Xemed LLC is developing magnetized gas (hyperpolarized xenon, HXe), which is being used in FDA Phase II trials as an inhaled contrast agent for

pulmonary functional Magnetic Resonance Imaging

F. William Hersman, PhDProfessor of Physics, University of New Hampshire

and CEO and owner of Xemed LLC

The Pitch

• Demonstrations of Xemed's prototype diagnostic technology for lung imaging, underway at Harvard Medical School and University of Virginia, have generated demand worldwide for hyperpolarized xenon in research clinics and academic centers.

• Xemed is seeking $7M investment/partnership to assemble commercial-quality xenon polarizers for four key academic research hospitals and conduct Clinical Trials.

• This Hyperpolarized Xenon Imaging Network would validate efficacy and clear FDA Phase II regulatory approval within four years.

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 2

Polarization column for ultra-high-flow xenon polarizer during installation

The Pain

• Chronic Obstructive Pulmonary Disease (COPD) is the fourth leading cause of death in the US (121,000/yr)

• Prevalence of severe COPD (stage 2 and higher) among people 40 and older is 10.1%

• The total health care cost of COPD was $32.1B ($18B direct costs and $14.1B indirect costs for 2002)

• HXe can reduce costs through early detection and intervention

• HXe can improve management and outcomes of cases with high cost burden

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 3

COPD is the only major cause of death with dramatic increase. COPD is projected to become the third leading cause of US deaths by 2020, surpassing stroke.

Existing clinical solutions

• Spirometry– non-imaging

• X-ray and CT – structure without function

• Ventilation scans (133Xe SPECT)– functional information

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 4

Ventilation images using radioactive xenon scintigraphy

61 year old male with asbestos lung: a) X-ray b) CT-scan

Production of Hyperpolarized Xenon (HXe)

• Breakthrough technologies:– Counter-flow production

(patented)– Rising dewar gas separation

(patented)– Production in heat exchanger

channels (patent pending)– High brightness laser x50,000

(patent pending)• Yields six one-liter bags per hour

of >50% polarized pure HXe gas

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 5

Xemed scientist Jeff Ketel and engineer John Brackett install “Einstein” prototype xenon polarizer at the University of Virginia

Administration of HXe for MRI

• Gas sampling bag• Normally given with oxygen• Chest coil tuned to xenon frequency• Breathed while lying in a scanner• Over 300 experiments on 25 healthy

subjects (FDA Phase I completed Dec 2006)

• Over 200 experiments on ~20 subjects with COPD, IPF, CF, asthma, sickle cell disease (FDA Phase II)

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 6

Parallel imaging is performed with 32-element phased-array chest coil tuned to xenon frequency

Human subject volunteer lying in the MRI scanner inhales from a gas sampling bag filled with HXe

HXe MRI of ventilation heterogeneity

Healthy volunteer Asthma patientImages acquired with University of Virginia

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 7

HXe MRI maps of lung function

• Local alveolar dimension declines with emphysema

• Local alveolar oxygen tension (PAO2) senses gas exchange

• Average Xe tissue uptake senses fibrosis and/or inflammation

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 8

1st 129Xe image

mean SNR=85

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Subjects with interstitial lung disease,with Brigham and Women’s Hospital

COPD subject, with University of Virginia

<septal thickness> vs LV/TLC

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4 healthy normals

Market Size

• Research hospitals with HXe are validating physiological biomarkers and investigating medical hypotheses today. $1M-$3M/yr beginning 2009

• HXe imaging biomarkers for lung disease will be used as a tool by pharmaceutical companies to screen compounds for lung disease therapy $3M-$10M/yr beginning 2013

• Immediately after FDA approval, HXe will be available for management of high-risk high-value patients, such as guiding lung volume reduction surgery, laser ablation of airways, or monitoring tissue rejection in lung transplantation. Additional $3M-$10M/yr beginning 2015

• As economies of scale increase market penetration, HXe will increasingly be utilized for identifying individual smokers before catastrophic loss of lung tissue for medical or lifestyle intervention and management of COPD in life-threatening conditions. $30M-$100M/yr beginning 2018

