CASI Pharmaceuticals Inc (CASI) 2005 Q4 法說會逐字稿

Good morning and welcome to EntreMed's fourth-quarter and year-end 2005 conference call. At this time, all participants had been placed in 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 and good morning, ladies and gentlemen. Welcome to our fourth-quarter and year-end 2005 update conference call. Joining me on the call today is Mr. Dane Saglio, our Chief Financial Officer, and Dr. Carolyn Sidor, our Vice President and Chief Medical Officer. My colleagues will join me for the Q&A portion of the call following my comments.

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

The purpose of today's call is to recap our progress in 2005, including our clinical and preclinical programs; update you on the financial status of operations; and provide an overview of upcoming 2006 milestones and business objectives. At the conclusion of the update, the phone lines will be open for questions.

As I've reported over the past year, EntreMed has focused its resources and scientific energies on small molecule drugs that target the inhibition of multiple cellular pathways important in cancer and inflammatory disease. Multiple pathways are particularly important in cancer because cancer cells have developed very elegant survival mechanisms. There are at least five to 10 major mechanisms that cancer cells use to survive and prosper. Our approach has been to interdict into the disease process at the level of both the tumor cell and the supporting tumor blood vessels.

The Company is now focused solely on developing drugs for the treatment of cancer and inflammatory diseases. Our therapeutic pipeline is being built using an extensive background in angiogenesis, cell cycle regulation and apoptosis, together with the understanding of how these mechanisms interrelate.

I am encouraged by the progress that we have made during 2005 and our prospects for advancing the clinical development program in 2006 and beyond. We have worked hard to demonstrate the Company's potential by executing consistently against our guidance, supporting our claims with rigorous scientific discipline and broadening our pipeline to mitigate the risk of adverse technical outcomes. I am proud of the effort that our team has put forth to accomplish these goals.

We entered 2006 a substantially different company. During the course of the past year, we repositioned EntreMed from a company with a single Phase Ib product candidate to a multi-product mid-stage clinical drug development company. We did this through a combination of advancing our own internal pipeline and through acquisition and end-licensing opportunities.

So let me share with you the highlights of 2005 and our plan for moving forward further in 2006. I will start with a review of our clinical stage cancer drug candidates and then proceed to describe our preclinical programs in cancer and inflammatory diseases.

With respect to Panzem, EntreMed continues to focus on the clinical development of our lead small molecule anti-cancer drug candidates, 2-methoxystradiol, or 2ME2, which is an orally active, well-tolerated anti-cancer agent that has both anti-proliferative and anti-angiogenic activities. This compound is currently in Phase II clinical trials under the trade name Panzem NCD, a formulation developed with Elan Drug Delivery to enhance the bioavailability of the drug in cancer patients.

Panzem is part of a new generation of cancer drugs that works through multiple cellular pathways, attacking tumor cells directly to induce programmed cell death, or apoptosis, blocking blood vessels that feed tumors -- in other words, angiogenesis inhibition -- and by disrupting microtubules, an intracellular matrix necessary for rapid division of cancer cells.

Panzem has been shown to induce cell death a number of ways, including the inhibition of HIF-1alpha, a pro-survival and pro-angiogenic transcription factor. We believe that 2ME2 may be one of the most potent inhibitors of HIF-1alpha, which is overexpressed in more than 70% of human tumors and helps maintain cancer cell growth.

In November 2005, we conducted our first analyst day focusing on the mechanism of HIF-1alpha inhibition. Participants included Dr. Gregg Semenza from Johns Hopkins University, who discovered, purified and cloned HIF-1alpha; Dr. Evi Giannakakou, a principal HIF-1alpha research collaborator from the Weill Medical College of Cornell University; and Dr. Theresa Lavallee, EntreMed's Senior Director of Cell Biology, who has led much of our internal and collaborative work on HIF-1alpha inhibition in 2ME2 and in ENMD-1198.

Additional information on the role of HIF-1alpha inhibitors can be found in the Therapeutic Pathways section of our website at www.entremed.com.

In January 2005, we commenced two Phase Ib clinical studies for Panzem NCD in patients with advanced cancer. These studies were conducted at the Indiana University Cancer Center and at the University of Wisconsin Comprehensive Cancer Center.

In November 2005, we announced results from the Phase Ib studies, which concluded that the pharmacokinetic profile of the drug candidate met the study objective. Based on these data, a Phase II dose was determined.

