According to IMS Health, the worldwide market for pancreatic enzyme replacement therapies grew at a compound annual growth rate of approximately 7% from $579 million in 2002 to $658 million in 2004. The market for these products in 2004 was approximately $190 million in North America, $228 million in Europe and $241 million in the rest of the world according to IMS Health.

According to the Cystic Fibrosis Foundation, cystic fibrosis disease affects approximately 30,000 people in the United States and is one of the most prevalent genetic disorders in Caucasian populations. Approximately 90% of cystic fibrosis patients are prescribed pancreatic enzymes to treat exocrine pancreatic insufficiency. Cystic fibrosis patients with exocrine pancreatic insufficiency have a median life expectancy of 31 years, compared to 50 years for those cystic fibrosis patients who have sufficient pancreatic enzymes.

In many patients, chronic pancreatitis is clinically silent and many patients with unexplained abdominal pain may have chronic pancreatitis that eludes diagnosis. Therefore, according to The New England Journal of Medicine, the true prevalence of the disease is not known, although estimates range from 0.04% to 5%.

The American Cancer Society estimates that approximately 30,000 people in the United States are diagnosed with pancreatic cancer each year. According to an industry estimate, approximately 65% of patients with pancreatic cancer will have some degree of fat malabsorption. According to the U.S. Centers for Disease Control and Prevention, there were approximately 1.1 million people with HIV/AIDS in the United States in 2003. Approximately 50% of HIV-positive patients in an industry study had evidence of pancreatic insufficiency.

The Company has designed ALTU-135 to exhibit consistent enzyme activity from batch to batch. The enzymes in ALTU-135 are microbially derived and produced through fermentation. The amount of material and related enzyme activity in a capsule of ALTU-135 is tightly controlled, as each of the three enzymes in ALTU-135 is individually manufactured and added to the final drug product in a specific amount.

The Company is developing ALTU-238 as a long-acting, growth hormone product that can allow patients to avoid the inconvenience of daily injections as recommended by current medical guidelines for existing products. The Company has used its proprietary protein crystallization technology and formulation expertise to developed ALTU-238 without altering the underlying molecule or requiring polymer encapsulation. Since hGH is a known protein molecule with an established record of safety and efficacy.

The ALTU-238 will offer growth hormone deficient patients the convenience of a once-weekly injection. ALTU-238 is designed to provide extended release without using polymers to encapsulate the component hGH molecules. The Company has designed ALTU-238 using its protein crystallization technology so that, as the crystals dissolve, the hGH is released over an extended period. This allows ALTU-238 to be administered with the same size needle as used with currently marketed products. In addition, The Company has designed ALTU-238 to be manufactured using well-established equipment and processes consistent with other injectable protein products.

The Company is currently developing a pipeline of preclinical products candidates that are designed to either increase the amount of protein that is in short supply in the body or degrade and remove toxic metabolites from the blood stream. The Company is developing all of these products candidates for oral delivery to address areas of unmet need in chronic gastrointestinal and metabolic disorders, including: an oxalate degrading enzyme for the treatment of hyperoxalurias; and an enzyme that degrades phenylalanine for the treatment of phenylketonuria.

The Company is also developing ALTU-236, an orally-administered enzyme replacement therapy designed to reduce the long-term effects associated with excess levels of phenylalanine, also known as hyperphenylalanemia.

Product sales decreased to $0.0 for the six months ended June 30, 2005 from $0.2 million for the same period in 2004.

Research and development expense for the six months ended June 30, 2005 increased 94% to $13.7 million from $7.0 million for the same period in 2004.

General, sales and administrative expense for the six months ended June 30, 2005 increased 17% to $3.8 million from $3.3 million for the same period in 2004.

Interest income for the six months ended June 30, 2005 increased 150% to $0.5 million from $0.2 million for the same period in 2004.