galectin therapeutics: equity research report

Advancing a potential blockbuster cancer and fibrosis drug platform.

Galectin Therapeutics, Inc.OTCBB: GALT

7 Wells Avenue Suite 34Newton, MA 02459

PHONE: 617.559.0033

www.galectintherapeutics.com

INDUSTRY: Drug Development

Valuation Considerations

The new management team is focusing on

those areas where shareholder value can be

most efficiently built: 1) advancing the fibro-

sis treatment; and 2) colorectal cancer.

Comparable biotechs with drugs at similar

stages of development are often valued 3-6x

higher than Pro, though few have drugs with

as much potential.

Eventual FDA approval for GT’s cancer drug

could bring a $1 billion+ valuation, while

advancement of a cirrhosis drug could bring

a nearer-term boost.

Recent Developments

In April, the Brussels branch of the Ludwig

Institute for Cancer Research announced that

GM-CT-01 may enhance the ability of tumor-

specific T-lymphocytes to kill cancer cells.

A Phase I/II trial has been designed to test

Davanat in combination with an anti-cancer

vaccine.

In 2011, the Company has extended its pat-

ent coverage to Japan, and new US and Aus-

tralian patents have been granted.

Research 360, GmbH • www.researchworks360.com/Galectin Therapeutics-(galt)

RESEARCH REPORT

REPORT UPDATE • June 27, 2011

Trading Range Since 11/15/06Equity Market CapitalizationEnterprise ValueAverage Daily Trading Volume

Common Shares Common Shares (Fully Diluted)

$1.15 - $1.90$143 Million$149 Million

NA

75 Million102.5 Million

MARKET DATA

52 Week Price RangeAve. Daily Volume (3 months)Equity Market CapitalizationEnterprise Value (E)

Common Shares (Mar. 1, 2011)Diluted Common Shares (E)

$0.48 - 1.57206,769

$84 Million$78 Million

68 Million139 Million

BALANCE SHEET $000s, data as of Mar. 31, 2011

Cash Current AssetsTotal AssetsCurrent LiabilitiesTotal LiabilitiesShareholders’ Equity

$6,948$7,021$7,124

$858 $865

$(140)

www.researchworks360.comRIGOROUS EQUITY ANALYSIS SINCE 1992THE RESEARCH WORKS

June 27 2011 CLOSE: $1.24

Jun$0.00

$1.50

$1.20

$0.90

$0.60

$0.30

Oct Feb

OTCBB: GALT 1-year chart

Company Description

Galectin Therapeutics, Inc. (“GT” or the “Company”) is pioneering the use of non-toxic carbohydrates (polysaccharides) for the treatment of cancer and fibrosis. GT’s technology uses a unique mechanism of blocking Galectins, which are found on all solid tumors and are involved in fibrosis. The Company has advanced a cancer drug candidate through Phase II clinical trials.

Investment Highlights

Drug Platform May Have Wide Applicability for Many Types of Cancer and Fibrosis

The Company’s technology focuses on the use of non-toxic carbohydrates that target galectins, proteins that are important for regulating cell reproduction and other key tumor cell activity. The technology also appears to be highly effective at eliminating fibroids, such as those that cause cirrhosis of the liver.

Drug Candidate Drastically Reduces Chemotherapy Side-effects and Increases Survival

GM-CT-01 was shown in Phase I and II trials for colorectal cancer to be non-toxic and to greatly enhance the efficacy of the leading drug, 5-FU. It completely eliminated mucositis (ulceration of the digestive tract) and reduced anemia.

Sales May Commence in 2012 in Colombia

The Company has formed a partnership with a large pharma company in Colombia, a market with 24,000 annual cases of colorectal cancer. Colombia participates in a joint drug approval network with other South American countries.

Cash Position Is Strong

New management has raised capital and reduced liabilities. Warrant and option exercises, government grants and the first drug sale have raised enough cash to sustain core operations through 2012. As of March 2011, there was $6.9 million in cash on hand.

Key Risks

Additional capital will likely be required to fund the entirety of Phase III clinicals, which management would like to initiate this year.

www.researchworks360.com/pro-pharmaceuticals-(prwp) • of 40

Pro-Pharmaceuticals, Inc. - OTCBB:PRWP Report Update: June 27, 2011

Table of Contents

Introduction to Galectin Therapeutics’ Drugs 3

Survey of the Cancer Market 4

Exhibit: Incidence of and Fatalities from Common Cancers 4

Introduction to Chemotherapy 5

Exhibit: Branded Chemotherapy Drugs: Mechanisms and Side-effects 6

Exhibit: Popular Chemotherapy Drug Annual Sales 7

Fluorouracil, the Complementary Cancer Drug in GT’s Initial Market 8

Manufacturers, Mechanism, Applications 8

Dosage, Treatment Cycle, Side-Effects 9

Sales 10

GT’s Top Drug Candidate for Cancer, GM-CT-01 11

Description and Mechanism 11

Overview of GM-CT-01’s Clinical Trials 12

Pricing Considerations for GM-CT-01 13-14

GT’s Pre-Clinical Fibrosis Drug Candidate, GR-MD-01 15

Lab Results and Target Market 15

Recent Developments and Milestones 16

Financials 17-19

Income Statements 17

Balance Sheet 18

Cash Flow Statements 19

Stock Valuation 20-23

Exhibit: Hypothetical Market-Sizing Model for GM-CT-01 20

Factors Effecting Commercialization 21

Comparable Company Analysis 22

Investment Summary 23

Management and Board of Directors 24-27

Appendix A 28-33

Details of Phase I Trial 29

Details of Phase II Clinical Trials 31

Appendix B: Market Data for Top Chemotherapy Drugs 34-39

Disclaimer 40



Introduction to Galectin Therapeutics’ Drugs

GM-CT-01: Blockbuster Potential for Solid Tumor Cancers; First Market is Colorectal Cancer

• GM-CT-01 is the Company’s top drug candidate.It has completed Stage II FDA trials for colorectal cancer as an adjunct to the popular chemotherapy drug, 5-FU. GM-CT-01 has been shown to reduce side-effects, most importantly mucositis (ulceration of the digestive tract) and anemia, and to extend patient survival. Phase III trials for patient survival are planned for the near future, pending available capital.

• GM-CT-01 has wide ranging potential applicability.The drug has potential applicability for all solid tumor cancers, as an enhance-ment to treatment with various popular chemotherapy drugs. This is a multi-billion dollar market in the US alone, and GM-CT-01 could possibly be priced in the range of $15,000 to $50,000 based on the savings from reduced hospitalization for chemo side-effects as well as survival and pain reduction. Colorectal cancer, the first intended application for GM-CT-01, kills over 50,000 people each year in the US, and 140,000 new cases are diagnosed.

• Near-term commercialization possible in Colombia.Commercialization may come as soon as the first half of 2011 in Colombia, through a partnership with an established local pharmaceutical company. This is a market with 24,000 cases of colorectal cancer per year and a government insurance program for universal coverage. Colombia participates in a joint drug approval program with other South American countries, which may open up those markets soon thereafter.

GR-MD-01: Reverses Liver Fibrosis in Rats; Human Clinicals Needed

The Company’s carbohydrate drug platform has applicability beyond cancer, as demonstrated by GR-MD-01, a pre-clinical drug compound that has been shown to eliminate liver fibrosis in rats.

Liver fibrosis (which leads to cirrhosis) is a serious condition often caused by Hepatitis C. There is so far no cure, so liver transplants are often required. Each year in the US, 24,000 people are diagnosed with the disease and 19,000 die.

Because GR-MD-01 may be an alternative to a liver transplant, management has suggested that a course of treatment could be priced as high as $40,000.

GM-CT-01 has shown excellent

clinical results as an adjunct

to 5-FU for treating colorectal

cancer.

First commercial sales may come

from Colombia in early 2011.

FDA Phase III clinicals should

commence shortly, pending

funding.

GR-MD-01 has been shown to

eliminate liver fibrosis in rats.

Human clinical trials are needed.

If successful, the drug could be

an alternative to liver transplants.



Exhibit 1: Incidence of and Fatalities from Common Cancers

Disease Type Description 2010 Est.New Cases

2010 Est.Deaths

Colorectal Cancer Although in the past decade colorectal cancer incidence has been decreasing, it is the third most common type of cancer and the third most common cause of death from cancer in the United States. The American Cancer Society (ACS) estimates that in 2010 approximately 102,900 people will be diagnosed with colon cancer and 39,670 with rectal cancer.

142,570 51,370

Breast Cancer Breast cancer initially develops in the breast tissue (milk duct and lobules); but it can spread to other areas of the body. Excluding skin cancer, breast cancer is the second most common cancer among women; in rare cases, it also occurs in men (less than 1% of all cases).

261,100 40,230

Ovarian Cancer Ovarian cancer develops in the cells that surround the one or two of the ovaries. Since it is difficult to detect in early stages, it often becomes advanced and spreads to other parts of the body.

21,880 13,850

Liver, Hepatic & Biliary Cancer

Liver cancer can consist of malignant tumors in the liver or bile duct, or can result from cancer that begins elsewhere and spreads to the liver. Liver or hepatic cancer incidence is expected to increase due to chronic Hepatitis B and C infections. After two to three decades of Hepatitis infec-tion, patients can develop complications such as liver scarring (cirrhosis) and liver cancer. Grouped with liver cancer, biliary cancer occurs in the duct that carries bile from the liver to the small intestine. These tumors usually grow slowly and spread gradually. In many cases, bile duct cancer tumors are diagnosed in the advanced stages.