In January 2006, we commenced Phase II studies with Panzem NCD in patients with blastoma multiforme, an often fatal form of brain cancer, and we did so at the Duke University Medical Center Brain Tumor Center.

We expect to commence additional Phase II studies with Panzem NCD during the first half of 2006. Additional Phase II studies under consideration include breast, prostate, ovarian, carcinoid, renal cell, multiple myeloma and non-small-cell lung cancer.

Furthermore, in December 2005, we signed a definitive agreement and in January 2006 completed the acquisition of Miikana Therapeutics, a target-focused oncology discovery and development company located in Fremont, California, with research laboratories in Toronto, Canada. Miikana's oncology pipeline adds both clinical and preclinical drug candidates that match our expertise in cell cycle regulation, apoptosis and angiogenesis.

Miikana was formed to discover and develop new anti-cancer drugs based on targeting specific pathways within tumor cells. Hence the name Miikana, which comes from native Canadian and American Ojibwa word for path or trail. Miikana Therapeutics was founded by Drs. Tak Mak and Mark Bray at the University Health Network in Toronto and Dr. Gail Eckhardt at the University of Colorado. We welcome the Miikana founders and the staff now to the EntreMed team.

Through Miikana, we enhance our clinical oncology pipeline with the addition of MKC-1, a Phase II drug candidate. MKC-1 is an orally available, small molecule cell cycle inhibitor with a unique mechanism of action. MKC-1 arrests cellular mitosis by inhibiting a novel intracellular target important in cellular trafficking that has been shown to be involved in cell division.

In January of this year, we commenced a small multi-center Phase II study with MKC-1 for the treatment of metastatic breast cancer. An additional Phase II clinical trial is planned for non-small-cell lung cancer later this year.

Our third clinical candidate is ENMD-1198, a new chemical entity based on the backbone of 2-methoxyestradiol chemistry. This compound retains the multiple mechanisms of action characteristic of 2ME2 while improving upon the metabolism. Based on preclinical studies, ENMD-1198 appeared to be a novel anti-cancer compound in terms of both its activity and safety profile.

Throughout 2005, we presented preclinical data on this orally active multi-mechanism agent. An IND was filed and accepted by the FDA in November 2005, and with an active IND in place, we anticipate commencing a Phase I dose escalation trial during the first half of this year.

In addition to our Phase II trials with Panzem NCD and MKC-1 and our pending Phase I trial for ENMD-1198, we also have a robust pipeline of preclinical and discovery programs in oncology and inflammatory disease. Our preclinical pipeline comprises both new indications for existing compounds and novel compounds with anti-cancer and/or anti-inflammatory properties. Under the new indication for existing compound category, we are focusing particular attention on the development of Panzem for the treatment of rheumatoid arthritis.

Exploring the anti-inflammatory properties of 2ME2 is a natural outgrowth of our work in angiogenesis inhibitors since angiogenesis is a major component of inflammatory diseases such as rheumatoid arthritis. With this understanding of RA disease pathology and the angiogenic inhibitory mechanism of Panzem, we have completed multiple studies with Panzem in preclinical models of our rheumatoid arthritis.

Based on the results from these studies, we have determined that Panzem not only has anti-inflammatory effects, but more importantly has the potential as a disease-modifying anti-rheumatic drug, or DMARD. DMARDs are drugs that have the ability to slow down disease progression in rheumatoid arthritis and in other autoimmune diseases.

Through studies conducted in-house and with our collaborators in 2005, we were able to demonstrate that Panzem diminished inflammation and the destructive effects of rheumatoid arthritis substantially in preclinical models. Inflammation is the process involving the reaction of tissue to injury or disease, and chronic inflammation is characterized by infiltration with mononuclear leukocytes, tissue destruction, angiogenesis and fibrosis.

By way of example, results from a preclinical model of chronic autoimmune inflammatory joint disease demonstrated that daily oral administration of 2ME2 resulted in a statistically significant reduction in clinical severity of joint inflammation and inhibition of articular joint damage as determined by blinded high-resolution radiographs of bone erosions. Treatment with 2ME2 in another collagen-induced preclinical model was clearly 100% effective in inhibiting inflammatory disease and tissue destructive processes.

This morning, we announced further evidence to support the potential for 2ME2 in rheumatoid arthritis. Data from additional preclinical studies were presented during an oral presentation at the Inflammation and Immune Diseases Discovery and Development Summit being held this week in New Brunswick, New Jersey.

