Adamis Pharmaceuticals Corp (ADMP) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the 2005 Q3 Cellegy Pharmaceutical’s Earnings Conference Call. [Operator Instructions]

I would now like to turn the presentation over to your host for today’s call, Mr. Dick Williams.

Please proceed, sir.

Hi.

I’m Dick Williams, Chairman and Interim CEO of Cellegy Pharmaceuticals.

Thank you for joining us this morning for an update to our press release of earlier today.

As you know, today’s call may include some forward-looking statements about product development, clinical trial, or other aspects of the Company’s business.

Actual results may differ materially from those anticipated by the forward-looking statements and investors should not place undue reliance on these statements.

For more information regarding these and other risks associated with the Company’s business, please refer to our most recent Form 10-K and other documents that we file with the SEC.

Joining me today is Robert Caso, Chief Financial Officer.

I would like to update you on several events before we review the financial results for the period ended September 30, 2005.

At the end of September, ProStraken, our European licensee for Tostrex, testosterone for male hypogonadism, launched the product in Sweden on schedule.

The Mutual Recognition Procedure is ongoing to obtain approvals in other countries throughout Europe.

Secondly, last week we reported on the Data Monitoring Committee’s review of the Ghana Savvy HIV Phase III trial.

The committee recommended that the trial be closed because the number of infections in the trial population was very low compared to the statistical plan.

Our partners and we concluded that we should discontinue the Ghana trial.

We also collectively agreed, based on the data reviews, that Savvy should continue to be studied for its affect on preventing HIV transmission.

At this point, we are considering several options for answering the low incidence rate, including the expansion of the ongoing study in Nigeria and/or opening of new trial sites in areas with higher HIV incidence.

These are some of the options under consideration as ways to determine the effectiveness of Savvy on HIV.

Most importantly, the Data Monitoring Committee concluded that there was no evidence of safety concerns with regard to Savvy, based on a review of the comparative numbers of HIV zero conversions in Savvy and the placebo groups and other interim data.

And in fact, the Ghana Savvy study can, at this point, be considered a very successful safety study.

Importantly, since the analysis of the HIV data did not indicate any safety concerns, all ongoing studies will continue, including the Phase III HIV prevention trial in Nigeria and the Phase III contraception trial underway in the United States.

In addition, there is a large amount of data from the Ghana trial that will be analyzed for affects on other end points, including pregnancy.

If the data warrant, these results will be submitted as a Supplemental Data Package for the Contraception New Drug application.

Enrollment is continuing in the contraception study in sites throughout the U.S. and we are finalizing our plans for the second contraception study also at sites in the U.S.

We are also in the process of designing protocols to determine the effectiveness of Savvy on other sexually transmitted diseases (STDs) including herpes in the near future.

Also, thirdly, last week we announced the renegotiation of the license and distribution agreement for Rectogesic with our licensee ProStraken.

Rectogesic, as you may recall, is the 0.4% nitroglycerin ointment indicated for the relief of pain associated with chronic anal fissures.

In September of 2004, the product was approved by the UK regulatory agency and has been launched and is selling currently in the UK.

The Mutual Recognition Procedure is proceeding throughout the rest of Europe to get the approved product recognized by the other countries in Europe.

Under the terms of the amended agreement, ProStraken will assume responsibility for all manufacturing and other product support functions and will purchase the product directly from the manufacturer rather than purchasing from Cellegy under the terms of the original agreement.

In return, Cellegy has received a payment of $2.0 million and may receive future milestone payments of up to $750,000 on approval of products in certain major European countries.

Cellegy will benefit from reduced infrastructure costs by having this partner take over the manufacturing responsibility.

The fourth item, which we have, through time, tried to keep you up to date on, is I’d like to report that in our most recent discussions with the FDA, the FDA has indicated the review of our NDA for Cellegesic is near completion.

We do not know what the results are, but hope to hear in the very near future.

I now would like to turn the call over to Rob Caso, our Chief Financial Officer, to review the financial results for the period ended September 30, 2005.

Rob?

Thanks, Dick, good morning.

I will first cover the financial highlights for the third quarter and then I will review the YTD September 30 results.

Note that the third quarter results include Biosyn, which was acquired in the fourth quarter of 2004.

The Company reported a net loss for the quarter ended September 30, 2005 of $2,793,000, or $0.09 per basic and diluted common share versus a net loss of $3,143,000 or $0.14 per share during the same quarter in ‘04.

Revenues for the quarter ended September 30, 2005 and 2004 were $1,952,000 and $483,000 respectively.

For the quarter ended September 30, 2005 revenues consisted of $471,000 in Rectogesic product sales, $1.3 million in research grant revenues, and a $200,000 milestone from the launch of Tostrex in Sweden by ProStraken, the Company’s European marketing partner.

