For immediate release: July 29, 2004
VANCOUVER - Inex Pharmaceuticals Corporation (INEX; TSX: IEX) reported today in its second quarter 2004 operating results the achievement of two significant milestones towards the commercialization of its lead anticancer product Onco TCS as well as progress on earlier stage products.
The first milestone, which was announced on May 21, 2004, was the acceptance for review by the United States Food and Drug Administration (FDA) of the Company’s New Drug Application (NDA) seeking marketing approval for Onco TCS as a treatment for relapsed aggressive non-Hodgkin’s lymphoma (NHL).
The second milestone, announced on June 7, 2004, was the reporting of follow-up data at the Annual Meeting of the American Society of Clinical Oncology (ASCO) that showed Onco TCS has the potential to be used in combination with other anticancer drugs for the first-line treatment of patients with aggressive NHL.
Pipeline product advances included the continued progress towards the filing of an Investigational New Drug (IND) application to the FDA seeking approval to begin human clinical trials for INX-0125 (liposomal vinorelbine). As well, the Company presented preclinical data from INX-0167, a new product from the Company’s Targeted Immunotherapy platform, showing promising anti-tumor activity when used in combination with monoclonal antibodies.
David Main, INEX’s President and CEO said that these accomplishments further advanced INEX in its goal of becoming a fully integrated biopharmaceutical company.
“We remain focused on our lead product as it nears its final stages in the approval process. While approval is not assured, we remain confident that our data are compelling and address an unmet medical need. In addition, products are advancing in our pipeline to complement the progress made with Onco TCS,” said Main.
Onco TCS
Onco TCS is a proprietary drug comprised of the widely used off-patent anticancer drug vincristine encapsulated in INEX’s liposomal drug delivery technology. This technology is designed to provide prolonged blood circulation, tumor accumulation and extended drug release at the cancer site. These characteristics are intended to increase the effectiveness and reduce the side effects of the encapsulated drug.
INEX’s commercialization partner for Onco TCS in North America is Enzon Pharmaceuticals Inc. (Enzon; NASDAQ: ENZN).
NDA accepted for review
The Company’s NDA for Onco TCS has been accepted by the FDA and granted a Standard Review designation. Based on this designation, the FDA has established a target date of January 15, 2005 for the completion of its review. Subject to regulatory approval, Onco TCS could be launched in the US in the first half of 2005.
The NDA is seeking marketing approval for Onco TCS as a single-agent treatment for patients with relapsed aggressive NHL previously treated with at least two combination chemotherapy regimens. The Company will continue to work closely with the FDA to address any questions during the review process.
The FDA’s acceptance of the NDA triggered the Company’s obligation to make a US$2.5 million payment to its former joint venture collaborator, Elan Corporation, plc. (Elan; NYSE: ELN). INEX is required to make one final payment of US$2.5 million to Elan upon FDA approval of Onco TCS. After the final payment is made, INEX will have no further milestone payments or royalty obligations to Elan.
Data presented at ASCO
INEX and Enzon released follow-up results from a phase II clinical trial that indicate Onco TCS has potential to be used in combination with other anticancer drugs for the first-line treatment of patients with aggressive NHL. The follow-up results were reported at ASCO in New Orleans, Louisiana.
The follow-up results were released from 68 evaluable patients in the phase II clinical trial conducted at The University of Texas M. D. Anderson Cancer Center in Houston, Texas in which Onco TCS was used as part of a combination regimen in the first-line treatment of aggressive NHL. Sixty-three patients, or 93% of patients, responded to the therapy. Sixty-two patients had their tumors completely eliminated for a complete response rate of 91.2% and one patient’s tumor volume decreased by more than 50% for a partial response rate of 1.5%.
Investigators also presented positive patient survival data. At a median follow-up of 22 months, median progression-free survival and median overall survival had not yet been reached. Overall survival was 99% (one death) and progression-free survival was 87% (nine relapses). Progression-free survival for an elderly patient sub-group was 86% (five relapses) and 87% for a younger patient sub-group (four relapses).