Data presented involved quantitative histological analysis showing dose-dependent increases in, one, white blood cell infiltration, which is a key component of the inflammatory process; two, pannus formation, the destructive tissue of the joint induced by angiogenesis; and three, cartilage destruction and bone resorption, the hallmarks of joint destruction in RA, all following treatment with 2ME2.

Additionally, preclinical studies demonstrated that the severity of arthritic development could be decreased further by combining 2ME2 with methotrexate, a current standard of care for RA.

Taken together, we have now generated substantial preclinical data demonstrating the positive effects of 2ME2 treatment on inflammation and disease progression in well-accepted RA models. The opportunity exists for 2ME2, based on this anti-angiogenic activity and safety profile, to become a novel, non-imunosupressive DMARD for the treatment of RA.

We are continuing to invest behind the development of Panzem for rheumatoid arthritis, potentially adding another large market opportunity to our pipeline. Our 2006 goal for this program is to initiate IND-directed studies leading to the filing of an IND for Panzem in rheumatoid arthritis. And we will continue to report our progress periodically on this program.

With respect to other programs, the Miikana acquisition enhanced our pipeline with two preclinical anti-cancer programs, one an aurora kinase inhibitor and the other an HDAC inhibitor, both of which fit very well with our expertise in cell cycle regulation.

The lead compound in the aurora kinase program MKC-1693, an aurora kinase inhibitor with a unique multi-kinase profile and mechanism of action, which is currently in preclinical oncology studies. Aurora kinases are known to be involved in the process of mitosis or cell division critical in human cancers. Our aurora kinase inhibitor induces G2M cell cycle arrest and apoptosis, and we're also exploring a unique anti-angiogenic component for this compound as well. Our 2006 goal for this program is to conduct IND-directed studies leading to the filing of an IND in 2007.

The second program developed by Miikana is focusing on histone deacetylase inhibitors or HDAC inhibitors. These have been known to arrest cancer cell growth and/or induce apoptosis both in vivo and in vitro. We are currently evaluating one compound, MKC-1704, and other HDAC inhibitors from this series of compounds with the goal in 2006 of identifying a lead molecule and commencing IND-enabling studies thereafter.

We are also making good progress in evaluating a series of tubulin inhibitor anti-cancer compounds that we licensed from Celgene in early 2005. Tubulin inhibitors comprise a broad family of compounds that bind the tubulin and disrupt microtubules, resulting in programmed cell death. Under the terms of the license, EntreMed is responsible for the preclinical and clinical development of these inhibitors and has exclusive rights to develop them globally for oncology applications.

Results from in vitro and in vivo studies have shown that these novel tubulin binding agents inhibit tumor cell proliferation in a dose-dependent manner, and based on in vitro studies, inhibit angiogenesis. The goal for 2006 is to select a lead compound and commence IND preclinical –- IND-enabling preclinical studies.

From a financial perspective, we have made substantial progress during the past year in reallocating our funds and building our cash reserves through additional financings. Following some right-sizing moves that we initiated in 2004 to streamline our administrative functions, we redeployed funds to our lead clinical candidate and to promising preclinical programs.

We also eliminated non-core programs outside of oncology and inflammation and turned our collective attention to making substantial progress on our lead product candidates. We clearly saw the benefits of our reallocation efforts through the technical progress that we made in 2005. We not only accomplished the programmatic goals of our efforts, but we did so within our 2005 net 20 million expense guidance.

On March 14 of this year, we filed our 10-K report with the SEC containing financial results for the 12 months ending December 31, 2005. And for the 12 months of fiscal year 2005, we recorded revenues of $5.9 million versus $514,000 during 2004. Included in the 2005 revenues are royalties of 5.3 million resulting from Celgene's sale of Thalomid.

For the year ended December 31, 2005, the Company reported a net loss of 17.3 million or $0.36 per share versus 13.6 million or $0.37 per share for fiscal 2004.

Going forward, we expect our 2006 results of operations to reflect a net loss of approximately $30 million before non-cash charges associated with the Miikana acquisition and the adoption of SFAS 123R, the expensing of stock options. The increase, which results primarily from clinical program expenditures, reflects supporting multiple Phase II clinical trials for both Panzem NCD and MKC-1, Phase I trials for ENMD-1198 and continued development of our key preclinical pipeline candidates.

As of December 31, 2005, the Company had cash and short-term investments of approximately 30.1 million. In February 2006, we completed a $30 million private placement, so our current cash and the proceeds from the recent financing should take us well into 2007.

