Utilizing Magnetic Field-Induced Heat to Release Cytotoxic Drugs

MagnoTherm
Business Plan
04-15-2013
Heather Goodwin
Manasa Jillella
Shuang Zhang

Table of Contents
1. Table of Contents……………………………………………………………...2
2. Executive Summary………………………………………………...…………3
3. Business Description and Vision……………………………………………...5
4. Market Analysis………………………………………………….……………7
5. Description of the Products and Services……………………………………11
6. Organization & Management………………………………………………...16
7. Anticipated Marketing and Sales Strategy…………………………………...21
8. Financial Plan………………………………………………………………...25
9. Appendices…………………………………………………………………...28
10. References……………………………………………………………………31
2

Executive Summary
The Company:
HMZ Pharmaceuticals was developed in Boston, Massachusetts at Northeastern
University. It is a limited liability company containing three members, Ms. Goodwin, Ms.
Jillella, and Ms. Zhang. These members have developed MagnoTherm, a thermal
magnetic chemotherapeutic, for the treatment and diagnosis of castration-resistant
prostate cancer. All general lab work is completed at a company rented facility in
Cambridge, Massachusetts, but Dana-Farber Cancer Institute serves as the company’s
contract research organization for animal models and MRI testing.
The company hopes to provide an additional, and more effective, treatment option
for patients suffering from cancer. HMZ Pharmaceuticals ultimately seeks to increase the
quality of life in patients, while decreasing their risks for serious adverse effects.
The Market:
In the United States and Western Europe, prostate cancer incidence is on the rise
as a result of the increased life expectancy. The mortality rates of prostate cancer have
remained stable over the past 40 years, demonstrating that current treatments do not meet
the needs of patients. This has allowed the members to conclude that there is definitely
room for improvement within the field and that prostate cancer drugs will definitely be
necessary in the future. Recent reports have revealed that chemotherapeutics hold
approximately 30% of prostate cancer drug market and that the sales of prostate cancer
drug products should exceed $8.1 billion by 2020. Because of our state-of-the-art
technology and advantages over current treatment options, the members definitely see
potential to share in the market.
Competitive Analysis:
Currently, hormone therapy drugs and chemotherapy treatments dominate the prostate
cancer market. However, these treatments are not effective when treating castration-
resistant prostate cancer. We see potential to share in the market because our system
utilize magnetic field-induced heat to release cytotoxic drugs and not androgen receptor
signaling, like the current dominant treatments. For drugs that can compete with
MagnoTherm, our technology has better targeting effects, less cytotoxicity, and better
biocompatibility. Therefore, MagnoTherm may be a more effective and safer option for
patients.
The Product:
MagnoTherm consists of doxorubicin-loaded iron oxide nanoparticles, which are
approximately 25 nanometers in diameter. MagnoTherm is a thermal magnetic
chemotherapeutic that has shown promising results in the treatment and diagnosis of
castration-resistant prostate cancer. These iron oxide nanoparticles are loaded with
doxorubicin and possess unique properties that allow for increased localization at the
disease site. Controlled drug release can be achieved by using a specific radio frequency
and amplitude in an alternating magnetic field, while their superparamagnetic properties
allow for enhanced contrast that open potential for magnetic imaging. Results from in
3

vitro studies in two cell lines have confirmed that MagnoTherm is biocompatible and
does not cause cytotoxicity.
Value Proposition:
The biggest advantage of MagnoTherm is its ability to serve as multifunctional carrier for
the targeting, imaging, and controlled drug release. The simultaneous diagnosis and
treatment of tumors reduces the risk for systemic reactions and adverse effects. Its ability
to accumulate and concentrate drug dosages at the site of interest gives it another
advantage over current treatment options for prostate cancer. Lastly, its PEGylated
coating increases biocompatibility and dispersibility, making MagnoTherm a safer and
possibly more effective alternative to current drugs on the market.
Marketing and Sales Plan:
HMZ Pharmaceuticals recognizes three potential customers, including prostate cancer
patients, physicians, and insurance companies. The members hope that results from both
in vitro and in vivo studies will demonstrate the benefits of MagnoTherm over other
treatments and encourage these customers to utilize the product. Even though our
technology requires expensive MRI machines and other magnetic field machines during
treatment, the decreased risk of adverse effects and better accumulation may result in less
required treatments over the long term, suggesting it could still be a more cost-effective
option. Once FDA approved, marketing and sales promotions will be achieved by using a
variety of methods, such as conferences, tradeshows, advertisements on health websites,
and free drug samples, specifically in three regions with dense populations and numerous
hospitals.
Management and Organization:
At the current stage, the three members, who are all students in the Pharmaceutical
Science Program at Northeastern University, serve as the governing board for all
decisions regarding the development and direction of MagnoTherm. All decisions are
based on a voting system, where the majority vote decides the direction of the product.
In the coming years, before clinical trials in human subjects are conducted, a
board of managers will be organized to ensure future success, because the members lack
experience in finance, business, and marketing. In addition, a scientific advisory board
will be organized to facilitate with decisions regarding the research and development.
Financial Summary:
The necessary funding for the preclinical and clinical trials will be raised from a variety
of sources. The three members will cover the start-up cost of approximately $90,000. In
the future, when the member-managed limited liability company converts to a manager-
managed company, the members will seek funding from friends and family, non-profit
organizations, angel investors, and venture capitalists. Successful and significant data in
preliminary studies will hopefully encourage a second and third round of funding from
supporters. Revenue is expected beginning in 2022.
4

