Can-Fite BioPharma (CANF)

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1 Initiating Coverage April 11, 2016 Can-Fite BioPharma (CANF) Initiation Report LifeSci Investment Abstract Can-Fite BioPharma (NYSE MKT: CANF) is a clinical stage biopharmaceutical company developing therapeutics for cancer, inflammatory diseases, and sexual dysfunction. The Company s product candidates are based on a validated and proprietary technology platform that involves the A3 adenosine G protein-coupled receptor (A 3 AR), which is highly expressed on inflammatory and cancer cells. Can-Fite s lead product candidate CF101, an A 3 AR agonist for the treatment of rheumatoid arthritis (RA) and psoriasis, has demonstrated efficacy in Phase II clinical trials and is poised to enter Phase III trials in the second half of Can- Fite s product candidate for liver cancer and NASH is CF102, a second-generation A 3 AR agonist that reduces inflammation and inhibits tumor cell growth. The Company is currently conducting a Phase II trial for CF102 in patients with hepatocellular carcinoma and plans to initiate a Phase II study in NASH by the end of the year. Can-Fite also plans to initiate a Phase I study with its allosteric A 3 AR regulator CF602 in erectile dysfunction by the end of Key Points of Discussion Platform Technology Company with Multiple Shots on Goal. Can-Fite s platform technology is designed to address large market opportunities in the treatment of inflammatory disease, cancer, liver disease and sexual dysfunction. The platform is based on the A3 adenosine G protein-coupled receptor (A 3 AR), which is highly expressed on the surface of inflammatory and cancer cells. The Company s three proprietary product candidates CF101, CF102 and CF602, bind with and modulate the activity of A 3 AR. CF101 is a first generation A 3 AR agonist in late stage clinical development for patients with A 3 ARpositive rheumatoid arthritis (RA) and psoriasis, where as a second generation agonist, CF102, is being developed for liver indications, including hepatocellular carcinoma (HCC) and NASH. Can-Fite s preclinical asset for the treatment of erectile dysfunction is CF603, which is slated to enter a Phase I trial by the end of the year. CF101 Showed Encouraging Signs of Efficacy in Randomized Phase IIb Study. Can- Fite s oral drug candidate CF101 was evaluated in randomized Phase IIb study in patients with A 3 AR-positive RA. 79 patients were randomized to CF101 1 mg or placebo twice daily for 12 weeks. At the completion of the study, 48.6% of CF101-treated subjects achieved a 20% reduction in RA disease activity, as measured by American College of Rheumatoid criteria (ACR20), compared to 25% in the placebo group (p=0.035). Analysts Jerry Isaacson, Ph.D. (AC) (646) jisaacson@lifescicapital.com Market Data Price $3.30 Market Cap (M) $46 EV (M) $29 Shares Outstanding (M) 14.0 Fully Diluted Shares (M) 14.4 Avg Daily Vol 156, week Range: $ $7.85 Cash (M) $16.9 Net Cash/Share $1.21 Annualized Cash Burn (M) $5.0 Years of Cash Left 3.0 Debt (M) $0.0 Short Interest (M) 0.30 Financials FY Dec 2013A 2014A 2015A EPS Q1 NA NA NA Q2 NA NA NA Q3 NA NA NA Q4 NA NA NA FY (0.61)A (0.34)A (0.21)A Expected Upcoming Milestones H Complete enrollment in Phase II study with CF102 in hepatocellular carcinoma Q Submit design of the NASH Phase II trial to IRB Q Initiate Phase III trial with CF101 in RA Q Initiate Phase III trial with CF101 in psoriasis Q Submit design of the ED Phase I trial to IRB Q Initiate Phase II study with CF102 in NASH For analyst certification and disclosures please see page 50 Page 1

2 A greater percentage of CF101-treated subjects also achieved ACR50 and ACR70 compared to placebo, although these did not reach statistical significance. CF101 was well-tolerated, and there were no grade 3 adverse events. CF101 is being developed as a more convenient and better-tolerated alternative to injectable systemic RA therapies. Can-Fite expects to initiate a Phase III trial with CF101 in RA in the third quarter of 2016.! Large Market Opportunity For a Differentiated RA Therapy. RA is a chronic, systemic autoimmune disorder that affects more than 1.5 million patients in the US, and 2.9 million around the world. It is estimated that approximately 70% of these patients would present with A 3AR-postive disease and thus be suitable candidates for CF101 therapy. Annual total direct and indirect costs of RA in the US are estimated to be over $19 billion, which translates to around approximately $15,000 per patient. Additionally, when intangible costs such as those associated with premature mortality and quality-of-life are factored in, total costs for RA are estimated to exceed $39 billion or approximately $30,000 per patient. Later in this report, we estimate peak sales for CF101 in the US and EU of $882 million and 840 million ($922 million), respectively.! CF101 is a Convenient and Well-Tolerated Treatment for RA. Patients with RA experience joint pain due to inflammation of the capsule surrounding the joint, swelling of synovial cells, excess synovial fluid, and eventually the development of fibrous tissue. The course of RA varies widely from patient to patient, with some individuals experiencing only short term and mild symptoms. For most patients the disease continues to progress and in late stages, causes pain and greatly affects quality of life. Many patients are eventually treated with the anti-tnf-α biologics, which are effective for a subset of patients but are costly, need to be injected, and carry the risk for severe infection. Can-Fite is developing the orally available CF101 as a more convenient and better-tolerated alternative to existing systemic injectable RA therapies.! CF101 Demonstrated Durable Anti-Inflammatory Activity in Psoriasis. Can-Fite completed a randomized, placebo-controlled Phase II/III trial with CF101 in patients with moderate-to-severe plaque psoriasis. 326 subjects were randomized to CF101 1 mg or 2 mg, or placebo, for 32 weeks. Subjects initially receiving placebo were switched to CF101 1 mg or 2 mg after 12 weeks. The trial did not meet the primary endpoint, which was a 75% reduction in the Psoriasis Area and Severity Score (PASI75) at week 12, however 24.7% of subjects achieved PASI90 at week 32. This is important to note because only 8% of patients achieved PASI90 in Celgene s (NasdaqGS: CELG) pivotal trials for Otezla (apremilast), the current leading oral treatment for psoriasis. A subgroup analysis of PASI90 responders found that treatment naïve subjects, meaning those subjects that had not received prior systemic therapy, achieved a higher response rate than those patients that were pre-treated (p=0.026). Safety and tolerability data were aligned with previous trials with CF101 in RA. A randomized, European Phase III trial with CF101 is expected to initiate in the fourth quarter of 2016.! Large Market Opportunity For CF101 in Psoriasis. Psoriasis is one of the most common autoimmune diseases, with a US and EU prevalence of approximately 3.2% in adults. This means there are approximately 6.9 million individuals in US and 11 million in the EU. These patients place a large economic burden on the economy, with direct and indirect annual costs of more than $112 billion in the US alone. The US psoriasis market was estimated to be $3.9 billion in 2010, and is expected to grow to $7.4 billion by Later in this report, we estimate peak US and EU sales for CF101 in psoriasis of $600 million and 650 million ($714 million), respectively.! Potential for Orally Available CF101 in Psoriasis. Plaque psoriasis is a chronic autoimmune disorder that affects the surface of the skin. It is characterized by areas of dry, raised, and inflamed clusters of epithelial cells called plaques, which are most commonly found on the elbows, knees, and scalp. Topical steroids are used to treat mild Page 2

3 and moderate forms of the disease, while the injectable anti-tnf-α biologics are commonly used for treatment of moderate-to-severe cases. Despite the wide availability of these therapies, many patients fail to adequately respond or become refractory to treatment, while others experience drug-related adverse events that cause them to discontinue treatment. In addition, these treatments are costly, need to be injected, and carry the risk for severe infection. We note that Celgene s oral treatment Otezla is already achieving annualized sales of approximately $400 million less than two years after launch. This clearly demonstrates a market for more convenient and better-tolerated psoriasis therapies.! CF102 is a Second Generation A 3AR Agonist for Hepatocellular Carcinoma. Can-Fite completed an openlabel, dose-escalation Phase I/II study evaluating the safety, tolerability and pharmacokinetics of the orally administered A 3AR agonist CF102 in patients with advanced hepatocellular carcinoma (HCC). Results showed good bioavailability and pharmacokinetics, as well as initial signals of efficacy. In a subset of HCC patients with Child- Pugh B liver disease, OS was 8.1 months compared to historical OS of 4 months. Can-Fite is currently conducting a Phase II study for CF102 in 78 HCC patients with Child-Pugh Class B who have previously failed the only FDA approved drug on the market, Nexavar (sorafenib). Top-line data from this trial are expected in CF102 has been granted Orphan Drug Designation in the US and Europe, and Fast Track Designation by the FDA for the treatment of second line HCC.! Large Market Opportunity for CF102 in HCC. Liver cancer is the second most common cause of death due to cancer worldwide. There were an estimated 782,000 new cases around the world in 2012, resulting in nearly 746,000 deaths. Liver cancer is a major problem in South East Asia and other less developed countries due to high rates of liver infections such as hepatitis B. The American Cancer Society estimates that 39,230 new cases will be diagnosed in the US in The market size for HCC was recently estimated at approximately $515 million in the US, Japan, and the 5 major European Union markets and it is expected to nearly triple by 2019 as new treatments are approved. Due to the high prevalence of HCC, new treatments that provide meaningful improvements to patient outcomes are expected to capture significant market share.! Preclinical Results with CF102 Suggest Potential in Non-Alcoholic Steatohepatitis. Can-Fite is also developing CF102 for the treatment of non-alcoholic steatohepatitis (NASH). NASH is a form of non-alcoholic fatty liver disease (NAFLD), which is a broad-spectrum condition in which excess fat accumulates in the liver. NASH is the middle stage of NAFLD, where inflammation is present that can lead to fibrosis and scarring but intervention is still possible. Despite prevalence as high as 30% in developed countries, the current best intervention for NASH is lifestyle modification, and patients are often noncompliant. Preclinical studies demonstrated that CF102 reduces NAFLD activity score and improves liver morphology. Can-Fite recently filed a method-of-use patent for CF102 in NASH and expects to initiate a Phase II trial in the second half of There is potential for a well tolerated and effective therapy to capture a significant portion of the multibillion dollar NASH market.! CF602 for the Treatment of Erectile Dysfunction. Can-Fite s preclinical product candidate for the treatment of erectile dysfunction (ED) is CF602, a novel allosteric modulator that enhances A 3AR activity. CF602 binds with A 3AR to prevent its desensitization, potentiating signaling for a longer duration of time. Like CF101 and CF102, CF602 is orally bioavailable and highly water soluble, and it reduces NF-kB transcriptional activity. In preclinical studies, animals treated with CF602 showed a 118% improvement in erectile function measures compared to placebo. Note that these results are in line with those achieved by Pfizer s (NYSE: PFE) Viagra (sildenafil citrate) in similar preclinical models. Note that treatment with CF602 did not lead to a general increase in mean arterial blood pressure (MAP), which is a known risk factor for cardiovascular events. If this effect is seen in the clinic, CF602 Page 3

4 could be targeted to those patients with increased risked for cardiovascular events, including individuals with diabetes. Can-Fite is preparing to file an IND with the FDA and expects to submit a Phase I protocol to an IRB in the fourth quarter of The Company intends to develop CF602 primarily for diabetic patients and others who are not able to tolerate currently available treatments. Financial Discussion Can-Fite's net loss for the twelve months ended December 31, 2015 was $5.2 million, or ($0.21) per share compared with a net loss of $6.3 million, or ($0.35) per share for the same period in Research and development expenses were $3.9 million compared with $4.2 million for the same period in General and administrative expenses were $2.7 million compared to $2.9 million for the same period in As of December 31, 2015, Can-Fite had cash and cash equivalents of $16.9 million. Page 4

