CASI Pharmaceuticals Inc (CASI) 2002 Q3 法說會逐字稿

Ladies and Gentlemen. Today's conference will begin momentarily. Good morning. At this time, I would like to welcome everyone to the EntreMed conference call. Today's call will be led by John Holaday. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a brief question and answer period. If you would like to ask a question, please press star 1. I will now turn the call over to Amy Fineen [PH].

Thank you, operator. Welcome to EntreMed's earnings call for the quarter ended September 30th, 2002. Prior to making the call, I'd like to remind our listeners that the call falls under the Safe Harbor Act. Statements are forward-looking and subject to risks and uncertainties. Actual results may differ materially due to a number of factors, including those set forth in the company -- security and exchange commission's filings. The early stage of our products under development, uncertainties, relating to clinical trials. Dependency. And risks related to the commercialization, if any, of the company's proposed product. Such at marketing, regulatory, patents, supply, competition and other risks. I'd like to now hand over the call to Dr. John Holaday.

I want to thank you for joining our third quarter conference call. I'd like to take the opportunity to welcome the members of EntreMed's board of directors to the call. Today's presentation. To begin, as you have all witnessed, EntreMed has taken the bold step of redesigning. With me turning my attention full time to EntreMed science in my new role as chief scientific officer. EntreMed has renewed its additional funding, moving small molecules forward in the lab and clinic and expanding our business opportunity.

Let's let's turn to the financial performance. Our third quarter revenues increased approximately 380% from the third quarter of 2001. This quarter's revenue is primarily from externally funded commercial research collaborations. Our R&B expenses declined by approximately $4 million, a 30% decrease over the comparable period last year. This decrease is due to a lower level of bulk protein manufacturing in the third quarter of 2002. Our third quarter G&A decreased by over $700,000 or approximately 20%, compared to the third quarter of 2001. The 2002 decrease is due primarily to lower personnel costs, associated with a smaller corporate staff and is partially offset by additional reserves that we used for the repurchase obligation of shares from Bristol-Myers Squibb. The cost associated with the company's staff productions, total about $700,000 and is reflected in this quarter's R&D and G&A expenses. The loss per share, both basic and diluted was 54 cents for the quarter ending September 30. In the third quarter of 2001, the one-time sale of future royalties on [INAUDIBLE] mide for 22.4 million resulted in income per share of 34 cents and 33 cents on a basic and diluted basis respectively.

Now, let's look at the nine-month performance? Revenues for the first nine months of 2002 were approximately 1 million less than for the comparable period of 2001 when we recognized approximately 1.4 million in net royalty revenue from the sale of [INAUDIBLE] mide. The 2002 decrease reflects the absence of this royalty revenue. As previously mentioned, we monetized our future [INAUDIBLE] mide royalties for 22.4 million last year. Research and development expenses for the first nine months were about 20% less, again reflecting a lower level of protein manufacturing in 2002. Our G&A expenses for the nine month period ending September 30, 2002 and 2001 were comparable. Although the company has taken steps to reduce its G&A base, as previously mentioned, the impact of this action was offset by the additional 2002 rev preserves for Bristol-Myer Squibb. And lastly, although our 2002 expenses are lower, the nine month loss, ending September 30, 2002 is $1.72 cents per share versus $1.08 for the comparable 2001 period as a result of the 2001 sale of our royalty interest. In order to raise the capital necessary to support our ongoing clinical trials and continued drug development, EntreMed is currently seeking additional funding. As of September 30, 2002, our cash and cash equivalents were approximately 4.8 million. We believe that we will be able to fund our operations until approximately the end of 2002 if additional funding is not secured. To update you on the partnership status, the EntreMed board of directors recently declined to accept an oncology partnership. The board ultimately concluded that the up-front and milestone payments provided inadequate financial benefit and did not meet the needs of the company or our shareholders. We continue in discussions with other possible strategic partners.

Let me tell you about our cost reduction plan. As you know, in August, we announced our plan to preserve our resources and reduce cash used in our operating activity. While we've seen some of the results of our actions, the consequence of the plan will begin to be fully recognized in the fourth quarter with operating expenses expected to be reduced by 30 to 40%. And in 2003, our net operating expenses are targeted to be approximately $12 million. The actions that we've completed in our cost reduction plan are many. Since announcing our plan in August, we've reduced our work force by a total of 50% from approximately 115 employees to approximately 57 employees. Each senior manager has deferred a portion of his or her salary. The science and business teams are working to prioritize our preclinical pipeline and the clinical development program. In that joint effort, we're now focusing our R&D and clinical efforts on the compounds in our small molecule programs. Further, we've suspended the majority of academic collaboration and sponsored research programs.

