PRIVATE - Crowdabilitycontent.crowdability.com/.../uploads/2016/07/Diabetes-Destroyer.p… · PRIVATE MARKET PROFITS INVESTMENT PROSPECTUS 1 In the year 2000, David Damiano was diagnosed

INVESTMENT PROSPECTUS:

“THE DIABETES DESTROYER”

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1PRIVATE MARKET PROFITS INVESTMENT PROSPECTUS

In the year 2000, David Damiano was diagnosed with diabetes.

He was just 11-months-old.

Like all diabetics, David wasn’t able to produce two life-sustaining hormones: insulin, which lowers blood sugar levels; and glucagon, which raises it.

For anyone with diabetes, managing these levels is extraordinarily difficult—but caring for a diabetic infant is a herculean task:

Infants are incredibly sensitive to insulin. Even a tiny bit too much can harm them.

In one respect, David was lucky. His parents were well suited to take care of him. His mother, Toby, was a pediatrician. And his father, Ed, was a biomedical engineer.

So, up to 12 or 15 times a day, they would check his blood sugar. Then, using carbs or insulin, they would “dose” his levels up or down.

But as Ed has admitted, staying on top of his son’s disease was an emotional roller coaster, and it was impossible to get right:

After being admitted to the hospital one night, for example, David’s blood sugar level soared to 800. That’s eight times the normal level.

You see, despite his parents’ meticulous attention to detail, David’s internal chemistry changed from day to day, even from hour to hour. Like all infants, David would go through

Beta Bionics At-a-Glance

Company Name: Beta Bionicshttp://www.betabionics.org/

Raising: $6,000,000

Already Raised: $5,235,000

Description: Breakthrough medical device for the treatment of diabetes.

Highlights:

• Even with low market penetration, sales could reach $250 million

• Major drug company Eli Lilly already invested $5 million

• Anyone can invest alongside Lilly for as little $100

Core Investment Thesis:

• Type-1 diabetes is a frightening disease—both for the millions who suffer from it, and for their loved ones

• This device is a breakthrough in diabetes care

• The company could be an attractive acquisition candidate, or could IPO

http://www.betabionics.org/%0D


a growth spurt; catch a cold; feel happy or anxious; eat too much or not enough; jump around a lot one day and not at all the next.

So dosage decisions his parents had made under seemingly identical circumstances the day before could have different, even disastrous, outcomes today.

The result is a child who might be perfectly fine—or who might be combative, helpless, and on a path to blindness and amputations.

Controlling David’s blood sugar became a 24-hour-a-day task.

As Ed has described, the daily process was an extreme series of events. For example, after David survived his infancy and became a toddler, Ed would need to calculate precisely how many strands of pasta his son could eat.

But that level of vigilance is nothing compared to what David and his family endured every night…

“DEAD IN BED” SYNDROME

Imagine for a moment being the parent of a child with a chronic illness.

And imagine that, if you get the dose of his medicine wrong—even if you get it just a little wrong—you could literally kill him.

This thought would weigh on you, day after day, for the rest of your child’s life. As Ed said recently, there’s only one difference between a nightmare of this magnitude and reality: reality lasts far longer.

Every night, Ed would hook up David to a monitor. If David’s blood sugar dropped too low, an alarm would sound on Ed’s nightstand.

At the sound of the alarm, Ed would jump out of bed and race into his son’s room. He knew that, if David’s blood sugar dropped too low, his son could die in his sleep.

As Ed said, “The fear is that there’s going to be this little cold limb, and I screwed up. It’s all on me.”

In diabetes, this tragic circumstance has a name: “Dead in Bed” (DIB) Syndrome.


While their son lived at home, Ed and Toby could take steps to protect him. But they knew, at some point, their son would fly the nest to attend college.

At college, young adults tend to test their limitations. They over-eat, over-drink, and pay little attention to “details” like alarm clocks or schedules.

For most college kids, this isn’t a big deal. Maybe they’ll get too drunk; maybe they’ll miss a class or a phone call.

But for those suffering from diabetes like David, it could mean a death sentence.

Ed couldn’t get this thought out of his mind.

So he immersed himself researching his son’s illness…

WHAT IT MEANS TO HAVE DIABETES

There are two main types of diabetes: Type 1 (T1D) and Type 2 (T2D).

T2D is more prevalent. According to 2014 data released by the Centers for Disease Control and Prevention (CDC), there are now more than 29 million adults living with the disease.

Estimates from CNN and the American Diabetes Association (ADA) put the U.S. market for diabetes healthcare costs between $120 billion and $245 billion. And globally, the anti-diabetic market has been estimated as high as $1 trillion.

In the U.S. alone, nearly 75,000 people each year die because of it. It’s the seventh leading cause of death. And the risk of premature death for people with diabetes is nearly double that of similarly-aged people without it.

Although T2D is more prevalent, T1D is far more aggressive—and it’s far more difficult to treat.

According to The Juvenile Diabetes Research Foundation, the leading global organization funding Type-1 diabetes research, T1D affects roughly 3 million Americans.

On average, children with T1D—children like David Damiano—are expected to live 20 years less than other kids.


“It’s devastating news, and it breaks my heart every time I walk into the room and deliver this message,” said Dr. Preneet C. Brar, a pediatric endocrinologist in the Department of Pediatrics at NYU Langone Medical Center.

Each year, American families spend almost $9,000 per child who’s been diagnosed with T1D. That equates to roughly $5 billion each year in direct treatment costs.

And in terms of total economic costs, T1D costs us $14.4 billion annually.

T1D, formerly called juvenile diabetes, is frequently diagnosed during childhood or adolescence. It’s a disorder where the body’s immune system attacks the pancreas.

The pancreas is a digestive organ that sits near the stomach. It’s about the size of a small banana, and it produces two hormones called insulin and glucagon.

With the pancreas under attack, production of these life-sustaining hormones is shut down. And without them, the body can’t break down sugar into energy.

That means the body doesn’t have a power source to perform all the necessary functions to keep you alive. And it means the body doesn’t have a natural way to control how much sugar stays in your blood, and how much is turned into energy for later use.

Accordingly, the blood glucose level of diabetics fluctuates widely: from very high (a condition called hyperglycemia), to very low (hypoglycemia).