24,120 18,910

Liver Fibrosis Liver fibrosis is the growth of excess hard, fibrous, scar tissue in the liver. When functional liver cells are injured due to cancerous growths, viral infections (Hepatitis B or C), toxins, chemicals, heavy al-cohol consumption, trauma, metabolic disorders, or other factors, the immune system is activated and begins to produce a large amount of extracellular materials which gradually accumulate and lead to the formation of liver fibrosis.[1]

N/A N/A

Pancreatic Cancer The pancreas is an organ that lies beneath the stomach and produces enzymes that help digestion, metabolism and external excretions. Cancerous cells in the pancreas produce no symptoms and spread very quickly, often so fast that it is difficult to detect them early enough to provide proper treatment and removal, thus this cancer is often fatal.

43,140 36,800

Prostate Cancer Cancerous in the prostate typically develops slowly, often undetected. Prostate cancer is the most common cancer among men in the US and the second leading cause of cancer death among men.

217,730 32, 050

Head and Neck Cancer

90% of head and neck cancers are squamous cell carcinomas originating in mucous membranes of the aerodigestive tract. The cancer typically spreads to the lymph nodes of the neck, and if not de-tected and treated, to other regions. Typical causes are tobacco, alcohol and environmental toxins.

35,720 11,000

Source: www.cancer.gov; [1] http://www.itmonline.org/arts/fibrosis.htm

survey of the cancer market

The Galectin Therapeutics technology platform may have a wide applicability for many types of solid cancers, as a therapeutic enhancer to multiple blockbuster chemotherapy drugs. To gauge the potential for this new field of oncology (galectins), it helps to survey the cancer market as a whole and current treat-ment options.

The American Cancer Society estimates that 1,529,560 new cases of cancer will be diagnosed in 2010, of which 569,490 are expected to be fatal. Cancer is the second most common cause of death in US, ac-counting for one out of four deaths. The following table summarizes some of the most common forms of cancer that Galectin Therapeutics’ primary drug candidate, GM-CT-01, may help treat.

Chemotherapy is often adminis-

tered as a “cocktail” of comple-

mentary drugs.

Pro’s DAVAVAT® may have wide

applicability with multiple leading

cancer drugs for many types of

cancer.



Exhibit 2: Common Chemotherapy Drugs and their Modes of Action

Chemotherapy Group Description Examples

Alkylating Agents Alkylating agents damage cell DNA to impede cancerous cells from reproducing. They work in all phases of the cell cycle.

Mechlorethamine, chlorambucil, cyclophosphamide, ifosfamide, melphalan, as well as Platinum drugs: Carboplatin, Cisplatin,Oxaliplatin.

Anti-metabolites Anti-metabolites obstruct cancerous cells’ DNA and RNA growth by substituting for the normal building blocks of RNA and DNA. They work in one specific phase of the cell cycle.

5-Fluorouracil, Foxuridine, Cytarabine, Capecitabine, Mercaptopurine, Fludarabine, Nelarabine , 6-Thioguanine and Gemcitabine.

Mitotic Inhibitors Plant- alkaloids. Mitotic inhibitors slow down mitosis or restrain enzymes from producing vital cell reproduction proteins. They work during the M phase of the cell cycle, but can damage cells in all phases. They are often categorized as plant alkaloids.

Paclitaxel, docetaxel, ixabepilone, vincristine vinorelbine, Estramustine.

Topoisomerase Inhibitors

These drugs interfere with enzymes called topoisomerases, which help separate the strands of DNA so they can be copied.

Topotecan, irinotecan, etoposide, teniposide.

Antitumor Drugs- Anthracyclines

Anthracyclines are anti-tumor antibiotics that interfere with enzymes involved in DNA replication. These agents work in all phases of the cell cycle.

Daunorubicin, doxorubicin, epirubicin, idarubicin.

Source: American Cancer Society

Introduction to Chemotherapy

Cancerous tumors are characterized by unrestricted, malignant cell division. Cancerous cells do not fol-low the proper checks and balances that normal cells follow to control cell division. Chemotherapy drugs generally dampen the uncontrolled cell division by damaging the cells’ DNA and/or RNA and as a result they impede cells from duplicating and dividing. If cells cannot divide, they die off.

The ability of a chemotherapy drug to destroy cancerous cells depends on its ability to properly impede the cancerous cell division process. Since chemotherapy cannot always fully differentiate between normal and cancerous cells, it can harm many types of tissue with rapidly dividing cells. Healthy cells may eventu-ally grow back, but in the meantime patients experience harmful side effects in normal tissues.

Chemotherapy drugs are categorized depending on how each drug group affects the cell division process. Cell-cycle specific chemotherapy drugs only affect dividing cells, and cell-cycle non-specific drugs affect all cells.

DNA:

Complex molecules inside a cell

nucleus that carry genetic in-

structions for building new cells.

RNA:

Molecules that deliver genetic

information to the cell cytoplasm

where proteins are made.

2 Categories of chemotherpay

druges:

• Cell-Cycle Specific:

only affect dividing cells

• Cell-Cycle non-Specific:

affect all cells



Exhibit 3: Popular Branded Cancer Drugs: Function, Administration and Side Effects

Generic Name

Brand Name Description Mode of Administration

Side Effects

Irinotecan Camptosar® A topoisomerase I inhibitor drug. Blocks the action of an enzyme in cells called topoisomerase I., which cells need to assure that their DNA is in the proper shape when dividing. Blocking this enzyme leads to breaks in the DNA and cell death. Because cancerous cells divide faster than normal cells, they are more likely than normal cells to be affected.

Infusion into a vein (IV)

Severe diarrhea, anemia, loss of appetite, leucopenia, nausea, fever, fatigue, and abdominal pain

Doxoru-bicin

Adriamy-cin ®

An antineoplastic drug. As a cytotoxic agent, it destroys cancerous cells and encourages tumor regression. It binds to the DNA, preventing replication and restricts nucleic acid synthesis.

Intravenous injection (IV)

Nausea, low red and white blood cells, vomiting, loss of hair, mouth sores, colon ulceration, and heart damage

Paclitaxel Taxol® A plant alkaloid and antimicrotubule agent that inhibits the microtubule structures within cells. Inhibition ultimately results in cell death.

Injection or infusion into the vein (Intravenous, IV)

Irritation, drop in blood pressure, anemia, major breathing problems, myalgias, hives and/or fluid buildup around the heart, and bone marrow suppression

Oxalipla-tin

Eloxatin® A cytotoxic drug and alkylating agent. Non cell cycle specific. It inhibits cell DNA synthesis, and may have greater cytotoxicity than cisplatin and carboplatin. Preclinical studies have shown Oxaliplatin to be synergistic with 5-FU and SN-38, the active metabolite of Irinotecan.

Infusion into the vein (Intravenous, IV)

Anemia, diarrhea, nausea, severe neuropathy, liver abnor-malities, fever, chest pressure, low red and white blood cells, and vomiting

Cisplatin PLATINOL® An alkylating-like agent. Forms a platinum complex inside a cell that assists in the process of cross-linking DNA, interfering with systematic cell division processes, causing systematic cell death.

Injection or infusion into the vein (Intravenous, IV)

Renal toxicity, nausea, vomiting, anorexia, diarrhea, anemia

Bevaci-zumab

AVASTIN® Locates and blocks a blood formation protein, ending a tumor’s blood supply. Destruction of blood vessel networks within tumors may slow their growth.


Bleeding, arterial clots (which could lead to stroke and heart at-tack), bowel perforation, wound healing difficulties, hypertension

Cetuximab Erbitux® An antibody that binds specifically to the extracellular area of the human epidermal growth factor receptors (EGFR) on all cells, inhibiting the binding of epidermal growth factor, blocking phosphorylation and activating receptor-associated kinases, resulting in inhibition of cell growth, induction of cell death, and decreased growth factor production. Not effective on patients with KRAS tumors (estimated 40%).


Skin rashes, nail changes, head-aches, diarrhea, and infections

Source: American Cancer Society, www.Avastin.com, www. Erbitux.com, www.Platinol.com, www.Bloomberg.com, and www.chemocare.com

Chemotherapy Treatment Options

Oncologists select the most appropriate therapy for each patient from the preceding types of chemothera-py drugs. The dosage of chemotherapy drugs depends on various factors such as age, size, line of treatment and other health conditions. The schedule of chemotherapy is based on the type of cells being targeted, the rate at which they divide, and the time in which a given drug is likely to be effective. Hence, chemotherapy drugs are typically given in cycles, with varying dosage from patient to patient.

Due to cancer cells’ potential resistance to chemotherapy treatments, patients who receive combined chemotherapy treatments minimize the risk of resistance and increase their chances for survival. Alterna-tives to chemotherapy treatment include anti-neoplastics, corticosteroids, retinoid, hormone therapy and immunotherapy.

Combined chemotherapy

treatments:

Minimize the risk of drug resis-

tance and increase a patient’s

chances of survival.



Exhibit 4: Annual Worldwide Sales for Selected Cancer Drugs

Brand Name Manufacturer Patent Info Sales

2007 2008 2009

Camptosar® Pfizer Inc. No, patent expired in 2005. $969 $563 $354

Adriamycin®Kyowa Hakko Kirin

No $76 $74 $53

Taxol®Bristol-Myers-Squibb Company

Two patents in Canada, expiring respectively in 2013, and 2014.

