PLANTATION, Fla., Dec. 15 /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,
Today our Company holds its 2005 Annual Meeting of Stockholders, and due
to critical business of great importance for our Company, I will be unable to
attend to provide this President's update in person. The reason for my
absence is related to our pending application in Sweden seeking approval for
Multiferon(R) as a new first-line adjuvant therapy for the treatment of
malignant melanoma. This potential approval is expected to serve as the
cornerstone for our European strategy, a very significant market opportunity,
and today I am meeting with the Swedish regulatory authorities to discuss
their review of our application. While it troubles me not to attend our
Stockholders' Meeting in person, this regulatory meeting is far too important
to delay, and I appreciate your understanding that this represents a high
priority event. Therefore, I have prepared this letter to serve as my report
to you, our valued stockholder.
2005: A Year of Progress and Challenge
2005 has been both very exciting and challenging, as we have reported
significant progress in many areas, and at the same time, we've been presented
with certain difficulties, as can often be expected in this business. Despite
the difficulties, I remain committed to building a "new" Viragen as a highly
respected Company delivering high-value, life-saving products, and growing a
sustainable business for the future. It is with great enthusiasm that I
believe that calendar-2006 will be a year of breakthrough progress, and with
significant near-term promise, I am convinced that we will be successful.
Multiferon(R)
Sales of Multiferon(R) have begun to improve as we and our active business
partners continue to build brand recognition and generate increases in
prescriptions. Over the next 12-24 months, and based on progressing marketing
activities, pending registration approvals, availability of additional
clinical trials data, the introduction of our new pre-filled syringe and the
culmination of our ongoing licensing activities, we are forecasting dramatic
sales growth. Although quarter-to-quarter sales may fluctuate, as we
currently are dependent on a variety of international distributors in
relatively small markets, year-to-year revenues are expected to substantially
increase. For example, our sales in the first quarter of fiscal 2006 (through
Sept. 2005) declined from the fourth quarter of the prior fiscal year, but
sales for the second quarter (to date) of fiscal 2006 are at levels that
should continue the positive trend.
European Strategy -- In February, we filed an application with the Swedish
regulatory authorities seeking to expand the approval for Multiferon(R) to
include the first-line adjuvant treatment of high-risk malignant melanoma,
following dacarbazine (DTIC) after surgical removal of tumors. We presented
data from this trial in a poster session at The American Society of Clinical
Oncology (ASCO) Annual Meeting in May, and the Principal Investigator
presented the trial and data at the World Melanoma Congress in Vancouver in
September. We have met and held extensive discussions with leading melanoma
experts from around the world at these important venues, and we continue to
build global recognition for the Multiferon(R) brand. We have met with the
regulatory authorities in Sweden on multiple occasions to answer questions
about the submission, and continue to do so today, as part of the ongoing
regulatory process for a new, first-line indication. We are confident that we
are providing satisfactory responses and expect a final decision in the very
near-term. Assuming we receive final approval for this important indication
in Sweden, we are prepared to launch this new indication immediately.
Once Sweden becomes the first European Union (EU) member to approve
Multiferon(R) for melanoma, and if the authorities agree, we will implement
our plan to file for European approval of Multiferon(R) through the Mutual
Recognition Procedure (MRP). This procedure allows a single registration
dossier to be filed for approval among an identified group of EU countries via
one submission and review process. We are required to have a "sponsor" state
to recommend our dossier for approval, thus the need to first file and gain
approval in Sweden. We will be requesting approval for first-line adjuvant
treatment of high-risk malignant melanoma, as well as the "second line"
indications already approved in Sweden for patients that fail recombinant
alpha interferon therapy for any disease. We plan to be ready to file under
MRP shortly after approval in Sweden, and after convening a meeting with the
European regulatory authorities in preparation for the filing.
We have convened a panel of globally recognized experts in the field of
melanoma to assist us in designing continuing clinical work to further expand
upon the utility of Multiferon(R) for melanoma patients. Clinicians from
Germany, the UK, France and Sweden are contributing to new ideas for clinical
development, and we plan to request approval to begin a clinical trial in a
pan-European setting in 2006.
Emerging Viral Threats -- We most recently announced the results of a
preliminary in vitro comparative study on Multiferon(R) and the H5N1 virus
strain, or avian flu. This is only a part of our ongoing anti-viral
development work and we expect to report on additional studies in the coming
months. We are using independent testing laboratories, government research
laboratories, and global experts to develop preliminary and confirmatory study
designs. From the data generated through these studies, we will be better
able to identify appropriate regulatory pathways for clinical development and
the approval of new indications. It is our intent to take advantage of a
number of types of grant funding to help us achieve these objectives.
