EXHIBIT 99.1
October 16, 1995
To Our Shareholders:
In recent days, our stock has been pummeled in the market. By no
means is the stock price decline indicative of major new problems,
nor does it accurately reflect our condition and prospects for the
future. We want you to have an update on our company's condition
and progress.
Epitope, Inc. is in excellent condition and progressing on several
fronts. We have had an eventful and productive calendar 1995, and
we continue to be optimistic about our future, both in Epitope
Medical Products and in Agritope. Among the year's
accomplishments are the following:
1. OraSure (R) Sales: One of the five largest US life
insurance companies has begun using OraSure in 9
states, and expects to use it in 19 states by December.
The insurer's experience with the product has been
excellent in terms of its technical performance, and in
terms of its acceptance and ease of use. We are making
the rest of the industry aware of this success and
their reception has been very positive.
We are targeting four primary foreign markets for sales
and have commenced shipments to two of them. We are
hopeful foreign sales volume will build as users learn
more about the product.
SmithKline Beecham (SB), our marketing partner and the
fourth largest pharmaceutical company in the world, has
begun to sell OraSure for HIV screening use in markets
where a confirmatory test is not necessary (see Western
blot discussion below). A full marketing of OraSure
for professional market diagnostic use will commence
when we receive FDA approval for our Western blot
confirmatory test. We have made all required FDA
filings for this approval.
2. SmithKline Beecham: We established a significant new
business relationship when we signed our agreement with
SmithKline Beecham on February 21, 1995. SB has made a
full commitment to our technology and has established
two new operating business units to develop and market
our diagnostic products.
In addition to marketing OraSure for screening, and
subsequently into the professional market with Western
blot, we and SmithKline have prepared plans for
advanced development of our technology for the over-
the-counter market and for additional indications.
SB's Consumer Diagnostic Group will be involved in this
work and has made a commitment to fund our research
projects related to it.
We know some of you have expected quick results from
SB. Please remember that SB has met Dr. Ferro's
announced nine-month schedule for first sales. We will
report progress on significant SB developments as they
occur.
3. Corporate Focus: Our management team has implemented a
strategy to move us to profitability and growth in
sales as soon as possible. Accordingly, we have:
* Directed our Epitope Medical Products team to
concentrate on the U.S. life insurance industry,
specified foreign markets, and to work with SB to
reach the domestic professional and over-the-
counter markets.
* Reduced our cash requirements by merging Agrimax
into a Florida-based flower company, and by
selling our Vinifera subsidiary to European
interests.
These changes have reduced our need for overhead
support and allowed us to re-size our staff, thus
producing future annual cash savings of more than $2
million. Unfortunately, our detractors in the market
see this as retreat, when in truth it is proper
management of an emerging, changing company.
4. Key Personnel Additions: Richard George, Ph.D., joined
us as V.P., Scientific Affairs after a distinguished
career with the Centers for Disease Control. Dr.
George is internationally respected for his scientific
work and has helped us immensely in several areas.
Mr. Byron (Gus) Allen has joined us after a long career
in the securities industry. Gus is helping us develop
our financial strategies and is vital to our
communication with the financial community.
Ms. Margaret Jordan and Mr. Michael Paxton joined our
Board of Directors. Margaret is an executive in the
health care field and Mike is the CEO of a major
consumer goods company. Both are strong additions.
5. Agritope, Inc.: We have moved dramatically ahead
developing and growing transgenic fruits and
vegetables. Transgenic tomatoes are expected to be our
first commercial success in this area, and we are now
working on important business partnerships which will
help us move these products to market. Again, we have
focused Agritope management on this specific category
of activity to more quickly achieve commercial success
and profitability.
While we did this, prices of our shares declined about 50% from
$21 3/8 at year-end to $9 7/8 at the close of business on October
10, 1995. Typically when a company moves from development to the
fully operational phase, the shares undergo a transition as
shareholders, tired of waiting, sell. Epitope experienced this
throughout the summer. Then in early October, when an investment
market letter author changed his buy recommendation, the stock
price fell sharply.
After investigating ways Epitope could save money, we found that
nearly 45% of public companies no longer send quarterly reports to
shareholders. Because other companies have changed their practice
and because our annual cost was $75,000, we also discontinued the
custom. We report quarterly to the Securities and Exchange
Commission and issue a press release to the various news media.
If you wish to get copies of press releases, you may call PR
Newswire's Company News On-Call and On-Call fax services at 1-800-
758-5804, extension 285632.
We applaud you for your patience and understanding. It is
regrettable that some shareholders have not been able to withstand
the pressures of a falling stock price. Let us assure you we are
making every effort to achieve our goals as soon as possible.
Sincerely,
Adolph J. Ferro, Ph.D. Roger L. Pringle
President and CEO Chairman of the Board