Prior year revenues consisted mainly of Rectogesic sales; skin care product sales and $208,000 in licensing revenue.

We expect sales to decline in the fourth quarter of ’05, due to the amendment of the Company’s agreement with ProStraken.

R&D expenses for the current and prior year quarters were $1,816,000 and $2,529,000 respectively.

The current quarter included Biosyn expenses of approximately $1.6 million relating to the manufacture of clinical testing supplies and other research activities relating to the development of its HIV products.

Prior year included $1.2 million of clinical expenses relating to Cellegesic and Fortigel.

At the parent level for the quarter, the Company did not have significant research expenses.

SG&A expenses for the current and prior year quarters were $2,575,000 and $1,093,000 respectively.

The increase of $1.4 million consisted primarily of Biosyn expenses, which were not a component of the results of the prior year, increases in administrative expenses relating to consulting, temporary services, severance and retention and expenses associated with the planned closure of the California office.

California personnel previously engaged in R&D have now focused their efforts on the management of the Company’s manufacturing activities, product commercialization, or other administrative functions.

Cellegy’s net loss for the nine-month period in ‘05 was $3,044,000 or $0.11 per share, compared to a net loss of $8,909,000 or $0.43 a share during the same period last year.

Revenues for the nine months of ‘05 and ‘04 were $11,307,000 and $1,251,000 respectively.

Licensing revenues of $6,988,000 included $6,500,000 of revenue from the settlement of the Company’s litigation with PDI, Biosyn research grant revenues of $3.4 million, and product sales of $899,000.

The prior year results included $638,000 of licensing revenue and $613,000 in product sales.

As noted previously, we expect sales to decline in the fourth quarter of ’05, due to the amendment of the Company’s agreement with ProStraken.

R&D expenses for the current and prior year period were $6,877,000 and $6,876,000 respectively.

The current year results include Biosyn’s research and clinical manufacturing expenses for its HIV product candidates of approximately $4.4 million.

The prior year includes $3.2 million of clinical and personnel costs related to Cellegesic and Fortigel.

The prior year also includes the $750,000 milestone payment relating to acquired research.

SG&A during the first nine months of ‘05 and ‘04 were $7,050,000 and $3,520,000 respectively.

The $3.5 million increase includes $1.1 million relating to Biosyn and the remaining increase of $2.3 million was attributable to $1.2 million in legal fees due to the PDI litigation, professional consulting fees, severance and retention and expenses incurred in connection with the Company’s relocation to Pennsylvania.

The California location is expected to be closed in the first quarter of ‘06.

The Company had cash and cash equivalents of $2.3 million at September 30, 2005, compared to $8.7 million at December 31, 2004.

Cash used in operations during the first nine months of ‘05 was $12,200,000, as compared to $8.4 million during the same period in the prior year.

The $3.8 million increase in the use of cash and operations in 2005 was due primarily to the settlement of PDI’s lawsuit and its associated legal costs, professional and consulting fees, severance and retention and the inclusion of Biosyn in Cellegy’s 2005 results.

The use of cash was partially offset by the $5.7 million PIPE deal in May and by a $1.0 million sublease termination fee.

The Company is presently experiencing liquidity difficulties.

Unless the Company raises additional funds, it may be unable to support its research programs or its product commercialization efforts for most of ‘06.

Subsequent to the end of the quarter, the Company renegotiated its agreement with ProStraken and received a $2.0 million payment.

The Company’s plans with respect to its cash position, including raising additional required funds through one or more of the following options, among others.

Seeking partnerships with other pharmaceutical companies to co-develop and fund R&D efforts, pursuing additional out-licensing arrangements with third parties, and relicensing and monetizing future milestone or royalty payments expected from existing licensees, and seeking equity or debt financing.

However, there can be no assurance that any of these options will be implemented on a timely basis so that the Company will be able to obtain additional financing on acceptable terms.

I’d like to turn it back over to Dick.

Thanks, Rob.

We’d like to thank you all very much for your support and interest in Cellegy Pharmaceuticals and now if there are any questions, Janelle, we’d be glad to take them.

[Operator Instructions] Ken Cohen.

I was going to send you an email, Mr. Williams, but decided instead to use this venue to pose my question.

I’ve been a holder of Cellegy stock for 10 years.

I’ve seen the Company go through many managements.

I’ve seen the price of the stock at $9.00 many times when there was nothing concrete to talk about at all and now it’s a penny stock.

Now, with products in the pipeline and the best kept secret in the investment community, Savvy, Cellegy has become a penny stock.

What is the reluctance of management to promote the Company?

