IXION
Ixion Biotechnology, Inc.
1999 Annual Report
Letter To Shareholders
April 28, 2000
Alachua, Florida
Dear Shareholder:
This letter, accompanied by the attached Securities and Exchange
Commission filing on Form 10KSB (containing our audited financial statements),
is your annual report for Ixion for the year 1999.
[Picture of Weaver H. Gaines, Chairman and CEO,
and Ammon B. Peck, Ph.D., Chief Scientist, in
Dr. Peck's laboratory at the University of Florida.]
Overview - A Good Year for Ixion
Our letter will cover highlights of last year's activities,
supplemented by recent developments during the first quarter of 2000.
In perhaps the most significant change for Ixion, during the last year,
our product pipeline matured enough to shift our primary effort from doing
cutting-edge research to emphasizing product and process development. As a
result, we are working hard to bring at least one product, our Ox-ControlTM
nutritional supplement designed to promote healthy levels of oxalate, to market
during the next twelve months. The new thrust has led to an expansion in our lab
staff as well as the retention of BioQuest corporation, product development and
regulatory specialists.
Our progress was made possible by the significant inflow of cash from
the sale of securities and successful NIH grant applications, both of which
supported our continued research and development.
Financing
Three events improved our financing picture in the last year:
significant investment from Q-Med AB (publ); a successful conclusion of our
Internet direct public offering; and the award of several NIH research grants.
Since April 1999, we have received $975,000 (at the rate of $75,000 per
month) in exchange for 487,500 shares of our common stock from our
collaborators, Q-Med AB (publ). Founded in 1987, Q-Med is a fast-growing,
profitable Swedish company (listed on the Stockholm stock exchange) that
develops, manufactures and sells natural, highly specialized medical implants.
(Q-Med AB is not related to nor affiliated in any way with Q-Med, Inc., a
Nasdaq-listed company.) Q-Med's products use a unique form of non-animal,
stabilized hyaluronic acid. The majority of Q-Med's revenues are from
Restylane(R) for cosmetic use. More information about Q-Med is available at
www.q-med.com.
Our interest in each other arose from the potential of using Q-Med's
hyaluronic acid gel as an encapsulation material for islet transplantation to
treat diabetes. We have an on-going joint research project with them to develop
this capability.
Q-Med has an option to acquire up to 2,700,000 shares of our stock.
Their option expires in June, and we are hopeful that the option will be
exercised; however, that remains to be seen.
The public offering we commenced in December 1997, using the Internet
for distribution, was oversubscribed and closed on March 31, 2000, after several
amendments. We sold 150,000 shares of common stock for gross proceeds over the
27- month offering period of $600,000. We were the first biotech company to use
the Internet to distribute fully-registered stock.
Last, but not least, we successfully competed for several NIH grants
during the last year, resulting in $500,000 of additional research funds for us.
Personnel Changes
Changes in the management team over the last year include our being
joined full-time by Kimberly A. Ramsey, who is our Vice President and
Controller. She had been our part-time controller since 1995.
[Picture of Kimberly A. Ramsey, Vice President
and Controller]
In recognition of Dr. Harmeet Sidhu's research contribution during her
five years with us, she was promoted to Vice President, retaining her position
as Director of Research, Oxalate Division.
Bengt Agerup, founder, former Managing Director, and currently Vice
President of R&D at Q-Med joined our board of directors, as did Tom Stagnaro,
currently an independent biotech and pharmaceutical consultant, with 30 years of
experience in the management of biotechnology companies, most recently as
President and CEO of 3-Dimensional Pharmaceuticals.
Lastly, we retained Dennis Palmer, Ph.D., and Alexander Rubido, MS from
the firm of BioQuest Corporation, to act as our product development and
regulatory advisors. BioQuest is a biotechnology consulting company we are using
to shorten the development cycle time and expenses of bringing our products to
market. They will assist us in planning and executing our program and project
management, our design control implementation, our regulatory and quality
compliance, and our process development.
Product Development - Oxalate Products
We have four oxalate products in development:
o Ox-ControlO - nutritional supplement and/or probiotic to promote healthy
levels of oxalate;
o Pet food supplement to promote healthy levels of oxalate in
companion animals;
o XEntrIx O Oxalobacter formigenes Monitor - diagnostic test
for the presence of the gut bacterium, O. formigenes; and
o IxC1-62/47 - drug for the therapeutic treatment of oxalate-related
diseases.
