CASI Pharmaceuticals Inc (CASI) 2006 Q2 法說會逐字稿

Good morning, and welcome to EntreMed's second-quarter 2006 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 your call.

Thank you, and good morning, ladies and gentlemen. Welcome to our second-quarter 2006 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 session portion of the call after the remarks.

Before we begin, I'd 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 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.

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

As I have emphasized during past quarterly updates, EntreMed has focused its resources and scientific energies on the development of small molecule drugs that target the inhibition of multiple cellular pathways important in cancer and inflammatory diseases. We continue to do so because these multiple pathways are particularly important in cancer cells that have developed very elegant survival mechanisms. There are at least five to 10 major mechanisms that cancer sales use to survive and prosper. Our approach has been to (indiscernible) [these] process at the level of both the tumor cell and the supporting tumor blood vessels.

EntreMed is focused solely on developing drugs for the treatment of cancer and inflammatory diseases. Our therapeutic pipeline is being built using our extensive background in angiogenesis, cell cycle regulation, apoptosis, and the inhibition of [trinase] signaling, together with the understanding of how these mechanisms interrelate.

We continue to make good progress in both our clinical and preclinical programs. I'm encouraged by our prospects for advancing the clinical programs of our three [lead] product candidates. We continue to demonstrate our progress by executing consistently against guidance, supporting our claims with scientific progress, and broadening our pipeline to mitigate risk.

We entered 2006 a substantially different company. During the course of the past six months, we repositioned EntreMed from a company with a single product candidate to a mid-range drug development company with multiple clinical-stage drug candidates. We achieved this through a combination of advancing our internal pipeline and the acquisition of Miikana Therapeutics.

And now, for a discussion of 2006 accomplishments to date and the Company's plan for moving forward over the remainder of this year and into 2007. I'll start with a review of our clinical-stage cancer drug candidates and then proceed to describe our clinical programs in cancer and inflammatory diseases.

We continue to focus on the clinical development of our lead small molecule anti-cancer drug candidate, Panzem NCD, which is an orally active, well-tolerated anti-cancer agent that has both antiproliferative and antiangiogenic activities. This compound is currently in multiple Phase II clinical trials using a formulation developed with Elan drug delivery to enhance its bioavailability in cancer patients.

Panzem is part of a new generation of cancer drug candidates that work through multiple cellule pathways by attacking tumor cells directly to induce programmed cell death, or apoptosis; by blocking blood vessel that feed tumors; the inhibition of angiogenesis; and by disrupting microtubules, an intracellular matrix necessary for the rapid division of cancer cells.

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

In January 2006, we commenced a Phase II study with Panzem NCD in patients with a glioblastoma multiforme, an often fatal form of brain cancer, at the Duke University Medical Center Brain Tumor Center. In April 2006, we commenced a Phase Ib study with Panzem NCD in combination with paclitaxel, or Taxol, in patients with metastatic breast cancer, also at the Duke University Medical Center. And this study is designed to evaluate the biologic effects on tissue and plasma in patients treating with paclitaxel alone and in combination with Panzem NCD.

Breast cancer remains a significant health problem, killing over 40,000 American women annually, despite the introduction of new therapies. A primary resistance mechanism to treatments for breast cancer is thought to be the upregulation of HIF-1 alpha. Prior studies conducted by the Duke team demonstrated that the inhibition of HIF-1 alpha causes nearly complete disruption of tumor vessels and enhances sensitivity to radiation in resistant breast tumors.

The inhibition of HIF-1 alpha, a primary mechanism of Panzem activity, may have the same or similar impact on chemotherapy-resistant tumors. Through serial biopsies of the Duke breast cancer patients, we will be able to directly evaluate HIF-1 alpha levels following treatment with Panzem and Taxol.

In May, we commenced a multicenter Phase II combination study with Panzem NCD and Genentech's Avastin in patients with metastatic carcinoid tumors at the Dana-Farber and other Harvard cancer centers. Carcinoids are tumors of neuroendocrine origin with 85% of carcinoid tumors developing in the gastrointestinal tract. Combination therapy, when used, has generally resulted in a response rate of 10 to 15%. We believe that combining two agents with antiangiogenic activity represents a unique approach to treatment, and may produce higher response rate than combination therapy or either antiangiogenic agent alone.