Business Description and Vision
Cancer is the leading cause of disease worldwide, with approximately 12.7 million new
cases occurring in 2008 alone1
. The World Health Organization (WHO) estimates that
there will be nearly 22.2 million new cancer cases diagnosed annually by 20302
. Even
with the large amount of new cases and death rates associated with the disease, the
treatment options are not as effective as desired. The most common types of cancer
treatments are chemotherapy, radiation therapy and surgery, which may be used alone of
in combination with each other. However, most of these treatments, particularly
chemotherapy and radiotherapy, are accompanied by severe side effects, which greatly
impact the patients’ quality of life.
Company History:
The idea for MagnoTherm was developed at Northeastern University in 2012. The
product’s development is still in the early stages. The members have demonstrated
efficacy in in vitro studies, performed at a small rented laboratory space in Cambridge,
Massachusetts and have decided to begin animal testing at Dana-Farber Cancer Institute
in Boston, Massachusetts. The members hope that successful results in animal models
will encourage financial support from a variety of sources, so the transition from
laboratory to market can be accomplished.
Company Vision:
Our vision at HMZ Pharmaceuticals is to develop and establish MagnoTherm as an
additional therapy to treat and diagnose patients suffering from cancer worldwide. We
hope MagnoTherm demonstrates obvious benefits over other cancer drugs as a result of
its design and technology.
Mission Statement:
Our mission is to build a company capable of discovering, developing, and delivering
innovative medicines and diagnostics for the treatment and diagnosis of serious illnesses,
like cancer. We hope to accomplish this by utilizing groundbreaking science and
innovation to make a difference in the health and wellbeing of others.
Business Goals and Objectives:
Primary goal of our HMZ Pharmaceuticals is to complete preclinical studies of
MagnoTherm by the conclusion of 2015. We hope to apply for Investigative New Drug
approval from the Food and Drug Administration (FDA) after completing all
pharmacological and toxicological date obtained from animal studies.
Our future goals are:
 To create value for MagnoTherm in the pharmaceutical market.
 To improve the quality of life of patients by providing a safe and effective
therapy.
 Operate with high standards of integrity.
 To achieve scientific excellence.
5

The Keys to Success include:
 A successful management team, which contains members who are motivated,
entrepreneurial, flexible, committed, and determined.
 Networking with other entrepreneurs and representatives in the industry to meet
the necessary investors for MagnoTherm.
6

Market Analysis
The Critical Needs of the Existing Market:
In United States, prostate cancer is the second leading cause of death in men, usually
developing after the age of fifty3
. Research has shown that the incidence rate of prostate
cancer increases with age4
and that almost 80% of men will have prostate cancer by the
time they reach age 805
. Therefore, the potential patient population for MagnoTherm is
quite large.
According to the National Cancer Institute, there will be 238,590 new cases of
prostate cancer diagnosed in 2013, and approximately 29,720 deaths attributed to the
disease in the same year6
. In addition to these statistics, the following chart demonstrates
that the prostate cancer mortality rate has remained constant, around 20 to 30 per
100,000, in the United Kingdom since the 1970s. This relatively stable mortality rate has
allowed us to conclude that currently available drugs for the disease have not met the
needs of prostate cancer patients. Therefore, the demand for a novel anti-prostate cancer
treatment that is capable of providing prolonged survival time, increased progression free
survival, increased efficiency, at a lower cost definitely still exists.
Age-Standardized Mortality Rates per 100,000 Population in UK7
7

Outlook of the Industry
In 2009, a cancer report revealed that the total worth of global prostate therapeutics was
approximately $3 billion. The report also revealed that from 2001 to 2009, the market’s
compound annual growth rate (CAGR) was 10.7%8
. In addition, the reporters stated that
the sales of prostate cancer therapeutics should exceed $8.1 billion, with a corresponding
CAGR of 9.3%, by the year 20209
.
Recent data, shown in the following diagram, has demonstrated that the United
States is the leading market for global prostate cancer therapeutics, with an estimated
share of 59%. Germany is the second leading market, with an approximate share of 12%,
followed by France, who shares approximately 7%10
. This information, in combination
for the estimated sales of prostate cancer therapeutics, has allowed us to conclude that the
market for a new drug, such as MagnoTherm, is wide and profitable.
Global Market Share of Prostate Cancer Therapeutics11
Hormone therapy drugs and chemotherapy treatments currently dominate the
prostate cancer drug market. Hormone therapy drugs, such as Zoladex (gosereline
acetate) and Casodex (bicalutamide), are often used during the initial treatment stage.
These drugs contribute to approximately 30% of the total prostate cancer therapeutic
markets to date12
. As for chemotherapy, Taxotere by Sanofi is the leading drug in the
field, with an approximate sale worth $820.5 million and a market share of 29%13
.
However, this market share is expected to change soon as the result of numerous other
players, such as Johnson & Johnson (Zytiga, approved in 2011), Bristol Myers-Squibb
(ipilimumab, in phase 3 clinical trial) and Teva Pharmaceuticals (Custirsen, in phase 3
clinical trial).
Johnson & Johnson's Zytiga (abiraterone acetate) and Medivation and Astellas'
Xtandi (enzalutamide) are becoming the most popular treatments for metastatic
castration-resistant prostate cancer (mCRPC). mCRPC is an advanced stage prostate
cancer, which cannot be cured by surgery or radiation therapy. Also, Bayer and Algeta's
Alpharadin (radium-223 chloride) is another promising prostate cancer drug because it is
capable of targeting painful bone metastasis. GlobalData predicts that Zytiga and Xtandi
8

