February 10, 2006
Information Memorandum
LeadGenex Inc.
● Non-competing molecular diversity technology
● Retains uniquely-created unknown drug-like small molecular libraries
● Systematic drug discovery strategy targeting multiple diseases at the same time
● Successful outcomes in new high value-added lifestyle drug developments
● High profile management and advisory group in biotechnology
Daedeok Innopolis is the largest innovative cluster in Korea
and one of the top tier clusters in the world.
Information Memorandum
Notice to Recipients
Pharos Capital Limited has been retained by LeadGenex Co., Ltd. (“Company”) to act as its exclusive
financial advisor (“Advisor”) in connection with the capital-raising of the Company.
The information contained herein has been prepared to assist interested parties in making their own
evaluation of the Company and does not purport to be all-inclusive or to contain all of the information that
a prospective investor may desire. While the textual information contained herein is believed to be accurate,
the Advisor has not independently verified any of the information contained herein in connection with the
Summary, and no representation or warranty is made by either the Advisor or Company as to the accuracy,
reliability or completeness of this Summary. In all cases, prospective parties should conduct their own
investigation and analysis of the Company and the data set forth in this Summary.
By accepting this Summary, the recipient acknowledges and agrees that all information contained herein is
of a confidential nature, that the recipient will treat it in a confidential manner and that recipient will not,
directly or indirectly, disclose or permit its agents or affiliates to disclose any of such information except in
accordance with a signed confidentiality agreement which accompanies or preceded this Summary.
Without limiting the generality of the foregoing, the recipient will not reproduce this Summary, in whole or
in part, and will use this Summary solely for purposes of evaluation the recipient’s interest in the capital
raising. Any proposed actions by the recipient will be made in the written proposal.
All communication or inquiries relating to this Summary or its subject matter can be addressed to either the
representative of the Advisor or the representative of the Company listed in the contact information (see
page 6).
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Contents
Page
Notice to recipients
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1.
Executive Summary
1.1
Company at-a-glance
1.2
LeadGenex’s Competitive Edges
1.3
Facts & Milestones
1.4
Contact Information
2.
Company overview
2.1
Business Model
2.2
Market Opportunity -------------------------------------------------------------------------------12
2.3
Management & Workforce
2.4
Technology Details
2.5
Intellectual Property and Existing Contracts
2.6
Investment & Ownership
2.7
Offering & Use of Proceeds
3.
Financial Forecast
3.1
Financial Forecast
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1. Executive Summary
1.1 Company at-a-glance
LeadGenex is a biotechnology company focused on the discovery and development of targeted
high value-added lifestyle drugs since 2000.
Based on the molecular diversity technology, the
company has been engaging in developing obesity, diabetes, prostatism, impotency, arthritis,
alopecia, osteoporosis and anti-cancer drugs independently or with pharmaceutical /
biotechnology collaborators, and outstanding outputs have been drawn according.
For example,
erectile dysfunction drug candidate is nearing the completion of preclinical trials, obesity and
diabetes are approaching the preclinical trials, prostatism and alopecia projects are waiting for
phase II and arthritis, osteoporosis and anti-cancer candidates are still in a stage searching for
leading compound.
LeadGenex can dramatically reduce the searching period toward
pharmaceutical gold by systematic drug discovery strategy targeting multiple diseases at the
same time.
In addition, the company has been serving worldwide synthetic and medicinal
chemistry custom service.
The lifestyle drugs market was reported worth phenomenal $23 billions in 2003 and average
annual growth is expected to 12%.
Lifestyle drugs are usually expensive and taken long lasting,
and build up high-yield, stable market like Viagra and Xenical.
LeadGenex, directly aiming at
this booming market, is developing about 8 different lifestyle drugs, and the company expects
that anti-hair loss and prostatic hypertrophy drug will be able to be introduced to the market in
2006 or 2007.
In the post-genome era, the drugs discovery and development has gained strong momentum and
competition has intensified as well.
Therefore, maintaining a comprehensive and competitive
molecular diversity technology and high throughput screening is essential in gaining advantage
over competitors.
