Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

COMMISSION FILE NO. 001-14888

GENETRONICS BIOMEDICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

        Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

        Indicate by check mark if whether the Registrant is an accelerated filer (as defined, in Exchange Act Rule 12b-2).    Yes ý No o

        The aggregate market value of the voting and non-voting common equity (which consists solely of shares of Common Stock) held by non-affiliates of the Registrant as of June 30, 2004 was approximately $90,924,877 based on $5.20, the closing price on that date of the Registrant's Common Stock on the American Stock Exchange.

        The number of shares outstanding of the Registrant's Common Stock, $0.001 par value, was 20,012,910 as of March 2, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

        We have incorporated by reference into Part III of this Annual Report portions of our proxy statement for the 2005 Annual Meeting of Stockholders, for which a definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the fiscal year to which this Annual Report relates.

TABLE OF CONTENTS

        THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, STATEMENTS CONTAINING THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS," "ESTIMATES" AND WORDS OF SIMILAR MEANING. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS, WHICH REFLECT MANAGEMENT'S OPINIONS ONLY AS OF THE DATE OF THIS REPORT, AS A RESULT OF SUCH RISKS AND UNCERTAINTIES. WE UNDERTAKE NO OBLIGATION TO REVISE OR PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE FOUND IN THIS ANNUAL REPORT ON FORM 10-K IN PART I, ITEM 1 UNDER THE CAPTION "RISK FACTORS," IN PART II, ITEM 7 UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ADDITIONAL FACTORS DISCUSSED ELSEWHERE IN THIS ANNUAL REPORT AND IN OTHER DOCUMENTS WE FILE FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING OUR QUARTERLY REPORTS ON FORM 10-Q. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS.

2

PART I

ITEM 1. BUSINESS

OVERVIEW

        We were incorporated on August 8, 1979, under the laws of British Columbia, Canada, as Genetronics Biomedical Ltd. On June 15, 2001, we completed a change in our jurisdiction of incorporation from British Columbia, Canada, to the state of Delaware. This change was accomplished through a continuation of Genetronics Biomedical Ltd. into Genetronics Biomedical Corporation, a Delaware corporation. We carry out our business through our United States wholly-owned subsidiary, Genetronics, Inc., which was incorporated in California on June 29, 1983.

        We are a San Diego-based biomedical company whose technology platform is based on medical devices that use Electroporation Therapy ("EPT") to deliver drugs and genes into cells. We are developing and commercializing novel medical therapies to address a number of diseases with critical unmet treatment needs using EPT. Our MedPulser Electroporation Therapy System is in Phase III clinical trials in the United States for the treatment of recurrent head and neck cancer. In addition, we are currently conducting pre-marketing studies to support the commercialization of the MedPulser Electroporation Therapy System in Europe. Our system delivers electrical pulses to tumors injected with the generic drug bleomycin. The unique feature of the system, which uses a generator together with disposable needle applicators, is the preservation of healthy tissue at the margins of the tumor. We believe this may afford distinct advantages over surgery in preserving function and improving the quality of life for cancer patients who would otherwise face significant morbidity associated with cancer surgery. Prior to commercial sales of the MedPulser Electroporation Therapy System in the European Union ("EU"), we were required to receive CE Mark Certification, an international symbol of quality and compliance. We believe that the planned commercial launch of our CE certified MedPulser Electroporation Therapy System in Europe in 2006 represents an important milestone for us.

        The primary front line treatment of solid tumors involves surgical resection and/or radiation to debulk and control tumor growth prior to initiating systemic therapy with chemotherapeutic agents. Because it is often difficult or impossible for surgeons to determine the border, or margins, between healthy and diseased tissue, they will often resect an area outside of the obvious tumor mass to ensure that they have excised all of the cancerous tissue. This can result in the loss of function and appearance of the surrounding tissues and organs, reducing the patient's quality of life. Examples include the loss of speech from resection of tumors on the tongue or larynx or loss of erectile function from resection of the prostate. Recent advances in non-surgical forms of tumor ablation, such as cryoablation, microwave or high frequency radio ablation therapy, fail to meet clinical needs in preserving normal healthy tissue. Given the desire for improved outcomes in the surgical resection of a large number of solid tumors such as head and neck, cutaneous, pancreatic, breast and prostate cancer, we believe that there will be significant demand for our technology from surgical oncologists.

        As part of our MedPulser Electroporation Therapy System product line, we have also been developing devices for the delivery of DNA for vaccinations and gene therapy. We were the first company to initiate a clinical study involving the use of EPT with DNA involving human patients. This was done in collaboration with investigators at the Moffitt Regional Cancer Center in Tampa, Florida in December 2004. This investigation was approved by the U.S. Food and Drug Administration ("FDA") and involves electroporating melanomas with DNA-encoded cytokines in an attempt to stimulate immunity against the patient's tumor. In 2004, we also extended our license with Vical to include a worldwide exclusive license for the use of electroporation together with Vical's "naked" DNA technology for their development of an HIV DNA vaccine. We also executed a major licensing deal with milestone and royalty payments with Merck for the development of proprietary DNA vaccines for cancer and infectious disease using electroporation. In addition, in January 2005, we acquired Inovio AS, a Norwegian company, to expand our patent portfolio in the area of intramuscular electroporation.

3

We believe our compelling asset base of intellectual property and scientific and engineering accomplishments, combined with clinical results, position us as a leader in EPT.

        We believe that attempts to pioneer new therapies based on DNA have been hampered by the side effects associated with the use of viral vectors for DNA delivery. In addition to safety issues, viral vectors are difficult and expensive to manufacture. Because electroporation has proven efficient and safe in animal experiments, we have been developing MedPulser DNA Delivery Systems for different target tissues. By engineering different applicators and choosing appropriate electroporation parameters, we can deliver DNA to the muscle, tumor tissue, skin or vasculature. This should facilitate attempts to use DNA for therapies ranging from vaccination to gene therapy of single or multiple gene defects, including cancer and vascular diseases. As with our oncology program, we believe that our efforts in DNA delivery position us as a leader in the field.

AVAILABLE INFORMATION

        Our Internet website address is www.genetronics.com. We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed on behalf of directors and executive officers, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC"). You can learn more about us by reviewing such filings on our website or at the SEC's website at www.sec.gov.

