CASI Pharmaceuticals Inc (CASI) 2003 Q1 法說會逐字稿

Good morning ladies and gentlemen. My name is Mathew and I will be your conference facilitator. At this time, I would like to welcome everyone to EntreMed's First Quarter 2003 Earnings Conference Call hosted by EntreMed's President and Chief Operating Officer, Neil Campbell. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer period. If you would like to ask a question during this time simply press "star" then the number "1" on your telephone keypad; if you would like to withdraw your question, press the "star", then the number "2". Thank you. I will now turn the call over to Mr. Neil Campbell. Sir, you may begin your conference.

Thank you. Good morning and welcome to EntreMed's First Quarter 2003 Conference Call. I want to thank all of you for joining us this morning. Before beginning the call, I remind our listeners that comments made during this call fall under the Safe Harbor Act of 1995 as follows. Statements here in 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 number of factors including those set forth in the Company's Securities and Exchange Commission filing under risk factors.

During the call, I would provide an overview of our first quarter 2003 financial performance and corporate actions. Next, I will highlight our plans to move forward and conclude with the brief question-and-answer session. Prior to proceeding, though I would like to note that our 2002 financials include the operating results for a previously consolidated subsidiary Maxcyte. Our first quarter 2002 results reflect approximately $1m in expenses related to Maxcyte. Of this amount, approximately $550,000 was reflected in Research and Development expenses and $450,000 in General and Administrative cost.

During the three months, ending March 31, 2003, revenues increased from approximately $60,000 in 2002 to $514,000 in 2003; this increased revenue was primarily due to a $300,000 clinical research grant from the Food and Drug Administration's office of work and product development. This grant provides financial support for a Phase II Endostatin trial in patients with norendocrine tumors. The balance of our first quarter 2003 revenue was primarily from an externally-funded commercial research collaboration.

Research and Development expenses declined to $2.6m for the first 3 months of 2003; this is approximately $8.3m or a 76% decrease over the comparable period last year. EntreMed's First Quarter 2003 decrease in R&D expenses reflects our shift in corporate focus to small molecule programs and in turn decrease cost associated with Endostatin and Angiostatin; this also including staff reduction. I also note that we expect our future R&D cost to begin to increase in upcoming quarters as we continue to advance Panzem and other small molecule programs forward. During the first quarter of 2003, General and Administrative expenses decreased by approximately $2.2m or 57% as compared to the first quarter of 2002.

Three factors contributed to EntreMed's decreased G&A expenses; first, lower personnel cost; second, a significant decline in legal cost; and three, the absence of our repurchase obligation of EntreMed's stock from Bristol-Meyer Squibb. In December 2002, we successfully renegotiated the terms of this agreement and as a result we have no further repurchase obligations. We had a net loss of approximately $3.7m for the first quarter 2003 as compared to $14.5m loss for the comparable period in 2002. This 75% decrease results from the items previously discussed. The net loss per share was 16 cents for the quarter ending March 31, 2003 versus a net loss of 67 cents per share for the same period last year. As on March 31, 2003, the company had approximately $15m in cash and short-term investments.

Now I would like to review our first quarter 2003 actions. First, EntreMed has continued its relationship with the Celgene Corporation in the first quarter of 2003. This is part of our December 2002 for [inaudible] analog transaction. Presently, EntreMed and Celgene are moving forward with a strategic relationship and we continue discussions that center around drug discovery, target validation, and drug development efforts. These are primarily in the areas of cancer and inflammation. Each company may perform preclinical research and development for the other. This allows of course each company to leverage a scientific expertise and talent. The actual projects from this relationship will be announced at the appropriate time by both companies. But I also want to make a mention that we are very pleased at the progress of our relationship at this time.

Secondly, I would like to update you on our relationship with Allergan. As you may recall, EntreMed entered into an alliance with Allergan to develop Panzem as a localized treatment for eye diseases. Our project teams meet regularly to review the program’s progress and to that end Panzem is currently in preclinical animal models with formulations and delivery systems under assessment by Allergan. Our plans with Allergan remain on track and any announcements of milestones will be made at the appropriate time by both companies.

