EntreMed finds itself needing cash again

`Oncology partnerships' being sought, CEO says

August 15, 2002|By Julie Bell | Julie Bell,SUN STAFF

EntreMed Inc. is "getting down to the wire."

For 11 years, the Rockville drug developer has found a way, sometimes at the last minute, to raise enough cash to stay alive. Now it must do so again.

Chief Executive Officer John W. Holaday acknowledged as much yesterday during a conference call with investors, saying the $11.3 million in cash the company had as of June 30 is enough only "to continue to maintain its financial obligations into the fourth quarter."

He also sounded an upbeat note, saying the company is "finalizing oncology partnerships" with other companies. He didn't elaborate, but such partnership deals generally give another company rights to certain sales proceeds from a drug -- in this case an EntreMed cancer drug -- in exchange for immediate cash and promise of future payments, including royalties.

"They're getting down to the wire," said Gerard Klauer Mattison analyst Peter J. McDonald, whose own estimates show EntreMed has enough cash to last it until the second or third week of October. "They either have to do a partnership or go back to the markets."

Holaday said EntreMed's plan is to make partnership deals and raise money through the stock market.

The company said its second-quarter net loss narrowed to $11.3 million, or 51 cents a share, from a loss of $14.9 million, or 82 cents a share, in last year's quarter. That beat McDonald's loss estimate of 65 cents a share.

Revenue fell to $309,170 from $757,523, primarily because EntreMed no longer gets royalties on the sales of thalidomide. The company sold the royalty stream to Royalty Pharma AG for at least $24.3 million in August last year. The once-reviled drug is approved as a leprosy treatment, allowing doctors to legally prescribe it for other uses. It increasingly has been used to treat cancer.

The royalty-stream sale was one of many fund-raising tactics EntreMed has used over the years, from raising multiple millions on the stock market to selling its equipment and leasing it back. Such financial balancing acts are familiar to many young biotechnology companies, which must spend heavily for years as they move their first drugs through the laboratory, animal and human tests required to get them approved.

EntreMed has three drugs -- Endostatin, Angiostatin and Panzem -- in the second of three stages of human tests in cancer patients.

Last week, the company laid off 30 employees, 25 percent of its work force, and said it would defer compensation for top executives. Those and other cost-cutting steps will shave operating expenses by up to 40 percent beginning in the fourth quarter, the company said.

EntreMed also predicts lower manufacturing costs, saying that once a current manufacturing run is completed in the third quarter, it will have enough of its Angiostatin and Endostatin drugs to supply clinical trials into 2004.

Shares of EntreMed gained 33 cents yesterday to close at $2.87 on the Nasdaq stock market.

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