Abuse (NIDA) at the US National Institutes of Health (NIH). The product is slated to report Phase IIb results around the end of 2014. Biotie also has a inflammatory/fibrotic disorders that Roche paid EUR 5 million for an option to license (but ultimately did not exercise). In October 2009, Biotie established a standby equity distribution line with Yorkville for EUR 20 million (expires November 2015 and has not been used since 2010). The Company raised EUR 27 million in March 2011 (at EUR 0.54/share) and EUR 20 million in September 2012 (at EUR 0.43/share). Both UCB (9.1%) and Lundbeck (4.1%) are investors in Biotie. Investment Positives SelincroTM (nalmefene) is generating royalties for Biotie
SelincroTM has been approved in Europe for the treatment of alcohol addiction in
combination with psychosocial support. It has been shown to reduce the number of
days of heavy drinking in Phase III trials. Biotie partnered SelincroTM with Lundbeck in a deal whereby Biotie received EUR 12 million upfront. The Company has booked a further EUR 10 million in additional milestones for launch in the top five European countries) plus tiered double-digit royalties. Lundbeck launched SelincroTM in April 2013 and is still progressing reimbursement/pricing in the various European territories. However, a positive draft recommendation has already been achieved by the UK's NICE that we believe provides a good indication that broad European reimbursement will be achieved. Lundbeck is guiding to peak sales of EUR 260-335 million, although we have taken a more conservative view and estimate peak sales in Europe of EUR 130 million. Even under this conservative forecast, we estimate the royalty stream to be worth EUR 0.07/share. If the lower end of Lundbeck's guidance

22 September 2014 Biotie Therapies
is achieved, the SelincroTM royalty stream alone would account for approximately two thirds of Biotie's current market capitalisation. Experienced management team and Board
Biotie has an experienced management team and Board. The CEO, Dr Timo
Veromaa, has been employed at the Company since 1998 (originally VP, R&D and
appointed CEO in May 2005). Previously he was Medical Director of Schering Oy (1996-1998) and Research and Program Manager of Collagen Corporation (1994- 1996). David Cook joined as CFO in February 2013 having previously been CFO, International, of Jazz Pharmaceuticals, Inc., a NASDAQ listed company and before this CFO of EUSA Pharma Inc., which was acquired by Jazz Pharmaceuticals in mid-2012. Biotie is Chaired by William Burns who was CEO of the pharmaceutical division of Roche from 2005-2009, and a non-Executive member of the Roche Board from 2010-2014. Tozadenant has generated positive Phase IIb data in Parkinson's disease
Tozadenant is an A2A inhibitor in development for the treatment of PD. In December
2012 the drug generated positive Phase IIb results in a large study where the primary
endpoint was met with statistical significance. Following these data, UCB paid $20
million and exercised its option on the drug, however following a strategic portfolio review handed its rights back in March 2014. While there have been a number of products in the PD space which have delivered positive Phase II results and subsequently failed in Phase III, we believe on the data generated that further development of tozadenant is warranted. The only A2A inhibitor ahead of tozadenant in development is istradefylline from Kyowa Hakko Kirin. This drug has already been launched in Japan (branded as NouriastTM and has had an encouraging launch) and is currently in a Phase III study in the US under a Special Protocol Assessment. A well balanced development pipeline
Biotie's pipeline is generally well balanced - SelincroTM is generating royalties,
tozadenant is shortly to commence a Phase III trial and SYN120 shortly to commence
a Phase II trial. In addition, the Company has nepicastat slated to report Phase IIb
results by the end of the year and BTT-1023 to shortly start a new Phase II trial. While the pipeline is diversified and balanced across the development stages, there nonetheless remains significant dependency on tozadenant due to its commercial potential and late-stage of development. Data due shortly on nepicastat, could be a Phase III-ready asset going into 2015
Nepicastat is currently in a Phase IIb trial to treat cocaine addiction. The trial is being
funded by NIDA of the US NIH and as such we view the drug as a free option in this indication. Should positive Phase IIb results be generated (data anticipated around the end of 2014), Biotie would effectively possess an additional proprietary Phase III- ready asset going into 2015. Biotie trades significantly below our fair value of EUR 0.32/share
Our fair value for Biotie is EUR 0.32/share, which we view as conservative as it
ascribes no value to SYN120, nepicastat, or BTT-1023. We believe the gap to our fair value is a reflection of ongoing financing concerns for a tozadenant Phase III trial. In our view, if Biotie successfully raises the capital required to complete the Phase III trial of tozadenant at approximately the current share price and if positive Phase III data are reported in 2018, a fair value for the shares at that time would be EUR 0.44/share based on our forecasts. 22 September 2014 Biotie Therapies
Investment Risks The alcohol addiction market is challenging and needs to be developed
The WHO estimates that 58 million Europeans consume alcohol at levels considered
harmful or hazardous. Despite this large potential market, uptake of the first opioid therapy, VivitrolTM from Alkermes (labelled for the treatment of alcohol dependence in patients who are able to abstain from alcohol) has been disappointing (currently annualising at approximately $85 million). The requirement for abstinence prior to commencing therapy and monthly injections thereafter are significant barriers to treatment, in our opinion. Furthermore, 75% of patients relapse during the first year of treatment. Biotie's SelincroTM is differentiated from existing products as it is not aimed at inducing or maintaining abstinence, but rather in reducing alcohol intake. While we continue to believe the alcohol dependence market is undeveloped as a result of inadequate therapies, we believe there will be a requirement to change the perception of the indication from that requiring just psychosocial treatment to that of being drug treatable. Such a change in perception requires a substantial marketing effort by Lundbeck and is likely to take time. As a result, we anticipate a slow ramp in SelincroTM sales and have also adopted a more conservative view on our peak sales forecast (EUR 130 million vs. Lundbeck's public guidance of EUR 260-335 million). Biotie needs to raise capital to undertake a Phase III trial of tozadenant
While Biotie's current cash position is relatively robust at EUR 34 million,
management has indicated that their preferred strategy is to complete Phase III
development of tozadenant in the late-stage PD setting. We estimate the Company will require approximately a further EUR 70 million to finance it through to results from the Phase III study. Such a substantial raise may be challenging and dependent on equity capital market conditions at the time. A fundraise may be completed at a significant discount to the current share price. Failure to achieve this fundraise is likely to significantly impinge on the value of these key assets (i.e. subsequent partnering would be from a position of weakness in our view). Furthermore, share prices of biotechnology companies where a further capital raise is anticipated by the market generally underperform until completion of the fundraise. Development of A2A inhibitors has been challenging in Parkinson's disease
Tozadenant has generated positive Phase IIb data in PD from a relatively large study.
In our opinion progression into Phase III is warranted. We believe this view is
validated by UCB's exercise of its option following review of the Phase IIb data.
