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At our last annual meeting, I stressed the need to refocus the Company onto those products which we felt had the greatest potential to achieve commercial success in the shortest time. Management and the new Board of Directors also emphasized our intent to control spending without compromising our most important research and development efforts. We have achieved these goals.

To accomplish this, we undertook a thorough review and reappraisal of the ALLERVAX® Programs; focused our energies on the Drugs of Abuse Vaccine Programs; accelerated the research program in recombinant proteins; and substantially reduced our net cash spending. As a result, the Cocaine Vaccine Program was brought from research into a Phase I clinical trial which began in April 1998; the Nicotine Vaccine Program was accelerated and has now entered a preclinical development phase; and a small research effort in recombinant allergenic proteins was expanded into a program for immunologic diagnosis and treatment.

Research and development
Management stated a clear commitment at our last meeting to establish the commercial and scientific value of the ALLERVAX® RAGWEED and ALLERVAX® CAT Programs. A comprehensive and careful analysis concluded that, although the basic science supporting this program was strong, the significant additional costs necessary to commercialize the products were not justified in light of the Company's other strategic alternatives. Instead, the Company felt that it should draw upon its vaccine and allergy experience and concentrate on vaccines for drugs of abuse and recombinant proteins directed to the diagnosis and treatment of allergic diseases. As part of that reorganization, the Company reduced its staff, subleased its Waltham facility, and outsourced its manufacturing efforts.
The Cocaine Vaccine Program was brought from research into a Phase I clinical trial which began in April 1998; the Nicotine Vaccine Program was accelerated and has now entered a preclinical development phase... - Dr. J. Joseph Marr, M.D. President and Chief Operating Officer

The renewed emphasis on the Drugs of Abuse Program resulted in an IND filing for the cocaine vaccine in late October 1997; we received clearance to proceed in early December 1997.

The Phase I study of the cocaine vaccine commenced at Yale University in early April 1998. Concurrently, we advanced our Nicotine Vaccine Program to a point where the candidate product has been identified and drug supplies are being prepared for toxicological and animal studies. In May 1997, the Company received a grant totaling $2.2 million from the National Institute for Drug Abuse to pay for much of the development of the cocaine vaccine in its research, preclinical, and clinical phases. These funds will defray approximately two-thirds of the Phase I cost and 40% of our Phase II costs. The Company is in discussions with potential partners to collaborate in the development of these vaccines.

In an innovative addition to our immunological portfolio, the Company began research on recombinant proteins as diagnostic reagents for persons with allergic diseases. These recombinants contain the main allergenic motifs of cat, dog, ragweed, house dust mite, or grass. Our goal is to have them used in place of the current extract mixtures for the diagnosis of allergic states. We are in discussions with several companies to exploit these product opportunities for diagnostic markets.
In an innovative addition to our immunological portfolio, the Company began research on recombinant proteins as diagnostic reagents for persons with allergic diseases.

In March 1998, the Company completed its research agreement with Schering AG for its multiple sclerosis peptide therapeutic. Schering AG will support the patent portfolio and retains an option to license this program until November of this year.

Corporate Partnerships and Collaborations
In May 1998, the Company entered into an agreement to license on a non-exclusive basis ImmuLogic's patent estate around the Japanese cedar recombinant proteins. This agreement provides for a licensing fee and certain milestone payments and royalties. In addition, the Company has ongoing discussions with other potential partners regarding the development of the recombinant proteins and the nicotine and cocaine vaccines.

Cash Management and Restructuring of Operations
As a part of its campaign to reduce costs while maintaining a vigorous research and development effort, ImmuLogic reduced its staff substantially and is outsourcing its manufacturing operations. We have retained our research capability and enough manufacturing resources to provide material for the cocaine vaccine trial through Phase II and the Nicotine Vaccine Program through toxicological testing and Phase I. In addition, the Company has subleased its entire Waltham facility and will relinquish it in stages. ImmuLogic will retain space in the facility until October 1998, when it will move into smaller quarters.

We have outsourced all of our clinical and regulatory activities to clinical research organizations. We retain a research organization which supports the programs in drugs of abuse and recombinant proteins. As a result of our restructuring of operations, our cash and investment balance is quite strong, approximately $50 million as of the end of the first quarter, 1998.
As a result of our restructuring of operations, our cash and investment balance is quite strong, approximately $50 million as of the end of the first quarter, 1998.

Looking Ahead
We believe the Company is positioned to move forward efficiently. The difficult but necessary measures we have undertaken to eliminate less productive programs, focus our efforts onto our research and development strengths, and gain control of our fiscal resources have repositioned the Company. As we seek to maximize opportunities, the Company will carefully consider various strategic alternatives including acquisition of additional technology, strategic alliances, and sale or merger. We remain committed to ImmuLogic and confident about the future.

None of this progress would have been possible without an unstinting and generous commitment by our employees. Turning an organization around requires not only a shared vision and faith in the future but also the character, patience, and perseverance to bring about that future. Our employees have these traits in abundance. I thank them and our stockholders for their support.

