EpiCept Reports Third Quarter 2012 Operating and Financial Results

        Print
| Source: Immune Pharmaceuticals Inc
Conference Call Begins at 9:00 A.M. Eastern Time Today
TARRYTOWN, N.Y.--(BUSINESS WIRE (http://www.businesswire.com/))-- Regulatory
News:

EpiCept Corporation (Nasdaq OMX Stockholm Exchange and OTCQX: EPCT) (the
Company) today reported a net loss for the three months ended September 30, 2012
of $1.1 million and a net loss for the nine months ended September 30, 2012 of
$1.7 million. These compare with net losses for the three and nine months ended
September 30, 2011 of $5.4 million and $12.2 million, respectively. The Company
also provided additional information with respect to its recently-announced
signing of a definitive merger agreement with Immune Pharmaceuticals, Ltd.

Robert Cook, Interim President and CEO of EpiCept, commented, “During the third
quarter we focused our attention on concluding an agreement with a merger
partner that is interested in our products and in implementing a strategy to
enable AmiKet™ to realize value for the Company’s shareholders. We are
enthusiastic about the proposed merger with Immune Pharmaceuticals as we believe
the combined company will provide EpiCept’s shareholders with a broad,
attractive portfolio of product candidates that address unmet medical needs and
have significant market potential. Monoclonal antibodies, a field in which
Immune Pharmaceuticals has particular expertise, are an exciting area for
pharmaceutical development. We are pleased that the combined company intends to
re-energize EpiCept’s efforts to obtain a partner to pursue the Phase III
development of AmiKet™. Additionally, we believe that EpiCept’s vascular
disruption agents Azixa®and crolibulin™ are promising, targeted oncology drug
candidates that may further benefit from Immune Pharmaceuticals’ expertise in
nanotherapeutics.”

Business Highlights

  · Immune Pharmaceuticals Ltd., a privately held Israeli company, and EpiCept
announced on November 8, 2012 that they have entered into a definitive merger
agreement. The transaction is anticipated to close during the first quarter of
2013 and is subject to satisfaction of certain customary closing conditions,
including the approval of the shareholders of EpiCept. The combined company will
be focused on developing antibody therapeutics and other targeted drugs for the
treatment of inflammatory diseases and cancer. Immune’s lead product candidate,
bertilimumab, is a fully human monoclonal antibody that targets eotaxin-1, a
chemokine involved in eosinophilic inflammation, angiogenesis and neurogenesis.
Immune is currently initiating a placebo-controlled, double-blind Phase II
clinical trial with bertilimumab for the treatment of ulcerative colitis.
The companies’ collective oncology portfolios comprise Immune’s NanomAbs®, a new
generation of antibody drug conjugates, and EpiCept’s vascular disruption
agents. The combined company will continue efforts to secure a partner for
EpiCept’s Phase III clinical development candidate AmiKet™, for which efficacy
has been demonstrated for the treatment of chemotherapy-induced neuropathic pain
and post-herpetic neuralgia.
The terms of the merger agreement provide that, upon the closing of the
transaction, EpiCept will issue shares of its common stock to Immune
shareholders in exchange for all of the outstanding shares of Immune, with
EpiCept shareholders retaining approximately 22.5 percent ownership of the
combined company and Immune shareholders receiving approximately 77.5 percent,
calculated on an adjusted fully diluted basis. The proportionate ownership of
the combined company by the EpiCept and Immune shareholders is subject to
adjustment based upon the size of certain specified liabilities of EpiCept at
the merger effective time and does not initially include the exercise or
conversion of certain EpiCept options and warrants whose exercise/conversion
prices are significantly higher than the current trading price of EpiCept's
common stock.
The combined company will have dual headquarters in Herzliya-Pituach, Israel and
in the New York City area, with research laboratories in Rehovot, Israel. Daniel
Teper, PharmD, the Chief Executive Officer of Immune Pharmaceuticals, will
become the Chairman and CEO of the combined company. Dr. David Sidransky,
Director of Head and Neck Research Division, Professor of Oncology at the Johns
Hopkins School of Medicine, and a former Vice Chairman of the Board of Directors
of ImClone Systems, will be the Vice Chairman of the Board of the combined
company. Immediately following the merger effective time, the board of directors
of the combined company will consist of the then-current directors of Immune
plus Mr. Cook, who will also serve as the CFO. The combined company plans to
assume EpiCept’s common stock listings on the OTCQX and on the NASDAQ OMX
Stockholm Exchange.
The signing of the definitive merger agreement with Immune Pharmaceuticals met
the November 15, 2012 deadline imposed on the Company by its senior lender,
MidCap Financial LLP. The loan is expected to be restructured and assumed by the
combined company at the closing of the merger.
  · On August 28, 2012, EpiCept received notice of termination of the License
and Collaboration Agreement, dated November 19, 2003, with Myrexis, Inc. Myrexis
has elected to terminate its efforts to develop and commercialize any product
covered under the License, including its drug candidate Azixa™. As a result of
the termination of the agreement, all rights and licenses granted under the
License by the Company to Myrexis have reverted to the Company. The Company is
currently negotiating a new agreement with Myrexis to secure rights to the
Myriad Technology as set forth in the License Agreement.