Third, we continue to reduce cost and allocate resources prudently in the first quarter of 2003 as expenses were significantly lower than any other previous four quarters. For example, first quarter of 2003 expenses decreased by 71% from the first quarter of 2002, and by 63%, 65 and 39% from the past three quarters respectively. These cost decreased reflect substantial reductions in the protein programs and an increased focus on our small molecule and peptide programs.

The impact of our prudent resource management is best illustrated by reviewing a bar graph of our expenses quarterly over the past two plus years. Since the fourth quarter of 2001, we’ve had significant downward trend in our expenses. The expenses related to Endostatin and Angiostatin continue to decrease as we center our activity on small molecule programs. Endostatin and Angiostatin costs reflect expenses associated with current clinical trials. At this time, we are maintaining four ongoing Endostatin and Angiostatin clinical trials. We are not expanding our current clinical trial program regarding these protein drug candidates.

Our expenses for Panzem and other R&D include new chemical entities associated with 2-methoxyestradiol or 2ME2, as well as existing small molecule and peptide programs. These costs will increase as we expand the clinical trial program and continue preclinical development of these and other small molecule drug candidates. We anticipate that our G&A expenses will stabilize at the current level. But moving forward, we expect our reported operating expenses to increase related to Panzem and our other small molecule programs as previously discussed. But I do want to remind our listeners, however, that we remain committed to prudent resource management.

Fourth, EntreMed completed the MaxCyte deconsolidation in the first quarter of 2003. I am pleased to announce that MaxCyte is now independent, but EntreMed maintains a 45% equity position in the new company. The separate MaxCyte financial reporting was effective on January 1, 2003, and is reflected in EntreMed’s first quarter 2003 SEC filings. To that end, the deconsolidation resulted in a $4.6m increase in EntreMed's shareholder equity.

Lastly, EntreMed met all NASDAQ requirements for continued listing on the national market in the first quarter of 2003. As you may recall, we appealed the NASDAQ staff determination to de-list our common stock from the NASDAQ National Market, and as part of the determination for continued listing, NASDAQ required that we file with the SEC, the Form 10-K for the fiscal year ended December 31, 2002; and the Form 10-Q for the quarter ended March 31, 2003; this evidencing shareholders equity of at least $10m on or before the respective SEC filings deadlines.

As we move forward in 2003, our top priority is to strengthen the Company’s financial position, and this is through a combination of activities. As of today, we are working to resolve all outstanding liabilities related to protein manufacturing. We will continue to explore options to access the capital markets.

In April we closed $10.25m transaction, and we believe our net proceeds from this transaction; combined with our March 31st cash position of approximately $15m, will fund the company’s planned activities well into 2004. Although our cash position has improved, we will continue to control our costs through prudent fiscal and resource management.

The therapeutic versatility of our small molecule programs have broadened our business opportunities to bring additional funds to the company. These include co-development, funded research, licensing and partnerships in oncology as well as non-oncology with biotechnology and pharmaceutical companies. We also continue to explore opportunities for the two clinical protein drug candidates Endostatin and Angiostatin.

Our efforts are now clearly focused on the continued research and development of small molecule and peptide programs. We have chosen to concentrate our financial resources and in-house scientific expertise on the small molecule and peptide programs. These are based on six attributes. First, these compounds have produced encouraging pre-clinical and clinical data. Secondly, these compounds act on multiple cellular pathways. Third, these candidates have various routes of administration and can be delivered orally, topically, or by other means. Fourth, our small molecules are therapeutically versatile, and they offer greater financial return having possible applications in oncology; as well as cardiovascular disease, bone disease, women’s health, dermatology, ophthalmology, and inflammatory disease, to name a few. Fifth, EntreMed maintains a strong intellectual property position with our small molecule and peptide programs. And sixth, these compounds are more economical to develop, manufacture than protein-based drugs.

I would like now briefly just review our small molecule and peptide programs. Panzem or 2ME2 is our first small molecule program. We continue our Panzem oncology trials, as we work to enhance the compounds bioavailability through a new formulation that we expect to introduce into the clinic in early 2004.

