CASI Pharmaceuticals Inc (CASI) 2004 Q4 法說會逐字稿

Good morning and welcome to EntreMed's fourth quarter and year-end 2004 conference call. At this time all participants have been placed 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. Mr. Burns, you may begin.

Thank you Allison, and thank you ladies and gentlemen and good morning. Welcome to our fourth quarter and year-end 2004 update conference call. Joining me on the call today is Mr. Dane Saglio, our Chief Financial Officer; Dr. Carolyn Sidor, our Vice President and Chief Medical Officer; And Mr. Marc Corrado, our newly appointed Vice President Corporate Development. My colleagues will join me for the Question-and-Answer portion of our call at the conclusion of these comments.

Before we would begin, I would like to remind our listeners that statements made during this call fall under the Private Securities Litigation Reform Act such that statements made during this conference call that are not descriptions of historical facts should be considered are -- are forward looking and subject to risk 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 filings with the Securities and Exchange Commission. Now the purpose of today's call is to recap our progress in 2004 including our clinical and preclinical programs. Update you on our financial status and operations and provide an outline of upcoming 2005 milestones and business objectives. At the conclusion of the update, the phone lines will be open for questions.

Since joining EntreMed in June 2004, my goal has been to clarify our business model, sharpen our focus and continue our transition to development and commercialization. The company is now focused solely on developing drugs for the treatment of cancer and inflammatory diseases. Our therapeutic focus is being built with a new generation of multi-mechanism drugs to treat cancer and inflammatory disorders by targeting two major components of the disease process - attacking disease cells directly and the blood vessels that nourish them. Our product candidates reflect an orientation to our drugs that attack multiple disease pathways including angiogenesis inhibition, a core technical competence of the company. To achieve these goals, we developed a near-term action plan that included streamlining operations, strengthening the management team, focusing resources on Panzem, our lead clinical product candidate, and accelerating our pipeline programs. I'd like to now review the status of our lead clinical stage cancer drug candidate and our preclinical programs in cancer and inflammatory diseases.

Our lead product candidate, Panzem, also referred to as 2-Methoxyestradiol or 2ME2, is an orally active well tolerated anti-cancer agent that has both anti-proliferative and anti-angiogenic activities. Panzem is part of a new generation of cancer drugs at bitatubulin (ph) and it works through a multiple cellular pathways attacking tumor cells directly to induce program cell death, or apoptosis, blocking blood vessels that feed tumors, in other words angiogenesis inhibition, and by disrupting microtubials, an intracellular matrix necessary for the rapid division of cancer cells. Attacking tumors on multiple fronts is important since most cancers have five to ten or more adaptive survival mechanisms which result in drug resistance. 2ME2 induces cell death a number of ways including the inhibition of HIF-1alpha, a pro-survival and pro-angiogenic transcription factor. EntreMed scientists believe that 2ME2 may be one of the most potent inhibitors of HIF-1alpha which is over-expressed in more than 70 percent of human tumors and helps maintain cancer cell growth. We also believe that Panzem has the potential to be a unique cancer therapy and may be particularly suited to attack tumors dependent on HIF-1alpha for survival. We are continuing to investigate 2ME2's tubulin and HIF-1alpha mechanisms both in-house and with our external collaborators. In additional information on the roll of HIF-1 inhibitors can be found in the therapeutic pathway section of our website at www.EntreMed.com.

We achieved our goal for the reformulation of our lead product candidate, Panzem, and selected an orally administered liquid dispension for clinical use. The new formulation, called Panzem NCD, resulted in higher peak blood levels of 2ME2 in animals than those achieved with the Panzem capsule formulation. The Panzem NCD formulation utilizes the Elan's NanoCrystal colloidal dispersion, or NCD technology, the same technology that is also used in commercial products sold by Wyeth and Merck. In July 2004, we entered into a clinical supply agreement with Elan to produce GMP material for Panzem NCD clinical trials. In January 2005, we commenced Phase 1B clinical trials for Panzem NCD in patients with advanced cancer at Indiana University Cancer Center and at the University of Wisconsin Comprehensive Cancer Center. Our new formulation follows six earlier Phase 1 and Phase 2 studies using the original formulation.

