CASI Pharmaceuticals Inc (CASI) 2004 Q2 法說會逐字稿

Good morning, and welcome to the EntreMed second quarter earnings conference call. My name is Bernie, and I will be your operator today. This call will be hosted by EntreMed President and CEO, James S. Burns. The call duration will be approximately 20 minutes, followed by a question-and-answer session. (Operator Instructions). I would like to turn the presentation over to Mr. James Burns.

Good morning ladies and gentlemen. This is Jim Burns. And I want to welcome you to EntreMed's second quarter 2004 conference call. Thank you for joining us today.

Before beginning the call, I would like to 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 his 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 2004 financial performance. Next, I will update you on the Company's financial and pre-clinical programs, followed by some thoughts on my first month and a half here at EntreMed and how I intend to move the Company forward. Then we will conclude with a brief description -- question-and-answer session.

Before I begin my formal presentation, I would like to make a few comments about my role and expectations in accepting the EntreMed CEO assignment. I took this assignment for one simple reason -- EntreMed represents an opportunity. For me, it is an opportunity to build the Company and further the commercialization of products based on a strong, scientific foundation.

My 25 years in the pharmaceutical and biotech industry have focused on a common theme, which is to build -- whether it is a product line, a new technology, or an entirely new business. My intent is to build EntreMed for the future. This is the mandate I have also received from the EntreMed Board.

Next, EntreMed represents an opportunity to commercialize therapeutic compounds based on the Company's angiogenesis expertise. We have a strong scientific foundation in angiogenesis, and I plan to build our commercial strategy upon that foundation. Since joining, I have learned that EntreMed also has a solid core of talented employees, providing the necessary support for building the Company.

Finally, I plan to strengthen the Company's financial position and our long-term business outlook. I believe in the prospects for EntreMed, and have already purchased shares in the open market to back up my belief in the Company. We have the opportunity and the will to re-create value in EntreMed. And I hope that the market will come to recognize this value.

Now, I would like to turn to the formal presentation, starting with a review of our second quarter financial performance. During the 3 months ending June 30, 2004, revenues decreased from approximately $286,000 in 2003 to $139,000 in 2004. The second quarter 2004 revenue represents amortized licensing fees from our agreements with Alchemgen and Allergan.

The 2003 revenues resulted primarily from two sources -- 1, a grant received supporting our Endostatin Phase 2 clinical trial in patients with neuroendocrine tumors; and 2, contract revenues resulting from performance of the subcontractor under an NIH-sponsored malaria vaccine program. During the second quarter of 2004, we did not receive any grant or NIH subcontract revenues.

Research and development expenses were approximately $2.5 million for the second quarter of 2004, as compared to $3.9 million for the same period of 2003. The majority of the 2004 R&D expenses are related to our ongoing clinical trials with Panzem, and our to 2ME2 analog program. The higher 2003 R&D expenses resulted from the acquisition of both 2ME2 drug material, used to support ongoing clinical trials, and our reformulation activities.

Second quarter 2004 general and administrative expenses were approximately $2 million, versus $1.7 million in the second quarter2003. Net loss per share was 12 cents for the quarter ending June 30, 2004, versus a net loss of 19 cents per share for the same period last year.

The increase in the Company's outstanding shares from approximately 28.6 million in the second quarter of 2003 to approximately 37 million in the second quarter of 2004 is the result of our November 2003 equity transaction.

As of June 30, 2004, the Company had approximately $26.4 million in cash and short-term investments.

Now I would like to draw your attention to the 6-month financial results. Revenues for the 6-month period ending June 30, 2004 were approximately $237,000 versus $799,000 for the same period in 2003. And as discussed previously, the decline in 2004 revenue is due to the absence of grant and collaborative research revenues.

Research and development expenses declined from $6.4 million for the first 6 months of 2003 to $5.4 million for the same period in 2004. This decline results from reduced 2004 expenditures on Endostatin and Angiostatin, as well as the purchase of bulk 2ME2 drug substance in 2003. The majority of our 2004 R&D expenses are related to Panzem and our 2ME2 analog program.

General and administrative costs for the first 6 months of 2004 were approximately $4 million, as compared to $3.3 million for the comparable 2003 period. The change from 2003 to 2004 results from increased costs for professional services related to Sarbanes-Oxley, NASDAQ, and SEC compliance; executive management changes; and costs associated with settling certain disputes. The net loss per share for the first 6 months of 2004 was 26 cents, versus 36 cents for the comparable 2003 period. This concludes the financial overview of our second quarter and first 6-month period.

