The H5N1 strain is a new strain of influenza virus that humans have little or no resistance to and has resulted in high rates of illness and death. ID Biomedical's development efforts will concentrate on creating a vaccine using a genetically modified variant of the H5N1 strain.

Since January 2004, sporadic outbreaks of highly pathogenic bird (avian) influenza caused by an H5N1 influenza strain have occurred in South East Asia. Occasional transmission of the virus directly from birds to human has resulted in a high mortality rate in those infected. To date, all humans infected have contracted the virus directly from birds and there is no conclusive evidence of human to human transmission that could lead to an influenza pandemic.

ID Biomedical has obtained the genetically modified rH5N1 reference strain from the National Institute for Biological Standards and Control (NIBSC) in the U.K. NIBSC is one of the few World Health Organization (WHO) selected laboratories in the world, which conducts experimental work aimed at producing pandemic reference strains for potential vaccine production.

The reverse genetics technology used by NIBSC allows the rH5N1 strain to be grown in chicken eggs, an important source of influenza vaccine production. Typically, because of their virulence, pandemic avian strains kill eggs, therefore making it impossible to produce a vaccine from this source. The genetic modification of the virus also weakens its virulence so that it is no more dangerous than the influenza strains used by manufacturers during annual influenza production.

The initial objective of the Company's development program is to optimize the conditions under which the rH5N1 virus grows in eggs and to develop a virus seed bank for future vaccine production. The work will be conducted by ID Biomedical at its Quebec manufacturing facility. The second phase of this pandemic preparedness program is to produce a "mock" vaccine in sufficient quantities to conduct clinical trials. ID Biomedical is currently in discussions with the Canadian Government with regard to funding this important program.

"The successful completion of this development program will position Canada and ID Biomedical as worldwide leaders in pandemic preparedness. There is a growing consensus among experts supported by the WHO that the development and testing of a mock pandemic vaccine is a critical component of pandemic preparedness because it will allow manufacturers to shorten production times, thereby providing the general public with vaccine more quickly. The speed at which we will make the vaccine available to people will have a direct impact on the number of lives saved. We are very proud to be the official Canadian pandemic vaccine supplier and to be at the forefront of the preparedness work," said Anthony Holler, M.D., Chief Executive Officer of ID Biomedical.

In October 2001, the Company announced that it had signed a ten-year contract with the Canadian Government to assure a state of readiness in case of an influenza pandemic. The contract requires that ID Biomedical develop the infrastructure and capacity, in Canada, to provide 100 % of domestic vaccine needs in the event of an influenza pandemic. To fulfill its commitments to this contract, ID Biomedical is currently completing an expansion of its production facility, has secured a year-round supply of eggs and has stockpiled raw materials and supplies necessary to permit rapid vaccine production.

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