will dominate mCRPC market, with an estimated of $1.7 billion for Zytiga and $2.05
billion for Xtanti by 2020.
Growth potential of the market:
The incidence rates of prostate cancer are extremely high and strongly correlated with
age, as shown in the table below. With developments in modern medicine and healthcare
reform, an increase in life expectancy in all individuals is definitely expected. The most
troubling news is that over the age 90, 100% men will develop prostate cancer14
.
Therefore, if other causes of death, such as car crashes or heart attacks, were eliminated,
every man would be diagnosed and most likely die as a result of prostate cancer.
Therefore, an increase in lifespan will result in an increased incidence of prostate cancer,
and in increase in market size for prostate cancer drugs.
1. Age 2. Incidence Rate
3. 50 4. 30%
5. 60 6. 35%
7. 70 8. 40%
9. 90 10. 100%
The Correlation Between Age and Prostate Cancer Incidence15
Targeting the Market’s Clients
MagnoTherm’s target consumers are patients diagnosed with Metastatic Castration-
Resistant Prostate Cancer (mCRPC), which is the hardest form to treat. As describe
earlier, early state prostate cancer cases are most commonly treated with surgery,
radiotherapy, and hormonal therapies. Hormonal therapies are effective as a result of
castrations, which lowers androgen levels in patients. In reducing these levels, a decrease
in androgen receptor signaling is observed, and prostate cancer progression is more
difficult. However, this treatment option becomes ineffective when the patients develop
resistance as they progress to mCRPC. At this point MagnoTherm may be a more
effective option. Because our system
specifically to the diseased area, it does not rely on androgen receptor signaling to
perform anti-cancer effects, like all other cytotoxic drugs systems. In addition,
MagnoTherm’s effective targeting effect can offer better cytotoxic profiles than other
cytotoxic drugs, such as Taxotere.
Our clients may be patients themselves, physicians, and insurance companies.
MagnoTherm’s technology enables our system to have better targeting effects and a more
controllable drug release, so less side effects are experienced. The features also give our
product an important insurance benefit because there is a decreased risk for complications
that could require other procedures or combined therapies.
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Anticipated Market Share:
MagnoTherm is a doxorubicin formulation, so it will share the market of
chemotherapeutics with a wide array of companies and corporations. Today,
chemotherapeutics hold about 30% of the market and this number will not change
drastically, regardless of new companies or players within the prostate cancer field,
because the majority of new drugs are hormone-related therapeutics. These new drugs
are often used in earlier stages of treatment and act through different mechanisms.
Therefore, there are very few overlapping competition areas between hormone-related
therapeutics and chemotherapeutics and the 30% market share should remain constant for
a considerable amount of time. In addition, the other drugs that can compete with
MagnoTherm have extremely cytotoxic drug formulations, as in Taxotere, or radiation
formulations, like Radium-223 Chloride. Due to the enhanced targeting effects and
controllable release, MagnoTherm has unique technical advantages over other competing
chemotherapy drugs. Conservatively, our anticipated share of prostate cancer market is 3
to 7%.
10

