Adamis Pharmaceuticals Corp (ADMP) 2004 Q4 法說會逐字稿

Good afternoon. My name is Monica and I will be your conference facilitator today. At this time, I would like to welcome everyone to the 2004 Financial Results and Business Update call. (Caller Instructions)

Thank you. Mr. Williams, you may begin your conference.

Thank you. Good morning and good afternoon, depending on which coast you’re on. I’m Dick Williams, Chairman and Interim CEO of Cellegy Pharmaceuticals.

Today I’d like to review three topics with you --

1. The announcement of Rob Caso as the new CFO of Cellegy Pharmaceuticals

2. The review of our 2004 financial results

3. A business update

Before going into those subjects, I’ll make the obligatory statement that we will be making forward-looking statements and investors are cautioned that subject to numerous risks and uncertainties, known and unknown, which can cause actual results and developments to differ materially, one should not rely substantially on these statements. You should not have any reliance on any forward-looking statements without receiving more information by reading the risk factors referred to in the Company’s Annual Report on Form 10-K for the year ending December 31, 2004 that the Company will file in the next day with the SEC.

First of all, announcement of Rob Caso as our new CFO -- Richard Juelis has resigned for personal reasons but will be available and will be working with Rob during the transition phase as we complete the SEC filings in the next couple of days here. Rob’s background is he was controller of Centocor for several years and as well as the Centocor division subsidiary of J&J after that position.

He also was one of the key leaders in a large finance project, which was a worldwide corporate finance project with J&J. Rob is a CPA and an MBA. We’re very, very happy to have Rob onboard with a financial background, expertise, go-get-it attitude and it’s going to be very helpful for the Company, especially, as we have stated earlier this year, as we drive to a different direction.

I’d like now to announce Rob so that he can review briefly the results of 2004, the financial statements, which were released this morning prior to the market. Rob?

Good morning, good afternoon. This is Rob Caso speaking. I’m going to go over Cellegy’s financial results for 2004.

* The net loss for 2004 was $28 million or $1.28 a share and I would like to point out that that includes a $15.0 million in-process R&D charge for the acquisition of Biosyn in October 2004.

* Revenues were $2.6 million in 2004, compared with $1.6 million in the same period in the prior year. Revenues in ‘04 consisted of $563,000 in Rectogesic sales from Australia and it also includes $1.0 million in grant revenue from Biosyn. And all the 2004 results contain Biosyn results for the [sub] (ph) period and the 2003 results, of course, do not.

* I’m sure everybody’s interested in cash. Cash at December 31st was around $9.0 million compared with $11 million at the end of ’03.

* And I can take you through the liquidity section if I can just get that available here. The $3.2 million of cash was used in the fourth quarter to extinguish certain Biosyn liabilities and this is offset somewhat by $1.0 million in up-front payment from the ProStraken deal.

* We expect that the Company will have enough cash to fund its operations through at least the third quarter of ’05.

* I want also to point out that the Company has recently moved its corporate offices to a rent-free facility and we are also expecting approximately $1.0 million from our former tenant for payment for our previous space in the building we just vacated.

* SG&A expenses increased by $1.8 million in ‘04 compared with ’03, due primarily to litigation costs of $1.2 million and accounting expenses of approximately $315,000. I guess that was due primarily to the Delaware move and due to the Sarbanes-Oxley.

* There were also launch expenses from Cellegy of $540,000 and these were offset by a decrease in admin expenses of about $300,000.

* I’ll go to R&D. In 2004 it decreased about $959,000 due to a reduction in clinical and regulatory costs -- I’m sorry, I read that incorrectly. Total R&D in 2004 compared with ‘03 decreased by $959,000 or 9.0%, due primarily to a reduction in clinical and regulatory costs of 2004 of about $2.8 million related to Cellegy’s Phase III clinical trials, which were in 2004, not in 2003.

These were offset somewhat by higher research and R&D costs incurred by Biosyn for Savvy development included in the consolidated results of ‘04. Once again and Biosyn’s results are included in the fourth quarter Cellegy results and not in 03.

