SynPlan
December 4
2009
Lilien Cheminformatics, revolutionizing pharmaceutical development
Includes: 3-page Executive Summary (not including diagrams), Final Business Model Canvas, Appendices
including Competition Analysis, Market Analysis, Business Case, Marketing Strategy, Sales and Marketing
Plan, Development Plan, Staffing Plan, Operations Model, Financial Model, Financing Plan, Customer
Interviews, Expert Interviews
Dejana Bajic, Brian Keng, Amanda Manarin, Maria Safi & Peter Park
LILIEN CHEMINFORMATICS
Table of Contents
E XECUTIVE S UMMARY
DESCRIPTION ......................................................................................................................................................... 4
VALUE PROPOSITION ............................................................................................................................................. 4
CUSTOMER SEGMENTS .......................................................................................................................................... 5
Table 1.1: Brief summary of R&D spending in 2008 2 ...........................................................................................5
MAJOR COMPETITORS ........................................................................................................................................... 5
ARCHEM BY SIMBIOSYS...................................................................................................................................................5
THERESA BY MOLECULAR-NETWORKS ................................................................................................................................6
BARRIERS TO ENTRY .............................................................................................................................................. 6
FINANCIAL ESTIMATIONS....................................................................................................................................... 6
COSTS & REVENUE STRUCTURE IN NEXT 5 YEARS .................................................................................................. 6
BUSINESS MODEL CANVAS .................................................................................................................................... 7
COMPETITION ANALYSIS........................................................................................................................................ 8
1 DIRECT COMPETITORS ..................................................................................................................................................8
1.1 ARChem ...........................................................................................................................................................8
1.2 Theresa ............................................................................................................................................................8
2 INDIRECT COMPETITORS................................................................................................................................................9
2.1 LHASA ..............................................................................................................................................................9
2.2 Synchem Inc. .................................................................................................................................................10
3 OUT-OF-CATEGORY COMPETITORS ................................................................................................................................10
3.1 SciFinder ........................................................................................................................................................10
3.2 Beilstein Crossfire/Reaxsys ............................................................................................................................11
4 DISCUSSION / STATUS QUO .........................................................................................................................................11
MARKET ANALYSIS ............................................................................................................................................... 12
Top 15 US Pharmaceutical Company Expenses Compared: ................................................................................13
Brief summary of R&D spending in 2008 : ..........................................................................................................13
Addressable Market: ...........................................................................................................................................14
BUSINESS CASE .................................................................................................................................................... 14
Scenario 1: Successful drug development (delivered to market) ........................................................................14
Scenario 2: Unsuccessful drug development (fails during clinical trials) .............................................................15
Scenario 3: Reverse Engineer Competitor Drug ..................................................................................................15
TYPICAL TOTAL SAVINGS PER YEAR: .................................................................................................................................15
PRICING JUSTIFICATION .................................................................................................................................................16
MARKETING STRATEGY & PLAN ........................................................................................................................... 16
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SALES PLAN .......................................................................................................................................................... 19
DEVELOPMENT PLAN ........................................................................................................................................... 19
Detailed Milestone Descriptions .........................................................................................................................20
Detailed Release Descriptions and Goals ............................................................................................................21
STAFFING PLAN
* SEE SPREADSHEET FOR DETAILS ........................................................................................... 22
OPERATIONS MODEL ........................................................................................................................................... 22
OPERATIONS PLAN OUTLINE...........................................................................................................................................24
FINANCIAL MODEL
* SEE SPREADSHEET FOR DETAILS ....................................................................................... 25
5 YEAR PRO FORMA INCOME STATEMENT.........................................................................................................................25
5 YEAR PRO FORMA CASH FLOW ....................................................................................................................................26
FINANCING PLAN ................................................................................................................................................. 27
Round 1 – Jan Year 1 (Seed Funding) ..................................................................................................................27
Round 2 - Jan Year 2 (VC Part I) ..........................................................................................................................27
Round 3- Jun Year 2 (VC Part II) ..........................................................................................................................27
Exit Scenario 1 – Dec Year 5 (Acquisition by private equity) ...............................................................................27
Exit Scenario 2 – Dec Year 5 (IPO) .......................................................................................................................27
CUSTOMER INTERVIEWS ...................................................................................................................................... 28
DAVID DUBINS.............................................................................................................................................................28
GRACE NG (MEDICINAL CHEMIST)...................................................................................................................................29
ANDREW COOPER ........................................................................................................................................................30
NOTES .......................................................................................................................................................................30
EXPERT INTERVIEWS ............................................................................................................................................ 31
MALCOLM BERSOHN ....................................................................................................................................................31
ABRAHAM HEIFETS .......................................................................................................................................................31
IP STRATEGY ........................................................................................................................................................ 32
TRADE SECRETS............................................................................................................................................................32
COPYRIGHTS................................................................................................................................................................33
TRADEMARKS ..............................................................................................................................................................33
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LILIEN CHEMINFORMATICS
Executive Summary
Description
SynPlan is a computer-aided organic synthesis tool that automates the complex and time-consuming
process of finding a series of chemical reactions to manufacture an organic compound at an industrial
scale. It leverages recent advances in artificial intelligence and computing power to speed up this key
step in the drug development cycle, positioning itself as an essential tool in the process chemist’s tool
box.
Today, generating these reactions involves using pen and paper to draw a series of complex organic
reactions aided only by his/her intuition of what is likely to be a valid step. With over 100 million
chemical substances and sequences1, it is clear that traditional methods are inadequate to cope with the
growing needs of modern pharmaceutical development. SynPlan will augment the chemist’s intimate
knowledge of the field by providing a list of possible solutions to the problem and allowing the final
judgement to be decided by a human expert, automating away the tedious task of finding valid solutions
to the problem.
SynPlan will be distributed to customers on site by an expert application engineer that will initially train
and showcase the benefits of using our product to the customer’s chemists. Support by these expert
engineers will be given to each customer to ensure that they are using the tool to maximize their cost
savings, productivity and drug development.
Value proposition
Once a pharmaceutical company acquires a patent on a new drug, cheaper generic versions of the drug
cannot be sold until the patent expires. Therefore each pharmaceutical company wishes to decrease the
drug development time to extend the period in which they can sell the drug exclusively on the market.
One of the most time-consuming processes in drug development cycle is finding a valid series of
chemical reactions to generate the desired compound for industrial scale production. This process can
take up to three years which translates directly to time that can be used to sell the drug. SynPlan will
automate this task reducing this three year task to three months. This savings in production time
translates directly into decreased labour costs and increased revenue from a larger period of time to sell
the drug exclusively on the market.
1
Chemical Abstracts Service, http://www.cas.org/newsevents/connections/heterocycle.html
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An added bonus comes when a competitor product is needed to generate an alternative, marketable
drug. In such a situation, in house scale up can be performed for a competitor compound using a
completely novel synthesis so the newer analog is patentable.
Customer Segments
Lilien Cheminformatics plans to target the pharmaceutical industry because it has the greatest need for
automating this synthesis process. The customer segments will be broken down into two segments
based on the size of the companies:
a) Large pharmaceutical companies (estimated 500+ licenses/year)
b) Small to mid-sized pharmaceutical companies (up to 500 licenses/year)
Lilien Cheminformatics will concentrate primarily on two markets USA and Europe because these two
regions represent the largest portion of global pharmaceutical sales (40.3% US, 32% Europe) 2. Lilien
Cheminformatics will initially focus product development towards the targeting the large
pharmaceutical customer segment due to their purchasing power noted in Table 1.1.
Table 1.1: Brief summary of R&D spending in 2008 2
US$ spent (millions)
100-500
500-1000
1000+
# Pharmaceutical companies in range
17
8
14
Major Competitors
Theresa and ARChem are two products which fall under the direct competitors’ category for SynPlan.
The comparison of SynPlan with ARchem and Theresa is provided below.
ARChem by Simbiosys
ARChem is a computer-aided organic synthesis tool from Simbiosys. While it provides similar
functionality to SynPlan, it is limited technical capabilities make it impractical for wide-spread industrial
use. While the average number of reactions to generate a drug is 8.13, ARChem is limited to an average
length of 3 rendering it unnecessary in most applications. In addition, it does not provide full support
for stereo-chemistry, a key consideration in creating any organic compound. SynPlan will not have these
technical limitations and will provide 8 steps during our beta and scale up to 12 for the first release.
2
3
Pharmaceutical Executive, May2009, Vol. 29 Issue 5, p68-79, 8p; (AN 40126374)
Carey et. al, “Analysis of the reactions used for the preparation of drug candidate molecules”, The Royal Society of
Chemistry, 2006.
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Theresa by Molecular-Networks
Theresa is another computer-aided organic synthesis tool from Molecular-Networks. Theresa does not
provide completely automation of this process; instead, it provides the process chemist with an
interactive search still leaving the bulk of the work to be done by the chemist. Furthermore, Theresa
uses a set of theoretical reaction rules which may not work in practice as opposed to reaction rules with
a historical precedent used by SynPlan.