Hyperglycemia can make a diabetic feel thirsty or confused, and over the course of years, it damages the body’s small blood vessels. This can lead to blindness, nerve damage and kidney failure. Hyperglycemia could also lead to stroke, heart attack, and amputation of the extremities.

In 1921, scientists discovered that many of these issues can be avoided by providing a diabetic with a synthetic (i.e., medically-made) form of insulin. The problem is that insulin is toxic: too much of it leads to “insulin shock,” which can kill you.

Even today, nearly a hundred years after the beneficial use of insulin was discovered, the “state of the art” options for diabetes management are grossly inadequate to balance the dangers of hyper- and hypoglycemia.

But despite the dangers, millions of people have little choice but to try.

And as you’ll see in moment, there’s a reason why success is so hard to achieve...


THE GOAL FOR DISEASE MANAGEMENT

Generally speaking, a healthy range for blood sugar levels is between 70 and 120.

That’s about a teaspoon of sugar mixed into the entire blood stream of an adult.

Blood sugar levels that fall outside that range can lead to hyper- or hypoglycemia—and can result in all the serious complications mentioned above, including death.

A major study showed that maintaining blood sugar at the ADA-recommended levels virtually eliminates the risk of complications of diabetes.

Unfortunately, the vast majority of people with T1D—80% of them or more—are unable to meet that goal.

And actually, it’s no surprise that so few people can meet the goal:

It would require living life with virtually no fluctuations in physical activity, no variety in choice and timing of food, and no changes in emotion.

Simply put, it would require keeping diabetes management in mind at all times, prioritizing care over everything else, and constant dosing with insulin.

“Managing diabetes with today’s insulin is very challenging,” says Aaron Kowalski, a Type 1 diabetic who is also the Vice President of Treatment Therapies at The Juvenile Diabetes Research Foundation. “Unlike the pancreas, which makes insulin and secretes it right into your bloodstream, you have [synthetic] insulin that takes a long time to work.”

The synthetic insulin that Kowalski refers to takes about 30 minutes to take effect. So dozens of times every day, diabetics need to match their insulin dosing to their carbohydrate consumption, exercise, activity, stress, and many other factors—all in a relentless effort to try and to keep blood sugar levels low… but not too low.

And if they don’t get it right, their blood sugar will crash or spike, throwing their health and well-being into chaos.

Let’s look now at how doctors and scientists have tried to solve this problem with medical technologies.


CURRENT “STATE OF THE ART” MEDICAL TREATMENTS

Currently, medical technology devices for the management of T1D include:

• Blood glucose meters (BGM). These hand-held meters came onto the market about eight years ago. They test glucose levels every five minutes and send the data to a receiver. To obtain a blood sample, a user must prick his skin with a lancet. These devices are able to capture a momentarily-accurate blood reading—but to be clear, they don’t determine or dose out the appropriate level of medicine needed to adjust the blood.

• Insulin pumps. This technology is 30-years-old. It delivers programmed amounts of insulin through a small catheter inserted under the skin. To determine how much insulin is needed, and when it’s needed, the wearer must monitor his blood glucose levels separately. These pumps deliver insulin—but to be clear, they require the user to make all dosing decisions.

The pumps certainly offer some advantages: they eliminate the need for injections, and they can be programmed to mimic the natural release of insulin by regularly dispensing small doses.

The problem is, as they don’t adjust automatically to the patient’s variable insulin needs—and since they only dispense insulin, not insulin and glucagon—these advantages are limited.

The user still needs to make continuous decisions about how much insulin to give himself. This requires an enormous amount of work on the user’s part, and the results are far from guaranteed.

You see, despite a diabetic’s best efforts, achieving “stable” insulin levels is nearly impossible. The way insulin reacts in any patient’s body at any given time is affected by a multitude of factors: emotional stress, physical activity, a growth spurt, an illness, how much they ate in a meal, etc.

But diabetics still need to make dosage decisions day-to-day and even hour-to-hour.

In addition, although some diabetics appreciate their blood glucose meters, many feel they interfere with their everyday lives. And very few people use insulin pumps and a BGM. Given how difficult it is to keep the two systems in synch, most patients think it’s just not worth it.

To make matter worse, as The New York Times reported, the “Food and Drug Administration, [...] allows the devices to be wrong by as much as 20 percent. Such a wide error rate can leave


patients vulnerable to severe problems, including seizures, unconsciousness and coma.”

If the blood sugar reading is reported as too high, the patient may not take enough insulin, which will cause their blood sugar levels to spike.

And if the reading is reported as too low, the patient may take too much insulin and put themselves into shock.

Given these challenges and dismal results, it might not come as a surprise that, currently, just 15% to 30% of people with T1D rely on these medical devices to regulate their blood sugar.

That leaves up to 85% of T1D sufferers using manual insulin shots to manage their disease.

Unfortunately, with this current standard of care, people with T1D face a high chance of at least one hospitalization every year.

In fact, over $3 billion every year can be attributed to hospitalizations for acute complications of T1D. And long-term complications are even more costly.

People do the best they can, but the results aren’t very good. For example, Brian Hunte of London, United Kingdom recently shared this story:

“When you’ve taken your insulin, you need to eat soon afterwards. I forgot once, when some guests arrived unexpectedly. I put some chairs out in the garden, forgetting I’d just taken my insulin. Next thing, I collapsed on to the kitchen floor.”

So now you know: the current tools to manage T1D simply aren’t good enough…

Despite advances in medical technology, managing diabetes requires vigilant monitoring and constant adjustment of glucose levels—and still, people often get it wrong.

What’s needed isn’t just an improvement in diabetes care, but a breakthrough.

What’s needed is a system that can give a continuous reading of blood glucose, determine the precise amount of insulin and glucagon needed, and then automatically dose out the right amounts—regardless of the ever-changing factors taking place in a user’s body.

And that’s where Ed Damiano, David’s father, comes back into the picture…


ED DAMIANO SEEKS A SOLUTION

At the time David was diagnosed with T1D in the year 2000, his father Ed was working as a professor of Applied Mathematics at the University of Illinois Urbana-Champaign.

But the worry of keeping his son healthy was weighing on him too greatly, so he shifted tacks: he made it his mission to help treat his son’s affliction.

After spending some time researching the current state of diabetes management, he soon realized that an entirely new approach was necessary—and he dedicated himself to finding a solution before David left for college.