Commencement of this clinical trial represents our first Phase II clinical trial in combination with an approved antiangiogenic agent. We are directing our clinical studies on the use of Panzem NCD primarily in combination with approved antiangiogenic and cytotoxic agents. Our preclinical studies have shown that Panzem has an additive or synergistic effect on tumor inhibition when used in combination with approved drugs at their maximum tolerated dose without increased toxicity. This is a unique feature of Panzem that we intend to pursue in current and future clinical studies.

All current trials are proceeding well, with data anticipated in the first half of 2007. In addition, we have also extended the two Phase 1b trial that [was in Wisconsin and] Indiana in order to determine food effects on Panzem metabolism and to determine if we can simplify the dosing schedule of Panzem NCD. Data from these trials will be presented in early 2007.

We plan to commence additional Phase II trials of Panzem NCD during the second half of 2006. Additional Phase II studies under consideration include combination and single-agent studies in glioblastoma, prostate, ovarian, renal cell carcinoma, and multiple myeloma. The planning for these studies is already underway.

With respect to multiple myeloma, five patients still remain on Panzem capsules, with stable disease for periods ranging from 18 months to five years. A publication on this trial is being prepared at the present time.

In a further development, we reported this morning that EntreMed was issued a U.S. patent covering composition of matter for purified 2ME2, the active ingredient of Panzem NCD. As a result, we now have issued patents for Panzem covering composition, methods, and uses across a broad range of diseases.

High-purity 2ME2, a novel composition that can be produced in 99.5% purity through synthetic methods, contributes to its pharmaceutical activity while reducing estrogenic components remaining from the manufacturing process. The issuance of this patent is a significant milestone for EntreMed, providing us with composition of matter protection for the first time, and effectively extending 2ME2's patent life to 2022.

Earlier this year, we expanded our clinical oncology pipeline with the addition of three programs through our acquisition of Miikana Therapeutics, including MKC-1, a Phase II drug candidates. MKC-1 is an orally active, small molecule cell cycle inhibitor with a unique mechanism of action. MKC-1 arrests cellular mitosis by inhibiting a novel intracellular target, important cellular [trafficking] that has been shown to be involved in cell division. The addition of MKC-1 to EntreMed's clinical pipeline is consistent with our expertise in cell cycle regulation and our continuing emphasis on anti-cancer agents with novel mechanisms or action.

Earlier this year, we commenced a multicenter Phase 2 studies with MKC-1 for the treatment of metastatic breast cancer. Patients are continuing to be accrued on this study, and we anticipate conducting an initial evaluation of response sometime in the fourth quarter of 2006. Planning for a second Phase 2 clinical trial for non-small-cell lung cancer is well underway, and we remain on our guidance of initiating the trial later this year. Other Phase I trials using MKC-1 are being planned to further evaluate its role in hematological cancers.

Our third clinical candidates is ENMD-1198, which is a new chemical entity based on a modified chemical structure of 2ME2. ENMD-1198 is designed to improve upon the metabolism of 2ME2 while retaining multiple mechanisms of action including apoptosis, binding microtubules, and inhibiting HIF-1 alpha.

In preclinical studies, 1198 has been shown to be a potent orally active microtubule disrupting agent that leads to arrest of cell division and apoptosis in tumor cells. 1198 also asserts antiangiogenic activity that further contributes to its overall antitumor properties. In preclinical studies, 1198 appears to be a novel anticancer compound in terms of both its activity and safety profile.

In May, we commenced a Phase I clinical trial to evaluate the safety, tolerability, pharmacokinetics, and clinical benefit of 1198 in patients with advanced cancer. Patient accrual is continuing for this study. The single center dose escalation study is being conducted at the University of Colorado.

In addition to our Phase II trials of Panzem NCD and MKC-1 and our Phase I trials for ENMD-1198, our preclinical pipeline comprises both new indications for existing compounds and novel compounds with anticancer and/or anti-inflammatory property. For today's update, I will focus on preclinical efforts that can lead to IND submissions within the next 12 to 18 months.

Based on the antiangiogenic and anti-inflammatory properties of Panzem, we're focusing particular attention on the development of Panzem for the treatment of rheumatoid arthritis. Angiogenesis is a major component of the pathology 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 preclinical studies with Panzem and rheumatoid arthritis models. Based on the results of the studies, we have determine that Panzem not only has anti-inflammatory effects, but more importantly, has potential as a disease-modifying antirheumatic drug, or DMARD. DMARDs are drugs that have the ability to slow down disease progression in rheumatoid arthritis and other autoimmune diseases.