Financial and Operating Highlights

EpiCept’s net loss attributable to common stockholders for the third quarter of
2012 was $2.8 million, or $0.03 per share, compared with a net loss attributable
to common stockholders of $5.4 million, or $0.08 per share, for the third
quarter of 2011. Net loss attributable to common stockholders for the third
quarter of 2012 includes $1.6 million of deemed dividends on convertible
preferred stock. EpiCept’s net loss attributable to common stockholders for the
nine months ended September 30, 2012 was $5.3 million, or $0.06 per share,
compared with a net loss attributable to common stockholders of $12.2 million,
or $0.18 per share, for the nine months ended September 30, 2011. The net loss
attributable to common stockholders for the nine months ended September 30, 2012
includes $3.6 million of deemed dividends on convertible preferred stock.

Third Quarter and Nine Months 2012 vs. Third Quarter and Nine Months 2011

Revenue

The Company recognized revenue of $0.9 million during the third quarter of 2012,
compared with $0.3 million during the third quarter of 2011. The Company
recognized revenue of $7.7 million during the nine months ended September 30,
2012, compared with $0.7 million during the nine months ended September 30,
2011. For the third quarter of 2012, revenue consisted primarily of license fee
payments, including the recognition of the remaining deferred revenue previously
received from Myrexis amounting to $0.7 million. For the third quarter of 2011,
revenue consisted primarily of the recognition of license fee payments
previously received from strategic alliances.

Cost of Goods Sold

Cost of goods sold in the third quarter of 2011 consisted solely of the costs
from the sale of Ceplene®to Meda AB. Cost of goods sold was $0.4 million for
each of the nine months ended September 30, 2012 and 2011, which consisted
solely of the costs from the sale of Ceplene®to Meda AB.

Selling, General and Administrative (SG&A) Expense

SG&A expense in the third quarter of 2012 decreased by approximately 55%, or
$1.1 million, to $0.9 million, compared with $2.0 million in the third quarter
of 2011. The decrease was primarily attributable to lower legal expenses, lower
salary and salary-related expenses and lower investor relations expenses. SG&A
expense for the nine months ended September 30, 2012 decreased by approximately
31%, or $1.7 million, to $3.7 million, compared with $5.4 million for the nine
months ended September 30, 2011. The Company expects SG&A expenses to trend
slightly higher as it proceeds to conclude the merger with Immune
Pharmaceuticals.