However, we note that Merck & Co.'s preladenant, a competing A2A inhibitor, also
generated positive Phase II results which did not translate in subsequent large, multi-
centre, Phase III studies. In addition, Kyowa Hakko Kirin has had a challenging time
developing istradefylline, approved in Japan, but currently in a new Phase III study in the US having initially been refused approval by the FDA. Next major inflection point for tozadenant not before 2018 in our view
Tozadenant is the key value driver for Biotie. The next major inflection point for this
drug, in our view, will be results from the Phase III trial. While the exact structure of this study has yet to be confirmed and agreed with the FDA, our best guess at this time is that topline data from the Phase III trial is most likely in 2018. Until this point in time, news flow on tozadenant is likely to be limited. 22 September 2014 Biotie Therapies
Financials (yearly) Table 1: Earnings Outlook – Annual Forecast Profit and Loss Statement (EUR'000)
Y/E 31 December
SelincroTM royalties SelincroTM milestones Tozadenant Cost of Goods
Gross Profit
Expenses
(25,783)
(22,829)
(30,001)
(32,401)
(28,822)
(23,763)
(24,661)
(25,595)
Other Operating Inc. Operating Profit
(29,186)
(30,980)
(25,536)
(18,115)
Profit Before Tax
(29,816)
(32,000)
(27,127)
(20,158)
Net Income
(29,816)
(32,000)
(27,127)
(20,158)
Ave No. of Shares (m) (28,837)
(55,205)
(74,606)
(79,417)
(60,987)
Source: Company data, RX Securities estimates Key Model Assumptions
 Biotie books royalties on sales of SelincroTM made in the quarter. Our model assumes royalties (double-digit, tiered
with an average of 15%) on sales of SelincroTM in Europe only – Lundbeck has partnered with Otsuka in Japan (Phase III trial due to start by end 2014) and should approval be achieved this would be upside to our model;  While we anticipate an equity capital raise, the timing and terms are not possible to predict. As such, for illustrative purposes, our model assumes debt and respective interest payments. The interest payments depicted in our model are likely to be significantly lower following an equity capital raise;  Funding from the Michael J Fox Foundation for SYN120 is effectively netted from R&D;  We assume tozadenant is launched in 2019. We anticipate Biotie completing a licensing transaction following the Phase III results and for illustrative purposes we have simply assumed a 35% royalty; and  Our model suggests that an approximate EUR 70 million is required to fund the Company through the key Phase III data for tozadenant. 22 September 2014 Biotie Therapies
Financials (interims) Table 2: Earnings Outlook – Interim Forecast Profit and Loss Statement (EUR'000)
Y/E 31 December
Cost of Goods
Gross Profit
Expenses
(22,829)
(30,001)
Other operating inc. Operating Profit
(29,186)
Profit Before Tax
(29,816)
Net Income
(29,816)
No. of Shares (m) Source: Company data, RX Securities estimates 22 September 2014 Biotie Therapies
Forecast News Flow Table 3: Biotie's forecast news flow
Expected News
Programme
Otsuka to commence Phase III trial in Japan SPA for development in late-stage PD Results from Phase IIb trial Lundbeck Q3 results Final guidance from UK's NICE Commence Phase II trial in PSC Commence Phase II trial for Parkinson's disease dementia Full year results Commence Phase III trial Results from the Phase II trial in Parkinson's disease dementia Results from Phase III trial of competing A2A antagonist Results from the Phase II trial in PSC Source: Company data, RX Securities estimates 22 September 2014 Biotie Therapies
Board and Management Table 4: Key members of the Board and Management
Executive History
Dr Timo Veromaa
Dr Veromaa is a medically qualified executive who was appointed as a member of the management team in 1998. Prior to being Chief Executive Officer appointed President and CEO in 2005, he was Vice President of R&D from 1998–2005. Prior to Biotie, he was Medical Director at Schering Oy from 1996–1998 and from 1994-1996 he was research and programme manager at Collagen Corporation (California, USA). Dr Veromaa studied at University of Turku (1985-1990) and did his Postdoc at Stanford University (California, USA) from 1990-1993. Dr Veromaa is also Chairman of the Board of Finnish Bioindustries and Chairman of the Steering Committee for HealthBIO, a national cluster program focusing on health applications of biotechnology and on business areas related to health. He is also a Board member of Herantis Pharma plc. Mr David Cook
Mr Cook was appointed as a member of the management team in February 2013. He is a British native, has extensive industry expertise Chief Financial Officer in life science enterprises in finance, strategy, investor relations and M&A. Previously he was CFO, International, of Jazz Pharmaceuticals, Inc., a NASDAQ listed company and before this CFO of EUSA Pharma Inc., which was acquired by Jazz Pharmaceuticals in mid-2012. Before joining EUSA, Mr Cook was Group Financial Controller at Zeneus Pharma Limited and prior to that worked for PricewaterhouseCoopers in the United Kingdom and Australia. David is a qualified chartered accountant and graduated from the University of Oxford with a degree in Chemistry. Dr Stephen Bandak
Dr Bandak was appointed as a member of the management team in February 2011 following Biotie's acquisition of Synosia Chief Medical Officer Therapeutics where he had been Chief Medical Officer from 2007 to 2011. Prior to this he was at Novavax as Vice President of Medical and Regulatory from 2004 to 2006. Prior to Novavax he worked at Eli Lilly in a variety of leadership roles including Executive Director of the US Medical Organization. He has been a Member the Royal College of Physicians since 1977. Dr Mehdi Paborji
Dr Paborji was appointed as a member of the management team in January 2014. From 2006-2013 he was founder and Chief Operating Chief Operating Officer Officer of TheraVida, a clinical stage biotechnology company based in California. Prior to this role he was Vice President of the Pharmaceutical Development at Irvine Pharmaceutical Services (from 2004-2006) and Senior Director, Pharmaceutical Research and Development at Theravance (2004-2006). From 1986-2011, Dr Paborji was Director, Pharmaceutical Research and Development at Bristol-Myers Squibb. Dr Paborji qualified with a B.S. Chemistry from Isfehan University and completed his PhD in Physical Organic and Bioorganic Chemistry at the University of Kansas. Mr William Burns
Mr Burns was the CEO of the pharmaceutical division of Swiss global healthcare company F.Hoffman La Roche (Roche) from 2005- 2009, and a non-Executive member of the Roche Board of Directors from 2010-2014. Mr Burns has also served on the Board of Directors of Genentech since 2002, and is a Director of Chugai Pharmaceutical Co., Shire plc and Mesoblast. Additional roles have included Chairman of the biologic companies Okairos (acquired in 2013 by GlaxoSmithKline) and Crucell (acquired in 2011 by Johnson & Johnson). He was also Chairman of the Wellcome Trust's HICF Funding Committee and Representative of the European Medical Companies on the British Government's Ministry Industry Steering Group. Source: Company data 22 September 2014 Biotie Therapies
Tozadenant for Parkinson's Disease Tozadenant is a Phase III-ready asset in development for Parkinson's disease
Tozadenant is an oral, potent and selective inhibitor of the adenosine 2a (A2A)
receptor that is being developed for the treatment of PD. The product was originally
acquired from Roche in 2007, but licensed to UCB in October 2010 following the
