Nuvelo_02ar 5/15/03 3:32 PM Page 1 Life Improved Nuvelo ANNUAL REPORT 2002 Nuvelo_02ar 5/15/03 3:32 PM Page 2 Ted W. Love, MD PRESIDENT, CEO AND DIRECTOR Nuvelo_02ar 5/15/03 3:32 PM Page 3 Nuvelo, Inc. 675 Almanor Avenue Sunnyvale, CA 94085 Dear fellow stockholders, Marching forward–these words articulate the year 2002 for Nuvelo. We have marched forward on a number of important fronts and in my letter to you this year I would like to share with you my enthusiasm for Nuvelo, my appreciation for your support and my optimism for our future. Focus When I joined Nuvelo two years ago, I began to realize that we needed to shift our focus from tools to therapeutics. The value of a therapeutics company, with a significant product on the market, is well established throughout the industry. Given the expertise and assets of the company, a product focus presented the clearest path toward creating a valuable business. Our singular focus is now dedicated to discovering and developing important, life improving therapeutics. It is with this focus in mind that we made some important decisions that have given the company a renewed sense of purpose and direction. In the beginning of 2002, realizing the benefit of accelerating our approach to the market, Nuvelo partnered with Amgen Inc., and brought in the company’s near-term product candidate, alfimeprase. In May of 2002, the company then decided to further strengthen its pharmaceutical focus and financial position by accelerating the completion of its agricultural gene discovery collaboration with BASF Plant Science LLC. Finally, at the end of 2002, the company announced a definitive agreement to merge with Variagenics, Inc. Our perseverance and focus were evidenced as we needed to make some difficult decisions following the completion of our merger with Variagenics in January 2003. Variagenics, located in Cambridge, Massachusetts, has some very important and intriguing technology surrounding molecular diagnostics and pharmacogenomics. While these present interesting business and scientific opportunities, we concluded that they do not fit with our core business objective of developing and commercializing therapeutics. As it is vital to our success that we invest our cash and efforts solely in our therapeutics business, we have decided to seek opportunities to divest the Variagenics business. We want to thank the leadership of Variagenics for their support in achieving this objective and for their hard work and dedication toward creating a valuable business. Nuvelo_02ar 5/15/03 3:32 PM Page 4 Perseverance There are several qualities about Nuvelo that set us apart. First, we have an unyielding perseverance. In our business, success does not come easily, you really have to work at it. We are beginning to see the positive effect of our perseverance as alfimeprase, our lead product candidate, enters Phase II clinical studies for two important indications, peripheral arterial occlusion (PAO) and catheter occlusion. These two medical conditions represent a significant market opportunity and a large patient population that we believe will benefit from this important therapeutic advance. We are privileged to work with Amgen on the development and commer- cialization of this significant product opportunity. Future outlook In conclusion, I would like to look to the future. It is a great privilege to lead Nuvelo. I have a tremendous colleague and mentor in George Rathmann, whom I learn from every day. I have great enthusiasm for our talented team of employees who are inspired by the opportunity to discover and develop important, life improving therapeutics. I have great confidence in our proprietary gene collection. There are many promising product candidates within this collection and we are making important progress toward understanding the biology that will lead us into clinical development. Additionally, we have adopted an opportunistic in-licensing and partner- ing strategy to accelerate the expansion of our product portfolio and our alfimeprase program is poised to deliver “proof of concept” data by the end of 2003. I would like to express my sincere thanks to you, our stockholders and employees for your support. I know that this past year has been particularly difficult. I believe our path is clear and we are indeed marching forward. I thank you for persevering with us. We are committed to building a company that makes a difference to patients, their families and health care providers. There is no greater motivation for the work that we do than to know that our ultimate goal is to improve life. We at Nuvelo thank you for the opportunity and are committed to marching forward. Ted W. Love, MD President, CEO and Director April 2003 George B. Rathmann, PhD CHAIRMAN OF THE BOARD Nuvelo_02ar 5/15/03 3:32 PM Page 5 George B. Rathmann, PhD CHAIRMAN OF THE BOARD Nuvelo_02ar 5/15/03 3:32 PM Page 6 Building Nuvelo 2001 2002 2003 01.01 Ted W. Love, MD joins as 01.02 Collaboration with Amgen Inc. 01.03 Shareholders approve merger president to develop the novel acting with Variagenics, Inc. thrombolytic, alfimeprase 03.01 