Acucela Inc. FY2014 3 Quarter Financial Results Analysts ... · This presentation contains forward-looking statements ... with dry age-related macular degeneration ... FY2013Q3 FY2014Q3

Acucela is a clinical-stage biotechnology

company that specializes in discovering and

developing novel therapeutics to treat and

slow the progression of sight-threatening

ophthalmic diseases affecting millions of

individuals worldwide.

Acucela Inc.

FY2014 3rd Quarter Financial Results

Analysts Meeting

Tokyo November 17 & 18, 2014

DISCLAIMER

This presentation contains forward-looking statements concerning our product development, our technology,

our competitors, our intellectual property, our financial condition and our plans for research and development

programs that involve risks, uncertainties and assumptions. These statements are based on the current

estimates and assumptions of the management of Acucela as of the date of this presentation and are subject

to uncertainty and changes in circumstances. Given these uncertainties, you should not place undue reliance

upon these forward-looking statements. Such forward-looking statements are subject to risks, uncertainties,

assumptions and other factors that may cause the actual results of Acucela to be materially different from

those reflected in such forward-looking statements.

Important factors that could cause actual results to differ materially from those indicated by such forward-

looking statements include, among others, those set forth in our reports on file with the Tokyo Securities

Exchange and the United States Securities and Exchange Commission. The Company does not undertake any

obligation to release publicly any revisions to these forward-looking statements to reflect events or

circumstances after the date hereof or to reflect the occurrence of unanticipated events. All statements

contained in this presentation are made only as of the date of this presentation.

FY2014 3rd Quarter Financial Results [ticker: 4589] 2

Company Overview/Introduction

Company Snapshot


An ophthalmology-focused, science-driven biotechnology company

People and Infrastructure • Broad-skilled employee base in research, development and

operations

• Three Locations: Seattle, WA Global Headquarters; Bothell,

WA Research Facility; Tokyo, Japan Office

Partnership • Long-time partnership with Otsuka Pharmaceutical

• Potential high-reward alliance

• Acucela has rights for lead investigational candidate

(emixustat hydrochloride) in Europe, South and Central

America and most of Africa

Technology • Unique mechanism of action in visual cycle modulation (VCM)

• Lead clinical trial program in geographic atrophy (GA)

associated with dry age-related macular degeneration (AMD);

no treatments currently available

• 118 granted patents; 150 pending patents (as of 9/30/14)

Financials • Successful IPO; $163M (gross) raised

• Cash, short-term and long-term investments for the three

months ended 09/30/14 was approximately $190M ready to

deploy

• General and administrative expense for the nine months

ended 09/30/14 was $7.3M

Senior Leadership


Hien DeYoung, CHIC, SPHR Vice President Human Resources

Keiko Mitsunobu Executive Director

Alliance Management &

Business Development

Karin Ludwig, MD Vice President

Clinical Development

Hans-Peter Pfleger, PhD Vice President

Commercial Operations &

Strategic Marketing

Ryo Kubota, MD, PhD Founder, Chairman and CEO

Brian O’Callaghan President, Chief Operating Officer

and Interim Chief Financial Officer

Board of Directors


Ryo Kubota, MD, PhD Founder, Chairman and CEO

Acucela Inc.

Peter Kresel Sr. Vice President,

Global Regulatory Affairs, Allergan (retired)

Glen Sato, JD Partner, Cooley LLP

Michael Schutzler CEO, The Washington

Technology Industry Association

Brian O’Callaghan President, Chief Operating

Officer and Interim CFO

Acucela Inc.

Investor Rationale

• Significant unmet medical need (GA associated with dry AMD)

− No approved therapy currently on the market

• Differentiated product candidate (emixustat)

− Oral administration

− Unique mechanism of action

− Ongoing phase 2b/3 clinical trial (ClinicalTrials.gov identifier: NCT01802866)

• Competitive and defensible IP position (as of September 30, 2014)

− 118 granted patents; 150 pending patent applications

• Healthy balance sheet

− $163M IPO (gross proceeds)

− Financially beneficial collaboration agreement with Otsuka Pharmaceutical


Emixustat Hydrochloride (Emixustat)

in Clinical Studies for GA Associated with Dry AMD

About AMD

• The Disease

− AMD occurs when the small central portion of the retina, known as the macula, deteriorates

− AMD exhibits in two forms – dry and wet

– Dry (non-neovascular) AMD occurs in progressive stages

– Early Dry AMD can cause blurry vision

– Geographic Atrophy (GA) is the advanced form of AMD, which can cause permanent vision loss

– No approved therapies to treat dry AMD at any disease stage are currently available

– Wet (neovascular) AMD progresses rapidly and may lead to a permanent loss of central vision

– Approved therapies currently on the market (via injection)

– The underlying condition of all AMD is the dry form

• Risk Factors

− Included, but not limited to: genetic factors, lifestyle (diet and smoking), light exposure and hypertension

• Prevalence

− Aggregate estimates of wet and dry AMD patients in 2012 was 12M (US) and 127M (Global)(1)

− Dry AMD represents approximately 90% of all AMD cases

– Approximately 15% of AMD patients develop intermediate or advanced dry AMD (also known as GA)


(1) 2012 MarketScope report, 2012 Report on the Retinal Pharma & Biotech Market, pages 73-75.

