CASI Pharmaceuticals Inc (CASI) 2003 Q2 法說會逐字稿

Good morning. Welcome to the EntreMed second quarter 2003 conference call. I am Derek. I will be your operator for this event. The conference call leader will be Neil Campbell, EntreMed President and COO. We expect the call to be 15 minutes with a brief question-and-answer session immediately following. If you would like to ask a question during this time press star followed by the number "1" on your telephone keypad. If you want to withdraw your question, please star then 2. The slides are on the web at www.entremed.com. The replay of the audio portion will be available two hours after the call's end at 1-800-642-16-87 in the U.S. and Canada or 1-706-645-90-21. The identity for the replay is 1-899-244.

I would like to turn the call over to Mr. Neil Campbell.

Good morning. Welcome to the EntreMed second quarter 2003 conference call. I want to thank all of you for joining please me this morning. I remind other listeners that comments made under the call fall under the Safe Harbor Act 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 filing under risk factors.

During the call this morning I will provide an overview of our second quarter 2003 financial performance and corporate actions. Next, I will highlight our plans to move forward and we will conclude with a brief question-and-answer session. Prior to the proceeding, I would like to note that our 2002 financial include the operating results for a previously consolidated subsidiary, MaxCyte.

Our second quarter 2002 results reflect approximately $937,000 expenses related to MaxCyte. Of this amount approximately $563,000 reflected in R&D expenses and $374,000 in general and administrative costs. During the three months ending June 30, 2003 revenues decreased slightly from approximately $309,000 in 2002 to $286,000 in 2003. The 2002 and 2003 revenue were primarily from an externally funded commercial research collaboration. Research and development expenses declined to $3.9 million for the second quarter of 2003.

This is an approximate $3.4 million or a 46% decrease over the comparable period last year. EntreMed's second quarter 2003 decrease in R&D expenses reflect our ship incorporate focus to small molecule programs and in turn decrease cost associated with Endostatin and Angiostatin and this includes staff reductions. I would like to note that the R&D increase between the first and second quarters of 2003, an increase of $1.3 million was planned.

These costs represent several items. Including the expansion of our reformulation program, the acquisition of Panzem bulk material to support the activity and to also supply our ongoing clinical trials with material. While we do not expect to incur this type of expense during the third quarter, we do plan to repurchase or purchase additional Panzem bulk material.

This is pursuant to a 2002 manufacturing commitment during the fourth quarter of 2003. Therefore, our planned R&D expenses in the fourth quarter are expected to reflect the second purchase of Panzem bulk material and we will make nose announcements at the appropriate time.

Also in the second quarter of 2003, general and administrative expenses decreased by approximately $2.5 million or a 60% decrease compared to the second quarter of 2002. We had a net loss of approximately $5.3 million for the second quarter of 2003 as compared to an $11.3 million loss for the comparable period in 2002. This reflects a net loss per share of 19-cent for the quarter ending June 30, 2003 versus the net loss of 51-cent per share for the same period last year.

As of June 30, 2003, the company had approximately $24.7 million in cash and short-term investments. Before reviewing the detailed results for the six months ending June 30, 2003, I also want to remind our listeners that the 2002 numbers include MaxCyte. For the first six months of 2002, approximately $2 million in expenses were related to MaxCyte. Revenues for the six-month period ending June 30, 2003 were approximately $800,000 versus

$369,000 for the same period in 2002. This increased 2003 revenue was primarily due to a $300,000 clinical research grant from the Food and Drug Administration's office of orphaned product development. This was received during the first quarter of 2003. This grant provides financial support for our phase II Endostatin trial in patients with neuroendocrine tumors. Research and development expenditures climbed by $11.6 million or 64% decrease for the first six months of 2003.

When compared to the same period in 2002. Likewise, general and administrative costs for the first six months of 2003 declined by $4.7 million, or a 59% decrease from the same period in 2002. For the six-month period ending June 30, 2003, we had a net loss of approximately $8.9 million versus a $25.8 million for the comparable period in 2002. This is a decline of over $18.9 million or a 65% decrease.

