JONATHAN KIL - SOUND PHARMACEUTICALS INC
CEO Interview - published 10/03/2003

DOCUMENT # TAT103

JONATHAN KIL MD is President, CEO & Director of Sound Pharmaceuticals,
Inc. Dr. Kil has an extensive background in auditory and cell cycle
biology, which translates directly into the scientific platforms of SPI.
He has served as the principal investigator on several NIH grants
including an SBIR phase II award for auditory hair cell regeneration. In
1998, Dr. Kil co-founded Otogene, the first inner ear biopharmaceutical
company, using anti p27Kip1 technology that he developed with
investigators at the Fred Hutchinson Cancer Research Center. As
President, CEO, and CSO he transitioned its basic R&D technology into a
pre-clinical drug development platform. He left in February of 2001 and
co-founded SPI in July of 2001. Dr. Kil earned his BA from the
University of California, Irvine, his MD from the University of Virginia
and completed his post-doctoral training at the University of
Washington.

Sector: Biotechnology

TWST: Would you begin with a brief historical sketch of Sound
Pharmaceuticals and a picture of things as they are now?


Dr. Kil: Sound Pharmaceuticals is an early-stage biopharm company, that
began operations a year and a half ago in 2002. We are focused on
developing drug treatments for sensori-neural hearing loss. We have
three product pipelines that we are developing and look to start our
first clinical study at the end of 2003. We are extremely novel in our
approach to sensori-neural hearing loss. There are no drugs in our space
and no ongoing clinical trials. Our technologies are revolutionary in
that they aim to not only protect sensory hair cells in the cochlea or
inner ear, but also aim to regenerate them. We have some novel
technology that we licensed from leading research institutions including
the Fred Hutchinson Cancer Center in Seattle, WA and the Memorial Sloan
Kettering in New York. We were also just granted our first issued patent
in Europe covering claims for inner ear disease, and these claims are
very broad. Our company has raised approximately $2 million in a seed
round and is looking to close $10 million in a first round to initiate
clinical trials and further our R&D. That's where we are in a snapshot.

TWST: How similar or dissimilar are you to the competing companies?


Dr. Kil: There are a very few companies actually in this space. We are
very unique, no one else including academic/university scientists has
the technology to regenerate auditory hair cells in mammals. We have
this technology and we are looking to develop that into a therapeutic.

TWST: Where will this lead you over the next couple of years?


Dr. Kil: Ultimately, we see this novel protective and regenerative
strategy being employed in other neurodegenerative diseases. Companies
that are attempting to improve function in neurodegenerative diseases
like Parkinson's or Alzheimer's, rely mostly on growth factors and/or
stem cells. We have a very unique approach where we are trying to
stimulate the regeneration of the remaining cells by inhibiting an
inhibitor of cell cycle progression. That's a very complicated way of
saying, we found proteins that inhibit cell regeneration and when we
antagonize those proteins, we can stimulate cell regeneration. We look
to apply this technology in other disease states involving the retina
and central nervous system.

TWST: Can you tell us about the two or three main projects that you are
working on now?


Dr. Kil: Specifically, otoprotection is protection against noise-induced
hearing loss. According to OSHA, noise is the leading occupational
disease. Over $2b is spent on disability compensation for noise-induced
hearing loss on the job. Whether you're in the military or in
manufacturing, it's a significant problem. Our first goal is to prevent
or reduce noise-induced hearing loss. We anticipate working with the
Army on this. We have a letter of support from Madigan Army Medical
Center, in Tacoma, Washington, which services Fort Lewis, a major Army
center. Our second program is aimed at preventing chemotherapy-induced
hearing loss.  We have excellent data in live animal models where we can
not only prevent the hearing loss, but also extend the animals' life and
improve their other bodily functions as well. We look at starting that
clinical trial at the end of 2004. And with regeneration, we anticipate
starting that at the end of 2005. That therapy is rather unique in that
it will be applied directly to the inner ear. This approach will limit
the possibility of systemic side effects and will allow us to build up a
greater concentration of our drug in that local space.

TWST: Which do you think holds the greatest opportunity for you?


Dr. Kil: Regeneration is obviously our potential blockbuster. Right now,
the  hearing aid market is in excess of $6 billion. Yet, only one out of
six people who qualify for a hearing aid will actually buy one. A
fraction of them, much less than one out of two will actually wear them
routinely. There  is a lot of unmet medical need in that device space,
and if we can regenerate hearing using a therapeutic approach, we could
take a significant part of that market. The other great opportunity,
maybe, one that is more readily approachable is going after the age-
related hearing loss market. Our otoprotective strategy is very well
defined, meaning we are going to reduce noise-induced hearing loss in a
well-defined population,  i.e. the Army. No one really knows what causes
age-related hearing loss, but we know it is highly associated with
previous exposure to noise. We want to extend those results to chronic
daily therapy for age-related hearing loss. If we can keep people on a
daily regimen of therapy starting at the age of forty and reduce their
decline in hearing, we could preserve hearing through the later decades
of life when you are in your sixties, seventies, and eighties. Twenty
million people in the US have age-related hearing loss. It's the most
common neurosensory disease. Many people believe it's blindness, but it
isn't. Those are our two big opportunities.

