TWST: May we begin with a brief historical sketch of Signature BioScience, and then an overview of what the company is doing at the present time?

Mr. McDade: Signature was formed in late 1998 by Founder and Chief Technology Officer, John Hefti, based on a new screening technology called multipole coupling spectroscopy (MCS). Since that time, the company has secured around $64 million in venture financing and has now grown into an integrated biotech company encompassing: engineering for developing this new type of spectroscopy, or detection technology; informatics to support the understanding of data generated by this new technology; and now building a direct discovery component with about 45 people, including both biologists and chemists. Currently, we are emerging as a drug discovery company emphasizing the use of very novel, state-of-the-art detection technologies, beginning with MCS.

TWST: Could you explain MCS in layman's terms?

Mr. McDade: Sure. This new spectroscopy uses microwave and radio frequencies to scan proteins and cells. The response signal indicates whether there's an interaction, the change in the structure of the protein or cell and the resulting change in function. That's simply how it works. It's a detection technology that can interpret structural change and, therefore, tell you functionally what's happening. Its use will then be in drug screening: to look at the effect on a given protein or a given cell caused by the addition of another molecule, whether it's a small molecule or a macromolecule. MCS operates in real time with no labels or tags necessary, so we see this as a real breakthrough, or next-generation screening technology.

TWST: It sounds to me, sitting here, as if it might have broad applicability ' is that correct?

Mr. McDade: Correct. It will certainly have broad applicability across the spectrum of drug discovery. We see it as essential in the early stage, when you're looking at targets and perhaps don't have a good handle on target identification. We also see it at the end-stage of drug discovery in the ADME/tox area, where we can set up cellular assays using MCS; then in between, in secondary screening and lead optimization, we also see a very powerful role for this new technology.

TWST: Now, you said 'breakthrough.' Are there any other companies working along similar lines that you know of?

Mr. McDade: Not with this form of spectroscopy. We have a very strong intellectual property position with over 45 patents filed and several now issued.

TWST: Then could you give us some idea of what you hope to accomplish in the next two or three years?

Mr. McDade: I think it's useful to recap just the past few months first. We closed $43 million in series D financing in June. In July we bought the West Coast operations of Millennium Pharmaceuticals, called Cambridge Discovery Chemistry (CDC), which brought us 26 very fine chemists in nearby Richmond, California. Last month we announced a major global alliance with MDS Sciex, the instrument maker, to co-develop and commercialize instrumentation using MCS for the research market. With that as very strong underpinnings, the company expects over the next three years to meet the obligations of our new instrument alliance with MDS Sciex, which should lead to the launch of instrumentation by the 2004 time frame. Simultaneously, we will continue to build an integrated, preclinical drug-discovery arm such that over the next several years Signature should be able to embark on partnerships whereby we'd license lead compounds that we uncover here through the use of MCS.

TWST: What are the obstacles or difficulties that might lie in your way?

Mr. McDade: Well, there are definitely a lot of other biotech companies trying to move forward into drug discovery and do much of what we're trying to do. However, we think the advantage is that we have this unique, real-time biological read-out system, which operates on a drug discovery platform under the trademark of WaveScreen. There's no question there's competition; there's no question that our technology is still early in terms of proof of concept. We're aware of that, and we are building a number of biotech-type relationships during the next year whereby we can continue to demonstrate the utility in a wide variety of cell systems or molecular targets from an assay perspective.

TWST: Following from what you say, it might be useful to know something about the strength of the intellectual leadership of your company. Who are some of the main people?

Mr. McDade: The team is quite solid. Our Founder, John Hefti, is now our Chief Technology Officer and spearheads the continuing fine-tuning of MCS, as well as looking at additional complementary detection technology. David Spellmeyer, our head of drug discovery and Chief Scientific Officer, comes out of DuPont Pharma. He's a very accomplished individual and the guy charged with mapping out how we will fully integrate a drug discovery capability. On the informatics side, critical to understanding the new information coming off of our new invention, is David Balaban. He heads up all of our informatics and has quite strong experience, having built the bioinformatics group at Affymetrix. My background is the successful building of Corixa, an immunotherapy company in Seattle, and before that, quite a number of years with big pharmaceutical companies, both Sandoz and Bohringer-Mannheim, from an operating perspective. On the product engineering side, success in our collaboration with MDS Sciex will really rely on two functions of the company: the first is engineering, which is headed by Joe Heanue, a very accomplished systems engineer; and overall project management and biological assay development led by Simon Pitchford, our head of project management. So this team of individuals plus the rest of the gang here are very experienced in both the biotech and instrumentation areas, and we're pretty excited about the future.

TWST: How many people work for the company at the present time?

Mr. McDade: We now are 105 in terms of full-time employees. That's split between our two facilities ' one in Hayward, California, our corporate headquarters and engineering and informatics headquarters; and then about 20 miles north of us in Richmond is the newly acquired group, the former CDC, which is the basis for our chemistry operations, and includes about 30 people.

TWST: Are there any areas in the company that you feel you ought to strengthen in the near future?

Mr. McDade: We need to continue to build in biology and assay development. We recognize that, and are continuing to build those important functions. To be able to say we're a drug discovery company, we have to be strong in those areas.

