CASI Pharmaceuticals Inc (CASI) 2001 Q4 法說會逐字稿

Good morning and welcome to the EntreMed fourth quarter and year-end 2001 earnings conference call.

Today's call will be conducted by Dr. John Holaday, EntreMed's Chairman and CEO.

All lines have been placed on mute to prevent any background noise.

We anticipate today's presentation, which includes, Dr. Holaday's, remarks and the Q&A session will run 25 to 30 minutes.

If you would like to ask a question during the appropriate time, simply press star, then the number one on your telephone keypad and questions will be taken in the order they are received. If you would like to withdraw your question, press star, then the number two.

Prior to, Dr. Holiday's, presentation, Miss Any Finan, Director of Corporate Communications of EntreMed, will make an opening comment regarding forward-looking statements.

Miss Finan, you may begin your conference.

Thank you, operator.

Prior to the beginning of the call I would like to remind our listeners that comments made during the call fall under the Safe Harbor Act of 1995 as follows.

Statements herein that are not descriptions of historical facts are forward-looking and subject to risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors including those set forth in the company's Securities and Exchange Commission filings under risk factors; including risks relating to the early stage of products under development, uncertainties relating to clinical trials, dependency of third parties, future capital needs, and risks relating to commercialization, if any, of the company's proposed products; such as marketing, safety, regulatory, patents, product liability, supply, competition, and other risks.

I'd like to hand over the call to, Dr. John Holaday, EntreMed Chairman and CEO.

John.

Thank you for joining us today for your fourth quarter and year-end earnings call.

As most of you know, we've been very active in meeting with the investment community of late. Very quickly I'd like you - to bring you up to speed on our IR related activities.

Last month for example, we hosted a well attended analysts' luncheon and associated Webcast in New York featuring, Dr. . That same week we also presented at the BIO CEO meetings in New York, and both presentations are currently available on our web site.

In the coming months, we'll participate at Wall Street scientific and industry sponsored conferences including the Gerard Klauer Matteson Healthcare Conference in New York on the 9th of April; the American Association for Cancer Research in San Francisco, April 6th to the 10th; the American Society of Clinical Oncology meeting coming up in Orlando, May 18th to 21st; and at the BIO annual meeting in Toronto which will be June 9th to 12th.

And once again Webcast summaries from the AACR and ASCO meetings will be made available at that time.

Today's call will highlight the following. We'd like to first give you our fourth quarter and year-end earnings. Then we'll give you our 2001 milestones as well as a way of looking ahead at 2002. And then the senior management team and I will be happy to take questions at the conclusion of the call.

Let me turn to discussion of EntreMed's financial performance. For the three months ended December 31st 2001, our revenues were $1 million less than the fourth quarter of the year 2000. royalty revenue really reflected this change by virtue of the fact that the thalidomide royalties were sold with a reported gain of $22.4 million in the third quarter. These were sold to Royalty Pharma and thus the royalties that were ordinarily received at that point in time were not actually marked but have been put down as a reported gain for the sale of the entire product.

We also retained additional upside on the sale of thalidomide should certain cumulative milestones be achieved. We think it was a great decision to monetize these assets, particularly as our own product candidates in addition to thalidomide are moving forward into clinical trials and making progress in phase two studies in the very areas that we think are going to be very appropriate for the - pending completion of these studies and addition of our knowledge of the clinical base of these molecules.

The R&D expenses increased in the comparable period of 2001 by approximately $8 million. We manufactured all three clinical compounds. These manufacturing costs in the fourth quarter of 2001 were 12.5 million, versus 4.5 million in the fourth quarter of 2000.

Again, what we wanted to do was to reinforce our current drug supply. Based upon what we have seen as some very promising results from our phase one and two clinical trials, we wanted to ensure that we had adequate materials to meet our phase two needs and we've done precisely that.

The fourth quarter G&A increased approximately $800,000 over the fourth quarter in the year 2000. Additional losses in the first quarter 2001, versus 2000, were due to increased manufacturing efforts and revenue decrease as previously described.

Let me review the 12-month data for the date ending December 31st 2001. The 2001 revenue was approximately 1.8 million less than 2000. This reflects the sale of the royalty for a gain of $22.4 million.