With this trend, LeadGenex, since its inception, has focused on molecular
diversity technology so that the company is now in an advantageous position over existing
pharmaceutical companies when cooperating for the development of new drugs, and the
company will become a leading player in the new-drug development industry
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1.2 LeadGenex’s Competitive Edges
■ Non-competing Technological Advantages
Dr. Sang Woong Kim, CEO of LeadGenex, first started molecular diversity technology in 1993
at UCLA, and started his first career as a new drug discovery researcher at LG, a leader in
developing new drugs in Korea.
Dr. Kim has been acknowledged as a profound professional in
the field for his experience and technology.
Based on this molecular diversity technology and
know-how, LeadGenex is aiming at the higher value-added lifestyle drugs market, and has
intensively researched to develop various drug candidates.
LeadGenex’s molecular diversity
technology is totally outperforming traditional method through its unique workflow.
Using in-
house developed high throughput synthesizers and the key technology of molecular diversity, the
company has performed numerous tasks of discovering or optimizing primary lead compounds
for drugs applying unique small molecular drug-like libraries which can be constructed much
faster than the competitors.
It gathers strength from the fact that LeadGenex can construct
unlimited number of unique chemical libraries according to the idea, and it is possible to occupy
an independent area in the field without direct competition.
*Molecular Diversity means constructing small molecule chemical libraries of various structures
based on molecular synthesizing and organic synthesizing technology, and also includes the
development of relevant devices and management programs, which systematically standardize and
evaluate(HTS), manage(cheminformatics), and use(chemical genomics) these chemicals.
■ Oligopoly in Domestic Market
Currently, there is no significant competitor in the domestic market, and the company does not
expect any other new entrants in the future.
The main reason is that pioneers in the early stage
could not come up with significant results or outputs due to lack of professionals in this field.
Also this market has been considered as a long, tedious and costly market.
In this severe
market environment, LeadGenex since its inception survived and proved itself to be a leading
company backed by molecular diversity and outstanding achievements.
■ Market Environment Becoming Favorable
With the emergence of the genome industry, the new drug sector and related industries are
expected to boom up in development.
As the demand for various types of drug-like small
molecule is increasing explosively, LeadGenex’s molecular diversity technology will be highly
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appreciated since there are only a handful of companies with independently developed libraries.
Also the market size of new drugs is becoming a mammoth, and it is expected that the lifestyle
drugs market will be more than USD 50 Billion in 2010.
With the increasing average age of
the population and the improvement of income levels, the demand from them is rapidly growing,
and the scale of the domestic market is also huge.
The concept of lifestyle drugs is to enhance
people’s physical and psychological conditions, and it is not defined as medicines since the
purpose is not to cure diseases or illnesses.
Lifestyle drugs are usually expensive, and people
tend to consume them continuously throughout their lifetime.
Viagra and Xenical are good
examples of lifestyle drugs that are bringing billions of dollars to the makers.
LeadGenex,
directly aiming this market, is developing about 8 different lifestyle drugs, and the company
expects that anti-hair loss and prostatic hypertrophy drug can be introduced to the market in
2006 or 2007.
■ Playing a Key Role in the Industry
LeadGenex has been entrusted with exclusive projects and assignments by the Ministry of
Health and Welfare, Ministry of Science and Technology, and Ministry of Commerce, Industry,
and Energy, receiving recognition from the Korean government for its outstanding technological
abilities.
In addition, the company was designated as an INNO-Biz Company by the Small and
Medium Business Administration with distinctions and as a Promising Small and Medium
Enterprise by Daejeon City.
Such accomplishments have enabled LeadGenex to find its own
niche in the field as a venture company with superior technology, management skills and
continuously recurring government-subsidized projects.
More over, LeadGenex has numerous
high profile customers like Merck & Co., Rexahn, Inc., USA, SPI Japan, LG Care Inc., CJ,
Chong Kun Dang Pharmaceuticals, Youngin Pharmaceuticals, and many other drug discovery
and pharmaceutical companies.
A relatively small venture company, LeadgGnex has been able
to compete and cooperate with these big players mainly because of its core technology as well as
its unique drug-like small molecular libraries.
gaining stronger negotiation influence in the field.
Based on strong references, LeadGenex is
The company will continuously play a key
role, and its position will be held strong as long as the company secures its uniqueness and
diversity of libraries.
.