completion of a Phase IIa study. A large Phase IIb study was subsequently undertaken and reported positive results in December 2012. Following a review of these data, UCB paid Biotie $20 million to exercise its option on the drug, but subsequently returned rights following a strategic portfolio review. Biotie is making preparations to commence a Phase III study in late-stage PD in H1 2015. We estimate tozadenant could reach the market in 2019 and forecast peak sales of approximately $500 million/annum in the late-stage PD setting alone. Single and multiple ascending dose studies have been completed…
Tozadenant has been evaluated for safety and tolerability in three placebo-controlled
clinical trials: (1) a single ascending dose study in 72 healthy subjects, of whom 54
(48 males and 6 females) received a single dose of up to 100mg of tozadenant; (2) a 28-day multiple ascending dose study in 40 healthy volunteers, of whom 28 (22 males and 6 females) received up to 120mg of tozadenant a day, given as 60mg twice-a-day; and (3) a second multiple ascending dose study in 32 subjects 55 to 74 years of age of whom 24 (12 males and 12 females) received tozadenant administered as 480mg once-a-day or 240mg twice-a-day for 14 days. …as well as a Phase IIa study
Tozadenant has also been evaluated in a Phase IIa study that reported results in April
2010. This double-blind trial enrolled 24 patients with PD who were dosed up to 120mg/day of tozadenant, in the absence of levodopa and in the presence of a low dose of levodopa. A 2x2 crossover design was used in which patients were randomised to 1 week each of tozadenant treatment, washout, then matching placebo, or the opposite order. Two cohorts completed active treatment at different doses (60mg twice-a-day, n=14; 120mg twice-a-day, n=13; 5 subjects participated in both cohorts). In the study fMRI was used to evaluate the effect of tozadenant on the brain. The results showed that tozadenant enters the brain causing changes in functional activity in specific regions associated with motor function and cognition. The areas of the brain modulated undergo similar effects when treated with dopamine agonists. In the 60mg cohort, tapping speed was faster on tozadenant than on placebo, both before (5%; p=0.03) and on levodopa (6%; p=0.02). Total UPDRS motor score was lower on tozadenant before (12%; p=0.48) and on levodopa (20%; p=0.09); while these differences were not statistically significant, 10 of the 13 UPDRS items were lower on tozadenant (binomial distribution, p=0.046). Improvement in two UPDRS measures of bradykinesia (finger taps and rapidly alternating movements of the hands) achieved statistical significance. While tozadenant was found to be safe and well tolerated in these studies, the drug was found to increase both systolic and diastolic blood pressure on initiation of treatment (not clearly dose related), although the effect rapidly diminished following continued dosing (no difference to baseline blood pressure was evident after 2 weeks). Similar first dose effects have been reported for other A2A receptor inhibitors. 22 September 2014 Biotie Therapies
A Phase IIb trial commenced in April 2011…
A 420 patient, Phase IIb, placebo-controlled, double-blind, 12-week study with four
active arms (60mg to 240mg given twice daily and a placebo arm) in PD patients
commenced in April 2011. Typical patients in this study had an average duration of PD of approximately 8 years and had been using levodopa for between 6-7 years. The primary endpoint was the mean total hours of OFF time. Secondary endpoints included assessing the effects of tozadenant on dyskinesias, UPDRS scores, and non- …and reported positive efficacy results…
In December 2012, Biotie announced that the study met its primary endpoint of a
highly statistically significant decrease in OFF time vs. placebo (see Figure 1), as well
as demonstrating efficacy across multiple secondary endpoints including an improved score in UPDRS part III and UPDRS parts I-III combined, as well as improvements in clinician- and patient-assessed global impression scores (see Figure 2 and Table 5). The mITT population consisted of all patients randomised who had a valid baseline diary and at least one diary post baseline. There were very few patients from the ITT population who were not in the mITT set (placebo and 60mg BID arms, 1 patient each; 120mg BID arm, 2 patients). …as well as demonstrating good safety and tolerability
Tozadenant was generally well tolerated in the study. The most common adverse
events on tozadenant were dyskinesia, nausea, dizziness, constipation, PD worsening
and insomnia. Note that it is likely that there would be an increase in dyskinesias for any drug that increases ON time. We understand that at the 60mg and 120mg doses there were no increases in "troublesome" dyskinesias. We also note that there is evidence that A2A inhibitors actually decrease dyskinesias (Neurology: 2003; 61 (3):p293-6). There was an increased incidence and rate of discontinuation due to adverse events in the 240mg BID dose group (see Table 6). Additionally, the study identified the minimally efficacious (60mg BID) and maximum feasible (180mg BID) dose levels, as well as clinically useful target doses for Phase III. The results of the Phase IIb study were presented at the 65th Annual Meeting of the American Academy of Neurology meeting in San Diego in March 2013. The full data have also been published in Lancet Neurology (Hauser, Olanow, Kieburtz et. al., 2014, 13 (8), p767-776). Figure 1: Mean change from baseline to end of treatment (week 12) in OFF and ON time
Source: Biotie Therapies; mITT population 22 September 2014 Biotie Therapies
Figure 2: Tozadenant significantly improved UPDRS Parts I-III (combined) and Part III
Source: Biotie Therapies; mITT population Table 5: Mean change in global impression scores
Tozadenant (mg BID) Clinical Global Impression - Severity Change in LS mean Adjusted p-value Clinical Global Impression - Improvement Change in LS mean Adjusted p-value Patient Global Impression - Improvement Change in LS mean Adjusted p-value Source: Biotie Therapies; mITT population 22 September 2014 Biotie Therapies
Table 6: Adverse events reported by over 5% of patients in any treatment group
Tozadenant (mg BID) Any adverse event Parkinson's disease Blood CPK increased Urinary tract infection Sudden onset of sleep Source: Biotie Therapies; mITT population UCB originally licensed tozadenant, but handed the drug back in Feb 2014
Tozadenant was licensed globally to UCB Pharma in October 2010. Under the terms
of the agreement UCB made an upfront payment of $5 million and would pay up to a
further $360 million in regulatory and commercial milestone payments. In February 2013, following the generation of positive Phase IIb data, UCB paid Biotie $20 million to exercise its option on tozadenant. At the time, UCB and Biotie indicated they planned on commencing Phase III development in H1 2015. However, following a strategic portfolio review in March 2014 (and an approximate additional $20 million spend on development), UCB returned to Biotie its rights to tozadenant. In our view, the return of rights was not a function of the safety or efficacy of tozadenant. Furthermore, we do not believe it was due to any changing regulatory/development requirements as Biotie has since confirmed the original timeline for commencement of Phase III. PD is a neurodegenerative disorder of the elderly…
PD is a progressive neurodegenerative condition of the central nervous system
