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| RPRX > SEC Filings for RPRX > Form 10-Q on 1-May-2006 | All Recent SEC Filings |
1-May-2006
Quarterly Report
We believe Proellex may have advantages in treating uterine fibroids and
endometriosis as compared to treatment with GnRH agonists. Unlike Proellex, GnRH
agonists induce a low estrogen, menopausal-like state in women. Because estrogen
is necessary for the maintenance of bone mineral density, GnRH agonists tend to
promote bone loss and are not recommended to be used for more than six months at
a time. When women cease treatment with GnRH agonists, fibroids rapidly
regenerate and symptoms associated with endometriosis quickly reappear. We
believe Proellex may have advantages over treatment with GnRH agonists because,
in our Phase Ib human clinical study and our animal research to date, Proellex
maintains a tonic estrogen state and therefore should maintain mineral bone
density. We believe Proellex may provide an attractive alternative to surgery
because of its potential to treat these conditions in a long-term or chronic
fashion, resolving the symptoms that most commonly lead to surgical treatment.
We completed a 28 patient European Phase Ib, 12-week clinical study of
Proellex in women with uterine fibroids in late 2004. Results of this study
showed significant reduction in uterine fibroid size, pain and bleeding.
The Company's Investigational New Drug, or IND, application for its 150
patient U.S. Phase II clinical study with Proellex for the treatment of woman
with uterine fibroids became effective in December 2005 and this study is
anticipated to be conducted in up to 20 clinical sites. The study is designed to
assess both improvement of symptoms associated with uterine fibroids as well as
effects on the fibroid itself. The study will test two doses of Proellex versus
placebo in a double-blind design over a 12-week duration. Doses to be used in
this trial were previously tested in our European Phase Ib, 12-week clinical
study of Proellex, in women with uterine fibroids. We hope this study will serve
as the first of two required pivotal trials of efficacy and we plan on enrolling
the participants of this study into a subsequent long-term open label study.
Initial data from this study is not expected before fourth quarter 2006 and we
hope to submit an NDA in 2008.
During the first quarter of 2006, the Company also received approval to start
its European Phase II study of Proellex for the treatment of endometriosis. This
European Phase II study will enroll 40 women and compare three doses of double
blinded Proellex against open label Lupron(R), the current standard of care, for
up to six-months of treatment. Initial interim three-month data from this
six-month study is not expected before the fourth quarter of 2006.
Proellex is a new chemical entity which means that the compound will be
required to go through the full clinical approval process, including amongst
other requirements a two-year carcinogenicity study which is scheduled to begin
in 2006. The Company previously completed a six-month rat study and a nine-month
dog study testing the safety of Proellex.
Our second product candidate, Androxal, is a proprietary orally active small
molecule being developed for the treatment of testosterone deficiency in men.
Androxal is a once-a-day oral therapy which is designed to restore normal
testosterone production in males versus competitive treatments that exogenously
replace testosterone.
Testosterone is an important male hormone. Testosterone deficiency in men is
linked to several negative physical and mental conditions, including loss of
muscle tone, reduced sexual
desire, and deterioration of memory and certain other cognitive functions.
Testosterone production normally decreases as men age, sometimes leading to
testosterone deficiency. According to the Urology Channel, recent estimates show
that approximately 13 million men in the U.S. experience testosterone
deficiency. Current therapies focus on testosterone replacement by delivering
testosterone either through the skin, nasal spray or via injection. The current
gold standard in the industry is Androgel®, with reported sales of approximately
$308 million in 2004 in North America.
We estimate over 70% of men that have low testosterone suffer from secondary
hypogonadism. Secondary hypogonadism is caused by failure of the pituitary to
provide appropriate hormone signaling to the testis, thereby causing
testosterone levels to drop to the point where pituitary secretions fall under
the influence of estrogen. In this state, estrogen further suppresses the
testicular stimulation from the pituitary. These men are readily distinguished
from those that have primary testicular failure via assessment of the levels of
secretions of pituitary hormones (i.e., men with primary testicular failure
experience elevated secretions of pituitary hormones). Secondary hypogonadism is
not relegated only to older men although the condition becomes more prevalent as
men age.
During 2004 we completed a 52 patient, 14-day duration, U.S. Phase II
clinical study of Androxal in men with secondary hypogonadism. In the study,
Androxal exhibited positive effects on inducing restoration of normal testicular
function as evidenced by achievement of normal testosterone levels. The drug was
well tolerated over the course of the study.
In February 2006, the Company announced results of an open-label study of
Androxal in 13 men with normal, borderline or low testosterone. This safety
study was undertaken to determine if treatment with Androxal could result in
supra-normal levels of testosterone, as observed with some currently available
testosterone-replacement therapies. At the conclusion of the trial, following
administration of 25 mg of Androxal for two weeks, all study subjects, including
those that had normal testosterone levels at the start of the study, exhibited
average testosterone levels within the normal range.