He wanted to be sure that, once David left home, he’d be able to manage his own diabetes, day and night, and keep himself safe from the dangers, the emotional burden, and the fear that T1D carries with it.

And that’s how Ed began a journey—first personal, then universal—to create a revolutionary automated device that would not only monitor diabetes, but also treat it.

Ed soon envisioned a new type of medical device. This device would need to constantly and meticulously measure blood glucose levels, determine the precise amount of insulin and glucagon needed, and then automatically release the appropriate doses.

What Ed was envisioning was a “bionic pancreas.”

CHALLENGES… AND THEN SIGNS OF SUCCESS

Ed—or more formally, Dr. Edward Damiano—moved from Illinois to Boston, Mass.

He became a Biomedical Engineering professor at Boston University.

And together with his research scientist, Dr. Firas El-Khatib, he began his quest.

In 2006, he and his team built a prototype of what would become the “bionic pancreas.” After seeing positive results from initial testing, Dr. Damiano was able to secure a formal collaboration with Boston University (BU) and Massachusetts General Hospital (MGH).

This partnership resulted in three clinical studies in adults and adolescents with T1D. The studies took place in Massachusetts General’s clinical research center from 2008 through 2012.


As published in the New England Journal of Medicine, and as reported at an American Diabetes Association meeting in San Francisco, these studies showed impressive results:

They showed that the T1D participants had healthier blood sugar when they used the bionic pancreas as compared to when they used their conventional treatment methods.

In 2013, after years of refining the early prototypes, Damiano and his team were able to construct a wearable version of this device.

The new platform consisted of a sophisticated app that ran on an iPhone 4S. It had an attached wireless glucose monitoring device, two pumps, and two reservoirs for insulin and glucagon.

Although cumbersome, this mobile device allowed for “real world” testing. Meaning, instead of requiring patients to test the device in the confines of a lab, it allowed them to take the device home and live their lives as they would normally.

Furthermore, it allowed Dr. Damiano to conduct experiments that were far longer in duration than was previously possible.

In what became known as “The Beacon Hill Study” and “The 2013 and 2014 Summer Camp Studies,” this new version of Damiano’s device was put to the test...

And it passed with flying colors.

In total, the iPhone version was tested in 6 outpatient studies. These studies found that in adult and children populations, Ed’s bionic pancreas achieved blood sugar levels that surpassed the benchmarks set by the American Diabetes Association.

You can see some of these results in the following charts.

The first set of charts show the blood sugar levels of someone with diabetes—someone following their usual treatment of care. The top graph shows levels during the day, and the bottom graph shows levels at night.

It’s important to measure results at night because sleeping diabetics are unable to give themselves medicine—and that could lead to life-threatening seizures.

(see graph on next page...)


The green shaded area is the ideal blood sugar level, and the jagged black lines are the patient’s actual levels. You’ll quickly notice a few things: Even with consistent treatment, blood sugar levels are erratic. Remember: this disease is extremely difficult to manage. You’ll also notice that at night, blood sugar levels fluctuate even more dramatically. Finally, you’ll see that even when using the current standard of care, blood sugar almost never reaches safe levels. But now take a look at another set of charts:


These charts are from a patient who took part in a clinical trial for the new device. The patient wore the device, day and night, for 11 days.

The effects are immediately clear:

This device was able to stabilize the patient’s blood sugar 24 hours a day, and the levels were perfect.

In fact, unlike existing treatment options, this device was able to deliver blood sugar levels that are as good as, or even better than, someone who doesn’t have diabetes.

Ed’s device proved that it could eradicate all long-term complications of T1D.

With these results in hand, Ed and his team realized that not only could their device change the lives of millions of people around the world, but it could have a massive commercial impact as well.

So they stopped thinking about their bionic pancreas as a “science experiment,” and started thinking about it as a business.

This meant they’d need to streamline and improve the device. They’d need to make it less cumbersome, sturdier, and far more precise.

Essentially, they’d have to create a proprietary product that was scientifically effective for treating diabetes, but also something that was elegant and easy-to-use.

This relentless focus on effective treatment and high-quality product design resulted in the creation of a revolutionary medical device...

It’s called the iLet.

THE ILET

The iLet is breakthrough in T1D care.

It’s a pocket-sized, bionic pancreas that manages blood sugar levels in people with T1D. It does this automatically and autonomously—which means it requires no input from the user—and it does it 24/7.

Here’s what it looks like:


The iLet integrates three key components of T1D care:

(1) A glucose-sensing device that estimates blood sugar levels every five minutes;

(2) A clinically-tested algorithm that determines the appropriate, micro-precise dosing requirement; and

(3) A dual-chambered mechanism to automatically deliver an ultra-precise dose of insulin or glucagon, thereby constantly keeping blood sugar at normal levels.

With the iLet, all the pieces of the disease management puzzle that you’ve already read about so far in this report—the monitor, the pump, the insulin, the glucagon— are integrated into a single device.

Not only that, but the device is elegant and easy-to-use.

It’s about the same size as iPhone, so it fits in a pocket or on a belt. And all of its sensors and pumps can easily be hidden beneath the patient’s shirt.

This isn’t just an improvement in diabetes care; it’s a transformation in how diabetics can live their lives.


It works whether the patient is 6-years-old or 76-years-old tested.

And it works if they’re 47 pounds or 247 pounds.

It doesn’t matter if they eat too much, drink too much, or just plain forget about their disease. It’s fool-proof.

The iLet eradicates all the long-term complications of T1D.

Essentially, it mimics the efficiency of the natural pancreas, fine-tuning the body’s glucose level both by lowering it with tiny amounts of insulin, and by raising it with tiny doses of glucagon.

And not only does it control and prevent hyper- and hypo glycemia in everyone who uses it, but it unburdens patients of the physical and emotional stress of trying to stay medically complaint.

It also unburdens the patient’s family and loved ones of their emotional stress related to the disease.

It relieves them of the constant fear of their child missing an insulin dose...

Having their blood sugar plummet to dangerously low levels...

Or, in the worst-case scenario, dying.

A device that solves any one of these concerns would be groundbreaking; a device that simultaneously solves all of them is without precedent.

Simply put, this is the biggest breakthrough in the world of diabetes since the discovery of insulin in 1921.

That’s why The BBC called this device, “A new dawn for diabetics...”

