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Liver Quest, LLC Leading the quest towards modern liver treatment

State College Owner

Prepared by: Tim Geldmacher & Jonathan Taulbee

This document contains confidential and proprietary

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information belonging exclusively to Liver Quest, LLC.

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Table of Contents Executive Summary

p. 3

The Company Mission Statement Company Description Management Team Partnerships Product Board of Directors Scientific Advisory Board

p. 5 p. 5 p. 5 p. 5 p. 6 p. 6 p. 6 p. 6

Market Analysis Market Size The Competition (MCT, NGT, and PED)

p. 8 p. 8 p. 10

Marketing Strategy Overall Strategy Research and Development / Growth Plan Sales Plan Potential Acquirers Exit Strategies

p. 13 p. 13 p. 13 p. 15 p. 15 p. 15

Financing Current Financial Position Financial Projections Funding Requirements Financial Assumptions

p. 16 p. 16 p. 16 p. 16 p. 16

Appendices A: Financial Statements B: ELISA & Western Blot Descriptions C: References

p. 18 p. 18 p. 28 p. 29

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Executive Summary Names, facts, dates, references, and figures deemed proprietary have been altered or removed from this business plan in order to protect the confidentiality of the product, its owners, and inventors. Given these changes, this business plan should be considered fictional. The basic structure of the plan has been maintained to serve as a teaching aid for university technology transfer office startups. Hepatocellular carcinoma (HCC or primary liver cancer) is the third leading cause of death amongst all cancers and each year kills over 600,000 people worldwide (Reference Removed). The key to surviving liver cancer is early detection, but the most commonly used serum screening test (MCT) fails to diagnose liver cancer 50% of the time (Reference Removed). Liver Quest is focused on the development and commercialization of a new screening test for liver cancer: HepaCarcinoDetector (HCD). HCD, a serum marker that is usually found in large quantities only in patients with cirrhosis or liver cancer, was identified by researchers at State College. A recent study showed that HCD is 60% more sensitive than MCT for diagnosing early liver cancer (Reference Removed). This finding is vitally important to the liver cancer community because the average liver cancer patient dies within 3-6 months after the onset of symptoms (Reference Removed). Current protocols for diagnosing liver cancer are cumbersome, expensive, and only marginally effective in improving patient outcomes. Under these circumstances, the availability of a simple and effective screening test for liver cancer would be expected to offer a significant medical value. The estimated size of the US liver cancer serum screening test market is $36 million. This market size is expected to increase to $57 million by 2015. The dramatic increase in market size by 2015 is due to a large group of patients that were originally infected with hepatitis C in the 1980’s (Reference Removed). This group of patients will have been chronically infected for more than two decades, thus they will be high risk for liver cancer. The worldwide market size for liver cancer serum screening tests is approximately $72 million and will expand to about $114 million in 2015. The main areas of commercial importance outside of the US are China, Japan, India, and parts of Europe. Large companies that already offer liver cancer screening tests worldwide, are better equipped than Liver Quest to take HCD global. These companies already have the manufacturing, distribution, regulatory, and marketing systems in place. HCD would be valuable to these companies because it may be a perfect complement to their current product offerings or in the hands of competitors pose a threat. We will approach these companies regarding the possibility of acquisition after the data from a federally funded clinical trial comparing HCD and three major competitors is released. The medical need and the sufficient market size makes HCD an attractive acquisition target for many diagnostic companies.

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HCD is now in the early stages of the development process. The 4 key milestones of developing HCD and their estimated time of completion are as follows: 1. Develop an ELISA test, which is a test that will measure the amount of HCD in the blood (See Appendix B for ELISA description) – May, 20** 2. Enter clinical trial that confirms HCD’s superiority over competitors – June, 20** 3. Sell Liver Quest to a strategic acquirer on the strength of the federally funded clinical trial data – Begin in April, 20** 4. Gain FDA approval – 2nd Quarter, 20** State College is now outsourcing and funding the development of a HCD ELISA prototype. We are raising $25,000, which together with $25,000 from State College will fund the second milestone of entering HCD into a clinical trial. Investors will receive 10% of equity in exchange for their $25,000 investment. After the data from the trial is released, investors will be given the right of first refusal when additional funding is sought. The second round of funding will be needed to fund the final two milestones, which are the sale of Liver Quest and gaining FDA approval. In summary, the potential value available from a screening test for liver cancer with significantly improved sensitivity and specificity is substantial. It would offer major benefits to patients who are high risk for developing liver cancer. The commercial opportunity is also attractive. This is an opportunity to earn significant returns on a minimal investment by funding the development of a product that has the potential of saving thousands of lives.

