Molecular Insight Pharmaceuticals F2Q07 (Qtr End 9/30/07) Earnings Call Transcript

Nov.12.07 | About: Molecular Insight (MIPI)

Molecular Insight Pharmaceuticals, Inc. (MIPI) F2Q07 Earnings Call November 12, 2007 10:00 AM ET

Executives

David Barlow - Chairman and Chief Executive Officer

John Babich - President and Chief Scientific Officer

John McCray - Chief Operating Officer

Donald Wallroth - Chief Financial Officer

Priscilla Harlan - Vice President of CorporateCommunications and Investor Relations

Analysts

Adam Walsh - Jefferies & Company

Aaron Reames - Wachovia

Ken Trbovich - RBC

Scott Henry - Oppenheimer

Operator

Good morning and welcome to the Molecular InsightPharmaceuticals Second Quarter 2007 Financial Results Conference Call. My nameis Shiquana and I will be the operator on today's call.

I will now like to turn the call over to; David Barlow,Chairman and CEO of Molecular Insight.

David Barlow

Thank you Shiquana. Good morning. I appreciate you alljoining us today for our quarterly conference call. I am David Barlow, Chairmanand CEO for Molecular Insight. With me today are; John Babich, our Presidentand CSO; John McCray, our Chief Operating Officer; Donald Wallroth, our ChiefFinancial Officer, who joint us in August and Priscilla Harlan, our VicePresident of Corporate Communications and Investor Relations.

Before moving forward, it is important to let you all knowthat we will be making forward-looking statements on today's call. Priscilla isgoing to go over a brief Safe Harbor statement, and then we'll proceed with therest of the call.

Priscilla Harlan

Thank you, David. Good morning everyone. Those of you whoare on the webcast, they want to turn to slide number two to see ourforward-looking statements. This is a reminder that statements on this callthat are not strictly historical in nature constitute forward-lookingstatements.

Such statements include, but are not limited to statementsabout the development of; Azedra, Onalta, Zemiva, and our other productcandidates. Such forward-looking statements involve known and unknown risks,uncertainties and other factors that may cause the actual results of MolecularInsight to be materially different from the historical results or from anyresults expressed or implied by such forward-looking statements.

These factors include, but are not limited to, risks anduncertainties related to the progress, timing, cost and results of clinicaltrials and product development programs, difficulties or delays in obtainingregulatory approval for product candidates, competition from otherpharmaceutical or biotechnology companies, and the additional risks discussedin filings with the Securities and Exchange Commission.

All forward-looking statements are qualified in theirentirety by this cautionary statement, and Molecular Insight undertakes noobligation to revise or update this information to reflect events orcircumstances after the date hereof.

I'll now turn the call back to David.

David Barlow

Thanks, Priscilla. At this point I will review the veryexciting news that we announced on Friday November 9th regarding our$150 million bond financing and John McCray will provide further details on thetransaction.

After that, Don Wallroth, will briefly summarize ourfinancial results for the third quarter. John Babich, will then reviewadditional clinical milestones that we’ve completed over this time period. Iwill then review some additional operational milestones that we’ve recentlyachieved and also what we expect to accomplish as a company over the next 12 to18 months.

At that time we will open up the call to you all for aquestion-and-answer period. As we’ve announced last Friday, we are extremelypleased to have priced our over subscribed $150 million bond financing.

In evaluating several financing options relative to ourbusiness needs and market conditions, we concluded that this transaction wasideally suited to provide the capital necessary to fund our product developmentplans while minimizing dilution to our current shareholders.

We anticipate that the $150 million raised in this financingshould provide us with sufficient capital to fund the company through our firstproduct launch including expenses related to continued clinical progress on ourrobust pipeline of Molecular Imaging and targeted Molecular Radiotherapeuticcandidate. Our pipeline programs continue to be at/or ahead of schedule.

