CASI Pharmaceuticals Inc (CASI) 2004 Q3 法說會逐字稿

Good morning and welcome to EntreMed's third quarter 2004 recap conference call. At this time, all participants are in a listen only mode. There will be a question and answer session prior to the conclusion of the call.

It is now my pleasure to turn the call over to your host, Mr. James S. Burns, EntreMed's President and CEO. Sir, you may begin.

Thank you and good morning everybody. Welcome to our third quarter 2004 conference call. This quarterly conference call represents a departure from our past practices in which we updated shareholders concurrently with the release of our quarterly earnings statements. However, going forward we'll hold quarterly updates independent of our earnings releases in order to concentrate on describing EntreMed's progress as to its clinical and business development activities.

Joining me for the call today is Mr. Dane Saglio, Chief Financial Officer, and Dr. Carolyn Sidor, our Vice President and Chief Medical Officer.

Before we begin the call, I would like to remind our listeners that statements made during the call fall under the Private Securities Litigation Reform Act, and statements herein that are not descriptions of historical facts are forward-looking and subject to risks and uncertainties.

And actual results could differ maturely from those currently anticipated due to a number of factors, including those set forth in the Company's Securities and Exchange Commission Filings.

The purpose of today's call is to recap our research and development activities for the third quarter 2004, as well as upcoming milestones and business objectives. At the conclusion of the update, the phone lines will be open for questions.

Now, as most of you know by now, I joined EntreMed in June 2004 and set goals for clarifying our business model, sharpening our focus, completing our transition to a development organization and building a sustainable oncology inflammation (ph) franchise.

As a first step in achieving those goals, we developed a near-term action plan that is well underway. And these involve streamlining operations, reinforcing fiscal management procedures, strengthening the management team, concentrating resources on our leading clinical product Panzem and our key pre-clinical programs.

In the process of streamlining our operations, we have reduced nonessential G&A expenses and have redirected those funds to promising pre-clinical programs. Nonrecurring G&A expenses associated with the Company's management changes and compliance with Sarbanes-Oxley are largely behind us now. Lower overall expenses in the second half of 2004, plus anticipated cash inflows, should provide us with sufficient capital to meet our anticipated 2005 budget.

I believe these operational actions, together with clear program objectives, provide a solid foundation upon which we can build the Company in 2005.

Now as our technology has evolved, so also has our mission. And today, our mission is focused on the development of a new generation of small molecule multi-mechanism drugs for the treatment of cancer and inflammatory disorders by targeting disease cells directly in the blood vessels that nourish them.

Our product candidates reflect an orientation toward target drugs that attack multiple disease pathways, including angiogenesis inhibition, which is a core technical competence of the Company and has been so since its inception.

I would now like to turn the call over to Carolyn Sidor, who will review the status of our lead clinical stage cancer drug candidate and the pre-clinical programs that we have undergoing in cancer and inflammatory diseases.

Thank you Jim. Good morning to all of our listeners. Our lead product candidate, Panzem, also referred to as 2-Methoxyestradiol, or 2ME2, is an orally-active, well tolerated anticancer agent that has both anti- (indiscernible) and anti-angiogenic properties.

Panzem is part of new generation of cancer drugs that bind to tubulin and work through multiple cellular pathways, attacking tumor cells directly to induce programmed cell death, or apoptosis, blocking blood vessels that feed them and angiogenesis inhibition, and by disrupting microtubules, an intracellular matrix necessary for the rapid division of cancer cells.

Attacking tumors on multiple fronts is important, since both cancers have 5 to 10 or more adaptive survival mechanisms. Tumor cells can mutate around 1 or several molecular signals, which can result in drug resistance.

Specifically, 2ME2 induces cell death by up-regulating death receptor 5, or DR 5, on the surface of tumor cells; blocks tumor cell divisions by disrupting the microtubules necessary for mitosis; and inhibits HIF-1 Alpha, a pro-survival transcription factor.

EntreMed scientists believe that 2ME2 may be one of most potent inhibitors of HIF-1 Alpha, which is overexpressed in more than 70 percent of human tumors and responsible for maintaining cancer cell growth under very low oxygen conditions typical in solid tumors.

Overexpression of HIF-1 Alpha correlates with tumor aggressiveness, metastasis and poor prognosis in multiple tumor types. HIF-1 Alpha is also an upstream regulator of growth factor VEGF (technical difficulty) and may therefore affect a different or broader range of tumors than VEGF inhibitors.