Clinical Programs -- We are making positive strides to supplementing our
existing clinical data through our international collaborators.
The trend for sales in Mexico continues to grow since the official market
launch with the higher number of prescriptions being related to cancer
treatments. To support anti-viral marketing efforts as well, our distribution
partner, Laboratorios Pisa, has initiated a 60-patient Phase IV "rescue
therapy" clinical trial using Multiferon(R) to treat hepatitis C in those
patients who have failed recombinant alpha interferon therapy. While only a
portion of the total patients required have started treatment, the preliminary
12-week results on those who have reached this interim analysis point are
extremely encouraging, and these results are surpassing protocol expectations.
The 12-week interim analysis point is an accepted standard for hepatitis C
trials. We expect this study, when complete, will give respected medical
opinion leaders in Mexico highly positive working experience with our product
in this market, and will add current clinical data to our growing
international dossier. While quarter-to-quarter sales may fluctuate, we
expect to continue the positive trend of increasing sales in Mexico.
We are conducting a clinical trial in Greece with 120 patients as rescue
therapy for the treatment of hepatitis C. Arriani Pharmaceuticals is
currently enrolling patients, and once again the early 12-week analysis
indicates encouraging results in those patients who have reached this interim
evaluation point. This study will enable us to continue to increase physician
awareness of the utility and value of Multiferon(R) in difficult-to-treat
hepatitis C patients and will be valuable in support of our overall EU
strategy.
As part of our marketing program in Sweden, we are planning a new clinical
trial in that country, with a modification to the treatment regimen,
specifically to establish Multiferon(R) as the "rescue therapy" of choice.
This is a 90-patient trial that is expected to start enrollment early in 2006.
With our historical clinical data, our ongoing trials in Mexico, Greece
and soon-to-begin trials across Europe, plus our growing sales around the
world, we intend to confirm that Multiferon(R) is indeed "The Natural
Choice(TM)".
Licensing -- We have recently completed the licensing of Multiferon(R) for
the South Korean market to Kuhnil Pharmaceuticals. We are very pleased to be
associated with Kuhnil, and we look forward to a promising opportunity in this
exciting territory. South Korea is home to 50 million people, and represents
a valuable market opportunity for Multiferon(R).
We have entered into negotiations with pharmaceutical companies for the
exclusive rights to Multiferon(R) for the largest market in South America -
Brazil. We hope to be in a position to execute a formal License Agreement in
the coming months. With a rather rapid registration process, we expect Brazil
to contribute to sales during calendar 2006.
Our collaborator in Chile, Pentafarma, will launch Multiferon(R) near the
end of the first quarter of 2006. And we are hopeful of reimbursement
authorization in Bulgaria, the last step to market launch in this country.
I believe that each of these territories will be contributors to our
short-term revenue growth, with long-term sustainability; however, our focus
will remain on the EU.
In Sweden, Viragen will focus its efforts on increasing sales for all
indications, including an aggressive market launch of the first-line melanoma
indication (assuming appropriate approval), followed by the MRP filing.
Europe is our priority target for Multiferon(R), with a total market value of
just over $700 million.
While there can be no guarantees, I remain confident that our licensing
goals will be realized. The field of interferon science is rapidly expanding
and renewed interest in various forms of interferon alphas, including natural
leukocyte-derived Multiferon(R), is evident around the world, and we must
capitalize on these significant market opportunities.
Production -- While we may not be in "regular" production in Umea, our
highly skilled and trained associates at ViraNative AB are by no means idle.
The pharmaceutical and biotechnology industries are among the best examples of
"continuous improvement" in practice. Evolving regulations, competitive
developments and scientific advancement mandate a constant process of change
to how we do things.
Our team in Umea has been active in continually upgrading facilities and
equipment, as well as completing required validations, developing new
analytical methods, production process improvements and operating procedures,
validation of new contract manufacturers for ampoules and pre-filled syringes,
and numerous other changes in preparation for European strategy. Early next
year, we plan to file for approval of our new pre-filled syringe dosage form,
for which we hope to have approval during mid-2006. We have produced new
batches of Multiferon(R) in order to carry out these various validations, and
to supplant our existing inventories.
We have enlisted the support of a leading Clinical Research Organization
(CRO) to provide expert services in the preparation of our regulatory dossier,
including all these upgrades and changes, into the required format for the
next step in our strategy (Common Technical Document, or CTD, format).
The Future -- As we continue to develop more and more data on
Multiferon(R), we are gleaning new insight into the therapeutic benefits of
the product in a number of different indications. Not only are we adding to
the scientific and regulatory dossiers for Multiferon(R), but we may identify
potential new indications as well as second- and third-generation products
that could be blockbuster additions to our product portfolio for the treatment
of viral diseases and cancers.