$422 $386 $308

Eloxatin® Sanofi-Aventis Yes, due to expire in 2013. $2,086 $1,981 $1,334

PLATINOL®Bristol-Myers-Squibb Company

No N/A N/A N/A

AVASTIN® Genentech, Inc. Yes, granted in 2000. $3,426 $4,818 $5,744

Erbitux® Merck KGaA Yes, granted to Yeda Research Corporation in 2007 $645 $830 $971

Erbitux® Bristol-Myers Squibb Company Yes, granted to Yeda Research Corporation in 2007 $692 $749 $683

All Financial Data in US Millions. Source: EvaluatePharma, www.managingip.com



Exhibit 5: Pharmaceutical Companies Manufacturing Fluorouracil (5-FU)

Manufacturer Brand Name

Roche Laboratories FluorouracilRoche®

TEVA Pharmaceuticals Adrucil®

VALEANT Pharmaceuticals Efudex ( Topical)

Sanofi Aventis Carac (Topical)

Source: www.chemocare.com

Fluorouracil (5-FU), the Complementary Cancer Drug in Pro-Pharma’s Initial Market

When administered as an adjunct, Pro-Pharma’s GM-CT-01 has been shown to increase the effectiveness of this chemotherapy drug and reduce its side-effcts. The first and largest market the Company is targeting, 5-FU is the standard of care for colorectal cancer and pancreatic cancer, though platinum compounds have also been widely used in recent years. Originally patented in 1957, 5-FU’s patent protection has expired, and a number of pharmaceutical companies manufacture the drug.

Mechanism

As a fluorinated pyrimidine, 5-FU is structurally similar to uracil, an essential building block in cellular production and growth. In cells 5-FU acts as a decoy of uracil and is incorporated into RNA where it dis-ables critical functions, and is also metabolized to substances that interfere with the production of DNA and RNA. Since RNA and DNA are vital to cell production and growth, the damage that 5-FU causes provokes unstable growth and death. The effect of DNA and RNA deficiency is stronger on rapidly growing tissues, including cancer.

Applications

5-FU is usually given intravenously by an injection or infusion to treat the following cancers: colon and rectal, breast, ovarian, liver, bladder, pancreatic, prostate, head and neck cancer. It also treats gastrointesti-nal cancers such as esphageal, pancreas and gastric (stomach) and anal, and is even used topically (cream or solution) to treat basal cell and squamous cell skin cancer, Bowen’s disease and actinic keratoses. 5-FU is often administered in combination with various other drugs such as AVASTIN®.

Pro-Pharma’s top candidate for

commercialization is the use of

GM-CT-01 as an adjunct to 5-FU

for colorectal cancer.

Cells absorb 5-FU because it

mimics uracil, a cellular building

block. 5-FU then interferes with

DNA and RNA production, lead-

ing to cell death, especially in

dividing tissues like cancer.



Dosage and Treatment Cycle

5-FU dosage depends on patients’ weight and body surface area, but health conditions and potential toxic-ity levels are taken into consideration. An oncologist can choose from the many possible dosage combina-tions, ranging from a single dose injection of 500 mg/m2 (12 mg/kg) to infusions of 1,000 to 2,000 mg/m2 (24 to 49 mg/kg) over a period of 24 hours for up to 5 days.

As a cell-cycle specific drug, 5-FU must be given in administered over time to maximize the number of cancer cells that come into contact with it during their DNA synthesis phase. In all dosage possibilities, the treatment course must be repeated every four weeks. The treatment cycle is repeated 9 to 45 times over a period of 12 to 60 months.

To produce a synergistic effect on colorectal cancer therapy, 5-FU is usually administered with the adju-vant leucovorin (folinic acid), which helps to preserve some normal DNA and RNA transcription functions and reduce side-effects. When combined with leucovorin, the general dosage is an I.V. injection of 370 to 400 mg/m2 (9 to 10 mg/kg) for 5 days plus lecovorin 200 to 500 mg/m2(5 to 12 mg/kg) for 5 days.

Side Effects

5-FU’s side effects are most heavily felt in tissues that require rapid cell division, most importantly the mucosal lining of the digestive tract. Patients are likely to experience any of a number of gastrointestinal disorders including mucositis, stomatitis, esophagopharyngitis (which may lead to ulcers), diarrhea, loss of appetite, nausea, vomiting. Skin reactions are also common, and a decreased white blood cell count usually follows each course of therapy, so anemia may develop. Recent data also suggests that 5-FU has delayed adverse effects on the central nervous system.

Mucositis in particular is very common for patients to experience at some point in their treatment. Mu-cositis is the ulceration of the mucosial tissue that lines the entire digestive tract, and it can be extremely uncomfortable and debilitating, with symptoms such as open mouth sores and rectal bleeding. 75% of mucositis patents get infections, and 9% die of those infections.

5-FU is given 9-45 times over 1-5

years. Dosage is limited by toxic-

ity and side-effects on healthy

tissues.

Aside from hair loss, the most

prevalent side effects involve

the digestive tract. Especially

debilitating is mucositis, painful

ulcers in the mouth, colon and

anus that interfere with eating

and digestion.



5-FU Sales

Exhibit 6: 5-FU Global Annual Sales, 2007-2009

2007

$30

2008

$36

2009

$31

All Financial data in US $ Million. Source: EvaluatePharma

Exhibit 7: Fluorouracil Retail Prices

Quantity Drugstore.com USA Price

50 ml $25.99

100 ml $39.97

150 ml $55.97

200 ml $74.62

250 ml $93.28

Source: drugstore.com

5-FU is very inexpensive for a cancer drug, so annual sales are merely $30 million despite its popularity.

5-FU sales are over $30 million

per year.



Galectin Therapeutics’ Top Drug Candidate for Cancer, GM-CT-01 Description and Mechanism

GM-CT-01 is a non-toxic carbohydrate compound that when used in combination with 5-FU keeps each dose in the bloodstream longer, thereby increasing its contact with tumors and efficacy, while radically reducing adverse side effects. GM-CT-01 appears to eliminate mucositis (a source of high discomfort and infections that can be debilitating or deadly). It also reduces the destruction of red and white blood cells to decrease anemia and increase patients’ energy levels. GM-CT-01 seems to lower overall chemotherapy side effects by more than 50% and decrease the total cost of treatment while improving quality of life and survival rates. Pro-Pharma owns all intellectual and commercial rights to this technology.

Possible Universal Applicability to Solid-Tumor Cancers

GM-CT-01 works by targeting and shutting down galectin receptors. Galectins are a type of lectin, car-bohydrate-binding proteins involved in biological recognition, and have been a growing topic in cancer research over the last decade. Galectins have a strong influence over cell death, and in tumors, galectin receptors influence metastasis and angiogenesis and can destroy T-cells.

Galectins are “new” receptors not yet used by other chemotherapy drugs, and are present in all cancers with solid tumors (colorectal, breast, head and neck, etc). Pro is positioned as a pioneer in this field, and Chief Scientist Anatole A. Klyosov is a co-author of the only book published on the role of galectins in cancer.

GM-CT-01 is a non-toxic sugar

that helps kill cancer cells and

reduces chemo side-effects.

Exhibit 8: Illustration of galectins’ influence on a tumor’s blood vessel growth and the spread of cancer cells to other locations in the body.

Image source: nature.com

Primary tumour

Stormal cells

Primary metastasis



Overview of GM-CT-01’s Clinical Trials Summary of Phase I and II Trial Results (See Appendix A for details)

• Phase I trials were highly successful.In Phase I, GM-CT-01 was administered to patients that had failed treatments with 5-FU, and the trial demonstrated that the compound was non-toxic. As such, a dose-limiting level was not reached, and at the highest dose tumors stabilized in 70% of patients. In effect, GM-CT-01 rendered 5-FU effective in patients for whom it had previously failed.

• Phase II trials demonstrated decreased side-effects and longer survival.In Phase II trials among 2nd and 3rd line refractory patients that had failed treat-ment with 5-FU, Xeloda, Oxaliplatin, Irinotecan, Avastin and/or Erbitux, GM-CT-01 was shown to render 5-FU much more effective. Phase II trials showed a 41% decrease in severe adverse effects (from 59% to 35%) and a 46% increase in median length of survival (from 4.6 to 6.7 months).

Phase III Plans

PRO is currently scheduling its pre-Phase III meeting with the FDA, and management hopes to begin the trial in 2011 or as soon as sufficient funds are raised. GM-CT-01’s first Phase III trial will evaluate survival rates, and success may depend on replicating the earlier results which showed an increase in median length of survival. Pending availability of funds, follow-up trials will look at reduction of side-effects such as anemia and mucositis.

Phase 1 trials showed that GM-

CT-01 was completely non-toxic,

and a dose-limiting level was not

reached.

Phase II trials showed a 41%

decrease in severe side-effects

and 46% increase in length of

survival.



Exhibit 8: Annual Costs of Leading Chemotherapy Drugs

Price / Day Days / Year Price of Drugs / Year / Patient

AVASTIN ® $2,880 26$55,000(Roche price cap)

Xeloda ® $33/day 243 days $7,995

5-FU (Adrucil®) $80 52 $4,160

*Leucovorin ® $70 52 $7800

Average: $18,740

* When administered with 5-FU. Source: pharmacyescrow.com

Pricing Considerations for GM-CT-01

Potential Price Targets

The price of a drug is determined by what the market can bear. Since the effect of GM-CT-01 on the suc-cess of the treatment is comparable to that of leading chemotherapy drugs, the price of GM-CT-01 could be set in line with these drugs.

