Neoprobe Releases Annual Letter to Shareholders
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Press Release Source: Neoprobe Corporation On Tuesday March 30, 2010, 12:15 pm
DUBLIN, Ohio--(BUSINESS WIRE)--Neoprobe Corporation (OTCBB: NEOP - News), a diversified developer of innovative oncology and surgical diagnostic and treatment product, today released the text of its annual Letter to Stockholders from Neoprobe Chairman, Carl J. Aschinger, Jr., and President and CEO, David C. Bupp.
The letter highlights Neoprobe’s business and financial activities in 2009 and early 2010 and outlines planned business initiatives for the remainder of 2010. The text of the stockholder letter follows.
Dear Neoprobe Stockholder,
We are pleased to report that 2009 was a period of outstanding clinical and commercial advancements for Neoprobe Corporation and our products. The beginning of 2010 has seen a continuation of the progress achieved last year with the successful completion of the Phase 3 clinical evaluation of Lymphoseek® in patients with breast cancer or melanoma (NEO3-05). We have completed our meeting with FDA to review the results of the NEO3-05 Phase 3 clinical study and we are preparing for the submission of the New Drug Application (NDA) for Lymphoseek with FDA later this year. The Lymphoseek NDA, if successful, will represent the first radiolabeled product cleared for marketing with an intraoperative indication for the identification of lymphatic tissue. Our evaluation of the final results of the Phase 3 clinical study confirmed that the primary endpoint of the study was achieved. In addition, no serious drug-related safety events were reported in the clinical trial or any of our prior clinical evaluations of Lymphoseek. Our achievements in 2009 and to-date in 2010 make us very optimistic about Neoprobe’s future as a diversified medical products company. We continue to execute a strategic business model built around a growing medical device platform while we develop a portfolio of recurring revenue drug and biologic products either in or poised to commence Phase 3 clinical evaluations, including Lymphoseek and RIGScan™ CR.
Our meeting with FDA in March 2010 confirmed that the NDA for Lymphoseek will be predicated on the efficacy data from NEO3-05. In addition, the NDA will be supported by safety data from the Phase 1 and Phase 2 clinical studies that have been completed and safety data from NEO3-05 and the patients enrolled to-date in a second Phase 3 clinical study being conducted in patients with head and neck squamous cell carcinoma (NEO3-06). No efficacy data has been requested by FDA for the NDA from NEO3-06. We intend to expand enrollment in NEO3-06 to support the registration for marketing of Lymphoseek in the European Union and for potential post-marketing claims for Lymphoseek in the United States. This modification to our original registration plan emerged in our recent meeting discussions with FDA. We have requested a subsequent series of pre-NDA meetings with FDA and expect to hold these meetings later in the second quarter.
In the first quarter of this year, the quality systems of all of Neoprobe’s significant contract suppliers were inspected by FDA. The inspections included the suppliers for Lymphoseek. The quality systems of all of the facilities were found to be robust and we believe the inspection findings will be beneficial to any inspections that might occur during the Lymphoseek NDA review process.
During 2009 and early 2010, we enhanced our internal staffing to meet the needs of our clinical and development programs. We have augmented our internal staff with personnel with backgrounds in drug manufacturing, regulatory affairs, quality assurance and clinical management. A key staff addition was Dr. Frederick O. Cope, who joined the Neoprobe team as Vice President, Pharmaceutical Research and Clinical Development. Dr. Cope brought a wealth of experience in clinical management and medical product development to Neoprobe, including six years of overseeing the oncology collaborative research programs at The Ohio State University medical research facilities. We have added a total of ten full and part-time personnel to the Neoprobe team in the past twelve months, primarily in the drug development, quality assurance and regulatory areas. The Neoprobe team and our research collaborators are dedicated to developing and providing innovative products that meet the medical needs of healthcare providers and the oncology patients they help to diagnose and treat.
