Form 8-K MEDGENICS, INC. For: Nov 03

 

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

________________________

 

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

November 3, 2016
Date of Report (Date of earliest event reported)

 

MEDGENICS, INC.
(Exact name of registrant as specified in its charter)

 

Delaware	1-35112	98-0217544
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

 

435 Devon Park Drive, Suite 715

Wayne, Pennsylvania 19087

(Address of principal executive offices, zip code)

 

(610) 254-4201
(Registrant’s telephone number, including area code)

 

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On November 3, 2016, Medgenics, Inc., a Delaware corporation (the “Company”), issued a press release regarding its financial results for the three months ended September 30, 2016. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

 

Item 7.01.

Regulation FD Disclosure.

 

As previously announced, the Company will host a conference call and live audio webcast on Thursday, November 3, 2016 at 8:30 a.m. EDT to discuss third quarter 2016 financial results and to provide a business update. The Company intends to refer to the slide presentation, attached as Exhibit 99.2 and incorporated by reference herein, on the conference call.

 

The slide presentation, together with an archive of the webcast, will also be available for 30 days after the date of the conference call in the Investor section of the Company’s website at www.medgenics.com.

 

This Current Report on Form 8-K, including the exhibits attached hereto, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and as that term is defined in the Private Securities Litigation Reform Act of 1995, which include all statements other than statements of historical fact, including (without limitation) those regarding the Company’s financial position, its development and business strategy, its product candidates and the plans and objectives of management for future operations. The Company intends that such forward-looking statements be subject to the safe harbors created by such laws. Forward-looking statements are sometimes identified by their use of the terms and phrases such as “estimate,” “project,” “intend,” “forecast,” “anticipate,” “plan,” “planning, “expect,” “believe,” “will,” “will likely,” “should,” “could,” “would,” “may” or the negative of such terms and other comparable terminology. All such forward-looking statements are based on current expectations and are subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, those discussed in the section titled “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. Should any of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results may differ materially from those included within these forward-looking statements. Accordingly, no undue reliance should be placed on these forward-looking statements, which speak only as of the date made. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, the events described in the forward-looking statements contained in this Current Report on Form 8-K, including the exhibits attached hereto, may not occur.

 

Item 9.01.

Financial Statements and Exhibits.

 

(d) Exhibits. The following exhibits are furnished herewith:

 

Exhibit No.	Description
99.1	Medgenics, Inc. Press Release dated November 3, 2016 (furnished pursuant to Item 2.02).
99.2	Slide Presentation dated November 3, 2016 (furnished pursuant to Item 7.01).

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	MEDGENICS, INC.
	By:	/s/ Brian D. Piper
		Name:  Brian D. Piper
		Title: Chief Financial Officer

 

 

Date: November 3, 2016

 

Exhibit 99.1

 

 

 

News Release

 

 

Medgenics Reports Third Quarter 2016 Financial Results

 

PHILADELPHIA, PA – (Marketwired) – November 3, 2016 -- Medgenics, Inc. (NASDAQ: MDGN)

 

·

Presented Data Confirming Prevalence of Genetic Mutations in Pediatric ADHD at the 63rd Annual American Academy of Child and Adolescent Psychiatry (AACAP) Meeting

·

Began Trading on the NASDAQ Global Markets

 

Medgenics, Inc. (NASDAQ: MDGN) (the Company) today announced third quarter 2016 financial results and provided a business update.

 

“We are pleased with the Company’s accomplishments during the first nine months of 2016,” stated Mike Cola, CEO of Medgenics. “The phenotype/genotype data presented during the recent AACAP conference confirms the prevalence of mGluR mutations in the targeted pediatric and adolescent ADHD populations, and demonstrates the Company’s ability to identify genetically stratified patient populations. We continue to make good progress in our study of NFC-1 in mGluR mutation positive (mGluR+) ADHD, and look forward to presenting top-line data from this study, expected around year end.”

