MESSAGE FROM THE CEO

Intarcia Speaks Out at 34th JP Morgan Healthcare Conference Calling for “Sanity” Instead of a Reliance on Current Models Failing to Control T2D In Most Patients

With impressive clinical results and business milestones to report, Kurt Graves explained the need to unleash disruptive innovation so that real progress can be achieved in T2D.

When looking at the 10-year global treatment trends in type 2 diabetes, we need to realize that we aren’t even close to beating this disease – we’re still not getting T2D under control in the majority of patients. I’m talking about hundreds of millions of patients. It’s time we faced the facts and honestly evaluate medicine’s collective under-performance to date based on the clinical evidence and the mounting T2D crisis that is growing more and more out of control around the world. We also need to rekindle and unleash a sense of urgency to address the crisis, because right now someone is dying from diabetes and diabetes-related complications every 6 seconds!

Kurt Graves addressed a group of more than 200 people at JPM, proving the point that disruptive innovation is needed to effectively address the majority of T2D patients not at goal.

When you look realistically at the treatment results and the trends over the last decade, one alarming insight jumps out at me: The failure to bring the majority of T2D under control hasn’t improved despite more than 40 new T2D Rx pills and injections being approved in the last 10 years! The utter lack of real-world clinical progress needed to bring these many millions of patients under control should make us all ask a very fundamental question: Do we really think doing more of the same – yet another pill or injection – will break the 10-year trends that haven’t budged in terms of not being able to treat-to-goal the majority of patients, and not being able to resolve the widespread difficulty adhering with their therapeutic regimens? 

Over the last 10 years we’ve had roughly one-third of T2D patients with controlled blood sugar (HbA1c level) over time, but at least two-thirds of patients are not in control over time. That puts a solid majority of patients at significant risk of serious adverse health consequences – often beginning with frequent hospitalizations, but also including amputations, blindness, heart attack, stroke, and death. It is only a question of time and how bad the consequences will be when you have chronically uncontrolled diabetes. If we don’t change this situation radically by finding totally new solutions for these people, the toll in human suffering will be epic, and the massive financial burden to our global healthcare systems will increasingly cripple the economic health of countries around the world.

At Intarcia, we passionately believe in fighting this fight, because we know it is high time to embrace totally disruptive therapeutics and technologies that take completely different approaches than what we’ve used to date. It’s urgent that we all need to work together to break the patterns of failure for as many as two-thirds of patients with T2D. The long-standing evidence and consistent trends clearly show another pill or injection isn’t likely to be the solution. Not likely at all. It is also crystal clear we cannot afford to keep trying the same things over-and-over hoping to achieve dramatically different results. A very smart man once called that the definition of insanity! 

At the same time, we don’t need things that are disruptively different just for the sake of them being “different”. No, we need disruptive new therapeutics and technologies that are well targeted and tailor designed with laser focus to hit squarely the most pressing unmet needs, reversing current negative therapeutic trends. At JPM 2016 this was my message, and I was really excited to see more and more people firmly agreeing with our logic and our insights, and cheering us on to face the alarming 10-year T2D trends that must be confronted and addressed in a big way:

 
  • Still > 50% of Patients Not Treated To Their HbA1c Goal
  • Still > 70+% of Patients Not Adherent with Their Medicine Over 12 Months
  • Still Increasing Prevalence Rates & Pre-Diabetes Spiraling Out of Control
  • Still a Leading Killer Worldwide: Someone Dying From T2D Every 6 Seconds
  • Still Escalating T2D Healthcare Costs: Global 10-Yr Estimates Now $7+ Trillion

If you can believe it, a recent study by the US Department of Heath & Human Services (HHS) clearly showed that some segments of the market that are most out of control, and at elevated risk, are actually getting worse! In some areas we are actually still losing ground with large numbers of patients at an increased risk of very bad and costly outcomes. As one example, there is a huge and growing segment of T2D patients with chronic A1c levels >9%, despite efforts to treat them with multiple pills and injections. This segment of patients with A1c levels >9% is getting much worse – over the last 5 years millions of additional patients fell into this segment in the U.S. alone. Look at the slide below based on a report from HHS.

In the last five years, the number of Americans at likely risk of serious long-term consequences from highly uncontrolled A1c increased by 1.5 million more patients than the previous 5-years.

At Intarcia, these trends are why we’ve taken a bold leap to get beyond pills and injections. We’ve all watched the insanity and lack of material progress for far too long. So instead of playing the same old game and executing a business model that everyone else is, we decided to stand up and take the risk – and the opportunity – to totally drop the “pill and injection model” every bio-pharma company is stuck in so we can shape an absolutely new game against these devastating T2D trends. We knew we had to design a completely new pathway to deliver chronic medicine: We knew it had to be a truly novel and focused approach that addresses the fundamental unmet needs pills and injections are failing to address for the majority of patients.

