EpiCept is on track to achieve 2011 goals - Analyst Blog

Grant Zeng, CFA

EpiCept (EPCT) Reports Second Quarter Results  
    
The Company recognized revenue of $0.2 million during the second quarter of 2011, compared with $0.3 million during the second quarter of 2010. For each of the second quarters of 2011 and 2010, revenue consisted primarily of the recognition of license fee payments previously received from strategic alliances, revenues from the sales of Ceplene to Meda and product royalties.

Selling, general and administrative expense in the second quarter of 2011 increased by approximately 19%, or $0.3 million, to $2.0 million, compared with $1.7 million in the second quarter of 2010. The increase was primarily attributable to higher legal expenses in connection with a complaint filed by a licensor of certain technology the Company is no longer developing.

R&D expense in the second quarter of 2011 decreased by approximately 22%, or $0.6 million, to $2.0 million, compared with $2.6 million in the second quarter of 2010. The decrease in R&D expense was primarily related to lower regulatory fees for Ceplene®. A substantial portion of the Company's R&D expense in 2010 related to costs associated with its NDA filing of Ceplene® and follow-up with respect to its New Drug Submission in Canada.

EpiCept's net loss for the second quarter of 2011 was $4.3 million, or $0.06 per share, compared with a net loss of $4.9 million, or $0.11 per share, for the second quarter of 2010. EpiCept's net loss for the six months ended June 30, 2011 was $6.8 million, or $0.10 per share, compared with a net loss of $9.4 million, or $0.21 per share, for the six months ended June 30, 2010.

As of June 30, 2011 EpiCept had $14.6 million in cash and cash equivalents. During the first six months of 2011, the Company raised $20.3 million from borrowing under a senior secured term loan facility, and the sale of common stock and warrants. The Company has an additional $2.0 million available under the senior secured term loan facility that may be utilized by December 31, 2011 upon meeting certain conditions.

According to our financial model, we believe the company's existing cash resources are sufficient to fund operations into the second quarter of 2012. The Company is continuing its efforts to secure financing that will extend its operations beyond 2012 and fund an anticipated Phase III clinical trial. Financing may be in the form of additional debt or equity. The Company also expects to receive cash from sales of Ceplene® to Meda, royalties on the sales of Ceplene® by Meda and Megapharm, and from certain licensing activities.

EpiCept Is Making Progress In Clinical Advancement and Business Development

The Amiket Program:

In the first quarter of 2011, EpiCept announced positive results from a Phase IIb trial evaluating the efficacy and safety of AmiKet in chemotherapy-induced neuropathic pain (CIPN).

During the second quarter of 2011, the Company commenced designing a Phase III program intended to support a New Drug Application (NDA) for AmiKet in this indication. A Phase III clinical trial protocol is being prepared and is expected to be submitted to the FDA later this year. A Special Protocol Assessment will be sought for this program. The company is planning an end-of-Phase II meeting with the FDA, which will provide clarity with respect to clinical data required for approval of AmiKet in CIPN and will help advance ongoing partnership discussions.

The Ceplene Program:

Ceplene has been approved in the EU and Israel for administration with low-dose interleukin-2 (IL-2) for the remission maintenance and prevention of relapse of patients with AML in first remission. 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.

During the first half of 2011, Ceplene was added to the list of reimbursed products in Italy, permitting reimbursement for one year, following which permanent reimbursement approval is expected. Reimbursement has been approved in Sweden and is being negotiated in France, while talks remain in a pre-negotiation phase in Spain. Reimbursement negotiations in several other European countries are ongoing. Sales of Ceplene were not material in the first half of 2011 and are not expected to grow significantly before 2012.

Reimbursement discussions are ongoing in Israel.

The Company recently filed its protocol for a Phase III confirmatory clinical trial for Ceplene with the FDA, and received initial written responses in June 2011. Among those responses, the FDA noted that, in contrast to its position disclosed in October 2010, it is now proposing that the trial attempt to isolate Ceplene's effect by including an IL-2 monotherapy arm in the trial protocol. EpiCept expects to meet with the FDA to reconcile major protocol differences later in the third quarter of 2011.

EpiCept is continuing patient enrollment for its European post-approval clinical study of Ceplene. Approximately 62 patients have been enrolled to date. Data from the first 75 patients enrolled are expected to be reported beginning in early 2012. 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 are also expected to have value for prescribing hematologists.

In early March 2011, EpiCept announced that it had submitted additional U.S. and global provisional patent applications based on the discoveries of the efficacy of Ceplene plus IL-2 in AML of monocyte origin. These provisional patents, if granted, would provide an additional 20 years of market exclusivity for Ceplene from the date of patent filing.

Crolibulin

As a vascular disruption agent, Crolibulin has demonstrated potent anti-tumor activity in both preclinical and early clinical studies. In December 2010, the NCI initiated a Phase Ib/II trial for Crolibulin to assess safety and efficacy in combination with cisplatin in patients with anaplastic thyroid cancer (ATC). Trial enrollment has progressed to the second dosing cohort and the combination is demonstrating good tolerability to date.

Azixa

Azixa is discovered by EpiCept and licensed to Myrexis, Inc. as part of an exclusive, worldwide development and commercialization agreement. Azixa has received orphan drug status in the U.S. for the treatment of glioblastoma multiforme (GBM).

In June 2011, Myrexis presented Phase II clinical results at the American Society of Clinical Oncology (ASCO) Annual Meeting from the Company's open-label study in patients with recurrent GBM, concluding that Azixa was active and well tolerated in patients who failed first-line therapy. Of the 31 patients enrolled in this arm of the Phase II study who had failed temozolomide therapy and were naïve to Avastin treatment, two patients (6.5%) achieved partial response as assessed by Macdonald criteria, one patient (3.2%) with two tumor lesions at baseline responded with no detectable disease after cycle 13 of Azixa treatment, and five patients (16.1%) achieved stable disease. The median progression-free duration was 1.8 months (range 0.04 -13.1) and the median overall survival was 9.9 months (range 1.1-17.2).

In December 2010, Myrexis initiated a Phase IIb trial of Azixa in patients newly diagnosed with GBM. Up to 120 patients will be randomized to receive either Azixa in combination with standard of care therapy or standard of care therapy alone. The dosing of the first patient in a Phase III trial for Azixa triggers a milestone payment to EpiCept.

We think EpiCept has made excellent progress in terms of advancing its clinical programs as well as boosting its balance sheet in the past quarter. These are two key elements for a small cap biotech to achieve ultimate success. We believe EpiCept is on track to achieve its important objectives for the rest of 2011.
 

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