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2014 Opportunities and Outlook for Growth Human & Animal Health
Notice to Investors & Analysts This Business Summary, Investment Summary and any Exhibits to it contain forward-looking statements that involve risks and uncertainties. These statements reflect the Company’s future plans, objectives, expectations and intentions, and the assumptions underlying or relating to any of these statements. These statements may be identified by the use of the words “anticipate,” “expect,” “estimate,” “intend,” “believe,” and similar expressions. The Company’s actual results could differ materially from those discussed in these statements. Factors that could contribute to these differences include, but are not limited to, those discussed in this document.
The Overview A small R&D company holds valuable intellectual property in the form of a proprietary algae culture that produces secondary metabolites, which show early promise to: Support a healthy immune response in animals and humans Promote healthy cholesterol balance in humans
Support joint health in animals and humans
Applications in food ingredients, dietary supplements, pharma
Company is poised to drive REVENUE IN MONTHS with a tiered monetizing strategy that begins with natural food/feed products and extends to future pharmaceutical potential
Speed to Revenue Biotech firms typically are committed to a long, complex development and validation process involving a small group of related compounds. By contrast, the Company offers investors a tiered strategy:
After efficacy/safety testing and registration, the Company’s natural animal products may be monetized in a matter of months by licensing to larger, well-established brand names as healthy feed and pet treat ingredients
In parallel, the Company intends to develop and license bioactive compounds and molecules derived from its natural products to animal health companies for therapeutic use at pre-IND or post-IND thresholds to drug development firms or directly to pharma’s
Human product development/compliance as a dietary supplement starts once revenue streams from animal licenses are realized
Company spreads development risk and capital across feed, food, dietary supplement and pharma market verticals, while sprinting toward positive cash flow
Monetizing Multiple Verticals
Market Potential Animal Health The Company’s proprietary, algae-derived bioactive compounds are found to be effective in early studies when applied to dairy cattle and dog models – our highest near-term priorities
Accelerate recovery from bovine mastitis – potentially saving US dairy farmers $2.8+ billion in lost milk production annually. The world’s 244 million dairy cows represent an untapped market
Have been shown to slow the degenerative effects of canine osteoarthritis – a proven $300 million market in the US alone
Company has already executed a Collaboration/Option agreement with world’s largest animal health company for bovine mastitis research
Near-Term Opportunities
Research Animal Health The Company’s proprietary algal culture, its extracts and isolates, are found to be effective in pre-NDI studies as applied to dairy cattle and dog models
In-vitro testing of primary bovine mammary epithelial cells in 3D culture at University of Wisconsin-Madison Dept. of Dairy Science indicated enhanced immune response when cells were exposed to infective pathogens responsible for bovine mastitis, 2013-2014
Explant testing of canine joint tissues at University of Missouri Comparative Orthopaedic Laboratory has indicated the Company’s bioactive compounds may slow the degenerative effects of canine osteoarthritis in early 2014
A canine whole blood proof-of-concept study conducted by Covance in early 2014 showed promise in the inhibition of pro-inflammatory cytokines, a study being repeated by another large CRO in October, 2014
Collaborative dairy cow in vivo study underway at UC-Davis to evaluate efficacy in addressing bovine mastitis as initiated by staph, strep, e.coli strains and mycoplasma bovis pathogens
Recent Developments
Licenses/Joint-Ventures Animal Feed & Health Ingredients
NATURAL PRODUCTS SYNTHETIC COMPOUNDS
Bovine Feed
Bovine Mastitis pharma
The Company expects to execute licenses as shown. Timeline “0” is close of funding
0 6 months 12 months 18 months
Canine Supplement
Canine Food
MORE REGULATED MORE REGULATED
Canine OA pharma
NATURAL PRODUCTS
Bovine Supplement (Non-US)
Canine Collaboration Option Agreement Partner TBD
HIGHLY REGULATED
LESS REGULATED
Bovine Collaboration Option Agreement Signed Dec. 20, 2013
Market Potential Human Health The Company’s algal biomass, secondary metabolites and extracts may be developed into ingredients for these market verticals
• Dietary Supplement/Nutraceutical – a $28 billion US and worldwide market that includes spirulina, algae-derived Omega-3s, algae-derived astaxanthin, dried kelp, etc.
• Functional Food Ingredient – over 400 good-for-you food and beverage categories need powerful ingredients to support their product claims – dozens of licenses can be created
Refined isolates and bioactive molecules for therapeutic applications
• Medical Food – a specialized but stable and profitable market niche for ingredients in prescribed foods and beverages
• Pharmaceuticals – as potential lead compounds for drug development
Natural Products/Future Therapeutics
Research Human Health The Company’s proprietary algal culture extracts were found to be beneficial in pre-NDI/pre-IND studies as applied to human and hypercholesterolemic hamster models
In-vivo testing of hypercholsterolemia at Wayne Statue University Dept. of Nutrition and Food Science found test subjects treated with culture extracts dropped total cholesterol by 32% and increased HDL cholesterol counts by 5% in studies conducted 2009-2012
In-vitro testing of human HEP-G2 and PBMC cell lines revealed early promise in addressing inflammatory cascades resulting from lipid peroxidation in repeated studies at Wayne State University School of Medicine conducted 2010-2012
Company commenced isolation and characterization efforts of bioactive components in 2012 as potential cholesterol management, autoimmune and anti-inflammatory ingredients in human food and dietary supplements
Natural Products/Future Therapeutics
Licenses/Joint-Ventures Human Nutrition & Health Products
BIOPHARMACOLOGICAL OR SYNTHETIC COMPOUNDS
Cholesterol Balance
Autoimmune Modulation
The Company expects to execute licenses as shown. Timeline “0” is close of funding
0 12 months 18 months 24 months
Cholesterol Balance
Joint Health
Immune Response
NATURAL PRODUCTS
Joint Health
Human Nutrition Ingredient JV or License
PHARMA REGULATIONS
FOOD SAFETY REGULATIONS
Human Therapeutic Lead Compound Option Agreement
Active
• Natural Bioactive(s) • Cholesterol
Pending
• Synthetic Development • Cholesterol
Active
• Natural Bioactive(s) • Anti-Inflammatory/Autoimmune
Active
• Single-Strain Algae Natural Product • Cholesterol/Anti-Inflammatory/Autoimmune
Pending • Bacterial Natural Product (Pre/probiotic) • Anti-Inflammatory/Autoimmune
Pending • Synthetic Development • Anti-Inflammatory/Autoimmune
Product Platforms
Human Animal
Human Animal Pharmaceutical
Human Only
Human Only
Human Animal
Human Animal
Pharmaceutical
Food ingredient Dietary Supp.
