CASI Pharmaceuticals Inc (CASI) 2003 Q3 法說會逐字稿

Good morning and welcome to the EntreMed third-quarter 2003 conference call. I am Michelle, and I will be your operator for this event. The conference call leader will be Mr. Neil Campbell, EntreMed's President and Chief Operating Officer. We expect the duration of the presentation to be approximately 15 minutes with a brief question-and-answer period immediately following. (OPERATOR INSTRUCTIONS).

Thank you, Michelle. Good morning and welcome to EntreMed's third-quarter 2003 conference call. I want to thank you for joining me this morning.

Before beginning the call, I remind our listeners that comments made during this call fall under the Private Securities Litigation Reform Act 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 today's call, I will provide an overview of our third-quarter 2003 financial performance and corporate highlights. Next I will discuss our plans to move forward and conclude with a brief question-and-answer session.

Prior to proceeding, I would like to note that our 2002 financials include the operating results for a previously consolidated subsidiary, MaxCyte. Our third quarter 2002 reflects approximately $800,000 in expenses related to MaxCyte. Of this amount, approximately $450,000 were reflected in research and development expenses and $350,000 in general and administrative costs. During the three months ending September 30th, 2003, revenues decreased from approximately $346,000 in 2002 to $258,000 in 2003. This 25 percent decrease from 2002 to 2003 reflects reduced activities associated with our subcontract with the National Institutes of Health. The third-quarter revenues represent the closeout of this contract.

Research and development expenses declined to $3.1 million for the third quarter of 2003. This is approximately a $5.7 million or 65 percent decrease over the comparable period last year. EntreMed's third quarter 2003 decrease in R&D expenses reflects our shift in corporate focus to small molecule programs and in turn decreased costs associated with Endostatin and Angiostatin. This also includes staff reductions.

The third-quarter 2003 general and administrative expenses decreased by approximately $1.4 million or a 45 percent decrease compared to the third quarter of 2002. We had a net loss of approximately $4.6 million for the third quarter of 2003 as compared to an approximate 11.8 million loss for the comparable period in 2002. This represents a decrease of over 60 percent.

Our net loss per share was 15 cents for the quarter ending September 30th, 2003 versus a net loss of 54 cents per share for the same period last year. This meets the street's estimates. As of September 30th, 2003, the Company had approximately $20.7 million in cash and short-term investments. Additionally, we completed an equity transaction for $22.3 million in gross proceeds earlier this week.

Before reviewing the detailed results for the nine months ending September 30th, 2003, I also want to remind our listeners that these 2002 numbers include MaxCyte. For the first nine months of 2002, approximately $2.8 million comprised of $1.6 million in R&D and $1.2 million in G&A expenses were related to MaxCyte. The revenues for the nine-month period ending September 30th, 2003 increased 48 percent to $1.1 million from $715,000 for the same period in 2002. This increased 2003 revenue was primarily due to our $300,000 clinical research grant received during the first quarter of 2003. This grant from the Food and Drug Administration's office of Orphan Products Development provides financial support for our Phase II Endostatin trial in patients with neuroendocrine tumors.

Research and development expenses for the first nine months of 2003 were approximately $9.7 million. This is a decrease of $17.3 million or 64 percent when compared to the same period in 2002. Likewise, general and administrative costs for the first nine months of 2003 decreased by $6.2 million or 55 percent from the same period in 2002. For the nine-month period ending September 30th, 2003, we had a net loss of approximately $13.5 million versus $37.5 million for the same period in 2002. This is a decrease of $24 million or 64 percent. The net loss per share for the first nine months of 2003 was 51 cents versus $1.72 for the comparable 2002 period.

Now let's shift to the third-quarter highlights. During the third quarter, we reached our primary objective for the year, the selection of a new formulation of Panzem. As you know, Panzem is being reformulated to increase its bioavailability -- in other words, the amount of the drug candidates circulating in the blood system. We have identified three formulations that successfully increase the amount of Panzem circulating in the bloodstream by tenfold when compared to the current or old formulation of Panzem in preclinical animal models. Furthermore, the safety profile of these formulations in preclinical models is quite favorable and similar to the current clinical formulation.

I am happy to report that we also continue to be on schedule with the new formulation of Panzem and expect to transition this formulation into the clinic during the first half of 2004. We are pleased with our progress to date and will make further announcements regarding the status of the new Panzem formulation and the clinical trial program at the appropriate times.

