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Product Development and Regulatory Process

Research, the first step in biopharmaceutical product development, initially involves optimization of chemical structures into leading compounds. Once a leading compound has been identified, the pre-clinical phase commences. In that phase, certain selected compounds are evaluated for possible therapeutic potential in a number of animal models. Successful pre-clinical work may lead to the filing of an Investigational New Drug Application ("IND"), or a foreign equivalent, with the relevant national regulatory authorities. The IND is a permission to administer the unapproved compound to humans in clinical trials. Several years of research and testing generally are necessary before an IND may be obtained and clinical development may commence. There can be no certainty that submission of an IND will result in The Food & Drug Administration's ("FDA") authorization to commence clinical trials or that authorization of a particular phase of a clinical trial program will result in authorization of other phases or that the completion of any clinical trials will result in FDA approval.

The clinical development of new drugs is subject to approval by the health authorities in individual countries, which have broad discretionary powers. For example, the FDA, the health authority in the US, reviews the results of all clinical studies and can discontinue a trial at any time if there is a significant safety issue, or if there is convincing evidence that the therapy is not effective for the chosen indication. The requirements regarding the duration of a clinical phase vary considerably among countries. For life-threatening and severely debilitating conditions where products provide meaningful therapeutic benefit over existing treatments or where no satisfactory treatment currently exists, however, it is possible to accelerate the development process in the United States through the "Accelerated Drug Approval Program." In other countries, the trial process for drugs directed toward life-threatening diseases is shortened by lower requirements regarding the patient sample size required to be met in the trials.

The time periods and objectives mentioned below are indications only and may vary and be materially longer. Upon successful completion of the development program, a New Drug Application ("NDA"), or a foreign equivalent, may be submitted to the authorities, and, if approved, the product may then be marketed upon the terms and conditions of such approval. Submission of an NDA does not assure that the FDA will approve a product for manufacturing and marketing. Clinical trials are typically conducted in sequential phases, but the phases may overlap.

Pre-clinical.  The initial testing of compound, where it is evaluated for therapeutic potential before it can be tested in humans. Successful pre-clinical work that establishes safety and therapeutic benefit is then prepared for human administration.

Investigational New Drug Application (IND).  An IND is filed with the U.S. Food and Drug Administration upon successful pre-clinical testing. This application contains all the information that is known about the drug product to date, including the pre-clinical test results and the clinical plan moving forward. Following a 30-day review period, if the FDA approves the IND, then Phase I human trials can begin.

Phase I.  The purpose of a Phase I study is to evaluate the toxicity of the tested compound and to establish how the tested compound is used and eliminated in the human body. A Phase I clinical trial traditionally tests the compound for safety (adverse effects), dosage tolerance, metabolism, distribution, excretion and pharmacodynamics in a small group of healthy individuals. A Phase I study may last up to one year.

Phase II.  A Phase II study marks the beginning of clinical trials on a specific, statistically determined number of patients to (i) determine the efficacy of the compound for specific indications, (ii) determine dosage tolerance and optimal dosage for future trials and (iii) identify possible adverse effects and safety risks. The trials also seek to establish the most effective route of administration. Trials are conducted on a larger, but still limited number of carefully monitored patients. A Phase II study may last up to two and one-half years.

Phase III.  If preliminary evidence suggesting effectiveness has been obtained and the compound is found to have an acceptable safety profile in Phase II evaluations, a Phase III trial may be undertaken. A Phase III clinical trial is an extensive clinical trial in a large number of patients. The number of patients in a Phase III trial program depends on the clinical indications that the drug addresses, to a great extent. Phase III trials involve a detailed statistical evaluation of test results. The compound is tested against placebos and existing treatment, if such treatment is available. Trials are often double-blinded. This means a physician conducting the trial may not know whether a patient will receive the tested compound or a known, existing treatment. Often, a Phase III trial is designed to compare the tested compound's effectiveness to a standard treatment. The product is manufactured in commercial quantities (batch manufacturing) and tested for shelf life, or stability, and further evaluation of the clinical efficacy and safety of the compound takes place. Phase III may last several years and is the most time-consuming and expensive part of a clinical trial program. There can be no assurance that Phase I, Phase II or Phase III testing will be completed successfully within any specified time period, if at all, with respect to any of the Company's products.

New Drug Application (NDA)/Biologics License Application (BLA).   This application can be submitted to the FDA upon sucessful completion of Phase III clinical trials. It contains all the scientific information known about the compound that was collected over the various pre-clinical and clinical phases of testing. The FDA may take from six months to up to two years to review and approve the NDA/BLA.

Accelerated Approval.  This is a means by which drugs that have been studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit to patients over existing treatments may gain marketing approval by the FDA. The FDA may grant marketing approval for a new drug on the basis of adequate and well-controlled clinical trials establishing that the drug is effective on a surrogate endpoint that is reasonably likely to predict clinical benefit (based on epidemiologic, therapeutic, pathophysiologic or other evidence) based on the drug's effect on a clinical endpoint other than survival or irreversible morbidity. This type of approval comes with a number of restrictions as well as the requirement to study the drug further to verify and describe its clinical benefit, where there is uncertainty as to the relation of the surrogate endpoint to clinical benefit, or of the observed clinical benefit to ultimate outcome.

Orphan Drug.  This designation is the mechanism by which sponsors of drugs for rare diseases qualify for tax credit and seven-year market exclusivity incentives provided by the Orphan Drug Act. The Office of Orphan Drug Products Development also administers a clinical research grant program, whereby researchers may compete for funding to conduct clinical trials to support the approval of drugs for rare diseases. The drug will go through the new drug approval process like any other drug. Historically, the approval time for orphan drugs has been considerably shorter than the approval time for all drugs. This is due to the fact that many orphan drugs receive expedited review because they are for serious or life-threatening illnesses.

Phase IV or Post-marketing.  This trial may serve several purposes. It may be a commitment to conduct post-approval research in response to a request from the FDA. Such a request is often made to assess some aspects of safety, but also to evaluate widespread off-label use or to further confirm and describe clinical benefit of the drug. The drug company may design a study to compare the cost-effectiveness of the new drug therapy to established traditional therapy.

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