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L. WILLIAM MCINTOSH - NEXELL THERAPEUTICS INC (NEXL)
CEO Interview - published 05/29/2000

DOCUMENT # KAC629

L. WILLIAM MCINTOSH has served as President and Chief Operating Officer
of Nexell Therapeutics since March 1, 1998. From May 1997 through
February 1998, he served as Senior Vice President of Business
Development and Finance and Chief Financial Officer of the c ompany.
Prior to joining Nexell, Mr. McIntosh served as Senior Vice President of
Business Development and Commercial Operations for Zynaxis Inc., a
biotechnology company with both drug delivery and diagnostic
technologies. Mr. McIntosh has served in senior management positions at
SmithKline Beecham (as a full-time consultant), Boehringer Mannheim
Pharmaceuticals Corporation, Medco Containment Services, Inc., and Merck
and Co., Inc. He currently serves of the Board of Directors of VIRxSYS
Corporation. Mr. McIntosh earned a BS in Business Administration and an
MBA from Lehigh University.

Sector: biotechnology

TWST: Could you begin by giving our readers an overview of Nexell
Therapeutics?

Mr. McIntosh: Nexell Therapeutics is the leading developer and marketer
of innovative ex vivo cell therapies and in vitro diagnostics for
cancer, autoimmune, metabolic and genetic diseases. We're the only
company marketing clinical stem cell technology in the US. We have a
broad patent portfolio and limited direct competition worldwide. Indeed,
our patent portfolio gives us a very strong position here in the United
Sates. The Company was formed through two acquisitions that we made. The
first was in late 1997, when we acquired the Immunotherapy Division of
Baxter Healthcare, Incorporated. And then, roughly a year later, we
acquired substantially all the assets of CellPro, Incorporated. So we
are, essentially, the combination of those two companies and that's why
we have the leading position in the world in the development of cellular
therapies.

TWST: What is stem cell technology and cell therapy?

Mr. McIntosh: Stem cell technology and cell therapy, as we practice it,
is the selection, manipulation, expansion and use of cells to achieve a
particular therapeutic end. The major cell type that we concentrate on
today is the hematopoietic stem cell, or, quite simply, the blood and
immune system stem cell. It's known in shorthand as the CD34 stem cell.
This cell is, essentially, the master cell that creates all the blood
and immune system components in the body. Now what we do, at least in
the initial application, is use our instrumentation, our plastic
disposables, and our biological reagents to capture these stem cells
from cancer patients before they undergo high dose chemotherapy. Those
cells are then re-infused into the patient after they receive treatment
to restore the blood and immune system, which were essentially destroyed
by the high dose chemotherapy. The beauty of this process is that our
technology not only captures the right cells to rebuild the immune
system, but it also eliminates cancer cells that are in the transplant
graft. So those cancer cells are not re-infused into the patient and,
therefore, you've reduced the chances of re-seeding the cancer. So we do
two things. We pull out those cells that are needed to rebuild the
immune system following high dose chemotherapy, and we eliminate
unwanted cells, particularly tumor cells, that are present in the
transplant graft.

TWST: Would this be a treatment for all types of cancer?

Mr. McIntosh: There are a number of cancers that use high dose
chemotherapy and, therefore, need these stem cell transplants that we've
been talking about. The major ones are the leukemias, lymphomas,
multiple myeloma, breast cancer, and the like.

TWST: What direction would you want to take Nexell Therapeutics over the
next few years?

Mr. McIntosh: In the near term we're looking to expand the utilization
of stem cell selection, our current revenue driver. We received approval
for our major stem cell selection system, the Isolex' 300i, about the
middle of last year, so we're really still in the launch phase, if you
will, for this product. So we're looking for some solid revenue growth
in that area. We continue to improve our selection platform and to
pursue regulatory approvals in new markets. We have just received US
approval on our latest enhancement for the Isolex', our version 2.5
upgrade for the positive selection system. And we've also just received
regulatory approval in Australia. We've just announced a major
distribution agreement with Takara Shuzo, covering Japan, China, Korea
and Taiwan. So our cell therapy products will soon be available in many
of the most important markets around the world. In terms of things
moving forward in the research and development front, we're looking to
significant advances in the treatment of important diseases beyond
cancer over the next few years. For example, researchers in France
recently showed that they could use some of our technology to create a
gene therapy for the 'boy-in-the-bubble syndrome,ý properly called
Severe Combined Immuno-deficiency syndrome (SCID). We expect to see some
significant progress in the development of cell therapies for treating
end-stage autoimmune diseases such as rheumatoid arthritis, multiple
sclerosis, and systemic lupus, among others. We're also looking at some
early programs that would involve the use of stem cells to help in the
process of solid organ transplant. Researchers have discovered that if
they transplant stem cells from the donor to the recipient, that it can
improve both the take rate, if you will, of the organ and reduce or
eliminate the need for immunosuppressive drugs following the transplant.
So there are a large number of major research and development
opportunities that we see for our technology over the next three to five
years.

