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Executives

Joe Camp - Investor Relation

Michael Flavin - Chairman, Chief Executive Officer

John Flavin - President, Director

Analysts

Angela Larson - SIG

Matt Osborne - Lazard

Jason Butler - Rodman & Renshaw

Advanced Life Sciences Holdings, Inc. (OTCPK:ADLS) Q4 2007 Earnings Call February 19, 2008 10:00 AM ET

Operator

Good day ladies and gentlemen and welcome to the Fourth Quarter 2007 Advanced Life Sciences Earning Conference Call. My name is Fab, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instruction). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Mr. Joe Camp, please proceed.

Joe Camp – Investor Relation

Thank you, Fab. Hello every one. Thank you for joining us today for the Advanced Life Sciences financial results conference call for the fourth quarter and full year of 2007. I'd like to again remind everybody that we are web casting today's call. The live and archived web cast of the call maybe found in the Investor Relation section of the Advanced Life Sciences website at www.advancedlifesciences.com. Joining me on the call today from Advanced Life Sciences are Dr. Michael Flavin Chairman & Chief Executive Officer and John Flavin, President.

Before we begin today's call, I would like to read a brief Safe Harbor statement. Except for historical information, the statements made in this presentation are forward-looking statements about Advanced Life Sciences Holdings, Incorporated, including statements regarding the clinical trials and regulatory pathway of cethromycin. Forward-looking statements represent our management's judgment regarding future events and are accurate at the time that they are made

The company does not undertake any obligations to update ant forward-looking statement whether as a result of new information, future events or otherwise. Our actual results could differ materially from those discussed herein due to several factors including our ability to obtain and maintain regulatory approval and labeling of our product candidates; our plans to develop and commercialize our product candidates; the loss of key scientific or management personnel; our ability to interpret regulatory developments in the U.S. and foreign countries; and the rate and degree of market acceptance of any future products. These and additional risks and uncertainties are detailed in the Company's filings with the US Securities and Exchange Commission.

I would now like the turn the call over to Dr. Michael Flavin Chairman & CEO of Advanced Life Sciences.

Michael Flavin - Chairman, Chief Executive Officer

Good morning ladies and gentlemen. Thank you for your interest in Advanced Life Sciences and for joining us today on this call to review the company's accomplishments, business developments, and fourth quater and full year financial results.

As I noted in our earnings' call last August, Advanced Life Sciences primary objective as a company since our IPO in August of 2005 was to bring cethromycin to the market as a treatment for community-acquired pneumonia or CAP. In order to address the global challenge of emerging bacterial resistance to the current standard of care drugs and to increase shareholder value in the process.

We are focused on three areas to accomplish this goal. First, the completion of our two pivotal Phase III clinical trials in CAP, second, the assembly and filing of our NDA in a CAP indication and third, the engagement of a commercial partner with an appropriately sized sales force to help us market cethromycin successfully to primary care physicians.

2007 was a year of achievement and promise for Advanced Life Sciences. We made great progress in advancing our lead drug candidate cethromycin as a treatment for mild-to-moderate CAP. Several significant milestones that we accomplished in the past year includes; successfully meeting all endpoints in our two pivotal phase III clinical trials in CAP, achieving positive results in a Thorough QT study of cethromycin, which were announced this morning supporting the cardiac safety of the drug.

Reporting positive efficacy data from the inhalation anthrax primate study, which can help elevate the importance of cethromycin from a regulatory perspective, and potentially augment the label and commercial opportunity for the drug.

Establishing a Blue Chip National Advisory Board, which is assisting us in our ongoing regulatory and medical communication strategies, building on the eight scientific presentations made in 2006 and the 11 presentations made last fall at the ICAAC and IDSA conferences.

Advancing discussions with several potential partners to ensure that we will have a qualified commercial partner to help us bring Cethromycin to the market and raising net proceeds of $18 million in a private placement with both existing and new investors to help us complete the next phase of our corporate objectives, including the consummation of a commercial partnership and NDA submission for Cethromycin as a treatment for CAP.