 

Recent Milestones and Upcoming Events

 

·

Presented New Data on the Prevalence of Genetic Mutations in Pediatric ADHD at the 63rd Annual AACAP Meeting: At AACAP’s 63rd Annual Meeting, the Company presented new data that showed for the first time the prevalence of rare, recurring copy number variants (CNVs) of specific metabotropic glutamate receptor (GRM, mGluR) and related network genes in children and adolescents with Attention Deficit Hyperactivity Disorder (ADHD). The multicenter, non-interventional study enrolled more than 1,000 children and adolescents (age 6 to 17 years) with a diagnosis of ADHD. Phenotype data was collected and saliva samples were submitted to The Center for Applied Genomics (CAG) at Children’s Hospital of Philadelphia (CHOP) for genotyping. In the clinical population evaluated, 20 to 25 percent had observed prevalence of mGluR network CNV mutations.

 

·

Began Trading on the NASDAQ Global Markets: In October, the Company announced its plans to list on the NASDAQ Global Markets. The NASDAQ exchange is home to many of the Company’s dynamic and high growth biotechnology peers and the Company believes that the move will improve Medgenics’ visibility to investors, enhance trading liquidity, and provide greater exposure to leading biotech and healthcare institutional investors. Trading formally began October 21, 2016.

 

 

·

Clinical Development Update: The Company’s clinical development programs continue to progress. The NFC-1 Phase 2/3 ADHD study continues to enroll, with topline data expected around year end. The NFC-1 Phase 1b study in 22Q Deletion Syndrome is actively recruiting patients, with initial data expected in 1H2017. The NFC-1 ADHD-001 non-interventional phenotype/genotype study continues to recruit patients, expanding the genomic database of mGluR+ ADHD patients and helping build a registry for future Phase 3 clinical trials. The Company’s anti-LIGHT antibody for severe pediatric Crohn’s disease in collaboration with Kyowa Kirin is anticipated to initiate a signal finding (Phase 1b) study during 4Q2016, with initial data expected in 1H2017.

 

Conference Call and Webcast

 

Medgenics will host a conference call and live audio webcast on Thursday, November 3, 2016 at 8:30 a.m. EDT to report financial results for the third quarter ended September 30, 2016 and discuss recent business updates.

 

In order to participate in the conference call, please dial (888) 576-4380 (domestic) or (719) 325-2437 (international). The conference passcode is 1910091.

 

The live webcast can be accessed under "Events" in the Investors section of the Company's website at www.medgenics.com or you may use the link: https://www.webcaster4.com/Webcast/Page/1395/17782

 

A replay of the call will be available after the end of the conference on November 3, 2016 through February 10, 2017. To access the replay, please dial (888) 203-1112 (domestic) or (719) 457-0820 (international) and reference the reply passcode 1910091.

 

The archived webcast will be available for 30 days in the Investor section of Medgenics' website at www.medgenics.com.

 

Third Quarter Financial Results

 

The Company reported financial results for the three and nine months ended September 30, 2016 and the filing with the U.S. Securities and Exchange Commission (SEC) of the Company's Quarterly Report on Form 10-Q. The Form 10-Q includes unaudited interim consolidated financial statements containing the information presented below, as well as additional information regarding the Company. The Form 10-Q is available at www.sec.gov and at www.medgenics.com.

 

Gross and net research and development expenses for the three months ended September 30, 2016 were $7.73 million and $7.53 million, respectively, increasing from $4.57 million and $4.20 million, respectively, for the same period in 2015 mainly due to increased sub-contractor costs to advance the Company’s clinical activities related to the NFC-1 (MDGN-001) program.

 

Non-recurring research and development expenses of $8.17 million for the three months ended September 30, 2015 were related to the Company’s acquisition of neuroFix LLC.

 

 

General and administrative expenses for the three months ended September 30, 2016 were $3.04 million, increasing slightly from $3.00 million for the same period in 2015.