5 Table of Contents Company Description... 7 A 3AR Platform Technology For Cancer, Inflammatory and Liver Diseases, and Sexual Dysfunction... 7 CF101 An Oral A 3AR Agonist for Rheumatoid Arthritis and Psoriasis... 8 Mechanism of Action... 9 Preclinical Studies Safety Profile Rheumatoid Arthritis Causes and Pathogenesis of Rheumatoid Arthritis Symptoms and Diagnosis of Rheumatoid Arthritis Treatments for Rheumatoid Arthritis Conditions with Similar Features as Rheumatoid Arthritis Rheumatoid Arthritis Market Information Clinical Data Discussion Rheumatoid Arthritis Phase IIb Trial with CF101 in Active Rheumatoid Arthritis Planned Phase III Trial with CF101 in Active Rheumatoid Arthritis Other Drugs in Development Plaque Psoriasis Causes and Pathogenesis of Plaque Psoriasis Symptoms and Diagnosis of Plaque Psoriasis Quantifying Responses to Plaque Psoriasis Treatments Treatments for Plaque Psoriasis Psoriasis Market Information Clinical Data Discussion Phase II/III Trial with CF101 in Plaque Psoriasis Planned Phase III Trial with CF101 in Plaque Psoriasis Other Drugs in Development for Plaque Psoriasis CF102 - An A 3AR Agonist for the Treatment of Liver Cancer Mechanism of Action Hepatocellular Carcinoma Pathogenesis and Causes Symptoms and Diagnosis Treatment Page 5

6 Hepatocellular Carcinoma Market Information Clinical Data Discussion Phase I/II Trial with CF102 in Hepatocellular Carcinoma Ongoing Phase II Trial with CF102 in Hepatocellular Carcinoma Other Drugs in Development for Hepatocellular Carcinoma CF102 for the Treatment of Non-alcoholic Steatohepatitis Preclinical Studies in Non-alcoholic Steatohepatitis Non-alcoholic Steatohepatitis Market Information CF602 - An Allosteric A 3AR Regulator for Erectile Dysfunction Preclinical Studies in Erectile Dysfunction Erectile Dysfunction Market Information Intellectual Property Management Team Risk to an Investment Analyst Certification Disclosures Page 6

7 Company Description Can-Fite BioPharma is a clinical stage biopharmaceutical company developing therapeutics for cancer, inflammatory diseases, and sexual dysfunction. The Company s product candidates are based on a validated and proprietary technology platform that surrounds the A3 adenosine receptor (A 3AR), a G protein-coupled receptor that is highly expressed on inflammatory and cancer cells. Can-Fite s lead product candidate is CF101, an A 3AR agonist for the treatment of rheumatoid arthritis (RA) and psoriasis. CF101 binds with A 3AR and inhibits the production of proinflammatory cytokines and triggers cell death of inflammatory cells. The Company has completed Phase II trials with CF101 in RA and psoriasis and plans to initiate Phase III trials in both indications in the second half of Can-Fite s product candidate for liver cancer and NASH is CF102, a second-generation A 3AR agonist that reduces inflammation and inhibits tumor growth. The Company is currently conducting s Phase II trial for CF102 in patients with hepatocellular carcinoma and plans to initiate a Phase II study in NASH later this year. Can-Fite s preclinical asset CF602 is an allosteric regulator of A 3AR for the treatment of erectile dysfunction. The Company plans to file a US IND and initiate a Phase I study for CF602 in the fourth quarter in Can-Fite s developmental pipeline is shown below in Figure 1. Figure 1. Can-Fite s Developmental Pipeline Source: LifeSci Capital A3AR Platform Technology For Cancer, Inflammatory and Liver Diseases, and Sexual Dysfunction Can-Fite s product candidates are based on a platform technology that exploits the activity of the endogenously expressed A3 adenosine G protein coupled receptor (A 3AR), which is highly expressed in inflammatory and cancer Page 7

8 cells. 1,2 After its initial cloning in 1993, subsequent studies found that muscles cells produce small molecules that modulate A 3AR activity. When cultured with cells expressing A 3AR, the molecules were shown to activate A 3AR and trigger a form of cellular suicide called apoptosis. Subsequent proof of concept preclinical studies demonstrated the A 3AR modulators could be used as therapeutics in a range of cancers and inflammatory conditions. Can-Fite s three proprietary compounds CF101, CF102 and CF603, are synthetic derivatives of the naturally produced A 3AR modulators. They are designed to bind with and modulate A 3AR activity in a manner similar to their endogenously expressed cousins. CF101 An Oral A3AR Agonist for Rheumatoid Arthritis and Psoriasis Can-Fite is developing CF101 as a targeted therapy for the treatment of rheumatoid arthritis (RA) and psoriasis. It is a selective agonist of the A 3AR that was in licensed from the National Institutes of Health. CF101 is orally bioavailable and has a half-life of approximately 8-9 hours in circulation. CF101 produces anti-inflammatory and anti-cancer effects by: 1) reducing the expression of pro-inflammatory cytokines and 2) inducing cancer and inflammatory cell death. Can-Fite is currently developing CF101 as a more convenient and better-tolerated alternative to existing RA and psoriasis therapies. The Company plans to initiate Phase III trials for RA and psoriasis in Figure 2 shows the structure of CF101. Figure 2. Chemical Structure of CF101 Source: LifeSci Capital 1 Madi, L. et al., The A 3 adenosine receptor is highly expressed in tumor vs normal cells: potential target for tumor growth inhibition. Clinical Cancer Research, 10, pp Ochaion, A. et al., The anti-inflammatory target A 3 adenosine receptor is overexpressed in rheumatoid arthritis, psoriasis and Crohn s disease. Cellular Immunology. 258, pp Page 8

9 Mechanism of Action CF101 is designed to activate A 3AR, which signals through the NF-κB and Wnt/B-catenin pathways 3 to reduce the expression of proinflammatory cytokines and promote inflammatory cell death. NF-κB is a transcription factor responsible for the production proinflammatory cytokines, including tumor necrosis factor-α (TNF-α), interleukin-6, -12 and -23 (IL-6, IL-12 and IL-23), macrophage inflammatory proteins, and receptor activator of NF-κB ligand (RANKL). A 3AR stimulation inhibits NF-κB activation by reducing its transcriptional activity. This results in less TNF-α production and abrogated inflammatory responses. It also triggers apoptosis in inflammatory and cancer cells, eliminating the key players that contribute to development and progression of RA and psoriasis. 4 Figure 3 illustrates that CF101 is designed to activate A 3AR and induce inflammatory cell death. We note that several anti- TNF-α agents have been approved for RA and psoriasis and provide clinically meaningful benefits to patients with these conditions. Figure 3. CF101 Inhibits TNF-α Production and Promotes Cell Death Source: Can-Fite Presentation 3 Fishman, P. et al., Pharmacological and Therapeutic Effects of A 3 Adenosine Receptor (A 3AR) Agonists. Drug Discovery Today, 17(7-8), pp Alonso-Ruiz, A. et al., Tumor necrosis factor alpha drugs in rheumatoid arthritis: systematic review and metaanalysis of efficacy and safety. BMC Musculoskeletal Disorders, 9(52), pp1-27. Page 9

10 Preclinical Studies The anti-inflammatory activity of CF101 has been demonstrated in several preclinical studies. 5 Two classical RA models were used: the rat adjuvant induced arthritis (AIA) model and mouse collagen-induced arthritis (CIA) model. A study with AIA analyzed clinical and histological data following treatment with CF101, showing reduced symptoms of RA and minimal bone and cartilage degradation. A study with CIA examined joint swelling, assessed histological data, and quantified TNF-α expression. Results showed reduced joint inflammation and TNF-α expression at three separate joints. Both studies are discussed in more detail below. Adjuvant-Induced Arthritis (AIA) Study in Rats. Rats were injected subcutaneously with Complete Freund s Adjuvant (CFA) containing 10 mg/ml of heat killed Mycobacterium tuberculosis. This procedure triggers an inflammatory response similar to RA, with symptoms appearing approximately 14 days post-injection. Seven days after vaccination, treatment groups received CF µg/kg, CF µg/kg, or placebo. The AIA rats were assessed for clinical disease activity and histology scores at day 14 and every other day thereafter until day 26. Clinical disease activity was determined by assigning each limb a score between 0 and 4, using the following criteria:! Score of 0 No arthritis present.! Score of 1 Redness or swelling of one joint of paw.! Score of 2 Redness or swelling of greater than one joint of paw.! Score of 3 Involvement of the ankle and tarsal-metatarsal joint.! Score of 4 Redness or swelling of entire paw. Blinded histological analyses was also scored on a scale between 0 and 4, with higher numbers signifying greater disease progression. All limbs were analyzed and ratings were averaged to determine the final histology score. Approximately 70% of the control group exhibited arthritis as indicated by a clinical activity score greater than 1, compared to 20% of the CF101 treated groups. Figure 4 shows the mean clinical activity scores for animals receiving CF101 or placebo at days 14 to 26 post-vaccination. There was a substantial difference in the mean clinical scores for rats in the control group versus the CF101 groups. At 22 days post-disease induction, the mean clinical activity score was greater than 6 in the control group compared to a score of less than 3 for CF µg/kg and less than 1 for CF µg/kg. These data indicate that CF101 treatment reduced the incidence and slowed the progression of arthritis in the AIA rat model, supporting the development of CF101 for the treatment of RA in humans. 5 Baharav, E. et al., Anti-inflammatory Effect of A3 Adenosine Receptor Agonists in Murine Autoimmune Arthritis Models. The Journal of Rheumatology, 32(3), pp Page 10

11 Figure 4. Mean Clinical Scores in CF101 or Placebo Treated Rats Source: Baharav, E. et al., 2005 Results from the study also showed that treatment with CF101 reduced histological evidence of arthritis. Figure 5 presents the mean histology scores for the CF101 and placebo treated groups, which were recorded on day 26 of the study. CF101 treated groups had close to normal limb histology, with no apparent damage to the cartilage or bone and a relatively low histology score compared to the control. Placebo-treated animals showed signs of cartilage and bone degradation, and exhibited a higher mean histology score than the CF101 treatment groups. The lack of evidence of disease pathology in the CF101 treated animals serves as another point of validation for the development of this agent in RA. Figure 5. Mean Histology Scores in CF101 or Placebo Treated Rats at Day 26 Source: Baharav, E. et al., 2005 Page 11

12 Collagen-Induced Arthritis Study in Mice. Mice were injected with Complete Freund s Adjuvant (CFA) containing Type II collagen, a component of cartilage. This procedure triggers an immune response that leads to RA-like symptoms in the animal s limbs. 6 At the time of symptom onset, mice were treated with either placebo or CF µg/kg/day. Figure 6 shows the extent of joint swelling over time in groups that received placebo or CF101. Joint swelling peaked at 6 days in the placebo cohort, compared to day 10 in the CF101-treated group. Note that swelling persisted in placebo treated animals out to day 21. In contrast, the CF101 treatment animals experienced significantly less swelling at this time point (p<0.02). This study design depicts a plausible scenario of treatment initiation upon the presentation of symptoms of RA, and supports the potential of CF101 in reducing joint inflammation. Figure 6. Mean Joint Swelling in CF101- and Placebo-Treated Mice Source: Baharav, E. et al., 2005 Arthritis histology scores were calculated with the same protocol used in AIA model, and the results are displayed in Figure 7. The mean histology score for the CF101 treatment group was 1.0 ± 0.6, which was significantly lower than the score of 3.87 ± 1.2 for placebo (p<0.01). The higher mean histological arthritis score in the control group indicates greater inflammation, hyperplasia of synovial cells, and damage to the cartilage and bone compared the CF101-treated group. The data from this study highlights the potential of CF101 to alter the underlying disease features that contribute to the development of RA. 6 Nakae, S. et al., Suppression of Immune Induction of Collagen-Induced Arthritis in IL-17-Deficient Mice. The Journal of Immunology, 171(11), pp Page 12