Our initial 2ME2 formulation Panzem capsules has been administered to 168 patients with av -- advanced cancers including breast cancer, prostate cancer and multiple myeloma. Panzem has been tolerated for up to three years in Phase 1 and Phase 2 trials with no dose limiting toxicities. 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 Taxotere. Additionally, clinicians have also reported patients with stable disease as well as clinical benefit in breast prostate and ovarian cancer patients. For further details on the clinical activity, please visit the clinical trials section of our website.

In addition to Panzem NCD and Panzem capsules, EntreMed also has a robust pipeline of preclinical and discovery programs in the areas of oncology and inflammatory diseases. Our preclinical 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 such as rheumatoid arthritis. All EntreMed compounds, with the exception of 2ME2, were discovered and developed internally and as a result are EntreMed's sole property. The goal of our analog program has been to develop a second generation of 2ME2-like drugs with improved angiogenesis enhanced pharmacokenetics and comparable or better anti-tumor properties. We have succeeded in accomplishing these goals.

From among many candidates our sci -- scientists discovered a number of new compounds that inhibit tumor growth. Our 2ME2 analogs have demonstrated improved pharmacokinetic and anti-tumor activity while retaining the principal mechanisms of action which include inducing apoptosis, binding micro tubials and inhipiti -- inhibiting HIF-1alpha. In the latter part of 2004, we identified a lead analog and IND directed toxicology studies are currently underway. In 2004, we also accelerated our work on PAR-2, or Proteinase Activated Receptor-2. PAR-2 is a progra -- is a protein that is expressed on the surface of multiple normal cell types but is up-regulated dramatically during inflammation. Our scientists discovered a peptide that blocks PAR-2, the first such compound identified as an antagonist of PAR-2. Now this antagonist inhibits tumor growth, the formation of new blood vessels and has been shown to be and inhibiter of inflammation in preclinical models.

Additionally, small -- multiple small molecule PAR-2 antagonists have been synthesized to identify compounds with increased activity and we are currently studying PAR-2's potential therapeutic applications in oncology and ant -- and in inflammatory diseases. We are investigating the potential for our disease modifying arthritis drug, or DMARD activity for PAR-2 and we are conducting similar studies to determine the anti-inflammatory properties of 2ME2. EntreMed also owns all the intellectual property associated with the PAR-2 antagonist program and its resulting compounds.

Our FGF2 cancer vaccine candidate has been shown to prevent the development of tumor metastasize in preclinical models. EntreMed scientists were the first to demonstrate that the growth factor vaccine can inhibit tumor development. Our FGF2 cancer vaccine candidate induces both cellular and antibody responses and has been shown to inhibit FGF2 driven angiogenesis and long-term inhibition of metastasizes after vaccination in animal models.

In 2004, we have accelerated our work on our tissue factor pathway inhibitor program. Now, TFPI is a naturally occurring anticoagulant protein that prohibits both tumor growth and angiogenesis. We have identified a TFPI peptide fragment that maintains the antitumor and antiangiogenic activities of the natural protein without adversely affecting normal blood cot -- clotting. EntreMed's peptide represents a promising step forward in overcoming the limitations that have previously prevented development of TFPI as an anticancer drug. In October, we announced our collaboration with Affymax, a leader in the development of peptide drugs, in order to identify and develop novel peptides by EntreMed'sTFPI technology. The goal of this collaboration is to generate lead cancer drug candidates. Our collaboration with Ma -- with Affymax is now fully operational and the identification of TFPI peptides is underway. We anticipate the presentation of data on several of our preclinical programs by company scientists and external research collaborators at the American Association of Immunology, the Canadian Society of Immunology and the American Association for Cancer Research, or AACR, annual meeting this spring.