affecting over 1.6 million people per annum in the US, Europe and Japan. The condition is associated with tremor of the hands, arms, legs, jaws or face, rigidity or stiffness of the limbs and trunk, bradykinesia or slowness of movement, and postural instability or impaired balance or coordination. Typically diagnosis occurs around the age of 60 and the average life expectancy after diagnosis is 21 years. PD is also frequently associated with co-morbid, non-motor symptoms including depression, dementia, psychosis, and sleep disorders. 22 September 2014 Biotie Therapies
…caused by death of dopamine neurons in the brain
PD is caused by the death of dopaminergic neurons in the substantia nigra region of
the brain, although what causes this death is not fully understood. Neurons normally
produce the chemical messenger dopamine that is responsible for transmitting signals to another part of the brain, the corpus striatum. Loss of dopamine causes the nerve cells of the striatum to fire out of control leaving patients unable to direct or control movements in a normal manner. The non-motor symptoms experienced by PD patients are likely secondary to the underlying loss of dopaminergic neurons and potentially associated with the loss of cholinergic, serotonergic, and adrenergic Current treatment of PD involves administration of L-Dopa
There is no cure for PD and as such the current goal of therapy is to reduce the
symptoms to allow patients to perform usual activities. Current therapies include L-
Dopa, dopamine agonists, and the dopamine extenders – there has been limited innovation in the field in the last 20 years. The dopamine agonists have modest efficacy and are associated with significant side effects. L-Dopa remains the most effective therapy for reducing the motor symptoms of PD. However, the effects of L- Dopa and dopamine agonists diminish over time and patients often begin to experience re-emergence of symptoms before their next dose (known as end of treatment wearing off). A2A receptor inhibition appears to potentiate the effects of dopamine
The A2A receptors are expressed in high concentration in the striatum and there is an
emerging body of data that they play an important role in regulating the motor
functions of the basal ganglia, the region of the brain that includes the striatum. The A2A receptors interact functionally with the dopamine D2 receptors and with the glutamate mGlu-5 receptors. Tozadenant binds tightly and selectively to the A2A receptor to inhibit the effect of endogenous adenosine. As a result, tozadenant potentiates the effect of dopamine at the D2 receptor and inhibits the effect of glutamate. This enables restoration of motor function in PD patients without the induction of troublesome dyskinesias. In preclinical animal models of PD, A2A receptor antagonists have been shown to enhance the effects of L-Dopa on motor function without the induction of dyskinesias. Merck's preladenant recently failed in Phase III development
There are many companies developing drugs involving novel mechanisms of action
for the treatment of PD (see Table 7). While a number of companies are developing
A2A receptor inhibitors, we also note that a number of drugs in this area have been discontinued including in May 2013 Merck's preladenant (yielded negative results in three Phase III trials involving over 2,000 PD patients). Kyowa Hakko Kirin is currently running a new Phase III trial of istradefylline under SPA in the US (NCT01968031 - a 609 patient study, 12-week study exploring 20mg and 40mg doses that started in October 2013 and is slated to complete in February 2016. The primary endpoint is improvement in OFF time). 22 September 2014 Biotie Therapies
Table 7: Drugs in development for PD with novel modes of action
Compound
Mode of Action
Istradefylline (Kyowa Hakko Marketed (Japan only, 2A receptor antagonist Safinamide (Newron/Zambon) Dual MAO-B and glutamate inhibitor Tozadenant (Biotie) Adenosine A2A receptor antagonist Fipamezole (Santhera) Alpha 2 adrenoceptor antagonist AZD-3241 (AstraZeneca) Myeloperoxidase inhibitor Dipraglurant (Addex) mGluR5 modulator for drug induced dyskinesia V81444 (Vernalis) Adenosine A2A receptor antagonist Peptide therapeutic (MNTF) sNN0031 (Newron) Recombinant human PDGF ProSavin (Oxford Biomedica) DNA therapy to replace dopamine AAV2 GDNF (uniQure) Gene therapy delivering GDNF to the brain Affitope PD01 (AFFiRiS) An alpha-synuclein inhibitor AVE 8112 (Sanofi) Source: RX Securities estimates We believe the preladenant Phase III studies were flawed
We have reviewed publicly presented results of Merck's Phase III trials of
preladenant and interviewed various key experts associated with these studies with a
view to gaining greater clarity as to why these studies failed. One of the Phase III studies involved an active comparator, rasagaline, which perplexingly did not demonstrate superiority to placebo, suggesting in our view the studies were flawed. We also note that there was significant variability across the large number of centres involved in the trial (for example, there was a very high placebo response rate in patients from centres in Eastern Europe and Latin America). Biotie plans to complete development of tozadenant on its own
While Biotie was originally looking at all options in regards continued development
of tozadenant following the return of rights by UCB, the Company's preferred
strategy is to complete development of the product, initially by itself, in late-stage
patients only (i.e. those on levodopa). The Company would require two trials deemed as pivotal by the FDA and the necessary safety database (exposure in over 1,500 patients of which 100 would be at least for one year). Biotie believes the successful Phase IIb may be deemed sufficient for this to be considered one of the two required pivotal trials and as such only one further efficacy study would be required. While Biotie has completed an end of Phase II meeting with the FDA, this meeting was in conjunction with UCB and Biotie has yet to discuss this revised development strategy with the FDA. We anticipate the Company will seek an SPA ahead of commencing a further study. While this is clearly a higher risk strategy than simply re-partnering the drug, the potential rewards are also substantially higher. Should positive results be obtained, Biotie would be in possession of a proprietary drug ready to be registered for approval in the US and Europe. 22 September 2014 Biotie Therapies
If successfully developed, tozadenant could reach the market in 2019
Assuming a Phase III trial commences in H1 2015, we estimate that it would take
approximately 2.5 years to complete, such that topline results are likely in 2018 and a
product could potentially reach the market in 2019. We estimate there are approximately 400,000 late-stage PD patients in the US. As a guide to commercial potential, Kyowa Hakko Kirin's NouriastTM (istradefylline) was launched in Japan on 30 May 2013. Sales of NouriastTM were approximately $4.9 million in 2013 and are forecast to be approximately $36 million in 2014. NouriastTM is priced at approximately $2,700 per annum in Japan (a 20% premium to ComtanTM) and we assume a similar level will be achieved for tozadenant (although it is possible that a premium price could be warranted should the drug generate a superior product profile). While it is premature to estimate penetration rates etc. we do view tozadenant as a potential $500 million opportunity in the late-stage setting alone. 22 September 2014 Biotie Therapies
SelincroTM for Alcoholism SelincroTM is on the market in Europe for the treatment of alcoholism
