Neose Technologies' Novel Approach to Drug Development

Neose Technologies (NTEC) employs a novel approach to drug development utilizing its proprietary enzyme-based technologies (GlycoAdvance & GlycoPEGylation) to develop and commercialize long-acting versions of therapeutic proteins with five compounds currently in various stages of research and clinical development. The Company focuses its drug development efforts on next-generation therapeutic proteins that are already on the market to take advantage of these compounds well known safety and efficacy parameters. GlycoAdvance is an enzyme-based technology that modifies or attaches new carbohydrate structures to existing therapeutic proteins. GlycoPEGylation is the current focus of the Company, involving an enzyme-based technology that attaches polyethylene glycol [PEG] to carbohydrate structures to impart long-acting characteristics to therapeutic proteins. The novel therapeutic proteins being developed with these technologies are expected to offer clinical advantages such as less frequent dosing requirements and possibly even greater effectiveness. The Company is developing wholly-owned NE-180 (targets a $12B global market) as a long-acting version (administered once every three weeks for chemotherapy indications and once every four weeks for renal indications) of erythropoietin (EPO) using GlycoPEGylation. EPO is used to treat anemia associated with a variety of causes. Although the US patent for EPO does not expire until 2015, key patents in Japan and the EU expired already in 2005. Results from a Phase 2 trial initiated in early 2007 are expected in mid-2008. The competitive landscape for long-acting EPO drugs is dominated by large pharmaceutical and biotech companies. Amgen (AMGN) markets a long-acting version of EPO (Aranesp had over $4 billion in global sales during 2006) and is working on an improved version of the drug. Roche is developing Mircera [CERA] to be an improved form of EPO as well and has already filed with the FDA for initial indications of anemia associated with kidney conditions. Other companies such as Affymax (AFFY) are also actively developing drugs in this category (e.g. Hematide), which has been under scrutiny by both the FDA for dosing/safety issues and Medicare for reimbursement issues.

Neose is also developing a long-acting version (dosed every three weeks in conjunction with chemotherapy treatment cycles) of granulocyte colony stimulating factor (G-CSF) (targets a $4B global market) in collaboration with privately held BioGeneriX AG to compete with Amgen's Neulasta (pegfilgrastim). G-CSF is used to stimulate production of white blood cells (neutrophils) in order to treat the drop in these infection-fighting cells during chemotherapy (neutropenia). Patents for G-CSF in Europe have already expired in 2006 while the US market is protected until 2013. Other companies active in clinical development for G-CSF products include Maxygen (MAXY) (MAXY-G34 in Phase 2) and CoGenesys (Neugranin in Phase 1). Recently announced Phase 1 results in 89 patients demonstrated that GlycoPEG-GCSF had similar safety parameters as Neulasta, but increased neutrophils by 30% more and was 60% more bioavailable when administered at equal doses. A Phase 2 dose-ranging study in multiple countries is expected to start in 1H08 and enroll 200 patients. The Company is also partnered with European drug giant Novo Nordisk (NVO) for the development of a variety of therapeutic proteins (including GlycoPEG-Factors VIIa, VIII, and IX) (targets a $3.3B global market) for the bleeding disorder hemophilia.

With shares of Neose currently trading near all-time lows and at a significant discount to my $3.50 valuation model (as well as other analyst targets of $3 by S&P and $7 by Rodman & Renshaw), now may be a good time to consider an investment in this speculative, micro-cap biotech stock. The Company will present key clinical trial results over the next six to nine months and is expected to begin a Phase 2 trial for GlycoPEG-GCSF in the first half of 2008, providing the opportunity for upside returns if results are positive as I expect based on previous data.

Disclosure: Author has a long position in NTEC