Kenneth J. Holroyd, M.D., MBA
Executive VP & Chief Business Officer

Interview conducted by:
Walter Banks, Co-Publisher

CEOCFOinterviews.com
September 2001

BIO of CBO:

Dr. Holroyd was appointed Executive Vice President and Chief Business Officer in November 2000. He joined the Company in February 1997, and has held various executive positions in Regulatory Affairs and Clinical Research, Respiratory Discovery Research, Product Development, and Business Development. Prior to joining Genaera, Dr. Holroyd was a faculty member and head of respiratory care services at Johns Hopkins University School of Medicine and Hospital.  Finally, he earned both his M.D. and MBA at Johns Hopkins University in Baltimore, Maryland.

About
Genaera Corporation

Genaera Corporation is a biopharmaceutical company committed to developing medicines for serious diseases from genomics and natural products. Research and development efforts are focused on anti-angiogenesis, obesity, infectious and respiratory diseases.

Their research and drug development efforts are focused on two technology platforms: host-defense drug discovery, and genomics and respiratory treatments.
 
Genaera was formed to engage in the research, development and commercialization of compounds derived from the host-defense systems of animals. The host-defense system is the complex of natural processes and mechanisms used by the body to protect itself against infection and certain cancers. The Company believes that certain classes of naturally occurring compounds, such as certain small molecules, known as aminosterols, are used by the host-defense system and may have activity against certain cancers.

Anti-Angiogenesis:
Squalamine, an anti-angiogenic agent, is currently in phase 2 clinical trials for the treatment of non-small cell lung cancer and advanced ovarian cancer.  Squalamine is the first clinical drug candidate in a class of naturally occurring, pharmacologically active, small molecules known as aminosterols. Discovered in the dogfish shark in 1992, squalamine is a synthetically produced molecule with a unique mechanism of action that directly blocks endothelial (blood vessel) cell activation, migration and proliferation by multiple growth factors. This intracellular mechanism contrasts to most other angiogenesis inhibitors that focus on a single growth factor or on a single stage of blood vessel recruitment.

Obesity:
Produlestan, Genaera's second aminosterol compound, has been shown to produce appetite suppression and weight loss in animals. Preclinical data on this compound demonstrate it is a potent appetite suppressant in numerous animal models of obesity. In these models, in additional to controlling weight, produlestan seems to normalize blood sugar, and hypercholesterolemia, as well as high blood cholesterol levels. Genaera researchers have shown efficacy with produlestan and demonstrated that animal food intake can be regulated in a reversible manner, leading to changes in body weight.

Genomics and Respiratory Treatments:
Genaera employs a comprehensive functional genomics approach to understand the genetic basis of disease and to develop potential drug leads. Through these efforts, they seek to identify appropriate targets for pharmaceutical intervention that aim to control the root cause of human disease. They believe that pharmaceuticals developed for use against these specific targets have the potential for greater effectiveness and fewer side effects than pharmaceuticals developed through more traditional processes.

Within the respiratory disease focus, Genaera has two genomics-based programs.  The Company has a collaboration with MedImmune, Inc. to co-develop an interleukin-9 (IL9) based antibody for asthma and other respiratory conditions. Genetic studies in both humans and animals have generated substantial support for IL9 as a major mediator of asthma, and functional genomic analyses have confirmed these findings. Genaera maintains a comprehensive research and development program to identify additional genes that may be implicated in respiratory disease.

Genaera’s second genomics-based program has led to the identification of several small molecules believed to inhibit the overproduction of mucin.  These so-called “mucoregulators” have the potential to yield novel therapeutics for mucus overproduction in a number of chronic respiratory diseases.  The Company initiated phase 1 mucoregulator clinical trials in August 2001.

CEOCFOinterviews - Dr. Holroyd, can you give us a brief history of Genaera Corporation?

Dr. Holroyd: "The Company was founded in l987 and has been public since December 1991. Its initial focus was developing medicines for serious diseases from natural products.  In 1995, we added a genomics focus, related to respiratory diseases. Since then our focus has been on both genomics and natural products."

CEOCFOinterviews – On which of the two do you put the most emphasis?

Dr. Holroyd: "Currently, we place an equal emphasis on both the genomics and the natural products areas. With the natural products, our lead compound is squalamine, which is moving into registration studies for advanced ovarian cancer, and we have other trials under way for cancer. We have announced results from our phase 2 studies in non-small cell lung cancer and ovarian cancer with updates in that area last May (2001). In addition, we have taken an interest in developing the compound for the angiogenesis associated with macular degeneration of the eye. Our second natural product compound, called produlestan, now in pre-clinical development that we believe, if there are no unexpected surprises, will be entering the clinic at the end of this year (2001) or early next year, is a central appetite suppressant

Within our genomics program, we have a collaboration with MedImmune on making an IL9 antibody for the treatment of asthma and other respiratory conditions. In addition, we have a drug that blocks mucus production, based on our genomics discovery. That drug will be entering the clinic for treatment of chronic respiratory disease, with initial studies that began recently."