SelincroTM is an oral drug for the treatment of alcoholism. The drug was approved in
Europe in February 2013 following an extensive Phase III programme (involving over 3,000 patients). The drug is indicated for the reduction of alcohol consumption in adults with alcohol dependence who have a high drinking risk level, without physical withdrawal symptoms and who do not need immediate detoxification. A high drinking risk level is defined as alcohol consumption of more than 60g/day (7.5 units/day) in men and more than 40g/day (5 units/day) in women. SelincroTM should be started only in people who continue to have a high drinking risk level two weeks after an initial assessment. Also, it should be prescribed only in conjunction with continuous psychosocial support focussed on treatment adherence and reducing alcohol consumption. It represents a new approach compared to traditional treatment models of alcoholism that attempt to maintain abstinence. SelincroTM was partnered with CNS specialist, Lundbeck, in December 2006 and was launched in April 2013. Biotie remains eligible for milestone payments and royalties on sales. We estimate peak annual sales of SelincroTM in Europe of EUR 130 million. The drug interrupts the feeling of reward from alcohol consumption
Animal models have demonstrated that alcohol consumption results in the release of
endogenous opioid peptides (endorphins) and other neurotransmitters which are known to have a stimulatory effect on the opioid receptors in the brain. It is thought that the activation of opioid receptors is involved in the pathophysiology of alcoholism and alcohol abuse. SelincroTM's active ingredient is nalmefene, an opioid receptor antagonist which when bound to opioid receptors prevents the endorphin-mediated sensations of reward and reinforcement, thereby decreasing cravings for SelincroTM has been shown to reduce the number of heavy drinking days
Of the Phase III trials of SelincroTM completed, the two main efficacy studies were
ESENCE 1 and ESENCE 2. A full review of the data from these studies has been
published in Alcohol and Alcoholism (van den Brink et. al., 48, 5, p570-578, 2013). In summary, compared with placebo plus psychosocial support, nalmefene plus psychosocial support statistically significantly:  Reduced heavy drinking days by 3.2 days/month from baseline to month 6 (while the improvement is small, it was considered clinically relevant by a scientific advisory group consulted by the European Medicines Agency's Committee for Medicinal Products for Human Use);  Reduced total alcohol consumption by 14.3g/day (1.8 units/day) from baseline to month 6 (see Figure 3);  Improved Clinical Global Impression Scale severity and improvement 22 September 2014 Biotie Therapies
Figure 3: SelincroTM reduces monthly heavy drinking days and total alcohol consumption
Source: Lundbeck The drug is taken as needed by the patient
SelincroTM is taken as needed on each day the patient perceives a risk of drinking
alcohol (one tablet preferably 1-2 hours prior to the anticipated time of drinking). If
the patient has started drinking alcohol without taking SelincroTM, the patient should take one tablet as soon as possible. In prior trials the average number of tablets taken during the month was 13 (with clearly more taken at weekends). Biotie partnered SelincroTM with Lundbeck…
In December 2006, Biotie outlicensed global rights to SelincroTM to Lundbeck in a
deal that generated EUR 12 million upfront. In addition, Biotie has booked EUR 10
million in milestones for launches in the top five European countries. Biotie receives tiered double-digit royalties on sales (we estimate an average of 15%) and is eligible for additional milestones. Lundbeck has partnered nalmefene with Otsuka in Japan (Biotie would be entitled to mid-single digit royalties on sales in Japan) and a Phase III trial is slated to commence by the end of 2014. Launch in Japan would represent upside to our current forecasts. …and the drug was launched in Europe in April 2013
Lundbeck launched SelincroTM in April 2013 and the drug is now available in over 20
European countries including the UK (where NICE has issued draft guidance recommending the drug), Germany, Italy, France and Spain. Lundbeck is still 22 September 2014 Biotie Therapies
progressing pricing discussions and we anticipate a full launch with reimbursement in Market growth needs perception of alcohol abuse treatment to change
Alcohol abuse results in a substantial societal burden – increased use of healthcare
services, accidents, lost labour productivity etc. Despite this the condition is under-
treated from a drug perspective (partly evidenced by the relatively low sales of currently marketed products). There are an estimated 18 million people in the US with alcohol dependence problems, but only 1 million seek treatment and the majority of these just get counselling. Nine of 10 Germans and 19 of 20 UK alcohol abusers do not get help, according to the World Health Organization. This may partly be due to the social stigma associated with alcoholism preventing individuals from seeking treatment or denial that a serious problem exists. We also believe that some physicians perceive alcohol abuse as a behavioural problem, as opposed to a condition treatable by drugs. This view is supported by the fact that psychosocial therapy continues to play a key role in the treatment of alcohol dependence. In our opinion, for the market to grow significantly a change in perception similar to that which occurred for the treatment of depression will be required. Existing therapies are essentially for the maintenance of abstinence
The products currently available on the market are, according to their prescribing
labels, indicated for the maintenance of total abstinence (see Table 8). However, a very substantial proportion of patients fail therapy or relapse. CampralTM (acamprosate) is marketed by Forest Labs in the US (launched January 2005 and had annual sales of approximately $18 million in 2013, but is now generic). It is thought to act by stabilising the imbalance of neurotransmitters which is seen in alcohol dependency and thereby reduce the craving that is experienced by alcohol-dependent patients. A number of clinical studies have shown that CampralTM significantly boosted rates of total abstinence. Teva markets AntabuseTM (disulfiram) in the US (which had approximate annual sales of $20 million before going generic in 2011) that works by increasing the unpleasant effects of alcohol including nausea, vomiting and flushing. It does this by inhibiting the enzyme acetaldehyde dehydrogenase, which is involved in alcohol metabolism. Table 8: Marketed drugs for the treatment of alcohol dependence
Naltrexone (oral) Naltrexone (depot injection) Source: RX Securities

Naltrexone, an opioid antagonist, was first approved by the FDA in 1994…
Naltrexone was approved by the FDA in 1994 and has been shown to help in
preventing relapse to heavy drinking, but to have only a modest effect on increasing abstinence. Prescribed as a once-a-day 50mg tablet, problems from side effects (10% suffer nausea) are compounded by the poor pharmacokinetics of naltrexone. As the drug is cleared relatively quickly, to maintain a significant effect for a sustained period a high dose tablet must be used. 22 September 2014 Biotie Therapies
…with Alkermes developing a once-monthly injection called VivitrolTM
To improve compliance, Alkermes developed a once-monthly sustained-release
injection (branded VivitrolTM) to replace the once-a-day formulation of naltrexone. In
