August 1, 2013 Dear Oxygen Biotherapeutics Shareholders,
We believe calendar 2013 will be a critical year for our Company with current developments continuing throughout fiscal 2014. Now that we
have committed our focus to Oxycyte® as a treatment for critical indications including traumatic brain injury (TBI), we have an opportunity
to make significant advances moving this unique product forward in clinical trials. On behalf of Oxygen Biotherapeutics’ board of directors
and management team, thanks and appreciation go out to our shareholders who have continued to support our Company through a challenging
The global TBI market is projected to reach $2 billion by 2017 according to market research firm, Global Data. A primary concern following a
TBI event is ensuring that a sufficient supply of oxygen is delivered as soon as possible to the brain and the rest of the body. Oxycyte® has the
unparalleled ability to deliver oxygen directly into damaged brain tissues that are ischemic and therefore in critical need of oxygen. Oxycyte®
represents a novel therapeutic that is focused on directly reducing brain damage, long-term disability, and death for patients suffering from a TBI.
Currently there are no approved drugs for the treatment of TBI. Oxycyte® has the potential to save millions of lives and improve the post-TBI
wellbeing of millions more.
At this point we believe we have taken the necessary steps to move the Company forward to achieve the goals of shareholder value preservation
and to rebuild from here. We recently brought on board a new Chief Medical Officer, Colonel Charles L. Pamplin III, M.D., who fortifies our executive
scientific and medical teams. He was previously a U.S. Army Colonel and Vice President of Clinical Development at King Pharmaceuticals. At the
appropriate time, which we believe will be during fiscal 2014, we intend to bring on board a new Chief Executive Officer whose goals and actions are
aligned with those of our Company’s key stakeholders. During this time of transition the board has entrusted me to continue with the additional
responsibilities of Interim President and CEO, in addition to my role as Chief Financial Officer. With the support of our board and clinical team,
we are working hard to execute on important clinical advancements that can support and potentially secure a very bright future for Oxygen Biotherapeutics.
On July 23, 2013 we closed on approximately $5.4 million in funding through Series C convertible preferred stock. We believe this capital will provide
us with the liquidity necessary to fund our projected operating requirements through the remainder of fiscal 2014. In February 2013 we had raised
$2.1 million to fund clinical trials and operating expenses, and more recently, implemented a reverse split of our common stock. The February funding and
the reverse stock split helped us maintain our NASDAQ listing. We have also taken steps to reduce our operating and clinical expenses by focusing on
the development of Oxycyte® for critical indications including TBI and stroke, while out-licensing and partnering on the non-core indications of our
The FDA’s Clinical Hold on Oxycyte® In the coming quarters, we hope to clear a major hurdle by addressing the U.S. Food and Drug Administration’s (FDA) clinical hold on perfluorocarbon
(PFC) emulsions. The FDA’s clinical hold was based on the observance of toxicities resulting from PFC emulsions that may or may not be clinically significant.
The FDA has requested that companies developing PFC emulsions, like Oxycyte®, explore in more detail PFC emulsions’ impact on two primary effects:
the potential interference of PFCs with an organism’s immune system (immunocompetency), and PFCs potential interference with platelet function.
TBI is a very important indication for which the U.S. Army seeks an effective treatment. In the Iraq war, 75% of all U.S. Military casualties were caused by
explosives weaponry resulting in TBIs and blast-induced neurotrauma. In June 2011, Oxygen Biotherapeutics initiated a two-year preclinical research program
fully funded by a $2.07 million reimbursement grant from the U.S. Army to address the FDA’s concerns. We are on schedule to complete all of these studies.
On June 18, 2013 we announced preliminary safety data results for four immunocompetence preclinical trials which we have already completed. In addition,
we have received final reports for one platelet study we completed aimed at assessing the potential of intra-cranial hemorrhage in response to Oxycyte®
administration. Results from that study showed no obvious risk of such events. We are also on track to complete the rest of the platelet preclinical studies
in the third quarter of the calendar year. Over the course of the next several months we will submit our results to the FDA.