Simultaneously, we are continuing pre-clinical research on Panzem’s multiple mechanisms of action including a recent paper on Panzem’s inhibition of hypoxia inducible factor 1 alpha or HIF 1 alpha. We also continue our pre-clinical work with Panzem in applications outside of oncology as evidenced by our pre-clinical published study demonstrating Panzem’s potential use in preventing and treating osteoporosis. Based on a greater understanding of Panzem, we are now developing new chemical entities related to 2ME2 structure, our second small molecule program. These new chemical entities are being designed to have enhanced efficacy in cancer and other disease models. To select suitable drug candidates, EntreMed scientists are screening these compounds in relevant in vitro and in vivo models. These new chemical entities are expected to operate specific therapeutic profile to guard further development in multiple therapeutic areas.

Our third small molecule program is proteinase activated receptor inhibitors or PAR. PAR is a self-surface receptor that activates inflammatory processes, including those involved in pain, arthritis, asthma, and cancer. We are developing antagonists to these receptors and are currently focusing on the development of novel peptides and the eventual small molecules through peptidomimetics. Our fourth small molecule program is based on tissue factor pathway inhibitor fragments or TFPI. TFPI is a natural inhibitor blood clotting and a post inhibitor of endothelial cell proliferation, as well as primary and metastatic tumor growth in pre-clinical animal models. EntreMed scientists have identified the mechanism underlying these effects, and generated small peptide fragments of TFPI with similar activities; once again focusing on the peptidomimetics development of small molecules for TFPI. We will report the new data about our small molecule programs at the appropriate time.

I want to remind our listeners, though, that we are committed in to positioning EntreMed as a small molecule company both scientifically and financially. For further information about the Company, please refer to the to the EntreMed website, www.entremed.com or to documents on file with the SEC. I would also like to invite you to attend the EntreMed Shareholders Meeting on Wednesday, June 18 at 10 A.M. Eastern Daylight Time. It will be held at the same location as previously years the Washington Marriott, in Gaithersburg Maryland. The meeting will also be available via webcast. Thank you and now I would like a few questions. Operator, could you please open the line.

At this time, I would like to remind everyone, if you have a question please press "star" then the number "1" on your telephone keypad. Again that’s "star" then the number "1" if you have a question. We will pause for just a moment to compile the Q&A roster. Your first question comes from Neil Klienhenler (ph.)

Good morning, Dr. Campbell, I would like to ask you a question which relates to the paper that was published at the end of April in Cancer Cell Magazine. After that paper was published, there seems to have been lots of activity in the stock. And I wonder if you could expand upon the significance of Panzem's ability to inhibit HIF factor-1 alpha and what the significance of that paper really means for the company in the long run?

Well, I will answer that I guess in two ways. One, it really is not appropriate and I really can't comment on short term stock movements and why the news has reacted that way. But specifically to your question about HIF-1 alpha, the preclinical study established Panzem as a new molecular inhibitor of the HIF-1 alpha. It’s a factor that’s over-expressed in more than 70% of human cancers and the metastases. This could include breast, prostate, brain, lung, head and neck cancers. It is also associated with diseases of the bone that are mediated by inflammation, so there is a link here between inflammation and potentially angiogenesis and cancer. And then one example there would rheumatoid arthritis. What we do believe is that these preclinical findings support the strategy to develop Panzem as a potential therapeutic for oncology, and to also expand its indications into lot of HIF-1 alpha related diseases such as arthritis, ischemic disorders. So although we are pleased with the result, we continue to explore a lot of preclinical research aspects into these multiple mechanistic pathways. This was an expansion area effect as we look at new chemical entities in our analog program as well.

You stated a few moments ago that expenses related to Panzem will increase in the future. Can you just expand upon that statement and tell us what activities you intend to support with these funds, with these expenditures?

The expenses associated with the Panzem have been factored in to the current burn rate going forward. These would be expenses related to some additional R&D but mostly attributed to the expanded or the starting of new clinical trials as the new formulation transitions into the clinic. And we will give further guidance on what the effects of those will be in upcoming calls.

Thank you.

Thank you very much for the question Neil.

Once again ladies and gentlemen that’s "star" and then number "1" if you have a question. At this time, there are no questions.

Okay, at this point, I would like to go ahead and close the call and I thank you for your participation. Once again if you want further information, please refer to our website www.entremed.com, or refer to our filings with the Securities and Exchange Commission. Thank you, have a good day.

This concludes today's teleconference. You may now disconnect.