Description of Products and Services
Product and services:
The goal of our company was to develop a drug delivery system, with high efficacy and
less adverse effects, for the treatment of mCRPC. With these goals in mind, we have
developed MagnoTherm, a thermal magnetic chemotherapeutic. While the aim of our
product was to treat prostate cancer via magnetic hyperthermia, we also believe that the
product may be useful in the treatment of cervical cancer and pancreatic cancer in the
near future.
MagnoTherm consists of Doxorubicin (DOX) loaded superparamagnetic iron
oxide nanoparticles, which are approximately 25 nm in diameter. They have a feasibility
to trigger encapsulated Doxorubicin release by the application of a specific radio
frequency and amplitude in an alternating magnetic field. The use of external oscillating
magnetic field ensures the localized release of drug only at the site of accumulation, thus
minimizing damage to adjacent areas. Their superparamagnetic nature allows for
enhanced contrast properties that open potential applications for magnetic resonance
imaging. Therefore, in using the concept of magneto-chemotherapy, MagnoTherm can be
used as an efficient multifunctional nanocarrier for combined therapy and imaging.
Features and benefits:
MagnoTherm serves as a theranostic agent that is they can be used both for diagnosis and
the treatment of the disease. Simultaneous diagnosis of the tumor during the treatment
helps in reducing the frequency of drug administration, which in turn helps reduce
systemic toxic reactions. MagnoTherm’s ability to accumulate and concentrate at the
targeted site also helps avoid adverse side effects, commonly seen with other anti-cancer
drugs. In addition to these benefits, the PEGylated coating on the nanoparticles are
soluble in water, so they show better dispersibility and enhanced long circulation.
Value proposition
 Novel technology.
 Serves as multifunctional carriers for targeting, imaging, and controlled
release of drug.
 Biocompatible and safer than other treatment.
Proof of concept:
Several scientific literature studies have supported the concept that these
superparamagnetic iron oxide nanoparticles serve as a novel approach in the diagnosis
and treatment of the cancer. These studies have shown that the nanoparticles deliver
drugs to the targeted site with minimal cytotoxic effects. Apart from the literature, results
obtained from cytotoxic studies in HeLa cell lines and PC3 cell lines have confirmed that
these nanoparticles are biocompatible and do not cause cytotoxicity. These studies have
also shown that when placed in an external oscillating magnetic field, these particles
trigger drug release that result in decreased cell viability.
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Stage of development:
HMZ Pharmaceuticals is a small start-up company that was founded in Boston,
Massachusetts, with an aim of developing novel cancer therapy to treat patients suffering
from mCRPC. The primary goal was to design a technology that was not only cost
efficient, but had less adverse effects when compared to other treatment options currently
on the market. Currently, our research and development team is performing preclinical
studies with MagnoTherm to evaluate the effectiveness and safety of the product. Results
obtained from the in vitro studies gave promising results, and encouraged us to perform
the in vivo studies. Our future goal is to obtain good pharmacokinetic profile in the
animal studies, which will allow us to started clinical trials. We ultimately hope to gain
FDA approval so the product can reach eventually the market.
Intellectual property:
Intellectual property is the core for every pharmaceutical or biotechnology company. To
protect all results and developmental techniques pertaining to our research, we are
planning to apply for the required patents in 2014. The patents will help protect our
intellectual property and enable commercialization of MagnoTherm, while keeping its
competitors at bay. In addition to these benefits, the patent protection will also help in
recovering the cost of out research and development. As earlier stated the aim of
MagnoTherm is to treat prostate cancer. The occurrence and mortality rates of this
particular cancer is higher is Western Europe, with 93.1%, and North America, at
85.6%16
. Therefore, we are planning to apply for patents in the United States first, then in
Europe in due time. We feel that these two regions will increase the selling of our
product, and that revenue can be utilized for the application process of other international
patents.
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Disclosure:
Our limited liability company, HMZ Pharmaceuticals, follows the stringent policies and
procedures that are essential to protect the results of our research and development
activities and also to ensure that all its intellectual property is protected prior to any
public disclosure of its new products.
Barriers to Reengineering:
To develop a new product and apply for approval from numerous government agencies
requires an immense amount of time, energy, and money. Considering the cost of
production, it is unlikely that other companies will re-engineer our product. Apart from
these factors, our company’s policies and patents will protect the concept of our new
technology from being used by others to produce the same product.
Product or service limitations:
Customers should consult physicians before considering the product. Patients should
report any adverse reactions such as nausea, vomiting, diarrhea, stomatitis, and/or
potential neutropenic complications while using the drug. Patients should also inform
their health care providers about any other medications in order to prevent drug
interactions. Physicians should take caution when considering the dose of MagnoTherm
because over-dosage enhances toxic effects. In addition, cumulative dosage increases the
risk of cardiomyopathy and congestive heart failure. The use of MagnoTherm requires a
magnetic hyperthermia device and MRI machine. Therefore, MagnoTherm can only be
used in hospitals with these devices.
Government approvals:
Government approvals are required in various stages of drug development
process. Approvals are needed when applying to conduct clinical trials, during the
clinical trials, when applying for marketing authorization, and during post- marketing
studies. Different countries have different regulatory requirements for the approval of
new drugs, which are enforced by regulatory authorities.
Because our project is still in preclinical stage, we do not have any government
approvals at this time. However, once the preclinical studies are completed, and
promising laboratory results are observed, we will apply for an investigational new drug
(IND) approval from the center for drug evaluation and research (CDER). After we
receive IND approval, we will begin our clinical studies, which will generate the safety
and efficacy profiles for our product. With the results from preclinical trials and animal
studies, along with manufacturing and production information, we will apply for a new
drug application (NDA), which will permit sales and marketing in the United States.
After successful sales in the United States, we are also planning on applying for the
European regulating agencies for marking approval in Europe.
Along with these major approvals we will also ensure that our company meets all
cGMP, cGLP regulations, and ISO 9000 standards for implementing modern quality
systems. We follow all the regulations and policies in maintaining safe working
conditions, good laboratory conditions, and proper disposal of hazardous waste. In
following these guidelines, we have lower risks of manufacturing problems, and
assurance that MagnoTherm is safe and effective for patients.
13

Liability insurance:
Because our product is still in the early stages, and not tested in humans, we do not need
any product liability. For the next few years, we will be using rented lab space, which
offers general lab equipment. Therefore, at the current time the equipment and other
assets will be protected from sudden accidents, fire, or disaster, through the renting’s
insurance. Once we begin conducting clinical trials, purchase our own facility, and
establish our management team we will need cost effective liability insurance to protect
our assets in the event of an emergency. Once the clinical trials begin we will also seek
product liability. Employee insurance will also need to be considered.
Suppliers:
All the glassware, chemicals and the plastic supplies are obtained from Fischer Scientific,
Sigma-Aldrich, Avanti Polar Lipids, Ocean Nanotech, Neoptix, and Paul Scientific
Corporation. We currently have a yearly purchasing contract from all these leading
suppliers, which entitles us to a price reduction upon purchasing in bulk. We hope to
continue these contracts in the future when our own facilities are established.
Production:
Small-scale production:
Production of MagnoTherm was done in a sterilized lab space in order to prevent
contamination. The first step in the manufacturing process requires the synthesis of the
core magnetic nanoparticles through a modified co-precipitation method. The ferric
chloride is weighed and dissolved in 15 ml of deionized water to produce ferrous
chloride. An addition 15 mL of deionized water is added to the solution, while stirring, to
form a clear liquid. The stirring process allows for the passage of inert gas. The solution
is then heated to 80°C.
Once the desired temperature is reached, 5M ammonium hydroxide and 0.1M
oleic acid is added to the solution, while stirring for 30 minutes. At this time, the
nanoparticles will precipitate in the presence of ethanol. A ratio of 1:10 nanoparticle to
ethanol is used to remove any excess oleic coating. In order to make the nanoparticles
water-soluble and dispersible, they are combined with DSPE-PEG (1:10).
The next step requires the loading of the drug, which in this case is Doxorubicin.
Hydrophobic DOX (2mg/ml) is added into the DSPE-PEG coated nanoparticle solution
and kept overnight in stirring apparatus to ensure that the iron oxide nanoparticles are
loaded with DOX. After the drug loading is completed, the nanoparticles are spin filtered
to remove any excess drug. They are then placed in a freezer for preservation. The
representative samples can be removed from the freezer to perform hyperthermia,
fluorescence, and cytotoxicity studies.
All chemical waste generated during this production process is discarded
according to the government regulations regarding waste disposal. In addition, all
significant health and safety risks are taken into consideration during the production
process.
The Large-scale production method will be developed in 2015.
14

