Feb 24 2011
EpiCept Corporation (Nasdaq and Nasdaq OMX Stockholm Exchange: EPCT) today announced operating and financial results for the fourth quarter and full year ended December 31, 2010, and provided an update on its key business initiatives.
"EpiCept marked several important achievements since our last quarterly report," stated Jack Talley, EpiCept President and CEO. "We are delighted with the excellent clinical data we recently reported from the EpiCeptTM NP-1 trial studying chemotherapy-induced peripheral neuropathy (CIPN), which we believe confirms NP-1's utility in meeting a high unmet medical need in a large patient population. We also made important progress late last year by gaining agreement with the U.S. Food and Drug Administration that a trial for Ceplene®/IL-2 with survival as the primary endpoint need not isolate the contribution of Ceplene® in the regimen, but would need to show a statistically significant overall survival advantage for remission maintenance of patients suffering from acute myeloid leukemia. We believe this study has a very good probability of success. We are also closely following Meda's marketing of Ceplene® in the European Union and believe that they are pursuing a determined course of action that will ultimately result in significant penetration into the EU medical community."
Business Update
- Ceplene® - approved in the European Union (EU) and Israel 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, and to MegaPharm Ltd. to market and sell in Israel.
In October 2010, EpiCept reached an agreement with the FDA on a regulatory path leading to a resubmission of a New Drug Application (NDA) for Ceplene®. EpiCept agreed to undertake a new confirmatory clinical trial to demonstrate Ceplene's activity in conjunction with low-dose IL-2 as remission maintenance therapy for AML patients in first complete remission with overall survival as the primary endpoint. The trial will be 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. EpiCept has drafted the clinical trial protocol and is now reviewing it with key opinion leaders before submitting it to the FDA. EpiCept expects to submit the protocol shortly following which the FDA, via the Special Protocol Assessment procedure, will provide guidance on specific sections of the protocol. The Company expects to begin the trial in the second half of 2011. Ceplene® has been granted orphan drug status in the United States, which provides seven years of market exclusivity from the approval date.
EpiCept believes that Ceplene's prospects for achieving a positive result in this confirmatory trial are very good. The 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 all patients studied in their first complete remission. In December 2010, EpiCept released the results of a new subset analysis of 190 patients from this trial that were treated aggressively with consolidation therapy before being randomized. Within this subset of patients, a difference in overall patient survival was seen in favor of Ceplene®/IL-2 versus standard of care.
During 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. In November 2010, EpiCept appealed the court's decision and withdrew its New Drug Submission until the appeals process is completed. EpiCept has been joined in its appeal of this decision by Canada's Rx&D, a national industry association representing 50 research-based pharmaceutical companies in Canada. The Company retains the right to re-file the application at any time over the next five years without prejudice.
In Europe, Meda is concentrating on gaining patient access to Ceplene® through its inclusion in clinical trials that are being conducted by key opinion leaders. Regulatory efforts include seeking reimbursement approvals in France, Spain, Italy and smaller markets in the EU, and filing for marketing approval in non-EU European and Pacific Rim countries. Reimbursement approvals are expected during 2011 and several marketing applications are expected to be submitted in the first half of 2011. Sales of Ceplene® were not material in the fourth quarter of 2010 and are not expected to grow significantly until 2012.
Ceplene® was approved for marketing by Israel's Ministry of Health in the fourth quarter of 2010. Marketing is expected to commence later this quarter by MegaPharm.
EpiCept is continuing patient enrollment into its post-approval clinical study with Ceplene®. Data is expected to be reported beginning in late 2011. Thirty centers across Europe are participating in this study, with sites in Sweden, Belgium, France, the U.K., Spain, Germany and Italy. The Company intends to use the data from this single-arm, open-label trial to meet its post-approval commitment and to seek a refinement of Ceplene's EU labeling. The data will also have value to prescribing hematologists.