INEX and Enzon also presented data on an Onco TCS pharmacokinetics trial in patients with metastatic melanoma. The data presented demonstrates that the Onco TCS formulation has a long circulation half-life which has the potential to increase drug exposure at the tumor site.
Additional Onco TCS indications
In addition to the first-line NHL trial, Onco TCS is currently being evaluated in several other phase II clinical trials as a treatment for relapsed small cell lung cancer, relapsed Hodgkin’s disease, relapsed acute lymphoblastic leukemia, relapsed pediatric malignancies, relapsed NHL in combination with the approved cancer drug Rituxan® (rituximab), and relapsed NHL in combination with the approved cancer drug etoposide. Results from one or more of these trials are expected to be released during the fourth quarter of 2004.
INX-0125 (liposomal vinorelbine)
INX-0125 is the second anticancer drug to be developed in INEX’s Targeted Chemotherapy product pipeline. It comprises the off-patent anticancer drug vinorelbine encapsulated in the Company’s liposomal drug delivery technology. Vinorelbine is similar in chemical structure to vincristine, the active component of Onco TCS, but is used to treat different cancers, including breast and lung cancer.
Preclinical data shows that liposomal vinorelbine is more active against breast, colon and lung cancers than free vinorelbine. Preclinical toxicology studies are ongoing and the Company is on track to file an IND application by the end of the year seeking approval to commence human clinical trials. The phase I clinical trial would start in 2005.
If INX-0125 is successful in clinical trials, and as resources permit, the Company intends to take this product through to commercialization in North America without a partner, allowing INEX to retain all commercial benefits of marketing the drug.
INX-0076 (liposomal topotecan)
INEX’s third anticancer drug, INX-0076, is being developed under a partnership agreement with international pharmaceutical company GlaxoSmithKline (GSK; LSE and NYSE:GSK). INX-0076 is a combination of INEX’s liposomal drug delivery technology and GSK’s approved chemotherapy drug topotecan hydrochloride, marketed as Hycamtin®. Hycamtin® is approved for the treatment of recurrent ovarian cancer in more than 70 countries and for the treatment of recurrent small cell lung cancer in more than 30 countries.
A phase I clinical trial for INX-0076 was expected to begin during the third quarter of 2004 but has been delayed. GSK is now planning to manufacture clinical trial material in the fourth quarter of 2004. Clinical development is planned to start in the second quarter of 2005.
Targeted Immunotherapy
INEX's second platform, Targeted Immunotherapy, induces the body's immune system to fight cancer and infectious diseases by delivering drugs that stimulate an immune response directly to the appropriate target cells.
INX-0204
In preclinical studies, INX-0204 achieved proof-of-principle by demonstrating that it can stimulate the immune system to inhibit the growth of tumors. The Company has ongoing research collaborations with organizations whose proprietary disease markers, called antigens, can be combined with INX-0204 to form therapeutic products to treat various conditions, including cancer and infectious diseases. Results from these collaborations will determine the partnering and development strategy for the product.
INX-0167
INX-0167 is a new formulation from INEX’s Targeted Immunotherapy platform that has demonstrated in preclinical studies the capacity to enhance the immunostimulatory response of monoclonal antibodies. INEX presented this data July 18, 2004 at the 12th International Congress of Immunology and the 4th Annual Conference of the Federation of Clinical Immunological Societies in Montreal.
INX-0167 presents a significant opportunity for INEX given the increased use of monoclonal antibodies to treat cancer. Monoclonal antibodies currently represent a multi-billion dollar opportunity in the cancer treatment market. The Company’s next step will be to determine the most appropriate development strategy to move the product forward.