Facilities:
At this stage in the company, animal studies will be performed at Dana Farber Cancer
Institute in Boston, Massachusetts. This was the agreed upon mode of action because our
revenue is limited at this point in our research and they are able to provide us access to
mice and the needed MRI machines. We think it would be best to use all funding on
research supplies and studies, rather than a high-end facility.
However, we hope to become an established and organized company within the
next three years. When this occurs, we will rent 4,000 square feet of laboratory space
near Cambridge, Massachusetts. This location is ideal for an emerging innovative
company like HMZ Pharmaceuticals, because it is located in close proximity to
universities, venture capital firms, law and accounting firms, and many other hospitals
and biotechnology companies. Our company will not own the facility, but will take a sub
lease of a second-generation space, which is equipped with all the necessary research and
development requirements. We will have all required equipment, such as fluorescence
instruments, Brookhaven DLS for measuring particle size and zeta potential,
hyperthermia units for in vitro studies, weighing machines, ultracentrifugation
equipment, rotary evaporators, sonicators, water baths, and cell culture room. We will use
contract manufacturer for manufacturing process in order to controlling our budget before
generating revenue.
15

Organization and Management Plan
Owners/Members:
MagnoTherm’s management team will be comprised of three members, all students from
Northeastern University’s Masters of Pharmaceutical Science Program. Heather
Goodwin, Manasa Jillella, and Shuang Zhang all have varying levels of experience in
laboratory research and cancer research.
Heather Goodwin. Ms. Goodwin received her Bachelor of Arts in Biology from College
in 2011. She also holds a minor in mathematics and chemistry. Ms. Goodwin is currently
a candidate for her Masters of Science in Pharmaceutical Sciences from Northeastern
University, hoping to graduate in May of 2013. Her experience in cancer research dates
back to 2010, when she began working in the Vidal laboratory at Dana-Farber Cancer
Institute in Boston, Massachusetts. As a student researcher she studied Epstein-Barr virus
associated cancers by examining disruptions in normal protein interactions.
Manasa Jillella. Ms. Jillella developed the idea of the magnetic thermal drug delivery
system while working in a nanomedicine laboratory at Northeastern University. She has
been working on iron oxide nanoparticles for triggered drug release for the past year
since developing the idea. She is currently a graduate student in the Pharmaceutical
Science Program at Northeastern University, and is expecting to graduate in May 2013.
In 2011, she completed her bachelors in pharmacy from India’s Jawarhal Nehru
Technological University. There she gained laboratory experience in the research and
development, but has worked on numerous cancer research based projects as well.
Shuang Zhang. Ms. Zhang received her Bachelor of Science in Pharmaceutical
Preparation from China Pharmaceutical University and is expecting to receive her Master
in Pharmaceutical Sciences from Northeastern University. She also holds a minor in
Business Administration from China Pharmaceutical University. She has engaged in
multiple cancer research projects both in China and the United States. Currently, she
works in Northeastern University's Center for Pharmaceutical Biotechnology and
Nanomedicine. Her specialty is in nanosystems for cancer drug and siRNA delivery. She
has an extensive understanding on anticancer drug market and marketing strategy.
16

Current Management Process at HMZ Pharmaceuticals
HMZ Pharmaceuticals is a relatively new member-managed limited liability company,
currently containing three members. Ms. Goodwin, Ms. Jillella, and Ms. Zhang, decide
upon all decisions regarding the development and direction of MagnoTherm at this time.
All decisions are made through a voting system, with each member holding one vote. The
majority vote always decides the direction of the product.
All general lab work up to this point has taken place in a small rented laboratory
space in Cambridge, Massachusetts. However, the members have decided to complete in
vivo animal experiments at Dana-Farber Cancer Institute because the facility can provide
the necessary equipment and lab space. As the results prove effective and useful to the
field of prostate cancer, we hope to convert from a member-managed limited liability
company to a manger-managed limited liability company. Within the next three years, the
members hope to have board of managers and advisory board who will delegate all
decisions regarding the research and development of MagnoTherm. The outlined
structure of the company when it reaches this stage is outlined below.
Anticipated Management and Organization
Board of Managers:
Ms. Goodwin, Ms. Jillella, and Ms. Zhang are not particularly skilled in any form of
management, so a manger-managed company limited liability company, with a board of
mangers was chosen as the future business structure. These five members will serve as
the governing body of the company and will have the authority to authorize business
decisions and actions. Their authority to authorize decisions will be delegated by an
operating agreement. Members will have extensive experience in pharmaceutical
regulatory affairs, research and development, finance, human resources, and sales and
marketing. Their broad knowledge and experience in each discipline will ensure them
qualified to make decisions on behalf of the company
Scientific Advisory Board:
Eight members will sit on the advisory board in the future. Each member will come from
a variety of backgrounds and offers expertise in numerous disciplines of pharmaceutical
science, drug development, and oncology. Each member will have expertise in one of the
listed clinical or scientific areas, including pharmacokinetics and pharmacodynamics,
drug development, clinical pharmacology, drug metabolism, drug development, and
toxicology. An individual experienced with FDA laws and regulations will be one of the
most important assets to the board. He or she will be able to ensure that the required data
is present and that unnecessary information is omitted, in turn saving the company time,
money, and energy.
17