It should be noted that while some chemotherapy drugs are taken in the form of pills and do not require additional expenses, administration of AVASTIN, 5-FU, and Leucovorin may require additional medical and hospital charges since they may be administered through an injection or an IV.

The price range for the leading chemotherapy drugs for treatment of colorectal cancer is between $7,800 to $55,000 per year per patient. The mean price of these drugs is $18,740 per year per patient.



Exhibit 9: GM-CT-01 Price Targets

Price Justification Price of GM-CT-01 per dose / cycle (given 26 doses / cycles per year)

$55,000 Price of AVASTIN $2,115

$47,200 Difference in price of 5-FU + Leucovorin ($7,800) and AVASTIN ($55,000) $1,815

$17,699 Price of an average chemotherapy drug for treatment of colorectal cancer

$681

$7,800

Price of Leucovorin (least expensive of the colorectal cancer chemo-therapy drugs) when administered with 5-FU

$300

Average: $1,228

Source: The Research Works

Conclusion: GM-CT-01 Could be Priced at Over $15,000 per Year

Given the efficacy of GM-CT-01 and its ability to increase survival and improve the quality of life of pa-tients, GM-CT-01 could possibly be priced in the range of $600-$1,000 per doze, or $15,600 to $52,000 per patient per year in the U.S., depending on how long each patient undergoes treatment.

The price of GM-CT-01 in other countries will most likely be lower than that in the United States as is the case with most other chemotherapy drugs. Prices for chemotherapy drugs in the EU stand at 60-80% of those in the U.S., and discounts can be higher in lower-income counties.

In the proposed market/revenue sizing model, we have used a conservative low-end price per dose of GM-CT-01 of $200, while the high-end price per dose is $1,000. The Company has modeled the economics using a target price of $500, which seems entirely reasonable if not conservative. There is considerable pricing power in GM-CT-01’s prevention of mucositis, which commonly results in infections that require hospitalization and resulting bills of $20,000 to over $50,000.

Pro-Pharma’s management plausibly suggests that because of the potential for synergies with chemother-apy drugs, the manufacturers of those drugs may be the largest proponents for GM-CT-01. If that scenario does come to pass, it may tremendously lower marketing costs and increase the market value of the Pro technology.

Very Low Production and Storage Costs

Because GM-CT-01 is a polysaccaride compound that is derived from a natural occurring carbohydrate and has a very long shelf life, manufacturing and storage costs should be very low, especially in compari-son to drugs that are derived from human or animal tissue.

Pro-Pharma has mentioned a

price of $500 per dose, which

seems in line with other chemo

drugs.

The savings from reducing

hospitalization from mucositis

alone could easily offset the price

of GM-CT-01.



Pro-Pharma’s Pre-Clinical Fibrosis Drug Candidate, GR-MD-01 The Company’s galectin technology platform also appears to be highly promising for the treatment of fibrosis of the liver (cirrhosis), kidneys and other organs. There are 12 million people with fibrosis in the US, and cirrhosis is one of the top ten causes of death and the leading reason for liver transplants. One major cause of cirrhosis is hepatitis C (itself often caused by AIDS), which effects over 170 million people worldwide with over 50% of these patients losing liver function.

Fibrosis in Rats Vastly Reduced by GR-MD-01

Early animal tests showed that fibrosis was radically reduced using a version of Pro’s carbohydrate tech-nology. In the tests, rats were injected with organic solvents for eight weeks until they developed liver fibroids that without treatment would continue to worsen and usually lead to death. GR-MD-01 was able to reverse this condition, which is very exciting because in humans the only treatment for cirrhosis is a liver transplant.

Exhibit 10: GR-MD-01 on Rat Liver Fibrosis

Rat liver fibrosis before treatment After four weeks of treatment with GR-MD-01

Source: Galectin Therapeutics

Fibrosis is the growth of excess

fibrous connective tissue.

Cirrhosis, caused by fibrosis

of the liver, is a leading cause

of death often resulting from

hepatitis C.

Management has suggested that GR-MD-01 could be priced in the range of $40,000 for a year of treat-ment. This target seems justified by the fact that it could be an alternative to a liver transplant.



Recent Developments and Milestones

Early Commercialization Possible in South America

Pro has maintained strong political and business ties with leaders in Colombia, in anticipation of full com-mercialization there and elsewhere in South America. The Company has licensed PROCAPS S.A. to market GM-CT-01 in this market, where there are 24,000 new cases of colorectal cancer per year. Colombia also participates in a joint drug approval network with other South American countries, which may open up a much larger market.

Phase III Trials to Start Soon

The Company is continuing apace for GM-CT-01’s Phase III testing, and announced in September that it has chosen Numoda Corp as a partner for managing the trial. Numoda is developing a plan and budget, and will handle the logistics of coordinating the clinics, labs and statistical analysis to ensure compliance with FDA standards. Management anticipates that these trials will start in 2011.

Clinicals Planned for Fibrosis Compound

In keeping with the strategy to most efficiently allocate capital for near-term shareholder benefit, manage-ment intends to nominate a compound for fibrosis treatment trials by the end of 2011.

Patent Coverage Expanded in US, Australia and Japan

Pro announced in March that it had been granted two new patents for GM-CT-01, “Co-administration of a Polysaccharide with a Chemotherapeutic Agent for the Treatment of Cancer” in Australia, and “Selectively Depolymerized Galactomannan Polysaccharide” in the United States. In April, the Company announced that Japan’s patent office had accepted Pro’s patent for “Co-administration of a Polysaccharide with a Che-motherapy for the Treatment of Cancer,” which of course applies to GM-CT-01.

Registration of New Shares

The new capital raised to fix the Company’s solvency crisis in 2008 and 2009 came in at a very low cost basis, so there were a large number of warrants and convertible securities issued. The Company recently registered 52,254,130 shares, mostly held by a fund controlled by the Executive Chairman. The current fully-diluted share count is approximately 140 million common shares.

Milestones to Watch For

• 2011: Begin US FDA Phase III trial for GM-CT-01, pending funding.

• 2011: Expected approval for GM-CT-01 in Colombia.

• 2011: First commercial revenue from Colombia; other South American markets to fol-low.

• 2012-2013: File NDA for GM-CT-01, final step towards commercialization in the US.

Sales of GM-CT-01 may

commence in 2011 in

Colombia, in partnership with

a well-connected local pharma

company.

Pro is prepping for Phase III

trials, and has raised sufficient

cash for the next two quarters of

operations.



Financials

Income Statements

Year Ending: 31.12.10 31.12.09 31.12.08

Operating Expenses

R&D Exp. (1,066) (1,110) (1,774)

SG&A (3,817) (4,983) (3,552)

Total Op. Exp. (4,883) (6,093) (5,326)

Continuing Operations

Other Net Exp. (746) (1,369) 2,175

EBIT (5,629) (7,462) (3,151)

Interest - - -

Pre-tax income (5,629) (7,462) (3,151)

Net Income (5,629) (7,462) (3,151)

Adjustments (3,080) (1,957) (239)

Net Inc. to Common Shrs. (8,709) (9,419) (3,390)

All figures in $000s.



Balance Sheet

Period Ending: 31.12.10 31.12.09 31.12.08 31.12.07

Assets

Current Assets

Cash & Equiv. 5,891 251 318 1,319

Other 304 53 62 70

Total Current 6,195 304 380 1,389

Long Term Assets

PP&E, net 7 17 40 73

Intangible 39 56 225 250

Other 59 59 59 70

Total Assets 6,300 436 704 1,782

Liabilities

Current Liabilities

Accounts Payable 710 1,052 1,079 2,600

Total Current 1,771 1,052 1,079 2,600

Long-term Liabilities

Other Liabilities 12 1,937 94 2,106

Total Liabilities 1,783 2,989 1,173 4,706

Stockholders’ Equity

Stocks, opt, warr. 2,073 - - -

Redeemable Pref. 4,138 1,914 - -

Preferred Stock 644 664 704 -

Common Stock 64 52 48 40

Retained Earn. (56,424) (47,715) (38,550) (35,160)

Capital Surplus 54,022 45,532 37,329 32,196

Total Stockholders’ Equity (1,694) (4,467) (469) (2,924)

Net Tangible Assets (1,733) (4,697) (469) (2,924)


Notes: A) Redeemable preferred stock consists of two classes: (1) Series B-1 12% redeemable convert-ible preferred stock; 900,000 shares authorized, 900,000 shares issued and outstanding, redemption value: $1,800,000, liquidation value: $1,800,000 as of Dec. 31, 2010; (2) Series B-2 12% redeemable convertible preferred stock; 2,100,000 shares authorized, 2,100,000 and 1,330,000 issued and outstanding, redemp-tion value: $4,200,000, liquidation value: $4,200,000 as of Dec. 31, 2010. B) Stockholders’ equity includes $2,073 in series C super dividend convertible preferred stock; 1,000 shares authorized, 212 issued and outstanding, redemption value: $4,240,000, liquidation value: $2,120,000 at Dec. 31, 2010.

Strongest cash position in

several years, following a large

equity raise and warrant exercise.