In 2009, the gross profit from our medical device business improved to $6.4 million an increase of 35%. The operating profit generated by our medical device business supported our drug development initiatives in addition to covering our public company corporate overhead costs. The increase in gross profit helped to decrease our loss from operations despite activities in 2009 to support two Phase 3 clinical trials as well as NDA preparation activities. Our net loss attributable to common shareholders for the year was $39.8 million and included $38.1 million in non-cash expenses, primarily due to the accounting treatment resulting from eliminating derivative instrument features embedded in some of our debt and related investment instruments. We ended 2009 with $5.6 million in cash to support our 2010 operations and initiatives.
The core of our medical device business, the Neoprobe gamma radiation detection systems, generated increasing revenue in 2009. The Neoprobe devices continue to be recognized as the premium gamma detection systems and the market leader among gamma radiation detection devices. In 2009, gamma detection device revenues increased by $2.0 million or 27% versus the then-record 2008 revenues. The gross margin on the gamma detection products improved to 67%. The revenue and margin growth of the gamma detection products continued to be led by our wireless probes based on Bluetooth® technology. Growth was further stimulated with the introduction of a high energy probe and updated operating software for the gamma detection systems. All of our gamma detection probes are compatible with the neo2000® and neoprobe® GDS consoles produced during the last five years.
2009 was the first year of an extended marketing and distribution agreement for our gamma detection equipment between Neoprobe and our primary medical device marketing partner, Ethicon Endo-Surgery, Inc. (Ethicon), a Johnson & Johnson company. The new marketing agreement commenced in January 2009 and runs through December 2013. The enhanced financial terms of the new agreement allowed Neoprobe to receive an increased portion of the revenue derived by Ethicon from the sale of the gamma detection device products to end customers and contributed to Neoprobe’s device gross margin increasing to 67%. Since we announced the marketing agreement extension, a number of product development initiatives have been introduced to the surgical community including a new control console, a wireless version of our laparoscopic probe and a high energy detection probe that could be used by physicians in conjunction with PET imaging targeting agents. The new probes received very favorable feedback at the 2009 Society of Surgical Oncology meeting. We continue to look at initiatives that will provide complementary products to our gamma detection device portfolio and that will enhance the margin contribution of the product line.
Consistent with our guidance for 2009, Neoprobe pursued nominal business activities related to its blood flow measurement devices. In the 3rd quarter of 2009 we announced that we discontinued commercial activities related to the blood flow measurement device business and incurred a non-cash impairment charge of $1.7 million for the net assets related to the blood flow measurement device business. We have initiated activities to sell the assets of the blood flow measurement device business.
In 2009, overall corporate research and development expenses totaled $5.0 million, an increase of 16% compared to the prior year. The primary reason for the increase was the development activities associated with the Lymphoseek commercialization program. In 2009, we completed a Phase 3 clinical evaluation of Lymphoseek in patients with breast cancer or melanoma and initiated enrollment in a second Phase 3 clinical study in patients with head and neck squamous cell carcinoma. With the successful completion of the breast or melanoma Phase 3 study of Lymphoseek, we completed additional development activities for Lymphoseek including the completion of drug manufacturing and drug testing validation protocols associated with supporting the NDA for Lymphoseek and initiatives associated with the initiation of clinical development and marketing registration of the product in Europe.
During 2009 and to date in 2010, a number of development, commercial and research milestones were achieved for our drug, biologic and medical device product initiatives:
* Completion of NEO3-05 clinical evaluation of Lymphoseek in patients with breast cancer or melanoma;
* Assessment of final clinical data that the NEO3-05 clinical study achieved its primary efficacy endpoint and achieved positive results related to the secondary endpoints;
* Completion of a successful meeting for NEO3-05 with FDA to review Phase 3 results and discussion of development plans to support a NDA submission for Lymphoseek as a lymphatic tissue tracing agent;
* Submission of a Phase 3 clinical protocol for RIGScan CR, NEO2-17 for treatment of colorectal cancer to FDA under the provisions of a Special Protocol Assessment (SPA);
* Validation of the first lot of commercial drug product of Lymphoseek that will be used for the commercial launch of the product in the United States upon NDA clearance;
* Introduction of the wireless laparoscopic and high energy probes for our gamma detection device systems that were developed in cooperation with Ethicon; and
* Development of a clinical strategy for the patient specific activated cellular therapy technology of our majority owned subsidiary Cira Bio including assessment of chronic fatigue syndrome CFS patients.
