Nereus' Unique Source For Drug Discovery

Marine microorganisms have developed unique metabolic and physiological capabilities that ensure survival in diverse habitats and offer the potential to produce metabolites that would not be observed from terrestrial microorganisms. Historically, microbes isolated from terrestrial sources have been a premier source for commercially successful drugs. Recently, however, there have been diminishing returns from attempts to further exploit terrestrial sources. Nereus believes that the production of new biologically active compounds from marine microbes has the potential to exceed that previously developed from terrestrial sources and published trends support this belief.

Nereus has capitalized on more than 15 years of academic research in marine microbiology by Dr. William Fenical, a co-founder of Nereus and a recognized chemist and oceanographic scientist at the Scripps Institution of Oceanography, University of California, San Diego. In the past two years, Nereus has industrialized these isolation and fermentation technologies to pharmaceutical standards. Currently, Nereus is the only company fully dedicated to the discovery of novel biologically active compounds from marine microbial collections. The Company's efforts in the past eighteen months have led to the identification of over 50 new structures with biological activity rivaling the cumulative new discoveries (listed in the literature) from this source during the past decade (as cited in literature).

Nereus' competitive advantage is based upon the robust discovery process formed through integration of its core technologies - microbiology, screening and natural products chemistry. The discovery process begins with isolation of unique microbes and generation of chemical extracts of biologically active molecules produced by the microbes. A series of interlinked databases containing information on the microorganisms, their sources, culture and extraction conditions, novel chemistries and biological activities have been developed that allow for a concentrated effort on the most productive organisms. Screening the extracts against the Company's primary screens leads to identification of novel, biologically active discovery leads in the selected therapeutic areas of oncology and infectious diseases.

Discovery Process And Productivity

Nereus has developed a highly scalable, reproducible discovery process (shown schematically below) that integrates microbiology, screening and natural products chemistry in an iterative manner. This discovery paradigm combines robust extraction and fractionation with streamlined sample dereplication to generate a unique and efficient methodology to discover new pharmaceutical agents.

Through 2003, this process has led to the identification of over 50 structurally new compounds with biological activity in the Company's screens. These new structures represent 14 chemical classes leading to 15 anti-infective and anti-cancer discovery leads. The table below shows cumulative totals resulting from Nereus' process to date. Each discovery lead is further evaluated for its potential as a Development Candidate and the Company has currently identified two IND Candidates. The Company's goal is to file at least one IND candidate per year beginning in 2004.