The net loss per share for the first six months of 2003 was 36-cents versus $1.18 per share for the comparable 2002 period. The major factors that contributed to the significant drop in R&D costs, G&A expenses and net losses for the period ending June 30, 2003, when they're compared to the same period in 2002 were, first, the company's shift in its current small molecule programs.

Secondly, the reduction in costs associated with protein-related programs, and, lastly, the absence of litigation costs in the Bristol-Meyer Squibb stock repurchase obligation.

Now let's turn to the actions for the second quarter. Our first action item during the second quarter of the year was the continued work in the improved formulation of Panzem. As you may recall Panzem is currently being reformulated to increase the viability, the amount of the drug candidate circulating in the blood system.

As previously discussed in the second quarter we purchased Panzem bulk material. With this material we're supplying our ongoing Panzem trials with drug candidate, testing final formulations for the selection of a new clinical form of Panzem and also producing clinical trial material to be used in our upcoming 2004 clinical trial program.

We are on schedule with the finalizing of the new formulation of Panzem and expect to transition this formulation into new clinical trials in early 2004. And then also to currently transition that into the current clinical trials that are under way.

We are pleased with the pleased with the progress to date and will make further progress in the Panzem formulation and the clinical trial programs at the appropriate time.

Our next second quarter action was the positive steps taken to improve the financial position of your company. In April and May, we completed two echo de transactions grossing $19.25 million. In addition to improving our cash position we have satisfied all remaining liabilities related to our protein drug candidates, Endostatin and Angiostatin.

And as of June 30, 2003, EntreMed had $24.7 million in cash and short-term investments. Depending on the scope and speed of the Panzem clinical trial program, the company anticipates that it's cash and short-term investments will fund activities into 2005.The third action we have taken during the second quarter related to our ongoing clinical programs, as you know during the annual meeting of the American society of clinical oncology or better known as ASCO, the national cancer institute presented data on a phase 1 clinical trial with Panzem. 17 patients with advanced tumors were included in the study. NCI investigators report a 67% tumor reduction in ovarian cancer patients with carcinoma (ph) a classification of tumors that produce an abundance of Hipoxa induced one alpha or HIF-1 alpha.

This clinical response of the 67% tumor reduction in the carcinoma patient is consistent with our pre-clinical findings that Panzem inhibits HIF-1 alpha, one of Panzem's mechanisms of action. And this brings me to the fourth and final second quarter action, the pre-clinical ward.

We continue to make significant progress in understanding Panzem's mechanisms of action. EntreMed has shown that Panzem disrupts micro finals, the cells that participate in cell division. This is resulting in a profound anti-tumor and anti-augenesofact (Inaudible) effect. This leads to the down regulation of HIF-1 alpha. This pre-clinical finding is also consistent with the Panzem clinical results of the 67% tumor reduction reported in this tumor type that over expresses HIF-1 alpha. While Microtube Lynn (ph) production is not unique to Panzem, there are two additional pre-clinical findings that have clinical considerations.

First, when compared to tax ill or PANCRISTIN in pre-clinical models, Panzem is the better inhibitor.

Secondly, in clinical trials today, Panzem has no toxicity or significant side effects commonly associated with this class of chemotherapeutic agents. We believe these findings act as one of a differentiating points. These Panzem studies were presented in American Association for cancer issue and published in the journal of cancer cell. During the second quarter we published pre-clinical finding in cancer research on the TFPI. The pre-clinical study demonstrated that the growth of primary and metastatic tumors in animal models was prevented when we blocked the activity of a naturally occurring complex of two proteins.

These activate the blood clotting, tissue factor and factor 7A. The data demonstrated for the first time that the anti-tumor activity of these inhibitors is independent of the pathway related to blood crossing. This discussion may allow for development of new therapies that have anti-tumor activity without affecting the violent processes involved in normal blood clotting.