Also during the third quarter, EntreMed licensed worldwide rights to the Endostatin and Angiostatin gene to United Kingdom based Oxford Biomedica for the development of a locally delivered gene therapy product to the eye. We have retained the rights to the Endostatin and the Angiostatin gene in applications outside localized delivery to the eye. Also, this deal does not affect the Endostatin or Angiostatin proteins, and we retain full rights to these two drug candidates. We will make further announcements regarding the status of the proteins at the appropriate times.

The next highlight of the third quarter is the addition of Dr. Udo Klein to the EntreMed Senior Management team. As Vice President for Research and Development, Udo is driving the research, development and commercialization of the Company's pipeline. He is a pharmaceutical and biotech veteran with over two decades of industry experience. He is responsible for the Company's small molecule, therapeutics discovery, research and development efforts. Having moved compounds from discovery to product launch, Udo is an expert in evaluating the science, the manufacturing and marketing of new therapeutics. Udo works very closely with our Vice President for Clinical and Regulatory Affairs Dr. Carolyn Sidor in executing the Company's short-term and long-term drug development strategies. Dane Saglio is EntreMed's Chief Financial Officer, and Dr. Jim Johnson serves as a Senior Vice President and General Counsel.

We remain on schedule for the new formulation of Panzem. In the fourth quarter of this year, we expect to manufacture GMP material for the clinical trial starting in early 2004.

EntreMed will also be presenting data at two upcoming scientific meetings. The first one, the AACR-NCI-EORTC meeting being held in Boston on November 18th through the 20th. We will be presenting data regarding the Company's analog program. These data are scheduled to be presented on Tuesday, November 18. At the same meeting on Thursday, November 28, we will be presenting data on the selection of a new Panzem formulation.

EntreMed data will also be presented during the American Society of Hematology's annual meeting or ASH in San Diego, and this is happening through December 6th through the 9th. On Sunday, December 7th, clinical investigators from the Mayo Clinic are scheduled to present data on the Phase II trial using the current or the old formulation of Panzem in patients with relapse or plateau-phase multiple myeloma. Also, on the 7th, EntreMed scientists plan to present data on our Protease Activator Receptor or PAR program. PAR is a cell service receptor that activates inflammatory processes, including those involved in pain, arthritis, asthma, and cancer, and we are developing inhibitors to these properties.

Obviously the last 14 months have been a period of positive change for EntreMed. In 2002, EntreMed had programs in five different areas -- small molecule, proteins, gene new cell therapy, a cell loading and drug delivery technology, and immunomodulators. Utilizing our scientific expertise, we focused our efforts in identifying the key areas in which to build the new EntreMed.

During the reorganization, the Company focused its scientific and financial resources on its small molecule programs. Today EntreMed's core programs are in small molecules with applications in oncology. With our focus firmly on small molecules -- now our core program -- we deem the other four scientific areas to be noncore assets, and to that end, we have begun the process of out licensing these noncore assets. First, we recapitalized and deconsolidated MaxCyte, a cell loading and drug delivery company that was formally a majority owned subsidiary.

Currently we are working to divest our protein programs consisting of four major areas -- Endostatin and Angiostatin currently in Phase II clinical trials, and in two preclinical candidates, human pad assay growth factor and Prostate Specific Antigen. And as such, EntreMed does not plan to further any work with these protein programs, including clinical trials. We are currently seeking alternative channels of commercialization for these projects. We will report further activity about our protein programs at the appropriate times.

As we have discussed earlier, we had out licensed the Endostatin and Angiostatin genes to Oxford Biomedica for one application -- localized delivery to the eye. We are exploring other applications for possible licensing. From our core program small molecules, we have achieved a major milestone -- the selection of the new Panzem formulation. Further, we continue to explore opportunities with pharmaceutical and biotech companies regarding Panzem's possible application in nononcology areas. Our discovery and preclinical work continues with our new chemical entities in the analogs, the peptimomimetic and immunomodulators areas.

During the first half of 2004, we plan to transition the new Panzem formulation into the clinic. We also expect Allergan to initiate Phase I trials with Panzem for eye disease in 2004. We plan to identify IND candidate or candidates from our analog program and to continue our preclinical research with our peptimomimetic program.

In closing, the Company has definitely had a busy and productive quarter. In addition to the highlights discussed today, we have been invited to speak at conferences about EntreMed's new corporate strategy and our small molecule focus. The Company has also had analyst coverage initiated in September, and we continue to speak to the community on a daily basis. I want to reinforce, though, that the EntreMed team has aligned the Company's core scientific and business strengths. We are executing a very focused business strategy. We operate under a system of prudent resource management, fiscal responsibility, and accountability.