[Picture of Harmeet Sidhu, Ph.D., VP and Director of Research, Oxalate Division]
Ox-Control,O an Oxalate-Reducing Nutritional Supplement. Ox-ControlO is
an oral formulation of whole cells or enzymes from O. formigenes in an enteric
coating, for use in promoting healthy levels of oxalate in the body (see the
picture below). Working with a potential collaborator, we have formulated
Ox-ControlTM in pill form to be taken with meals. We are now concentrating on
optimization and scale-up of the manufacturing process.
[Picture of Ox-ControlTM -Enzyme version of our
nutritional supplement to promote healthy levels
of oxalate]
Companion Animal Food Supplement. An additional oxalate-based product
is an animal food or supplement formulated to maintain healthy levels of oxalate
in companion animals, particularly dogs and cats.
The XEntrIX TM Oxalobacter formigenes Monitor. We have used the genes
from the gut bacterium, O. formigenes, to construct a DNA-based diagnostic test
(the XEntrIX TM Oxalobacter formigenes Monitor) for the rapid and sensitive
detection of O. formigenes in easily-collectable stool samples. Except for our
XEntrIX TM Oxalobacter formigenes Monitor, there is no method of rapidly and
easily detecting the presence or absence of O. formigenes in the body.
IxC1-62/47 Enzyme Therapy for Oxalate-Related Disease. In addition to
the XEntrIX TM Oxalobacter formigenes Monitor, we are developing IxC1-62/47, an
orally administered therapeutic product consisting of the recombinant form of
two enzymes normally found in O. formigenes. IxC1-62/47 is targeted at
oxalate-related disorders including kidney stones, enteric hyperoxaluria,
oxalosis, cardiomyopathy, cardio conductance disorders, cystic fibrosis, Crohn's
disease, and possibly vulvodynia.
Work on IxC1-62/47 has been proceeding well. During the last year, we
worked with Amersham Pharmacia Biotech to successfully develop our commercial
purification process, which is now complete.
Product Development - Diabetes
[Picture of Vijay Ramiya, Ph.D., Director of Research, Diabetes Division]
Our planned islet replacement therapy products, both of which are in the
research stage, include
o an autologous cultured islet or stem cell service for
transplantation; and
o an implantation device consisting of both generic cultured islets and
an encapsulation material.
Autologous Cultured Islet Service. A trained surgeon will supply Ixion with
a biopsy of pancreatic tissue taken from the diabetic patient. Using our
proprietary methods, we will grow new insulin producing islets for that
individual patient. The replacement islets will then be delivered to the surgeon
for implantation to reduce the patient's requirement for daily insulin
injections. This service avoids the problems of immune rejection because it uses
the patient's own cells, hence no immuno-privileged encapsulation will be
required.
Generic Cultured Islet in an immuno-privileged capsule. Using our
proprietary methods, we will grow generic cell lines of insulin-producing
islets. These islets will then be encapsulated in an immuno-privileged material
to protect the islets from attack by a patient's immune system. The encapsulated
islets will be sold to surgeons for implantation to reduce a diabetic patient's
requirement for daily insulin injections.
Collaborations and Research Grants
During the last year, we were awarded four NIH grants for a total of
$500,000, including
o In collaboration with Dr. Marguerite Hatch (a member of our scientific
advisory board) of the University of California at Irvine, a Small
Business Technology Transfer (STTR) grant to study the enteric
elimination of oxalate;
o With Dr. Ross Holmes, a researcher at Wake Forest Medical School, a
Small Business Innovation Research (SBIR) grant to
study the digestion of food oxalate;
o
o A two-year, $200,000, Exploratory and Development grant to Dr. Vijay
Ramiya, our Director of Research, Diabetes Division, to study islets
from islet progenitor and stem cells for implantation; and
o With Dr. Michael Humphreys-Beher of the dental school at the University
of Florida, an STTR to study the feasibility of developing a new
diagnostic test for sufferers of Sjogren's Syndrom, an autoimmune
disease.
We are extremely proud of our researchers and collaborators for
qualifying for four NIH grants in less than a year.