Avian Transgenic Technology:
The OVA(TM) System
In June, we announced a dramatic breakthrough in our pioneering
collaboration with the Roslin Institute to develop an Avian Transgenic
Biomanufacturing System (the "OVA(TM) System") to produce certain biotech
drugs in hens' eggs.
In a historic announcement in June, we reported recovery of a functional
humanized antibody incorporated only in the whites of eggs laid by a
transgenic hen. It is important to note that to develop a highly competitive
commercial system, it is most desirable to achieve germline transmission of
the transgene (gene encoding the target protein), meaning that the transgene
is passed along from one generation to the next, as we have indeed achieved.
The analysis confirms that our results are being achieved through expression
that is targeted to the specific tissue in the oviduct and not throughout the
transgenic animal (tissue-specific expression) -- a major breakthrough.
There are nearly one hundred therapeutic proteins currently approved for
sale with many hundreds more in the pipeline. As part of our project, we have
included two protein drug candidates that are commercially marketed products,
which collectively realize more than $5 billion in annual sales. In the
coming months, we expect to publicly identify these products along with
specific data demonstrating the increased value potential conferred by the
OVA(TM) System. Following a successful presentation of our progress at BIO
2005 in Philadelphia late in June, and at BIO-Europe in November, we initiated
discussions with global companies concerning this revolutionary technology.
We are also examining various alternatives that may be used to expedite
future stages of the project so that we can enter into a production mode in a
very rapid fashion. We expect to make many announcements of our progress over
the next calendar year and we look forward to several exciting scientific
publications as well.
One frequent question I receive from stockholders is the potential for
avian flu virus to infect our transgenic chickens. For approximately 30
years, vaccines have been produced in chicken eggs, within Specified Pathogen
Free (SPF) facilities. Such facilities have been operated successfully,
without viral outbreaks, under the scrutiny of various global regulatory
authorities, including the FDA and the EMEA (European Medicines Agency). We
will make use of qualified, certified and inspected facilities operated by
companies who are skilled in this field, thereby avoiding unnecessary delays
to our projects. We are confident that the containment, control and testing
procedures proven over decades of experience will prevent contamination of our
transgenic flocks by any viral contaminant. Supplementing this will be our
internal control procedures whereby we will retain and isolate genetic
materials that we would use in the event of any catastrophic outbreak to
resume a separate and unaffected new flock of birds. To date, there have not
been any outbreaks of avian flu virus in animals contained in SPF facilities.
Anti-cancer Candidates
While our anti-cancer projects are in their preclinical stages, we are
encouraged by the preliminary results being obtained. Based on these results,
we have received numerous inquiries related to early-stage partnering.
However, we must also realize that our limited resources are stretched quite
thin in having so many projects at early stages of development. For this
reason, we have implemented a prioritization of projects in order to reduce
our ongoing expenses and to focus our attention on what we believe to be the
most promising candidates for the future.
We eliminated one project earlier this year (VG104 or IEP-11), which we
believe represented a higher level of risk than our other projects.
We are continually evaluating all of our projects to ensure that further
development is warranted, and if not, we will swiftly revise our priorities as
necessary and redirect our resources accordingly.
VG102 (Anti-CD55 Antibody) -- "CD55" is a control protein that shields
normal cells from being destroyed by the body's own immune system. The same
protein is over-expressed on most solid tumors including breast, ovarian and
other types of cancers. VG102 holds tremendous potential as it has shown to
bind to a unique region of the CD55 antigen in a unique way. The antibody has
also been shown to bind only to malignant cells, acting to remove the
protective effect on the tumor, allowing for the destruction of the cancer
through complement-mediated cell lysis (the body's natural immune system) or
by treatment with chemotherapeutic agents.
Earlier this year, we reported that VG102 was found to significantly
enhance the activity of rituximab (Rituxan(R); Genentech/IDEC), a leading
cancer medication, when both drugs were used together in a cell-based in vitro
evaluation study. The combination led to a significant increase in the
destruction of cancer cells as compared to rituximab alone. These preliminary
results indicate the potential of VG102 to improve the efficacy of cancer
therapies, and we expect to be able to expand these studies into in vivo
models, also examining the effect of the antibody when used in combination
with other anti-cancer antibodies.
In April 2005, we executed an exclusive global license to the rights to
develop and commercialize this antibody with Cancer Research Technology UK.
We are continuing advancement of this humanized antibody with the help of
an $833,000 grant, which was awarded from the Scottish Executive in April
2004. During 2006, we expect to begin manufacturing scale-up, complete
analytical development and characterization of the antibody and to prepare for
toxicity studies in early 2007. At the current time, our targets for this
antibody are expected to be ovarian, breast and/or colorectal cancers, with a
priority target dependent upon additional data.