Financials
The net loss for the first half of 2004 was $10.7 million ($0.31 per common share) as compared to $21.5 million ($0.69 per common share) in the first half of 2003. For the second quarter of 2004, the net loss was $5.6 million ($0.16 per common share) and compares with a net loss of $11.6 million ($0.37 per common share) for the same period in 2003 and $5.1 million ($0.15 per common share) for the first quarter of 2004. These net losses were in line with expectations. The decrease in the current periods’ losses as compared to the losses in the first half and second quarter of 2003 is largely due to an increase in revenue, primarily arising from the Company’s partnership agreement with Enzon Pharmaceuticals, Inc. (Enzon) entered into in January 2004 and a significant decline in research and development spending on pre-commercial manufacturing activities related to Onco TCS because most of this work was completed in 2003.
INEX commenced the filing of a New Drug Application (NDA), seeking marketing approval for Onco TCS, in the third quarter of 2003 and completed the filing in March 2004. The NDA was accepted in May 2004 and has been granted a Standard Review designation. Based on this designation, the US Food and Drug Administration (FDA) has established a target date of January 15, 2005 for the completion of its review of the Onco TCS NDA. Assuming receipt of FDA approval, the Company does not anticipate receiving a share of commercial product sales revenue from Onco TCS any sooner that the second quarter of 2005.
At June 30, 2004, INEX had cash, cash equivalents and short-term investments of approximately $43.5 million as compared to $50.8 million at December 31, 2003. INEX believes that current funds on hand, anticipated funding from corporate partners and government grants, and expected interest income, will be sufficient to finance currently planned operations and capital needs for approximately two years. Funding needs may vary, however, depending upon a number of factors as more fully outlined in the Company’s 2003 Annual Report.
Revenue from research and development collaborations, licensing fees and milestone payments were $7.0 million for the first half of 2004 and $2.5 million for the comparable period in 2003. Revenues were $3.3 million for the second quarter of 2004, $3.7 million for the first quarter of 2004 and $0.1 million for the second quarter of 2003. The overall increase in revenue from 2003 is attributable to revenue from Enzon in conjunction with a strategic partnership agreement, entered into in January 2004, to jointly develop and commercialize INEX’s lead product candidate, Onco TCS.
Research and development collaborations revenues increased to $2.6 million in the first half of 2004 and $1.3 million in the first and second quarters of 2004 as compared to nil in the same periods in 2003. This was a result of revenue recorded from Enzon in relation to Enzon’s share of ongoing development expenses for Onco TCS.
Licensing fees and milestone revenue was $4.3 million in the first half of 2004 as compared to $2.5 million during the comparable period in 2003. In the second quarter of 2004 these revenues were $2.0 million as compared to $2.3 million in the first quarter of 2004 and $0.1 million for the second quarter of 2003. Licensing fees and milestone revenue includes amortization of the up-front US$12.0 million payment received from Enzon in January 2004 of $3.8 million (US$2.8 million) in the first half of 2004 and $1.9 million (US$1.4 million) in the second quarter of 2004. The US$12.0 million up-front payment was initially recorded as deferred revenue. Licensing fees and milestone revenue in the first half of 2004 also includes $0.3 million in milestone payments earned from GlaxoSmithKline (GSK) as compared to $2.2 million in the comparable period in 2003. There were no milestone payments from GSK in the second quarter of 2004 or 2003.
Research and development expenses decreased $3.0 million to $11.9 million for the first half of 2004 as compared to the same period in 2003. Research and development expenses were $6.1 million for the second quarter of 2004, $5.8 million for the first quarter in 2004 and $7.5 million for the second quarter in 2003. The decline is mainly the result of a significant decline in spending on pre-commercial manufacturing and other activities related to the NDA for Onco TCS since most of this work was completed in 2003. Partially offsetting the overall decrease in research and development expenses from 2003 was an increase in development and preclinical study spending in the first half of 2004 related to INX-0125 (liposomal vinorelbine).
General and administrative expenses increased $0.3 million to $4.7 million for the first half of 2004 as compared to the same period in 2003. General and administrative expenses were $2.4 million for the second quarter of 2004, $2.3 million for the first quarter of 2004 and $1.9 million for the second quarter of 2003. The increases were largely due to consulting fees for various projects including compliance with new corporate governance rules and reviewing the Company’s information systems.