Business Structure:
MagnoTherm will function as a manager-managed limited liability company. A
limited liability structure was the chosen business structure as a result of numerous
advantages, such as protected assets, pass-through taxation, and limited compliance
requirements. Because all members are first time business starters it is important that
personal assets, such as homes and savings accounts, are protected in the event of
business debts and liabilities. In addition, this business structure will ensure that the
company will not pay taxes at the business level, but instead on the personal level. Since
this company is newly developed, the advantage of avoiding double taxation is important.
A manager-managed limited liability company was chosen in order to allow the
members to concentrate on building business, instead of addressing the needs of the
company on a daily basis. Ms. Goodwin, Ms. Jillella, and Ms. Zhang will be more
passive investors, only to be consulted for advice regarding the company. However, they
do not have the power to bind the company, like the mangers. The members’ advice can
be disregarded if the board decides to do so. The board of managers will have the
authorization to make all decision regarding the sale, distribution, and lease of the
company’s assets. In addition, they can also decide on the purchase of additional assets,
use of the company’s assets, and payments of the company’s funds. They will be
authorized to make decisions regarding the hiring of employees, financing agreements,
and licensing agreements.
18

Manager’s Powers17
Future managers will have the power to:
Purchase liability and other insurance to protect the company’s property and
business.
Hold and own any company real and/or personal properties in the name of the
Company.
Oversee the management to ensure compliance with the easement and terms of
other management agreements.
Invest any Company funds temporarily in time deposits, short-term governmental
obligations, commercial paper, or other investments;
Employ on behalf of the company such persons, firms or corporations as the
Manager, in its discretion, shall deem advisable, for or in connection with the
operation and management of the business of the Company and for the
performance of forestry, land management, accounting and legal services.
Recommend when and in what amounts distributions shall be made.
Estimate the amount needed for the Management Reserve Fund and recommend
when an assessment or loan is needed.
 Execute on behalf of the Company all instruments and documents, including,
without limitation: checks, drafts, loans, notes and other negotiable instruments,
financing statements, documents providing for the acquisition, mortgage or
disposition of the Company’s property; bills of sale; leases; and any other
instruments or documents necessary, in the opinion of the Manager, to the
business of the Company.
Members Powers:
After the formation of the company, the members will have power to delegate any other
decisions, not outlined above. If that situation arises the decision will be made through a
voting system, where each member holds one vote. The decision will be based off the
majority vote.
Removal of a Manger:
A person in the board of managers may be removed from the position with or without
probable cause. This must be a result of the affirmative vote of the three members, each
of which holds one vote.
Addition of a Manger:
The three members, Ms. Goodwin, Ms. Jillella, and Ms. Zhang, will be the only
individuals authorized to appoint a new manger. The position will be fulfilled by
affirmative vote from the members. Each member will hold one vote in the decision
making process.
Recruitment and Selection of Employees
The board of mangers has the authority to recruit and select the employees of the
company. An educational background in health, science, or technology is required.
19

Permits and Licensing:
The company will operate with both federal and state licenses and permits, in accordance
with the FDA and state of Massachusetts. All procedures will be conducted by following
the FDA’s good manufacturing practice guidelines.
Meetings/Communication:
Ms. Goodwin, Ms. Jillella, and Ms. Zhang will meet as often as necessary, but no less
than once a quarter. The board of managers will meet once every week, for as long as
necessary. The board of advisory will meet four times a year, for three to five hours, to
offer advice on a wide variety of issues.
Ownership:
The profits of the company will be divided based on the chart below. Dilutions will occur
depending on the number of future investors.
Individual Percent Equity
Ms. Goodwin 25.3%
Ms. Jillella 25.3%
Ms. Zhang 25.3%
Board of Managers 20% = 4% for each board of managers
member
Advisory Board 4% = 0.5% for each advisory board
member
Total = 100%
Exit Plan:
If advised by the financial advisor on the board of managers, HMZ Pharmaceuticals will
attempt to merge with another company. While disadvantages include lack of control for
existing staff members and difficulties in blending the companies’ two cultures, some
advantages do apply. First, the members, board of mangers, and advisory board may still
receive cash and/or stock, have access to resources from both companies, and some
company staff may still hold the same job titles. The members feel that the therapy will
be extremely useful in treating prostate cancer, if it is able to get to market. Therefore, the
efforts to expand and better the therapy should not be wasted, but facilitated by other
interested individuals.
BSD Medical Corporation is a potential cooperation partner. They are developing
a 3-dimensional magnetic hyperthermia system, which also has MRI imaging function. It
could be useful in directing MagnoTherm to target sites, for inducing drug release, and
for giving real-time imaging through MRI.
20

Anticipated Marketing and Sales Strategy
Company image:
MagnoTherm is based on state-of-the-art technology, which utilizes magnetic
thermo-sensitive nanoparticles. The company is specifically built to develop the
applications of this technology and has the ability to propel the development process
from bench side to market through the strict regulation standards of FDA. After the
patent is approved, the company will be glad to answer any possible technique questions
and provide research data for physicians, patients, and whomever it may concern.
Customers and demands:
Process of Introducing Pharmaceutical Products to Customers
For pharmaceutical products, especially for cancer drugs, the concept of reaching
consumers is more complicated than for other products. While patients are the actual
users of the product, they are usually not able to choose the treatment option. In addition,
most patients are not paying out of pocket for the drug because of insurance company
protection. Therefore, MagnoTherm recognizes three different customers: the doctors
who prescribe the drug, the insurance companies, who pay for the drug, and the patients
who consume the drug. Therefore, all three customers will be covered in our marketing
and sales plan.
The usual parameters a doctor will consider when choosing a chemotherapy drug
are the response rate, response duration, and the patient's tolerance18
. Using the results of
our company’s clinical research, we will confine MagnoTherm's indication to the group
of patients who demonstrate the best response during the trials. We will utilize the
thermal release nature of the technology, with a simultaneous monitor feature, as our
main marking strategy to physicians. These two combined features of the technology
allow for an effective targeting of cancer cells and a decreased toxicity profile. To our
knowledge, there is no other cancer technology on the market, which possesses these two
features, so we hope physicians will be encouraged to try a new form of treatment.
As for patients, they are typically concerned with the efficacy of the treatment,
side effects, average survival rate, and recovery rate. We hope that successful
MagnoTherm clinical trials, which demonstrate an increase in efficacy, survival rate, and
recovery rate, with a decrease in side effects, will increase patient’s interest in the
technology.
21

