“During the third quarter, we were disappointed to receive a refusal to file letter from the U.S. Food and Drug Administration (FDA) for our New Drug Application (NDA) for Ceplene®”
EpiCept Corporation (Nasdaq and Nasdaq OMX Stockholm Exchange: EPCT) today announced operating and financial results for the three and nine months ended September 30, 2010, and provided an update with respect to the Company's key business initiatives.
"During the third quarter, we were disappointed to receive a refusal to file letter from the U.S. Food and Drug Administration (FDA) for our New Drug Application (NDA) for Ceplene®," stated Jack Talley, EpiCept President and CEO. "However, we are pleased that our recent meeting with the FDA and our agreement with them on the outline of a Phase III trial provide a clear regulatory path for approval of Ceplene® in the U.S. We expect such a trial to commence in 2011. Also, we have filed an application with the FDA to grant Ceplene® fast track status, which should permit an expedited review of the Ceplene® NDA once it is filed, among other benefits."
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 August 2010, EpiCept received a refusal to file letter from the FDA on the New Drug Application to market Ceplene® with low-dose interleukin-2 (IL-2) for the prevention of relapse of AML patients in first remission. In October 2010, EpiCept reached an agreement with the FDA on a regulatory path forward for Ceplene®. A new trial will be required to demonstrate Ceplene's activity in conjunction with low-dose IL-2 as remission maintenance therapy for AML patients in first complete remission. EpiCept has reached agreement with the FDA for a two-arm, randomized, open-label trial that will compare the efficacy of Ceplene® plus low-dose IL-2 to standard of care in this indication. Based on FDA guidance, the primary endpoint of the trial will be overall patient survival. EpiCept's previous Phase III trial demonstrated a statistically significant prolongation of the primary endpoint of leukemia free survival and an advantage in increased overall survival of more than an extra year of life in patients in their first complete remission. Ceplene® has been granted orphan drug status in the United States, which provides seven years of marketing exclusivity from the approval date.
Meda launched marketing activities during the second quarter of 2010 in the United Kingdom, Germany and Austria and is seeking reimbursement approval in Spain, Italy and France as well as several other countries in the European Union. Approval from many of these countries is expected beginning in the next few months. Meda continues to make progress in its long term strategy to position Ceplene® as the standard of care in AML relapse prevention by continuing to gain commitments by key leading physicians to treat their patients with Ceplene® and by incorporating the use of Ceplene® into treatment guidelines in major countries. Sales of Ceplene® were not material in the third quarter of 2010 and are not expected to grow significantly until 2012.
During the third quarter of 2010, EpiCept's appeal of a decision by Health Canada not to provide data protection for Ceplene® was denied by a federal court in Canada. Lack of data protection in Canada for an innovative drug such as Ceplene® eliminates any right to sales exclusivity by EpiCept and enables competition to seek approval to sell generic equivalents immediately. EpiCept expects to appeal the court's decision and may withdraw its New Drug Submission until the appeals process is completed. If the application is withdrawn, EpiCept retains the right to re-file the application at any time over the next five years without prejudice.
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 to be reported beginning in late 2011.
- EpiCeptTM NP-1 - a prescription topical analgesic cream designed to provide long-term relief from the pain of peripheral neuropathies, which affect more than 15 million people in the U.S. alone. In October 2010, the Company presented interim data on 370 patients from its Phase IIb trial for EpiCept™ NP-1 in chemotherapy-induced peripheral neuropathy (CPN), which is being conducted by National Cancer Institute (NCI)-funded Community Clinical Oncology Program. The interim results demonstrated that NP-1 provided a statistically significant reduction in pain in patients whose cancers were treated with taxanes, 94% of whom were breast cancer patients. CPN may affect 50% of women undergoing treatment for breast cancer.
The double-blind, randomized placebo-controlled study has enrolled approximately 485 patients suffering from painful CPN for at least 28 days following the conclusion of chemotherapy. The primary endpoint of the six-week trial is change in average daily neuropathy intensity scores from baseline to the endpoint. Secondary endpoints include the percentage of patients whose neuropathy intensity decreases at least 30% from baseline as well as various other measures. Top line data from the study is expected to become available by year end 2010.
EpiCept intends to partner NP-1 prior to the commencement of the Phase III program in order to share the costs and development risk, and ultimately to have that partner market the product globally upon approval. Partner negotiations have reached an advanced stage.
- CrolibulinTM - a vascular disruption agent that has demonstrated potent anti-tumor activity in both preclinical and early clinical studies. The NCI is co-funding a new Phase Ib trial to assess safety and efficacy of crolibulinTM in association with standard of care in certain solid tumors. The protocol for this trial is currently under review. The trial is expected to commence during the fourth quarter of 2010 and is progressing on schedule.
