PLANTATION, Fla., Jan. 12 /PRNewswire-FirstCall/ -- The following is a
letter from Charles A. Rice, President and CEO of Viragen, Inc. (Amex: VRA).
In addition to these comments, stockholders and potential investors are
referred to: the Company's SEC filings, including Form 10-K and Form 10-Q
(Annual and Quarterly Reports); press releases; website; and other publicly
disseminated information which is available free of charge upon request by
contacting the Company.
Dear Stockholder,
Since joining Viragen nine months ago, I have examined, evaluated and
analyzed a myriad of issues related to all of our projects on every level, and
we have swiftly moved to start implementing changes, improvements and new
strategies designed to efficiently and cost-effectively build a significant
business -- and thus reward our stockholders. And while displeased with our
present market valuation, we made great strides in 2004 toward achieving the
dramatic growth we envision in the coming years. Some of these activities,
events and accomplishments included:
* Successfully Completing a Recapitalization and $20 Million Financing
* Managing the Positive Completion of a Multiferon(R) Malignant Melanoma
Study
* Meeting our Goal to Complete and Validate our New Swedish Multiferon(R)
Manufacturing Facility which is Capable of Producing Salable Product
* Being Awarded a Scottish Grant to Fund an Anti-Cancer Project (CD55)
* The Publication of Breakthrough Avian Transgenics Milestones Related to
Gene Delivery and Securing the Rights to that Technology
* Extending the Approved Shelf-Life of Multiferon(R) to 18 Months
* Adding New Patent Protection for Multiferon(R)
* Marketing Initiatives that Increased Demand for Multiferon(R) in Mexico
* Preparations to Apply in Sweden and other EU Countries to Seek Approval
for Multiferon(R) as First-Line Adjuvant Treatment of High-Risk Malignant
Melanoma
* Gaining Approval for Multiferon(R) in Bulgaria
* Creating New Sales Initiatives in Sweden
* Accelerating Active Work on Anti-Cancer Peptide IEP 11
* Obtaining Equity Research Analyst Coverage
This list by no means represents all of the successes we realized in 2004
or the basic changes we made in our business moving forward, but I would like
to highlight some of these key accomplishments and point to major milestones
we expect to report in 2005 and beyond.
Multiferon(R)
Manufacturing -- In accordance with our commitments to the Swedish
regulatory authorities, we met our goal to successfully validate our new
manufacturing facility in Sweden for the large-scale production of
Multiferon(R). We have prepared this new state-of-the-art facility to be
capable of fulfilling our mission to make Multiferon(R) the most widely
prescribed natural human alpha interferon in the world.
Marketing -- We have rationalized our agreements for distributing
Multiferon(R) around the world and we have now focused our resources on only
those territories and partners where we believe there can be a reasonable
financial return. For example, our potential return on investment in Mexico
is much more attractive than further allocating resources into a smaller
market such as Myanmar.
We anticipate sales growth in Mexico and Sweden for 2005, two valuable
markets from which we can extract immediate benefits. We continue to work
closely with our partners in Mexico who report that new patients are
consistently being treated, and our internal sales staff in Sweden are
positioning and promoting Multiferon(R) with expectations of a potentially
expanded approval this year that would further confirm our prospects.
Our partner in Greece has obtained a new approval for Multiferon(R) in
Bulgaria, and we expect this will soon be followed in other Balkan
territories. We are anticipating potential new approvals and reimbursement
authorizations in Turkey, Chile and Pakistan, all within the first half of
2005 and all representing near-term sales opportunities that will contribute
to revenues.
Partnering -- Based on the level of interest and negotiations, I had
expected to report successful partnering initiatives in 2004, but with the
advent of our highly successful melanoma results, this process became more
complex in determining the most appropriate partner(s). Because Multiferon(R)
is approved for multiple indications, including viral diseases and oncology,
we are now considering partners that are capable of distributing Multiferon(R)
for all of its many indications, as well as organizations that may be highly
specialized in one field. I stress that we continue to be in active
discussions and negotiations with potential partners for European, South
American and Asian territories for Multiferon(R) and believe there is a high
probability of partnering success in 2005.
Malignant Melanoma Study -- In the fourth quarter of 2004, we released the
final data summary from our malignant melanoma study, including patient
follow-up over a 7-year period. Following meetings and discussions with the
Swedish regulatory authorities, our Swedish subsidiary, ViraNative, is
preparing an application for first-line adjuvant use of Multiferon(R) in high-
risk melanoma patients. In order to adequately position the data in the form
requested by the authorities and recommended by our regulatory experts, we
have now scheduled to submit this application in the first quarter of 2005.
Concurrently, we are working on a detailed strategy for broader European
approvals for this important indication. We will soon publish the study
results in a peer-reviewed journal, and we plan to present the results at
appropriate scientific meetings.