Barriers to Entry
The primary barriers to entry relate to our superior domain knowledge and technical expertise. Our
domain knowledge and partnerships places a significant barrier to entry because knowledge of
retrosynthetic chemistry combined with algorithms is only known to very specialized researchers and
practitioners in the field. Partnerships with University of Toronto’s Computational Biology lab as well as
other experts in the field, put us ahead of new entrants into the market. Beyond our domain
knowledge, Lilien Cheminformatics also possesses proprietary search and planning algorithms
developed at our lab which surpass existing competitors’ technology in the field while simultaneously
providing a large barrier to any new entrant into the market space. With Lilien Cheminformatics’
combined expertise in chemistry, medicine and computer science, it sits at a distinct advantage over
new entrants into the market as well as existing competitors.
Financial Estimations





First set of customers are the initial 200 beta testers. ($40k license + $10k support = $10m revenue)
Increase in fame through advertisement and word of mouth brings in more customers by year 4.
Small and large pharmaceuticals will require our product in order to keep their edge in R&D by year
5, creating large and fast sales
Number of support crew rise with increase in rise of customers
All employment salaries are based on 60k/year model
Costs & Revenue Structure in Next 5 Years
Year 1
All figures are in thousands
Revenues
Licenses
Support Handling
Setup Charge
Training & Support
Total Support
$
$
$
$
$
Year 2
-
$
$
$
$
$
Year 3
-
$
$
$
$
$
14,160
177
3,540
3,717
Year 4
$
$
$
$
$
77,520
792
19,380
20,172
Year 5
$ 414,640
$
$
4,214
$ 103,660
$ 107,874
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LILIEN CHEMINFORMATICS
Total Revenue
$
-
$
-
$
17,877
$
97,692
Expenses
General & Admin
Product Dev.
Sales & Marketing
Support
Total Operating Costs
$
$
$
$
$
331
398
230
109
1,068
$
$
$
$
$
347
463
555
278
1,644
$
$
$
$
$
593
612
885
986
3,077
$
$
$
$
$
592
632
1,005
2,638
4,868
Net Earnings Before Taxes
Taxes (Assume 20%)
Net Earnings
$
$
$
(1,068)
(1,068)
$
$
$
(1,644)
(1,644)
$
$
$
14,800
3,101
11,699
$
$
$
92,824
18,565
74,259
$ 522,514
$
$
$
$
$
592
1,165
1,005
5,234
7,997
$ 514,517
$ 102,903
$ 411,614
Business Model Canvas
Leave me blank.
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Appendicies
Competition Analysis
The competition analysis for SynPlan is presented below. ARChem and Theresa are the only direct
competing products, whereas the most threatening competitors have been described in the indirect and
out-of-category sections. Company specific data, where available, has been included with each
competitor. Unless specifically mentioned, the company has no international offices.
1 Direct Competitors
1.1 ARChem
Company: Simbiosys
Structure: Private
Company website: www.simbiosys.ca
Company Size: 10 people
CEO: Aniko Simon
Partners: Sun Microsystems, IBM, Accelrys, Elsevier, Alfa Aesar, Lilien Lab at University of Toronto. The
partnerships with Sun, IBM and Accelrys are for grid computing and software porting. Elsevier and Alfa
Aesar provide databases (see Indirect Competitors) to be used by ARChem. The information about
company size as well as the CEO and company structure comes from personal knowledge and
interaction of the author with Simbiosys representatives.
Competing Product - ARChem: ARChem is a tool aimed at helping chemists design viable synthetic
routes for the target molecules. The tool provides automated extraction of reaction rules from
reaction databases and performs exhaustive search for synthetic routes. ARChem does not handle
stereo-chemistry and chirality.
Threat Level: Medium. ARChem is a Retrosynthetic chemical planner, and is one of the first of its kind.
However, the major drawback of this product is its inability to search for synthetic routes longer than 3
steps. However, typical synthetic plans are much longer than 3 steps. Therefore, the plans ARChem is
able to generate, are extremely limited in their advantage to the chemist. We note that, ARChem can
search for longer synthetic plans as well. However, since it uses a brute-force exhaustive search, plans
longer than 3 steps are infeasible in their run time due to the combinatorial explosion of the search
space. (For instance, using exhaustive search, a plan involving 5 steps, with a reaction database size of
5000 reactions, can possibly take up to 15 years of runtime.)
1.2 Theresa
Company: Molecular Networks
Type: Private
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LILIEN CHEMINFORMATICS
Number of Customers: 100 4
CEO: Prof. Johann Gasteiger
Headquarters: Leeds, UK.
Website: http://www.molecular-networks.com/
Partners: Accelrys, biomax, BioSolveIT GmbH, Chemical Computing Group, Inc., Inte:Ligand, Optibrium
Limited, Symyx Technologies.
We note that none of the partnerships are in the chemical synthesis domain.
Product Description: Theresa is a web-based tool for stepwise retrosynthetic analysis of a target
compound. Theresa uses reaction and publication databases to search for synthetic plans/routes.
Based on reaction similarity with a previously known synthesis, Theresa can also suggest novel steps
for a synthesis. However, Theresa does not generate complete, novel synthetic routes for previously
unknown targets. Furthermore, it does not handle stereo-chemistry and chirality.
Threat Level: Medium. Theresa is a retrosynthetic planner that allows for search of reaction databases
and publications. Its major limitations lie in its inability to generate novel synthetic plans from scratch
and its reliance on theoretical chemical rules vs. historically precedented chemical reactions. In
addition, it cannot deal with stereochemistry and chirality.
2 Indirect Competitors
2.1 LHASA
Company: Harvard University
Type: Private
CEO: Dr. E. J. Corey
Headquarters: Boston, MA.
Website: http://lhasa.harvard.edu/
Key Partners: Academia.
Product Description: LHASA is an acronym for Logic and Heuristics Applied to Synthetic Analysis. The
program comes out of E. J. Corey's Lab at Harvard University. LHASA helps the chemist to interactively
derive synthetic routes from the target molecule to available starting materials. However, LHASA
requires the user to manually create a set of reaction/chemistry rules instead of extracting these rules
from chemical reaction databases. It is worth noting that LHASA does NOT automatically generate
complete synthetic routes, instead it requires the chemist to select a reaction at each step manually. In
this way, LHASA unfolds the search tree, one step at a time, depending on the user input.
Threat Level: Low. LHASA, in essence, is a work flow tool or visual aid. It does not provide automated
plan generation. As the search tree is unfolded one step at a time, plans generated by LHASA are
limited by the interacting chemist's knowledge. As the search is guided by the chemist selecting a
reaction at each step, LHASA cannot generate completely novel and previously unknown routes/plans.
Furthermore, LHASA does not provide access to the vast knowledge databases which are crucial to
4
http://www.molecular-networks.com/companyprofile
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LILIEN CHEMINFORMATICS
generate novel and complex synthetic plans, instead requiring the chemist to generate chemical rules
manually.
2.2 Synchem Inc.
Company: Synchem Inc.
Type: Private
Headquarters: Elk Grove Village, Illinois.
Key Customers: Astra Zeneca, Ambit Biosciences, TorreyPine Therapeutics, TetraPhase Pharmaceuticals,
GSK Research. 5
Website: http://www.synchem.com
Product Description: Synchem Inc. specializes in contract research and organic synthesis. It provides
services to various companies including pharmaceuticals which can outsource the scale up process to
Synchem. Currently, its catalog contains about 1000 products/molecules that can be manufactured for
its customers.
Threat Level: Low. Synchem is a chemical manufacturing company. It does not provide automated tools
to help pharmaceutical medicinal chemists in organic synthesis. Instead it uses its in house chemists to
perform scale up.
3 Out-of-category competitors
3.1 SciFinder
Company: American Chemical Society
Type: Private / Non-profit. 6
Number of Customers: 154,000 7
CEO: Madeleine Jacobs 7
Headquarters: Washington, DC.
Website: http://www.acs.org
Customer segments: Researches in academia, researchers in industry, authors, corporate and
government research labs.
Product Overview: SciFinder is a research discovery tool. It provides access to a number of publications
in scientific fields including organic chemistry. It allows the medicinal chemists to search for previously
published syntheses. However, it neither allows planning of a new synthetic route for previously
designed molecules, nor does it create synthetic plans for novel compounds.
Threat level: Low. SciFinder is a chemical database. It provides text mining access to a large number of
previously published chemical syntheses. The company itself aims to publish chemical papers, hold
conferences in recent chemical advancements as well as maintains curated databases of chemical
knowledge such as SciFinder vs. producing industrial search and planning software.
5
6
http://www.synchem.com/
American Chemical Society. (1 October). Hoover's Company Records,57675. Retrieved October 4, 2009, from
Hoover's Company Records. (Document ID: 168282271).