Yes, we could have brought a new pill and injection to market and fought for market share in a totally inadequate model of delivering medicine for tens of millions of patients, but what good would that do for the unmet clinical needs and frightening trends payers, providers, and many millions of patients are dealing with everyday? The unmet needs and financial burden we are targeting is massive, and the life-changing consequences for millions and millions of T2D patients are at the very core of what drives our passion, our tenacity of purpose, and our will to win at Intarcia.

We are here to open-up a totally new pathway of delivering chronic medicines!  We aim to make them more effective, well tolerated, and dosed just once or twice-yearly in a game-changing approach that provides an entirely new level of real-world efficacy, treatment adherence, and control over time. This is the type of disruptive innovation that has the potential to reverse the poor A1c control trends, and the near impossible task of changing T2D patient adherence trends in upwards of 70-80% of patients. We are here to deliver big wins and everyday victories for the vast number of patients, providers and payers who have been losing their battle against T2D.

The successful results for ITCA 650 in multiple phase 3 trials have been powerful, unprecedented in many regards, and incredibly consistent across studies. They show the clear potential of ITCA 650 against negative T2D trends and unmet needs: The first once or twice-yearly therapy in T2D designed to deliver powerful HbA1c reductions and control, weight reduction, a very low rate of minor hypoglycemia, and the truly game-changing adherence over time that so many patients desperately need. That is really exciting, that is really important, and that is what is really motivating all of us at Intarcia.

During 2015, Intarcia did a stellar job focusing on executional excellence so that the full promise of ITCA 650 can be delivered as quickly as possible. And we didn’t stop there. We also took major steps toward building a disruptively different and impressive pipeline of additional once-yearly products beyond ITCA 650 that should create similar progress in other major chronic diseases such as obesity, and autoimmune and inflammatory diseases. As a result, 2015 was an incredibly productive year:

 
  • A novel $300M synthetic royalty financing deal for 2% of WW sales, with an option to give back the royalty interest and convert into our stock at a $5.5B valuation when we are approved through the first two years of launch
  • Successful trial results of FREEDOM-1 and FREEDOM-1 HBL at the 75th ADA
  • FREEDOM-2 head-to-head superiority vs. market-leading oral therapy Januvia®
  • FREEDOM-CVO safety trial in 4000 patients met the events needed to wind the study down in record time; top-line results will be available in 2Q 2016
  • Pipeline: Numab product collaborations and our acquisition of Phoundry
  • CXO (customer experience outcomes) took procedure time to less than 1 minute
  • Doubled our talent base and expanded all three US sites: Boston, Hayward, RTP

In 2016 we are raising the bar again and actively pursuing five key fronts: 1) Deliver our ITCA 650 global regulatory filings, 2) Continued organizational build and launch readiness, 3) Finance Intarcia appropriately to preserve maximum optionality, 4) Launch new head-to-head superiority trials, and 5) Progress our pipeline. It will be an intense and exciting year filled with all our passion, determination and skill to execute on our Vision and Purpose as a Company: Unleashing our talent to deliver disruptively innovative progress in some of the biggest diseases on the planet – starting with type 2 diabetes!

We are fully on track and confident regarding our opportunity. We have faced challenges and skeptics every step of the way so far, and we always will with the mission we’ve taken on.  Whenever you do something disruptively new where there is no analogue, there are always skeptics.  But there are far fewer now that people see the incredible progress we’ve made.  We have millions of people still to reach, but I know we have the will to win for them, and the will to find solutions to keep us on track toward our Vision and Purpose each and every year. 

I can feel the excitement building all around us. It certainly continued this year at our presentation at the 34th annual JP Morgan Healthcare Conference where we received strongly positive reactions and feedback from investors, analysts, potential partners, and major business and trade journalists. The clinical data for ITCA 650 is unambiguous and differentiated, and the T2D trends and unmet needs are unambiguous, too. The closer we come to touching millions of lives and truly unleashing our potential, the more people understand just how important and exciting our mission really is.

We are committed to do what is right and what will do the most good for all parties, beginning with patients, payers and providers. In fact, the central theme of our commercial strategy will be focused on driving improved outcomes for each of our customer segments. We will be actively engaged with payers, patients, and providers to turn around the 10-year unmet need trends as much as possible. It won’t happen overnight, but we will make it happen. Working together we will open up a totally new treatment pathway for managing T2D where everybody wins – not one party vs. another. We will be delivering a tailor made solution that I truly believe stands the very best chance of breaking the insane trends we’ve suffered through for so long in T2D.

As always, I want to thank all our employees and partners for their efforts and results in 2015: It was one of the finest annual performances I’ve seen in my 25-year career. Even more, I want to say thanks for your continued sense of urgency to complete our tasks and advance our first medicine to market. Your efforts will allow a vast number of people around the world to benefit sooner rather than later from our totally disruptive and mission critical approach to T2D therapy. I also want to thank our investors for their incredible and steadfast support.

Stay tuned for further news from Intarcia as 2016 unfolds and our efforts continue to produce the outcomes we’ve targeted – outcomes that are vital to millions of patients, and that fulfill our Vision and Purpose as a Company.

Kurt Graves
Chairman, President and CEO
Intarcia Therapeutics, Inc.