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The Company Mission Statement: Liver Quest will strive to offer physicians the most sensitive and specific serum screening test for liver cancer. Company Description: Liver Quest is a virtual company with the goal of further developing the HCD liver cancer screening test and selling it after “proof of concept” is established. HCD is owned by State College. A “Memo of Understanding” will be written in May of 20**, which will state that State College will exclusively license HCD to Liver Quest after the data from the federally funded trial is released. Management Team: Given the timeline and tasks associated with milestone achievements, Liver Quest does not need a full-time manager. Rather, general oversight is needed to ensure that progress remains on schedule. One of management’s primary concerns will be to facilitate the involvement of key constituents (i.e. FDA consultants, legal representation, trade show coordination, etc.). These responsibilities will be managed by a consultant, Pat M., and a representative from State College, Max A.. Pat M., C.P.A. – Medical Diagnostic Industry Consultant contracted by Liver Quest Pat M. has over 30 years experience in the medical diagnostics industry, including key roles in sales, marketing and manufacturing operations with a major medical diagnostics corporation. As Chief Executive Officer, he directed the successful development and global launch of many diagnostic products, including the most successful product in their history. He also oversaw five acquisitions. Pat M. will serve as the primary manager of Liver Quest and will be making key decisions as to which FDA consulting firm to contract and which companies to approach about possible acquisition. Pat M. has valuable experience and relationships that will help facilitate the development of HCD and the sale of Liver Quest. Max A., M.D., Ph.D. – State College Representative and Liaison to Liver Quest Max A. is the Director of State College’s Technology Transfer Office. As the director, Max A. is responsible for identifying research that could lead to commercialization. Max A. originally identified the HCD research that Jase A., M.D. conducted and has led the development of Liver Quest up to this point. Max A.‘s office is handling all patent issues. Max A. will also be vital in exploring how State College resources can help Liver Quest achieve milestones quickly (i.e. networking with hepatologists in State College’s Liver Center to identify possible ELISA development laboratories, recommending FDA consultants that State College has already established relationships with, etc.).

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Partnerships Liver Quest has developed key partnerships that will help propel HCD to each milestone. Listed below are brief descriptions of Liver Quest’s partners: State College Liver Center The State College Liver Center has been recognized by the US News World Report several times over the last decade as a leading treatment center for liver cancer. The Liver Center has already assisted Liver Quest by providing valuable feedback in regards to understanding the market. (Other partnerships have been removed) Product Liver Quest is focused on the development and commercialization of the HCD liver cancer screening test. HCD is a liver cancer serum marker. A preliminary study showed that there are increased amounts of HCD in those with cirrhosis, and that amount increases significantly with the onset of liver cancer. HCD can be detected in the bloodstream utilizing two testing techniques: Western Blot and Enzyme Linked Immuno-Sorbent Assay (ELISA). Thus far, all data regarding HCD has been gathered utilizing Western Blot. Although Western Blot data is considered reliable, the market standard for liver cancer screening tests is ELISA because it is much simpler and more cost-effective. (See Appendix B for a description of ELISA and Western Blot testing technologies). Board of Directors Board of Directors will be created upon financing. Scientific Advisory Board The purpose of the Scientific Advisory Board (SAB) is to: • • •

provide high-level insight and guidance on clinical and scientific issues important to Liver Quest’s strategy, maximize the organization’s credibility with outside parties serve as independent ambassadors for Liver Quest at industry meetings, technical seminars, and other relevant events.

Liver Quest is actively growing its SAB, which currently has two members, Jase A., M.D. and Pat M., C.P.A. Jase A., M.D. Jase A. is a Professor at State College, where he discovered HCD. Jase A. is the leading expert on HCD, and has many colleagues in the liver community.

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Jase A.’s relationships in the liver community will be leveraged to recruit at least two more hepatologists to join Liver Quest’s SAB. Pat M., C.P.A. Pat M. (bio provided on previous page) will provide the SAB with business expertise. As a former CEO of a major medical diagnostics corporation, Pat M. has experience in diagnostic product development and marketing, and he was directly involved at the executive level with several mergers and acquisitions.

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Market Analysis Market Size The size of the market was determined by utilizing the “Cause of Cirrhosis Market Model” (table on next page). The “Cause of Cirrhosis Market Model” uses the American Association for the Study of Liver Disease’s (AASLD) guidelines that identify which patients should be routinely tested for liver cancer. Here is how the “Cause of Cirrhosis Market Model” was created: 1. First, the medical conditions that lead to cirrhosis as identified by the AASLD were listed. 2. Then, the “prevalence rate” or percentage of Americans with a specific medical condition was multiplied by the total US population to determine the “number of patients” with a specific medical condition. 3. Then, the “number of patients” was then multiplied by an “inclusion rate” to determine the number of patients that will develop cirrhosis. 4. An “access adjustment” was then made to determine the number of patients that will develop cirrhosis and seek medical care. 5. High risk populations should be screened twice per year according to the AASLD Standard of Care, so a multiplication factor of two was applied. 6. The total amount of annual tests was then multiplied by the average sale price to determine market size. The prices used in this analysis were $10 and $15. $10 is a realistic estimate, based on the fact that two major hospital systems pay around $5 for the industry standard test (MCT), which is a generic, non-specific test that preliminary studies have shown to be inferior to HCD. The $15 price point is based on the fact that another competitor (PED) is sold at that price. Again, initial studies show that HCD is superior to PED. 7. Finally, the total market value was then adjusted for the dramatic increase in prevalence of those with long lasting hepatitis C infections (> 20 years). The “Cause of Cirrhosis Market Model” is shown below:

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*

Reference Removed

**

Reference Removed

This model concluded that the current US market size is approximately $36 million (at $10 per test), but will grow to around $57 million in 2015. The increase in market size is due to a large group of patients who were originally infected with hepatitis C in the 1980’s and will be entering their third decade of chronic liver infection. Individuals who have had chronic liver infection for 20+ years are considered high risk for developing liver cancer. One drawback to this model is that it relies on assumptions pertaining to the inclusion rate and those who have access to healthcare. These assumptions were corroborated by a world renowned hepatologist and an epidemiologist. It is important to note that the hepatologist and epidemiologist do not want their names made public, until a more formal agreement is reached between them and Liver Quest as advisors.

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There is also a large market for liver cancer screening tests outside of the US. The table below compares the amount of people that died from liver cancer in Japan, China, India, parts of the European Union, and the US in 2002. Liver Cancer Deaths in 2002: 617,395 Worldwide European Union 31,300

China 324,900

India 22,200

Japan 34,900

USA 14,400

NOTE: EU statistic only accounts for France, Spain, Italy, Germany, and U.K., because they are by far the most affected countries. SOURCE:

(Reference Removed)

Although the statistics state that over 600,000 more people outside of the US died from liver cancer in 2002, not all of them would seek or receive liver cancer screening tests for a variety of reasons (lack of education, inadequate healthcare system, etc.). Therefore, the worldwide market for liver cancer screening tests is conservatively estimated to be twice the size of the US market, or about $72 million (at $10 per test). The Competition HCD’s competitors in the liver cancer screening test market are MCT, NGT, and PED. The following table shows each products’ sensitivity and specificity when trying to detect early liver cancer (tumors smaller than 2 cm):

Test MCT NGT PED HCD

Early Detection of Liver Cancer (tumors smaller than 2 cm) Sensitivity* 22% 60% 0-30% 82%

Specificity** 88% 82% 15% 91%

* Sensitivity: The statistical probability that an individual who does not have the particular disease being tested for will be correctly identified as negative, expressed as the proportion of true negative results to the total of true negative and false positive results.

SOURCE: sensitivity. (n.d.). The American Heritage® Stedman's Medical Dictionary. Retrieved May 30, 2007, from Dictionary.com website: http://dictionary.reference.com/browse/sensitivity ** Specificity: The proportion of individuals in a population that will be correctly identified when administered a test designed to detect a particular disease, calculated as the number of true positive results divided by the number of true positive and false negative results.

SOURCE: specificity. (n.d.). The American Heritage® Stedman's Medical Dictionary. Retrieved May 30, 2007, from Dictionary.com website: http://dictionary.reference.com/browse/specificity

Below is a description of each competitor, their strengths and weaknesses, and HCD’s competitive advantage over each of them.

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MCT HCD’s main competitor is the MCT test. MCT has dominated the liver cancer screening market for many years. MCT is now off-patent and many companies offer the test. Some of the most popular test providers are companies that provide laboratories with an expensive ELISA machine needed to run the tests. The laboratories typically get a free or discounted machine out of the deal and the machine provider gets all of the revenue generated from laboratories exclusively using their MCT test on their machine. The major advantages and disadvantages of MCT are as follows: Advantages Whereas the intended purpose of HCD is to detect liver cancer, MCT is utilized to detect other conditions. In short, the many uses for MCT provide the many manufacturers of MCT with a larger market than HCD. The larger market, in turn can be used to keep the cost of their product low and discourage potential competitors from entering the liver cancer diagnostic industry. Disadvantages MCT is unable to detect 50% of all liver cancers. More importantly, MCT is very poor at detecting early liver cancer (sensitivity of 22%). HCD’s Competitive Advantage over MCT: More sensitive than MCT A preliminary study shows that HCD is 60% more sensitive than MCT in detecting early liver cancer (tumors smaller than 2 cm).. This is vitally important, because liver cancer, like most cancers, is best treated if caught early. NGT Elevated levels of NGT in patients with chronic liver disease have been shown to be associated with a ten-fold increase in the risk of developing liver cancer in the next 5-11 months. Advantages The major advantage that NGT has over MCT is that it is more sensitive to liver cancer than MCT. NGT is 60% sensitive and 82% specific at detecting early liver cancer (tumors less than 2 cm). Furthermore, studies have shown that NGT can detect liver cancer 4-5 months before imaging techniques (MRI, ultrasound, and CT scan). The fact that NGT can detect cancer before imaging techniques makes it very valuable to physicians, because the key to surviving liver cancer is early detection. Disadvantages The major disadvantage of NGT is that it is not an ELISA test, it is a new technology that has not been fully adopted by the diagnostic industry. This new type of test might be responsible for NGT’s marked improvement in sensitivity over MCT, but the machine that runs the test is very expensive (~$500,000). Furthermore, most established labs do not have the machine nor do they want it.