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3.2 Beilstein Crossfire/Reaxsys
Company: Elsevier
Type: Public. 7
Number of Customers: 7000 8
CEO: Ian R. Smith, Mark H. Armour 8
Headquarters: New York, Amsterdam. 8 9
Website: http://www.info.crossfiredatabases.com, www.elsevier.com
Key Partners: Bayer AG, Fujitsu, Boehringer Ingelheim, Informationszentrum, Chemie Biologie, University
of Bath, Mercachem, Novasep, Vienna University of Technology, Pharmazie ETH Zuerich. 10
Customer segments: Researches in academia, researchers in industry, authors, corporate and
government research labs.
Product overview: Reaxys is a chemical work flow system. It provides searchable access to reaction and
substance databases to aid synthesis planning. It also provides access to chemistry publications since
1771 and patent publications from 1869-1980. However, it neither allows planning of a new synthetic
route for previously designed molecules, nor does it create synthetic routes for novel compounds.
Threat level: Low. Reaxsys is a chemical workflow system. It provides text mining access to a large
number of previously published chemical syntheses. The company itself is a publishing company, with
products ranging from scientific journals to scientific databases.
4 Discussion / Status Quo
The last decade has seen a shift towards computer assisted organic synthesis. The vast deployment of
chemical databases such as Beilstein and SciFinder is a testament to this paradigm shift. However, the
number of retrosynthetic planning tools which can provide efficient and complete synthetic plans for
novel compounds remains small. The first approaches towards full automation including ARChem and
Theresa, have already seen willing customers even though their effectiveness remains questionable11.
From our initial customer interviews, involving representatives from companies like Pfizer as well as from
academia, we gather that the community is very open to a tool which can aid them in generating
previously unseen and complex synthetic routes. We also believe that we also have a second-mover
advantage in this market. Our targeted customers have already been educated about the potential
usefulness of a retrosynthetic planner by our competitors. Consequently, they are also much more
cognizant of the extensive limitations of the existing solutions. Hence, we are confident that right now is
a ripe time to offer this community a complete and efficient retrosynthetic planning solution.
7
Elsevier B.V. (1 October). Hoover's Company Records,161041. Retrieved October 4, 2009, from Hoover's Company
Records. (Document ID: 1712299121).
8
Elsevier B.V. (1 October). Hoover's Company Records,161041. Retrieved October 4, 2009, from Hoover's Company
Records. (Document ID: 1712299121).
9
http://www.info.cross_redatabases.com/contact.html
10
http://info.reaxys.com/development partners
11
http://www.simbiosys.ca/blog/2009/02/13/new-paper-on-archem-route-designer
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Efficiency
ARChem
SynPlan
Theresa
LHASA
SynChem
Completeness
Figure 1: Magic quadrant competitor analysis. Efficiency comprises of: the speed of execution or runtime
of the program, and the amount of user intervention required. Completeness is defined by reaction
library size, length of suggested plans, as well as size of the search space considered. Note that to
achieve higher completeness; a search algorithm must only discard areas of search space which do not
fit user defined criteria. The out of category competitors are not included, since they do not generate
plans and hence the Completeness dimension is invalid for them. Also, SynChem represents all chemical
manufacturing companies, which employ chemists to scale up a target compound.
Market Analysis
The multi-billion dollar pharmaceutical industry is facing a financial crisis in the near future12 for the
following reasons:
- The industry will become a target for major cost-cutting as the size of the health sector changes in
proportion to the overall economy.
- The capacity of the industry to exert pricing power against a consolidating payer base is shrinking fast.
With growing mergers and acquisitions trends, during the past decade the pharmaceutical companies
have been using job reductions as one of the cost-saving strategies. With average sales of 601K1 per
12
Looney, William; industry Audit; Pharmaceutical Executive; Sep2009, Vol. 29 Issue 9, p54-72, 11p
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LILIEN CHEMINFORMATICS
employee among the top 27 companies, it does not seem clear how this strategy will yield increased
productivity per worker employed. The record from past mergers suggests that payoff will take years to
accomplish. Also, considering the expense breakdown as shown below, it is easy to see where most of
the money is being spent.
Top 15 US Pharmaceutical Company Expenses Compared13:
% of expenses
Cost of Goods
29
Marketing and Administrative
30
R&D
15
Other
26
SynPlan will quickly evolve from being a commodity to simply a necessity with the following motivation:
Saving money – Pharmaceutical companies will save anywhere from thousands to tens of millions of
dollars by extending the duration of sales under the patent. Refer to Business Case analysis section for
exact figures.
More capabilities –Empowered by fast and reliable algorithms, SynPlan is capable of providing solutions
to synthesis problems that are currently not solvable by humans. Our customers will have the ability to
explore new horizons when it comes to medical research.
Pharmaceutical companies gain access to SynPlan by purchasing an annual software license. Depending
on the number of licenses purchased, SynPlan’s customer base is broken down into two segments:
α) Alpha group, major pharmaceutical companies – 500+ licenses/year
γ) Gamma group, small to mid-sized pharmaceutical companies – up to 500 licenses/year
Brief summary of R&D spending in 2008 14:
US$ spent (millions)
# Pharmaceutical companies in range
100-500
17
500-1000
8
1000+
14
This summarizes the size of the Alpha customer segment as well. Lilien Cheminformatics’ goal is to gear
the product development towards the Alpha group as they are the biggest possible source of revenue.
Lilien Cheminformatics’ primary focus will be breaking though Canadian Pharmaceutical R&D market.
Canada is at the forefront of discovery when it comes to the pharmaceutical sector. Human health
related research in Canada generates 70% of all revenues, and close to 90% of all R&D15. Canada ranks
fourth internationally when it comes to health research patents. Over $1.3 billion was spent on
biopharma-related research in Canada in 20072. Canada also has the second highest number of
13
http://www.cptech.org/ip/health/econ/allocation.html
Pharmaceutical Executive, May2009, Vol. 29 Issue 5, p68-79, 8p; (AN 40126374)
15
http://investincanada.gc.ca/eng/industry-sectors/life_sciences/bio-pharma.aspx
14
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biotechnology companies in the world16. Hence Lilien Cheminformatics has an enormous advantage of
being located within the pharmaceutical cluster in Toronto.
Addressable Market:
 US companies spend $39 billion in 2003 on R&D17

Assuming that the largest portion of R&D is made up of drug development costs, Lilien
Cheminformatics can reduce costs at all stages of pre-clinical direct cost.

Direct preclinical costs: 121 million / 802 million = 15%18
Addressable market of big pharma R&D budget:
= $39 billion on R&D * 15% on direct costs
= $5.9 billion
Business Case
Cost:
SynPlan license
IT support
SynPlan support costs
Total:
User
$40,000
$500
$10,000
$51,000
Notes
Volume (500+) per seat yearly license.
Support for machines servers and licensing setup.
Application engineer assistance training/support.
Assumptions:
 Fully loaded, $250,000/year organic chemist based on salary and benefits, research support
costs, and general company overhead.19
 Assume 8 medicinal/process chemists working a drug scale up/initial development. 20
 Estimate of average time saved by SynPlan 6 months vs. manual effort based on customer
interviews:
o 1 months savings during initial development
o 5 months savings during scale up
Scenario 1: Successful drug development (delivered to market)
 Time savings for 8 organic chemists, average of 6 months savings: $1,000,000
16
http://investincanada.gc.ca/download/833.pdf
http://www.cbo.gov/doc.cfm?index=7615
18
http://www.cbo.gov/doc.cfm?index=7615
19
http://www.jaici.or.jp/sci/SCIFINDER/roi_1.pdf
20
http://www.jaici.or.jp/sci/SCIFINDER/roi_1.pdf
17
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
6 months more time selling drug under patent protection assuming drug does 1/100th as well as
Lipitor21, saves $64.5 million dollars
Savings:
 Eight licenses over 6 months: $0.2 million
 Savings: $64.5 million + $1 million – $0.2 million = $65.3 million
Scenario 2: Unsuccessful drug development (fails during clinical trials)
 Time savings for 8 organic chemists, average of 2 months savings: $333,333
 Assume 18 potential drugs in initial stage development ready for clinical22
Savings:
 Eight licenses over 2 months: $68,000
 Savings: $333,333 * 18 – $68,000 = $5.9 million
Scenario 3: Reverse Engineer Competitor Drug
 Promising drug patent that was filed by competitor. Slight modifications might result in an
enhanced version of the drug. Use SynPlan to reverse engineer and modify a competitor’s drug
so that you can beat them to clinical trials and FDA approval.