In June 2008, we announced initiation of enrollment in a Phase 3 clinical assessment of Lymphoseek to demonstrate the ability of Lymphoseek to accurately identify lymph nodes draining from the primary tumor in patients with either breast cancer or melanoma. The Phase 3 study, NEO3-05, compared the ability of Lymphoseek and the commonly used vital blue dyes to identify lymph nodes in intraoperative lymphatic mapping procedures. NEO3-05 evaluated 156 protocol compliant patients who provided 251 vital blue dye positive nodes of which 239 contained Lymphoseek. The statistical analysis determined that the p-value for the primary objective of the study was 0.009, which exceeded the commonly used regulatory standard of a p-value of 0.05 or better. In addition to the 251 lymph nodes identified with the vital blue dye, Lymphoseek identified 86 lymph nodes that were missed by the dyes. Relative to the secondary endpoint of looking at the pathology status of the lymph nodes, 17% of the nodes identified by Lymphoseek but not by the blue dye were found to contain tumor. There were no safety issues attributed to Lymphoseek reported in the study.
With the successful completion of the NEO3-05 clinical study, Neoprobe began discussions with FDA to schedule a meeting and to determine the criteria for a NDA submission. In addition, the first of the Phase 3 clinical data was reported at international medical conferences beginning with the data from the breast patients enrolled in NEO3-05 at the San Antonio Breast Cancer Symposium in December 2009. Additional clinical data including the results of the melanoma patients treated in NEO3-05 was presented at the Society of Surgical Oncology in March 2010. A manuscript for submission to one of the major peer reviewed medical journals has been prepared.
While the concept of the lymph node staging of cancer patients with radiolabeled colloids and vital blue dye products has become widely adopted for breast cancer and melanoma patients, no radiolabeled products have been approved as biological marker-based lymph node targeting agents. Under the scientific advice process, Neoprobe reviewed a Phase 3 clinical study design with the centralized European medical products regulatory review body the EMEA to support the registration of the drug in Europe. The Phase 3 clinical trial would be conducted in patients with head and neck squamous cell carcinoma. In third quarter of 2008, we received the EMEA’s agreement to the clinical trial design. With the receipt of the EMEA concurrence, we approached FDA with the design of a Phase 3 clinical trial (NEO3-06). The NEO3-06 trial is to be conducted at cancer centers in the United States and Europe and based upon the recent discussions with FDA on the NDA for Lymphoseek we expect that it will involve approximately 300 patients. We began first patient enrollment in the trial at clinical sites in the United States last year and are awaiting clearance from the first investigational sites in Europe to commence patient enrollment in the clinical trial in Europe this year. We intend to use the results from NEO3-06 to amend marketing claims for Lymphoseek in the United States and to support the marketing clearance for the product in Europe.
