Houston, TX, (April 14, 2005) Cytogenix, Inc. (CYGX: OTC: BB)
Valued shareholders:
CytoGenix is poised for the achievement of significant milestones in the coming fiscal year. We are expanding the application of our highly innovative technology. With continued discoveries in research, aggressive protection of proprietary technology, success in product development, and anticipation of revenues from synthetic DNA sales, this year promises to be an exciting year for the shareholders of CytoGenix
Analyst Reports
The following evaluations of the Company were performed by two independent firms. The Company commissioned these reports and provided data and response to the analyst's questions; however, the analyst's conclusions were independently constructed.
Bioscience Valuation (BSV GmbH) Report
Bioscience Valuation (BSV) is a management consulting firm located in Grainau, Germany specializing in the evaluation of pharmaceutical R&D projects, portfolios, and platform technologies. BSV uses advanced financial modeling based on thorough market and risk analysis to develop R&D strategies that reduce risk and enhance the value of your projects.
Bioscience Valuation's analysis indicates that CytoGenix is currently significantly undervalued and therefore represents a good opportunity for both existing and prospective shareholders. The forecast models project significant year-by-year growth with an estimated net present value of $1.5BN by 2008.
J.M. Dutton and Associates, LLC
Dutton & Associates is an investment research firm offering high-quality, independent, fundamental research on small cap public companies.
Their continuing year-long program of research coverage allows under-followed companies to gain a thorough, independent analysis of their competitive position along with independently developed earnings and valuation models. The Dutton report concludes that, at current levels, CytoGenix remains an unexploited, virtually undiscovered company with exciting new technology. Dutton rates CytoGenix as a Speculative Buy with a twelve month target price of $0.90 a share.
Product Development Update
CY301 (SIMPLIVIR(tm)) for topical herpes simplex infection
Since our pre Investigational New Drug (IND) meeting with Federal Drug Administration (FDA), we have identified several vendors capable of conducting the required work packages necessary to allow filing of an IND application. Work to be outsourced includes manufacturing of drug substance, formulation of drug product as well as conduct of preclinical safety and biodistribution studies. We expect these IND-enabling studies to be completed this year. The BSV report indicates that the herpes treatment market is $2-3BN annually and this remains a conservative estimate due to the underreporting of the condition.
CY403 for blood-borne Staphylococcus infection
Following on the success in laboratory and animal studies of CY401, a novel drug product, CY403 was added to the company's pipeline. CY403 targets a different gene than CY401 and will be developed for use in the treatment of the most serious unmet medical need in bacterial infectious disease, e.g., multi-drug resistant staphylococcus aureus infections. We have advanced this product from target identification to preclinical testing in less than three months and this efficiency is indicative of our ability to expedite the early drug discovery process. The Centers for Disease Control and the World Health Organization have identified multi-drug resistant bacterial infections as a serious emerging threat to the general public. CytoGenix antimicrobial products address this serious unmet medical need which the government accounting office (GAO) estimates the cost of antibiotic resistance is approximately $5BN annually.
CY303 for topical skin inflammation
The Company's product for topical inflammation, CY302, was renamed CY303 to conform to a standard nomenclature system recently implemented to maintain control of the expanding number of new products being developed by our Research group. CY303 will be tested in several established models in an academic setting to clarify the activity, potency and duration of action prior to the initiation of preclinical animal testing. The combined market for topical dermatologic products treating the target inflammatory conditions such as psoriasis, atopic dermatitis, bed sores and acne is in excess of $10BN annually.
synDNA(tm) process for cell-free DNA production
We are building a commercial scale manufacturing facility to produce mini-circle DNA for our future clinical development needs. Synthetic DNA offers several competitive advantages over the current practice of using bacterial fermentation to produce commercial quantities of clinical grade DNA. These advantages include reduced cost, higher purity, faster production cycle times.
An industry leading engineering firm has been engaged and is currently conducting the preliminary design feasibility study. We have evaluated multinational suppliers for the raw materials necessary for our process and we are currently negotiating pricing to assure a competitive cost of goods for our finished drug substance. We have begun laying the framework for a Quality Assurance plan that will provide the infrastructure to maintain compliance with current Good Manufacturing Procedures (cGMP) necessary for FDA certification. We expect to complete construction of a facility capable of supplying our internal need for DNA as well as selling the extra capacity the general market. The synDNA(tm) technology is particularly well suited for the production of DNA vaccines. Development of DNA vaccines is a major component of the Company's strategic plan.
Intellectual Property
In December of 2004, the Company submitted a new United States Patent Application for the method to produce therapeutic quality DNA. We are inceasing the range and scope of this application with further filings based on new developments and improvements made in the last quarter.
