Date: Thu, 18 Dec 1997 18:19:19 GMT Server: Apache/1.0.5 Content-type: text/html Content-length: 11184 Last-modified: Tue, 21 Oct 1997 20:16:56 GMT Neoprobe 1996 Letter to Shareholders

to our shareholders

"1996 was a year of Olympic achievements for Neoprobe Corporation. We reached new heights in our progress toward providing tomorrows for cancer patients everywhere because of the dedicated efforts of the Neoprobe RIGS team, including staff, patients, physicians, and others worldwide who gave their maximum effort."


David C. Bupp
President and
Chief Operating Officer

Neoprobe achieved a number of significant milestones in 1996 that brought us closer to the launch of RIGScan CR49, our first surgical cancer detection product, from filing our first product marketing applications with the U.S. and European regulatory authorities to creating a marketing alliance unique to the biotechnology industry. Our accomplishments this year also enhanced our financial position and intellectual property holdings, putting the company on strong footing for the future.

A public offering in April of 1.75 million shares of Neoprobe common stock at $18.50 per share raised $32.4 million. We received an additional $15 million from the exercise of more than 99 percent of 2.3 million outstanding series E warrants. Our marketing partnership agreement brought Neoprobe $2 million and the commitment of another $3.5 million upon marketing approvals in Europe and the U.S. along with funding for future research projects.

With its strong cash position, Neoprobe is poised to make the transition to commercialization of our first product.

RIGScan CR49 Progress

Neoprobe achieved two major goals this year by submitting our first product marketing applications in both the U.S. and Europe. We filed a Biologics License Application (BLA) with the United States Food and Drug Administration (FDA) for RIGScan CR49 in December. Earlier in the year, we were among the first companies to file a "dossier," a similar marketing application, to the centralized European regulatory authorities for approval by the Committee for Proprietary Medicinal Products (CPMP). Neoprobe believes that both applications could be approved in 1997.


The first comprehensive, multicenter results from the company's pivotal studies with RIGScan CR49 for metastatic colorectal cancer were discussed at the Society of Surgical Oncology's 49th Annual Cancer Symposium. The data showed that RIGScan CR49 accurately identified tumor in more than 90 percent of patients and helped surgeons find additional pathology-confirmed cancer in a significant number of patients. For the first time, pivotal phase III trial data for RIGScan CR49 were presented at the American College of Surgeons (ACS) Clinical Congress. John Daly, M.D., Surgeon-in-Chief, New York Hospital, presented the paper to a capacity crowd of ACS surgeons.

We also completed patient enrollment and participation in our pivotal Phase III trial for RIGScan CR49 for primary colorectal cancer. Neoprobe began analysis of the clinical information in 1996 and plans to submit an amendment to our BLA and dossier in 1997.

Neoprobe's RIGScan CR49 product is protected by a patent granted in 1996 to Jeffrey Schlom, Ph.D., at the National Cancer Institute and David Colcher, Ph.D., at the University of Nebraska Medical Center. The patent covers claims to composition of matter for a large group of second-generation monoclonal antibodies, including CC49 which Neoprobe licensed exclusively for use with RIGS technology.

Partners in Product Launch

Neoprobe reached another significant goal when we signed a unique marketing agreement with United States Surgical Corporation (USSC), Norwalk, Conn.,

 

David C. Bupp
President and
Chief Operating Officer
John L. Ridihalgh, Ph.D.
Chairman of the Board and Chief Executive Officer

giving USSC exclusive worldwide sales and marketing rights to RIGS surgical detection products. Neoprobe will recognize the full revenue of RIGS product sales, retain primary responsibility for product development and manufacturing, and maintain customer contact through its distribution service responsibility. USSC, the foremost creator and developer of new surgical markets, will promote and sell the product, conduct physician training, and provide research and development royalties to Neoprobe.

Under the guidance of our new vice president of marketing, Neoprobe attained record sales of the Neoprobe 1000 device for use with the intraoperative lymphatic mapping (ILM) technique for malignant melanoma and, investigationally, breast cancer. Our new regional sales force realized nearly $1 million in product revenue, most of it in the fourth quarter of 1996. In addition to generating revenue, these instrument sales are a strategy to place probes in surgical suites and in the hands of trained surgeons worldwide in anticipation of launching RIGScan CR49 in 1997.

Together, Neoprobe and USSC began developing future gamma detection devices and establishing a number of centers of excellence for lymphatic mapping training in addition to the well established program at the H. Lee Moffitt Cancer Center and Research Institute, Tampa, Fla.

It was truly a monumental day at Neoprobe in January 1997 when we received our first marketing approval for RIGScan CR49 in South Korea with our partner in the Korean peninsula, Damon Pharm Ltd. of Seoul. Damon Pharm also has exclusive marketing and distribution rights in Thailand, Taiwan, Singapore and Malaysia.

 


Advancing the Pipeline

Neoprobe advanced development and secured licensing for new RIGS surgical detection and therapy products in 1996 and hired a new vice president of clinical research/medical director to oversee clinical development.

We began a breast cancer initiative by opening a Phase I trial to test a new antibody fragment targeting agent. The study involves women who have biopsy-proven breast cancer and who will undergo a partial or total mastectomy and an axillary dissection.

We signed an exclusive worldwide license with Biomira Inc. for MAb-170 for surgical detection of breast cancer. The agreement gives Neoprobe options for use of the antibody in other indications, for improvements to MAb-170, and for another antibody, MAb-174. A Phase I trial using MAb-170 is in development. Our initiative has also opened pilot RIGS/ACT testing to breast cancer patients and supports research for intraoperative lymphatic mapping for breast cancer.

We established a joint venture with Peptor Ltd., an Israeli-based biopharmaceutical company, to develop radiolabeled forms of Peptor's small, stable peptide analogs for cancer detection and treatment. We also licensed a portfolio of 120 patents from The Dow Chemical Company to develop advanced RIGS surgical and therapy products.

Our new vice president of therapeutics directed progress this year in the clinical and strategic development of RIGS/ACT products. A Phase I/II trial was completed, and a Phase II trial will begin in 1997 for the treatment of metastatic colorectal


"The RIGS technology is important because it solves a very real problem. The dream we are beginning to realize is that our technology will have a profound impact on how cancer surgery is done by helping the surgeon find cancer that otherwise goes undetected."


John L. Ridihalgh
Chairman of the Board andChief Executive Officer

 

cancer patients. We prepared for commercial-scale RIGS/ACT cell processing through an agreement for use of cGMP facilities with Cellcor, a wholly owned subsidiary of Cytogen Corporation.

Neoprobe entered into an investment and license agreement with XTL Biopharmaceutical, Ltd. of Rehovot, Israel, for exclusive rights to XTL's Trimera XTL for developing ACT products and for producing fully human monoclonal antibodies for RIGS and radioimmunotherapy (RIT).

Looking Forward

As 1997 unfolds, we will focus on continually advancing our pipeline of RIGS surgical cancer detection products and activated cellular therapy products for the treatment of cancer and chronic viral conditions. We will also participate proactively in the regulatory reviews of RIGScan CR49, and, with USSC, set the stage for product launch.

As we near commercial introduction of our RIGS technology, we are conscious of its importance to people whose lives it may save, to doctors who will perform better cancer surgeries with better information, and to Neoprobe's future innovative developments. This report shares the thoughts, hopes, and dreams of a patient, a surgeon, and a visionary about a technology valuable to them and to you, our shareholders.

Sincerely,