The leading investors in the private placement included Domain Public Equity Partners, Xmark Funds, Lehman Brothers and Abingworth. Celgene Corporation, our principal shareholder, also participated in the transaction. The institutions participating in the financing are leading biotech investors who know the oncology area and their investment supports our belief that EntreMed has an attractive mid-stage clinical development program.

So 2005 was an important transition year for EntreMed, one in which we took positive and decisive steps toward building a substantive franchise in anti-cancer and anti-inflammatory drugs. During the past year, EntreMed completed the transition from a single Phase Ib company to a strong mid-stage clinical drug development company through a combination of internal and external activities. EntreMed now has two product candidates in multiple Phase II trials and a third compound ready to enter Phase I trials.

I believe that the Company is progressing well and that we have a solid team to drive our future success. We will continue to focus on small molecules and pursue the development of a robust pipeline of multi-mechanism drug candidates. We will continue to exploit opportunities on this path.

In 2005, we enhanced our pipeline, focused our development priorities and advanced our Panzem NCD clinical program. And some of those key milestones that we accomplished during 2005 include the following -- the Phase Ib studies for Panzem NDC. We were granted orphan drug status for Panzem for ovarian cancer, a second orphan drug designation from the FDA behind multiple myeloma. We added financial resources in excess of $10 million through Celgene's exercise of EntreMed warrants from a previous licensing arrangement, and we furthermore entered into an exclusive worldwide license with Celgene for the development and commercialization of their small molecule tubulin inhibitor compounds.

Furthermore, we entered into a research collaboration with the National Cancer Institute to study the role of HIF-1alpha in cancer and increased our intellectual property protection through the addition of multiple new patents.

We also submitted an IND for 1198, our novel tubulin binding agent, putting us on the track with an active IND to commence clinical trials this year. We also acquired Miikana Therapeutics, adding three complementary programs to our pipeline, and as I mentioned previously, we strengthened our balance sheet in early 2006 through a $30 million private placement with strong biotech institutional investors.

In 2006, we expect to continue building an attractive mid-stage clinical development pipeline, having the financial resources to pursue our key programs simultaneously. We will be emphasizing our later-stage program comprising the two oncology product candidates in multiple Phase II trials, a third oncology product candidate in Phase I trials, and furthermore, working on the preclinical rheumatoid arthritis program that is headed toward IND-directed studies later in the year.

Specifically, our milestones for 2006 include the following -- initiate the first of multiple Panzem NDC Phase II trials in 1Q '06 -- that was accomplished in January; initiate several additional Panzem NCD Phase II trials by midyear, and our goal is to have at least three Phase II clinical trials underway this year for Panzem NDC.

Furthermore, our goal is to initiate the first of multiple Phase II trials for MKC-1, and we did so in the first quarter of '06, and to initiate a second MKC-1 Phase II trial in the second half of '06. And our goal is to have those two Phase II clinical trials underway this year.

Our goal is also to initiate ENMD-1198 Phase I studies for the first half of 2006. And we're on target to accomplish this milestone. We are also looking to integrate the Miikana acquisition in the first half of the year, for which we are making good progress, and we remain on schedule.

We plan to initiate Panzem IND studies in rheumatoid arthritis in the second half of the year. And we are continuing preclinical mechanism studies in preparation for the IND-directed studies. We plan to initiate aurora kinase inhibitor IND studies in the second half of this year based on completing further in vitro and in vivo pharmacology studies throughout the year, and on two other programs, we're looking to identify lead compounds, and that's for our tubulin inhibitor program and our HDAC inhibitor program.

In summary, I believe that we have the appropriate strategy in place to build a leading oncology franchise, one that will benefit both patients and our investors. We will remain focused on developing small molecule drugs like Panzem NCD, MKC-1, ENMD and our other multi-mechanism drugs. We will continue to invest behind the potential for 2ME2 in rheumatoid arthritis.

We will continue to build our Company around a multi-product portfolio. We will not rely on one drug to map out the future of the Company, believing instead that multiple product candidates in clinical trials mitigate the risk associated with a narrow pipeline. We will also continue to add breadth and depth to our development program, which means that we will look selectively at acquiring other technologies or product candidates that fit our strategy.

And ultimately, our goal is to commercialize our pipeline, on our own and in partnership with pharmaceutical or biotech companies. So we are in good shape financially, have solid institutional investors and have adequate resources to meet our near-term goals, the financial means to carry us well into 2007, and a plan for building the capital and the expertise to sustain our efforts for the long term.

And thank you today for your participation in the call. And operator, at this point, I'd like to open the line for questions.