Food ingredient Dietary Supp.
Food ingredient Dietary Supp.
Food ingredient Dietary Supp.
Potential Multiple Licenses
Business Model Company builds the value of intellectual property by:
Validating a specific application, i.e., bovine mastitis feed ingredient, through safety/tox testing, in vitro and in vivo studies and then patenting uses, production methods, administration modes
Creating a valuable dataset for such a specific application, to shrink risk and development time for a potential licensee, such as an animal feed manufacturer, dietary supplement marketer, animal health co.
Executing royalty agreements, joint ventures and licenses to boost market value and earning power of the intellectual property
Core Business: Monetizing Early Results
Prioritized Objectives Potential Revenue Streams
Near-Term < 24 months
Bovine Feed Ingredient Canine Diet Supplement
Porcine Feed Ingredient Human Diet Supplement
Longer-Term > 24 months and beyond
Bovine Medicinal App Canine Medicinal App
Pharmaceutical Lead Compound
Company Snapshot Publicly traded, fully-reporting since 2003
New management and $5.75 million new capital infusion beginning January, 2012
New business model adopted in January 2012 – Company primarily engaged in R&D and subsequent licensing/JV of Intellectual Property
Actively acquiring intellectual property Acquired assets of metabolic testing company August 2013 – WellMetris
subsidiary currently in FDA pre-submission, preparing for market launch and active partnering
Optioned libido-enhancement drug candidate August 2014 – newly formed Derivlan Bioscience subsidiary to test compounds in Brazil
Company launched $4.5M capital funding initiative Q2 2014
Trading symbol: OTC:HEPI.QB
Company Snapshot WellMetris Profile: Pre-clinical screening tool for insurers, employers and accountable care organizations
Subsidiary Product Pipeline
Point-of-Care Reporting Software
Analyzer Device
Test Cartridge
Cloud-Based Records Management
WellMetris
Company Snapshot Derivlan Biosciences is investigating non-steroidal libido enhancement drug candidates for animal and human applications Potential use in pork production, where artificial insemination
continues to increase as 30-40% of male swine don’t exhibit breeding behavior
Potential use in addressing female hypoactive sexual dysfunction disorder, affecting 30+million women in the US alone
Proof-of-concept testing indicates bioactivity in rodent model
New studies in planning stage
Company intends to commence license marketing post-IND application
Subsidiary Product Pipeline
Prospects & Projections
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
6 12 18 24 30 36
Revenue Estimates in (000’s)
Months
The Company anticipates income streams to begin developing in late 2014/early 2015, consisting initially of advances or options, based on required funding, and then ramping to sustainable revenues from long-term royalty agreements, licenses and private labeling
All sources of revenue
Exit Strategy Health Enhancement Products, Inc. is a publicly-traded Nevada corporation. Once revenue is optimized, the options to consider are:
Sell the entire Company to a larger, well established JV or licensee for a healthy multiple
Spin out the revenue-generating licenses or subsidiaries into another public entity and conduct an IPO, distribute proceeds to Company shareholders pro-rata
Continue to operate the Company in its current form and develop new applications from the Company’s proprietary algal cultures, metabolic testing platforms and new drug candidates. Move listing to NASD
Realizing the Potential
Management Since taking over in late December of 2011, the new management team has focused on reorganizing and revitalizing the enterprise:
• Andrew A. Dahl – President & CEO, former Fortune 500 marketing executive and consultant with 20+ year track record, previously in private consulting practice
• Philip M. Rice II – Chief Financial Officer, former DeLoitte CPA, former CFO Stahl’s, 20+ years management consulting, corporate finance and turnaround
• Scott M. Freeman, MD – Chief Science Officer, former COO/Clinical Studies Director, Onyx Pharmaceuticals with 20+ years in drug development, clinical trials management, compliance and regulatory affairs
• Amy E. Steffek, Ph.D.,-- Director, Research & Development, with 14+ years in scientific research experience spanning neurology, cardiology, oncology, psychiatry, and endocrinology
• Scott Forsberg – Director, Product Development, former Director of R&D for Solaray and Director of Marketing for Nature’s Way with 20+ year history in nutrition and supplement industry
Core Team
Summary The Company holds valuable intellectual property that can be exploited across several market verticals and potentially dozens of licenses within:
• Functional food/feed ingredients • Dietary supplements • Medical foods • Drug development lead compounds
These distinctly different market verticals substantially increase the odds that any one market may be successful. Acquiring related IP provides opportunities that may help mitigate risk and amortize internal resources across other platforms
Realizing the Potential
Healthy Outcomes Health Enhancement Products, Inc. is dedicated to the discovery, re-purposing and development of products and processes that positively impact health and wellness in humans and animals
Corporate Mission