initiation report cymabay therapeutics (cbay) partnering...

Initiating CoverageOctober 26, 2015

CymaBay Therapeutics (CBAY)Initiation Report

LifeSci Investment Abstract

CymaBay Therapeutics (NasdaqCM: CBAY) is a clinical stage biopharmaceutical companydeveloping therapies for metabolic and orphan diseases. The Company’s lead productcandidate is arhalofenate, an anti-flare and serum uric acid (sUA) lowering drug for thetreatment of gout. Initial signs of efficacy have been shown in several Phase II trials. Apivotal Phase III program is expected to launch in the first half of 2016 pending partnershipdiscussions. The Company’s is also developing MBX-8025 for the treatment of homozygousfamilial hypercholesterolemia (HoFH) and primary biliary cirrhosis (PBC). Results from aPhase I study in HoFH are expected in the fourth quarter of 2015 and CymaBay expects toinitiate a Phase II study in PBC in the first quarter of 2016.

Key Points of Discussion

■ Partnering Opportunity for Phase III Gout Program. CymaBay Therapeutics’ currentdevelopmental pipeline includes arhalofenate, a Phase III-ready asset for the treatment ofgout. The drug produced strong data in Phase II clinical studies indicating that arhalofenatein combination with Takeda’s (Other OTC: TKPYY) Uloric (febuxostat) could be the firstgout therapy with robust serum uric acid (sUA) lowering and anti-flare activities. It is thefirst entry into a new class of gout therapies that CymaBay refers to as Urate LoweringAnti-Flare Therapy (ULAFT). This could position the agent well to compete for theapproximately 2.0 million gout patients who are inadequately served by existing therapies,a potential blockbuster opportunity in the US. CymaBay held an end-of-Phase II meetingwith the FDA in the third quarter of 2015. The results of the meeting will likely driveefforts to secure a development and commercialization partner for arhalofenate, which isexpected in the first half of 2016. Given the quality of the Phase II data, we expect thereto be significant interest among potential partners.

Expected Upcoming Milestones

■ Q4 2015 – Results from Phase II study of MBX-8025 in patients with HoFH.■ H1 2016 – Expected announcement regarding partnership for Phase III development

of arhalofenate.■ H1 2016 – Expected launch of Phase III trial with arhalofenate in gout.■ Q4 2015 – Expected launch of Phase II trial with MBX-8025 in primary biliary

cirrhosis.■ Q4 2016 – Expected results from Phase II trial with MBX-8025 in primary biliary

cirrhosis.

Analysts

Jerry Isaacson, Ph.D. (AC)(646) [email protected]

Market Data

Price $1.70Market Cap (M) $40EV (M) $(4)Shares Outstanding (M) 23.4Fully Diluted Shares (M) 27.0Avg Daily Vol 183,50252-week Range: $1.61 - $13.39Cash (M) $54.0Net Cash/Share $2.00Annualized Cash Burn (M) $28.0Years of Cash Left 1.9Debt (M) $10.0Short Interest (M) 0.31Short Interest (% of Float) 2.3%Cash and debt are pro forma as of 6/30/2015

Financials

FY Dec 2013A 2014A 2015AEPS Q1 NA (1.02)A (0.44)A

Q2 NA (0.56)A (0.09)AQ3 NA (0.44)A NAQ4 NA (0.93)A NAFY (3.54)A (2.65)A NA

For analyst certification and disclosures please see page 41

! Arhalofenate is the First Urate Lowering Anti-Flare Therapy (ULAFT) for Gout. Gout is caused by excess uric acid in the blood and affects approximately 8 million individuals in the US. Of the 8 million people in the US with a diagnosis of gout, more than 3 million are currently taking urate lowering therapies (ULT). Approximately 60% of these patients inadequately respond to ULT, indicating a need for more potent treatments. Patients also experience an increased frequency of gout flares during the first 6 to 12 months of therapy. Anti-flare medications are used prophylactically with ULT to reduce the frequency of flares; however, they are not well tolerated and often are contraindicated for gout comorbidities, meaning patients are left without viable treatment options. Results from Phase II clinical studies in gout patients indicate that arhalofenate in combination with febuxostat significantly reduces sUA, and as a monotherapy significantly reduces flares in patients with gout. This latter feature differentiates arhalofenate from all approved ULT or those in development, including AstraZeneca’s (NYSE: AZN) lesinurad.

! Positive Phase II Data Support Arhalofenate Profile for Gout. CymaBay has completed five Phase II trials in gout with arhalofenate. The results indicate the drug is safe, well tolerated, and capable of lowering sUA levels and reducing the frequency of flares. In a recently completed Phase II study, the drug demonstrated a significant reduction in sUA whether administered alone or in combination with febuxostat. One hundred percent of patients receiving 800 mg of arhalofenate in combination with febuxostat achieved sUA reduction below 6 mg/dL compared to 47% for febuxostat alone (p<0.01). On the more aggressive goal of reducing sUA below 5 mg/dL, 93% of patients on the combination therapy met the standard compared to only 7% with febuxostat alone (p<0.001). In another recently completed Phase II trial, arhalofenate significantly reduced the flare incidence rate over 12 weeks from 1.24 with allopurinol, a generic sUA lowering gout drug, to 0.66 with arhalofenate (p=0.0056). CymaBay will develop and commercialize a fixed-dose combination of arhalofenate and febuxostat, which is intended to provide robust sUA lowering and anti-flare activity. These strong Phase II results in trials that used the same endpoints expected for Phase III give a clear indication of the potential for success in the planned registration trials.

! Pivotal Phase III Program for Arhalofenate in Gout Expected to Launch in 2016. The current proposed Phase III program is intended to obtain indications for the treatment of hyperuricemia and prophylaxis of flares in patients with gout. It includes trials in patients with chronic gout as well as in patients with a more severe form called tophaceous gout. The general features of the program are as follows:

o Chronic gout: two trials using arhalofenate 800 mg in combination with febuxostat 40 mg versus febuxostat, co-primary endpoints of sUA response rate below 6 mg/dL and flare rate at 6 months.

o Tophaceous gout: a single trial of arhalofenate 800 mg in combination with febuxostat 80 mg versus febuxostat, primary endpoints of sUA response rate below 5 mg/dL, flare rate at 6 months, and reduction in tophi at 12 months.

The proposed design was discussed with the FDA during an End of Phase II meeting in the third quarter. Planning for the Phase III program is underway and the trials are expected to launch in the first half of 2016 upon completion of a partnership agreement.

! Large Opportunity in Gout due to Inadequate Disease Control with Existing Therapies. There are roughly 8.3 million individuals in the US with gout. Approximately 3 million of these patients seek treatment for their symptoms and are prescribed ULTs. Out of the 3 million, it is estimated that 90% receive allopurinol and about 5% receive febuxostat. Approximately 60% of patients treated with allopurinol and 60% of patients treated with febuxostat do not achieve sUA of less than 6mg/dL, meaning there are an estimated 1.7 million gout patients in the US who are not reaching recommended sUA goals. Combining these individuals with the approximately 300,000

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that are intolerant to allopurinol, we estimate that there are roughly 2.0 million patients currently in the US who are not adequately served by ULT therapy and may be potential candidates for arhalofenate treatment. We estimate later in this report that with reasonable penetration, pricing, and compliance assumptions that an arhalofenate-febuxostat fixed dose combination could achieve peak US sales of between $814 million and $1.2 billion.

! MBX-8025 has Potential in Two Orphan Indications. CymaBay is developing MBX-8025, a peroxisome proliferator-activated receptor delta (PPARδ) agonist, for the treatment of the orphan diseases homozygous familial hypercholesterolemia (HoFH) and primary biliary cirrhosis (PBC). Originally in development for mixed dyslipidemia, clinical studies indicate the drug significantly reduces LDL cholesterol (LDL-C) and improves biomarkers of liver disease, including alkaline phosphatase (ALP). Clinical programs for orphan disease usually involve small trials and accelerated regulatory paths for approval, in addition to preferred pricing, making these attractive and realistic opportunities.

! MBX-8025 is an LDL Receptor-Independent Therapy for HoFH. HoFH is a rare genetic lipid disorder that affects approximately 1 in every 300,000 individuals worldwide. The disorder is usually caused by mutations of the low-density lipoprotein (LDL) receptor gene which produces a protein responsible for removing LDL-C from the blood. Patients develop atherosclerosis very early in life, which increases the risk of a serious or fatal cardio-vascular, including stroke and aortic valve dysfunction. Currently approved therapies are associated with safety issues or are only effective in patients with residual LDL receptor activity. CymaBay is developing MBX-8025 as a potentially safer, more convenient, and more broadly applicable treatment for the reduction of LDL-C in patients with HoFH.

! Data from Phase II Study in HoFH Expected in Q4 2015. CymaBay is conducting an open label, dose-escalation Phase II study for MBX-8025 in patients with HoFH. The trial is expected to enroll 8 or more patients in Europe and Canada. The primary endpoint is the change in LDL-C from baseline to the end of each treatment period of 12 weeks. Secondary endpoints include the change in total cholesterol, HDL-C, very low-density lipoprotein (VLDL-C), non HDL-C, and Apo B. The trial began in the second quarter and results are expected in the fourth quarter of 2015.

! Phase II trial in PBC Expected in Q4 2015. PBC is an orphan autoimmune disease of the liver that primarily affects women over the age of 40. The condition is characterized by inflammation and immune-mediated destruction of bile ducts within the liver. This causes harmful substances to build up in the liver, leading to irreversible scarring and potentially hepatic failure for which a transplantation is the only treatment available. The only approved drug for PBC is ursodiol, however only 40% - 50% respond to this disease slowing therapy. CymaBay is planning to conduct a double-blind, placebo-controlled, dose-ranging Phase II study for MBX-8025 of 12 weeks duration in patients with PBC. The Company expects to enroll approximately 75 patients who have an inadequate response to ursodiol. The primary endpoint of the study will be the reduction in alkaline phosphate (ALP), which was used in Intercept Pharma’s pivotal Phase III study for obeticholic acid (OCA) in PBC. Pruritus and asthenia, key symptoms of PBC, will be studied as secondary endpoints. Results from this trial are expected in the fourth quarter of 2016.

Financial Discussion Quarterly Financial Results. On August 10th, 2015, CymaBay announced second quarter financial results for 2015. The net loss for the quarter ending on June 30th, 2015, decreased by 57% or $1.8 million, to $1.4 million or ($0.09) per diluted share, compared to a net loss of $3.2 million, or ($0.56) per diluted share in the same period of 2014. The

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decrease in net loss was due in part to a non-cash gain of $5.3 million for the quarter compared to a non-cash gain of $2.8 million for the same period in 2014, from the mark to market valuation of the company’s warrant liability. Research and development costs were $4.3 million in the second quarter, a 4% increase over $4.1 million in the comparable period in 2014. As of June 30th, 2014, the company had cash, cash equivalents, and short term investments of $27.0 million, as compared to $34.8 million at December 31, 2014. Recent Financing Activity. On July 27, 2015, CymaBay completed a public offering of 8,188,000 shares of common stock at $2.81 per share. The net proceeds to the Company, after deducting the underwriting discount and expenses, were approximately $21.3 million. On August 7, 2015, the company refinanced its loan facility with Oxford Finance LLC and Silicon Valley Bank for an aggregate amount of $15 million. The first $10 million tranche was drawn at closing with a portion of the proceeds used to retire debt outstanding under the previous loan facility.

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Table of Contents Financial Discussion ....................................................................................................................................................................... 3!Company Description .................................................................................................................................................................... 6!Arhalofenate: The First Urate-Lowering Anti-Flare Therapy (ULAFT) for Gout .............................................................. 6!Gouty Arthritis ................................................................................................................................................................................ 9!