13 Figure 7. Mean Histology Scores in CF101- and Placebo-Treated Mice Source: Baharav, E. et al., 2005 To determine how CF101 treatment impacts the expression of TNF-α, tissue samples were collected from placeboand CF101-treated animals, and western blots, which are used to detect protein, were performed on several different cell and tissue types. Samples from the draining lymph node (DLN), spleen, and synovial cells were analyzed and the results are presented in Figure 8. CF101 treatment reduced the expression of TNF-α across all three of the tested protein extracts. These data demonstrate that CF101 reduces the proinflammatory cytokine TNF-α. Figure 8. TNF-α Expression in CF101- and Placebo-Treated Mice Source: Baharav, E. et al., 2005 Page 13

14 Safety Profile Approximately 1,200 subjects have been treated with CF101 in clinical trials and the results suggest that CF101 is safe and well tolerated. The compliance rate was high in a 79 patient Phase IIb trial. 99.4% of CF101-treated patients completed the full XX weeks of treatment compared to 97.1% for placebo. 7 Adverse events (AEs) were similar between groups, with events occurring in 16.7% of CF101 treated patients and 16.2% of those receiving placebo. Results from a XX patient Phase II/III trial for CF101 in psoriasis were consistent with prior studies not discussed in this report but were conducted by the Company between 2005 and % subjects in the CF101 group reported an AE, compared with 19.6% in the placebo arm. Rheumatoid Arthritis Rheumatoid arthritis (RA) is a chronic, systemic, autoimmune disorder that affects more than 1.5 million patients in the US, and 11.3 million around the world. Patients with RA experience joint pain due to inflammation in the capsule surrounding the joint, swelling of synovial cells, excess synovial fluid, and eventually the development of fibrous tissue. Epidemiology studies have found that women are about three times as likely as men to suffer from the disease. The course of RA varies widely from patient to patient, with some individuals experiencing only short term and mild symptoms. However, for most patients the disease continues to progress, and in late stages causes pain and greatly affects quality of life. 8 Most patients are treated with anti-tnf-α agents, however, these are injectable drugs are and carry the risk for severe infection due a mechanism that broadly dampens immune function. Can-Fite is developing CF101 as a potentially more convenient and safer therapy for the treatment of RA. Causes and Pathogenesis of Rheumatoid Arthritis The current pathogenesis model of RA involves unknown antigens triggering an autoimmune response. Through co-stimulatory signals, T-cells become activated leading to stimulation of monocytes, macrophages, and synovial fibroblasts. This leads to the production of pro-inflammatory cytokines, including TNF-α, interleukin-6, -12, -17, and -23 (IL-6, IL-12, IL-17 and IL-23). Each of these factors recruit other cells and stimulate proliferation, which further induces and sustains joint inflammation. This causes damage to connective tissue and also drives bone destruction. Symptoms and Diagnosis of Rheumatoid Arthritis RA is diagnosed following a physical examination by a rheumatologist. The main symptoms of RA include joint swelling, tenderness, and limited mobility. These symptoms tend to affect joints in the upper and lower extremities, and on both sides of the body. Early stages of the disease may display features of other forms of inflammatory arthritis, so clinicians will use a combination of tests to arrive at positive diagnosis. These may include blood tests to determine levels of inflammation and look for certain biomarkers associated with RA. 7 Stoilov R.M. et al., Therapeutic Effect of Oral CF101 in Patients with Rheumatoid Arthritis: A Randomized, Doubleblind, Placebo-controlled Phase II Study. Immunome Research, 11(1), pp Wasserman, A.M., Diagnosis and management of rheumatoid arthritis. American Family Physician, 84(11), pp Page 14

15 Quantifying Responses to RA Treatments The American College of Rheumatology (ACR) criteria are used to assess the effectiveness of RA treatments in clinical trials. The ACR is reported as percentage improvement, comparing disease activity at two discrete time points, which are usually baseline and week 24. The ACR measures improvement in tender or swollen joint counts, and the improvement in at least three of the following parameters:! patient assessment,! physician assessment,! pain scale,! disability/functional questionnaire,! and acute phase reactant (ESR or CRP). ACR20, which is used as the primary endpoint in most clinical trials for RA, indicates a greater than or equal to 20% improvement in tender or swollen joint counts and 20% or greater improvement in 3 of the 5 above parameters. ACR50 would correspond to 50% or greater improvement, and ACR70 is a 70% or greater improvement. Treatments for Rheumatoid Arthritis Early-stage disease can be managed with corticosteroids and non-steroid anti-inflammatory drugs (NSAIDs). However, as the disease progresses, patients often receive non-biological disease modifying antirheumatic drugs (DMARDs), such as sulfasalazine, hydroxychloroquine, and methotrexate (MTX). Most patients only partially respond to these agents, so many are treated with anti-tnf agents. These include Remicade (infliximab), Humira (adalimumab), Enbrel (etanercept), Cimzia (certolizumab pegol), and Simponi (golimumab). Pivotal trials supporting the approval of biologics have demonstrated that the agents in combination with MTX can significantly reduce patient symptoms. However there is a risk of developing severe infections with these agents because of their broad immunosuppressive effects. Additionally these are injectable drugs, which is less preferable than an oral agent. Can- Fite is developing CF101 as a more convenient and safer therapy for the treatment of RA. Conditions with Similar Features as Rheumatoid Arthritis In addition to RA, a number of other autoimmune and inflammatory diseases are known to have similar mechanisms of action, and many RA drugs have also been approved for these indications. Some of the RA-related conditions include:! Plaque Psoriasis This is a skin affliction causing itchy red or white scaly patches to appear on the epidermis. It is an autoimmune disease that is related to an immune reaction to healthy skin cells that speeds up skin cell growth.! Psoriatic Arthritis This is a type of inflammatory arthritis that develops in about 30% of psoriasis patients and can cause joint swelling and pain, dactylitis, pain in the feet and ankles, and changes to nails.! Juvenile Idiopathic Arthritis This is the most common form of arthritis in adolescents and children. It is an inflammatory autoimmune disorder that can be limited and transient or in some cases chronic.! Ankylosing Spondylitis This is a chronic inflammatory disease of the axial skeleton that sometimes involves peripheral joints and non-articular structures. It is an autoimmune condition that usually affects spine and pelvis, sometimes resulting in spinal fusion. Page 15

16 ! Crohn s Disease This is a chronic inflammatory bowel disease affecting any part of the gastrointestinal tract, causing symptoms such as abdominal pain, diarrhea that may contain blood, vomiting, and weight loss, as well as skin rashes, arthritis, and eye inflammation.! Ulcerative Colitis This is a type of inflammatory bowel disease of the colon causing characteristic ulcers; the primary symptom is progressively worsening, constant bloody diarrhea. These conditions could represent follow-on indications for CF101. We note that clinical development is already underway for CF101 in plaque psoriasis. Rheumatoid Arthritis Market Information Epidemiology. There are an estimated 1.5 million individuals in the US 9 and 23 million around the world with RA. 10 The global prevalence of RA is estimated to be %. 11 Onset typically occurs between 30 and 50 years of age, 12 with an estimated incidence in the United States of 41 per 100,000 people. 13,14 This translates to over 130,000 new cases of the disease each year. Women are affected by RA more than men, but this difference diminishes in older age groups. 15 The earlier the disease starts, the more likely it is that patients will become severely disabled. Up to 50% of RA patients cease work within 10 years of diagnosis, and an estimated 50% to 90% leave the workforce before they reach 65 years of age. 16 Market Size. RA poses a significant economic burden to both patients and society. Annual total direct and indirect costs of RA in the United States are estimated to be $19.3 billion, which translates to approximately $14,900 per patient. Additionally, when intangible costs such as those associated with premature mortality and quality-of-life deterioration are factored in, costs for RA are estimated to equal $39 billion or approximately $30,000 per patient. 17 Approved drugs for RA include non-steroidal anti-inflammatory agents (NSAIDs), corticosteroids, conventional disease modifying anti-rheumatic drugs (DMARDs), targeted oral treatments, and biologic DMARDs. Some of these drugs are among the best-selling therapeutics in the world. Figure 9 shows the worldwide annual sales figures. Each agent is approved for multiple autoimmune indications, meaning that the sales figures below are not exclusive to RA. 9 Arthritis Rheum Jun;62(6): Accessed on Jan 30, 2015 at 10 Kahlenberg, J. M., & Fox, D. A Advances in the Medical Treatment of Rheumatoid Arthritis. Hand Clinics, 27(1), pp Scott, D.L. et al., Rheumatoid arthritis. Lancet, 376(9746), pp Stoll, J. G., & Yasothan, U Rheumatoid arthritis market. Nature reviews. Drug discovery, 8(9), p Alamanos, Yannis, Paraskevi V. Voulgari, and Alexandros A. Drosos Incidence and Prevalence of Rheumatoid Arthritis, Based on the 1987 American College of Rheumatology Criteria: A Systematic Review. Seminars in Arthritis and Rheumatism 36 (3): doi: /j.semarthrit Areskoug-Josefsson, Kristina, and Ulrika Oberg A Literature Review of the Sexual Health of Women with Rheumatoid Arthritis. Musculoskeletal Care 7 (4): doi: /msc Ahlmén, M, B Svensson, K Albertsson, K Forslind, and I Hafström Influence of Gender on Assessments of Disease Activity and Function in Early Rheumatoid Arthritis in Relation to Radiographic Joint Damage. Annals of the Rheumatic Diseases 69 (1): doi: /ard Birnbaum, Howard, Crystal Pike, Rebecca Kaufman, Maryna Marynchenko, Yohanne Kidolezi, and Mary Cifaldi Societal Cost of Rheumatoid Arthritis Patients in the US. Current Medical Research and Opinion 26 (1): doi: / Birnbaum, Societal Cost (see footnote above) Page 16

17 Figure 9. Sales of Top Rheumatoid Arthritis Drugs (in US $ millions) Treatment Cimzia (certolizumab pegol) $610 $789 $1,058 n/a Enbrel (etanercept) $4,236 $4,551 $4,688 $5,364 Humira (adalimumab) $9,265 $10,659 $12,543 $14,012 Remicade (infliximab) $6,139 $6,673 $6,868 $6,561 Simponi (golimumab) $607 $932 $1,187 n/a Source: Company Reports The field is moving towards the development of novel biologic therapies and small molecule agents that will target patients in a more personalized manner. The potential for Can-Fite comes from its ability to select patients most likely to respond to CF101 treatment through the use of a blood-based biomarker test. This approach was validated in a 79 patient Phase IIb study, which showed a significant increase in ACR20 in patients pre-selected for elevated A 3AR expression 18 US Market Opportunity. There are an estimated 1.5 million individuals in the US with RA. Up to 70% of all RA patients express elevated levels of A 3AR. Can-Fite is developing CF101 for patients who have failed non-biologic DMARDS, including sulfasalazine, hydroxychloroquine, and methotrexate. We estimate that approximately 70% of RA patients would be eligible for CF101 therapy. This amounts to an addressable US market of approximately 735,000 patients. Figure 10 highlights the breakdown of eligible patients for CF101 in the US. Figure 10. CF101 s US Addressable Patient Population for RA % of Patients # of Patients # of US patients with RA M % of patients with RA and high levels of A 3AR biomarker expression 70% 1.05 M % of patients that only received non-biologic DMARDS 70% 735,000 CF101 s US addressable patient population 735,000 Source: LifeSci Capital EU Market Opportunity. According to the National Rheumatoid Arthritis Society, there are an estimated 2.9 million individuals in the EU with RA. We estimate that 70% of these individuals would express elevated levels of 18 Fishman P., Adenosine Receptors The Promise of A3AR Research. Drug Development & Delivery, March 2015, Vol 15, No 1. Page 17

