AN2728 is our lead topical anti-inflammatory product candidate for the treatment of psoriasis and atopic dermatitis. AN2728 is a novel boron containing small molecule that inhibits PDE4 and reduces the production of TNF-alpha, a precursor of the inflammation associated with psoriasis and atopic dermatitis, as well as other cytokines, including IL-12 and IL-23, which are proteins believed to be involved in the inflammation process and immune responses. If approved, AN2728 would be the first topical non-steroidal treatment that inhibits TNF-alpha release. Thus, we believe AN2728 has the potential to approach the efficacy of injectable biologics with a better safety profile than existing therapies. We believe AN2728 has the potential to treat atopic dermatitis patients and patients with mild to moderate psoriasis. In addition, patients with severe disease who combine topical and systemic therapies may use AN2728.

Psoriasis is a chronic inflammatory skin disease that as of 2006 affected approximately 10 million people worldwide, according to Decision Resources. Psoriasis is characterized by thickened patches of inflamed, red skin covered with thick, silvery scales typically found at the elbows, knees, scalp and genital area. Patients can be categorized as mild, moderate or severe, with approximately 80% of patients having mild to moderate forms of the disease. The disorder ranges from a single, small, localized lesion in some patients to a severe generalized eruption. The recent introductions of new systemic biologic therapies for moderate to severe psoriasis has provided new treatment options for patients with moderate to severe disease and greatly expanded amounts spent on drugs to treat psoriasis. According to LeadDiscovery, sales of psoriasis drugs in the seven major pharmaceutical markets (United States, Japan, France, Germany, Italy, Spain and the United Kingdom) were $2.5 billion in 2008.

Most psoriasis patients use more than one type of treatment at any given time and may rotate treatments over time as their disease severity changes or they develop complications. Although current treatments attempt to decrease the severity of the disease, none of them cures the disease. Currently available treatments can be classified as topical, oral or injectable. According to IMS Health, 87% of all prescriptions for psoriasis within the United States in 2006 were for topical treatments. The most common topical treatments are topical corticosteroids, vitamin D derivatives, such as Dovonex (calcipotriene), vitamin A derivatives, such as Tazorac, and crude coal tar preparations. Taclonex also is a topical treatment for psoriasis and is a combination of calcipotriene and the high potency corticosteroid betamethasone dipropionate. The most common oral treatments are the immunosuppressive drug methotrexate and the vitamin A derivative acetretin. A number of injectable biologic drugs in the market include Amevive, Enbrel, Humira, Remicade and Stelara. The majority of these drugs are monoclonal antibodies, a type of complex protein molecule, some of which act by the inhibition of TNF-alpha. In addition to topicals, orals and injectables, psoriasis is also treated with ultraviolet light exposure. Typically, physicians initiate treatment by prescribing topical therapies to treat mild or moderate forms of psoriasis, followed by light therapy or oral treatments if the patient's disease does not improve. For patients who do not respond to oral treatments or light therapy, or for those who have severe psoriasis, physicians will prescribe injectable biologic treatments.

Current topical therapies have demonstrated only moderate efficacy in decreasing disease severity and rarely achieve a complete clearing of the psoriatic lesions. Long term use of topical corticosteroids is associated with atrophy, or thinning, of the skin and has the potential to suppress the body's ability to make normal amounts of endogenous corticosteroids, which limits the duration of safe treatment with these therapies. Vitamin D derivatives can cause skin irritation, and some patients report burning sensations associated with their use. Oral and injectable drugs have greater activity than topical therapies but also have well documented and significant systemic side effects such as liver toxicity, increase in blood fats and suppression of the immune system. In addition, injectable biologic drugs are very expensive, costing tens of thousands of dollars annually. Ultraviolet light treatments can be effective but require multiple visits to the doctor's office each week and have been shown to increase patients' risk of developing skin cancer.

Atopic dermatitis is a chronic rash characterized by inflammation and itchiness. In 2007, Datamonitor reported that atopic dermatitis affected approximately 40 million people across the seven major pharmaceutical markets. The condition most commonly appears in childhood, with 20% of children in the United States affected, and it can persist into adulthood. Skin that is broken and chafed from itching allows bacterial or viral access, which leads to secondary infections.

Current atopic dermatitis treatments attempt to reduce inflammation and itchiness to maintain the protective integrity of the skin. Combinations of antibiotics, antihistamines, topical corticosteroids and topical immunomodulators, such as Elidel and Protopic, are the current standard of care. However, these have limited utility because of lack of efficacy and treatment limiting side effects. While not approved by the FDA for treatment of atopic dermatitis, ultraviolet light has been used to treat this disease.

For AN2728, all three of our completed Phase 1b microplaque trials showed significant anti psoriatic activity over vehicle. Subsequently, our three completed Phase 2 trials confirmed the results of the microplaque studies when applied by the patient for several weeks. One of those trials, our first Phase 2b study, also achieved its objective of defining the optimal duration of therapy in patients with psoriasis.

The following chart summarizes our AN2728 clinical trials to date: