CASI Pharmaceuticals Inc (CASI) 2003 Q4 法說會逐字稿

Good morning and welcome to the Entremed fourth-quarter and year-end 2003 conference call. I'm Mike and I will be your operator for this event. The conference call leader will be Mr. Neil Campbell, Entremed 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. At this time, all participants are in a listen-only mode. (OPERATOR INSTRUCTIONS). The slides and audio are available on the Web at www.entremed.com and a replay of the audio portion will be available two hours after the call's end at 888-286-8010 in the U.S. and Canada, or 617-801-6888 internationally. The pass code for the replay will be 17311583. Okay, Mr. Campbell, please proceed.

Thank you, Mike. Good morning and welcome to Entremed's fourth quarter and year-end 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 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 filings under risk factors.

During the call this morning, I will provide an overview of our fourth quarter and year-end 2003 financial performance and corporate highlights, then I will conclude with a brief question-and-answer session. Prior to proceeding, I would like to note that our 2002 financials include the operating results from our previously consolidated subsidiary, MaxCyte (ph). Our results for the fourth quarter reflect approximately $150,000 in expenses related to MaxCyte. Of this amount, approximately $500,000 were associated with research and development expenses, and $350,000 in general and administrative costs.

During the three months ending December 31st, 2003, revenues increased from approximately $462,000 in 2002 to $518,000 in 2003. This 12 percent increase from 2002 to 2003 reflects two primary activities. First, grant revenues from the Food and Drug Administration's office of (indiscernible) products development to support the Phase II Endostatin trial in patients with neuroendocrine tumors; and second, results resulting from our license with Oxford Biomedica.

Research and development expenses were $4.6 million for the fourth quarter of 2003 as compared to $4.2 million for the comparable period of 2002. The $4.6 million for R&D includes the purchase of bulk Panzem material for $1.5 million from our supplier, Axo Nobel. Delivery of this material represents fulfillment of a spring 2002 bulk manufacturing commitment.

Fourth quarter 2003 general and administrative expenses decreased by approximately $800,000, or 28 percent, compared to the fourth quarter of 2002. This decrease reflects a reduction in legal costs associated with the Celgene litigation. During the fourth quarter of 2002, the Company recognized a $2.9 million gain on the sale of an asset to the Celgene Corporation. Also during the fourth quarter of 2002, outstanding liabilities were satisfied with partial cash payments and the issuance of common stock and warrants. As a result of these settlements, we recorded a gain of approximately $2.2 million in the fourth quarter.

The combination of the gain on the Celgene transaction and the liability settlements offset a large portion of our 2002 operating expenses and resulted in a net loss of approximately $1.5 million for the fourth quarter of 2002.

During the fourth quarter of 2003, we had a net loss of approximately $6.2 million. The net loss per share was 18 cents for the quarter ending December 31st, 2003, versus a net loss of 7 cents per share for the same period last year. As of December 31, 2003, the Company had approximately $36.8 million in cash and short-term investments.

Before reviewing the detailed results for the 12 months ending December 31, 2003, I remind our listeners that the 2002 numbers include MaxCyte. For 2002, approximately $3.7 million in operating expenses, comprised of $2.1 million in R&D and $1.6 million in G&A expenses, were related to MaxCyte. Additionally, our 2002 results reflect an interest accrual of approximately $500,000 related to convertible debt issued by MaxCyte.

Revenues for the 12-month period ending December 31, 2003 were $1.6 million versus $1.2 million for the same period in 2002. As previously discussed, these revenues are primarily from an FDA grant and the Oxford BioMedica license. Research and development expenses for the 12 months of 2003 were approximately $14.3 million. This is a decrease of $17 million, or 55 percent when compared to the same period in 2002. This decline reflects our shift in corporate focus too small-molecule programs and, in turn, decreased costs associated with Endostatin and Angiostatin, including staff reductions.