AMD Disease Progression

Normal Retina Dry AMD (Drusen)

Wet AMD (Neo-vascularization)

Late-Stage Dry AMD (Geographic Atrophy or GA)


Emixustat Overview:

Lead Investigational Product Candidate

• Non-retinoid small molecule

• Oral administration

• Designed to modulate visual cycle

activity and reduce the accumulation of

toxins in the retina

• Targets a key rate-limiting enzyme of the

visual cycle

• Measureable pharmacologic effect in the

retina through ERG (Electroretinography

or ERG is an eye test used to detect

abnormal function of the retina - the

light-detecting portion of the eye)


Investigational Compound in Clinical Studies for

Emixustat for GA Associated with Dry AMD


2005 2007 2009 2012 2013

» Phase 2b/3 clinical trial commences

» Two-year treatment

» Toxicology

» Proof-of-concept in pre-

clinical model

» Medicinal chemistry

» Five phase 1 clinical trials completed

» One phase 2a clinical trial completed

(GA subjects)

» 179 total subjects exposed to emixustat

» Fast track designation granted

» IND filed

» First human trial

2008

12

2014

» Phase 2b/3 clinical

trial enrollment

completed in 508

subjects

2016

» Phase 2b/3 clinical

trial top-line results

expected

Clinical Development Progress to Date

• Completed Clinical Trials to Date

− Five phase 1 clinical trials (normal healthy adults)

− One phase 2a clinical trial (GA subjects)

− Total of 179 human subjects exposed to emixustat

• On-going Clinical Trial – phase 2b/3 “SEATTLE” Study

− Design

– Two year, randomized, double-masked, dose-ranging study comparing the safety and efficacy of emixustat with

placebo in patients with GA associated with dry AMD

– A total of 508 patients with GA associated with dry AMD were enrolled

− Objectives

– Primary: Determine if emixustat reduces lesion growth rate compared to placebo

– Secondary:

– Evaluate safety and tolerability

– Assess changes in best-corrected visual acuity

– Evaluate the effect on development of wet AMD

− Next Milestone

– Top-line 2-year trial results anticipated in mid-2016


Current Status and Upcoming Events

Acucela will continue to focus on conducting its phase 2b/3“SEATTLE”

study as originally planned

• Current status of the “SEATTLE” study

− Completed enrollment in the phase 2b/3 “SEATTLE” study ahead of schedule

− The study will be carried out through the original 24-month treatment

− Depending on the results of the study, which are anticipated to be announced in mid -2016, Acucela

will conduct at least one additional confirmatory phase 3 clinical trial in patients

• Anticipated disclosures and events related to the emixustat program

− Preclinical and phase 2a data publications in peer reviewed journals

− Continue to build patent estate with important patent disclosures


Overview of FY2014 Forecast Revision

and FY2014 3rd Quarter Results

Overview of 2014 Q3 and Recent Activities

• October 2014

− Acucela’s Emixustat Hydrochloride, in Development for Geographic Atrophy Associated with Dry Age -

Related Macular Degeneration, Subject of Podium Presentation at the American Academy of

Ophthalmology 2014 Annual Meeting

• September 2014

− Acucela presented at the BioCentury NewsMakers in the Biotech Industry Conference

• September 2014

− Acucela appointed Biotechnology Industry Veteran and Former Pharmaceutical Executive, Brian

O’Callaghan, as its New President and Chief Operating Officer and Interim Chief Financial Officer

• August 2014

− Acucela presented at the Nikkei IR Fair


FYE 2014 Revised Forecast


* Using 32,729,000 weighted average shares for expected basic and diluted shares outstanding for purposes of the Revised Forecast.