Research and Development (R&D) Expense

R&D expense in the third quarter of 2012 decreased by 58%, or $1.5 million, to
$1.1 millionfrom $2.6 million in the third quarter of 2011. R&D expense for the
nine months ended September 30, 2012 decreased by approximately 46%, or $2.9
million, to $3.4 million, compared with $6.3 million for the nine months ended
September 30, 2011. The decrease was primarily attributable to lower clinical
trial costs for Ceplene®, lower salary and salary-related expenses and lower
patent expenses. The Company’s clinical efforts for the nine months ended
September 30, 2012 and 2011 were focused on the open-label trial of Ceplene®,
the responsibility for which has now been transferred to Meda AB. Research and
development expense is expected to remain at approximately current levels over
the next few quarters.

Other Income (Expense)

Other income (expense) during the third quarter of 2012 was net expense of
$47,000, compared with net expense of $1.0 million in the third quarter of 2011.
Other expense for the nine months ended September 30, 2012 was $2.0 million,
compared with other expense of $0.8 million for the nine months ended September
30, 2011. The primary components of other expense in 2012 were warrant amendment
expense of $0.9 million, interest expense of $1.0 million related primarily to
the Company’s senior secured term loan and a foreign exchange loss. The primary
component of other expense, net for the nine months ended September 30, 2011 was
interest expense of $0.9 million.

Liquidity

EpiCept had $1.1 million in cash and cash equivalents as of September 30, 2012
and an additional $1.1 million in cash that is restricted by the Company’s
lender. In September 2012 EpiCept reduced the exercise price of certain of its
outstanding Common Stock Purchase Warrants, which were issued pursuant to
registered direct offerings in February 2012 and April 2012, in return for the
immediate cash exercise of all such warrants, resulting in total proceeds to
EpiCept of approximately $0.8 million after estimated fees and expenses.
Pursuant to the amendment to the Loan and Security Agreement dated August 27,
2012 with MidCap Financial, LLC, EpiCept was given until November 15, 2012 to
sign a definitive agreement with respect to a sale of the Company or a
partnering transaction for AmiKet™. In November 2012 EpiCept entered into a
definitive merger agreement with Immune Pharmaceuticals, which satisfied this
requirement. The loan is expected to be restructured and assumed by the combined
company at the closing of the merger. Current cash is anticipated to be
sufficient to run operations into the first quarter of 2013. See EpiCept’s
Quarterly Report on Form 10-Q for the period ended September 30, 2012 for a
further discussion of the Company’s liquidity and cash position.

Conference Call

EpiCept will host a conference call to discuss these results and answer
questions on November 14, 2012 beginning at 9:00 a.m. Eastern time.

To participate in the live call, please dial from the United States or Canada
(877) 809-8594 or from international locations (706) 758-9407 (please reference
access code 70213691). The conference call will also be broadcast live in listen
-only mode on the Internet and may be accessed at
www.epicept.com (http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2
F 
www.epicept.com&esheet=50477728&lan=en
-US&anchor=www.epicept.com&index=1&md5=362bad3b28f7e48d4838e5c1f0d83cd0). The
webcast will be archived for 90 days.

A telephone replay of the call will be available for seven days by dialing from
the United States or Canada (855) 859-2056 or from international locations (404)
537-3406 (please reference reservation number 70213691).

Additional Information

In connection with the proposed merger transaction, EpiCept will file a proxy
statement with the U.S. Securities and Exchange Commission (SEC) seeking
appropriate shareholder approval. SHAREHOLDERS OF EPICEPT AND OTHER INVESTORS
ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
TO THE PROXY STATEMENT) REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES
AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. EpiCept’s shareholders
will be able to obtain a copy of the proxy statement, as well as other filings
containing information about Immune and EpiCept, without charge, at the SEC’s
Internet site
(www.sec.gov (http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fww
w 
.sec.gov&esheet=50477728&lan=en
-US&anchor=www.sec.gov&index=2&md5=52c247f3667f2b4653b470c8b8b77973)). Copies of
the proxy statement and the filings with the SEC that will be incorporated by
reference in the proxy statement can also be obtained, without charge, by
directing a request to EpiCept Corporation, 777 Old Saw Mill River Rd,
Tarrytown, NY 10591, Attention: Investor Relations, Telephone: (914) 606-3500.