The R&D expenditures increased approximately $11 million in 2001 - really reflects the transition of EntreMed from a company that's largely research and development, to a critical biopharmaceutical company. These additional expenses included rounding out our new staff and additions - and additionally our clinical trail expansions as well as increased manufacturing to support these clinical trials based upon progress in the studies to date.

The 2001 G&A expenditures were up approximately $3 million from 2000. Again reflecting increased personnel, insurance and investor relations and communications costs.

We also reported a reserve, which is an accounting adjustment based on the fact that the Bristol-Myers Squibb was working with us - such that we can have the opportunity of repurchasing the shares, which they have at some point in the future.

The 2001 net losses were $43.3 million, or $2.39 per share. This is higher than the expected $2 per share net loss based upon the fact that we had the opportunity to expand production of our clinical molecules in order to meet the needs of our phase two trials as projected for 2002 and beyond.

We also had a net loss of $48.8 million or $3.4 per share in the comparable period of the prior year. This lower loss was due to the sale of the royalty , which as I previously mentioned was $22.4 million.

The cash and cash equivalent on December 31st were approximately $41.4 million, versus $24.5 million in December 31st of the year 2000.

Let me also share with you the fact that we were quite successful in raising funds during the year 2001. In all we grossed over $74.9 million and this included a public offering that was conducted a year ago in March, a pipe transaction that was completed in December of last year, and in August we sold the thalidomide royalty for $22.4 million.

We put our money where the needs should be met. The expenditures of 80 percent of our resources and research and development, and 20 percent in G&A is typical for our company. And 75 percent of our R&D expenditures go into the three lead product candidates including Endostatin, Panzem and Angiostatin. Let's move forward to the 2001 corporate milestones. We have added to our exceptional management team. During the course of the last year, we promoted, Dr, Ed Gubish, to President and Chief Operating Officer. We've got, Neil Campbell, on board and who is recently appointed to Senior Vice President for Corporate Development. Dr. Jim Johnson, came on board as our Senior VP for Legal Affairs, and, Dr. Carolyn Sidor, joined our team as the Vice President for Clinical Development.

We also had a number of business development strategies come to fruition. We are the Angiogenesis company and in that context, largely are focusing our efforts in the field of oncology. But as was recently reviewed with you in a conference call of last January, we're also moving forward with non-oncology applications. For instance, ophthalmology, where more people go blind every year that develop cancer frankly.

This allegiance with or alliance with Allergan, which we announced last January is moving forward, as are other partnerships discussions in the field of oncology and non-oncology uses.

Furthermore, in terms of corporate milestones, we have looked at the phase one data and moved forward in developing some rational drug dosing designs. We are maximized - we already maximized the safety profile in a rather short period of time during our rather conclusive phase one studies. We went from an IV bolus administration of our protein drug to continuous infusion, and then to subcutaneous administration.

Now I am pleased to tell you that patients that are receiving both Endostatin, and Angiostatin are injecting themselves at home, with shots - much like a diabetic would manage their diabetes with insulin injections.

We've initiated phase two trial programs. And these include not only for Endostatin, but also for Panzem as we'll share in more depth later on.

Our open drug designations were reported. Furthermore we've achieved some real breakthroughs in increasing the protein yields for our protein products Endostatin and Angiostatin. These will make our final products competitively priced with commercially available therapeutic proteins as well as chemotherapy.

Our new Panzem formulation has increased bioavailability. We'll begin clinical trials in phase two with our other phase two studies shortly.

So our manufacturing has allowed us to develop a strategic investment in drug inventory as previously mentioned and this includes for Endostatin, Angiostatin and Panzem, which are currently in fifteen different clinical trials in the U.S. and Europe. These 15 trials include 12 phase one trials, and three phase two trials. Thirteen of these trials are as a single agent and two in a combination with known chemotherapeutics. To date approximately 300 patients have been enrolled in these studies worldwide. We just announced the addition of the University of California, San Francisco to our and tumor studies. We also achieved orphan drug designation for End station in metastatic melanoma.

For 2001 our corporate milestones in terms of clinical results include the following. Endostatin was shown to have no side effects and no dose limiting toxicities. And indeed we were pleased to see that there was in many cases disease stabilization and tumor regression. In fact one of our patients has been on the drug for over 18 months and continues to show progressive declines in tumor size.

