October 2007
Dear Shareholders,
The following is a brief summary of activity during the third quarter of this fiscal year.
Management
The Company welcomes Greg Taylor as its new Chief Financial Officer. Mr. Taylor took on the responsibilities as CFO at the beginning of September and brings a strong combination of training and experience in strategic planning, business operations, financial management and fund raising to the position. Mr. Taylor's biography will be posted on the Company Website. The search for a new CEO continues and is expected to accelerate as the Company attains a stronger financial position.
Business Development
The Company has historically raised operating funding through small private placements of unregistered securities. In order to take the Company to the next level of growth, we are working to supplement this ongoing support with additional institutional financing.
In addition to supporting the completion of our new corporate and laboratory facility, this combined funding effort is designed to support the ongoing marketing and development of four of our leading products including:
the manufacture and sale of synDNA(tm) to third party users, including diagnostic, drug and vaccine developers;
preparation for IND submission to the FDA for permission to test Simplivir(tm) in clinical trials by performing toxicity and absorption, distribution, metabolism and excretion (ADME) tests;
preparation for performing ADME tests to ready pandemic flu and smallpox synDNA(tm) vaccines for IND submission;
development of other promising synDNA(tm) vaccines in collaboration with the US Army Research Institute for Infectious Diseases (USAMRIID) at Fort Detrick and in collaboration with the US Department of Agriculture; and
development of oligonucleotide based anti-microbials including methicillin resistant staphylococcus aureus (MRSA) and anti-cancer programs.
In addition, the Company has implemented an aggressive plan to submit multiple grant proposals to various government and private agencies representing the Company's development of its leading proprietary technology, including the development of synDNA(tm) vaccines and oligonucleotide-based anti-microbials.
The Company has partnered with BioXcel Corporation, which provides worldwide business services in the areas of pharmaceuticals, biotechnology, diagnostics, and associated industries. BioXcel has initiated multiple contacts and several agreements for evaluation trials for synDNA(tm) to date, and has been instrumental in raising the profile of the Company within the pharmaceutical industry both nationwide and in Europe. The Company is currently negotiating extension of this agreement to further expand its marketing efforts and to provide synDNA(tm) constructs to other companies. To complement this effort, the Company plans to hire additional marketing and business professionals in the coming year that will provide an even stronger base of experience to this effort.
Scientific Development in the third quarter, 2007
The Company's ongoing research and development efforts have previously produced three platforms which support product development: (1) cell-free production of DNA (synDNA(tm)); (2) single-stranded DNA expression systems; and (3) anti-microbial/anti-cancer oligonucleotide sequences. These areas will continue to be the focus of the Company with the goal being IND filings along with clinical trials to prove the safety and efficacy of its products. The success of these efforts will drive the value creation of CytoGenix.
Ongoing Sponsored Research
Drs. Jeffery Actor & Lisa Armitige at the University of Texas Health Science Center Houston, Texas are conducting a study entitled, "Novel compounds against Staphylococcus aureus (MRSA) and M. tuberculosis ".
Drs. Lyuba Benimetskaya and Cy Stein at Albert Einstein College of Medicine, New York are conducting a study entitled, "Targeting melanoma and prostate cancer genes".
Dr. Slobodan Paessler at University of Texas Medical Branch, Galveston, TX is conducting a study entitled "Influenza H5N1 synDNA(tm) vaccine".
Dr. David Weiner at University of Pennsylvania, Philadelphia, PA is conducting a study entitled "synDNA(tm) vaccines against HIV and smallpox in primate models".
Recent Scientific Paper Submissions
Kendirgi, F., Nadezda E. Yun, N.E, Linde, N.S., Zacks, M.A, Smith, J.N., Smith, J.K., McMicken, H., Chen, Y.*, & Paessler, S. Novel linear DNA vaccines induce protective immune responses against lethal infection with influenza virus type A/H5N1, Vaccine, 2007 (submitted).
Conference Presentations
Chen, Y. "Production of DNA Using a Novel Cell-Free synDNA™ Technology", DNA Vaccine 2007, Malaga, Spain, May 23-25, 2007 (invited speaker).
Kendirgi, F., et al., "A Novel DNA-based vaccine protects mice against lethal infection with H5N1 influenza virus isolate A/Vietnam/1203/04". Options for the control of influenza VI, Toronto, Ontario, Canada, June 17-23, 2007 (abstract).
