Dominari Holdings Inc (DOMH) 2011 Q2 法說會逐字稿

Welcome to the Spherix second-quarter financial results and business update conference call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a Q&A session. (Operator Instructions).

As a reminder, this conference is being recorded August 18, 2011. I would now like to turn the conference over to Kim Golodetz. Please go ahead, Ma'am.

Thank you. This is Kim Golodetz with Lippert/Heilshorn & Associates. Thank you all for participating in today's call.

Joining me this morning from Spherix are Doctor Claire Kruger, Chief Executive Officer, Robert Clayton, Chief Financial Officer and Doctor Robert Lodder, the Company's President.

Last week, Spherix issued a press release highlighting its second-quarter 2011 financial results and business highlights. If you have not received this news release or if you would like to be added to the Company's distribution list, please call Lippert/Heilshorn in New York at 212-838-3777 and speak with Carolyn Curran.

As we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of Spherix. These forward-looking statements involve risks and uncertainties that include, without limitation, risks that product candidates may fail in the clinic or may not be successfully marketed or manufactured; that Spherix may lack financial resources to complete development of D-tagatose and/or SPX106; that the FDA may interpret the results of the studies differently than management interpretation; that competing products may be more successful; that demands for new pharmaceutical products may decrease; that the biopharmaceutical industry may experience negative market trends; that the Company's continuing efforts to develop D-tagatose and/or SPX106 may be unsuccessful; that its common stock could be delisted from the NASDAQ capital market and other risks detailed in the Company's filings with the US Securities and Exchange Commission.

I encourage you to review these filings including the Company's Forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Importantly, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live call today, August 18, 2011. The Company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call.

With that, I would like to turn the call over to Claire Kruger. Doctor Kruger?

Thank you, Kim. And my thanks to each of you for participating in this call.

As you're probably aware, Spherix consists of two subsidiaries -- Spherix Consulting, our health sciences consulting division which is responsible for our revenues, and Biospherics, which is our development subsidiary that accounts for all of our R&D expense.

Today Doctor Robert Lodder and I will review our accomplishments and our growth strategy and, as we did a few months ago, we will provide our upcoming milestones so that you may measure our progress going forward.

Let me start with a few words on our health sciences consulting business. As you're aware, this wholly owned subsidiary accounts for almost all the revenues of the Company. We performed work on behalf of 15 customers this year compared with 14 in the same period last year. Our scientists regularly publish and present at major trade and professional shows and conferences, and we have listed some of them in the press release that we issued last week.

Importantly, this division is responsible for overseeing the research work of Biospherics, our pharmaceutical development subsidiary.

Today, we will discuss the progress we are making in our business development strategy of in-licensing IP to continue portfolio diversification. Before I discuss these plans and the expectations for our in licensed compound SPX106 in the treatment of dyslipidemias alone and with D-tagatose, I'll turn the call over to Robert Clayton who will review our recent financial results with you. Robert?

Thanks, Claire. The net loss for the second quarter of 2011 was $1 million or $0.40 per share, compared with a net loss for the second quarter of 2010 of $2.6 million or $1.49 per share. The narrowing of the net loss is attributed mainly to a lower research and development expense. The R&D expense for the second quarter of 2011 was $0.4 million, a decrease of $1.1 million from R&D expense of $1.5 million in the prior year's second quarter. The decrease in R&D was attributed to lower spending, following completion of a Phase III clinical trial and a Phase II dose-ranging trial to develop D-tagatose for the treatment of Type 2 diabetes.

Second-quarter 2011, R&D expense is related to the Company's preclinical trials for the use of both D-tagatose and SPX106 in the lowering of triglyceride levels. The net loss for the first quarter of 2 -- of this year was $1.2 million or $0.40 per share, compared with a net loss for the six months ended June 30, 2010, of $4.7 million or $2.74 per share. R&D expense for the first half of 2011 was $0.8 million down from $2.9 million in the comparable prior year period, due to completion of the aforementioned clinical trials.

The Company had cash and cash equivalent of $5.6 million and working capital of $5.6 million as of June 30, 2011, compared with $5.6 million and $4.9 million, respectively, as of December 31, 2010.

The Company raised $2.5 million net of offering costs and a registered direct offering of common stock and warrants during the first quarter of 2011. We regained compliance with our NASDAQ listing during the quarter, owing to a 1 per 10 reverse stock split, effective in May.

With that, I'll turn the call back to Claire.

Thanks, Robert. For those of you who are new to Spherix, I will very briefly review our experience with D-tagatose as a treatment for diabetes. As a reminder, D-tagatose was originally developed as a low-calorie sweetener and its safety in humans was established in 2001 when it received a designation as generally recognized as safe for rats when use in foods by the US Food and Drug Administration.

You might recall that D-tagatose showed a statistically significant reduction in HbA1c levels in our Phase III double blind placebo-controlled trials in patients with Type 2 diabetes. The reduction was 0.4% in the intent to treat global population at 10 months and a 1.1% reduction in the US per protocol population at 10 months, which we believe may be due to differences not only in patient compliance between the populations but also due to differences in adiposity as reflected in a study by body mass index, or BMI.

We continue to believe that D-tagatose is sufficiently effective to support continued development in diabetes but because the cost for continued development is beyond our means, we continue to have discussions with potential partners who could fund the additional studies required by the FDA to market D-tagatose as a diabetes drug.

In addition, we believe the use of D-tagatose as an ingredient in functional foods holds promise, and we continue to remain open to opportunities in this product space. Given our expertise in food safety, honed through our work in health sciences consulting side of our business, Spherix is uniquely positioned to understand the role that D-tagatose may play as a functional food ingredient and we may be able to benefit from the strength of our contacts in the food industry.