Now if I can, I'd like to move on and a quick summary of our financial situation. And -- on March 16th, yesterday, we filed our report containing financial results for the 12 months ending December 31, 2004, on Form 10-K. For the fourth -- fourth quarter of 2004, we reported a loss of $511,000 or $0.02 per share versus a loss of 6.2 million or $0.18 per share for the comparable 2003 period. For the 12 months ending December 31st, we reported a loss of 13.6 million, or $0.37 per share versus a loss of 20.5 million, or $0.68 per share, for the same 12 month period in 2003.

Our financial results for the fourth quarter of 2004 were in line with our expectations. Our first quarter -- our fourth quarter results were impacted positively by a $3 million gain resulting from a one-time purchase price adjustment pursuant to the 2001 sale of our royalty right on sales of Thalidomide . Our financial results also reflect the Company's commitment to practical resource management in the absence of significant clinical cost for Panzem in 2004. At December 31st, we reported cash and short term investments of approximately 34.5 million and working capital of 35 million. These amounts reflect the proceeds of our December equity sale to leading independent bio-technology institutional investors from which we received gross proceeds of approximately 14 million. We believe that these proceeds coupled with inflows from contractual arrangements, including the payment of the $3 million gain which was received in 2005, will be sufficient to fund planned operations well into 2006.

Under our current plans we project neck -- net expenditures for operations to total approximately $20 million in 2005. We also expect to receive royalty revenues on sales of Thalidomide based on a royalty sharing provision that was also triggered and begins in 2005. Under our arrangement with Royalty Pharma, we expect to record royalty revenue beginning in the second half of 2005. Our 2005 planned expenditures include funds to support the initiation of both Phase 1 and Phase 2 Panzem NCD clinical trials and IND filing in Phase 1 clinical trials for our lead 2ME2 analog and the continued development of our other preclinical pipeline candidates.

Now at this time, I would like to turn my update to our upcoming milestones and corporate goals. In 2004, we reshaped our business model, adjusted our development priorities and formulated the strategy for recreating shareholder value. We are on target for moving Panzem into -- NCD into clinical trials which occurred early in January 2005. I believe that this is one of a number of steps that we will undertake in the process of building a sustainable franchise of novel small molecule drugs to treat cancer and inflammatory diseases.

I would like to recap what we have accomplished in 2004 and where I see us going forward. In 2004, we completed the re -- the formulation of work on Panzem NCD including animal studies and a study in human volunteers. We entered into a clinical manufacturing agreement with Elan to produce our Panzem NCD clinical material and completed the production of clinical material in the fourth quarter 2004. We added resources and emphasis to accelerate key preclinical programs. We increased our commitment to collaborative studies relating to the -- to the tubulin and HIF-1alpha inhibition pathways of 2ME2 and our 2ME2 analogs. We also established a collaboration with Affymax to accelerate a promising preclinical program within our existing budget and to gain peptide development capability.

We initiated a program to further build our management team particularly in the areas of drug development and business development. Dr. Carolyn Sidor, our clinical oncology with extens -- clinical oncologist with extensive clinical trial experience was appointed Vice President and Chief Medical Officer. And at the beginning of this month, Marc Corrado, an experienced pharmaceutical corporate development professional, joined us from Aventis where he was previously Senior Director of Mergers and Acquisitions.

To attain our goal of building a sus -- sustainable cancer and inflammatory drug development franchise, we will explore opportunities to raise additional capital or to share clinical costs for co-development and commercialization partners. While we may go to the capital markets periodically to finance internal operations, my intention is to build our business through a balanced combination of internal development, product acquisition, technology, licenses and partnerships. We intend to focus our business development activities on cancer and inflammatory diseases, particularly product candidates and technology that play to our expertise in angiogenesis, cell cycle regulation and inflammation. For the time being, we at -- we intend to de-emphasize other indications for angiogenesis inhi -- inhibitors. While out -- 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.