Amortization expense is $1.6 million year-to-date as compared to $4.5 million for the comparable period in 2003. Amortization expense was approximately $0.8 million for the second quarter of 2004, $0.8 million for the first quarter of 2004 and $2.2 million for the second quarter of 2003. The primary source of the decreases was a change in the estimated useful life of the Onco TCS medical technology that was licensed from Elan Corporation, plc (Elan) in April 2001. At the time the medical technology was licensed, the useful life was estimated as three years. Based on more recent developments and INEX’s expectations of reaching product commercialization, commencing in the first quarter of 2004 the estimated useful life of this medical technology has been extended for an additional 10 years. As a result, the amortization of the Onco TCS medical technology in the first half of 2004 was $0.3 million as compared to $3.1 million in the first half of 2003.
In the first half of 2004, INEX made cash payments of US$3.0 million and US$2.5 million to Elan as required under its termination agreement with Elan. Under the terms of this agreement, on April 3, 2003 the Company regained 100% ownership of Onco TCS by acquiring Elan’s 19.9% interest in a joint venture company formed to develop Onco TCS. The US$3.0 million payment, triggered by the signing of the strategic partnership with Enzon in January 2004, and the US$2.5 million payment, triggered by the acceptance of INEX’s NDA in May 2004, have both been recorded as increases in the cost of medical technology related to Onco TCS and will be amortized over the technology’s estimated 10 year useful life until the fourth quarter of 2013.
Interest income is $0.5 million year-to-date as compared to $0.7 for the comparable period in 2003. Interest income was $0.2 million for the second quarter of 2004, $0.3 million for the first quarter of 2004 and $0.3 million for the second quarter of 2003. The other earnings in the second quarter and first half of 2004 are mainly the result of foreign exchange gains on US dollar denominated holdings of cash and short-term investments.
Capital expenditures were $1.0 million, none of which were funded by capital leases, during the six month period ended June 30, 2004 as compared to $0.4 million, including $0.1 million funded by capital leases, during the same period in 2003. Capital expenditures in the second quarter of 2004 were $0.7 million as compared to $0.3 million in the first quarter of 2004. Capital expenditures in the second quarter of 2004 largely relate to equipment purchased in preparation for Onco TCS commercialization.
Risks and Uncertainties
To the extent possible, management implements strategies to reduce or mitigate the risks and uncertainties associated with INEX’s business. Operating risks include:
INEX’s ability to successfully complete preclinical and clinical development of its products;
- Decisions, and the timing of decisions, made by health regulatory agencies regarding approval of INEX’s technology and products including the approvability of Onco TCS by the FDA under its Accelerated Approval legislation;
- The effectiveness of INEX’s contract manufacturers in obtaining regulatory approval to manufacture Onco TCS;
- The effectiveness of INEX’s partners in carrying out the development and commercialization of its product candidates including, subject to regulatory approval in the US, Enzon’s ability to successfully launch Onco TCS;
- If approved, the degree and rate of market acceptance for Onco TCS; and
- The continued availability of capital to finance INEX’s activities.
INEX’s risks and uncertainties are discussed in further detail in the “Management’s Discussion and Analysis of Financial Condition and Operations” portion of its 2003 Annual Report and in its Annual Information Form dated May 13, 2004 and remain substantially unchanged. Both the 2003 Annual Report and Annual Information Form are available on www.sedar.com.
The unaudited interim consolidated financial statements presented here have been prepared in accordance with Canadian generally accepted accounting principles for interim financial information.
