Dear Stockholders,
2007 was a productive year for Maxygen’s lead program, MAXY-G34, our long-acting G-CSF for the treatment of neutropenia. During the first half of the year we completed a successful Phase I clinical trial and mid-way through the year we began a Phase IIa study in breast cancer patients. The Phase I trial showed that the drug was safe in healthy volunteers, with enhanced neutrophil response as compared to Neulasta®.
As we begin 2008, the Phase IIa trial is proceeding at a good pace and the data - albeit early data from a small trial - is encouraging. To date we know that MAXY-G34 shows activity at the first three dose levels, and there have been no reports of serious adverse events or immunogenicity. Our priority for 2008 is to complete the bulk of this trial and share preliminary results with you later this year.
Today’s G-CSF Market
The benefits of G-CSF supportive care are clear: without G-CSF support, patients can be forced to quit or delay critical chemotherapy regimens. Neulasta® is considered the standard for G-CSF supportive care in the United States, and sales patterns outside the U.S. indicate that long-acting Neulasta® is growing at a faster rate than once-daily Neupogen®. The worldwide market for G-CSF products in 2007 was approximately $4.8 billion, with Neulasta® accounting for almost two thirds of those sales. We believe the market potential for long-acting G-CSF products, including MAXY-G34, will remain attractive well into the future.
Because Neulasta® is patent-protected until 2015, our proprietary, patent-protected MAXY-G34 has an opportunity to become established before generics enter the market. Our hope is that MAXY-G34 will be differentiated from Neulasta®, further strengthening our position against Neulasta® and any biosimilar or biogeneric competitors.
The Differentiation Equation
Based on our research, we believe there is a market demand for biosimilar versions of Neulasta®. However, a differentiated, biosuperior product is clearly a more attractive opportunity. We intend to proceed carefully, yet purposefully, to define a path to differentiation for MAXY-G34.
From our Phase I trial we know that MAXY-G34 has distinct biological properties compared to Neulasta®. We will now watch for trends in Phase II that suggest how these properties may translate into clinical differentiation. As these trends develop, we will share the data with potential partners and map out future trials. Because the market position, product portfolio and strategy of our eventual partner will be key components of the overall MAXY-G34 strategy, our plan is to identify a partner before entering Phase III trials.
Our Pipeline Continues to Grow and Advance
Our two preclinical programs also advanced during 2007. We completed the toxicity and CMC (chemistry, manufacturing and control) packages for MAXY-VII for the treatment of hemophilia. This achievement set the stage for us to meet our goals of filing a Clinical Trial Application in the first half of 2008 and starting our first clinical trial in hemophilia patients in the second half of 2008.
We also advanced MAXY-4, our next generation CTLA4-Ig for the treatment of rheumatoid arthritis (RA), into preclinical development. We are encouraged by early interest in this program from potential partners, which is in part due to compelling data we have generated to date. In multiple in vitro assays, MAXY-4 has been shown to be 40 to 300 times more potent than Orencia® in inhibiting T-cell proliferation. If these results translate into human patients, we could potentially deliver a subcutaneous formulation of CTLA4-Ig that could compete against current second- and third-line therapies for RA. Achieving this goal would open up a multi-billion market opportunity for our MAXY-4 program.
Research continues on several other programs in our protein therapeutics pipeline, all of which have potential to advance to the development stage. We are continually evaluating our research projects to maintain a balance between number of active programs and cash utilization.
In addition to our protein pipeline, Maxygen has a vaccine discovery program that is fully supported by federal funding. We have continued to nurture this asset, with no impact on our cash utilization. In 2007 we were pleased to announce a vaccine licensing agreement with sanofi-aventis. Under this agreement sanofi-aventis will develop Maxygen’s shuffled Dengue antigens, with the goal of creating a vaccine against this devastating worldwide disease.
Key Challenges for 2008
For 2008 we are focused on seeking partnership opportunities, maintaining financial strength, and progressing our three lead programs.
Strategic partnering of any of our programs would help us reduce our cash burn and allow us to maintain multiple research and preclinical programs, thus enhancing our risk/reward profile. In 2008 we plan to have two drugs in clinical trials. Our hope is that data from these trials will support the value of our programs and allow us to partner these programs on favorable terms. We are in active partnership discussions on all three of our lead programs, and delivering a partnership in one or more of these programs is one of our highest priorities.
Financially, we believe we are well positioned to aggressively progress our programs until such partnerships are secured. With the recent closure of our Denmark facility, we have improved our operational efficiency and achieved significant operational cost savings.
In addition, we have non-core assets that could play a role in supporting our long-term financial health. In 2007 Codexis, which was spun out of Maxygen in 2002, consummated an expanded collaboration agreement with Royal Dutch Shell in the area of biofuels. This collaboration provided us with a $7.5 million cash infusion. Our current ownership in Codexis is 25%.
Maxygen’s gene shuffling and other protein engineering technologies give us a unique engine for generating next-generation biotherapeutics. Through our history of successes in application areas like chemicals and agriculture, we know that nature’s diversity holds secrets that can be harnessed to produce better proteins. Our mission now is to harness those secrets to produce drugs that contribute to improved human health.
Sincerely,
Russell Howard
Chief Executive Officer
Maxygen