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NORTHFIELD LABORATORIES, INC.
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TO OUR SHAREHOLDERS
This past year has been both rewarding and exciting for Northfield
Laboratories in our efforts to complete the successful development of
PolyHeme(TM) as the first blood substitute to be commercially available for
human use in this country. We believe that we have achieved a unique status in
the field of blood substitutes based on our impressive clinical experience that
has demonstrated a remarkable survival benefit using PolyHeme in lieu of blood
in the treatment of urgent, life-threatening blood loss. We believe we are
addressing the clinical setting of greatest need for a blood substitute and one
that will provide us with a key market opportunity. We remain confident,
optimistic and have high expectations for the successful completion of our
clinical development.
ABOUT POLYHEME
We believe PolyHeme represents an ideal oxygen-carrying resuscitative fluid
for use in the treatment of urgent, life-threatening blood loss. Our on-going
clinical trials continue to demonstrate that PolyHeme will support life in human
patients in the virtual absence of any remaining red blood cells. PolyHeme
provides temporary, life sustaining oxygen-carrying capacity and avoids
dangerously low hemoglobin levels until adequate red blood cell levels can be
restored safely. We believe PolyHeme therefore addresses a critical, unmet
medical need by providing life-saving therapy in situations where no alternative
currently exists. In addition, PolyHeme's other attributes such as immediate
availability, universal compatibility, lack of transfusion reactions, lack of
disease transmission, and its extended shelf-life make this solution perfectly
suited for use in the urgent treatment of substantial hemorrhage. PolyHeme's
most essential characteristic is its ability to be safely infused in rapid and
massive fashion. In fact, PolyHeme was specifically designed during its product
development to avoid the adverse effects of other hemoglobin-based
oxygen-carriers that would preclude such rapid, massive infusions. No other
blood substitute has achieved this goal.
POTENTIAL POLYHEME OPPORTUNITY
The potential clinical role of PolyHeme as a novel oxygen-carrier can be
best assessed in relation to the present pattern of blood use. The current
market for blood in the United States is estimated to be in the multiple
billions of dollars. There are approximately 12 million units of blood
transfused each year into approximately four million recipients. Sixty percent
of this blood is used for acute blood loss and 40% for chronic blood loss. Acute
blood loss refers to an abrupt onset of bleeding, usually involving major
surgery. Our focus has always been the treatment of acute blood loss because of
the potential benefits of PolyHeme in this setting.
There are two categories of acute blood loss, urgent use and elective use.
Approximately 2.5 million units of blood per year are used in urgent use,
consisting of both trauma and non-trauma settings. The larger category in acute
blood loss is that of elective surgery where approximately 4.7 million units of
blood are used each year. These are two different and distinct clinical
settings, with different issues, different potential patient benefits, and
different regulatory considerations.
As stated above, we believe the most important and appropriate setting for
PolyHeme is for the treatment of urgent blood loss. Urgent blood loss is
unplanned, unscheduled hemorrhage. It usually occurs during nights and weekends
and places considerable stress on the available resources. The volume of
hemorrhage tends to be rapid and substantial. It is most often life-threatening,
and importantly, there are currently no alternatives to donated blood in this
setting. Of more significance, however, is the fact that frequently there is no
donated blood available. In these situations, the delay until blood is available
may place the patient at extreme risk. The potential benefit of PolyHeme in this
setting is that it addresses the greatest clinical need for an alternative
oxygen-carrier because of the urgency and difficulties of the situation. Our
data demonstrate that PolyHeme saves lives in this setting and thereby provides
a remarkable clinical benefit.
The issues in elective blood loss are quite different. Blood loss in
elective surgery is primarily planned hemorrhage. The bleeding tends to be slow
and more modest in volume, usually not life-threatening. Perhaps
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the most important observation is that a number of alternatives to donated blood
for use in elective surgery are presently available, including preoperative
autologous donation, cell-saver techniques, acute normovolemic hemodilution,
recombinant erythropoetin, and even the possibility of rescheduling such
elective operations. The potential benefit of PolyHeme or any alternative
oxygen-carrier in these situations is the avoidance of donated blood. While this
is important, in view of the current safety of the blood supply this is a more
modest clinical benefit.
The actual market potential of PolyHeme is difficult to accurately project
but it will depend on a number of factors. There may certainly be some
penetration of the current blood market. However, we anticipate that the major
early opportunity will be in the use of PolyHeme when blood is not available. We
therefore anticipate premium pricing to blood based on the potential benefits of
PolyHeme and believe that this will create a substantial business opportunity.
CLINICAL STATUS
Our trials continue in three different areas. Our primary focus remains the
trials in urgent blood loss at a dose of up to 20 units, equivalent to two
complete blood volumes. The other trials in elective surgery at a dose of six
units, and compassionate use for life-saving therapy also continue. The
important safety observations are that none of the adverse effects historically
associated with other hemoglobin solutions have been identified by our clinical
studies. Furthermore, the demonstration of life-sustaining benefits and improved
survival in the urgent setting provides a simultaneous demonstration of efficacy
and safety. Based on the published literature, the anticipated survival rate at
life-threatening red blood cell hemoglobin levels is less than 20%. The observed
survival rate in our patients with similar hemoglobin levels continues to be
75%. This dramatic improvement unequivocally demonstrates the ability of
PolyHeme to effectively transport oxygen. We are pleased with the response of
both scientific and lay audiences to these results.