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Aside from the cost, the machine does not perform as many different types of tests as the current ELISA machine. Laboratories want machines that can perform a variety of tests. HCD’s Competitive Advantage over NGT: HCD is measured by an ELISA test Although the technology involved with NGT may be the future in diagnostics, most labs still exclusively use ELISA testing. Furthermore, most labs are not willing to make the significant capital expenditure (~$500K) for the new machine required to run a NGT test, because their current ELISA machine is able to run a larger variety of tests. Most labs are also not willing to surrender valuable lab space for a machine, roughly the size of a copy machine, that only runs a couple tests. HCD is measured by an ELISA test, so it can quickly be adopted by the healthcare industry without the need for a major capital investment by laboratories. PED: PED is a relatively new product. Advantages One advantage of PED is that it is not directly correlated with MCT. That is to say that both bio-markers are independent of each other. Therefore, when PED is used in conjunction with MCT, the sensitivity and specificity of the tests combined, outperforms each test when performed individually. PED is also an ELISA test. This makes it easy for physicians by simply ordering a PED test at the same time as an MCT test. The same ELISA machine could do both tests in a matter of minutes. Disadvantages The major disadvantage of PED is that studies have shown that it is not effective for early detection of liver cancer (tumors smaller than 2 cm). This fact is of critical importance because liver cancer is very dangerous if not detected early. HCD’s Competitive Advantage over PED HCD’s main competitive advantage over PED is simply its superior performance. PED’s inability to detect cancerous tumors early limits its application to that of a confirmatory test. Although PED is able to distinguish whether a tumor is liver or another cancer, that information may be useless if the cancer is not caught early.

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Marketing Strategy Overall Strategy Our marketing strategy is to sell Liver Quest after the federally funded trial confirms previous findings that HCD is superior to all other liver cancer screening tests. Research & Development / Growth Plan There are 4 key milestones that when met will add significant value to our asset, HCD. The timeline and costs for achieving each milestone is provided in the chart below.

Listed below are each milestone and a description of what is needed to achieve each one. 1. Develop an ELISA Test – May 20** Although studies show that elevated levels of HCD in the blood indicates the presence of liver cancer, that knowledge does not help physicians unless there is

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an effective, inexpensive, and convenient way to test for elevated levels of HCD in the bloodstream. Liver Quest is aggressively pursuing the development of an Enzyme Linked Immuno-Sorbent Assay (ELISA) to measure HCD in blood. Thus far, Liver Quest has approached academic and private laboratories in search of a technician that can create an ELISA test. The most promising approach regarding ELISA development is via a small antibody testing center. The center predicts they will have a HCD ELISA prototype developed in May, 20**. What is needed to accomplish milestone # 2: After a prototype HCD ELISA is developed, then enough antibodies need to be produced to create 2,000 tests for the federally funded trial. The test kits (i.e. tubes, packaging, etc.) will also need to be mass produced. Then the test kit and $7,000 (to cover added costs, like shipping, processing, etc.) need to be sent to the organizers of the federally funded trial in order for HCD to be included in the trial. The total cost associated with these expenses is $50,000. State College will cover half the costs, but is looking for investors to provide the other $25,000. After the data from the trial is released, investors will be given the right of first refusal when seeking additional funding. 2. Enter Clinical Trial that Confirms HCD’s Superiority – Early 20** A large study is needed to statistically confirm HCD’s superiority over not only MCT, but also PED. Fortunately, there is a federally funded research trial that is comparing the effectiveness of MCT, PED, and HCD. It is important to note that two independent FDA consultants have indicated that the data generated from the federally funded will be sufficient to gain FDA approval. The federally funded study is very important, because it allows us to make marketing claims about the effectiveness of HCD when selling Liver Quest. View the federally funded trial protocol at: reference removed. 3. Sell Liver Quest – Begin 2nd Quarter – 20** After the federally funded trial’s data confirms HCD’s superiority over its competitors, then Liver Quest will actively seek an acquirer. Upon the release of data, Pat M. (profile available in company section) will be contracted as a consultant to sell Liver Quest. Pat M. will conduct additional market research, attend trade shows, contract legal advisors, and oversee the acquisition. In addition to his wages, Pat M. will receive a bonus that is directly tied to the sale price of Liver Quest. 4. FDA Approval – 2nd Quarter 20** Even though Liver Quest will be for sale immediately after the federally funded trial’s data is released, we still plan on pursuing FDA approval for HCD. Having HCD FDA approved will increase the value of Liver Quest, which aids in the selling process. Liver Quest officials have spoken with two independent FDA consultants and both believe that HCD will be reviewed under the 510K classification because there is already a similar diagnostic tool FDA approved,

