Dear Investors,

I take with pleasure this opportunity to update you on the progress made since the start of the current year  in the research and development work performed by Tissera-sponsored research team at the Weizmann Institute of Science, led by the immunologist Prof. Yair Reisner. This work is performed under a multi-year agreement between Tissera Inc. and Yeda Research and Development Company Ltd, the technology transfer arm of the Weizmann Institute.

As we have already reported, our extensive experiments throughout 2005 on mouse models have further supported and solidified previous research results demonstrating the advantage of the company's approach to xenotransplantation of pig embryonic pancreatic precursor tissue harvested within a specifically defined gestational time window. Impressive results were obtained both in terms of sustained growth and functionality of the transplanted tissues within the mouse recipients, as well as in terms of reduced immunogenicity (meaning lesser risk of rejection) of those tissues. What is further, the curative value of the company's approach was further strengthened by the successful results of studies in two different diabetic mice models, in which the potential of transplanted pig embryonic pancreatic precursor tissue to restore and maintain normal blood sugar levels was clearly exhibited, thus demonstrating the therapeutic potential in the treatment of insulin-dependent diabetes.

As a recognition of their scientific value, an article reporting about those achievements, entitled "Embryonic Pig Pancreatic Tissue Transplantation for the Treatment of Diabetes", authored by Prof. Yair Reisner and his team, was elected for publication  in the much renowned and appreciated scientific journal, PLoS Medicine, (PLoS stands for Public Library of Science), and subsequently appeared in its June 20, 2006 online edition.

On the basis of these successful achievements, large animal model studies were initiated. In these experiments, embryonic pig pancreatic precursor tissues are transplanted into non human primates (monkeys), and are followed for various periods and under various immunosuppressive regimens for survival, structural and functional growth and proliferation within the recipient primates.

A follow-up of sixteen weeks after transplantation showed considerable growth of the engrafted tissue, with persisting significant proliferation of the transplanted cells and a pronounced presence of endocrine elements, notably islet cells, responsible for the production of insulin, the hormone deficient in type I diabetes. No signs of rejection of the pig embryonic pancreatic implants were detected and the tissues were shown to be wholly vascularized by the host primate blood vessels, a fact likely to provide a significant benefit for the successful acceptance and thriving of the graft and for the company's future goal of using minimal immune suppression in transplanted patients.

It is to be stressed that the presence, in primates and among them in humans, of specific antibodies to certain pig antigens is known to be a determinant factor in the development of hyperacute and acute rejection reactions, responsible for early graft rejection. This problem was shown to be surmountable by the company's technological approach and by the immunosuppressive protocol adopted for the implementation of this approach.

The ability of the transplanted tissues to produce hormones was demonstrated by specific staining for the presence of intra-cellular insulin and glucagon.

The pancreas normally consists of endocrine elements, called islet cells, responsible for insulin and other hormones production, and of exocrine elements, responsible for the production of proteolytic enzymes associated with food digestion.  A major concern associated with pancreatic tissue transplantation is how to avoid destruction of the growing organ by the possible local release of such proteolytic enzymes by the exocrine elements. In previous experiments in mice, the company has shown a marked preference for the development of the endocrine elements, with a progressive disappearance of the exocrine elements. Those results repeated themselves in the large animal experiment, in which the marked presence of insulin-producing islet cells was accompanied by a complete absence of potentially noxious exocrine elements at sixteen weeks after transplantation.

Based on these positive results, the company has moved forward to investigate in diabetic monkeys the functional and therapeutic value of the company's approach. In these studies, non human primates are treated by an agent called streptozotocin (STZ) which induces them to become diabetic and consequently dependent upon the administration of exogenous insulin for the maintenance of reasonable blood sugar levels. After allowing a few days for stabilization, appropriately timed pig embryonic pancreatic tissue is transplanted into the diabetic primate, which is thereafter intensively and carefully followed    

Considering that treatment with transplanted pig embryonic pancreatic tissue requires a prolonged time until a sufficiently large functional graft is developed, the maintenance of STZ treated primates represents a major challenge, calling for an intensive and around the clock effort of the members of the research team at the Weizmann Institute.

As part of the results obtained so far, a progressive post transplantation reduction of the insulin amounts required for maintenance of blood sugar levels has been observed, together with the demonstration of the presence of slight blood insulin levels, suggestive of endogenous insulin production, which might be attributed to the growing pancreatic graft, though the pig origin of this insulin remains to be verified. Those are positive and encouraging preliminary data, though it must be emphasized that further work and follow up is needed to clarify whether this tendency of reduction of insulin requirements persists over time and whether complete weaning from exogenous insulin dependence can be achieved. The diabetic primate model experiments are still ongoing and further time for the current and future additional experiments must be allowed in order to reach conclusive results.

It is my personal and the company's hope and belief that this extensive research effort in the non human primate diabetic model will help demonstrate the scientific and technical feasibility of our unique therapeutic approach, thus paving the way for the conduction of human clinical studies for the treatment of insulin-dependent diabetes mellitus.

Amos Eiran, CEO & Chairman

Tissera Inc.

About Tissera

Tissera is a biotechnology company dedicated to the development of novel tissue precursor regeneration technologies for treating gene deficiencies and diseases in which organ transplantation is necessary, while minimizing the dosage of immunosuppressive drugs. Tissera obtained the license for the worldwide exclusive rights to the technology developed by Professor Yair Reisner and his team at the Weizmann Institute of Science in Israel. In this research, scientists successfully implanted in mice embryonic human and porcine organ precursor tissues, which grew into functional organs. This research was published in Nature Medicine and attracted worldwide scientific and media attention.

Safe Harbor Statement