CEOCFOinterviews - Which market offers the greatest potential for squalamine?

Dr. Holroyd: "The potential is very large within the cancer market, where a company’s focus is naturally to show that the drug is effective and safe for a particular indication, and then build off of that for other indications and studies, phase 4 and off-label use. I believe this is something that we will see with all anti-angiogenic compounds. Therefore, based on our studies to date, we believe that a very promising area to develop squalamine for regulatory approval is advanced ovarian cancer, the type that is recurrent and refractory disease. This is where the patient has not responded well to standard chemotherapy. If the agent is successful we will branch out to other indications."

CEOCFOinterviews - What sets squalamine apart from any of the other angiogenesis inhibitors that are being developed?

Dr. Holroyd: "What that sets squalamine apart is that it is a direct acting agent on the activated blood vessel or endothelial cell. It is absorbed into the endothelial cell, where it has a very long half-life and therefore it does not have to be in the circulation constantly, like some of the other agents. It also has both a unique and multi-faceted anti-angiogenic mechanism within the cell that has to do with the combination of blocking growth factor signaling, the cell’s ability to multiply, and integrin expression.  All of which we believe are related to squalamine’s unique function within endothelial cells, where it is absorbed specifically to calmodulin. Therefore, it has a direct mechanism and is unique structurally, and it is a small molecule. We feel that these factors make squalamine unique and present us with potential advantages."

CEOCFOinterviews – When do you see squalamine going into phase 3 studies?

Dr. Holroyd: "That is the next step that we are looking at for ovarian cancer. There are a number of mechanisms that Food and Drug Administration (FDA) has for developing cancer drugs for registration. Those include both the accelerated approval mechanism, and the more standard phase 3 mechanisms, or some combination. We are presently looking at all those possibilities."

CEOCFOinterviews - In the studies that you have done with squalamine so far, has there been any side effects or complications, or has it move smoothly through the process?     

Dr. Holroyd: "Squalamine has done very well. During phase 1 single agent studies, at very high doses, these are doses that we are not using clinically at all, it has shown side effects of increasing the liver enzyme blood test. However, we do not believe it is likely to be a problem for developing the drug for cancer or macular degeneration. We certainly have a lot of evidence that the drug is very active at levels much below what we’re currently administering. Therefore, I think the safety profile has turned out fine that way and that is really the only significant toxicity that we’ve seen"

CEOCFOinterviews - Is squalamine considered a chemotherapy?

Dr. Holroyd: "It is a chemotherapy, in the strict sense that chemotherapy just means that the chemicals provide the therapy. However, in the sense that there is a cytotoxic chemotherapy, that is directly trying to kill the cancer cells, squalamine is not that type of typical cancer chemotherapy agent. It is a very new approach - trying to block blood vessel proliferation caused by the cancer and cut off the cancers nutrient supply. Cancer cells require oxygen and nutrients, which are received from the body's blood supply. In order to access this blood supply, cancer cells initiate a mechanism that stimulates angiogenesis. Squalamine is a drug trying to block the blood vessel proliferation, cutting off the cancer's nutrient supply."

CEOCFOinterviews – Can you tell us about the other possible markets for squalamine?

Dr. Holroyd: "We have already completed a phase 2 study in advanced non-small cell lung cancer and will have studies looking at prostate cancer, brain tumors with radiation therapy and pediatric tumors as well as the genetic condition called FOP. The other large and promising market for squalamine, based on number of years of preclinical investigating with leading ophthalmologic groups, is so called macular degeneration, the most common cause of blindness in the developed world. The blindness that results in macular degeneration has to do with a number of blood vessels proliferating abnormally in the eye, which then have a tendency to hemorrhage and thereby block the vision. The anti-angiogenesis therapies have promise for blocking this blood vessel proliferation. In the case of squalamine we have hopes, based on our data from experiments with primates, that we will be able actually to reverse the abnormal blood vessel proliferation. That would be something very new and exciting for that condition. We hope to start studies clinically in that area in 2002."

CEOCFOinterviews - Are there any other biotech companies doing studies in this area?

Dr. Holroyd: "There are a number of companies interesting in developing anti-angiogenesis agents and some of them have attempted to do studies in the area of the eyesight, yet have not been very successful so far. They are trying to treat the abnormal blood vessels in a different way. Recently approved by FDA, is a QLT Therapeutics Company and Novartis Pharmaceuticals collaboration, in which they have an injectible dye that absorbs light by laser into the eye. Therefore, that laser treatment in combination with the dye does provide some benefit for some set of patients with macular degeneration."

CEOCFOinterview - What is the form of delivery for squalamine?