- 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. Azixa™ is currently being evaluated in Phase II trials. In June 2010, Myrexis reported results from two of the Phase II trials, in metastatic melanoma in combination with temozolomide and in recurrent glioblastoma in combination with carboplatin, at the annual meeting of the American Society for Clinical Oncology (ASCO). Myexis will present a poster with updated results from an ongoing, open-label Phase 2 monotherapy study of Azixa™ in treatment-experienced patients with glioblastoma multiforme (GBM) at the 2010 Society for Neuro-Oncology Scientific Meeting and Education Day on November 19, 2010 in Montreal, Canada. The presentation will focus on the subset of enrolled patients with the poorest prognosis who had relapsed following both first- and second-line chemotherapy, including Avastin® (bevacizumab).
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 third quarter of 2010, the net loss attributable to common stockholders was $3.2 million, or $0.06 per share, compared with a net loss attributable to common stockholders of $4.8 million, or $0.11 per share, for the third quarter of 2009. For the nine months ended September 30, 2010, the net loss attributable to common stockholders was $12.6 million, or $0.27 per share, compared with a net loss attributable to common stockholders of $34.4 million, or $0.89 per share, for the nine months ended September 30, 2009. As of September 30, 2010, EpiCept had cash and cash equivalents of $3.6 million and 50.4 million shares outstanding.
Third Quarter and Nine Months 2010 vs. Third Quarter and Nine Months 2009
Revenue
The Company recognized revenue of $0.3 million during the third quarter of 2010, compared with $0.1 million during the third quarter of 2009. The Company recognized revenue of $0.7 million during the nine months ended September 30, 2010, compared with $0.3 million during the nine months ended September 30, 2009. For the third quarter of 2010, revenue consisted primarily of the recognition of license fee payments previously received from the Company's strategic alliances, revenues from the sales of Ceplene® to Meda and product royalties. For the third quarter of 2009, revenue consisted primarily of the recognition of license fee payments previously received from the Company's strategic alliances.
Selling, General and Administrative Expense
Selling, general and administrative expense in each of the third quarters of 2010 and 2009 was $1.9 million. Selling, general and administrative expense in both of the nine months ended September 30, 2010 and 2009 was $5.6 million. EpiCept expects selling, general and administrative expenses to decline modestly over the next few quarters.
Research and Development (R&D) Expense
R&D expense in the third quarter of 2010 decreased by approximately 36%, or $1.1 million, to $2.1 million compared with $3.2 million in the third quarter of 2009. R&D expense for the nine months ended September 30, 2010 decreased by approximately 28%, or $2.5 million, to $6.7 million compared with $9.2 million for the nine months ended September 30, 2009. The decrease in R&D expense was primarily related to lower salary and salary-related expenses and facility costs related to closing the research facility in San Diego in 2009, lower license fees and lower clinical trial expenses for Ceplene®, partially offset by higher regulatory fees for Ceplene®. A substantial portion of the Company's R&D expense in 2010 related to regulatory costs associated with the Company's NDA filing of Ceplene®.
Other Income (Expense)
Other income (expense) during the third quarter of 2010 amounted to net income of $0.8 million, compared with net income of $0.2 million in the third quarter of 2009. The primary component of other income (expense) in both quarters is foreign exchange gain. Other income (expense) for the nine months ended September 30, 2010 amounted to net expense of $0.5 million, compared with net expense of $19.8 million for the nine months ended September 30, 2009. Other expense, net for the nine months ended September 30, 2010 was impacted by a $0.4 million foreign exchange loss incurred as a result of the increased strength of the U.S. dollar compared with the euro. Interest expense of $19.9 million was recorded in the first nine months of 2009, 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.
Liquidity
As of September 30, 2010 EpiCept had approximately $3.6 million in cash and cash equivalents. On October 29, 2010, the Company was notified by the Internal Revenue Service that its application for the Qualifying Therapeutic Discovery Project Program was certified and a grant in the amount of $0.7 million was approved. Grant funds are expected to be received in November 2010. On November 8, 2010, the Company announced that it entered into definitive agreements for the purchase of approximately 3.3 million shares of its common stock at $0.61 per share, and five-year warrants to purchase up to approximately 1.3 million shares of common stock at an exercise price of $0.56 per share. EpiCept will receive approximately $1.9 million in net proceeds from the offering, which is expected to close on or about November 10, 2010. The Company believes that its cash at September 30, 2010 plus the proceeds from the public offering and the grant from the Internal Revenue Service is sufficient to fund operations into the first quarter of 2011.
On November 6, 2010 the Company provided an update with respect to its financing plans. The key element of the plan is a non-equity financing transaction that, if completed, will support the Company's operations through at least year-end 2011. The Company anticipates that the transaction, which is subject to completion of due diligence and execution of mutually-satisfactory documentation, will close before year-end, but should the transaction not close or the proceeds be less than anticipated the Company may determine to seek additional or alternative sources or types of financing, including equity financing. EpiCept may delay or cancel some of its planned activities until results of the financing plan become more apparent.
EpiCept plans to out-license its NP-1 compound to a third party who will agree to complete clinical development and commercialize the product upon receipt of necessary regulatory approvals. Discussions with prospective partners are progressing, however at this time it is not possible to determine whether or when such an agreement might be concluded or the amount of any fees that may be paid to EpiCept in connection with the agreement.
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