18 A 3AR and thus make them eligible for treatment with CF101. Similar to the US breakdown, we estimate that approximately 70% of these patients have only received non-biologic DMARDS. This amounts to an EU market of approximately 1.4 million patients. Figure 11 highlights the breakdown of eligible patients for CF101 as a treatment for RA in countries outside of the US. Figure 11. CF101 s EU Addressable Patient Population % of Patients # of Patients # of EU patients with RA M % of patients with RA and high levels of A 3AR biomarker expression 70% 2.0 M % of patients that only received non-biologic DMARDS 70% 1.4 M CF101 s WW addressable patient population 1.4 M Source: LifeSci Capital CF101 s US Market Potential. We conducted a scenario analyses to estimate the US market potential for CF101 as a treatment for RA. The analysis is based on the assumptions listed below:! Addressable Market We used assumptions detailed in Figure 10 above to calculate the addressable population of patients who may be candidates for CF101.! Peak Market Penetration Since there are many approved therapies for the treatment of RA, we modeled peak penetration range of up to 10%. There are competing oral programs in the clinic, similar to CF101, and so we modeled a penetration rate of 5% on the low end of the range.! Pricing We assume a price per month of approximately $1,000, which is conservative but in line with Company guidance. We note that this price is at a considerable discount to the anti-tnf agents, which can cost upwards of $3,000 per month. Figure 12 shows three scenarios for peak US sales of CF101 based on the assumptions above. Scenario 1 assumes peak penetration of 5%. This scenario would be consistent with a modest peak penetration but still results in revenues up to $441 million. Scenarios 2 and 3 are more aggressive peak penetration estimates, and would result in annual revenues potentially exceeding $882 million. Figure 12. Scenario Analysis of US Market Potential for CF101 in RA Scenario 1 Scenario 2 Scenario 3 CF101 Eligible Patients 735,000 patients Peak Penetration 5% 7.5% 10% Yearly Cost $12,000 Peak Annual Revenues $441 million $661 million $882 million Source: LifeSci Capital Page 18

19 CF101 s EU Market Potential. We conducted a scenario analyses to estimate the EU market potential for CF101 as a treatment for RA. The analysis is based on the assumptions listed below:! Addressable Market We used assumptions detailed in Figure 11 above to calculate the addressable population of patients who may be candidates for CF101.! Peak Market Penetration Since there are many approved therapies for the treatment of RA, we modeled a peak penetration 10%. There are competing oral programs in the clinic, similar to CF101, and so we modeled a penetration rate of 5% on the low end of the range.! Pricing We assume a price per month of approximately 500, which is conservative but in line with Company guidance. We note that this price is at a considerable discount to the anti-tnf agents, which can cost upwards of 1300 per month in the EU. Figure 13 shows our three scenarios for peak WW sales of CF101 based on the assumptions above. Scenario 1 assumes peak penetration of 5%. This scenario would be consistent with a modest peak penetration but still results in revenues up to 420 million. Scenarios 2 and 3 are more aggressive peak penetration estimates, and would result in annual revenues potentially exceeding 840 million. Figure 13. Scenario Analysis of EU Market Potential for CF101 in RA Scenario 1 Scenario 2 Scenario 3 CF101 Eligible Patients 1.4 million patients Peak Penetration 5% 7.5% 10% Yearly Cost 6000 ($6,600) Peak Annual Revenues 420 M ($461 M) 630 M ($692 M) 840 M ($923 M) Source: LifeSci Capital Clinical Data Discussion Rheumatoid Arthritis Can-Fite is developing CF101 for patients with A 3AR-postive RA. A randomized Phase IIb trial evaluating the safety and efficacy of CF101 met its primary endpoint, with more subjects in the treatment arm achieving ACR20 at week 12 compared to the control arm. Can-Fite is planning to initiate a randomized, placebo-controlled Phase III trial for CF101 in the EU in the second quarter of Phase IIb Trial with CF101 in Active Rheumatoid Arthritis Trial Design. Can-Fite completed a randomized, double-blind, placebo-controlled Phase IIb trial for CF101 in 79 patients with active RA. 19 For this trial, active RA was defined as: at least 6 of 28 swollen joints, 6 of 28 tender joints, and a Westergren erythrocyte sedimentation rate (ESR) greater than 28 mm/hour or C-reactive protein (CRP) 19 Page 19

20 approaching abnormally high. Subjects were enrolled in the trial based on expression of A 3AR 1.5-times above the predetermined normal population standard. 79 subjects were randomized to twice daily CF101 1 mg or placebo and treated for 12 weeks. Subjects had the option of remaining on nonsteroidal anti-inflammatory drugs (NSAIDS) and corticosteriods. The primary endpoint was ACR20 at 12 weeks. Trial Results. The study met the primary endpoint. 49% of CF101 patients achieved an ACR20, compared to 25% in the placebo arm (p=0.035). A greater number of CF101 treated patients also achieved numerically greater ACR50 and ACR70 responses than those receiving placebo, although these results were not statistically significant. The ACR response rates at 12 weeks are presented in Figure 14. Figure 14. ACR Response Rates at 12 Weeks Placebo CF101 P-value ACR20 25% 49% ACR50 9% 19% >0.05 ACR70 3% 11% >0.05 Source: LifeSci Capital Post-hoc analysis of treatment naïve patients showed a robust response to CF101 therapy. Figure 15 presents the data for the 16 subjects that were included in this analysis. Greater than 75% of patients in the CF101 arm achieved ACR20 at week 12, compared less than 40% in the placebo group. Although these results were in a small set of patients, Can-Fite has decided to target treatment naïve patients in the upcoming CF101 Phase III program. Figure 15. CF101 Response for Treatment Naïve Patients Source: Company Presentation Page 20

21 CF101 was well tolerated and its safety profile was consistent with previous Phase II studies in other autoimmune and inflammatory conditions. There did not appear to be a broad immunosuppressive effect, and all adverse events were mild to moderate. Planned Phase III Trial with CF101 in Active Rheumatoid Arthritis Potential Trial Design. Can-Fite is planning to conduct a randomized, double-blind, placebo-controlled Phase III trial evaluating the safety and efficacy of CF101 in patients with active RA. 20 Approximately 360 patients with high expression of A 3AR will be randomized 1:1:1 to receive CF101 1 mg, CF101 2 mg, or placebo. The primary endpoint is expected to assess disease activity. Can-Fite has submitted the study protocol to submit to the EMA in the first half of The Company intends to file the protocol in the US and Canada in the second half of If the protocol is approved, the trial is expected to enroll its first patients in the second quarter of Other Drugs in Development There are several late-stage drugs in development for the treatment of RA. Regeneron s (NasdaqGS: REGN) sarilumab and Eli Lilly s (NYSE: LLY) baricitinib are two product candidates with PDUFA dates in Q and Q1 2017, respectively. Sarilumab is a monoclonal antibody targeting the interleukin-6 receptor, while baricitinib is a small molecule inhibitor of Janus (JAK) 1 and 2 kinases. 61% of subjects in Regeneron s Phase III program for sarilumab achieved ACR20 at week 24, compared to 34% in the placebo arm (p<0.001). Similarly, Eli Lilly s recently completed Phase III program with baricitinib met its primary endpoint, demonstrating superiority to placebo and active comparators after 12 weeks of treatment based on ACR20 response. We highlight the design and results of these trials in the section below. Figure 16 lists programs in Phase III development or later for the treatment of RA. Biosimilars are not included in this list. Figure 16. Late-Stage Rheumatoid Arthritis Drugs in Development Drug Company Status in RA Sarilumab Baricitinib ABT-494 Sirukumab Regeneron (NasdaqGS: REGN) & Sanofi (NYSE: SNY) Eli Lilly & Company (NYSE: LLY) & Incyte (NasdaqGS: INCY) Abbvie (NYSE: ABBV) Johnson & Johnson (NYSE: JNJ) Source: LifeSci Capital Q PDUFA date Q PDUFA date Ongoing Phase III 21 Ongoing Phase III trials 22, Page 21

22 Regeneron Pharmaceuticals Phase III Program for Sarilumab in Rheumatoid Arthritis Trial Design. Regeneron Pharmaceuticals completed the SARIL-RA-TARGET study, a randomized, double-blind, placebo-controlled Phase III trial with sarilumab in patients with RA. 24 Subjects enrolled in the trial had moderate to severe RA for 6 months or more, failed or were intolerant to TNF-α antagonists, and were treated with a DMARD for 6 weeks before screening. 546 patients were randomized to receive sarilumab 150 mg, sarilumab 200 mg, or placebo. Treatment was administered subcutaneously every other week and given concomitantly with a DMARD. The co-primary endpoints were:! Percentage of patients achieving ACR20 at 24 weeks.! Health Assessment Question-Disability Index (HAQ-DI) improvement at 12 weeks. Trial Results. On May 21, 2015, Regeneron announced that the SARIL-RA-TARGET trial met its co-primary endpoints of RA disease reduction and improvement in physical function, defined by ACR20 and HAQ-DI, respectively. Figure 17 shows the proportion of patients achieving ACR20 at week 24 and the change in HAQ-DI from baseline to week 12. Sarilumab 150 mg and 200 mg treatment groups achieved statistical significance for both endpoints (p<0.001). Results from the SARIL-RA-TARGET study show that 56% in the sarilumab 150 mg group and 61% of the sarilumab 200 mg group achieved ACR20, as compared with 34% in the placebo group. At week 12, HAQ-DI score decreased by 0.49 from baseline in the sarilumab 150 mg group (p=0.0007) and 0.50 in the sarilumab 200 mg group (p=0.0004), compared to 0.29 reduction in the placebo group. Figure 17. Results for the Co-Primary Endpoint in SARIL-RA-TARGET Endpoint Sarilumab 150 mg Sarilumab 200 mg Placebo ARC20 (Week 24) 56%* 61%* 34% HAQ-DI (Δ Week 12) -0.49* (p=0.0007) -0.50* (p=0.0004) * denotes significance (p<0.001) as compared to placebo Source: LifeSci Capital Safety. The frequency of treatment-emergent adverse events (TEAEs) was slightly higher in the sarilumab treatment groups than the placebo arm. TEAEs occurred in 65% and 66% of patients in the 200 mg and 150 mg groups, respectively, versus 50% in placebo. The most common adverse events were infection and neutropenia. The safety findings of this study were consistent with previous studies with sarilumab in RA. Eli Lilly & Incyte Registration Program for Baricitinib in Rheumatoid Arthritis Trial Design. Eli Lilly and Incyte conducted two randomized, double-blind, active- and placebo-controlled Phase III trials with baricitinib in patients with moderate to severe RA. 25,26 These studies, named RA-BEGIN and RA- BEAM, were designed to evaluate baricitinib as a first-line treatment for RA Page 22