U.S. Strategy -- We are considering requesting a meeting with the United
States Food and Drug Administration (FDA) to review the malignant melanoma
study results and to inquire of FDA recommendations for a U.S. clinical
program for high-risk malignant melanoma. However, based on the projected
costs of preparing Multiferon(R) for entry into the U.S. market, including
American-based sourcing of leukocytes, Viragen does not currently have the
capital necessary to conduct U.S. clinical trials without an appropriate
partner to share in these expenses. As part of our ongoing partnering
initiatives, we are currently considering potential interested collaborators
for this market.
Clinical Programs -- We continue to strengthen the product's clinical
dossier in an efficient and economical manner through studies conducted in
international clinical trials. Working with our partner in Mexico, we have
two clinical trials moving forward. The first is using Multiferon(R) as a
"rescue" therapy for patients who fail to respond to Glivec(R)* for the
treatment of chronic myeloid leukemia (CML). This trial is being conducted in
cooperation with the National Cancer Institute of Mexico, one of Latin
America's leading oncology centers. A second trial is also about to begin
which will use Multiferon(R) to treat hepatitis C patients who fail or relapse
after treatment with recombinant alpha interferon. While Multiferon(R) is
already approved for sale in Mexico, these local studies will be used to
support our marketing activities and give respected medical opinion leaders
working experience with our product, while adding to our international
clinical data. Both studies are expected to be completed in 2005.
Our partner in Greece is initiating a trial that is designed to utilize
Multiferon(R) for the treatment of hepatitis C for those patients that have
failed or relapsed to recombinant interferon regimens. This trial is also
expected to be completed this year. These clinical programs are not only
efficient and cost-effective, but also enable us to increase physician
awareness of the utility and value of Multiferon(R).
Avian Transgenic Technology
Our transgenics subsidiary, ViraGenics, appears to be realizing startling
success in our mission to manufacture therapeutic proteins more efficiently in
the eggs of genetically engineered hens. While we are pleased and very
optimistic with this apparent success, we must make sure that we can
understand and replicate these results consistently. Therefore, we must
continue with confirmatory studies before making any formal announcements, as
well as ensure that we are securing any potential new intellectual property
that arises from this progress.
Previously, we reported that our next significant milestone would be the
expression of a targeted protein in the bird's oviduct, known as tissue
specific expression (TSE). Upon demonstrating TSE, we must then be able to
produce commercially relevant quantities of a target protein drug, such as
beta interferon, in the whites of the eggs laid by transgenic hens. Again,
while it has been a longer road than originally predicted, our progress with
Scotland's Roslin Institute appears to be excellent, and we hope to report
significant achievements in the coming months that could be unprecedented in
this field.
Anti-Cancer Therapeutics
While in prior years we have elected to focus our research expenditures
primarily on Multiferon(R) and Avian Transgenic Technology, I believe that our
anti-cancer product candidates, consisting of two antibodies and a peptide,
are capable of creating value for Viragen in the near and intermediate-term
and must be progressed in an efficient manner. Therefore, we are moving
forward with each compound as follows:
VG104 (Mucin 1 Variant -- IEP 11 Peptide) -- In cooperation with the
University of Miami Sylvester Cancer Center, we have moved forward with
confirmatory animal studies using IEP 11, a novel peptide drug, using models
of lung and breast cancer. It is expected that we will have the results
needed to make a decision on the next steps in the first half of 2005. If
these studies confirm the merits of the technology, we could be in a position
to schedule a pre-Investigational New Drug (IND) meeting with the FDA soon
thereafter. With a favorable outcome, we could then plan for an IND filing
and begin an intensive licensing program to identify suitable partners who
would help take this drug through human clinical development in the U.S.
While this promising peptide drug has not been highly publicized by us in
recent years, it may represent a more important part of our portfolio than
previously envisioned.
VG102 (Anti-CD55 Antibody) -- The therapeutic potential of anti-cancer
antibodies can be limited due to the inherent ability of most cancer cells to
block activity by the immune system. With our UK partners, we have conducted
in vitro studies demonstrating that our anti-CD55 antibody is able to overcome
this mechanism, which could translate to improved responses in cancer therapy.
We are continuing development of this humanized antibody with the help of an
$833,000 grant, which was awarded from the Scottish Government in April 2004,
and we aim to have this product ready for a pre-IND meeting and licensure in
mid-to-late-2006.
VG101 (AntiGD3/R24 Antibody) -- This specific target is significantly
over-expressed on malignant melanoma cancer cells, and our esteemed partners
at Memorial Sloan-Kettering Cancer Center have conducted dozens of clinical
trials using this antibody for the treatment of malignant melanoma. However,
in these previous studies, the antibody was delivered in its murine or mouse
form, which caused a deleterious response and thereby masked its utility. We
are designing a humanized version of this antibody that is expected to be
better tolerated while retaining its anti-cancer properties. We aim to have
this product ready for a pre-IND meeting in late 2006/early 2007.