Participants in the Solicitation

EpiCept and its directors and executive officers and Immune and its directors
and executive officers may be deemed to be participants in the solicitation of
proxies from the shareholders of EpiCept in connection with the proposed
transaction. Information regarding the special interests of these directors and
executive officers in the merger transaction will be included in the proxy
statement of EpiCept referred to above. Additional information regarding the
directors and executive officers of EpiCept is also included in EpiCept’s proxy
statement for its 2011 Annual Meeting of Stockholders, which was filed with the
SEC on April 28, 2011. Additional information regarding the directors and
executive officers of EpiCept is also included in EpiCept’s registration
statement Post-Effective Amendment No. 1 to Form S-3 on Form S-1, which was
filed with the SEC on April 6, 2012. These documents are available free of
charge at the SEC’s web site
(www.sec.gov (http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fww
w 
.sec.gov&esheet=50477728&lan=en
-US&anchor=www.sec.gov&index=3&md5=b47d4b09f7c045a16e9379a2a07674a0)) and from
Investor Relations at EpiCept at the address described above.

This communication shall not constitute an offer to sell or the solicitation of
an offer to buy any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended (the “Act”). The securities issued in exchange for all of the
outstanding shares of Immune will not be and have not been registered under the
Act and may not be offered or sold in the United States absent registration or
an applicable exception from registration requirements.

The merger agreement and any accompanying issuance of shares by Immune
Pharmaceuticals are not, under any circumstances, to be construed as an
advertisement or a public offering of securities in Israel. Any public offer or
sale of securities in Israel may be made only in accordance with the Israeli
Securities Act-1968 (which requires, inter alia, the filing of a prospectus in
Israel or an exemption therefrom).

About EpiCept Corporation

EpiCept is focused on the development and commercialization of pharmaceutical
products for the treatment of pain and cancer. The Company's pain portfolio
includes AmiKet™, a prescription topical analgesic cream in late-stage clinical
development designed to provide effective long-term relief of pain associated
with peripheral neuropathies. The Company's product Ceplene®, when used
concomitantly with low-dose IL-2 is intended as remission maintenance therapy in
the treatment of AML for adult patients who are in their first complete
remission. The Company sold all of its rights to Ceplene®in Europe and certain
Pacific Rim countries and a portion of its remaining Ceplene®inventory to Meda
AB in June 2012. Ceplene®is licensed to MegaPharm Ltd. to market and sell in
Israel and EpiCept has retained its rights to Ceplene®in all other countries,
including countries in North and South America. The Company has other oncology
drug candidates in clinical development that were discovered using in-house
technology and have been shown to act as vascular disruption agents in a variety
of solid tumors.