• HXe MRI becomes the standard-of-care for 3% of COPD patients $500M/yr

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 9

Competitive Advantages of HXe MRI

• Over spirometry, pulmonary function tests: HXe MRI provides regional delineation and functional alterations of lung function compromise

• Over CT: HXe MRI multiparameter functional information is complementary to the structural information from CT. Absence of ionizing radiation is a benefit for children or for repeated usage

• Over competing 129Xe: Our counter-flow polarizer provides ~8x higher polarization and ~6x more bags per hour than other polarizers, allowing sharper images and more types of measurements from a single patient

• Over 3He MRI: Xenon supply is unlimited while 3He comes from nuclear weapons production. Xenon’s solubility is tissues allows direct sensing of gas exchange and tissue thickness. (Xemed also produces polarized 3He)

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 10

Projected revenue and timeline

• Sale/lease of three polarizers anticipated over 12 months, with one in 2009

• Seven polarizers installed by 2011

• Research tool for drug companies by 2013

• FDA NDA approval 2015• Guiding surgery 2015• Managing high-risk COPD• Early intervention 2018• Standard of care

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 11

$550k + $60k/yr each polarizer

$2M for four polarizers in 2011

$1000 per scan for 4 MRIs, 1000 subjects, before and after, $8M.

5000 surgery patients/yr, 3 visits, $1000 ea, $15M/yr

1M patients/yr $500 ea, $500M/yr(10% of market is $50M/yr)

Sale of one polarizer with every 3 MRI scanners: 400/yr = $200M/yr

Introduction to Xemed

• Founded five years ago, July 2004, as spin-off from Univ of New Hampshire• Awarded $5.6M through 11 SBIR/STTR projects in three categories

– Polarizer technology/development– Validation of MR imaging sequences– Efficacy for disease diagnosis, staging, phenotyping, and/or

management• Annual expenditures of $1.4M/yr, current spending authority ~$1M• Team Xemed consists of Founder + 10 employees + two PhD students + 3

undergrads• Partnering with Brigham and Women’s Hospital and University of Virginia• Ten pending funding proposals would add $10.2M and seven additional

sites

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 12

Management and Team

Bill Hersman PhD, CEO/CFO/CTOJan Distelbrink PhD, Director: Xenon Production

SystemsDavid Watt PhD, Director: Helium Production SystemsIulian Ruset PhD, Director: Imaging ApplicationsWalt Porter MBA MSME, Senior Product EngineerSteve Bryn, Senior Software Engineer, Quality SystemsFour additional scientist/engineers, two PhD students,

three undergradsChristina Johnson, bookkeeping, purchasing, grants, IPEmily Roster CPA, HR and accounting (outsourced)Annual External Scientific Advisory BoardAnnual A-133 audit of financial statements

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 13

Prototype polarizer “Bell” assembled in 2006.

Use of Proceeds

• Establish a ISO9000:2008 quality system GMP/GCP (ongoing, $1M)– Hire Quality Systems Engineer

• Assembly, installation, first results from 4 polarizers, 4 chest coils at 4 research hospitals ($2.5M)– Hire technical staff

• Conduct a controlled multi-center FDA Phase II trial in US and Europe ($0.35M/center/yr 2 years; $3.5M)– Hire Clinical Trial Director

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 14

2009: Xenon polarizer “Hawking” offers automated production of hyperpolarized xenon in a clinic

Summary

• With patented technology that produces hyperpolarized xenon at high rates, achieving higher polarization values, Xemed is a leading contender to monopolize hyperpolarized noble gas MRI

• Utilization of HXe by Pharma in validating new therapies could yield Xemed $10M/trial, while saving them money and time-to-market

• Acceptance of HXe MRI as a standard of care would create a $500M/yr market at point-of-care, and yield $200M/yr for Xemed

• Beginning next year, four sites worldwide can be investigating clinical indications for diagnosis, staging, phenotyping, and management of COPD, asthma, fibrosis, and other diseases in adults and children

• After four years and $7M, Xemed will be the dominant and established leader in HXe MRI with a worldwide network of research hospitals initiating FDA Phase III trials using validated biomarkers for disease.

June 25, 2009 Xemed LLC – Life Sciences Venture Forum 15