I’d now delighted to turn this call over to John McCray, ourChief Operating Officer. John played a critical role throughout the process ofour high impact bond financing and will provide some additional details of thefinancing.

John McCray

Thank you David. For those of you who are on the webcastplease look at the next slide number three, Highlights of Bond Financing. AsDavid mentioned, the gross proceeds from this financing are $150 million withnet proceeds of $139.9 million after repayment of some vender notes, fees andexpenses having been deducted.

The bonds were standard and have no convert features. Theyhave five-year maturity dates and there are coupons equivalent to LIBOR orLondon Interbank Offered Rate, plus 8% as determined on a quarterly basis.

The placement is due in 2012 to a Syndicate of InstitutionalInvestors. Warrant coverage is 18% on a fully diluted post money basis with anexercise price of $5.87. The bonds are redeemable by Molecular Insight at itsauction beginning November 16, 2008.

Further details of the funding are available in 8-K filingdocuments, which are expected to be publicly available on the SEC website thisweek.

David Barlow

Thanks John. Don Wallroth, our CFO was also critical toachieving our bond financing, will now highlight our financial results for thethird quarters.

Donald Wallroth

Good morning everyone and thank you David. As we outlined intoday’s business press release, Molecular Insight’s third quarter 2007 net losswas $13.2 million or $0.53 per share. Total revenues for the third quarter of2007 were $317,000.

As of September 30th, 2007 our cash and cash equivalents are$38.7 million. R&D expenses totaled $9.8 million in the quarter as comparedto $4 million for the same period last year. This increase was primarily due toincreased costs associated with the trials for Azedra and Zemiva increased pre-clinicaldevelopment cost and compensation related expenses associated with an expandedR&D team.

G&A expenses were at $4.2 million for the third quarterof 2007, compared to $2.5 million in the third quarter of the prior year,primarily due to the increased compensation expense including stock-basedcompensation, increased legal fees, increased recruiting and relocation fees,increased communications, sales and marketing expenses and increased insuranceexpenses.

These increases were primarily a result of both additionalservices and expenses related to our new public company legal and reportingrequirements following our initial public offering in the first quarter of2007, and additional outside services to support accounting and financepersonnel in the third quarter of 2007.

In summary, as of September 30th, we had a cash,cash equivalents and investment balance of $38.7 million when that amount iscombined with a net proceeds of $139.9 million from our $150 million bondfinance and just discussed we anticipate that we will have sufficient capitalto fund the company through our first product launch.

I will now turn the call over to John Babich.

John Babich

Thanks, John. Id’ like to review the significant progress wehave made in the third quarter toward advancing our robust product pipeline onor ahead of schedule. For those on the webcast please turn to slide numberfour, recent clinical highlights.

You will see Molecular Insight presented positive results ofthe Azedra Phase I dosimetry trial at the European Association of NuclearMedicine meeting that was held this past October. As you may know, Azedra hasoften drug status as well as fast track status from the USFDA and is our leadtargeted radiotherapeutics for the treatment of neuroendocrine cancer.

The presentation also highlighted the benefits of ourproprietary Ultratrace technology in improving the safety and efficacy profileof this targeted radiotherapeutics candidated by eliminating cold contaminantsthat are commonly found in the conventional products.

In September, we presented the positive results of the studydesign to develop and validate the Zemiva normal reference database making useof both gender based images and cardiac ischemia risks parameters.

The data we presented as a post presentation at the AmericanSociety of Nuclear Cariology or ASNC, which again was held in September in SanDiego. Zemiva currently is under planned pivotal registration trial, which isongoing this our lead molecular imaging pharmaceutical candidate for thedetection of cardiac ischemia and patients presenting few emergency departmentsettings.

Importantly, at the ASNC meeting we also presented positivequantitative data form the perspective analysis of the Zemiva Phase IIbclinical trial using validated Normals reference database. The data demonstrateas Zemiva compares favorably to publish performance parameters of approvedcardiac blood flow tracers used to detect cardiac ischemia and heart attack.