If it is the cost of hiring a topnotch IR firm, might I suggest you reduce your $40,000 a month salary, along with reductions of the salaries of the other executives of the Company in order to pay for a topnotch IR firm until you grow the value of the stock where it is no longer a penny stock?

It’s time, I think, that Cellegy management feels the same pain that you are causing the average stockholder - not the rich ones, but the average ones.

Where is your fiduciary responsibilities of not only maintaining stock value but of growing that value?

What do you intend, Mr. Williams, to do about getting the price of this stock up and promoting Cellegy and letting the world know about the products that are within the Company called Cellegy?

Ken, thank you for your comments and concerns.

As you know, both the Board as well as management have basically the same ones.

I’ll try to answer what I can.

Both the Board of Directors and myself have reduced our compensation substantially in the last three months.

We have proceeded, as I’ve indicated, to accomplish the key factors of getting this thing restructured through the last part of this year.

We’ve made progress.

We have discussed, promoted or set forth in a community at three conferences in the last 60 days the importance of Savvy, the safety profile of Savvy, as well as the very strong Phase II results in both contraception as well as in STD, or sexually transmitted disease, protection.

As I indicated today, we have continued to make progress with the FDA on Cellegesic, because still many of the shareholders, like yourself over 10 years, and myself and the Board have focused on that one NDA being approved versus the tremendous value and benefit from Savvy, as you indicated.

So we are continuing to promote and to discuss with new institutional investors and have been over the last three or four months and despite the fact that a product like Savvy takes a long time to develop in the marketplace, meaning the clinical marketplace.

So we hope that all these results will finally be reflected, Ken.

I appreciate your interest, comments and making them verbally versus in writing by email.

Michael Forrest.

Good morning.

Good morning.

With regard to the announcements you made last week on Biosyn, what is the case with regard to the continuation by AID to finance an additional trial in Ghana or expand the trial in Nigeria?

That’s what I meant by my comments, Mike, in regards to our partners, Family Health, USAID and ourselves, have made the decision that we would continue to fund, direct and expand Nigeria and we may consider other options as to additional sites.

We are focusing more on the higher infected populations in Nigeria.

But as far as Ghana, we felt that it was appropriate to discontinue the trial and analyze the data and take a look at it on other indications because of the very low incidence of HIV, which was incurred in the trial population, as compared to the original assumption.

That really wasn’t my question, Dick.

I understood that part.

The question is where is the funding for the additional trials going to come from?

At this point, I’m reviewing that with USAID.

So they’ve not committed to fund these trials?

We have not decided which option we are going to carry out yet.

Once the option is decided upon, are they going to fund the trials?

They’ve indicated an interest in funding.

They have not indicated an interest in not funding.

But there is no decision made at this point in time.

Okay.

You mentioned also that in the trial in the United States, the second safety study for Biosyn contraception.

Can you use that data to forego the necessity to do the second safety study in the United States?

We hope to be able to, but as you know, until we’ve closed the data bank, opened the data bank, which will be a few months, we won’t know exactly what’s in there.

The way it looks, from what the Data Monitoring Committee reviewed, is that it had a very strong safety profile and in discussions with the FDA we probably have an opportunity here to file it as a supplemental package.

But not as something that would replace the necessity for a second trial in the U.S.?

As you know, you don’t know until you’ve closed the data, opened it up, and it may.

I see.

Now you mentioned --

Until you close out the data you don’t know.

Yes.

You talked about the monetization of the assets from Rectogesic from ProStraken.

Can you explain to us what the basis for that net present value calculation was?

The basis per se, no.

It was a renegotiation of the contract.

ProStraken purchased directly from the contract manufacturer, versus through Cellegy and that allows us not only to reduce our responsibilities on the manufacturing but also additional infrastructure costs and receive funds now versus over the future.

If you get approval in the United States, won’t you need those infrastructure costs?

It depends on what happens in regards to getting the approval.

I mean, sorry, I don’t understand.

I’m talking about infrastructure costs related to the ProStraken contract.

You mean the manufacturing people?

Yes.

Well, if the product --

Well, and their responsibilities and the additional validation costs, supplements that we made to the manufacturing capacity, etc.

I see.

Those are all additional costs related to the ProStraken contract, at this point in time.

So those trials, those costs will go away if you get approval and have to have the product manufactured yourselves?

That’s a whole different situation.

I’m talking about the costs related to the European product.

And Mr. Williams, at this time we have no more questions.

Well, Rob and I would both like to thank you very much for your questions, your interest and we look forward to serving you well in the future and getting the value of Cellegy to where it should be.

Thank you very much.

Thank you for your participation in today’s conference.

This concludes the presentation.

You may now disconnect.

Good day.