May 2005, Alkermes announced results from a Phase III open label, 12 month clinical trial that showed that VivitrolTM together with appropriate counselling can lead to a significant reduction in HDD. The Phase III extension study involved 322 patients (n=115 (380mg); n=102 (190mg); n=105 (placebo)). At the higher dose the median HDD were reduced from 19 days per month to 2.6 vs. 5.2 on placebo. VivitrolTM was approved by the FDA in H1 2006. Cephalon acquired US rights to the product in June 2005 and paid Alkermes $160 million upfront, a further $110 million on FDA approval and a share of any profits from future sales. However, following the disappointing launch of the product, Cephalon handed rights back to Alkermes in December 2008. In October 2010, the FDA approved the expansion of VivitrolTM's label to include its use for the prevention of relapse to opioid dependence after opioid detoxification. We estimate the product will achieve US sales of approximately $85 million in 2014. No significant game changers in the global development pipeline
While the existing market is small by monetary value and we have already
highlighted the requirement for a change in the perception of the indication to that
being drug treatable, the opportunity nonetheless remains large. Table 9 is a list of the current drugs in development for treating alcoholism. Table 9: Drugs in development for the treatment of alcohol dependence
Compound
Mode of Action
Sodium oxybate (CT Labs) Dopamine inhibitor Pre-registration NOC-1 antagonist AD/04 (ADial Pharmaceuticals) Low dose ondansetron AD/01 (ADial Pharmaceuticals) Ondansetron and topiramate combo CRF receptor 1 antagonist Baclofen ER (Sun Pharma) GABA receptor agonist Source: RX Securities estimates We assume Europe as the principal market for SelincroTM…
Nalmefene was approved by the FDA in 1995 as an IV preparation for the reversal of
opioid effects (RevexTM). However, no oral formulations have been approved in the US and RevexTM has since been withdrawn from the market for commercial reasons. SelincroTM has market exclusivity in Europe via data protection for 10 years post launch, eliminating the risk of direct generic competition until 2023. Considering the lack of a composition of matter patent and the unclear path ahead in the US, we conservatively assume Europe as the only market in our sales estimates. …and forecast peak sales of EUR 130 million/annum
In our view, factors that will influence the market potential of SelincroTM include: (1)
getting patients to seek treatment; (2) price and frequency of use (in the Finnish Phase III trial, an average of 13 tablets were taken per month) and dropout rates; (3) tolerability; (4) changing the treatment paradigm from psychosocial to drug treatable. In Europe it is estimated there are 14.6 million who are alcohol dependent (Wittchen et. al., Eur Neuropsychopharmacol 2011; 21(9): 655-679), but only 8% receive 22 September 2014 Biotie Therapies
treatment (Alonso et. al., Acta Psychiatr. Scand. 2004: 109:47-54 and Kohn et. al. Bull World Health Organ 2004; 82:858-866). For our financial projections, we assume that of the 8% that seek treatment, at peak 15% of this group receives SelincroTM. This results in our peak sales forecast of EUR 130 million (see Table 10). We note that our forecast is conservative in comparison to Lundbeck's, which currently stands at DKK 2-2.5 billion (approximately EUR 260-335 million). In Q1 2014, Lundbeck disclosed sales of DKK 3 million and DKK 5 million for Q2 (the drug has been launched in more than 20 European countries). In 2013, revenues totalled DKK 9.5 million. We expect 2015 to provide a better guide on the peak sales opportunity once launch/reimbursement has been generally achieved throughout Europe. Table 10: SelincroTM revenue assumptions
No. seeking treatment 14.6m % receiving treatment % using SelincroTM Cost of treatment (€) Revenue (€m)
Source: RX Securities estimates 22 September 2014 Biotie Therapies
SYN120 for Parkinson's Disease Dementia SYN120 is a dual 5-HT6/5-HT2A antagonist for Parkinson's disease dementia
SYN120 is an oral drug for the treatment of cognitive disorders that has completed
Phase I development. It is a dual antagonist of the 5-HT6 and 5-HT2A receptors (making it uniquely procognitive and antipsychotic). The drug was licensed from Roche in 2009 (the company retained a post-Phase I option, but did not exercise it). Biotie had originally planned to re-partner the product following Phase I, but subsequently decided to undertake a Phase II trial in Parkinson's disease dementia (PDD) following a grant from the Michael J Fox Foundation. The trial is slated to commence in Q4 2014 and we anticipate results in 2016. Biotie has completed a number of Phase I trials of SYN120…
The 5-HT6 receptors are located exclusively in the brain and antagonism results in
increased concentrations of acetylcholine and glutamate, two known procognitive
neurotransmitters. SYN120 has been shown to improve cognition in multiple rodent and primate preclinical models. The 5-HT2A receptors are widely expressed throughout the CNS. This receptor was first given importance as the target of such as Later it came back to prominence because it was also found to be mediating the action of manydrugs (e.g. Acadia's pimavanserin). SYN120 has been studied in two placebo-controlled Phase I studies in which 63 volunteers received SYN120 at doses up to 600mg per day (this dose is over 10-fold the anticipated therapeutic dose) for up to 14 days. The drug was found to be safe and well tolerated with no clinically relevant effects on cardiovascular parameters, especially QTc that has been an issue with other compounds targeting this mechanism. …including a positron emission tomography imaging study
In March 2012 Biotie completed a Phase I clinical study using positron emission
tomography (PET) imaging for SYN120. The study was designed to establish the
appropriate dose for Phase II trials. The PET study was conducted at the Johns Hopkins University School of Medicine in the United States. It evaluated occupancy of the 5-HT6 receptor in the brain in nine healthy volunteers who were treated with different doses of SYN120. The results demonstrate that target levels of receptor occupancy expected for efficacy could be achieved with SYN120 doses that are an order of magnitude lower than those that had previously been shown to be safe and well tolerated for up to two weeks in healthy older volunteers. Dementia affects a significant proportion of Parkinson's disease patients
The symptoms of PD can be broadly grouped into two domains: motor and non-
motor. Motor symptoms were recognised first and they are the clinical hallmarks of a
diagnosis of PD. More recently, there has been increased recognition of the high prevalence, disabling burden and management challenges of the non-motor symptoms. These include sleep disturbance, pain, autonomic dysfunction, and cognitive, behavioural and psychosis problems. Cognitive deficit is especially common. PDD is a type of dementia that occurs when a patient withdevelops a progressive dementia at least two years after a diagnosis of PD has been made, and other causes ofhave been ruled out. Approximately 25-30% of all patients with PD also have dementia and this increases to 68% in patients that have had PD for 15 years or more. PDD can be difficult to diagnose - motor deficits, depressive or other psychiatric symptoms, and cognitive impairment not amounting to dementia 22 September 2014 Biotie Therapies