And we expect this progress to continue throughout 2008. We remained confident in our original course and we grow more excited everyday about the developing market for Cethromycin. Moreover, we believe that the positive results achieved in the Thorough QT study that we announced this morning provides further support to the cardiac safety of Cethromycin and strengthen our upcoming NDA submission.

I just described to you how we successfully completed the first of these goals by completing our clinical program for Cethromycin. Now I will share, why we believe we are in the home stretch for completing the other two goals.

With respect to the NDA and CAP, the remaining work will be to confirm our NDA submission to guidance standing from the upcoming FDA Advisory Committee meeting and the Advanced Life Sciences meeting with the FDA scheduled for early April.

In addition, our National Advisory Board has provided guidance on the NDA document and regulatory strategy. And we are engaged with FDA and the regulatory process to stay abreast of the regulatory environment in order to submit the highest quality NDA.

On the commercialization front, we have made significant progress with prospective partners that view cethromycin as an attractive asset to fill the growing market need for new antibiotics that can overcome resistance without causing collateral damage to the body.

Notably, interested partners are not valuing Cethromycin solely on its CAP potential really rather they are looking at its potential in the overall community-based antibiotic space as the true market opportunity for the drug. With declining competition in the field for the foreseeable and even distant future, there is an opportunity for us to secure economically attractive partnership transaction.

Our focus at this time is to capitalize on our position and complete negotiations to finalize a transaction. Resistance is threatening the community as well as the hospital setting. Macrolides and penicillins, two of the most frequently prescribed drugs for respiratory tract infections have resistance rates as high as 40 and 60% respectively.

Broad-spectrum antibiotics such as fluoroquinolones, which were originally developed to address the resistance issue, have subsequently have been shown to lead to increased collateral damage such as Clostridium difficile-associated diarrhea.

These products' inability to effectively and safely treat RTIs has led to an estimated $5 billion economic burden in the US, resistance-resultant treatment failures, which leads to increased hospitalizations and deaths.

Physicians are becoming increasingly concerned as the promise of resistance and collateral damage manifest themselves in private practice, in addition to the hospital setting. The cost of macrolide or penicillin treatment failure for one patient is estimated to be $15,000 for an eight day hospital visit versus just $200 for an office visit and a prescription for a drug not associated with resistance. Without new classes of antibiotics with mild safety profiles, binary care physicians and specialists are seeing their treatment options become limited.

From a competitive perspective, if approved Cethromycin would be entering the branded oral antibiotic field with dwindling competition an opportunity for increase share of voice. Macrolide such as Biaxin and Zithromax are now generic. Beta-Lactams such as Omnicef are also generic with only the fluoroquinolones such as Levaquin and Avelox remaining as branded players. Cethromycin, therefore has an opportunity to address a major unmet medical need in the marketplace.

Before I turn the call over to John for an overview and update of our drug development programs, I want to emphasis that our team is extremely pleased with the results we achieved in both the pivotal Phase III trials completed last year and in the Thorough QT study of Cethromycin. And we believe those results offer compelling evidence to support the commercialization of the drug.

Immunity Acquired Pneumonia remains the sixth leading cause of death in the United States with approximately 6 million cases diagnosed each year. Moreover, the spotlight on antibiotic resistance continues to grow as more frequent occurrences of drug resistance Streptococcus Pneumoniae, community acquired MRSA, the 19A superbug and collateral damage in the form of Clostridium difficile associated disease stemming from fluoroquinolone overuse attracted additional attention.

We believe that if approved Cethromycin is very well positioned to address these areas of growing need in the future. And potential partners are valuing Cethromycin on its CAP potential as well as the overall community based antibiotics space.

Developing a drug from the lab to the clinic and ultimately to commercialization is a daunting challenge. Advance Life Sciences has accomplished a great deal towards this endeavor in the past two and a half years. And we remained bullish about the future of Cethromycin and about our company. We believe we're on the cusp of some exciting developments and we look forward to reporting on our progress throughout 2008.