23 584 subjects were randomized 1:1:1 to baricitinib 4 mg, baricitinib 4 mg plus methotrexate, or methotrexate alone. The primary endpoint was the proportion of patients achieving ACR20 at week 24. In the RA-BEAM study, 1,304 subjects were randomized 1:1:1 to baricitinib 4 mg plus subcutaneous placebo, oral placebo plus 40 mg Humira (adalimumab), or oral placebo plus subcutaneous placebo. The primary endpoint was the proportion of patients achieving ACR20 at 24 weeks. Trial Results. Eli Lilly announced positive results for RA-BEGIN and RA-BEAM studies. The RA-BEGIN trial met the primary endpoint of baricitinib s non-inferiority to methotrexate, as determined by ACR20 response at 24 weeks. Treatment groups improved in all of the metrics that compose the ACR score, including swollen and tender joints, pain, and patient and physician assessments. The RA-BEAM study also met its primary endpoint, demonstrating baricitinib s superiority to placebo. Full results from the trial are expected to be published in a peerreviewed journal later this year. Safety. The frequency of treatment-emergent adverse events (TEAE) was similar between treatment groups. The safety findings of these studies were consistent with prior studies. Plaque Psoriasis Plaque psoriasis is a chronic autoimmune disorder that affects the surface of the skin. It is characterized by areas of dry, raised and inflamed clusters of epithelial cells called plaques, which are most commonly found on the elbows, knees, and scalp. Plaques appear in cycles known as flares, and can be triggered by bacterial or viral infections, stress, medications, and smoking. Psoriasis is rarely life threatening, however it causes emotional stress and significantly affects quality of life. The condition usually presents at the time of adolescence, and is estimated to affect roughly 6 million individuals in the US. 27,28,29 There is no cure for psoriasis, although several treatment options can reduce the frequency and duration of flares. Topical steroids are used to treat mild and moderate forms of the disease, while systemic biologics including Humira (adalimumab), Enbrel (etanercept), and Remicade (infliximab) are commonly used for treatment of moderate-to-severe cases. Despite the availability of these therapies, many patients remain untreated, do not have an adequate response, or have treatment-related side effects. 30 Can-Fite is developing oral CF101 as a potentially safer, more convenient therapy for patients with moderate-to-severe psoriasis. Causes and Pathogenesis of Plaque Psoriasis Plaque psoriasis is caused by the rapid turnover of epithelial cells. Figure 18 shows that these cells initially develop deep within the layer of the skin called the dermis, and then rise to the surface or epidermis as older cells die and are Kircik, L.H., Anti-TNF agents for the treatment of psoriasis. Journal of Drugs in Dermatology, 8(6), pp Lowes, M.A. et al., Pathogenesis and therapy of psoriasis. Nature, 445(7130), pp Lebwohl, M.G. et al., Patient perspectives in the management of psoriasis: results from the population-based Multinational Assessment of Psoriasis and Psoriatic Arthritis Survey. Journal of the American Academy of Dermatology. 70(5), pp Page 23

24 shed from the body. The process of cell turnover usually takes a month in healthy individuals. Psoriasis greatly accelerates cell turnover and causes clusters of epithelial cells to accumulate and form plaques. 31 Figure 18. Schematic of Normal Skin and Psoriatic Skin Source: Food and Drug Administration The autoimmune response that triggers psoriasis is likely mediated by T-cells. The current model posits that T-cells patrolling the dermis respond to an unidentified self-antigen, and become activated. These activated cells secrete cytokines including IL-1, IL-6, IL-8, and TNF- α. The cytokines stimulate cells in the epidermis to rapidly divide and ultimately result in plaques. 32 Types of Psoriasis There are several forms of psoriasis. Each type is listed and described below. Can-Fite is initially targeting patients with plaque psoriasis, which accounts for approximately 80% of all psoriasis cases.! Plaque psoriasis. This form is characterized by skin lesions that are red at the base and covered by silvery scales.! Guttate psoriasis. This form involves small, drop-shaped lesions that appear on the trunk, limbs, and scalp. Guttate psoriasis is most often triggered by upper respiratory infections.! Pustular psoriasis. This form presents with blisters of noninfectious pus surrounded by irritated skin. Attacks of pustular psoriasis may be triggered by medications, infections, stress, or exposure to certain chemicals.! Inverse psoriasis. This form involves smooth, red patches that occur in the folds of the skin near the genitals, under the breasts, or in the armpits. The symptoms may be worsened by friction and sweating Al-Shobaili, H.A. & Qureshi, M.H., Pathophysiology of psoriasis: current concepts. Psoriasis- Types, Causes and Medication, Chapter 4. Page 24

25 ! Erythrodermic psoriasis. This form of psoriasis can be very serious and requires immediate medical attention. It involves widespread reddening and scaling of the skin, and may be triggered by a reaction to severe sunburn or to taking corticosteroids or other medications. It can also be caused by a prolonged period of increased activity of psoriasis that is poorly controlled. Another condition associated with psoriasis is psoriatic arthritis (PsA), a form that produces joint inflammation and pain. It is worth noting that the skin lesions and joint pain do not necessarily have to occur at the same time. PsA will develop in roughly 40% of people with psoriasis. 33 Symptoms and Diagnosis of Plaque Psoriasis Plaque psoriasis is diagnosed following a physical examination. The main symptom of plaque psoriasis is development of thick, inflamed clusters of epithelial cells called plaques. Plaques are dry, cracked, and occasionally bloody skin deposits that can be associated with burning or itchy sensations. The elbows and knees are common sites of plaque flares, and chronic inflammation in these areas can lead to psoriatic arthritis. Clinicians will examine the plaques, and may perform a skin biopsy to rule out other related disorders. Quantifying Responses to Plaque Psoriasis Treatments Clinicians use the Psoriasis Area and Severity Index (PASI) quantify the response to therapy. This index takes into account the affected body surface area (BSA) and the severity of the plaques as measured by the redness, thickness, and scaling of the skin. The two assessments are combined and assigned a number that ranges from 0 to 72, with 0 indicating no psoriasis, and 72 indicating maximal disease. Treatments for Plaque Psoriasis Treatment for plaque psoriasis is determined by the severity of the disease. Typical treatments involve topical corticosteroids, topical vitamin D analogues, phototherapy, biologic therapeutics such as TNF- α and IL-12/23 inhibitors, Otezla (apremilast) or a combination of one or more of these agents. 34 In the section below we highlight commonly used psoriasis treatments for moderate-to-severe plaque psoriasis. There are a number of treatment options available, including small molecule and biologic agents. Systemic Therapy. Systematic therapies are used to treat patients with moderate-to-severe plaque psoriasis. They include both immunosuppressive and immuno-modulatory drugs like methotrexate (MTX) and cyclosporine A (CsA). MTX and CsA are effective treatments, however their long-term use is associated with significant toxicity. CsA use is limited to one year in the US due to potential irreversible vascular abnormalities, interstitial fibrosis, and renal toxicity. 35 Patients treated with MTX may develop liver and bone marrow toxicity, which can be lethal. Biologics. The biologic therapies for moderate-to-severe plaque psoriasis inhibit TNF-α, a key inflammatory cytokine. Humira (adalimumab), Enbrel (etanercept), and Remicade (infliximab) all target TNF-α and have been approved for treatment of psoriasis. The anti-tnf-α therapies are effective, and can lead to PASI75 scores of great than 70% after 12 weeks of treatment. Although the side effect profile for these agents is mild compared to other 33 Mease, P.J. et al., Managing Patients with Psoriatic Disease: The Diagnosis and Pharmacologic Treatment of Psoriatic Arthritis in Patients with Psoriasis. Drugs, 74(4), pp Feldman, S.R., Treatment of Psoriasis. UpToDate. 35 Vorhees, A.V The psoriasis and psoriatic arthritis pocket guide. National Psoriasis Foundation. Page 25

26 treatment options like MTX or CsA, they increase the risk of serious infection, heart failure, and lymphoma. In addition, approximately 40% patients that do not respond to anti-tnf-α or loose response after over time. Another biologic therapy that has gained market share since approval in 2009 is Stelara (ustekinumab), which is an IL-12/23 inhibitor. Stelera is similar in efficacy to the anti-tnf- α agents, and produces PASI75 scores in 60-70% of patients after 12 weeks of treatment. The compound is administered via subcutaneous injection and costs approximately $50,000 per year. Similar to TNF-α inhibitors, the side effect profile includes a risk for severe opportunistic infections. PDE4 Inhibitors. Celgene s twice daily oral therapy for psoriasis, Otezla (apremilast), is a small molecule inhibitor of the enzyme phosphodiesterase 4. In the pivotal trial for apremilast, 33.1% of subjects receiving drug achieved PASI75, compared to 5.3% for patients on placebo. Apremilast is generally well tolerated, although some patients experience gastrointestinal side effects, including diarrhea, nausea, and vomiting. Treatment is estimated to cost approximately $22,500 per year. Psoriasis Market Information Psoriasis Epidemiology. Psoriasis is the most common autoimmune disease. The US prevalence is approximately 3.2% in adults, which translates to approximately 6.9 million affected individuals. 36 These patients place a large burden on the economy, with direct and indirect annual costs of more than $112 billion in the US. 37 Prevalence of psoriasis in the EU is roughly 3% among adults, translating to approximately 11.1 million affected individuals. 38 Psoriasis Market. The US psoriasis market was estimated to be $3.9 billion in 2010, is expected to grow to $7.4 billion by This growth is greatly due to the use of biologics, which are priced at $XX per year on average. These therapeutics are among some of the best selling in the world, and are approved for many different autoimmune indications due to their systemic effects. Figure 19 shows the approved indications for each biologic and the worldwide sales figures for 2013, 2014, and Rachakonda, T.D. et al., Psoriasis prevalence among adults in the United States. Journal of the American Academy of Dermatology, 70(3), pp Carpentieri, A. et al., Retrospective analysis of the effectiveness and costs of traditional treatments for moderate-tosevere psoriasis: A single-center, Italian study. Journal of Dermatological Treatment, 28, pp World Health Organization, Global report on psoriasis. 39 Williams, S.C. et al., New biologic drugs get under the skin of psoriasis. Nature Medicine, 18(5), pp638. Page 26

27 Figure 19. Sales in Million of Biologics Indicated for Plaque Psoriasis Humira (adalimumab) Enbrel (etanercept) Indications Plaque psoriasis, psoriatic arthritis, RA, JIA, AS, CD, and UC Plaque psoriasis, psoriatic arthritis, RA, JIA, and AS $10,659 $12,543 $14,012 $4,551 $4,688 $5,364 Remicade (infliximab) Plaque psoriasis, psoriatic arthritis, RA, AS, CD, and UC $6,673 $6,868 $6,561 Total $21,883 $24,099 $25,937 RA = rheumatoid arthritis, JIA = juvenile idiopathic arthritis, AS = ankylosing spondylitis, CD = Crohn s disease, UC = ulcerative colitis Source: LifeSci Capital CF101 Market Potential in the US & EU. To determine the addressable market for CF101, we performed the analysis shown in Figure 20. We estimate the total target population for CF101 in the treatment of moderate to severe plaque psoriasis to be approximately 2.1 M individuals in the US and EU combined. Our analysis is based on the following assumptions:! Individuals Afflicted with Psoriasis We based our psoriasis patient estimates on adult prevalence rates of 3.2% in the US and 3.0% in the EU, which translate to 6.9 million pain the US and 11.1 million in the EU.! Proportion of Patients with Plaque Psoriasis An estimated 80% of psoriasis patients have plaque psoriasis, based on a published report. 40! Moderate to Severe Disease We assume that 17% of psoriasis patients have moderate to severe disease, based on a published report. 41! Seeking Treatment An estimated 84% of psoriasis patients seek treatment., based on a published report Johnson, M.A. et al., Clinical and Histologic Diagnostic Guidelines for Psoriasis: A Critical Review. Clinical reviews in allergy and immunology, 44(2), pp Kurd, S.K. et al., The prevalence of previously diagnosed and undiagnosed psoriasis in US adults: results form NHANES Journal of the American Academy of Dermatology, 60(2), pp Armstrong, A.W. et al., Undertreatment, treatment trends, and treatment dissatisfaction among patients with psoriasis and psoriatic arthritis in the United States. Findings from the national psoriasis foundation surveys, JAMA Dermatology, 149(10), pp Page 27