Chen, Y., et al., "Rapid Production of DNA Vaccines Using a Novel Cell-Free synDNA™ Technology', Biomedical Advanced Research and Development Authority (BARDA)-Industry Day, Washington, DC, August 3, 2007 (invited speaker).
Chen, Y. Producing DNA Vaccines Using a Novel Non-Fermentation Technology, European Biopharm Scale-up, Geneva, Switzerland, September 11-13, 2007 (invited speaker).
Tan, X, et al., "Novel DNA Aptamers against Staphylococcus aureus Identified by Whole-Bacterium SELEX", 47th Annual Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC), Chicago, September 17-20, 2007 (abstract, winner of ICAAC Program Committee Award).
Building Progress
Following the grant of building permits by the City of Houston, which took longer than anticipated, groundbreaking for the new CytoGenix facility was held on August 30, 2007. The new site is 6030 North Course Drive located just south of Harwin between Beltway 8 (Sam Houston Tollway) and Wilcrest Drive. The foundation has now been poured and construction is proceeding on schedule with an anticipated completion of the initial phase, which consists of office and lab space, in the second quarter of 2008. Actual progress is dependent upon weather, material, sub-contractor availability and related factors. Buildout of the GMP production facility is dependent upon funding constraints but is anticipated to be completed in the forth quarter of 2008. We will post updates of site photos as progress continues.
Legal Update
Intellectual Property Matters - Since July, we have filed two additional provisional patent applications. One application covers a new set of sequences effective in animal challenge experiments against pandemic flu infection as a synDNA™ vaccine. The other covers an enrichment procedure used to identify novel sequences effective in killing specific types of antibiotic resistant bacteria. This expands our patent holdings to a total of 70 pending patents or patent applications covering various applications of our ssDNA expression, herpes antiviral, anti-bacterial and synDNA™ technology platforms. Typical patent practice routinely rejects most of the initial claims submitted to the patent office. It is only through argument with patent examiners and iterated modification of patent claims that patents able to withstand challenges are obtained.. As such, our 57 pending patent applications are proceeding through the normal prosecution process.
Waldroff and Applied Veterinary Genomics, Inc. - Litigation initiated in March 2004 regarding the validity of license agreements for use of our ssDNA expression technology in shrimp and horse therapeutic applications, which initially resulted in entry of a judgment against CytoGenix, was successfully appealed by the Company in December of 2006 with a finding that there was no obligation for CytoGenix to honor the contracts or to pay opposing party attorney fees. Waldroff and Applied Veterinary Genomics subsequently filed a motion for a rehearing which was denied by the Appellate Court. Waldroff and Applied Veterinary Genomics then filed a Petition for Review with the Texas Supreme Court which was dismissed. The case has been finalized through all available appeal proceedings in favor of CytoGenix, and a final mandate was issued by the 1st Court of Appeals on August 31, 2007. The security deposit made by the Company to comply with the trial court's judgment has been released and the funds returned to the Company.
Employment Litigation Issues - The Company continues with its ongoing arbitration effort to determine if former executives, Lawrence Wunderlich (CFO) and Frank Vazquez (COO) are entitled to benefits following their resignations from the Company in November of 2006. Following his resignation, the former CFO filed a Sarbanes-Oxley (SOX) whistleblower complaint with the Department of Labor (DOL). The SOX complaint was forwarded to the SEC which made a separate inquiry. The Company submitted answers to the original questions directed to the Company by the SEC and has further addressed the SEC inquiry by appointing a special investigative committee made up of outside directors who commissioned an independent, outside attorney to conduct an investigation to determine the merits of the allegations made in the SOX complaint. The investigation was concluded and a final report was filed with the SEC by the independent investigator on behalf of the special committee on September 5, 2007. The report included a finding that the allegations of Company malfeasance made in the SOX complaint are not supported by the evidence, are devoid of merit, and must be rejected. The Company awaits further communication from the SEC with regard to the SOX complaint as it prepares for Arbitration.
Compliance Issues - The Company is continuing the process of improving it's corporate governance provisions to include business conduct and ethics provisions as well as disclosure controls. CytoGenix, Inc. is committed to and is in the process of correcting weaknesses identified in its internal control processes.
Thank you for your ongoing interest and support.
Malcolm Skolnick
AI
