Exhibit 1
ANNUAL INFORMATION FORM OF THE REGISTRANT
FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2003
[LOGO (NEUROCHEM)]
NEUROCHEM INC.
ANNUAL INFORMATION FORM
SIX-MONTH PERIOD ENDED DECEMBER 31, 2003
MAY 12, 2004
TABLE OF CONTENTS
ITEM 1 - COVER PAGE...........................................................i
ITEM 2 - CORPORATE STRUCTURE..................................................1
2.1 NAME AND INCORPORATION...............................................1
2.2 INTERCORPORATE RELATIONSHIPS AND REORGANIZATION......................1
ITEM 3 - GENERAL DEVELOPMENT OF THE BUSINESS..................................1
3.1 THREE-YEAR HISTORY...................................................1
ITEM 4 - NARRATIVE DESCRIPTION OF THE BUSINESS................................7
4.1 GENERAL: OUR BUSINESS................................................7
ITEM 5 - SELECTED CONSOLIDATED FINANCIAL INFORMATION.........................19
5.1 ANNUAL INFORMATION..................................................19
5.2 DIVIDENDS...........................................................19
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS................................19
6.1 QUARTERLY INFORMATION...............................................19
ITEM 7 - MARKET FOR SECURITIES...............................................19
ITEM 8 - DIRECTORS AND OFFICERS..............................................20
ITEM 9 - AUDIT COMMITTEE FINANCIAL EXPERT....................................23
ITEM 10 - PRINCIPAL ACCOUNTANT FEES AND SERVICES..............................23
ITEM 11 - ADDITIONAL INFORMATION..............................................24
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As used in this Annual Information Form, unless the context otherwise requires,
the terms "we", "us", "our", "Neurochem" or the "Corporation", mean or refer to
Neurochem Inc. and, unless the context otherwise requires, its subsidiaries and
its Affiliates (as such term is defined in this Annual Information Form). Except
as otherwise stated, all dollar amounts and references to $ are to Canadian
dollars and US$ refers to United States dollars.
ITEM 2 - CORPORATE STRUCTURE
2.1 NAME AND INCORPORATION
Neurochem was incorporated on June 17, 1993 under the Canada Business
Corporations Act in association with Parteq Research and Development
Innovations, the technology transfer office at Queen's University of Kingston,
Ontario. On June 20, 2000, the Corporation amended its share capital (i) to
change all of the then issued and outstanding Class "A" Shares into Common
Shares and cancel the Class "A" Shares as an authorized class and (ii) to create
a class of Preferred Shares, issuable in series.
2.2 INTERCORPORATE RELATIONSHIPS AND REORGANIZATION
As of May 2003, the corporate structure of the Neurochem group of companies was
changed. Currently, Neurochem Inc. has an indirect wholly-owned subsidiary,
Neurochem (International) Limited, a Swiss corporation. Neurochem
(International) Limited is wholly-owned by Neurochem Holdings Limited, a Swiss
corporation which is, in turn, wholly-owned by Neurochem Luxco II S.A.R.L., a
Luxembourg corporation. Neurochem Luxco II S.A.R.L. is wholly-owned by Neurochem
Luxco I S.C.S., a Luxembourg limited partnership whose sole limited partner is
Neurochem Inc. and whose sole general partner is Neurochem Luxco I S.A.R.L., a
Luxembourg corporation wholly-owned by Neurochem Inc. Neurochem Inc. is also the
sole shareholder of Neurochem U.S. LLC, a Delaware limited liability company.
All of such entities, other than Neurochem Inc., are sometimes collectively
referred to in this annual information form as our "Affiliates".
ITEM 3 - GENERAL DEVELOPMENT OF THE BUSINESS
3.1 THREE-YEAR HISTORY
We are a biopharmaceutical company focused on the development and
commercialization of innovative therapeutics for neurological disorders. Our
pipeline of proprietary, disease-modifying, oral products addresses unmet
medical needs. We have three programs in clinical trials and one lead compound
in pre-clinical development, each targeting disorders for which there are
currently no known cures.
Over the past three years, the Corporation has successfully advanced three
programs from pre-clinical to clinical trials namely, Alzhemed(TM), for the
treatment of Alzheimer's Disease; Fibrillex(TM), for the treatment of Amyloid A
Amyloidosis; and Cerebril(TM), for the prevention of Hemorrhagic Stroke caused
by Cerebral Amyloid Angiopathy.
We changed our year end during 2003 from June 30 to December 31. As a result,
our fiscal year ended December 31, 2003 is represented by the six-month period
then ended.
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SIX-MONTH PERIOD ENDED DECEMBER 31, 2003
For the six-month period ended December 31, 2003, we expanded our management and
scientific team, and raised significant funds in a cross-border offering, as our
lead product candidates continue to advance to the marketplace.
CLINICAL ADVANCES:
o On December 9, 2003, we issued a press release reporting the positive
interim results on cognitive function as measured by ADAS-cog of
patients suffering from mild-to-moderate Alzheimer's Disease in an
open-label Phase II extension study of Alzhemed(TM). The report is
based on results of patients in the ongoing study who had completed
nine and also 12 months of treatment on the highest dose (300mg daily)
of Alzhemed(TM).
COLLABORATIVE AGREEMENTS, GRANTS AND FINANCINGS:
o On September 23, 2003, we completed the initial public offering of our
Common Shares in the United States and a new issue of Common Shares in
Canada. In connection with this offering, the Common Shares were
approved for quotation on the Nasdaq National Market ("NASDAQ") under
the "NRMX" trading symbol. We issued 5.75 million Common Shares at a
price of US$10.87 per share. The aggregate net proceeds from the
offering, including the proceeds from the over-allotment option
granted to the underwriters of the offering, were approximately $78.1
million (US$59 million), net of underwriting fees and commissions and
issue expenses. We intend to use these proceeds to fund clinical
trials of our lead product candidates, as well as to further complete
pre-clinical and research and development programs. We also intend to
use the proceeds for capital expenditures and the balance for working
capital and general corporate purposes.
INTELLECTUAL PROPERTY PORTFOLIO:
o U.S. Patent no. 6,670,399 entitled "Compounds and Methods for
Modulating Cerebral Amyloid Angiopathy" was issued to us on December
30, 2003.
o As of December 31, 2003, our portfolio contained over 200 patents and
pending patent applications.
LITIGATION:
o Neurochem executed an agreement (the "CTA") with Immtech International
Inc. ("Immtech") of Vernon Hills, Illinois in 2002 pursuant to which
Immtech provided Neurochem with certain compounds for testing and
granted Neurochem an option to license such compounds. On August 12,
2003 Immtech filed certain legal proceedings with the federal district
court for the Southern District of New York, U.S.A., with respect to
the agreement. Neurochem has and will continue to vigorously defend
against the claims brought by Immtech.
RECENT ANNOUNCEMENTS:
o On November 13, 2003, we announced that we had been selected for
addition to the NASDAQ Biotechnology Index pursuant to our listing
which took effect in September 2003.
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o At our annual and special meeting of shareholders held on December 9,
2003, Dr. Frederick H. Lowy, Rector and Vice-Chancellor of Concordia
and Graeme K. Rutledge, Consultant, Chartered Accountant and former
senior partner of Deloitte & Touche LLP, Canada, an accounting firm,
were elected to our Board of Directors.
o On December 19, 2003, we announced that we were added to the S&P/TSX
Composite Index, the Capped Health Care Index, as well as to the
Global Industry Classification Standard Index.
o Effective December 31, 2003, we changed our fiscal year-end from June
30 to December 31. Our year-end will now be consistent with that of
most other companies in our industry.
FISCAL YEAR ENDED JUNE 30, 2003
During the fiscal year ended June 30, 2003, we transitioned our business from a
research and development focused company to a product-driven company and
concentrated our activities on neurological disorders. In a strategic move aimed
at focusing on our core expertise, we completed a technology transfer pertaining
to our Diabetes program to Innodia Inc. ("Innodia"), a company focused
exclusively on the development of therapeutic treatments for Diabetes, in
exchange for an equity interest in Innodia. We also invested $500,000 in a
private placement concluded by Innodia. As at June 30, 2003, we indirectly owned
a 31% equity interest in Innodia. This strategy will eliminate funding
requirements associated with our Diabetes program while allowing us to share in
the program's economic potential as an indirect shareholder of Innodia.
CLINICAL ADVANCES:
o Our product pipeline made significant progress during the fiscal year.
We completed patient recruitment for the Phase II/III clinical trial
of Fibrillex(TM), our most advanced product candidate to treat Amyloid
A Amyloidosis ("AA Amyloidosis"). We completed a Phase II clinical
trial in respect of Alzhemed(TM), our next most advanced product
candidate for the treatment of Alzheimer's Disease. We initiated a
Phase II clinical trial during the year in respect of Cerebril(TM),
our product candidate to treat Hemorrhagic Stroke due to Cerebral
Amyloid Angiopathy ("CAA"). We continued to advance a compound for the
treatment of epileptic seizures following Traumatic Brain Injury
("TBI") through pre-clinical testing.
o In June 2003, we reported the successful results of the Phase II
clinical trial for Alzhemed(TM). Positive findings from the 12-week
trial involving patients with mild-to-moderate Alzheimer's Disease
showed Alzhemed(TM) to be safe and well tolerated. Alzhemed(TM) was
able to change the level of amyloid in the cerebrospinal fluid ("CSF")
in Alzheimer's Disease patients in a dose-related fashion.