Based upon the preclinical trial data we have analyzed to date, we believe the FDA may find the safety results address their stated concerns and combined
with the clinical data we continue to collect, may lead to the FDA removing its clinical hold on Oxycyte® in the treatment of TBI. Having the FDA’s blessing
to resume clinical trials in the U.S. is a major milestone that we are working towards. While we address the FDA’s clinical hold on our product, we continue to
seek out-licensing opportunities in international markets and make solid progress in Phase IIb clinical trials for Oxycyte® for the treatment of TBI in Israel
and Switzerland. The Data Safety Monitoring Board (DSMB) overseeing our ongoing Phase IIb trials has, based on the results of the first cohort of patients,
authorized us to move forward with the next cohort of the study with dosses where signs of efficacy are expected. The absence of any safety concern on the part
of the DSMB and their unanimous recommendation to proceed with the next cohort represents a significant milestone for our clinical program.
On July 1, 2013 we announced the enrollment of our first patient in the second cohort.
Successfully Completed Four Immunocompetence Preclinicals to Address FDA’s Hold The immunocompetence studies that were requested by the FDA and tested the impact of Oxycyte® on the most common immune system challenges for TBI
patients are complete. In the immunocompetence experiments that used the Influenza virus to assess the overall health of the immune system, Oxycyte® had
only subtle effects on antibody production and did not adversely impact clearance of this common lung infection. Similarly, in a separate study examining the
early phase response of the immune system, Oxycyte® did not interfere with the efficient clearance of a Streptococcal pneumonia infection from the lung.
Many TBI patients may experience one or more bouts of pneumonia as a result of being intubated; therefore, these results are important in that they provide
evidence suggesting that Oxycyte® does not compromise the patient’s ability to fight this infection often seen in the intensive care unit (ICU) of a hospital.
An additional experiment requested specifically by the FDA demonstrated that Oxycyte® did not interfere with the ability of macrophages to identify and engulf
bacteria and, thus, should have minimal effect on that clearance mechanism, which is associated with many common bacterial infections.
A fourth study was developed to test the potential immunomodulatory effects of Oxycyte® in a listeria model of systemic bacterial infection. Our study
confirmed prior findings from other researchers working with PFCs. In our study the administration of Oxycyte® immediately prior to an injection of listeria
directly into the circulation resulted in a marked decrease in the animal’s ability to fend off this infection. It is important to note, however, that listeria is not a
bacterium commonly associated with TBI patients and was used in this study simply as a tool to assess immune function. According to the U.S. Centers for
Disease Control, there are only an estimated 1,600 cases of listeria reported each year in the U.S., whereas the Centers for Disease Control state that 1.7 million
Americans suffer from TBI each year, contributing to 30% of all injury related deaths in the U.S. annually.
Enormous Market for Treatment of TBI The treatment of TBI was an estimated $1.5 billion global market in 2010 and is projected to grow at a CAGR of 3.8% annually to become a $2 billion global market
by 2017 according to GlobalData. We remain on track with our Phase IIb human clinical trials for the treatment of TBI in Switzerland and Israel. Upon successful
completion of these Phase II trials, we believe Oxygen Biotherapeutics will be well positioned to attract a licensing deal with a larger biotech looking to commercialize
an effective TBI treatment in global markets.
Outside of our focus on TBI, our platform technology has many other clinical applications ranging from diagnostics to cosmetics. We are pursuing a strategy of
out-licensing and partnering in order to maximize our return on these non-core indications while minimizing our operating expenses.
Generating Revenue from Out-licensed Skincare Line Having launched our cosmetics line, Dermacyte® and built out operations to support the growth of its sales, we shifted strategy in the interest of improving
our ROI for this product line. In February we entered into a License and Supply Agreement with the Cosmetics Division of Valor SA of Lausanne, Switzerland. We
granted Valor the exclusive right to sell, import, export, distribute, package, label and commercialize Dermacyte® worldwide. In exchange, Valor is paying
Oxygen Biotherapeutics an annual, non-refundable license fee as well as a royalty on all sales of Dermacyte® when a specific agreed upon sales goal is achieved. The
Dermacyte® line of topical cosmetics products contains our patented platform technology. The product line has passed required safety and toxicity tests in the U.S.,
and a Cosmetic Product Ingredient Statement (CPIS) has been filed with the FDA. Oxygen carrying cosmetics address a significant market including the multi-billion
dollar anti-aging segment. As a result of our deal with Valor, we are now generating licensing revenues while reducing operating expenses associated with the non-core
Partnered for Multi-Billion Dollar Market in Diagnosis and Treatment of Stroke We are also pursuing indications for Oxycyte® including magnetic resonance imaging (MRI) diagnostics and the treatment of stroke. In February of 2012 Oxygen
Biotherapeutics entered into a Joint Research Agreement with Aurum Biosciences to develop Oxycyte® as both a diagnostic tool and therapeutic agent for acute ischemic
stroke, which is the most common kind of stroke, caused by an interruption of blood flow to the brain. Currently, Aurum is conducting a series of preclinical studies to
explore whether Oxycyte® administered while the subject is receiving oxygen therapy allows for optimization of MRI scans and improved patient outcomes. Research
presented at the 2012 Gordon Conference on Brain Metabolism Energy & Blood Flow shows that Oxycyte® improves imaging of the penumbra following a stroke. The
penumbra is the region of the brain where blood supply is inadequate to support normal brain function but sufficient to maintain tissue viability for a limited period of time
following stroke. It represents potentially salvageable tissue which, if oxygen supply can be restored, could lead to improved functional outcomes for stroke patients. Studies
conducted at the University of Glasgow showed that Oxycyte® can both help identify compromised penumbra tissue and it can also offer the most efficient delivery of oxygen
to the stroke-affected tissue. GlobalData estimates that the global stroke market will grow from $2.9 billion in 2008 to $3.6 billion by 2015.