 

Financial expenses for the three months ended September 30, 2016 were de minimis, decreasing from $1.19 million for the same period in 2015. The $1.19 million of financial expenses in 2015 were mainly due to an increase in the valuation of the Company’s warrant liability. All such warrants requiring revaluation were exercised in 2015, thus eliminating such liability revaluation in 2016.

  

The Company had cash and cash equivalents of $47.26 million as of September 30, 2016.

 

For the quarter ended September 30, 2016 the Company reported a loss of $10.57 million or $0.29 per share, compared with a loss of $16.52 million or $0.66 per share for the comparable quarter in 2015. The decrease in the loss is primarily due to non-recurring research and development expenses incurred in the quarter ended September 30, 2015 related to the neuroFix acquisition offset in part by increased research and development expense related to the NFC-1 program.

  

Nine Months Financial Results

 

Gross research and development expense for the nine months ended September 30, 2016 were $23.42 million increasing from $12.93 million for the same period in 2015 mainly due to increased sub-contractor costs to advance the Company’s clinical activities related to NFC-1 (MDGN-001) program. Net research and development expenses for the nine months ended September 30, 2016 were $23.22 million, increasing from $11.13 million for the same period in 2015. The increase in net research and development expenses was due to the increase in gross research and development expenses as detailed above in addition to a decrease of $1.60 million in the amount of development grants received from the Israeli Office of the Chief Scientist.

 

Non-recurring research and development expenses of $8.17 million for the nine months ended September 30, 2015 were related to the neuroFix acquisition.

 

General and administrative expenses for the nine months ended September 30, 2016 were $10.18 million, decreasing from $10.83 million for the same period in 2015 primarily due to a decrease in stock-based compensation expenses related to options granted to directors, which was offset in part by severance benefits recorded upon the termination of an officer of the Company.

 

Financial expenses for the nine months ended September 30, 2016 were de minimis, decreasing from $1.43 million for the same period in 2015. The $1.43 million of financial expense in 2015 was mainly due an increase in the valuation of the Company’s then outstanding warrant liability that required revaluation. All such warrants were exercised in 2015, thus eliminating such liability and revaluation in 2016.

For the nine months ended September 30, 2016 the Company reported a net loss of $33.42 million or $0.97 per share, compared with a net loss of $31.53 million or $1.27 per share for the nine months ended September 30, 2015.

 

 

MEDGENICS, INC. AND ITS SUBSIDIARY

 

CONSOLIDATED BALANCE SHEETS

U.S dollars in thousands (except share and per share data)

 

 

		September 30, 2016				December 31, 2015
		Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	47,257			$	53,064
Prepaid expenses and other current assets			589				747
Total current assets			47,846				53,811
LONG-TERM ASSETS:
Restricted lease deposits			30				23
Property and equipment, net			454				424
Total long-term assets			484				447
Total assets		$	48,330			$	54,258
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables		$	618			$	1,322
Other accounts payable and accrued  expenses			4,878				2,586
Total current liabilities			5,496				3,908
Total liabilities			5,496				3,908
STOCKHOLDERS' EQUITY:
Common stock-$0.0001 par value; 100,000,000 shares authorized; 37,106,343 shares issued and 37,097,843 shares outstanding at September 30, 2016; 32,869,217 shares issued and 32,860,717 shares outstanding at December 31, 2015			4				4
Additional paid-in capital			214,381				188,476
Accumulated deficit			(171,551	)			(138,130	)
Total stockholders' equity			42,834				50,350
Total liabilities and stockholders' equity		$	48,330			$	54,258

 

 

MEDGENICS, INC. AND ITS SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF OPERATIONS

US Dollars in thousands (except share and per share data)

 

 