The Angiostatin studies showed us mild side effects, again with no dose limiting toxicities. Some of the patients have been stable with their disease for over one year. Indeed in some studies where Angiostatin was given along with radiation therapy at Thomas Jefferson University in Philadelphia, 15 of 15 patients showed partial responses in the field of radiation and no .

Finally with Panzem, which is bioavailable; it was shown to be well tolerated with limited side effects. And it was studied not only in breast cancer, but also hormone refractory metastatic prostate cancer and multiple myeloma. And in all three cases clinical benefit was seen with these different types of tumors.

Let's look ahead to the ASCO meeting in May 17th to 21st. First of all the clinicians are currently being notified as to whether or not their abstracts were accepted for presentation at these ASCO meetings. As you know due to the size of the ASCO meetings, not all abstracts can be accepted for presentation.

At the time of the ASCO meetings, I'd encourage you to check our Web site for updates. Remember that December submissions are not always reflecting the current data as many of the presentations that will be presumably made by the clinical investigators working closely with EntreMed's products, will have at least several months of more data to present at that time.

These included seven abstracts submitted - and these are six phase one studies; Endostatin in two trials, Panzem, the breast cancer trials as a single agent and in combination with taxotere, and Angiostatin as a single agent and in combination with radiation. Again, one phase two study of Panzem and hormone refractory metastatic prostate cancer will also be - it was also submitted and we look forward to hearing whether or not that will also be presented. We'll let you know when that time arises.

Let's look ahead to the year 2002. We'll have a continued expansion of our Panzem and Endostatin clinical trial programs. Angiostatin phase two studies will be initiated. EntreMed scientists are aggressively presenting at a number of internationally known scientific meetings, as well as a number of publications by our scientists as well as others that are collaborating with us will be achieved in a number of well known publications.

We'll achieve some milestones in our alliance with Allagan. And these include publication of some pre-clinical results reflecting data obtained using Panzem in models of as well as initiation through our strategic relationship with them of potential phase one study, or at least submission of an within the next 12 months.

We're working towards new partnerships in oncology as well as in non-oncology applications. Frankly, the data that we've obtained to date with our clinical trials has been very encouraging to us and to people that would like to work with us in the process of accelerating the available molecules as the clinical trials allow.

This includes not only an expansion of interactions with folks in fields like oncology, dermatology, ophthalmology, et cetera; all of which share common and Angiogenesis pathology, and all of which are potential users of our drug candidates.

Looking ahead to the year 2002, we'll be initiating an analyst presentation program. We told you that we had the inaugural event for this which was February 19th, New York City and we'll continue this pattern of presentations to analysts both from the sell and the buy side to keep them informed of the progress that we're making at EntreMed.

We'll have a continued presence at a number of business meetings. As well as the annual shareholders' meeting which is coming up and will be Webcast on June the 6th here in Rockville, Maryland.

Really that concludes what I think is a very successful year for us, briefly giving you an update of the milestones that we have achieved, as well as how we used our resources in the strategic spending as necessary to evolve our clinical products.

I'd be pleased to take any questions that you might have at this point in time.

At this time I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. If you are on a speakerphone, please pick up the handset before asking your question.

Please hold for your first question.

Your first question comes from, , of .

Hello guys.

Is this ?

Yes, hi. This is, .

Hello, . How are you?

Good. How are you doing?

Couple of quick questions. The first one is actually - let me start with the manufacturing. I was wondering how many runs did you total have in 2001? And how many more do you - will you get until the capacity increase from Chiron in 2002?

Well I must say that we have had several individual runs of course at the Chiron facility over the course of the last year in their 10,000 liter fermenter. Each of these runs yields a significant amount of product and we've stockpiled tens of kilograms to bring us forward in our phase two studies.

We'll continue to manufacture Endostatin to meet the needs - particularly to take advantage of the opportunity as that time becomes available through their fermentation sweeps. Those are decisions that we made based upon the clinical trial data as they come along, and also expansion of these studies towards other applications. So again we're going to be very opportunistic. I should emphasize here, , that we have some new clones that are showing much higher yields than we have with those that are presently being used in the runs.

We also have new purification procedures, which also increased the efficiency. We think for our products this combination of more efficient productions as well as increased yields will result in a significant product cost reduction that will allow us to studies and ultimately end up with a commercially feasible price.

Can you - can you give us some guidance in terms of what you expect on the - to increase in 2002 versus the last year due to the manufacturing ?

