Kazia Therapeutics Annual Report 2021

MAKING DEALS KAZIA’S BUSINESS MODEL IS PREDICATED NOT JUST ON THE ABILITY TO DESIGN AND EXECUTE INNOVATIVE CLINICAL TRIALS, BUT ALSO ON THE CAPACITY TO PARTNER WITH OTHER COMPANIES FOR DISCOVERY AND COMMERCIALISATION. PARTNERING FOR SUCCESS: THREE MAJOR CROSS-BORDER LICENSING DEALS IN FY2021 A typical pharmaceutical licensing deal has three components: Upfront Payment – this is paid at the time of signing a licensing agreement and is non-refundable. Milestone Payments – these are paid throughout the development and commercialisation of the drug, providing certain milestones are met. Typical milestones may include FDA approval, selling >$500 million in a given year, or achieving approval for a second indication. Royalties – these are paid as a percentage of net sales. They may be tiered, so that higher sales in a given year pay a larger percentage in royalties. In March 2021, Kazia partnered the legacy Cantrixil asset to Oasmia Pharmaceutical AB of Sweden. This drug candidate was developed by Novogen Limited, and Kazia was of the view that the work needed to shape it into a viable commercial product would be better performed by a larger, more specialised company. Oasmia has an existing commercial product in ovarian cancer, and deep expertise in this field, so it represented the ideal partner. Kazia received a US$ 4 million upfront payment, up to US$ 42 million in milestone payments, and double- digit royalties (i.e. ≥ 10%). In this way, Kazia will substantially benefit from any future success in the drug, without needing to devote further resources to its development. Also in March 2021, Kazia partnered the Greater China rights for paxalisib to Simcere Pharmaceutical. Regional partnerships such as this are sometimes executed late in the development of a drug, so as to provide the specialist capabilities required to commercialise in territories such as China. Kazia received a US$ 11 million upfront payment, up to US$ 281 million in milestone payments, and mid-teen royalties. Unlike the Cantrixil deal, where Oasmia will take the lead in the drug’s future development, the Simcere partnership envisages the companies working closely together to secure regulatory approval and commercial success in China. The Greater China market represents 8-10% of the global opportunity for a new cancer drug, and so Kazia remains free to find other partners in other regions or, in principle, to commercialise itself in some territories. In April 2021, we executed a deal with Evotec SE which brought a new asset, EVT801, into our pipeline. Evotec is one of the world’s leading drug development partners and works closely with a wide range of pharmaceutical companies to help develop their drug candidates. Unsurprisingly, the work done on EVT801 was first-class. Their business strategy does not envisage taking their own drugs into clinical trials, and so it presented an ideal partnering opportunity for Kazia. The deal comprised a €1 million upfront payment, up to €308 million in milestones, and single digit royalties (i.e. < 10%). In aggregate, these three transactions have radically reshaped Kazia as a business, and left it greatly strengthened. The sense of transformation however is deceptive – these sorts of transactions are a central part of what Kazia exists to do and they represent one of our core competencies as a business. Not so long ago, drug development used to be conducted in complete isolation, with individual companies working on their own drugs, ‘from the bench to the bedside’. This is no longer the case. Today, many drugs pass through the custodianship of several companies during their development and commercialisation. In 2020, pharmaceutical licensing deals in oncology alone totalled US$ 59 billion in value. 1 Kazia has been established to capitalise on this trend. The company performs no in-house drug discovery. Rather, we look to identify promising drug candidates in the global pipeline which are no longer strategic for their parent companies. We bring those in to Kazia, build their value through innovative clinical development strategies, and generally seek to partner them for commercialisation. One key advantage of this approach is financial in nature. To bring a good quality drug candidate to the point where it can begin clinical trials costs many millions of dollars. Kazia typically acquires assets for a discount to their sunk cost, providing future upside to licensors in the event of success. This has allowed us to bring two world-class drug candidates into our pipeline at very modest cost. A second advantage is that it gives us access to the very best research, without being limited by the expertise of in-house scientists. 1 S Hardison (2021). BioPharma Dealmakers. Kazia Therapeutics Limited Annual Report 2021 13 2021 AT A GLANCE CHAIRMAN’S LETTER CEO’S REPORT KEY MILESTONES PIPELINE REVIEW PARTNER FOR SUCCESS WORK WITH THE BEST #2 IN THE KAZIA STORY FINANCIAL REPORTS