28 Figure 20. CF101 s US & EU Addressable Patient Population US EU Patients with Psoriasis 6.9 M 11.1 M Patients with Plaque Psoriasis (%) 80% 5.5 M 8.9 M Patients with Moderate-Severe (%) 17% 0.9 M 1.5 M Patients Receiving Treatment (%) 84% 0.9 M 1.3 M US & EU Target Population: 0.8 M 1.3 M Soruce: LifeSci Capital We conducted a scenario analysis, shown in Figure 21, to estimate the potential peak annual sales of CF101 in US for the treatment of moderate to severe plaque psoriasis. The analysis is based on the assumptions listed below:! US & EU Addressable Population Based on the above analysis we assume that the US has a total of 0.8 million patients with moderate to severe plaque psoriasis who are seeking treatment.! CF101 Annual Price We assume an annual price of $15,000 for CF101. This is a 50% discount to estimated biosimilar drug pricing, and is thus a conservative estimate. This would also represent a discount to estimate annual cost of $22,000 for Otezla, the only approved oral product on the market for psoriasis.! Dosing Schedule We assume that the induction and maintenance treatment regimens for CF101 are similar, with no differences in dosing schedule. Figure 21. Sales Estimates for CF101 as a Treatment of Plaque Psoriasis in the US Scenario 1 Scenario 2 Scenario 3 CF101 Eligible Patients 0.8 million patients Peak Penetration 0.5% 2.5% 5% Yearly Cost $15,000 Peak Annual Revenues $60 million $300 million $600 million Source: LifeSci Capital We conducted a scenario analysis, shown in Figure 22, to estimate the potential peak annual sales of CF101 in the EU for the treatment of moderate to severe plaque psoriasis. The analysis is based on the assumptions listed below:! US & EU Addressable Population Based on the above analysis we assume that the EU have a total of 1.3 million patients with moderate to severe plaque psoriasis who are seeking treatment.! CF101 Annual Price We assume an annual price of 10,000 for CF101. This is a 50% discount to estimated biosimilar drug pricing, and is thus a conservative estimate. This would also represent a discount to Otezla, the only approved oral product on the market for psoriasis. Page 28

29 ! Dosing Schedule We assume that the induction and maintenance treatment regimens for CF101 are similar, with no differences in dosing schedule. Figure 22. Sales Estimates for CF101 as a Treatment of Plaque Psoriasis in the EU CF101 Eligible Patients Scenario 1 Scenario 2 Scenario million patients Peak Penetration 0.5% 2.5% 5% Yearly Cost 10,000 ($11,000) Peak Annual Revenues 65 M ($71 M) 325 M ($357 M) 650 M ($714 M) Source: LifeSci Capital Clinical Data Discussion Can-Fite is developing CF101 for the treatment of moderate to severe plaque psoriasis. The Company has completed a Phase II/III trial evaluating the safety and efficacy of CF101. Although the trial did not meet the primary endpoint, signs of anti-inflammatory activity were demonstrated, with 20% of subjects achieving PASI90 at week 32. A randomized, European Phase III trial with CF101 is expected to initiate in the fourth quarter of Phase II/III Trial with CF101 in Plaque Psoriasis Trial Design. Can-Fite conducted a randomized, placebo-controlled Phase II/III trial for CF101 in patients with moderate to severe plaque psoriasis. 326 subjects were enrolled in 17 clinical sites in the US, EU, and Israel. Subjects were randomized to receive CF101 1 mg, CF101 2 mg, or placebo for 32 weeks. Subjects initially receiving placebo were switched to CF101 1 mg or CF101 2 mg after 12 weeks. The primary endpoint of this study was the difference between CF101 and placebo in PASI 75 percentage at 12 weeks. Secondary endpoints included Physicians Global Assessment (PGA) and safety. Trial Results. The trial did not meet its primary endpoint of a significant difference in PASI 75 between CF101 and placebo at 12 weeks. At the time point, 8.5% of subjects receiving CF101 achieved PASI75 compared to 6.9% for placebo. There were positive efficacy trends suggesting that CF101 may have activity in plaque psoriasis when examining the PASI scores beyond 12 weeks. 25% of subjects achieved a PASI 90 by week 32, which indicates a 90% response rate for clearing skin lesions. In addition, a subgroup analysis of PASI 90 responders indicated that treatment naïve subjects achieved a higher response rate than patients with prior exposure to systemic agents (p=0.026). The safety data were similar to previous trials, suggesting that CF101 to be well-tolerated with a differentiated safety profile than currently approved therapies. Results from the study suggest that CF101 has durable anti-inflammatory activity. In contrast, other agents such as Celgene s Otezla (apremilast) often lead to peak activity after a few months of treatment and patients then begin to relapse. Figure 23 compares results from CF101 s Phase II/III study with Celgene s ESTEEM-2 trial with Otezla. Although Otezla treated subjects showed a greater response rate at week 16 compared to CF101, a greater number of Page 29

30 CF101 treated patients continued to respond through week 32. This provides additional rationale to pursue CF101 as a first-line therapy for moderate-to-severe psoriasis. Figure 23. Proportion of Patients Achieving PASI While Taking CF101 (left) and Otezla (right) Source: Company Presentation Planned Phase III Trial with CF101 in Plaque Psoriasis Can-Fite is nearing completion on the design of the Phase III trial for CF101 in patients with moderate to severe plaque psoriasis. The Company plans to submit a study protocol to the EMA in the first half of 2016 and initiate the study in the fourth quarter of Other Drugs in Development for Plaque Psoriasis There are a number of therapies in late-stage development for the treatment of plaque psoriasis. Many of these drugs are list in Figure 24, along with the stage of clinical development. Elli Lilly s (NYSE: LLY) ixekizumab and AstraZeneca s (NYSE: AZN) brodalumab are two late-stage product candidates in for plaque psoriasis. These biologics target IL-17, which is an inflammatory cytokine associated with several autoimmune diseases. Lilly completed two Phase III trials for ixekizumab in plaque psoriasis and submitted a biologics license application (BLA) in the first quarter of AstraZeneca has completed two Phase III trials with brodalumab in plaque psoriasis. We highlight the design and results of these trials in the section below. Page 30

31 Figure 24. Late-Stage Plaque Psoriasis Candidates in Development Company Drug Status in Psoriasis Eli Lilly (NYSE: LLY) AstraZeneca (NYSE: AZN)/ Valeant (NYSE: VRX) Pfizer (NYSE: PFE) UCB (Brussels: UCB.BR) Dr. Reddy s Laboratories (NYSE: RDY) Forward Pharma A/S (NasdaqGS: FWP) Johnson & Johnson (NYSE: JNJ) Valeant (NYSE: VRX) Sun Pharmaceutical Industries (NSE: SUNPHARMA.NS) Ixekizumab Brodalumab Xeljanz First Quarter 2016 PDUFA Date Third Quarter 2016 PDUFA Date snda FDA Response First Half 2016 Cimzia Ongoing Phase III Trials 43,44,45 DFD06 Cream Ongoing Phase III Trial 46 FP187 Initiating US Phase III in 2016 Guselkumab Ongoing Phase II Trials 47,48,49 IDP-118, IDP-122 Ongoing Phase III Trials 50,51,52 Tildrakizumab Ongoing Phase III Trial 53,54 Source: LifeSci Capital Eli Lilly Phase III Program for Ixekizumab in Plaque Psoriasis Ixekizumab is an anti-il-17 monoclonal antibody designed to block the activity of proinflammatory lymphocytes. This therapy is administered subcutaneously once every two weeks. Eli Lilly filed a BLA in March of 2015, so an approval decision is expected in the first quarter of Page 31

32 Trial Design. Eli Lilly conducted two randomized, double-blind, active- and placebo-controlled Phase III trials with ixekizumab as a treatment for moderate-to-severe plaque psoriasis. 55,56 The studies were named UNCOVER-2 and UNCOVER-3. Patients had a confirmed case of plaque psoriasis for at least 6 months before study enrollment, and a body-surface area involvement equal to or greater than 10% at screening and baseline. Patients were randomized 2:2:2:1 to receive:! Ixekizumab 80 mg once every two weeks.! Ixekizumab 160 mg once every 4 weeks.! Etanercept 50 mg twice weekly.! Placebo. All patients receiving ixekizumab were given a 160 mg dose of the drug at the start of treatment. The primary endpoint for the trials was the percentage of patients achieving PASI75 at week 12. Trial Results. On June 10, 2015 Eli Lilly announced that the UNCOVER-2 and UNCOVER-3 trials met their primary endpoints. Results from the trials were published in The Lancet. 57 Figure 25 shows the PASI75 response rates for ixekizumab compared to etanercept and placebo. Results from the UNCOVER-2 study show that 89.7% patients receiving ixekizumab biweekly achieved PASI75 compared to 2.4% receiving placebo (p<0.0001). When ixekizumab was administered every 4 weeks, the response rate with ixekizumab was 77.5% (p<0.0001). Results from the UNCOVER-3 study were inline with UNCOVER-2, and showed that 87.3% of patients receiving ixekizumab biweekly achieved PASI75 compared to 7.3% receiving placebo (p<0.0001). When ixekizumab was administered every 4 weeks, the response rate with ixekizumab was 84.2% (p<0.0001). In both trials ixekizumab significantly improved response rates compared to etanercept. Figure 25. Phase III Results for Ixekizumab in Plaque Psoriasis Endpoint PASI75 Response Rate Endpoint PASI75 Response Rate Ixekizumab Biweekly UNCOVER-2 Ixekizumab Every 4 Etanercept Weeks Placebo 89.7% 77.5% 41.6% 2.4% Ixekizumab Biweekly UNCOVER-3 Ixekizumab Every 4 Etanercept Weeks Placebo 87.3% 84.2% 53.4% 7.3% Source: LifeSci Capital Griffiths, C.E. et al., Comparison of ixekizumab with etanercept or placebo in moderate-to-severe psoriasis (UNCOVER-2 and UNCOVER-3): results from two phase 3 randomised trials. The Lancet, 386(9993), pp Page 32

33 Safety. The frequency of serious AEs was similar across all treatment groups. Common adverse events included infection, common cold, injection site reactions, and headache. AstraZeneca Phase III Program for Brodalumab in Plaque Psoriasis Brodalumab is fully human monoclonal IL-17 receptor antibody designed to block the activity of proinflammatory lymphocytes. This therapy is administered subcutaneously once every two weeks. AstraZeneca s BLA for brodalumab was accepted by the FDA in January and an approval decision is expected in the third quarter of Trial Design. Amgen and AstraZeneca completed two randomized, double-blind, active- and placebo-controlled Phase III trials with brodalumab as a treatment for moderate-to-severe plaque psoriasis. 58,59 The studies were named AMAGINE-2 and AMAGINE-3. More than 1,800 patients in total were randomized 2:2:1:1 to receive brodalumab 210 mg, brodalumab 140 mg, 45 mg or 90 mg ustekinumab, or placebo. The co primary endpoints were the percent change in PASI and Static Physician Global Assessment (spga) score at week 12. Trial Results. Both studies met their primary endpoints, and results were published in the New England Journal of Medicine. 60 Figure 26 shows the percentage of patients achieving PASI75 and PASI100 in each study. 86% of patients in the brodalumab 210 mg group, 67% of patients in the brodalumab 140 mg group, 70% of patients in the ustekinumab group, and 8% of patients in the placebo group achieved PASI75 in the AMAGINE-2 study. 44% of patients in the brodalumab 210 mg group, 26% of patients in the brodalumab 140 mg group, 22% of patients in the ustekinumab group, and 1% of patients in the placebo group achieved PASI100. Results for AMAGINE-3 were similar to AMAGINE-2. Figure 26. Results from AMAGINE-2 and AMAGINE-3 Studies Week 12 AMAGINE-2 Study Endpoint 210 mg 140 mg 45 mg ustekinumab Placebo PASI % 26% 22% 1% PASI 75 86% 67% 70% 8% Week 12 AMAGINE-3 Study Endpoint 210 mg 140 mg 45 mg ustekinumab Placebo PASI % 27% 19% 0.3% PASI 75 85% 69% 69% 6% Source: LifeSci Capital Lebwohl, M. et al., Phase 3 Studies Comparing Brodalumab with Ustekinumab in Psoriasis. New England Journal of Medicine, 373(14), pp Page 33