Cash Flow Statements

Year Ending: 31.12.10 31.12.09 31.12.08

Net Income (5,629) (7,462) (3,151)

Operating Activities

Depreciation 12 37 49

Adj. to Net Income 3,198 3,139 (1,437)

Chng. in Acc. Rec. (234) - -

Chng. in Liabilities (432) 390 (134)

Change in OtherOp. Activities

(17) 9 8

Total Op. Cash Flows

(3,102) (3,887) (4,665)

Investing Activities

Capex. - - (2)

Investments - - -

Other - - 11

Total Investing Cash Flows

- - 9

Financing Activities

Sale Purchase of Stock

8,742 4,020 3,455

Net Borrowing - - 200

Total Investing Cash Flows

8,742 3,820 3,655

Change in Cash & Equiv. 5,640 (67) (1,001)




Stock Valuation The colorectal cancer market alone for GM-CT-01 could far exceed a billion dollars in the US and much more worldwide. The following table models potential revenue from various markets given varying adop-tion rates and prices per dose.

Blockbuster potential,

considering the size of GM-CT-

01’s target markets and its high

value to patients.

Exhibit 11: Hypothetical Market-Sizing Model for GM-CT-01

USA Colombia EU Rest of World TOTAL

New cases of colorectal cancer 142,570 24,000 150,000 2,925,700 3,242,270

GM-CT-01 min adoption rate 25% 25% 25% 25% 25%

GM-CT-01 max adoption rate 60% 60% 60% 60% 60%

Price per dose, min $200 $100 $150 $80

Price per dose, max $1,000 $400 $750 $400

Number of doses per patient / yr 26 26 26 26 26

Number of doses per year, min 926,705 156,000 975,000 19,017,050 21,074,755

Number of doses per year, max 2,244,092 374,400 2,340,000 45,640,920 50,579,412

Revenue, $/yr/patient, min $5,200 $2,600 $3,900 $2,080

Revenue, $/yr/patient, max $26,000 $10,400 $19,500 $10,400

Revenue, $yr, min $185,341,000 $15,600.000 $146,250,000 $1,521,346,000 $1,868,555,000

Revenue, $yr, max $2,224,092,000 $149.760,000 $1,755,000,000 $18,256,368,000 $22,385,220,000

Revenue, $yr, average $1,204,716,500 $82,680,000 $950,625,000 $9,888,866,000 $12,126,887,500

Cost per dose /cycle (Est.) $25 $25 $25 $25 $25

Other costs per dose /cycle (Est.) $25 $25 $25 $25 $25

Total costs, min $46,335,250 $7,800,000 $48,750,000 $950,852,500 $1,053,737,750

Total costs, max $111,204,600 $18,720,000 $117,000,000 $2,282,046,000 $2,528,970,600

EBITDA, min $139,005,750 $7,800,000 $97,500,000 $570,511,500 $814,817,250

EBITDA, max $2,112,887,400 $131,040,000 $1,638,000,000 $15,974,322,000 $19,856,249,400

EBITDA, average $1,125,946,575 $69,420,000 $867,750,000 $8,272,416,750 $10,335,533,325

Source: Company Reports, American Cancer Society, The Research Works.



Factors Effecting Commercialization

It is notoriously difficult to estimate with any degree of precision a drug’s chances of reaching commer-cialization, but given the GM-CT-01’s excellent Stage I and II results and the non-toxic nature of the com-pound, Pro appears to have a solid chance for U.S. sales, possibly as soon as 2013. Commercialization in Colombia and likely then elsewhere in South America could come as early as 2011. The Colombian colorectal market alone could generate tens of millions in revenue.

There is also considerable value in GM-CT-01’s potential for treatment of other types of solid tumor can-cers and as an addition to other chemotherapy drugs besides 5-FU. Furthermore, the Company’s overall galectin technology platform may be applicable to a very wide range of diseases. This is a growing area of study and it is too early to try to define a market size, though clearly the economic potential is vast and Pro is well-positioned as a pioneer in the field.



Comparable Company Analysis

The Company’s stock valuation ($93M market cap) is low compared of that of most other public biotechs with drugs at similar stages of development. This seems inappropriate given the relatively higher market potential of GM-CT-01, its trial results, and the possibility of revenues within 12 months. Also witness Abraxis and Dendreon below as to what can happen with an approved NDA.

$200+ million market caps are

common among comparables,

and FDA approval can boost

these stocks into the bilions.

Exhibit 12: Comparable Companies

Company Name Ticker Price SOS, M MCap, $M

Rev, $M*

Cash Enterprise Value Pipeline - by Phase

Total, $M /Share Total, $M /Share I II III NDA

Galectin Therapeutics

GALT $1.38 E.67 $93 $0.00 $5.89 $0.09 $89.00 $1.32 3

Keryx Biophar-maceuticals

KERX $3.66 58.92 $216 $0.00 $21.64 $0.37 $194.01 $3.29

DendreonCorporation

DNDN $32.33 141.78 $4,584 $2.88 $217.95 $1.54 $4,365.80 $30.79 3 1

Abraxis Bioscience

ABII $74.20 40.4 $2,998 $338.78 $171.72 $4.25 $2,825.96 $69.95 1 1

Medvation MDVN $8.84 34.57 $306 $68.09 $26.80 $0.78 $278.80 $8.06 3 4 5

Targacept TRGT $19.33 28.6 $553 $56.61 $221.63 $7.75 $331.21 $11.58 2 2

Momenta Pharmaceuticals

MNTA $12.26 44.99 $552 $16.14 $19.64 $0.44 $531.94 $11.82 1

Sangamo Biosciences

SGMO $3.71 45.2 $168 $27.48 $12.79 $0.28 $154.90 $3.43 1

ArQule ARQL $4.30 44.89 $193 $27.17 $26.15 $0.58 $166.88 $3.72 1 1

Idera Pharmaceuticals

IDRA $3.60 23.5 $85 $26.69 $9.82 $0.42 $74.78 $3.18 5 1

Ariad Pharmaceuticals

ARIA $2.82 110.73 $312 $183.60 $61.76 $0.56 $250.50 $2.26 2 2 1

Poniard Pharmaceuticals

PARD $0.60 48.05 $29 $0.00 $10.20 $0.21 $18.63 $0.39 2 1

Group Average $15.06 $908.50 $67.94 $835.76 $13.50

*Revenue for 4 quarters ended 30 June 2010. Source: Bloomberg, The Research Works



Investment Summary

The share price has risen over the last 18 months as cash infusions have eliminated balance sheet worries, but the market cap remains well below historic highs, even as the Company’s potential blockbuster drug candidate has advanced towards commercialization.

The new management has done an excellent job of raising capital and taking care of liabilities. Recent warrant exercises, drug sales and government grants have reduced any remaining concerns and secured sufficient funding for the next several quarters. The one negative here is the dilution from the large number of new shares, but even accounting for full dilution (to over 140 million shares), the stock could easily ap-preciate more as it becomes clear to investors that the Company is financially sound and proceding with Phase III clinicals.

Furthermore, commercialization in South America would be a very positive development, as cash flows could quickly become be substantial and eliminate the need for further dilution, if not generate bottom-line profits. Very few biotechs are able to generate commercial sales while still conducting FDA clinicals, so this would raise Pro above the pack. Traction in South America could more than justify a doubling or more in share price from this level, ignoring all other markets, as biotechs tend to trade at high multiples to revenues.

The potential of the galectin-targeting platform is so great that Pro also has a realistic chance of a multi-hundred million or billion+ dollar drug application. With an approved NDA for GM-CT-01 for colorectal cancer, the market valuation could shoot to well over a billion dollars. The recent successes of Abraxis Bioscience ($3B market cap on $338M in sales) and Dendreon Corporation ($4.6B market cap on still negligible sales) offer examples of what FDA approval can do for a company.

Pro has reached solid financial

footing, as evinced by the stock

rebound.

This remains a deep value stock,

considering GM-CT-01’s potential

and the efforts in Colombia.



Management

Peter Traber, Ph.D.Chief Executive Officer, President and a Director

Dr. Traber has been a Director since February 12, 2009 and served as the Chief Medical Officer on a consulting basis prior to assuming the role of President and CEO in March 2011. He is President Emeritus and former Chief Executive Officer of Baylor College of Medicine. Previously, Dr. Traber was Senior Vice President Clinical Development and Regulatory Affairs and Chief Medical Officer of GlaxoSmithKline plc. He has also served as Chief Executive Officer of the University of Pennsylvania Health System, as well as Chair of the Department of Internal Medicine and Chief of Gastroenterology for the University of Pennsyl-vania School of Medicine.

James C. CzirrExecutive Chairman and Series B Director

Mr. Czirr was appointed a director in 2009 and became Executive Chairman of the Board of Directors in February 2010. Mr. Czirr is a co-founder 10X Fund, L.P. and is a managing member of 10X Capital Man-agement LLC, the general partner 10X Fund, L.P. Mr. Czirr was a co-founder of the Company in July 2000. Mr. Czirr was instrumental in the early stage development of Safe Science Inc., a developer of anti-cancer drugs, served from 2005 to 2008 as Chief Executive Officer of Minerva Biotechnologies Corporation, a developer of nanoparticle bio chips to determine the cause of solid tumors, and was a consultant to Metal-line Mining Company Inc. (NYSE Alternext US: MMG), a mineral exploration company seeking to become a low cost producer of zinc. Mr. Czirr received a B.A. degree from the University of Michigan.