The comparison indicated that’s Zemiva demonstrated strongsensitivity and negative predictive value for the rule-in and rule-out ofpatients suspected of having heart attacks and cardiac ischemia. Zemiva’s scanswere positive in 100% of the patients with elevated troponins serum biomarkerfor heart attack diagnosis, which typically requires six to 12 hours to reach ameasurable level in a patient's blood.

In October, we presented positive data on Trofex of prostatecancer imaging program at the annual AACR-NCI-EORTC Molecular Targets andCancerTherapeutics meeting that was held in San Francisco. Trofex is ourmolecular imaging pharmaceutical for the detection and staging prostate cancerthat targets prostate specific membrane antigen.

And as Dave presented we compare the tumor to normal tissuekinetics of our two lead product candidates, which are both schedule toprogress clinical exploratory IND in the first half of 2008.

I’ll now turn the call back to the David.

David Barlow

Thanks John. And thank you also for your superb job on thefinancing. For those of you who are on the webcast, please turn to slide numberfive, entitled recent operational highlights. We have achieved several keyoperational milestones in the quarter and recently including completing thestrategic purchase of our commercial scale radiopharmaceutical manufacturingfacility in Denton, Texas on October 1, also appointing Don Wallrothas our Chief Financial Officer after a nationwide search and electing Dr. ScottGottlieb, ex-Deputy Director of the FDA, to our Board of Directors.

In addition to his work with the FDA Dr. Gottlieb has alsoserved as a senior official at the centers for Medicare and Medicaid servicesknown as CMS. Clearly, we have very productive third quarter and we have strongconfidence in continuing the development of our robust portfolio of targetedradiotherapeutics and molecular imaging pharmaceuticals.

I’ll now review our clinical milestones for the next 12 to18 months, those on the webcast may want to turn to slide number six. In thefirst half of 2008, we expect to complete Azedra Phase I dose-ranging clinicaltrail in pheochromocytoma patients, also to initiate Azedra's key neuroblastomaclinical trial.

We also intend to complete Zemiva’s planned pivotalregistration trial that is currently underway in roughly 650 patients. We alsointend to initiate Trofex’s Phase I dosimetry trial with the detection ofprostate cancer and initiate Onalta as additional Phase I dosimetry trial.

Onalta is our somatostatin receptor-targeted molecularradiotherapeutic peptide for the treatment of neuroendocrine tumors. And inaddition we expect to initiate Solazed Phase I dosimetry trial. Solazed is oursmall molecule targeted radiotherapeutic for the treatment of malignantmelanoma.

In the second half of 2008, we expect to initiate Azedra’splanned Phase II pivotal trial also initiate Zemiva’s planned confirmatoryPhase III pivotal trial and complete the Trofex dosimetry trial. We have manysignificant milestones to achieve over the next 12 to 18 months and are confidentthat with our strong management team and post transaction financial resources.We‘ll continue to realize the potential of our robust pipeline.

This now concludes our prepared remarks. So I'd like to openup the floor for questions from our audience. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from theline of Adam Walsh, with Jefferies & Company. Please proceed.

Adam Walsh - Jefferies & Company

Good morning, guys. Thanks for taking my questions.

David Barlow

Hello Adam.

Adam Walsh - Jefferies & Company

My first here is for John. John I get this question a lotfrom investors and I wondered if maybe you can clarified here on the conferencecall today. When the first Zemiva pivotal trial data comes what should we belooking for in terms of sensitivity, specificity and positive and negativepredictive value? Thanks.

John Babich

Thank you, Adam. As you are aware of the, show me the datafrom the Asthmatic presentation, which reviewed our Phase IIb data, we hadstrong sensitivity data in terms of supporting sensitivity and negativepredictive value. And we believe in regards to what the FDA is looking for andalso what our clinicians are looking for are really key, those are the keyfindings.