Alzhemed(TM) also demonstrated its ability to overcome the major
challenge of crossing from the bloodstream to the brain through the
protective blood-brain-barrier ("BBB"). Interim results also revealed
that patients treated for six months on the highest dose of
Alzhemed(TM) showed stable or improved cognitive function.
GRANTS AND FINANCINGS:
o In January 2003, the lead investigator for Cerebril(TM) was awarded
approximately US$1 million from the National Institutes of Health.
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o On July 25, 2002, we issued 2.8 million units at a price of $2.50 per
unit to P.P. Luxco Holdings II S.A.R.L., a wholly-owned subsidiary of
Picchio Pharma Inc. ("Picchio Pharma"). The holdings and purchases of
Common Shares by Picchio Pharma through P.P. Luxco Holdings II
S.A.R.L. are referred to in and for the purposes of this annual
information form as being holdings and purchases of Picchio Pharma.
Each unit was comprised of one Common Share and one warrant to
purchase an additional Common Share at any time and from time to time
within a three-year period from issuance at an exercise price of
$3.13. In connection with this investment, we covenanted to cause a
total of three nominees of Picchio Pharma to be included in the list
of management nominees to be proposed for election to our Board of
Directors at each meeting of our shareholders called therefor. The
subscription agreement provides that this obligation shall terminate
on the date Picchio Pharma ceases to beneficially hold at least 15% of
the outstanding Common Shares (including shares issuable upon exercise
of the warrants issued to Picchio Pharma on July 25, 2002). Dr.
Bellini and Messrs. Kruyt and Nordmann are the current nominees of
Picchio Pharma.
o P.P. Luxco Holdings II S.A.R.L. made an additional investment in the
Corporation on February 18, 2003 when the Corporation issued 1.2
million units. Each unit was comprised of one Common Share and one
warrant to purchase an additional Common Share at any time and from
time to time within a three-year period from issuance at an exercise
price of $7.81. The disinterested shareholders of the Corporation
approved, confirmed and ratified the issuance of the units at a
shareholders meeting held on February 18, 2003. Shares held by Picchio
Pharma and its associates were excluded from voting in respect of such
issuance.
INTELLECTUAL PROPERTY PORTFOLIO:
o We were issued two additional patents covering (a) methods and
compounds for inhibiting amyloid deposits and (b) phosphonocarboxylate
compounds for treating amyloidosis, bringing the total to 16 patents
granted worldwide.
o We filed 38 new patent applications, including eight new cases.
Overall, we have more than 150 patent applications pending in the
United States, Canada and internationally.
RECENT ANNOUNCEMENTS:
o In November 2002, Dr. Francesco Bellini was appointed Chief Executive
Officer, adding to his other responsibilities as Director and Chairman
of the Board.
o In January 2003, we announced the appointment of Dr. Phillipe Calais
as our President. The Company also appointed Mr. David Skinner as
Director of Legal Affairs, General Counsel and Corporate Secretary in
April 2003.
o Over the course of the year, we appointed Mr. Richard Cherney,
co-managing partner of the law firm Davies Ward Phillips & Vineberg
LLP and Dr. Emil Skamene, Scientific Director of the Research
Institute of the McGill University Health Centre to our Board of
Directors.
FISCAL YEAR ENDED JUNE 30, 2002
In fiscal 2002, we achieved many advances and several important milestones in
our clinical and drug development programs. The highlights of such advances and
milestones were as follows:
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CLINICAL ADVANCES:
o Alzhemed(TM) - Alzheimer's Disease: We completed three Phase I
clinical trials for Alzhemed(TM). In these trials, the drug candidate
was shown to be safe and well tolerated at the anticipated therapeutic
dose in both young and elderly volunteers. We also established an
international Clinical Advisory Board ("CAB") for Alzhemed(TM)
comprised of distinguished experts in the fields of Alzheimer's
Disease and Neurology.
o Cerebril(TM) - Hemorrhagic Stroke due to CAA: We put in place a CAB
for Cerebril(TM), comprised of world-renowned researchers and
clinicians.
o Fibrillex(TM) - AA Amyloidosis: We received a prestigious $1.4 million
grant from the Food and Drug Administration ("FDA") in the United
States for the Phase II/III clinical trial for Fibrillex(TM). Orphan
Medicinal Product status for the drug in Europe was also obtained,
typically allowing for 10 years of market exclusivity upon
commercialization. With a total of 13 submissions to regulatory
authorities for Investigational New Drug ("IND") status and subsequent
approvals in the U.S., Europe and Israel, we initiated the Phase
II/III clinical trial and patient recruitment worldwide.
EXTERNAL VALIDATION OF THE CORPORATION:
o We were selected by the Montreal Business Magazine as one of the top
30 Montreal-based growth companies.
COLLABORATIVE AGREEMENTS, GRANTS AND FINANCING:
o We announced an important new collaboration with the United
Kingdom-based Amersham Health (a division of Amersham PLC), for the
creation of a diagnostic imaging tool for Alzheimer's Disease.
o We announced an agreement with H. Lundbeck A/S ("Lundbeck") of Denmark
pursuant to which the Corporation regained the full ownership and
control of its anti-amyloid drug molecules program for Alzheimer's
Disease at no cost to the Corporation.
o We entered into a collaborative agreement with the University Medical
Center-Utrecht in the Netherlands for the Corporation's Diabetes Type
2 program, focusing on islet amyloid formation using the Corporation's
glycosaminoglycan ("GAG") mimetic technology.
o We announced an agreement with Picchio Pharma for the acquisition of
2.8 million units of the Corporation at a cost of $2.50 per unit for a
total of $7 million. The transaction closed in July 2002. The units
were comprised of one Common Share of the Corporation and one warrant
to purchase a Common Share exercisable any time within a three-year
period with a 25% premium over the issue price. Assuming the exercise
of warrants, the total possible investment by Picchio Pharma under the
transaction is $15.75 million. We planned to use the proceeds of the
investment for working capital to advance the Corporation's pipeline
of products. Dr. Francesco Bellini, O.C., chairman of Picchio Pharma,
assumed the position of chairman of the Corporation.
INTELLECTUAL PROPERTY PORTFOLIO:
o Four additional patents issued which enhanced the Corporation's
commercial and scientific assets. The patents covered:
anti-epileptogenic agents (U.S. patent), methods
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and compositions to treat GAG-associated molecular interactions (U.S.
patent), phosphonocarboxylate compounds (U.S. patent) and method for
treating Amyloidosis (Mexico patent).
RECENT ANNOUNCEMENTS:
o Unanimous recommendation was received by Neurochem's independent Data
Safety Monitoring Board to advance the Phase II/III clinical trial for
Fibrillex(TM), in patients suffering from AA Amyloidosis.
o Two IND applications for Phase II clinical trials took effect with the
FDA in the United States, which allowed us to advance to Phase II
clinical trials for Alzhemed(TM) and Cerebril(TM) in patients
suffering from Alzheimer's Disease and Hemorrhagic Stroke due to CAA.
o We recruited Mr. Claude Michaud to our management team as Senior
Vice-President, Finance and Chief Financial Officer.
o We appointed two new board members to our board of directors, Mr.
Peter Kruyt, Vice-President, Power Corporation of Canada, and Mr.
Ronald M. Nordmann, Co-President, Global Health Associates, LLC.
RECENT AND EXPECTED DEVELOPMENTS
JANUARY - DECEMBER 2004:
o On January 14, 2004, we received our third unanimous recommendation to
continue our pivotal Phase II/III clinical trial for Fibrillex(TM).
The recommendation by the independent Data Safety Monitoring Board
members was based on their recent review of the safety data from 183
patients, of whom 77 have completed at least 12 months of the Phase
II/III clinical study.
o On January 20, 2004, we issued a press release announcing that we are
advancing our efforts to prevent and treat Alzheimer's Disease by
forming a strategic alliance with the National Research Council of
Canada's Institute for Biological Sciences, and more specifically,
with Dr. Harold J. Jennings, in relation to the development of a novel
synthetic vaccine to prevent and treat Alzheimer's Disease. We have
also entered into a licensing agreement with PRAECIS PHARMACEUTICALS
INCORPORATED, a leading biopharmaceutical company, relating to certain
A(beta) amyloid peptides for use in the development of such a vaccine.
o On January 22, 2004, we issued a press release reporting additional
positive results on cognitive function, as measured by the ADAS-cog
test, of patients suffering from mild-to-moderate Alzheimer's Disease
in an open-label Phase II extension study of Alzhemed(TM). The report
is based on the results of 30 patients in the ongoing study who have
completed both the three-month randomized Phase II clinical trial and
an additional nine months of treatment in the open-label Phase II
extension study with Alzhemed(TM).
o On February 11, 2004, the U.S. FDA designated Fibrillex(TM) as a fast
track product ("FTP") for the treatment of Amyloid A Amyloidosis. The
FTP designation expedites the development and review of new drugs.