Causes ........................................................................................................................................................................................ 10!Symptoms and Diagnosis ....................................................................................................................................................... 11!Treatment .................................................................................................................................................................................. 11!

Gout Market Information ........................................................................................................................................................... 12!Clinical Data Discussion .............................................................................................................................................................. 14!Other Drugs in Development for Gout ................................................................................................................................... 24!Competitive Landscape ............................................................................................................................................................... 24!MBX-8025: A Selective PPAR-δ Agonist for Orphan Metabolic and Autoimmune Diseases ........................................ 25!Homozygous Familial Hypercholesterolemia (HoFH) ........................................................................................................... 27!

Causes ........................................................................................................................................................................................ 28!Diagnosis ................................................................................................................................................................................... 28!Treatment .................................................................................................................................................................................. 29!

Disease Market Information for HoFH .................................................................................................................................... 30!Competitive Landscape in HoFH .............................................................................................................................................. 30!Primary Biliary Cirrhosis (PBC) .................................................................................................................................................. 30!

Causes and Pathogenesis ........................................................................................................................................................ 31!Symptoms and Diagnosis ....................................................................................................................................................... 31!Treatment .................................................................................................................................................................................. 31!

Disease Market Information for PBC ....................................................................................................................................... 31!Other Drugs in Development for PBC .................................................................................................................................... 32!Competitive Landscape for MBX-8025 in PBC ...................................................................................................................... 33!Clinical Data Discussion for MBX-8025 in Mixed Dyslipidemia ......................................................................................... 33!

Phase II Trial with MBX-8025 in Mixed Dyslipidemia ..................................................................................................... 34!Ongoing Phase I Trial with MBX-8025 in HoFH ............................................................................................................. 37!Expected Phase II Trial with MBX-8025 in PBC .............................................................................................................. 37!

Intellectual Property ..................................................................................................................................................................... 37!Management Team ....................................................................................................................................................................... 38!Risk to an Investment .................................................................................................................................................................. 40!Analyst Certification ..................................................................................................................................................................... 41!Disclosure ...................................................................................................................................................................................... 41!

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Company Description CymaBay Therapeutics is a clinical-stage biopharmaceutical company developing therapies for metabolic and orphan diseases. The Company is developing lead candidate arhalofenate for the treatment of gout. Arhalofenate’s dual acting mechanism reduces gout flares and lowers serum uric acid (sUA) levels. The Company has conducted Phase II studies which have demonstrated the safety and efficacy of arhalofenate alone and in combination with Takeda’s (TKPYY) Uloric (febuxostat) as a gout treatment. CymaBay is exploring strategic partnerships to fund Phase III development of arhalofenate and expects to have an agreement in place by the first half of 2016. The launch of a Phase III program is expected to follow shortly after signing a partnership agreement. The Company is also developing MBX-8025 as a treatment for homozygous familial hypercholesterolemia (HoFH) and primary biliary cirrhosis (PBC). Previous studies with MBX-8025 in patients with mixed dyslipidemia demonstrated favorable effects on lipids and liver biomarkers. The Company initiated a proof-of-concept Phase II study for MBX-8025 in patients with HoFH in the second quarter of 2015 and expects topline results from this study by the end of the year. CymaBay expects to initiate a Phase II study for MBX-8025 in PBC in the fourth quarter of 2015 and expects top-line data in the fourth quarter of 2016. The developmental pipeline is shown in Figure 1.

Figure 1. CymaBay’s Developmental Pipeline

Source: LifeSci Capital

Arhalofenate: The First Urate-Lowering Anti-Flare Therapy (ULAFT) for Gout CymaBay is developing arhalofenate for the treatment of gout. The condition is characterized by the insufficient excretion or overproduction of uric acid, which leads to elevated levels of serum uric acid (sUA).1 When the concentration of uric acid exceeds its solubility limit in the blood, monosodium urate (MSU) crystals form and deposit in joints. Immune responses against MSU deposits can lead to painful episodes of acute joint inflammation known as flares or gout attacks, which are a hallmark symptom of the condition. None of the approved therapies for the hyperuricemia of gout reduce the frequency or severity of flares, and many patients are not able to sufficiently

1 Choi, H.K. et. al., 2005. Pathogenesis of Gout. Annals of Internal Medicine, 143, pp499-516.

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lower sUA levels in order to slow or reverse disease progression.2 Results from clinical studies conducted by CymaBay indicate that arhalofenate in combination with an existing gout therapy, Takeda’s (TKPYY) Uloric (febuxostat), can adequately lower sUA and significantly reduce flare rate by controlling inflammation.3,4 CymaBay intends to market this drug combination as the first uric acid- or urate-lowering anti-flare therapy (ULAFT) for gout patients who inadequately respond to existing urate lowering therapies (ULT) and desire improved flare control. The Company expects to secure a development and commercialization partner for arhalofenate in the first half of 2016 and subsequently launch a potential registration Phase III trial to test the safety and efficacy of an arhalofenate and febuxostat combination therapy in patients with gout. Arhalofenate Background. Arhalofenate is the R-enantiomer of the racemic drug halofenate, which was investigated by Merck (NYSE: MRK) in the 1970s for the treatment of dyslipidemia and hyperurcicemia. Merck demonstrated that halofenate was effective at lowering serum triglycerides, and uric acid, but discontinued the program due to the drug’s gastrointestinal (GI) side effects. They also discovered that halofenate lowered glucose in the subset of patients with type 2 diabetes. After CymaBay discovered that the GI toxicity was associated with the activity of the S-enantiomer in the mid-2000s, the Company began developing arhalofenate for the treatment of gout. Figure 2 shows the chemical structure of arhalofenate.

Figure 2. Structure of Arhalofenate

Source: LifeSci Capital Mechanism of Action. Arhalofenate’s unique pharmacological activities reduce sUA acid and inflammation, making it the first urate lowering anti-flare therapy (ULAFT). This dual mechanism differentiates arhalofenate from all approved ULT or those in development. Arhalofenate reduces the frequency and duration of flares by blocking cytokine-induced inflammatory responses. sUA precipitates as monosodium urate crystals (MSU) in bone joints when the concentration of uric acid exceeds approximately 6.8 mg/dL. Resident inflammatory cells including macrophages, monocytes, and neutrophils within the affected joints react to the crystals and secrete the cytokine Interleukin-1B (IL-1B), which promotes joint infiltration of additional inflammatory cells from the circulation. This immune response causes joint redness and swelling, and triggers the pain associated with a gout attack. Figure 3 shows that arhalofenate inhibits the local

2 Rees, F. et al., 2014. Optimizing current treatment of gout. Nature Reviews Rheumatology, 10, pp271-283. 3 https://clinicaltrials.gov/ct2/show/study/NCT01416402 4 https://clinicaltrials.gov/ct2/show/NCT02252835

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production of IL-1B, preventing the recruitment of inflammatory cells that initiate and potentiate the inflammatory response.

Figure 3. Arhalofenate Inhibits IL-1B-mediated Inflammatory Responses

Source: LifeSci Capital Arhalofenate reduces sUA by blocking URAT1, the main uric acid transporter in kidney tubules. URAT1 is expressed on the apical side of proximal tubule cells and is responsible for the reabsorption of uric acid from the urine. A second set of transporters expressed in these same cells pump uric acid into the circulation. Figure 4 illustrates that arhalofenate blocks uric acid reabsorption by inhibiting URAT1, allowing a greater fraction of uric acid to be excreted in urine. This mechanism of action is characteristic of a class of drugs known as uricosuric agents, which include probenencid, benzbromarone and sulfinpyrazone.

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Figure 4. Arhalofenate Inhibits the Activity of URAT1

Rees et al., 20145 and LifeSci Capital Safety Profile. Arhalofenate has been studied in 17 clinical studies and more than 1,100 subjects most of which with either type 2 diabetes or gout. Arhalofenate was generally safe and well tolerated in the studies. The most frequent adverse events were increases in creatinine phosphokinase, upper respiratory tract infections, hypertension, and headache.

Gouty Arthritis Gouty arthritis, or gout, is the most common form of inflammatory arthritis in men and affects more than 8 million patients in the US.6 Gout is associated with elevated levels of sUA, which is caused by the under excretion or overproduction of uric acid. The hallmark symptom of gout is painful episodes of acute joint inflammation known as gout flares or attacks. These often debilitating events are triggered by immune responses against MSU crystals, which form in joints when the concentration of uric acid exceeds its solubility limit in the blood. Patients experiencing gout flares miss an average of 2.6 more days of work per year and require more healthcare utilization than those without gout.7 The goal of gout treatment is to reduce sUA to levels that allow for the dissolution of crystals. The current standard of care is uric acid lowering therapies (ULTs), which act by either reducing uric acid

5 Rees, F. et al., 2014. Optimizing current treatment of gout. Nature Reviews Rheumatology, 10, pp271-283. 6 Zhu, Y. et al., 2011. Prevalence of gout and hyperuricemia in the US general population: the National Health and Nutrition Examination Survey 2007-2008. Arthritis and Rheumatology, 63, pp3136-3141. 7 Sicras-Mainar, A. et al., 2013. Resource Use and Economic Impact of Patients With Gout: A Multicenter, Population-Wide Study. Reumatologia Clinica, 9(2), pp94-100.

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production or enhancing the fractional excretion in the urine. However, these drugs fail to adequately reduce sUA in approximately 1 out of 2 patients,8 and paradoxically they increase the frequency of acute attacks during the first 6 to 12 months of treatment. Anti-flare medications are used prophylactically with ULTs to reduce the frequency of flares, however they are not well tolerated and often are contraindicated because of gout comorbidities. There is a large unmet medical need for a dual-acting agent that can safely lower sUA levels and minimize gout attacks. CymaBay’s arhalofenate is the first urate lowering anti-flare therapy (ULAFT) for gout patients who inadequately respond to existing urate lowering therapies (ULT) and desire superior flare control. Causes Gout is likely caused by the elevation of uric acid in the blood, a condition known as hyperuricemia and is defined as a sUA level greater than 6.0 mg/dL.9 High levels of sUA trigger the formation of needle‐like MSU crystals in joints, bone, bursae, tendons, ligaments and other soft tissues and organs. White blood cells recognize the crystals as ‘danger signals’ and launch responses aimed at their elimination. This activity triggers severe inflammation and joint pain, which often prevents patients from participating in everyday activities. Not all patients with hyperuricemia develop gout, so there are likely additional environmental and genetic factors that contribute to disease onset. Hyperuricemia can be caused by increased uric acid production or when the kidneys fail to remove uric acid from the body effectively. 10 Certain foods may raise sUA such as red meat, alcohol, and snacks with high-fructose corn syrup. These foods are rich in purines, which are naturally metabolized into uric acid. Although diet can contribute to sUA levels, it is estimated that 80-95% of hyperuricemia cases result from impaired kidney excretion of uric acid. Under-excretion is most often associated with an altered activity of the URAT1 transporter, which regulates uric acid reabsorption in the kidney.11 When the function of URAT1 is compromised due to genetic mutations, drug-drug interactions or other unknown causes, a greater fraction of uric acid is reabsorbed from the urine and dispensed into the blood. Pathogenesis. Depending on the severity and frequency of symptoms, gout can be subdivided into three disease phases. Each phase is discussed in more detail below.

! Acute Gouty Arthritis. Acute gout is characterized by the sudden onset of redness, swelling, and pain of a bone joint. This phase usually involves a single joint, most often the big toe or the knee. Over time, the attacks can involve multiple joints at once and may be accompanied by fever.

! Inter-Critical Period. This phase describes the period of time between a patient’s first and second gout

attack. Most patients experience their second attack within two years,12 and additional attacks with increased frequency and duration may occur thereafter.

