Letter to Shareholders | 2015 Highlights

As we have in previous years, I’m writing to update you on the progress we have made this past year and the direction NeurOp is heading for the remainder of 2016 and into 2017.  We will continue to update our website with current information (www.neuropinc.com ) and events and also invite you to join our LinkedIn page. This year has proven to be a challenge, and our lead compound, NP10679, is on track to have an open IND by the summer’s end. The support for this program from the NIH remains strong, and we are confident of continued support from this agency to initiate Phase I trials. Feel free to reach out to me with any questions.

Barney Koszalka, PhD
President and CEO
NeurOp, Inc.

Letter to Shareholders | 2014 Highlights

Dear NeurOp Shareholder:

I want to update you on the substantial progress we made in the last year and the opportunities we see in front of us for 2015 and beyond. Our drug discovery efforts, focused on the NMDA receptor, have yielded two development candidates that will advance in 2015. I am pleased to share that we reached a significant milestone in our collaboration with Bristol-Myers Squibb (BMS) in the area of depression. BMS selected a development candidate, which triggered a milestone payment to NeurOp. In addition, the NIH continues to show strong support and enthusiasm for our subarachnoid hemorrhage (SAH) program, because they see intervention in this indication as a major unmet medical need.

In addition to moving these programs toward clinical testing, we made progress in identifying promising new applications for NMDA modulators outside those targeted for SAH and depression. NeurOp began a research collaboration with Janssen Pharmaceuticals to identify molecules that may yield further medical applications of NMDA receptor modulation.

Since BMS internalized the depression program in 2013, our access to information on the progression of the program is limited. However, in late June, BMS elevated compound NP11948 to development status. They are now evaluating the compound in the necessary experiments to file an Investigational New Drug (IND) application with the FDA. Typically, one would expect to this work to be completed in 2015, and we are hopeful that will be the case.

Ischemia & Addiction
NP10679, a compound meant to ameliorate or prevent brain damage and its clinical manifestations in those receiving treatment for SAH, met criteria set by us and the NIH to qualify it as a development candidate in 2013. Results from advanced pre-clinical studies performed in 2014 support the continued development of this molecule. Of significance, NP10679 showed a durable effect in animal studies. This observation, coupled with successful scale-up synthesis of drug substance and pre-IND cardiovascular studies, led us to a meeting with the FDA to review our planned submission to begin human testing.

The FDA review of the program reinforced our plan to move this program forward with all possible speed. The NIH granted additional funding of almost $400,000 to support our pre-IND studies, which brings the investment in this stage of the program to over $1.6 million for this year. We anticipate an IND filing in late 2015.

Last year, we mentioned an investigation of our compound’s ability to influence addiction – specifically, reducing the cravings associated with nicotine and opiate addiction. NeurOp conducted this research in collaboration with a leading researcher at the Medical University of South Carolina. The experimental findings in animals were positive in lessening cravings. These data suggest clinical application of NP10679 beyond SAH, and we are currently formulating an experimental strategy to enhance the compound’s value.

Further Leveraging the NMDA Platform
The NeurOp-Emory University collaborative research program helped us form another partnership with big pharma this past year. Janssen Pharmaceuticals and NeurOp entered into a short-term research agreement to find molecules that inhibit the NMDA receptor through GluN2C and/or GluN2D subunits. Although the program is in its early stages, we are encouraged and making progress to meet the yearly objectives for the program.

Looking Forward In 2015/16, we anticipate that the BMS depression program should reach a second milestone and trigger an additional payment to NeurOp. We will also continue our early drug discovery efforts by working to extend our agreement with Janssen and pursue an additional large pharma collaboration to identify NMDA modulators outside our current scope.

We expect that the ischemia program for NP10679 will have an approved IND and enter into clinical trials once we obtain funding. Despite having adequate funding to meet our 2015 objectives and complete the remaining studies required to file the IND, we will be unable to begin clinical trials without additional funds. NINDS, the division of the NIH that has supported the SAH program to date, has a limited budget for the initial Phase I trials we plan to start in 2016. While we will submit a grant application for this early clinical work, the total cost of the program is not likely to be covered. Securing additional funding remains a top priority for us.