Now I would like to update you on the status of our lead clinical candidate, Panzem, as well as progress on our pre-clinical programs. Panzem, also known as 2-Methoxyestradiol, or 2ME2, has been administered in a capsule form to 167 oncology patients with a variety of cancers, including breast cancer, prostate cancer, and multiple myeloma.

With patients on therapy for up to 2 years, Panzem capsules have been well tolerated, with no dose-limiting toxicity. Additionally, clinicians reported evidence of therapeutic activity with the Panzem capsules, including partial responses and a complete response in a breast cancer patient in combination with Taxotere. Likewise, clinicians reported patients with stable disease, as well as signs of clinical benefit.

We continue to see anti-tumor activity in pre-clinical animal models, representing other indications such as non small cell lung cancer. Also using animal models, we have established a therapeutic dose range. Equally as important as our clinical data and our work in pre-clinical models is our research to expand our understanding of Panzem's multiple mechanisms of action.

Panzem affects many different cellular pathways at a molecular level, and for that reason may hold strong therapeutic potential. Panzem blocks tumor growth through direct anti-tumor actions, as well as indirect anti-angiogenic effects.

EntreMed scientists, in collaboration with outside researchers, have discovered 3, but possibly co-dependent mechanisms of action. First, Panzem turns on increased levels of death receptor 5, or DR 5, that are located in the surface of tumor cells. In turn, this increase in DR5 triggers program cell death, or apoptosis.

Secondly, Panzem disrupts microtubules, the scaffolds of cells that actively participate in cell division. This results in both anti-tumor and anti-angiogenic effects. While some chemotherapeutics and disrupts microtubule formation, Panzem it is unique in lacking clinically significant side effects such as myelosuppression, which is commonly associated with this class of drugs.

Lastly, Panzem's mechanism of action relates to the compound's ability to down regulate at hypoxia-inducible factor 1 Alpha, or HIF-1 Alpha, a factor involved in angiogenesis. When compared to Taxol with (indiscernible) in pre-clinical models, Panzem was shown to be more potent HIF-1 Alpha inhibitor.

It is also important to note that HIF-1 is a factor that is over-expressed in more than 70 percent of human cancers. And based on evidence of therapeutic activity in patients, strong pre-clinical anti-tumor activity, and multiple mechanisms of action, we believe that Panzem has good therapeutic potential.

Now to enhance this potential, Panzem needed reformulation to increase its bioavailability, or the amount of 2ME2 that is circulating in a patient's blood. The Panzem reformulation process involved 27 different formulations from 8 vendors. We performed specific pre-clinical tests on each formulation to evaluate, pharmacokinetics, efficacy in pre-clinical tumor models, and toxicology.

And based on those pre-clinical results, we tested 3 formulation approaches in healthy human subjects -- a capsule, a liquid, and a liquid suspension. The goal of this clinical study was to determine pharmacokinetics and safety for each of the 3 formulation approaches.

Next, we carried out an analysis of pre-clinical and clinical data for each formulation approach. In pre-clinical models, the new formulation has demonstrated enhanced anti-tumor effects associated with higher plasma levels, with no increase in toxicity.

Similarly, in healthy human subjects, no additional 2ME2 related toxicities were observed. The liquid suspension approach demonstrated the most improved pharmacokinetic profile. And a single dose of the liquid suspension produced a fivefold increase in peak plasma levels.

And based on the half-life of the drug product, cancer patients at our upcoming trials will receive a dose of Panzem in an oral liquid suspension format, most likely every 6 hours, to maximize exposure time in the potential therapeutic range.

Now, having decided to move forward with the liquid suspension, our first step was to optimize the formulation. We reviewed many technologies, and selected NanoCrystal colloidal dispersion, or NCD, based on the technology's proven commercial track record. NCD is a patented technology of Elan drug delivery, and as we announced a few weeks ago, Elan will produce the reformulated Panzem that will be used in our 2005 clinical program.

Two marketed drugs, Wyeth's Rapamune and Merck's Emend, are formulated with Elan's NCD. Likewise, other companies have licensed the NCD technology. NCD produces nanometer-sized particles that are up to 50 times smaller than particles manufactured by conventional milling processes. And according to Elan, the pharmacokinetic properties of NCD include enhanced absorption, distribution, metabolism, and excretion of the compound.

In our upcoming trials, Panzem NCD will be supplied to cancer patients as a liquid in bottles, much like over-the-counter medications. Patients will be taking a few teaspoons of Panzem NCD, most likely every 6 hours, and storing the product in their refrigerators at home.

With our Elan clinical supply agreement in place, we are now working on a number of activities in preparation for our upcoming clinical trial program with NCD. In accordance with our Elan agreement, Elan is conducting long-term drug stability studies and producing clinical GMP genetic material.