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o On April 8, 2004, we issued a press release announcing that we had
signed a conditional agreement to purchase the former Shire BioChem
facilities located in the Parc scientifique et de la haute technologie
in Laval, Quebec, for a purchase price of $10.5 million. Upon
completion of the transaction, we will relocate our headquarters and
corporate and scientific employees to the same site. The transaction
will be financed by asset-backed funding and cash on-hand.
o On April 14, 2004, we issued a press release reporting additional
positive results on cognitive function, as measured by the ADAS-cog
test, of patients suffering from mild-to-moderate Alzheimer's Disease
in an open-label Phase II extension study of Alzhemed(TM). The report
is based on the results of 23 patients in the ongoing study who have
completed both the three-month randomized Phase II clinical trial and
an additional 13 months of treatment in the open-label Phase II
extension study with Alzhemed(TM). It was also announced that the
complete data on all patients who participated in the Phase II
clinical trial and the open-label Phase II extension study for a
period of up to 20 months will be presented at the 9th International
Conference on Alzheimer's Disease and Related Disorders to be held in
Philadelphia, Pennsylvania, U.S.A., from July 17 through July 22,
2004.
o On April 26, 2004, we issued a press release reporting that we had
received our fourth consecutive positive recommendation from Data
Safety Monitoring Board to continue Phase II/III clinical trial for
Fibrillex(TM).
o We expect to initiate the first Phase III clinical trial for
Alzhemed(TM).
o On April 27, 2004, we issued a press release reporting promising Phase
II results for Cerebril(TM)'s. 24 CAA patients with lobar cerebral
hemorrhage were randomized to receive three different doses of
Cerebril(TM) (100, 200 and 300 mg) for a period of 12 weeks. The data
showed no safety findings of concern based on patient's clinical
laboratory tests, vital signs and electrocardiograms during follow-up
physical exams. The most frequent adverse events, namely nausea and
vomiting, were mid-to-moderate at all doses tested and transient in
the patients receiving 100 mg or 200 mg daily of Cerebril(TM). Five
patients withdrew prematurely; three because of nausea and vomiting
and two because of expected complications of CAA.
ITEM 4 - NARRATIVE DESCRIPTION OF THE BUSINESS
4.1 GENERAL: OUR BUSINESS
A. COMPANY OVERVIEW
We are a biopharmaceutical company focused on the development and
commercialization of innovative therapeutics for neurological disorders. Our
strategy is to in-license early-stage products and to focus our resources on the
management of clinical development and the commercialization of novel products.
We design and manage the clinical trials for our product candidates which are
carried out by recognized contract research organizations. We have three
programs in clinical trials and one product candidate in pre-clinical
development, each targeting disorders for which there are currently no known
cures. Because our drugs target what are known or believed to be the causes of
disorders and potentially inhibit their progression, they are known as "disease
modifiers".
As people age, specific types of normal proteins can change structure to become
long strands called amyloid fibrils. There are at least 21 different proteins
recognized as, or believed to be, causative agents
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of severe amyloid-related disorders. All of these proteins can change structure
by binding to components of proteins known as glycosaminoglycans or "GAGs",
generate amyloid fibrils and accumulate as deposits in parts of the body,
including various organs such as the brain and kidneys. See "4.1 General: Our
Business -- F. Our Product Technology Platforms". These amyloid deposits can
kill cells and lead to organ failure. When deposits of a certain type of amyloid
protein appear in the brain, they may cause Alzheimer's Disease or Hemorrhagic
Stroke due to CAA. When deposits of a different type of amyloid protein appear
in several peripheral organs like the kidneys, they can induce systemic
disorders such as AA Amyloidosis.
Our product candidates consist of a new class of small molecules that mimic
specific properties of the GAGs. We call these molecules "GAG mimetics". By
binding to the amyloid protein, our molecules inhibit both the formation of
fibrils and the resulting toxic deposits. Fibrillex(TM), Alzhemed(TM) and
Cerebril(TM), our product candidates in clinical trials, are based on our GAG
mimetics technology.
In addition, our focus in neurology has led to the development of compound
candidates to prevent the development of epileptic seizures following TBI. These
compounds are designed to protect the brain from neuronal damage often
associated with TBI.
Fibrillex(TM), our most advanced product candidate, is in a Phase II/III
clinical trial. Fibrillex(TM) is designed to treat AA Amyloidosis, a systemic
disorder resulting in significant illness, organ failure (particularly of the
kidney, spleen and liver), and ultimately death.
Alzhemed(TM), our next most advanced product candidate, is our drug for the
treatment of Alzheimer's Disease, a degenerative neurological disorder that
progressively impairs a person's cognitive functions and gradually destroys the
brain. We have completed a Phase II clinical trial for Alzhemed(TM) and are
currently designing Phase III efficacy trials.
Cerebril(TM), our third program, is designed to treat Hemorrhagic Stroke due to
CAA, a fatal neurological disorder that is characterized by recurrent brain
hemorrhage. We have completed a Phase II clinical trial for Cerebril(TM), and
currently intend on designing a Phase IIb clinical trial to test efficacy.
We are also conducting pre-clinical testing on a compound, NC-1461, to prevent
the development of epileptic seizures following TBI.
The following table illustrates the stage of development, the estimated date of
FDA NDA filing and the patent expiration date for each of our product
candidates:
PRODUCT TARGET STAGE OF ESTIMATED PATENT
CANDIDATE DISORDER DEVELOPMENT US NDA EXPIRATION(2)
FILING(1)
------- ------ -------- --------- ------
Fibrillex(TM) AA Amyloidosis Phase II/III clinical trial 2005 2014
Alzhemed(TM) Alzheimer's Disease Phase III clinical trials in 2007 2016
Cerebril(TM) Hemorrhagic Stroke Phase II clinical trial completed -- 2016
NC-1461 Epileptic seizures Pre-clinical testing -- 2018
- ----------
(1) The actual date of NDA filing, if any, can vary widely depending on a
variety of factors. There is no assurance that FDA approval will be
obtained following NDA filing and there is typically a period of many
months from filing to approval of a product. In addition, we may not be
able to successfully commercialize our products, even if they are
approved.
(2) See "4.1 General: Our Business -- H. Intellectual Property" for a more
detailed discussion of our patent portfolio.
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B. OUR BUSINESS STRATEGY
Our goal is to become a leading biopharmaceutical company in the development and
commercialization of innovative therapeutics for neurological disorders. To
achieve this goal, we are pursuing the following strategies:
TARGET UNMET MEDICAL NEEDS: Each of our product candidates addresses a disorder
for which there is currently no known cure. To our knowledge, Fibrillex(TM) is
the only amyloid-targeting product in advanced clinical development to treat AA
Amyloidosis. Contrary to currently available Alzheimer's Disease therapies which
treat only the symptoms of the disease, Alzhemed(TM) targets what is believed to
be its main underlying cause. To our knowledge, Cerebril(TM) is the only product
candidate targeting the underlying cause of Hemorrhagic Stroke due to CAA and
NC-1461 is a compound candidate with a novel mechanism of action targeting the
underlying cause of epileptic seizures induced by TBI. We intend to continue to
target opportunities in related neurological areas where medical needs are
unmet.
EXPEDITE CLINICAL DEVELOPMENT: We leverage our scientific and clinical
development expertise to optimize the time it takes for our product candidates
to reach market. We have already successfully brought forward three programs to
Phase II and Phase II/III clinical trials. In addition to the Phase II/III
clinical trial for Fibrillex(TM), we expect to have Alzhemed(TM) and
Cerebril(TM) in Phase III trials.
MAXIMIZE OWNERSHIP AND CONTROL OF OUR PRODUCTS: We will continue to maximize
ownership of our products throughout their development and commercialization
phases by conducting clinical development and marketing activities on our own,
or in partnership with others where appropriate. We intend to retain full
commercialization rights for products and in markets that we can adequately
exploit on our own. In cases where extensive clinical trials are required and a
commercialization strategy with global reach is needed, we intend to enter into
collaborative agreements with industry partners to develop and to co-market our
products. The decision whether to partner with respect to the development and
commercialization of our product candidates and the terms and conditions of such
agreements will be product and market specific in order to maximize our economic
benefits.
MAINTAIN A PRODUCT PIPELINE AT VARIOUS STAGES OF DEVELOPMENT THROUGH INTERNAL
DEVELOPMENT AND IN-LICENSING: We pursue sustained development by maintaining a
portfolio of products at different stages. We intend to continue feeding our
product pipeline to leverage our drug development and commercialization
infrastructure over time. In addition to developing products on our own, we
intend to continue to in-license lead compounds at early stages of development.
LEVERAGE MANAGEMENT'S SCIENTIFIC, PRODUCT DEVELOPMENT AND COMMERCIALIZATION
EXPERTISE: We are led by an experienced group of individuals with significant
industry expertise. Dr. Francesco Bellini, O.C., Chairman and Chief Executive
Officer of the Corporation, was the co-founder and former Chairman and Chief
Executive Officer of Biochem Pharma Inc., an innovative biopharmaceutical
company which was merged with Shire Pharmaceuticals Plc in 2001 in a transaction
worth approximately US$4 billion. Other members of our management team include
scientists experienced in drug discovery and development, and pharmaceutical
industry professionals having significant expertise in the areas of new product
launches, sales and marketing and finance.