The scientific news around modulating the NMDA receptor continues to be very positive, and NeurOp is entering a new and exciting phase in its evolution. We are energized by the potential of providing new medicines for unmet medical needs in many underserved areas of neuroscience, while at the same time growing value for our company.

I look forward to updating you throughout the year on our progress.

Very sincerely yours,

George Koszalka, Ph.D.
President and Chief Executive Officer, NeurOp, Inc.

NeurOp is committed to keeping you informed of our progress. We are working to launch a new website in the next few months that will allow us to share news, events and publications in a more timely, mobile-friendly format. You may sign up on our website to receive our latest news through an RSS feed. We also post news to our LinkedIn page, so you may wish to follow us there.



Letter to Shareholders | 2013 Highlights

Dear NeurOp Shareholder:

Within the last year, NeurOp has witnessed both financial challenge and significant scientific progress. Most importantly, our NMDA receptor drug discovery effort has matured from being exclusively engaged in early-stage preclinical work to one that maintains cutting-edge target validation and lead identification, while moving selected development candidates through late-stage studies that lead to clinical testing.

Our development candidates are aimed at areas of significant medical need, with initial clinical targets of treatment-resistant depression and subarachnoid hemorrhage. We have also made progress and remain engaged in efforts to identify additional applications for NMDA receptor modulators, such as controlling craving in addiction, improving cognitive function in Alzheimer’s disease, and motor performance in Parkinson’s disease.

The beginning of 2013 signaled the internalization of the depression program by Bristol-Myers Squibb. This marked the end of a productive three-year research phase of our agreement with BMS where NeurOp played a central role. In November 2013, BMS announced a major change in their research strategy that led to the discontinuation of many preclinical and clinical CNS programs. Our depression program was continued, however, and BMS remains committed to this late-stage preclinical program for depression and neuropathic pain. Lead optimization efforts have led to the identification and selection of a single lead molecule, as well as potential backups. BMS expects to elevate the lead to advanced-lead status this quarter and is expecting to declare it a clinical candidate later this year. We look forward to clinical candidate nomination and the initiation of studies to support Investigational New Drug (IND) filing with the FDA.

Ischemia & Addiction
Our ischemia research program identified a development candidate in 2013, and pre-IND studies have begun. NIH funding to complete large-scale synthesis and advanced toxicology studies was delayed until the end of the first quarter of 2014. This delay, which added seven additional months to our development timeline, was due to a multitude of issues, including the government shutdown in October, a lengthy review of the program’s data, and the bureaucracy of clearing funds through the NIH. However, the acceptance of NP10679 by the NIH as a development candidate was a major milestone for NeurOp, and we are on track to deliver an IND in 2015. The initial target for this therapy is prevention of ischemic damage and its consequences in persons receiving surgical treatment for subarachnoid hemorrhage.

The identification of multiple advanced compounds for ischemia has provided opportunities to study additional therapeutic applications. We have initiated investigation of our compound’s ability to influence addiction, specifically lessening the cravings associated with nicotine and opiate addiction, in collaboration with a leading researcher at Medical University of South Carolina. We are working toward a proposal to support advanced research in this area to better understand the value of applying our compounds to prevention of drug abuse and addiction.

Leveraging the NMDA Platform
Last year we told you about a NeurOp-Emory University collaborative research program to discover modulators of two subunits of the NMDA receptor beyond GluN2B (i.e. GluN2C and GluN2D). Rationale exists that supports the idea that subunit-selective modulators of these subunits may provide a novel class of antipsychotic drugs, as well as new treatments for Parkinson’s and Alzheimer’s diseases.

Our effort in this area was curtailed in the latter part of 2013 due to budget constraints. We are hopeful that recent interest by a major pharmaceutical organization to fund this research will lead to a research collaboration agreement in the near future and allow resumption of NeurOp’s GluN2C and GluN2D programs.