Note: 1 USD = 109.45 as of September 30, 2014

Unit: US$ in thousands (JPY in thousands)

Revenue from collaborations

Operating Income (loss) Income (loss) before

income tax Net Income (loss)

Net income (loss) per share *

Previous Forecast (A) 61,840

(6,768,388) 836

(91,500) 433

(47,391) 264

(28,894) 0.02

(1)

Revised Forecast (B) 34,739

(3,802,183) 693

(75,848) 250

(27,362) -1,997

(-218,571) -0.06

(-7)

Change (B-A) -27,101

(-2,966,205)

-143

(-15,652)

-183

(-20,029)

-2,261

(-247,465)

-0.08

(-8)

Percentage Change (%) - omitted where not meaningful. -44% -17% -42% NA NA

FY 2013 (accumulated) 52,947

(5,795,049) 6,994

(765,493) 7,182

(786,069) 4,299

(470,525) 0.10 (10)

• Key points

− The current phase 2b/3 “SEATTLE” study is ongoing

− Our long-term partnership with Otsuka Pharmaceutical remains strong and unchanged

− The revenue variance is mainly due to the delay in clinical development activities as a result of changes to the emixustat pr ogram schedule

− The net income variance is due to recording a partial valuation allowance related to deferred tax assets, due to expected fut ure losses as a result

of our new strategic plan

• Please refer to our press release dated November 12 th, 2014 for detailed explanations on the forecast revision

Overview of 2014 Q3: P/L

Nine months ended Sept. 30 FY2013Q3 FY2014Q3 FY2013Q3 FY2014Q3 Reasons for change in 2013 Q3 and 2014Q3

P/L Statement - selected data USD USD JPY JPY

Revenue from Collaborations

Proprietary(1) 28,464 27,719 3,115,385 3,033,844 Decrease due to timing and fewer billable activities in the current year periods

under the emixustat agreement

In-Licensed(2) 13,231 31 1,448,132 3,392 Due to termination of the Rebamipide Agreement in September 2013, as well

decrease in revenue related to the completion of the phase 1/2 study for OPA-

6566

Research and Development

Proprietary 16,813 19,191 1,840,183 2,100,455 Increase in activity associated with the initiation and conduct of the phase 2b/3

study for emixustat

In-Licensed 7,528 23 823,939 2,517 Decrease due to due to the termination of the Rebamipide Agreement in

September 2013 and the completion of the phase 1/2 study for OPA-6566

Internal Research(3) 1,880 760 205,766 83,182 Decrease due to strategic restructuring in fourth quarter 2013

General and administrative 7,724 7,272 845,391 795,920 Remained constant YoY

Income from operations 7,750 505 848,238 55,272

Net income (loss) 5,111 (1,411) 559,399 (154,433)

Income tax expense was $2.2 million. The difference between the U.S. federal

statutory rate of 34% and our effective tax rates of 269% in 2014 was due

primarily to the provision of a partial valuation allowance related to deferred tax

assets (1) Proprietary: includes emixustat (program under the Emixustat Agreement)

(2) In-Licensed: includes rebamipide (program under the terminated Rebamipide Agreement) and OPA-6566 (program under the Glaucoma Agreement)

(3) Internal Research: includes costs and expenses associated with our discovery research activities related primarily to our VCM compounds

Note: 1 USD = 109.45 JPY as of September 30, 2014


(US$ in thousands; JPY in thousands)

Overview of 2014 Q3: Cash Flow

Nine months ended Sept. 30 FY2013Q3 FY2014Q3 FY2013Q3 FY2014Q3 Reasons for change in 2013 Q3 and 2014Q3

Cash flow Statement – selected data USD USD JPY JPY

Cash flows from operating activities 1,018 10,575 111,420 1,157,434

In 2104, cash inflow was primarily the result of an increase in deferred

revenue from collaborations, decrease in accounts receivable and

decrease in deferred tax assets, partially offset by a decrease in

accrued compensation primarily related to payments of accrued

bonuses and decrease in accrued liabilities

Cash flows from investing activities (10,912) (123,625) (1,194,318) (13,530,756) Net purchases of marketable securities

Cash flows from financing activities (2,173) 148,317 (237,835) 16,233,295 2014, cash inflow consisted of net proceeds from our IPO and stock

option exercises

• We expect costs to continue to be funded by Otsuka pursuant to our development agreements

• Cash from operations and our existing cash and investment balances will be sufficient to fund our ongoing operating activitie s, working

capital, capital expenditures and other capital requirements for at least the next 12 months

• Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our resea rch and

development activities, the timing and extent of our elections to co -promote product candidates under our collaboration agreements

with Otsuka, and the timing of achievement of milestones under our collaboration agreements with Otsuka

• Although we are not currently a party to any agreement or letter of intent regarding potential investments in, or acquisition s of,

complementary businesses, applications or technologies, we may enter into these types of arrangements, which could require us to

seek additional equity or debt financing.