- 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. Earlier this month, EpiCept announced positive results from a Phase IIb trial evaluating the efficacy and safety of EpiCept™ NP-1 (NP-1) in chemotherapy-induced peripheral neuropathy (CIPN). The multi-center, double-blind, randomized, placebo-controlled study was conducted by the National Cancer Institute (NCI)-funded Community Clinical Oncology Program. More than 460 cancer survivors suffering from painful CIPN were enrolled in the six-week study. The results of the trial in the intent to treat (ITT) population demonstrated that the change in average daily neuropathy intensity scores in the NP-1 group achieved a statistically significant reduction in CIPN intensity versus placebo (p<0.001), which was the trial's primary endpoint. Additionally, a pre-specified subgroup of the ITT population, those patients who previously received taxane chemotherapy, also showed a statistically significant reduction in average daily neuropathy intensity scores.
The NCI estimates that 30-40% of cancer patients treated with chemotherapy experience symptoms of CIPN, which impairs their quality of life and ability to function. The debilitating, chronic pain of CIPN is one of the most common reasons why cancer patients discontinue their treatment prematurely. More than one million breast cancer survivors in the United States alone suffer from this disease, for which there is no effective therapy.
The results of this trial build upon EpiCept's clinical development of NP-1 in both diabetic and post-herpetic neuropathies. The Company has enrolled more than 1,700 patients into clinical trials of NP-1, including a 360-patient trial that studied NP-1's efficacy compared with gabapentin and placebo in post-herpetic neuropathy, for which positive results were previously reported. As previously reported, 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 discussions are continuing.
- CrolibulinTM - a vascular disruption agent that has demonstrated potent anti-tumor activity in both preclinical and early clinical studies. In December 2010, the NCI initiated a Phase II trial for crolibulinTM to assess safety and efficacy in combination with cisplatin in patients with anaplastic thyroid cancer (ATC). Trial enrollment has commenced and data from this trial could be available as early as late in 2011.
- Azixa™ - a compound discovered by EpiCept and licensed to Myrexis as part of an exclusive, worldwide development and commercialization agreement. Myrexis is currently conducting Phase II trials with Azixa™. Updated results from an ongoing, open-label Phase IIa monotherapy study of Azixa™ in treatment-experienced patients with glioblastoma multiforme (GBM), an aggressive brain tumor, were presented in November 2010 demonstrating durable responses in patients who had failed both first- and second- line therapy. Data from a sub-group of patients with recurrent GBM who are naïve to Avastin is expected to be reported in the first half of 2011. In December 2010, Myrexis began a Phase IIb clinical study of AzixaTM to treat GBM. The study will enroll as many as 120 patients in the U.S. and India in order to evaluate AzixaTM combination therapy as a first-line GBM treatment. AzixaTM has received orphan drug status in the United States for the treatment of glioblastoma. The dosing of the first patient in a Phase III trial for Azixa™ triggers a milestone payment to EpiCept.
Financial and Operating Highlights
EpiCept's net loss for the fourth quarter of 2010 was $3.0 million, or $0.06 per share, and for the year was $15.5 million, or $0.32 per share. As of December 31, 2010, EpiCept had approximately 55.0 million shares outstanding. EpiCept's loss per share and shares outstanding reflect a 1:3 reverse split that was effected in January 2010.
Fourth Quarter 2010 vs. Fourth Quarter 2009
Revenue
The Company recognized revenue of $0.3 million during the fourth quarter of 2010, an increase of $0.2 million compared with $0.1 million in the fourth quarter of 2009. The increase was primarily related to $0.1 million in product revenue from the sales of Ceplene® in 2010 and an increase of $0.1 million in the recognition of license fee payments previously received from the Company's partners.
Cost of Goods Sold
Cost of goods sold in the fourth quarter of 2010 was $0.6 million, consisting primarily of a $0.5 million expense for Ceplene® inventory the Company believes will not be sold prior to reaching its product expiration date.
Selling, General and Administrative Expense
Selling, general and administrative expense in the fourth quarter of 2010 decreased by 15%, or $0.3 million, to $1.6 million compared with $1.9 million in the fourth quarter of 2009. The decrease was primarily related to lower investor relations, public reporting and stock-based compensation expenses.