Oncology clinical studies have been performed with inhibitors of blood clotting proteins however side effects with bleeding and minimal efficacy in patients with cancer have prevented these studies from becoming useful as an oncology therapy. Moving forward EntreMed's pipeline and research efforts are organized into three different programs. All of which are expected to result in small molecules for drug development. Our lead program is Panzem, or (inaudible) and its applications are in oncology and non-oncology fields. Our second program is the development of new chemical entities that are based on (Inaudible) or TM -- or 2ME2 structures. These are expected to offer a specific therapeutic profile to guide further development in multiple therapeutic areas and we're developing two separate and distinct groups of NCE's. In the first group we're making positional modifications to 2ME2 but keeping its parent structure intact.

We expect the compounds to have oncology and non-oncology applications. In the second NCE program we're changing the chemical structure of 2ME2 resulting in non-steroidal drug compounds. The third program is peptomedics, identifying a protein based pep tide and mimicking the activity for small molecule drug program. We have two programs in peptomedic, (Inaudible) which I just reviewed and protease active receptor inhibit tars or called PAR, and it activates anti-inflammatory -- including those in pain, arthritis, asthma and in cancer. We are developing antagonists to these receptors and we will report new data about our small molecule programs at the appropriate time.

Moving forward, some guidance. We expect to select new chemical entities for pre-clinical development. Next we expect to identify a 2ME2 related structure for an IND. And then thirdly, we anticipate the new formulation of Panzem with increased bioviability into transition of the new clinical trials in early 2004 and then to the current clinical trial programs later in the year. Lastly, we will work to improve the company's financial position. We are continuing to manage our resources prudently. We continue to explore relationships including co development, funded research, licensing and partnerships with other pharmaceutical and biotech companies to bring funds to the company. And lastly, we will also continue to monitor the activity of the Capital Markets. Now, this concludes my formal part of the presentation. Now I would like to take a few questions. Operator, could you please open the line.

I would like to remind everyone if you would like to ask a question press star followed by 1 on your telephone keypad. We will pause for a moment to compile the Q&A roster.

First question is from Wren Benjamee (ph) with Rodmenon Winshaw (ph).

Hi, good morning. Congratulations on your ongoing progress.

Thank you, Wren.

Just a quick question regarding essentially milestones. Do you see any -- you know, what milestones do you see going ahead for the next 12 months, clinical milestones, when can we expect data, any publication or presentation milestones, we have a whole slew conference coming up at the end of the year, do you expect to present any there.

There are conferences like the ACR meeting and the American cytohematology and several scientific ones. We're finalizing the formulation of Panzem right now and once we have that formulation finalized and commercial aspects shown up then we have in place the clinical trials, time lines and all of that that will be put in place and we will give guidance when those occur, the indications for those trials.

And we anticipate selecting and finalizing the formulation in the third quarter and doing the necessary things for our commercial standpoint for GNP material by the end of year and this will allow us to transition into the clinical trial program and new trials into early 2004. So I would expect in the coming months for this year we would be able to give further guidance and incorporate mile stones at that time.

And what about any pre-clinical data that will be presented at has these conferences?

There will be data presented. At this point in time, I can't comment on what that will be. There are abstracts machines deadlines that still alive. So as we get closer to that, that information will be discussed.

Terrific. And one last question.

Sure.

Can you talk to us a little bit about your view as to, you know, not only Panzem but also its mechanism of action, the fact that it has multiple mechanisms of action and how you feel that differentiates, you know, EntreMed pipeline versus other drugs that are out there?

What is interesting is that I think we have come to realize over the last year or so that Panzem is a very unique and novel compound. For example, one of the mechanisms that disrupts the microfibulin. There are a lot of microfibulin inhibit out there but a lot of them have shown toxicity in drug research system and we have not observed that today with Panzem.

We think the low or minimal toxicity going forward and the multiple mechanisms that play with each other in disease plus being an early and available drug seem to give it strong differentiating points. And it's not so selectively targeted to go after a particular tumor type, for example a small population of breast cancer. It could potentially go after a larger.