BETA BIONICS: COMMERCIALIZING THE ILET

For years, Damiano and his team had been doing their research inside Boston University.

But now, to begin commercial operations for the iLet, it was time for Damiano to set up a new company. He called it Beta Bionics.

Beta Bionics soon developed a formal business plan and started negotiating strategic alliances.


For example, it successfully negotiated a license with Boston University for all the intellectual property it had created.

Simply put, Damiano’s company was granted the exclusive rights to use, and to commercialize, the patented technology it had developed at Boston University.

But intellectual property isn’t enough to get a business off the ground. To build a business, the old cliché holds true: to make money, you need money.

That’s why, several months ago, Damiano and his team set out to raise a large round of seed capital.

Surprisingly, they didn’t raise funding from traditional sources like venture capital funds or angel investors. Instead, the company quickly secured a $5 million investment from Eli Lilly & Company (NYSE: LLY).

You’re probably familiar with this Fortune 500 pharmaceutical giant. Its annual revenues exceed $20 billion, and its market cap is currently close to $80 billion.

A big part of Lilly’s business—a big part of its history—is in diabetes. Lilly Diabetes is one of Lilly’s five global business areas. This unit alone generated more than $4 billion in annual revenues.

One of the products Lilly Diabetes manufactures is synthetic insulin. In fact, not only is Lilly the company that in 1923 first commercialized insulin for patients with diabetes, but it currently manufacturers the insulin that’s used in the iLet.

As Enrique A. Conterno, president of Lilly Diabetes, commented: “I’m so impressed with Ed’s passion, but also with his pragmatism, his creativity in moving this forward. We thought for us it was a great investment.”

Lilly’s multi-million dollar investment, as well as its strategic involvement, is a huge vote of confidence from one of the biggest and most important players in the diabetes field.

As Conterno said about Ed’s results with iLet: “… he had incredible data. It’s pretty clear that his algorithms and his systems are delivering better outcomes.”

As part of the Lilly investment, Deirdre Ibsen, global brand development leader of Lilly Diabetes, joined the Beta Bionics board. So not only can she act as a valuable sounding board for top-level management decisions, but she can provide Beta Bionics with invaluable insights into the diabetes market.


A $1 TRILLION OPPORTUNITY

As you know by now from reading this report, diabetes is a major disease—and a massive business.

In the U.S., it represents a market worth hundreds of billions of dollars.

And globally, the market is worth upwards of $1 trillion.

Here’s how much a handful of pharmaceutical companies make each year from their anti-diabetic treatments:

Astra Zeneca earns $2.2 billion.

Eli Lilly makes about $4 billion.

Merck generates more than $6 billion.

Sanofi brings in about $8.4 billion.

And Novo Nordisk brings in more than $12.5 billion.

THE MARKET RESPONDS TO THESE COMPANIES

With a market this large and this important, any signs of progress from the established players in diabetes—or from new entrants with novel therapies—can attract the attention of investors.

Just look at the stock prices of the companies we mentioned a moment ago...

Eli Lilly, for example, was one of the first manufacturers of insulin back in the 1920s. But it’s continued to innovate in the space—most recently launching a new treatment in 2012. And since then, it’s stock has doubled.

Merck began selling its anti-diabetic treatment in 2006—and since then, its stock has soared by more than 216%.

Smaller companies have done even better. For example, look at insulin management device maker, Insulet Corp. In just four years, its sales have grown from $200 million per year to $324 million.


In the same period, its stock price went from $15 per share to a high of $45.18. That’s 300% growth in just four years.

In other words, in just a few years, investors like you could have turned $1,000 into $3,000. Or $10,000 into $30,000.

In another example, glucose monitor maker, DexCom, has grown its sales from under $100 million a few years ago to more than $400 million in 2015.

In that time, its stock price exploded—it went from $7.34 in 2011 to a high of $100 per share last year.

That equates to 1,300% growth. That’s enough to turn every $1,000 you invested into $13,000. And every $10,000 into $130,000.

In a moment, we’ll look at how Beta Bionics and its investors might do in the market…

But first, let’s look at who might try to compete with it.

COMPETITION

With such a massive market to address, and with so many people suffering, it’s not surprising to discover that other groups are seeking solutions to help manage T1D.

The medical device company, Medtronic, for example, is working on the same problem. So are researchers at the University of Virginia and Harvard University.

But Beta Bionics’ solution is unique.

For one thing, instead of merely offering automated and autonomous delivery of insulin, the iLet will also deliver glucagon. This is a major leap in diabetes management.

You see, having easy access to a glucagon-delivery system would allow diabetics to raise their blood sugar without ingesting fast-acting sugars like candy or juice. Having to rely on eating fast-acting sugars isn’t just unhealthy and inconvenient, it’s also inexact, which can be dangerous.

Currently, glucagon is only used for medical emergencies. It’s injected into a T1D patient when they’re having a seizure or they’ve lost consciousness. The glucagon signals the liver to release its stored glucose into the bloodstream, which almost instantaneously raises blood glucose


levels.

But the iLet allows a long-lasting form of glucagon to be stored for immediate and micro-precise delivery. This patented delivery system is a major competitive advantage.

In fact, looking at the competitive set, Enrique A. Conterno, president of Lilly Diabetes, described Damiano’s device as “the most advanced.” He went on to say that “… we are a huge believer that glucagon will be a very important part of the artificial pancreas. That’s how, physiologically, the human body works.”

Perhaps this is why Time Magazine reported that it “…. could seriously change the management of […] diabetes.”

Secondly, Beta Bionics offers something invaluable that its competitors do not:

Simplicity.

For a diabetic to take advantage of its solution, all they need to do is enter their body weight. After that, the iLet requires no input, no decision-making, and no response from the user.

No other device or therapy in the diabetes market offers that level of simplicity and ease.

Nothing even comes close.

You may not think of “user friendly” as a competitive advantage...

But take a look at Apple’s stock price since the launch of the iPhone—and then see if you change your mind.

AN ALL-STAR TEAM

Another key part of Beta Bionic’s competitive advantage comes from its team.

Ed Damiano has been leading the science and engineering effort for the bionic pancreas project for more than a dozen years. He started shortly after his son, David, was diagnosed with T1D.

But Ed has built a top-notch team around him—a team that shares his mission.