TWST: You based your career on studying and exploring auditory and cell
cycle biology. With regard to these important discoveries regarding
hearing damage, what's your rough time table for their development over
the next few years?


Dr. Kil: We will have products on market for otoprotection starting in
2007/8, and for chemoprotection in 2009. For our regenerative strategy,
we are looking at 2010 and other markets in the retina and CNS, probably
by 2012 and 2015. So, we have both near-term and long-term strategies
for our drug development.

TWST: What obstacles and problems, if any, can present themselves to you
in the next three or five years?


Dr. Kil: One would be an unacceptable level of toxicity in our
regeneration strategy. We already know, in our otoprotection and
chemoprotection that these compounds do no harm. With our regeneration
platform, there may be some unforeseen toxicity that we have not
observed or predicted. That would be our potential greatest pitfall.

TWST: Have you given any thoughts to future partnerships and alliances?


Dr. Kil: Yes, we are talking with several groups now about co-developing
compounds for innerear indications worldwide.

TWST: Can you expand on that?


Dr. Kil: Right now, they are pretty sensitive negotiations. So, I
wouldn't want to state any names.

TWST: Do you see any other opportunity to enhance your capital
structure?


Dr. Kil: We are always looking to enhance our capital structure. That's
why we are trying to close this first round of financing for $10
million. That would give us enough runway for the next two full years of
development and will allow us to get our otoprotection compound into
phase III, our chemoprotection compound, provided we have a partner,
into phase II, and initiate our regenerative therapeutics into phase I.
So, I think very rapidly in the next two to three years, we will evolve
from a pre-clinical company into a mid to late stage clinical company.
At that time, we would position the company for an IPO or major
acquisition, which I think is a very rapid time line for a return on
investment.

TWST: Could you tell us about the background and expertise of a couple
of key members of your team?


Dr. Kil: In addition to myself, our Director of Research, Eric Lynch is
a well-known hearing biologist. His background is in molecular genetics
and he  identified one of the first deafness genes as well as the first
breast cancer gene. He's been working on deafness for almost two decades
and he lends incredible support to the development of our molecular
strategies. One of the other scientists that we have is a leader in
surgical approaches to the inner ear and his name is

Dr. Rende Gu. He has significant experience in the auditory system and
his approaches to the inner ear allow us to deliver some of these drugs.
Our company is quite small right now with only eight fulltime people.

TWST: What type of culture have you tried to develop within Sound
Pharmaceuticals?


Dr. Kil: We are a combination of scientific excellence and commercial
know-how. One thing that I'm very proud of is that we not only have
journal clubs  every week where we discuss the latest breaking
discoveries in other labs, but we can move on them very quickly. Within
a couple of days, we can start a new line of experimentation to analyze
potential benefits to the auditory system. Having been in several
academic labs that were auditory focused, I have not seen that ability
to act on new data in such a timely manner. We try to convey a corporate
culture of not only scientific know-how, but expediency, the ability to
move very quickly on projects as well as to stop projects that aren't
working.

TWST: As Chief Executive Officer of Sound Pharmaceuticals, what do you
focus  on most on a day-to-day basis?


Dr. Kil: Technology development, fund raising, intellectual property,
and then partnership opportunities.

TWST: Where do you recently expect the company look like three to five
years  from now? You mentioned some milestones, can you expand on that
for us?


Dr. Kil: I anticipate us being a public company having our first product
come to market and our next two products being in late stage clinical
development, having significant corporate partnership and really being
rewarded by The Street for being a very novel company upon many levels.
One, we would be the first and potentially only company focused on
developing drug treatments for inner ear disease. Number two, seeing our
technology being exploited in other disease systems such as
neurodegenerative and neuroretinal disease. That's where I see us being
in 3 to 5 years.

TWST: What do you do to bring your message out to potential investors,
Dr. Kil?


Dr. Kil: I attend and present at investor conferences throughout the
year, typically two to three. We have a website that lists some of our
most up-to-date discoveries and news. And it's quite interactive, we
have links to other centers of excellence, which further validates not
only our strategies but the way the field is moving and developing. We
also attend and present at scientific conferences to encourage
collaboration with academic scientists and disseminate our results.

TWST: Can you give us two or three best reasons why long-term investors
should take a serious look at Sound Pharmaceuticals?


Dr. Kil: Novelty and excellent broad reaching technology are important
considerations. In addition, we have developed business strategies that
will  generate product and partnership revenue in the near term, and yet
still have ample opportunity to generate blockbusters in the long-term.
We have also thought carefully about who will pay for our products and
when, and how they can save the system money buy reducing the cost
burden of hearing loss. That's why I would invest.

TWST: Is there anything you want to add?


Dr. Kil:: No, not at this time but just thanks for the opportunity.

TWST: Thank you.


JONATHAN KIL, MD
 President, Director & CEO
 Sound Pharmaceuticals, Inc.
 4010 Stone Way N
 Suite 120
 Seattle WA 98103
 (206) 634-2559
 (206) 634-2342 - FAX

Copyright 2003 The Wall Street Transcript Corporation
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