Emisphere Technologies CEO Speaks About His Company

On April 28, The Wall Street Transcript interviewed Michael V. Novinski, President and Chief Executive Officer of Emisphere Technologies, Inc. (EMIS). Key excerpts follow:

TWST: Please begin with a brief historical sketch of the company and a picture of the things you are doing at the present time?

Mr. Novinski: Emisphere Technologies, Inc., which has been in business for nearly 20 years, is a biopharmaceutical company that focuses on developing oral forms of injectable drugs, either alone or with corporate partners, by applying its proprietary eligen® technology to these drugs. Emisphere's eligen technology improves the body's ability to absorb select molecules. Emisphere's carriers provide a demonstrated safe method of chaperoning molecules without impacting on their biological benefit. Many of these molecules are currently delivered by injection. In certain cases, their benefits are limited due to poor bioavailability, slow onset of action or variable absorption. Our technology, which we like to think of as "carriers" or "chaperones," if you will, facilitates the transport of normally poorly bioavailable molecules across the GI epithelium into the bloodstream where they become active.

TWST: What medical conditions are you addressing?

Mr. Novinski: In trying to alleviate unmet medical needs, we are entering into some very, very exciting areas. In our late-stage pipeline, we are working with our partner Novartis on Phase III studies with our carrier and Salmon Calcitonin for the treatment of osteoarthritis. This is an exciting market which can address the needs of somewhere between 15 and 20 million managed Americans with osteoarthritis. There are no known treatment modalities to stop the progression of the disease, which means our Salmon Calcitonin product with Novartis could become the first global disease-modifying drug for osteoarthritis. We are also in Phase III for the treatment of osteoporosis, so we are involved in addressing two very interesting and exciting markets with this product. We are also involved in the area of diabetes, which is a bit more early stage. We are investigating the use of our compound with Glucagon-like peptides, GLP-1 and PYY, for the potential treatment of diabetes. We are also looking at the technology using analogs of GLP-1. If you talk to most of the experts and people involved in the treatment of diabetes, they do believe that the future treatment is going to be with GLP-1 or GLP-1-type analogs. The problem with the GLP-1 or GLP-1 analogs is that they are all currently administered via injection. We are involved with potential oral delivery in a very early stage. Another medical condition we are addressing is vitamin B12 deficiency. B12 is a molecule that is very poorly absorbed for a number of reasons. In the United States alone there are 40 million injections given per year, in addition to large numbers of tablets of various strengths — somewhere in the order of magnitude of 600 million to 700 million tablets annually. The B12 taken in the tablets is not absorbed, though, in any substantive way. For this reason, many B12 deficient patients must take the injection route. We have completed two animal studies involving B12 and hope to be conducting studies in humans by mid-year. We are looking to potentially commercialize this opportunity for an oral vitamin B12 sometime in 2009.

TWST: What were the reasons for the company's lack of success in the past and what changes will you be making?

Mr. Novinski: Emisphere spent an enormous amount of time, money and resources on two particular molecules, insulin and heparin, that were not necessarily the best fit for our technology. The company spent years and literally tens of millions of dollars trying to take both of these injectable products to the oral form of delivery, at a level that would be considered acceptable to the FDA for its appropriate treatments. The issue is that essentially neither of these molecules fit the criteria as well as other molecules do. The reason for that is the therapeutic index for both insulin and heparin is very, very narrow. You can compare that to the treatment for osteoporosis and osteoarthritis, which is essentially administration for a chronic condition taken over a long period of time. But for insulin and heparin, if you are talking about treating Type II diabetes, or if you are talking about, for heparin, treating a DVT, you have a very narrow therapeutic window. With any oral delivery mechanism, there is always going to be some variability, and this technology is no exception. When you take something orally, the GI track is a very complicated place. A lot of things can occur that could affect the delivery of the molecule to the body at any given time. Therefore, if you are delivering molecules with very specific needs, like insulin and heparin, you have to be very specific every time and, quite frankly, variability is just basically unacceptable for these particular two areas of treatment.

I think what they found in pursuing these particular molecules was that they just didn't allow for the levels of safety and efficacy to be reached, or were acceptable for these particular treatment modalities. It's just inherent to oral delivery of molecules and with this technology that there is going to be some variability. If you compare that with the treatment of osteoarthritis or B12 administration, there may be some variability, but it is not as significant, because some of it is absorbed now or one hour later, and that kind of timing is not crucial. Overall, the molecule is being delivered over a period of time, which becomes fairly consistent as opposed to the oral delivery of oral heparin and oral insulin. That's why I say that I don't believe that they necessarily had a great understanding of the technology.

When I came aboard in mid-2007 there were three things that we did. First, we evaluated people and processes. Second, we evaluated the technology. Number three is, we put together both a long- and short-term plan for success. When you look at the people and processes, we put a lot of procedures in place to make sure that the organization had proper controls, that spending was occurring at proper levels and that communication was occurring with the appropriate staff and within the proper departments. We then brought in a different scientific team, added expertise from consultants, assessed the technology and established criteria for development. What we have learned is that the molecules that were being explored in the past didn't really meet the criteria where the technology actually performed best. At the end of the day, that's what counts. We established the criteria, and then we established the list. We looked at molecules that perhaps would work best with the technology. Oral heparin and oral insulin didn't really fall on the list for the reasons that I discussed, and some molecules that came on list were actually quite surprising. Some of the molecules were prescription drugs and some that were turning up on the list were not. This is where B12 came in, because it does not necessarily have to be a prescription drug to be a molecule that is poorly absorbed. This process started in the third quarter of 2007, about four months after I got here, and then we directed our efforts in more aggressive, preclinical programs and developed our technology with products that we felt met the criteria.

TWST: Is there anything that you would like to add, especially regarding strategies, long-term objectives and reasons for an investor to look at the company?

Mr. Novinski: What I would like to highlight is that the organization's goals are very simple, and that is we want to commercialize our technology as soon as possible. We believe there is an opportunity to do so as early as next year, and that during the course of this year we are going to be able to build our early and mid-stage pipeline with additional partnerships. It would be my goal to communicate to existing and potential shareholders to look at these milestones as Emisphere is emerging from what it has been in the past, and I think they will see a completely different company.