Firas-El Khatib, Ph.D, for example, started working on the bionic pancreas project as Ed’s Ph.D


student. Firas is the primary author of the mathematical “dosing” algorithms. This is the core technology upon which the bionic pancreas is built.

As the company grows and develops, Firas will lead the company’s R&D efforts.

Joining Ed and Firas in the executive suite is Gibb Clarke, the company’s COO and CFO.

Gibb has extensive experience as a medical device start-up executive. Previously, he was the co-founder and CEO of Blockade Medical, and the co-founder of Pulsar Vascular. Both companies focused on developing therapeutic medical devices for complex cerebral aneurysms. Gibb raised multiple rounds of venture capital for these companies—and as it relates to his role at Beta Bionics, it’s important to note that he helped craft and manage these companies’ clinical and regulatory strategies for U.S. device approvals.

Prior to Pulsar, Gibb helped develop the Seattle Neuroscience Institute, for which he raised in excess of $35 million.

And previously, Gibb spent 8 years in the US Marines Corps. He served as a team leader in the elite Marine Recon unit.

Toby Milgrome, Ed Damiano’s wife, is also a stakeholder in Beta Bionics. As the pediatrician who diagnosed her son David with T1D, she’s been part of the conversation from the very beginning.

Three other members of Ed’s team have also faced the first-hand challenges and fears of having children with T1D:

Edward Raskin and his wife Serafina experienced the psychological trauma of having their seven-year-old son, Max, diagnosed with T1D in 2013.

Initially, Ed and Serafina were volunteer legal advisors for Damiano’s bionic pancreas project. But when Beta Bionics was created in anticipation of becoming a commercial enterprise, the Raskins formally joined the team.

Serafina serves as the Company’s General Counsel and Secretary, and Ed serves on the Board of Directors as well as in the Benefit Officer function, ensuring that corporate strategy, management decisions and daily functions are designed and executed to maximize benefits to the T1D community.

Another board member is Jeff Hitchcock, whose 28-year-old daughter Marissa was diagnosed with T1D at 24 months. Jeff is founder of the nonprofit, Children with Diabetes, a prominent


online community that promotes understanding of the care and treatment of the disease.

Hitchcock met Damiano at a diabetes technology conference in 2006. “I heard for the first time someone talking about a technological solution that I knew would work,” says Hitchcock. “He spoke with passion and with the conviction of a scientist—not that touchy-feely hope kind of thing, but with ‘I know how to do this and I’m not going to stop until I solve it.’”

These corporate founders have bonded over the 24/7 management required to keep their children healthy, and the constant worrying about complications. Unfortunately, they all know the fear of “dead-in-bed” syndrome, which can occur if blood sugar levels drop too low when a person with T1D is asleep.

This team has “skin in the game.” They understand personally that diabetes management is relentless, exhausting, and unforgiving. As parents of kids with T1D, this project has become not just a business, but a mission. They are deeply motivated to bring the iLet to fruition for their children—and for the entire T1D community.

As Hitchcock has said about the potential of the iLet: “All that constant worry goes away. The bionic pancreas never gets tired. It’s always there.”

PATENT-PROTECTED PROFITS

The company’s strong patent portfolio will also be a key part of helping it build and maintain its competitive moat.

All of the intellectual property (IP) for Beta Bionics was created by Ed and his engineering team while they were at Boston University. As we mentioned previously, this IP has now been granted exclusively to Beta Bionics in a worldwide and exclusive license agreement.

Given the value and potential of this IP, this is a huge vote of confidence from BU.

These patents can be grouped into two clusters:

The first surrounds the mathematical algorithms that enable the iLet to make automatic dosing decisions.

And the second surrounds the design of the iLet. That includes everything from the infusion pumps, to the user-friendly features, to the specialty components that add high levels of safety and efficacy.


WHAT COMES NEXT—FOR THE COMPANY, AND FOR YOU

With the $5 million cash infusion from Eli Lilly, Beta Bionics has started preparing itself for commercial operations.

But before it can bring the iLet to market and start offering it to T1D patients, it needs to do final testing and get FDA approval.

The next test, currently scheduled for Q2 2017, is called “The Bionic Pancreas Pivotal Trial.”

This trial will have patients wear the device for an extended period of time. The aim of the trial is to prove—to Beta Bionics, to the T1D community, and to the FDA—that the iLet is safe and effective in managing blood sugar levels.

So it can provide all the clinical data necessary for a pre-market approval application to the FDA, Beta Bionics plans to enroll at least 600 subjects with T1D. It aims to get pre-market approval for both an insulin-only device, and for a “bihormonal” device that includes insulin and glucagon.

It expects the insulin-only test will take up to 9 months to complete, and the bihormonal test to take 12 months or more.

It hopes to submit the pre-market approval application to the FDA for the insulin-only configuration of the iLet by the end of 2017. And it hopes to get a positive decision from the FDA by the middle of 2018. It will then follow a similar path for the dual-hormone configuration of the iLet.

Given this schedule, the plan is to release the iLet commercially with the insulin-only configuration first, and then release the dual-hormone configuration.

With respect to its relationship and status with the FDA, the company had this to say:

“We have had an extremely productive and collaborative relationship with the FDA for almost a decade now. The enthusiasm the Agency has expressed to us about our technology has been very encouraging and reassuring. Over the past 18 months we have been in discussions with both the centers for devices and drugs (CDRH and CDER) and have converged upon a roadmap for our final pivotal trial for both the insulin-only and dual-hormone configurations of the iLet.”

But having enough cash in the bank is critical to ensuring it can successfully reach this milestone.

For example, Beta Bionics has a 2016 fiscal year budget that includes $3,788,00 for research and development activities, and additional funds so it can hire staff and consultants to focus on


areas such as compliance.

Which is where you come in…

A LIFE-SAVING INVESTMENT

Beta Bionics wanted to be sure that everyone whose life has been touched by diabetes—and everyone who believes in the company as an investment—could take part in its growth and mission.

Which is why it’s created a way for you to invest.

If you choose to invest, you’ll become a shareholder—an equity owner—so if the company goes onto great success, you’ll share in that success.

The company is currently raising $1 million from investors like you.

The minimum investment is just $100.

The maximum you can invest is based on your income and net worth.

You see, to ensure it could allow everyone who cares about diabetes to invest in this groundbreaking technology—regardless of their wealth or income—Beta Bionics is leveraging a new set of U.S. laws called the JOBS Act.