We have generated substantial preclinical data demonstrating the positive effects of 2ME2 treatment on inflammation in disease progression in well-accepted RA models. We believe that an opportunity exists for 2ME2 based on its antiangiogenic activity and safety profile to become a novel nonimmunosuppressant 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.

Since we last reported on our progress in RA, we have been conducting a series of preclinical studies internally and with collaborators to confirm that Panzem's activity is based in part on its antiangiogenic properties as well as evaluating how its activity differs from standard RA treatments. Since Panzem represents the first of a potentially new class of disease modifying rheumatoid arthritis drug candidates, an understanding of Panzem's safety history and mechanisms will be important components of our IND submission. The lead time -- we anticipate reporting this year on the findings from these mechanistic studies.

Furthermore, we remain on track to complete IND directed safety studies for Panzem in rheumatoid arthritis by the end of 2006 and to file an IND in 2007. We will continue to report progress periodically on this program.

The lead compound in our aurora kinase program, an aurora kinase inhibitor with a unique multikinase profile and mechanism of action, 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.

We are also exploring a unique antiangiogenic component of MKC-1693, our lead candidates. We now have had data demonstrating that MKC-1693 has activity in multiple preclinical tumor models. Our 2006 goal for this program is to extend our research into antitumor mechanisms of MKC-1693 and to conduct IND-directed studies living to the filing of an IND in 2007.

We are also making their progress in developing a number of tubulin-inhibiting anti-cancer compounds that we licensed exclusively from Celgene in early 2005. Tubulin inhibitors comprise a broad family of compounds that bind to tubulin and disrupt microtubules, resulting in programmed cell death or apoptosis. 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 by the end of 2006 is to select lead compounds and commenced IND-enabling preclinical studies in 2007.

I would now like to provide a brief overview of our current financial position. On August 9, 2006, we filed a report containing financial results for the three and six months ending June 30th, 2006 on Form 10-Q. We reported a net loss for the second quarter of 2006 of 6.0 million, or $0.09 per share, which compares with a net loss of 4.3 million or $0.09 per share for the same period last year.

Net loss for the first six months of 2006 was 40.7, or $0.59 per share compared with 9.8 million or $0.22 per share for 2005. The 2006 net loss includes a non-cash charge of 29.5 million resulting from the acquisition of Miikana Therapeutics in January 2006. Excluding the non-cash charge, the Company's net loss for the first six months of 2006 would have been 11.2 million compared with 9.8 million for the first six months of 2005.

We did not report any revenues for the first six months of 2006 versus 605,000 for the comparable period in 2005, although the Company does expect to record royalty revenue on sales of Thalomid by Celgene in the third and fourth quarters of 2006. We currently anticipate that 2006 royalty revenue will be in line with royalty revenues in 2005.

Our increased expenses for the second quarter 2006 reflect the Company's shift to a clinical focus for Panzem NCD, MKC-1, and ENMD-1198 as well as our progress in key preclinical programs. R&D expenditures will increase in the second half of the year as we secure material to support ongoing and planned trials for our three clinical-stage drug candidates. However, we expect our loss for the full year will be approximately 56 million, giving effect to the Miikana non-cash acquisition charge, or approximately 27 million without it, somewhat less than our previous guidance of 30 million.

As of June 30th, 2006, the Company reported cash and short-term investments of approximately 45.1 million. We believe that our cash, short-term investments, and royalty revenue will be sufficient to fund planned operations well into the second half of 2007.

In terms of milestones and corporate goals, the first six months of 2006 have been very productive for the Company. We've executed on the guidance we set for the first half of the year, and anticipate achieving the remainder of our goals for 2006. So far this year, we have achieved -- our achieved milestones included initiation of the Phase II Panzem NCD study in patients with glioblastoma; initiation of the Phase II MKC-1 multicenter study in patients with metastatic breast cancer; initiation of the Phase I ENMD-1198 dose escalation study in patients with advanced cancer; initiation of Phase I combination study with Panzem NCD and Taxol in patients with metastatic breast cancer; initiation of the Phase II study with Panzem NCD in combination with Avastin in patients with carcinoid cancer; granted orphan drug status for Panzem [in GDM]; completion of the Miikana integration; and most recently, issuance of a patent covering composition of matter for Panzem.