During the first quarter 2006, we initiated clinical sites for our 200
patient U.S. Phase III clinical study for the treatment of men with testosterone
deficiency resulting from secondary hypogonadism. This 200 patient clinical
study is being performed under an existing U.S. IND and is anticipated to be
conducted in up to 20 clinical sites. The study is designed to assess both the
safety of Androxal and its efficacy in restoring normal pituitary and testicular
function in men that are hypogonadal due to secondary hypogonadism. The
double-blind study will test two doses of Androxal versus placebo and will
include an open-label arm of the commercially available drug Androgel®. The
dosing is of 24-week duration with an efficacy assessment made at 12 weeks.
Initial data after 12 weeks of dosing is not expected before fourth quarter
2006. The extension of the trial dosing to 24 weeks is to satisfy the U.S. FDA's
request regarding the safety of restoring normal testicular function as compared
to placebo or the currently approved testosterone replacement therapies. Doses
to be used in this U.S. Phase III trial were previously tested in a U.S. Phase
II clinical study of 52 patients which was conducted over a 14-day duration.
Based on our communications with the FDA, we believe that at least two
additional Phase III pivotal studies beyond this current study will be required
before an NDA can be submitted and we hope to submit an NDA in 2008.
Initial review of our special protocol assessment (SPA) for a Phase III
pivotal study of efficacy has been completed by the FDA. Unlike testosterone
replacement therapies in which efficacy can be shown through mere elevation of
testosterone levels back to normal ranges, the FDA has noted that Androxal must
demonstrate a benefit over placebo on a clinical endpoint such as improvement in
libido and the associated emotional distress. The FDA has suggested that prior
to using certain endpoints proposed by us in our SPA filing, such as reduced
stress, in a Phase III efficacy study, tests that measure these endpoints must
be validated. We intend to
comply with the FDA's request, develop a validated clinical test and revise our
proposed Phase III pivotal efficacy protocol to incorporate the FDA's other
suggestions. We anticipate that this study will begin in late 2006 or early
2007, subject to available funding and successful completion of our initial
Phase III study.
Androxal is considered a new chemical entity by the FDA which means that the
compound will be required to go through the full clinical approval process,
which will include amongst other requirements a two-year carcinogenicity study.
A revised two-year carcinogenicity study will be initiated in 2006. The Company
previously completed a six-month rat study and a nine-month dog study testing
the safety of Androxal.
All clinical trial results relating to both Proellex and Androxal are subject
to review by the FDA, and the FDA may disagree with our conclusions about safety
and efficacy. We caution that results obtained in early stage clinical trials
may be reversed by the results of later stage clinical trials with significantly
larger and more diverse patient populations treated for longer periods of time.
Our Androxal product candidate is covered by eight pending patent
applications in the United States and 19 foreign pending patent applications.
These applications relate to methods and materials for treating certain
conditions including the treatment of testosterone deficiency in men. Androxal
is purified from clomiphene citrate. A third party holds an issued patent
related to the use of an anti-estrogen such as clomiphene citrate for use in the
treatment of androgen deficiency and disorders related thereto. In our prior
filings with the SEC, we have described our request to the U.S. Patent and
Trademark Office (the "PTO") for re-examination of this third party's patent
based on prior art. The third party amended the claims in the reexamination
proceedings, which has since led the PTO to determine that the amended claims
are patentable in view of those publications under consideration and a
reexamination certificate was issued. However, we believe that the amended
claims are invalid based on, among other things, additional prior art
publications not yet considered by the PTO and we are seeking further
reexamination of the third party's patent in light of a number of these
additional publications. Nevertheless, there is no assurance that the patent
ultimately will be found invalid over the prior art. If such patent is not
invalidated, we may be required to obtain a license from the holder of such
patent in order to develop Androxal further. If such license were not available
on acceptable terms or at all, we may not be able to develop or commercialize
Androxal.
We are continuing our limited development assessment and out-licensing
efforts relating to our phentolamine-based product candidates, including
VASOMAX®, which had previously been approved for marketing in several countries
in Latin America for the treatment of male erectile dysfunction, or MED. VASOMAX
is currently on partial clinical hold in the United States but is not on
clinical hold in any other country. During Q1, 2006, we met with the Ministry of
Health in Mexico regarding our second generation phentolamine-based products for
the treatment of erectile dysfunction: Bimexes™, an oral therapy for men with
mild to moderate impotence, and ERxin™, an injectable therapy for the treatment
of severe erectile dysfunction. Initial assessment of the outcome from a meeting
held with the Mexican Ministry of Health in Q1, 2006, suggests that both drugs
could potentially be approved in Mexico after completion of a successful single
positive controlled registration trial to the satisfaction of the Mexican
Ministry of Health. Our Board of Directors is evaluating its options before
proceeding with Mexican approval
trials for Bimexes or Erxin. Mexico is viewed as the gold standard for
regulatory efforts in Latin America. Approval in Mexico can lead to approvals in
other Latin American countries. For example, VASOMAX, our former lead erectile
dysfunction drug was approved in seven additional countries in Latin America
after approval in Mexico. The current Latin American market for erectile
dysfunction therapies now exceeds $230 million.