Before opening the lines for a few questions, I would like to remind our listeners that further detailed information about EntreMed in general, as well as our third quarter, is available on our Website at www.EntreMed.com and also in our filings with the SEC including this quarter's 10-Q filings.

This concludes my formal comments. Now I would like to take a few questions. Michelle, could you please open the lines?

(OPERATOR INSTRUCTIONS). Reni Benjamin.

Good morning and congratulations on your ongoing progress. Can you remind us if Panzem has any particular designations assigned to it -- orphan drug or fast-track? If not, when do you think you might be applying for that?

Currently the Panzem has orphan drug status designation in multiple myeloma, and as such, we will be also looking at some of the other indications as we move forward with the new formulated Panzem and a new clinical trial program. So we will continue to look at orphan drug status and fast-track designation as part of our clinical strategy moving forward with the new formulation.

Okay. Can you give us some clarity as to the use of the recently paid finances? Will your burn be going up? Will you be end licensing more products? What do you plan on doing?

The financing that was completed on Monday of this week is meant to extend the runway or the amount of months of operation more so than increasing the burn. We are projecting a modest increase in 2004, but again the estimate may change based upon decisions with respect to future clinical trials, based upon success parameters, developments in our business including possible acquisition of additional intellectual property, technology and then also too looking forward in our clinical trial program. So the idea behind this was to put more capital resources behind the Company.

But really that is thirdly because what we're trying to do firstly is prudent resource management, to watch the dollars that we have and spend them appropriately. Secondly, look for nondilutive ways through partnerships such as the Oxford Biomedica, the Allergan and our business models, and then thirdly to access the capital markets as appropriate.

Terrific. Thank you very much.

(OPERATOR INSTRUCTIONS). Jeff Harvey.

Regarding the divestiture of the protein business, is it at the moment your intention to -- as you mentioned, you have out licensed Oxford health for Endostatin for eye disease. Would it be your intention to sell or divest the whole unit or retain some type of royalty from this, or are you really open to anything at this point?

The general business model of the Company is to take what we have learned from our research efforts and find ways to maximize that knowledge outside the areas of oncology, as well as to build value in our oncology franchise. That is true of the small molecules, and it is also true as part of our alternative ways of finding commercialization for the protein program. The Oxford Biomedica is a good example of localized delivery of a gene product to the eye, very similar in concept to the Allergan deal, which was a small molecule delivery to the eye.

Specifically though on the biologics program, we are working to explore alternative ways of having other companies continue the commercialization of the protein programs from the current Phase II programs. And as we have said before, we will be working and making announcements by year-end as it relates to the protein. So at that time, we will make the appropriate announcements. But I can tell you that conceptually -- and we have been saying this all year -- the goal of the deals is to get upfront payment, milestones, royalties on net sales and wherever possible to try to share in some of that upside or uptick on the direct responsibility.

Thank you.

(OPERATOR INSTRUCTIONS). Neil VanHandler (ph).

I, too, want to congratulate you on the successful completion earlier this week of the private placement. It is very comforting to know that you now have what you believe are sufficient funds to carry you through to the early part of 2005. It is also exciting and encouraging to hear about the status on the new formulation of Panzem.

I would like to get back to a clarification on the work that Allergan is doing with Panzem. Will they be using the existing formulation in their initial clinical trials in 2004, or will they be held up for awhile until you give them a new formulation to try?

First of all, I will answer the first part of your question. The financing this week takes us well into 2005. Related to the Allergan, they have been working fairly quickly over the last year and half to final formulation that slowly releases into the eye and certain kinetics so that this procedure can be replaced at a specific time.

With that project, they are working with bulk pansome (ph) material. From that bulk powder, they then do their own formulation process, which then puts us into a biodegradable palette about the size of a grain of sand. It is a different type of formulation approach for the final product. It is very different than the formulation work we are doing for an oral product.

That is great.

To answer your question real quickly, what we're doing with the oral does not affect Allergan or other products.

There are no further questions at this time.

Thank you very much for joining us on the third-quarter conference call. Once again, for further information, you can join our Website at www.EntreMed.com or our recent filings with the SEC.

Thank you and have a good day.

Thank you for participating in today's conference call. You may now disconnect.