The biotechnology and pharmaceutical industries are very competitive. In particular, competition for the development and marketing of urological and endocrine pharmaceutical products is intense and is expected to increase. Many of the competitors have substantially greater financial and other resources, larger research and development staffs and more experience developing products, obtaining FDA and other regulatory approval of products and manufacturing and marketing products. The main competiotion is against all pharmaceutical companies that manufacture or market LHRH agonist products. In addition, there is competition against biotechnology companies, universities, government agencies, and other research institutions in the development of urological and endocrine products, technologies and processes that are, or in the future may be, the basis for competitive commercial products.

The total number of patients with advanced prostate cancer in the U.S. was 652,000 in 2004. It is estimated that the patient population to be similar in Europe, and it plans to file an application for regulatory approval in the European Union in the first half of 2005. The current standard of care for the palliative treatment of prostate cancer is LHRH agonist therapy. LHRH agonist therapies for advanced prostate cancer are designed to suppress the production of testosterone because testosterone promotes and accelerates the growth of tumors associated with prostate cancer. Histrelin, a powerful inhibitor of testosterone production, is the most potent LHRH agonist available. Prostate cancer is the most common cancer for men and the second leading cause of cancer death in men. According to the American Cancer Society, every year approximately 200,000 men are diagnosed with prostate cancer and 40,000 die from this disease. The National Cancer Institute’s SEER Program and the National Oncology Database each project that this patient group will grow at an annual rate of 2-3% per year through 2008 and beyond.

VP002 is an implant utilizing Hydron Technology to deliver histrelin over a 12-month period for the treatment of central precocious puberty, or CPP. The prevalence of this condition is estimated to be between one in 5,000 to 10,000 children. This yields a potential population of up to 11,700 children with this condition who are 14 or younger in the U.S. CPP is the early onset of puberty in young children, resulting in the development of secondary sexual characteristics and short stature, if left untreated.

VP003 is an implant utilizing Hydron Technology to deliver octreotide over a six-month period for the treatment of acromegaly. It is believed there are approximately 1,000 new acromegalic patients per year in the U.S. and 16,000 total patients. Acromegaly is a chronic hormonal disorder that occurs when a pituitary tumor produces excess growth hormone, or GH. It most commonly affects middle-aged adults, and if untreated, causes enlargement of certain bones, cartilage, muscles, organs and other tissue, leading to serious illness and potential premature death.

VP004 is an implant utilizing Hydron Technology to deliver naltrexone for the treatment of opioid addiction over a six-month period. The National Institute for Drug Addiction estimates that there are approximately one million heroin addicts in the U.S. of which only 25% seek treatment. Naltrexone is an opiate antagonist currently approved as an oral daily formulation in the U.S. for the treatment of opiate dependence. Naltrexone competitively binds at the opiate receptor sites in the brain, thereby blocking the euphoric effects of opiates such as heroin.

Cost of product sales for the year ending December 31, 2004 was $608,150 resulting in a gross margin of 89%. For the year ended December 31, 2003, there was not a cost of product sales.

Research and development expense for the year ended December 31, 2003 were $5,229,529 and for the year ended December 31, 2004 were and $6,375,819, representing an increase of 21.9%.

Selling and marketing expense for the year ending December 31, 2003 were $509,514 and for the year ending December 31, 2004 were $5,025,038.