CytoGenix Shareholder Update - January 22, 2008 ( not on web site)
HAPPY NEW YEAR to all our friends, colleagues and shareholders!
2007 has proven to be a challenging year for us all, but we are
working with determination and optimism to overcome our obstacles and
return to our primary focus -increasing shareholder value through the
commercialization of our DNA based therapeutics. Toward this end, we
commit to advance our products to the clinical trial stage as quickly
as our funding allows. For 2008 this means bringing our Herpes and
Avian Flu candidates closer to an IND filing. Several external tests,
most notably adsorption, distribution, metabolism and excretion
("ADME"), toxicology and stability need to be initiated. These tests
will be directly impacted by our ability to raise necessary funding.
In addition, we want to increase our emphasis on our anti-microbial
technology which has many exciting components including therapeutics
to combat MRSA, and possibly breast cancer and melanoma. With regard
to our SynDNA(TM) technology, we hope to increase licensing and
partnering opportunities with well-established players in the field of
DNA therapeutics. Finally, in 2008 we expect to complete construction
and move in to our new office and laboratory facilities
Management:
As we noted in our previous update, the Company hired Greg Taylor
as its new CFO in September of 2007. Mr. Taylor comes to the company
with 20 years of fund raising, corporate advisory, entrepreneurial and
senior management experience including CEO of a private healthcare
company. Mr. Taylor holds a BBA degree in Accounting and Finance as
well as a Masters of Taxation, both from Baylor University. Mr. Taylor
has experience in biotechnology as a venture capitalist and
understands the issues and challenges that confront the Company. He is
making strides in fund raising, corporate governance and business plan
development, so that the market is in a better position to perceive
the true strength of the Company.
Our goal for 2008 is to strengthen our management team with more
professionals having similar passion for our objectives, with
experience in the fields of Business Development, Marketing and
clinical trial planning and execution. We are hopeful that the
addition of individuals with these skills will help us move forward
toward commercialization of our products. With regard to our CEO
search, this has been put on hold pending additional fund raising and
continued stabilization of the Company after the reverberations of the
management shake-up that occurred near the end of 2006. Additionally,
the management team has committed to increasing the visibility of the
Company in the investment community, while at the same time, raising
the profile of CytoGenix' three proprietary DNA-based technology
platforms, as a means to further build and strengthen shareholder
value. In order to better execute on this goal, we have retained the
services of BioXcel and OTC Communications.
The collaboration with BioXcel is focused on two-fold approach: 1)
highlighting our proprietary DNA-based technology to generate
excitement, as well as sales revenue, of the Company's synDNA(TM)
production methodology as a means to market CytoGenix; and 2)
assisting the Company in targeting, recommending and negotiating with
suitable partners for the further marketing and development of our
therapeutic drug candidates.
The Company also recently retained the services of an investor
relations agency, OTC Communications. OTC Communications is an agency
focused on the life sciences and healthcare industries and
specializing in providing micro and small-cap companies in these
sectors with investor and media relations capabilities. We are
confident that our partnership with these two organizations will
assist in accomplishing our goals of raising visibility for CytoGenix
and increasing shareholder value.
Financial Update:
As a small biotechnology company, CytoGenix, Inc. is constantly
battling with the problem of undercapitalization. Though the Company
is generating revenue, it will continue to rely on raising necessary
funding through the issuance of common stock. This is a sensitive
issue to the Company as we seek to raise the funds needed yet try to
be mindful of the dilution to the existing shareholders as well as the
problem of selling common stock shares at prices we believe are
significantly below the intrinsic entity value. We would also like to
make note that though additional share issuance is at first appearance
dilutive, it does not negate the prospect that funding increases the
value of the company as scientific and commercialization progress is
made so that ultimately the addition of shares may actually be
accretive to entity value. This past year saw a significant drop in
share price. We believe this is due primarily to non-operational
issues as well as the management change and subsequent arbitration and
SOX complaint. Management believes that the current share price is not
indicative of the inherent value of the Company's IP and the potential
for commercialization of its products as well as recognition of its
revolutionary technology. In the last quarter of 2007, the Company
secured financial commitments totaling approximately $1.1 MM through a
private placement offering. Though the Company needs to raise
additional funds to perform necessary scientific testing it is trying
to judiciously schedule its private placements to minimize share
dilution. This is difficult to accomplish at the current share price.
The Company is currently undergoing a thorough due diligence
investigation by a strong private equity investment firm with the goal
of providing most if not all of our budgeted funding needs for the
next two to three years. In the meantime, our current plan is to
complete an immediate small private placement to be followed by an
appeal to select institutional investors for a larger raise in the
first and second quarters of fiscal 2008 depending on the price of the
stock and the possibility of a rebound from the heavy selling at the
end of 2007. The Company is also in discussions regarding long-term
financing of the remaining balance on the new corporate offices and
lab facility. It is the Company's view that a permanent financing of
its building will be less expensive that issuance of shares at the
current price.