John will now provide you with an overview and update of our drug development programs.

John Flavin - President, Director

Good morning everyone. Thank you for joining us on the call this morning. I'm going to spend most of my time discussing the progress we've made with and plans for Cethromycin. But I also will briefly touch upon the development of ALS-357 from Melanoma as we advance that development program last year too.

As Mike noted earlier, we made tremendous progress and development of Cethromycin in 2007, as well as added significant value to our competitive position with the drug. We completed two successful well controlled, well conducted CAP trails with strict inclusion exclusion criteria to ensure that we have assembled a rich database of CAP patients and associated data.

We strictly adhered to the FDA's current guidelines for conducting CAP trails. In fact we've meet with the FDA prior to the beginning of these Phase III clinical trails in CAP to conform the suitability of our trail design.

In addition, we've had recent direct interactions with the FDA following our clinical program and our discussions with them have not changed our view on the adequacy of our trail design.

While our primary and secondary endpoints focussed on clinical and bacteriological cure rates we have captured extensive clinical and laboratory data to support additional analyses and these are ongoing. We believe this data will further establish the benefits of Cethromycin and CAP and all of these factors can be supported in our overall risk benefits analysis of Cethromycin for CAP in the upcoming NDA.

Our NDA is further enhanced by the positive results demonstrated in the Thorough QT study that we announced this morning. In that study at the therapeutic and super therapeutic doses Cethromycin showed no signal of any ECG affects and hence supported a favorable cardiac safety profile.

The study was conducted to evaluate the cardiac safety of cethromycin and to enhance the safety database for the company's upcoming new drug application submission for Cethromycin to treat community acquired pneumonia.

The US FDA requires Thorough QT studies for all new chemical entities, because prolongation in the QT interval proactive for changes in heart rate or QTC may signify and increase risk of developing cardiac arrhythmias in patients. Trial CL07-001 was a double-blind randomized parallel study in which Cethromycin given at a therapeutic dose of 300 milligrams once daily for five days and a supratherapeutic dose of 900 milligrams once daily for five days was compared to Placebo and moxifloxacin in 238 healthy adult volunteers.

Moxifloxacin is an FDA approved anti infective-therapy that was used as a positive control in the study, because it is previously been established to cause an increase in the QT interval. A Placebo corrected QTC mean change from baseline using the individual correction method for heart rate or QTCI for the therapeutic and supratherapeutic doses of Cethromycin were negative 0.4 and 0.9 milliseconds respectively.

Moxifloxacin demonstrated QT prolongation of 4.9 milliseconds, which is consistent with previous clinical experience and thus validated the outcome of the study. In additions to the values for the mean QTCI interval, none of the subject from the Cethromycin cohorts showed increases in the QTCI of greater than 60 milliseconds nor did any of the Cethromycin subjects display a QTCI that exceeded 480 milliseconds at any time. There was one extension in the moxifloxacin cohort that did exceed 480. Again a valid study looking at the positive control results from moxifloxacin in the study.

There were no desks or serious adverse events observed in the trial in either of the Cethromycin cohorts. No hepatic related adverse events were observed and liver functions tests at the therapeutic and supratherapeutic doses were consistent with those observed and reported in prior clinical studies. No hepatic safety signals, No new hepatic safety signals emerged in the study and were consistent with all prior clinical studies.

The most common adverse events seen were gastrointestinal in mild-to-moderate in nature and were consistent with rates observed in prior Cethromycin clinical studies at the 300 milligram dose level. We believe the results achieved in both Phase III trials validate our dosing strategy for Cethromycin. The results demonstrated in the Thorough QT study endorse the safety of the drug and that combine formed a basis of a strong NDA submission, in addition to the 50 other clinical studies that were completed prior to this program.