Sensitivity, particularly in patients with Troponin positivebiomarkers was one of the things that was particularly important in terms ofthe Phase IIb trials and as you recall, a 100% of the patients with positiveTroponin biomarkers were positive for Zemiva scans as well.

We are looking at 80, around 80, in the 80s for sensitivityfor the ultimate trial. We are looking at a higher negative predictive value inthe 90s and we expect those to be the levels on which the FDA is going to beholding us to.

Adam Walsh - Jefferies & Company

John, can you just quickly touch on positive predictivevalue and specificity.

John Babich

In regards to what's in the market today, if we go back tothe current drugs that are approved for the detection of cardiac ischemia andCAD. Those drugs were approved with sensitivities in the 60s, mid 60s andspecificities around 50% little higher than that.

What we are looking at in terms of our own specificity inthe Phase IIb that was presented at Asthmatic is around 60%. And this isprobably driven in some degree by finding disease and patients that aresuffering from chronic CAD and not necessarily by Coronary Syndrome, and sowell we do have some false positives under the technical term of ACS.

We believe we are finding disease and its an importantfinding that we're not, we actually have some positive scans that are findingdisease, underlying disease in patience that maybe driven by hypertension orchronic CAD.

And in discussions with both the agency and with ourclinician colleagues in the emergency department, as well as, clinicalcardiologist, they believe that this is a very important finding that these arenot random findings but rather we are finding underlying disease in thesepatience's even though they may not be linked directly to the definition ofACS.

So, we believe that our specificity will be adequate forapproval, we certainly believe its adequate for clinical performance,characteristics and then in finding of patience with underlying cardiac diseasethat enters the ED setting. We believe that’s an important finding in that theemergency positions will embrace.

Adam Walsh - Jefferies & Company

That’s very helpful. Thanks very much.

Operator

Your next question comes from the line of Aaron Reames withWachovia. Please proceed.

Aaron Reames - Wachovia

Thanks for taking my questions, and congratulations onfinancing.

John Babich

Thank you.

Aaron Reames - Wachovia

The first question that I have, do you have any planinitiating a build out of intiating a build out of one or more cyclotrons infacilities in Texas after its financing?

John McCray

Aaron this John McCray. We have, what we believe is verybroad flexibility in our, the new facility that we have purchased in Denton.And our first goal is going to be the build out a commercial supply capabilityfor Azedra and followed by the Zemiva and weather or not, we intend to purchaseand install a cyclotron in that facility is a decision we'll make later.

Aaron Reames - Wachovia

Okay. And then, I have question for John, I was wondering ifyou could just provide us within update on the Azedra trials for us how manypatients have been at least identified and lined-up for entering into the studyhow many centers were online and specifically how long it should take get toread out on the Phase II portion?

John Babich

Thanks Aaron, right now we have 10 centers in the U.S.lined-up for our Phase II trials, two in Canada and another 10 in Europe. We’vecanned us approximately emphases in the U.S. right now, we have our 25 patientsalready lined-up to enter into the Phase II trial. We are obviously in theprocess of canvassing the remainder those sites and so, we were very confidentthat will be able together a very good rate of recruitments.

Our overall and for that (ph) trial currently is 40patients. So, we think that’s a very positive response and I think we discusspreviously that we had a backlog of patients that we’re looking to enter thePhase I those findings study and that right now is on track, we also have fourcenters that were involved in that trials well.

David Barlow

This is Dave, just to add to that this also reflects, webelieve to be a growing pent-up demand for Azedra in the neuroendocrinecommunity. And we expect as John mentioned to complete this trials well onschedules and prepared that for the commercial launch.

Aaron Reames - Wachovia

Okay. And the primary end point of (inaudible) enforceassist response rate?

John Babich

Yes, we are looking at two classic research criteria fortuneresponse.

Aaron Reames - Wachovia

Okay. Thank you for taking my questions.