In particular, it’s using what’s called “Title III” of the JOBS Act, or as it’s more commonly known, “Equity Crowdfunding.”

Based on the new laws, every 12 months, you can invest a certain amount into equity crowdfunded deals. Here’s how you can calculate your maximum investment:

If your annual income or net worth is less than $100,000, you can invest thegreater of:

• $2,000 per year, or• 5% of your annual income or net worth, whichever is less.

If your annual income and net worth are more than $100,000, you can invest:• 10% of your annual income or net worth, whichever is less.


And no matter what your income or net worth may be, during any 12-month period, the total amount of Title III securities you can invest in can’t be greater than $100,000.

To make the process fast, safe and easy, Beta Bionics has teamed up with a high-quality website called WeFunder. WeFunder is what’s called a “crowdfunding platform.” It’s a government-regulated business that connects investors like you to early-stage investment opportunities.

Here are the basic steps for you to make an investment:

1. Go to Beta Bionic’s page on WeFunder (https://wefunder.com/beta.bionics)2. Read through any additional research you’re interested in3. To invest, click on the big green “Invest” button

Then just follow the prompts to enter your investment amount, complete your registration, and make your investment.

In a moment, we’ll look at the financial reasons why you might want to invest, but first, here are answers to some “Frequently Asked Questions.”

Question: Can non-US citizens or non-US residents invest?Answer: Yes, they’ll just need to provide a Taxpayer Identification Number (TIN).

Question: Can I invest through an IRA? Answer: Yes. To enable this, WeFunder has partnered with a company called The Entrust Group to provide an easy way for you to open a self-directed IRA. Please note that Entrust charges a $150 annual fee.

Question: How does WeFunder make money? Answer: Wefunder charges investors up to 2% of their investment. For an equity crowdfunding deal like Beta Bionics, it also charges the company up to 3% of the funds it raises.

Question: Can I change my mind once I commit to investing?Answer: Yes. At any time while Beta Bionics’s fundraising round is still open—up to 48 hours before its offering deadline—you can get a full refund for any reason, even if you’ve signed the investment contract.

Question: How can I pay for the investment?Answer: You can pay via online transfer, wire transfer, or check.

If you invest, you’ll receive updates in the form of an annual report that includes financial statements and a discussion of its business. You’ll receive these reports no later than 3 months

https://wefunder.com/beta.bionics


after the end of the company’s fiscal year.

Now let’s look at a crucial piece of information:

How you can earn a return from this investment.

POSSIBLE GAINS OF 990% (OR MORE)

To make a return in the private market, the company you invest in needs either to go to public, or to be acquired by a bigger company.

Just like with stocks, your goal is to “buy low” and “sell high.”

First let’s look at what it means to “buy low.”

If you invest in this company, you’ll be buying in at a “valuation” of $100 million. (A company’s “valuation” is the same thing as its market cap.)

Is $100 million “low”? Is it “high”? Generally speaking, it’s difficult to say. Unlike companies whose stock actively trades on an exchange like the NYSE, there is no public market for Beta Bionics’ equity, and there are no revenues to evaluate and inform any valuation figure.

That being said, you might take considerable comfort knowing that the $100 million valuation is exactly what Eli Lilly paid when it invested its $5 million. Certainly, Lilly’s team of sophisticated finance executives are in a position to make a fair determination of a company’s value.

And actually, Beta Bionics believes that between December 31, 2015 (when the Eli Lilly transaction closed) and May 16, 2016 (the date of the offering that you’d be investing in), its value has likely increased. It believes this to be the case because it’s made progress in areas such as product development, manufacturing, and quality-assurance systems.

To be transparent, Eli Lilly does receive a few more “rights” than investors like you. For example, it can vote on corporate matters. But Beta Bionics believes that any difference in value between Lilly’s stock and your stock is more than made up for by the increased value it’s generated since December 2015.

So now let’s look at how you might “sell high.”

A few pages back, we looked at the size of the diabetes market.


Remember: American families spend almost $9,000 per child who’s been diagnosed with T1D. That equates to roughly $5 billion each year in direct treatment costs.

Given that the iLet is a major transformation in a diabetes care, and given that it offers clinically better results, it could potentially attract a big chunk of the market.

But for the sake of argument, let’s say Beta Bionics’ iLet is able to capture just 5% of the market.

That would mean annual sales of roughly $250 million.

Here’s what that could mean for the company’s valuation—and in turn, your profits:

Currently, public companies in the diabetes market trade at a price-to-sales multiple of 4x to 10x.

To be conservative, let’s assume Beta Bionics commands a 4x multiple.

In an IPO, or if the company were acquired by a big pharmaceutical company like Eli Lilly, a 4x multiple would put its valuation at $1 billion.

Based on the $100 million price where you invested, that would give you a net profit of 990%. Essentially, you’d make 10x your money.

That’s like turning $1,000 into $9,900...

$5,000 into $49,500…

Or $10,000 into nearly $100,000.

But keep in mind: this calculation was based on capturing just 5% of the T1D market, and by using a low-end sales multiple of 4x.

Perhaps it would capture far more than 5% of the market, and perhaps its sales multiple would be closer to 10.

EVEN MORE PROFITS FOR EARLY INVESTORS

Furthermore, given the effectiveness of the iLet, Beta Bionics could potentially expand its market to include Type-2 diabetes patients as well.


Let’s see what could happen if this company captured 5% of the market for Type-1 and Type-2 diabetes.

Remember, even on the low end, the combined market for Type-1 and Type-2 diabetes is $120 billion.

Meaning, this device could attack a market 20 to 25 times larger than initially expected.

In that case, this business would command sales of roughly $5 billion...

And at a 4x multiple, it would earn a market cap of $20 billion.

At that level, every $1,000 you invested would turn into $200,000.

And every $10,000 would turn into close to $2 million.

That’s probably more than you’ve ever made on any single investment in your life.

For many folks, that’s enough to retire on. And when we look at the potential for this company on a global scale, the numbers get even bigger.

For example, even if this tiny company could capture just 1% of the $1 trillion global diabetes market, its revenues could grow to more than $10 billion. It would then eclipse nearly all the companies we’ve mentioned so far in this report.