 Time savings for 8 organic chemists, average of 6 months savings: $1,000,000
 Develop and get FDA approval a drug under patent protection assuming drug does 1/100th as
well as Lipitor2321
Savings:
 Eight licenses over 6 months: $0.2 million
 Savings: $64.5 million + $1 million – $0.2 million = $65.3 million
Typical Total Savings per Year:24


Out of $802 million cost to develop drug: preclinical (4.3 years), clinical / FDA (7.5 years)
Direct costs
o Pre-clinical: $121 million
o Clinical: $282 million
21
$12.9 billion annual sales, 2008 annual report
http://media.pfizer.com/files/annualreport/2008/annual/review2008.pdf
22
based on average number of drugs in phase 3 pipeline
http://media.pfizer.com/files/annualreport/2008/annual/review2008.pdf
23
$12.9 billion annual sales, 2008 annual report
http://media.pfizer.com/files/annualreport/2008/annual/review2008.pdf
24
http://www.cbo.gov/doc.cfm?index=7615
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





Indirect costs:
o Pre-clinical: $214 million
o Clinical: $185 million
Cost of developing a drug per year = $802 million / 12 years = $66 million / drug / year
Median R&D spending out of top 20 Pharmaceutical Companies: $2.255 billion
Number of drugs in pipeline for median pharmaceutical company per year:
= R&D spending / cost drug development per year
= $2.25 billion (Pfizer annual report) / $66 million
= 34 drugs in pipeline
Assume drugs in pipeline are spread evenly across 4 phases of development per year:
= 34 drugs in pipline / 4
= 8 drugs in pipeline
Assume scale-up of drugs required primarily for Phase I clinical.
Total Savings
= Number of drugs in need of scale up for Phase I per year * total savings per drug
= 8/year * $12.4 million
= $99.2 million / year
Pricing Justification


Cost of developing a new drug: $802 million25
Drug takes on average 12 years to develop26
Cost of 8 licenses/year: $0.4 million
Cost of drug/year: $802 million / 12 years = $66.8 million
Percentage of drug development cost: $0.4 million / $66.8 million = 0.6%
Marketing Strategy & Plan
Lilien Cheminformatics will use a variety of means to reach our customers. A number of these strategies
will be integrated with the development phase of SynPlan. Taking the technology adoption curve into
account, we first need to target the early adopters. These early adopters will be university research
groups and small pharmaceutical companies. During development we plan to work with these
customers to develop and refine our product as well as promote our product. They will have access to a
beta release of our software. Often, when one research lab has a useful beta release of software,
researchers within that lab will spread the word to researchers (in other labs). As a result, we know that
if other labs start contacting us to obtain a beta version of SynPlan, this marketing strategy is surely
25
26
http://csdd.tufts.edu/About/History.asp
www.cbo.gov/doc.cfm?index=7615
16
LILIEN CHEMINFORMATICS
successful. We can also use the feedback from users during this period to gauge our success and improve
our product. This marketing strategy carries little financial cost.
Once our software is stable enough to be released to large pharmaceutical companies we will first
release SynPlan to a large pharmaceutical company such as Pfizer. They will have a trial version of our
software to integrate into their synthesis process. We will ensure that Pfizer is content with our product
and provide improvements and customizations to suit their needs. Members of our team will be sent to
the facilities (where our software is in use), to train users and to aid and facilitate adoption. Thus, our
relationship with Pfizer will serve as a “poster child”, they will become our spokesperson who will help
spread the word about SynPlan across the industry. Our relationship with Pfizer will aid in making the
jump across the chasm, from early adopters to the early majority/mainstream market and will eliminate
the skepticism around our product by proving that it really works and is greatly beneficial. The
customers in the mainstream market are pragmatists and conservatives, both of which only make
purchasing decisions once they see someone else making that purchase27. Once a pragmatist sees that
SynPlan is being successfully used by another big pharma such as Pfizer, they will follow suit and make
the purchase. The conservative customers watch the pragmatists, once we have a substantial number of
large pharmas happy with our product they too will start making purchases and adopt SynPlan.
Since SynPlan is developed in partnership with the Computational Biology lab at the University of
Toronto, we have a strong network in which we can promote our product. SynPlan will be offered to
Universities and their researchers free of charge, which will also aid in spreading the word between
researchers about our product. We will also hold talks within the university (and possibly other
universities). Since many biotech and pharmaceutical companies have head offices in the Toronto area
we hope that researchers and representatives from these companies will attend these talks. Such talks
will be held during development to speak about the advancements in our technology.
During the development phase we will also publish papers about SynPlan in a number of pharmaceutical
and cheminformatics journals. These papers will also highlight advances in the development of our
technology. Publishing an article can cost as much as $2000 (in a high end journal), and is an inexpensive
means to reach our customers since medicinal chemists are actively reading such journals. Below is a list
of journals in which we plan to publish:
 Journal of Chemical Theory and Computation: http://pubs.acs.org/journal/jctcce
 Expert Opinion on Drug Discovery: http://informahealthcare.com/edc
 Current Opinion in Drug Discovery & Development
http://www.biomedcentral.com/curropindrugdiscovdevel/
 Drug Discovery Today: http://www.drugdiscoverytoday.com/ (Magazine which reports
developments in drug discovery and related technologies)
 Drug Development Research: http://www3.interscience.wiley.com/journal/34597
 Computational Biology and Chemistry Journal:
http://www.sciencedirect.com/science/journal/14769271
 Journal of Chemical Information and Modeling: http://pubs.acs.org/page/jcisd8/about.html
27
Moore, Jerrery A. Crossing The Chasm. Harper Paperbacks: c. 2002.
17
LILIEN CHEMINFORMATICS

Journal of Computational Chemistry:
http://www3.interscience.wiley.com/journal/33822/home
 Journal of Medicinal Chemistry: http://pubs.acs.org/page/jmcmar/about.html
 Journal of Cheminformatics: http://www.jcheminf.com
From publishing in aforementioned journals, we hope that pharmaceutical companies will contact us
and become customers. Our success will not only be based on the number of customers we gain from
our publications, but also the number of citations that we receive from other papers. When other
researchers cite our technology and findings they are also aiding in spreading the word about SynPlan.
Lastly, one of the more expensive means of reaching our customers is to attend conferences and trade
shows. We plan to attend conferences during the development phase of our product. These conferences
include those held by eChemInfo (http://www.echeminfo.com), and various computational chemistry
conferences such as the Canadian Computational Chemistry Conference
(http://www2.bri.nrc.ca/cccc7/). At these conferences we will present the findings published in journals
and network with other members of the chemical and pharmaceutical industry.
When we have finally released the final version of SynPlan, our goal is to attend large industry
tradeshows such as INTERPHEX which is held in New York annually. INTERPHEX showcases the latest
technological innovations across the pharmaceutical industry and attracts around 12,000 people from
pharmaceutical and biotech companies globally28. Representatives from top pharmaceutical companies
such as Bristol Meyers Squibb, GlaxoSmithKilne and Novartis regularly attend the conferences and thus
gives us a chance to connect with these companies if we have not already done so. Attending
INTERPHEX costs around $6000-$10000 depending on the size of the booth, which will be covered with
the sale of a single license. We plan to have a booth with a few stations available so users can interact
and use SynPlan themselves. We will also hold numerous demos during the show demonstrating the
benefits and advantages of our software.
28
http://www.interphex.com/RNA/RNA_Interphex/Documents/2009/pdfs/IPX09-PostshowRelease-v3.pdf
18
LILIEN CHEMINFORMATICS
Sales Plan
Year3 Q1: First set
of customers
Year 4 Q3: Factor
of 10th growth
Year 4 Q1: First
non-beta sales





Year 5 Q4: Factor
of 50th growth
Year 3 Q1: First set of customers: The beta testers during the beta phase are our first target
customers. We expect to reach 200 customers as soon as the product is available. (200 x $40k =
$80m in licenses & 200 x $10k = 2m in support of $10m total)
Year 4 Q1: Through marketing and spread via worth of mouth, new customer is reached.
Year 4 Q3: Through experience in usage, adaptation within companies grows; causing growth is
expected. (2,000 customers = $100m)
Year 5 Q4: Knowledge of our product is widely spread and a large portion of pharmaceuticals
will be seeking us to keep their competitive edge in R&D from small to large companies. (10,000
customers = $500m)
Continued growth is expected beyond 5th year till a significant portion of the market is
penetrated.
Development Plan
Year 1
Product
Design & Specification
Alpha Release
Complete Beta Release
Year 2
Year 3
♦
♦
♦
♦
Documentation Complete
Integration Testing Complete
1.0 Release Complete
1.1 Release Complete
1.2 Release Complete
1.3 Release Complete
2.0 Release Complete
Year 5
♦
Training Materials Complete
Unit Testing Complete
Year 4
♦
♦
♦
♦
♦
♦
♦
19
LILIEN CHEMINFORMATICS
Executives
Hire VP Marketing
♦
♦
♦
Hire CEO
Hire CFO
Financial
Obtain 1st Round Funding
♦
♦
Obtain 2nd Round Funding
♦
rd
Obtain 3 Round Funding
♦
Expected Break-even
Company
Get office
♦
Detailed Milestone Descriptions
Description
Design & Specification
Engineers architect and
design software
specifications.
Alpha Release
Initial feedback with
academic partners on
prototype.
Complete Beta Release
An early release with
major features
included.
Training/Documentation In depth manual and
Materials Complete
training material that
allows users to learn
about the tool.
Unit Testing Complete
Integration Testing
Complete
In depth test suite for
each module of the tool
with realistic cases from
academic and customer
testing.
High level testing of
system including
external components
(reaction database,
user interface)
Completed Scenario
Development on code
begins.
