Investment Highlights

In late 2008, FDA approved DDSS’ once-daily formulation of the analgesic tramadol – Ryzolt. The Company’s marketing partner for its product in the United States, Purdue Pharma L.P., launched Ryzolt tablets in May 2009, these being the second once-daily tramadol therapy to reach the U.S. market. DDSS’ once-daily tramadol product is being commercialized globally and to date has been launched in 15 countries, including Canada, Brazil South Korea, Australia and the five largest individual markets in Europe. In addition, it has received regulatory approval or is under regulatory review in 29 countries and the Company has established marketing partnerships for its product in 38 countries. Meanwhile, DDSS’ product (marketed under the brand name Tridural in Canada) was ranked number one among tramadol products in terms of new-to-brand prescriptions in Canada for the first quarter of 2009.

In September, 2008 DDSS submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for Trazodone (DDS-04A), a once-daily serotonin antagonist reuptake inhibitor (SARI) that provides an effective alternative in the treatment of major depression. On July 20, 2009, the Company received a complete response letter from the FDA, which states that theFDA will not approve its application for the antidepressant Trazodone in its present form as a result of deficiencies at the active pharmaceutical ingredient (API) manufacturing facility. The API manufacturer, Gruppo Angelini, has said that the observations raised by the FDA are not critical.

Recently, DDSS amended its debt facility agreement with Hercules Technology Growth Capital Inc. Under the amended agreement, DDSS has extended the date required to begin repaying the loan to July 1, 2010, from July 1, 2009, and the maturity date of the loan has been extended to June 1, 2012, from December 1, 2011. In consideration of the revised repayment terms, DDSS will not draw down the remaining USD 5 million of the USD 25 million facility. DDSS also entered into a CAD 2.6 million credit facility with the National Bank of Canada (the ABCP Facility).

Depression therapy is one of the largest drug therapy markets in the world today. More than 120 million people around the world suffer from depression. The World Health Organization predicts that, by 2020, depression will be the second-largest cause of the global health burden. According to a report by AdvanceTech Monitor, the market for antidepressant drugs continues to grow, although the rate of growth has slowed down in recent years due to generics competition. Global sales of branded antidepressants rose over USD 20 billion in 2008.

The worldwide market for tramadol is estimated to be valued at USD 1.3 billion, and IMS Health estimates that the worldwide sales volume of tramadol has grown at a compounded annual rate of 14% over the past five years. Pain affects an estimated 76 million Americans and the annual cost of chronic pain in the United States is estimated at USD 100 billion, including healthcare expenses, lost income and lost productivity. The United States is the world’s largest market for tramadol products with sales for the 12-month period ended September 2008 of more than USD 650 million resulting from more than 25 million prescriptions, which have grown at a compounded annual rate of 11% over the last five corresponding periods.

The Company is trading near its lower Bollinger Band. This suggests that the stock price is low relative to its recent price action.

Comparative Analysis

The Company is traded with premium to peer P/S multiples. The Company continues to prepare for the commercialization of its novel antidepressant and intend to launch in the U.S. market as soon as possible after it receives approval. With approval of their once daily tramadol in the United States, and pending approval of Trazadone, DDSS could move to profitability in a short time period.

Source: Thomson Financial, Yahoo! Finance, Analyst estimates.

Insider Trading Activity

Net Share Purchase Activity

Data provided by Thomson Financial

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