RECENT DEVELOPMENTS

        In January 2005, we announced the acquisition of Inovio AS, a Norwegian company dedicated to intramuscular electroporation, in a stock purchase transaction for $3.0 million in cash and $7.0 million in Series D Preferred Stock. Inovio holds several patents for the use of intramuscular electroporation for gene therapy, supports a number of clinical studies and is the recipient of a significant appropriation from the U.S. Department of Defense to develop electroporation devices. We feel that the acquisition represents a consolidation within the industry that will serve to strengthen our position as a leader in EPT.

        In January 2005, we completed a private placement to accredited investors whereby we sold 1,540,123 shares of our common stock at a purchase price of $4.05 per share and issued warrants to purchase 508,240 shares of our common stock at an exercise price of $5.50 per share, which resulted in aggregate cash proceeds of $3.03 million (assuming no exercise of the warrants). A portion of this private placement involved investors who converted $3.2 million of their previous investment in our Series C Preferred Stock into 790,123 shares of the common stock issued as part of this private placement with no associated cash proceeds to us.

        In December 2004, we announced the initiation of a clinical study at the Moffitt Regional Cancer Center to treat melanomas injected with a cytokine gene followed by electroporation. This study is a first for the combined use of DNA with electroporation in humans and highlights our pioneering efforts with DNA and that of our other partners Vical and Merck. If successful, we have rights to the proprietary method being used at Moffitt (which is held by RMR Technologies and licensed to us) and could subsequently enter into a licensing deal with a partner for the treatment of melanoma.

        In October 2004, we announced the extension of our licensing deal with Vical to include the development of HIV DNA vaccines using electroporation. This expands the existing license to include HIV and increases the milestone and royalty payments we would receive from the successful development of this vaccine by Vical or its future partners.

4

        In August 2004, we announced that we had been awarded a grant by the National Institutes of Health to conduct research in the field of vascular gene therapy. The $100,000 Phase I grant entitled "Ex vivo venous gene delivery by pulsed electric fields," was awarded through the Small Business Innovative Research ("SBIR") program and may be followed, upon evaluation, by a Phase II award of up to $1.0 million. Vascular diseases are the number one cause of death in the U.S and other industrialized countries. Vascular transplants, a frequently used method to treat these diseases, unfortunately suffer from a high failure rate, resulting in a significant unmet treatment need. The SBIR grant will support our research aimed at making vascular transplants more effective and longer lasting.

        In May 2004, we closed a private preferred share placement and raised an aggregate of $10.9 million through the sale of our Series C Cumulative Convertible Preferred Stock to institutional and accredited investors. All proceeds from the sale of the Series C Preferred Stock were received as of December 31, 2004.

        In May 2004, we announced a significant licensing deal with Merck for the development of Merck's DNA cancer and infectious disease vaccines. The terms of the agreement include milestone and royalty payments for successful completion of the clinical development of the vaccines by Merck. Merck will also reimburse us for the co-development of a proprietary electroporation system for the delivery of the Merck DNA vaccines. In addition, Merck and Genetronics will execute a supply and licensing agreement according to a timeline mutually agreed upon by the companies.

        In March 2004, we announced the selection of Quintiles Transnational Corp., a leading global pharmaceutical services organization, as the clinical research organization ("CRO") for our clinical trials in the U.S. and EU for the treatment of head and neck cancer.

        In March 2004, we announced that we have begun treating patients with new and recurrent primary squamous cell carcinoma of the head and neck ("SCCHN") in a post European regulatory approval clinical study. The clinical study is designed to support the commercialization of our MedPulser Electroporation Therapy System in the EU. The European clinical study will facilitate adoption of the technology by thought leaders and allow us to apply for reimbursement. Prior clinical trials established the safety and performance of the MedPulser Electroporation Therapy System for the treatment of SCCHN, leading to approval for sale in the EU based on achieving the CE Mark.

        During the first quarter of 2004, we initiated two Phase III head and neck clinical trials in the U.S. and EU. In February 2004, we announced that we have completed the Special Protocol Assessment review process with the FDA for the two Phase III pivotal studies to evaluate the use of our MedPulser Electroporation Therapy System as a treatment for recurrent and second primary SCCHN. Several Institutional Review Boards ("IRB") in the U.S. have approved the two protocols to date, and we have initiated patient enrollment. These trials compare EPT to surgery using a primary endpoint of function preservation and secondary endpoints of local tumor control, disease-free survival and overall survival. Shifting from a primary endpoint of survival to a quality of life outcome allows us to carry out clinical trials that we expect may be faster, less costly and have a higher likelihood of success. As a result, our previously announced Phase III head and neck trials focusing on survival as a primary endpoint have been discontinued.

        In February 2004, we announced that we have entered into an agreement with RMR Technologies, LLC ("RMR"), to permit us to commercialize RMR's electroporation methods and devices on a worldwide exclusive basis. This extends a long-standing relationship with University of South Florida scientists and RMR founders Drs. Richard Heller, Mark Jaroszeski, and Richard Gilbert, dating back to the co-development of our CE marked MedPulser Electroporation Therapy System for the treatment of solid malignant tumors including head and neck cancers.

        In January 2004, we announced that we have been granted two new U.S. patents. The first patent includes claims to novel, less severe methods for delivering an agent, such as a drug or polynucleotide,

5

into a cell. We believe that this patent enhances the intellectual property for the oncology, gene therapy and DNA vaccine applications of electroporation. The second patent includes claims to methods for reducing changes in target muscle tissue from the application of an electric field, the key elements including electric pulsing parameters. We believe this patent has applicability in the field of gene therapy and DNA vaccines.

BUSINESS OBJECTIVES

        Going forward, we have the following business objectives:

1.

Conclude patient enrollment in phase III recurrent and second primary head and neck cancer study in the U.S. and EU (see "Oncology—Overview");



2.

Conclude the European pre-marketing clinical study in new and recurrent primary SCCHN to support the commercialization of our MedPulser Electroporation Therapy System in the EU (see "Oncology—Overview");



3.

Conclude the European pre-marketing clinical study for new and recurrent primary skin cancers to support commercialization of the MedPulser Electroporation Therapy System (see "Oncology—Overview");



4.

Develop additional indications, such as breast and pancreas cancers (see "Oncology—Overview");



5.

Obtain codes for reimbursement and early sales of the MedPulser Electroporation Therapy System for the treatment of head and neck or cutaneous cancers in the EU (see "Oncology—Overview");



6.