C. OUR PRODUCTS
FIBRILLEX(TM) -- OUR SOLUTION TO AA AMYLOIDOSIS
Fibrillex(TM) is our product candidate for the treatment of AA Amyloidosis. AA
Amyloidosis is a chronic, systemic disorder characterized by the over-expression
of Serum Amyloid A ("SAA"), a protein found in the blood that is produced in
response to inflammation. SAA is a precursor to an amyloid protein known as the
AA protein. In AA Amyloidosis, the AA protein forms fibrils that accumulate in
the kidney, spleen, liver and other internal organs, compromising their
function. AA Amyloidosis results from certain chronic
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inflammatory diseases, such as Rheumatoid Arthritis and Inflammatory Bowel
Disease, certain chronic infections such as Tuberculosis, and from a genetic
disease named Familial Mediterranean Fever. As AA Amyloidosis progresses, it
results in serious illness, organ failure (particularly of the kidney, spleen
and liver), and ultimately death. There is at present no known cure for the
disorder, and patients with AA Amyloidosis normally have a life expectancy of
five to 15 years. It is estimated that approximately 270,000 patients suffer
from AA Amyloidosis in industrialized areas and countries, including North
America, Europe and Japan.
OUR PRODUCT
Fibrillex(TM), our most advanced product candidate, is in a two-year Phase
II/III clinical trial. We have received a grant from the FDA of approximately
US$900,000 for this Phase II/III trial, which is designed to investigate the
safety and efficacy of Fibrillex(TM) in 183 patients suffering from AA
Amyloidosis at 27 sites across the United States, Europe and Israel. To our
knowledge, Fibrillex(TM) is the first amyloid-targeting drug candidate to
undergo advanced clinical testing for AA Amyloidosis. The Phase II/III clinical
trial completed patient enrolment in January 2003 and is expected to be
completed in January 2005. All patients who complete the Phase II/III clinical
trial are invited to join an open-label extension study and receive
Fibrillex(TM) for an additional two-year period. No safety issues have been
reported to us by the independent Data Safety Monitoring Board we have
established to monitor the safety of patients during the trial.
Fibrillex(TM) is a small molecule that was selected to interact with the AA
protein prior to its forming fibrils. Animal studies have shown that
Fibrillex(TM) inhibits amyloid deposition in tissues by binding to the AA
protein.
To date, the safety, tolerability and pharmacokinetic profiles of Fibrillex(TM)
have been investigated in four Phase I clinial studies in either healthy adult
volunteers or volunteers with renal impairment due to non-amyloid-related
diseases. Fibrillex(TM) was well tolerated in these studies, and no major
adverse events were reported. Fibrillex(TM) exhibited a well-characterized
pharmacokinetic profile in both subject groups. In pre-clinical trials,
Fibrillex(TM) was shown to be an effective and potent inhibitor of amyloid
fibril formation and amyloid deposition in the affected organs and to be
specific for the AA protein.
CURRENT THERAPEUTIC ALTERNATIVES
There is, at the present time, no known specific treatment for AA Amyloidosis.
Current therapies attempt to control the chronic infection or inflammatory
disease which leads to the disorder. It is thought that treatment that
suppresses the inflammation or infection will also decrease the production of
SAA and will slow the progression of the disorders. Historically, efficient
anti-inflammatory or immunosuppressor treatments have been shown to suppress or
halt the development of AA Amyloidosis in some patients with Rheumatoid
Arthritis. Patients with severe Rheumatoid Arthritis are currently being treated
through a new anti-cytokine therapy (e.g. Remicade(TM) by Centocor, Inc.,
Enbrel(TM) by Wyeth and Amgen Inc.) to minimize the inflammatory response
characteristic of Rheumatoid Arthritis. These new therapies might have an impact
on the onset and progression of AA Amyloidosis by partly controlling the
production of the precursor protein SAA. However, scientific and clinical
reports on the benefits of such new therapies for the treatment of AA
Amyloidosis are not yet available.
Several studies have demonstrated improved renal function in patients with
rheumatic conditions complicated by AA Amyloidosis following treatment with
alkylating agents. Regression of amyloid deposits has been documented in
patients with chronic infections following successful surgical excision (for
example, excision of bone in osteomyelitis). In AA Amyloidosis associated with
Familial Mediterranean Fever, treatment with colchinine has shown some
beneficial effects. In addition, an injectable compound is being tested by the
Centre for Amyloidosis and Acute Phase Proteins, Department of Medicine, Royal
Free and University College Medical School, London.
10
Consequently, while there are a variety of therapeutic alternatives being
investigated, none has been shown to be a safe and effective curative treatment
for AA Amyloidosis.
ALZHEMED(TM) -- OUR SOLUTION TO ALZHEIMER'S DISEASE
Alzhemed(TM) is our product candidate for Alzheimer's Disease. According to the
American Alzheimer's Association, it is estimated that over four million North
Americans are currently afflicted with Alzheimer's Disease. Alzheimer's Disease
is reported to be the third most expensive disease in terms of health care cost
in the United States, behind heart disease and cancer. The patient population is
expected to grow significantly over the next decade, primarily due to an
increasing elderly population. In addition, the combination of awareness
campaigns and the anticipated introduction of a number of diagnostic products is
expected to markedly increase the total number of estimated cases, as previously
undiagnosed patients are confirmed and the disease is detected at an earlier
stage and age.
Alzheimer's Disease is a degenerative neurological disease that progressively
impairs a person's cognitive functions and gradually destroys the brain. There
is no cure currently available for Alzheimer's Disease, and existing drugs only
treat symptoms such as cognitive function deficit for a limited period of time.
In its early stages, Alzheimer's Disease may cause only minor incidences of
memory loss or forgetfulness. However, as it progresses, the symptoms multiply
and intensify and the patient experiences the deterioration of both cognitive
and motor functions, leading ultimately to death within an average of seven to
10 years. Although popularly perceived as a disease associated with old age,
Alzheimer's Disease is increasingly being diagnosed in individuals in their 50s
and 60s.
The pathogenesis of Alzheimer's Disease is still somewhat ill-defined. It is now
well recognized in published scientific material that, although there is an
early onset form of the disease that is genetically inherited, the vast majority
of cases have no known genetic cause and occur later in life. However, common to
all cases of Alzheimer's Disease is the deposition of amyloid fibrils in the
brain. These fibrils result when the Amyloid (beta) protein ("A(beta)"),
interacts with naturally occurring GAGs. We have therefore chosen to pursue an
amyloid-based approach in developing a treatment for Alzheimer's Disease.
OUR PRODUCT
Alzhemed(TM) is designed to stop the progression of Alzheimer's Disease in
patients, whether the disease occurs sporatically or has a genetic basis. We are
currently designing two Phase III efficacy trials for Alzhemed(TM) in North
America and in Europe. The North American trial is scheduled to begin in the
first half of 2004, while the European trial is anticipated for the first half
of 2005. The trials will be large multi-center, international, randomized,
double-blind, placebo-controlled and parallel group studies that will include,
in total, approximately 1,900 patients with mild-to-moderate Alzheimer's
Disease. It is anticipated that patients will be treated for 18 months. The
effects of Alzhemed(TM) on disease progression will be measured through
cognitive function and global performance tests. We will also be examining
changes in brain volume using magnetic resonance imaging ("MRI") techniques. The
clinical study protocols are being developed in collaboration with our
Alzhemed(TM) Clinical Advisory Board and the regulatory authorities.
Alzhemed(TM) is a small molecule that binds to soluble non-fibrillar A(beta) and
prevents it from interacting with naturally occurring GAGs. By inhibiting the
binding of GAGs to soluble A(beta), Alzhemed(TM) can prevent the A(beta) protein
from assuming its fibrillar structure, thus preventing amyloid deposition in
brain tissue and the associated toxicity and neuronal damage. Alzhemed(TM) has
been shown to decrease amyloid deposition and to favor A(beta) clearance from
the brain in an animal model of Alzheimer's Disease.
In order to be effective, Alzhemed(TM) must overcome the challenge of crossing
from the blood to the brain through the protective BBB . Alzhemed(TM) has been
found to be present in both the brain of animals and in the CSF of humans
participating in our trials, suggesting that Alzhemed(TM) has the ability to
cross
11
the BBB. The in vivo brain pharmacokinetic profile obtained in two animal
species showed brain uptake of the drug with a half-life in the brain which is
markedly longer than that found in plasma.
Our Alzhemed(TM) Phase II clinical study, which concluded in March 2003 and the
results of which were released in June 2003, primarily investigated the safety,
tolerability, pharmacokinetic and pharmacodynamic profiles of Alzhemed(TM) over
a 12-week period in patients with mild-to-moderate Alzheimer's Disease. There
were no safety findings of concern in the Phase II clinical trial. Alzhemed(TM)
was detected in CSF, indicating an ability to cross the BBB. As secondary
objectives, the trial evaluated, on an exploratory basis, the effect of
Alzhemed(TM) on amyloid protein levels in CSF and on the cognitive function of
the Alzheimer's Disease patients participating in the study. Alzhemed(TM) was
found, after 12 weeks of use, to decrease the level of A(beta)42 (the more
fibrillogenic form of the two A(beta) proteins) in CSF in a dose-related
fashion. A 21-month open-label extension study was initiated in January of 2003,
with patients invited to join the extension study as they completed the Phase II
trial. Patients enrolling in this open-label extension study are given the
highest dose of Alzhemed(TM). The results in standard cognitive tests at 16
months were consistent with a stabilizing effect of Alzhemed(TM) on cognitive
function tests.