On the small molecule front, prior to discussing these programs, I thought it would be helpful to provide a snapshot of the compound that make up these programs. [INAUDIBLE] successful work with small molecules dates back to the early '90s. In less than five years, you might remember that we moved [INAUDIBLE] mide from the lab into phase 2 clinical oncology trials and subsequentially licensed oncology uses of [INAUDIBLE] mide to Cellgene [PH]. Today [INAUDIBLE] mide is used in experimental treatment for a variety of different forms of cancer. The most advanced of our small molecule program are Panzem and that [INAUDIBLE] mide analog ENMD0995. We are performing preclinical work with an additional [INAUDIBLE] mide analog that we refer to as ENMD0997. Our team has also begun preclinical work with our analog of Panzem or [INAUDIBLE]. We also have a very strong par 2 [PH] inhibitor program and tissue factor pathway inhibitor peptide [PH] that are in discovery in our labs in Rockfield. We've actively chosen to focus on the small molecule programs, and it's the priority of our scientific and business teams. We are very encouraged by our preclinical data to date. The benefits of these compounds are, first of all, small molecules are more economical to manufacture, secondly, they have a faster time to commercialization, and third, these compounds have numerous possible applications in addition to oncology. For all these reasons, prospective partners and investors are attracted to EntreMed's small molecule program focus.

Let me give you an update on Panzem. Our current formulations and our current ongoing clinical trials are going to be continued. The Mayo Clinic and Dana Farber [PH] are enrolling patients in the Panzem Phase 2 Trail for multiple myeloma [PH]. Indiana University continues to maintain breast cancer patients on drugs, in the phase 1 combination trial [INAUDIBLE] where investigators have reported a complete response in a patient who's been on study for two years. The study will not close as long as there are patients still on drug and showing clinical responses. We are reformulating Panzem and will bridge the new formulation into the clinic. We continue our work with Allergen [PH] through a joint research and development committee that communicates regularly. We're excited about Panzem's potential to the treatment for age-related macular degeneration. We're also excited about Panzem's potential in other fields outside oncology and ophthalmology and are pursuing the appropriate business strategies for their development as well.

Next, I'd like to discuss our other lead small molecule drug candidate, ENMD0995, chemically known as S3 amino [INAUDIBLE] mide. This [INAUDIBLE] mide analog has demonstrated improved anti-tumor activity over [INAUDIBLE] mide and shows no evidence of the toxic side effects reported for [INAUDIBLE] mide. In addition, [INAUDIBLE] inhibitor activity, ENMD0995 also has B cells specific anti-proliferative activity. We have strong patent position to protect ENMD0995. And, you may know that yesterday we announced the start of a phase 1 trial at the Mayo Clinic, using ENMD0995 in patients with multiple myeloma. The trial will evaluate ENMD0995's safety, [INAUDIBLE] kinetics and tumor responses in approximately 20 patients. Acting on our commitment to focus on the small molecule and clinical programs, we made a strategic decision to initiate this trial for the following reasons. First, ENMD0995 has shown very encouraging preclinical data that warrants its being moved forward into the clinic. Second, ENMD0995 may improve our partnering and investing opportunities. Historically, EntreMed's primary expense associated with the clinical trial is related to drug costs. We've incurred the costs for both manufacturing 0995 and have sufficient inventory to maintain the Mayo trial through the summer of 2003.

Further, to support the clinical costs associated with the trial, we have an orphan drug grant application pending with the FDA. As you may know, currently we have such a grant at $300,000 per year for three consecutive years to support our phase 2 Endostatin trial for patients with neuroendocrine tumors. It should also be noted that we announced last week, that ENMD0995 received orphan drug designation from the Food and Drug Administration for its use in multiple myeloma.