8 Becker, M.A. et al., 2010. The urate-lowering efficacy and safety of febuxostat in the treatment of the hyperuricemia of gout: the CONFIRMS trial. Arthritis Research and Therapy, 12(2), r63 9 Bardin, T. et al., 2014. Definition of hyperuricemia and gouty conditions. Current Opinion in Rheumatology, 26(2), pp186-191. 10 Hochberg, M.C. et al., 2003. Rheumatology. 3rd ed. New York: Mosby. 11 Enomoto, A. et al., 2002. Molecular identification of a renal urate–anion exchanger that regulates blood urate levels. Nature, 417, pp447-452. 12 Yu, T.F. et al., 1961. Efficacy of Colchicine Prophylaxis in Gout: Prevention of Recurrent Gouty Arthritis Over a Mean Period of Five Years in 208 Gouty Subjects. Annuals of Internal Medicine, 55, pp179-192.

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! Chronic Tophaceous Gout. Patients with repeated attacks can develop tophaceous gout. This stage of the disease results in the accumulation of large numbers of MSU crystals in one or more joints. Patients develop large crystal deposits called tophi, which may cause erosion of the bone and eventually permanent joint damage.

Symptoms and Diagnosis Patients with mild forms of gout may have flare attacks that are separated by years. Initially the flares can typically be managed with over-the-counter anti-inflammatory medications. However as the disease progresses, flares become more frequent and prolonged, and have a greater impact on the patient’s quality of life. Patients with chronic gout experience sudden attacks of severe pain, most often in the big toe, ankle, or knee, but that also occur in elbows, wrists, and fingers over time. The affected joint will show signs of inflammation such as swelling and redness, and is often sensitive to pressure. The attacks tend to take place during the night and patients have trouble sleeping due to pain and aching. The symptoms tend to be most debilitating at the beginning of a gout attack and then gradually subside within a few days to weeks. It is not entirely clear how the body turns off these painful episodes, but it is possible that immunosuppressive cell populations within the affected joint may dampen the inflammatory response over time. Gout is most frequently diagnosed when a patient presents with a flare. Physicians will then order a blood test to confirm elevated sUA. Treatment Treatment goals for gout focus on reducing sUA levels and the frequency of flares. The American College of Rheumatology and European League Against Rheumatism recommend the use of urate lowering therapies (ULTs) to reverse hyperuricemia and stem the deposition of proinflammatory MSU crystals.13 ULTs are given to patients with the goal of reducing sUA levels below 6 mg/dL, although reducing sUA below 5 or 4 mg/dL is particularly desirable for those patients with chronic tophaceous gout. The most commonly prescribed ULTs in the US are allopurinol and Takeda’s Uloric (febuxostat). They are xanthine oxidase (XO) inhibitors that decrease the production of uric acid in the liver, intestine, and muscles. Although approximately 90% of gout patients who seek treatment are prescribed allopurinol, studies have shown that only about 40% of patients reach their sUA goal of less than 6.0 mg/dL.14 The second class of drugs used for the treatment of hyperuricemia is the uricosurics, which reduce sUA by promoting the urinary excretion of uric acid. These drugs inhibit the activity of URAT1 in the proximal tubule cells in the kidney. CymaBay’s arhalofenate, along with probenencid, benzbromarone and sulfinpyrazone are uricosuric drugs. XO inhibitors and uricosurics are not able to reduce the frequency of acute gout flares. In fact, these drugs often increase flare frequency during the first 6 to 12 months of therapy, causing roughly 50% of patients to prematurely end treatment. This feature of initial treatment may be triggered by the breakdown of MSU crystals, which causes

13 Khanna, D. et al., 2012. 2012 American College of Rheumatology Guidelines for Management of Gout Part I: Systemic Non-pharmacological and Pharmacologic Therapeutic Approaches to Hyperuricemia. Arthritis Care Research, 64(10), pp1431-1446. 14 Becker, M.A. et al., 2015. An open label, 6-month study of allopurinol safety in gout: The LASSO study. Seminars in Arthritis and Rheumatism, article in Press.

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hyper-activation of immune and inflammatory cell responses. The most common anti-flare therapies are generic nonsteroidal antiinflammatory drugs (NSAIDS), colchicine, and steroids. These agents come with added side effects. Known effects of colchicine include diarrhea, nausea, vomiting, destruction of skeletal muscle, neuromuscular toxicity, and decreased blood cell production. Chronic use of NSAIDS, which only provide symptom relief and is not recommended in patients over 65 years, is associated with increased risk of renal toxicity, gastrointestinal bleeding, and cardiovascular events. Similarly, steroids are linked to hypertension and a worsening of glycemic control, which is problematic for patients with diabetes, hypertension, and/or heart disease. Given the prevalence of cardiovascular and metabolic comorbidities in gout patients, the use of existing anti-flare medications can be problematic in a significant number of gout patients. There is no drug on the market that reduces flares and lowers sUA. CymaBay’s arhalofenate potentially addresses an unmet need by preventing flares while also helping patients achieve their sUA goals.

Gout Market Information There are roughly 8.3 million individuals in the US with gout.15 Approximately 36% (3 million) of these patients seek treatment for their symptoms and are prescribed ULTs, as shown in Figure 5. Out of the 3 million patients, it is estimated that 90% (2.7 million) of individuals receive allopurinol and just 5% (150,000) receive febuxostat. Approximately 60% of patients treated with allopurinol and 60% of patients treated with febuxostat do not achieve sUA levels less than 6mg/dL,16,17,18 meaning there are a large number of gout patients who are not reaching recommend sUA goals. Combining these patients with the approximately 300,000 that are intolerant to allopurinol, we estimate that there are roughly 2.0 million patients currently in the US who are not adequately served by ULT therapy and may be potential candidates for arhalofenate treatment.

15 Zhu, Y. et al., 2011. Prevalence of gout and hyperuricemia in the US general population: the National Health and Nutrition Examination Survey 2007-2008. Arthritis and Rheumatology, 63, pp3136-3141. 16 Becker, M.A. et al., 2015. An open label, 6-month study of allopurinol safety in gout: The LASSO study. Seminars in Arthritis and Rheumatism, article in Press. 17 https://clinicaltrials.gov/ct2/show/NCT00174915 18 https://clinicaltrials.gov/ct2/show/NCT00102440

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Figure 5. Arhalofenate’s Addressable Patient Population in 2015

Percent of Patients

Number of Patients

Gout patients in US 8.3 M

Gout patients who seek ULT 36% 3 M

% of ULT treated patients that are prescribed allopurinol 90% 2.7 M

% of allopurinol treated patients who do not achieve target sUA ! 60% 1.6 M

% of gout patients who seek ULT that are intolerant to allopurinol 10% 300,000

% of ULT treated patients that are prescribed febuxostat 5% 150,000

% of febuxostat treated patients who do not achieve target sUA 60% 90,000

Arhalofenate’s Potential Addressable Patient Population ~2.0 M


Arhalofenate Market Potential. We conducted a scenario analysis to estimate the peak US market potential for arhalofenate in gout. The analysis is based on several assumptions listed below:

! Addressable Population – We used similar assumptions as detailed in Figure 5 above to calculate the addressable population of patients who may be candidates for arhalofenate. Adjustments were made to account for population growth.

! Market Penetration – Given the existing treatments available for sUA reduction and the potential approval of AstraZeneca’s (NYSE: AZN) lesinurad, we conservatively assume a 20-30% market penetration for arhalofenate.

! Compliance – We assume a compliance rate of 70%, which is at least 20% higher than rates seen with existing ULTs.19 We believe compliance will be higher for arhalofenate since the drug decreases rather than increases the frequency of flares.

! Pricing – We assume a price per year of $2,400 for arhalofenate, which is comparable to the current $2,000 annual cost for febuxostat. We factor in a modest 1% price of inflation per year to account for competitive pressures.

Figure 6 shows our two scenarios for US sales of arhalofenate based on the assumptions above. Scenario 1 is a modest launch where peak penetration reaches 20%. Scenario 2 is a more aggressive launch with peak penetration of 30%. These scenarios yield estimated peak sales in 2025 between $684 million and $1 billion per year. It is worth noting that arhalofenate has patent protection beyond 2032. Thus, the total value of the product extends to this period of exclusivity.

19 Zandman-Goddard, G. et al., 2013. Rates of adherence and persistence with allopurinol therapy among gout patients in Israel. Rheumatology, 52, pp1126-1131.

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Figure 6. US Sales Projections for Arhalofenate in Gout

2020 2021 2022 2023 2024 2025

Number of Gout Cases in US

8.7 M 8.8 M 8.8 M 8.9 M 9 M 9 M

Arhalofenate Target Patient Population

2.0 M 2.0 M 2.0 M 2.0 M 2.0 M 2.1 M

Scenario 1

Penetration Rate

4% 6% 9% 12% 15% 20%

Treated Patients

78,810 134,766 194,853 256,011 318,253 438,858

Compliance Rate

70% 70% 70% 70% 70% 70%

Cost Per Year

$2,522 $2,548 $2,573 $2,599 $2,625 $2,651

Potential Sales

$139 M $240 M $351 M $466 M $585 M $814 M

Scenario 2

Penetration Rate

5% 9% 13% 18% 22% 30%

Treated Patients

107,905 196,582 286,847 378,720 472,224 658,287

Compliance Rate

70% 70% 70% 70% 70% 70%

Cost Per Year

$2,522 $2,548 $2,573 $2,599 $2,625 $2,651

Potential Sales

$191 M $351 M $517 M $689 M $868 M $1,222 M


Clinical Data Discussion CymaBay has completed five Phase II trials with arhalofenate in gout patients. In the following section we provide the details for each study, and highlight the potential design of the Phase III program. Figure 7 summarizes key features of the completed studies. CymaBay intends to develop and commercialize a fixed-dose combination of arhalofenate and Takeda’s xanthine oxidase inhibitor (XO) febuxostat, which is distinct from the Phase IIa study for arhalofenate, which was in combination with allopurinol. The Company expects to hold an end-of-Phase II meeting with the FDA in the third quarter of 2015. The results of the meeting will likely drive efforts to secure a development and commercialization partner for arhalofenate, which is expected in the first half of 2016. A Phase III program is expected to launch shortly thereafter to support approval of arhalofenate.

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Figure 7. Summary of Completed Arhalofenate Trials

Design

Number of

Patients

Dose of Arhalofenate Tested

Primary Endpoint

Primary Endpoint Met

Phase II, randomized, double-blind, controlled trial

64 400 mg and 600 mg change in sUA Yes

Phase IIa, randomized, double-blind, controlled trial in combo with allopurinol

95 400 mg or 600 mg change in sUA No

Phase IIa, open-label trial in combo with febuxostat


Phase IIb, open-label trial in combo with febuxostat


Phase IIb, randomized, double-blind, controlled trial

239 600 mg and 800 mg reduction in flares Yes


Overview of Phase III Program for Arhalofenate CymaBay plans to discuss the Phase III program for arhalofenate with the FDA at an EndofPhase II meeting in the third quarter of 2015. The Company intends to use the co-primary endpoints of sUA responder rate and reduction in flares as a basis for approval for the management of hyperuricemia and prophylaxis of flares in patients, respectively. The program is anticipated to include two Phase 3 studies of arhalofenate 800 mg in combination with febuxostat 40 mg in patients with chronic gout for which the sUA goal is < 6 mg/dL. A third study would examine arhalofenate 800 mg with febuxostat 80 mg in patients with tophaceous gout for which the sUA goal is < 5 mg/dL. The total trial program size is currently estimated at approximately 1300 patients. The company expects the final program will need to align with the views of potential future development partners. The Phase III program is expected to include pivotal studies for the following two patient populations:

! Patients with chronic gout and hyperuricemia and who are at risk for flares and have not achieved the recommended sUA goal of less than 6 mg/dL on xanthine oxidase (XO) inhibitors.

