Adamis Pharmaceuticals Corp (ADMP) 2003 Q3 法說會逐字稿

Welcome to the Cellegy Pharmaceuticals third-quarter business update. At this time, all participants are in a listen-only mode.

Following management's prepared remarks will follow a Q and A session. To ask a question, please press star followed by one on your touch tone phone. If anyone has difficulty hearing the conference, please press star 0 for operator assistance. As a reminder, this conference is being recorded today, November 7th, 2003.

I would now like to turn the conference over to Mr. Juelis. Please go ahead, sir.

Thank you. Welcome to the third-quarter Cellegy business update. This is Rich Juelis, CFO.

Before we start, I would like to remind you that we will be making forward-looking statements. These statements will contain some risks and uncertainties, particularly with regard to the timing and outcome of our clinical trials and also with regard to regulatory discussions with the USFDA.

You may want to check our filings with the SEC, including our annual report, for further description of the risk factors. We will introduce shortly Mr. Richard Williams, followed by Mike Forrest, then I'll conclude with a discussion of the financials. So, uh, Dick, why don't you take it away.

Thanks, Rich. Good morning, I'm Dick Williams, the newly elected Chairman of Cellegy as of yesterday. Thank you very much for your interest in the company.

I know the purpose of this call is to review the financial performance of the company, but I felt it was important, as did Mike Forrest, to review some of the major happenings before Rich reviews the financial results. Some of you upon my review of shareholder records and communications with the company know who I am. Those who do not, I will introduce in a moment my background.

More important is why should Dick Williams become involved with Cellegy? Easy question to answer. The people who were the foundation of the company are outstanding, the leadership, the prospects for growth, the therapeutic areas of focus, the strength of the investor base, the intellectual portfolio and more.

After 30-plus years in the industry, I am confident that there is a hidden jewel that needs further polishing. This is further confirmed by the addition of two other directors of strong backgrounds and expertise to the board at this time. We all believe that there is an outstanding opportunity that has not been recognized.

If I may, let me give you a synopsis of our backgrounds, but first I would like to thank the three directors who helped guide this company to where it is today and who resigned yesterday. Our thanks to the work and advice of Jack Bowman, Allen Steigrod and Larry Wells who have stepped down.

We are pleased that Dr. Klar and Dr. Saldarene will remain on the board providing employee consistency and advice and each brings valuable perspective and expertise.

If I may, I'd like to review first the backgrounds of the two directors who joined us as of yesterday and we the company are excited that they will be part of the team in the future with Tobi, Ron and Mike as incumbents. Cellegy is very lucky to attract the talents and expertise of John Adams and Tom Steinberg.

John Adams brings to Cellegy over 45 years of experience in the pharmaceutical industry. During his career, John has founded, built and sold three companies into major industry players. He has a significant operational, sales, and marketing experience and also has been successful in the regulatory arena, having obtained FDA approval of one NDA and has filed two additional NDAs which are pending review. John's experience in growing and emerging companies will be put to good use at Cellegy.

Don Steinberg is president of the Tishfamily interest. The Tishfamily of course is one of Cellegy's major shareholders. Tom has a tremendous amount of financial experience in the public equity, private equity, real estate and debt markets. As a vice-president of Goldman Sachs he co-managed with four other partners all of Goldman Sachs' real estate portfolio and later on behalf of the Tish family acted as a lead underwriter for the Canary Warf development investment in England, a mammoth undertaking. Tom, with his broad financial and business acumen as well as his access to capital, will be a major asset to the company.

As I promised, then there's Dick Williams. To those of you who do not know me, I do not like to talk about history, but many would like to know. I've been in the industry 30-plus years from American Hospital to Abbott Laboratories to (inaudible) a genetics company, Demetco research, king pharmaceuticals and others. My skill set is to grow companies and realize shareholder value. I am not, in my words, but Mike's, a broad-based executive. Over the last 30-plus years I have been involved in or directed eight billion in transactions globally.

For example, at King, in less than a year, with the support of the board and the chairman, I was involved and completed several transactions in excess of 4 billion in financing and the acquisition of Jones Farma. Over the last three years I was also involved with the New York Stock Exchange as a member of the listed company advisory board, and was involved in the review and establishment of the governance requirements of member companies.

That's the background of your new board members. Mike, the ball's yours.

Thank you, very much, Dick. I appreciate your opening comments.

And certainly, uh, with the -- such dramatic changes to the board composition and with many of them coming as quickly as they have, you may have had some questions as to the reasons for these changes as well as the timing.

I think Dick has largely put that to rest, but I know when I speak for all of the board of the members of directors that these changes reflect the utmost confidence in our products, our pipeline and in the current management's ability to steer the company in the right direction. These changes take advantage of the additional very high calibre resources available to Cellegy. And reflect our desire to accelerate the progress of building the company. The company holds tremendous potential as Dick has pointed out in its objective with the board and the management to unlock it.