These milestones are the result of the Company's focus on the development of small molecules that target drug and the inhibition of multiple cellular pathways important in cancer and inflammatory diseases. Our progress has positioned us as a solid Phase II oncology drug development company.

As we move further into the second half of 2006, we expect to continue emphasizing our later-stage programs comprising two oncology product candidates and multiple Phase II clinical trials, a third oncology product candidate in Phase I trials, as well as preclinical rheumatoid arthritis and aurora kinase programs that are headed toward IND submissions in 2007.

For the remainder of 2006, we intend to achieve the following milestones -- initiated a Phase II trial with Panzem NCD in prostate or ovarian cancer; initiated a Phase II trial with MKC-1 in patients with non-small-cell lung cancer; complete the IND-directed safety studies with 2ME2 and rheumatoid arthritis; initiate IND-directed studies with a lead aurora kinase inhibitor [in] oncology; and identify lead compounds for our tubulin inhibitor program and select lead compounds for our [astatic] inhibitor program.

In summary, I believe that we have the appropriate strategy in place to build a leading oncology franchise, one that is focused on developing small-molecule oncology drugs like Panzem NCD, MKC-1, ENMD-1198, and other multimechanism drugs, together with investing behind the potential for 2ME2 in rheumatoid arthritis.

We will continue to build our Company around a multiproduct portfolio. We're not relying on one drug candidate 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 portfolio, which means that we will look selectively at acquiring technology and product candidates that fit the strategy. In addition, we're beginning the process of seeking codevelopment partners for one or more of our core programs and licensing partners for noncore programs. Ultimately, our goal is to commercialize our core pipeline on our own and in partnership with pharmaceutical and biotech companies.

On a final note, while this is a tough period for biotech companies, I believe that staying on plan, meeting guidance, and generating the data to support continuing development of our multimechanism drug candidates will create shareholder value. We're making good progress on multiple fronts, and we will keep you informed periodically of our progress.

Thank you for your continuing interest and support in the Company. Operator, I would now like to open the line for questions.

(OPERATOR INSTRUCTIONS) [Stephen Quitman].

Congratulations on your announcement of the composition of matter patent for Panzem this morning. My question is, does EntreMed plan to present at any upcoming scientific conferences over the next several months? And will there be any early results of the ongoing trials released at that time?

I'll turn that over question over to Carolyn Sidor.

We have submitted posters or abstracts for potential poster or oral presentation for the EORTC meeting in Prague as well as ASHE. At this point in time, we anticipate some of those will be accepted -- maybe all those will be accepted for either a poster or an oral presentation. But we can't comment until we get that information. None of the current clinical studies are part of those submissions, however, because they were initiated earlier this year.

I have a follow-up questions. I read a recent article by Dr. D'Amato in which he discussed an EntreMed-sponsored preclinical study which showed a systemic treatment with oral Panzem resulting in a dose-dependent decrease of choroidal neovascularization without toxicity. Are there any plans to test Panzem NCD as an oral treatment for age-related macular degeneration? And if so, would there be any collaboration with another company if EntreMed went with this program?

At the present time, we have no plans for straying away from either oncology or inflammatory diseases. So probably the most direct answer to your question is we're not really focused on macular degeneration or related ophthalmological indications. Depending on what additional information might come out from Dr. D'Amato or others, we could change our mind in the future. But we're trying to stay focused for the present time on oncology and the lead we're pursuing in inflammatory diseases.

(OPERATOR INSTRUCTIONS). [Jeff Harvey], Janney Montgomery.

Just curious -- you indicated that your royalty from Thalomid would be about the same as last year. And yet, the sales of Thalomid are up about 17% for the first six months. So I'm just curious why you expect it to be the same level?

Well, in the absence of any guidance from Celgene as to what their sales are going to be for this year, we're trying to take a pretty conservative view of it. And we're pretty comfortable at this point in time in feeling that we will basically take in royalty revenues at about the same rate as last year. And if they do better than that, we'd certainly like to hope we could get above the $5 million in royalty revenues.

If there are no further questions, I would like to turn the call back over to Mr. Burns for closing remarks.

Once again, I'd like to thank all of you for your continued interest in EntreMed and your participation in today's call. And thank you all so much. And this concludes today's teleconference. Please disconnect your lines at this time, and have a wonderful day.