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Microbix LumiSortTM

Next Generation Semen Sexing Technology for the Commercial Livestock Industry November 2010

Introducing Microbix LumiSortTM


Microbix proprietary semen sexing technology LumiSort is expected to be introduced to the dairy and beef livestock management markets before the end of 2012. This paradigm shifting technology will provide the highest quality sexed semen with superior economics to both the end users and providers of sexed semen products. The technology will not only provide a much higher quality product leading to higher conception rates, but is also expected to improve the sexed semen production yield by over 400% thereby increasing the range of bulls that would be appropriate to have their semen sexed economically.

What is LumiSort
LumiSort is a proprietary instrument and technology that will improve the yield and quality of sexed semen by an order of magnitude over methods used in the livestock industry today. It incorporates a novel and innovative instrument design to address fundamental problems with existing commercial sex selection technologies, while providing Microbix with a strong and well differentiated intellectual property advantage in the industry. LumiSort technology emerged from Microbix research focus in semen sexing, initiated in 2005 to establish a deeper understanding of the molecular structure and composition of sperm cells and focused on the question of delivering high quality sexed semen. Microbix LumiSort program represents an approach to semen sexing that will be commercialized faster, for lower cost and with a greater chance of success than competing candidates.

Why is LumiSort Better?


Both the existing technology and LumiSort move sperm cells in a fluid stream at high velocity past a detection laser and optical viewing system one cell at a time, analyzing each cell individually, to determine if the cell is female (bearing an X chromosome) or male (bearing a Y chromosome). LumiSort achieves this in a completely novel instrument design that increases the rate at which male and female cells can be distinguished, dramatically decreases the wastage of cells that cannot be differentiated, and functionally removes undesired (wrong-sex) cells from the preparation without subjecting the desired cells to harmful, high pressure fluid sorting that limits the fertility of conventional sexed semen today.

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LumiSort User Benefits


Higher fertility rates Up to five times higher yield per semen collection Greater than five times higher production rate Controlled of use of the technology by semen producer Simplified installation and operation Existing sperm sexing methods use high-pressure airborne droplet streams for the sorting of cells. Even in theory, they cannot produce sexed cells faster than 10,000 cells per second; the practical limit is less than 5000 cells per second. LumiSort uses controlled, contained fluid streams and is not subject to the theoretical limits that govern droplet sorting. Droplet-in-air method creates shear forces that damage cells. Shear forces in the enclosed LumiSort system are very low. Droplet collection represents a collision of sperm cells with the surface of the collection fluid. LumiSort avoids such collision forces Complexity, controlled air (clean room) space, and significant operator training are required for droplet-in-air technology. LumiSort is a closed system, requiring basic operating conditions and training. Imprecise sex determination1 results in a high percentage of discarded cells and average yields of about 30%. LumiSort significantly increases the accuracy of sex determination and permits the recovery of more cells from valuable sires.

While the existing technology uses damaging droplet-based sorting to separate undesired cells, LumiSort simply incapacitates undesired cells using a laser pulse. These differences lead to substantial advantages: Higher production rate and yield o Production rates could exceed 100,000 cells per second Precise sex determination1 allows for near theoretical maximum recovery Better quality of product by minimizing cell damage o Continuous fluid stream avoids airliquid interfaces, inherent in the droplet-in-air method, reducing shear forces. o No damaging electrostatic charges required o No harsh droplet collection o Shorter time from collection to freezer for valuable semen samples

Market Background
The Artificial Insemination (AI) industry is mature in Western markets and developing rapidly in emerging markets. The dairy market is the largest opportunity, in which 85% of the industry purchases semen from one of approximately forty regional semen distributors. This market is
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estimated to generate about US$ 1.5B in semen sales annually. Beef and swine semen revenues are smaller (annually US$ 250M and US$ 600M respectively) but are growing globally. AI and the benefits of sexed semen are well understood by dairy, beef and pork producers, as are the limitations of the currently-available sexed semen products. As a result, users are pressuring their suppliers to provide a better sexed semen product with fertility comparable to conventional unsexed semen. Semen distributors are seeking a more efficient technology that will increase sexed semen yields and quality while reducing operational complexity and cost. Sexed semen has been in the market on a commercial scale for over a decade and has been selling at a premium price double that of unsexed semen. The poor performance (low conception rates) of this product renders it useful only in niche applications primarily for select virgin heifers. This means that only one third of the potential dairy market for sexed semen is being served. Because of cost and fertility issues, only a very small portion of the beef market is being served and the swine market is effectively unaddressed to date. The AI industry recognizes that if a sexed semen technology could deliver the desired sex 90% of the time with conception rates approaching unsexed semen performance levels, up to 100% of the dairy market will convert within 3 years of market launch.

Product Development and Commercialization Overview


LumiSort can be viewed in four distinct areas: Intellectual Property Instrument development Biological development Commercialization Last year, Microbix designed and submitted the patent application with the firm Marshall Gerstein and Borun LLP (Chicago, Ill)2. With the patent filing complete, the Company selected a globally recognized leader in the design and manufacturing of these types of instruments based on their expertise, their efficiency and the personal interest of their CEO to see this project successfully completed. The Company then selected a second development partner, a global player in the semen collection industry, to assist in the biological development, field trials and launch of the technology. The partner invested $500,000 up front and will invest and additional $1.5 Million as development milestones are reached. We have completed a final licensing agreement with this company, granting them a 2 year exclusivity for LumiSort in selected markets. All other terms are similar to other term sheet agreements already signed. With the development partner, Microbix now has relationships with artificial insemination companies in broad geographic regions providing over 35% of the semen straws sold to the dairy industry.
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The commercialization of the technology is considered low risk because the market is well developed, there are no regulatory barriers, there is an acute need for a better product, the distribution network is understood, and agreements are in place and can be replicated enabling LumiSort to become the standard in the industry. The Company is currently focused on the instrument development and parallel, biological development.

Footnotes 1Sex determination in a sperm is accomplished by measuring DNA in the cells. Female cells contain X chromosomes which are larger than the Y chromosomes contained in male cells. The result is a difference in total DNA content of about 3.8%. The DNA is stained with a dye which fluoresces when illuminated by laser light and DNA content is inferred from the amount of light emitted from the cell. Sperm cells, however, are flat-lens-shaped, and the amount of light emitted depends strongly on the direction from which they are viewed. The current technology only measures DNA in cells that can be oriented to face the optical system side-on; other cells must be discarded. LumiSort renders orientation irrelevant by aligning them head-to-tail and viewing them from the end, not the side, of the fluid stream. Without orientation problems, sexdetermination can be made for most cells in the preparation. 2 Marshall has a reputation in the biotechnology field as one of the best intellectual property firms in the US. The firm ranked 2nd in patent prosecution and 11th overall among in-house counsel of the FORTUNE 250 in "Who Protects IP in America," (IP Law and Business, 2006)
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