! Patients with tophaceous gout, who in addition to hyperuricemia and risk for flares, also have tophi and are expected to benefit from lowering their sUA below 5 mg/dL.

Activities to enable the Phase III program are underway and the trials are expected to launch in the first half of 2016 upon completion of a partnership agreement.

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Phase II Trial of Arhalofenate Monotherapy in Patients with Gout Trial Design. This was a randomized, double-blind, placebo-controlled Phase II trial testing arhalofenate for the treatment of hyperuricemia in patients with gout.20 Patients had baseline sUA between 8 mg/dL and 12 mg/dL and had received a clinical diagnosis of gout using the standards set by the American College of Rheumatology. This range of sUA represented moderate to severe hyperuricemia. 64 subjects were enrolled and randomized into three equally sized treatment arms to receive 400 mg of arhalofenate, 600 mg of arhalofenate or placebo. Treatment or placebo was administered once daily for 4 weeks. Patients also received 0.6 mg of colchicine as flare prophylaxis. The primary endpoint was the change in sUA from baseline to 4 weeks. Efficacy Results. Both doses of arhalofenate treatment led to a statistically significant reduction of sUA, as shown in Figure 8. Patients in the placebo group experienced a 4% increase in mean sUA compared to a 15% decrease in the 400 mg arhalofenate arm and a 23% decrease in the 600 mg arhalofenate arm. When compared to placebo, the sUA reductions in both arhalofenate treatment groups were statistically significant (p=0.0002). Subjects treated with arhalofenate also demonstrated dose dependent reductions in sUA and the number of gout flares. The proportion of patients reporting at least one flare during the treatment phase was 5% (1/22), 20% (4/20) and 23% (5/22) in the 600 mg, 400 mg, and placebo groups respectively. These results demonstrate that arhalofenate can significantly lower sUA and reduce the frequency of flares.

Figure 8. Change in sUA Levels and Fraction of Patients Experiencing more than 1 Flare

Placebo Arhalofenate

(400 mg) Arhalofenate

(600 mg)

n=22! n=20! n=22!

Mean % change in sUA from day 1!

+4% -15% (p=0.0002) -23% (p=0.0002)

% of subjects experiencing >1 flare!

23% 20% 5%

Source: CymaBay Presentation

Phase IIa Trial of Arhalofenate in Combination with Allopurinol in Patients with Gout Trial Design. This was a randomized, double-blind, placebo-controlled Phase II trial evaluating arhalofenate in combination with allopurinol in patients with gout.21 Subjects in this study had baseline sUA between 6 and 12 mg/dL, had received a clinical diagnosis of gout using the standards put forth by the American College of Rheumatology, and were unable to achieve sUA levels less than 6 mg/dL when treated with allopurinol alone. This range of sUA represented moderate to severe hyperuricemia. 95 subjects were enrolled and randomized into three equally balanced treatment arms. Each study arm received 300 mg of allopurinol in combination with placebo, 400 mg of arhalofenate, or 600 mg of arhalofenate. All study drugs including placebo were administered once daily for

20 https://clinicaltrials.gov/ct2/show/study/NCT01336686 21 https://clinicaltrials.gov/ct2/show/study/NCT01399008

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four weeks. During the treatment period, subjects received 0.6 mg of colchicine daily as flare prophylaxis. The primary endpoint was the change in sUA from baseline to 4 weeks. Efficacy Results. Arhalofenate treatment in combination with allopurinol did not lead to a significant difference in sUA in comparison to treatment with allopurinol alone, as shown in Figure 9. There was a decrease in mean sUA of 16.0% and 9.9% in the allopurinol plus 400 mg or 600 mg arhalofenate groups, respectively. In comparison, there was a 9.5% decrease in mean sUA in the allopurinol plus placebo group. The proportion of patients who reached a sUA target of less than 6 mg/dL at the end of the treatment phase was 35.5% in the allopurinol plus placebo group, 52.9% in the allopurinol plus 400 mg arhalofenate group, and 43.3% in the allopurinol plus 600 mg arhalofenate group. A trend in the reduction of gout flares was observed for patients receiving 600 mg arhalofenate plus allopurinol compared to the placebo arm. The proportion of patients in the per protocol population reporting at least one flare during the 4 week treatment phase was 13% in the allopurinol plus placebo group, 18% in the allopurinol plus arhalofenate 400 mg group, and 7% in the allopurinol plus arhalofenate 600 mg group.

Figure 9. Change in sUA Levels in Patients Receiving Arhalofenate in Combination with Allopurinol

Allopurinol +

Placebo

Allopurinol + Arhalofenate

(400 mg)

Allopurinol + Arhalofenate

(600 mg)

n=31 n=34 n=30

Mean % change in sUA from baseline (standard deviation)

-9.5% (19.0) -16.0% (20.9) -9.9% (17.1)

% of patients reaching sUA goal of <6.0 mg/dL

35.5% 52.9% 43.3%

% of patients experiencing one or more flares

13% 18% 7%


The modest additional sUA reduction observed in the combination groups is attributable to a drug-drug interaction between arhalofenate and allopurinol. This study demonstrated that arhalofenate promoted the excretion of the active metabolite of allopurinol, called oxypurinol, as well as uric acid. This is rationale because both uric acid and oxypurinol are known to be reabsorbed by URAT1, the target of arhalofenate. Other uricosuric drugs also have this effect on oxypurinol. Phase IIa Trial of Arhalofenate in Combination with Febuxostat in Patients with Gout Trial Design. This was an open-label Phase II trial of arhalofenate in combination with febuxostat for the treatment of hyperuricemia.22 Subjects in this study had baseline sUA levels above 8 mg/dL and had received a clinical diagnosis of gout using the standards put forth by the American College of Rheumatology. This level of sUA

22 https://clinicaltrials.gov/ct2/show/study/NCT01416402

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is considered to be moderate to severe hyperuricemia. The study enrolled 11 subjects who received once daily treatment on the following schedule:

! Week 1: 80 mg febuxostat. ! Weeks 2 and 3: 80 mg febuxostat plus 400 mg arhalofenate. ! Weeks 4 and 5: 80 mg febuxostat plus 600 mg arhalofenate.

Subjects also received 0.6 mg colchicine daily as prophylaxis for gout flare. The primary endpoint was the proportion of patients achieving sUA less than 6.0 mg/dL, less than 5.0 mg/dL, less than 4.0 mg/dL and less than 3.0 mg/dL at the end of the five-week treatment period. Efficacy Results. Arhalofenate treatment in combination with febuxostat (FBX) reduced sUA in a dose dependent fashion, as shown in Figure 10. Subjects experienced a decrease in mean sUA of 48% following one week of treatment with febuxostat. Mean sUA decreased further at week 3 to 54% after patients received 400 mg arhalofenate in combination with FBX for 2 weeks. At the end of week 5 when patients received 2 weeks of 600 mg arhalofenate in combination with FBX, subjects exhibited a decrease in mean sUA of 60%.

Figure 10. Change in sUA in Patients Receiving Arhalofenate in Combination with Febuxostat

FBX FBX +

Arhalofenate (400 mg)

FBX + Arhalofenate

(600 mg)

Day 8 Day 22 Day 36

Mean % change in sUA from baseline -48% -54% -60% % of patients reaching sUA goal of <6.0 mg/dL 100% - 100% % of patients reaching sUA goal of <5.0 mg/dL ~50% - 100% % of patients reaching sUA goal of <4.0 mg/dL ~10% - ~60% % of patients reaching sUA goal of <3.0 mg/dL - - ~20%


100% of patients treated for 1 week with single-agent FBX achieved a sUA level less than 6.0 mg/dL, approximately 50% achieved less than 5.0 mg/dL, and approximately 10% were less than 4.0 mg/dL. The combination of febuxostat 80 mg with arhalofenate 600 mg resulted in 100% of patients experiencing sUA levels below 5.0 mg/dL, approximately 60% of patients experiencing sUA levels below 4.0 mg/dL, and almost 20% of patients experiencing sUA levels below 3.0 mg/dL. These results demonstrate that arhalofenate in combination with febuxostat can significantly lower sUA. Phase IIb Trial of Arhalofenate for Flare Reduction in Patients with Gout Trial Design. This was a randomized, double-blind, active- and placebo-controlled Phase II trial evaluating the anti-flare properties of arhalofenate in patients with gout.23 This study was unique from prior trials in that it

23 https://clinicaltrials.gov/ct2/show/NCT02063997

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evaluated arhalofenate in the absence of prophylactic colchicine and included active comparator arms to fully assess arhalofenate’s anti-flare properties. Subjects in this study had baseline sUA between 7.5 mg/dL and 12 mg/dL, had received a clinical diagnosis of gout using the standards put forth by the American College of Rheumatology, and had reported at least three flares during the 12 months prior to enrollment. 239 subjects were enrolled and divided into a placebo arm and 4 equally sized treatment arms. The 5 arms were:

! Placebo ! 600 mg arhalofenate. ! 800 mg arhalofenate. ! 300 mg of allopurinol (Allop). ! 300 mg of allopurinol plus 0.6 mg of colchicine (COL).

Subjects received treatment or placebo once-daily for 12 weeks. The primary endpoint was the flare incidence rate from baseline through week 12 in the 800 mg arhalofenate group compared to the allopurinol group. The trial used an accepted definition of flare and used electronic diary data to record flares, which was an innovative aspect of this study. Secondary endpoints included flare rate of arhalofenate 800 mg versus placebo group and and sUA reduction. The flare incidence rate is presented as the number of flares per patient over 12 weeks. Efficacy Results. Arhalofenate treatment significantly reduced flares rates in patients with gout, as shown in Figure 11. The trial met the primary endpoint of a statistically significant reduction of 46% in flare rate between the 800 mg arhalofenate arm and the allopurinol group without colchicine (p=0.0056). There was not a significant difference in flare rates between 800 mg arhalofenate and allopurinol combined with colchicine (p=0.091). Patients receiving 800 mg arhalofenate also experienced a significantly lower flare rate when compared to placebo (p=0.049).

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Figure 11. Reduction in Flare Rate in Patients Receiving Arhalofenate and Allopurinol


Both doses of arhalofenate treatment led to a statistically significant reduction of sUA in patients, as shown in Figure 12. Patients in the arhalofenate groups experienced between a 10% and 20% decrease in mean sUA compared to an approximately 1% decrease for placebo arm. When compared to placebo, the sUA reductions in both arhalofenate treatment groups were statistically significant (p<0.01) and were in line with a previous study. 24 Subjects treated with allopurinol demonstrated an approximately 25%-30% reduction in sUA (p<0.01). It is worth noting that these sUA reductions were achieved with single-agent arhalofenate, whereas CymaBay intends to develop the drug as a combination with febuxostat. 24 https://clinicaltrials.gov/ct2/show/study/NCT01336686

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Figure 12. Change in sUA in Patients Receiving Arhalofenate and Allopurinol

Source: CymaBay Presentation Safety results. There were no serious adverse events deemed related to arhalofenate. The most frequent treatment emergent adverse events were increases in creatinine phosphokinase, upper respiratory tract infections, hypertension, and headache, with no relevant differences between groups. Phase II Trial of Arhalofenate in Combination with Febuxostat in Patients with Gout Trial Design. This was an open-label, Phase II drug-drug interaction trial testing arhalofenate in combination with febuxostat for the treatment of hyperuricemia in patients with gout.25 Subjects in this study had baseline sUA above 7.5 mg/dL and had received a clinical diagnosis of gout using the standards put forth by the American College of Rheumatology. 32 subjects were enrolled and randomized into two equally sized cohorts for a treatment period of 6 weeks, as shown in Figure 13 below. One cohort received 600 mg arhalofenate once daily for 2 weeks followed by a week of combination therapy with 80 mg febuxostat, and another week of combination therapy with 40 mg febuxostat. Patients received 40 mg of single-agent febuxostat once daily for the final 2 weeks. Subjects in the second cohort received 800 mg arhalofenate once daily for 2 weeks followed by a week of combination therapy with 40 mg febuxostat, and another week of combination therapy with 80 mg febuxostat. In the final 2 weeks, these patients received single-agent febuxostat once daily at a dose of 80 mg.