The Company continues to be aggressive in the protection of its proprietary technology capitalizing on the addition of second in-house intellectual property counsel.
Legal Issues
Waldroff/AVGI
(William B. Waldroff and Applied Veterinary Genomics, Inc. v. CytoGenix, Inc.)
CytoGenix filed a Declaratory Judgment action in March 2004 to obtain a finding of non-liability with respect to two license agreements, one for shrimp and one for horses, purportedly issued in 1998 to William B. Waldroff. Waldroff and Applied Veterinary Genomics, Inc. ("AVGI"), a party in interest as a sublicense of Waldroff's, counterclaimed for damages, attorney's fees, unrelated torts, and a permanent injunction to honor the purported licenses.
A jury trial was held in February 2005. Both Waldroff and AVGI also sued three Directors of CytoGenix for interfering with the licenses. The jury did not assess any damages against any of the Directors or against CytoGenix and dismissed Waldroff and AVGI's counterclaims. The court has preliminarily entered a judgment ordering CytoGenix to perform according to the licenses and for attorney's fees. CytoGenix is prepared to comply with the judge's order to provide product at cost plus twenty percent (20%).
Phanuel Pursuits
Phanuel Pursuits, Ltd., entered into an option agreement with the Company to obtain licenses to commercialize the Company's anti-herpes product in Peoples Republic of China and India. Phanuel withdrew from the China agreement. Phanuel owes unpaid option fees under the Indian option agreement including a specific payment required to purchase the Company's data needed for submission to the Indian regulatory authorities. Phanuel filed suit October 8, 2004 alleging that the Company had withheld the data and stopped work on herpes product development. Both charges are false. The Company believes the suit is without merit.
Very truly yours,
Malcolm Skolnick, Ph.D., J.D.
President & Chief Executive Officer
About CytoGenix: CytoGenix, Inc. is a Houston-based biopharmaceutical company that develops and markets innovative products and services based on its proprietary ssDNA expression technology. The company has developed a breakthrough synthetic process for large-scale production of high purity DNA at fraction of the cost of traditional fermentation methods. CytoGenix currently has one issued US patent and over 44 international or US pending patent applications claiming methods and materials in connection with this platform technology.
About Dutton & Associates: Dutton & Associates is one of the largest independent investment research firms in the U.S. Its 29 senior analysts are primarily CFAs, and have expertise in many industries. Dutton & Associates provides continuing analyst coverage of over 85 enrolled companies, and its research, estimates, and ratings are carried in all the major databases serving institutions and online investors.
The cost of enrollment in the J.M. Dutton & Associates, LLC, one-year continuing research program is U.S. $33,000 prepaid before commencement of its research activities. The company is additionally responsible for additional pass through costs, including printing, estimated at $3,250 for the year. All electronic reports and distribution are included in the initial research fee. Although any party can pay the enrollment fee, reports are performed on behalf of the members of the public, and are not a service to any company. The analysts are responsible only to the public. J.M. Dutton & Associates, LLC, does not accept payment of any of its fees in company stock or any form of securities, as receipt and disposal of these securities under these alternative payment methods might compromise the integrity of the continuing research program.
About Biosciences Valuations GmbH: BSV is a firm of well respected financial valuation consultant based in Germany, with emphasis on performing valuations for the biopharmaceutical industry on drug products that are in stages of development.
Valuation Approach:
The valuation is based on a Monte Carlo simulation of future expected net cash flows. All major cash flow risks have been explicitly modeled. The valuation is not in compliance with US Revenue Ruling 59-60, nor does it comply with standards set forth by the ASA, IBA, NACVA and AICPA. Most standards emphasize accounting figures that are not appropriate to value R&D projects. R&D projects, however, are the main source of value for biotech companies.
The valuation is derived from projected cash flows and relies on information provided by CytoGenix' management, supported by our own research. Users of this report should be aware that the projected future cash flows may or may not materialize. Reasonable appraisers can differ in their assumptions and, therefore, in their estimates of value. Methodologically, our valuation approach is sound and commonly accepted in the finance community and by pharma executives. CytoGenix paid BSV $45,000 for these services.
SAFE HARBOR: Except for statements of historical fact, the statements in this press release are forward-looking. Such statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These factors include, but are not limited to, general economic conditions, risks associated with the acceptance of new products, competition, and other factors more fully detailed in the company's filings with the Securities and Exchange Commission. Additional information about CytoGenix and its technology can be found on the website at www.cytogenix.com.
Contact: CytoGenix, Inc., Communications Director - Juan Ferreira, (800) 677-5707.