Maureen E. FoleyChief Operating Officer

Maureen E. Foley has served as the Chief Operating Officer of the Company since October 2001.Prior to that, she served as the Manager of Operations from January 2001 until October 2001. Ms. Foley has been involved in the start-up of several high tech companies, where she was responsible for the establish-ment and administration of business operations including human resources, benefits, accounting, finance, marketing, product development and project management. Her experience with start-up companies is as follows: From June 2000 to December 2000 she provided business operations services as described for eHealthDirect, Inc., a developer of medical records processing software. From October 1999 to May 2000 she provided business operations services for ArsDigita, Inc., a developer of business software and programs. From June 1996 to August 1999, Ms. Foley served with Thermo Fibergen, Inc., a subsidiary of Thermo Electron Corporation, a paper waste processing developer. She is a director and Chairman of Tax/Eze, Inc., a tax preparation and financial services company, a director of Stewart Precision Inc., a metal fabricator and Ergonics, Inc., a project management firm. Ms. Foley is a graduate of The Wyndham School, Boston, Massachusetts, with a major in Mechanical Engineering.

Anthony D. Squeglia

Chief Financial Officer

The Board of Directors appointed Anthony D. Squeglia CFO, effective October 1, 2007. Since 2003, Mr. Squeglia, has served as Vice President of Investor Relations for the Company. From 2001 to 2003, Mr. Squeglia was a Partner in JFS Advisors, a management consulting firm that delivered strategic services to entrepreneurial businesses that include raising funds, business planning, positioning, branding, marketing and sales channel development. From 1996 to 2001, Mr. Squeglia was Director of Investor Relations and Corporate Communications for Quentra/Coyote Networks. Previously, Mr. Squeglia helped to successfully launch an IPO for Summa Four and held management positions with Unisys, AT&T, Timeplex, Colonial Penn and ITT. Mr. Squeglia received an M.B.A. from Pepperdine University and a B.B.A. from The Wharton School, University of Pennsylvania.



Anatole Klyosov, Ph.D., D.Sc.Chief Scientist

Dr. Klyosov is a co-inventor of Pro’s patented technology and a founder of the Company. Dr. Klyosov was vice president, research and development for Kadant Composites, Inc., a subsidiary of Kadant, Inc. (KAI-NYSE), where he directed, since 1996, a laboratory performing work in biochemistry, microbiology and polymer engineering. From 1990 to 1998, Dr. Klyosov was visiting professor of biochemistry, Center for Biochemical and Biophysical Sciences, Harvard Medical School, and from 1981 to 1990 he was professor and head of the Carbohydrates Research Laboratory at the A.N. Bach Institute of Biochemistry, USSR Acad-emy of Sciences. Dr. Klyosov was elected as a member of the World Academy of Art and Sciences and is the recipient of distinguished awards including the USSR National Award in Science and Technology. He has published more than 250 peer-reviewed articles in scientific journals, authored books on enzymes, carbohydrates, and biotechnology, edited two books: Carbohydrates in Drug Design and Galectins, and holds more than 20 patents. Dr. Klyosov earned his Ph.D. and D.Sc. degrees in physical chemistry, and an M.S. degree in enzyme kinetics, from Moscow State University

Eliezer Zomer, Ph.D.Executive Vice President of Manufacturing and Product Development

Dr. Zomer is Executive Vice President of Manufacturing and Product Development. Prior to joining the company in 2002, Dr. Zomer was the founder of Alicon Biological Control, where he served from Novem-ber 2000 to July 2002. From December 1998 to July 2000, Dr. Zomer served as Vice President of product development at SafeScience, Inc. and Vice President of Research and Development at Charm Sciences, Inc. from June 1987 to November 1998. Dr. Zomer received a B.Sc. degree in industrial microbiology from the University of Tel Aviv in 1972, a Ph.D. in Biochemistry from the University of Massachusetts in 1978, and undertook a post-doctoral study at the National Institute of Health.



Board of Directors

Arthur R. “Bobby” Greenberg

With 37 successful years in the semiconductor equipment and materials industries, Mr. Greenberg is the President and Founder of Prism Technologies, Inc. Prism provides professional sales & marketing ser-vices and business development consulting services. Previously, he was the first President of SEMI, North America, a semiconductor equipment and materials industry trade association representing the interests, including public policy, of more than 2000 members doing business in North America. In 1982, Mr. Greenberg was a founding member of Semiconductor Systems, Inc, a supplier of semiconductor manufac-turing equipment. In 1973, he was a founding member, and Vice President of Sales & Marketing, for KTI Chemicals, Inc, a supplier of processing chemicals for the semiconductor industry. A native of Arkansas, Mr. Greenberg received his Bachelor of Science degree in Business Administration from Henderson State University. In 2000, Mr. Greenberg received Henderson State University’s Alumni Entrepreneur of the Year Award.

Rod D. Martin, J.D.

Mr. Martin is a Director and Vice Chairman of the Board, Chairman of the Nominating and Corporate Governance Committee and Chairman of the Compensation Committee. Mr. Martin is co-founder and principal of 10X Capital Management. Mr. Martin previously served as a senior advisor to PayPal, Inc. founder Peter Thiel, most notably during PayPal’s IPO and subsequent merger with eBay Inc., and afterward at Clarium Capital, a global macro hedge fund which today has more than $5 billion under management. Mr. Martin also served as Director of Policy Planning & Research for former Arkansas Governor and presi-dential candidate Mike Huckabee. He is a widely noted author and speaker, and leads several non-profit organizations.

Gilbert F. Amelio, Ph.D.

Dr. Amelio is a named a Director of the Company and a member of the Nominating and Corporate Gov-ernance Committee. Dr. Amelio is a venture capitalist focused on early stage companies, is a senior part-ner of Sienna Ventures and lead director of AT&T, Inc. Dr. Amelio is a former CEO of Apple, Inc., and of National Semiconductor Corporation, which he led from its worst-ever to its best-ever quarter in just three years. Dr. Amelio also has served as a director of Chiron (now a part of Novartis Vaccines and Diagnostics), is the author of two business best-sellers, and has been personally awarded sixteen patents.

S. Colin Neill

Mr. Neill, a Director of the Company since May 2007, became President of Pharmos Corp. (Nasdaq: PARS) in January 2008, and since October 2006, was its Senior Vice President, Chief Financial Officer, Secretary, and Treasurer. From 2003 to 2006, Mr. Neill served as Chief Financial Officer, Treasurer and Secretary of Axonyx Inc., a biopharmaceutical company that develops products and technologies to treat Alzheimer’s disease and other central nervous system disorders.

Mr. Neill served as Senior Vice President, Chief Financial Officer, Secretary and Treasurer of ClinTrials Re-search Inc., a global contract research organization in the drug development business, from 1998 to 2001. From 2001 to 2003, Mr. Neill served as an independent consultant assisting start-up and development stage companies in raising capital. Earlier experience was gained as Vice President Finance and Chief Financial Officer of BTR Inc., a U.S. subsidiary of BTR plc, a British diversified manufacturing company, and Vice President Financial Services of The BOC Group Inc., a British owned industrial gas company with substantial operations in the health care field.

Mr. Neill served four years with American Express Travel Related Services, first as chief internal auditor for worldwide operations and then as head of business planning and financial analysis. Mr. Neill began his career in public accounting with Arthur Andersen LLP in Ireland and later with Price Waterhouse LLP as



a senior manager in New York City. He also served with Price Waterhouse for two years in Paris, France.

Mr. Neill graduated from Trinity College, Dublin with a first class honors degree in business/economics and he holds a masters degree in Accounting and Finance from the London School of Economics. He is a Certified Public Accountant in New York State and a Chartered Accountant in Ireland. Mr. Neill serves on the board of OXIS International, Inc. (OXIS:BB).

Steven Prelack

Mr. Prelack, a Director of the Company since April 2003, has served as Senior Vice President, Chief Fi-nancial Officer and Treasurer of VelQuest Corporation since 2001, a provider of automated compliance management solutions for the pharmaceutical industry. In this capacity, Mr. Prelack oversees business de-velopment, financial, administrative and other functions and is responsible for VelQuest’s transition from a development-stage company to an operating company.

Mr. Prelack is a director of Codeco Corporation, a designer and manufacturer of custom resisters and switches, and of Sight Code, Inc., which specializes in OPM, a systems design and architecture platform. Mr. Prelack, a Certified Public Accountant, received a B.B.A. degree from the University of Massachusetts at Amherst in 1979.

Jerald K. Rome

Mr. Rome, a Director of the Company since March 2004, has been a private investor since 1996. Mr. Rome founded Amberline Pharmaceutical Care Corp., a marketer of non-prescription pharmaceuticals, in 1993 and served as its President from 1993 to 1996. From 1980 to 1990, he served as Chairman, President and Chief Executive Officer of Moore Medical Corp., a national distributor of branded pharmaceuticals and manufacturer and distributor of generic pharmaceuticals and was previously Executive Vice President of the H.L. Moore Drug Exchange, a division of Parkway Distributors and predecessor of Moore Medical Corp. Mr. Rome received a B.S. degree in pharmaceutical sciences from the University of Connecticut.

Theodore D. Zucconi, Ph.D.Dr. Zucconi was formerly CEO, President and a Director until March 2011. Formerly, since 2002, Dr. Zucconi was President of Implementation Edge, a management consulting firm that specializes in orga-nizational performance improvement. From 1994 until 2002, Dr. Zucconi served in various capacities at Motorola, including Director of Motorola University. Prior to Motorola, Dr. Zucconi held technical, operational, and scientific positions at various high technology companies. Dr. Zucconi received his Ph.D. in analytical chemistry from State University of New York in 1977. Dr. Zucconi also received a Master’s Certificate in international management from Thunderbird University, and he is a Stanford Certified Project Manager.