Additional Indications Explored by U.S. Navy Funded Studies While the U.S. Army has funded the preclinicals requested by the FDA, we currently have four additional Cooperative Research and Development Agreements (CRADA)s
with the U.S. Navy for the treatment of decompression sickness and spinal cord injury related to decompression sickness, TBI, hemorrhagic shock, and wound treatment.
These CRADAs provide Oxygen Biotherapeutics with non-dilutive funding that helps advance our science while providing our Company the opportunity to contribute to the
wellbeing of our nation’s service men and women.
In Conclusion... We look forward to closing out 2013 with positive momentum based on the advancement of our science and sound business choices made by our management team, with
the guidance of our board. In the third quarter of the calendar year we plan to submit our preclinical results to the FDA, which we hope will result in a positive outcome and
removal of its clinical hold on PFCs. This would open up the U.S. TBI treatment market for us. At the same time, we are moving forward with Phase IIb trials internationally.
Either of these two triggers - the FDA lifting its hold on PFCs, or the successful completion of international Phase II trials, could position us very well for a partnership deal
with big pharma which may lead to a cash infusion plus licensing fees upon regulatory approvals. In the balance of 2013 and beyond we look to expand our intellectual property
portfolio as well as seek additional out-licensing and partnership deals for a range of non-core indications of our platform technology.
I would like to conclude by once again thanking all our shareholders and other supporters for being part of our journey and we are working hard on making fiscal 2014 a
pivotal year for the Company.
CFO and Interim President & CEO Oxygen Biotherapeutics?
ONE Copley Parkway, Suite 490 Morrisvillle, NC 27560
This shareholder letter contains certain forward-looking statements by the company that involve risks and uncertainties and reflect the company’s judgment as of the date of this letter. The forward-looking statements are subject t
o a number of risks and uncertainties delays in new product introductions and customer acceptance of these new products, and other risks and uncertainties as described in our filings with the Securities and Exchange Commission, i
ncluding in our annual report on Form 10-K filed on June 26, 2013, as well as other filings with the SEC. The company disclaims any intent or obligation to update these forward-looking statements beyond the date of this letter.
This caution is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Diagnosis and treament of Stroke using Oxycyte
'Holy Grail' technique in treating stroke patients
Ground Breaking Research Into Stroke http://www.nhsggc.org.uk/content/default.asp?page=s1192_3&newsid=16171&back=s8_1
2013 Scottish Health Innovation Limited (SHIL) Award
Aurum and its Gold Technology - Celestine Santosh and Dave Brennan, Greater Glagow Health Board
Gold is a novel oxygen carrier and proprietary software for use with MRI, initially for Acute Ischaemic Stroke known as AIS. Currently in preclinical development Gold simultaneously Perfluorocarbons enhance a T2*-based MRI technique for identifying the penumbra in a rat model of acute ischemic stroke
provides improved imaging of damaged brain tissue and delivers oxygen to prevent further tissue damage and tissue death.
Journal of Cerebral Blood Flow & Metabolism , (26 June 2013) | doi:10.1038/jcbfm.2013.86 http://www.nature.com/jcbfm/journal/vaop/ncurrent/full/jcbfm201386a.html
Investor Presentations 2013 Latest http://www.sec.gov/Archives/edgar/data/34956/000135448813003685/oxbt_fwp.htm (June 2013)