TWST: What is Millenium Biologix?

Mr. Pugh: Millenium Biologix is a unique orthobiologics company with a focus on delivering solutions in the area of regenerative medicine for skeletal tissues, principally cartilage, bone, and tendon. We're unique because unlike most companies in our sector that talk about orthobiologics as the combination of just two technologies ' that is, combined biomaterial scaffolds and growth factor as implants ' we achieve the key differentiating goal of our company, which is to provide not only direct orthobiologic implants, but also a patient's own cells and tissues grown outside the body in the form of autologous cell therapy and tissue engineering solutions. In order to achieve this, we have developed a third proprietary technology platform in bioengineering to complement our synthetic bone scaffolds and growth factors, and this combination allows us to provide an array of therapies that makes us unique. We can enable cell therapy directly in the hospital with a very exciting new product line that we are going to be launching in 2005. So it's the combination of three technology platforms ' advanced biomaterials for bone, growth factors plus the engineering expertise to carry out ex vivo cell multiplication and tissue growth ' that provides our strength in depth.

TWST: Give us the background of what those areas of science look like as far as markets today and how they're currently being addressed. What's the differential that Millenium Biologix can bring to that market?

Mr. Pugh: On the biomaterial scaffold side, which is the basic building block, this is the piece that provides the physical replacement necessary to either fix a trauma site or to replace diseased bone and other associated skeletal tissues. That market is one that is still dominated by the use of autograft. Alternatives in the form of bone graft substitutes have been marginal in performance to date, and what we bring as a breakthrough in that area is our Skelite_ technology. This is a proprietary synthetic bone graft scaffold, in which we have uncovered the role of trace elements that are found in normal bone that were thought to be benign and have no effect. We have discovered that, in fact, if you incorporate these elements in synthetic bone graft scaffolds, you actually get a unique biological effect whereby the implant is gradually and completely replaced over time. In the first phase after implantation, Skelite promotes good healing; this is followed by natural replacement, and this combination provides the ideal outcomes the surgeon and the patient want. So that's the first thing that we bring. That market internationally is around $200 million, but the potential for that sector is probably $1.5 billion. Patients often suffer chronic pain at the harvest site when they have the costly dual surgery which is necessary for autograft harvesting. Because of this, surgeons are looking for a replacement for autograft, the so-called gold standard. So market potential is great. There is a lot of growth potential in synthetic bone graft substitutes. But to be well accepted, they need to have this unique biological characteristic of being remodeled over time that matches the body's own normal bone turnover, and that's what we've captured in our Skelite technology. In the area of growth factors, that market is just opening up. There are some very exciting numbers out of the independent analysts who are forecasting market potentials that range from $2 billion to $3 billion. I think that's being validated by the first two products in the market; the first one is InFUSE, from Medtronic Sofamor Danek, and the second product is OP-1 from Stryker. Already, in the case of InFUSE which has only been on the market for around 18 months in the US and is not significantly used in any other world markets, analysts' reports in the second quarter of 2004 were showing sales of over $1 million a day of this product. So the run rates we estimate at the moment for those two products combined is probably somewhere in the region of $600 million to $700 million a year, less than two years after their launch. These growth factors open up the possibility to treat more difficult cases and, again, seek to provide the ideal goal of long term, best outcomes for patients, so they will not come back with recurring problems. That market opportunity is just beginning to be realized, and it's opening up the biological future for orthopedics. It's the one that has created this whole new term, orthobiologics, which is deemed by many to be the future for this sector. So that's the first two areas in which we compete. The third area, which is that of cell therapy and regenerative medicine, is truly just emerging. One of the things that we believe has made it a slow-to-get-started business is that, first of all, it is technologically quite challenging. Also, the industry has pursued a very standard model in that it has put itself in the position of being the source of the biological material. In other words, biopsies of cartilage, for example, will be taken from a healthy site and sent to a remote industry facility. In North America, the primary facility, and maybe the only one on a commercial scale, is run by Genzyme Biosciences in Boston. There are, similarly, a few companies in Europe; Verigen and co.don, for example, trying to do similar things. But the logistics of it ' the costs and risks of shipping these biological materials, often across national borders and certainly over long distances ' is hugely challenging. Because of that, this market, where there are a million surgical interventions a year for cartilage repair alone, is commercially still quite small, maybe only $100 million at the moment. But clearly, if better solutions can be found, especially coinciding with developments in early intervention and minimally invasive surgery brought along by arthroscopy and so forth, the market is several billion dollars, possibly even eclipsing ultimately the growth factor and the bone graft scaffolds market. That's really where we feel we have an exciting opportunity to actually own a market, rather than with the first two products where we will compete very effectively.