■ Simultaneous Research Capability for Multiple Projects
Based on LeadGenex’s molecular diversity technology, the company has the capability to
proceed with multiple projects to develop new drugs simultaneously.
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projects can hedge risks in case of a failure of a project, and can be a buffer that can minimize
the loss.
This process is possible because the company has the fastest ability to draw new
leading compounds from the molecular diversity.
Several independent new drug researches are
in progress such as developing anti-hair loss, anti-obesity, anti-diabetes, anti-rheumatism and
prostatic hypertrophy drugs.
At the same time, the company is co-developing new drugs like
erectile dysfunction drug, anti-cancer drug and osteoporosis drug with prominent pharmaceutical
companies.
1.3 Facts & Milestones
■ Facts
Facts
CEO
Sang Woong Kim
Foundation
October, 2000
Address
Venture Town Dasan, 1687-2 Shinil-dong, Daedeok-gu, Daejeon, Korea
Paid In Capital
KRW 885M (USD 885,000 )
No. of Employees
11 employees as of January, 2006
Drug Candidates, Drug-like Small Molecular Libraries, Building Blocks,
Products
Intermediates, Cosmetic Raw Materials, Electronic Materials
Independent Auditors
Target Market
Pharmaceutical Companies
■ Milestones
2000. 10
Established LeadGenex, Inc.
Fundraised KRW 300,000,000 by increasing paid-in capital (Samsung Fine Chemicals
2000. 11
invested)
2000. 12
Established Research Institute of LeadGenex
2001. 06
Authorized as a Venture Enterprise
2001. 08
Authorized as an INNO-BIZ company
Award grand prize in Bio filed in 2001 The Maeil Economic Daily Excellent Venture
2001. 10
Finding Competition
2001. 10
Contracted Rexahn (US) for co-development of new drugs
2002. 04
Contracted SPI (Japan) as a Marketing Partner
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Fundraised KRW 500,000,000 by increasing paid-in capital (Chong Kun Dang
2002. 07
Pharmaceutical invested)
2002. 07
Selected as the “Best Venture Company” from the Federation of Korean Industries
2003. 08
Selected as a promising small enterprise in Daejeon
2003. 11
Custom Synthesis Agreement with Merck & Co. (USA)
2004. 08
Selected as the “Promising Exporting Company” from Small Business Corporation
Authorized as a Materials-Components Technology Development Enterprise from
2006. 02
the Ministry of Commerce, Industry and Energy
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1.4 Contact Information
Pharos Capital Limited
Mr. D.I. Cho
Associate Manager
Tel. +82-2-540-6501
Email. pharoscap@hitel.net
LeadGenex
Sang Woong Kim, Ph.D./MBA
CEO
Tel. +82-42-936-0991
Email. ceo@leadgenex.com
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2. Company Overview
LeadGenex is a leading company in developing various drug candidates based on molecular
diversity technology aiming at booming lifestyle drugs market.
With the aging of population
and the improvement of an income level, the demand on the lifestyle drugs is rapidly growing.
The company has two clinical trials, one preclinical trial, two nearing preclinical trials and three
finding leading compound stages.
LeadGenex also offers drug-like small molecule libraries
and chiral intermediates, contract research and discovery, and optimization of new hit and lead
compounds as a cash flow.
2.1 Business Model
■ Lifestyle Drugs
Lifestyle drugs are medicines that help people improve physical and psychological conditions,
and these are not means for direct cure, but rather considered as a must-have medicine.
type of drugs usually requires long-term medication period.
hypnotic and contraceptive come within this category.
This
Antidepressants, Viagra, Xenical,
Currently, Viagra and Xenical are
leading the market trend, and erectile dysfunction treatment, anti-obesity and anti-hair loss drug
will lead the future lifestyle drug market.
LeadGenex has been striving to develop various drug candidates aiming the lifestyle drugs
market.
It is expected that the lifestyle drugs market will be more than USD 50 Billion in 2010.
With the increasing average age of the population and the improvement of income levels, the
demand on them is rapidly growing, and the scale of a domestic market is also getting huge.