As I indicated previously, we have been actively engaged in pursuing in in-licensing strategy to bolster and diversify our pipeline. As you are aware, we have in-licensed preclinical cardiovascular and metabolic drug candidates from the University of Kentucky and Rob Lodder will update you on this progress shortly.

We are also currently evaluating numerous additional opportunities, including those in the orphan drug space, as exciting and achievable targets. We are investigating opportunities to in-license drug candidates currently in Phase I or Phase II. Our objectives is to choose the opportunities best suited to our business goals based on financial considerations, achievable clinical milestones, and development potential that will advance our shareholder value.

Our in-house scientific expertise and long-term experience and execution of drug development plans, including successful completion of Phase II and III clinical diabetes trials has been cited as very attractive during our discussions with potential targets.

Additionally, our NASDAQ listing position as a company is an attractive platform for private companies, whose products require access to capital for further development.

In particular, our attention to the orphan drug market is important because of the benefits of orphan drugs for the developer and marketer or numerous. First the pathway to approval tends to be shorter because by definition these patients have unmet medical needs and the regulatory authorities are anxious to provide solutions. Orphan drugs are granted seven years of additional exclusivity to encourage their development by providing this financial incentive.

In addition, these drugs typically may be marketed by fewer sales representatives and often prices for the drugs are set at a premium. We have engaged a financial advisor who is charged with identifying drug candidates, including orphan drug candidates, in clinical development that may be available to us.

I would like to turn the call over to Doctor Robert Lodder now to go over our progress with our preclinical programs in both D-tagatose and our licensed product, SPX106. Rob?

Thank you, Claire. As Claire mentioned, SPX106 is in preclinical development in combination with other agents, including D-tagatose, for the prevention and treatment of atherosclerosis, hypertriglyceridemia and related dyslipidemias.

As we announced in June, SPX106 achieved statistically significant reductions in triglycerides and cholesterol when administered in combination with D-tagatose for nine weeks to genetically engineered mice prone to dyslipidemia. The animals were dosed twice daily and that dose significantly reduced triglycerides by 43 mg per deciliter compared with control animals having a mean triglyceride level of 118 mg per deciliter. This is a 36% reduction with a P value of 0.01.

The same therapy significantly reduced total cholesterol by 73 mg per deciliter from a mean level of 378 mg per deciliter or a 19% reduction compared with control animals and again with the P value of 0.01.

Results of measurements of atherosclerotic lesions in these animals will be available very soon. The link between triglycerides and atherosclerosis is not well understood; however a drug to treat hypertriglyceridemia is more interesting if it also reduces atherosclerosis.

Both SPX106 and D-tagatose alone are able to lower both triglycerides and cholesterol. But the combination we call it [SPX106-T] is believed to be extremely powerful. Our next step with this combination is to test in a second animal model, the wild type Syrian golden hamster which is important because hamsters express CETP -- that's cholesteryl ester transfer protein -- as humans do.

CETP is a plasma protein that collects triglycerides and cholesterol esters from very low density, VLDL, or low density lipoprotein, LDL, often called the bad cholesterol and usually exchanges them for the same type of molecules from high density lipoproteins, HDL, also called the good cholesterol and vice versa. The hamster study was recently initiated and is expected to provide results by the end of September 2011.

An absorption study is now underway of glucose, fructose, and tagatose in the gut. It will help clarify the mechanism of action of tagatose. Depending upon the results of the absorption study, the absorption study will most likely be followed later in the fall of 2011 by a study of the VLDL production in the liver.

An important four-week safety study of the toxicology of SPX106 is also presently being conducted. This experiment examines the effect of near-normal doses to very high doses of SPX106 on various organ systems in the rat. Once this study is completed, the Company intends to submit an INDF application to the FDA for SPX106-T and begin human trials. Biospherics would then be free to begin a Phase I safety study of SPX106-T in humans in early 2012.

Phase I studies of SPX106-T would determine safety in dosing over the next year, that's 2012, and involve perhaps 20 to 80 healthy volunteers. The Phase II studies over 2013 and 2014 might involve 100 to 300 patient volunteers and would evaluate the effectiveness of SPX106-T as well as look for any side effects.

Finally, Phase III clinical trials in the period 2015 to 2017 in 1,000 to 3,000 patient volunteers would establish efficacy and monitor any adverse reactions from long-term use before an NDA is filed at FDA.

In the meantime, Biospherics will continue to develop its other in-license drug candidates to diversify its pipeline.

With this review of the data, I will turn the call back over to Claire.

Thanks, Rob. As we have mentioned in the past, the development pathways of triglycerides and cholesterol-lowering drugs have lower hurdles in terms of study requirements for approval and that's lower development costs, and for diabetes.

Therefore, we have chosen to fund additional research to export these indications. The market for triglyceride lowering and cholesterol-lowering drugs is a large and underserved market with an estimated worldwide treatment market of $26 billion annually and exceeds $3 billion annually in the US alone.

With fully one third of the population of the US overweight or obese, the market for pharmaceutical products to treat metabolic syndrome is enormous and a host of drugs has been fraught with safety problems and denied approvals by the FDA. We hope that SPX106-T will prove to be safe and effective and ultimately garner very meaningful sales.

However, as Rob mentioned, the path to approval will take a while. So we have elected to pursue an in-licensing strategy which will provide us with a nearer term pipeline and round out our development efforts.

With that, we will open up the call for questions. Operator?

(Operator Instructions). There are no questions at this time. Presenters, do you have any closing remarks?

Thank you. Yes. In closing, we are very excited about our drug development pipeline. We plan to present at the Rodman & Renshaw conference in September and hope to provide additional details on our progress then. In the meantime, I wish you a good day. Goodbye.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.