Enact Pharma 'message from the CEO'

14th October 2002. So, why have we decided to introduce a "message from the CEO"? The simple answer is that we believe there is currently a gap between perception and the reality of Enact Pharma. To be honest, this is understandable. The last two months have been a very busy period both in terms of new products and of course our fundraising activity. Because of the fundraising, it has often been difficult to be as transparent as we would have liked. It has also been difficult to take a step back and present the overall vision. I hope that in writing this, I go some way to correcting this situation. I would also be happy to receive feedback and questions and there is an email address adjacent to this document. 

Firstly, I would like to say that our overall strategy remains unchanged and we are now some way towards achieving our goal of becoming a fully integrated biopharmaceutical company with each of the four corner stones (early product revenue through sales; pharmaceutical and clinical development; drug discovery and platform technologies). The addition of YAS platform technology via the agreed acquisition of DeMontfort BioPharma is just one example.

However, although our achievements in building the infrastructure to support this model are significant, let me reassure you that our primary objective has and always will be to generate early revenue. There is a fine balance between dedicating resources to generating revenue in the short term, and laying the building blocks for the company's long term future. We believe we are now striking that balance.

With this in mind, I would now like to talk about some key issues:

Fundraising 
NQ02 
CPG2 
Human Nerve Growth Factor (hNGF) 
Fundraising

There is some mis-understanding regarding our fundraising objectives and achievements. This is largely due to media coverage in September which jumped the gun a little and certainly took some of the Company's comments out of context. 

In September we were hoping to secure several cash investments, as well as the investment via the New Opportunities Investment Trust (NOIT). I made the comment at the time that were all of these strategies to come to fruition we would be in a position where we would be unlikely to need further investment. That statement was perfectly accurate and at the time looked very likely.

To date, we have been successful in raising around £1.8 million through the NOIT and we are still in negotiation with NOIT in respect of these transactions for further funding. In each instance, the investments have been at a premium to share price.

In the last two months our share price has reacted exactly as every other biotechnology company's, but perhaps not as disastrously as many. We are naturally cautious about dilution (we are all shareholders as well!). Again, therefore we are tasked with balancing the immediate cash needs of the business with longer term need to minimise dilution. The NOIT deal satisfies our short and medium term requirements and when the market (and our share price) improves, we will proceed with a limited number of other cash investors.

NQ02
As most followers of Enact will be aware, NQ02 is a novel and selective system for the treatment of human cancer based on the co-administration of two simple drugs - please see the "Product Pipeline" section of our web site for further details.

This therapy system, which has a high potential return, has been granted patents in the UK and is under examination in other territories. We have successfully completed pre-clinical studies, have received approval for a full human PhaseI/II trial and are currently having the drugs formulated for that clinical trial. A delay has been encountered in final formulation due to recent legislation requiring that DDX PhaseI/II trial materials at this final stage of formulation comply with GMP regulations. However this is a minor problem and should not overly delay the trial, which is now expected to commence before the end of this year. 

The completion of this clinical trial, if successful (which the company does expect from all the scientific, preclinical and toxicological data to date) will enormously enhance the value of the Company for shareholders.

CPG2
CPG2 has been developed for the treatment and rescue of life-threatening methotrexate overdose in cancer therapy. Again, full details can be found in the "product pipeline" section of our web site. 

The critical factor is that CPG2, for which trademarks are now being applied, reduces dangerous methotrexate levels by over 95% in 15 minutes, with no known side effects. The incidence of life threatening methotrexate toxicity is increasing as this effective anti-cancer drug becomes more widely used at higher levels. In addition, beyond the methotrexate cancer market place, methotrexate at high dose is now also in trial for the treatment of Crohn's disease and Multiple Sclerosis as an immunological suppressant. 

We applied for orphan drug status in Europe in August and will apply in the US this month. Orphan Drug Status will provide the Company with 10 years marketing exclusivity in Europe and 7 years in the USA. 

The significance of CPG2 is that it will generate early revenues. Named patient sales will commence as soon as we have made a new batch of material which is scheduled for completion in Q1 2003. This will provide an early revenue flow to the Company in 2003 which had not previously been anticipated. We expect significant and rising revenues after the Company has been granted its Biological License for this product, anticipated in 2004. 

We estimate that based on current therapeutic uses, the market place for this licensed product will be over £1 million in the first year, rising to £5-7 million within three years. In addition, further therapeutic cancer indications alone could establish a market potential of up to £40 million per year. 

Two further things need to be appreciated about CPG2. Firstly that three of the Company's Directors and staff have been intimately involved with this product since inception and secondly that CPG2 has undergone successful clinical trials, in collaboration with the National Cancer Institute (USA) and with European oncology centres in Bonn and Berlin - 200 patients have been treated to date in clinical trials.

Human Nerve Growth Factor (hNGF)
The Company has been waiting to commence this trial for many months. The material has been prepared to the required clinical grade and UK Medicines Control Agency Approval was given last year for the trial to commence. The single and problematical issue is and has been clinical trial insurance cover for the trial. The insurance market altered dramatically after September 11th 2001 and many trials in many European countries cannot now obtain insurance cover. While this is not a problem for large pharmaceutical companies who can take the litigation risk unto themselves, it is a problem for small companies such as Enact Pharma. In this context it should be noted that Celltech has recently set up their own insurance capability in order to insure their own clinical trials.

The Board of Enact Pharma concluded that it would not be prudent for the shareholders of Enact Pharma for the Company to take this risk onto its own books to effectively self insure the proposed Alzheimer's trial but we are actively seeking a way forward in discussion with the University of Bristol, The Frenchay Hospital and the manufactures of the miniature pump Medtronics in order to commence the clinical trial.

Summary
This document is by no means exhaustive. Regular followers of Enact will appreciate that we have a tremendous pipeline including mE2, Organometallics, Tamoxifen and Nerve Cell Regeneration to name but a few. All of these projects are progressing well and we will of course make announcements as we pass milestones with each.

I do hope that this exercise has gone some way in closing the gap between perception and reality, but as I said earlier, I am more than willing to take on-board feedback and answer additional questions.

Best wishes

Tony Atkinson
CEO, Enact Pharma plc 14th October 2002

Email: tatkinson@enactpharma.com 

Mel Choi
Senior Account Manager
WMC Communications
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