Slide 1: Safe-Harbor Statement
Safe-Harbor Statement Various statements made in this presentation about future expectations, plans and prospects for the Company constitute forward-looking statements for purposes of the Safe-Harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ mat
Slide 2: A New ACTIVE Board Is Required NOW to Restore Stockholder Value
NeoPharm, Inc. A New ACTIVE Board Is Required NOW to Restore Stockholder Value
Slide 3: Objectives
Objectives: Focus on IL-13 PE38QQR PRECISE trial and get approval for commercialization Restructure Company operations to cut the burn rate from $55-58 million (Company's August 6, 2004 press release) to approximately $30 million annually Streamline Company's clinical programs to make them more effi
Slide 4: The Issues
The Issues: Collapsing market price Do-nothing, insular board Lack of financial discipline No plan to restore stockholder value
Slide 5: The Issues: Collapsing Market Price
The Issues: Collapsing Market Price $335 million in stockholder value has evaporated
Slide 6: The Issues: Do-Nothing, Insular Board
The Issues: Do-Nothing, Insular Board Concerns expressed about excessive burn rate for over a year. Lack of discipline on budget due to gamble on arbitration with Pharmacia, which resulted in no award (May 3, 2004). Management continues "business as usual" approach, with no challenge from the board
Slide 7: The Issues: Do-Nothing, Insular Board
The Issues: Do-Nothing, Insular Board Board complacent during massive stock price decline Stock declined from $16.43 (May 4) to as low as $4.85 (August 24) Until filing of consent solicitation, this board took no action to reduce burn rate Board fails to understand urgency-currently "planning to" cu
Slide 8: The Issues: Do-Nothing, Insular Board
The Issues: Do-Nothing, Insular Board Other board members hand-picked by former CEO James Hussey Messrs. Rogan, Flaum and Safavi were previous business associates of Hussey Mr. Hanson was CEO of Option Care, a company where Dr. Kapoor serves as Chairman Mr. Hanson was dismissed from this position fo
Slide 9: The Issues: Lack of Financial Discipline
The Issues: Lack of Financial Discipline Cost structure inflated compared to other development stage companies No focus on objectives and goals Inadequate budgeting Unable to adjust to business developments, such as the Pharmacia setback Unacceptable dilution inevitable if Company continues on prese
Slide 10: The Issues: No Plan to Restore Stockholder Value
The Issues: No Plan to Restore Stockholder Value Dr. Kapoor has been sole voice for change on the NeoPharm board No reforms have been considered until consent solicitation filing Other board members never challenged management No plan given as to how they will cut burn rate No guidance as to what pr
Slide 11: The Solution: Install active board dedicated to implementing reform
The Solution: Install active board dedicated to implementing reform Reduce burn rate to approximately $30 million per annum Focus resources on development and approval for marketing of IL-13 PE38QQR Streamline all other development projects
Slide 12: The Solution: Install active board dedicated to implementing reform
The Solution: Install active board dedicated to implementing reform Appoint a highly qualified, independent and knowledgeable board who will be responsive to stockholder concerns Dr. Bernard Fox (Immunology) Mr. Ron Eidell (Financial) Mr. Brian Tambi (Operations/Development) Dr. Kapoor will gladly s
Slide 13: The Solution: Cut Burn Rate to Approximately $30 million per annum
The Solution: Cut Burn Rate to Approximately $30 million per annum Experience in restructuring: First Horizon Pharmaceutical (FHRX) Option Care, Inc. (OPTN) Familiar with biotech development-stage companies' cost structure: Introgen Therapeutics, Inc. (INGN) Experience in licensing and development:
Slide 14: Cut Burn Rate: Thorough Due Diligence Process
The Solution: Cut Burn Rate to Approximately $30 million per annum Thorough Due Diligence Process The due diligence consisted of discussions with consultants (including those used by the Company), similar companies in biotechnology and Dr. Kapoor's knowledge of NeoPharm Key elements of cost model (s
Slide 15: Focus Resources on IL-13 PE38QQR Development and Approval
The Solution: Focus Resources on IL-13 PE38QQR Development and Approval Only continue PRECISE trials which are needed for approval Stop trials on initially diagnosed GBM patients to save money and avoid distraction Stop pediatric and European GBM trials Prioritize test centers in three categories (A
Slide 16: Streamline all other Development Projects
The Solution: Streamline all other Development Projects LE-SN38 Complicated protocol caused Phase I trials to last 4 years, draining Company's financial resources Simplify Phase II protocol as suggested by oncology consultants to expedite progress and reduce expenditures LEP-ETU Use 505(b)(2) approa
Slide 17: Streamline all other Development Projects
The Solution: Streamline all other Development Projects LErafAON Outsource completion of Phase I/Phase II NeoPhectin Development is complete. Find partners to further its potential for success It is critical to complete Phase II before these products can be licensed to recognize full value
Slide 18: Conclusion
Conclusion: NeoPharm needs a new active board that will implement the reforms necessary to set it on a course for the sustainable future Dr. Kapoor pushed for these reforms, but was silenced by the current board-left with no other choice but to pursue this consent solicitation The current board sat
Slide 19: Appendix A
Appendix A In arriving at the cash burn rate goal of $30 million per year, Dr. Kapoor was not primarily focused on examining the Company's current expenses. This is because management and the other board members have never been able to explain why NeoPharm is spending money at the current rate. Dr.
Slide 20: Appendix A (continued)
Appendix A (continued) Based on Dr. Kapoor's experience with clinical trials of other drugs and his knowledge of pharmaceutical company cost structures, particularly his experience as the Chairman of the Board of Introgen Therapeutics, Inc., a publicly-traded biopharmaceutical company which has an a
Slide 21: Appendix A (continued)
Appendix A (continued) Based on this very limited level of clinical trial activity, Dr. Kapoor believes that the infrastructure necessary for the support of the Company's operations would consist of approximately 60 employees with approximately 25 in the clinical department, 25 in research and devel
Slide 22: Appendix A (continued)
Appendix A (continued) Using these clinical trial cost estimates and adding the presumed annual infrastructure expenses, Dr. Kapoor arrives at the following estimated cash burn rate on an annualized basis, for the Company to conduct its operations and continue to pursue the relevant clinical trials:
Slide 23: Appendix B: Memorandum of May 4, 2004
Appendix B Memorandum of May 4, 2004 To: Mr. Rick Hanson From: Dr. John N. Kapoor ___________________________________ Rick, Just to reiterate my conversation with you, for consideration at the Independent Board conference call today. I recommend the following strategy: The company's burn rate should