Supplemental Appendix A

Details of Phase I and Phase II Clinical Trials



Details of Phase I Trial (Closed in March 2005)

Objective

PRO’s Phase l multi-center, open-label trial for GM-CT-01 was designed for third- and fourth-line cancer patients with advanced solid tumors averaging more than 100mm that were not amenable to surgery, ra-diation or chemotherapy. Patients were refractory to 5-FU, had progressive disease, and had a minimum of 12 weeks to live. To summarize, 5-FU has been found to be effective within a narrow margin of safety, and has known side effects such as severe gastrointestinal and hematological toxicity.

The objectives of the study were to determine:

1. Maximum Tolerated Dose and Dose Limiting Toxicity of GM-CT-01 as a single agent, and when administered in combination with 5-FU

2. Pharrmacokinetic profile of 5-FU in the presence of GM-CT-01

3. Effect of GM-CT-01/5-FU combination on tumor size in patients with measurable disease.

Administration

The study design included a screening period followed by two consecutive 28-day treatment cycles:

• Cycle 1: patients were dosed with GM-CT-01 intravenously as a single agent for four consecutive days, followed by a 24-day monitoring period.

• Cycle 2: patients were dosed intravenously with GM-CT-01/5-FU for four consecutive days, followed by a 24-day monitoring period.

In the Phase l study, GM-CT-01 was dose escalated from 30mg/m2 in the first cohort to 280 mg/m2 in the sixth and final cohort, while the dose level of 5-FU was held constant at 500 mg/m2. The four well-regarded cancer centers that participated in the study are:

• Ochsner Cancer Institute in New Orleans, LA

• Norris Cotton Cancer Center at Dartmouth-Hitchcock Medical Center in Lebanon, NH

• University of Michigan Comprehensive Cancer Center in Ann Arbor, MI

• Florida Oncology Associates in Jacksonville, FL

In advanced cancer patients who

were not previously responsive

to chemotherapy, GM-CT-01 ap-

peared to stabilize the disease.



Results of Phase I Trial

Dose Limiting Toxicity and Maximum Tolerated Dose were not reached at the highest dose level when GM-CT-01 (280 mg/m2) was administered alone or in combination with 5-FU (500 mg/m2).

Pharmacokinetics data:

• 5-FU was administered at a dose of 500 mg/m2. As body surface area of the patients ranged between 1.55 and 2.38 m2, the actual 5-FU administered to certain cancer patients ranged between 775 and 1,190 mg/m2 per day for four consecutive days.

• Concentration time profiles showed no marked differences between groups or study days.

• Peak systemic levels were generally achieved at the end of infusion. 5-FU disappeared in a biphasic manner thereafter.

• Systemic exposure to 5-FU Area Under the Curve and peak 5-FU systemic Concentrations (Cmax) tended to increase with repeated doses of 5-FU. These pharmacokinetics parameters have almost the same profiles for days one through four.

• Systemic exposure to 5-FU and peak 5-FU systemic Concentrations (Cmax) tended to increase with high doses of GM-CT-01 (between 150 and 280 mg/m2).

• Total systemic clearance values ranged between 1.16 and 4.65 L/min. The highest clearance was achieved at day one after giving between 150 and 280 mg/m2 of GM-CT-01. 5-FU systemic clearance tended to decrease with increased doses of GM-CT-01 thereafter.

• Half-life values of 5-FU ranged between 28 and 137 minutes compared with histori-cal 5-FU data between 8 and 20 minutes.

Phase l data also indicates that GM-CT-01/5-FU was well tolerated. GM-CT-01 enhanced 5-FU anti-tumor activity. The disease was stabilized in 14 of 26 patients with measurable disease. Six of ten patients were stabilized at the highest dose level (sixth and final cohort).

Efficacy results are based on Response Evaluation Criteria in Solid Tumors (RECIST) following completion of the second cycle of treatment. According to RECIST, stable disease is defined as “Neither sufficient shrinkage to qualify for Partial Response (more than 30% shrinkage) nor sufficient increase to qualify for Progressive Disease (greater than 20% increase) taking as reference the smallest sum longest diameter since the treat-ment started”.

With GM-CT-01, 5-FU remained

in the system longer and had

a higher peak concentration,

possibly helpin to increase its

effectiveness.



Details of Phase II Clinical Trials

Study ID Number: DAVFU-003 - End Date: 2007 (Submitted in 2008)

Name: A Phase II, Multi-Center, Open-Label Trial to Evaluate the Efficacy and Safety of Intravenous GM-CT-01 in Combination with 5-Fluorouracil When Administered in Monthly Cycles as Third, or –Fourth-Line Therapy for Metastatic Colorectal Cancer.

Objective: The primary objectives of this study were to: (1)Document the complete and partial response (CR and PR) and the rate of stable disease (SD) with GM-CT-01/5-FU (DAVFU, GM-CT-01 280 mg/m2 together with 500mg/m2 5- FU) combination therapy when administered in monthly cycles to patients with metastatic carcinoma of the colon or rectum whose tumor has failed to respond to, or has progressed in spite of, standard second-, or third-line chemotherapy; (2)Evaluate the safety of DAVFU in this population.

The secondary objectives of this study were to: (1)Gather pilot data on the effect of DAVFU on mortality and ancillary clinical indicators in this setting, including, Eastern Cooperative Oncology Group (ECOG) performance status, quality of life, carcinoembryonic antigen (CEA) levels, and mortality; (2) Evaluate pro-gression free survival as an exploratory endpoint.

Subject Population: Male and female patients aged 18 years or older with histologically-proven adenocarcinoma of the colon or rectum that was not amenable to curative surgery or radiotherapy and that had progressed during or after receiving treatment with at least 2, but not more than 3, lines of therapy that collectively must have included, at a minimum, 5-fluorouracil or capecitabine, irinotecan, and oxaliplatin were to be enrolled in the study. (If, in the opinion of the investigator, the patient was not able to receive irinotecan and/or oxaliplatin due to medical contraindications, irinotecan and/ or oxaliplatin were not required to have been included in the prior lines of therapy.) Furthermore, patients were to have 1 or more measurable lesion, according to Response Evaluation Criteria in Solid Tumors (RECIST) criteria.

Adverse Effects: Overall, a total of 19 (95%) patients of the study experienced at least 1 treatment-emergent adverse event, and 14 (70%) patients experienced at least 1 treatment-emergent adverse event was considered by the Investigator to be at least possibly related to study drug. Most adverse events reported were assessed by the Investigator as Grade 1 or Grade 2 in intensity. A total of 12 (60%) patients experienced a ≥Grade 3 adverse event during the study. The only ≥Grade 3 adverse events reported by more than 1 patient included anemia, anorexia, metastases to central nervous system, dehydration and dyspnea, each of which was reported for 2 (10%) patients. All other Grade 3 adverse events were reported by 1 (5%) patient each and included reports of abdominal pain, constipation, nausea, vomiting, jaundice, malignant ascites, esopha-geal varices hemorrhage, headache, hypotension, and deep venous thrombosis.

Serious Adverse Effects:A total of 7 (35%) patients experienced an SAE, including anemia and dehydration (2 patients each; 10%), and liver failure, malignant ascites, hepatic encephalopathy, abdominal pain, disease progression, esopha-geal varices hemorrhage, hematuria, and metastases to bladder, constipation, metastases to the central nervous system, vomiting, dyspnea, and malignant pleural effusion (1 patient each; 5%). There were no treatment-related deaths, and no patient died while on study. However, as stated above, 2 patients were reported to have died over 30 days after the last study drug dose. The causes of death for these patients (disease progression and liver failure) were considered to be unrelated to the study drug.

Efficacy: Progression-Free Survival was defined as the time measured from the date of randomization until the date of documented tumor progression or death due to any reason, as determined by the Core Laboratory. The median duration of progression-free survival was 8.4 weeks (~2 months).

Status: The study was terminated so that a more contemporary chemotherapy regimen for colorectal cancer could be combined with GM-CT-01 in a new study.

Phase II trials on colorectal

cancer showed that GM-CT-01

extended survival, eliminated

mouth and colon sores, and

shortened hospital stays.



Study ID Number: DAVFU-006 Start Date: 13 October 2006

Name: An Open-Label, Phase II Study of GM-CT-01 when added to a Regimen of Leucovorin, 5-FU, and Avastin® as First-Line Treatment for Locally Advanced and Unresectable or Metastatic Colorectal Cancer in Subjects Unable to Tolerate Intensive Chemotherapy.

Objectives: The primary objective assessed for this study was to assess the clinical activity of a regimen of GM-CT-01/5 FU, LV plus Avastin® when administered IV as a first-line treatment to subjects with Stage III or IV, ad-vanced or metastatic CRC. Clinical activity was assessed by determining the percentage of subjects exhib-iting an objective response (CR plus PR). Tumor response was to be assessed following RECIST guidelines.

The secondary objectives assessed for this study were to: (1) assess the percentage of subjects demonstrat-ing clinical benefit (i.e., CR, PR, and SD); (2) evaluate the safety of the GM-CT-01/5-FU, LV, plus Avastin® regimen; (3) explore PFS and Overall Survival after the first dose of study drug, and continue through sub-ject death, or 24 months after the first dose of study treatment, whichever occurred first; (4) assess Duration of Response; (5)assess ECOG Performance Status; (6) assess CEA; (7) assess subject reported outcomes using a QoL instrument.