Ted W. Love, MD appointed 02.03 Combined company changes chief executive officer 02.02 Collaboration with Genetastix name to Nuvelo and begins Corporation to generate fully trading on the Nasdaq with its 04.01 Linda Fitzpatrick appointed human monoclonal antibodies new name and symbol, NUVO senior vice president of human against a proprietary antigen resources utilizing the HuMYTech 02.03 Philippe O. Chambon, MD, PhD, technology general partner of the Sprout 05.01 Peter Garcia appointed Group; Jean-Francois Formela, MD, senior vice president and 04.02 Raised $15 Million in a private general partner at Atlas Ventures chief financial officer placement and Martin Vogelbaum, partner of Apple Tree Partners, join board of 07.01 Collaboration and license agree- 05.02 Accelerated completion of directors as a result of the close ment with Aurora Biosciences agricultural gene discovery of the merger Corporation (now Vertex collaboration with BASF Plant Pharmaceuticals Inc.) to screen Science LLC, strengthening 02.03 IND filed for alfimeprase in secreted proteins and provide the company’s pharmaceutical second indication, catheter selected novel targets for the focus and financial position occlusion development of small molecule drug candidates 06.02 Mary K. Pendergast JD, LLM 03.03 Successful completion of from the U.S. Food and Drug enrollment for our Phase I clinical 08.01 Collaboration with Kirin Brewery Administration and currently at trial with alfimeprase in chronic Co., Ltd., Pharmaceutical Division Elan Corporation, appointed to peripheral arterial occlusion to identify and develop secreted the board of directors proteins and associated antibodies with clinical utility 06.02 Nina Giles joins as vice president of business development 08.01 Raised $21 million in a private placement 06.02 Initiated Phase I clinical trial for alfimeprase in chronic peripheral 10.01 Collaboration with Deltagen, Inc. arterial occlusion to identify and develop therapeutic candidates through research and 09.02 License agreement with UCSF development of novel secreted and Celera Diagnostics involving proteins a large-scale DNA sample collection used to identify genetic 10.01 Patent litigation predispositions that contribute to with Affymetrix, Inc. settled cardiovascular diseases 10.01 Callida Genomics established 11.02 Entered into a definitive merger as a subsidiary to focus on DNA agreement with Variagenics, Inc. chip and sequencing technology 3. NUVELO 2002 ANNUAL REPORT Nuvelo_02ar 5/15/03 3:32 PM Page 7 Marching Forward Focus 1. Advancing Alfimeprase 2. Driving Drug Discovery 3. Maximizing Our Full Potential 4. Harvesting Our Gene Collection 5. Ingredients For Success 4. NUVELO 2002 ANNUAL REPORT Nuvelo_02ar 5/15/03 3:33 PM Page 8 Alfimeprase, unlike other thrombolytic agents, directly dissolves blood clots. In addition, a common protein circulating in the body rapidly inactivates alfimeprase outside of the targeted clot. These unique attributes allow catheter-directed administration of alfimeprase to hold the potential to achieve rapid clot lysis without the risk of bleeding complications. Nuvelo_02ar 5/15/03 3:33 PM Page 9 1 Advancing Alfimeprase • OVERVIEW • HOW IT WORKS • POTENTIAL THERAPEUTIC APPLICATIONS Recognizing the opportunity to march forward and accelerate the company’s transition into a therapeutics company, Nuvelo formed a partnership with Amgen Inc. in early 2002 for the devel- opment and commercialization of alfimeprase. Identified through research programs at Amgen, alfimeprase is a novel acting thrombolytic used to degrade blood clots. Under the terms of the collaboration, Nuvelo is leading clinical development activities and Amgen is responsible for man- ufacturing activities. Amgen will have the option to lead commercialization efforts in which both companies may participate. Both Amgen and Nuvelo share worldwide commercial rights. In the months following the announcement of the collaboration, Nuvelo aggressively got to work on alfimeprase. We began a Phase I clinical trial with alfimeprase in June 2002, marking a major milestone for Nuvelo as the company’s first human trial. The Phase I study, designed to evaluate the safety and pharmacokinetics of alfimeprase in patients with chronic peripheral arterial occlusion (PAO), was conducted in twenty patients in seven centers across the United States. In March of 2003, we successfully completed enrollment in this Phase I trial showing that alfimeprase was safe and well-tolerated with no drug related adverse events. On the heels of this announcement, we also disclosed plans to initiate a multi-national Phase II study in acute PAO patients in the second quarter of 2003. The trial will test the safety and effi- cacy of multiple doses of alfimeprase. Renowned leaders in the field of thrombolysis, Dr. Kenneth Ouriel, chairman of the department of vascular surgery at the Cleveland Clinic, and Jacob Cynamon, professor of clinical radiology and director of the division of vascular and interventional radiology at the Montefiore Medical Center, will serve as the principal investigators for the study.