We have completed four Phase I clinical studies to assess the safety,
tolerability and pharmacokinetic profiles of Alzhemed(TM) (and Cerebril(TM),
being the same compound as Alzhemed(TM)) in 117 healthy volunteers (including 37
elderly persons). Alzhemed(TM) has also undergone extensive toxicology and
pharmacokinetic investigations in two animal species. In these studies, no
safety findings of concern were found and Alzhemed(TM)'s pharmacokinetic profile
was well characterized.
CURRENT THERAPEUTIC ALTERNATIVES
None of the existing treatments for Alzheimer's Disease is curative. Patients
with the disease are treated with drugs which target only its symptoms. These
drugs enhance patients' cognitive functions and general behaviour for a certain
period of time but do not stop the progression of the disease.
Patients with Alzheimer's Disease are usually treated with drugs designed to
improve their cognitive function using compounds which maintain a higher
concentration of neurotransmitters which results in improved cognitive function
and behavior. The most prescribed drugs in this category are Aricept(TM) (Pfizer
Inc./Eisai Company, Ltd.), Exelon(TM) (Novartis AG), Reminyl(TM) (Shire
Pharmaceuticals Group Plc and Janssen Pharmaceutica Products, L.P.), Ebixa(TM)
(Merz Pharma GmbH & Co. KgaA) and Namenda(TM) (Forest Laboratories Inc.), which
is the trade name used in the U.S. for Ebixa(TM).
Several pharmaceutical companies have drug development efforts aimed at the
development of drugs to stop the progression of Alzheimer's Disease. The
majority of these programs target different aspects of the amyloid protein. The
different strategies consist in stopping the production of A(beta), blocking the
fibril formation or clearing the deposits from the brain. The major companies
working on an amyloid-based therapeutic approach are Merck & Co., Bristol-Myers
Squibb Company, Prana Biotechnology Limited, Axonyx Inc., PRAECIS
PHARMACEUTICALS INCORPORATED, Eunoe Incorporated, GlaxoSmithKline plc and Elan
Corporation, plc. However, to our knowledge, Alzhemed(TM) is the only
orally-administered disease modifying product candidate with preliminary
pharmacological proof-of-concept in humans scheduled to enter Phase III clinical
trials.
CEREBRIL(TM) -- OUR SOLUTION TO HEMORRHAGIC STROKE DUE TO CAA
Cerebril(TM) is our product candidate to treat Hemorrhagic Stroke due to CAA.
Hemorrhagic Stroke due to CAA is a syndrome of recurrent strokes caused by
amyloid deposits that cause blood vessels in the brain to rupture or otherwise
malfunction. This type of stroke represents approximately seven percent of all
strokes, with the incidence increasing as the population ages. It is typically
diagnosed in patients aged 55 years or older with multiple hemorrhages confined
to lobar brain regions and no other cause of hemorrhage. CAA can appear alone in
some patients and is also a common pathology found in 50% or
12
more of patients with Alzheimer's Disease. Approximately five percent of
patients with Alzheimer's Disease experience Hemorrhagic Stroke due to CAA. It
is estimated that approximately 135,000 patients suffer from Hemorrhagic Stroke
due to CAA each year (either alone or in association with Alzheimer's Disease).
Hemorrhagic Stroke due to CAA remains a largely untreated disorder which is
often undiagnosed unless it is confirmed by an autopsy. It ranges in severity
from asymptomatic amyloid deposition in otherwise normal cerebral vessels to
lobar hemorrhages resulting from progressive invasion of the vascular wall by
amyloid fibrils. 70% to 80% of lobar hemorrhages are not fatal in their first
occurrence, providing the opportunity for therapeutic intervention. However,
recurrent lobar hemorrhages are frequent and are often fatal within just a few
years.
OUR PRODUCT
Cerebril(TM) is designed to prevent the recurrence of Hemorrhagic Stroke due to
CAA by reducing the deposit of amyloid fibrils within the microvasculature of
the brain. The active ingredient in Cerebril(TM) is the same compound, and
Cerebril(TM) has the same properties, as Alzhemed(TM).
Cerebril(TM) has completed a Phase II clinical trial for which our lead
investigator, Dr. Steven M. Greenberg of Massachusetts General Hospital in
Boston has been awarded a grant of approximately US$1 million from the National
Institute of Health. Enrollment was completed in October 2003 and the trial was
being conducted in five centers in the United States. The study involved a
12-week treatment and was primarily investigating the safety, tolerability,
pharmacokinetic and pharmacodynamic profiles of the product candidate in 24
patients who have suffered a lobar hemorrhage. The Phase II study also aimed to
determine the optimal dosing regimens for subsequent testing of efficacy.
Secondary objectives included assessing the effect of Cerebril(TM) on
neurological function and the occurrence of new lesions detectable by MRI. An
independent Data Safety Monitoring Board was established to monitor the safety
of patients throughout the duration of the study. The first meeting of our Data
Safety Monitoring Board for Cerebril(TM) was held after the first eight patients
had completed two weeks of treatment, and no safety findings of concern were
reported to us.
Cerebril(TM) has been found to markedly reduce CAA in an animal model.
Cerebril(TM), being the same compound as Alzhemed(TM), has undergone
comprehensive pre-clinical and clinical trials. See "Alzhemed(TM) -- Our
solution to Alzheimer's Disease".
CURRENT THERAPEUTIC ALTERNATIVES
No effective therapy has yet been developed for Hemorrhagic Stroke due to CAA.
Patients experiencing Hemorrhagic Stroke due to CAA are currently offered
palliative therapies which are not directed at treating the disorder. To our
knowledge, no specific treatment aimed at preventing the recurrence of
Hemorrhagic Stroke due to CAA through the inhibition of amyloid fibril formation
and deposition is available.
Novartis AG, Aventis and Pfizer Inc. have reported work done in research in CAA,
mostly using animal models where CAA has been observed, but to our knowledge
none has identified a specific treatment approach to the disorder or advanced to
a pre-clinical stage of development.
NC-1461 -- OUR SOLUTION TO THE DEVELOPMENT OF EPILEPTIC SEIZURES FOLLOWING TBI
We have identified a series of compounds, of which NC-1461 is the lead
candidate, to prevent the development of epileptic seizures following TBI.
In the United States, approximately 1.5 million people sustain a TBI each year.
TBI causes severe damage to the brain with internal bleeding, inflammation and
neuronal cell death. TBI can lead very early
13
on to an imbalance between the activities of two specialized types of neuronal
cells. This imbalance is due to the uncontrolled up-regulation of excitatory
neurons, coupled with a strong down-regulation of inhibitory neurons. The
imbalance leads to an uncontrolled electrical discharge which manifests itself
as an epileptic seizure. Approximately 13% of patients who have had a TBI will
start experiencing epileptic seizures 12 to 18 months following their injury.
The brain tissue which is damaged as a result of TBI and which exhibits the
neurological imbalance is called an "epileptic focus" and the process is
referred to as "epileptogenesis".
Since it is impossible to identify patients with a TBI who will develop
epileptic seizures, all patients who have suffered a TBI would benefit from
treatment early on following the injury to prevent the later development of
seizures.
OUR PRODUCTS
In collaboration with Dr. Don Weaver, formerly of Queen's University of
Kingston, Ontario, and now at Dalhousie University of Dalhousie, Nova Scotia, we
have identified a series of compounds, of which the lead candidate is NC-1461,
that we are developing as a treatment for patients at risk of developing
epileptic seizures following a TBI. NC-1461 has been shown to cross the BBB and
to have anti-epileptogenic activity in an animal model of spontaneous recurrent
seizures following chemically-induced brain injury.
Our compounds are designed to have dual action to: (i) bring down the activity
of the excitatory neurons while (ii) increasing the activity of the inhibitory
neurons. To achieve such an activity profile, the molecules need to act at the
level of both the excitatory and inhibitory responses. This type of activity
profile (although weak) has already been observed with (beta)-alanines. A series
of (beta)-alanine analogs was therefore developed to identify compounds which
would possess this activity profile and be able to maintain normal neuronal
electrical activities early-on following a TBI, therefore preventing the
establishment of epileptic foci. In pre-clinical studies, NC-1461 has indicated
a potential for a dual mechanism of action. Promising results have also been
achieved in animal models of epileptogenesis.
CURRENT THERAPEUTIC ALTERNATIVES
Presently, no treatment is available to TBI patients to prevent the
establishment of the epileptic foci and the resulting onset of epileptic
seizures. Drugs currently on the market aim only at preventing the onset
epileptic seizures. None of these anti-convulsant drugs has been shown to
prevent or treat the neurological damage resulting from TBI which leads to the
development of epileptic foci and the resulting seizures.
Although several pharmaceutical companies are focusing on developing more
effective therapeutics to treat epileptic seizures, we are not aware of any
other company developing a therapy based on compounds with dual activity or with
the same mechanism of action as our compounds. NeuroSearch A/S of Denmark has
reported anti-epileptogenic activity with a compound which is presently in a
Phase II trial for the treatment of seizures in patients already suffering from
Epilepsy. UCB Pharma SA of Belgium has also reported anti-epileptogenic activity
with a compound presently in Phase I trials which is being developed as an
anti-convulsant drug.