Therefore, we now are focusing our initiatives on commercialization effort for Cethromycin. This includes the assembly and filing of an NDA and CAP indication and the engagement of a commercial partner that possess a sales force large enough to market Cethromycin successfully to primary care physicians.

The company remains confident in its regulatory strategy for Cethromycin in the CAP indication. Again further insight in t the evolving regulatory landscape for antibiotic drug development, members of the management and scientific teams will be present at the upcoming FDA Anti-Infectives Advisory Committee meeting discussing non-inferiority margins in CAP clinical trials scheduled for April 1st and 2nd, 2008 in Maryland.

The company will hold an Investor Conference Call on April 3, 2008 following that meeting after the completion of that panel to provide management's view points and reflections on the deliberations.

In an effort to reconfirm the regulatory pathway for Cethromycin after the Anti-Infectives Advisory Committee meeting is completed. Advanced Life Sciences requested and established a meeting following the Advisory Panel, which will take place on April 7, 2008, directly with the FDA to discuss the anticipated NDA submission for Cethromycin in CAP. The company will conduct a conference call with investors on April 10th following that meeting to discuss the outcome of the April 7th meeting with the FDA.

Again a summary of upcoming communications on April 3rd, we will conduct a conference call to provide managements understanding and reflections on the discussion that the FDA Anti-Infectives Advisory Committee deliberates on the 1st and 2nd of April and on April 10th we will have a conference call with investors to discuss the outcome of the company's one on one meeting with the FDA that takes place on April 7th. The company will issue a press release with the time and dialing instructions for each call in advance. We look forward to clarity that we believe will be forthcoming after the completion of the upcoming meetings.

We've made significant progress with prospective partners towards the successful commercialization partnership. They, like we believe that doctors prescribe cethromycin if approved over current standard of care therapies, because of the increasing resistance rates to macrolides, penicillins now even fluoroquinolones and development of collateral damage in the form of CDAD clostridium difficile associated disease from the over use of fluoroquinolones. Like us our prospective partners are paying attention to the regulatory environment and view clarity from the FDA as a welcome and valuable outcome of the upcoming meetings.

Our 2008 cethromycin objectives are as follows: we will attend April 1st and 2nd FDA Advisory Panel, and conduct an April 7th meeting with the FDA regarding the cethromycin NDA and update investors on NDA submission progress following these events. We'll incorporate guidance from the April 1st and 2nd Advisory Committee meeting and the April 7th Advanced Life Science's meeting with the FDA to complete our NDA submission activities for cethromycin as a treatment for CAP. We intend to finalize negotiations with potential commercialization partners for cethromycin.

We will continue collaboration with the National Institute of Allergy and Infectious diseases and the US Army Medical Research Institute for infectious diseases to explore cethromycin's activity against high-priority bioterror agents for its use as a broad countermeasure. And last, we plan to present cethromycin's Phase III and Thorough QT clinical data at ICAAC in the fall.

Now let's discuss the achievements and progress we made in 2007 briefly with our second drug candidate ALS-57, the clinical development aspect of ALS-57 program progressed well last year. We completed our pre-clinical studies and commenced work with CRO on the design of a Phase I/II study in melanoma. We successfully manufactured the clinical materials and placed them on stability for the trail. We submitted our protocol to the Institutional Review Board or IRB for approval. The trail is designed in an escalating dose format with at least four dosing cohorts consisting of four patients each. Dosage will be increased based on response to the drug.

Ultimately between 16 and 24 patients will be enrolled and the primary goal of the study is to establish proof-of-concept in man and both efficacy and safety endpoints will be monitored. In vision commencing the Phase I/II clinical trail of ALS-57 for melanoma in the first half of this year after IRB approval has occurred.

And finally before we turn the call over to the operator to take your questions, I'd like to briefly review our financial results. The net loss for the three months ended December 31, 2007 was $5.6 million or a loss of $.18 per share, this compares to a net loss of $5.9 million or a loss of $.21 per share for the three months ended December 31, 2006.