Cost/Resources
Engineering resources.
Detailed feedback from
academic partners on
prototype of tool.
Ship beta to early
customer partners’ site
for evaluation.
Material ready to be
given to support
engineers to present
and documentation to
ship with product.
Continuous regression
and unit testing system
in place that passes all
tests.
Engineering resources
supporting academic
partners use of tool.
Engineering resources.
After testing a
comprehensive list of
customer scenarios, no
show-stopper bugs
found.
Engineering resources.
Engineering resources.
Engineering resources.
20
LILIEN CHEMINFORMATICS
1.0 Release Complete
Full functional and
tested release.
Release product to
customer site.
1.x Release Complete
Full functional and
tested release with
customer bug fixes and
selected feature
requests.
Full functional and
tested release with
significantly improved
capacity.
Necessary funding for
first year operations
from angels, family,
IRAP and SRED.
Necessary funding for
first half of year 2
Necessary funding for
ramp up to 1.0 release
and support.
Release product to
customer site.
2.0 Release Complete
Obtain 1st Round
Funding
Obtain 2nd Round
Funding
Obtain 3rd Round
Funding
Engineering resources,
marketing/sales
resources.
Engineering resources,
marketing/sales
resources.
Release product to
customer site.
Engineering resources,
marketing/sales
resources.
Close $1,200,000 in
funding, including
founders investment.
Time for meetings and
presentations.
Close $9,000,000 in
funding.
Close $7,00,000 in
funding.
Time for meetings and
presentations.
Time for meetings and
presentations.
Detailed Release Descriptions and Goals
Alpha Release: This will be an initial prototype to send to academic partners to ensure the core
functionality of the product is implemented. This is intended to aid in developing the core features (i.e.
retrosynthesis planning engine) but not intended for minor features that are in early stages of
development (e.g. GUI). Having validated with real users, this will aid in our credibility in academia, the
industrial community and potential investors.
Beta Release: This release contains all the major release features (planning engine). This will be
targeted at friendly industrial companies that will evaluate and simultaneously give feedback on the
product. This release aims to make the product more robust through real customer testing as well as
gain valuable feedback for critical features that can be released in time for 1.0.
1.0 Release: This is the first feature-complete release that will generate revenue. It will contain all
major features and feedback included from the beta release. This release will target early adopters who
will want to evaluate our relatively new technology. This release will provide all the major features to
increase the organic chemists’ productivity, however, it is expected that there will be significant areas in
which real-world show where the product can be improved.
21
LILIEN CHEMINFORMATICS
1.x Release: Minor releases will fix any bugs found by customers as well as in-house testing. In addition,
additional features will be implemented based on user feedback of the tool. These releases will be
available to all licenses.
2.0 Release: This release will include a significantly more powerful planning engine. It will be based
upon previous 1.x releases. Any additional bug fixes will be implemented as well as major feature
requests that were not able to be put into 1.x releases.
Staffing Plan
* See spreadsheet for details
Year 1
Year 2
Year 3
Year 4
Year 5
CEO
0
1
1
1
1
CFO
0
1
1
1
1
VP Sales & Marketing
1
1
1
1
1
Team Lead
1
1
1
1
1
Software Architect
1
1
1
1
1
Developers
2
2
3
3
3
Testers
1
2
3
2
2
DB Specialists
1
1
1
1
1
Customer Support
1
6
26
66
126
Marketing Staff
2
2
2
2
2
Sales People
1
1
2
3
3
Administrative
1
1
1
1
1
Total Employees
13
20
43
83
143
Executive Staff
Software Development Team
Other
Operations Model
Key Activities
Development and testing of SynPlan is our key activity in order to keep our product up to date.
Members of our staff will be responsible for reading journals, attending expos and conferences to keep
up with the current pharmaceutical industry findings and trends. They will also be responsible for
publishing papers and presenting at such conferences to educate the community about SynPlan. We will
also dedicate members of our staff to work alongside customers to educate and train chemists to ensure
they are using SynPlan optimally.
22
LILIEN CHEMINFORMATICS
Key Resources
Our most valuable resource is our experts in chemistry and computer science. Our experts will have
expertise in both fields which will allow us to bridge the gap between the two disciplines and deliver an
effective chemical planner.
Key Partners
Our main partner is the UofT Computational Biology Group. We will work alongside them to develop and
test SynPlan. Once we have developed the beta version of SynPlan we will begin to partner with other
academic departments. These departments will be responsible for beta testing. Chemical reaction
databases provide us with all the known chemical reactions needed for SynPlan to generate plans.
Therefore we will form a key partnership with these database providers so we can have access to the
most reliable and up to date information. Lastly, we will form a partnership with publishing companies
to allow for easy publication of papers to expose ourselves and spread the word across the pharma
industry of all the latest research and developments pertaining to SynPlan.
To date, Lilien Cheminformatics has conducted extensive market research and has begun planning for
the development of SynPlan. We currently have dedicated experts in chemistry and computer science,
who have already completed research related to the issues of retro synthetic planning. The next steps in
bringing SynPlan to market are as follows:
 Complete requirements and design specification
 Begin development cycle: Alpha development will be completed in Y1 Q4, followed by extensive
alpha testing
 Acquire larger office space, purchase equipment (computers, databases, servers) to support
development and customers.
 Hire marketing staff in order to gain exposure and engage potential customers
 Release beta version to academic departments. These academic departments will be involved in
beta testing (Y2 Q2)
 Hire customer support and application engineers.
 Go live with 1.0 release
 Customer training and education
To implement the above steps we need the following key operations:
Development/Testing:
We will have a strong development team in order to implement all features and requirements of
SynPlan. The team lead will be responsible for communicating with the in house developers and testers
to ensure the product specifications are being met and that the product is of high quality. He/she will
also be responsible for communicating with the academic partners conducting beta testing, overseeing
their progress and getting appropriate feedback and status updates.
Sales/Marketing:
SynPlan will be sold directly to customers. We will reach these customers through ads in pharmaceutical
journals, industry papers, trade shows, conferences and word of mouth. Sales and Marketing will
communicate with Development to produce industry papers and schedule such talks and conferences.
Once a purchase has been made, SynPlan will be distributed to customers on site by an expert
application engineer. This application engineer will be responsible for installing and configuring SynPlan,
23
LILIEN CHEMINFORMATICS
and will train chemists in the use of our software.
Customer Support:
Throughout the customer relationship, Lilien Cheminformatics will offer product support by phone,
online troubleshooting documents and most importantly, in person by our expert application engineers.
Our application engineers will be available at the customer’s request for onsite training and help to
ensure customer satisfaction and that SynPlan is being used to maximize productivity and drug
development. The customer support team, made of application engineers, will be responsible for these
duties and maintaining customer relationships.
Management/Administration:
Our management team will be responsible for the hiring of staff, acquiring new office space and for
facilitating any purchases that need to be made (eg: computers, servers).
Operations Plan Outline
Year 1
Key Resources
Hire experts in chemistry &
technology
Key Activities
Year 2
Year 5
♦
♦
Start Research / Reading journals
♦
Attend expos, trade shows
conferences
Education & Training Customers
♦
♦
♦
♦
Partner with Reaction Databases
♦
Partner with Publishing Companies
Infrastructure / Facilities
Get office
Purchase Computers / Databases /
Servers (for developers)
Purchase and implement Servers /
Databases (for Customer Support)
Implement Customer Service
support
Launch Website (for marketing +
support)
Year 4
♦
Start software development
Key Partnerships / Relationships
Partner with U of T Computational
Biology Lab
Partner with other Academia
Year 3
♦
♦
♦
♦
♦
24
LILIEN CHEMINFORMATICS
Financial Model
* See spreadsheet for details
5 Year Pro Forma Income Statement
All Figures are in thousands
Revenues
Licenses
Support Handling
Setup Charge
Training & Support
Total Support
Total Revenue
Expenses
General and Admin
Salaries
Rent and utilities
Office Equipment
Legal Fees
Accounting Fees
Insurance
Other
Total General & Admin
Product Development
Salaries
Datacenter
Other Equipment
Total Product Dev.
