Jack Talley - President and CEO
Bob Cook - CFO
Stephane Allard - CMO
Dileep Bhagwat - SVP Pharmaceutical Development
Greg Kelley - Investor Relations
EpiCept Corporation (EPCT) Q4 2007 Earnings Call February 29, 2008 9:00 AM ET
At this time, I would like to welcome everyone to the EpiCept Fourth Quarter and Year end 2007 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period.
(Operator Instructions) It is now my pleasure to turn the floor over to your host, Greg Kelley. Sir, you may begin.
Thanks, Operator. Good morning everyone and thank you for joining us today. This call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements which express plans, anticipation, intent, contingency, goals, targets, future development, and are otherwise not statements of historical fact.
These statements are based on EpiCept's current expectations and are subject to risks and uncertainties that could cause actual results or developments to be materially different from historical results or from any future results expressed or implied by such forward-looking statements.
Factors that may cause actual results or developments to differ materially, include the risk associated with our need to raise additional financing to continue to meet our capital needs and our ability to continue as a going concern. The risk that Ceplene will not receive regulatory approval or marketing authorization in the EU or that any appeal of an adverse decision will not be successful.
The risk that Ceplene, if approved, will not achieve significant commercial success. The risk that Myriad's development of Azixa will not be successful. The risk that Azixa will not receive regulatory approval or achieve significant commercial success. The risk that we will receive any significant payments under our agreement with Myriad. The risk that the development of our other apoptosis product candidates will not be successful. The risk that our ASAP technology will not yield any successful product candidates. The risk that clinical trials for NP-1 or EPC2407 will not be successful. The risk that NP-1 or EPC2407 will not receive regulatory approval or achieve significant commercial success.
The risk that our other product candidates that appear promising in early research and clinical trials do not demonstrate safety and/or efficacy in larger scale or later stage clinical trials. The risk that we’ll not obtain approval to market any of our product candidates. The risks associated with dependence upon key personnel. The risks associated with reliance on collaborative partners and others for further clinical trials, development, manufacturing, and commercialization of our product candidates. The cost, delays, and uncertainties associated with our scientific research, product development, clinical trials, and regulatory approval process. Our history of operating losses since our inception. The highly competitive nature of our business, risks associated with litigation, risks associated with prior material weakness in our internal controls and risks associated with our ability to protect our intellectual property.
These factors and other material risks are more fully discussed in EpiCept's periodic reports, including its reports on Forms 8-K, 10-Q and 10-K, and other filings with the US Securities and Exchange Commission.
You are urged to carefully review and consider the disclosures found in EpiCept's filings, which are available at www.sec.gov or at www.epicept.com. You are cautioned not to place undue reliance on any forward-looking statements, any of which could turn out to be wrong due to inaccurate assumptions, unknown risks or uncertainties, or other risk factors.
With that, I will to now turn the call over to Jack Talley, President and CEO of EpiCept. Jack, please go ahead.
Good morning and thank you for joining us today. I would like to take this opportunity to provide with you an update on the recent development, with our clinical pipeline, as well as give an overview of some of our key upcoming milestones for 2008. Following this update I’ll ask Bob Cook, our CFO to review our financials for the fourth quarter, which will be followed by a question-and-answer session.
I am also joined here today by Stephane Allard, our Chief Medical Officer and Dr. Dileep Bhagwat, Senior Vice President Pharmaceutical Development and Ceplene Project Team Leader.
I will begin my remarks by touching on recent developments with respect to Ceplene. Our registration stage compound for the remission maintenance, and prevention of relapse of patients with acute myeloid leukemia in first remission. As we reported earlier this week we recently participated in an Oral Explanation meeting before the European committee for Medicinal Products for Human Use or CHMP, the scientific committee of the EMEA, which addressed the remaining outstanding issues on Ceplene's Marketing Authorization Application.
Following this meeting the CHMP members conducted a non-binding trend vote on our application. The results from this vote indicated that a slight majority of CHMP members were not in favor of a positive opinion for the MAA. Those not in favor of a positive continue opinion concluded, that while the data presented in the application were support of the drug efficacy and safety and the indication for which approval was requested, these data should be confirmed by clinical data from an additional replicate study.