We believe Panzem has the potential to be a unique cancer therapy and may be particularly suited to attack tumors dependent on HIF-1 Alpha for survival. We are continuing to investigate 2ME2 tubular and HIF-1 Alpha mechanisms, both in-house and with our external collaborators.

For additional information on the role of HIF-1 Alpha inhibitors, I would like to draw your attention to a recent review paper by Escuin, et. al. in the July issue of Cancer, Biology and Therapy. You may also visit the Therapeutics Pathway section of our Web site at www.EntreMed.com for further information, and sometime later this quarter, a bibliography on tubulin inhibitors.

To date, Panzem capsules, our initial 2ME2 formulation, have been administered to 168 patients with advanced cancers, including breast cancer, prostate cancer, and multiple myeloma.

Panzem has been well tolerated for up to two years in these Phase I and II trials with no dose-limiting toxicity. Clinicians have reported evidence of therapeutic activity with Panzem capsules, including partial responses and a complete response in a breast cancer patient in combination with Taxatere.

Additionally, clinicians have also reported patients with stable disease as well had (ph) (technical difficulty) signs of clinical benefit in breast, prostate and ovarian cancer patients. For further detail on our clinical activity, visit the Clinical Trials section of our Web site.

We continue to observe anti-tumor activity in pre-clinical animal models, representing other indications such as non-small cell lung cancer, and have also been able to establish a therapeutic does range in these models.

A new clinical formulation of 2ME2, known as Panzem NCD, has been developed with the goal of improving clinical outcome by further enhancing file (ph) availability. Through Elan's proven NanoCrystal dispersion technology, we will be able to increase the drug candidate's surface area at (ph) (technical difficulty) 50 times more than conventional processes. We entered into a clinical supply agreement with Elan in July of 2004. And the manufacture of Panzem NCD clinical material is taking place this quarter.

Panzem NCD will be used in further clinical trials in advanced cancer patients. And we remain on target for moving Panzem NCD into the clinic, and expect these trials to begin in early 2005. Patients will take a few teaspoons of liquid Panzem NCD supplied in convenient over the counter style bottles. Date of release in prior clinical studies, as well as ongoing pre-clinical studies, will determine the specific does and indications for further multi-center trials.

EntreMed has also developed a pipeline of pre-clinical product candidates with a strong intellectual property position. And we retained full ownership of these product candidates. Our pre-clinical product candidates include analogs of 2ME2, an FGF2 cancer vaccine, TFPI peptides and PAR-2 inhibitors, which are showing promise for treating both cancer and inflammatory diseases.

The goal of our analog program has been to develop the next generation of 2ME2-like drugs with improved anti-angiogenesis, enhanced pharmacokinetics, and comparable or better anti-tumor properties. We have identified 3 such analogs of potential cancer drug candidates.

In pre-clinical models, these compounds have demonstrated improved pharmacokinetic and anti-tumor activity while retaining the mechanism of action for inducing apoptosis, binding to microtubules, and inhibiting HIF-1 Alpha. We expect to select at least 1 of these compounds for IND-directed studies in early 2005.

EntreMed's FGF-2 cancer vaccine candidate has been shown to prevent the development of tumor metastasis in animal models. Our scientists were the first to demonstrate that a growth factor vaccine can inhibit tumor development.

EntreMed's FGF-2 cancer vaccine candidate induces both cellular and antibody responses, and has been shown to inhibit FGF-2 driven angiogenesis and long-term inhibition of metastasis after vaccination in animal models. The FGF-2 cancer vaccine has no adverse effects on wound healing, reproduction or organ development in these pre-clinical studies.

This is a key pre-clinical program which we expect to move forward into IND-directed studies during the first half of 2005.

Proteinase activated receptor 2, or PAR-2, is expressed on the surface of multiple cell types and is up-regulated dramatically during inflammation. PAR-2 peptide in small molecule antagonists have been developed by EntreMed that inhibit angiogenesis, block tumor growth and attenuate inflammation in multiple animal models.

Our PAR-2 inhibitors have shown promise in multiple animal models of inflammation. And we are investigating their potential disease modifying arthritic (ph) drug or DMARD activity. We believe that our PAR-2 inhibitors represent promising IND selection candidates. And we'll update you on the progress as the data becomes available.

We are accelerating our tissue factor pathway inhibitor, or TFPI program. TFPI is a naturally occurring and anti-coagulant protein that inhibits both tumor growth and angiogenesis. EntreMed scientists have identified a TFPI peptides fragment that maintains the anti-tumor and anti-angiogenic activities of the natural protein without adversely affecting normal blood clotting.