Looking Forward
In 2014, we anticipate that the depression program will reach the first milestone with BMS and trigger a payment to NeurOp. We also expect to complete critical pre-IND studies for NP10679, our compound for the ischemia indication, and advance this compound to the 28-D toxicology studies needed for filing an IND by end of 2015.

Meeting these objectives will require securing additional funding. Earlier this year, we raised $170,000 via convertible debt. The round was funded by members of the existing board and Mario Family Partners. Seeking additional funding is a top priority. Importantly, the current government grants do not cover the entire development costs of the NP10679 program, which is a key component of value generation for the company.

In 4Q 2013, we made a difficult decision and reduced our research staff to conserve our cash. Our value position is best improved by focusing the available cash on our development programs. We are also closely monitoring any developments at BMS that will indicate a change in priority in the depression program.

In this time of reduced federal and state budgets for R&D, we are looking at more traditional routes to fund our advancing development programs. We have raised over $11.5 million in funding from BMS, investors, government and industry sources, and almost 90 percent of this funding is non-dilutive. These funds provided the compounds and intellectual property that have built the value of NeurOp to what it is today. With our compounds moving into the clinic, the cost of these programs is projected to rise significantly, and we will be prepared to meet this challenge.

In Conclusion
The scientific news around modulating the NMDA receptor continues to be very positive. Recently, four new reports were published in scientific peer-reviewed journals that build on previous work documenting the beneficial effects of modulating the NMDA receptor for treating depression and suicidal ideation. Together, the studies represent robust clinical evidence showing a significant rapid and sustained response to treatment, usually within hours of starting the therapy. There is a critical unmet medical need for faster-acting and more effective therapies for treatment-resistant depression and suicidal ideation associated with both unipolar and bipolar depression. NeurOp’s approach of NMDA modulation may lead to treatments that meet this need.

Each year, we move our programs closer to the clinic while also seeking new potential areas of interest. I believe NeurOp’s NMDA-centered drug research is getting closer to achieving our goal of introducing novel approaches to treating both mood and neurodegenerative disorders that are such a burden to so many in our society. I look forward to updating you throughout the year on our progress.

Very sincerely yours,

George Koszalka, Ph.D.
President and Chief Executive Officer

NeurOp, Inc.
We are committed to keeping you informed of our progress. You may sign up on our website to receive our latest news through an RSS feed. We also post news to our LinkedIn page, so you may wish to follow us there.

Letter to Shareholders | 2012 Highlights

Dear NeurOp Shareholder:

Your continued support and enthusiasm for NeurOp’s NMDA receptor research helped us achieve many
notable milestones in 2012. We continue to advance a number of promising molecules that may one day
become new treatments for depression, subarachnoid hemorrhage, schizophrenia, PTSD, and Alzheimer’s and Parkinson’s diseases.

I am pleased to share that the progress made during the three-year research phase of our agreement with
Bristol-Myers Squibb has been dramatic. BMS will now drive this late-stage preclinical program for
depression and neuropathic pain from within their organization, and we look forward to the selection of a clinical candidate and the initiation of Investigational New Drug (IND) studies for these areas.

Ischemia & Traumatic Brain Injury
Our ischemia research program reached a major milestone this summer with the identification of two
compounds that are now undergoing detailed animal studies. The National Institutes of Health (NIH)
recognized our findings as a significant advancement, which triggered a second tranche of grant funding of close to a million dollars to study these molecules in more detail. First announced in July 2011, the NIH grant is a $3 million, four-year award that provides annual funding to NeurOp upon successfully meeting its project budget and certain milestones. Our focus remains on moving our lead molecules as rapidly as possible toward an IND filing for the treatment of subarachnoid hemorrhage and those patients at risk of a stroke.

The identification of molecules for advanced studies for ischemia has also opened up avenues of
investigation into traumatic brain injury and lessening the tragic effects for individuals exposed to blast injury.