As for the insurance companies, their primary concern is the cost of the product.
We understand that the use of magnetic materials in our technology requires challenging
preclinical research and the use of MRI machines in treatment, meaning that the cost of
MagnoTherm will definitely be higher than other prostrate cancer chemotherapies.
However, with the better targeting effect and decrease toxicity profile, MagnoTherm may
cost less in the long run because other treatments required for complications experienced
with other treatments may be less. In addition, the combined features of MagnoTherm
may result in fewer treatment sessions when compared to other prostate cancer drugs.
Therefore, the overall cost of MagnoTherm could cost less for an individual patient,
when compared to other treatment options currently on the market.
Distribution team:
In order for the administration of HMZ Pharmaceuticals to be effective it needs to
be lead by magnetic force. In order to acquire the real-time image of drug distribution,
the theranostic requires the facilitation of MRI machine. It is a relatively complicated
administration process. It requires the training of both physicians and technical
specialists, who can answer the physician’s questions whenever necessary and travel to
hospitals when drug administration is in the early stage of marketing.
To achieve this goal with limited funding, the sales representatives will also fit the
roles as technical specialists. A science background is required for the position and a
three-month training program will be conducted to inform them about the technique
details, clinical cases, and sales skills.
The vice president of marketing and sales will first approve the general marketing
strategies, before reviewed by the five-member management board. The major
distribution channel of MagnoTherm will be hospitals and physicians. In early stage,
three areas have been chosen to start MagnoTherm's market. There will be three regional
marketing and customer service managers in charge of each region. They will develop
region-specific marketing strategies under the guideline of general marketing strategy and
ask for approval from the vice president of marketing & sales. Those region-specific
strategies should be established in compliance with laws and regulations of each state and
several sales representatives will be working under regional manager's supervision in
each region. These regions were chosen because they have the top healthcare centers and
hospitals in the United States and they also have dense populations. Therefore, success in
these three marketing areas will have the highest impact for sales and may propel
MagnoTherm’s success across the nation.
In the future, we will explore many more regions, but we will continue of utilize
internal distribution, because of the high technical requirements of our sales team. The
complete structure of the sales team is shown below.
22

Market Penetration and Growth Strategy:
Future general marketing strategies are outlined below. The regional marketing and
sales manager will be responsible for the development of the marketing strategies
according to local regulations and other conditions.
 Our vice president of research and development will give presentations at
major prostate cancer conferences about the technique of magnetic thermo-
sensitive systems. At this stage, the goal is to increase the awareness about
MagnoTherm's technology, rather than advertisement.
 Top prostate cancer physicians will be involved in the clinical trials of
MagnoTherm, if the funding allows. Once the clinical trials succeed, they
will be the first group of physicals who understand our product and are
willing to prescribe it. Their professional influence will help us to establish
MagnoTherm into mCRPC's routine treatment list.
 MagnoTherm’s website will be managed by a website team. They will be
responsible for the maintenance of the website and in time updating of
information. They will also collect and forward questions being left on the
website by physicians and customers to relevant personnel
 Once MagnoTherm receives FDA approval, advertisements will be placed on
major health websites, at trade shows, and in conferences in order to peak the
interest of physicians and patients.
 Free drug samples will be dispensed to well-known physicians. This will help
to establish relationships between our sales representatives and physicians.
And once treatment starts, patients and physicians will be willing to continue
treatment with MagnoTherm.
23

 Case collection surveys will be conducted and analyzed by relevant sales
representatives. They will give further instructions to physicians and report
important feedback to their supervisor. It is a new way to instruct physicians
on how to prescribe drugs correctly. Participation in this survey could also be
compensated to stimulate the sale of MagnoTherm.
 Physician's travelling expenses to prostate cancer conferences will be
sponsored. In doing so, presentation about the benefits and effectiveness of
MagnoTherm will be shared. If physicians are willing to share their
experiences and successes with MagnoTherm they will be compensated.
 Presentations will be held in the three marketing regions, respectively. In
addition, a sales representative will do presentations in each hospital about
the use of MagnoTherm.
 After the markets of first three marketing regions demonstrate stable growth,
more marketing regions will be developed.
 Regional and national networking events for prostate cancer physicians will
be host or sponsored by MagnoTherm.
Because of the short patent protection window, starting promotion before FDA
approval is necessary. Therefore, the first few marketing strategies will be initialized
right after the acquisition of patents in major markets. During the process, surveys will be
conducted about effectiveness of each strategy and adjustments of general marketing
strategies will be made accordingly.
Communication and Customer service:
As described before, our sales team will also act as technical specialists, where they
will help facilitate drug administration in the hospitals. Every representative will
complete a three-month training program before they are qualified. These individuals will
also receive additional training periodically, to ensure they are experts on MagnoTherm.
These individuals will provide customer service by answering patients and physicians
question about MagnoTherm. In addition to this, patients and physicians will also be able
to ask questions on MagnoTherm’s website, or call the toll-free phone number.
On the other hand, we will also have active communication, where we obtain advice
through case-collection surveys or by inviting physicians to attend out presentations. We
believe advice from practice is the key for MagnoTherm's further development.
Financial Plan
Financial Summary
24