Is such a scenario possible? As you’re thinking about the answer, consider that Beta Bionics’ iLet is a breakthrough in diabetes care. Given that it far surpasses all other therapeutic treatments on the market, it’s possible that it could become one of the most valuable anti-diabetic companies in the world today.

Will it get pressured by Lilly or other shareholders to sell too soon? Before it reaches its true potential?

If it were like most other companies, yes: that would be possible. And to be clear, even if that did happen, it could mean a very profitable return for early investors like you.

But there’s something unique about how Beta Bionics incorporated—something that could lead to even far greater gains than you imagined.


BE LIKE AMAZON

To set the stage for what you’re about to learn, we’re going to bring up a company you’re probably familiar with:

Amazon.com.

On May 16, 1997, Amazon went public on the NASDAQ with the symbol AMZN. Adjusted for dividends and stock splits, it closed its first day at $1.73.

As of the day I’m writing this—June 8, 2016—Amazon closed at $726.

If you’d bought shares back in May of ’97, and sold yesterday, you would have made more than 400 times your money.

A $250 investment would now be worth $100,000.

A $1,000 investment would be worth more than $400,000.

And a $10,000 investment would be worth more than $4 million.

How did Jeff Bezos, Amazon’s founder, do it?

Well, he certainly did plenty of things right…

But maybe the most important one was this:

The decisions he made were for the long-term.

He didn’t give in to the pressures of day traders or hedge funds that pushed for quick profits or a “big fourth quarter.”

Rather than maximizing for short-term profits, he made the decision to build a company that could become one of the most valuable enterprises in the world.

And it worked:

Currently, by market cap, Amazon is the e 6th–largest company on the planet.

At $340 billion, it’s worth even more than Facebook.


And as Citigroup recently reported, Amazon should be able to maintain or even grow that lead over time.

But Bezos is extraordinarily rare. It’s difficult for a manager to feel he has the latitude to manage for the long-term.

But here’s where Damiano had a stroke of brilliance:

He set up the company so he can manage to the long-term.

Literally no other medical device company has done the same thing.

Simply put, he set up the company in such a way that he’s obligated to manage it for the long-term. He’s obligated to allow the company to reach its maximum potential.

Part of that means remaining faithful to his core mission of helping the T1D community—and part of it means allowing the company to aim for the stars.

As Damiano has said: “I believe that if Beta Bionics remains faithful to our convictions and to our core values, it will lead to the best possible products—products that will thrive in the marketplace and change the paradigm of type 1 diabetes management.”

Damiano set up Beta Bionics as something called a “public benefit company.” This is ideal for for-profit corporate entities that also have a social mission.

You see, Beta Bionics doesn’t want to compromise its technology, or do anything that would lead to incremental improvements in care instead of major breakthroughs. And with the structure it put in place, it won’t have to compromise.

As the company has stated: “… we believe that such a commitment, coupled with effective execution, will necessarily and naturally lead to the best medical technology platform that the modern world can offer – to a technology that everyone covets, and to an inherently sustainable business model.”

As a public benefit corporation, it can act with its best long-term interests—and the interests of the T1D community—in mind.

In fact, these rights are protected by law.

Mike Pratt, managing director of Boston University’s Technology Development office, whose team helped Damiano navigate all the intellectual property agreements required to start the


company, had this to say:

“Traditional corporations may make decisions based on a short-term horizon. [...] the public benefit corporation structure gives Beta Bionics some flexibility that other companies don’t have…”

To be clear, this doesn’t mean Beta Bionics won’t pay attention to profits—it just means Ed can manage the company so it has the potential to achieve great profits.

As you know after reading this far in our report, this company has great potential.

But before we get too excited by its potential, let’s take a moment to put it through our 10 Private Equity Commandments…

You might remember that when you first joined Crowdability, we sent you three special reports. One of them is a quick checklist we use during our evaluation of any potential investment.

We call it the “10 Commandments of Crowdfund Investing”—if you’re interested, you can review the full report here later »

But for now, let’s look at how Beta Bionics scores:

• Quick Progress – Check. In this case, the term “quick” is relative. Yes, it’s taken Damiano

more than a decade to get here—but Beta Bionics isn’t a tech start-up like Facebook or SnapChat. This is a company aiming to save lives.

• Simple Business Model – Check. Medical devices like the iLet have significant margins. And with a good chance of becoming eligible for healthcare reimbursement, the company could become a cash cow.

• Founders – Check. Damiano and Firas have made tremendous progress in their quest by becoming domain experts in every aspect of treating T1D through a medical device. They’ve also shown a strong ability to recruit key team members, and to bring on key strategic investors like Eli Lilly.

• Be a Follower – Check! We’re following Eli Lilly into this investment. Lilly is perhaps the #1 investor Beta Bionics could attract. In the diabetes market, it has the experience, the credibility, and the power to make things happen.

10 CROWD COMMANDMENTS

http://www.crowdability.com/resources%23white_papers


If you add up the checks from our Private Equity Commandments, you’ll see that it comes out to an 8 out of 9.

Not quite a “perfect” score, but it certainly adds up to a promising and exciting opportunity.

As always, you’ll need to decide for yourself whether this gives you enough comfort to warrant an investment. Given the inherent risks of early-stage companies, it’s unusual to identify a deal that scores even a 7 out of 9.

To be clear, investing in start-ups like Beta Bionics is high-risk. It should always be done in the context of a larger strategy.

Professional investors know that for every massive winner they invest in—the type of investment that provides a 990%+ return—they’ll invest in 5 to 10 other companies that will either provide a 1x or so return (where they’ll basically get their money back), or will go out of business (which means they’ll get zero).

That’s why the pros recommend that individuals allocate only a small amount of their investable assets to early-stage companies (no more than 5% or 10%)…

• Marketing Expertise – Half-Check. Eli Lilly’s muscle could certainly help Beta Bionics

quickly gain a foothold in the diabetes market. But we’d be even more excited if someone on the team were already in place specifically to focus on marketing.

• Competition – Check. Beta Bionics has a first-mover advantage with its dual-hormone pump. And with its patent protection, it can build a strong competitive moat. It stands a decent chance at “owning” this space.

• Why Now? – Check. Diabetes is a growing global epidemic. Healthcare costs are growing. And the technology it uses has just caught up to its potential. Now is an outstanding time for a device like the iLet to come to market.