A drug masterfile will be submitted by Elan to the Food and Drug Administration, covering the manufacturing process. We also must submit a clinical amendment to the existing Panzem IND to provide information on our planned clinical studies. And we will make further announcements once we have completed this preparatory work and the institutional review board process at the proposed clinical sites.

In conjunction with our clinical activities, we continue to evaluate Panzem NCD in pre-clinical models to identify anti-tumor activity in combination with other chemotherapeutic agents, and to further our understanding of Panzem's mechanism of action.

All of our Panzem NCD activities remain on schedule. And we expect to begin clinical trials in patients with various types of advanced cancer in early 2005. The clinical data collected from these upcoming trials will determine the specific indications to be pursued in subsequent Panzem NCD studies.

At this time, we are considering indications such as breast cancer, prostate cancer, ovarian cancer, renal cell carcinoma, glioma, and multiple myeloma. And based on our discussions with our investigators conducting the Phase 2 multiple myeloma trial, the 6 patients currently receiving the capsules will continue with that Panzem formulation. And a separate new trial is being planned with Panzem NCD.

Next, I would like to update you on 2 pre-clinical programs, beginning with the 2ME2 analogs. These compounds have been discovered by EntreMed scientists, and the intellectual property is owned by the Company.

Three other 2ME2 analogs have been identified for possible oncology applications, and in pre-clinical models, these compounds demonstrated reduced rates of metabolism and improved pharmacokinetics. They also showed improved anti-tumor activities by inducing apoptosis, targeting microtubules, and inhibiting HIF-1 Alpha. We will be conducting IND directed studies with one of these 2ME2 analogs beginning sometime in the fourth quarter.

The next pre-clinical compounds out of the EntreMed pipeline is ENMD 0996, a vaccine product candidate that was also discovered at, and is owned by, the Company. ENMD 0996 is thought to block the activities of basic fibroblast growth factor, or FGF-2. And FGF-2 is a known promoter of both angiogenesis and tumor growth.

3 months following administration of ENMD 0996, pre-clinical animal models showed an inhibition of metastases. We saw no evidence of toxicity in the pre-clinical models, or any negative effect on wound healing or reproduction. The next steps in the ENMD 0996 program are to conduct further pre-clinical oncology studies and to explore internal or external development opportunities.

As outlined in our pipeline slide, we also have compounds in discovery, as well as the clinical and pre-clinical programs that I have discussed so far. If you would like more information on these programs, please visit our website at www.EntreMed.com.

I would like to conclude my presentation today with some comments on where I believe the Company is situated today, and some preliminary thoughts on where I believe we should be heading in the future.

First, where are we today? As I mentioned my opening remarks, I believe EntreMed represents an opportunity to further the commercialization of products based on our established scientific platform. As a first step, I have assessed the capabilities of the organization to complete the transition from science to development and commercialization.

And I have asked myself some of these questions -- are we focused on the right goals? Have we prepared adequately for the clinical development of Panzem NCD? Are our clinical programs making sufficient progress? Are these programs resourced adequately? Do we have the core capabilities to achieve our milestones? And do we have the team to provide the foundation for future growth?

So with regard to the first question, I believe that we are on track to commence clinical trials of Panzem NCD in early 2005. The manufacturing of Panzem NCD is underway with Elan, the clinical sites have been selected, and we will be moving forward in the fall to update our IND and secure the necessary IRB approvals.

In keeping with our focus on development and commercialization, we are placing additional emphasis on key pre-clinical programs such as the 2ME2 analogs. And to make sure that we have adequate funding on both our clinical and pre-clinical programs, we will be de-emphasizing our discovery research efforts with new chemical entities, and reducing certain non-essential operating expenses.

The emphasis on product development and commercialization will also require that we add some skills to the organization that will be necessary to carry out this transition, such as program management, regulatory affairs, and formulation development.

In addition, this fall, our R&D team will undergo further training in project management techniques, those skills essential for managing clinical and pre-clinical studies involving multiple organizations and development partners. While I don't have the answers to all the questions that either I still have, or I'm sure many of you have, I do believe that EntreMed is moving in the right direction, with an experienced core team, a solid product development effort, and adequate funding for our current programs.

At this point, I am comfortable with the guidance that management has provided, particularly as to Panzem NCD clinical trials. And I assure you that we are working diligently to meet and achieve these milestones.

So as -- where we go from here, let me share with you some of my preliminary thoughts on EntreMed's future direction. I have emphasized at several points in today's presentation that EntreMed is moving from fundamentally a research organization to that of a product development and commercialization organization. I intend to continue and complete that effort.