Sales and Marketing
Salaries
Advertising & PR
Publications
Conferences
Trade Shows
Website
Total Sales & Marketing
Support Handling
Salaries
Rent and utilities
Office Equipment
Total Support
Total Operating Costs
Net Earnings Before Taxes
Taxes (Assume 20%)
Net Earnings
Year 1
Year 2
Year 3
Year 4
Year 5
$
$
$
$
$
$
-
$
$
$
$
$
$
-
$
$
$
$
$
$
14,160
177
3,540
3,717
17,877
$
$
$
$
$
$
77,520
792
19,380
20,172
97,692
$
$
$
$
$
$
414,640
4,214
103,660
107,874
522,514
$
$
$
$
$
$
$
$
60
48
24
24
40
120
15
331
$
$
$
$
$
$
$
$
70
50
29
24
40
120
14
347
$
$
$
$
$
$
$
$
180
72
41
120
40
120
20
593
$
$
$
$
$
$
$
$
180
72
41
120
40
120
20
592
$
$
$
$
$
$
$
$
180
72
41
120
40
120
20
592
$
$
$
$
360
10
29
398
$
$
$
$
420
10
34
463
$
$
$
$
540
29
43
612
$
$
$
$
480
114
38
632
$
$
$
$
480
646
38
1,165
$
$
$
$
$
$
$
185
10
20
15
230
$
$
$
$
$
$
$
240
240
10
20
40
5
555
$
$
$
$
$
$
$
300
480
20
20
60
5
885
$
360
$
480
$
31
$
50
$
80
$
5
$ 1,005
$
$
$
$
$
$
$
360
480
31
50
80
5
1,005
$
240
$
24
$
14
$
278
$ 1,644
$ (1,644)
$
$ (1,644)
$
$
$
$
$
$
$
$
840
96
50
986
3,077
14,800
3,101
11,699
$
$
$
$
$
$
$
$
$ 4,440
$
528
$
266
$ 5,234
$ 7,997
$ 514,517
$ 102,903
$ 411,614
$
80
$
24
$
5
$
109
$ 1,068
$ (1,068)
$
$ (1,068)
2,240
264
134
2,638
4,868
92,824
18,565
74,259
25
LILIEN CHEMINFORMATICS
5 Year Pro Forma Cash Flow
All Figures are in thousands
Year 1
Year 2
Year 3
Year 4
Year 5
Operating Activities
Net Earnings (Before Taxes)
$
$
(1,644)
$
14,800
$
92,824
Depreciation
$
(1,068)
-
$
-
$
-
$
-
$ 514,517
$
-
Working Capital Changes
$
-
$
-
$
-
$
-
$
-
Accounts Receivables
$
-
$
-
$
-
$
-
$
-
Other Current Assets
$
-
$
-
$
-
$
-
$
-
Accts Pay And Accrd Expenses
$
-
$
-
$
-
$
-
$
-
Other Current Liab
$
-
$
-
$
-
$
-
$
-
Net Cash Provided/(Used)
$
(1,068)
$
(1,644)
$
14,800
$
92,824
$
(52)
$
(28)
$
(92)
$
(160)
$
(240)
$
(52)
$
(28)
$
(92)
$
(160)
$
(240)
Short-Term Debt
$
-
$
-
$
-
$
-
$
-
Curr. Portion Ltd
$
-
$
-
$
-
$
-
$
-
Long-Term Debt
$
-
$
-
$
-
$
-
$
-
Common-Stock
$
-
$
-
$
-
$
-
$
-
$ 514,517
by Operating Activities
Investing Activities
Property And Equipment
Net Cash Used in Investing
Activities
Financing Activities
Preferred-Stock
$
1,200
$
1,600
$
-
$
-
$
-
Dividends Declared
Net Cash Provided/(Used) by
Financing
$
-
$
-
$
-
$
-
$
-
$
1,200
$
1,600
$
-
$
-
$
-
Increase/(Decrease) In Cash
$
80
$
(72)
$
14,708
$
92,664
$ 514,277
Cash at Beginning
$
-
$
80
$
8
$
14,716
$ 107,380
Cash at End
$
80
$
8
$
14,716
$
107,380
$ 621,657
26
LILIEN CHEMINFORMATICS
Financing Plan
Round 1 – Jan Year 1 (Seed Funding)
Sources: Angels, friends, family, founders, IRAP, credit cards.
Total: $1,200,000
Required activities:
Development of alpha and beta releases.
Journal paper publishing for core algorithms
Presenting demos of the algorithms and initial prototypes at conferences.
Evaluation of alpha (prototype) release with academic partners.
Round 2 - Jan Year 2 (VC Part I)
Sources: VC.
Total: $900,000
Required activities:
 Finishing up beta release 1.
 Evaluation with friendly early adopter customers.
 Journal paper publishing for beta release.
 Presenting demos of the beta 1 at conferences.
Round 3- Jun Year 2 (VC Part II)
Sources: VC, investment conditional on previous milestones.
Total: $700,000
Required activities:
 Attending trade shows with working product demos.
 1.0 Release.
 Customer purchase.
Exit Scenario 1 – Dec Year 5 (Acquisition by private equity)
 Conservative valuation using P/E ratio of 10.
 Net Income: $411 million
 Valuation: $8,220 million
Exit Scenario 2 – Dec Year 5 (IPO)
 Market valuation using P/E ratio of 16 [1].29
 Net Income: $411 million
 Value: $20,550 million
29
Investment U “Biotech Stocks: The Market’s Best Bargain Right Now” November 12, 2009.
<http://www.dailymarkets.com/stocks/2009/11/11/biotech-stocks-the-market’s-best-bargain-right-now>
27
LILIEN CHEMINFORMATICS
Customer Interviews
We have contacted a number of people to get some insights about our product. Since, SynPlan is aimed
at facilitating retrosynthesis, we selected chemists belonging to various pharmaceuticals, research labs
and academia as our interviewees. We believe (and it was confirmed through the interviews we
conducted) that the end-user/chemist input is the deciding factor in the purchase of our product by any
pharmaceutical, university or research lab. Hence the information obtained from the chemists is crucial
for the success of our product. In addition, we spoke with chemists working at different levels of the
drug design procedure such as medicinal chemists, process chemists, industrial chemists, synthetic
chemists etc, to confirm where our product belongs in the drug design pipeline, and how it can be
improved.
The interviews were not structured. However, we tried, at least, to ascertain the answers to the
following questions:




How are various phases of drug design (design, scale up, synthesis etc) procedure completed at
the moment?
What are some of the difficulties that can be addressed in these phases?
How, and to what extent, can a product like SynPlan help? Are they currently using any of our
competitor's products?
What are some of the major flaws they can envision in our product/idea?
A summary of each interview is provided, followed by a summary of insights we gained from these
interviews and how it affected our business plan/model/product.
David Dubins
Faculty at Leslie Dan Faculty of Pharmacy, University of Toronto. Bio Services Pharmaceutical Inc.
David's response confirmed our initial research that synthesis in the lab is a painstaking process. It takes
very long. David also mentioned that the team of chemists is limited by the number of starting chemicals
they are aware of. As the commercially available starting compound libraries grow exponentially large,
manual work for the chemist becomes cumbersome and inefficient.
David was very excited by the possibility of a planner that can automate the entire process and suggest
chemical routes for synthesis. David mentioned that almost everything available commercially these
days, such as our indirect competitors, is at best, rudimentary.
He mentioned the need of allowing the chemist to be flexible by suggesting multiple routes vs. a single
one. the final decision should rest on the chemist.
David also pointed us towards an added value proposition of our product that we were previously
unaware of. While the drugs are still patent protected, competitor companies would try to manufacture
large quantities of that drug to create another, highly similar, yet patentable drug. For instance, if drug A
has been patented by PharmA, PharmB will try to produce drug A in house, and generate different
28
LILIEN CHEMINFORMATICS
analogs of it (eg. by adding a benign methyl group.) to produce another moleulce B. The new molecule B
can have very similar properties as A, yet is now patentable by pharmB. Our product can help pharmB
produce drug B using an alternative synthetic route than drug A so it can be patended. Our product can
also offer pharma companies the flexibility of pursuing multiple drug leads and analogs simultaneously
to avoid this patent run off.
A final insight that David provided was that most chemists or biochemists prefer using a program with a
web interface, so that they do not have to install it. Hence, if our product can run calculations on a
remote server and just provide a web based front end to the chemists, it would be much preferable than
a stand alone, installable software. This is an important insight in terms of design, however, supporting a
web based service only requires immense compute power on Lilien ChemInformatics' side and restricts
chemists from using in-house, proprietary raw material catalogs. We are in the process of conducting
more interviews to find out what percentage of our intended customers are averse to an installable
product.
He was also very keen to be able to try a beta version of the software.
Grace Ng (Medicinal Chemist)
Campbell Family Institute for Breast Cancer Research, Toronto
As a medicinal chemist, the synthesis process takes from a few weeks to a few months. As a medicinal
chemist you are just trying to produce enough end product to conduct trial experiments, so yield is less
important. It is also worth noting that a medicinal chemist does not start from commercially available
starting materials in general, hence the chemical plans are not as long (about 4-5 steps according to
Grace.) However, Grace mentioned that her own knowledge of chemistry is a limiting factor, hence she
has to constantly search for newer reactions and synthetic plans published by other chemists to make
sure she has explored all possibilities. Currently, Grace and her team mates use SciFinder or Reaxys to
search for existing, previously published synthetic plans. However, it is not very often that they can use
already existing, previously published syntheses. Hence, a considerable effort still goes into planning a
full fledged product even at the medicinal chemist level. Grace also mentioned that, she and her fellow
medicinal chemists are generally working with multiple 'possible' candidate drug like molecules. Hence,
although the syntheses are shorter, and potentially somewhat easier than they are during a scale up, the
process becomes complicated and longer due to optimization for multiple drug targets.