TWST: How strong financially is Millenium Biologix? Is it a question of an accelerating burn rate?

Mr. Pugh: Yes, but not an exponentially accelerating burn rate. We were very fortunate from the start. When we founded the company, we identified an early niche opportunity for our first technology, which was our synthetic bone graft technology in the research market, and that allowed us to both prove our capabilities to develop products and get them on the market and get them accepted, and to partner successfully, in this case with Becton Dickinson, to sell that product for us. So we've been in the position of generating revenues from a complementary source in that this was a technology we were developing for implant purposes, which has helped to fund the development and the regulatory approval and the partnering of our first clinical product. So we have a history of generating revenues. So our financial position right now, with the successful closing of a private round that was concurrent with us going public recently, has given us adequate resources to deliver our business objectives and forecast profitability in the medium term.

TWST: Introduce us to your top-level management team, and provide us with your assessment as you look at bench strengths and skill sets, opportunities and timelines. Will you need to add or augment that team?

Mr. Pugh: Our top-line team at the moment consists of Ian Malone, who is our Chief Financial Officer. He was a very experienced international banker before moving on and successfully helping finance companies through IPOs and on to success. I still, to a large degree, take care of the business and the marketing side in terms of the top-level strategy. We have a product management group here in North America and also in Europe because we have offices in Zrich as well as in North America. Our science leader is the person I started the company with, Dr. Tim Smith. His basic background is in biomaterials and bioengineering. Also, further in the finance area, we have a very experienced senior accountant in the capacity of Controller. In Zrich, we were very fortunate, arising from an early collaboration with Sulzer Orthopedics, in being able to hire two Chief Scientists, Dr. Rupert Hagg and

Dr. Roberto Tommasini, from Sulzer's cartilage program. They know the cartilage tissue engineering field very well, and they form the nucleus of our group that has been highly productive in Switzerland, which is not only an R&D center, but also a business base for our expanding commercial operations over there. So that's a quick snapshot. You asked me the question about near-term hires. We've succeeded in hiring a General Manager for Europe who begins on February 2. This very experienced senior Belgian national speaks five languages and has done the kind of thing that we are asking him to do several times successfully before in Europe. Also, here in North America, we are currently searching for a VP R&D, and a VP Global Marketing, and are about to close on a Director of Business Development.

TWST: What is the agenda at this point? What are the priorities for the next 12 to 24 months? What would make that time frame a success from your perspective?

Mr. Pugh: We have the Skelite line of synthetic bone grafts now being sold in North America. It is our goal by the end of 2005 to have successfully launched our first growth factor product and the Skelite products in Europe, to have successfully launched our first in the family of Autologous Clinical Tissue Engineering Systems (ACTES_) in both Europe and North America, and by the middle of 2006, by which time we hope to have concluded successful clinical trials for our growth factor in the US, to have launched our first growth factor products in the United States. So there are 18 very busy months ahead, by which time we will have three clinical product lines on the market, each of which represents a family of products with multiple line extension opportunities into the future.

TWST: At this point, what role can mergers and acquisitions play as you look at your opportunities to grow and to build? How suitable is Millenium Biologix as a target for acquisition?

Mr. Pugh: We look at M&A in two ways. One is, of course, we recognize that as we become more and more successful, we become an acquisition target. While we don't plan for that, if it comes along and is with the right partner and it looks as if it is going to be a win-win scenario, of course we would look at it. The other way that we look at M&A is doing the acquiring ourselves. Now that we are a public company and have access to capital markets that give us the potential to look at M&A opportunities, I expect that we will become active in this regard. We are increasingly being approached with complementary technologies and business opportunities, so therefore M&A for us is a two-way street.