Enter into further industry relationships for the use of our EPT technology in the delivery of specific genes (see "Gene Therapy—Overview");



7.

Initiate additional Phase I human clinical studies involving the use of electroporation with DNA, most likely in the areas of infectious disease and cancer (see "Gene Therapy—Overview"); and



8.

Conclude a strategic license with a partner in the U.S. and/or EU for the marketing rights to the MedPulser Electroporation Therapy System in oncology.

DRUG AND GENE DELIVERY

        We develop equipment that is designed to allow physicians to use EPT to achieve more efficient and cost-effective delivery of drugs or genes to patients with a variety of illnesses. Although there are many diseases where improved drug or gene delivery is important, we believe that our greatest opportunities lie in applying EPT in the areas of oncology and gene therapy (including DNA vaccines) where we are focusing our major efforts.

ONCOLOGY

OVERVIEW

        In the area of oncology, we have initiated Phase III clinical trials and have completed Phase II clinical trials in the United States using the MedPulser Electroporation Therapy System to deliver bleomycin for the treatment of late stage head and neck cancer. Bleomycin is an effective generic chemotherapeutic agent that induces single and double strand DNA breaks in cancer cells. However, because of its size and electrical charge, it is difficult to deliver across the cell membrane. We have chosen bleomycin as the chemotherapeutic agent for the treatment of cancer because of its unmatched

6

efficacy as a chemotherapeutic agent when delivered by electroporation. Bleomycin has been approved by the FDA, the Health Protection Branch in Canada and across the EU, and has been used as a chemotherapeutic agent in North America for the treatment of certain cancers for more than 25 years.

        Initially, we made head and neck ("H&N") and cutaneous cancers our highest priority. A Phase II trial using EPT and bleomycin to treat late stage recurrent H&N squamous cell carcinoma produced a 25% complete response and 57% objective response, which we believe are excellent results at this disease stage. In a European early stage oral cavity squamous cell carcinoma trial, 16 out of 20 patients (80%) showed no viable cancer cells after four weeks, which we believe validates EPT's potential as a primary treatment for H&N cancer. In a cutaneous cancer trial, 130 of 146 tumors (89%) demonstrated a complete response. Using significantly smaller chemotherapeutic doses than in conventional chemotherapy, results to date indicate that EPT matches or exceeds tumor response and survival results of current traditional therapies while preserving healthy tissue, and results in minimal systemic drug distribution and related side effects, and potentially lower treatment costs. EPT may preserve a patient's appearance or ability to speak, smell, eat, or taste, and this may uniquely enhance the quality of life of patients suffering from cancer's harsh effects.

        We have completed a number of other clinical studies in the EU using the MedPulser Electroporation Therapy System to deliver bleomycin for the treatment of liver and pancreatic cancer, basal cell carcinoma and Kaposi's sarcoma. The results from the clinical studies we carried out in Europe have allowed us to obtain a CE Mark certification qualifying the MedPulser Electroporation Therapy System for sale in Europe. We are continuing to carry out and expand our market seeding clinical studies in the EU using the MedPulser Electroporation Therapy System to deliver bleomycin for the treatment of skin cancer and both early and late stage head and neck cancer.

        In addition to our work in head and neck cancer, we plan to use the MedPulser Electroporation Therapy System to deliver bleomycin for the treatment of other cancers. We are currently reviewing a number of other cancer indications in order to assess our competitive advantage for the treatment of cancers and the size of the market that we might serve. The next application for which we are preparing protocols for submission to the FDA is for the treatment of disfiguring cutaneous cancers where patients may benefit from the tissue and function-sparing attributes of EPT and bleomycin.

PARTNERSHIPS AND COLLABORATIONS

        On September 20, 2000, the University of South Florida Research, Inc. ("USF") granted us an exclusive, worldwide license to its rights for certain patents and patent applications generally related to needle electrodes. We jointly developed these electrodes with USF. The terms of the exclusive license include a royalty to be paid to USF based on net sales of products under the license. As of December 31, 2004, no royalty had accrued as no sales were generated from this product. In connection with the acquisition of this exclusive license, we issued 37,500 shares of our common stock and warrants to purchase 150,000 shares of our common stock at $9.00 per share (some of which will vest subject to the occurrence of specified milestones) to USF and its designees, Drs. Heller, Jaroszeski, and Gilbert.

        On August 8, 2000, we entered into a new supply agreement with Abbott Laboratories ("Abbott") to purchase the approved anti-cancer drug bleomycin for use in the United States with our MedPulser Electroporation Therapy System after regulatory approval had been granted for its use for the treatment of patients with solid tumor cancers. Under a separate agreement, we entered into a supply agreement with Faulding, Inc. to purchase bleomycin for use in Canada after regulatory approval had been granted for its use. Both agreements provide that we may purchase bleomycin from time to time in accordance with the terms of the respective agreements.

7

MARKET

        We hope to market our MedPulser Electroporation Therapy System to deliver chemotherapeutic agents, such as bleomycin, for the treatment of cancer. We believe that EPT can address many diseases, but we have focused on oncology's significant unmet needs. There is still much that scientists do not know about cancer; consequently, there are significant unmet needs in its treatment. We have initially targeted those indications, such as head and neck cancer, for which current treatments result in a poor quality of life and very high mortality rates.

TREATMENT OF HEAD AND NECK TUMORS

        The use of EPT is quite simply understood and easy to apply:

•

The physician selects and connects the sterile applicator appropriate for the nature and location of the tumor.



•

The patient is given general anesthesia in a hospital operating room setting. Certain future applications may require only local anesthesia.



•

The drug is injected into the selected tissue, followed by a brief interval lasting only a few minutes.



•

The applicator needles are then inserted into the tumor.



•

The physician activates the electrical pulse using a foot pedal or hand switch.



•

For a larger tumor or area, the applicator is reinserted in an overlapping pattern to cover the entire tissue area requiring treatment.



•

After treatment, the needle array applicator is discarded.

        The entire procedure can be completed within 20 minutes or less and typically needs to be done only once. The dosage of drug used is based on tumor volume and is typically a small fraction (one-third to as little as one-fiftieth) of the dosage that would be used if injected systemically into the patient's blood during chemotherapy. As a result of the lower dosage administered locally, side effects have been minimal. No episodes of injury to normal (non-tumor) tissue adjacent to the tumors have been observed in the patients treated to date.