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MCT. The 510K classification is less stringent than other types of approval processes, because a similar technology has been thoroughly reviewed and approved. It also only takes approximately 90 days to gain approval. Sales Plan: We plan to simultaneously focus our marketing towards physicians and companies who might want to add HCD to their portfolio by publicizing the findings from the federally funded trial. We will market to physicians and companies by advertising in areas where they are both present, like conferences/workshops. The findings from the federally funded trial will be published in a journal like the Journal of Hepatology or American Journal of Gastroenterology, which are read by both physicians and companies. Liver Quest’s value will increase as physicians become more educated about HCD’s superiority. Potential Acquirers Liver Quest’s sales plan is to approach a select few companies in the diagnostic industry and inquire about acquisition. Some companies that may be ideal acquirers would be: The names and descriptions of potential acquirers have been removed. It is important to note that potential acquirers were chosen because of their substantial stake in the medical diagnostics arena. Exit Strategies The primary exit strategy is to sell Liver Quest within six months of the release of the federally funded trial data. At that point Liver Quest will have “proof of concept” for HCD. Investors will collect their initial investment plus their share of the profit after the sale of Liver Quest is finalized. The secondary exit strategy is to sublicense HCD if Liver Quest is not sold in the six months following the release of the federally funded trial data. Potential sublicensing partners will likely be the same companies that were approached regarding potential acquisition. The revenue stream generated by royalties will be used to fund tasks associated with selling Liver Quest. Liver Quest will again approach companies regarding potential acquisition after HCD has been sublicensed for a year. If the team fails to sell Liver Quest or sublicense the HCD technology, then investment(s) can be claimed as a tax deductible loss.

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Financing Current Financial Position State College’s Technology Transfer Office has funded all research and development up to this point. After an ELISA prototype is created, then State College will provide half of the funding needed ($25,000) to reach the next milestone of entering the federally funded trial. Liver Quest is raising the additional $25,000 from outside investors. Funding Requirements After a HCD prototype ELISA is produced then Liver Quest will need an investment of $25,000 (in exchange for 4% of guaranteed equity) to propel itself to the next milestone of entering the federally funded trial. Liver Quest is seeking investors who not only provide financial assistance, but also strategic business knowledge and relationships that will aid in the sale of Liver Quest. Specifically, investors with experience in product development, life sciences, mergers and acquisitions, international business, and FDA filings will be given first opportunity to invest. If the federally funded trial produces favorable data, then an additional $166,000 will be needed to sell Liver Quest. Note that $166,000 is a high estimate, because if the federally funded trial yields favorable data, as expected, it is likely that an acquirer will locate Liver Quest. Financial Projections Although the current plan is to sell the company before HCD enters the market, a projection has been created to demonstrate HCD’s value to potential acquirers. Sales and revenue ramp is projected to begin in 20**, with FDA approval and marketing clinical trial data in hand. Financial projections are located in Appendix A. Financial Assumptions Used in Projections • Market Size: The explanation for the market size can be found in the “Market Size” section of this business plan. • Market Penetration: The market penetration was estimated at 5% per year until 25% market share was attained. This figure is an estimate based on the fact that we plan on selling Liver Quest to an acquirer with the resources necessary to quickly enter the market. • Cost of Goods Sold: The cost of goods sold was conservatively estimated at $5 per test. This estimated figure is based on the fact that two major hospital systems purchase MCT for around $5. That means MCT’s cost of goods sold is less than $5. MCT’s cost of goods sold is very low because it has a larger market. MCT’s market is larger because it has more applications. Therefore, MCT manufacturers are able to utilize economies of scale to drive down their cost of goods sold. • Price of Test: The explanation for the price of $10 used in the financial analysis can be found in the “Market Size” section of this business plan. • Percent Discounted: The Net Present Value was discounted based on the risk associated with achieving each milestone. The amount of risk assessed to each CONFIDENTIAL

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milestone was derived from conversations with State College officials and an industry consultant. Sales: Sales were derived by multiplying the total market units (taken from the “Cause of Cirrhosis Market Model”) by the market penetration percentage, which yielded the number of units sold. The number of units sold was then multiplied by the price of the test, $10, to determine the total amount of sales in a period. Zero Burn During Federally Funded Trial: Because the bulk of the risk associated with the development of HCD lies in the findings yielded from the federally funded trial, we will not be making any major expenditures during that period.

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Appendices Appendix A: Financial Statements Liver Quest LLC Projected Statements of Income (Loss) 8 Months Ending December 31, 20** May-** Sales

$

-

Cost/ Goods Sold (COGS) Gross Profit

Jun-** $

Jul-** -

-

$

Aug-** -

-

$

-

-

Sep-** $ -

Oct-** $ -

Nov-** $ -

Dec-** $ -

$ -

$ -

$ -

$

$ -

$ -

$ -

$

$

-

$

-

$

-

$

-

$ -

$

-

$

-

$

-

$

-

$ -

Total 20** $

-

Operating Expenses Consultant fees Plate Manufacturing

20,000

20,000

Clinical Trial Fees

7,000

7,000

Antibody Scale-up

13,000

13,000

Misc.