D. SALES AND MARKETING
We intend to pursue different commercialization strategies for our products in
different parts of the world. We intend to retain full commercialization rights
for products in markets that we can adequately exploit on our own. In other
markets, we intend to partner with third parties through collaborative
arrangements, including co-marketing agreements. In addition, in various
designated markets, we intend to enter into out-licensing arrangements.
14
FIBRILLEX(TM): Because AA Amyloidosis is a disorder affecting a specific patient
population and treated by a well-defined pool of specialists, we intend to
develop and deploy our own sales and marketing force for the commercialization
of Fibrillex(TM) in North America and in Europe in order to take advantage of
local commercialization expertise while maximizing ownership for our products,
and to out-license in the Japanese market due to specific clinical development
and regulatory requirements there. We intend to capitalize on any benefits which
result from Fibrillex(TM) having been granted Orphan Drug status in the United
States and Europe and the Fast Track Product Designation in the United States.
ALZHEMED(TM): Alzheimer's Disease is characterized by a large and growing
patient population and a broad prescriber base composed of general
practitioners, internists and specialists. We therefore intend to partner with a
leading pharmaceutical company possessing a global marketing and commercial
network for the commercialization, marketing and sale of Alzhemed(TM).
CEREBRIL(TM): Cerebril(TM) targets a small and well-defined population primarily
treated by a relatively small group of specialists. Therefore, our
commercialization strategy for Cerebril(TM) is similar to our strategy for
Fibrillex(TM). Cerebril(TM) will require targeted sales efforts and will provide
us with the opportunity to expand our anticipated Fibrillex(TM) sales force in
North America, while seeking a distribution partner in Europe and an out-license
arrangement in Japan. Since Cerebril(TM) and Alzhemed(TM) are made up of the
same compound, potential commercialization synergies between the two products
will be evaluated as we explore partnership arrangements for Alzhemed(TM).
E. OTHER PRODUCT CANDIDATES
In addition to our ongoing clinical work, we have an active research and
development program aimed at feeding our product pipeline.
SECOND GENERATION ANTI-AMYLOID COMPOUNDS
Know-how acquired through the development of Alzhemed(TM) has led to the design
and synthesis of a second generation of anti-amyloid compounds based on our GAG
mimetics technology. The compounds present, both in vitro and in vivo, a
promising anti-amyloid activity profile. We have already conducted preliminary
studies on approximately 200 of these compounds.
VACCINE
Our approach to Alzheimer's Disease has been to focus on targeting the A(beta)
protein before it organizes into fibrils and causes neuronal damage. One
approach to block the development of Alzheimer's Disease is to prevent the
damage caused by A(beta) by intervening early using a vaccine strategy. Our
vaccine approach consists of a modified fragment of A(beta) peptide to induce an
immune response which targets soluble A(beta) (prior to any structural change
which leads to fibril formation).
Preliminary in vivo studies have shown promising results where immune
recognition of soluble A(beta) reduces brain amyloid protein levels but does not
attack fibrillar deposits, thereby minimizing the risk of brain inflammation.
LIBRARY OF PRODUCT CANDIDATES
To date, we have produced a library of potential product candidates of over
2,000 molecules through traditional organic chemistry. The library comprises
several different classes of potential pharmacophores, sulfates, sulphonates,
phosphonates, carboxylates and a number of other functional groups, all of which
address amyloid proteins. In addition, we have access to compound libraries
through alliances, collaborations and commercial arrangements.
15
Through our portfolio of in vitro and in vivo screening assays, we have
identified lead drug molecules with potent anti-amyloid activity, the most
promising of which are undergoing further research and development.
F. OUR PRODUCT TECHNOLOGY PLATFORMS
GAG MIMETICS FOR AMYLOID-RELATED DISORDERS
Our therapeutic approach to amyloid-related disorders aims at preventing the
onset and arresting the progression of the targeted disorders. We have
identified small molecules which can inhibit the formation of amyloid deposits
and thereby prevent amyloid-induced toxicity.
A variety of neurological as well as systemic disorders are mediated by a class
of proteins known as amyloids. Amyloids are naturally occurring proteins found
in the central nervous system, the blood and elsewhere in the body. To date, at
least 21 different unrelated proteins have been found to be capable of changing
structure, depositing in different tissues and causing different types of
amyloid diseases. During amyloid fibril formation, the amyloid protein
associates with other proteins, such as GAGs, which bind to the amyloid protein,
promote fibril formation and protect the fibrils from being degraded by enzymes.
Our molecules, designed to mimic specific properties of the GAGs and therefore
called "GAG mimetics", attach to the amyloid protein and inhibit the development
of amyloid deposits and associated toxicity.
The first of the following diagrams illustrates the interaction between GAGs and
an amyloid protein during the process of fibril formation. The next diagram
shows how our GAG mimetics can block the amyloid fibril formation process. By
binding to the amyloid protein, our molecules can prevent the natural GAGs from
binding to the amyloid protein, preventing the promotion of amyloid fibril
formation. We believe that our GAG mimetic approach presents an effective
therapeutic intervention which may ultimately either be combined with or replace
other approaches which treat only the symptoms of the disorders we are
targeting.
[PICTURE]
The amyloid fibril formation and associated elongation of the fibrils is
modulated by the presence of GAGs. The GAGs are involved in promoting amyloid
fibril formation and its interaction with cells.
[PICTURE]
Our compounds act as mimetics and target GAG binding sites on the amyloid
protein. In this capacity, they compete with natural GAGs which results in
interference with amyloid fibril formation and prevention of cellular toxicity
which damages the surrounding cells.
16
DUAL ACTION ANTI-EPILEPTOGENICS
Our drug design aims at correcting the neurotransmitter imbalance created early
on following a TBI using compounds capable of dual action: (i) bringing down the
activity of the excitatory neurons and (ii) up-regulating the activity of the
inhibitory neurons, thereby restoring the natural balance.
We have developed and synthesized a library of approximately 300 (beta)-alanine
analogs which demonstrate this dual activity. In addition, we are evaluating the
anti-epileptogenic and anti-convulsion activities of a small library of uracil
and dihydrouracil compounds. In in vivo and in vitro experiments, we have found
that these compounds (which may get metabolized into (beta)-alanine analogs in
vivo) are capable of (i) preventing the development of epileptogenesis following
a TBI or (ii) blocking the onset of epileptic seizures. We believe that such an
activity profile is unique to our compounds and may lead to the development of
therapeutics addressing both epileptogenesis and the control of epileptic
seizures.
G. IMPORTANCE OF IDENTIFIABLE INTANGIBLE PROPERTIES
RESEARCH ALLIANCES, LICENSE AGREEMENTS AND GOVERNMENT FUNDING AGREEMENTS
We have entered into licensing agreements with Queen's University (Kingston,
Ontario, Canada) with respect to amyloid and Epilepsy research; research
alliances with University of Montreal -- Ste. Justine Hospital (Montreal,
Quebec, Canada) to test animal models relating to our development of compounds
to prevent epileptic seizures following TBI; and service agreements with the
National Research Council of Canada (Montreal, Quebec, Canada) to develop
techniques to measure A(beta) protein. Neurochem has also concluded a strategic
alliance with the National Research Council of Canada and Dr. Harold J. Jennings
(Ottawa, Ontario, Canada) to collaborate on the discovery and assessment of
certain vaccine approaches in animal models, and work towards the development of
a specific vaccine using amyloid protein fragment conjugates. This collaboration
also includes the possibility of preclinical and clinical development, as well
as future commercialization in the field of A(beta)-peptide-protein conjugates.
Through a licensing agreement with PRAECIS PHARMACEUTICALS INCORPORATED
(Waltham, Massachusetts, U.S.A.), Neurochem is expanding its pool of
intellectual property relating to specific A(beta)-derived peptide sequences for
use in the development of a novel synthetic vaccine to prevent and treat
Alzheimer's Disease.
In addition, we have entered into an agreement with Technology Partnerships
Canada ("TPC") regarding financial assistance to be provided by the Government
of Canada for the development of one or more oral therapeutic products for the
treatment of Alzheimer's Disease. To date, we have received approximately $6.7
million under this agreement and we will pay to TPC a royalty equal to 7.24% of
gross revenues from the commercialization of effective orally-administered
therapeutics for the treatment of Alzheimer's Disease until June 30, 2010. After
June 30, 2010, we may have to continue to pay royalties to TPC until such time
as the aggregate amount of royalties paid pursuant to the agreement reaches
$20.5 million.
H. INTELLECTUAL PROPERTY
We, and the pharmaceutical industry in general, attach significant importance to
patents and the protection of industrial secrets for new technologies, products
and processes. Accordingly, our success depends, in part, on our ability to
obtain patents or rights thereto, protect our commercial secrets and carry on
our activities without infringing the rights of third parties. Our strategic
approach is to build a portfolio which provides broad protection of our
technology, as well as a tiered patent claim structure to provide back-up patent
positions in commercially significant areas. We have established internal
mechanisms for developing strategy and identifying patentable technology,
including a patent committee and frequent status reports from our scientific
personnel. We have filed for patent protection on our novel compositions,
methods of therapy, screening assays for identifying new lead drug candidates,
and diagnostic procedures. We generally seek to protect our proprietary
treatment methods and drug discovery techniques by filing patent applications
unless we believe that keeping an invention as a trade
17
secret is preferable. In addition, it is our policy to require our employees,
consultants, members of the scientific and clinical advisory boards and parties
to collaborative agreements to enter into agreements which typically provide
(among other things) that specified information obtained or developed during the
relationship remain confidential and that work product belongs to us.