EntreMed's peptide remains a promising step forward in overcoming the limitations that have previously prevented development of TFPI as an anticancer drug. Recently, we announced a collaboration with Affymax, a leader in the development of peptide drugs, to identify and develop novel peptides based on EntreMed's TFPI technology with the goal of generating lead TFPI cancer drug candidates. Our collaboration with Affymax is now fully operational, and the identification of TFPI peptides is underway.

Thank you Carolyn. And now I would like to turn the call over to Dane Saglio, our CFO, who'll provide a brief overview of our current financial position.

Thank you Jim. On November 9, we filed our report containing financial results for the 3 and 9-month periods ending September 9, 2004 on Form 10-Q. For the third quarter of 2004, we reported a loss of 3.1 million or 9 cents per share versus a loss of 4.6 million or 15 cents per share for the comparable 2003 period.

For the 9 months ending September 30, we reported a loss of 12.4 million or 35 cents per share, versus a loss of 13.5 or 51 cents per share for the same 9-month period in 2003.

The results of each period reflect the Company's commitment to practical resource management in the absence of significant clinical costs for Panzem. Our 2003 efforts were focused on product reformulation. And our 2004 efforts have been directed towards optimizing the NCD formulation for clinical trials scheduled in early '05.

The cost of manufacturing Panzem NCD clinical material and the start up of the clinical -- start up costs for the clinical trials will be reflected in our fourth quarter 2004 financial results.

We currently expect net operating expenditures for '04 to total approximately 18 million. Also reflected in our 10-Q filing -- our cash and short-term investments of approximately 23.4 million. We believe that this, coupled with certain inflows from contractual arrangements, will be sufficient to fund planned operations through 2005.

Of particular note is an anticipated $3 million inflow relating to a purchase price adjustment triggered by meeting a cumulative Thalidomide sales milestones. Based on reported Thalidomide sales in Celgene's public financial guidance, we are confident that the milestone will take effect by the end of '04 and be paid to EntreMed in Q1 of '05.

Under our current plans, we project net expenditures for operations to total approximately 20 million in 2005. Included in our '05 projections are funds to support the initiation of both Phase I and Phase II Panzem NCD clinical trials and IND filings, and Phase I clinical trials for our lead 2ME2 analog and the continued development of our other pre-clinical pipeline candidates.

I would like to turn the call back to Jim to discuss our upcoming milestones and corporate goals.

Thank you Dane. So what have we accomplished and where are we going? And it is my intention to bring you up to date a little bit more on our anticipated activities in the business development area.

In the past quarter, we reshaped our business model. We've adjusted our development priorities and formulated a strategy for re-creating shareholder value. And we are on target for meeting -- for moving Panzem NCD into clinical trials in early 2005.

We are focused on completing our transition to a development organization. And by streamlining operations, we have the capital necessary to advance our key clinical -- pre-clinical programs.

I believe that we have now set the stage for building a sustainable franchise and targeted small molecule drugs to treat cancer and inflammatory diseases.

Specific actions that we have undertaken include -- 1, a clinical manufacturing agreement with Elan for Panzem NCD formulation; 2, added resources and emphasis to accelerate our key pre-clinical programs; 3, we have increased our commitment to collaborative studies relating to tubulin and HIF-1 Alpha inhibition pathways of 2ME2 and 2ME2 analog.

Number 4, we have established a collaboration with Affymax to accelerate this promising pre-clinical program and do so within our existing budget, and also, in the process, gain peptide development capability. And last, we have initiated searches to further build our management team, particularly in drug development and business development areas.

To attain the goal of building a sustainable cancer and inflammatory drug development franchise, we will need to raise additional capital and share clinical costs through development and commercialization partnerships. While we may go to the capital market periodically to finance internal operations, my intention is to build our business through a balanced combination of internal development, product acquisitions and partnerships.

We intend to focus our business development activities on cancer and inflammatory diseases, and for the time being de-emphasize other indications for angiogenesis inhibitors.

While out-licensing other angiogenesis indications may appear to be an attractive way to monetize some of our technology assets, they require substantial work to develop the necessary data packages and are not core to our mission. So from a business development perspective, this means that we will first seek development partners for Panzem and one of our lead pre-clinical candidates where we can both add and receive substantial value from the partnership.

Secondly, we will look to acquire technology that enhances our capability to develop anticancer and anti-inflammatory drugs targeting multiple cellular pathways. And third, we'll seek to in-license or acquire pre-clinical product candidates that target multiple pathways that are similar to the Company's existing pathways.