TWST: You referred to the take rate ' do you mean the acceptance of the
organ?

Mr. McIntosh: Yes, exactly. Generally, the acceptance of the organ is
very high now, but that is simply because organ transplant patients are
given fairly massive doses of immunosuppressive drugs to prevent organ
transplant rejection. Of course the problem with immunosuppressive
drugs, other than the fact that they're expensive, is that the patient
is then, for the rest of their life, exquisitely sensitive to infections
of any kind. So they are constantly battling the balance between having
enough immunosuppressive drugs on board to keep the organ from being
rejected, and risking life-threatening infections. What has been
discovered in the laboratory and now in the clinic, is that if you
transplant stem cells along with the organ, you can virtually eliminate
the use of immunosuppressive drugs, and at the same time, have a
successful transplant. But again, this is just one of the many, many
exciting areas that we're seeing unfolding over the next three to five
years.

TWST: Would that involve heart transplants, liver, kidney?

Mr. McIntosh: Right. Any sort of organ transplant, in theory, could use
this approach.

TWST: What about bone marrow?

Mr. McIntosh: Bone marrow transplant is sort of the old way of doing
things. In the early days of high dose chemotherapy, they used bone
marrow to transplant stem cells because that's where you found stem
cells. The new way of doing it is to use a mobilization drug, usually G-
CSF, which drives the stem cells out of the bone marrow into the
peripheral blood where they can be collected more easily. Because of
mobilization, we can collect stem cells in an outpatient procedure
called apheresis that is not unlike blood donation in a typical Red
Cross setting.

TWST: What do you see as the biggest opportunity for Nexell? Would that
be the development of the 2.5 Isolex'?

Mr. McIntosh: Certainly, we view the Isolex 300i 2.5CE, which actually
was launched last fall in Europe, as the next evolution of our
technology. It allows for extremely high purities and yields of cell
products and, in the version available in Europe, also allows for both
positive and negative selection in one single run. Positive selection is
when we take out cells that we want to use in a patient, such as the
stem cells. Negative selection is when we actively target and purge
cells that we don't want, such as the cancer cells. With our new 2.5CE
system, we can do positive-negative selection in a single run. There's
no other instrument in the world that can do that.

TWST: As far as the business aspects of Nexell, will acquisitions or
mergers play a role in the company's future?

Mr. McIntosh: We think mergers and acquisitions are an important way to
continue to add to our technology base, our patent position, and expand
our footprint in the world of cell therapies. While we do have the
broadest commercial offering of any company out there, including a full
line of products for tumor cell detection, cell selection, expansion and
manipulation, and storage, we believe there are other important
technologies that are being invented and discovered. For us to continue
to broaden our base, we probably will seek to do some strategic mergers
and acquisitions.

TWST: What do you see as the rate of gain in sales and earnings over the
next few years?

Mr. McIntosh: It is a little difficult to predict because quite frankly,
this is a brand new market. It's not one of those markets that is
already established and therefore, easily predicted. We're certainly
looking for double-digit growth in our sales over the next two years and
to the extent that we see some of these new applications that we've
talked about coming into more routine medical practice, we would expect
to benefit from those developments also.

TWST: What would you say about your research team and your management
team? Would you say that you have a pretty sound management team and
research team?

Mr. McIntosh: No question about it. Since we made the initial
acquisition back in late 1997, we've been working to build our
management team. We have added a number of new members to that team
quite recently, including a VP of Marketing, Lew Chapman, who has
extensive experience in pharmaceutical, biological and medical device
marketing, and a new VP for Business Development, Michel Bergh, PhD.

Dr. Bergh also has extensive experience in both pharmaceutical and
biotechnology worlds, including former positions at Genzyme, Schering,
and several West Coast biotech companies. Both of these gentlemen make
great additions to what has turned out to be a first-class team that
we've built over the last two years.

TWST: As President and COO, where do you spend more of your time within
the company?

Mr. McIntosh: Speaking of the team, I've spent a lot of my personal time
over the last two years building this team. In addition, the two most
important activities for me are fundraising and strategic planning. We
did have a successful effort late last year and raised $63 million for
the company. We've also worked hard to lay out the strategic vision for
the company and drive the company to that strategic vision.

TWST: Raising $63 million is certainly no small  accomplishment.