Likewise, general and administrative cost for the fiscal year of the fiscal year 2003 decreased by $6.9 million or 50 percent from 2002. The decreases associated with the reduction in staff, the absence of stock repurchase obligations of Bristol-Myers Squibb and the reduction in legal costs reflecting the settlement of the Abbott and the Celgene litigations. For the 12-month period ending December 31, 2003, we had a net loss of approximately $20.5 million versus $39 million for 2002. This decrease of $18.5 million, or 47 percent, results from our shift in corporate focus to our current drug pipeline. The net loss per share for 2003 was 68 cents versus $1.78 for the 2002 period. The reduction results from decrease in overall losses and an increase in shares outstanding.

In early 2002, Entremed had five very different drug development programs -- small molecules, immunomodulators, proteins, gene and cell therapy and a cell loading and drug delivery platform. During the second half of 2002, the new management team analyzed the Company's scientific discoveries and capabilities and prioritized the drug candidates pipeline. The outcome of this activity was to focus Entremed's work on small-molecule therapeutic. In late 2002, we reorganized the Company to direct our scientific and financial resources on our small-molecule programs and began a period of transition which is now complete. Today, Entremed's core programs are small molecules with applications in oncology, and we are exploring potential applications outside the field of oncology.

We also proactively decided to continue work on our immunomodulator programs and are currently evaluating external development opportunities, most likely but not limited to, a co-research and co-development partnership. With our focus now firmly on small molecules, our core programs, we began the process of outlicensing and/or transferring our other programs, which we considered to be noncore assets.

First, we recapitalized and de-consolidated MaxCyte, a cell loading and drug delivery company that formerly was a majority-owned subsidiary. MaxCyte now is an independent private biotech company where Entremed retains an equity position.

Second, we outlicensed the Endostatin and Angiostatin genes to Oxford BioMedica of the United Kingdom for a single application -- localized gene-based delivery to the eye. This project is moving along, and the next milestone will be an IND filing by Oxford BioMedica. Oxford will make the announcement at the appropriate time regarding any activities in that program alliance.

Next, we transferred our licensed rights to the proteins Endostatin and Angiostatin. The further development of Endostatin and Angiostatin is being continued by the Children's Medical Center Corporation, or CMCC in Boston, and Alchemgen Therapeutics, a Houston-based, privately held by a pharmaceutical company. Alchemgen holds the exclusive rights to develop, make and market Endostatin and Angiostatin in Asia, and Children's holds the licensing rights for the rest of the world. All patients currently receiving Endostatin and Angiostatin in ongoing clinical trials continue to be treated.

As part of this license transfer, Entremed has received an upfront cash payment from Alchemgen and will receive a future cash payment as well as royalty payments on any future sales in Asia only. Alchemgen will also reimburse Entremed for all costs associated with the transfer of Endostatin and the Angiostatin programs. Additionally, Entremed will receive 20 percent of all future proceeds, such as upfront, milestone and royalty payments, resulting from any subsequent children's license for Endostatin and Angiostatin outside of Asia, termed rest of the world. The rest of the world is comprised of European and North American markets, which are the predominant sales regions for pharmaceuticals. If these drug candidates are approved in markets for the rest of the world, the 20-percent rights and future licensing proceeds may be significant.

With the proteins now transferred, Entremed's pipeline is clearly focused on small molecules. In addition to our work with Panzem and oncology, ophthalmology and other non-oncology applications, we are moving forward with other new chemical entities, such as analogs of 2ME2, protease-activated receptor or PAR 2 inhibitors, tissue factor pathway and other new chemical entities for oncology and inflammation, and our ENMD 0996 immunomodulator program. These compounds were discovered and are being developed internally by Entremed scientists. The intellectual property rights for these programs reside with the Company and in turn, significantly lessens the obligation to make future milestone, royalty and/or licensing payments. Entremed will also look for in-licensing opportunities to complement existing drug pipeline.