Our development activities have not been confined to our medical devices and Lymphoseek. In the course of our discussions with the EMEA on Lymphoseek, we opened a dialogue on the RIGS® technology. Our initial approach was favorably received and we determined that the EMEA would be receptive to a modified review of a development plan and clinical approach for the RIGS biologic product for the treatment of colorectal cancer. The product review was presented under the scientific advice procedure that had worked well for Lymphoseek. In October of 2008, we received a favorable response to the scientific advice assessment. The response included the potential for RIGScan CR to be considered for the Conditional Marketing Authorization program adopted by the EMEA in December 2007. During 2009 we discussed with our clinical and statistical advisors means of harmonizing the Phase 3 study design and product development plan with FDA. To that end, we developed a prospective Phase 3 clinical trial (NEO2-17) that would be conducted in patients diagnosed with cancer of the colon or rectum. The proposed study had a primary clinical endpoint of improvement in overall survival and a series of diagnostic and prognostic secondary endpoints. As designed the trial would evaluate approximately 300 patients randomized to unequal control and RIGS treatment arms. The NEO2-17 protocol and supporting materials were submitted to FDA in late 2009 under an Investigational New Drug amendment with a request for a pre-Phase 3 meeting and a review by FDA in the provisions of a SPA. In anticipation of a response from FDA to our SPA request in the 3rd quarter of 2009, we commenced development activities for the biologic component of RIGS with Laureate Pharmaceuticals.
What do we see in the coming months for Neoprobe Corporation in 2010?
* Publication of the complete data from the Lymphoseek Phase 3 clinical study (NEO3-05) conducted in patients with breast cancer or melanoma in a major peer-reviewed medical journal;
* Submission of the NDA for Lymphoseek as a lymphatic tissue tracing agent;
* Initiation of the European phase of the Lymphoseek Phase 3 clinical study (NEO3-06) in patients diagnosed with head and neck squamous cell carcinoma;
* Finalization of the Phase 3 clinical trial design for RIGScan CR with FDA through the SPA procedures and moving forward with development partnership initiatives;
* Acceptance of the RIGS drug manufacturing plan under an IND amendment; and
* Maintain a leadership position for our gamma detection device business by evaluating potential new or enhanced product offerings.
In conclusion, we are very optimistic about the commercial prospects for Neoprobe Corporation. We face challenges with the current economic and regulatory environment, but we achieved a great deal in 2009 and we believe 2010 will be an exciting year for the commercial prospects of Neoprobe. Our employees are focused on improving our products toward providing more effective cancer patient care and improving patient outcome. We appreciate your continued assistance and support in making Neoprobe a successful biomedical company.
Sincerely,
Carl J. Aschinger, Jr. David C. Bupp
Chairman of the Board
President and CEO
About Neoprobe
Neoprobe is a biomedical company focused on enhancing patient care and improving patient outcome by meeting the critical intraoperative diagnostic information needs of physicians and therapeutic treatment needs of patients. Neoprobe currently markets the neoprobe® GDS line of gamma detection systems that are widely used by cancer surgeons. In addition, Neoprobe holds significant interests in the development of related biomedical systems and radiopharmaceutical agents including Lymphoseek® and RIGScan™ CR. Neoprobe’s subsidiary, Cira Biosciences, Inc., is also advancing a patient-specific cellular therapy technology platform called ACT. Neoprobe’s strategy is to deliver superior growth and shareholder return by maximizing its strong position in gamma detection technologies and diversifying into new, synergistic biomedical markets through continued investment and selective acquisitions. www.neoprobe.com
Statements in this news release, which relate to other than strictly historical facts, such as statements about the Company’s plans and strategies, expectations for future financial performance, new and existing products and technologies, anticipated clinical and regulatory pathways, and markets for the Company’s products are forward-looking statements The words “believe,” “expect,” “anticipate,” “estimate,” “project,” and similar expressions identify forward-looking statements that speak only as of the date hereof. Investors are cautioned that such statements involve risks and uncertainties that could cause actual results to differ materially from historical or anticipated results due to many factors including, but not limited to, the Company’s continuing operating losses, uncertainty of market acceptance of its products, reliance on third party manufacturers, accumulated deficit, future capital needs, uncertainty of capital funding, dependence on limited product line and distribution channels, competition, limited marketing and manufacturing experience, risks of development of new products, regulatory risks and other risks detailed in the Company’s most recent Annual Report on Form 10-K and other Securities and Exchange Commission filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements.
Contact:
Neoprobe Corporation
Brent Larson, 614-822-2330
Vice President / CFO
or
The Shoreham Group
Tim Ryan, 212-242-7777
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