Metabasis is a biopharmaceutical company focused on the discovery, development and commercialization of novel drugs by applying its proprietary technologies, scientific expertise and unique capabilities for targeting the liver and liver pathways. The Company has established a broad pipeline of product candidates and advanced research programs targeting large markets with significant unmet needs. Metabasis' product pipeline represents candidates indicated for the treatment of metabolic diseases such as hyperlipidemia and diabetes, among others. Additionally, our pipeline includes drug candidates for the treatment of liver diseases such as hepatitis and primary liver cancer which the company plans to license to companies focused on these areas. All of our product candidates were developed internally using proprietary technologies including our NuMimetic and HepDirect technologies.

Core Metabolic Disease Product Pipeline:

Metabolic Diseases
We have two product candidates in our core metabolic product pipeline, MB07811, a novel therapy currently being studied for the treatment of hyperlipidemia and MB07803, a novel product candidate for the treatment of type 2 diabetes. Additionally, we have several discovery programs targeting metabolic diseases, the most advanced being glucagon, TR beta agonist and AMPK. While there are drugs available to treat these diseases, there is tremendous need and opportunity for new therapies for cholesterol disease and diabetes as most patients are inadequately treated or controlled. We believe these and other metabolic diseases may be treated by targeting metabolic pathways that reside in the liver, such as pathways responsible for the production of glucose, cholesterol and fat molecules.

MB07811, a product candidate for the treatment of hyperlipidemia, is the first of a new class of compounds designed to lower serum cholesterol, reduce serum triglyceride (TG) levels and liver fat and reduce lipoprotein (a) [Lp(a)] through a liver targeted approach. We successfully completed a 14-day, Phase 1b clinical trial for MB07811 in the second quarter of 2008, which showed the compound to be safe and well tolerated across all seven dose cohorts tested. Additionally, statistically and clinically significant reductions in LDL-cholesterol and fasting TG levels were observed. We retain exclusive worldwide commercialization rights to MB07811.

MB07803, for the treatment of type 2 diabetes, is a second generation product candidate in our fructose-1,6-bisphosphatase (FBPase) inhibitor class, a novel class of drugs discovered internally by Metabasis using our NuMimetic™ technology. MB07803 represents a new and a novel mechanism of action that we believe could be an important new approach for treating poorly controlled patients. In the second quarter of 2008, we successfully completed a Phase 2a, 28-day, proof-of-concept clinical trial for MB07803 and announced top-line results. MB07803 met its efficacy endpoint with results demonstrating a statistically and clinically significant reduction in fasting plasma glucose (FPG) at day 28 versus placebo, and was shown to be safe and well tolerated. MB07803 has been shown in multiple preclinical studies and Phase 1 clinical trials to have an improved pharmacokinetic profile as compared to a first generation compound that was studied previously. Metabasis is independently developing this important product candidate and we retain commercialization rights.

Glucagon is an advanced research program focused on identifying chemically novel, potent, orally bioavailable glucagon antagonists for treating type 2 diabetes. Our most advanced compound has shown significant and consistent lowering of blood glucose when dosed orally to diabetic db/db mice and three other animal models of diabetes or insulin resistance. We hope to recommend the most advanced compound in this class for clinical development by mid 2008.

TR beta Agonist is an advanced research program is to identify second-generation TR beta agonists for managing hyperlipidemia. This program may yield additional development candidates that lower cholesterol and triglycerides by the same mechanism as MB07811 but with potential improvements. We hope to recommend the most advanced compound from the program for clinical development by mid 2008.

AMPK is a program in collaboration with Merck seeking treatments for metabolic diseases such as hyperlipidemia, type 2 diabetes and a disease associated with fatty liver known as non-alcoholic steatohepatitis, by identifying small molecule activators of AMP-activated protein kinase to inhibit cholesterol and lipid production in the liver. The three-year research term of this collaboration has been extended by one year through June 2009.

Non-Core Liver Disease Product Pipeline:

Liver Diseases
Additionally, we have two product candidates in our non-core liver product pipeline, MB07133 for the treatment of primary liver cancer and pradefovir, for the treatment of hepatitis B, both of which we plan to license to companies focused on these areas. Our most advanced discovery program targeting liver disease is HCV.

MB07133, developed using our HepDirect technology, is a product candidate for the treatment of primary liver cancer. A Phase 1/2 clinical trial was completed in June 2007. We expect to review data from the Phase 1/2 clinical trial and plans for our next clinical trial with the regulatory authorities in 2008, positioning the candidate for initiation of the next clinical trial in the second half of 2008. We retain exclusive worldwide commercialization rights to MB07133, but plan to license MB07133 to a suitable company for the development and commercialization of this product candidate.

Pradefovir is a product candidate for the treatment of hepatitis B. A Phase 2b clinical trial for pradefovir was completed in 2006. Metabasis recently regained exclusive development and commercialization control of pradefovir. We are reviewing plans for the next step for this product candidate which will likely include licensing pradefovir to a suitable company for the development and commercialization of this product candidate

HCV is a program in collaboration with Merck to apply our HepDirect technology to certain compounds Merck has studied for the treatment of hepatitis C infections.