Operator

Our next question comes from the line of Ken Trbovich withRBC Capital Markets. Please proceed.

Ken Trbovich - RBC

Thanks for the question, John I was wondered if you give usan update and color on the Zemiva's studies and the Phases in roman there Iknow the initial plans were we sort of have four centers up and running byOctober as wondered if there yet how things will progress in from there?

David Barlow

We are additional plan with have 40 centers up and running,we do have that right now and things were on track I can.

Ken Trbovich - RBC

Okay. And in terms of the actual supply, I guess there wasthe other issue in terms of the number of days that week that you could getmaterials for using this study, is that also on plan?

David Barlow

That’s also expanded form how we begin this trial initially,so we out from two to three in after four days a week.

Ken Trbovich - RBC

Okay. And then, just finally with regards to Azedra,obviously, part of the challenge is just working through the doses in andcompleting the study, other internal works that you get a change to report outon with regards to more response of symptoms reporting from the Phase Ipatients.

John Babich

Well, we certainly were taking a look. I mean, I don’t thinkwe’re in a position to report out on any of that data. But I would say thatthings are on track and we are in the process of pulling together that data andwe’re expecting to meet our projected timelines of finishing that in the firsthalf of '08.

Ken Trbovich - RBC

Okay. And then, one final question, just with regard toneuroblastoma is there much overlap between the neuroblastoma trial in thePhase II that you expect to run for Azedra. In terms of the standards and so.

John Babich

Well, not particularly because of the special nature of thepediatric population. I mean, obviously there’s overlap in terms of drugproduction and in terms of trial designs and such. Although, the children’sdisease is much more aggressive disease and we usually go with a moreaggressive dosing schedule so, while there is some similarities, more of themlikely be different sites, different investigators involved and obviously weare slightly different protocol based on the aggressiveness of the children’sdisease.

Ken Trbovich - RBC

Okay. Thank you.

Operator

Your next question comes from the line of Scott Henry withOppenheimer. Please proceed.

Scott Henry - Oppenheimer

Thank you. Just a couple of questions. First, on the Zemivadata, how do you expect to disseminate that data in the first half of '08, isthat a release or do you think you’re representing it at a conference.

John Babich

We’ve already presented the data as the arsenic meeting,which was held in San Diego this past September.

Scott Henry - Oppenheimer

I am sorry, I’m referring to this Phase II pivotal trial.

John Babich

The one that’s on going currently?

Scott Henry - Oppenheimer

Yes.

John Babich

Well, depending on when we complete that study and when wehave all the data wrapped up in regards to an analysis we’re looking atsubmitting to either arsenic as a late breaking clinical trial or the AHA orAmerican Cardiology Meetings, next year.

Scott Henry - Oppenheimer

Okay. And just a question, you kind of referenced a coupleof different parameters, sensitivity, specificity, positive and negativeproductive value, in terms of your discussions with the FDA, are there hardendpoints for those parameters or is it more of a qualitative look when you gothrough all the numbers together.

John Babich

Well, I think there will be hard endpoint, I mean, they areobviously interested in sensitivity. Clinically, I think our colleagues areinterested in both sensitivity and negative productive value and in regards tospecificity, it really depends on what’s driving your specificity. So if we’repicking up underlying disease that is in classic acute chest pain or acutecoronary syndrome.

We are actually finding disease in some of these patientsthat is probably coincidental. So I think we are looking at end points thatwill be driven by sensitivity and all have a lot of dialog, which is on going.

Scott Henry - Oppenheimer

Thank you for taking the question.

John Babich

Thank you, Scott.

Operator

Okay there are no more questions at this time. I would liketo turn the call back to Barlow for his final remarks. Sir?

David Barlow

Thank you, Shiquana. Thank you, all for joining us on thisthird quarter call and I wish you a pleasant day.

Operator

This concludes the call you may now disconnect and have agood day. Thank you.

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