* Other Cellegy research expenses related to validation of Cellegy are the Fortigel manufacturing process of about $630,000 and there was also a $750,000 non-cash expenditure to Neptune Pharmaceuticals for a milestone achieved during ‘04.

I think that’s about it, with respect to financial results.

Okay, thank you, Rob. I think another key factor on financial results - and it relates to the liquidity position that Rob reported - is that at this moment in time we will file a 10-K with a going concern opinion, based upon the fact that liquid resources are only available through the end of the third quarter, early fourth quarter.

I think it’s important to note, especially with Cellegy versus other companies, that we have an adequate number of shares in the Kingsbridge financing facility of about $3.4 million, which at today’s price is close to $7.0 million.

During the first quarter and until we accomplish several of the factors that I will report on, we felt that it was not appropriate, in the best interest of all of our shareholders, to issue stock under the Kingsbridge facility at this moment in time.

We do expect, as I will report, in the next few months, during the second quarter, to complete some type of financing, which may be one of several structures. We are reviewing the possible financing of our future royalty and milestone payments, the ability of our pipe, the use of the Kingsbridge facility and various other potential options to ensure that the going concern issue does not become a long-term issue for this Company.

We just felt that we’re better off to get the accomplishments done, which I report and then have a better stage to set up our financing.

I’d now like to update our business and you may recall, in early January of this year, shortly after I assumed the position of interim CEO, I reported that the Company would be striving to accomplish several key redirection items under my leadership during 2005.

These key actions identified in January included --

* Maximize overseas commercial cash flows

* Continue licensing products, which have been approved by regulatory authorities in Europe.

* Concentrate on Savvy Vaginal Gel 1.0% in its three clinical trials

* Drive for the approval of Fortigel

* Redefine spending priorities

* Minimize infrastructure dollars

* Monetize our intellectual property portfolio

As of today, I’d like to report that we’ve made significant progress during these key programs during the first quarter of 2005.

In regards to maximize overseas commercial cash flows, the Company recently announced a license agreement for Tostrex with Kalbe Pharma for parts of Far East, Indonesia and Singapore. The revenue generation in these countries is expected to commence to Cellegy in late 2005, early 2006.

There are license discussions continuing with prospective partners for Rectogesic and Tostrex for other parts of the Far East and Latin America.

Second major project -- concentrate on Savvy development. The Savvy Phase III trials are moving ahead as planned in Africa and the United States. There are over 1,500 patients enrolled in the two HIV prevention trials in Africa and in excess of 200 enrolled in the United States contraception trial. In all three trials, we are fairly well on our planned development enrollment plan.

Third item, drive for approval of Fortigel. Final discussions with the FDA on program parameters have been completed. The Company believes that it will be ready to begin trials during the second quarter of 2005.

Redefine spending priorities and minimize infrastructure. Actions have been taken, which reduced the Company’s spending level in the latter part of 2005 by approximately 30% from previous levels. The Company has reduced several areas of discretionary expense. Rob indicated that the Company recently relocated its office to rent-free space for the next 12 months and in addition, during the second quarter, will receive a payment for vacating the prior space. The Company is continuing to evaluate our infrastructure savings.

The last item, monetize intellectual property portfolio -- continuing efforts are being made to achieve this goal. As I’d indicated three months ago, two months ago, it is a slow process but we will achieve some results this year under that key project.

I’d like, if I could, to make a few following observations in what we’ve reported, what we said, and what we have done in the last quarter as to what is going to be coming in the next few months.

ProStraken, our business partner in Europe, plans to launch Rectogesic in the UK during the second quarter of 2005. That’s in the next few weeks. The mutual recognition procedure beginning in Europe to receive additional approvals in other European countries later this year or early next year for Rectogesic and Tostrex has been underway. If and when these approvals are obtained in the other countries, it will expand the revenue generations for not only our licensee but for Cellegy.