From a business development perspective, we will focus our energies on drugs to treat cancer and inflammatory diseases through a number of initiatives, namely, one, seek to in-license or acquire preclinical and clinical stage product candidates that target multiple pathways similar to those of our current pipeline programs. We'll also look to acquire technology that enhances EntreMed's capability to develop anti-cancer and anti-inflammatory drugs targeting again multiple cellular pa -- cellular pathways. And third, we will seek development partners for our product candidates where we can both add and receive substantial value from the partnership.

These efforts are designed to deepen our pipeline, create a balanced portfolio of preclinical and clinical product candidate and mitigate the risks associated with a narrow clinical pipeline. The process of identifying development partners, additional technology and product acquisitions has already begun. Our goal is to complete one or several such transactions during 2005, and as our plans take shape, we will provide further guidance on 2005 business development milestones.

So 2004 was a year of tremendous progress in our clinical and preclinical programs. The roll of angiogenesis inhibition has been proven commercially it's no longer just simply a concept and this sets the stage for our drug candidates going forward. EntreMed has substantial experience in small molecule angiogenesis inhibitors, including development of oncology applications for Thalidomide. Under our license to Royalty Pharma we expect to receive further royalties from Thalidomide sales later in 2005. We believe we are on the leading edge of a next generation targeted multi-mechanism therapies and that we have a unique del -- differentiable product candidates. We intend to build our business around cancer and anti-inflammatory drugs that target multiple pathways. We intend to continue to develop and add to our capabilities in this area. We believe that we have a robust pipeline of product candidates that attack diseased cells directly and block the formation of blood vessels that nourish these diseased cells.

We believe that we now have a targeted growth strategy both internally and through external transactions and that I am 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 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 and we are building a leadership team to implement the strategy. We now have adequate resources to meet our near-term goals, the financial means to carry us well into 2006, and a plan for building the capital and expertise for the long run. So thank you all for your participation in today's call and that concludes my comments for the day. And operator, I'd like now open the line for questions, please.

Thank you. The call will now be open for questions. If you have a question, please press star, 1 on your touch-tone phone at this time. You may remove yourself from the queue by pressing the pound key. Questions will be taken in the order they are received. To provide optimum sound quality, we ask that you pick up your handset while posing your question. Once again, please press star, 1 on your touch-tone phone for any questions at this time. One moment while we poll for questions. Our first question is coming from Ren Benjamin with Rodman & Renshaw. Please go ahead.

Hi, good morning and congratulations on your ongoing progress.

Thank you Ren, and good morning to you.

Thanks. Couple of questions for you. Has to do with the -- the clinical progress that's seen to date with the -- wit the ongoing clinical trials at the -- at the two clinical sites with -- with Panzem NCD. If I remember right, probably about a month or so ago the first cohorts were completely enrolled. Can you -- can you give us a little bit more of an update as to how those trials are -- are going?

Sure, I'll turn it over to Dr. Sidor to answer that for you.

Good morning. Yes, the trials continue to progress well. We've had no interruption. As you probably are aware, it's -- it's usually not our policy to -- to comment on cohort by cohort progress but we're still on target with that trial and it's continuing very well.

So can -- can you -- can you just remind us of the targets? When do you expect enrollment to complete or -- or when can we begin to see some of the data?

That will depend somewhat on the data that you're referring to. As you know, the study has safety pharmacokinetic and other end points. So we would anticipate some of the safety and pharmacokinetic end points to be available later this -- this year, probably in the summer or early fall. Other end points may take longer to develop.

Okay. Can you highlight for us any -- any data presentations or -- or any conferences that you guys will be at where, you know, whe -- where some results or -- or data whether it be preclinical or clinical may be highlighted?

Sure. We'll start with the AACR meeting where there's, I think, 11 different posters or presentations related to work we've done or our collaborators. That covers 2ME2, the analogs and the PAR-2 program principally. So that will take place at the end of April. There also be a poster at the American Association of Immunology, which is in early April on 2ME2 and rheumatoid arthritis. There will be also a presentation in July by one of our collaborators at the World Lung Congress. That is a poster I believe. And we anticipate additional data, probably clinical data, to be presented at the EORTC NCI meeting in Philadelphia this fall.