CLINICAL TRIALS—Head and Neck Cancer

Current International Trials

        We are enrolling patients in our two Phase III pivotal studies to evaluate the use of the MedPulser Electroporation Therapy System as a treatment for recurrent and second primary SCCHN. Both trials have sites in North America and Europe and both protocols will compare our MedPulser Electroporation Therapy System to surgery in patients with resectable recurrent or second primary SCCHN. The primary endpoint is to demonstrate that patients treated with electroporation therapy have superior preservation of function (e.g. eating in public, diet, and talking) compared with those who have surgery, as well as showing local tumor control and survival that are equivalent to results achieved by surgical treatment. The secondary endpoints include comparison of quality of life, safety, and pharmacoeconomics.

        In late 1997, the FDA granted us clearance to initiate multi-center Phase II clinical trials in the United States utilizing the MedPulser Electroporation Therapy System in combination with bleomycin to treat squamous cell carcinoma of the head and neck in late stage patients who had failed conventional therapies such as surgery or chemotherapy. We also obtained IND clearance from the Canadian Health Protection Branch to initiate the Phase II trials in Canada. Two Phase II protocols were initiated. The first Phase II was a single crossover controlled study evaluating the effectiveness of the MedPulser Electroporation Therapy System with bleomycin to treat tumors that failed an initial

8

bleomycin-alone treatment. The second Phase II protocol was a single arm study that evaluated the effect of EPT with bleomycin as the only treatment.

        Twenty-five patients (37 tumors) were enrolled in the crossover-controlled study and initially received bleomycin-alone treatment. No tumors showed a complete response¹ and only one tumor demonstrated a partial clinical response². Seventeen of these patients subsequently had lesions treated with bleomycin and EPT. Of the 20 lesions treated, 55% achieved an objective clinical response³.

        In the open-label Phase II (single arm) study, all patients received full bleomycin and EPT as their initial treatment. Among the 25 patients (31 tumors) treated, 58% achieved an objective clinical response.

        In a similar open-label single arm study conducted in France, 56% of lesions achieved an objective clinical response, consistent with the North American results.

        More recently, market seeding trials in the EU evaluated bleomycin and EPT for localized primary or recurrent oral cavity squamous cell carcinoma. Sixteen of 20 patient tumors (80%) had no evidence of cancer cells by histopathology assessment following bleomycin EPT four weeks after treatment, which we believe validates the potential of EPT as a primary local treatment for H&N cancer.

        The results of these H&N cancer studies are provided in the table below.

¹

Complete response means that no sign of the tumor is present.

²

Partial response is > 50% reduction in tumor volume.

³

Objective tumor response includes complete and partial responses to treatment.

Pre-Marketing Studies

        We are enrolling patients in two post European regulatory approval clinical studies, one in patients with primary or recurrent SCCHN and one in patients with primary or recurrent cutaneous or subcutaneous tumors. Both studies are consistent with the approved intended use of the MedPulser Electroporation Therapy System and are designed to support the commercialization in the EU. Prior clinical trials established the safety and performance of the MedPulser Electroporation Therapy System for the treatment of these tumors, leading to approval for sale in the EU based on achieving the CE Mark. The European clinical studies will:

•

document the clinical and pharmacoeconomic benefits of the MedPulser Electroporation Therapy System in support of reimbursement approval throughout Western Europe;



•

establish centers of excellence to facilitate early sales;

9

•

create a reference and customer base among key opinion leaders for a projected European commercial launch in 2005; and



•

generate safety and efficacy data to support marketing applications in North America.

        Each study will enroll approximately 100 patients with primary or recurrent SCCHN and cutaneous and subcutaneous tumors at about 30 hospitals located in the UK, Germany, Italy, France, Austria, and other western European countries. The studies will evaluate the MedPulser Electroporation Therapy System's pharmacoeconomic impact on the cost of operative and post-operative care. It will also examine patient quality of life, preservation of organ function (i.e. ability to speak, swallow, and eat in public), and local tumor control. These data will help to define the overall benefits of the MedPulser Electroporation Therapy System for the treatment of SCCHN relative to surgery, the standard of care, which frequently compromises a patient's ability to speak or swallow and may be grossly disfiguring. The European studies differ from the current U.S. Phase III clinical trials, which are controlled two-armed trials for the purpose of filing a Pre-Market Approval ("PMA") application in the U.S. and are restricted to the treatment of recurrent SCCHN.

        In late 1997 and early 1998, we received regulatory approval to initiate clinical trials in France for head and neck cancer, metastatic cancer of the liver, pancreatic cancer, metastatic melanoma and Kaposi's sarcoma and in Australia to initiate an expanded metastatic melanoma study. These trials involved treating multiple lesions with bleo-EPT and control lesions with bleomycin-only on each patient. The overall results of the cutaneous and subcutaneous cancer studies sponsored by us is provided in the table below.

⁴

Objective tumor response includes complete and partial responses to treatment.

        The overall average tumor response rate following EPT with bleomycin to cutaneous and subcutaneous cancer was 86% (ranging from 79% for metastatic melanoma to 100% for basal cell carcinoma ("BCC") and kaposi's sarcoma ("KS") compared with an overall tumor response rate of 25% for bleomycin-alone treated lesions (ranging from 13% for BCC, 21% for metastatic melanoma to 55% for KS cancer).

        These trials were initiated to demonstrate the MedPulser Electroporation Therapy System device's safety and performance in treating a variety of solid tumors in support of CE Mark certification in accordance with the essential requirement of the Medical Device Directive 93/42/EEC. We received CE Mark certification in March 1999. To date, the MedPulser Electroporation Therapy System is CE marked as an electroporation device indicated for the treatment of head and neck cancer and for cutaneous and subcutaneous cancers with bleomycin. This certification allows us to market our MedPulser Electroporation Therapy System within the countries of the European Union.

        In December 2004, we initiated a Phase I clinical trial with the H. Lee Moffitt Cancer Center using our MedPulser Electroporation Therapy System to deliver plasmid DNA to tumors with the aim of treating malignant melanoma. The trial is sponsored by the H. Lee Moffitt Cancer Center and will measure the safety of our Medpulser Electroporation Therapy System to deliver plasmid DNA into tumor cells to mount an immune response. In this Phase I open-label study, plasmid DNA encoding a cytokine is delivered directly to tumors in patients with malignant melanoma through electroporation

10

using the MedPulser Electroporation Therapy System. This technology enables the entry and significant uptake of plasmid DNA into the tumor cells, ultimately leading to cytokine production. The intent of this procedure is to induce an immune response that will eliminate the cancer.