| Consolidated Balance Sheets (Expressed in Canadian Dollars) | ||||
| June 30, 2004 (unaudited) |
December 31, 2003 | |||
|
| ||||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents |
$34,081,744 | $46,107,754 | ||
| Short-term investments | 9,383,246 | 4,732,287 | ||
| Accounts receivable | 1,194,702 | 436,062 | ||
| Government grant receivable |
25,804 | 70,000 | ||
| Prepaid expenses and other assets |
447,957 | 649,511 | ||
|
| ||||
| 45,133,453 | 51,995,614 | |||
| Long-term investment | 1,294,874 | 2,001,166 | ||
| Property and equipment |
5,438,605 | 5,313,178 | ||
| Medical technology | 12,703,055 | 6,178,225 | ||
| Other long-term assets | 1,513,898 | 296,328 | ||
|
| ||||
| $66,083,885 | $65,784,511 | |||
|
| ||||
| Liabilities and Shareholders' Equity | |||
| Current liabilities | |||
| Accounts payable and accrued liabilities | $1,883,797 | $4,835,501 | |
| Current portion of obligations under capital leases |
167,282 | 174,131 | |
| Current portion of long-term debt | 788,733 | 365,906 | |
| Current portion of deferred revenue | 2,426,444 | 503,310 | |
|
| |||
| 5,266,256 | 5,878,848 | ||
| Obligations under capital leases | 184,831 | 264,911 | |
| Long-term debt | 1,463,077 | 781,096 | |
| Deferred lease inducements | 484,292 | 440,699 | |
| Deferred revenue | 9,936,000 | - | |
| Deferred dilution gain | 1,456,136 | 2,162,428 | |
|
| |||
| 18,790,592 | 9,527,982 | ||
|
| |||
| Shareholders' equity | |||
| Share capital: | |||
| June 30, 2004 - 38,550,549 | 180,147,235 | 179,097,330 | |
| December 31, 2003 - 38,409,633 | - | ||
| Additional paid-in capital | 14,324,094 | 13,684,109 | |
| Exchangeable and development notes |
49,645,717 |
48,243,515 |
|
| Deficit | (196,823,753) | (184,768,425) | |
|
| |||
| 47,293,293 | 56,256,529 | ||
|
| |||
| $66,083,885 | $65,784,511 | ||
|
| |||
| Consolidated Statements of Operations (Expressed in Canadian Dollars) | ||||
| Three Months Ended | Six Months Ended | |||
| June 30, 2004 (unaudited) |
June 30, 2003 (unaudited restated) |
June 30, 2004 (unaudited) |
June 30, 2003 (unaudited restated) | |
|
| ||||
| Revenue | ||||
| Research and development collaborations |
$1,320,974 | $ - | $2,632,274 | $ - |
| Licensing fees and milestone payments |
2,007,866 | 119,088 | 4,346,933 | 2,478,705 |
|
| ||||
| 3,328,840 | 119,088 | 6,979,207 | 2,478,705 | |
|
| ||||
| Expenses | ||||
| Research and development |
6,109,831 | 7,491,131 | 11,925,893 | 14,898,631 |
| General and administrative |
2,394,046 | 1,891,204 | 4,687,763 | 4,398,514 |
| Amortization | 855,522 | 2,237,822 | 1,649,151 | 4,512,608 |
|
| ||||
| 9,359,399 | 11,620,157 | 18,262,807 | 23,809,753 | |
|
| ||||
| Loss before other income (expenses) |
(6,030,559) | (11,501,069) | (11,283,600) | (21,331,048) |
| Interest income | 226,452 | 337,831 | 540,650 | 695,791 |
| Other earnings (losses) |
239,047 | (404,453) | 89,824 | (826,896) |
| Dilution gain from Protiva Biotherapeutics Inc. |
361,646 | 435,997 | 706,292 | 816,614 |
| Equity in loss of Protiva Biotherapeutics Inc. |
(361,646) | (435,997) | (706,292) | (816,614) |
|
| ||||
| Loss for the period | $(5,565,060) | $(11,567,691) | $(10,653,126) | $(21,462,153) |
|
| ||||
| Loss per common share | $(0.16) | $(0.37) | $(0.31) | $(0.69) |
|
| ||||
| Consolidated Statements of Cash Flows (Expressed in Canadian Dollars) | ||||
| Three Months Ended | Six Months Ended | |||
| Cash provided by (used in) | June 30, 2004 (unaudited) | June 30, 2003 (unaudited restated) | June 30, 2004 (unaudited) | June 30, 2003 (unaudited restated) |
|
