Next Generation Vaccines for Generations in Need Corporate Information

AVANT IMMUNOTHERAPEUTICS, INC. 119 FOURTH AVENUE NEEDHAM, MA 02494-2725 781.433.0771 WWW.AVANTIMMUNE.COM AVANT AVANT IMMUNOTHERAPEUTICS, INC. ANNUAL REPORT 2003

NEXT GENERATION VACCINES FOR GENERATIONS IN NEED CORPORATE INFORMATION

DIRECTORS PETER WARD, M.D. J. BARRIE WARD, PH.D., CHAIRMAN University of Michigan Medical School Chief Executive Officer HANS WIGZELL, M.D., D. SC. 2003 MAJOR MILESTONES KuDOS Pharmaceuticals, Ltd Karolinska Institute UNA S. RYAN, PH.D. President and Chief Executive Officer CORPORATE OFFICES AVANT Immunotherapeutics, Inc. AVANT Immunotherapeutics, Inc. // REDUCED DEATHS AND HEART ATTACKS SHOWN 119 Fourth Avenue THOMAS R. OSTERMUELLER Needham, MA 02494-2725 IN MEN RECEIVING TP10 BEFORE CARDIAC BY- HARRY H. PENNER, JR. Tel: (781) 433-0771 President and Chief Executive Officer Fax: (781) 433-0262 PASS SURGERY Nascent BioScience, LLC E-mail: [email protected] Internet: www.avantimmune.com FREDERICK W. KYLE formerly President INDEPENDENT AUDITORS // FALL RIVER FACILITY PLANNED TO IMPLEMENT Worldwide Pharmaceutical Operations PricewaterhouseCoopers LLP SmithKline Beecham Corp. VITRILIFE® MANUFACTURING PROCESS One Post Office Square PETER A. SEARS Boston, MA 02109 formerly President // GLAXOSMITHKLINE BEGINS PHASE III TRIAL OF S.R. One, Ltd., SmithKline Beecham Corp. LEGAL COUNSEL Stuart M. Cable KAREN SHOOS LIPTON, J.D. ® Goodwin Procter LLP ROTARIX ROTAVIRUS VACCINE Chief Executive Officer Exchange Place American Association of Blood Banks Boston, MA 02109 // CETI VACCINE INCREASES HDL CHOLESTEROL IN LARRY ELLBERGER Principal and Founder REGISTRAR AND TRANSFER AGENT PHASE II TRIAL Healthcare Ventures Associates, Inc. EquiServe Trust Company, N.A. P.O. Box 43023 OFFICERS Providence, RI 02940-3023 // ® UNA S. RYAN, PH.D. (800) 426-5523 USDA GRANTS LICENSURE FOR MEGAN EGG FOOD President and Chief Executive Officer www.equiserve.com

SAFETY VACCINE AVERY W. CATLIN ANNUAL SHAREHOLDERS’ MEETING Senior Vice President and Chief Financial Officer The Annual Meeting of Shareholders will be HENRY C. MARSH, JR., PH.D. held at 2:00 p.m. on May 13, 2004 at the offices Vice President, Research of the company in Needham, MA.

SCIENTIFIC ADVISORS SHAREHOLDER INQUIRIES MARK DAVIS, PH.D. Communications concerning transfer require- Stanford University School of Medicine ments, lost certificates and changes of address should be directed to the Registrar and PETER HENSON, PH.D. Transfer Agent (listed above). National Jewish Center for Immunology and Respiratory Medicine INVESTOR INQUIRIES AVANT Immunotherapeutics, Inc. discovers, develops and sells innovative vaccines and ROBERT LANGER, PH.D. Analysts, investment professionals, individual immunotherapeutics that harness the human immune system to prevent and treat disease. Massachusetts Institute of Technology investors and members of the press should The company has developed a broad, well-staged pipeline of vaccines and immunothera- PETER LIBBY, M.D. direct their questions to Investor Relations at peutics for large, high-value, under-served markets. Six of AVANT’s products are in clinical AVANT’s Corporate Offices. development.These include an oral human rotavirus vaccine, a treatment to reduce Brigham & Women’s Hospital complement-mediated inflammation and tissue damage associated with cardiac by-pass sur- TAK MAK, PH.D. gery, and a novel vaccine for cholesterol management. AVANT has also assembled a Ontario Cancer Institute Design: Design, Communications Schenkel/Stegman Photography: Executive www.schenkelstegman.com Jack Foley, Boston technology platform that enables the creation of rapid-protecting, single-dose, oral vaccines that remain stable without refrigeration.The company is developing applications of this vaccine technology in four areas: biodefense, travelers’ vaccines, global health needs, and human food safety.AVANT’s goal is to demonstrate proof-of-concept for its products before leveraging further development through both traditional pharmaceutical partnerships and collaborations with governmental and other organizations. 140552.EDIT 4/29/04 9:31 AM Page 1