Yesterday we reported a very positive result of a Rectogesic hemorrhoid study completed in Australia, which was announced at a symposium in Singapore. The Company believes very much that these results will increase the revenue production of Rectogesic, as it has proved through the rest of the world for our licensees and ourselves.

The key element in the two most severe hemorrhoids patients, who are categorized One and Two, showed substantial statistical significance in lowering the sphincter pressure, a p-Value of 0.001 and improvement in pain was also statistically significant at less than 0.05.

These results are very, very advantageous to the use of this product and ProStraken looks to be able to continue to be able to benefit from this clinical study in the areas that we have licensed them, as well as Kalbe, who is, as I indicated, in Indonesia, Singapore, etc.

Discussions are ongoing with the FDA regarding the Phase III trial requirements for Tostrelle. You may recall that Tostrelle is a testosterone gel for female sexual dysfunction. Safety guidelines for this product are under discussion at the FDA, primarily because of the Advisory Committee’s concern on the PNG product.

Once the Agency comes to a conclusion on these safety guidelines, the Company expects to resume partner discussions with those who it had been talking to previously, as well as others, and that will give us a much clearer regulatory path once the safety guidelines are confirmed by the FDA.

As I indicated earlier, we will complete during the next few months a financial arrangement for Cellegy through one of several possible vehicles. Kingsbridge, the structured secondary offering, as I indicated has 3.4 million shares available under it. We are looking at various other alternatives in financing our royalty and milestone arrangements, a pipe, and other alternatives.

I think it’s also important to note that the Company is very strongly supported by all of its shareholders, including several major shareholders.

I intend to provide an update on our dialog with the FDA regarding the provability of Cellegesic during the next few weeks. I can report now that we are progressing in our discussions and we hope to have resolution in the next several weeks on the Cellegesic situation with the FDA.

And other items to look for in the coming months --

* Increased professional staffing, especially in the area of contraception and HIV work.

* Further Savvy progress in the Phase III trials

* Further progress of UC-781 clinical trials, which is another compound that was part of the Biosyn acquisition

We’d now like to turn it over for questions, but more importantly we thank you very much for your support and we very much look forward to reporting to you on these items in the next several weeks. Thank you.

Monica, we can take some questions.

(Caller Instructions.) First question, Davis Paris (ph).

Yes, good morning, Mr. Williams. Thank you for the update.

Good morning, David.

I was wondering if you could comment on a couple of things real quickly. One, is research still continuing on dyspareunia?

On a very small scale. If you recall, in early January we looked at several of the research programs, two of which we maintained in Australia. One was dyspareunia, which will be completed, probably in the next year - it’s a much longer program - and the other one was the hemorrhoid study, which has just been completed and reported.

Ah, I see. Okay. So it’s kind of a little bit on the back burner, but it hasn’t been abandoned?

It is not on the back burner. It’s just a longer program to get to the end result of what we have with the trial.

Oh, I see. I misunderstood. Okay.

No, no, no, but there is no U.S. trial.

Okay. It’s going on in Australia?

Correct.

And then the other question would be who would you see as the main competition for the Savvy Gel? Are there other products that are in trials that we could consider anywhere near reporting on our own timeline? Or what do we know about competition on that area?

Well, to the best of our knowledge we have knowledge of several other products that are fully on in the clinic in that general area. Some are with microbicides, but not many. The key to Savvy is the chemical entity, which has very strong intellectual property protection and also much broader therapeutic use, if you recall. It’s not only HIV but has shown not in Phase III but has shown in Phase II in the bench prevention of other sexually transmitted diseases.

That could really be a phenomenal product.

Yes sir and the key, I think, is the double, in the in the fact that it is contraception and it is STD prevention. But it will reduce the major universe that we’re dealing with out there where everyone is spending a lot of money on cure, but if we can lower that universe that needs cure, we can prevent a lot of situations throughout the world.

Sure. I think that the applications would be huge and the need is incredible. I’ve read quite a bit about the devastation in Africa and parts of the developing world and certainly there’s concern here too, so, yes, I’m very excited about that product.