10,000

10,000

Computers

0

FDA Consultant

0

Supplies

0

FDA Filing Fees

0

Travel

0

Marketing/Advertising

0

Legal Fees

2,000

2,000

Accounting/Tax services

0

Telephone

0

Utilities ELISA Development Total Expenses

CONFIDENTIAL

0 2,000 $ (2,000)

2,000 $ (2,000)

$(50,000)

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$

-

$ -

$ -

$ -

$ -

$ (54,000)


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Liver Quest LLC Projected Statements of Income (Loss) Year Ending December 31, 20**

Sales Cost/ Goods Sold (COGS) Gross Profit Operating Expenses Consultant fees

Jan-** $ -

Feb-** $ -

Mar-** $ -

Apr-**

$ -

$ -

$ -

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$ -

$ -

$ -

$

2,000

$

1,000

$

1,000

$

1,000

$

1,000

$

1,000

$

1,000

$

1,000

$

1,000

$

10,000

$

May-** -

$

-

Jun-** -

$

-

Jul-** -

$

-

Aug-** -

$

-

Sep-** -

$

-

Oct-** -

$

Nov-** -

-

$

Dec-** -

-

$

Total 20** -

-

$

-

-

-

Plate Manufacturing

0

Clinical Trial Fees

0

Antibody Scale-up

0

Misc.

10,000

10,000

Computers

2,000

FDA Consultant

2,000

2,000

Supplies

3,000

FDA Filing Fees

2,000

Travel

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

18,000

Marketing/Advertising

5,000

5,000

5,000

5,000

5,000

5,000

2,500

2,500

2,500

37,500

Legal Fees Accounting/Tax services

5,000

5,000

5,000

5,000

5,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

18,000 3,000 2,000

25,000

5,000

5,000

Telephone

300

200

200

200

200

200

200

200

200

1,900

Utilities

305

215

215

215

215

215

215

215

215

2,025

ELISA Development Total Expenses

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0 $ -

$ -

$ -

$(38,605)

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$(15,415)

$(15,415)

$(15,415)

$(15,415)

$(10,415)

$ (7,915)

$ (7,915)

$ (7,915)

$ (134,425)


Liver Quest LLC Projected Statements of Income (Loss) 5 Months Ending May 31, 20** Jan-** Sales Cost/ Goods Sold (COGS)

Gross Profit

Feb-**

Mar-**

Apr-**

May-**

Total 20**

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 5,000

Operating Expenses Consultant fees Plate Manufacturing

0

Clinical Trial Fees

0

Antibody Scale-up

0

Misc.

0

Computers

0

FDA Consultant

2,000

2,000

2,000

2,000

2,000

10,000

Supplies

0

FDA Filing Fees

0

Travel

2,000

Marketing/Advertising

2,500

2,000 2,500

2,500

2,500

2,500

12,500

Legal Fees

0

Accounting/Tax services

0

Telephone

200

200

200

200

200

1,000

Utilities

215

215

215

215

215

1,075

$ (7,915)

$ (5,915)

$ (5,915)

$ (5,915)

$ (5,915)

ELISA Development

Total Expenses

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0

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$ (31,575)


Liver Quest LLC Projected Statements of Cash Flows 8 Months Ending December 31, 20** Cash on Hand (beginning of year)

May-** 4,000

Jun-** 2,000

0 4,000

0 2,000

Jul-**

Aug-**

Sep-**

Oct-**

Nov-**

Dec-**

0

0

0

0

0

0

50,000 50,000 50,000

0 0

0 0

0 0

0 0

0 0

CASH RECEIPTS Investors TOTAL CASH RECEIPTS Total Cash Available (before cash out)

CASH PAID OUT Consultant Fees Plate Manufacturing Clinical Trial Fees Antibody Scale-up Misc. Computers FDA Consultant Supplies FDA Filing Fees Travel Legal Fees Accounting/Tax Services ELISA Development Marketing/Advertising Telephone Utilities SUBTOTAL Cash Position (end of year)

CONFIDENTIAL

20,000 7,000 13,000 10,000

2,000 2,000

2,000

2,000

50,000

0

0

0

0

0

2,000

0

0

0

0

0

0

0

23 of 35


Liver Quest LLC Projected Statements of Cash Flows Year Ending December 31, 20** Jan-** Cash on Hand (beginning of year)

0

Feb-** 0

Mar-** 0

Apr-** 0

May-** 127,395

Jun-** 111,980

Jul-** 96,565

Aug-** 81,150

Sep-** 65,735

Oct-** 55,320

Nov-** 47,405

Dec-** 39,490

0 0

0 0

0 0

166,000 166,000 166,000

0 127,395

0 111,980

0 96,565

0 81,150

0 65,735

0 55,320

0 47,405

0 39,490

2,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000

2,000 5,000

2,000 5,000

2,000 5,000

2,000 5,000

2,000

2,000

2,000

2,000

5,000 200 215 15,415 111,980

5,000 200 215 15,415 96,565

5,000 200 215 15,415 81,150

5,000 200 215 15,415 65,735

5,000 200 215 10,415 55,320

2,500 200 215 7,915 47,405

2,500 200 215 7,915 39,490

2,500 200 215 7,915 31,575

CASH RECEIPTS Investors TOTAL CASH RECEIPTS Total Cash Available (before cash out)