According to Grace, a planner that helps plan for the entire synthesis would come in very handy. It
would solve a significant problem. Grace mentioned that have precedented reactions was extremely
important. If the suggested synthesis includes complicated reactions, they must be accompanied with a
citation for the published paper they come from. Grace also mentioned that toxicology was an
important concern for a medicinal chemist and allowing elimination of the toxic compounds from the
synthesis would be a significant help.
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One of the aspects of SynPlan that Grace was concerned about, was the layout. She wanted it to be
simple, easy to use and intuitive. In addition, she wanted us to make sure that the chemist should be
able to draw in a molecule to search for.
We had also asked Grace about the decision making process for purchases at her work place. She
mentioned that the major decision factor was the user demand. If a few of the end users (chemists in
our case) considered our product useful and wanted to try it out, the purchase would be made. So, the
buying power lies, in essence, with the end users or chemists.
Like the rest of our interviewees, Grace was excited about the product and wanted to be signed up for
beta testing as soon as we have a beta version.
Andrew Cooper
Analytical/Process Chemist - Allied Chemicals
Andrew is an analytical chemist and has been a first line lab manager at Allied Chemicals formerly.
During his work at Allied Chemicals, he has worked closely with many process chemists as well.
Andrew also confirmed our hypothesis that the process of retrosynthesis was extremely time consuming
and inefficient. Furthermore, he asserted that each chemist was limited by his own knowledge during
the quest for a synthetic plan.
After we explained RetPlan, Andrew was very excited about the idea of automating retrosynthetic
planning. He mentioned that it should be natural for a computer to do the search, since the starting
materials and the end goal was available.
When asked if he could see chemists using this, his answer was an immediate yes. He mentioned that
process chemists generally deal with longer synthetic plans which are time consuming to generate today.
Furthermore, the yield is of extreme importance since the desired drug is needed in industrial quantities.
Andrew mentioned that stereochemistry and chirality should be extremely important factor of the
target software, and this is one area where most of our competitors are lacking. He also elucidated the
need to report all the necessary conditions such as pressure, temperature and time taken for a reaction.
Andrew was also excited to keep in touch with us and help with the beta testing of the product as well
as for any additional design/product insights/brainstorming we might need.
Notes
Some of the salient points of the customer interviews and how they are reflected in our future activities
are listed below:
1. All the interviewees confirmed our hypothesis that we are trying to solve a real world problem,
which has a willing customer base.
2. We confirmed that our product will reduce time and increase productivity of the chemists and
consequently the profit margin of the pharmaceuticals.
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3. We also confirmed that our competitors seriously lack in certain areas which are deemed crucial
by the chemists such as precedented chemical rules, stereochemistry etc.
4. At least one customer mentioned the need to make our product a web service. However, the
use of SynPlan as a web service can be limiting for the customers since many pharmaceuticals
have their in house raw material catalogs which are not available for remote/third party use. We
are going to conduct further interviews to ascertain the importance to our customers of SynPlan
being a web service instead of an application.
5. Toxicology turned out to be an important factor for the medicinal chemists. We see another
potential product which can predict toxicology of a particular reaction. The suggested product
can use existing databases and chemical journals combined with learning algorithms to predict
toxicology.
6. While our initial targets were the medicinal chemists, we notice that the process chemists have
to deal with longer, more complicated synthetic plans. Furthermore, the time and yield are of
importance. Whereas, the medicinal chemists tend to start from intermediate products, and are
less concerned about optimal yield. Hence, we have shifted our focus to make process chemists
our main targets, followed by the medicinal and synthetic chemists.
Expert Interviews
Malcolm Bersohn
Prof. Emeritus Chemistry, University of Toronto
Malcolm has worked on retrosynthetic planning for about 2 decades now. He designed one of the first
retrosynthetic planners a few decades back.
Malcolm feels that there was, and there is a need for automating retrosynthesis. Furthermore, his
interactions with chemists and pharmaceuticals during his research and sales of his product, confirm
that the community is open to such a tool. However, Malcolm cautioned about the marketing strategy.
According to him, the retro-synthetic planner should never be marketed or advertised as a replacement
for human judgement. Since the target markets is the chemists, the planner should not, and cannot be
the chemist replacement. Malcolm also noted the need for stereo-chemistry in a planner, since it was
and remains, an important but lacking feature.
Abraham Heifets
PhD Candidate, AI/Computational Biology Lab, University of Toronto. (Former Researcher at IBM J.
Watson Research Center).
Abraham is a theoretician and an expert in computational search. According to Abraham, the biggest
challenge of previous efforts such as Malcolm's has been a lack of what he terms as 'efficient computer
science'. Almost all previous efforts in retrosynthetic planning have failed to find a balance of efficient
computer science and accurate chemistry. Planners coming out of chemistry labs such as Malcolm's,
made use of accurate chemistry while being computationally inefficient. This has prevented a
widespread use of previous planners in the industry.
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However, Abraham believes that, in the past few years, there have been significant improvements and
research conducted in the fields of heuristic search and computational planning. Yet, none of the
existing retrosynthetic planners makes use of these technological advances. Hence, according to
Abraham, right now is a ripe time to design a retrosynthetic planner, which, not only has accurate
chemical capabilities, but also makes searching for plans feasible due to state-of-the-art search and
planning capabilities.
IP Strategy
Lilien Cheminformatics plans to use Trade Secrets, Copyrights and Trademarks as our IP strategy to
protect the magic behind our innovative chemical planner.
Trade Secrets
We have chosen to keep our source and its ideas a trade secret. Patents will require us to make the
details of our system and algorithm public, even in its early stages. We believe the publication of our
algorithm will invite competition. For instance, once one company reads the details of patent they may
feel inspired to create a better algorithm. Software patents are also not completely effective since
software cannot be patented under Europe Patent Office.
As with other competitors in our market, our IP strategy consists mainly of trade secrets. The details of
our algorithm will remain a secret through the signing of Non-Disclosure Agreements by our employees
and collaborators. If an investor wants to know the low-level details of our system, then they too will be
required to sign an NDA. From day one each employee we hire will sign an NDA, which is included on the
following pages.
The NDA attached is just a guideline, but will cover all aspects of confidentiality, ownership, noncompetition, etc. Employees are only permitted to talk about our trade secrets amongst other
employees, and must not disclose any information regarding our system and algorithm, business
strategy, and private financial records to any third party. All work completed by the employee will
become the property of Lilien Cheminformatics. It also addresses the issues of non-competition;
employees must not work for our competitors during their employment with Lilien Cheminformatics and
10 years after, should their employment be terminated. They may not divert any potential
customers/business away from our company. They also agree to not solicit or hire away existing staff
members to a competitor, or solicit existing employees to start their own business (in competition with
Lilien Cheminformatics). If an employee, collaborator, partner or investor breaks any of the terms
outlined in the NDA, we reserve the right to take legal action.
The database containing the source code of our software will be password protected, and access will
only be given to our developers. Should any of our source code be leaked, we reserve the right to take
action against the employees responsible.
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Copyrights
We will register our source code as a copyright with CIPO. This will help protect us from pirated software.
The cost is $65 for the certificate which will facilitate matters (and prove our copyright), should we need
to take action against copyright infringement.
Trademarks
The product name SynPlan and our logo will be registered as a trademark, so it becomes a recognizable
brand across the pharmaceutical industry. SynPlan is not currently registered as a trademark by any
other company, and therefore we plan to pursue registration.
The cost of registration is fairly low, and is one of the most economical solutions to product our brand.
Application and registration will cost $450. We will also incur additional costs, $700-1000 through hiring
a trademark agent to assist with registration. This agent will help ensure our application is complete,
conduct addictional research in the field to ensure our trademark is valid, and lastly if required, handle
the situation where another party opposes our trademark application.
Lilien Cheminformatics’ legal services provider will aid in administering Non-Disclosure Agreements, and
deal with any agreement violations should they occur. They will also aid in prosecuting copyright
infringement, should the situation arise. In our financial model, we allocate $24,000/year from years 1
to 2, and $120,000/year from year 3 onwards, in spending to our legal services provider.
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NON-DISCLOSURE AGREEMENT
THIS NON-DISCLOSURE AGREEMENT (the "Agreement") dated this _______ day of ______________,_______
BETWEEN:
Lilien Cheminformatics
(the "Employer")
OF THE FIRST PART
- AND ___________________________
(the "Employee")
OF THE SECOND PART
BACKGROUND:
1.
2.
The Employee is currently or may be employed as an employee with the Employer for the position of:
_______________(Software Developer/Tester/Etc). In addition to this responsibility or position (the
"Employment"), this Agreement also covers any position or responsibility now or later held with the
Employer.
The Employee will receive from the Employer, or develop on the behalf of the Employer, Confidential
Information as a result of the Employment (the 'Permitted Purpose').
IN CONSIDERATION OF and as a condition of the Employer employing the Employee and the Employer providing
the Confidential Information to the Employee in addition to other valuable consideration, the receipt and
sufficiency of which consideration is hereby acknowledged, the parties to this Agreement agree as follows:
Confidential Information
1.