We currently hold rights to a number of patents and patent applications in the
United States and Canada relating to our technology, as well as foreign
counterparts for many of these patents and patent applications. A number of
these patents and patent applications were filed by Queen's University and
licensed to us. Other patents and patent applications are co-owned by Queen's
University and us or by us and the University of British Columbia. A number of
other patents and patent applications were filed by us. With respect to our
product candidates and product pipeline, our patent portfolio is continually
expanding, focusing on our commercialization and clinical efforts.
We are a party to license agreements under which we have obtained rights to use
certain technologies to develop our product candidates. The licenses to which we
are a party impose various milestones, commercialization, sublicensing, royalty
and other payment, insurance, indemnification and other obligations on us and
are subject to certain reservations of rights.
The following sets forth the status of our trademarks and trademark applications
for our product candidates:
TRADEMARK COUNTRY STATUS
------------------------ ------- ------
Fibrillex(TM)........... Canada Allowed
Fibrillex(TM)........... United States Allowed
Fibrillex(TM)........... Germany Allowed
Fibrillex(TM)........... Spain Allowed
Fibrillex(TM)........... Japan Allowed
Alzhemed(TM)............ Canada Allowed
Alzhemed(TM)............ United States Pending
Cerebril(TM)............ Canada Pending
Cerebril(TM)............ United States Pending
Neuroxil(TM)............ Canada Allowed
We are currently in discussion with Alza Corporation of California regarding an
opposition it has filed to our registration of the trademark Alzhemed(TM) in the
United States.
All of our intellectual property, with the exception of the commercialization
rights of our products in Canada and the applications for our Canadian
trademarks (which are owned by Neurochem Inc.), is owned by Neurochem
(International) Limited, a Swiss corporation and an indirect wholly-owned
subsidiary of Neurochem Inc. See "2.2 Corporate Structure -- Intercorporate
Relationships".
I. HUMAN RESOURCES
We currently employ 128 people, the majority of which are involved in R&D and
drug development. Of these 128 people, 27 are scientists with Ph.D degrees and
21 are scientists with M.Sc. degrees.
18
ITEM 5 - SELECTED CONSOLIDATED FINANCIAL INFORMATION
5.1 ANNUAL INFORMATION
The following table sets forth selected consolidated financial data for the last
three fiscal years of the Corporation and should be read in conjunction with the
audited financial statements of the Corporation for the six-month period ended
December 31, 2003 and years ended June 30, 2003 and June 30, 2002.
Six-month period ended Fiscal year ended Fiscal year ended
December 31,2003 June 30, 2003 June 30, 2002
---------------------- ----------------- -----------------
$ $
(in thousand of dollars, except for earnings per share)
Revenues(1) Nil Nil 2,271
Net earnings (loss) (16,773) (19,618) (13,475)
per share (0.63) (0.90) (0.75)
Total assets 94,225 31,160 32,733
Long-term debt 416 633 1,044
5.2 DIVIDENDS
We have not declared any dividends since our incorporation. Any future
determination to pay dividends will remain at the discretion of our Board of
Directors and will depend on our financial condition, results of operation,
capital requirements and such other factors as our Board of Directors deems
relevant.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The "Management's Discussion and Analysis" on pages 9 through 20 of the Annual
Report with respect to the six-month period ended December 31, 2003, is
incorporated herein by reference.
6.1 QUARTERLY INFORMATION
The following table sets forth selected consolidated financial data for the last
eight quarters of the Corporation.
Six-month period ended Fiscal year ended Fiscal year ended
December 31,2003 June 30, 2003 June 30, 2002
---------------------- --------------------------------------- -------------------
Q1 Q2 Q1 Q2 Q3 Q4 Q3 Q4
$ $ $ $ $ $ $ $
(in thousands of dollars, except for earnings per share)
Revenues Nil Nil Nil Nil Nil Nil Nil Nil
Net earnings (loss) (6,787) (9,986) (3,962) (6,577) (5,609) (3,470) (4,277) (4,694)
per share (0.28) (0.34) (0.20) (0.31) (0.25) (0.15) (0.24) (0.26)
diluted (0.28) (0.34) (0.20) (0.31) (0.25) (0.15) (0.24) (0.26)
ITEM 7 - MARKET FOR SECURITIES
Our Common Shares are listed on The Toronto Stock Exchange since June 21, 2000
under the symbol "NRM", and quoted on the NASDAQ since September 18, 2003 under
the symbol "NRMX".
19
ITEM 8 - DIRECTORS AND OFFICERS
The following table lists our directors and executive officers. All members of
the Board of Directors will hold their positions until the next annual meeting
of shareholders of the Corporation.
YEAR FIRST
NAME AND MUNICIPALITY BECAME A
OF RESIDENCE PRINCIPAL OCCUPATION OFFICE DIRECTOR
- -------------------- -------------------- ------ ----------
Dr. Francesco Bellini, O.C.(1)..... Chairman and Chairman of the Board, 2002
Montreal, Quebec Chief Executive Officer(2) Chief Executive Officer
and Director
Dr. Colin Bier(3), (4)............. Consultant Director 1996
Montreal, Quebec
Richard Cherney.................... Co-Managing Partner, Director 2003
Montreal, Quebec Davies Ward Phillips & Vineberg LLP
(a law firm)
Peter Kruyt(1),(4),(5)............. Vice President, Director 2002
Montreal, Quebec Power Corporation of Canada
(a diversified management
and holding company)
Dr. Frederick H. Lowy(5)........... Rector and Vice-Chancelor Director 2003
Montreal, Quebec of Concordia University
John Molloy(3)..................... President and Chief Executive Officer, Director 1994
Kingston, Ontario Parteq Research and
Development Innovations,
Queen's University
(a university technology
transfer organization)
Ronald M. Nordmann(1),(4),(5),(6)... Co-President, Director 2002
Little Falls, New Jersey Global Health Associates, LLC
(a consulting company to the healthcare
and financial services industries)(7)
Graeme K. Rutledge(3)............... Consultant(8) Director 2003
Perth, Ontario
Dr. Emil Skamene(5)................. Scientific Director, Director 2002
Montreal, Quebec Research Institute of the
McGill University Health Centre
(an academic health centre)
Dr. Philippe Calais................. President(9) President --
Hudson, Quebec
Claude Michaud...................... Senior Vice-President, Senior Vice-President, --
Montreal, Quebec Finance and Chief Financial Officer(10) Finance and Chief Financial Officer
Dr. Denis Garceau................... Vice-President, Vice-President, --
Montreal, Quebec Drug Development Drug Development
Dr. Francine Gervais................ Vice-President, Vice-President, --
Montreal, Quebec Research and Development Research and Development
Dr. Lise Hebert..................... Vice-President, Vice-President, --
Montreal, Quebec Corporate Communications(11) Corporate Communications
</Table>
20
YEAR FIRST
NAME AND MUNICIPALITY BECAME A
OF RESIDENCE PRINCIPAL OCCUPATION OFFICE DIRECTOR
- -------------------- -------------------- ------ ----------
Christine Lennon.................... Vice-President, Vice-President, --
Montreal, Quebec Business Development(12) Business Development
Judith Paquin....................... Vice-President, Vice-President, --
Montreal, Quebec Human Resources(13) Human Resources
David Skinner...................... Director of Legal Affairs, Director of Legal Affairs, --
Montreal, Quebec General Counsel and General Counsel and
Corporate Secretary(14) Corporate Secretary
</Table>
NOTES:
(1) Pursuant to a subscription agreement dated July 25, 2002, by and between
Picchio Pharma, P.P. Luxco Holdings II S.A.R.L. and the Corporation, the
Corporation covenanted to cause a total of three nominees of Picchio
Pharma Inc. to be included in the list of management nominees to be
proposed for election to the Board at each shareholders meeting occurring
following the date thereof. Picchio Pharma's right shall terminate on the
date it ceases to beneficially hold at least 15% of the issued and
outstanding Common Shares (including Common Shares issuable upon exercise
of the warrants issued to them concurrently). Dr. Bellini and Messrs.
Kruyt and Nordmann are the current nominees of Picchio Pharma.
(2) Prior to his appointment as Chief Executive Officer of the Corporation on
December 11, 2002, Dr. Bellini's principal occupation was Chairman of
Picchio Pharma, a biopharmaceutical investment company, a position he
continues to hold. Prior to 2001, Dr. Bellini was Chairman and Chief
Executive Officer of Biochem Pharma Inc. (now Shire Biochem Inc.), a
biopharmaceutical company which he co-founded in 1986.
(3) Member of the Audit Committee.
(4) Member of the Compensation Committee.
(5) Member of the Nominating and Corporate Governance Committee.
(6) Mr. Nordmann is the Lead Director of the Corporation.