J. Joseph Marr, M.D.
President and Chief Operating Officer

April 30, 1998

TOP

At our last annual meeting, I stressed the need to refocus the Company onto those products which we felt had the greatest potential to achieve commercial success in the shortest time. Management and the new Board of Directors also emphasized our intent to control spending without compromising our most important research and development efforts. We have achieved these goals. To accomplish this, we undertook a thorough review and reappraisal of the ALLERVAX® Programs; focused our energies on the Drugs of Abuse Vaccine Programs; accelerated the research program in recombinant proteins; and substantially reduced our net cash spending. As a result, the Cocaine Vaccine Program was brought from research into a Phase I clinical trial which began in April 1998; the Nicotine Vaccine Program was accelerated and has now entered a preclinical development phase; and a small research effort in recombinant allergenic proteins was expanded into a program for immunologic diagnosis and treatment.
Research and development Management stated a clear commitment at our last meeting to establish the commercial and scientific value of the ALLERVAX® RAGWEED and ALLERVAX® CAT Programs. A comprehensive and careful analysis concluded that, although the basic science supporting this program was strong, the significant additional costs necessary to commercialize the products were not justified in light of the Company's other strategic alternatives. Instead, the Company felt that it should draw upon its vaccine and allergy experience and concentrate on vaccines for drugs of abuse and recombinant proteins directed to the diagnosis and treatment of allergic diseases. As part of that reorganization, the Company reduced its staff, subleased its Waltham facility, and outsourced its manufacturing efforts.	The Cocaine Vaccine Program was brought from research into a Phase I clinical trial which began in April 1998; the Nicotine Vaccine Program was accelerated and has now entered a preclinical development phase... - Dr. J. Joseph Marr, M.D. President and Chief Operating Officer
The renewed emphasis on the Drugs of Abuse Program resulted in an IND filing for the cocaine vaccine in late October 1997; we received clearance to proceed in early December 1997.
The Phase I study of the cocaine vaccine commenced at Yale University in early April 1998. Concurrently, we advanced our Nicotine Vaccine Program to a point where the candidate product has been identified and drug supplies are being prepared for toxicological and animal studies. In May 1997, the Company received a grant totaling $2.2 million from the National Institute for Drug Abuse to pay for much of the development of the cocaine vaccine in its research, preclinical, and clinical phases. These funds will defray approximately two-thirds of the Phase I cost and 40% of our Phase II costs. The Company is in discussions with potential partners to collaborate in the development of these vaccines.
In an innovative addition to our immunological portfolio, the Company began research on recombinant proteins as diagnostic reagents for persons with allergic diseases. These recombinants contain the main allergenic motifs of cat, dog, ragweed, house dust mite, or grass. Our goal is to have them used in place of the current extract mixtures for the diagnosis of allergic states. We are in discussions with several companies to exploit these product opportunities for diagnostic markets.	In an innovative addition to our immunological portfolio, the Company began research on recombinant proteins as diagnostic reagents for persons with allergic diseases.
In March 1998, the Company completed its research agreement with Schering AG for its multiple sclerosis peptide therapeutic. Schering AG will support the patent portfolio and retains an option to license this program until November of this year. Corporate Partnerships and Collaborations In May 1998, the Company entered into an agreement to license on a non-exclusive basis ImmuLogic's patent estate around the Japanese cedar recombinant proteins. This agreement provides for a licensing fee and certain milestone payments and royalties. In addition, the Company has ongoing discussions with other potential partners regarding the development of the recombinant proteins and the nicotine and cocaine vaccines. Cash Management and Restructuring of Operations As a part of its campaign to reduce costs while maintaining a vigorous research and development effort, ImmuLogic reduced its staff substantially and is outsourcing its manufacturing operations. We have retained our research capability and enough manufacturing resources to provide material for the cocaine vaccine trial through Phase II and the Nicotine Vaccine Program through toxicological testing and Phase I. In addition, the Company has subleased its entire Waltham facility and will relinquish it in stages. ImmuLogic will retain space in the facility until October 1998, when it will move into smaller quarters.
We have outsourced all of our clinical and regulatory activities to clinical research organizations. We retain a research organization which supports the programs in drugs of abuse and recombinant proteins. As a result of our restructuring of operations, our cash and investment balance is quite strong, approximately $50 million as of the end of the first quarter, 1998.	As a result of our restructuring of operations, our cash and investment balance is quite strong, approximately $50 million as of the end of the first quarter, 1998.
Looking Ahead We believe the Company is positioned to move forward efficiently. The difficult but necessary measures we have undertaken to eliminate less productive programs, focus our efforts onto our research and development strengths, and gain control of our fiscal resources have repositioned the Company. As we seek to maximize opportunities, the Company will carefully consider various strategic alternatives including acquisition of additional technology, strategic alliances, and sale or merger. We remain committed to ImmuLogic and confident about the future. None of this progress would have been possible without an unstinting and generous commitment by our employees. Turning an organization around requires not only a shared vision and faith in the future but also the character, patience, and perseverance to bring about that future. Our employees have these traits in abundance. I thank them and our stockholders for their support. J. Joseph Marr, M.D. President and Chief Operating Officer April 30, 1998