<Table > Products under Development
Market Size
Product
Status
Remark
Preclinical trials
Joint research with
(USD Million)
Erectile Dysfunction Drug
15,000
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Chong Kun Dang
Toxicity test to become
Antiobesity / Antidiabetes Drug
18,000
Independent
a preclinical candidate
Anti-hair loss
15,000
Clinical trials
Independent
Prostatic Hypertrophy Drug
-
Clinical trials
Independent
Rheumatism Drug
20,000
Optimizing leading
Independent
compound
Joint research with
Optimizing leading
Anti-cancer Medicine
30,000
Chong Kun Dang and
compound
Seoul Nat’l University
Osteoporosis Drug
Optimizing leading
Joint research with
compound
Yonsei University
9,000
The worldwide lifestyle drug market is growing more than 10% annually, and LeadGenex has
been putting enormous efforts to develop various kinds of lifestyle accordingly.
Currently,
erectile dysfunction drug candidate is nearing the completion of preclinical trials, obesity and
diabetes are approaching the preclinical trials, prostatism and alopecia projects are waiting for
phase II, and arthritis, anti-cancer and osteoporosis are in searching for leading compound stage.
<Figure> Summary of Development Pipeline
■ Drug-like small molecule
Drug-like small molecular libraries are the basis for the development of new drugs.
LeadGenex is maintaining numerous and these unique libraries that are not released in public
domain.
The company has obtained drug-like libraries based on molecular diversity
technology for itself, and utilizes them in co-developing new drugs with other pharmaceutical
companies or independently.
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<Figure> LeadGenex Chemical Library
■ Building Blocks & Chiral Intermediates
LeadGenex also maintains and provides various unique chiral or building blocks that are
required to synthesize small molecular libraries.
These original building blocks can be applied
to various drug-like libraries. New developments in various technologies for isolating, preparing,
and purifying (chiral) materials have greatly increased the opportunities for utilizing optically
pure compounds in commercial applications.
<Figure> Chiral Intermediates
■ Custom Synthesis
LeadGenex provides custom organic synthesis based on its proprietary technology, and its
accurate NMR (Nuclear Magnetic Resonance) data guarantee the high quality and high purity of
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all compounds.
The company has worldwide top-tier customers such as Merck & Co., Rexahn,
Inc., USA, SPI Japan, LG Care Inc., CJ, Chong Kun Dang Pharmaceuticals, Youngin
Pharmaceuticals, and many other drug discovery and pharmaceutical companies.
■ Contract Research
LeadGenex can provide customized drug-like small molecules and perform private research
through a contract.
Contract research includes focused library generation by combinatorial
chemistry and lead optimization by molecular diversity, medicinal chemistry and organic
synthesis projects, etc.
■ Revenue of major products
Unit: KRW Million
2005
2006E
2007E
2008E
Chemical Libraries
250
600
1,500
2,000
Intermediates
100
300
800
1,000
200
500
900
100
200
300
10,000
20,000
50,000
11,200
23,000
54,200
Research Project
Cosmetics Raw Material
Licensing
Licensing/New Medicine
Total
350
2.2 Market Opportunities
■ Market Outlook
According to 2005 research by Samsung Economy Research Institute, worldwide bio-science
market would be USD 1,194 Billion in 2010, and more than 80% would be medicines.
As
shown in the table below, the percentage of medicines in bio-science market is enormous.
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However, the importance of developing new drugs in domestic market has been overlooked until
the recent date, and huge amount of funds have been utilized in developing health-subsidizing
foods and medicines.
<Table > Market Status and Size
Marketsize
Industry
Products
Status
Participants
(USD Billion)
Anti-cholesterol drug, red
Pfizer, GSK, Amgen,
Medicines
blood cell growth
Commercialization
970
Genetech
accelerator
Blood transfusion, cell
Bio Treatment
treatment, genomic
Under research
56.2
Aastrom, ONYX, Vical
30
Affymetrics, Medtronics
treatment
Accumulated
U-Health
Bio-chip
technology
GMO
(Genetically
Crops, animals, fish
Commercialization
15
Monsanto, Syngenta
Visual diagnosis
Commercialization
85
HP, GE, Agilent
Early stage
16
Shell, BP
Early stage
25
Modified
Organism)
Bio Equipments
Microbial decomposition,
Bio Energy
bio fuel
Replacing conventional
Bio Process
Cargill-Dow, BASF,
process
DuPont
Source: Report of Samsung Economy Research Institute, IMS Health, Jain PharmaBiotech Report 2005
The optimal business model in bio industry is not platform technology, but the development of
new drugs.