Research and Development Expense
Research and development expense in the fourth quarter of 2010 decreased by approximately 39%, or $0.9 million, to $1.5 million compared with $2.4 million in the fourth quarter of 2009. The decrease was primarily related to lower clinical trial and regulatory expenses for Ceplene®.
Other Income (Expense)
Other income (expense) during the fourth quarters of 2010 and 2009 amounted to net income of $0.4 million and net expense of $0.3 million, respectively. The primary component of other income in the fourth quarter of 2010 was a tax grant of $0.7 million received from the Internal Revenue Service (IRS) as part of the Qualifying Therapeutic Discovery Project Program, partially offset by interest expense and a foreign exchange loss. The primary component of other expense in 2009 was interest expense and foreign exchange loss.
Full Year 2010 vs. Full Year 2009
Revenue
During the years 2010 and 2009, the Company recognized deferred revenue of $0.8 million and $0.4 million, respectively, and product revenue from the sales of Ceplene® of $0.2 million and zero, respectively. During 2010, revenue was primarily related to the recognition of deferred revenue from the Company's license agreements with its partners, as well as royalties with respect to certain technology and sales of Ceplene®. During 2009 revenue was primarily related to the recognition of deferred revenue from the Company's license agreements with its partners, as well as royalties with respect to certain technology and sales of Ceplene®.
Cost of Goods Sold
Cost of goods sold in 2010 was $1.0 million, consisting primarily of a $0.9 million expense for Ceplene® inventory the Company believes will not be sold prior to reaching its product expiration date.
Selling, General and Administrative (SG&A) Expense
Selling, general and administrative expense in 2010 decreased by approximately 4%, or $0.3 million, to $7.2 million compared with $7.5 million in 2009. The decrease in SG&A expense can be attributed to lower investor relations, public reporting and stock-based compensation expenses.
Research and Development Expense
Research and development expense in 2010 decreased by approximately 30%, or $3.5 million, to $8.1 million compared with $11.6 million in 2009. The decrease compared with 2009 was primarily attributable to a $2.0 million reduction in salary and salary-related expenses and facility costs related to the closing of the Company's research facility in San Diego in 2009, lower clinical trial expenses for Ceplene® of $0.9 million, lower license fees of $0.5 million and lower stock-based compensation expenses of $0.2 million, partially offset by higher regulatory fees for Ceplene® of $0.3 million.
Other Income (Expense)
Other income (expense) during 2010 amounted to a net expense of $0.2 million compared with a net expense of $20.1 million during 2009. The $19.9 million decrease in other expense, net was primarily related to $10.5 million in amortization of debt issuance costs and discount and $9.3 million in interest expense, which was paid from restricted cash, 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 common stock in 2009. Other income (expense) was negatively impacted by a $0.5 million foreign exchange loss in 2010, compared with a $0.2 million foreign exchange gain in 2009. The Company received a $0.7 million tax grant in 2010 from the IRS as part of the Qualifying Therapeutic Discovery Project Program.
EpiCept also announced today that in its Annual Report on Form 10-K for the year ended December 31, 2010, the Company's independent registered public accounting firm is expected to express an unqualified opinion on the December 31, 2010 consolidated financial statements and will include an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern.
Liquidity
As of December 31, 2010 EpiCept had approximately $2.4 million in cash and cash equivalents. Subsequent to the end of the year, in February 2011, the Company announced that it received approximately $6.6 million in net proceeds from the issuance of approximately 8.9 million shares of its common stock at $0.80 per share, and five-year warrants to purchase up to approximately 3.6 million shares of common stock at an exercise price of $0.75 per share. The Company believes that its current cash is sufficient to fund operations through the third quarter of 2011.
In November 2010, the Company provided an update on its efforts to finance the Company's operations beyond 2010. The key element of the Company's plan is a non-equity financing transaction that, if completed, will support its current operations well into 2012. The completion of this transaction was delayed by due diligence and other considerations and, while EpiCept is continuing its efforts to secure this financing, there is no assurance that it will be completed. The Company may determine to seek additional or alternative sources or types of financing should the transaction not close or the proceeds are less than anticipated. The Company may receive cash from certain licensing activities during 2011.
Source: EpiCept Corporation
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