CASH PAID OUT Consultant Fees Plate Manufacturing Clinical Trial Fees Antibody Scale-up Misc. Computers FDA Consultant Supplies FDA Filing Fees Travel Legal Fees Accounting/Tax Services ELISA Development Marketing/Advertising Telephone Utilities SUBTOTAL Cash Position (end of year)

CONFIDENTIAL

10,000 2,000 2,000 3,000 2,000 2,000 5,000 5,000

0 0

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0 0

0 0

5,000 300 305 38,605 127,395


Liver Quest LLC

CONFIDENTIAL

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Projected Statements of Cash Flows 5 Months Ending May 31, 20**

Cash on Hand (beginning of year)

Jan-** 31,575

Feb-** 23,660

Mar-** 17,745

0 31,575

0 23,660

1,000

2,000

Apr-**

May-** 11,830

5,915

0 17,745

0 11,830

0 5,915

1,000

1,000

1,000

1,000

2,000

2,000

2,000

2,000

2,500 200 215 5,915 17,745

2,500 200 215 5,915 11,830

2,500 200 215 5,915 5,915

2,500 200 215 5,915 0

CASH RECEIPTS Investors TOTAL CASH RECEIPTS Total Cash Available (before cash out)

CASH PAID OUT Consultant Fees Plate Manufacturing Clinical Trial Fees Antibody Scale-up Misc. Computers FDA Consultant Supplies FDA Filing Fees Travel Legal Fees Accounting/Tax Services ELISA Development Marketing/Advertising Telephone Utilities SUBTOTAL Cash Position (end of year)

2,000

2,500 200 215 7,915 23,660

Liver Quest LLC Projected Balance Sheet CONFIDENTIAL

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8 Months Ending December 31, 20** May-**

Jun-**

Jul-**

Aug-**

Sep-**

Oct-**

Nov-**

Dec-**

Assets Current Assets Cash in bank Total Current Assets

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

Other Assets Intangibles(Patents)1 Other

$0

$0

$0

$0

$0

$0

$0

$0

Total Other Assets

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

TOTAL Assets

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

Accounts payable

$0

$0

$0

$0

$0

$0

$0

$0

Taxes payable

$0

$0

$0

$0

$0

$0

$0

$0

Total Liabilities

$0

$0

$0

$0

$0

$0

$0

$0

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$27,000

$29,000

$54,000

$54,000

$54,000

$54,000

$54,000

$54,000

-$2,000

-$4,000

-$54,000

-$54,000

-$54,000

-$54,000

-$54,000

Liabilities and Equity Liabilities

Owners' Equity Invested capital State College Retained earnings - beginning Retained earnings - current

-$2,000

-$2,000

-$50,000

$0

$0

$0

$0

$0

Total Owners' Equity

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

Total Liabilities & Equity

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

Liver Quest LLC Projected Balance Sheet

CONFIDENTIAL

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Year Ending December 31, 20** Jan-** Assets Current Assets Cash in bank Total Current Assets Other Assets Intangibles(Patents)1 Other Total Other Assets TOTAL Assets Liabilities and Equity Liabilities Accounts payable Taxes payable Total Liabilities Owners' Equity Invested capital State College Retained earnings beginning Retained earnings current Total Owners' Equity Total Liabilities & Equity