		Nine months ended September 30,								Three months ended September 30,
		2016				2015				2016				2015
		Unaudited
Research and development expenses		$	23,417			$	12,927			$	7,725			$	4,568
Less - Participation by the Office of the Chief Scientist			(196	)			(1,797	)			(196	)			(367	)
Research and development expenses, net			23,221				11,130				7,529				4,201
Non-recurring research an development expenses resulting from acquisition			-				8,170				-				8,170
General and administrative expenses			10,178				10,832				3,042				2,996
Operating loss			(33,399	)			(30,132	)			(10,571	)			(15,367	)
Financial expenses			(10	)			(1,431	)			-				(1,192	)
Financial income			4				45				14				44
Loss before taxes on income			(33,405	)			(31,518	)			(10,557	)			(16,515	)
Taxes on income			16				11				13				6
Net Loss		$	(33,421	)		$	(31,529	)		$	(10,570	)		$	(16,521	)
Basic loss per share		$	(0.97	)		$	(1.27	)		$	(0.29	)		$	(0.66	)
Diluted loss per share		$	(0.97	)		$	(1.30	)		$	(0.29	)		$	(0.66	)
Weighted average number of Common stock used in computing
basic loss per share			34,510,787				24,911,481				37,080,789				24,982,577
Weighted average number of Common stock used in computing
diluted loss per share			34,510,787				24,974,128				37,080,789				24,982,577

 

 

 

About Medgenics

 

Medgenics is dedicated to unlocking the potential of genomic medicine to identify and treat patients with life-altering conditions. Its efforts, including its internal research and development and ongoing sponsored research and licensing agreements with a well-respected pediatric academic medical center, give Medgenics the ability to focus on the underlying genetic pathway of pediatric diseases with the goal of finding therapeutic solutions for subpopulations of both children and adults living with rare and other difficult-to-treat diseases. Medgenics is also the developer of TARGT™ (Transduced Autologous Restorative Gene Therapy), a proprietary gene therapy platform.

 

Forward-looking Statements

 

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and as that term is defined in the Private Securities Litigation Reform Act of 1995, which include all statements other than statements of historical fact, including (without limitation) those regarding the Company's financial position, its development and business strategy, its product candidates and the plans and objectives of management for future operations. The Company intends that such forward-looking statements be subject to the safe harbors created by such laws. Forward-looking statements are sometimes identified by their use of the terms and phrases such as "estimate," "project," "intend," "forecast," "anticipate," "plan," "planning,” "expect," "believe," "will," "will likely," "should," "could," "would," "may" or the negative of such terms and other comparable terminology. All such forward-looking statements are based on current expectations and are subject to risks and uncertainties. Should any of these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may differ materially from those included within these forward-looking statements. Accordingly, no undue reliance should be placed on these forward-looking statements, which speak only as of the date made. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. As a result of these factors, the events described in the forward-looking statements contained in this release may not occur.

 

 

 

Contacts:

 

Medgenics

Brian Piper

[email protected]

 

Westwicke Partners

Chris Brinzey

339-970-2843

[email protected]

 

 

Exhibit 99.2

 

Q3 Business Update and Financials November 3, 2016

Forward Looking Statement This presentation includes certain estimates and other forward - looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements with respect to anticipated operating and financial performance, clinical results, potential partnerships, licensing opportunities and other statements of expectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “assumes,” “seeks,” “estimates,” “should” and variations of these words and similar expressions, are intended to identify these forward - looking statements. While we believe these statements are accurate, forward - looking statements are inherently uncertain and we cannot assure you that these expectations will occur and our actual results may be significantly different. These statements by the Company and its management are based on estimates, projections, beliefs and assumptions of management and are not guarantees of future performance. Important factors that could cause actual results to differ from those in the forward - looking statements include the factors described in the Company’s filings with the U.S. Securities and Exchange Commission. The Company disclaims any obligation to update or revise any forward - looking statement based on the occurrence of future events, the receipt of new information, or otherwise. 2

Q3 2016 Executive Summary 3 NFC – 1 Programs Advancing – mGluR+ ADHD • Enrollment ongoing; top - line data expected around year end • mGluR + prevalence rate of ~25% confirmed • US market opportunity of $ 2B – $3B – 22q Deletion Syndrome • Study initiated at CHOP • Initial data expected in H1 2017 Anti - LIGHT Program • Successfully transferred IND • FDA Type B meeting completed • Initiating signal finding study • Initial data expected in H1 2017 Pipeline Development • MDGN/CAG translational research continues to produce potential development targets