TWST: Is it possible for you to reach forward and give us some indication of the outcomes in relation to human health of the work that you'll be doing?

Mr. McDade: Well, the goal is, using MCS embedded in our new drug discovery platform called WaveScreen, to come up with lead compounds faster than it has ever been done before. We think we have the edge. So the output, then, to answer your question, is generating very novel, effective and highly-qualified lead compounds that we can then license to pharmaceutical and biotech companies for them to take into the clinic. Our hope is that within the next three to five years we will have very clear, measured output in terms of new products entering the clinic stemming from our discovery effort.

TWST: I see. Would you care to sketch out in any terms that you think appropriate the basic picture for the next three to five years, the steps that the company will be taking?

Mr. McDade: You've hit on one of them. First, we need to continue to build the infrastructure in the biology assay development areas. Number two is to build up our target portfolio, namely protein, molecular targets for drug screening, and we hope to do that through collaborations with other biotechs. A third important step is to partner our technology through service-type agreements whereby we'll partner with pharmaceutical and biopharmaceutical companies to give this new biological profile of information from our new technology. Basically, if we hit on those three elements over the next several years, I believe we'll be quite successful

TWST: Now, the company is privately held at the present time. What are your thoughts on going public? Is there anything you'd like to tell us about that?

Mr. McDade: Well, we have a pretty sizable war chest with more than $50 million in the bank at present, thanks to the recent financing. And we do not see an enormous burn year-on-year, as a result of, first, the instrumentation deal that we've now embarked on, and second, anticipated partnerships with pharmaceutical or biotech companies. But we'll be opportunistic with respect to either additional private financing or public financing, depending on the state of the markets.

TWST: Now, though earlier in the conversation I asked you about barriers or obstacles, I'd like to go further. As I understand it, by its nature, in your area there is a certain amount of risk of failure. Could you talk about risk and the odds, etc., however you wish to put it?

Mr. McDade: Sure. The number-one risk inherent in our business is the outright failure of MCS, but I think technically we are now beyond that because we've proven, both in cellular and protein analysis, that the system works. The question now is getting speed, or throughput, analysis up to commercially viable standards. We think that technical risk is mitigated because our detection platform actually relies on many advances already made in the cell phone and computer chip industries, and we'll be able to continue to execute engineering improvements that tap off the high-tech industries. Risk is also accessing people. We definitely need to grow our organization, as I mentioned before, and there's clearly a challenge in continuing to attract good people ' although so far, knock on wood, we've had good success. As to other risks that we're well aware of, there's the fact that some technologies could come along that supersede ours, so what we're doing to mitigate that is in fact being very aggressive now about in-licensing potentially complementary assay capabilities that will continue to grow our drug discovery arm.

TWST: And right now, day-by-day, what is your own personal focus?

Mr. McDade: Continuing to hire the right people into the organization; looking at pharmaceutical partnering opportunities; managing, from the 4,000-foot level, the optimal use of our resources among the various programs we're now developing. That's kind of how my day is spent.

TWST: And you were talking about your attractiveness to investors. Could you perhaps go on with that and give us the three or four best reasons why investors should be interested in Signature on a long-term basis?

Mr. McDade: Well, venture investors, which are the predominance of our investors, typically will tell you, the first thing they invest in is people ' and I like to think we have a great team. Second, we have a completely novel technology. Nobody else has MCS ' because we invented it, and we've done a very good job in building a patent estate. Third, I think we're very well financed, and therefore, able to embark on a discovery approach that integrates our technology in MCS and yet, at the same time, mitigates some of the early financing. Having now partnered this technology with a major instrument maker is helping to offset some of our burn in the next couple of years through the revenues achieved through that collaboration. I think all of those add up to an attractive and unique opportunity, from an investment perspective.

TWST: I'd like to ask you one more thing about people. You said the venture capitalist is always looking at people. Although you did talk about some of the main people in the company, what would you say about the culture in general? What do you do to, let us say, stimulate, provoke and excite the employees at large?

Mr. McDade: Well, I have a few important tenets that I keep reminding people of since coming onboard about nine months ago. I believe a company has to be fun, otherwise it's not worth working for. We try to maintain a pretty fun atmosphere, offering challenges and offering new technologies, etc., including many social events where people can get to know each other and do things other than work. We offer a well-financed and decisive company environment, so people can trust that management is paid to make decisions around here, and we will make decisions that make sense. Some companies have more trouble making decisions than others, and I like to think we're a decisive group. Then there's a healthy respect for the team ' and for partners, at the same time ' because we're building this business to be successful in meeting our partners' needs, and that takes teamwork across the board, both outside the company with our partners and inside the company with well-defined objectives. So I think, culturally, if you ask people what it's like to work here, it's fun; it's very fast-paced; we've made a lot of progress just in the past nine months; and we have high aspirations for success.

TWST: Is there anything further that you'd like to bring in ' or is there a closing statement that you'd like to make?

Mr. McDade: I guess if there's a closing statement, it's that we at Signature are quite excited about coming up with a brand new business model to drive drug discovery through unique detection technologies, and we're enthusiastic about what we're doing.

TWST: Thank you. (MC)

MARK MCDADE CEO Signature BioScience 21124 Cabot Boulevard Hayward, CA 94545 (510) 576-2334

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.

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