Nevertheless, Research and development period is comparatively longer than any
other field and it would be the most attractive and profitable business model that can exercise
rights with patent protection if the development was successful.
New drug research can be categorized into discovery and development, and discovery is
considered more important because patent protection is possible in the stage of discovery.
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if there are proper period and funds for the development after discovery, new products can be
drawn easily in the development stage.
Developing new drugs can take enormous amount of
investments, but the portion in the discovery stage is relatively small so that small and medium
companies can maintain competitiveness if properly staffed with R&D personnel.
■ Competitors
Currently, there are no substantial competitors that can handle drug-like small molecular
libraries in domestic market.
Some private enterprises have started research on these libraries
with government subsidies from 1995, but the companies lack professional researchers in this
field, and they are having a hard time securing related technologies.
As an alternate method,
the companies are constructing libraries from scattered libraries throughout the country or by
purchasing libraries from abroad, but it will not guarantee the competitiveness and profitability
for the rights and ownerships belong to others.
<Table> Comparison with Domestic Competitors
Foreign top tier-pharmaceutical companies have already secured from 100K to 2 million
chemical libraries through years of accumulated know-how and experiences.
Also there are
professional chemical library providers like ChemDiv, Asinex, Axys and Cambridge, and these
companies are closely cooperating with pharmaceutical companies for the development of new
drugs and discovery of new chemical candidates.
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<Table> Pharmaceutical Companies in Stock Market
Company
Foundation
IPO
Market Cap (USD M)
Affymetrix
1993
1995
34,500
Vertex
1989
1993
12,900
Pharmacopoeia
1993
1995
660
Array Biopharma Inc.
1998
2000
370
ArQule
1993
1996
320
Discovery Partners Int’l
1995
2000
100
2.3 Management & Workforces
Sang Woong Kim, President and Chief Executive Officer
Specialties
Organization
LeadGenex
LG Research Park
Main Achievement
-President and CEO
-Drug discovery
Administrations and
Texas Tech University
Management
Ph.D
-Research assistant
UCLA Post Doc.
-Research associate
MBA
Eun Ju Lee, Vice President
Specialties
Organization
LeadGenex
Main Achievement
-Vice President
Bioneer
-Drug discovery & development
KAIST
-Drug discovery & development
Administrations and
Texas Tech University
Management
Ph.D
-Research assistant
UCLA Post Doc.
-Research associate
MBA in progress
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In Ho Cho, Manager, R&D Center
Specialties
Organization
LeadGenex
Main Achievement
-Manager, R&D Center
Administrations and
Siegen University,
Management
-Research associate
Germany, Ph.D.
2.4 Technology Details
■ Diversity-oriented Synthesis
Diversity-oriented synthesis can draw and ensure the molecular diversity of optimized chemicals
by combining lead compounds at high speed based on its unique technology.
Traditional
synthesis was done one by one, and it took about 3~8 years to draw a single lead compound
whereas diversity-oriented synthesis can extract 3~5 lead compounds per year.
As per the
research expense, traditional synthesis generally required USD 7,500 / compound while
diversity-oriented synthesis only needs USD 20~30 / compound.
This is the critical advantage
why LeadGenex can compete with top tier pharmaceutical companies and negotiate in
advantageous position.
<Figure> Molecular Diversity Inventory Planning and Synthesis Workflow
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2.5 Major Contracts and Intellectual Properties
■ Major Contracts
Note
Partner
Date of contract
Birogen
Jan-30, 2001
Research Agreement
KRRIB (Nat’l Institute)
Jan-31, 2001
Research Agreement
DNA Link
Feb-16, 2001
Research Agreement
CNBR, Inc.
Feb-17, 2001
Research Agreement
IDR Tech
April-19, 2001
Research Agreement
Yonsei Univ.