Feb-**

Mar-**

Apr-**

May-**

$127,39 5 $127,39 5

$111,98 0 $111,98 0 $25,000 $0 $25,000 $136,98 0

$0

$0

$0

$0

$0

$0

$25,000 $0 $25,000

$25,000 $0 $25,000

$25,000 $0 $25,000

$25,000

$25,000

$25,000

$25,000 $0 $25,000 $152,39 5

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$25,000 $54,000 $54,000

$25,000 $54,000 $54,000

$25,000 $54,000 $54,000

$191,00 0 $54,000

$191,00 0 $54,000

-$54,000

-$92,605

$0

$0

$0

$25,000

$25,000

$25,000

$25,000

$25,000

$25,000

-$38,605 $152,39 5 $152,39 5

-$15,415 $136,98 0 $136,98 0

Liver Quest LLC CONFIDENTIAL

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Jun-**

Jul-**

Aug-**

Sep-**

Oct-**

Nov-**

Dec-**

$96,565

$81,150

$65,735

$55,320

$47,405

$39,490

$31,575

$96,565

$81,150

$65,735

$55,320

$47,405

$39,490

$31,575

$25,000 $0 $25,000

$25,000 $0 $25,000

$25,000 $0 $25,000

$25,000 $0 $25,000

$25,000 $0 $25,000

$25,000 $0 $25,000

$25,000 $0 $25,000

$121,565

$106,150

$90,735

$80,320

$72,405

$64,490

$56,575

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$191,000 $54,000 $108,020

$191,000 $54,000 $123,435

$191,000 $54,000 $138,850

$191,000 $54,000 $154,265

$191,000 $54,000 $164,680

$191,000 $54,000 $172,595

$191,000 $54,000 $180,510

-$15,415

-$15,415

-$15,415

-$10,415

-$7,915

-$7,915

-$7,915

$121,565

$106,150

$90,735

$80,320

$72,405

$64,490

$56,575

$121,565

$106,150

$90,735

$80,320

$72,405

$64,490

$56,575


Projected Balance Sheet 5 Months Ending May 31, 20** Jan-** Assets Current Assets Cash in bank Total Current Assets Other Assets Intangibles(Patents)1 Other Total Other Assets TOTAL Assets Liabilities and Equity Liabilities Accounts payable Taxes payable Total Liabilities Owners' Equity Invested capital State College Retained earnings - beginning Retained earnings - current Total Owners' Equity Total Liabilities & Equity

CONFIDENTIAL

Feb-**

Mar-**

Apr-**

May-**

$23,660 $23,660

$17,745 $17,745

$11,830 $11,830

$5,915 $5,915

$0 $0

$25,000 $0 $25,000 $48,660

$25,000 $0 $25,000 $42,745

$25,000 $0 $25,000 $36,830

$25,000 $0 $25,000 $30,915

$25,000 $0 $25,000 $25,000

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$0 $0 $0

$191,000 $54,000 -$188,425 -$7,915 $48,660 $48,660

$191,000 $54,000 -$196,340 -$5,915 $42,745 $42,745

$191,000 $54,000 -$202,255 -$5,915 $36,830 $36,830

$191,000 $54,000 -$208,170 -$5,915 $30,915 $30,915

$191,000 $54,000 -$214,085 -$5,915 $25,000 $25,000

29 of 35


Liver Quest LLC

CONFIDENTIAL

30 of 35


Projected Statements of Income (Loss) 5 Months Ending May 31, 20** Jan-** Sales Cost/ Goods Sold (COGS)

Gross Profit

Feb-**

Mar-**

Apr-**

May-**

Total 20**

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ -

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 1,000

$ 5,000

Operating Expenses Consultant fees Plate Manufacturing

0

Clinical Trial Fees

0

Antibody Scale-up

0

Misc.

0

Computers

0

FDA Consultant

2,000

2,000

2,000

2,000

2,000

10,000

Supplies

0

FDA Filing Fees

0

Travel

2,000

Marketing/Advertising

2,500

2,000 2,500

2,500

2,500

2,500

12,500

Legal Fees

0

Accounting/Tax services

0

Telephone

200

200

200

200

200

1,000

Utilities

215

215

215

215

215

1,075

$ (7,915)

$ (5,915)

$ (5,915)

$ (5,915)

$ (5,915)

ELISA Development

Total Expenses

CONFIDENTIAL

0

31 of 35

$ (31,575)


Net Present Value of Liver Quest adjusted for risk of achieving milestones

YR1 ($54,000 )

YR2 ($166,000 )

YR3 $1,021,58 6

YR4 $2,307,51 8

YR5 $3,782,24 8

Cash Flows YR6 YR7 $5,455,37 $7,323,30 6 3

YR8 $7,323,30 3

YR9 $7,323,30 3

YR10 $7,323,30 3

YR11 $7,323,30 3

YR12 $7,323,303

Pre-ELISA discounted value

Pre-Clinical Trial discounted value

Pre-FDA Approval discounted value

Market Launch discounted value

$689,592

$1,872,927

$13,046,731

$18,039,441

90%

60%

20%

15%

CONFIDENTIAL

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Description of ELISA and Western Blot Technologies ELISA Enzyme-linked immunosorbent assay; a sensitive immunoassay that uses an enzyme linked to an antibody or antigen as a marker for the detection of a specific protein, especially an antigen or antibody. SOURCE: ELISA. (n.d.). The American Heritage速 Stedman's Medical Dictionary. Retrieved May 16, 2007, from Dictionary.com website: http://dictionary.reference.com/browse/ELISA Performing an ELISA test

SOURCE: Foundation for Blood Research http://www.fbr.org/swksweb/immunolymeoutline.html

CONFIDENTIAL

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Western Blot A blot consisting of a sheet of cellulose nitrate or nylon that contains spots of protein for identification by a suitable molecular probe and is used especially for the detection of antibodies SOURCE: Western Blot. (n.d.). Merriam-Webster's Medical Dictionary. Retrieved May 16, 2007, from Dictionary.com website: http://dictionary.reference.com/browse/Western Blot

SOURCE: Davidson College http://www.bio.davidson.edu/COURSES/genomics/method/Westernblot.html

CONFIDENTIAL

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Appendix C: References References removed. The types of references used in this business plan included medical journals, interviews with industry experts, public health information (i.e. World Health Organization), and industry specific news releases.

CONFIDENTIAL

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Business Plan Liver Quest