TO OUR SHAREHOLDERS:

DURING 2003, AVANT ENTERED A NEW STAGE IN ITS EVOLUTION. We committed to establish a process development and pilot manufacturing facility in Fall River, Massachusetts with funding assistance from MassDevelopment. Build-out is now underway. Establishing this facility, which will implement the VitriLife® technology acquired last year, achieves several things for AVANT.It allows us to manufacture our “next generation” vaccines for clinical trials, specifically the biodefense vaccines under development with the U.S. Department of Defense, DynPort Vaccine Company and the National Institutes of Health. Having this manufacturing capability will also enable us to compete for further government vaccine contracts. Finally, it provides AVANT with partnering opportunities to apply our VitriLife® technology to other companies’ products.We consider establishing this pilot manufacturing plant a major step forward in our efforts to build a commercial company.

This year we also saw the first of our products enter Phase III studies as GlaxoSmithKline (GSK) began trials of our two-dose oral rotavirus vaccine, Rotarix®.This study, perhaps one of the largest clinical trials ever conducted, will enroll up to 60,000 infants in Latin America and South East Asia and end in late 2004. GSK plans to commercialize Rotarix® in Europe and other international markets prior to seeking regulatory approval in the United States.

The USDA licensure of Megan® Egg in November gave us the second approved product in our portfolio of food safety vaccines. Our partner Lohmann Animal Health International is commercializing this product, which reduces Salmonella contamination in chickens and their eggs.

AVANT further achieved development milestones for several other products. CETi-1, our novel vaccine for cholesterol management, demonstrated proof- of-concept in humans when Phase II data showed that a vaccine approach could indeed raise HDL. Similarly, data from a Phase II trial showed that treatment with TP10, our novel inhibitor of complement-mediated inflammation, could reduce post-surgical deaths and heart attacks in men undergoing open heart surgery.We recently initiated a second, smaller Phase IIb trial to better understand TP10’s effects in women prior to advancing to a registration- directed study. UNA S. RYAN We also made significant progress in preclinical efforts to apply our novel vaccine platform to the development of oral vaccines for biodefense.We have PRESIDENT & CEO already received $6.9 million of our $8 million contract supporting preclinical development of an oral vaccine combining protection from anthrax and plague.The establishment of our Fall River pilot plant will enable AVANT to pursue additional support for the development of this product as well as potentially other novel vaccines for biodefense and public health needs.

Throughout 2004, we anticipate building on the past year’s gains and further realizing the value of AVANT’s technology and products. I look forward to communicating our progress to you as events unfold.

Sincerely,

PAGE 1 / 140552.EDIT 4/29/04 9:31 AM Page 2

DEVELOPMENT PIPELINE

Product Preclinical Phase I Phase II Phase III Marketed

CARDIAC SURGERY

TP10

CHOLESTEROL MANAGEMENT

CETi

BACTERIAL VACCINES

CholeraGardeTM (Cholera)

Ty800 (Typhoid Fever)

ETEC (E. coli)

Shigella

Campylobacter

BIODEFENSE VACCINES

Injectable Anthrax

Oral Anthrax/Plague

Oral Anthrax

VIRAL VACCINES

Rotarix® (Rotavirus)

Therapore® (HIV)