May-2, 2001
Research Agreement
Mokam Institute
May-16, 2001
Research Agreement
June-4, 2001
Research Agreement
Young Jin Pharmaceutical
June-5, 2001
Contract Research Agreement
NeuroNex
June-7, 2001
Research Agreement
Rexahn, Inc., USA
Sept-15, 2001
Research Collaborative Agreement
Rexahn, Inc., USA
Nov-10, 2001
Contract Research Agreement
CJ
Jan-28, 2002
Contract Research Agreement
CrystalGenomics
Apr-19, 2002
Research Agreement
SPI, Japan
May-24, 2002
Marketing Agreement
Yonsei Univ. Med. Center
June-1, 2002
Research Agreement
CKD
Aug-1, 2002
Research Agreement
LG Care
Sep-22, 2002
Contract Research Agreement
Merck & Co., USA
Nov-12, 2003
Custom Synthesis Agreement
Bio CS
■ Intellectual Properties
LeadGenex has 15 core patents related to diversity-oriented synthesis.
Contents
Item
Compounds
Patent
having
an
antioxidant
Date
Status
2006
Patent applied
2005
Patent applied
activity,
method for preparation thereof and composition
for preventing skin aging
Pharmaceutical composition for treating hair loss
Patent
and benign prostatic hyperplasia
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Benzothiazole derivatives for the treatment or
Patent
2005, 2004
Patent applied
2005, 2004
Patent applied
2005
Patent applied
2003
Patent applied
2003
Patent registered
2003
Patent registered
prevention of diabetes and obesity
Quinazoline derivatives for the treatment or
Patent
prevention of diabetes and obesity
Quinazoline derivative having inhibition activity
of phophodiesterase, a process for preparing the
Patent
same,
and
pharmaceutical
composition
comprising the same
Patent
Composition for inhibiting telomerase activity
Preparation
of
new
intermediates
in
drug
Patent
development
Beta-Nitrostyrene Compound and Telomerase
Patent
Inhibitor Having an Anticancer Activity
2.6 Investments and Ownership
■ Investment History
No. of Issued
Date
Type
Accumulated
Par Value
Issue Price
Shares
Paid-in Capital
Oct-00
Foundation
104,800
5,000
5,000
524,000,000
Nov-00
Common
11,696
5,000
25,650
582,480,000
Nov-00
Common
2,460
5,000
5,000
594,780,000
Jul-02
Common
10,000
5,000
50,000
644,780,000
Oct-02
Bonus Issue
48,000
884,780,000
884,780,000
Total
■ Shareholder Breakdown
Shareholder Name
Percentage (%)
Sang Woong Kim
41.74%
Eun Ju Lee
12.69%
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Samsung Fine Chemicals
10.91%
Chong Kun Dang Pharm
7.75%
Others
26.89%
Total
100.00%
2.7 Offering and Use of Proceeds
■ Offering
Type of Financing Instrument
Equity
Value of Offering shares
US $ 3,000,000
Price
Negotiation
Terms of Offering
The offering commences on February 10, 2006 and continues until
August, 2006 unless otherwise extended by the Company.
Withdrawal of
The Company may withdraw or cancel this Offering at any time
Offering
without notice, and may reject offers for shares for any reason.
■ Use of Proceeds
The principal purposes of this offering are to raise the expenses for marketing, developing
various new products and working capital, extend the overseas channels that can be helpful to
marketing and increase LeadGenex’s visibility in the overseas financial marketplace. The
company intends to use the proceeds from this offering as follows:
i.
approximately US $ 2 million for expenses of research and development of new
products
ii.
approximately US $ 0.5 million for expansion of sales and marketing activities
iii.
approximately US $ 0.5 million for capital expenditures, general and administrative
expensive
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3. Valuation
3.1 Financial Forecast
Unit: KRW Million
(Won: Million)
2005
2006E
2007E
2008E
Sales
350
11,200
23,000
54,200
Gross Profits
169
10,877
22,160
53,030
Operating Profits
-116
10,338
20,788
51,119
Recurring Profits
-16
10,931
22,088
48,119
Net Profits
-16
9,308
18,808
40,973
*Note: LeadGenex has been striving to develop various drug candidates aiming a lifestyle drug
market.
Currently, several lifestyle drugs like anti-hair loss and prostatic hypertrophy drug
candidates are waiting for permits to proceed with the clinical trials, and erectile dysfunction
drug is nearing completion of preclinical trials.
These lifestyle drugs are expected to be
commercialized in 2006 or 2007, which will make explosive sales.
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