Again, would you repeat the question please?

Could you give us some guidance by how much percent you are in - need to increase in 2002?

Well we think that the - down - in 2002 will have a decrease in R&D expenditures by virtue of the fact that we were successful in taking advantage of the opportunity to manufacture more product in the year 2001, thus allowing us to stockpile - for the coming year. So we can expect that the 2002 numbers will be less that the 2001 numbers.

Well you basically manufactured enough to take care of planned in 2002?

Indeed. Unless once again, as opportunity arises and we continue to show progress in the clinic which would demand that we perhaps increase the number of clinical trials to follow those leads and expedite the development of these product candidates.

Another question I had was actually related to the Allagan partnership that you announced at the beginning of the year. And I was wondering if you could give us a little bit more guidance with regard to how the - how the money's going to be amortized? Particularly the up front payments that you should receive? Is this going to be a one-time payment? Or is this going to be amortized over the five years of the agreement? Could you give us some guidance there - how we are looking at that?

Yes, we're going to amortize this over the course of the five-year agreement. But as you know the initial fees included not only a license fee but also an equity participation in ...

Right.

... the company. And one of the other things that's important to note is, that if we identify other small molecules that can go forward with other ophthalmologic diseases, there's a reset provision that allows us once again to receive monies from them in the form of license fees and additional milestone payments. So this is a rather complete agreement that constitutes the strategic partnership more than just a simple relationship.

I also wanted to share with you the fact that the pre-clinical paper which will show some data that we originally presented at the ARVO - or the ophthalmology meeting - reflecting the efficacy of pre-clinically in decreasing the kinds of blood vessel growth typical of macular degeneration will be coming out shortly. And we're looking forward to those data further to validate this particular approach, .

Great. And then I have one last question. for the clinical development you are - talked about the progress that you have done an infusion schedule optimization and I was wondering - maybe I didn't catch that - if we are going to see any results from that at the ASCO? And how they would relate to maybe the effect on anti-tumor activity?

...

... expect to see something there?

I do. You know the ASCO abstracts were submitted in December and we just started our phase two studies on tumors of the pancreas at the end of November. So there weren't enough data to make any submissions for the efficacy of the subcutaneous administration, so that they could be reviewed for presentation at the ASCO meetings.

What about the trials that have been going on in Amsterdam? With the infusion and ?

Again, those data will be presented by, . At least those have been submitted and we've not yet heard as to whether or not those will be - whether or not those will be accepted for presentation there. We're looking forward to the opportunity for him to present should that avail itself.

But again, one of the things I'd like to do is to refer you and the other listeners to an appendix or an addendum at the back of the Webcast, which has a more thorough clinical update, and reflects on many of these questions that you're raising.

Thank you very much.

Thank you, .

Next question?

Your next question comes from, , of Bank of America.

Hi, John.

Hello, .

Quick question regarding the existing compounds that are in clinical development; Angiostatin, Endostatin, Panzem. Do you have any plans to license those compounds with a larger pharmaceutical partner? And if so, is there any kind of timing regarding that?

Thanks.

Well I must say, we've been very pleased, , with the last several months where there's been an increasing interest in the part of potential - not only large pharmaceutical companies - but also big biotech companies that have been anxious to work with us, understand the data, and to see how we could possibly work together and move forward. Neil Campbell's been doing an exceptional job of managing these dialogs forward with a number of these potential partners.

So really to share with you what we can expect, I think that fundamentally as the data come in and we move forward we can expect big biotech and Pharma might well be working with us - not only in the field of oncology, but also much like we did with the Allagan deal, to look for other fields of application. For instance we saw some anecdotal data in the clinical trials with both Panzem and Angiostatin on other diseases such as scoriasis. It happened to indicating that these might be good targets for the use of these molecules.

And again, in so much as we can find creative ways to partner uses of our anti-angiogenics outside the field of oncology and potentially inside the field of oncology; we'll aggressively pursue those relationships.

Our next question comes from, .

Hello.

Hi, John.

Hello, .

I understand you indicated in your discussion that you have sufficient - you have sufficient clinical material for 2002 without having to raise funds. Is that correct?