may all also contribute to the diagnostic problem. Presently, there is only one FDA- approved treatment for PDD. Th patch (rivastigmine transdermal system) and ExelonTM (rivastigmine tartrate) capsules are indicated for the treatment of mild to moderate dementia of the Alzheimer's type and mild to moderate dementia associated with PD. The Michael J Fox Foundation is funding a Phase IIa trial
Biotie announced in July 2014 that it had been awarded a grant of $2 million from the
Michael J Fox Foundation to investigate SYN120 in PDD. The grant will fund an 80 patient, 16 week, Phase IIa, randomised, double-blind, placebo-controlled trial assessing the safety, tolerability and efficacy of SYN120 on cognition using the Cognitive Drug Research Computerized Cognition Battery as the primary efficacy endpoint. This trial, which is expected to begin in late 2014, will be conducted by the Parkinson Study Group (PSG) at approximately 10 US sites specialising in cognitive dysfunction in PD. Biotie and the PSG will share responsibility to design and execute this study. We anticipate results in 2016. 22 September 2014 Biotie Therapies
BTT-1023 – VAP-1 mAb BTT-1023 is a VAP-1 mAb for inflammatory/fibrotic diseases…
Biotie has developed BTT-1023, a fully human mAb directed against the novel target VAP-1 for treating inflammatory/fibrotic disorders. The drug has completed a number of clinical studies and Biotie is currently preparing for an investigator-sponsored Phase II trial in primary sclerosing cholangitis (PSC), an Orphan fibrotic disease of the liver affecting young adults for which there is currently no approved treatment. …that prevents VAP-1 mediated leukocytes migrating to inflammatory sites
VAP-1 mediates the interactions of leukocytes in the blood with the vessel wall and
assists in their migration to sites of inflammation in tissue. BTT-1023 blocks the adhesion function of VAP-1, thereby preventing VAP-1-mediated leukocyte transmigration to the area of inflammation. An exciting feature of VAP-1 is that its expression is thought to be upregulated only at the site of inflammation, limiting potential side effects of a drug targeting this pathway. Biotie has completed two Phase Ib studies in rheumatoid arthritis and psoriasis
Biotie has completed a Phase I trial of BTT-1023 in healthy volunteers (35 subjects)
and two multiple ascending dose Phase Ib studies in rheumatoid arthritis and psoriasis
patients. A randomised, double-blind, placebo-controlled trial in rheumatoid arthritis patients was completed in January 2010. 24 patients were enrolled in a centre in Sofia, Bulgaria and were given multiple ascending intravenous doses and each patient followed up for 17 weeks. A second randomised, placebo-controlled, double-blind, safety study involving 26 psoriasis patients from four German sites was completed in September 2010. While BTT-1023 was generally well tolerated in these studies and no serious adverse events were reported, efficacy was modest. Data demonstrating potential in fibrotic diseases has been generated recently
More recently, Biotie has generated new data indicating that VAP-1, in addition to its
clinically demonstrated role in inflammatory diseases, has an important role in
fibrotic diseases. The Company has indicated these data, generated in part in collaboration with National Institute for Health Research Liver Biomedical Research Unit at the University of Birmingham, UK, suggest potential for BTT-1023 in certain niche liver inflammatory/fibrotic diseases. Biotie owns 100% of the rights to BTT-1023
The original development focus of BTT-1023 was in the major autoimmune
inflammatory disorders. Biotie had licensed certain rights to Seikagaku (Far East) and Roche had an option for all other territories, but did not exercise it (May 2010). Biotie now owns 100% of the rights for BTT-1023. An investigator-sponsored study of BTT-1023 in PSC…
In July 2014, Biotie announced that in partnership with the University of
Birmingham, UK, funding of up to approximately EUR 1.0 million had been awarded
for a Phase II, proof-of-concept study with BTT-1023, in PSC. PSC is a disease where the bile ducts become inflamed and subsequently obstructed. The inflammation impedes the flow of bile to the gut, which can ultimately lead to cirrhosis of the liver, liver failure and liver cancer. The underlying cause of the inflammation is believed to be autoimmunity and more than 80% of PSC patients also have ulcerative colitis. There are currently no approved drugs for the disorder and the definitive treatment is liver transplantation. PSC is a chronic and progressive Orphan fibrotic disease which 22 September 2014 Biotie Therapies
is estimated to affect approximately 40,000 patients in the US with approximately 3- 4,000 diagnosed each year. …will commence by the end of 2014
The investigator-sponsored (Professor David Adams) study will be an 11 week, open
label, single arm, multi-centre study enrolling 41 patients and will examine the
efficacy, safety and pharmacokinetic properties of BTT-1023 in PSC patients. The primary efficacy endpoint will be the reduction of elevated levels of alkaline phosphatase, a blood biomarker of bile duct inflammation. The study will be conducted in the UK and is expected to start recruiting patients by the end of 2014. We anticipate results from this study in H1 2017. 22 September 2014 Biotie Therapies
Nepicastat for Cocaine Addiction Nepicastat is being tested as a potential treatment for cocaine dependence
Nepicastat is an orally administered inhibitor of the enzyme dopamine beta-
hydroxylase (DBH) that is being developed as a potential treatment for cocaine dependence. Biotie owns 100% of the rights to nepicastat having licensed the drug from Roche (where it was being developed as a treatment for congestive heart failure) in 2007. The drug is currently in a Phase IIb trial in the US that is slated to report results by the end of the year. This trial is being funded by the National Institute on Drug Abuse (NIDA) at the US National Institutes of Health. However, there are limited markers of efficacy going into this study and we view it as high risk at this stage. While nepicastat's composition of matter patent has expired, Biotie has filed a patent covering the use of the drug to treat cocaine addiction, which could provide protection to 2028. This patent has already been allowed in Australia and New Zealand and is under review in a number of additional territories. The drug works by increasing dopamine and decreasing norepinephrine
By inhibiting DBH which converts dopamine to norepinephrine, nepicastat increases
dopamine levels and decreases norepinephrine levels. Like many other addictions,
cocaine dependence is driven by dysregulation in the dopamine-reward system. It is believed that increasing levels of dopamine reduces the craving for cocaine and reducing the levels of norepinephrine decreases the pleasurable responses to cocaine and reduces the potential for stress induced relapse following withdrawal of cocaine. Disulfiram (AntabuseTM), which inhibits DBH by copper chelation, has shown promise in the clinic as a treatment for cocaine dependence, although its lack of specificity, hepatotoxicity and low tolerability limit its widespread use. Nepicastat is a direct, competitive inhibitor of DBH that does not chelate copper, can cross the blood brain barrier and is approximately 100 times more potent than disulfiram. There are no FDA approved treatments for cocaine dependence
Cocaine dependence is a significant public health problem associated with serious
medical, psychiatric, social and economic consequences for users and society.