I'm very pleased and the rest of the management here at Cellegy is pleased that Dick has agreed to join our board in the important role of Chairman. While I continue to focus on the critical aspects of my duties as Cellegy's CEO and president. We are both confident that our combined strengths will be positive to the company and its shareholders. Now moving on to an update of our -- of our products. First of all Cellegesic.

The Cellegesic trial for the treatment of pain associated with chronic ano fissures which began at the end of June of this year and which has been overseen by Dr. David Karlin, our vice-president of clinical research, continues to progress very nicely. We are well ahead of schedule and will be in a position to update you on the specific status within the next several weeks. We are very happy to be making such good progress with this Phase 3 trial, which is a confirmatory trial as you know, and which is being conducted under a special protocol assessment.

Special protocol assessments are a pseudo or a contract that's negotiated with the FDA as an intended to provide assurance that if a prespecified trial result is achieved, the FDA will approve the new drug application. In order to facility the very rapid completion of the trial, uh, or -- in anticipation of a rapid completion of the trial, we made a number of operations -- operational changes prior to the trial start-up, which include the fact that the current trial, when completed, will have approximately 150 subjects enrolled and up to 40 sites compared to the previous studies 229 subjects that were enrolled in 18 sites. This increase in the number of sites is greatly contributed to the rapid pace in patient accrual.

We've also simplified the trial design and the analysis, ultimately, by administering only one active dose versus placebo in comparison with the two active doses and placebo in the previous study. The number of days required to reach our primary end point was reduced to 21 days, compared with the 56 days with the previous study, consistent with previous findings that the most pronounced pain reduction produced by the drug was observed during the first three weeks of treatment.

Our eligibility trial criteria were refined to ensure that only the most appropriate subjects were included in the trial, and to be eligible, the subjects entering have to have a higher level of pain compared with the previous trials and have physical signs of a chronic ano fissure.

Finally, a new CRO was engaged and they've done an outstanding job in terms of being able to rapidly enroll patients. And since we also engaged, as you know, and reported earlier, the well-respected and highly experienced Washington, D.C. based firm of Hyman, Phelps, and McNamara to support our regulatory activities we now feel we have a much better resources in place to navigate the FDA going forward. That will of course be complemented by the addition of Mr. Adams to the board. As indicated earlier, we are well ahead of schedule and will be in a position to update you on the specific status of the trial within the next several weeks.

Now, uh, another indication that we've talked about going forward with is one for dysperinia, an indication that it afflicts a number of women, approximately 5 million women in the United States that are characterized by difficult sexual intercourse, and there is no effective treatment for this particular indication. Treating dysperinia with a nitric oxide donor could potentially provide very significant benefit to these patients who really have no available medical alternatives.

Our plan to initiate a confirmatory dose ranging trial using nitroglycerin for the treatment of dysperinia has now been pushed out to the first quarter of 2004 due to the conflicting resource requirements that are in place by virtue of the acceleration of the Cellegy Phase 3 study but we do intend to proceed with this very lucrative indication.

In the third quarter, we received the issuance of United States patent from the U.S. PTO, that delineates the methods of treating euro genital disorders in females, using a night nitric oxide donor or a phosphodiesterase inhibitor for the treatment of these conditions. These euro genital disorders include dysperinia, the condition we just talked about previously, or pain during intercourse. Decreased vaginal lubrication, and decreased vaginal engorgement. The latter indication of sexual dysfunction in females is the same one that's being -- that is of interest to Fizor which is reported to be conducting clinical trials with Viagra for female sexual dysfunction.

That patent increases the companies intellectual property portfolio to five U.S. issued patents and more than 20 pending U.S. and foreign patents for the treatment of Euro-genital disorders and female sexual dysfunction using nitric oxide donors and related compounds. I can assure you that our IP position in this lucrative field is very strong.

Moving to Fortigel. After receiving a non-approval letter on Fortigel from the FDA in early July, at the end of that month, Cellegy and PDI, its licensee, met with the FDA in order to gain a better understanding of the agencies concerns with regard to our initial filing. Since then Cellegy has been working very diligently on a clinical and regulatory strategy that we believe will address these concerns and we've planned to submit this plan to the FDA during the fourth quarter of this year.

In the meantime, in late October, we received a communication from PDI in both mediation procedures under the terms of the Fortigel license agreement. The mediation notice asserts that Cellegy breached several provisions of the license agreement, failed to disclose relevant facts, and seeks damages up to the full $15 million of the initial license fee that was paid to us by PDI when the agreement was signed.