At this point we're pleased with the progress of the formulation, the increase in viability and we're going to go appropriately aggressive in a clinical trial program to really get at these signals for these indications.

Thank you very much.

Thank you for joining us this morning.

Next question.

One moment sir for your next question. Your next question comes from David Gray.

.Good Morning

Good morning

It's apparent we're not being significantly proactive any further with the Endostatin and the Angiostatin. And I just wondered at what point without further active development on our part, which I understand is necessitated by these (Inaudible). Would we lose our licensing rights from children hospitals with regard to those?.

So your question is -- I think in general the status of Endostatin and Angiostatin, correct?

Good enough.

We continue to enjoy a very good relationship with children hospital in boss and Dr. Folkman who does not have any direct ties to the company. As we stated previously over the last three or four quarters, including the annual show rose meeting is that we continue to keep the Endostatin and Angiostatin programs going.

The continual trials and support necessary on appropriate rates today do a partnership with those two programs. We're not expanding the current clinical trials to minimize the expenditures at this point. We are in active discussions through several various options that could be pursued between now and the end of the year to find a development partner for Endostatin and Angiostatin. When we have the appropriate, you know, data deal structure and announcement of a close, we will talk about it at that time.

I can assure you, though, that the company and the scientific staff here at EntreMed believes strongly scientifically in Endostatin and Angiostatin. But unfortunately, we can't do everything, especially a company our size. So we're working to build a handle for the developmental aspects of the program with other partners. That's about all, I'm sorry, can I give you at this point but can I tell you we're moving very actively.

Thank you very much.

Thank you. Next question, please?.

One moment, sir, for your next question. Your next question comes from Bob with Willingham Management.

Thanks for taking my call. Can you outline for us what the clinical program for Panzem is going to look like?

Well, you know currently, can I outline where we are currently. We know we have a phase one all comers with MCI and a phase II myeloma trial that is currently ongoing and a metastatic breast cancer phase one. That patient is in complete response and will be approaching 34, 35 months here shortly

And those trials or plans are to transition into those with the new formulations. They are continuing to receive the current formulation. On the new clinical trials that I have alluded to, the actual indications, the sites and all of the additional information will be announced at a later point.

Once we have clinical trial agreements in place and everything is ready to go. Prematurely announcing that calls a number of phone calls to the sites and we would prefer not to do that until we finish and that will be in the coming months as we get the formulation ready for the clinic.

The third one that you mentioned was what again?

There's two phase ones, metastatic breast cancer patient trial in combination with Taxital which is (Inaudible) and that has a complete response patient out and out 34 months. There's also a phase 1 trial with NCI where we report on the ovarian and phase II myeloma.

So the phase 1 is that metastatic breast cancer in specific with?

It's specific to metastatic or factory breast in combination with Taxital (ph).

How many patients have been enrolled so far?

The trial itself has one patient left on the study. And there were a total of -- looking at my notes here -- 33.

Is that the only responder then?

I'm sorry. I'm looking at the wrong trial. 15.

Was that the one responder then or were there more?

That's the complete response in the program

OK. and the new formulation, that's going to be oral, I assume?

I am sorry Can you say that again?

The new formulation, is that oral? is that oral formulation?

Yes, it's an oral formulation of Panzem, very similar to the same formulation that we have now. What I would recommend is to get the latest status, which we do this daily, if there are changes is on our Web site, at www.entremed.com.

OK, all right. Thank you.

Again if you would like to ask a question, please press star followed by the number "1" on your telephone keypad. You have no further questions at this time.

OK, thanks Derek. I would like to end the call and thank everybody for joining us the second earnings call. Thank you.

Thank you for participating in today's EntreMed conference call. This call will be available for replay beginning at 1:30 P.M. Eastern standard time today through 11:59 P.M. Eastern standard time on August 6, 2003. That conference I.D. number for the replay is 189-92-44. Again the conference number is 189-92-44. The number to dial out is 1-800-642-1687 or 1-706-645-9291