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Executives

Lawrence A. Kenyon - Chief Financial Officer, Executive Vice President, Corporate Secretary

Tina Shogen - Chairman of the Board, Chief Executive Officer

Analysts

Raymond A. Myers - Emerging Growth Equities

Alfacell Corporation (OTC:ACEL) F4Q07 Earnings Call October 15, 2007 11:00 AM ET

Operator

Greetings and welcome to the Alfacell quarterly update conference call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Larry Kenyon, Executive Vice President and Chief Financial Officer. Thank you, Mr. Kenyon. You may now begin.

Lawrence A. Kenyon

Thank you. Welcome, everyone and thank you all for participating in the inaugural Alfacell Corporation quarterly update conference call for investors and analysts. As you know, my name is Larry Kenyon and I am Alfacell's Executive Vice President and Chief Financial Officer. With me today is our Chairman of the Board and Chief Executive Officer, Tina Shogen.

Before we begin, please allow me a moment to read our Safe Harbor statement. This presentation includes statements that may constitute forward-looking statements usually containing the words believe, estimate, project, expect, or similar expressions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include the risks discussed in the company’s periodic filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this release.

Thank you for your patience. I will now ask Tina to review our fiscal 2007 accomplishments and our outlook for fiscal 2008.

Tina Shogen

Thank you, Larry. Good morning, all. 2007 was a year of great progress at Alfacell that has positioned us for a successful 2008. Most importantly, we began submissions of our ONCONASE rolling NDA in February and we expect to complete the rolling NDA submission within four months of reaching 316 evaluable events in our confirmatory Phase IIIb registration trial of ONCONASE in undetectable malignant mesothelioma. We are currently at 295 evaluable events and continue to expect to reach 316 events by the end of this December.

Assuming that the clinical trial is successful, we expect to complete the NDA submission by April 30th of 2008. We will be able to confirm this date after we reach the 316th evaluable event.

Our current plan also includes the presentation of the data from our confirmatory trial at the Scientific Forum by the end of -- by June, 2008. Additionally, we continued to make progress in 2007 in our Phase I/II clinical trial program for ONCONASE in solid tumors. While we await the completion of the dosing of the final few patients in Phase I, we are finalizing our plans for the Phase II component of the study. We continue to expect to launch the beginning of the Phase II clinical trial program by the end of this December.

Fiscal 2007 also saw us enter into our first two commercial agreements for ONCONASE. We have now partnered with GENESIS Pharma in Greece and Southeast Europe, and U.S. Pharmacia in Poland and Northeast Europe. In both agreements, we are entitled to receive milestone payment and double-digit royalties. Additionally, U.S. Pharmacia paid us $1.5 million in an up-front fee and equity investment.

Dialog continues with other potential ONCONASE partners and we are optimistic about completing additional agreements in 2008.

Our collaborators have been very busy in 2007 as well. During the fiscal year, numerous publications were announced that describe pre-clinical research of ONCONASE, as well as [inaudible]. Dr. Intae Lee of the University of Pennsylvania and Michael Carbone’s laboratory at the University of Hawaii each presented ONCONASE data at the 2007 AACR annual meeting that enlightened their work with ONCONASE in breast cancer and lung cancer, as well as mesothelioma.

We are also very pleased to see that ONCONASE was included in the latest edition of the Handbook of Therapeutic Antibodies as the ribonuclease of choice in therapeutic antibody research.

Finally in July, we completed our move to our new facility in Somerset, New Jersey. We believe that our corporate headquarters are adequate for our needs as we advance to our next phase of corporate development.

I will now ask Larry Kenyon to review the fiscal 2007 financial results.

Lawrence A. Kenyon

Thank you, Tina. As we announced in this morning’s news release, our fiscal 2007 net loss was approximately $8.8 million, or $0.19 per share, an increase of approximately $1 million compared to fiscal 2006. R&D expenses increased by approximately $300,000 versus fiscal 2006, primarily as a result of increased compensation expense from employee stock option grants.

Additionally, general and administrative expenses increased by approximately $1 million compared to fiscal 2006. This increase was also primarily related to increased compensation expense from employee stock option grants, but also included increased investor relations expenses as the company began utilizing the services of an investor relations firm in fiscal 2007.

These increased expenses were offset by increased investment income of approximately $300,000 and increased proceeds from the sale of our state tax loss benefit of $200,000 in fiscal 2007.

Cash and equivalents on July 31, 2007, were approximately $7 million, a decrease of only $4.5 million in cash and equivalents from July 31, 2006. In addition to proceeds from exercises of stock options and warrants, the July 2007 cash and equivalents include the receipt of $1.5 million from U.S. Pharmacia, our new partner for ONCONASE in Poland and Eastern Europe.

We estimate that our cash and equivalents should be sufficient to allow us to complete the submission of our ONCONASE NDA, assuming a positive outcome for the Phase IIIb clinical trial and assuming that our projected costs for the completion of the NDA are accurate.

At this time, Tina and I would be happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is coming from Raymond Myers of Emerging Growth Equities.

Raymond A. Myers - Emerging Growth Equities

Thank you for taking the questions and congratulations, Tina and Larry, for getting to this point. We are almost to the un-blinding of our data. In September, there was an announcement of 390 evaluable patients and now we’ve -- you’ve said that there’s -- sorry, 290 and now there’s 295, so there’s five additional. Was that as of today, October 15th?