| ||||
| Operations | ||||
| Loss for the period | $ (5,565,060) | $(11,567,691) | $(10,653,126) | $(21,462,153) |
| Items not involving cash: | ||||
| Amortization of property and equipment |
432,293 | 456,545 | 865,083 | 950,053 |
| Amortization of medical technology |
423,229 | 1,781,277 | 784,068 | 3,562,555 |
| Amortization of deferred revenue |
(2,007,866) | (131,067) | (4,015,731) | (262,133) |
| Amortization of deferred lease inducements |
(27,722) | (27,722) | (55,446) | (55,444) |
| Amortization of other long- term assets |
49,848 | - | 99,696 | - |
| Increase in deferred lease inducements |
49,519 | - | 99,039 | - |
| Dilution gain from Protiva Biotherapeutics Inc. |
(361,646) | (435,997) | (706,292) | (816,614) |
| Equity in loss of Protiva Biotherapeutics Inc. |
361,646 | 435,997 | 706,292 | 816,614 |
| Stock-based compensation expense |
479,196 | 572,581 | 997,473 | 1,112,804 |
| Increase in deferred revenue | (22,735) | - | 15,874,865 | - |
| Net change in non-cash working capital |
(489,678) | 956,255 | (3,265,200) | (2,851,016) |
|
| ||||
| (6,678,976) | (7,959,822) | 730,721 | (19,005,334) | |
|
| ||||
| Investments | ||||
| Acquisition of property and equipment |
(673,178) | (321,716) | (990,510) | (367,440) |
| Acquisition of medical technology |
(3,334,498) | - | (7,308,898) | - |
| Acquisition of long-term assets | - | - | (1,196,363) | - |
| Sale (purchase) of short-term investments, net |
(930,397) | 401,567 | (4,650,959) | 20,672,799 |
|
| ||||
| (4,938,073) | 79,851 | (14,146,730) | (20,305,359) | |
|
| ||||
| Financing | ||||
| Issuance of common shares pursuant to exercise of options |
432,760 | 81,307 | 692,417 | 391,502 |
| Long-term debt, net of security deposit and financing costs |
489,638 | - | 1,046,304 | - |
| Repayment of long-term debt | (168,334) | - | (261,793) | - |
| Repayment of obligations under capital leases |
(43,880) | (54,305) | (86,929) | (107,282) |
|
| ||||
| 710,184 | 27,002 | 1,389,999 | 284,220 | |
|
| ||||
| Increase (decrease) in cash and cash equivalents | (10,906,865) | (7,852,969) | (12,026,010) | (1,584,245) |
| Cash and cash equivalents, beginning of period | 44,988,609 | 41,717,575 | 46,107,754 | 32,280,361 |
|
| ||||
| Cash and cash equivalents, end of period | $ 34,081,744 | $ 33,864,606 | $ 34,081,744 | $ 33,864,606 |
|
| ||||
About Forward Looking Statements
There are forward-looking statements contained herein that are not based on historical fact, including without limitation statements containing the words “believes,” “may,” “plans,” “will,” “estimate,” “continue,” “anticipates,” “intends,” “expects,” and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, INEX’s stage of development, lack of product revenues, additional capital requirements, risks associated with the completion of clinical trials and obtaining regulatory approval to market INEX’s products, the ability to protect its intellectual property and dependence on collaborative partners. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.
INEX is a Canadian biopharmaceutical company developing and commercializing proprietary drugs and drug delivery systems to improve the treatment of cancer.
INEX investor contact:
Ian Mortimer
Senior Director, Investor Relations
Inex Pharmaceuticals Corporation
Tel: 604.419.3200
Email: info@inexpharm.com
Website: www.inexpharm.com
INEX media contact:
Miriam Zitner
James Hoggan & Associates Inc.
Tel: 604.739.7500
Email: mzitner@hoggan.com
INEX’s common shares are traded on the Toronto Stock Exchange under the trading symbol “IEX”.