The Employee acknowledges in any position the Employee may hold, in and as a result of the Employee's
employment by the Employer, the Employee will, or may, be making use of, acquiring or adding to
information about certain matters and things which are confidential to the Employer and which
information is the exclusive property of the Employer, including, without limitation:
a.
'Confidential Information' means all data and information relating to the business and
management of the Employer, including proprietary and trade secret technology and accounting
records to which access is obtained by the Employee, including Work Product, Production
Processes, Other Proprietary Data, Business Operations, Computer Software, Computer
Technology, Marketing and Development Operations, and Customers. Confidential Information
will also include any information that has been disclosed by a third party to the Employer and
governed by a non-disclosure agreement entered into between the third party and the Employer.
Confidential Information will not include information that:
i.
ii.
iii.
is generally known in the industry of the Employer;
is now or subsequently becomes generally available to the public through no wrongful
act of the Employee;
the Employee rightfully had in his possession prior to the disclosure to the Employee by
the Employer;
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LILIEN CHEMINFORMATICS
iv.
b.
c.
d.
e.
f.
g.
h.
i.
is independently created by the Employee without direct or indirect use of the
Confidential Information; or;
v.
the Employee rightfully obtains from a third party who has the right to transfer or
disclose it.
'Work Product' means work product resulting from or related to work or projects performed or
to be performed for the Employer or for clients of the Employer, of any type or form in any stage
of actual or anticipated research and development;
'Production Processes' means processes used in the creation, production and manufacturing of
the Work Product, including but not limited to formulas, patterns, molds, models, methods,
techniques, specifications, processes, procedures, equipment, devices, programs, and designs;
'Other Proprietary Data' means information relating to the Employer's proprietary rights prior to
any public disclosure of such information, including but not limited to the nature of the
proprietary rights, production data, technical and engineering data, technical concepts, test data
and test results, simulation results, the status and details of research and development of
products and services, and information regarding acquiring, protecting, enforcing and licensing
proprietary rights (including patents, copyrights and trade secrets);
'Business Operations' means internal personnel and financial information, vendor names and
other vendor information (including vendor characteristics, services and agreements), purchasing
and internal cost information, internal services and operational manuals, and the manner and
methods of conducting the Employer's business;
'Computer Software' means all sets of statements, instructions or programs, whether in human
readable or machine readable form, that are expressed, fixed, embodied or stored in any manner
and that can be used directly or indirectly in a computer ('Computer Programs'); any report
format, design or drawing created or produced by such Computer Programs; and all
documentation, design specifications and charts, and operating procedures which support the
Computer Programs;
'Computer Technology' means all scientific and technical information or material pertaining to
any machine, appliance or process, including specifications, proposals, models, designs, formulas,
test results and reports, analyses, simulation results, tables of operating conditions, materials,
components, industrial skills, operating and testing procedures, shop practices, know-how and
show-how;
'Marketing and Development Operations' means marketing and development plans, price and
cost data, price and fee amounts, pricing and billing policies, quoting procedures, marketing
techniques and methods of obtaining business, forecasts and forecast assumptions and volumes,
and future plans and potential strategies of the Employer which have been or are being
discussed; and
'Customers' means names of customers and their representatives, contracts and their contents
and parties, customer services, data provided by customers and the type, quantity and
specifications of products and services purchased, leased, licensed or received by clients of the
Employer.
Obligations of Non-Disclosure
2.
3.
4.
The Employee must not disclose the Confidential Information.
The Confidential Information will remain the exclusive property of the Employer and will only be used by
the Employee for the Permitted Purpose. The Employee will not use the Confidential Information for any
purpose that might be directly or indirectly detrimental to the Employer or any of its affiliates or
subsidiaries.
The obligations to ensure and prevent the disclosure of the Confidential Information imposed on the
Employee in this Agreement and any obligations to provide notice under this Agreement will survive the
expiration or termination, as the case may be, of this Agreement and those obligations will last
indefinitely.
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LILIEN CHEMINFORMATICS
5.
The Employee may disclose any of the Confidential Information:
a.
to such of his employees, agents, representatives and advisors that have a need to know for the
Permitted Purpose provided that:
i.
b.
c.
the Employee has informed such personnel of the confidential nature of the
Confidential Information;
ii.
such personnel agree to be legally bound to the same burdens of non-disclosure and
non-use as the Employee;
iii.
the Employee agrees to take all necessary steps to ensure that the terms of this
Agreement are not violated by such personnel; and
iv.
the Employee agrees to be responsible for and indemnify the Employer for any breach
of this Agreement by his personnel.
to a third party where the Employer has consented in writing to such disclosure; and
to the extent required by law or by the request or requirement of any judicial, legislative,
administrative or other governmental body.
Avoiding Conflict of Opportunities
6.
7.
It is understood and agreed that any business opportunity relating to or similar to the Employer's current
or anticipated business opportunities coming to the attention of the Employee during the Employee's
employment is an opportunity belonging to the Employer. Accordingly, the Employee will advise the
Employer of the opportunity and cannot pursue the opportunity, directly or indirectly, without the
written consent of the Employer.
Without the written consent of the Employer, the Employee further agrees not to:
a.
b.
solely or jointly with others undertake or join any planning for or organization of any business
activity competitive with the current or anticipated business activities of the Employer; and
directly or indirectly, engage or participate in any other business activities which the Employer, in
its reasonable discretion, determines to be in conflict with the best interests of the Employer.
Non-Solicitation
8.
Any attempt on the part of the Employee to induce others to leave the Employer's employ, or any effort
by the Employee to interfere with the Employer's relationship with its other employees and contractors
would be harmful and damaging to the Employer. The Employee agrees that during the term of the
Employment and for a period of five (5) years after the end of term of the Employment, the Employee will
not in any way, directly or indirectly:
a.
b.
c.
d.
induce or attempt to induce any employee or contractor of the Employer to quit employment or
retainer with the Employer;
otherwise interfere with or disrupt Employer's relationship with its employees and contractors;
discuss employment opportunities or provide information about competitive employment to any
of the Employer's employees or contractors; or
solicit, entice, or hire away any employee or contractor of the Employer.
This obligation will be limited to those that were employees or contractors of the Employer when the
Employee was employed
Non-Competition
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LILIEN CHEMINFORMATICS
9.
Other than through employment with a bona-fide independent party, or with the express written consent
of the Employer, which will not be unreasonably withheld, the Employee will not, during the continuance
of this Agreement or within ten (10) years after the termination or expiration, as the case may be, of this
Agreement, be directly or indirectly involved with a business which is in direct competition with the
particular business line of the Employer that the Employee was working during any time in the last year of
employment with the Employer.
10. For a period of ten (10) years from the date of termination or expiration, as the case may be, of the
Employment, the Employee will not divert or attempt to divert from the Employer any business the
Employer had enjoyed, solicited, or attempted to solicit, from its customers, prior to termination or
expiration, as the case may be, of the Employment.
Ownership and Title
11. The Employee acknowledges and agrees that all rights, title and interest in any Confidential Information
will remain the exclusive property of the Employer. Accordingly, the Employee specifically agrees and
acknowledges that the Employee will have no interest in the Confidential Information, including, without
limitation, no interest in know-how, copyright, trade-marks or trade names, notwithstanding the fact that
the Employee may have created or contributed to the creation of the same.
11. The Employee does hereby waive any moral rights that the Employee may have with respect to the
Confidential Information.
12. The Employee agrees to immediately disclose to the Employer all Confidential Information developed in
whole or in part by the Employee during the term of the Employment and to assign to the Employer any
right, title or interest the Employee may have in the Confidential Information. The Employee agrees to
execute any instruments and to do all other things reasonably requested by the Employer (both during
and after the term of the Employment) in order to vest more fully in the Employer all ownership rights in
those items transferred by the Employee to the Employer.
Remedies
13. The Employee agrees and acknowledges that the Confidential Information is of a proprietary and
confidential nature and that any disclosure of the Confidential Information to a third party in breach of
this Agreement cannot be reasonably or adequately compensated for in money damages and would cause
irreparable injury to the Employer. Accordingly, the Employee agrees that the Employer is entitled to, in
addition to all other rights and remedies available to it at law or in equity, an injunction restraining the
Employee and any agents of the Employee, from directly or indirectly committing or engaging in any act
restricted by this Agreement in relation to the Confidential Information.
Return of Confidential Information
14. The Employee agrees that, upon request of the Employer, or in the event that the Employee ceases to
require use of the Confidential Information, or upon expiration or termination of this Agreement, or the
expiration or termination of the Employment, the Employee will turn over to the Employer all documents,
disks or other computer media, or other material in the possession or control of the Employee that:
a. may contain or be derived from ideas, concepts, creations, or trade secrets and other proprietary
and Confidential Information as defined in this Agreement; or
b. is connected with or derived from the Employee's services to the Employer.
AGREED AND ACCEPTED:
By: _________________________
Witness:____________________
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LILIEN CHEMINFORMATICS
Signature:____________________
Signature:___________________
Date:________________________
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