2005 Growth Outlook
It is our expectation that the following events in 2005 could provide
sufficient revenues and/or provide working capital to fund our ongoing
operations:
* Increasing sales of Multiferon(R) in existing markets
* Initial sales of Multiferon(R) in newly added markets
* Licensing fees for Multiferon(R) in Europe, South America and/or Asia
* Licensing fees for marketing rights to anti-cancer peptide IEP 11
We cannot guarantee that these revenues will be realized or that such
revenues will be sufficient to fund ongoing operations, but we do continue to
creatively examine and implement new ways of controlling our expenses, as well
as determine other possible sources of capital until the products in our
pipeline reach their licensure stage.
While we believe that we can achieve key milestones for our Avian
Transgenics Technology in the near future, we would not expect to generate
license or sales revenues from this technology for at least another year,
possibly longer. After we demonstrate "Proof of Principle," we will still
need to validate an economic model in support of the technology. Once we
begin to add candidate products, we would expect a regular stream of license
revenue, as each new protein-based drug or antibody is efficiently produced
through this novel technology. Like the CD55 and GD3/R24 antibodies, Avian
Transgenics is poised to contribute to our financial growth beyond 2005.
Collectively, we have established a portfolio of products that can provide
sequential sources of growing income -- a continuing stream of revenue in the
form of license fees, milestone payments, purchases of products and royalties
on sales, for many years to come. And we will continue to evaluate potential
new technologies that could enhance our products and extend our patent
protection.
In Closing
When I issued my first President's Letter in May 2004, I made a commitment
that our two foremost priorities were to increase revenues and control our
expenses. These priorities have not changed. While I am not satisfied with
our current revenues, I believe we have made the correct decisions that are
setting the stage for a much improved future. These steps, and additional
ones we will take in the coming months, will continue to focus on revenue
generation, expense control and building stockholder value.
We have immediate opportunities which we must seize, and I look forward to
reporting tangible results throughout 2005, thus positioning Viragen as a
widely recognized source of life-saving therapeutics and technology, as well
as a compelling investment case.
Our entire Viragen Team is working tirelessly to make these objectives a
reality. With a revitalized and renewed focus on delivering results in the
form of revenues, I strongly believe that 2005 will be a year of prosperous
achievement.
Sincerely yours,
Charles A. Rice
* Glivec(R) is a registered trademark of Novartis AG
In other news, Viragen announced that it will hold its 2004 Annual Meeting
of Stockholders on Thursday, February 17, 2005 at 3:00 p.m. at the Sheraton
Suites Hotel in Plantation, Florida.
About Viragen, Inc.
Viragen is a biotechnology company specializing in the research,
development and commercialization of natural and recombinant protein-based
drugs designed to treat a broad range of viral and malignant diseases. These
protein-based drugs include natural human alpha interferon, monoclonal
antibodies and a peptide drug. Viragen's strategy also includes the
development of Avian Transgenic Technology as a biomanufacturing platform for
the large-scale, cost-effective production of therapeutic proteins.
Viragen is publicly traded on the American Stock Exchange (VRA).
Viragen's majority owned subsidiary, Viragen International, Inc., is publicly
traded on the Over-The-Counter Bulletin Board (VGNI). Viragen's key partners
and licensors include: Roslin Institute, Memorial Sloan-Kettering Cancer
Center, Cancer Research UK, University of Nottingham (U.K.), University of
Miami, America's Blood Centers and the German Red Cross.
For more information, please visit: http://www.Viragen.com
Viragen, Inc. Corporate Contact:
Douglas Calder, Director of Communications
Phone: (954) 233-8746; Fax: (954) 233-1414
E-mail: dcalder@viragen.com
The foregoing press announcement contains forward-looking statements that
can be identified by such terminology such as "expect," "potential,"
"suggests," "may," "should," "could" or similar expressions. Such forward-
looking statements involve known and unknown risks, uncertainties and other
factors that may cause the actual results to be materially different from any
future results, performance or achievements expressed or implied by such
statements. In particular, management's expectations regarding future
research, development and/or commercial results could be affected by, among
other things, uncertainties relating to clinical trials and product
development; availability of future financing; unexpected regulatory delays or
government regulation generally; the Company's ability to obtain or maintain
patent and other proprietary intellectual property protection; and competition
in general. Forward-looking statements speak only as to the date they are
made. The Company does not undertake to update forward-looking statements to
reflect circumstances or events that occur after the date the forward-looking
statements are made.
SOURCE Viragen, Inc.
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Related links:
http://www.Viragen.com
CONTACT:
Douglas Calder, Director of Communications,
Viragen, Inc., +1-954-233-8746, or fax, +1-954-233-1414, or
dcalder@viragen.com
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