The pharmaceutical industry is highly focused on the development of new
antibodies for a variety of therapeutic indications. Viragen has received
numerous inquiries about VG102 and interest in licensing this product at the
pre-clinical stage. We cannot determine at this time if there will be any
licensing agreement, but we are encouraged that there is keen interest. For
this reason, our development plans must become more aggressive with VG102. In
addition, VG102 may prove valuable as a diagnostic imaging agent. While not
quite a "biomarker", VG102 may be useful in pinpointing the exact location and
size of a tumor mass, plus identifying those patients most likely to benefit
from treatment with the antibody.
Budget Update:
As of the end of calendar 2005, we will have executed a number of new
strategic initiatives designed to reconstruct an exciting future for Viragen
and our stockholders. These initiatives include a redirection of our
resources, reassessment of our expenses to focus more on R&D, and a
realization that expenses related to clinical trials must increase if we are
to be successful.
But there remain other initiatives that must be put into place in order to
further control our limited resources. In the coming weeks and months, we
will be announcing a number of changes that will enable accomplishment of
these critical objectives.
Debt Restructuring / Financing:
In June 2004, we announced the completion of a $20 million financing.
These funds were raised from the sale of convertible promissory notes and
common stock purchase warrants to eight institutional investors. The
agreement gave the note holders the right to convert into shares of common
stock at an approximate price of $1.52. This obligation was due to mature on
March 31, 2006 meaning Viragen would need to repay the entire $20 million if
the stock price did not appreciate appropriately to allow for sufficient
conversions. With this deadline fast approaching, and the lack of any
guarantee of sufficient revenues with which to repay the debt, a number of
alternatives were evaluated and a new approach was agreed upon.
An agreement was reached to restructure this debt, extending the agreement
with new terms into August of 2008. In addition, in September 2005, and as a
contingent requirement, a group of four of these investors agreed to a new $2
million financing agreement. With this restructuring of our debt over a
longer term, we have additional time to realize our objectives, grow our
sales, generate licensing revenue and advance our research projects, and
service the debt - all of which are critical to our success. Please refer to
our Form 8-K, filed with the SEC, for full details of this financing, as well
as the restructuring of debt.
At today's Stockholders' Meeting, we are seeking stockholder approval to
ratify the new $2 million financing agreement and to increase the number of
authorized shares in Viragen, Inc.
It is important that we have sufficient shares in reserve to be able to
take advantage of potential future opportunities such as mergers, acquisitions
and equity/debt financings. Our Board of Directors and Company Management
recommends that you vote in favor of the initiatives as proposed, and we
appreciate your support in these matters.
Closing
We believe we have set the stage for significant business opportunities to
result from the products and technologies in our portfolio, as we continue to
strive to advance these in a cost-effective and scientifically elegant manner.
We are entering a period of development activity that is very expensive. For
this reason, we have developed specific and targeted objectives, with go/no-go
decision points throughout our product development plans. For the first time
in many years, we will be spending more in pre-clinical and clinical
development than we do in SG&A (Selling, General & Administrative Expenses).
While we must tap into new sources of working capital to be successful, we
are pursuing creative solutions that can leverage the value of our life-saving
and innovative pipeline and capitalize on the anticipated positive impact from
a series of important new developments we expect to announce throughout 2006,
including the identification of at least one new product, which I believe
holds significant value for our stockholders.
In our industry, everything flows from good science. We are intensely
focused on generating good science in all our projects and platforms, with
both internal and external expertise. While there is always a degree of
uncertainty, our progress in 2006 should easily eclipse prior years and set
the stage for breakthrough scientific milestones and commensurate revenue for
years to come.
All of us here at Viragen greatly appreciate your support, and we remain
committed to make these objectives a reality.
Sincerely yours,
Charles A. Rice
President & CEO
About Viragen, Inc.:
With global operations in the U.S., Scotland and Sweden, Viragen is a
biotechnology company engaged in the research, development, manufacture and
commercialization of pharmaceutical proteins for the treatment of viral
diseases and cancers. Our product portfolio includes: Multiferon(R) (multi-
subtype, natural human alpha interferon) targeting a broad range of infectious
and malignant diseases; and humanized monoclonal antibodies targeting specific
antigens over-expressed on many types of cancers. We are also pioneering the
development of Avian Transgenic Technology, with the renowned Roslin
Institute, as a revolutionary manufacturing platform for the large-scale,
efficient and economical production of human therapeutic proteins and
antibodies.
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 letter 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
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CONTACT:
Douglas Calder, Director of Communications,
Viragen, +1-954-233-8746, or fax, +1-954-233-1414, or
dcalder@viragen.com
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