FOOD SAFETY AND ANIMAL HEALTH

AVANT/Pfizer Vaccines

Megan®Vac

Megan®Egg

PAGE 2 / AVANT IMMUNOTHERAPEUTICS ANNUAL REPORT 2003 140552.EDIT 4/29/04 9:31 AM Page 3

Estimated Annual Market Description and Partner

$2b Complement inhibitor to limit damage following cardiac surgery,Worldwide commercial rights retained

$12b Inhibition of cholesterol ester transfer protein (CETP),Worldwide commercial rights retained

$25m Live, attenuated, oral, single dose vaccine,Worldwide commercial rights retained, International Vaccines Institute

$240m Live, attenuated, oral, single dose vaccine,Worldwide commercial rights retained

$400m Live, attenuated, oral, single dose vaccine,Worldwide commercial rights retained

$200m Live, attenuated, oral, single dose vaccine,Worldwide commercial rights retained

$120m Live, attenuated, oral, single dose vaccine,Worldwide commercial rights retained

TBD Vaccines against anthrax infection, DVC/DoD

TBD Vaccines against anthrax and plague infection, DVC/DoD

TBD Vaccines against anthrax infection, NIH

$1b Two dose, oral vaccine, GlaxoSmithKline plc

$1b Delivery system that presents HIV antigens, US Army and WRAIR

$100m Vaccination of food sources against bacterial pathogens, Pfizer Inc

$400k Vaccination of food sources against bacterial pathogens, Lohmann Animal Health

TBD Vaccination of food sources against bacterial pathogens, Lohmann Animal Health

PAGE 3 / 140552.EDIT 4/29/04 9:31 AM Page 4

CARDIOVASCULAR PRODUCTS

In cardiopulmonary by-pass surgery, tissue-damaging inflammation can occur when the patient’s shut-off blood flow is suddenly restored and from contact of their blood with the heart-lung machine. This inflammation can increase post-operative heart attacks and complications that affect patient survival.

Clinical data suggests that AVANT’s TP10 can limit this inflammation in men undergoing cardiopulmonary by-pass surgery, leading to significantly fewer post-surgical deaths and heart attacks compared to placebo-treated patients. AVANT recently began a Phase IIb study in women to pro- vide more safety data and further define TP10’s effect before advancing to a Phase III study aimed at product registration.

AVANT’S UNDERSTANDING OF THE IMMUNE SYSTEM HAS TP 10 reduces death or heart attack during RESULTED IN TWO PRODUCTS THAT ADDRESS IMPORTANT cardiac surgery 25 CARDIOVASCULAR DISEASES: A TREATMENT TO REDUCE 20 43% Reduction 15 LIFE-THREATENING COMPLICATIONS OF CARDIOPULMONARY 10 5 BY-PASS SURGERY AND A NOVEL VACCINE TO RAISE

Rate of death or heart attack (%) 0 Placebo TP10 P=0.025 HDL CHOLESTEROL.

Medicine now recognizes that high levels of “good” HDL cholesterol are protective against heart disease. Most current drugs, however, act to reduce LDL cholesterol.

AVANT’s experimental vaccine for cholesterol management, called CETi-1, raises HDL cholesterol levels by eliciting antibodies that inhibit the transfer of cholesterol from HDL to LDL. Phase II clinical results validated this approach during 2003 by confirming that blocking this cholesterol transfer could raise HDL levels in humans. If successfully developed, a vaccine approach to raising HDL cholesterol could offer significant benefits over drug therapies by increasing patient compliance with treatment, leading to better clinical outcomes and potentially lower treatment costs.

PAGE 4 / AVANT IMMUNOTHERAPEUTICS ANNUAL REPORT 2003 140552.EDIT 4/29/04 9:32 AM Page 5

REDUCED DEATHS AND HEART ATTACKS SHOWN IN MEN RECEIVING TP10 BEFORE HEART BY-PASS SURGERY

NEXT GENERATION CARDIOVASCULAR THERAPEUTICS

onary by-pass “ age tissues, plement system during cardiopulm matory reaction that can dam “Activation of the com en causes an acute, inflam plement contributing to post-operativepact patientheart attacks survival. and Recent increased data insurgical m

complications that can im matory response, leading to ed that treatment with TP10,ful ainflam potent inhibitor of com show it this harm es following cardiac surgery.” activation, can lim improved post-surgical outcomHarold L. Lazar, M.D., Boston University School of Medicine

PAGE 5 / 140552.EDIT 4/29/04 9:32 AM Page 6

VIRAL VACCINES

Rotavirus infection causes potentially life-threatening diarrhea and dehydration in infants.This virus kills a child every minute in the developing world and causes over 2 million hospitalizations globally. AVANT has created a rotavirus vaccine called Rotarix® to protect infants from this disease with two oral doses.

