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The global pharmaceutical market continues to grow. IMS Health, an industry analyst, estimates that sales will reach US$1.1 trillion by 2014. According to DataMonitor, a market research firm, the most rapid growth across the branded prescription pharmaceutical market will occur in the biologic drug segment, which includes monoclonal antibodies. Sales of monoclonal antibodies are expected to increase at a compounded annual growth rate of more than 10% between 2008 and 2014; approaching US$60 billion in 2014.

The growing commercial success of monoclonal antibody therapy is being driven, in part, by anticipation that fully human antibodies will reduce the immunogenicity of related products (making them better and safer drug products), facilitating even greater market share for these products. The Company believes that its True Human™ monoclonal antibodies, with their expected ultra-low immunogenicity profile, will position XBiotech as an important player in this rapidly expanding market segment.

XBiotech is developing the product candidate MABp1, which it believes is the first True Human™ antibody directed against a pro-inflammatory target. The Company considers that this candidate therapeutic has potentially enormous medical importance: both from the point of view of being a first-in-class True Human™ monoclonal antibody; and from the perspective of its potential utility to treat numerous serious disease conditions.

According to Vision Gain, a market research firm, the leading four monoclonal antibodies accounted for 34% of the global cancer drug market in 2009. According to RNCOS, a market research firm, the global cancer drug market was expected to surpass US$78 billion by 2013. Presently a number of drugs are available for cancer treatment, but while providing some relief, these drugs also can cause serious side effects. Thus, it is anticipated that market growth in the cancer segment will be driven by new products with improved efficacy/side effect profiles. We expect MABp1 to be highly competitive in this market environment.