LIPPOMIX's OptisomeTM- encapsulated ivermectin is for the treatment of head lice and scabies. The currently available pediculicide products contain either lindane or pyrethrins. These products are potentially neurotoxic, teratogenic, and/or associated with allergic skin disorders. Lindane-containing products have been reclassified from OTC products to prescription products because of serious concerns about adverse effects. Cases of head lice are currently on the rise in the United States as resistance is developing to currently available pediculicide (particularly the permethrin-based formulations). It has been estimated that 12 million youngsters contract head lice in the United States each year. Scabies is a second potential indication for the product. The skin condition is often found in institutional settings and is treated with lindane or pyrethrin-containing dermal creams. Clearly, there is currently a growing market need and commercial opportunity for a safe and effective pediculicide. LIPPOMIX is developing a proprietary position on such a product and expects regulatory approval to be relatively rapid, based upon the safety and efficacy profile of the active component, ivermectin.

Potential Market

Last year's sales of the number one selling pediculicide in the U.S., Nix ® by Warner-Lambert, were $57M. There are at least 25 pediculicides on the market for treating head lice with the number two products being Rid ®, which is sold by Pfizer. The total market for pediculicides also includes treatment for scabies and pubic lice. It is probably safe to assume that the pediculicide market well exceeds $100M in the U.S.

Competition

The company has recently become aware that Merck, a manufacturer of ivermectin thought is developing a pediculicide, which contains this active ingredient. It is likely that other companies exist which may be developing new products in this area, although LIPPOMIX is currently unaware of any these companies and/or what new products they may be developing. LIPPOMIX also feels confident that its Optisome Tm- formulated product will have several significant advantages over other shampoos/formulations which contain the same active ingredient based upon preliminary data in veterinary trials in cats. These studies indicate that very low doses of ivermectin are required to achieve a therapeutic effect. This is potentially the result of the slow-release of the ivermectin from the Optisome TM, as well as the ability of the Optisomes to carry the ivermectin across the exoskeleton of the insect pest and have its desired effect. LIPPOMIX also believes that the chemical properties of the Optisome Tm- based formulation may allow the active ingredient in the product to destroy the eggs of the lice which remain attached to the hair of treated children following topical application of the currently marketed products. More importantly, because ivermectin may destroy the eggs of lice ("nits"), LIPPOMIX believes that its product will be safer and more effective than existing products and those in development, because it will require only one treatment. The commercial products now available usually require two treatments and the use of a special fine-tooth comb to remove the eggs or nits. LIPPOMIX's new pediculicide would provide a very convenient, effective and safe tool for parents and school nurses to control head lice in school aged children.

Initial Disease Target and Regulatory/Clinical Strategy

LIPPOMIX plans to develop a "conditioning rinse" for head lice and does not anticipate that a prolonged development program will be needed in order to obtain regulatory approval.

Commercialization of Topical Pediculicide (U.S.)

Annual Incidence	12,000,000	Does not include scabies and pubic lice
100% Eligible	12,000,000
Penetration	50%
Market Share	20%	Assumes no other resistant treatments
Available Revenue/Patient/Year for each	$48M	Assumes $20.00 for each treatment cycle