AVANT’s partner, GlaxoSmithKline (GSK) began a Phase III trial of Rotarix® in 60,000 infants in Latin America and South East Asia during 2003. Based on positive results from this trial for which the major- ity of children have already been vaccinated – as well as data from over 6,500 previously vaccinated children – GSK plans to commercialize Rotarix® in the European Union and other international markets before seeking marketing approval in the United States.

AVANT’S IMMUNOLOGY EXPERTISE HAS ALSO LED TO SAFETY

TREATMENT EFFECTS THE DEVELOPMENT OF VACCINES TO PREVENT OR

CONFIRMATION OF TREAT SERIOUS VIRAL INFECTIONS. DURING 2003, THE CLINICAL BENEFIT ROTARIX® VACCINE AGAINST ROTAVIRUS INFECTION Stages of Clinical Trials BECAME THE FIRST AVANT PRODUCT TO ENTER PHASE III CLINICAL TRIALS.

AVANT technology may also result in vaccines that treat chronic viral infections by stimulating a patient’s own immune system to fight their disease. Therapore® uses an injectable bacterial protein to deliver minute amounts of disease antigens into human cells. Within the cell, these antigens generate potent cell-mediated immune responses against the virus from which they come. AVANT’s partner, the Walter Reed Army Institute of Research (WRAIR), is studying Therapore® as a potential treatment against the human immunodeficiency virus (HIV). In March 2004,WRAIR initiated a Phase 1 study of an experimental HIV vaccine based on AVANT’s Therapore® technology.

PAGE 6 / AVANT IMMUNOTHERAPEUTICS ANNUAL REPORT 2003 140552.EDIT 4/29/04 9:32 AM Page 7

PHASE III CLINICAL TRIAL OF ® ROTARIX IN 60,000 INFANTS UNDERWAY IN LATIN AMERICA AND SOUTH EAST ASIA

NEXT GENERATION VIRAL VACCINES “ ® vaccine. Experience “We are excited to be developing the Rotarix

to date in our global Phase III clinical trials with this vaccine candidate, together with efficacy that it demonstrated in Phase II trials, clearly Jean Stéphenne, President and General Manager GSK Biologicals suggests that we have an excellent vaccine product for the world.”

PAGE 7 / 140552.EDIT 4/29/04 9:33 AM Page 8

BACTERIAL VACCINE PLATFORMS

AVANT has created a technology platform that enables the creation of vaccines that offer rapid, effective protection against one or more disease organisms with a single oral dose. This allows AVANT to address a broad array of vaccine needs in areas as diverse as biodefense, global health, travelers’ vaccines, and human food safety.

Key elements of this vaccine platform are AVANT’s patented bacterial vectors, SalmoVec™ and VibrioVec™. Another key element is AVANT’s patented VitriLife® manufacturing process. By enabling the production of vaccines that are room temperature stable, this technology eliminates the need for costly cold-chain distribution and storage – a major challenge to vaccine affordability and use in many parts of the world.

BIODEFENSE AVANT IS DEVELOPING A NEW GENERATION OF VACCINES GLOBAL HEALTH WITH THE IDEAL PROFILE TO ADDRESS BOTH SIGNIFICANT TRAVELERS VACCINES COMMERCIAL MARKETS AND SERIOUS GLOBAL HEALTH FOOD SAFETY CARE NEEDS. Market Areas

AVANT has taken steps to fully implement VitriLife® by adding manufacturing to the company’s core capabilities. With support from MassDevelopment, the economic development entity for the Commonwealth of Massachusetts, AVANT recently began the build-out of a pilot manufacturing facility. This plant will enable AVANT to produce vaccine supplies for clinical trials, including an oral plague vaccine candidate scheduled for Phase 1 testing in humans during 2004. The facility will also allow AVANT to seek further governmental and defense contracts for the development and supply of its biodefense vaccines, as well as seek corporate partnerships aimed at applying the VitriLife® process to other companies’ products.