Let me update you on Endostatin and Angiostatin. With our manufacturing campaign of Endostatin and Angiostatin completed, we have bulk material to supply all ongoing trials. We plan to maintain our four ongoing Endostatin trials at five sites, Dana Farber [PH], University of California, San Francisco, University of Pittsburgh, MD Andersen in Houston Texas and the Free University in Amsterdam. Likewise, our Angiostatin trials at Indiana University and the University Medical Center in the Netherlands, will be maintained. Trials currently enrolling patients will continue to accrue patients and patients will have an uninterrupted supply of drug. We will not be initiating additional Endostatin and Angiostatin trials. During the next six months, a number of scientific meetings will be held. The first of which is the ERTC NCI AACR meeting next week in Germany. EntreMed will have two posters at this meeting. First, investigators from MD Andersen will be reporting on an Endostatin phase 1, 2 trial in patients with solid tumors, with an emphasis on sarcoma and melanoma. The poster will be limited to biologic assessment of [INAUDIBLE] versus continuous infusion of Endostatin. While we look forward to reviewing and building on the data, Endostatin is now being self administered by subcutaneous injections. Our second poster at ORTC meeting will be on the preclinical work with our FGF 2 vaccine, ENMD0996. In December, at the American Society of Hematology meeting, EntreMed scientists will present new preclinical data on our [INAUDIBLE] mide analog ENMD0995. The American Association for Cancer Research meeting will be held April 5th to 9th in Toronto, but all abstracts must be submitted today for consideration. Abstracts must be submitted by December 20th for consideration by the American Society of Clinical Oncology or the ASCO meeting, which are going to be held in Chicago May 21st -- excuse me May 31st to June 3rd. We'll inform you of abstracts accepted for presentation at the AACR and ASCO meetings, as that time arises.

Before opening the lines for two or three questions, I'd like to reiterate our goals moving forward. Our top priority is to secure additional financing. We continue our discussions with possible strategic partners. We are preserving resources and cutting costs. In the 4th quarter, our costs are targeted to be reduced by 30 to 40%. As demonstrated in the program changes discussed today, we are focused on our small molecule programs. And finally, we remain committed to targeting our 2003 net operating expenses to approximately $12 million. Operator, I'd like to open the lines briefly for two or three questions.

All right, sir, at this time, I would like to remind everyone, if you would like to ask a question, press star then the number 1 on your telephone key pad. If you are on a speaker phone, please pickup the handset. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Jeff Harvey, [INAUDIBLE].

Good morning, doctor. If you would just comment on a couple of things. One, has it been at all considered possibly to sell Maxite to raise some cash if that was an alternative? And also, it's my understanding that as of December 1st or 2nd, Bristol-Myers is free to sell another block of stock of EntreMed? If you could comment on that?

We are pleased with the progress that Maxite has made over the course of time. And what we're working on right now is the process of actively deconsolidating Maxite and allowing it to move forward. Of course, EntreMed will maintain a strong shareholder position in Maxite as that occurs. With regard to Bristol-Myers Squibb, we are exploring, or going to explore alternatives to resolve this issue.

All right. Thank you.

Thank you.

Your next question comes from Neil Clinehandler, an investor.

Good morning, Dr. Holaday. During the second quarter conference call, I believe you made a statement that it was your best guess that the company had sufficient funds to take it into the 4th quarter. I thought I heard you say a few moments ago that the company now has sufficient funds to take it to the end of this year. Can you explain why there is a difference at this point in time?

I certainly can. The estimate we gave during the second quarter call was conservative. We try to be that way. And since that time, as we've said during the call today, we've continued to reduce our costs by implementing our restructuring plan and using other things to address our financial needs.

Thank you.

Thank you.

At this time, there are no further questions. We will now go back to Dr. Holaday for any closing remarks.

Well, I really would like to thank you once again for joining in on the conference call today. I think you'll find that EntreMed, despite these dire circumstances that biotechnology companies in general find themselves in, continues to do our best to make progress and to bring back the value for our shareholders. I'd like to conclude the call now, Operator. On behalf of EntreMed's board and the management team, I thank you very much for joining us today.

Thank you for participating in today's EntreMed 3rd quarter earnings conference call. This call will be available for replay, beginning at 2 p.m. eastern standard time today through 11:59 p.m. eastern standard time on Thursday, November 21st, 2002. The conference id number for the replay is 6558592. That's 6558592. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. Thank you for participating. You may now disconnect.