25 https://clinicaltrials.gov/ct2/show/NCT02252835

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Figure 13. Trial Design for Phase II Study of Arhalofenate in Combination with Febuxostat

Week 1-2 Week 3 Week 4 Week 5-6

Cohort 1 Arhalofenate

600 mg

Febuxostat 80 mg +

Arhalofenate 600 mg

Febuxostat 40 mg +

Arhalofenate 600 mg

Febuxostat 40 mg

Cohort 2 Arhalofenate

800 mg

Febuxostat 40 mg +

Arhalofenate 800 mg

Febuxostat 80 mg +

Arhalofenate 800 mg

Febuxostat 80 mg


All subjects received 0.6 mg colchicine daily for flare prophylaxis. Baseline mean sUA in cohorts 1 and 2 were 9.4 and 9.2 mg/dL, respectively. The primary endpoints of the study were as follows:

! Proportion of patients achieving a target sUA less than 6.0 mg/dL, 5.0 mg/dL, and 4.0 mg/dL, and 3.0 mg/dL on day 29 following treatment with 800 mg arhalofenate and 80 mg febuxostat.

! Proportion of patients achieving an sUA reduction of less than or equal to 2.0 mg/dL, 3.0 mg/dL, and 4.0 mg/dL from baseline on day 29 following treatment with 800 mg arhalofenate and 80 mg febuxostat.

Efficacy Results. CymaBay released topline results from this study on January 12, 2015. Arhalofenate treatment in combination with febuxostat significantly reduced sUA as shown in Figure 14. 100% of subjects receiving 800 mg of arhalofenate in combination with febuxostat achieved sUA levels less than 6 mg/dL. 93% of patients achieved sUA levels less than 5 mg/dL and 79% achieved levels less than 4 mg/dL, which are more ambitious goals recommended for patients with high MSU crystal burden and tophaceous gout. Figure 14. sUA Responder Rates with Arhalofenate Combined with 40 mg and 80 mg Doses of Febuxostat

Arhalofenate

sUA <6 mg/dL sUA <5 mg/dL sUA <4 mg/dL

FBX 40 mg FBX 80 mg FBX 40 mg FBX 80 mg FBX 40 mg FBX 80 mg

0 mg 47% 93% 7% 71% 0 29%

600 mg 79% 94% 43%* a 88% 7% 31%

800 mg 100%** a 100% 93%*** a 93% 20% 79%* b

* p<0.05, ** p<0.01, *** p<0.001 a vs. 40 mg of FBX b vs. 80 mg of FBX

Source: CymaBay Presentation Figure 15 shows that 93% patients in the trial treated with the 800 mg arhalofenate in combination with 40 mg febuxostat reached sUA goal of less than 5 mg/dL compared to 7% of patients receiving febuxostat alone. These

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results support use of this combination in patients with tophaceous gout, where the recommended sUA level is less than 5 mg/dL. 5 mg/dL, and especially below 4 mg/dL, has been shown to accelerate tophi resolution.26

Figure 15. sUA Responder Rate with Febuxostat and Combination Therapy

Source CymaBay Presentation Safety. Arhalofenate in combination with febuxostat was found to be safe and well tolerated. There were no serious adverse events and only one severe adverse event of uncontrolled hypertension not deemed to be related to the study drugs. There was one case of elevated liver transaminases that emerged after the initiation of febuxostat in the second cohort. No patient in the study experienced a greater than 1.5 times elevation in creatinine. Conclusions of Arhalofenate’s Clinical Experience Data from the 5 studies show that arhalofenate significantly reduced sUA whether administered alone or in combination with febuxostat, and most notably decreased the incidence of flares in the absence of colchicine treatment. This feature if confirmed in a pivotal trial would bring a medical benefit to gout patients by addressing their most burdensome symptom without the risk of toxicity associated with current anti-flare therapies. The antiflare activity may be beneficial when arhalofenate is used as a combination therapy with febuxostat or as a monotherapy in patients who are resistant or have a contraindication to allopurinol. CymaBay is currently designing a Phase III program for arhalofenate.

26 Perez-Ruiz et al., 2002. Effect of urate-lowering therapy on the velocity of size reduction of tophi in chronic gout Arthritis & Rheumatism, 47(4), pp 356 – 360

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Other Drugs in Development for Gout There are no products in development that reduce the frequency and duration of flares. The most advanced sUA lowering product candidate is AstraZeneca’s (NYSE: AZN) lesinurad, which is currently under review by FDA and EMA. Lesinurad and arhalofenate are both uricosuric drugs, meaning they act by enhancing the urinary excretion of uric acid. They are also being developed as combination therapies with XO inhibitors, and would be marketed to patients who do not achieve optimal sUA levels with currently available treatments. Given these similarities, it is reasonable to assume that these drugs may compete for market share. Below we summarize safety and efficacy results for lesinurad’s Phase III program. CLEAR1 and CLEAR2 Phase III Trials. The CLEAR1 and CLEAR2 (Combining Lesinurad with Allopurinol in Inadequate Responders) trials were randomized, placebo-controlled studies. The trial enrolled gout patients who had not achieved target sUA levels on allopurinol alone and had reported at least two gout flares in the 12 months prior to enrollment. The primary endpoint for the trials was the proportion of subjects achieving a sUA level less than 6.0 mg/dL after 6 months of treatment. In these trials, both 200 mg and 400 mg lesinurad in combination with allopurinol met the primary endpoint, with a higher proportion of patients reaching goal compared to allopurinol alone (p<0.0001). CRYSTAL Phase III Trial. The CRYSTAL (Combination Treatment Study in Subjects with Tophaceous Gout with Lesinurad and Febuxostat) study compared the efficacy and safety of 200 mg and 400 mg lesinurad in combination with febuxostat to febuxostat monotherapy in patients with tophaceous gout. The primary endpoint for the trial was the proportion of subjects achieving a sUA level of less than 5.0 mg/dL at 6 months, which is the recommended sUA goal for patients with tophaceous gout. Lesinurad at 400 mg in combination with febuxostat met the primary endpoint, with more patients reaching goal compared to febuxostat alone (p<0.0001). In contrast, Lesinurad at 200 mg in combination with febuxostat missed the primary endpoint but did significantly lower sUA at all other time points measured. Lesinurad Safety Results. Common adverse events reported across all trials were upper respiratory tract infection, inflammation of the nasal passages, back pain, kidney stones, kidney toxicity, and an increase in serum creatinine. There was a higher incidence rate of renal-related adverse events in the 400 mg lesinurad plus febuxostat cohort compared to the febuxostat monotherapy group. AstraZeneca has filed for approval in the EU with the 200 mg lesinurad dose in combination febuxostat or allopurinol.

Competitive Landscape Xanthine oxidase (XO) inhibitors, especially allopurinol, have been the choice treatment for physicians and gout patients. The major drawbacks with these drugs is their widespread underdosing which is likely linked in part to the need for colchicine prophylaxis to mitigate flares during the initial 6 to 12 months with their treatment. Sales of Takeda’s (OTC: TKPYY) branded colchicine drug Colcrys totaled approximately $559 million in 2014, highlighting the importance of preventing and treating flares effectively. However, anti-flare medications including Colcrys, nonsteroidal anti-inflammatory drugs (NSAIDs) and steroids are contraindicated for several gout comorbidities, meaning physicians and patients are often left without treatment options. Colcrys is not recommended for patients with renal or hepatic impairment who are currently prescribed p-glycoprotein (P-gp) inhibitors or strong inhibitors

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of CYP3A4. In these patients, life-threatening and fatal colchicine toxicity has been reported with colchicine taken in therapeutic doses.27 It should also be noted that allopurinol fails to adequately reduce sUA below 6 mg/dL in approximately 60% of gout cases. When combined with the approximately 300,000 patients who are intolerant allopurinol, this leaves approximately 2.0 million patients in the US without adequate sUA control. AstraZeneca is developing lesinurad in combination with allopurinol or febuxostat for the treatment of hyperuricemia. Results thus far indicate improved sUA responder rates compared to XO inhibitors alone. However these combinations increase flares upon treatment initiation. Since patients usually seek treatment for relief from acute attacks, lowering sUA alone is not sufficient to ensure success in the market. CymaBay’s arhalofenate is positioned to be the only gout drug that reduces the duration and frequency of acute flares as well as lower sUA. The drug may eliminate the need for colchicine prophylaxis, and when used in combination with febuxostat, may allow a significant portion of the 2.0 million inadequate responders to achieve target sUA levels.

MBX-8025: A Selective PPAR-δ Agonist for Orphan Metabolic and Autoimmune Diseases CymaBay is developing MBX-8025, shown in Figure 16, for the treatment of homozygous familial hypercholesterolemia (HoFH) and primary biliary cirrhosis (PBC). MBX-8025 has been examined in five Phase I trials and one Phase II trial for the treatment of lipid disorders associated with mixed dyslipidemia. The data were promising and suggested that the drug significantly reduced LDL cholesterol (LDL-C) and improved liver biomarkers. However, CymaBay redirected its development program after the FDA indicated a cardiovascular outcome study would be required for approval in mixed dyslipidemia. Due to MBX-8025’s broad mechanism of regulating lipid and sugar metabolism, the Company plans to develop MBX-8025 for HoFH and PBC, two orphan indications for which cardiovascular outcome studies are not required. CymaBay has initiated a proof-of concept study for MBX-8025 in HoFH, and results are expected in second half of 2015. A second proof-of-concept trial in PBC is expected to initiate before the end of 2015.

Figure 16. Chemical Structure of MBX-8025

Source: LifeSci Capital Mechanism of Action. MBX-8025 is an orally administered agonist of peroxisome proliferator-activated receptor delta (PPARδ), which is a nuclear receptor that regulates genes involved in lipid metabolism. PPARδ impacts gene expression by binding to specific response elements within the promoters of target genes. Figure 17 shows that PPARδ binds to regions of the genome together with retinoid X receptor (RXR) and alters the rate of gene

27 http://www.fda.gov/Drugs/DrugSafety/PostmarketDrugSafetyInformationforPatientsandProviders/ucm174382.htm

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transcription. Preclinical studies conducted by CymaBay have shown that MBX-8025 activates PPARδ, causing it to selectively modulate genes involved in lipid storage transport and metabolism, insulin signaling, as well as anti-inflammatory and anti-fibrotic responses.

Figure 17. PPARδ Regulates Gene Expression

Source: LifeSci Capital Due to PPARδ’s widespread expression in metabolically active tissues and its role in metabolic processes, activating the protein could be useful in the treatment of several diseases. In preclinical studies in rodents, dogs, rabbits and primates, MBX-8025 demonstrated a variety of beneficial effects on the lipid profiles and other metabolic parameters. MBX-8025 treatment in these studies increased peripheral oxidation of fatty acids leading to reduced levels of triglycerides (TGs) and low-density lipoprotein (LDL), while raising high-density lipoprotein (HDL). Figure 18 highlights several possible indications for MBX-8025 based on the mechanism of action, including the orphan diseases HoFH and PBC.