There are numerous efforts underway by others to develop both
hemoglobin-based and perfluorochemical oxygen-carriers. To our knowledge, all
other trials are occurring in only elective surgery at low doses and slow
infusions where the blood loss is relatively moderate. The endpoint for efficacy
in those trials is a reduction in the use of donated blood, with no survival
benefit. Although such observations are useful, and similar to our own
experience in elective surgery, we believe this benefit is less compelling than
our experiences in urgent blood loss.
THE REGULATORY CHALLENGE
The major unresolved issue at present is the regulatory challenge. It is
indeed a real challenge. PolyHeme is an innovative product with no precedent to
provide guidance for the FDA. A history of safety concerns for other blood
substitutes as well as other recent highly visible product recalls have added a
considerable degree of caution to all current FDA reviews. In the field of blood
substitutes, the presence of multiple sponsors, multiple products, and varying
clinical experiences has resulted in the current evolving requirements for
approval of such a product. Additionally, the potentially helpful guidance to be
issued following the FDA Workshop in the fall of 1999 is still being finalized
so it is not presently available. We continue to believe that we are addressing
all of the important areas that will be of concern to the regulatory
authorities. Our experience in both trauma and elective surgery, in stressed and
stable patients, with high doses and rapid infusions, focusing on a survival
endpoint in trauma are appropriate because that is how we believe PolyHeme
should and will be used. Furthermore, it is the strength and robustness of our
data that we believe should provide the relevant basis for product approval.
PolyHeme is unique in that it is the only product under development that is
equivalent in oxygen-carrying capacity to a unit of blood. We believe our
clinical program is unique in addressing both trauma and elective surgery. Our
protocol of rapid, massive infusion provides a unique safety experience, and the
survival benefit demonstrated in our trials represents the only formal protocol
in urgent blood loss that is addressing this end-point.
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We are enthusiastic about our progress. We are in the final stages of the
preparation of our Biologic License Application for PolyHeme. In fact, we are
planning to file our BLA with the FDA in the very near future. We remain
confident about the prospects for the approval and subsequent marketing of
PolyHeme.
MANUFACTURING
Last year we described the expansion of our manufacturing capacity of
PolyHeme to our current capability to produce 10,000 units annually. We also
leased space adjacent to our current facility that will allow a further
expansion of an additional 75,000 units of capacity per year as our next step.
We view this approach as financially prudent, yet large enough for commercial
viability. We remain in discussion with several potential manufacturing,
marketing-distribution and source supply partners.
SCIENTIFIC AND INVESTOR PRESENTATIONS
As in prior years, we have continued to make formal, public presentations
in a variety of forums. Last year we presented at the Prudential Vector
Securities HealthCare Conference in November, and the Deutsche Banc Alex Brown
Conference in May, as well as the Illinois Bio Market Place 2000 Conference in
October.
We also made presentations at the post-graduate course on Pre and Post
Operative Care at the Annual Meeting of the American College of Surgeons, at a
NATO conference on Combat Fluid Resuscitation, and at the Illinois Society of
Anesthesiologists. This fall we will be participating in the American
Association of Blood Bank educational symposium on the potential role of blood
substitutes in trauma, and most importantly, we will be presenting the results
of our trials in urgent blood loss and trauma at the Papers Sessions at the
Annual Meeting of the American College of Surgeons in October in New Orleans.
This is a particularly important forum since this is the largest surgical
meeting covering all specialties in the United States each year.
RUSSELL 3000(R) INDEX
We were notified in June that we were selected for inclusion in the Russell
3000(R) Index for the next year. Selection for inclusion in the Russell 3000(R)
identifies Northfield as one of the 3,000 largest publicly traded U.S. companies
based on total market capitalization.
ANNUAL MEETING FORMAT
We will once again be using the Internet to provide information
simultaneously to all of our shareholders following the conclusion of our annual
meeting. The meeting will convene at 2:00 pm (CDT) on Friday, August 31, 2001.
The meeting will adjourn after the completion of the official business matters
and the annual business update, including responses to frequently asked
questions, and will be broadcast on the Internet only beginning at 4:30 pm
(CDT). The update will be broadcast by Video News Wire, a partner of PRNewswire.
You may visit either Northfield's website at www.northfieldlabs.com or
www.videonewswire.com to access the presentation. Shareholders without Internet
access will be able to listen to the report by calling a toll free number. The
call-in number will be made available approximately two weeks before the
presentation, and will be announced in a press release and posted on our
website. The replay will be available for 30 days on the Internet, and for seven
days by telephone.
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In summary, we continue to appreciate the support of our shareholders, and
the dedication and diligent efforts of our loyal employees. We hope this review
conveys our sense of excitement and enthusiasm. We are gratified at your ongoing
support through the many challenges of the past. We believe the future will
continue to bring further good news. We remain optimistic with high expectations
for the next year.
Sincerely,
-s- Richard DeWoskin -s- Steven A. Gould
Richard DeWoskin Steven A. Gould, M.D.
Chairman & Chief Executive Officer President & Chief Operating Officer