Genomic Medicine Approach

Genetic Influence in Pediatric Disorders E arly Onset Disease: Distinct genetically driven Severe burden of illness Aggressive progression Less responsive to standard of care 5 *1Ruel, J. et al. (2013) IBD across the age spectrum — is it the same disease? Nat. Rev. Gastroenterol . Hepatol . doi:10.1038/nrgastro.2013.240

Center for Applied Genomics (CAG) at CHOP CAG’s pediatric biobank contains a high percentage of rare genetic variants Datasets (Genomics EMR) Over 75K pediatric and 150K related adult patients GWAS genotyped with associated longitudinal EMR since 2006 Data Analytics End to end internal Next - Gen sequencing capabilities Integrated bioinformatics Rapid identification of novel genetic biomarkers Biobank (BB) Fully automated robotic biorepository Consented Patients 85% of the BB patients are consented for longitudinal follow up and are eligible for call back for future studies ~1.2M patient visits / year 10% of all R/O disease patients in N. America are treated at CHOP Population is unique in that it represents the most severe forms of common diseases Global reach in many therapy areas In the last 9 years CAG has had over 600 peer reviewed publications focused on novel genetic discoveries Highly scalable infrastructure to support translational research 6

CAG/MDGN - Genetic Discoveries to Drugs 7 Genomically Validated Target Rational Search & Acquisition Genomically Guided Product Development Targeted Launch Medgenics ’ R ole: Match unique genetic discoveries with potential therapies Acquire the rights to programs that have been abandoned – Ideal program: Correct MOA Excellent safety profile Inadequate efficacy in heterogeneous patient populations Lead development and commercialization Identification of disease causing genetic mutations allows for repurposing drug development programs 5 - 7 years of development time and of millions of dollars can be saved with this approach

Benefits of Genomic Guided Drug Development Higher Value Medicines Improved response rates Smaller, faster, clinical trials Increased probability of regulatory success Targeted launch Potential label expansion in adjacent genetic diseases G enomic biomarkers improve overall program outcomes 8

NFC - 1 Program Update

ADHD: Rationale for Genomic Medicine Approach Most prevalent neurodevelopmental disorder in children Highly heritable* (70%); Heterogeneous, suggesting multiple causes Early studies focused on individual genes failed to identify causal associations N ovel discovery from CAG, based on network biology, identified an underlying cause of disease in a subset (22 - 25%) of ADHD patients** 10 ADHD Inattention Hyperactivity Impulsivity * Farone SV, Perlis RH, Doyle AE, et al. Molecular genetics of attention - deficit / hyperactivity disorder. Biol Psychiatry 2005; 57: 1313 - 1323 **Nature Genetics 44, 78 – 84 (2012).

mGluR Mutations Highly Predictive of ADHD 11 In a blinded study of 155 mGluR+ patients assessed in CHOP psychiatry > 98% were diagnosed with ADHD H. Hakonarson , data presented at 63rd Annual American Academy of Child and Adolescent Psychiatry in Oct 2016

NFC - 1: ADHD Program 12 ADHD Phenotype / Genotype Pediatrics, Adolescents N=1,000+ Design: Non - interventional Multi - center (25) Genotype 1,000+ ADHD subjects, age 6 - 17, identifying patients who are mGluR + Phase 2/3 mGluR+ ADHD, Adolescents N=90, Ages 12 - 17 Phase 3 mGluR+ ADHD, Pediatrics N= TBD, Ages 6 - 12 Phase 3 mGluR+ ADHD, Children N=TBD, Ages 6 - 17 Objectives: Confirm prevalence of mGluR+ Characterize mGluR+ phenotype Expedite enrollment in Phase 2/3 interventional trials