The process of identifying development partners, additional technology and product acquisitions has already begun. And the goal -- we have the goal of completing one or several such transactions during 2005. And as our plans take shape, we'll provide further guidance on 2005 business development milestones.

In summary, I believe that EntreMed is in the right space. The role of angiogenesis inhibition is being proven commercially. EntreMed is a pioneer in the development of angiogenesis inhibitors such as Thalidomide in oncology, which we licensed to Celgene. And we expect to receive further royalty from Thalidomide sales later in 2005.

We are on the leading edge of a next generation of targeted multi-mechanism therapies. And these are ones that have unique differential -- and we have unique differential (technical difficulty) product candidates in this area. We intend to build our business around cancer and anti-inflammatory drugs that target multiple pathways. And we intend to continue develop and add to our capabilities in this area.

We have a robust pipeline of product candidates that attack these cells directly and that block the formation of blood vessels that nourish these diseased cells. We also have a targeted growth strategy, both internally and through external transactions. And I am building -- (technical difficulty) continue building a management team capable of implementing such a strategy.

We will stay focused on and fund promising small molecule drug development programs that play to our strengths in targeted cancer and anti-inflammatory drugs. These are the areas that I believe will create sustainable shareholder value.

In summary, I believe that we have a strategy for creating value, the leadership to implement the strategy, adequate resources to meet our near-term goals and a plan for building the capital and expertise for the long run. I want thank you all for participating today. And operator, I would like to open the line for questions at this point.

(OPERATOR INSTRUCTIONS). Joe Clark, Clark Consulting. (inaudible) (multiple speakers) Mr. Clark has removed himself from the queue. (OPERATOR INSTRUCTIONS). Peter Lagerman (ph), H. D. Wellington (ph).

Good morning. What about Angiostatin and Endostatin please? Thank you.

I will turn that question over to Carolyn Sidor to answer.

As you probably are aware, the 2 drug candidates Angiostatin and Endostatin, we sold the rights to those 2 products in February of 2004. And so we are no longer involved in their development.

(OPERATOR INSTRUCTIONS). Ted Busbaum (ph), Prospective Value (ph),

You both spoke about upcoming milestones payments. I think Mr. Saglio had said 3 million upcoming if I understood that right. It sounds like that is from Celgene and that has to do with Thalidomide reaching sales goals. Is that correct?

And also, when is that likely to be received? And based on your agreement with Celgene, do you stand to receive possibly similar payments in the future?

The source of the payment to EntreMed will actually be from the group that we sold the royalty stream to in 2001. As part of that arrangement, there was a provision that called for a purchase price adjustment if Thalidomide hit certain cumulative sales over a defined period. We are confident that will occur by the end of '04, which will trigger the $3 million payment. We do expect to receive that in the first quarter of '05.

There is an additional provision that is triggered. That is a royalty sharing arrangement on sales above the certain milestone on an annual basis. And based on their current sales trends, we would expect that those things could be triggered in future periods.

In another area, speaking of targeted drugs, I understand the term the way you're using the term targeted. But I was wondering also, do you -- have you identified any genetic markers or any way to identify subgroups of patient populations that might be potentially benefited by your drugs similar to what -- I'm thinking of like Herceptin; a subgroup of breast cancer patients that seems to work on?

At this point, we are actively investigating in some of our pre-clinical systems for ways to identify particular patient populations or tumor types that might be expressly sensitive to either 2ME2 or our 2ME2 analog. But there is a distinction between our types of drug candidates which bind the tubulin and have multiple downstream effects versus the type that you just described, which has specific molecular targets.

Thank you very much.

(OPERATOR INSTRUCTIONS). There appear to be no further questions. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful (multiple speakers) day.

We have somebody who has a question.

Okay. Richard Sachs (ph), First (ph) (indiscernible) (technical difficulty).

I would like to know what your cash burn rate is and more specific plans for raising capital.

Guidance that we have given regarding the cash burn is that we expect to use about 18 million in operations for 2004. And we are projecting approximately 20 million in 2005. As Jim alluded to in our discussions, we would hope to avail ourselves of other vehicles rather than the equity market immediately. Through partnerships and other types of BD activity we would hope to generate capital for the (technical difficulty) (indiscernible) use of funding operations.

Thank you. At this time there appears to be no further questions. We do thank you for your -- being on this call. You make disconnect your lines at this time and have a wonderful day.