We currently have six full-time employees and utilize the services of
contract research organizations, contract manufacturers and various consultants
to assist us in performing regulatory, clinical development and manufacturing
activities related to the clinical development of our products. We are highly
dependent on our various contract groups to adequately perform the activities
required to obtain regulatory approval of our products and to complete
development and manufacturing thereof.
The clinical development of pharmaceutical products is a complex undertaking,
and many products that begin the clinical development process do not obtain
regulatory approval. The costs associated with our clinical trials may be
impacted by a number of internal and external factors, including the number and
complexity of clinical trials necessary to obtain regulatory approval, the
number of eligible patients necessary to complete our clinical trials and any
difficulty in enrolling these patients, and the length of time to complete our
clinical trials. Given the uncertainty of these potential costs, we are unable
to estimate the total costs we will incur for the clinical development of our
product candidates over those costs currently projected. We do, however, expect
these costs to increase substantially in future periods as we continue
later-stage clinical trials, initiate new clinical trials for additional
indications and seek to obtain regulatory approvals. Any failure by us to
obtain, or any delay in obtaining, regulatory approvals could cause our research
and development expenditures to increase and, in turn, have a material adverse
effect on our results of operations.
We have limited financial resources and personnel and anticipate that we will
need to raise additional capital and hire a significant number of employees in
order to be able to successfully develop each of our current product candidates
through the clinical trials and to be able to market them, should regulatory
approval be obtained, on a worldwide basis. Alternatively, we may elect to
partner with a larger and more experienced pharmaceutical company with better
resources for one or more of its product candidates and/or target indications.
As a result, we believe that an out-license of one or more of our product
candidates could occur at some point in the future, and discussions are held
from time to time with potential partners to explore possible arrangements;
however, there can be no assurance that such an agreement will be entered into
by us.
Results of Operations
Three Month Periods Ended March 31, 2006 and 2005
Our results of operations may vary significantly from quarter to quarter and
year to year, and depend on, among other factors, our ability to be successful
in our clinical trials, the regulatory approval process in the United States and
other foreign jurisdictions and the ability to complete new licenses and product
development agreements. The timing of our revenues may not match the timing of
our associated product development expenses. To date, research and
development expenses have generally exceeded revenue in each particular period
and/or fiscal year.
Revenues and other income. Total revenues and other income for the
three-month period ended March 31, 2006 increased to $174,000 as compared to
$112,000 for the same period in the prior year.
Research and development grant revenues for the three-month period ended
March 31, 2006 were zero as compared to $4,000 for the same period in the prior
year. Grant revenue relates to an $836,441 Phase II Small Business Innovative
Research ("SBIR") grant that was awarded to us in 2002 for the development of
Proellex as an oral treatment for endometriosis. This SBIR grant has come to its
anticipated conclusion and is essentially depleted.
Interest income increased 61% to $174,000 for the three-month period ended
March 31, 2006, as compared to $108,000 for the same period in the prior year.
This increase is primarily due to the increase in marketable securities as a
result of the completion of our follow-on public offering on February 1, 2005 in
which we received approximately $18.2 million in net proceeds, and an increase
in interest rates.
Research and Development Expenses. Research and development ("R&D") expenses
primarily include clinical regulatory affairs activities and preclinical and
clinical study development expenses. R&D expenses increased 46% to approximately
$1.8 million for the three-month period ended March 31, 2006 as compared to
approximately $1.2 million for the same period in the prior year. This increase
in R&D expenses is primarily due to an increase of $351,000 and $145,000 related
to our clinical development programs for Androxal and Proellex, respectively,
and an increase in non-cash stock compensation expense of $23,000 due to the
adoption of SFAS No. 123(R).
General and Administrative Expenses. General and administrative expenses
increased 42% to $610,000 for the three-month period ended March 31, 2006 as
compared to $431,000 for the same period in the prior year. This increase in
expenses is primarily due to an increase in non-cash stock compensation expense
of $130,000 due to the adoption of SFAS No. 123(R) and an increase in investor
relations costs of $74,000, offset by a decrease in costs associated with
strategic administrative fees in the amount of $35,000.