Forward-Looking Statements

This news release and any oral statements made with respect to the information
contained in this news release contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. You are urged
to consider statements that include the words “may,” “will,” “would,” “could,”
“should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,”
“anticipates,” “intends,” “continues,” “forecast,” “designed,” “goal,” or the
negative of those words or other comparable words to be uncertain and forward
-looking. Such forward-looking statements include statements which express
plans, anticipation, intent, contingency, goals, targets, future development and
are otherwise not statements of historical fact. These statements are based on
our current expectations and are subject to risks and uncertainties that could
cause actual results or developments to be materially different from historical
results or from any future results expressed or implied by such forward-looking
statements. Factors that may cause actual results or developments to differ
materially include: the risk that we may be unable to complete the proposed
merger transaction with Immune Pharmaceuticals, the risks associated with the
adequacy of our existing cash resources and our ability to continue as a going
concern, the risks associated with our ability to continue to meet our
obligations under our existing debt agreements, the risk that Azixa®will not
receive regulatory approval or achieve significant commercial success, the risk
that clinical trials for AmiKet™ or crolibulinTM will not be successful, the
risk that AmiKet™ or crolibulinTM will not receive regulatory approval or
achieve significant commercial success, the risk that we will not be able to
find a partner to help conduct the Phase III trials for AmiKet™ on attractive
terms, a timely basis or at all, the risk that Ceplene®will not receive
regulatory approval or marketing authorization in the United States or Canada,
the risk that Ceplene® will not achieve significant commercial success, the risk
that our other product candidates that appeared promising in early research and
clinical trials do not demonstrate safety and/or efficacy in larger-scale or
later-stage clinical trials, the risk that we will not obtain approval to market
any of our product candidates, the risks associated with dependence upon key
personnel, the risks associated with reliance on collaborative partners and
others for further clinical trials, development, manufacturing and
commercialization of our product candidates; the cost, delays and uncertainties
associated with our scientific research, product development, clinical trials
and regulatory approval process; our history of operating losses since our
inception; the highly competitive nature of our business; risks associated with
litigation; and risks associated with our ability to protect our intellectual
property. These factors and other material risks are more fully discussed in our
periodic reports, including our reports on Forms 8-K, 10-Q and 10-K and other
filings with the U.S. Securities and Exchange Commission. You are urged to
carefully review and consider the disclosures found in our filings which are
available at
www.sec.gov (http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fus.
l 
rd.yahoo.com%2F_ylt%3DAgfqFPfVOEK5M4_Rv8aJvhTjba9_%3B_ylu%3DX3oDMTEzM2pvaWgxBHBv
c 
wMyBHNlYwNuZXdzYXJ0Ym9keQRzbGsDd3d3c2VjZ292%2FSIG%3D15t064n6f%2F**http%253A%2Fct
s 
.businesswire.com%2Fct%2FCT%253Fid%3Dsmartlink%2526url%3Dhttp%25253A%25252F%2525
2 
Fwww.sec.gov%2526esheet%3D6170045%2526lan%3Den_US%2526anchor%3Dwww.sec.gov%2526i
n 
dex%3D2%2526md5%3D61ec7b72044301e411e3335754ee5c07&esheet=50477728&lan=en
-US&anchor=www.sec.gov&index=4&md5=c883fdc3bba819e419ccf8a5caf23214) or at
www.epicept.com (http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2
F 
us.lrd.yahoo.com%2F_ylt%3DAhBuoawHw6iS3RhJOH9dNNfjba9_%3B_ylu%3DX3oDMTE2OGhhcWs4
B 
HBvcwMzBHNlYwNuZXdzYXJ0Ym9keQRzbGsDd3d3ZXBpY2VwdGNv%2FSIG%3D1659oglun%2F**http%2
5 
3A%2Fcts.businesswire.com%2Fct%2FCT%253Fid%3Dsmartlink%2526url%3Dhttp%25253A%252
5 
2F%25252Fwww.epicept.com%2526esheet%3D6170045%2526lan%3Den_US%2526anchor%3Dwww.e
p 
icept.com%2526index%3D3%2526md5%3D8b3a48c3367e26fcfbd15295b6d82118&esheet=504777
2 
8&lan=en
-US&anchor=www.epicept.com&index=5&md5=de809fb27038b721154b0ca99c50631c). You
are cautioned not to place undue reliance on any forward-looking statements, any
of which could turn out to be wrong due to inaccurate assumptions, unknown risks
or uncertainties or other risk factors.

Selected financial information follows:

EpiCept Corporation and
Subsidiaries
(Unaudited)
Selected Consolidated
Balance Sheet Data
(in $000s)
                                  September 30,           December 31,
                                  2012                    2011

Cash and cash                     $  1,131                $  6,378
equivalents
Restricted cash                      1,178                   70
Inventory                            6                       360
Property and equipment,              72                      120
net
Total assets                      $  2,866                $  7,521

Accounts payable and              $  4,024                $  3,333
other accrued
liabilities
Deferred revenue                     7,881                   12,947
Notes and loans payable              3,932                   8,022
Total stockholders’                  (13,168  )              (17,146  )
deficit
Total liabilities and             $  2,866                $  7,521
stockholders’ deficit


EpiCept Corporation
and Subsidiaries
(Unaudited)
Selected
Consolidated
Statement of
Operations Data
(in $000s except
share and per share
data)