The countries expressing this view are using the mixed experience in another disease, malignant melanoma with liver metastasis as the basis to require a confirmatory trial. We and our advisors strongly believe the clinical experience in melanoma, as well as any other disease is irrelevant to the body of evidence we have accumulated in AML.
There are large distinct differences between these two types of cancer that makes any head-to-head comparison of clinical experience irrelevant. Even the comparison of the two clinical trial histories is vastly different. For instance, in AML, Ceplene met its primary endpoint in the intent to treat population of all patients.
In malignant melanoma, no clinical trial ever met primary endpoint in any intent to treat population. I could go on, but I don't want to belabor the point, beyond to say, that there are distinct and rational differences by which we can separate the melanoma history from the AML reality with Ceplene.
We believe that the results of the trend vote did not align with the strength of our application. In our opinion, as well as that of one of the two [reporters], the application adequately demonstrated the benefits of Ceplene and prolonging leukemia free survival when used in conjunction with low dose interleukin-2 and was supported by data sufficient for approval, under the regulations.
There is clear regulatory guidance from the EMEA, to form the basis upon which to deliver a positive opinion, based on a single pivotal trial, where the drug meets or -- in this case, Ceplene meets or exceeds every point of this guidance in AML and this position has been affirmed by one of the two reporters. Approval decisions are supposed to be made on the risk benefit ratio of a candidate drug, not based on mixing experiences across different diseases.
If we look at the risk benefit of Ceplene and AML, the picture is very clear. From a risk standpoint there has never been a treatment-related mortality in AML from this therapy. Simply put, patients don't die from taking Ceplene.
From a benefit standpoint, Ceplene is the only therapy that has ever been shown to extend leukemia free survival and prevent relapse in AML. It confers a 50% improvement in LFS and in excess of an extra year of life for these desperately ill patients.
This is more than adequate risk benefit equation to support approval in our view. As a result of this trend vote, we are now pursuing all activities we can undertake to gain approval for Ceplene prior to the final vote on our MAA next month.
We are also exploring our options for appeal or reexamination, should the final opinion at the March CHMP meeting be negative. We remain hopeful that we will be able to work with regulators in Europe to identify a path forward for approval for this important drug, and we'll continue to provide you with updates on any new developments.
Requiring a confirmatory trial would deny this drug to thousands of patients and lead to premature death in approximately 1,000 patients to 1,500 patients each year in Europe. This would be a terrible outcome.
Lastly, I should mention that prior to this vote, partnering interest for Ceplene in Europe was very strong. We remain encouraged after this vote, that the ability to get Ceplene partnered in Europe post approval is a very attainable and lucrative outcome for the company.
As you know, EpiCept is not and has never been a one-drug story. We possess a deep and balanced pipeline of promising early and later stage clinical product candidates, in pain and Cancer that are supported by validating revenue generating partnerships with key industry partners.
I would like to spend a few minutes updating you with progress made with these product candidates. Starting with our pain program, we are pleased with the recent developments with EpiCept NP-1. Our patented topical cream formulation for the long-term relief from the pain of peripheral neuropathies. NP-1 was the primary focus of our clinical efforts in the pain category in 2007 and we expected to continue to be in 2008.
Earlier this month we announced encouraging results in what we believe to be proof of concept for NP-1 in the diabetic peripheral neuropathy indication. This is the largest segment of the $1 billion plus market for neuropathic pain. We observed a consistent analgesic effect in the pain scores measured in the trial and believe that this preliminary data forms a strong basis for the advancement of NP-1 into our later stage pivotal Phase III clinical trial. We will be using the data derived from this study as well as our earlier Phase II trials to design this Phase III trial.
In addition to the study of NP-1 and the DPN indication there are currently two other clinical trials for NP-1 being conducted. This includes a Phase III trial in chemotherapy induced peripheral neuropathy or CPN which is being conducted by the Community Clinical Oncology Program funded by the National Cancer Institute and a Phase II comparative trial of NP-1 versus gabapentin and placebo in post-herpetic neuralgia or PHN.
We anticipate completing enrollment and reporting results for this PHN trial next quarter. It is our expectation that NP-1 will continue to be placebo in terms of efficacy in this trial and more importantly that we will observe a CNF safety benefit for NP-1 compared to gabapentin.