Now we turn to our 2004 planned activities for our pipeline. First, we expect to have a new formulation of Panzem in the clinic during the first half of 2004. Our current efforts are moving along, and we will make the announcements at the appropriate time. Allergan continues its own in-house preclinical work with Panzem for applications and localized delivery for ophthalmology, with a preliminary lead indication remaining age-related mac degeneration. Allergan will make announcements regarding the project at the appropriate time. Entremed's discovery group, along with outside collaborators are researching other possible non-oncology applications with Panzem for outlicensing opportunities.

With our analog program, we expect to identify an IND candidate in oncology. Entremed scientists working on the part II program plan to move compounds into preclinical testing this year. And our discovery team continues to work with TSPI and other new chemical entities for possible applications in oncology and inflammation. Outlicensing or co development opportunities are being explored for our immunomodulators program, ENMD 0996.

Now let's move to fourth quarter highlights. At the AACR NIH ERTC meeting in November, we presented preclinical data on our new Panzem formulation. Entremed scientists released data demonstrating an increase in tumor inhibition, as well as an increase in bioavailability when the new Panzem formulations were tested in animal models. The new Panzem formulations showed a similar safety profile to the current clinical formulation with no evidence of new toxicities in preclinical models. We anticipate that a new Panzem formulation will enter the clinic during the first half of 2004. We also presented preclinical data on our 2ME2 analog program during AACR NIH ERTC meeting. Entremed's discovery group is currently designing new molecules by modifying the chemical structures of 2ME2 and synthesizing molecules with combinations of these modifications.

The preclinical data demonstrated improved in-vitro anti-proliferative activities in tumor and in (indiscernible) cells. The compounds also had good oral pharmacokinetic and pharmacodynamic profiles and, as previously mentioned, we plan to identify an IND candidate from this program.

In December, our protease-activated receptor, or part II inhibitor program, was highlighted at the American Society of Hematology's annual meeting. During this meeting, Entremed scientists presented preclinical data on two important discoveries. First, that PAR-2 plays a critical role in tumor growth and angiogenesis; and, second, Entremed scientists have designed the first compounds known to specifically inhibit PAR-2 in preclinical models. We are using a peptide as a template to design a more potent small molecules mimetic to block the PAR-2 signaling. We are currently evaluating the PAR-2 program for potential applications in cancer and inflammatory disease.

In addition to the progress of our research and development efforts in the fourth quarter, the Company's financial position was strengthened to the November equity transaction that grossed Entremed $22.3 million. Also in the fourth quarter in October, Dr. Udo Klein, a seasoned pharmaceutical and biotechnology professional, joined the Entremed management team as vice president for research and development. Udo is responsible for the company's discovery, research and development efforts and for executing the Company's short-term and long-term drug development strategies. With over 20 years of industry experience, he had moved compounds from discovery to product launch.

At upcoming scientific meetings this spring, the Company has had three abstracts accepted for post recessions (ph) during the American Association for Cancer Research annual meeting to be held March 27 through 31st in Orlando, Florida. Entremed scientists will be presenting preclinical data on our analog program, the new Panzem formulations and ENMD 0996 immunomodulators program. As of this date of this conference call, Entremed has no planned presentations for the American Society of Clinical Oncology's annual meeting, to be held this June in New Orleans, Louisiana.

Now, before opening the lines for a few questions, I would like to remind our listeners that further detailed information about Entremed in general and a fourth quarter and year-end is available on our newly designed web site at www.Entremed.com, and also in our filings with the Securities and Exchange Commission.

Now, this concludes my formal comments. Mike, I would like now to take a few questions, if you could open line, please.

Pease for all the listeners on the conference call, we seem to have an operator technical issue. Please stand by for Q&A.

This is Neil Campbell, and I apologize. We seem to have lost the technical line from our investor groups that have connected onto the phones, so we will be terminating the conference call. I want to thank you very much for attending this morning's conference call on the fourth-quarter and year-end 2003 for Entremed. For further information, please refer to www.Entremed.com, our newly designed web site, where you will find a lot of information, and then also too, our filings with the Securities and Exchange Commission on EDGAR. Thank you very much.