Lawrence A. Kenyon

Ray, that was as of our most recent count, which is pretty much an ongoing count at this point.

Raymond A. Myers - Emerging Growth Equities

Okay, so help me to understand how we are going to get to 21 more evaluable patients in the next roughly two months.

Lawrence A. Kenyon

Sure. As we’ve discussed in the past with both, the number is variable from month to month. On any two- to three-month period though, we’ve seen average monthly patients adds at a pretty consistent level which has allowed us to project that 316th event should be expected to occur by the end of December.

If we hit another month and we are still only at five patients per month, we’ll have to reassess and see if there is a change in the trend that needs to be reflected, but at this point we’re not concerned. We still think we can get to 316 events.

Additionally, there a number of patients at this point, once we got to 316 total events, we were able to determine that some patients had been technically lost to follow-up, meaning that they hadn’t been in contact with any of the particular sites where they were treated for an extended period of time. This is not a large number. It’s less than 10 but we are taking efforts right now and taking measures to track down those patients and determine their status.

So we expect that, given the length of time that some of these patients have been alive, that it’s not unreasonable to assume that a number of them may have passed on at this point. So the number that we are giving, 295, is very conservative. There’s probably a couple more in there and we’ll have more clarity on that in the next month or so.

Raymond A. Myers - Emerging Growth Equities

So it’s not an issue at all that there may be some patients that are lost to follow-up? Is that an issue for the data analysis? What does that mean?

Lawrence A. Kenyon

No, that’s not an issue at all. We’re looking for 316 evaluable events, period. And a few, a handful of patients that are lost to follow-up is to be expected in any clinical trail.

Raymond A. Myers - Emerging Growth Equities

And can you explain for everyone what it means to be non-evaluable? How does that happen and how many non-evaluable patients have there been to date?

Lawrence A. Kenyon

Well, I’ll answer your second question first; obviously, when we first announced about a month ago that we were at 316 total events and 290 evaluable, 26 patients were considered not evaluable and at this point, that number has not changed.

Additionally, to be considered evaluable, patients must meet all eligibility requirements in the study and have received at least one dose of study drug on the Phase IIIb clinical trial.

Raymond A. Myers - Emerging Growth Equities

And so -- and these 26 patients, what happened with them?

Lawrence A. Kenyon

You have a number -- you know, some of those patients were not -- did not meet all of the eligibility criteria. A couple of key criteria that’s important to be measured in this study is patients must be all in groups one through four using the CALGB ranking system, and they cannot ever be more than one prior chemotherapy regimen, and there’s a host of others too. At this point, I would prefer not to go through a long list. It’s kind of a laundry list but it can be read if you go to clinicaltrial.gov and look up the ONCONASE Phase IIIb clinical trial.

Tina Shogen

Ray, I think what’s important also to consider here is that when some of the patients were randomized under control arm where [inaudible] alone was the drug, they opted not to be included in the program so they were never part of the program, although they were registered to be entered into the program.

Raymond A. Myers - Emerging Growth Equities

So they really -- they wanted the [ALKINASE].

Tina Shogen

Right.

Raymond A. Myers - Emerging Growth Equities

Yeah, well, that’s understandable. So what can we read into it taking longer to reach the 316 events than we had originally forecast? Are patients living longer than you had anticipated or was there any -- is it more related to the timing of recruitment or the number of non-evaluable patients? What can we read into this?

Tina Shogen

I would suggest we shouldn’t be reading anything into anything until we know what is what. However, obviously we do have some patients that have been on the study for a very long period of time and that is a fact. So we will see what is once we have the event and once statistical analysis or databases are curried and locked, then we will know exactly how each patient fairs.

Raymond A. Myers - Emerging Growth Equities

Okay, great. And then one final bookkeeping point; what is the fully diluted share count? If all the warranted options, et cetera were converted to common shares, what is the fully diluted share count currently?

Lawrence A. Kenyon

67 million shares, Ray.

Raymond A. Myers - Emerging Growth Equities

Great. Thanks, Larry. I’ll let others ask questions.

Operator

(Operator Instructions) There are no further questions at this time. I would like to hand the floor back over to Mr. Kenyon for any closing comments.

Lawrence A. Kenyon

Thank you and thank you, everyone, once again for participating in this inaugural quarterly update conference call. As we mentioned before, we intend to conduct these calls in the future on a regular basis and we hope that you will find them useful. I will now turn the call over to Tina for her final remarks.

Tina Shogen

Thank you, Larry. Everyone at Alfacell is excited by the opportunity that awaits us in 2008. Key events over the next 12 months include: reaching 316 events by the end of December and beginning the statistical analysis of the confirmatory Phase IIIb ONCONASE data; beginning our Phase II oncology program for ONCONASE; completing the submission of the ONCONASE NDA in early 2008; presenting the ONCONASE Phase IIIb data at the Scientific Forum in the second quarter of 2008; and beginning our commercial phase of Alfacell.

In addition, we plan to conduct a science day webinar to discuss our unique and proprietary technology within the next few weeks. We will be providing more details on the event shortly and we invite everyone listening to participate in this Internet-based review and discussion.

Finally, I would like to add that I personally appreciate the dedication of our shareholders, employees, and collaborators that has made it possible for us to reach this critical point in our company’s history.

Thank you for your continued support and I hope that you are as excited about our opportunities in 2008 as we are. Thank you again and have a wonderful day.

Operator

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Alfacell F4Q07 (Qtr End 7/31/07) Earnings Call Transcript
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