Mutation Prevalence Confirmed in Phenotype/Genotype Study 13 Data presented at 63 rd Annual American Academy of Child and Adolescent Psychiatry Meetings (AACAP) in Oct 2016 Age Group mGluR+ (n) Total (n) % Pediatrics (ages 6 - 12) 71 271 26% Adolescents (ages 13 - 17) 271 1,274 21% A ddressable pediatric/adolescent patient population: 1.2M - 1.5M

mGluR+ ADHD Patients: Higher Prevalence of Negative Symptoms (n=1013) 14 In mGluR+ patients*: • Symptoms associated with emotional dysregulation most prominent: disruptive behavior, anger control • Emotional dysregulation often has significant life consequences** • Majority of symptoms more prevalent *Data presented at 63 rd Annual American Academy of Child and Adolescent Psychiatry Meetings (AACAP) in Oct 2016 **Shaw, et al, Emotion Dysregulation in Attention Deficit Hyperactivity Disorder American Journal of Psychiatry, Volume 171 , Issue 3, March 2014, pp. 276 - 293

• Current diagnostic paradigm is symptom - based without objective biomarkers • Current treatment paradigm exposes children to multiple stimulants in a “fail first” approach • Underlying safety concerns create issues with compliance and adherence: • Cardiovascular risk • Growth retardation • Sleep disturbance • Anorexia • Anxiety • Substance abuse • Average time to discontinuation of medication is 4 months; fully compliant for only 2 months* 15 “ Fail First” Treatment Paradigm in ADHD * Chacko A et al. Improving medication adherence in chronic pediatric health conditions: a focus on ADHD in youth. Curr Pharm Des 2010; 16(22):2416 - 23.

NFC - 1: Potential for Superior Product Profile NFC - 1 clinical profile in mGluR+ ADHD patients – Effective non - stimulant (non - scheduled) – Excellent safety profile in >1,000 patients No evidence of growth retardation, addiction, sleep disturbance No evidence of cardiovascular risk No expectation for black box warning Potential to address co - morbid symptoms (e.g ., emotional dysregulation) Potential for increased compliance and adherence – No need for drug holidays 16

mGluR + ADHD: Market Opportunity Overall US ADHD Market – 2015 Sales in excess of $10B* – ~6M pediatric / adolescent patients** – Stimulants dominate market: 90+% of total prescriptions mGluR + ADHD Market, ages 6 - 17 – 1.2M - 1.5M patients (~25% mGluR+) – $ 2B - $3B market opportunity based upon current pricing and compliance / adherence – Potential upside for premium pricing with superior product profile 17 *IBIS World.com **”Trends in the Parent - Report of Health Care Provider - Diagnosed and Medicated Attention - Deficit / Hyperactivity Disorder: United States, 2003 – 2011”, Journal of the American Academy of Child & Adolescent Psychiatry, Volume 53, Issue 1, January 2014, Pages 34 – 46.e2

Anti - LIGHT mAb Program

Anti - LIGHT mAb Program First - in - Class Biologic from Kyowa Hakko Kirin – Initial development in S evere P ediatric O nset IBD – Phase 2 ready antibody – Strong regulatory e xclusivity and robust i ntellectual p roperty p ortfolio – High value c ommercial o pportunity with potential for indication e xpansion Rapid and c apital - efficient g lobal d evelopment p athway – Minimal investment to POC – Single pivotal t rial for registration Program Update – Successfully transferred IND – FDA Type B meeting completed Agreement on plan to requalify trial supply Agreement on design of first POC trial in patients 8 weeks active treatment 19

Rationale for Anti - LIGHT Approach DcR3 is strongly linked to Severe Pediatric Onset IBD 1 Initial strategy to augment DcR3 – Very short half life – Toxicity reported with previous DcR3 analog “Rational Search” based on biological pathway – LIGHT overexpressed in IBD – DcR3 LOF increases LIGHT 2 20 Decoy Receptor 3 DcR3 LIGHT Immune Cell HVEM LT b R 1 Hakonarson , et al 2008. Loci on 20q13 and 21q22 are associated with pediatric - onset inflammatory bowel disease. Nature Genetics 40 (10): 1211 - 1215 2 Mauri DN, et al 1998. LIGHT, a new member of the TNF superf amily, and lymphotoxin alpha are ligands for herpesvirus entry mediator .Im munity 8 (1): 21 – 30 Our Approach: Therapeutic antibody which mimics DcR3 regulation by binding LIGHT