Dr. Holroyd: "In our studies we are currently giving the drug intravenously and we think that it would be quite a good idea for the eye study as well. However, we are still working on local delivery related to eye disease, which is another of several possibilities." 

CEOCFOinterviews - Do you have any other natural drugs?

Dr. Holroyd: "We have produlestan, our second aminosterol compound, working as a central appetite suppressant. It is now in formal preclinical testing and we plan to begin phase 1 studies later this or early next year. Produlestan is another completely unique small molecule that does seem to have effectiveness in many different types of obese animals, including genetically obese mice, and we are very excited about it."

CEOCFOinterviews - Where are you right now in the genomics area and what are you targeting?

Dr. Holroyd: "Within the genomics area, the first program that we have developed is now partnered with MedImmune. The program is for developing an interleukin-9 (IL9) antibody that is treatment for asthma. Genaera, and it’s scientific and development team, has done research showing that IL9, by gene mapping techniques, looks to be a key risk factor for asthma, and a new pharmaceutical target for asthma, based on human asthma family and mouse inbred strain mapping studies. A lot of scientific works by many investigators in academia in collaboration with us have shown that IL9 seems to be unique in controlling all of the key factors that relate to the inflammation that causes asthma in both humans and animals. We believe that is it an ideal target for the antibodies because it is a circulating factor with high concentration in the lung in asthmatics specifically.

We are very excited about our MedImmune partnership, and we have received a $10 million up front payment, plus they have given us a minimum of $2.5 million for research and development support, while they are really conducting the development, manufacturing and future marketing and sales of the product. Moreover, we will receive milestones and royalties. Therefore, we are quite happy."

CEOCFOinterviews - Will MedImmune take the drug to the market?

Dr. Holroyd: "That is correct. At the same time, we have many other genes that we have discovered here that are a part of our respiratory gene database along with a number of others small molecule programs. The second one that I would like to highlight is a novel chloride channel that we discovered by functional genomics techniques a number of years ago. We have developed a small molecule that recently entered into clinical trials. It concerns excess mucus production that leads to blockage of breathing, promotes infection and lung dysfunction in number of lung diseases including asthma and chronic obstructive pulmonary disease, that is emphysema and chronic bronchitis, as well as patients with cystic fibrosis. We are also interested in chronic sinus diseases, where experts believe the symptoms are also caused by excess mucus production. This is one of the five most common reasons people visit the doctor, accounting for over 35 millions visits a year. We are very exited about the lead compound, which is based on our genomics discovery. It is a small molecule compound entering the clinic.  We discovered the gene at Genaera, and began looking for compounds to block the chloride channel. We believe that we have a very promising drug candidate, as well as other back-up compounds in development. Therefore, this has been one of the large focuses for our Company for the last several years.  I believe we will be having some very exciting studies coming up with this compound."

CEOCFOinterviews - Where are you in relation to cystic fibrosis studies on it?

Dr. Holroyd: "Cystic fibrosis is a very promising area for a medication that can block excess mucus production and we are currently planing those studies as one normally would in the sequence of development. We are likely to begin development of our drug outside of the US this year and then have a US IND in 2002."

CEOCFOinterviews - Are you planing to bring your product to the market through partnering or do you see yourself developing a sales force?

Dr. Holroyd: "I think that Genaera will look to have partnerships at least on territorial bases for the squalamine and mucoregulator programs. That is currently a large focus of our business development program. We are keeping in mind that for smaller indications, such as ovarian cancer with squalamine, or cystic fibrosis with the mucoregulator product, it may be advantageous to have a targeted sales force or work with a contract sales organization other than with one of the big pharmaceutical companies. All options are open to us and we are trying to make business decisions that will be profitable for both ourselves and our shareholders. Right now our focus is on some territorial deals, for example Japanese markets for our compounds, and on taking further steps to develop them here in the US."

CEOCFOinterviews - Do you have the cash and credit to continue your growth strategy?

Dr. Holroyd: "After completing the MedImmune transaction in April, the Company has about $25 million in cash, with the Company burning $850,000 to $950,000 per month, and currently the price of our stock is about $3.00 per share. Therefore, we believe we are in a good position now to continue our programs, and look for additional business partnering opportunities in the future in order to carefully manage our cash and development programs while trying to minimize dilution for our shareholders."

CEOCFOinterviews - Is there any closing statement you would to make to your shareholders and potential investors?

Dr. Holroyd: "There have been a lot of exciting developments at the Company over the last year as our programs moved forward. I think that with the mucoregulator program entering the clinic, squalamine moving on to registration studies, and the appetite suppressant moving toward the clinic late this or early next year, plus our partnership with the MedImmune, we have a lot of exciting developments going on. By taking them one step at a time I think we will be able to continue to develop business relationships that bring in funds to support these programs' future development and deliver value to our shareholders."