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Figure 18. Potential Indications for MBX-8025


Safety Profile. All drugs that interact with members of the PPAR family of transcription factors are subject to a partial clinical hold, due to the potential for treatment-related tumors in rodents after administering certain compounds. This hold limits clinical studies to durations of less than 6 months. The decision to lift a partial clinical hold for a particular program involves an assessment of the relevance and perceived risk of the rodent carcinogenicity findings in relation to the anticipated benefit to the patient for the intended indication. CymaBay has completed the 2-year rodent carcinogenicity studies with MBX-8025 and is currently conducting additional de-risking studies requested by the FDA. The Company intends to discuss lifting its partial clinical hold with the FDA once results from the Phase II trial in HoFH and chronic toxicity studies in rats and monkeys are available in the first half of 2016. The Phase II results and data from the safety studies will be presented to the FDA so that it can conduct a risk/benefit assessment of MBX-8025.

Homozygous Familial Hypercholesterolemia (HoFH) Homozygous familial hypercholesterolemia (HoFH) is a rare genetic lipid disorder that affects approximately 1 in every 1 million individuals worldwide.28 The disorder is usually caused by loss of function mutations to the low-density lipoprotein (LDL) receptor gene which produces a protein responsible for removing LDL cholesterol (LDL-C) from the blood.29 LDLC levels are around 100 mg/dL in healthy individuals. Patients with HoFH may present 28 Bruckert, E., 2014. Recommendation for the management of patients with homozygous familial hypercholesterolaemia: Overview of a new European Atherosclerosis Society consensus statement. Atherosclerosis, 15, pp26-32. 29 Brown, M.S. and Goldstein, J.L., 1986. A receptor-mediated pathway for cholesterol homeostasis. Science, 232(4746), pp34-47.

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with levels that exceed 500 mg/dL. These patients develop atherosclerosis, which increases the risk of a serious or fatal cardiac event very early in life. Many HoFH patients experience heart attack or stroke before the age of 20, and the average age of death is approximately 40. The current standard of care is lipid apheresis combined with high dose statins, although this procedure is not universally available and most patients do not achieve optimal LDL levels with these therapies. Aegerion’s (NasdaqGS: AEGR) Juxtapid (lomitapide) and Sanofi’s (NasdaqGS: SNY) Kynamro (mipomersen) have recently been approved for the treatment of HoFH in the US. Both labels carry boxed warnings due to liver toxicity, and patients must undergo monthly liver function testing. Amgen’s (NasdaqGS: AMGN) PCSK9 inhibitor Repatha (evolocumab) is also approved for HoFH. Repatha’s mechanism of action blocks LDL receptor recycling, so that the receptors remain available on the surface of hepatocytes remove circulating cholesterol. Not all HoFH patients have sufficient LDL receptor function to benefit from Repatha. CymaBay is developing MBX-8025 as a potentially safer, more convenient, and more broadly applicable treatment for the reduction of LDL-C in patients with HoFH. Causes HoFH is primarily caused by mutations in both copies of the LDLR gene, which encodes the LDL receptor protein. This receptor is expressed of the surface of cells and removes LDL-C from the blood.30 Other mutations in genes involved in lipoprotein metabolism can cause HoFH. These genes include autosomal recessive hypercholesterolemia adaptor protein 1 (ARH), apolipoprotein B (ApoB100), and proprotein convertase subtilisin/kexin type 9 (PCSK-9). All of these genes are critical to LDL receptor function and mutations in any one these factors result in impaired LDL-C clearance from the blood. Patients with mutations that render both copies of LDLR completely non-functional often have a more severe form of the disorder and worse prognosis than patients with some residual LDL receptor function. This distinction is worth noting since patients with non-functional receptors tend to respond poorly if at all to therapies that increase the activity of the LDL receptor, such as PCSK-9 inhibitors. Diagnosis Suspected cases of HoFH are confirmed using Next Generation Sequencing (NGS), which allows for rapid and simultaneous screening of multiple genes. These assays can specifically identify mutations in the LDL receptor, ARH, ApoB100 and PCSK-9, which are all known to be associated with the disorder. In cases where genetic testing may not provide a definitive confirmation of the disorder, the following clinical criteria are used:

! Skin deposits of cholesterol before ten years of age. ! LDL-C greater than 500 mg/dL before treatment or greater than 300 mg/dL despite treatment. ! Parents with features suggestive of hypercholesterolemia including persistent LDL-C levels above 100

mg/dL.

30 Brown, M.S. and Goldstein, J.L., 1986. A receptor-mediated pathway for cholesterol homeostasis. Science, 232(4746), pp34-47.

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Treatment Patients are currently treated using lipid apheresis and lipid-lowering drugs at maximally-tolerated doses.31 Lipid apheresis is a mechanical filtering procedure akin to dialysis that removes LDL-C from the blood.32 Apheresis can temporarily reduce levels by more than 50% and may delay the onset of atherosclerosis. The drawback to this procedure is that it must be repeated approximately every 1 or 2 weeks. Patient compliance with apheresis treatment is low since it is not readily available in many geographic areas and the procedure is time-consuming. More convenient HoFH treatments include statins and other pharmacological therapies that lower LDL-C levels. These therapies work largely by increasing activity of the LDL receptor, which is problematic for patients who carry mutations that render the receptors non-functional. Even those patients with residual LDL receptor activity tend to inadequately respond to these therapies.33 Three new drugs have recently been approved for reducing LDL-C in patients HoFH: Aegerion’s (NasdaqGS: AEGR) Juxtapid (lomitapide), Sanofi’s (NasdaqGS: SNY) Kynamro (mipomersen), and Amgen’s (NasdaqGS: AMGN) Repatha. They are discussed in more detail below. Juxtapid (lomitapide) – Aegerion. Juxtapid is an oral inhibitor of the microsomal triglyceride transport protein (MTP), which is responsible for packaging triglycerides and phospholipids onto lipid carrying molecules during their assembly in the intestine and the liver, respectively. Studies have shown that inhibiting MTP reduces secretion of these lipoproteins into the blood. In an open-label trial in HoFH patients, lomitapide in combination with LDL apheresis reduced plasma LDL-C levels by approximately 50% at 26 weeks, with durable LDL-C lowering occurring over a further 12 months of follow-up.34 The most frequently observed adverse events were gastrointestinal symptoms and liver fat accumulation. The drug causes fat cells to integrate into the liver, which compromises function and can lead to liver failure. For this reason, the drug carries a box warning and a requirement for monthly liver function monitoring tests. Kynamro (mipomersen) – Sanofi. Kynamro is an antisense oligonucleotide inhibitor that blocks the synthesis of ApoB100, the protein component of LDLC. In clinical studies, mipomersen lowered LDLC by approximately 25% from a baseline LDLC level of 439 mg/dL. Like lomitapide, mipomersen causes the accumulation of fat in the liver and carries a boxed warning for potential liver toxicity. Patients treated with Kynamro require monthly liver function monitoring tests. The FDA requested four post-marketing safety studies for mipomersen, partly because of concerns about abnormal growths observed in certain clinical trial patients, some of which were malignant. Repatha (evolocumab) - Amgen. Repatha received FDA approval on August 27th, 2015 following a positive Advisory Committee vote. The drug works by blocking PCSK9, which prevents degradation of the receptor. PCSK9 binds to LDL receptors and induces their degradation, reducing the number of receptors available to sequester circulating LDL-C molecules. Inhibition of PCSK9 increases the number of available LDL receptors, thus leading to significant reductions in circulating LDL-C cholesterol. Because of their unique mode of action, PCSK9 inhibitors

31 Harada-Shiba, M. et al., 2012. Guidelines for the management of familial hypercholesterolemia. Journal Atherosclerosis and Thrombosis, 19, pp1043-1060. 32 Thompson, G.R. et al., 2008. Recommendations for the use of LDL apheresis. Atherosclerosis, 98, pp247-255. 33 Raal, F.J. et al., 1997. Expanded-dose simvastatin is effective in homozygous familial hypercholesterolemia. Atherosclerosis, 135, pp244-256. 34 Cuchel, M. et al., 2013. Phase 3 HoFH Lomitapide Study investigators. Efficacy and safety of a microsomal triglyceride transfer protein inhibitor in patients with homozygous familial hypercholesterolaemia: a single-arm, open-label, phase 3 study. Lancet, 381, pp40-46.

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have mainly been studied in combination with stable lipid-lowering therapy such as statins. This combination therapy will only be effective in HoFH patients with residual LDL receptor activity. While these three relatively new drugs offer additional treatment options for patients with HoFH, there remains a large unmet medical need. Even with an aggressive combination of available therapies, subjects with HoFH generally have LDLC levels substantially above the treatment targets of 70 mg/dL. CymaBay is developing MBX-8025 as an alternative for the treatment of HoFH. Its unique mode of action does not require LDL receptor activity, which makes the drug particularly well suited for those patients who carry non-functional receptors. It is likely that many patients with HoFH will require combination therapy with lipid lowering agents in order to achieve a significant reduction of LDLC, suggesting there could be opportunities to combine MBX8025 with lomitapide or mipomersen.

Disease Market Information for HoFH Incidence rates for HoFH range from 1 in 1,000,000 to 1 in 400,000 in the US and EU, meaning CymaBay’s current target patient population is approximately 2,000 in the US. HoFH is primarily treated with Juxtapid, the first agent approved for the disease. As of 2014, there were approximately 745 active patients on Juxtapid; 632 of those patients were in the US. 2015 sales for Juxtapid are estimated to be approximately $195 million to $215 million. The price for Juxtapid per patient per year is $300,000. MBX-8025, if approved, may be priced similarly.

Competitive Landscape in HoFH Statins and other pharmacological therapies that lower LDL-C levels are only modestly effective for the treatment of HoFH, which means lipid apheresis was the only effective therapy available for most patients for many years. Juxtapid and Kynamro were seen initially as breakthrough therapies, but safety issues have hindered their wide adoption in the medical community. With the recent approval of Amgen’s Repatha, some patients may have a safe and effective LDL-C lowering therapy. Moreover, the approximate 20% LDL-C reduction seen with Repatha still leaves HoFH patients above treatment goals with substantial continuing cardiovascular risk. It is however important to note that these inhibitors will only work in patients with residual LDL receptor activity. CymaBay’s MBX-8025 stands alone as the only product candidate in development that lowers LDL-C independent of receptor activity, which means it has the potential to benefit all HoFH patients.

Primary Biliary Cirrhosis (PBC) PBC is an autoimmune disease of the liver that primarily affects women over the age of 40. The condition is characterized by inflammation and immune-mediated destruction of bile ducts within the liver. This causes harmful substances to build up in the organ, leading to irreversible scarring and potentially liver failure. The incidence for PBC is estimated at 1 in 1,000 in women or approximately 300,000 patients in the major markets worldwide, making it an orphan indication. The current standard of care is ursodiol (ursodeoxycholic acid, UDCA), which is the only approved drug for PBC. The drug slows disease progression in only approximately 50-60% of patients, indicating a need for additional therapies to address a significant portion of the PBC patient population. CymaBay expects to initiate a Phase II proof-of-concept study for MBX-8025 as a treatment for PBC in by year end 2015. The primary

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endpoint is expected to be the reduction in alkaline phosphatase, which was used for Intercept Pharma’s (NasdaqGS: ICPT) pivotal Phase III program for obeticholic acid (OCA) in PBC. Causes and Pathogenesis PBC is an autoimmune disease that affects the liver. White blood cells or T lymphocytes accumulate in the organ and destroy the cells lining the bile ducts, causing chronic inflammation. As the ductal cells are eliminated, they are replaced by scar tissue, which compromises liver function and can lead to organ failure. Symptoms and Diagnosis Severe itching, known as pruritus, is a common symptom associated with PBC. The itching can be extremely distressing to patients and can be exacerbated at night or in hot weather. Other common symptoms include fatigue, jaundice, hyperlipidemia, osteopenia, and osteoporosis, and coexisting autoimmune diseases. When PBC is suspected, routine blood tests are performed to confirm diagnosis. Elevated ALP activity, positive anti-mitochondrial antibodies (AMA), anti-nuclear antibodies (ANA) and elevated IgM indicate PBC. Treatment There is no cure for PBC, so the goal of treatment is to slow the rate of liver damage. The only FDAapproved treatment is ursodiol, which is an isomer of chenodeoxycholic acid. Ursodiol decreases serum levels of alkaline phosphatase (ALP), bilirubin, alanine aminotransferase, aspartate aminotransferase, cholesterol, and immunoglobulin M, all of which are elevated in patients with PBC and can serve as biomarkers of the disease. Other therapies, such as colchicine, methotrexate, prednisone, and multiple immunosuppressive regimens are sometimes used to slow disease progression. However, these drugs have questionable efficacy and are associated with multiple side effects impacting long-term use. Liver transplantation is the only effective treatment for PBC patients with liver failure. Transplantation can provide immediate relief but cirrhosis recurs in 15% of transplant patients at 5 years and in 30% of patients 10 years. As a result, despite the available treatments, PBC is not a well-controlled disease and patients are in need of new therapeutic options.

