bioshares report

On behalf of Avexa, please refer to a report by independent industry experts Bioshares on the state of the HIV market and position of ATC.

Company: Avexa
Date 28 June 2010
Publication: Bioshares

Avexa Comment
An EGM has been requisitioned for July 6 by a group of shareholders seeking to take control of the board and recommence the development of apricatabine (ATC).

This attempt to continue development of ATC, under a proposed new management, seems flawed for one key reason.

The patents that cover ATC will expire in the Europe in 2011 and 2015 and in the US in 2012.

The Phase III trial of ATC, involving 970 subjects, was scheduled to complete by July 2011, according to Avexas filing on clinicaltrials.gov . As such, it is likely that any passage through regulatory agencies in the US and in Europe would be completed well after the patent expiration dates.

In our view, the most likely reason no partners have been found for ATC is that any prospective partner would have come to the view that the drug would be coming to market with insufficient patent protection.

Even allowing for the possibility of gaining marketing exclusivity of up to 5 years, it is unlikely that this extra time, if indeed fully granted, would generate the returns needed to cover a potential partners costs for the marketing of the drug and not forgetting the standard industry royalty they would have to pay Avexa, in the order of 20-25%. The potential market position of ATC is made more difficult by the emergence of Gileads hugely successful threein- one drug combination Atripla (combining tenofovir,emtricitabine and efavirenz) and its newer four-in-one drug(tenofovir, emtricitabine, elvitegravir and GS9350), which is still in the pipeline. Medicines such as these have the potential to improve patient compliance and decrease the rate at which mutations arise.

Another signal of commercial stress in HIV drug markets can been seen with GlaxoSmithKline and Pfizer merging their HIV drug units into a joint venture (on a roughly 85/15 split). This is remarkable considering GSK was a pioneer in the HIV drug business. While GSK has been a leader, drugs coming off patent and a failure to generate new HIV drugs caused it find a solution with Pfizer, which has a better pipeline, but only one drug on the market. The message this JV delivers is that the competition coming from companies such as Gilead, is very intense. Gilead has a greater than 30% share of the HIV market.

In light of what we believe is the commercial reality facing ATC,continued development of ATC is not warranted.

The current board may or may not be the best board for Avexa in the long term. However, any board existing or proposed should at the minimum set forward a transparent and credible plan for the management and application of funds that Avexa holds as its main asset, which is estimated by the board to be $23 million as of June 30, 2010.
Bioshares