• Numbers – Half-Check. Given the size of the potential market and Eli Lilly’s involvement, we believe the $100 million valuation is fair—but it’s certainly not “cheap.”

• Goal Oriented – Check. The company has a clear use of funds, and it’s aiming to start commercial operations in 2018.

• Diversification – As always, this item is on you. We’ll explain in a moment…

10 CROWD COMMANDMENTS (CONTINUED)


That’s why we always recommend building a diversified portfolio of holdings…

And that’s where the 10th item on the checklist comes into play:

Diversification.

ASSET ALLOCATION

To make the math simple, let’s say you have total investable assets of $100,000. If you allocate 10% to early-stage investments, you’d have $10,000 to invest. (You can re-do the math based on the actual size of your own portfolio.)

For early-stage investments as an asset class, data has shown that you need to have a portfolio of at least 25 to 50 investments to be considered “diversified.” In the above example, you’d commit $200 to $400 to each of 25 to 50 companies.

These dollar figures per investment might sound small—but keep in mind that a $400 investment into Facebook in 2005 would today be worth more than $600,000.

The point is that you can start doing early-stage investing with a small amount of capital and gradually build a diversified portfolio… all without being a mega-millionaire.

POTENTIAL RETURN PROFILE

To illustrate our point, let’s run the math on Beta Bionics.

If you invest $1,000 into this financing round for Beta Bionics, you’ll own roughly ~0.001% of the company.

Hypothetically, if the company went public, what would your shares be worth?

Well, as we explained earlier, even if it captured just 5% of the U.S. T1D market, Beta Bionics would generate $250 million in sales.

And even at a conservative price-to-sales multiple of 4x, that would give the company an estimated $1 billion market cap.

If the company goes public at a $1 billion valuation soon after you invest, your $1,000 stake


would turn into about $10,000. ($1 billion x .001% = $10,000.)

Not too bad.

However, Beta Bionics might need to raise more capital before it goes public.

To take this fact into consideration, we should assume that there will be at least two additional funding rounds for this company. And each time, your stake will get “diluted” about 20%.

You might not be familiar with the concept of dilution, but it’s quite common for start-ups—and it can be a promising sign.

If a start-up is able to raise more and more capital over time, it generally indicates that it’s making progress, and it means investors are willing to keep backing the company’s vision.

As investors in the future contribute new capital, the business issues them new shares. This increases the total number of company shares.

How does this affect you?

Well, the number of shares you own doesn’t change: if you bought, say, 1,000 shares, you’ll always own 1,000 shares. But your percentage of ownership goes down over time, and hopefully, the value of your holdings goes up.

Let’s look at an example to explain:

Let’s say a year from now, Beta Bionics raises $50 million at an increased valuation of $200 million. After the financing takes place, that $50 million investment would represent an ownership stake of 20% of the company.

Because new investors just acquired 20% of the company, your ownership stake would be “diluted” by 20%...

The good news is that the value of your holding just went up by about 100%:

You used to own a .001% stake worth $1,000…

Now you own a .0008% stake that’s worth $2,000.

So when you’re investing in early-stage deals, you should be aware of dilution… but you shouldn’t worry about it.


Now let’s look at the return profile of Beta Bionics.

To be conservative, let’s do the math based on two more rounds of financing. Theoretically, this would dilute your ownership stake to about .0006% on a $1,000 initial investment.

Acquisition Valuation

$500 million $1 billion $2 billion $5 billion

Initial Investment ($1,000)

$3,168 $6,336 $12,673 $31,683

% Return on Investment

317% 634% 1,267% 3,168%

As you can see, even with dilution, getting in this early can be very profitable.

At exit prices of $500 million to $1 billion, these are the types of returns that investors hope for when they invest in “growth” financing rounds like this—in other words, there’s some possibility of a 2x to 5x return, and some possibility it’ll turn into 10x or more.

Beta Bionics offers us tremendous long-term investment potential. This is a company that could stand on its own and conceivably go public:

Given the company’s current traction, and given the pressing need for better diabetes treatments, an IPO with these types of returns is certainly possible.

But even if the company doesn’t go public, we believe it offers us a path to great profits as a takeover target.

The acquirer might be a company Beta Bionics already has a relationship with—a company like Eli Lilly.

Or it might be another player in the anti-diabetic market—a multi-billion dollar company like Astra Zeneca or Merck that’s looking for a new blockbuster.

THE BOY WHO LIVED

In May of 2016, David Damiano turned 17-years-old and achieved an exciting milestone:

He got his driver’s permit.

He’s been lucky. Under his parent’s care, he’s managed to have a healthy childhood.


But now he’s just one year away from leaving home and going to college.

Over the past sixteen years, his father has worked tirelessly to create a device that can automatically manage diabetes, 24/7...

A device that can keep sufferers of T1D—and their loved ones—safe from the harms, the dangers, and the fear of this disease.

It’s been a long journey, but the commercial release of the iLet is finally within sight.

As David said recently: “My whole life I’ve just known — just had this knowledge that my dad is going to have this bionic pancreas out when I go to college.”

Releasing the iLet will be a great day for the Damiano family…

A great day for sufferers of T1D around the world…

And a great day for everyone who believes in Beta Bionics’ mission.


Disclaimer:

This document is made available for general information purposes only. This report does not constitute a specific investment recommendation or advice upon which you should rely based upon, or irrespective of, your personal circumstances. Use of this document is not a substitute for obtaining proper investment advice from an authorized investment professional. Actual results may differ significantly from the results described. Potential retail investors are urged to consult their own authorized investment professional before entering into any investment agreement. Past performance of securities is not necessarily a guide to future performance and the value of securities may fall as well as rise. In particular, investments in the technology sector can involve a high degree of risk and investors may not get back the full amount invested.


ABOUT CROWDABILITY

Crowdability provides individual investors with education, information and insight into opportunities in the crowdfunding market.

Our free website and email newsletter aggregate and organize deals from an ever-expanding universe of crowdfunding platforms. We aim to save people time and simplify the process of discovering and evaluating crowdfunding opportunities.

BENEFITS OF JOINING CROWDABILITY

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PRIVATE - Crowdabilitycontent.crowdability.com/.../uploads/2016/07/Diabetes-Destroyer.p… · PRIVATE MARKET PROFITS INVESTMENT PROSPECTUS 1 In the year 2000, David Damiano was diagnosed