Any -- anything at ASH or ASCO?

There won't be anything at ASCO this year. There probably will be abstracts for ASH but as you know they're not due until July so I can't really comment on that now.

Okay. Great. Can you talk to us about the -- the -- the clinical development plan for Panzem NCD? So you have the -- the two ongoing trials right now. Whe -- where do you see -- where do you see additional trials being done and -- and will they be started in 2005?

It is our expectation that we will move quickly from our current program into Phase 2 studies. So the answer to your question is, yes we would expect other trials to start this year. When those are closer to actually happening, we'll certainly make it known to everybody.

Okay. Great. I think that's it for me. Con -- congratulations.

Thanks.

Thank you, Ren.

Thank you. Once again, I would like to remind the callers if you do have a question, please press star, 1 on your touch-tone telephone at this time. Thank you. Our next question is a follow-up coming from Ren Benjamin with Rodman & Renshaw. Please go ahead.

I remembered one more question. Can you talk to us a little bit about HIF-1alpha. What's happening in -- in this space? It seems like there's a lot more people who are -- who are interested in this target. Can -- can you -- can you review for us maybe wha -- what -- what 's all the excitement about?

Well, it -- it's not new excitement for us but it is certainly an exciting molecule to be looking at in terms of developing cancer therapeutics. We actually have a whole section on our webpage which people can refer to that I think would cover it much more extensively than we really can on a phone call. But I think the excitement is that it appears to be a molecule that is. sort of, sticking out as something that should be able to be approached in terms of the cancer therapeutic. It is up-regulated. It is a survival mechanism for cells where we know they're under stress which occurs clearly in cancer growth. And, therefore, is a prime suspect for making drugs or developing molecules that will down-regulate it. So, again, I -- I think that it's a complicated story but because we know it is associated with tumors and it's up-regulated in stressful situations, particularly Hypoxia, it makes it a, sort of a prime -- prime suspect.

Are there any other drugs in development against targeting HIF-1alpha? That you know?

Yes, and again there's information on our webpage which I would refer people to. There are other companies as well as academic centers that are looking at HIF inhibitors.

Terrific. Thank you very much Carolyn.

We -- we don't believe any of them are in advanced clinical trials yet.

Great. Thank you.

Thank you. Our next question is coming from Wayne Rothbaum with Quogue Capital Please go ahead.

Hi guys, how are you doing.?

Good morning, Wayne.

Good. Just a quick question, in -- in terms of 2ME2, the capsule formulation, the original formulation, are those -- are the trials still open for that and if so, when do you think we would see da -- the full set of data from that? Or have you closed down to focus only on the nano particle?

The NCI ran two trials and they currently have one patient that remains on study. That's a lady with an ovarian cancer who is now coming up on three years of therapy. The multiple Myeloma trial is very close to being fully accrued. We had a target of 60. And we actually are just about fully accrued on that trial. The other two, actually the Phase 2 and the Phase 1 trials, have all been completed and reported on. So, the plans are, I assume, to -- for the NCI to present additional information in follow-up at their meetings in the fall. And, for us, the plans are to do a publication on the multiple Myeloma trial as soon as we have at least three months data on the last patients to enroll.

Okay. And regarding the prostate study, do we expect to -- to see a publication for some -- from that randomized study, the Phase 2?

I'm sorry, I didn't hear the question.

I'm sorry. Regarding the prostate study.

There is a publication in process.

Okay. Do you know if it's been accepted yet? Or you -- or you've just sent in the --

It's been submitted.

It's been submitted. Okay. Okay. Great. Thank you.

Thank you. There appears to be no further questions at this time. I'd like to turn the floor back over to you for any further or closing remarks.

Okay. Thank you very much. And ladies and gentlemen, thank you for your time and -- and your continued interest in EntreMed and we will continue to work hard to -- to justify our belief and -- and your belief in the Company and -- and continue to move our product candidates forward. So, everybody have a wonderful day and thank you so much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.