RESEARCH AND DEVELOPMENT

        We have historically directed our research and development activities to the areas of oncology, gene therapy, vascular therapy, transdermal delivery and dermatology. Currently, our areas of focus are oncology and gene therapy.

        The following table summarizes our programs in the area of oncology, the primary indications for each product and the current status of development. "Pre-Clinical Studies" means the program is at the stage where results from animal studies have been obtained. "Human Clinical Studies" means that human data is available. In March 1999, we received CE Mark certification in the EU. This certification allows us to market our MedPulser Electroporation Therapy System within the countries of the EU. Commercial launch is dependent on having compelling data from the ongoing market seeding trials and pharmacoeconomic data with which to obtain national reimbursement or hospital purchasing under approved codes.

Clinical Development Status

11

        Our research and development efforts in the field of oncology will focus on preparing for a strategic alliance with a major partner in oncology, expanding applications of the MedPulser Electroporation Therapy System, and designing the next generation of EPT devices. Preparations for forging a strategic alliance include the organization and summarizing of engineering, pre-clinical and clinical data and records to be able to convey information to strategic partners in the most effective manner. The expansion of the MedPulser Electroporation Therapy System to additional applications is intended to involve pre-clinical and engineering work regarding the treatment of additional types of cancers, and the design and manufacture of new types of electrode applicators, such as an applicator for treating laryngeal cancer. We intend to develop second-generation EPT devices for cancer treatment to include devices causing reduced muscle contractions and a device specifically targeted for treating deep-seated tumors, such as prostate tumors. Finally, we intend to continue to strengthen our intellectual property position in the oncology area by pursuing patent protection of any new inventions.

COMPETITION

Current Treatment Practices

Surgery

        The primary treatment (90%) for localized and operable tumors or lesions is surgical resection alone or in combination with other modalities. Given the ability to cut an appropriate margin around the tumor, surgery is highly effective for early stage cancers, but accessibility of a tumor often prevents its use or limits the margin that can be removed. The drawback of cutting away tissue is potential disfigurement or debilitating effects on organ function. Surgery may require a costly hospital stay.

Radiation Therapy

        Radiation therapy's high-energy rays, generated by an external machine, or by radioactive materials placed directly into or near the tumor, are used to damage and stop growth of malignant cells. It is typically used in place of or in conjunction with surgery, or afterwards to destroy remaining cancer cells. It damages healthy cells surrounding the target area and takes several weeks to administer.

Chemotherapy

        Where surgery is not an option, chemotherapy is often combined with radiation. Typically, a secondary or palliative treatment with the goal of helping control tumor growth and making a patient more comfortable, it is used under the following circumstances:

•

When a cancer has advanced from a local tumor and has become a larger regional mass or has metastasized to other organs;



•

When the tumor is difficult to access;



•

For organ preservation, when appearance and/or function are threatened; and



•

For palliation, to achieve tumor shrinkage that may improve quality of life.

12

        The cytotoxicity of many existing anti-cancer drugs is well proven, but their systemic application in required high dosages produces many detrimental side effects, including alopecia (loss of hair), nausea, vomiting, myelosuppression and in some cases drug resistance.

        Surgery and radiation cannot be used where treatment poses a risk to nearby nerves, blood vessels, or vital organs. All of these practices have limited efficacy in treating cancers of certain organs, such as the pancreas.

Alternative Treatments

Radio Frequency Ablation

        This modality uses radio frequency energy to heat tissue to a high enough temperature to ablate it, or cause cell death. An ablation probe is placed directly into the target tissue. An array of several small, curved electrodes are deployed from the end of the probe. Once sufficient temperatures are reached, the heat kills the target tissue within a few minutes. This treatment has been proven efficacious in treating solid tumors. It also destroys surrounding healthy tissue and can result in burns.

Photodynamic Therapy

        Photodynamic therapy ("PDT") uses intravenous administration of a light-activated drug that naturally accumulates in malignant cells. A non-thermal laser is used to activate the drug, producing free radical oxygen molecules that destroy the cancer. PDT has low risk of damage to adjacent normal tissue, the ability to retreat, and can be used concurrently with other treatment modalities. A major side effect of PDT is photosensitivity that can last up to eight weeks. Other side effects include nausea and vomiting. This method is limited to penetration just below the skin or organ lining.

Cryoablation

        Cryoablation is a technique being tested for liver, kidney, prostate, and breast cancer, for which it is being heralded as a method to avoid scarring. This method freezes cancer cells with liquid nitrogen. Necrosis (cell death) occurs and the dead cells are naturally sloughed off into the body. Cryoablation is a relatively inexpensive treatment modality. The treatment of prostate cancer can result in impotence. Tumor accessibility may be a limitation and this modality also damages healthy tissue. Cryoablation may be a competitive treatment modality for certain indications.

Biological Therapy or Immunotherapy

        This treatment encompasses many approaches focused on invoking an immune response against the cancer, including vaccine-based treatments and treatments using monoclonal antibodies.

        One leading type of immunotherapy perceived as a medical breakthrough uses epidermal growth factors (EGF) or EGF inhibitors. These drugs are thought to interfere with EGF receptors found on the surface of many cancer cells. When this receptor is triggered, it instructs the cell to grow and divide into two new cells. EGF inhibitors are thought to not only prevent or slow the division of cancer cells, but also enhance the killing power of chemotherapeutics.