And by the way, congratulations on the hemorrhoid results. I think that that’s very encouraging. As I recall, the indications are that that may even be a larger market than the anal fissure market, so.

It is pretty much from most market research. You’re correct. And thank you very much.

Thank you, Mr. Williams.

Appreciate it.

Dr. Sal Baglot (ph).

Hello, Dr. Baglot here of J.M Dutton & Associates.

Yes sir?

The question I have is just regarding the FDA and prior Cellegy experience with the FDA and your three failures. What changes are you going to make in the way you interact with the FDA - designing trials, hiring consultants or outside experts - to get product approval?

Let’s back up a little bit, if I could, instead of saying what we will do. As of the first of January I brought in several new consultants to help drive us through the non-approvable letter that we have.

Yes, good.

So we’re not waiting. We started a long time ago.

Okay.

Our dialog, as I indicated -- and we’ve been quiet on this and as you know, you really have to be quiet until you get somewhere.

Yes.

But I am feeling very good that we are making progress. We have some individuals in-house, but in combination with the new team and let’s put it this way - the more brain matter that’s involved that has experience the stronger you’re going to be in at least getting to an understanding of what the situation is.

Yes.

That’s one element. That’s dealing with what we have there now. Going forward, we will be looking at different strengthening throughout our functions and skill sets for future trials, to add to the capabilities we have in-house now.

Very good, great. The other question is would you consider posting the FDA non-approvable letter on Cellegesic so we can basically assess the feasibility of --

No. We’ve gone through that ourselves and at this point in time it gets down to, as we have indicated, some interpretations. And I feel very strongly we’re better off to do that in private, because, as you know, and I say a couple other companies yesterday that got approval on drugs and all of a sudden instead of being on the positive, people started saying, “Oh, adverse reactions”, whatever and whatever.

So, I don’t want a lot of conjecture out there because I think that could harm our discussions. I hope you understand that.

Yes. No, I understand and thank you very much.

Thank you, sir, for your interest.

Eun Genum (ph), Kingsbridge.

Hi, good morning. This is Eun Genum of Kingsbridge. I have a couple of questions. Are you and ProStraken anticipating any off-label use of Rectogesic in Europe? And the second part kind of relates to the first. Does ProStraken have any plans to initiate a hemorrhoid or even dyspareunia trials of their own to expand their market beyond just for anal fissure symptoms?

Let me go back to your first one, if I can. Secondly, I think it’s a little premature to talk about off-label. The primary focus here by both parties is to get through the mutual recognition procedures. Let’s get the products approved throughout Europe.

As you know, it’s going to depend on the country, the pharmacists, etc, as to whether it may be used off-label. Each country has different rules and regulations on recognized journal publications, is that enough, etc. There are no plans to detail the product like that at this point in time.

As to the second, yes. Again, you have to take things sequentially. Let’s get the products approved. Let’s get the initial launch and economics for both parties started and that’s the time to then start expanding market through other indications.

Great and the last question. Could you discuss the outcome of the FDA discussion for Fortigel and what is required for you to move forward into Phase III trial in terms of patient pool? And also, what is asked to do differently from your last Phase III trial and that’s going to happen in second quarter?

Yes, I indicated late second quarter, early third. At this moment we’re still trying to finalize the SPA, so it’s a little difficult to answer all the differences. But I’d be glad for you to give us a ring and we’d be glad to go through that with you.

Great. Thank you.

Thank you very much.

Whit Davis.

Hi Dick. I was a little bit late joining the call, but you’re sounding a little more optimistic regarding the FDA discussions about Cellegesic. Is this correct?

Yes sir. I would agree with you, Whit. We’re making progress.

Okay. Do you have any feel for timeline or anything of that nature yet?

No. All I can, at this point in time, is say we hope to have something to continue to report on in the next few weeks.

Great. Thank you very much.

Hey, good to talk to you.

You too.

At this time there are no further questions in the queue.

Well, thank you very much, everybody, for your interest. Rob and I appreciate the support. Have a nice day.

Thank you. This concludes today’s conference call. You may now disconnect. 8