The net loss for the full year 2007 was $32.5 million or $1.12 per share, which compares to a net loss of $20.7 million or $.78 per share for recorded full year 2006. The increase in the net loss for the full year 2007 is due to increased costs involved in the clinical development of our lead compound cethromycin.

We ended 2007 with cash totaling $18.3 million. We believe that this cash balance puts us in a very strong financial position to execute on our plan of completing the NDA submission for CAP and completing our commercial transaction.

At this point, we'd like to ask the operator to open the discussion for questions from the participants.

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from the line of Angela Larson from SIG. Please proceed.

Angela Larson

Good morning and thanks for taking the question. I was hoping if you could give us the little more color on some of the items that might go into making the commercial partnership, specifically he will be doing the manufacturing and covering cost of the manufacturing and what are you intent to market or to fully just out-license and let someone else market?

John Flavin

Thanks Angela. In response to your question, we envision the structure of the transaction having upfront fees as well as milestones and regulatory accomplishments in the CAP and even follow on indications. So, milestone fees coming into the company and then we would look for down streaming recurring revenues in the form of net royalties coming into the company. We believe we're in a strong position to achieve this goal given the strong results we've seen again the dwindling competitive landscape and the value preposition Cethromycin brings to address emerging resistance in the community based space. If you look at the overall aspects of the cost of the program, our intent is to rely on our partner to bear those costs and that's why we would structure the transaction in a milestone on a royalty based approach. So, we'll be relying on our partner's sales and marketing infrastructure, and they would be bearing the cost associated with bringing the product to the marketplace.

As you know, we have worked with our own manufacturing operations for DSM and Cardinal Health, which is now called Catalent. These will likely be the manufacturers as we move through the process. We would expect again that the overall cost to carry forward into the market would be borne by the partner, however, but in terms of the operations, we would expect that those commercial manufacturing groups will be responsible to make and then bring Cethromycin to the market.

Angela Larson

That's very helpful. And, as you look at your R&D activities ongoing outside of the CAP indication as well as the other products and development, if finances were not the issue, would R&D continue at the level we saw in 2007, or is it something that could accelerate given the scope of the programs you're looking at?

John Flavin

No. I think that if you look at what we saw in 2007, the pro finance of R&D cost were made up of Cethromycin clinical trials. And, as you know, we had a heavy program underway, which consisted of the two pivotal programs and the Thorough QT study, which made up in the end a heavy overall R&D expense. I would not expect, even the finances were not the issue. I don't expect that the R&D component would rise to that level in the current year.

The R&D areas that we would focus on as I mentioned the melanoma program and then also continuing to support the overall Cethromycin NDA submission are what our expectations for current costs are right now. There are other kinds of clinical development work that one can contemplate with regards to Cethromycin, for example, we do believe that now that the CAP indication has been successfully pursued with regards to where we stand and moving into the NDA, there are other applications, more formulations can be explored, IV formulation, suspension formulation, different applications and indications, health side if CAP exists as you know, and respiratory tract infections. However, we would be relying primarily on our partner to bear the costs of opening up those other indications even if or participating in the development of those other indications.

So, I think just in summary the overall R&D expenses we would expect those to be lower than what we saw in 2007. The cost going forward this year in terms of our estimated cash burn -- I was clearly focused on NDA submission and the appropriate manufacturing ramp up activities as well as some small R&D expenses associated with the melanoma program.

Angela Larson

That's very helpful. Thank you.

Operator

Your next question comes from the line of Matt Osborne from Lazard.

Matt Osborne

Hi, guys thanks for taking the questions. Just a couple on the upcoming panel meeting, when you discussed the range of topics or outcomes with your National Advisory Board what are they suggesting to you? What do we anticipate a vote or recommendation coming out of that panel?