Homelessness and unemployment are common for those who are addicted to cocaine as addiction related behaviours present significant barriers to securing stable housing and employment. When addiction can be managed, participation in supportive housing and transitional work programmes is greatly improved. Although many compounds have been evaluated for the treatment of cocaine dependence, the US FDA has yet to approve any drug for this specific purpose. Psychosocial and behavioural therapy are the current treatments of choice for cocaine dependence. A challenging market as only a small fraction receive any treatment
According to the US Substance Abuse and Mental Health Services Administration's
National Survey on Drug Use and Health (SAMHSA), 23.5 million people aged 12 or older needed treatment for an illicit drug or alcohol abuse problem in 2009. Of these, 2.6 million who needed treatment received it at a specialty facility. SAMHSA also reports characteristics of admissions and discharges from substance abuse treatment facilities in its Treatment Episode Data Set (TEDS). According to TEDS, there were over 200,000 admissions in 2008 for the treatment of cocaine abuse. 22 September 2014 Biotie Therapies
There is a significant amount of safety data for nepicastat
Nepicastat has been evaluated in 192 subjects, including 34 patients with congestive
heart failure for periods of up to nine months. In these studies, nepicastat was found
to be safe and well tolerated. In addition, the drug (at 120mg/day) was shown to be safe and well tolerated in a 100 patient, 6 week trial as a potential treatment for post- traumatic stress disorder (although not shown to be efficacious). A small Phase IIa study in cocaine addicts has been completed
Biotie has conducted a Phase IIa study in non-treatment seeking cocaine addicts. The
objective of this 13 day study was to examine the haemodynamics and subjective
effects of ascending doses of cocaine (10mg, 20mg and 40mg) vs. placebo during treatment with two doses of nepicastat (80mg and 160mg). Of the 20 volunteers randomised, 16 completed treatment (13 on nepicastat, 3 on placebo). Nepicastat was found to be well tolerated, with no serious adverse events reported and no differences in the number of adverse events reported compared to placebo. The drug was not found to alter the pharmacokinetics of cocaine. A decrease in ‘drug effects', ‘high' and ‘good effects' were reported in subjects receiving nepicastat and cocaine compared to placebo on the Stimulant Effects Visual Analogue Scale. No significant effect on ‘craving' was found using this scale. Nepicastat also significantly increased the occurrence of ‘depressed' and ‘anxious' feelings, while reducing ‘stimulated' feelings. Biotie and NIDA are now running a larger Phase IIb trial
In December 2011, Biotie signed a Collaborative Research and Development
Agreement with the NIDA at the US National Institutes of Health. Under the
agreement, NIDA and Biotie are investigating the safety and efficacy of nepicastat (120mg/day) in the treatment of cocaine dependence. NIDA is funding the conduct of a randomised, double-blind, placebo-controlled Phase IIb trial, lasting 11 weeks, in 179 treatment-seeking cocaine-dependent subjects. The primary endpoint is abstinence rate as confirmed by two urine samples provided by patients in the last week of the 11 week treatment period. This study started in May 2013 and is being conducted at 10 US clinics specialising in the treatment of drug dependence. Patient enrolment into the study was completed ahead of schedule in May 2014 with results expected around the end of 2014. We view nepicastat as a free option for Biotie
Nepicastat has limited efficacy data going into the ongoing Phase IIb trial and we
view cocaine addiction as a challenging indication (not only from a development
perspective, but also clearly from a commercial perspective). However, NIDA is funding the trial and it is possible, with positive Phase IIb results, that Biotie could be in possession of a Phase III-ready asset going into 2015. 22 September 2014 Biotie Therapies
Valuation – Our Fair Value is EUR 0.32/share We estimate a fair value for Biotie of EUR 0.32/share
We have chosen to adopt a highly conservative approach to our valuation of Biotie.
From the product portfolio we only include tozadenant and SelincroTM in our valuation analysis. This is clearly highly conservative as it values three proprietary clinical assets at zero, one of which (nepicastat) could be a Phase III-ready asset going into 2015. We utilise a risk-adjusted net present value methodology, which in our view provides a clear indicator of the value drivers of the business. Tozadenant is the key value driver, worth EUR 0.18/share…
Biotie's stated strategy is to now complete development of tozadenant in late-stage
PD patients. We believe this opportunity alone could result in tozadenant achieving
peak sales in excess of $500 million. We believe tozadenant could also have potential in earlier-stage PD patients, but have chosen to exclude this segment of the market from our valuation analysis. For the purposes of our valuation we have built a model that assumes the drug is licensed. We assume launch in 2019 and a 60% chance of success based on the data generated to date. Based on our forecasts, we derive a net present risk-adjusted value of EUR 0.18/share for tozadenant at this time. …and SelincroTM royalties are conservatively worth EUR 0.07/share
SelincroTM is already on the market and the key risk is now commercial. Based on our
assessment of the market, we forecast SelincroTM to ramp slowly, but progressively and achieve peak sales of EUR 130 million prior to losing exclusivity. We note this forecast is conservative and that Lundbeck's public guidance is for peak sales of EUR 260-335 million. However, based on our projected sales profile and assuming a tiered double-digit royalty to Biotie (that averages at 15%), we derive a net present value of EUR 0.07/share for the SelincroTM royalty stream at this time. We have attempted to be conservative in our calculation and excluded potential royalties from Japan as well as any sales related milestones (we understand that based on our forecast Biotie would trigger sales milestones in the low single-digit million range). By comparison, if we had assumed the lower end of Lundbeck's guidance is achieved, the SelincroTM royalty stream alone would account for approximately two thirds of Biotie's current market capitalisation. Adding in cash results in a fair value of EUR 0.32/share
Biotie's balance sheet is currently relatively robust with cash of EUR 34 million. The
Company has received capital loans from The Finnish Funding Agency for
Technology and Innovation (TEKES). The repayment of these capital loans and
accrued interest can only occur when the Company has distributable reserves (i.e. a number of years after the Company achieves profitability). The capital loans relate to specific projects and indeed a number have been already been forgiven as a result of discontinuation of the projects. We also understand that if Biotie were to shut down now that these capital loans would not be repayable. We estimate that Biotie will end 2014 with a cash position of EUR 31.6 million, which we add in to our valuation to reflect the excess cash the company would have should its assets be sold at this time. 22 September 2014 Biotie Therapies
Figure 4: Risk-adjusted valuation drivers for Biotie
Source: RX Securities estimates We currently consider SYN120, nepicastat and BTT-1023 as free options
Our fair value for Biotie is EUR 0.32/share, which we view as conservative as it
ascribes no value to SYN120, nepicastat, or BTT-1023. We have taken a conservative approach with regards to these three proprietary clinical assets - should any of these drugs generate positive results in ongoing proof-of-concept trials we would incorporate them in to our valuation. As such, they represent only upside from the perspective of our valuation. Of near-term significance, we would highlight nepicastat, which if positive Phase IIb results are reported at the end of this year would effectively result in Biotie possessing an additional Phase III-ready asset going in to 2015. With positive Phase III tozadenant data, Biotie could be worth EUR 0.44/share
Biotie's current enterprise value is approximately EUR 67 million. We estimate that
in 2018, if tozadenant generates positive Phase III data and can be filed for approval
in both the US and Europe that a fair enterprise value for Biotie at that time would be
EUR 385 million (still assuming zero for SYN120, nepicastat and BTT-1023). If we assume that Biotie raises the EUR 70 million required to take the Company to results from the Phase III data at approximately the current share price, this would equate to a share price at that time of EUR 0.44/share. 22 September 2014 Biotie Therapies
22 September 2014 Biotie Therapies
Whitman Howard Contacts Chief Executive Officer
Richard Morecombe +44 (0)20 7087 4552 Institutional Sales
+44 (0)20 7087 4572 +44 (0)20 7087 4571 +44 (0)20 7087 4562 +44 (0)20 7087 4566 +44 (0)20 7087 4583 +44 (0)20 7087 4573 m.rice @whitman-howard.com +44 (0)20 7087 4570 +44 (0)20 7087 4584 +44 (0)20 7087 4565 Daryll Warnford-Davis +44 (0)20 7087 4559 +44 (0)20 7087 4589 22 September 2014 Biotie Therapies
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Source: http://www.biotie.eu/~/media/Files/B/Biotie-IR/documents/rx-securities-bthiv-220914.pdf