Other 1999 Milestones
During 1999, we had several other successes, including:
o Receipt of our third issued patent and a notice of allowance from the
U.S. patent office, as well as our first foreign patent for our oxalate
technology. We now have three US patents, one US notice of allowance,
and one foreign patent in this area.
o Receipt of our second U.S. patent and our first foreign patent for our
islet technology. We now have two US and one foreign
patents in this area.
o Our ground-breaking study relating to the use of islets to reverse
diabetes was published in Nature Medicine, leading to world-wide
favorable press coverage.
o Dr. Ammon B. Peck, our Chief Scientist, was one of the world experts
invited to present at the workshop on Stem Cells and Pancreatic
Development in April, jointly sponsored by the NIH, the Juvenile
Diabetes Association International and the American Diabetes
Association.
o Our precedent-setting study of the significance of O. formigenes in
cystic fibrosis patients was published in the
prestigious European journal of medicine, Lancet.
o Members of our scientific team also gave invited presentations at the
Urolithiasis 2000 conference held in Cape Town, Africa.
[Picture of David C. Peck, President and CFO]
In short, it's been another good year.
Thank you again for your wonderful support.
Sincerely yours,
Weaver H. Gaines David C. Peck
Chairman & CEO President & CFO
<PAGE>
Officers, Board, Advisors, Staff...
Scientific Advisory Board
Ammon B. Peck, Ph.D. Chairman and Ixion's Chief Scientist
Milton J. Allison, Ph.D. Professor Microbiology, Immunology and
Preventive Medicine, Iowa State University
Marguerite Hatch, Ph.D. Professor, College of Medicine, Nephrology
Division and Director of the Kidney Stone
Center, University of California, Irvine
Saeedur R. Khan, Ph.D. Associate Professor of Pathology, University
of Florida College of Medicine
Desmond A. Schatz, M.D. Medical Director, Diabetes Center, and
Associate Professor of Pediatric
Endocrinology at the University of Florida.
Sheldon M. Schuster, Ph.D. Biotechnology Program Director at the
University of Florida
Hans Wigzell, M.D., D. Sci. Rector, Karolinska Institute, Stockholm,
Sweden
Executive Staff
Weaver H. Gaines Chairman, Chief Executive Officer and
Director
David C. Peck President, Chief Financial Officer and
Director
Ammon B. Peck, Ph.D. Senior Vice President and Chief Scientist
Harmeet Sidhu, Ph.D. Vice President & Director of Research,
Oxalate Division
Vijay K. Ramiya, Ph.D. Director of Research, Diabetes Division
Kimberly A. Ramsey Vice President & Controller
Board of Directors
Bengt Agerup Vice President, Research and Development,
Q-Med AB (publ)
Karl-E. Arfors, Ph.D. President, Experimental Medicine, Inc.
Weaver H. Gaines Chairman and Chief Executive Officer, Ixion
David M. Margulies, M.D. Director, Executive Vice President, and
Chief Scientist, CareInsite, Inc.
Vincent P. Mihalik Senior Vice President and General Manager,
Lab Systems and Molecular
Biochemicals, Roche Diagnostics
David C. Peck President and Chief Financial Officer, Ixion
Thomas P. Stagnaro Pharmaceutical Consultant
Corporate Information
Headquarters: 13709 Progress Blvd., Box 13, Alachua, FL
32615
Tel: 904-418-1428 Fax: 904-418-1583
Email: [email protected]
Web Site: http://www.ixion-biotech.com
Shareholder Relations: Ted Snow, Director of Administration
Tel: 904-418-1428 Fax: 904-418-1583
Email: [email protected]
Transfer agent & registrar: Questions regarding
stockholdings, certificate replacement, and
address changes should be directed to:
Sun Trust Bank, Central Florida, N.A.
58 Edgewood Avenue, Room 225
<PAGE>
Atlanta, Georgia 30303
Tel: 404-581-1579 Fax: 404-332-3875
Customer Service 800-568-3476
Independent accountants: PricewaterhouseCoopers L.L.P.
Orlando, Florida
Ixion Biotechnology, Inc.
13709 Progress Blvd., Box 13
Alachua, FL 32615
904-418-1428
904-418-1583 (fax)
Internet Web Site:
http://www.ixion-biotech.com