Well indeed, there's a - kind of two questions in one. We have stockpiled sufficient material from our protein point of view - for Endostatin particularly as well as Panzem to move forward with our phase two program as data allows. We have been opportunistic and wanted to make sure that we didn't get caught with too little material if the data continue to come in as they are now indicating that there are reasons to broaden our potential clinical uses of these molecules.

But as for the funding of these - that really - by virtue of the fact that we did increase our production of these molecules in the fourth quarter of 2001 allowed us to look forward to 2002 with a less aggressive manufacturing schedules because we stockpiled the materials necessary to broaden our study.

The other point I'd like to ask is, have you already developed a marketing strategy for your Angiogenesis drugs? Assuming that - you know, you're going to be successful very quickly?

Well I think it's clear that we've developed a marketing strategy. We've been looking towards this end for some time. Of course it's always based upon the clinical trial data. And moving forward with three molecules in phase two studies, and one to shortly join in a phase two, means that we've seen a lot of opportunity to make a difference to the lives of cancer patients. That's our fundamental passion. And that is to achieve a patient benefit with these molecules.

We'll move these molecules forward in phase two studies and hopefully phase three towards ultimately commercializing. And certainly the commercialization of these molecules can occur with partners. It can also potentially be done if we grow our own resources by EntreMed at some point in the future, because it is our goal to become a more fully integrated biopharmaceutical company with time.

Again, it's always going to be data driven. So we're moving forward; we've certainly achieved some yields with our product candidates on the protein as well as with Panzem, that means that they can be competitively priced and now we're continuing the efforts to show that they'll make a difference in the clinical trials.

Are you still working on a vaccine? I recall you having mentioned it about a year ago.

Indeed we're continuing progress with a vaccine against factors. That was published in the journal about one year ago. And this is part of our pipeline of molecules, including not only the vaccine, but mainly the proteins Endostatin, Angiostatin as well as discovery proteins that were invented here by EntreMed scientists. Small molecules including not only Panzem and thalidomide but also analogs of those promising compounds.

And finally gene based medicines where we have found that we can take the proteins and put the genes that in those proteins into and allow them to manufacture adequate protein to achieve effects in pre-clinical study. So again, we have a lot of opportunities to grow with out diverse platform of product candidates.

Thank you very much.

Thank you, .

Our next question comes from, , who's a private investor.

Good morning, Dr. Holaday.

I have two questions for you. The first is a question you may have touched upon and I just want to know if there's anything you can - anything else you can say as to what milestones we can anticipate from the Allagan deal?

Well I think during the course of the year what we're going to see is - in fact the steering committee has already met between EntreMed and Allagan. These people are working towards establishing the correct pre-clinical studies that are necessary to move forward with a submission of an to do clinical trials within the next 12 months, or thereabouts. Also what we're going to see is the publication - is some very promising pre-clinical results.

In these studies, we're looking at the effects of Panzem when put into the eyes of animals that had blood vessels that were growing in a way that mimics that which happens in age related macular degeneration. So these are two things to look forward to but a series of events leading towards submission is certainly going to be key.

My other question relates to an update as to the status of what's happening with the subsidiary MaxCyte?

Thank you for that question. MaxCyte has grown enormously under, Doug Doerfler's leadership as Chief Executive Officer. Not only are we working in ways in phase two - phase - excuse me - phase one studies are currently underway to investigate to enhance oxygen delivery by red blood cells - those studies being conducted at the Hoxworth Blood Center at Cincinnati - but we've also found that we can use this Flow Electroporation Technology which is key to MacCyte's value as a way of putting genes into white cells and allowing them to traffic through the body, manufacturing the very proteins that we thing will be therapeutic.

And finally we've also found a way to put this procedure to use in putting drugs into platelets. That's what we provided is a natural way of using blood cells for delivering drugs or genes or protein to address a number of diseases. What we expect to see with MaxCyte in the coming year is further growth towards strategic partnering, additional of molecules towards further clinical trials, and further progress in adding to their resources as they're growing underneath the EntreMed umbrella.

OK, I'd like to go ahead and close the conference call today and thank all of you for participating. And we look forward to providing another conference call in the future if time allows. I would encourage you to please visit our Web site as well as the clinical addendum, which we'll give you a more thorough update on the studies to date. And as the ASCO trials evolve we'll be in touch with you and let you know what abstracts will be presented there and how they will likewise be conveyed to our shareholders.

Thank you once again.

Thank you for participating in today's teleconference. You may all disconnect.