DNA DELIVERY

OVERVIEW

        In the context of this section, DNA delivery refers to the transfer of therapeutic DNA molecules into cells of humans or animals to prevent or treat diseases. Therapeutic DNA delivery can be performed either ex vivo or in vivo. Ex vivo DNA delivery involves the delivery of DNA into cells outside the body. Typically, a small amount of tissue or blood is removed from the patient and the cells

13

within that tissue are propagated outside the body. After they have grown to a sufficient mass, new genetic information in the form of DNA is introduced into the cells. The genetically modified cells, typically blood, bone marrow or other cells, are then returned to the patient, usually by blood transfusion or direct engraftment. In vivo DNA delivery is the introduction of genetic information directly into cells within the patient's body. Theoretically, any tissue or cell type in the body can be used, and the choice is dependent upon the specific goals of treatment and indications being treated. For internal tissue targets, a gene may be transfused through the blood stream to the organ or site of action, or it may be injected at the desired site and then electroporated to allow the gene to pass through the cell membrane of the cells present at the treatment site. Once the DNA is inside the cell, it finds its way to the nucleus where RNA copies are made from the therapeutic genes encoded in that DNA. The RNA copies are then translated into specific proteins, which either accumulate inside the cell or are secreted into the cellular environment from where they eventually enter the lymph or blood stream. Thus, therapeutic genes may either act locally or systemically.

        Both for DNA vaccines and gene therapy, effective DNA delivery technologies are crucial. Many of the leading scientists in these fields have pointed out that the major obstacle to success has been the lack of safe, efficient, and economical methods of delivering DNA.

        Methods in the past, including a variety of viral vectors, lipid formulations, the "gene gun" approach, and "naked" DNA injection, have not been successful. Reasons include toxicity, safety issues, low efficiency, and concerns about economic feasibility. Of the more than 600 gene therapy and DNA vaccine clinical trials started in the U.S. to date, none have progressed to regulatory approval. We believe that the DNA delivery problem must be solved if the promise of gene therapy and DNA vaccines are to be fulfilled.

        The simplest DNA delivery mode is the injection of "naked" plasmid DNA into target tissue, usually skeletal muscle. This method is safe and economical but inefficient in terms of cell transfection. Transfection is the process of transferring DNA into a cell across the outer cell membrane. However, when naked DNA injection is followed by electroporation of the target tissue, transfection efficiency is generally enhanced 100 to 1000-fold. This increase makes many gene therapy and DNA vaccination projects feasible without unduly compromising safety or cost. We believe we are a leading company in the field of in vivo DNA delivery.

        In recent years, DNA vaccine projects have increased in number and scope while pharmaceutical companies have slowed or shelved most gene therapy projects. This shift was prompted both by serious incidents in the gene therapy area caused by the toxicity of viral vectors, and by a strong demand for better vaccines. Within a few years, surprisingly rapid progress has been achieved in the development and testing of DNA vaccines. This trend is also reflected in our shift from gene therapy to DNA vaccines. The latter are now the subject of most of our DNA delivery projects and partnerships. In December 2004, the first patient was treated with EPT and DNA and we anticipate to initiate, together with our partners, additional Phase I clinical trials using our EPT and DNA technology.

        We believe that the greatest obstacle to making DNA vaccines and gene therapy a reality, namely the safe, efficient, and economical delivery of the DNA construct into the target cells, may be surmounted by our electroporation technology. The instrumentation we use for high-efficiency in vivo gene transfer is derived from the instrumentation we developed for intratumoral and transdermal drug delivery, an extension of the Medpulser Electroporation Therapy System. We believe electroporation may become the method of choice for DNA delivery into cells in many applications of DNA vaccination and gene therapy.

DNA VACCINES

        DNA vaccines consist of DNA molecules that are introduced into cells of humans or animals with the purpose of evoking an immune response, either to prevent a disease (prophylactic vaccines) or to

14

treat an existing disease (therapeutic vaccines). The information encoded in the vaccine DNA molecules directs the cells to produce proteins ("antigens") that trigger the immune system to mount two responses-the production of antibodies and the activation of "killer cells." These responses can neutralize or eliminate infectious agents (viruses, bacteria, and other microorganisms) or abnormal cells (e.g. malignant tumor cells). DNA vaccines have several advantages over traditional vaccines in that they are completely non-pathogenic, may be effective against diseases which cannot be controlled by traditional vaccines, and are relatively easy and inexpensive to produce. These vaccines are also stable at normal environmental conditions for extended periods of time and do not require continuous refrigeration. A potentially major advantage of DNA vaccines is their short development cycle. In principle, vaccines against new infectious agents may be developed within weeks or months, as opposed to traditional vaccines that take years for development.

        We have acquired considerable expertise in the delivery and efficacy evaluation of DNA vaccines, both against infectious agents and complex metabolic diseases. In most cases, we have chosen skeletal muscle as the target tissue for vaccine delivery. However, skin is also an attractive target for DNA vaccination and we have developed and patented technology for DNA delivery into skin cells as well.

GENE THERAPY

        Gene therapy, as well as DNA vaccination, involves the introduction of new genetic information into cells for therapeutic purposes. However, in gene therapy, cells of the body are transfected with a specific gene to compensate for a genetic defect that results in a deficiency of a specific protein factor. In this context, one goal of gene therapy is to convert target cells or tissues into "protein factories" for the production and secretion of a normal protein for local or systemic treatment. Many genetic illnesses, including those currently treated by regular injection of a missing protein, can potentially be "cured" by supplying the functional gene to a sufficient number of cells under conditions which allow these cells to produce a therapeutically effective dose of the protein.

        Currently, single-gene recessive genetic disorders are the most accessible targets for correction by gene therapy, but ultimately researchers believe that polygenic and acquired diseases will be treated using genes as pharmaceutical agents. In principle, any aspect of metabolism can be manipulated by modifying gene function, and it is this application of gene therapy that has enormous potential, extending far beyond the treatment of rare genetic diseases. For example, the ability to influence cellular metabolism by introducing specific genes has led to extensive investigations into the use of gene therapy for cancer treatment. By adding a tumor suppressor gene to certain types of cancers, the uncontrolled growth of those cells potentially could be brought under normal regulation. Likewise, transfecting tumor cells with genes capable of inducing programmed cell death may result in tumor death.

        As mentioned earlier, gene therapy can be performed by delivering DNA either ex vivo or in vivo. We have focused on in vivo DNA delivery, in particular delivery into skeletal muscle tissue. To a lesser extent, we have also explored DNA delivery into skin, cancer tissue and blood vessel walls for gene therapy purposes.