                              Three
Nine
                              Months
Months
                              Ended
Ended
                              Sept.
Sept.
                              30,
30,
                                 2012                       2011
2012                       2011


Product net                   $  —                       $  34
$  583                     $  35
revenues
Licensing and other              871                        241
   7,131                      702
revenues
Total net revenues               871                        275
   7,714                      737
Operating expenses:
Cost of product net              —                          51
396                        411
revenues
Selling, general                 852                        1,977
3,667                      5,413
and administrative
Research and                     1,104                      2,617
   3,363                      6,292
development
Total operating                  1,956                      4,645
   7,426                      12,116
expenses
Income (loss) from               (1,085      )              (4,370      )
   288                        (11,379     )
operations
Other income
(expense):
Interest income                  —                          4
3                          10
Foreign exchange                 207                        (621        )
(57         )              38
(loss) gain
Warrant amendment                —                          —
(936        )              —
expense
Interest expense                 (254        )              (409        )
   (997        )              (870        )
Other income                     (47         )              (1,026      )
   (1,987      )              (822        )
(expense), net
Net loss before                  (1,132      )              (5,396      )
(1,699      )              (12,201     )
income taxes
Income taxes                     —                          (1          )
   (2          )              (4          )
Net loss                      $  (1,132      )           $  (5,397      )
$  (1,701      )           $  (12,205     )
Deemed dividends on              (1,624      )              —
   (3,550      )              —
convertible
preferred stock
Loss attributable             $  (2,756      )           $  (5,397      )
$  (5,251      )           $  (12,205     )
to common
stockholders


Basic and diluted             $  (0.03       )           $  (0.08       )
$  (0.06       )           $  (0.18       )
loss per common
share


Weighted average                 84,618,394                 71,003,667
81,826,154                 67,406,765
common shares
outstanding


EpiCept Corporation and
Subsidiaries
(Unaudited)
Selected Consolidated
Statement of Cash Flows
Data
(in $000s)

                                     Nine Months Ended Sept. 30,
                                        2012                    2011

Net cash used in operating           $  (4,189   )           $  (10,085  )
activities
Net cash (used in)                      (1,107   )              111
provided by investing
activities
Net cash provided by                    60                      18,156
financing activities
Effect of exchange rate                 (11      )              (1       )
changes on cash
Net (decrease) increase in              (5,247   )              8,181
cash and cash equivalents
Cash and cash equivalents               6,378                   2,435
at beginning of year
Cash and cash equivalents            $  1,131                $  10,616
at end of year


EpiCept Corporation and
Subsidiaries
(Unaudited)
Selected Consolidated
Statement of Stockholders’
Deficit Data
(in $000s)

                                     Nine Months Ended Sept. 30,
                                        2012                    2011

Stockholders’ deficit at             $  (17,146  )           $  (14,135  )
beginning of year

Net loss for the period                 (1,701   )              (12,205  )
Stock-based compensation                394                     753
expense
Foreign currency                        47                      (83      )
translation adjustment
Share and warrant issuance              2,833                   11,416
Warrant amendment expense               936                     —
Exercise of warrants                    1,469                   —

Stockholders’ deficit at             $  (13,168  )           $  (14,254  )
end of year


EpiCept had 92,220,376 shares outstanding as of October 31, 2012. EpiCept
expects to release its results for the year ending December 31, 2012 on or about
February 28, 2013.

*Azixa is a registered trademark of Myrexis, Inc.

EPCT-GEN
EpiCept Corporation:
Robert W. Cook, (914) 606-3500
rcook@epicept.com
or
Media:
Feinstein Kean Healthcare
Greg Kelley, (617) 577-8110
gregory.kelley@fkhealth.com
or
Investors:
LHA
Kim Sutton Golodetz, (212) 838-3777
kgolodetz@lhai.com
or
Bruce Voss, (310) 691-7100
bvoss@lhai.com
@LHA_IR_PR