34 Safety. The most common symptoms associated with the brodalumab treatment groups were common cold, upper respiratory infection, headache, and joint pain. The rate of serious adverse events was similar between the study arms. CF102 - An A3AR Agonist for the Treatment of Liver Cancer Can-Fite is developing CF102 for the treatment hepatocellular carcinoma (HCC) and non-alcoholic steatohepatitis NASH. CF102 has been granted Orphan Drug Designation in the US and Europe for HCC, and Fast Track Designation by the FDA as a second line treatment for HCC. Similar to CF101, CF102 is a selective A 3AR agonist that induces cell death in cancer cells. Can-Fite is currently conducting a Phase II study for CF102 in 78 HCC patients with Child-Pugh Class B liver disease who have previously failed the only FDA approved systemic therapy on the market, Nexavar (sorafenib). Can-Fite has decided to target this specific population because data suggest that Child-Pugh Class B patients do not benefit from sorafenib. 61 Top-line data from the trial are expected in Figure 27 shows the structure of CF102. Figure 27. The Chemical Structure of CF102 Source: LifeSci Capital 61 Da Fonseca, LG. et al., Safety and efficacy of sorafenib in patients with Child-Pugh B advanced hepatocellular carcinoma. Molecular Clinical Oncology, 3(4), pp Page 34

35 Mechanism of Action CF102 is a selective agonist of the A 3AR, a GCPR that is highly expressed on liver cancer cells. A 3AR agonists produce anti-cancer activities by inducing apoptotic cell death in tumor cells. A 3AR is highly expressed in human HHC tissue and peripheral blood mononuclear cells (PBMCs). 62 Figure 28 shows that CF102 activates A 3AR, which signals through NF-κB and Wnt/B-catenin pathways to promote cancer cell cycle arrest and death. 63 Preclinical studies have shown that CF102 specifically induces the expression of BAX and BAD, 64 two key proapoptotic proteins, and inhibits tumor growth by causing cell cycle arrest by inhibiting the activity of c-myc. Proof of concept has also been established in preclinical models of melanoma, 65 prostrate cancer, 66 and colon cancer. 67 Figure 28. Signaling Pathways Activated Downstream of A 3AR in Tumor Cells Source: Merimsky et al., Bar-Yehuda, S. et al., The A3 adenosine receptor agonist CF102 induces apoptosis of hepatocellular carcinoma via deregulation of the Wnt and NF-kappaB signal transduction pathways. International Journal of Oncology, 33(2), pp Fishman, P. et al., Pharmacological and Therapeutic Effects of A 3 Adenosine Receptor (A 3AR) Agonists. Drug Discovery Today, 17(7-8), pp Bar-Yehuda, S. et al., The A3 adenosine receptor agonist CF102 induces apoptosis of hepatocellular carcinoma via deregulation of the Wnt and NF-kappaB signal transduction pathways. International Journal of Oncology, 33(2), pp Fishman P et al., Evidence for involvement of Wnt signaling pathway in IB-MECA mediated suppression of melanoma cells. Oncogene, 21(25),pp Fishman, P. et al., Targeting the A3 adenosine receptor for cancer therapy: inhibition of prostate carcinoma cell growth by A3AR agonist. Anticancer Research, 23(3A), pp Fishman, P. et al., An agonist to the A3 adenosine receptor inhibits colon carcinoma growth in mice via modulation of GSK-3 beta and NF-kappa B. Oncogene, 23(14),pp Merimsky, O. et al., Modulation of the A3 Adenosine Receptor by Low Agonist Concentration Induces Antitumor and Myelostimulatory Effects. Drug Development Research, 58, pp Page 35

36 Hepatocellular Carcinoma Hepatocellular carcinoma (HCC) is the most common type of human liver cancer and is primarily caused by hepatitis B (HBV) or C (HCV) infection or excess alcohol consumption. The incidence rate of HCC has been steadily increasing and liver cancer is the second leading cause of cancer mortality worldwide. It is the fifth most frequent cancer in men and the seventh most common in women. 69 HCC carries a poor prognosis, and the combined 5-year survival rate for individuals in all stages still ranks among the lowest of cancers at approximately 15%. Treatment for HCC depends on the stage of the disease, a person s age, the underlying causative agent, and includes surgical resection, liver transplantation, localized chemotherapy, and Bayer/Onyx s Nexavar (sorafenib), the only systemic drug that has received FDA approval in this indication. Pathogenesis and Causes The most prominent risk factors associated with hepatocellular carcinoma are HBV and HCV viral infections, chronic alcohol consumption, and consumption of aflatoxin-b1 contaminated grains. 70 These agents contribute to cancer pathogenesis in two main ways: inflammation due to a host immune response, and alteration of proliferationassociated genes by the virus. Chronic active infection by HBV and HCV stimulates multiple host-viral interactions resulting in an immune response to combat viral infection. This activated immune response leads to sustained cycles of necrosis, inflammation, and regeneration of new liver cells. Chronic alcohol consumption also causes similar continuous cycles of destruction and regeneration of liver cells ultimately culminating in liver cirrhosis. 71 As shown in Figure 29, a cirrhotic liver is characterized by the formation of multiple abnormal liver nodules, which are tumorlike masses or lesions, surrounded by collagen depositions as well as scar tissue. These nodules give rise to hyperplastic nodules followed by dysplastic nodules, ultimately leading to HCC Ferlay, J. et al., Estimates of worldwide burden of cancer in 2008: GLOBOCAN International Journal of Cancer, 127, pp Fattovich, G. et al., Hepatocellular carcinoma in cirrhosis: incidence and risk factors. Gastroenterology, 127, pp Campbell, J.S. et al., Platelet-derived growth factor C induces liver fibrosis, steatosis, and hepatocellular carcinoma. Proceedings of the National Academy of Sciences, 102, pp Farazi, P.A. et al., Hepatocellular carcinoma pathogenesis: from genes to environment. Nature Reviews Cancer, 6, pp Page 36

37 Figure 29. Histopathological Progression and Molecular Features of HCC Source: Farazi, P.A. et al., 2006 The proliferation and survival of cancer cells depends on the activation of specific oncogenes coupled with inactivation of tumor suppressor genes. The viral proteins of HBV and HCV may alter growth-controlling genes like tyrosine kinases and the tumor suppressor p53, resulting in increased and unchecked cellular proliferation. 73 HBV infection followed by integration of viral DNA into the host genome can directly cause mutations or deletions of key proliferation regulating genes. Alcohol consumption and aflatoxin-b1 have also been associated with mutations of p53. All these events in turn provide a context for the accumulation and propagation of mutations within the liver cells. Conditions leading to cirrhosis such as diabetes, non-alcoholic fatty liver disorders (NAFLD), and non-alcoholic steatohepatitis (NASH) have also been implicated in HCC at lower frequencies, and are likely to be a problem of developed countries where obesity and metabolic syndrome are more commonplace. Symptoms and Diagnosis HCC is typically asymptomatic until the later stages of the disease. Patient examinations that assess the overall condition of the liver can provide physicians with clinical readouts that indicate the presence of HCC. Physical signs of HCC can include abnormal swelling of the liver and ascites, a build up of fluid between abdominal organs and the lining of the abdomen caused by high blood pressure in the liver. Jaundice, anorexia, weight loss, malaise, and upper abdominal pain are some of the nonspecific symptoms associated with HCC Feitelson, M.A. et al., Genetic mechanisms of hepatocarcinogenesis. Oncogene, 21, pp Takamatsu, S. et al., Influence of risk factors for metabolic syndrome and non-alcoholic fatty liver disease on the progression and prognosis of hepatocellular carcinoma. Hepatogastroenterology, 55, pp Page 37

38 HCC is diagnosed using a combination of clinical, radiographic imaging, pathology, and laboratory examinations. Imaging tools best capture the pathologic characteristics of HCC by identifying and characterizing hypervascularized nodules. In a cirrhotic liver, cells often form tumor masses or lesions called dysplastic nodules (DNs) before ultimately progressing to early HCC. DNs derive their blood supply from the hepatic artery unlike the surrounding healthy liver tissue, so angiogenesis is a key pathologic factor for differential diagnosis. 75 A combination of computed tomography (CT), magnetic resonance (MR), and ultrasonography (US) imaging techniques is employed for diagnostic confirmation of HCC. Biopsy is an invasive diagnostic procedure to confirm suspicious lesions as HCC. Samples can be obtained by a core needle biopsy or a fine-needle aspiration biopsy (FNAB). FNAB provides a rapid means of analysis and diagnosis while preventing complications when samples are taken from deep tissues or are near major arteries. On the other hand, samples derived from core needle biopsy provide detailed tissue architectures under the microscope and can also be used for histological studies. 76 The use of biopsy is limited due to sampling error that can occur as well as the risk that a tumor to spread from the biopsy needle track. In cases where the diagnosis of HCC is certain after clinical and radiographic evaluation, biopsy is not recommended. Treatment Patients diagnosed with early-stage HCC benefit from potentially curative treatments such as surgical resection and liver transplantation. HCC patients at intermediate stage are recommended for loco-regional treatments like transarterial chemoembolization (TACE), a procedure that delivers a localized dose of chemotherapy while also blocking blood supply to the tumor. Once HCC has progressed to an advanced stage, the only clinically beneficial option is Bayer/Onyx s Nexavar (sorafenib). Patients in the terminal stage of HCC have a median survival time of less than three months and are recommended to receive supportive care. Importance of Clinical Staging. Clinical staging of HCC is a crucial stratification step required for the selection of an optimal therapeutic intervention and to determine a prognosis. Staging is primarily based on the evaluation of liver function using the Child-Pugh scoring system, an assessment of tumor burden and the health status of the patient. 77 Patients are assigned points based on factors such as total bilirubin levels and the presence of hepatic encephalopathy. Patients with 5-6 points are labeled as Class A, 7-9 points as Class B, and points as Class C. Several algorithms have been developed to create treatment recommendations based on patient staging, and the American Association for the Study of Liver Diseases (AASLD) as well as the European Association for the Study of the Liver (EASL) have endorsed the Barcelona Clinic Liver Cancer (BCLC) algorithm. According to BCLC algorithm, HCC patients can be classified into 5 stages, and each stage corresponds to specific treatment recommendations. 78 Figure 30 below shows the algorithm. Child-Pugh scores and information regarding 75 Hussain, S.M. et al., Benign versus malignant hepatic nodules: MR imaging findings with pathologic correlation. Radiographics, 22, pp International Consensus Group for Hepatocellular Neoplasia, Pathologic diagnosis of early hepatocellular carcinoma: a report of the international consensus group for hepatocellular neoplasia. Hepatology, 49, pp Bruix, J. et al., Practice Guidelines Committee. American Association for the Study of Liver Diseases. Management of hepatocellular carcinoma. Hepatology, 42, pp European Association for the Study of the Liver EASL-EORTC clinical practice guidelines: management of hepatocellular carcinoma. Journal of Hepatology, 56(4), pp Page 38