Business Development:
We continue our belief that synDNA(TM) offers the DNA therapeutics
field a streamlined and cost effective alternative to the use of
cumbersome, bacterially grown plasmids. The synDNA(TM) production
process eliminates the use of bacterial sequences and antibiotic
markers in the expression cassette. The "cassette" to which we refer
is the DNA construct made of a number of different oligonucleotide
sequences that, when injected into host cells, instruct the host cell
to make the antigenic proteins that set the host immune system into
motion to provide protection against the pathogen which displays the
same proteins. The synDNA(TM) process by-passes the need to remove
bacterial debris and endotoxins. It affords significant reduction of
the time to develop expression cassettes with new sequences. This is
especially important to meet new threats such as mutated or engineered
pathogens. Use of synDNA(TM) in the Company's products makes us
independent of the need to purchase plasmids or invest in the
extensive capital equipment to produce plasmids ourselves.
Development of synDNA(TM) has led to an expansion of the product
pipeline and given rise to another dimension of potential products in
DNA vaccines. The Company has progressed from proof of concept studies
to animal challenges showing protection against virulent pathogens. We
have tested DNA vaccines for smallpox, HIV (mice and monkeys),
Hepatitis B (rabbits), seasonal flu (mice) and avian flu (mice). The
avian flu tests included challenges of the animals with the Vietnam
strain of the avian flu. We are now initiating tests of avian flu in
ferrets. Ferrets are a good model for the disease in humans. We will
use the data from the animal experiments in our efforts to achieve an
IND for clinical trials for the vaccine.
Our collaborative agreements with the US Army at Fort Detrick to
develop DNA vaccines against ebola and equine encephalitis and with
the US Department of Agriculture to develop a vaccine against
brucellosis are moving forward. We have learned from our experiments
with these various vaccines that the synDNA(TM) platform is both
robust and flexible. Now that we have developed the basic structure of
the expression cassette, we can consider DNA vaccines against any of
the dangerous pathogens listed by the Center for Disease Control
(CDC).
Unlike other pharmacological agents employed to chemically signal
cells to interrupt, reduce production or bind and regulate specific
disease-causing proteins, this application of CytoGenix's novel single
stranded DNA ("ssDNA") technology as a platform for the expression
vector we have constructed against the herpes virus directs infected
cell(s) to make a short nucleic acid sequence that specifically
targets and impedes the activity of a protein needed for viral
reproduction. We are confident that the specificity of this
application reduces the possibility of side effects and/or long-term
effects and is a more direct approach to targeting the origin of
disease rather than merely treating symptoms.
Based on the results of our animal testing for Simplivir(TM),
avian flu and the anti-microbials and our ability to complete
additional financing required to meet Company objectives, we are
focused on initiating the FDA required absorption, distribution,
metabolism and excretion (ADME) tests needed to commence clinical
trials for these candidates. We remain confident that the animal
studies and FDA required ADME tests will further validate our
proprietary technology platforms as a leader in the field of gene
based medicine.
We continue our efforts to increase sales of synDNA(TM) to other
companies and to expand this market as well as to extend our
repertoire of useful applications. We are following through with our
efforts to team up with an established player in the field; these
efforts will include both domestic and foreign markets, including a
possible business venture with a manufacturer to sell GMP quality
synDNA(TM) prior to completion of our own GMP facilities. As more
companies recognize the advantages afforded by synDNA(TM), CytoGenix
will benefit not only from increased revenue but also in support from
parallel efforts to seek clinical and regulatory approval of
synDNA(TM) based products.
Legal Update:
Intellectual Property Matters
Since October of 2007, we have received two additional patent
allowances. We currently have an allowance in the US for our
application covering our Herpes Simplivir(TM) product. We will be
filing a divisional application on some of this technology that may
allow us to broaden our ability to use this technology in additional
business applications as well as to extend the life of the patent. The
divisional application will be filed prior to issuance of the allowed
application. Our second allowance covers our original ssDNA expression
technology in Australia. These allowances will bring our total number
of granted patents to fifteen, providing a broadening strength to our
intellectual property portfolio which will support licensing and
cross-licensing opportunities in the future.
Employment Litigation Issues
The litigation effort with the arbitration addressing the
departure of our former executives, Lawrence Wunderlich (CFO) and
Frank Vazquez (COO) continues. As with all litigation matters, timing
is always difficult to predict, but we continue to proceed as swiftly
as is prudent and as allowed given the circumstances. The Company has
not been contacted by the SEC since the special committee filed its
final report on September 5, 2007. The investigation and report filed
with the SEC found that the allegations made in the SOX complaint,
filed by the former CFO, were not supported by evidence and were
devoid of merit.
New Facility Progress:
Our new office and lab facility is making good progress with the
weather becoming less of a factor in the timing of the project. We
expect completion in the second quarter of 2008. As funds become
available and engineering plans progress, we will begin the build-out
of the GMP portion of the facility.
Summary:
In summary, the Company is stronger from a senior management
standpoint than it has been in several years. Intellectual property
management has improved markedly and is progressing at a better rate
under the guidance of Dr. Cindee Ewell. Our science is moving forward
with renewed vigor and potential commercialization of our products is
moving closer each day. Our new facilities will soon be completed. The
primary challenges are to improve our share price and continue to
raise money to fund our progress. We are optimistic that 2008 will be
a significant improvement over 2007 and we expect it to be a
breakthrough year. To our faithful shareholders we say thank you for
your patience and continued support and we look forward to seeing you
this spring at our annual shareholders meeting.