Overview of 2014 Q3: Balance Sheet

12/31/2013 9/30/2014 12/31/2013 9/30/2014 Reasons for change in 12/31/2013 and 9/30/2014

Balance sheet – selected data USD USD JPY JPY

Current Assets 42,281 149,227 4,627,653 16,332,893 Increase in cash and cash equivalents as well as short-term investments

from net IPO Proceeds of $142.0 million

Non-current Assets 11,767 50,321 1,287,896 5,507,632 Increase in long-term investments from net IPO Proceeds of $142.0

million

Total Assets 54,048 199,548 5,915,549 21,840,525

Current Liabilities 22,869 14,655 2,503,011 1,603,987 Decrease due to conversion of convertible debt upon listing

Long-term Liabilities 55 53 6,019 5,800 Represents deferred rent, lease incentives and others

Shareholders’ Equity 31,124 184,840 3,406,519 20,230,738 Increased due to conversion of convertible preferred stock and convertible

notes related to our IPO and stock option exercises




• The Company recorded a partial valuation allowance against our deferred tax assets of $1.6 million, which has no cash impact

Financial Overview

27,019

36,457 34,226

46,424

52,947

34,739

-

10,000

20,000

30,000

40,000

50,000

60,000

FY09 FY10 FY11 FY12 FY13 FY14 est

Revenue from Collaborations

2,350

4,528 3,869

7,033 6,994

693

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

FY09 FY10 FY11 FY12 FY13 FY14

Operating income

23,638 34,809 41,495 47,024 54,048

199,548

-

50,000

100,000

150,000

200,000

250,000

FY09 FY10 FY11 FY12 FY13 FY14Q3

Total assets

4,209 14,101 20,840 25,607 31,124

184,840

-

50,000

100,000

150,000

200,000

FY09 FY10 FY11 FY12 FY13 FY14Q3

Total shareholders' equity


Note: FY09 and FY10 are unaudited figures

(US$ in thousands)

Planned Investor Relations

Activities

Planned Investor Relations Activities

• Planned Activities in FY2014Q4

− One on one meetings with institutional investors and analysts

− Presentation for security company equity sales team (December)

− Retail Investor Presentation in Nagoya (December)

− Nomura IR Fair (December)

− On-going PR activities

• Planned Activities in the first half of FY2015

− Disclosure of a new strategic plan

− One on one meetings with institutional investors and analysts

− Healthcare Conference (March, May and June)

− Non-deal overseas roadshow

− TSE IR Fair (March)

− Annual Shareholders’ Meeting and Event (June)

− Updates to IR website

Maximizing shareholder return is a core element of our business. We

will continue to place further emphasis on investor relations effort.


Appendix

Partnership with Otsuka Pharmaceutical


Investigational Product

Candidate Potential Indication License Territory Financial Terms

Emixustat hydrochloride

(developed by Acucela)

Dry AMD and other

ophthalmic indications

Joint (50/50) - North America

Acucela - Europe, South and

Central America and most of

Africa

Otsuka – Asia-Pacific, some

countries in Africa/Middle East

• Otsuka paid $5M cash upfront payment to Acucela

• Potential milestone payments - $258M total

• To date (as of 09/30/14) Otsuka has paid approximately $141.5M for

development activities to Acucela (including a $5M milestone payment)

• Currently Otsuka and Acucela are equally sharing all development

expenses; Otsuka loans funds to Acucela for the payment of Acucela’s

share of the development expenses through to product launch

OPA-6566

(developed by Otsuka)

Glaucoma and other

ophthalmic indications

United States • Pre-specified condition for Acucela to exercise its right to co-develop

and co-promote (“opt-in” right)

• Otsuka funds all development costs prior to Acucela’s opt-in election

• If Acucela elects to opt-in, Acucela pays to Otsuka a pre-determined

opt-in fee

• Following the opt-in election, Acucela shares its portion of development

expenses, which are capped

• Currently evaluating next steps for the program

Pipeline Chart

Drug PRE-CLINICAL PHASE 1 PHASE 2 PHASE 3 Product Origin (2) Acucela Territory IP Expiration

Date

Emixustat HCI

Acucela

North America (joint),

EU, South America

and Africa

Nov 2029

(Subject to

extension)(3)

Other VCM and

retina product

candidates

Global

OPA-6566 Otsuka US (Joint）(4) April 2025 (5)

Stargardt Disease, Retinitis Pigmentosa,

Retinopathy of Prematurity

Glaucoma

AMD

VC

M

Stargardt Disease, Retinitis Pigmentosa,

Retinopathy of Prematurity (1)

26

DR/DME

(1) Refers to back-up compounds

(2) Refers to the party who identified the product candidate.

(3) Excludes the potential for additional years of patent protection due to the Hatch-Waxman Act and additional use patents.

(4) Following completion of the phase 2 and phase 3 clinical trials, subject to our election to co-develop and co-promote OPA-6566.

(5) Otsuka, as the originator, may have the ability to apply for an extension of up to five years to increase the patent life for OPA-6566.


Acucela is a clinical-stage biotechnology

company that specializes in discovering and

developing novel therapeutics to treat and

slow the progression of sight-threatening

ophthalmic diseases affecting millions of

individuals worldwide.

Documents

Acucela Inc. FY2014 3 Quarter Financial Results Analysts ... · This presentation contains forward-looking statements ... with dry age-related macular degeneration ... FY2013Q3 FY2014Q3