39 liver nodules are used to stage patients as very early, early, intermediate, advanced, or terminal. The algorithm recommends curative therapies to patients with very early and early HCC. Those with intermediate stage are recommended to receive TACE, and sorafenib is recommended for patients with advanced stage disease. Patients who progress or are intolerant to sorafenib should consider an experimental therapy in a clinical trial or receive supportive care. Figure 30. BCLC Algorithm Based Staging and Recommended Treatments for HCC Patients Source: European Association for the Study of the Liver Potentially Curative Treatments. Radical or potentially curative therapies provided to early-stage patients lead to 5-year survival rates of between 60% and 70%. 79 Radical therapy includes surgery/resection, liver transplantation, and local destruction techniques such as radiofrequency ablation (RFA) or percutaneous ethanol injection (PEI). For patients with single lesions, non-cirrhotic liver, or well functioning cirrhotic liver, surgical resection is recommended. 5-year recurrence rates can exceed 70%. Liver transplantation is a potentially curative treatment with a 85% 4-year survival rate and a 92% relapse-free survival rate for certain patients with favorable tumor characteristics. 80, 81 Because of long waiting times, candidates on transplantation lists are offered resection or local ablation therapy to minimize the risk of tumor progression. For patients not suitable for surgery, local destruction of cancer cells is 79 Llovet, J.M. et al., Hepatocellular carcinoma. Lancet, 362, pp Mazzaferro, V. et al., Liver transplantation for the treatment of small hepatocellular carcinomas in patients with cirrhosis. The New England Journal of Medicine, 334(11), pp Mazzaferro, V. et al., Liver transplantation for hepatocellular carcinoma. Annals of Surgical Oncology, 15(4), pp Page 39

40 achieved by chemical ablation with injection of ethanol, acetic acid, or boiling saline, or thermal ablation, which uses radio frequency (RFA) or microwaves. Ablation has a reported 5-year survival rate of approximately 70%. 82 Transarterial Chemoembolization (TACE). HCC patients with intermediate-stage disease are candidates for arterial directed therapies such as TACE. TACE works on the principle that healthy liver tissue receives the majority of its blood supply from the portal vein, whereas liver tumors receive blood from the hepatic artery. Taking advantage of this pathologic feature, TACE selectively blocks blood supply to the tumor cells via injection of gelatin sponge particles, polyvinyl alcohol particles, or polyacrylamide microspheres. This is combined with highly selective delivery of concentrated chemotherapeutic agents such as cisplatin, doxorubicin, or mitomycin to the hepatic artery. Such a delivery system minimizes systemic toxicity of chemotherapy and increases contact between the chemotherapeutic agent and HCC cells. Two-year survival rates of 63% have been reported for this therapeutic method. 83 Nexavar (sorafenib). Sorafenib is an oral multi-kinase inhibitor that blocks several signaling pathways, including those that regulate cell proliferation and angiogenesis within tumor cells and the surrounding endothelial cells. 84 It was approved in 2007 for the treatment of patients with advanced-stage disease and remains the only drug approved for advanced HCC. Pivotal data were generated in a randomized, double blind, placebo-controlled trial of 602 patients with unresectable, biopsy-proven HCC. Treatment with sorafenib led to a statistically significant increase in OS compared to placebo (p<0.001). Median OS was 10.7 months in the sorafenib arm and 7.9 months for the placebo arm. A parallel study conducted in the Asian-Pacific region validated the results. Hepatocellular Carcinoma Market Information Liver cancer is the second most common cause of death due to cancer worldwide. There were an estimated 782,000 new cases around the world in 2012, resulting in nearly 746,000 deaths. 85 Although liver cancer is largely a problem of South East Asia and other less developed countries due to high rates of hepatitis B infection in these areas, the American Cancer Society estimates that 39,230 new cases will be diagnosed in US in The market size of HCC was recently estimated at approximately $515 million in the US, Japan, and the 5 major European Union markets. It is expected to nearly triple by 2019 as new treatments are approved. Bayer/Onyx Pharmaceutical s Nexavar is the only drug approved for the treatment of advanced or metastatic HCC, and is also approved in the US and EU for kidney and thyroid cancer. Sales in 2015 exceeded $1 billion. Due to the large prevalence of HCC, new treatments that provide meaningful improvements to patient outcomes are expected to capture significant market share. 82 Giorgio A. et al., Percutaneous radiofrequency ablation of hepatocellular carcinoma compared to percutaneous ethanol injection in treatment of cirrhotic patients: an Italian randomized controlled trial. Anticancer Research, 31, pp Llovet, J.M. et al., Arterial embolisation or chemoembolisation versus symptomatic treatment in patients with unresectable hepatocellular carcinoma: a randomised controlled trial. Lancet, 359(9319), pp Wilhelm S.M. et al., Preclinical overview of sorafenib, a multikinase inhibitor that targets both Raf and VEGF and PDGF receptor tyrosine kinase signaling. Molecular Cancer Therapeutics, 7(10), pp Globocan 2012: Estimated Cancer Incidence, Mortality and Prevalence Worldwide in Page 40

41 Clinical Data Discussion Can-Fite is developing CF102 as a second-line therapy for HCC. Results from a Phase I/II study show that a subset of patients with Child-Pugh B stage liver disease achieved a median overall survival of 8.1 months, compared to historical data indicating approximately 4-month survival in this population. Note that the Company s ongoing Phase II study for CF102 in patients with Child-Pugh B liver disease is expected to complete enrollment in the second quarter of Phase I/II Trial with CF102 in Hepatocellular Carcinoma Can-Fite completed a Phase I/II, open-label, dose-escalation study evaluating the safety, tolerability, pharmacokinetics, and pharmacodynamics of orally administered CF102 in patients with advanced HCC. 18 subjects received CF102 at doses of 1 mg, 5 mg, or 25 mg twice a day. Results from the study show good bioavailability and pharmacokinetics. The median overall survival (OS) was 7.8 months, and in the subset of patients with Child-Pugh B liver disease, median OS was 8.1 months. These results compare favorably with historical data, which indicate an OS of 4 months in this patient population. 12 patients were treated with CF102 for over 6 months, with no severe adverse events reported. Based on the encouraging survival signal in Child-Pugh B patients, Can-Fite is focusing on this population in an ongoing Phase II trial. Ongoing Phase II Trial with CF102 in Hepatocellular Carcinoma Can-Fite is conducting a randomized, double-blind, placebo-controlled Phase II trial for CF102 in patients with Child-Pugh Class B liver disease who failed Nexavar. Approximately 78 subjects will be enrolled at sites in the US, EU and Israel. Patients are treated twice daily with oral CF mg. Top-line data from this trial are expected in Other Drugs in Development for Hepatocellular Carcinoma The development of novel targeted treatments for advanced HCC has been largely unsuccessful. Several multikinase inhibitors failed to improve survival rates or provide a better tolerability profile despite similar efficacy. The candidates were tested as single agents compared to sorafenib, which was a difficult path to take. Figure 31 shows current Phase III trials with candidates for HCC. These include checkpoint inhibitors, including Opdivo (nivolumab), and the tyrosine kinase inhibitor Lenvima. It remains to be seen whether these new agents will succeed in providing clinical meaningful benefits to patients with HCC. Page 41

42 Figure 31. Late-Stage Hepatocellular Carcinoma Agents in Development Drug Company Status in HCC Cometriq Exelixis (EXEL) Phase III Cyramza Eli Lilly (LLY) Phase III Lenvima Eisai (ESALY) Phase III Livatag Onxeo (ONXEO:FP) Phase III Melblez Kit Delcath Systems (DCTH) Phase III Opdivo Bristols Meyers Squib (BMY) Phase III Pexa-Vec SillaJen Biotherapeutics (Private); Transgene (TNG.PA) Phase III Stivarga Bayer (BAYRY) Phase III ThermoDox Celsion (CLSN) Phase III Tivantinib ArQule (ARQL) Phase III Source: LifeSci Capital CF102 for the Treatment of Non-alcoholic Steatohepatitis Can-Fite is also developing CF102 for the treatment of non-alcoholic steatohepatitis (NASH). NASH is a form of non-alcoholic fatty liver disease (NAFLD), which is a broad-spectrum condition in which excess fat accumulates in the liver. As the name suggests, hepatic fat accumulation in NAFLD is not due to alcohol use, but rather to a multitude of other pathologic processes. The clinical progression of NAFLD is still very similar to that of alcoholic liver disease, beginning with mild inflammation in the earliest stages and progressing to fibrosis, then to cirrhosis, and eventually hepatic failure in the more advanced stages. The only treatment for cirrhosis is liver transplantation. NASH is the middle stage of NAFLD, where inflammation is present that can lead to fibrosis and scarring. Despite prevalence as high as 30% in developed countries, the current best intervention for NASH is lifestyle modification, and patients are often noncompliant. Can-Fite recently filed a method-of-use patent for CF102 in NASH and expects to initiate a Phase II trial in the second half of Preclinical Studies in Non-alcoholic Steatohepatitis The anti-inflammatory activity of CF102 has been demonstrated in several preclinical studies. Using a mouse model of NAFLD and NASH, researchers tested CF102 s effect on liver pathology. Figure 32 shows the NAFLD Activity Score (NAS) for animals treated with placebo, or a high or low dose of CF102 (listed as Compound A low and Page 42

43 high). NAS was developed to assess a patient s likelihood of developing NASH. The score is comprised of the sum of separate scores for steatosis (0 3), hepatocellular ballooning (0 2), and lobular inflammation (0 3). The majority of patients with NASH score 5. Results demonstrated that animals treated with both high and low doses achieved a significant reduction in NAS score compared to placebo. Each dot represents a treated animal. The mean score for animals treated with placebo was approximately 5, whereas those treated with the high or low dose scored 3 and 4, respectively. Figure 32. NAFLD Activity Scores for CF102 and Placebo Treated Animals Source: Company Presentation Treatment with CF102 improved NAS and also reduced the number of fatty liver deposits. Figure 33 shows liver sections from placebo and CF102 treated animals. Note the micro- and macrovesicular fat deposits, hepatocellular ballooning and inflammatory cell infiltration in sections from animals treated with placebo. In contrast, sections from the CF102 treated groups showed a decrease in steatosis and inflammation. These results provide compelling rationale for developing CF102 in NASH. Page 43

44 Figure 33. Liver Sections from Animals Treated with CF102 or Placebo Non-alcoholic Steatohepatitis Market Information Source: Company Presentation NASH is present in an estimated 2-3% of the population in the US, which means there are 6 to 9 million Americans with the disease. The prevalence of co-morbidities linked to NASH, such as obesity, diabetes, and dyslipidemia, are continuing to increase, and growth in the prevalence of NASH is expected to follow. A survey of market data suggests that in 2012, sales of off-label treatments for NASH were almost $250 million in the US and Europe. In 2010, the direct costs of liver cirrhosis and chronic liver disease in the United States were estimated to be $6.5 billion. Early intervention at the level of liver inflammation has the potential to minimize these medical costs and prevent patients from developing life-threatening conditions. Assuming modest pricing and market penetration, a safe and effective branded drug for NASH could easily see revenues of several billion dollars. CF602 - An Allosteric A3AR Regulator for Erectile Dysfunction Can-Fite s product candidate for the treatment of erectile dysfunction (ED) is CF602, a novel A 3AR allosteric modulator that enhances receptor activity. CF602 binds with A 3AR and prevents its desensitization, potentiating signaling for a longer duration of time. Like CF101 and CF102, CF602 is orally bioavailable and highly water soluble, and it reduces NFkB transcriptional activity. In preclinical studies, animals treated with CF602 showed a 118% improvement in erectile function measures compared to placebo. Note that these results are in line with those achieved by Viagra (sildenafil citrate) in similar preclinical models. Can-Fite is preparing to file an IND with the FDA and expects to submit a Phase I protocol to an IRB in the fourth quarter of The Company intends to develop CF602 for diabetic patients and those who can not tolerate currently available treatments. The chemical structure of CF602 is shown in Figure 34. Page 44