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i Lead Products: Helicobacter pylori Antibody Product The Disease In March 1995 GalaGen signed an agreement with Chiron Corporation to develop jointly a bovine antibody product for the treatment of Helicobacter pylori,the pathogen associated with most duodenal ulcers and gastritis. The Market Opportunity The prevalence of duodenal ulcers in the United States is estimated at 3.5 million cases. Each year there are estimated to be 250,000 new cases of duodenal ulcers and 3.2 million recurrences. The U.S. market for existing ulcer drugs is estimated at$3.2 billion annually. The term "ulcer"describes an erosive opening in the internal surface of the stomach or duodenum with inflammation and bleeding at the site. The accepted standard treatment for ulcers focuses on gastric acid hypersecretion, for example, via antacids which neutralize the acid or drugs which inhibit acid secretion or coat the ulcerated tissue to protect against the acid. Because relapse rates are significant,many physicians also prescribe maintenance therapy. Since the discovery that an infection by the bacterium H.pylori is associated with most duodenal ulcers and gastritis and is likely the cause of relapse after conventional ulcer therapies, a major trend in the development of duodenal ulcer therapy has been the increased use of antibacterial"Triple Therapy" (a combination of several antibiotics and bismuth) instead of or in addition to conventional ulcer therapies. Development Status GalaGen's bovine antibody product in development is intended to eradicate H.pylori from the gastrointestinal tract, targeting those patients who would be treated with antibiotic "Triple Therapy." GalaGen's initial laboratory studies with the product have successfully demonstrated neutralizing antibody activity against a key feature of H.pylori. Preclinical studies are being conducted with Institut Pasteur, University of Minnesota and Chiron Corporation's Biocine division. Chiron recently published a mouse infection model that mimics the pathology that develops in humans infected with H.pylori. This model will provide a rapid screening system for evaluating and optimizing new antibodies prior to testing them in the clinic. Phase II clinical trials are expected to begin in the second half of 1996. Development and Marketing Partner GalaGen and Chiron have cross-licensed proprietary immunizing technology and will collaborate on ZZ further development of the product. GalaGen has granted Chiron an option to the exclusive worldwide marketing rights for H.pylori products emerging from the collaboration. •