TWST: To date, what has been the investor or funding history, and what does the shareholder universe look like today? Is that base undergoing any changes or transitions?

Mr. Pugh: We are very focused on product development and timely delivery of products to the market. Being in the device sector, time and cost to market are significantly more favorable than the biopharma sector. Additionally, we've generated early revenues, actually taking the company all the way to our first FDA clinical product approval with no external investors other than the money that my partner and I put in to start the company, and a lot of sweat equity. Also, being here in Canada, significant help has come from Canadian government programs, groups like the National Research Council and, of course, Canada's extremely favorable investment tax credit for R&D companies. However, in 2002, as we obtained US FDA approval for our first clinical product, Skelite, we welcomed investment from Genesys Capital Partners, a VC group in Toronto, Canada. Until we succeeded in closing the private offering concurrent with the closing of the RTO a few weeks ago, they were our only external investors. We funded early growth and development internally to a very large degree. Now, as a public company we've welcomed some high-quality institutional investors, not only from Canada, but with international participation. What we're looking to do in the early part of 2005 is becoming better known among the international investment community. Our tradition has been, in whatever we've done, to pursue quality. This is as important to maintain on the investor front as it is in all of our products and other activities. I think also what's very attractive about our story is that it is easy to understand by the retail side. Most people, either themselves or their close family and friends, have orthopedic problems, and everyone understands the fundamental demographic driving this business; an aging population and the rapid emergence of sports medicine. So I think the company will be appealing both to quality institutional investors who will be absolutely vital as we expand internationally, principally, with a focus on the US and Europe, and also, a story that will attract the interest and commitment probably of the retail sector. So I think it's an exciting time ahead for us.

TWST: What compels investors to review Millenium Biologix and include it in their current portfolios and in their longer-term investment strategies?

Mr. Pugh: Bearing in mind our focus is orthopedics, I was really pleased to read a recent interview by the President of the world's number one orthopedics company, Zimmer, and in it, he refers to them needing an acquisition in the cartilage space. What we're going to do in the area of skeletal tissue engineering regenerative medicine is essentially make redundant the use of many metal implants for knees, hips and shoulders by early intervention to provide both cell and tissue solutions in the hospital through an automated system that can be put into any center of excellence hospital to do that kind of therapy. I think that's the most important thing, and it is not science fiction. This is a product line that we've already previewed at important international meetings. We have a bone program, and tendon, ligament and disk programs behind this as well. So this is a real platform capability to match the growth of early intervention and biological solutions. So I think the really compelling story for the investor is if they look around even to the highest pinnacles of achievement of the orthopedic sector right now in terms of the industry, and look at the needs that those corporations are defining, that's exactly what we're bringing to the table through the next 12 to 24 months.

TWST: Are there any thoughts or issues you'd care to include that we haven't touched on?

Mr. Pugh: Our short-term goal is to have these three clinical product lines representing our three technology platforms on the market within 12 to 18 months from now so that people can fully comprehend the power of what we bring into play through partnerships. That's one thing we haven't touched on. We have generated some excellent commercial and academic partnerships on our way, and they're going to be key to our future, but also, it's a future where increasingly we're going to be branded in the marketplace. We are increasingly doing co-marketing. That's why we've expanded our sales and marketing efforts, and we're looking to grow that internationally. High-quality partnerships will remain central to our strategy. But we intend to establish our own brand in the marketplace that will increasingly make Millenium Biologix a name that instantly brings differentiation and a smile to the faces of orthopedic surgeons, their patients and our shareholders.

TWST: Thank you. (DWA)

SYDNEY M. PUGH Chairman & CEO Millenium Biologix Corporation 785 Midpark Drive Kingston, Ontario K7M 7G3 Canada (613) 389-6565 (613) 389-6625 - FAX www.millenium-biologix.com e-mail: investor@millenium-biologix.com

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