Subject Population: The target subject population for this study included 10 mostly elderly subjects with locally advanced and unresectable, or metastatic colorectal cancer who were candidates for first-line treatment with a regimen of 5 FU/Leukovorin, and bevacizumab (Avastin®) because they were judged by the Investigator to be poor candidates for first-line therapy with FOLFOX of FOLFIRI regimens, or because the subject had discontin-ued treatment with either of these regimens due to unacceptable toxicity without documented clinical or objective progression of disease.

Preliminary Results: Of the 8 patients that completed the study, 3 subjects had a partial response of over 30% tumor shrinkage, 5 subjects completed 12 or more cycles of treatment. In a survival survey of the patients, the median over-all survival is about 71.5 weeks. Eight of the 10 subjects completed the study and are valuable for efficacy assessment. One subject withdrew consent, and one subject discontinued the study by the Investigator due to disease progression.

Adverse Effects: There were 87 treatment emergent adverse events in 9 subjects; 39 of the events (in all 9 subjects) were deemed possibly or probably related to study drug. All of these most frequent adverse events were Grade 2 or lower in severity. Seven (70%) of the subjects had a prior medical history of hypertension.

Serious Adverse Effects: There were no deaths during the study, but 1 subject died within one month after leaving the study. There were 3 subjects with serious adverse events (3%), Sepsis, Ddyspnea and chest pain.

Status: The study was terminated in 2009 after enrolling 10 subjects. Early termination of the study occurred due to the lack of funding available to the Company.



Study ID Number: DAVFU-007End Date: 2009

Name: A Phase II, Multi-center, Open-label Trial to Evaluate the Efficacy and Safety of GM-CT-01 in Combina-tion with 5-Fluorouracil When Administered as First Line Chemotherapy in Patients with Advanced Biliary Cancer

Objectives: The primary objective of this study was to determine the overall response rate (ORR) defined as CR rate plus PR rate using RECIST), as well as SD rate in patients with unresectable, locally advanced or metastatic cholangiocarcinoma or other biliary tract tumors treated with DAVFU at doses of DAV 280 mg/m2 plus 5-FU 600 mg/m2 during cycles of 4 consecutive days of treatment, followed by a 24-day follow-up period.

The secondary objectives of this study were to (1) determine the overall survival and progression-free survival (PFS) times of patients treated with the DAVFU regimen; (2) determine the quality of life (QoL) of patients treated with the DAVFU regimen; (3) determine the safety and tolerability of the DAVFU regimen.

Subject Population: Patients aged 18 years or older who had histologically- or cytologically- or histologically documented car-cinoma primary to the intr.- or extra-hepatic biliary system or gall bladder with clinical and/or radiologic evidence of unresectable, locally advanced or metastatic disease. Patients also had 1 or more measurable target lesions according to RECIST, an ECOG performance status ≤2, and a life expectancy ≥3 months.

Results: All reported serious Adverse Events were deemed not related to study drug by the Principal Investigators.

Status: The study was discontinued in 2009. A total of 19 patients had been recruited, and 7 were discontinued from the study. Phase II gall bladder and bile duct cancer trials have been inactive due to financial con-straints, as the Company has chosen to focus on colorectal cancer.

http://www.pro-pharmaceuticals.com/press/pr-08-16-07.pdf

http://www.pro-pharmaceuticals.com/press/pr-10-06-05.pdf

http://pro-pharmaceuticals.com/press/pr-06-22-10.pdf

Phase II trials for gall bladder

and biliary cancer are encourag-

ing for tumor stabilization, but

more data is needed, and the

Company has focused only on

colorectal cancer since 2008 due

to financial restraints.



Supplemental Appendix B

Market Data for Top Chemotherapy Drugs



Exhibit A1: Alkaloids - The top five marketed chemotherapy drugs per therapy category and subcategories.

Rank Product GenericName

Company Annual Sales Worldwide Growth per Year (%) Group Sare (%)

2007 2008 2009 2008 2009 2007 2008 2009

1 Taxotere docetaxelSanofi-Aventis

$2,570 $2,987 $3,304 +16% +2% 54% 61% 65%

2 Camptosaririnotecan-hydrochlo-ride

Pfizer $969 $563 $354 -42% -37% 20% 12% 8%

3 Abraxanepaclitaxel (albumin-bound)

Abraxis BioSci-ence

$325 $336 $315 +3% -6% 7% 7% 7%

4 Taxol paclitaxelBristol-Myers Squibb

$422 $385 $308 -9% -20% 9% 8% 7%

5 Hycamtintopotecan-hydrochlo-ride

GlaxoSmith-Kline

$238 $259 $269 +9% +4% 5% 5% 6%

Other $277 $357 $400 +57% +12% 5% 7% 9%

TOTAL $4,751 $4,887 $4,680 +3% -4% 100% 100% 100%

All Financial Data in US $ (mil). Source: EvaluatePharma ®



Exhibit A2: Anti-Metabolites - The top five marketed chemotherapy drugs per therapy category and subcategories.



2007 2008 2009 2008 2009 2007 2008 2009

1 Alimtapeme-trexed sodium

Eli Lilly $854 $1,155 $1,706 +35% +48% 20% 23% 31%

2 Gemzar

gem-citabine hydrochlo-ride

Eli Lilly $1,592 $1,720 $1,363 +8% -21% 37% 34% 25%

3 Xeloda capac-itabine

Roche $960 $1,121 $1,163 +17% +4% 22% 22% 21%

4 Vidaza azacitidine Celgen - $207 $387 n/a +87% - 4% 7%

5 Dacogen decitabine Eisai $24 $151 $166 +535% +10% 1% 3% 3%

Other $895 $692 $647 -23% -7% 21% 14% 12%

TOTAL $4,235 $5,044 $5,433 +17% +8% 100% 100% 100%

All Financial Data in US $ (mil). Source: EvaluatePharma®



Exhibit A3: Anti-neoplastic Mabs - The top five marketed chemotherapy drugs per therapy category and subcategories.



2007 2008 2009 2008 2009 2007 2008 2009

1 Avastin bevaci-zumab

Roche $3,426 $4,818 $5,744 +41% +19% 25% 28% 31%

2 Rituxan rituximab Roche $4,602 $5,481 $5,620 +19% +3% 33% 32% 31%

3 Herceptin trastu-zumab

Roche $4,048 $4,712 $4,862 +16% +3% 29% 28% 27%

4 Erbitux cetuximabMerck KGaA

$645 $830 $971 +29% +17% 5% 5% 5%

5 Erbitux cetuximabBristol-Myers Squibb

$692 $749 $683 +8% -9% 5% 4% 4%

Other $505 $503 $458 -0% -9% 4% 3% 2%

TOTAL $13,918 $17,093 $18,338 +23% +7% 100% 100% 100%




Exhibit A4: Cytotoxic Antibiotics - The top five marketed chemotherapy drugs per therapy category and subcategories.



2007 2008 2009 2008 2009 2007 2008 2009

1 Caelyx

doxorubi-cin hydro-chloride (liposo-mal)

Schering-Plough

$257 $297 $219 +16% -26% 29% 29% 42%

2Pharmo-rubicin/Ellence

epirubicin hydrochlo-ride

Pfizer $247 $211 $194 -15% -8% 28% 21% 37%

3 Adriacindoxorubi-cin hydro-chloride

Kyowa Hakko Kirin

$76 $74 $33 -3% -29% 9% 7% 10%

4 Caelyx

doxorubi-cin hydro-chloride (liposo-mal)

Merck & Co

- $188 $47 n/a -75% - 18% 9%

5Theraru-bicin

pirarubi-cin

Meiji Seika Kaisha

$10 $11 $12 +9% +6% 1% 1% 1%

Other $293 $228 $3 -22% -99% 33% 23% 1%

TOTAL $883 $1,009 $527 +14% -48% 100% 100% 100%




Exhibit A5: Platinum Compounds - The top five marketed chemotherapy drugs per therapy category and subcategories.



2007 2008 2009 2008 2009 2007 2008 2009

1 Eloxatin oxaliplatinSanofi-Aventis

$2,086 $1,981 $1,334 -5% -33% 87% 84% 69%

2 Elplat oxaliplatinYakult Honsha

$180 $230 $263 +27% +15% 8% 10% 14%

3Oxalipla-tin

oxaliplatin Hospira $3 $13 $164 +289% n/a 0% 1% 8%

4Parapla-tin

carbopla-tin

Bristol-Myers Squibb

$67 $66 $75 -2% +15% 3% 4% 4%

5Carbo-platin Injection

carbopla-tin

Teva Pharma-ceutical Indus-tries

$40 $40 $35 +0% -13% 2% 2% 2%

Other $25 $28 $58 +13% +103% 1% 1% 3%

TOTAL $2,401 $2,357 $1,929 -2% -18% 100% 100% 100%




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Mark Rubinshtein, who assisted with the research and editing of this report, received his B.A. in Chemistry magna

cum laude in 2001 and his M.S. in Chemical Engineering in 2003 from Columbia University. He expects to receive

his Ph.D. from the Department of Chemistry and Biochemistry at UC San Diego in March 2011. His research focuses

on the development of targeted therapeutics for Alzheimer’s disease and synthesis of organic polymers with potential

drug-delivery applications.

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