Rapid Development Pathway to Approval 21 Severe Pediatric Onset IBD POC Trial Anticipated Phase 1b design: Single center (CHOP) N = up to 12 patients Duration 8 weeks Ascending dose Endpoints : Endoscopic Evaluation, Crohn’s Disease Activity Index (CDAI ), Safety Estimated Cost: ~$2M Single Phase 3 Pivotal Registration Trial Long Term Safety Trial

Severe Pediatric Onset IBD: “ Top Down” Treatment Paradigm 22 1 Altwegg & Vincent (2014) TNF Blocking Therapies and Immunomonitoring in Patients with Inflammatory Bowel Disease. Mediators of Inflammation. doi:10.1155/2014/172821 Treatment Objectives : Induce remission with anti - TNFα immediately so patients can develop normally Avoid steroids and IMs Manage utilization of anti - TNF alphas to extend time before resistance develops Opportunity: 30 % of patients do not respond to anti - TNFα Up to 50% of patients who initially respond, resistance will develop within 3 years 1 Creates significant opportunity for new Therapies / MOAs , that can treat anti - TNF alpha failures Step - up approach “Top - down” approach to more aggressive disease

Severe Pediatric Onset IBD: Anti - LIGHT Opportunity (US Pop.) 23 1 Kappleman et al. (2007) Clin Gastro Hepat 2 Oliva - Hemker (2015) J Pedtr 3 Remicade Monograph 4 Altwegg - Vincent (2014) Mediators of Inflamm Initial Target: anti - TNFα failure with DcR3 Loss of Function 2,000 – 3,000 IBD patients in US $300 - $400M opportunity (based conservative pricing) Potential Upside Pediatric anti - TNFα failures: – 15,000 – 16,000 IBD Patients in US Pediatric indications with DcR3 LOF (juvenile idiopathic arthritis, psoriasis, etc.) Pediatric IBD Prevalence: 71/100,000 1 (52,000) Anti - TNF Usage 35 - 55% 2 (24,500) Responders (70%) 3 (17,000) Resistance to anti - TNF’s (50%) 4 (8,500) DcR3 LOF (15%) (1,275) Non - responders (30%) 3 (7,350) DcR3 LOF (15%) (1,100)

Financials & Milestones

Q3 2016 Financial Update R&D expenses for the 3 rd Quarter were $7.7M (gross) and $7.5M (net), increasing from $4.6M (gross) and $4.2M (net) for the same period in 2015 – Primarily due to increased spend on clinical activities related to advancing the NFC - 1 (MDGN - 001) program G&A expenses for the 3 rd Quarter were $3.0M, consistent with $3.0M for the same period in 2015 $47.3M cash balance (cash and cash equivalents) at 9 /30/16 – Current resources estimated to fund operations through Q1 2018 ~37.1M shares outstanding at 10/31/16 ~11.0M options and ~4.9M warrants outstanding with a weighted average exercise price of $5.79 and $7.27, respectively, at September 30, 2016 25

Upcoming Milestones 26 R&D Programs Timing NFC - 1 Complete enrollment in phenotype / genotype study ✓ Initiate enrollment in Phase 2/3 mGluR+ ADHD Adolescent Trial ✓ Top line data H2 16 Initiate enrollment in Phase 1/2 22q Deletion Syndrome Trial Q4 16 Initial open - label responder data H1 17 Anti - LIGHT mAb Initiate Signal Finding Study Q4 16 Initial open - label responder data H1 17 TARGT CNS Preclinical POC H2 16

Thank You

 

 

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