Mr. McIntosh: I agree, and we did it, quite frankly, before the
biotechnology market came into vogue late last year and early this year.
I'm really quite proud of that financing because we brought in four of
the biggest names in the world of insurance, led by John Hancock, to
invest in Nexell Therapeutics. I think their investment helped validate
our business to many other investors. They looked at this company very,
very closely and decided to invest based on the fundamentals and where
they see this company going.

TWST: What are the primary factors that affect your operating margins?

Mr. McIntosh: The largest cost for us is research and development. We
spend, in round numbers, close to $20 million a year, if you look at all
our research, development, clinical trials, regulatory affairs, and so
forth. But this is the engine that's going to drive new products and
drive the future of the company. So we think it is well spent. The
second largest cost or line item for the company is marketing and sales.
We originally had an agreement where Baxter was doing our end market
selling. That was changed last year, and so late last year and early
this year we're essentially building our own sales and marketing team
here, both in the US and Europe. And, of course, that represents a
fairly substantial cost item for us. But we think, again, that's a well-
placed expense because we now have control of our entire business from
the research and development laboratory to the end user customer.

TWST: What two or three reasons would you give potential long-term
investors for investing in Nexell Therapeutics?

Mr. McIntosh: I think the first reason is that cell therapies represent
a whole new medical paradigm. If you look at some of the important major
advances in the field of medicine, such as antibiotics or monoclonal
antibodies, these represent revolutionary developments in the use of
science and technology to advance medicine. This is what cell therapies
have the potential to do. The use of living cells as therapeutics is a
major medical advance. So we're operating on the leading edge of what we
view as an important change in the way this technology will be used.
Secondly, I would say that we are the most important player in this
field. As I mentioned, we have acquired a number of companies, a large
asset base, an extremely broad patent portfolio, and we have a full line
of products from cell selection devices, to storage devices, to
manipulation devices, to in vitro diagnostics. So we have a position in
each of the important segments of this market. Quite frankly, we have
the largest position of anyone in the market. Thirdly, we're not just a
typical biotechnology company that sort of is spending, spending,
spending on research and development with the hope that something will
happen in the future. We have revenues today. We expect to see our
revenues grow over the next few years, so we can look forward to a day
when this company can stand on its own from a P&L standpoint. Last, but
not least, I think we have an opportunity to do some important mergers
and acquisitions, to bring in and enlarge our portfolio of technologies,
giving us an even more dominant position in this emerging field.

TWST: So there is some competition in the field, but it's still a
relatively new  and you are ahead of the pack?

Mr. McIntosh: We're clearly the leader in the field. There is limited
competition. As I said, because of our patent portfolio, we are very
competitive with our most important product lines here in the US. And we
only have one, small, private company that's a direct competitor in
Europe. There are a number of other companies that are sort of
peripheral to our space, but we really have a dominant position in the
marketplace around the world.

TWST: Is there anything we may have missed or overlooked that you might
want to discuss before we conclude the interview?

Mr. McIntosh: I might point to some important milestones that our
investors can look forward to in 2000 and beyond. We should mention that
we made a proposal to our shareholders to rationalize our capital
structure with a reverse split. This is an important activity for us
and, of course, unusual because this isn't done very often. But we're
trying to reduce the total number of shares outstanding to try to reduce
some of the volatility in our share price ' and attract long-term
investors to the company. Again, we'll be looking for revenue growth
over the next few years. We're continuing to actively pursue win-win
partnerships with large pharmaceutical and other biotechnology
companies, so people should watch for announcements in those areas. Of
course, we continue to either acquire, or through our own research and
development, invent innovative technologies that add to our intellectual
property estate and product offerings.

TWST: Thank you.

L. WILLIAM MCINTOSH
 President & COO
 Nexell Therapeutics, Inc.
 9 Parker
 Irvine, CA 92618
 (949) 470-9011
 (949) 586-2420 ' FAX

Each Executive who is the featured subject of a TWST Interview is
offered the opportunity to include an Investors Brief or other highlight
material to be provided and sponsored by and for the company. This
interview with L. William McIntosh, President & COO, of Nexell
Therapeutics, Inc., is accompanied by an Investors Brief containing
corporate information.

Copyright 2000 The Wall Street Transcript Corporation
All Rights Reserved


The Wall Street Transcript (TWST) interviews are published verbatim, and TWST does not in any way endorse or guarantee the accuracy of any information or opinions expressed herein and all opinions are subject to change without notice. Nothing herein constitutes a solicitation to buy or sell any securities. TWST interviews with CEOs may include include "forward-looking statements", which are based on factors that involve risks and uncertainties. Actual results may differ materially from those expressed or implied. TWST shall have no liability whatsoever for any trading losses arising out of use of this information. Copyright 1999 Wall Street Transcript Corporation. All Rights Reserved.