“The filing of the New Drug Application (NDA) for Ceplene® with the U.S. Food and Drug Administration (FDA) was the highlight of our second quarter”
EpiCept Corporation (Nasdaq and Nasdaq OMX Stockholm Exchange: EPCT) today announced operating and financial results for the three and six months ended June 30, 2010, and provided an update with respect to the Company's key business initiatives.
"The filing of the New Drug Application (NDA) for Ceplene® with the U.S. Food and Drug Administration (FDA) was the highlight of our second quarter," commented Jack Talley, President and Chief Executive Officer of EpiCept. "Also during the quarter our commercial partner Meda moved very quickly to launch Ceplene® in the United Kingdom and Germany, and filed applications for reimbursement in France, Italy and Spain. It will take time for Ceplene's adoption to become widespread throughout Europe, but we believe Meda is implementing a marketing strategy that ultimately will maximize Ceplene's impact in Europe in the treatment of AML patients in first remission and provide meaningful financial returns to both Meda and EpiCept," he added.
Business Update
- Ceplene® - approved in the European Union for administration with low-dose interleukin-2 (IL-2) for the remission maintenance and prevention of relapse of patients with Acute Myeloid Leukemia (AML) in first remission; AML is the most deadly form of leukemia in adults. The product has been licensed to Meda AB of Sweden to market and sell in Europe and certain Pacific Rim countries.
In June 2010, EpiCept submitted an NDA with the FDA to market Ceplene® with low-dose IL-2 for the prevention of relapse of AML patients in first remission. Ceplene® has been granted orphan drug status in the United States, which provides seven years of marketing exclusivity from the approval date. Marketing applications are also under regulatory review in Canada and Israel.
EpiCept intends to market Ceplene® in the United States. During the second quarter of 2010 the company added a senior director of marketing to assist in the design and implementation of a U.S. marketing and launch strategy. Significant pre-approval activities are underway in order to facilitate a timely commercial launch of Ceplene® upon receipt of regulatory approval. A marketing strategy is being devised that is tailored to current treatment paradigms in the U.S. and also reflects the experiences from the European strategy being executed by Meda. EpiCept believes that it can effectively reach target physicians in the U.S. with a specialty sales force.
Adoption of Ceplene is likely to be an ongoing process. Modifications to treatment patterns in orphan diseases like AML are heavily influenced by a small number of key academic thought-leaders at major institutions with nationally recognized expertise. Each market requires time to build awareness, acceptance and adoption of the treatment. Meda launched marketing activities during the second quarter of 2010 in the United Kingdom, Germany and Austria. In each of these markets Meda has tailored a specific strategy for gaining acceptance and generating usage of Ceplene®/IL-2. Sales of Ceplene® are expected to be modest in 2010 and 2011 and to grow significantly thereafter.
In the U.K., Meda has deployed a team of medical science liaisons to call on Key Opinion Leaders (KOLs) to educate them on Ceplene's clinical benefits. The KOLs will help to establish new treatment guidelines and include the product on national cooperative group studies that will provide exposure and credibility. At several leading hematology centers in England, agreements have been completed to allow applications for inclusion of Ceplene®/IL-2 on their respective formularies, which once accepted will allow hematologists to prescribe Ceplene® for their patients. Progress has been made at both private and National Health Service hospitals. Meda has also applied to the Scottish Medicines Council for approval to sell Ceplene® in Scottish medical centers. Formulary approvals are expected to occur over the remainder of 2010.
In Germany, the marketing strategy is similarly focused on KOLs. The strategy requires the involvement of KOLs to use Ceplene® initially in their clinical trials while key Meda account managers implement a sales and marketing program based on one-on-one meetings, placement of journal advertisements, and product presence at national and international congresses.
Ceplene® is expected to be rolled out to other countries in the European Union over the next 12 months. Applications for product reimbursement have been submitted and must be approved by the remaining Big Five European countries of France, Italy and Spain before a formal commercial launch can occur. These approvals are expected to be received before the end of the year.
EpiCept is continuing patient enrollment into its post-approval clinical study with Ceplene®. The Company plans to enroll up to 150 patients at approximately 30 centers across Europe with sites in Sweden, Belgium, France, the U.K., Spain, Germany and Italy. The two primary objectives of the study are to further demonstrate the clinical pharmacology of Ceplene® by assessing certain immunologic biomarkers in AML patients in first remission, and to measure the effect of Ceplene® and low-dose IL-2 on minimal residual disease in the same patient population. The Company intends to use this data to meet its post-approval commitment and to seek a refinement of Ceplene's European labeling. The data will also have value to prescribing hematologists. Enrollment into the trial is on track and data is expected beginning in late 2011.
EpiCept's efforts to expand the uses for Ceplene® in other hematologic diseases via a study led by Groupe Francophone des Myélodysplasies continued during the quarter. A study that will examine the effects of Ceplene® and low-dose IL-2 in combination with Vidaza® (azacitidine) in the treatment of patients with higher risk myelodysplastic syndrome (MDS), a bone marrow disease that can progress to AML, is nearing commencement. This study is expected to enroll patients beginning later this year.