John Flavin

Matt, I think that's still unclear. I don't think anyone really fully knows the answer of that question, probably won't know that until the briefing documents come out a couple days ahead of the overall panel. So, I think it's difficult to speculate because I know that many times when panels meet to discuss designs of clinical trails as a President, votes have not been forthcoming. As you know, when they are reviewing a drug in particular, they are usually is a vote. So we do know that many times in clinical trial Design Advisory Panels, votes are not taken. But we do not know at this time what the format of the overall panel will be. I don't think we will know that until the briefing documents come out and provide more clarity of coupled days ahead of the panel itself. I'm just giving you a prospect in terms of what has been seen in the past.

Matt Osborne

Okay, great. Thanks. And then will any of your potential partners be attending that FDA meeting on April 7th?

John Flavin

Yes, as stated in our opening comments, partners are keenly watching the development from the advisory panel perspective. Many of these prospective partners beyond our engagement are looking at collaborations with regards to Cethromycin. As you can imagine they have programs in place that are in the anti-infective scope and so they are all paying attention not only to the impact for Cethromycin, but also, like us, they are paying attention so that they can incorporate their overall guidance coming out of these meetings to apply to their own internal programs that are part of the any infective landscape. So the answer is yes, they will be.

Matt Osborne

So just to clarify, so they will be at the meeting, the April 7th meeting that you'll have with the FDA?

John Flavin

Oh! no, I'm sorry. What I was referring to there was the advisory panel. It will strictly be an Advanced Life Sciences meeting directly with the FDA.

Matt Osborne

Okay, great. And then last question, can you comment on the other clinical data that you have in the current package outside of the resolution of clinical symptoms in bacteriological cure rate?

John Flavin

I think we have tried to revive as much information as we could with regards to the clinical trial design. And again suffices to so say we have collected a rich database of CAP patients and as part of our overall program with regards to establishing risk benefit, we believe, we have many different types of data that we can be providing to support our case from a compelling perspective on Cethromycin for CAP.

Matt Osborne

Okay great. Thank you.

Operator

(Operator Instructions). And your next question comes from the line of Jason Butler from Rodman & Renshaw.

Jason Butler

Hi, thanks for taking the question. I just had a question on the QT study, could you tell us what proportion of patients had a QT prolongation of greater than 30 milliseconds and if any patients had a QT that was longer than 450?

Michael Flavin

No patient had any past 450. Placebo and Cethromycin were the same across both Cethromycin cohorts; both the therapeutic and supratherapeutic doses in which above 30 milliseconds, placebo had 2% which was one patient as did Cethromycin in both of the cohorts, so one patient or 2%. Moxifloxacin had 7% above 30 milliseconds. Moxifloxacin also had one patient or 2% above 480 milliseconds and again there were no outliers for Cethromycin; a very successful study for Cethromycin across the board.

Jason Butler

All right, thank you.

Michael Flavin

Does that clarify it?

Jason Butler

Yeah, thank you.

Operator

There are no further questions for today's Q&A session. I would now like to turn the call back over to Mike Flavin for closing remarks.

Michael Flavin

Thank you again for joining us on the call today and for your continued support of our company. 2008 is shaping up to be an exciting year for Advanced Life Sciences. Resistance to existing antibiotic treatments continues to grow and therefore the dire need intensifies for new drugs to treat pneumonia and other life threatening diseases.

In 53 clinical trials as well as extensive preclinical studies, we have accrued a great deal of information about Cethromycin's unique resistance profile and other product features; all of which we believe to form the basis of a strong NDA submission. And if approved, would help to differentiate Cethromycin in the market place. We are fully focused on our goal of bringing Cethromycin to the markets and we look forward to reporting on our progress throughout 2008.

We'll be presenting and web casting at the upcoming Susquehanna Financial Groups Significant Options and Healthcare Conference on March 5th, at New York City. In the meantime, if you have any further questions or concerns, please feel free to contact either myself or John.

Thank you and have a pleasant day.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.

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Source: Advanced Life Sciences Holdings, Inc., Q4 2007 Earnings Call Transcript
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