We believe that the study of NP-1 in these various indications will provide a multitude of benefits to us, as we further study this product. In addition to helping to potentially broaden it’s labeling and raising its future market potential in the long-term we believe these data will serve to create further excitement in the near term from potential licensees related to the drugs application in treating a wide variety of neuropathic pain condition.
With respect to our earlier stage cancer candidate, we are continuing to advance EPC2407 our novel, small molecule, vascular disruption agent, an apoptosis inducer for the treatment of patients with advanced solid tumors and lymphoma.
In October of last year, we announced that the Phase I trial for this compound had met its objective. We are in the process of evaluating the pharmacodynamic effects of EPC2407 and should be in a position to begin a Phase Ib combination trial for the drug later this year. We have submitted abstracts describing this exciting progress made with EPC2407 for the ASCO meeting later this year.
We have also been pleased with the progress made by our partner Myriad Genetics with our licensed cancer compound Azixa. Myriad is currently conducting three registration trials for Azixa. These studies have been conducted in patients with non-small cell lung cancer that is spread to the brain and primary glioblastoma and in melanoma that is metastasized to the brain. These trials are expected to begin dosing patients momentarily, which will generate a milestone payment to the company.
If successful, these results are expected to form the basis for a new drug application for Azixa, which would trigger another milestone payment for EpiCept.
I would now like to turn the call over to Bob Cook who will walk us through the numbers for the fourth quarter and year-end. Please go ahead Bob.
Thank you, Jack. I would like to briefly review our fourth quarter and year-end 2007 financial results. First, let me note that net loss for the fourth quarter reported in our press release last night was slightly incorrect, though the financial tables contained a correct numbers.
For the fourth quarter of 2007, our net loss attributable to common stockholders totaled $6.3 million or $0.15 per share. This was the lowest quarterly loss we reported during 2007. For the full year 2007, our net loss attributable to common stockholders was $28.7 million or $0.79 per share. I apologize for the rounding errors.
We reported revenue of $23000 during the fourth quarter of 2007 and $0.3 million for the full year 2007, compared with $1.4 for the fourth quarter of 2006 and $2.1 million for the full year 2006.
Our revenues in 2007 were primarily related to the recognition of deferred revenue from our agreements with Endo Pharmaceuticals and Durect.
Our general and administrative expense increased by 8%, or 0.2 million to $2.7 million in the fourth quarter, compared to $2.5 million in the fourth quarter of 2006. This increase was primarily related to higher insurance and public reporting cost.
R&D expense increased by approximately 8% from $3.4 million in the fourth quarter of '06 to $3.6 million in the fourth quarter of '07. This increase was primarily related to the two ongoing Phase II clinical trials of NP-1 and the Phase I clinical trial of EPC2407, plus activity relating to our review of the 150-day assessment of the Ceplene MAA our response to the Day 180 List of Outstanding Issues, and our preparation for the Ceplene Oral Explanation.
Despite the increase in quarterly R&D expense, compared to last year, fourth quarter R&D expense fell approximately $1 million, compared with the third quarter of 2007.
During the fourth quarter of 2007, we extended the maturity date on our 10-year non-amortizing loan to June 30, 2008. The interest rate on this loan was increased marginally to 7.38% from 6%, as the lender agreed to forego other interest that might have been due under certain circumstances. As a result of this modification, we recognized a $0.5 million gain on the extinguishment of that debt.
Cash used in operating activities amounted to $6.7 million for the fourth quarter 2007, an average of about $2.2 million per month. For the full year 2007, our net cash used in operations was $25.8 million, an average of about $2.15 million per month basically in line with our expectations. We reduced our cash used in operations in the fourth quarter ’07, compared to the third quarter of ’07.
Shares outstanding at December 31, 2007 amounted to almost 45.9 million. As of that same date EpiCept had cash and cash equivalents of $4.9 million.
Thank you very much for your attention. Operator you may open the call up for questions.
Thank you. (Operator Instructions). There are no questions at this time.
Okay. Well thank you for your participation in this mornings call. We believe we will have the opportunity this year to realize the promise from our diversified portfolio of valuable cancer and pain management candidate. We will continue to be keenly focused on building value for our investors through the advancement of our key product development programs and our efforts will be supported by the efficient and strategic use of our finances.
We look forward to sharing our progress with you in the coming months. Operator you may end the call.
Thank you. This concludes today's conference call. You may now disconnect.