PAGE 8 / AVANT IMMUNOTHERAPEUTICS ANNUAL REPORT 2003 140552.EDIT 4/29/04 9:33 AM Page 9

FALL RIVER FACILITY PLANNED® TO IMPLEMENT VITRILIFE MANUFACTURING PROCESS IN EARLY 2005

NEXT GENERATION MANUFACTURING “ anufacturing panies like AVANT are “I congratulate AVANT’s decision to build a pilot mmonwealth.” ic engines of the Com facility and bring newthe jobs econom to Fall River. Com Mitt Romney, Governor, Commonwealth of Massachusetts

PAGE 9 / 140552.EDIT 4/29/04 9:33 AM Page 10

BIODEFENSE Many disease organisms have properties that make them potentially useful as weapons against armies and civilians alike. AVANT’s bacterial vaccines platform offers significant potential for the creation of a broad array of biodefense vaccines that are more effective, better tolerated, less expensive and faster acting than current products.With funding from the U.S. Department of Defense, DynPort Vaccines Company and the National Institutes of Health,AVANT is developing an oral vaccine that combines protection against anthrax and plague. AVANT has also received NIH funding that supports the development of a single-dose oral vaccine against anthrax.

GLOBAL HEALTH Access to effective vaccines could alleviate life- threatening health problems that plague much of the developing world. However, the high cost of refrigerated distribution and storage, as well as the need for sterile needles has limited conventional vaccine use.AVANT vaccines – oral, providing rapid protection with a single dose, and stable without refrigeration – offer the ideal profile for both high-value commercial markets and serious world health needs. AVANT has partnered NEXT GENERATION with the International Vaccine Institute (IVI), an organization funded by PRODUCTS FOR the Bill & Melinda Gates Foundation, to leverage the benefits of AVANT’s IMPORTANT MARKETS vaccine technology where it is most needed.The IVI is conducting Phase II clinical trials of AVANT’s oral cholera vaccine in Bangladesh, where that AND GLOBAL HEALTH disease is endemic.Additionally, the NIH plans to initiate human testing of an AVANT oral vaccine for typhoid fever.

TRAVELERS’ VACCINES Growing worldwide travel has increased the risks that business people and vacationers face from serious bacterial illnesses. Such infections, which can cause severe diarrhea and dehydration, can ruin a trip and potentially put lives at stake. AVANT is applying its vaccines technology to develop rapid-acting oral vaccines against the most serious bacterial infections that plague many parts of the world, including enterotoxigenic E. coli, Shigella and Campylobacter.

FOOD SAFETY Bacteria that infect food animals are a major source of food borne illness. Salmonella enteriditis, which can infect the ovaries of hens and contaminate eggs before they are laid, is a particu- lar health concern. AVANT is developing vaccines aimed at increasing the safety of the human food supply. In 2003, the U.S. Department of Agriculture licensed for sale the second of AVANT’s food safety vaccines, Megan®Egg. In North America, Lohmann Animal Health International will distribute this product, which protects breeding and laying hens from Salmonella enteriditis infection. AVANT is also developing food safety applications of its vaccine technology in partnership with Pfizer Inc.This collab- oration aims to create new livestock vaccines against enteric diseases and other bacterial pathogens associated with food safety.

PAGE 10 / AVANT IMMUNOTHERAPEUTICS ANNUAL REPORT 2003 CORPORATE INFORMATION

AVANT IMMUNOTHERAPEUTICS, INC. 119 FOURTH AVENUE NEEDHAM, MA 02494-2725 781.433.0771 WWW.AVANTIMMUNE.COM AVANT AVANT IMMUNOTHERAPEUTICS, INC. ANNUAL REPORT 2003

NEXT GENERATION VACCINES FOR GENERATIONS IN NEED