Secondly, EntreMed will not abandon its research heritage in angiogenesis and related mechanisms that have provided the backbone for the Company's pipeline. Rather, we will utilize and add to this expertise in order to develop other products over time, both for our own account and in partnership with other biotech and pharmaceutical companies.

We will expand our clinical capabilities to support a more robust clinical pipeline. Our understanding of the mechanisms that inhibit angiogenesis, induced tumor cell death, and reduce inflammation provide the focal point for future products in both oncology and inflammation.

Angiogenic inhibitors such as Avastin are just beginning to come to market. And the future for these products appears bright. I would like to see EntreMed become a key player in this arena.

While our clinical and pre-clinical product candidates are promising, EntreMed needs additional product candidates, both to create shareholder value and to mitigate the risks associated with the development of new drugs.

And finally, we will seek product acquisitions, co-development alliances, and in-licensing opportunities that play directly to building a broader portfolio of late pre-clinical and clinical product candidates. At a later date, I will provide further insight on this aspect of our commercialization effort.

So thank you all very much for participating in today's presentation. And I do look forward to providing future updates on our progress with Panzem and our other product candidates. Now, before opening the lines for a few questions, I would like to remind our listeners that you can find further detailed information's about EntreMed in general, and our second quarter in particular is available, on our Web site, again, at www.EntreMed.com, and also in our filings with the SEC.

So this concludes my formal comments for today, and now I would like to take a few questions. Operator, could you please open the lines?

(Operator Instructions) Ren Benjamin, Rodman & Renshaw.

Congratulations on your ongoing progress. A couple of quick questions -- the cash that you have on hand -- you have 26.4 million. How long do you think that will last? And obviously, you are going to continue to watch your burn. But how long do you think this will last?

Well, in addition to watching our burn, and based on anticipated inflows of cash, we anticipate having sufficient cash resources to last us through 2005.

What sort of inflows do you expect?

I am going to let Dane Saglio, our CFO, addressed those items specifically.

Contractually, we are entitled to some payments under both the Allergan and the Royalty Pharma agreement when we sold the thalidomide Royalty Stream back in 2003. Those are based on -- triggers that are based on our thalidomide sales and also certain patent issuances under the Allergan agreements. And we reasonably anticipate those to occur in the next 12 months.

In the next -- how many months?

12.

12 months, okay. Great. Thank you. One question has to do with the 6 patients that are currently on Panzem. Are these multiple myeloma patients? Are they refractory patients? And what sort of responses are we seeing?

Ren, I am going to refer the question to Dr. Carolyn Sidor, our Vice President of Clinical and Regulatory Affairs. Carolyn, can you take this?

Sure. Good morning. The 6 patients that remain on the multiple myeloma trial are a mixture of individuals having both refractory or relapsed multiple myeloma, and some with what we call plateau phase multiple myeloma, which were the 2 types of patients that were allowed into this study.

In terms of response, again, the trial is ongoing. Those patients remain under care and under treatment. We really cannot comment on the response information until they complete their therapy.

And just for clarification -- they are on the new formulation? Is that correct?

No. Those patients are receiving the capsules, the old formulation. Some of them have been on therapy for more than 2 years.

Okay, great. Thank you. And then finally, can you go through the upcoming milestones that we can expect from the Company? Any presentations at conferences in the fall -- maybe a little bit more clarity as to when the clinical trials are expected to start, anything along those lines --?

In terms of milestones, the key milestones that I am monitoring right now are obviously getting Panzem NCD into the clinic. So we are anticipating that one early 2005, as we have reported and reiterated in our guidance. I will be speaking at the Rodman & Renshaw investor meeting at the end of October. In the fourth quarter, we will also be moving along with pre-clinical studies on at least one of our analogs.

Any presentations at scientific meetings?

Ren, this is Carolyn. There will be a poster presented at the NCI/EORTC/AACR meeting that is going to be held in Europe in the fall. That will be on the Panzem NCD formulation. We do not anticipate anything for ASH this year, because the abstract deadline is now.

Okay. And how about publication-wise?

We anticipate that our investigators for the multiple myeloma trial will want to publish their data as soon as they have completed their accrual. And that could be this year or next year, depending upon how well the patients do. So that a publication would be upcoming.

(Operator Instructions).

Any other questions, ladies and gentlemen? If not, at this point, I would like to conclude the proceedings for today. Thank you very much again for your participation. And we look forward to the next earnings call next quarter, and reporting on continued progress. Thank you so very much.

Ladies and gentlemen, thank you for your participation. This concludes your conference call. You may now disconnect.