15

STRATEGY

        In advanced pre-clinical trials, our technology has enabled high levels of DNA uptake and gene expression without significant acute side effects. Based on the results obtained, we believe that our technology is well suited as compared to competing technologies to meet the requirements for DNA vaccines and gene therapy. We have adopted the strategy of co-developing DNA vaccine and gene therapy applications with corporate partners where possible, or licensing our gene delivery technology for specific genes or specific medical indications. In most cases, we provide proprietary instruments and expertise to optimize the delivery of genes for particular applications, and a partner company provides its proprietary gene or gene regulation technology. Our collaboration with partners allows pre-clinical research and clinical trials to be undertaken which may lead to the introduction of a new treatment and/or products in the marketplace at a rate and range which we would not be able to support on our own. Our goal is to enter into additional agreements to license our EPT technology for use in the delivery of specific genes in 2005 and 2006. See "Business Objectives" for further discussion of our corporate strategy and goals.

PARTNERSHIPS AND COLLABORATIONS

DNA VACCINES

        In January 2005, we acquired privately-held Inovio AS, a Norwegian company. Inovio's use of electroporation for gene therapy and DNA vaccines is a complement to our existing electroporation therapy program. The acquisition expands our intellectual property in electroporation, expands the number of agreements with major pharmaceutical companies, and provides for the near-term initiation of a Phase I/II DNA vaccine clinical trial.

        In October 2004, we entered into an agreement with Vical Incorporated wherein Vical received an option to license HIV and IL-2 as targets. This agreement is an extension of our October 2003 agreement with Vical. Under this agreement, Vical has an option to a worldwide exclusive license for the use of our proprietary in vivo electroporation delivery technology in combination with Vical's vaccine and therapeutic DNA technology for undisclosed targets. Upon completion of a collaborative research program, this partnership could lead to a definitive licensing agreement, encompassing multiple indications with the potential for commercialization.

        In May 2004, we announced that we had signed a collaboration and licensing agreement with Merck & Co., Inc. ("Merck") to develop and commercialize our MedPulser DNA Delivery System, which will be developed for use with certain of Merck's DNA vaccine programs. This development and commercialization agreement is an extension of an initial evaluation agreement that was established in 2003. Under the terms of the agreement, Merck receives the right to use our proprietary technology initially for two specific antigens with an option to extend the agreement to include a limited number of additional target antigens. In addition, Merck obtains a non-exclusive license to the intellectual property related to the initial two specific antigens. The companies will co-develop certain components of the electroporation system designed for administering DNA vaccines. Merck will be responsible for all development costs and clinical programs.

        In December 2003, we announced the extension of our collaboration with Chiron to continue to explore the delivery of its proprietary DNA vaccine for HIV using EPT, with the potential for possible clinical development. We previously had entered into evaluation and option agreements with Chiron for the delivery of one or more of Chiron's DNA vaccines for the treatment of infectious diseases using our DNA delivery technology. In accordance with these agreements, we have granted an option to Chiron, during the terms of the agreements and for three months thereafter, to license our EPT technology for use in the field of certain DNA vaccines. The extension of these agreements expires on May 21, 2005.

16

GENE THERAPY

        In August 2004, we announced that we had been awarded a grant by the National Institutes of Health to conduct research in the field of vascular gene therapy. The $100,000 Phase I grant, entitled "Ex vivo venous gene delivery by pulsed electric fields," was awarded through the Small Business Innovative Research (SBIR) program and may be followed, upon evaluation, by a Phase II award of up to $1.0 million. Vascular diseases are the number one cause of death in the U.S. and other industrialized countries. Vascular transplants, a frequently used method to treat these diseases, unfortunately suffer from a high failure rate, resulting in a significant unmet treatment need. The SBIR grant will support our research aimed at making vascular transplants more effective and longer lasting.

        In February 2004, we entered into an agreement with RMR to permit us to commercialize RMR's electroporation methods and devices on a worldwide exclusive basis. This extends a long-standing relationship with the University of South Florida scientists and RMR founders Drs. Richard Heller, Mark Jaroszeski, and Richard Gilbert, dating back to the co-development of our CE marked MedPulser Electroporation Therapy System, for treatment of all types of solid tumors including head and neck cancers. RMR is the collective effort of three scientists, collaborating with the University of South Florida and the H. Lee Moffitt Cancer Center and Research Institute.

        In November 2001, we entered into a non-exclusive license and supply agreement with Valentis to use our MedPulser Electroporation Therapy System for the development of certain Genemedicine™ products. When combined with Valentis' GeneSwitch™ gene regulation system, EPT allows researchers to control the level and duration of gene expression in cells for up to several months.

        The research carried out under the above agreements may result in our entering into long-term license agreements with the other parties and should provide us with additional data that we believe will assist us in assessing the efficacy of using our MedPulser Electroporation Therapy System for delivery of DNA vaccines and gene delivery and should further assist us in our other licensing and commercialization efforts.

        In December 2004, we initiated a Phase I clinical trial with the H. Lee Moffitt Cancer Center using our MedPulser Electroporation Therapy System to deliver plasmid DNA to tumors with the aim of treating malignant melanoma. The trial is sponsored by the H. Lee Moffitt Cancer Center and will measure the safety of Genetronics' electroporation system to deliver plasmid DNA into tumor cells to mount an immune response. In this Phase I open-label study, plasmid DNA encoding a cytokine is delivered directly to tumors in patients with malignant melanoma through electroporation using the MedPulser Electroporation Therapy System. This technology enables the entry and significant uptake of plasmid DNA into the tumor cells, ultimately leading to cytokine production. The intent of this procedure is to induce an immune response that will eliminate the cancer.

        In addition to the above collaboration and licensing arrangements, we may develop our own gene therapeutic through early stage clinical trials and partner the product for late stage clinical development and marketing. We may have to negotiate license(s) for genes or other components of the product if they are not in the public domain.

17

MARKET

DNA VACCINES

        We believe that there is a significant unmet clinical need to develop more efficacious vaccines that stimulate cellular immunity or can be applied in therapeutic settings such as cancer, hepatitis C or HIV infection. For these applications, scientists believe that DNA vaccines may offer an improvement over classical vaccination. Our scientists believe that electroporation of naked DNA is critical in maximizing the efficiency of DNA vaccination in meeting the unmet clinical need for therapeutic vaccines. We therefore plan to work with its corporate partners to develop electroporation for the delivery of DNA vaccines to capture what some analysts consider a multi-billion dollar market opportunity. DNA vaccines also represent a technology platform that is of interest to government agencies concerned with warfighter preparedness and bioterrorism threat prevention. We are working with the U.S. government to develop the technology for selected infectious disease targets.