(OPERATOR INSTRUCTIONS). Ren Benjamin, Rodman Renshaw.

Congratulations on an outstanding 2005. A couple of questions. The first one is can we get an update on the ongoing [arthritis] trial -- the Phase I/II trials evaluating Panzem? How is that proceeding? And will we get an update, a further update on this data at an upcoming conference?

It's Carolyn. Yes, in answer to your question, Phase Ib studies remain ongoing. They have been amended, as you know, to include additional patients. The timing of when we present the data will be dictated by when we have completed that additional enrollment. But we do intend to present additional data on those studies.

Do you think that will happen this year? Or it's too early to tell based on enrollment?

The timing would be the end of this year or early 2007.

And do you have any updates as far as -- I mean, we've seen some very nice data at last year's AACR regarding responses. Has there been an update to that?

You mean the responses from the Phase Ib studies that we presented last November, that's what you're referring to?

Yes.

We will provide, as part of the ongoing update when we present the additional data, the status of the patients who participated in the first part of this trial. There will be some updates, and as I said, they'll be presented at the time that all the data is released.

Can you talk to us a little bit about how the MKC-1 trial is proceeding? Is it sort of too early to tell? Is enrollment going pretty well? Anything you can tell us on that?

The study is up and running and enrolling. And of course, we're moving it as quickly as we can. It's probably too early to say much more about that. As you know, this study was just announced in January.

One of the milestones that maybe I missed when Jim was talking about it, you're initiating quite a few trials, obviously, this year. But what about RA? Is that also going to be -- 2ME2 for RA, is that also going to be a goal for 2006? Or will that be something more slated for [multiple speakers]?

The goal in RA, Ren, for 2006 is to initiate IND-directed studies.

And then finally, can you talk to us a little bit about milestones regarding presentations coming up? So obviously, you announced today some preclinical results regarding 2ME2 and RA. Are there any other conferences that you know of right now that you will be presenting data at?

Well, I think the obvious one is AACR, which is a couple weeks away. And we always have a presence there with both our own work and our collaborators' work, and this year will be no exception. There will be I think several exciting posters and data presented there. Later in the year, we also have some talks and presentations slated. We will be announcing those as we get closer to those meetings.

And then one final question, because I can't leave Dane out. What's --

Thanks, Ren, I appreciate that.

What's the -- including now the recent financing and the Miikana acquisition, what's the total shares outstanding, please?

The common shares outstanding after the two transactions are about 73 million, and there are an additional approximately 17 million voting rights associated with Celgene's preferred stock.

[Stephen Quitman, Stephen A. Quitman, PH].

I know that the Panzem trial for the capsule version in multiple myeloma has been going on for many years now. Can we expect any update or results of that trial?

Carolyn can provide you the status of where we are right now and her view on when we're likely to compile that data and present it.

Yes, actually, we are in the process of working with the investigators to put together a publication. As you may know, there were some interim data presented at ASHE several years ago now. The problem is, then, a good one. We still have people on study. So it's been very hard to analyze all the data when we have some people more than four years out still receiving the capsules.

And it is several patients. So it does impact the analysis. The investigators have preferred to wait to do a full publication when they have completed data. But we're moving in that direction. And I expect we'll have a publication on that this year.

Thank you. I have just one other question. Last summer, EntreMed provided Duke University with Panzem NCD for a trial, breast cancer trial with Docetaxel, which was sponsored by the Susan Komen Breast Cancer Foundation, especially I think regarding HIF-1alpha and its roles in breast cancer development. Do we have -- do we expect any information either from Duke or from Susan G. Komen or from EntreMed on that Duke University trial?

Yes. The announcement last summer was the announcement of the granting of the funds. That grant included some preclinical work, as well as the clinical trial you're referring to. The trial is one of the trials we expect to run this year. As Jim mentioned, we have other Phase II studies we expect to initiate with Panzem NCD in this first half, so you should be hearing about that shortly.

So the time between when it was announced and today was involved in continuing to do those preclinical studies in anticipation of commencing the clinical portion of the program.

Congratulations to all of you.

(OPERATOR INSTRUCTIONS). There appears to be no further questions at this time. I'll turn the floor back over to you for any further or closing remarks.

No closing remark other than to thank everybody for their continued support of the Company, and the whole entire team is working hard to continue to move our pipeline forward. And I just want to thank you all for participating today, and have a great day.

Thank you. This concludes today's teleconference. Please disconnect your lines at this time and have a wonderful day.