Disease Market Information for PBC The incidence of PBC in the developed world is about 1 in 1000 in women over the age of 40, which translates to approximately 300,000 patients in major markets. The only approved treatment for PBC is ursodiol, a bile acid that helps move bile through the liver. It does not cure the disease but it may slow progression. It is often used as first line therapy even though approximately 50% of patients do not adequately respond. Intercept Pharmaceuticals has filed an NDA for its semi-synthetic bile acid obeticholic acid (OCA) for the treatment of PBC. The FDA set a PDUFA date of February 29, 2016. Analysts estimate that OCA may generate $2.5 billion in 2020 sales and could be among one of the top selling orphan drugs by 2020. 35 If MBX-8025 is approved, CymaBay would only need to capture a small portion of the market to be very successful.

35 http://info.evaluategroup.com/rs/evaluatepharmaltd/images/2014OD.pdf

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Other Drugs in Development for PBC We identified 3 drugs in development for PBC including CymaBay’s MBX-8025. The programs are shown in Figure 19. Each drug candidates’ developmental stage and mode of action are listed. Below we highlight Intercept Pharma’s (NasdaqGS: ICPT) obeticholic acid (OCA), which is currently under consideration for approval by the FDA and has a PDUFA date of February 29, 2016.

Figure 19. Treatments in Development for PBC

Company Drug Description Development Stage

Intercept Obeticholic acid

Bile acid analog

NDA and MAA filed

Shire SHP625 Bile acid inhibitor Phase I

CymaBay MBX-8025 PPARδ agonist Phase II


Intercept – Obeticholic Acid OCA is a bile acid analog and a semi-synthetic agonist to the farnesoid X receptor (FXR). Activation of FXR mediates a wide range of genes that play a crucial role in the modulation of bile acid production and transport, lipid metabolism, and homeostasis of glucose and energy levels.36 Intercept has submitted applications for regulatory approval of OCA in the US and Europe. The FDA granted Priority Review for OCA based on positive data in a Phase III clinical trial where OCA significantly reduced alkaline phosphatase (ALP) levels compared to placebo. A potential FDA approval will be conditional upon successful results in an ongoing, confirmatory Phase IIIb study. This outcome study began in December of 2014 and expected to read out in 2023. OCA has orphan drug designation in the EU and US. Phase III Trial. Intercept Pharmaceuticals completed a randomized, double blind, placebo-controlled Phase III trial with OCA in 216 patients with PBC.37 These patients had a history of elevated ALP levels and were intolerant to or had been taking ursodeoxycholic acid (UDCA) for 12 months or more. Enrolled patients were randomized to receive 5 mg/day of OCA, 10 mg/day of OCA, or placebo. Patients in the 5 mg/day cohort were up-titrated to 10 mg if they has an inadequate response. The primary endpoint was the change in ALP levels less than 1.67x the upper limit of normal (ULN), with a greater than 15% reduction from baseline and a normal bilirubin level after 12 months of therapy. Secondary endpoints included ALP response rates and several measures of liver function. OCA 36 Lefebvre, P. et al., 2009. Role of bile acids and bile acid receptors in metabolic regulation. Physiological Reviews, 89(1), pp147– 191. 37 https://clinicaltrials.gov/ct2/show/NCT01473524

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treatment significantly reduced ALP levels in patients with PBC compared to placebo. Figure 20 shows the proportion of patients in each arm that experienced an ALP level less than 1.67 times the ULN with a minimum 15% decrease, and had normal bilirubin levels.

Figure 20. Phase III Efficacy Results of OCA in PBC

Measurement OCA (5-10 mg/day)

n=73 OCA (10 mg/day)

n=73 Placebo

n=70 p value

% of patients with ALP <1.67x ULN and 15% minimum decrease, and normal bilirubin

46% 47% 10% p<0.0001 for both

doses

ALP decrease from baseline

33% 39% 5% p<0.0001 for both

doses

Source: Company Presentations

Safety Results. Patients in the drug arm of the study experienced an increase in LDL-C, which is a risk-factor for atherosclerosis. The safety signal was not strong enough to prevent filing in PBC, however more data may be needed to determine the long term safety of OCA. Results from the ongoing Phase III outcome study are expected in 2023.

Competitive Landscape for MBX-8025 in PBC There are currently few treatment options available for patients with PBC. The current standard-of-care is ursodiol, which slows disease progression in some but not all patients. The drug is not active in roughly 40% to 50% of patients. The only option for patients with severe disease is liver transplantation. If the FDA approves Intercept Pharma’s OCA, physicians and patients may finally have a new safe and effective treatment option. Considering the high degree of unmet medical need in this indication, there is ample opportunity for additional therapies such as Cymabay’s MBX-8025 to be used as monotherapy or in combination with OCA.

Clinical Data Discussion for MBX-8025 in Mixed Dyslipidemia CymaBay completed five Phase I studies and one Phase II trial evaluating MBX-8025. Results from the Phase II trial have been published in the peer-reviewed journals Atherosclerosis38 and Journal of Clinical Endocrinology & Metabolism39 and show that MBX-8025 treatment significantly reduced LDL-C levels in patients with mixed dyslipidemia. In addition to reducing LDL-C, this study also found that MBX-8025 reduces the activity of several liver enzymes

38 Choi, J.C. et al., 2012. Effects of the PPAR-δ agonist MBX-8025 on atherogenic dyslipidemia. Atherosclerosis, 220, pp470-476. 39 Bays, H.E. et al., 2011. MBX-8025, A novel peroxisome proliferator receptor-δ agonist: Lipid and other metabolic effects in dyslipidemic overweight patients treated with and without atorvastatin. Journal of Clinical Endocrinology & Metabolism, 96(9), pp2889-2897.

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including alkaline phosphatase (ALP). The benefits of MBX-8025 on certain lipid and liver parameters support its development in HoFH and PCB, respectively. Phase II Trial with MBX-8025 in Mixed Dyslipidemia Trial Design. CymaBay conducted a randomized, double-blind, placebo-controlled Phase II trial of MBX-8025 in 181 moderately obese patients with mixed dyslipidemia. This condition is characterized by low levels of high density lipoprotein cholesterol (HDL-C) and elevated levels of triglycerides (TG), with or without elevated levels of LDL-C. Prior to randomization, patients underwent a 5 week, single-blind, placebo run-in where no lipid-modifying drugs were allowed. This was performed to allow metabolism and elimination of any prior lipid-modifying drugs. Patients were then randomized to one of the following six study groups and treated for 8 weeks:

! MBX8025 monotherapy at 50 mg/day. ! MBX-8025 monotherapy at 100 mg/day. ! MBX8025 at 50 mg/day plus atorvastatin at 20 mg/day. ! MBX-8025 at 100 mg/day plus atorvastatin at 20 mg/day. ! Lipitor (atorvastatin) monotherapy at 20 mg/day. ! Placebo.

The primary endpoint was the change from baseline to week 8 in the levels of apolipoprotein B (ApoB100) between treatment and placebo. Secondary endpoints included changes in LCL-C, triglycerides (TG), HDL-C, total cholesterol, apolipoprotein A, non-HDL-C, free fatty acids (FFA), alkaline phosphatase (ALP), and gamma glutamyl transferase (GGT), body weight, and certain lipid ratios. Trial Results. The study met the primary endpoint with a significant change in ApoB100 levels between treatment and placebo, as shown in Figure 21. All doses and combinations of MBX-8025 led to a statistically significant decrease in ApoB100 compared to placebo (p<0.0001 for all comparisons). Patients also exhibited a significant difference on several key secondary endpoints, including changes in LDL-C, TG, HDL-C, and total cholesterol.

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Figure 21. Change in Lipid Measurements from Baseline to Week 8

Lipid Metric Placebo MBX-8025 50 mg/day

MBX-8025 100 mg/day

Atorvastatin

MBX-8025 50 mg/day

+ atorvastatin

MBX-8025 100 mg/day

+ atorvastatin

ApoB100 -0.1% -20.0%# -20.2%# -34.3%# -38.2%#,* -32.2%#,* LDL-C -0.2% -18.4%# -21.8%# -41.1%# -43.4%#,* -40.3%#,* TG -4.5% -32.4%# -32.7%# -18.2%# -34.7%# -30.9%# HDL-C 1.3% 9.9% 13.2%# 2.3% 13.0%#,** 2.5%* Total Cholesterol -1.4% -14.8%# -16.9%# -31.2%# -33.1%#,* -31.5%#,* # p<0.05 between placebo and treatment group * p<0.05 between monotherapy and respective combination therapy ** p<0.05 between atorvastatin and respective combination therapy

Source: Bays, H.E. et al., 2011 & LifeSci Capital

For certain lipid measurements, such as TG reduction, patients in the single-agent MBX-8025 or combination arms had better results than atorvastatin alone. This suggests that adding MBX-8025 to background statin therapy could improve the overall lipid profile of patients with mixed dyslipidemia. However, CymaBay does not intend to further develop MBX-8025 in mixed dyslipidemia due to regulatory hurdles such as the need to run large cardiovascular outcomes studies. Instead, the Company is pursuing HoFH and PBC, which may offer an easier regulatory path. Some of the clinical results discussed below support its use in these indications. Implications for HoFH Development. Patients with HoFH have high baseline levels of LDL-C that contribute to disease progression. For this reason the percentage change in LDL-C levels from baseline has been used as an approvable endpoint in HoFH. In CymaBay’s Phase II trial, MBX-8025 treatment produced a statistically significant reduction in LDL-C compared to placebo, and the reduction was larger in patients with a higher baseline LDL-C. Figure 22 highlights the LDL-C reductions achieved in all patients and 3 subgroups separated by baseline LDL-C. In the total population, the percentage change in LDL-C was approximately 20% in patients receiving MBX-8025 compared to placebo. In patients with baseline LDL-C levels of 195 or greater, the percentage change was approximately 25% in the 50 mg/day MBX-8025 group and over 40% in the 100 mg/day MBX-8025 group. These results suggest that higher doses of MBX8025 may produce clinically meaningful reductions in LDL-C in patients with high baseline levels, such as those with HoFH.

