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Dragon is developing an engineered version of insulin, a naturally occurring hormone produced by the pancreas. Insulin is critical for regulating the level of glucose in the blood and, since glucose is the primary energy source for the body, is essential for normal metabolism. A defect in insulin production, or an abnormal response to insulin, leads to high glucose concentrations and diabetes. Diabetes takes two major forms: insulin dependent diabetes mellitus (IDDM or Type 1), an autoimmune disease; and non-insulin dependent diabetes mellitus (NIDDM or Type 2), a far more common condition associated with an affluent lifestyle.

Approximately 135 million people worldwide have diabetes, 10% of whom have Type 1 disease. There is no cure for either type of the condition, and insulin injections to regulate blood glucose are required by all Type 1 and approximately 20% of Type 2 patients to permit a near normal lifestyle. The injectable human insulin market was developed by two major pharmaceutical companies, Eli Lilly and Novo Nordisk, and is currently worth $2.76 billion. This market continues to grow as the number of patients with diabetes, particularly Type 2 disease, reaches epidemic proportions.

Dragon has developed a proprietary process for the production of insulin, based on our Pichia yeast cell culturing technology . We believe that this process will result in greater yields and lower production costs than insulin produced by current manufacturers. Preclinical studies with our product should be completed by the end of 2002 and clinical studies are expected to commence in mid-2003. We anticipate first launch of Dragon insulin by the end of 2004.

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