The dispute resolution provision of the agreement requires that we enter into non-binding mediation before either party may initiate further legal proceedings. As we indicated earlier in a press release, we do not believe we breached any provision of our agreement and feel very strongly that all PDI's claims are without merit.

We hope to resolve any issues and are still working with PDI and continue to go on a path towards gaining FDA approval of the product. In the meantime, due to the status of the dispute, there really isn't anything more that we can say until after the mediation has taken place, and we expect that that should be completed in approximately 60 days. Therefore, please understand that we will not entertain any questions on this subject during the Q & A session.

With that, I'd like to turn it over to Rich, who will give you a brief overview of the financial results during the third quarter in the first nine months.

Thank you, Mike.

And I'm referring now to the earnings press release from yesterday. And you can see that, uh, for the comparable periods, three and nine months, this year versus last year, that our revenues increased nicely in both periods. Let me point out in particular Rectogesic sales in Australia. Now, Rectogesic, as you remember, is the equivalent of Cellegesic in the U.S.

The product continues to do very well in the nine-month period this year versus last year there's been a 38% increase in sales. So we're very happy with that result.

On the cost side of the equation, there were a number of non-cash charges which you can read about in the press release, but the important thing is that on a comparable year-to-year basis, our cash expenses have actually decreased and we plan to continue to control spending very carefully over the next several months. We expect that our burn rate, our use of cash, will average about a $1 million a month going forward.

I might mention that two days ago, we did file an 8K discussing a change in auditors, and let me just briefly mention that both Cellegy and Ernst and Young, for strategic reasons, decided to, uh, go ahead and make a switch. The important thing is that there were no discrepancies or disputes between E & Y and Cellegy and we thank E & Y very much for their services over the years. We look forward to working very closely now with Price Waterhouse Coopers and will begin that relationship effective with the filing of the 10Q.

For the moment, that's what we have, and we will open it up now to questions.

Ladies and gentlemen, if you wish to register for a question for today's question-and-answer session, you will need to press star, then the number one on your telephone. You will hear a prompt to acknowledge your request. If your question has been answered and you wish to withdraw your request, you might do so by pressing star then the number two. If you are using a speaker phone, please pick up your handset before entering your request. One moment, please, for the first question.

Your first question comes from Larry Smith with DLS Research. Please go ahead with your question.

Hi, Mike.

Hi.

Mike, I have a feeling you won't answer this question. But in terms of Fortigel, do you have any sense as to whether you may have to do another trial or you may just be able to submit the data that you have now.

Um, Larry, it's a good question. Of course, I can't give you an absolute answer on it because the answer is really determined by the FDA. So what we've done is we prepared an analysis of our information and we have included some new information on the basis of a trial that was recently completed. An and that information will be as part of the plan that we are going to be -- or the strategy that we're building around in order to resubmit the data to the FDA.

Of course, when it gets submitted to the FDA, they need to review it, comment on it, and, uh, tell us which way they think we need to go. So I -- it's too early at this point to predict what the outcome is. I think, however, for the sake of conservatism, one should expect that another trial will be necessary.

Mike, can you -- just elaborate on what you mean by new analysis of data.

We completed a small -- in the meantime what we had -- since we had filed our NDA we completed a small-based clinical try with additional subjects and we want to include the information from that subject -- from that trial into a filing with the FDA.

Okay. Thank you.

Once again, ladies and gentlemen, as a reminder, to register for a question, please press star, then the number one on your telephone. There are no further questions at this time. Please proceed with your presentation or any closing remarks.

Okay. Thank you. If there is one other question, please stop now, or otherwise we will be terminating the conversation shortly.

Okay. If there are no further questions, then what I'd like to do is to thank you very much for your participation in today's call and your interest in our company. As you can see from the disclosures that we've made during the course of today in our recent press release that we're hard at work on a number of activities that we believe will contribute to the growth and progress of our company.

In particular, I think that our aggressive and swift action of revamping the Board of Directors is a strong indication of the level of commitment that we have at Cellegy, to deliver very significant value to our investors in the most expeditious time possible. The new directors have looked very closely at our company and its potential, and I, along with our word of directors and the senior management of the company believe very strongly the potential of our products, our product candidates, and our strategic direction. And collectively, as a team, we look forward to reporting to you on our progress in the weeks and months ahead and on unlocking this potential.

Thank you very much for tuning in to Cellegy's third-quarter update.

Ladies and gentlemen, today's call will be available for replay beginning at 3:30 p.m. eastern time today, until November 9th at midnight.

To listen to the replay, please dial 1-800, 642-1687, or 706-645-9291, and enter conference ID number 3718790. Again, that ID number is 3718790.

This concludes your conference call for today. We thank you for your participation and ask that you please disconnect your line.