Sirtris Pharmaceuticals: Living Healthier, Longer

1. At the time Westphal joined Sirtris, what is your assessment of the odds that the
company will ever generate substantial revenues? If you were Westphal, would you have
left Polaris for Sirtris?
Westphal has played an important role in presenting the research at Sirtris as commercially
viable. The chances of company attracting investors or generating revenue in such early
period od development is very less. Both the owners come from scientific backgrounds with
little to no experience in attracting investments and growing business. They did not have a
strategy in place and were confused about the right method to leverage the research.
Westphal’s experience in raising capital and connections in the VC community were helpful
in raising Series A investment, create interest in the research done by the company and build
momentum. Some investors also felt nervous leaving out the opportunity to invest in the
company. Westphal’s experience and previous record of running successful ventures gave him
credibility and provide managerial insights as Sinclair was inexperienced in this field.
If I was Westphal, I would have certainly left Polaris to join Sirtris due to the trend that we
see in the way Westphal replaces himself with a CEO once the company got off the starting
block. Also, because Westphal had his own way of building biotech companies and making
their operations majorly successful, we would have left Polaris for a new challenge as Polaris
has already overcome its challenges. When he came across Sirtris, he was looking for a new
opportunity. It provided a perfect time to leave Westphal. He saw the opportunity in the future
use of this research despite the research still being in the nascent stage. He was excited as he
wanted to be an entrepreneur rather than a consultant or advisor. Hence, leaving Polaris is the
right decision.

2. Should Sirtris do the deal with the pharmaceutical company? Why or why not? If you
do recommend a deal, which equity stake (20% or 51%) would you prefer?
We will look at both the sides that is doing the deal and not doing it.
Doing the deal:
Having a drug development deal was often a condition of having a successful initial public
offering. A successful IPO could deliver some of the financial resources a company needs to
move drug development from the laboratory through clinical trials. The terms of a deal could
include a significant upfront cash payment, an equity purchase agreement, non-milestone-
based (i.e., guaranteed) R&D support that would be likely to step up over a four-to-five-year
period, and payments tied to clinical development milestones. Sirtris would also receive
royalties on sales of any drugs resulting from its SIRT activation program. Deal is a relatively
inexpensive source of additional capital. Public investors will also see prior involvement of
pharma company as a good sign.
Not doing the deal:
Partnering with a large pharmaceutical company would require out-licensing these new
compounds without knowing their full value. If the deal did not produce the results, the
pharma deal terms would be substantially worse. The CEOs may loose their ability to control
the workings of the company.
Since, most terms od the deal hold constant regardless of the pharma stake as per Exhibit 9, a
20% equity should be chosen to protect founders stake and observed benefits mentioned
above.

3. Should Sirtris launch a SRT501 nutraceuticals business? Why or why not?

YES:
 The continuous mails received by Sinclair show there exists a market demand for the
product. He receives more than 30 emails per day.

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  Good margins on the products.
 Very promising market: Nutraceuticals' market annual sales are $120 billion with a
7% CAGR
NO:
 It'll be hard to market the product as the differentiation of Sirtris’ offering is very
difficult from other resveratrol supplements available on the market.
 Pricing the product may be an issue as the products available in the market are priced
low because of their low or no resveratrol percentage. STR501 contains active
resveratrol and cannot be priced low, and it can also be a problem to convince
customers in the matter if it is priced a little high.
 Sirtris is known for its scientific research and established its company based on its
research. Now launching nutraceuticals might hinder their research and also cause
reputation damage.
 The company has no experience selling through distribution channels, which might
affect their sales at least in the initial phase. They would have to hire a marketing
expert who is good at working with distribution channels.

4. Suggest a launch plan for a nutraceuticals business?

 Hiring a marketing manager who has experience selling products through distribution
channels (retail channels).
 Focusing on limited channels for distribution. GNC and Vitamin Shoppe would be
ideal due to their national presence and customer base looking for improved health
and good quality of life. They also have trained personnel who can recommend
products according to customers' needs.
 Product rebranding is necessary.
 Aggressive advertising is necessary as they need to convey their product's superiority,
which contains resveratrol compared to other products that have very low or no
amounts at all. As it is important to convince the customers of its high pricing of the
product.
 The company can leverage its media presence to promote its new product.
 Hiring a celebrity spokesperson (famous for maintaining a good quality of life) might
benefit them, even though it might be a little costly.

5. Would your response to questions 2 to 4 depend on whether you considered these

decisions jointly or independently?
Our response to the mentioned questions could probably vary since executives individually
could have different way of looking at a problem, a different perspective. While if we are
taking a joint decision, maybe the deliberation would lead to elimination of much individual
biases and hence leading to perhaps a better decision.
Sinclair being optimist about the Nutraceuticals industry, would push for organisation to
launch such products, while Westphal was not sure as to what to emphasise on, since the
timing needed to be right and also hasty decision in absence of knowledge about the value of
research didn’t help the case for him. Besides, executives were in favour of the in-licensing
deals.

6. Would any of your responses to questions 2 to 4 depend on whether you were taking the
point of view of the founders or the investors?

Yes, the responses to questions 2 to 4 would depend on whether we were taking the point of
view of the founders or the investors.

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 The investors had a huge risk associated having invested a lot of money in a recently
incorporated company. So, they would want to sell the stocks as holding on to it could
perhaps mean dilution of stake and hence posed a greater risk. For them the possibility of IPO
would be there if the Pharma deal went through. This would mean that they could cash out
and exit their position.
The founders were evidently more patient and confident about their organisation and the work
that they did. Their research led them to multiple proprietary formulations of drugs having
great potential. They had what they called an “all-star” group of scientists; the Scientific
Advisory Board, and along with that they were faring well on funding aspect. Perhaps they
would evaluate all other alternatives well before taking any decision. The survival and growth
potential would be of concern. Therefore, both entities had different perspectives towards the
company and can say, much different goals. Therefore, the responses would definitely be
different.

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