GENE THERAPY

        The gene therapy market includes treatment of single gene defects as well as complex polygenic diseases such as cancer and vascular diseases. Examples of markets for single gene defects include hemophilia, sickle cell anemia, and EPO deficiency. For sickle cell anemia, one of the most prevalent genetic diseases, there is presently no effective and sustainable treatment available. EPO deficiency affects cancer patients undergoing chemotherapy, patients with chronic kidney failure, and others as well.

        In addition to the many diseases caused by single gene defects, the two major polygenic disease groups, vascular disease and cancer, are prime targets for gene therapy.

RESEARCH AND DEVELOPMENT

        The following table summarizes the ongoing programs in the area of gene therapy, the primary indications for each product and the current status of development.

        We intend to proceed with the joint projects that we are currently working on with our partners as set out above. We also intend to expand ongoing collaborations and forge new alliances and research collaborations with the goal of having these relationships mature into licensing agreements.

        In addition, we may complete pre-clinical research for other DNA delivery projects that we intend to carry out ourselves. Projects presently under evaluation are focused on developing therapeutic vaccines for infectious diseases. Other research and development activities will target improvements in DNA delivery, both in vivo and ex vivo, and the strengthening of our intellectual property position in the fields of DNA delivery, gene therapy, and DNA vaccines.

18

COMPETITION

        The main competitive technologies in the area of DNA delivery are the following:

•

Viral DNA delivery;



•

Lipid DNA delivery; and



•

The injection of "naked" DNA.

        To our knowledge, we are presently the only U.S. company that has publicly announced that it has the capability to manufacture electroporation equipment under the Quality System Regulations ("QSRs"). Our competitors include several companies that either have rights to intellectual property related to electroporation devices, to electroporation methods, or to applications of electroporation.

MEDPULSER ELECTROPORATION THERAPY SYSTEM

OVERVIEW

        The MedPulser Electroporation Therapy System is designed for the clinical application of EPT. In the field of oncology, the MedPulser Electroporation Therapy System is used to treat tumors by the local application of a controlled electric field to targeted tumor tissues that have been previously injected with a chemotherapeutic agent, typically bleomycin. The controlled short duration electric field pulses temporarily increase the cellular membrane permeability within the tumor, thus allowing the chemotherapeutic agent to more easily enter the tumor cells and kill them.

        The system has two components: (1) a pulse generator that creates the electric field; and (2) a sterile, disposable electrode applicator for single patient use. Applicators presently used contain needle electrode arrays that are inserted into the tumor tissue.

        The pulse generator is designed for ease of use, such that minimal user input is needed to apply the therapy. Based on the size and anatomical location of the tumor to be treated, a physician selects the most appropriate electrode applicator. The applicator is then connected to the pulse generator of the MedPulser Electroporation Therapy System and sends configuration information for that particular applicator size and shape to the pulse generator, which automatically selects the appropriate treatment parameters. Currently, several different electrode applicator configurations are available. The applicators vary in needle length, needle gauge, electrode needle spacing, tip angle and handle configuration to allow the physician to access a wide range of tumors.

        New models of electrode applicators will be considered in the future to address customer needs. The system is designed such that the installed base of the MedPulser Electroporation Therapy System instruments allows for a wide variety of new electrode applicator configurations. In addition, the system incorporates other features to minimize the possibility of applicator reuse as well as prevent the use of competitive applicators with the MedPulser Electroporation Therapy System. The commercial version of the MedPulser Electroporation Therapy System has been certified by an independent test laboratory as meeting strict international product standards.

        In the U.S., the MedPulser Electroporation Therapy System and bleomycin are currently regulated as a combination drug-device system. As a result, we will be required to obtain both drug labeling and device approvals from the FDA. For drug labeling approvals, we have filed an IND and have successfully completed Phase I and II clinical trials. We are currently engaged in Phase III clinical trials and after successful completion we intend to submit a U.S. New Drug Application ("NDA"). We may also submit a device Pre-Market Approval or 510(k) for FDA approval as a device. We are unable, due to the complexities of completing Phases I, II, and III clinical trials, to estimate the length of time or cost involved in obtaining approvals from the FDA.

        In most of the rest of the world, we anticipate that the MedPulser Electroporation Therapy System will be regulated as a device. In the EU, the MedPulser Electroporation Therapy System comes under Medical Device Directive 93/42/EEC ("MDD") which means that prior to marketing the MedPulser

19

Electroporation Therapy System, we are required to obtain a CE Mark certification of conformity to the quality system, production and clinical investigation essential requirements of the directive. We have obtained CE Mark certification for the MedPulser Electroporation Therapy System, which allows us to market it in the European community. In many of the EU countries, bleomycin is approved for intra-tumoral, intra-lesional, local, intramuscular or subcutaneous administration. While the administration of approved drugs outside the label indication may be at the discretion of the physician and hospital pharmacist, we cannot predict with absolute certainty whether additional regulatory approvals for the combined use of the drug with our system may be required in certain countries. The costs associated with such a filing cannot be reasonably determined at this time.

MEDICAL DEVICE MANUFACTURING

        We are a medical device manufacturer and, as such, operate in a regulated industry. We must comply with a variety of manufacturing, product development and quality regulations in order to be able to distribute our products commercially around the world. In Europe, we must comply with the MDD. We have a Quality System certified by our international Notified Body to meet the requirements of the MDD and to be in compliance with the ISO13485 and ISO9001 international quality systems standards. We completed an Annex II Conformity Assessment procedure and achieved our CE Mark of the MedPulser Electroporation Therapy System in March 1999. This CE Mark clears the MedPulser Electroporation Therapy System for sale in the EU.

        In the U.S., we are required to maintain facilities, equipment, processes and procedures that are in compliance with quality systems regulations. Our systems have been constructed in compliance with these regulations and our ongoing operations are conducted within these regulations. Commercially distributed devices within the U.S. must be developed under formal design controls and be submitted to the FDA for clearance or approval. As we prepare for U.S. marketing approval, all development activity is performed according to formal procedures to ensure compliance with all design control regulations.

        We employ modern manufacturing methods and controls to optimize performance and control costs. Internal capabilities and core competencies are strategically determined to optimize our manufacturing efficiency. We utilize contract manufacturers for key operations, such as clean room assembly and sterilization, which are not economically conducted in-house. We also outsource significant sub-assemblies, such as popula