(7) From 1994 through 1999, Mr. Nordmann was a partner at Deerfield Management
Inc., a healthcare equity fund.
(8) Prior to June 2002, Mr. Rutledge was a Senior Partner at Deloitte &
Touche, Canada, an accounting firm.
(9) Prior to January 2003, Dr. Calais was General Manager at Servier Canada
Inc., part of the French private pharmaceutical group.
(10) Prior to 2002, Mr. Michaud was Vice-President and Chief Financial Officer
of C-Mac Industries Inc., a global electronic manufacturing services
company, and prior to 2001, was Managing Director, Investment Banking at
Scotia Capital Inc., a Canadian investment bank.
(11) Dr. Hebert was promoted to Vice-President, Corporate Communications on
December 12, 2002. Prior to that date, she was Director, Communications
and Investor Relations.
(12) Prior to January 2004, Ms. Lennon was Venture Advisor for the
Biotechnology and Life Sciences investment sector of CDP Capital Inc, a
division of a pension fund. Prior to this, Ms. Lennon was Vice President,
Global Commercial Development - Oncology of Biochem Pharma Inc. (now Shire
Biochem Inc.), a biopharmaceutical company.
(13) Prior to January 2004, Ms. Paquin was Vice President, Human Resources of
Schering Canada Inc., a biopharmaceutical company.
(14) Prior to April 2003, Mr. Skinner served as Commercial Counsel and Deputy
to the Director of Commercial and Legal Affairs in the London, England
office of Antfactory Limited, a global venture capital firm. Mr. Skinner
also served in the corporate commercial departments of the law firms
Freshfields Bruckhaus Deringer in London, England and Stikeman Elliott in
Montreal, Budapest and London.
In our management proxy circular dated April 6, 2004, all of the above listed
directors were nominated by management for election as directors, except for Mr.
Richard Cherney. Management also proposed the additional nomination of Messrs.
Jean-Guy Desjardins and Francois Legault, both from Montreal, Quebec, as
directors.
21
As of May 11, 2004, the directors and executive officers, as a group,
beneficially owned or exercised control or direction over approximately
7,198,124 of the Common Shares outstanding.(1)
The following is a description of the current committees of the Board:
COMMITTEES OF THE BOARD
AUDIT COMMITTEE
The mandate of the Audit Committee includes assisting the Board in its oversight
of (i) the integrity of the Corporation's financial statements, financial
reporting process, system of internal controls over financial reporting, and
audit process, (ii) the Corporation's compliance with, and process for
monitoring compliance with, legal and regulatory requirements, (iii) the
independent auditors' qualifications and independence, and (iv) the performance
of the independent auditors. The current members of the Audit Committee are Mr.
Graeme K. Rutledge (chair), Dr. Colin Bier and Mr. John Molloy.
Under the listing requirements of NASDAQ to become effective July 31, 2005, no
director who is not independent may be appointed to the audit committee of a
company. Mr. Molloy would not be independent under these listing requirements
when they become effective, as he is the President and Chief Executive Officer
of Parteq Research and Development Innovations, Queen's University ("Parteq").
However, in accordance with those NASDAQ listing requirements, the Board has
resolved that the continued membership of Mr. Molloy on the Audit Committee is
required in the best interests of the Corporation and its shareholders because
of his knowledge of the Corporation and experience in such matters.
COMPENSATION COMMITTEE
The mandate of the Compensation Committee includes reviewing the compensation
arrangements for the Corporation's employees, including executive officers and
directors and making recommendations to the Board with respect to such
compensation arrangements, as well making recommendations to the Board with
respect to the Corporation's incentive compensation plans and equity-based plans
and to oversee succession planning. The Compensation Committee is also
responsible for preparing an annual report on executive compensation for
purposes of disclosure to shareholders. The current members of the Compensation
Committee are Dr. Colin Bier (chair), Mr. Peter Kruyt and Mr. Ronald M.
Nordmann.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The mandate of the Nominating and Corporate Governance Committee is to develop
and recommend to the Board a set of corporate governance principles and to
prepare and review the disclosure with respect to, and the operation of, the
Corporation's system of corporate governance, before such disclosure is
submitted to the Board for its approval. In addition, the Nominating and
Corporate Governance Committee is responsible for the review and periodic update
of the Corporation's Code of Ethics which governs the conduct of the
Corporation's directors, officers and other employees. Moreover, the Nominating
and Corporate Governance Committee is mandated to examine, on an annual basis,
the size and composition of the Board and, if appropriate, recommend to the
Board a program to establish a Board comprised of members who facilitate
effective decision-making. Finally, the Nominating and Corporate Governance
Committee shall identify individuals qualified to become members of the Board,
recommend to the Board nominees to be put before shareholders at each annual
meeting and recommend to the Board a process for board, committee and director
assessment. The current members of the Nominating and Corporate Governance
Committee are Mr. Ronald M. Nordmann (chair), Dr. Frederick H. Lowy, Mr. Peter
Kruyt and Dr. Emil Skamene.
- --------
(1) Included in this amount are 166,666 Common Shares owned directly by Dr.
Bellini and the 6,718,368 Common Shares owned indirectly by Picchio Pharma of
which the FMRC Family Trust is a 50% owner. Dr. Bellini is a beneficiary of the
FMRC Family Trust.
22
ITEM 9 - AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Mr. Graeme K. Rutledge is an audit
committee financial expert.
ITEM 10 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
We have paid KPMG LLP ("KPMG"), our external auditors, the following fees in
each of the last two fiscal periods:
AUDIT FEES
The following sets forth the aggregate fees paid for each of the two past fiscal
periods for professional fees to KPMG for the audit of the annual financial
statements or for services normally provided by KPMG in connection with
statutory and regulatory filings or engagements for those fiscal periods.
Fiscal year ended June 30, 2003 $ 53,700
Audit of consolidated financial statements
for the six-month period ended December 31, 2003 $ 64,040
AUDIT-RELATED FEES
The following sets forth additional aggregate fees to those reported under
"Audit Fees" in each of the last two fiscal periods for assurance and related
services by KPMG that are reasonably related to the performance of the audit or
review of the financial statements:
Fiscal year ended June 30, 2003
Review of interim financial statements $ 23,200
Translation services $ 16,200
Six-month period ended December 31, 2003
Review of interim financial statements $ 10,500
Public offering $206,000
Comments on accounting treatment
or requirements of various transactions $ 43,870
Translation services $ 31,400
NON-AUDIT AND TAX FEES
The following sets forth the aggregate fees billed in each of the last two
fiscal periods for professional services rendered by KPMG for assistance with a
corporate reorganization, tax compliance, tax advice, tax planning and review of
business opportunities:
Fiscal year ended June 30, 2003
Assistance with corporate reorganization
and tax compliance work $119,700
Six-month period ended December 31, 2003
Review of various business opportunities,
sales tax and US tax issues $ 38,300
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ALL OTHER FEES
The following sets forth the aggregate fees billed in each of the last two
fiscal periods for products and services provided by the principal accountant
not described above:
Fiscal year ended June 30, 2003 None
Six-month period ended December 31, 2003 None
Our Audit Committee pre-approves every engagement by KPMG to render audit or
non-audit services. All of the services described above were approved by the
audit committee.
Prior to the beginning of each fiscal period, we seek audit committee approval
for all services expected to be rendered by KPMG during the coming year. If
during the course of the year, we require a service to be performed that is not
contemplated in the list of pre-approved services we seek approval from the
Chairman of the audit committee for KPMG to proceed with such service, which
approval requires subsequent ratification at the next meeting of the audit
committee.
ITEM 11 - ADDITIONAL INFORMATION
We shall provide to any person, upon request to the Secretary of the
Corporation:
(a) when our securities are in the course of a distribution under a preliminary
short form prospectus or a short form prospectus,
(i) one copy of our annual information form, together with one copy of any
document, or the pertinent pages of any document, incorporated by
reference in the annual information form,
(ii) one copy of our comparative financial statements for our most recently
completed financial year for which financial statements have been
filed together with the accompanying report of the auditor and one
copy of our most recent interim financial statements that have been
filed, if any, for any period after the end of our most recently
completed financial year,
(iii) one copy of our information circular in respect of our most recent
annual meeting of shareholders that involved the election of directors
or one copy of any annual filing prepared instead of that information
circular, as appropriate, and
(iv) one copy of any other documents that are incorporated by reference
into the preliminary short form prospectus or the short form
prospectus and are not required to be provided under clauses (i), (ii)
or (iii) above; or
(b) at any other time, one copy of any documents referred to in clauses (a)(i),
(ii) and (iii), provided that we may require the payment of a reasonable
charge if the request is made by a person or company who is not one of our
security holders.
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Additional information, including directors' and officers' remuneration and
indebtedness, principal holders of the Corporation's securities, options to
purchase securities and interests of insiders in material transactions, if
applicable, is contained in our information circular dated April 6, 2004 which
was prepared for the 2004 annual meeting of shareholders. Additional financial
information is provided in the Corporation's comparative financial statements
for the six-month period ended December 31, 2003.
The foregoing documents may be obtained by contacting the office of the
Secretary at the head office of the Corporation, 275 Armand Frappier Boulevard,
Laval, Quebec H7V 4A7.
25