Axys Pharmaceuticals is an integrated drug discovery and development company, with capabilities that extend from target identification and validation to clinical development. For the past five years, Axys has applied its core competencies in medicinal and structural chemistry to a broad and diversified research pipeline of programs funded by major pharmaceutical partners, including Merck, Aventis and Bayer, to name a few. This work has been focused primarily on protease disease targets and the identification of small molecule drugs for the treatment of chronic diseases.

Today, Axys is moving several high visibility collaborative programs to the clinic in osteoporosis, allergic asthma, and in inflammatory disease, including a Phase II program to develop a new treatment for ulcerative colitis. In 1999, Axys refocused unpartnered internal resources on oncology as the therapeutic area in which we are building a proprietary pipeline. Current research and preclinical programs target angiogenesis, estrogen receptor modulation, tumor metastasis, and apoptosis. A significant number of the programs are also directed toward the development of small molecule protease inhibitors, a long-standing Axys focus area.

Axys' particular strengths rest in applying its chemistry skills to identify clinical candidates and optimize their pharmacological properties. These are two rigorous disciplines that are applied to every new drug in development to make sure they provide appropriate improvements over current therapy. Where newer technologies such as combinatorial chemistry and high throughput screening are accelerating drug discovery methodologies, Axys expertise is high complimentary, representing the final threshold that must be passed before a drug can be tested in humans.

Similarly, as the genomics revolution is dramatically increasing the number of potential drug targets, most therapies suggested by the ongoing discoveries in the human genome will eventually move to structural and then, medicinal chemistry before they can be seriously evaluated for human administration. For example, the most resource-intensive stage of drug discovery is the identification of a preclinical candidate with a desirable pharmaceutical product profile. Here, Axys has built a group of approximately 50 chemists who work closely with an in-house pharmacology group to determine how Axys compounds can be best engineered for effective therapeutic activity in the body.

In short, Axys combines the nimble creativity of the biotech revolution with the traditionally difficult and complex challenges of pharmaceutical discovery and development. It is well positioned to fund its important work in oncology, and is executing successfully on its strategy of funding drug discovery and development based on value it is creating by leveraging broadly applicable technology in affiliated businesses. In mid-2000, the merger of Axys' Advanced Technologies group with Discovery Partners International (Nasdaq: DPII) and the subsequent successful initial public offering of DPII created value for the Axys combinatorial chemistry business of approximately x times Axys' original investment.

Moving forward, Axys intends to similarly leverage the opportunities of its two other spinoffs: Akkadix Implementations, an agricultural biotechnology business; and xGS Tech, a pharmacogenomics venture focused on using genomics information to predict the responses of patients to drugs.