Liquidity and Capital Resources
We had cash, cash equivalents and marketable securities of approximately
$14.9 million at March 31, 2006 as compared to $16.8 million at December 31,
2005. This decrease in cash is primarily due to an increase in costs related to
our clinical development programs for Androxal and Proellex and associated
administrative costs.
We believe that our existing capital resources under our current operating
plan will be sufficient to fund our operations through at least December 31,
2006. The Company's 2006 budget contains allotted financial resources to fund
the existing CRO contracts for expenses to be incurred during 2006 relating to
the Company's three clinical studies which are the Androxal U.S. Phase III,
Proellex U.S. Phase II and the Proellex European Phase II studies. The Company
will
need to obtain additional funding from the capital markets in 2006 to continue
the future clinical development of its products. We can not assure that
additional funding will be available on acceptable terms, or at all. There can
be no assurance that changes in our current strategic plans or other events will
not result in accelerated or unexpected expenditures. We expect clinical and
preclinical development expenses to increase substantially in future periods as
we continue later-stage clinical trials, initiate new clinical trials for
additional indications, seek to obtain regulatory approvals and start long-term
animal safety studies.
Excluding maturities and purchases of marketable investment securities of
$4.3 million, we used $2.0 million during the three-month period ended March 31,
2006 for operating activities. The major uses of cash for operating activities
during the three-month period ended March 31, 2006 was to fund our clinical
development programs and administrative costs of approximately $2.2 million and
to pay our accounts payable and current liabilities. Cash used in investing
activities was $83,000 in the three-month period ended March 31, 2006, primarily
for the purchase of capital assets and capitalized costs related to our Proellex
and Androxal patent portfolios. Cash provided by financing activities was
approximately $203,000 in the three-month period ended March 31, 2006, relating
to the exercise of 66,361 stock options. As of March 31, 2006, in addition to
general operating obligations, we also had current open purchase order
commitments primarily relating to the clinical development of both Proellex and
Androxal in the amounts of $4.8 million and $3.2 million, respectively, which
commitments are cancelable on thirty days notice, although the Company would be
responsible for expenses incurred to that point of termination.
As of March 31, 2006, we had an accumulated deficit of $96.4 million. We have
incurred losses since our inception and expect to continue to incur losses for
the foreseeable future. Inception to date losses have resulted principally from
costs incurred in conducting clinical trials for VASOMAX, our previous lead
product candidate for the oral treatment of male erectile dysfunction, in
research and development activities related to efforts to develop our products
and from the associated administrative costs required to support those efforts.
We have financed our operations primarily with proceeds from public offerings
and private placements of equity securities, funds received under collaborative
agreements and SBIR grants. We will require substantial additional capital to
further develop Proellex as an oral treatment for uterine fibroids and
endometriosis and Androxal as an oral treatment for testosterone deficiency and
to pursue commercialization efforts of the Company's phentolamine products
should the Board of Directors elect to do so.
Our capital requirements will depend on many factors, including the costs and
timing of seeking regulatory approvals of our products; the problems, delays,
expenses and complications frequently encountered by development stage
companies; the progress of our preclinical and clinical activities; the costs
associated with any future collaborative research, manufacturing, marketing or
other funding arrangements; our ability to obtain regulatory approvals; the
success of our potential future sales and marketing programs; the cost of
filing, prosecuting and defending and enforcing any patent claims and other
intellectual property rights; changes in economic, regulatory or competitive
conditions of our planned business; and additional costs associated with being a
publicly-traded company. Estimates about the adequacy of funding for our
activities are based on certain assumptions, including the assumption that the
development and regulatory approval of our products can be completed at
projected costs and that product
approvals and introductions will be timely and successful. There can be no
assurance that changes in our research and development plans, acquisitions or
other events will not result in accelerated or unexpected expenditures. To
satisfy our capital requirements, we may seek to raise additional funds in the
public or private capital markets. We may seek additional funding through
corporate collaborations and other financing vehicles. There can be no assurance
that any such funding will be available to us on favorable terms or at all. If
we are successful in obtaining additional financing, the terms of such financing
may have the effect of diluting or adversely affecting the holdings or the
rights of the holders of our common stock.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. Cash, cash equivalents and investments were approximately
$14.9 million at March 31, 2006. These assets were primarily invested in
investment grade corporate bonds and commercial paper with maturities of less
than 6 months, which are classified as Trading Securities. We do not invest in
derivative securities. Although our portfolio is subject to fluctuations in
interest rates and market conditions, no significant gain or loss on any
security is expected to be recognized in earnings due to the expected short
holding period.
Item 4. Controls and Procedures
Based on their evaluation as of the end of the period covered by this
Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), are effective.
In connection with the evaluation described above, we identified no change in
internal control over financial reporting that occurred during the fiscal
. . .
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