- Azixa™* - a compound discovered by EpiCept and licensed to Myrexis, Inc. (formerly Myriad Pharmaceuticals, Inc.), as part of an exclusive, worldwide development and commercialization agreement. Myrexis is currently conducting Phase II trials for Azixa™ and provided an update on the progress of the trials at the meeting of the American Society of Clinical Oncology (ASCO) in June 2010. In the Glioblastoma multiforme study, six subjects achieved stable disease and two subjects had achieved partial responses. One subject's partial response duration was 7.8 months; the additional patient's response was, at the time of the ASCO report, 16 months in duration and has been classified as almost a complete response. Additional data collection is ongoing in this study. The dosing of the first patient in a Phase III trial for Azixa™ triggers a milestone payment to EpiCept.
Financial and Operating Highlights
For the second quarter of 2010, the net loss attributable to common stockholders was $4.9 million, or $0.11 per share, compared with a net loss attributable to common stockholders of $7.1 million, or $0.18 per share, for the second quarter of 2009. For the six months ended June 30, 2010, the net loss attributable to common stockholders was $9.4 million, or $0.21 per share, compared with a net loss attributable to common stockholders of $29.6 million, or $0.81 per share, for the six months ended June 30, 2009.
For the six months ended June 30, 2009, other expense, net amounted to $20.0 million consisting primarily of interest expense incurred as a result of the conversion of $24.5 million of the Company's 7.5556% convertible subordinated notes due 2014 into approximately 9.1 million shares of its common stock. As of June 30, 2010, EpiCept had cash and cash equivalents of $8.3 million and 50.4 million shares outstanding.
Second Quarter and Six Months 2010 vs. Second Quarter and Six Months 2009
Revenue
The Company recognized revenue of $0.3 million during the second quarter of 2010, compared with $0.1 million during the second quarter of 2009. The Company recognized revenue of $0.4 million during the six months ended June 30, 2010, compared with $0.2 million during the six months ended June 30, 2009. For the second quarter of 2010, revenue consisted primarily of the recognition of license fee payments previously received from Meda, Myrexis, Endo Pharmaceuticals and Durect, revenues from the sales of Ceplene® to Meda and product royalties. For the second quarter of 2009, revenue consisted primarily of the recognition of license fee payments previously received from Myrexis, Endo Pharmaceuticals and Durect.
Selling, General and Administrative Expense
Selling, general and administrative expense in each of the second quarters of 2010 and 2009 was $1.7 million. Selling, general and administrative expense in both of the six months ended June 30, 2010 and 2009 was $3.8 million. Selling expense is expected to increase during the year and to offset reductions in general and administrative expenses as the Company prepares to market Ceplene® in the U.S. upon receipt of marketing approval.
Research and Development (R&D) Expense
R&D expense in the second quarter of 2010 decreased by approximately 32%, or $1.2 million, to $2.6 million compared with $3.8 million in the second quarter of 2009. R&D expense for the six months ended June 30, 2010 decreased by approximately 12%, or $1.4 million, to $4.6 million compared with $6.0 million for the six months ended June 30, 2009. The decrease in R&D expense was primarily related to lower salary and salary-related expenses and facility costs related to closing our research facility in San Diego in 2009, partially offset by higher regulatory fees and clinical trial expenses for Ceplene®. A substantial portion of the Company's R&D expense in 2010 related to regulatory costs associated with our NDA filing of Ceplene® and follow-up with respect to our NDS in Canada.
Other Income (Expense)
Other income (expense) during the second quarter of 2010 amounted to net expense of $0.8 million, compared with net expense of $1.6 million in the second quarter of 2009. Other income (expense) for the six months ended June 30, 2010 amounted to net expense of $1.4 million, compared with net expense of $20.0 million for the six months ended June 30, 2009. The primary component of other income (expense) in both quarters is interest expense and foreign exchange loss. The first six months of 2009 included $19.8 million of interest expense, which included $10.5 million in amortization of debt issuance costs and debt discount related to the conversion of $24.5 million of the Company's 7.5556% convertible subordinated notes due 2014 into approximately 9.1 million shares of its common stock. Other expense, net for the six months ended June 30, 2010 was impacted by a $1.2 million foreign exchange loss incurred as a result of the increased strength of the U.S. dollar compared with the euro.
Liquidity
As of June 30, 2010 EpiCept had $8.3 million in cash and cash equivalents. In May 2010 the Company received a $2 million payment from Meda in connection with the first commercial sale of Ceplene® in a major European country. In June 2010, the Company sold approximately 6.1 million shares of common stock and warrants to purchase approximately 11.0 million shares of common stock for gross proceeds of $6.7 million, or $6.2 million net of $0.5 million in transactions costs. We also raised proceeds of $0.1 million from sales of our common stock through our At-the-Market program through June 30, 2010. The Company believes that existing cash resources are sufficient to fund operations into the fourth quarter of 2010. We expect to receive cash from certain licensing activities and upon achievement of specified clinical milestones. We may seek alternative sources of financing, such as issuing additional debt or equity, should these funds be insufficient to timely meet the Company's liquidity requirements.
In February 2010 EpiCept established an At-the-Market offering program through which the Company may, from time to time, offer and sell shares of its common stock having an aggregate offering price of up to $15.0 million through its sales agent. Sales of the shares, if any, will be made by means of ordinary brokers' transactions on The Nasdaq Capital Market or, to the extent allowable by law, the Nasdaq OMX Stockholm Exchange, at market prices. The Company has agreed to suspend the use of its At-the-Market program for a minimum of 90 days from the date of its June 2010 common stock offering.
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