Therapeutic Program – Collaboration with Eli Lilly and Company Alzheimer’s disease drug discovery and development activities are focused on novel targets, including one targeting an intracellular phosphorylation pathway with the potential to impact both hallmark disease pathologies, amyloid plaques and neurofibrillary tangles.  In November 2006, we entered into an agreement with Eli Lilly and Company (Lilly) to develop therapeutics to treat AD.  The agreement forms a collaboration that combines the expertise, research tools and tau-based approach advanced by Dr. Davies and our team at Applied NeuroSolutions, with the scientists, therapeutic development expertise and financial resources at Eli Lilly and Company.  The agreement calls for Lilly to receive the exclusive worldwide rights to the intellectual property related to our expertise in understanding the molecular neuropathology of AD as it pertains to the formation of neurofibrillary tangles.  Lilly will fund the vast majority of all pre-clinical research and development and will fully finance the clinical testing, manufacturing, sales and marketing of AD therapeutics developed from our collaboration. Pursuant to the collaboration agreement, Lilly will, based on the achievement of certain defined milestones, provide us over time with up to a total sum of $20 million in milestone payments for advancing the APNS proprietary target to a therapeutic compound.  The collaboration has also made progress on other targets that are part of the collaboration that could provide milestone payments to us over time of up to a total sum of $10 million for advancing each of these other targets to a therapeutic compound.  There is no limit to the number of targets for which we could receive milestone payments from Lilly.  Royalties are to be paid to us for AD drug compounds brought to market that result from the collaboration.  There is no limit on the number of drug compounds for which royalty payments may be due to us. The market potential for a drug to effectively treat Alzheimer’s disease is extremely large. Currently there are only five drugs approved in the U.S. to treat AD.  Four of these drugs are cholinesterase inhibitors and one is an NMDA receptor antagonist.  These drugs have limited beneficial effects in treating symptoms associated with AD and are not able to arrest the progression of the disease. Research Products We market a transgenic mouse containing the human tau gene that develops human paired helical filaments, the building blocks of the neurofibrillary tangles, which are known to be involved in the pathology of Alzheimer’s disease. The pathology in these mice is Alzheimer-like, with hyperphosphorylated tau accumulating in cell bodies and dendrites as neurofibrillary tangles.  In addition, these transgenic mice have exhibited extensive neuronal death that accompanies the tau pathology.  These transgenic mice could be used for testing the efficacy of therapeutic compounds.  To date, no widely accepted animal model that exhibits both AD pathologies has been developed.  The mice are currently available through Jackson Laboratories.