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Figure 22. Change in LDL-C in Patients with Mixed Dyslipidemia

Source: CymaBay Presentation Implications for PBC Development. Patients with primary biliary cirrhosis (PBC) have elevated liver enzymes, which indicate liver damage and disease progression. In CymaBay’s Phase II trial, MBX-8025 treatment significantly reduced the activity of the liver enzymes ALP and GGT compared to placebo (p<0.05). Figure 23 shows the average change from baseline for ALP and GGT in all patients. Patients receiving the highest dose of MBX-8025 displayed the greatest reduction in liver enzyme activity, with ALP activity lowered approximately 10-fold compare to placebo. These results suggest that MBX-8025 may be used to slow disease progression in patients with PBC.

Figure 23. Change in Liver Enzyme Activity from Baseline to Week 8

Liver Enzymes Placebo MBX-8025 50 mg/day

MBX-8025 100 mg/day

Atorvastatin

MBX-8025 50 mg/day

+ atorvastatin

MBX-8025 100 mg/day

+ atorvastatin

ALP -4.2% -31.9%1 -42.8%1 6.4%1 -27.6%1,2 -38.3%1,2 GGT -3.2% -23.6%1 -28.2%1 2.4% -24.5%1,2 -31.6%1,2

1 p<0.05 between placebo and treatment group 2 p<0.05 between atorvastatin and respective combination therapy

Source: Bays, H.E. et al., 2011 & LifeSci Capital

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Safety. 250 adverse events were reported in 115 subjects during the course of the study. No patients withdrew from the study due to safety issues in the MBX-8025 monotherapy groups. The three most common adverse events were upper respiratory tract infection (7.1%), nasopharyngitis (6.6%), and a predefined category of adverse events involving muscle pain, weakness, or cramps (8.7%). Subjects administered MBX-8025 experienced significant reductions in mean red blood cell count, hemoglobin, and hematocrit from baseline compared to cohorts that did not receive treatment, however they were not clinically meaningful.3 No patients experienced an anemia that was deemed treatment related. Ongoing Phase I Trial with MBX-8025 in HoFH Trial Design. CymaBay is conducting an open-label, dose-escalation Phase I study for MBX-8025 in patients with HoFH.40 The trial is expected to enroll a total of 8 or more patients at sites in Europe and North America. Patients will receive either 50, 100, or 200 mg/day of MBX-8025 for three successive 4-week periods for a total of 12 weeks. The primary endpoint is the change in LDL-C from baseline to the end of the period of each dose level treatment at week 12. Secondary endpoints include the changes in total cholesterol, HDL-C, very low-density lipoprotein (VLDL-C), non HDL-C, and apolipoprotein B (ApoB). CymaBay initiated this trial in the second quarter of 2015 and results are expected in the fourth quarter of 2015. Expected Phase II Trial with MBX-8025 in PBC Phase II Trial Design. CymaBay is planning to conduct a double-blind, placebo-controlled, dose-ranging Phase II study for MBX-8025 in patients with PBC. The Company expects to enroll roughly 75 patients who have failed ursodiol treatment for 12 weeks of treatment with MBX-8025. The primary endpoint of the study will be the reduction in alkaline phosphate (ALP) activity, which was used in Intercept Pharma’s pivotal Phase III study for OCA in PBC. Secondary outcomes will be the incidence of pruritus and fatigue. The study is expected to begin in the fourth quarter of 2015 and results are expected by the end of 2016.

Intellectual Property CymaBay owns or co-owns approximately 31 US patents and 179 foreign patents, and has filed 26 US patent applications. In addition, the Company licensed from third parties approximately 17 US patents and 1 US patent application. These patents and patent applications include claims covering various aspects of the product pipeline and research and development strategies, including: arhalofenate crystal forms, methods of use both alone and in combination with other drugs, methods of manufacture, certain PPAR delta agonists, and candidates compositions and uses. The arhalofenate portfolio consists of approximately 129 issued patents and 91 pending patent applications relating to composition, method of use, or methods of manufacture. Issued patents should protect arhalofenate through at least 2019 to 2029 before accounting for any potential patent term extension.

40 https://www.clinicaltrials.gov/ct2/show/NCT02472535

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On August 6, 2015, CymaBay announced two new patents with expiration in 2032 that help protect the use of arhalofenate in combination with the XO inhibitor febuxostat. Figure 24 lists the patent numbers, titles, and uses.

Figure 24. Patents Protecting Arhalofenate in Combination with Febuxostat

Patent! Title Use

9,023,856

Methods For Treating Hyperuricemia in Patients With Gout Using

Halofenate or Halofenic Acid and a Second Urate-Lowering Agent

For the treatment of hyperuricemia when used in

combination with febuxostat

9,060,987 Methods for Treating Gout Flares For the treatment and

prevention of gout flares while lowering sUA


MBX-8025. The MBX-8025 portfolio consists of approximately 240 issued patents and 89 pending patent applications related to composition and method of use that should provide protection through at least 2024 to 2026 before accounting for any potential patent term extensions.

Management Team Harold Van Wart, Ph.D. President, Chief Executive Officer Dr. Van Wart has served as our Chief Executive Officer and a member of the Board of Directors since January 2003, and President since April 2001. He served as Chief Operating Officer from December 2002 to January 2003 and Senior Vice President, Research and Development from October 2000 to December 2002. From 1999 to 2000, Dr. Van Wart was Vice President and Therapy Head for arthritis and fibrotic diseases at Roche Bioscience, a biopharmaceutical company. From 1992 to 1999, he was Vice President and Director of the institute of biochemistry and cell biology at Syntex Corporation, a biopharmaceutical company acquired by Roche Bioscience in 1994. From 1978 to 1992, Dr. Van Wart served on the faculty of Florida State University. He currently serves on the Emerging Companies and Health Section Governing Boards of the Biotechnology Industry Organization (BIO), as well as on its board of directors. He is also a Director of Conatus Pharmaceuticals, Inc and Idun Pharmaceuticals, Inc., and is the Vice Chairman of the California Life Sciences Association. Dr. Van Wart holds a Ph.D. Sujal Shah Chief Financial Officer Mr. Shah joined CymaBay as Chief Financial Officer in December of 2013. Prior to that he served as a consultant and acting Chief Financial Officer since June 2012. From 2010 to 2012, Mr. Shah served as Director, Health Care

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Investment Banking Group for Citigroup, where he was responsible for managing client relationships and executing strategic and financing related transactions for clients focused in life sciences. From 2004 to 2010 Mr. Shah was employed with Credit-Suisse, last serving in the capacity as Vice President, Health Care Investment Banking Group. Mr. Shah received a MBA from Carnegie Mellon University – Tepper School of Business in 2004 and a M.S. from Northwestern University in Biomedical Engineering in 1997. Pol Boudes, M.D. Chief Medical Officer Dr. Boudes joined CymaBay in April 2014 as our Chief Medical Officer. Prior to joining CymaBay, Dr. Boudes was Chief Medical Officer at Amicus Therapeutics. From 2004 to 2009, Dr. Boudes was with Berlex Laboratories (which merged with Bayer HealthCare Pharmaceuticals in 2006) where he held the position of Vice President, Global Clinical Development, Women's Health Care US. From 1990 to 2004, he held positions of increasing responsibility with Wyeth-Ayerst Research both in Philadelphia, PA and in Europe, with Hoffmann-La Roche, and with Pasteur-Merieux Serums & Vaccines. Dr. Boudes received his M.D. from the University of Aix-Marseilles, France. He completed his internship and residency in Marseilles and in Paris, France and was an Assistant Professor of Medicine at the University of Paris. He is specialized in Endocrinology and Metabolic Diseases, Internal Medicine, and Geriatric diseases. Robert L. Martin, Ph.D. Senior Vice President, Manufacturing and Nonclinical Development Dr. Martin has been Senior Vice President, Manufacturing and Nonclinical Development since 2015. Previously, he served as our Vice President of Nonclinical Development and Project Management since 2008. Dr. Martin served as our Sr. Director of Preclinical Development and Project Management from 2006 to 2008 and our Director of Preclinical Development and Project Management from 2004 to 2006. From 1994 to 2004, Dr. Martin served in various positions of increasing responsibility with Roche Palo Alto, a division of F. Hoffman-La Roche Ltd. Dr. Martin obtained his Ph.D. in Biochemistry from the University of California, Davis. Charles A. McWherter, Ph.D. Senior Vice President and Chief Scientific Officer Dr. McWherter has served as our Senior Vice President and Chief Scientific officer since 2013. Previously he served as our Senior Vice President, Research and Preclinical Development since July 2007. From 2003 to 2007, he served as Vice President and head of the cardiovascular therapeutics areas of Pfizer Inc. From 2001 to 2003, Dr. McWherter served as Vice President of Drug Discovery at Sugen, Inc., a subsidiary of Pharmacia acquired by Pfizer Inc. in 2003. Dr. McWherter obtained his Ph.D. from Cornell University. Patrick J. O’Mara Vice President, Business Development Mr. O’Mara joined CymaBay in 1991 and has served CymaBay in a variety of operational and business development positions. He became Vice President for Business Development in August 2006. Before joining CymaBay, Mr. O’Mara worked at Thymax Corporation and Thomas Research Corp. Mr. O’Mara received a B.A. in Biochemistry from the University of California, Berkeley.

October 26, 2015

Kirk Rosemark Vice President, Regulatory Affairs and Quality Assurance Mr. Rosemark joined CymaBay as Vice President Regulatory Affairs and Quality Assurance in April 2015. Prior to joining he held the position of Vice President Regulatory Affairs and Quality Assurance at Exelixis, Inc. from 2003 to 2014, and served in the same capacity at NeoPharm Inc. Mr. Rosemark held various positions of increasing responsibility within the Regulatory Affairs and Quality Assurance functions at Solvay Pharmaceuticals, Inc., Ciba Vision and Bausch & Lomb Pharmaceuticals, Inc. Mr. Rosemark obtained a B.S. in Chemistry from Cleveland State University.

Risk to an Investment We consider an investment in CymaBay to be a high-risk investment. CymaBay is currently in clinical-stage development and does not have any marketed or approved products. The Company has not entered Phase III clinical trials for any program. Failure to show convincing results in future pivotal clinical studies or failure to reach FDA or EMA approval could adversely affect CymaBay’s stock price. Regulatory approval to market and sell a drug does not guarantee that the drug will penetrate the market, and sales may not meet expectations. As a clinical-stage company, CymaBay is not profitable and may need to seek additional financing from the public markets, which may result in dilution of existing shareholder value.

October 26, 2015

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DISCLOSURESThis research contains the views, opinions and recommendations of LifeSci Capital LLC (“LSC”) research analysts. LSC (or an affiliate)has received compensation from the subject company for producing this research report. Additionally, LSC provides investment bankingservices to the subject company and has received compensation from the subject company for such services within the past 12 months.LSC expects to receive or intends to seek compensation for investment banking services from the subject company in the next 3 months.An affiliate of LSC has also provided non-investment banking securities-related services, non-securities services, and other products orservices other than investment banking services to the subject company and received compensation for such services within the past 12months. LSC does not make a market in the securities of the subject company.

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LSC is a member of FINRA and SIPC. Information used in the preparation of this report has been obtained from sources believed to bereliable, but LSC does not warrant its completeness or accuracy except with respect to any disclosures relative to LSC and/or its affiliatesand the analyst's involvement with the company that is the subject of the research. Any pricing is as of the close of market for the securitiesdiscussed, unless otherwise stated. Opinions and estimates constitute LSC’s judgment as of the date of this report and are subject to changewithout notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchaseor sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances,objectives, or needs and are not intended as recommendations of particular securities, companies, financial instruments or strategies toparticular clients. The recipient of this report must make his/her/its own independent decisions regarding any securities or financialinstruments mentioned herein. Periodic updates may be provided on companies/industries based on company specific developments orannouncements, market conditions or any other publicly available information. Additional information is available upon request.

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October 26, 2015

initiation report cymabay therapeutics (cbay) partnering...

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