Last year, we submitted a proposal to the U.S. Department of Defense seeking funding to develop
compounds that might provide neuroprotection for our soldiers when exposed to blast injury. Unfortunately, they didn’t elect to fund our initial proposal; however, agency feedback was encouraging enough that we are resubmitting the proposal in the second quarter of 2013. You may recall that our compounds only target areas of the brain affected by an ischemic event, so they may preserve brain function and retain more motor, speech and cognitive function in the event of an injury, as well as speed recovery.

In early 2011, NeurOp initiated research into GluN2C and GLuN2D subunit-selective modulators that may lead to a novel class of antipsychotic drugs. Later that year we submitted a funding proposal to the National Institute of Mental Health (NIMH) for support based on our early results. In April 2012, the NIMH funded a two-year, $700,000 research plan that allows us to further study these compounds. Our approach has also generated investment interest from major pharmaceutical companies as they look for promising science in earlier-stage research pipelines than they did in the past.

Schizophrenia affects one percent of the world’s population and can have tragic consequences for the
individual and those around them. The need is great for new, effective treatments, as there are a number of undesirable side effects related to current drugs. Increased tolerability will lead to better compliance and more stability in the lives of people affected by this debilitating mental illness.

NeurOp and Emory Scientists Target Cognitive and Mental Health Disorders
Just last month, we announced that NeurOp formed a three-year research collaboration with Emory
University to study NMDA receptor modulation and its possible impact on several serious cognitive and
mental health disorders – schizophrenia, post-traumatic stress disorder (PTSD), and Parkinson’s and
Alzheimer’s diseases. Working together, we believe we can move more quickly toward the goal of having
compounds in late-stage optimization with one or more compounds moving toward IND-enabling testing.

This collaboration combines the expertise of our scientists with Emory’s NMDA receptor researchers,
including its pharmacology team, led by Dr. Stephen Traynelis, and medicinal chemistry team of Dr. Dennis Liotta, who is also a member of NeurOp’s board of directors.

Corporate Development
The addition of Dr. Robert Zaczek into the newly created role of chief scientific officer helped us achieve
many of our milestones this year. Rob brought in-depth knowledge of neuroscience and an exemplary record of scientific achievement and drug development experience from BMS to our management team. While at BMS, he was executive director of psychiatry drug discovery and headed a multidisciplinary scientific group, which included the joint research team that currently collaborates with NeurOp on its depression and neuropathic pain programs. His teams also contributed to numerous discovery programs that led to the nomination of clinical candidates for affective disorders, schizophrenia and Alzheimer’s disease.

Looking Forward
In 2013, we anticipate that the depression program will continue to rapidly progress toward clinical candidate nomination. We also expect to nominate a compound for the ischemia indication and complete the advanced preclinical testing needed to understand the doses we need to achieve in man for efficacy. We believe the schizophrenia program will also make significant progress, and we will continue to evaluate some of our compounds in controlling addiction cravings.

To reach these goals, securing the necessary funding is a top priority for us. Governmental grants help and preserve the value of your investment; however, federal and state budgets for R&D are likely to be reduced.

Despite that, we have raised nearly $11 million in funding from BMS, investors, and government and industry sources, and 90 percent of this funding is from non-dilutive sources. Securing funding to maintain and grow the company is quite challenging in today’s economy and your management team is leaving no stone unturned in this endeavor. As we have in the past, we will continue to constantly monitor the bottom line and take advantage of creating strategic partnerships and outsourcing, where possible, to preserve our capital.

In conclusion
Hardly a day goes by that we don’t see something in the news about untreated or undertreated mental illness and cognitive disorders. Your continued support and investment are vital to advancing our important research in these areas. Serious, incapacitating brain conditions affect millions of people, yet doctors still have a relatively small medical arsenal with which to treat them. Each year, I believe NeurOp’s NMDAcentered drug research is getting closer to changing that. I look forward to updating you throughout the year on our progress.

Very sincerely yours,

George Koszalka, Ph.D.
President and Chief Executive Officer
NeurOp, Inc.

We are committed to keeping you informed of our progress. You may sign up on our website to receive our latest news through an RSS feed. We also post news to our LinkedIn page, so you may wish to follow us there.