HMZ Pharmaceuticals was formed in Boston, MA to develop, license and market its
magnetic hyperthermia drug delivery system. The first product will be MagnoTherm, a
doxorubicin formulation for the treatment of prostate cancer. The current financial plan is
focused on the first few years of the company’s development, and a pipeline with
projected expenses and expected timelines is shown below. A start-up cost of 90,000 is
expected. HMZ Pharmaceuticals will expand preclinical research and start clinical trials
gradually after receiving monetary funds and revenue is expected to grow beginning in
2022.
Start-Up Costs
The start-up costs are estimated in the table below. The total start-up costs, approximately
$90,000, will be covered by the three members’ investments. At this point, only a lab
facility will be needed and $17,000 will be used to purchase start-up materials and
chemicals. In addition, $6,000 will be used during animal testing trials at Dana-Farber
Cancer Institute. We are renting a fully established laboratory in a biotechnology
incubator, therefore no expenses for equipment will be required. The cost of the operating
expenses for a six-month period is also included in the start-up cost. Because employee
wages are one of the biggest operating expenses for a stat-up company, the three
members will serve as the only employees until the needed funding is received. During
this period, the three members have agreed to work without payment. After the
appropriate funding is available, the hiring process for employees will commence.
The application processes for SBIR funding and other non-profit organization
funding will begin right after the company is formed. If the monetary funds from the
three owners run out before additional funding is received, the owners will provided an
25
Preclinical
Research
3 years
20 million
Patents
Phase 1
Clinical Trail
IND
1 year
10 million
2 years
30 million
Phase 2
Clinical Trail
Phase 3
Clinical Trail
3 years
60 million
NDA
Post-market
Research

additional round of funding for the company. We will also consider other way to keep the
company operating in this event, such as recruiting other owners and/or performing
experiments for customers as a contractor research lab. However, in that case, additional
licensing fees may apply.
Start-up Costs
Licenses and Fees 3,000
Office Supplies 500
Rent 60,000
Telephone 500
Utilities 1,000
R&D expense (without wages) 23,000
Wages 0
Total 88,000
Research and Development Costs
In 2013, a fully established lab space will be rented at 120,000 a year, but animal testing
will be performed in animal facility at Dana Farber Cancer Institute. The total cost for
animal testing is estimated at $10,000. Other expenses, including materials and
chemicals, are approximately $36,000. If external grants are obtained, five research and
development staff will be hired for $40,000 a year, totaling an expense of $200,000.
Therefore, the total expense on wages for research and development staff will total
approximately $33, 300 for the last two months of 2013. In addition, an external
regulatory affair agency will be contracted and paid $30,000 a year.
In 2014, five more staff will be hired to perform the Food and Drug Administration’s
required toxicity and pharmacokinetics tests. The total expenses on materials, chemicals
and animal testing will increase to approximately $180,000.
In 2015, a contracting manufacturer will be hired to ensure MagnoTherm’s GMP
compliance for human use in clinical trials. A $1 million expense is projected for scaling
up the product and $10 million is projected for manufacture.
Sales Projections
Sales are projected to begin in 2022. The projected sales in for MagnoTherm in 2022 is
estimated to be around $200 million, while the annual growth should remain at 20% for
the next five years.
Income Projections
The company is projecting increasing profitability from 2022, once MagnoTherm is
approved.
Cash Requirements
A capital infusion of $1 million is needed to fund FDA required preclinical tests in 2014.
In 2015, an additional $20 million will be required for scale up and manufacturing
MagnoTherm for clinical trials.
26

Sources of Financing:
The three owners will cover the start-up costs for HMZ Pharmaceuticals. Additionally,
government funded and non-profit organization grants will be sought to support the
preclinical research in 2013 and the first few months of 2014. Venture capital
investments are going to be sought after those funds are spent. At that time, equity will be
offered to investors. The first round of $1 million will continue to facilitate preclinical
research in 2014 and a second round of $20 million will be required in 2015. After the
company received IND approval, a third round required tens of millions will be required
for the clinical research.
Appendices
[HMZ Pharmaceuticals]
Cash Flow Statement
27

For the Year Ending 12/31/13 12/31/14
Cash at Beginning of Year - 214,060
Operations
Cash receipts from customers - -
Cash paid for
General & Administrative 166,500 176,500
Compliance, Regulatory, Reimbursement 30,000 65,000
Sales and Marketing - 5,000
R&D, Clinical Trial, Pre-Production Engineering 79,440 580,500
Net Cash Flow from Operations (275,940) (827,000)
Investing Activities
[42] Cash receipts from
Sale of property and equipment - -
Collection of principal on loans - -
Sale of investment securities - -
Cash paid for
Purchase of property and equipment - -
Making loans to other entities - -
Purchase of investment securities - -
Net Cash Flow from Investing Activities - -
[42]
Financing Activities
Cash receipts from
Owners 90,000 -
SBIR 150,000 500,000
Non-profit organization 250,000
Venture capital 1,000,000
Cash paid for
Repurchase of stock (treasury stock)
Repayment of loans - -
Dividends - -
Net Cash Flow from Financing Activities 490,000 1,500,000
Net Increase in Cash 214,060 673,000
Cash at End of Year 214,060 887,060
{42}
28

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