Analyst Reports, page-6

Might be worth better articulating why I think the Genentech payment was worth so much more than the research grant other than just the quantum and timeframe and direct benefit to our cash flow.

The way I saw the Genentech deal prior to the $2m was (note these are guesstimates of the USD142m sequence and a loose description of possible triggers) -

How I thought about it before the first payment ( approx value US$6.5m)-

1st payment (Excercise option) $2m Probability 50% Value $1m
2nd payment (pre trail milestone) $5m Probability 20% Value $1m
3rd payment (enter phase 1) $15m Probability 10% Value $1.5m
4th payment (phase 1 success) $20m Probability 5%. Value $1m
5th Payment (phase 2 success) $20m Probability 4% Value $0.8m
6th Payment (Phase 3 success) $40m Probability 2% Value $0.8m
7th Payment (FDA app) $40m Probability 1% Value 0.4m

How I think about it after Genentech committed US$2m (approx value now US$17.25m)-

1st payment (Excercise option) $2m Probability 100% Value $2m
2nd payment (pre trail milestone) $5m Probability 50% Value $2.5m
3rd payment (enter phase 1) $15m Probability 25% Value $3.75m
4th payment (phase 1 success) $20m Probability 15%. Value $3m
5th Payment (phase 2 success) $20m Probability 10% Value $2m
6th Payment (Phase 3 success) $40m Probability 5% Value $2m
7th Payment (FDA app) $40m Probability 5% Value 2m

But that is just the value of the single deal with Genetech - the bigger value was changing the broader perception among investors about where PYC is up to and whether bigpharma are engaged with them at all. This has begun to remov a discount that was being applied to PYC's market cap based on past failure. How much of this discount has been removed is opinion of course but 4 years of progress since the poor outcomes of previous deals is hard to measure. Obviously I think we still have some way to go in recognising that.

When I spoke recently to Stuart Roberts he described a different way of coming to a similar conclusion - my summary is that each incremental successful step forward on any programs by PYC unlocks the ability to value all of its programs with a lower risk factor.

Back to my point about the Bioshares article - I value A$750k grants to collaborators spread over 4 years close to zero but because of the Genetech affirmation I value the 6 MTAs higher than before and I would imagine that conversations within Genentech are not limited to biologics.