NEW YORK, May 24, 2011 (GLOBE NEWSWIRE) -- Intellect Neurosciences, Inc. (OTCBB:ILNSD), a biopharmaceutical company engaged in the discovery and development of disease-modifying therapeutic agents for the treatment and prevention of Alzheimer's disease with an internal diversified pipeline and licenses with major pharmaceutical companies covering products in late-stage clinical trials, today issued the following Letter to Shareholders from Dr. Daniel Chain, Chairman and CEO.
I would like to take this opportunity to update you about pertinent corporate and industry developments contemporaneous with the current filing of our quarterly financial statements with the SEC.
On April 12, we filed an orphan drug application with the Office of Orphan Products Development of the FDA to have Orphan Drug Designation granted to our clinical stage drug candidate, OX1 (OXIGON™) for the treatment of Friedreich's Ataxia ("FA"). Of particular note, is the assistance and encouragement we received from the Friedreich's Ataxia Research Alliance ("FARA") in support of our drug development strategy for OX1. Jennifer Farmer, MS, CGC, Executive Director, FARA commented: "FARA is excited that Intellect Neurosciences has decided to advance clinical research of OX1 in Friedreich's Ataxia. Research into the underlying mechanism of FA and damage that occurs in the cells strongly supports such a therapeutic candidate. We look forward to partnering with Intellect Neurosciences as their research efforts move forward."
Intellect's decision to develop OX1 as a potential ground-breaking treatment for FA results from the convergence of two independent lines of inquiry over several years: one relates to the general properties and mechanisms of action of the drug and the other relates to a greater understanding of the pathogenic mechanisms underlying FA, especially the important role of oxidative stress. These parallel developments spanning more than a decade of research by numerous investigators helped bring to light the strong potential of OX1 as a disease-modifying treatment for FA based on its unique multimodal antioxidant properties preventing damage to cell membranes as well as the oxidation of proteins and DNA. We believe that OX1 will ultimately prove disease modifying for FA and other neurodegenerative diseases.
FA is a rare, hereditary, progressive, neurodegenerative disease caused by a defective gene affecting energy production affecting an estimated six thousand people in the United States. OX1 may qualify for Orphan Drug designation under The United States Orphan Drug Act of 1983 intended to assist and encourage companies to develop safe and effective therapies for the treatment of rare diseases and disorders. Orphan Drug designation would provide a seven-year term of market exclusivity for OX1 if ultimately approved by the FDA pending successful outcome of planned clinical trials and would enable the Company to take advantage of various financial and regulatory benefits, including government grants for conducting clinical trials, waiver of FDA user fees and certain tax credits. The Office of Orphan Drug Product Development at the FDA may require additional efficacy studies before granting this designation for OX1.
Our focus on FA as an indication for OX1 stimulated significant discussions with potential strategic partners, including large pharmaceutical companies interested in OX1 as a potential breakthrough disease-modifying treatment for FA. Typically licensing agreements regarding compounds at the stage of development of OX1 can yield substantial revenues from licensing fees, milestone payments and royalties from sales. We are aggressively pursuing these opportunities.
We were disappointed by the Official Action that we received from the United States Patent and Trademark Office (USPTO) regarding our ANTISENILIN® technology platform. In January, an independent, world renowned, New York-based academician, who is a recognized expert in Alzheimer's disease immunotherapy, provided a written declaration in support of our position. The Official Action reiterated the Examiner's previous arguments, and impermissibly ignored the counter arguments contained in the declaration provided by the expert. Although the Official Action was marked as a "Final Rejection", several options remain available to us to continue with patent prosecution and our patent specialists are developing an appropriate strategy on our behalf. We remain confident of the validity of the patent applications as filed with the USPTO. We note that corresponding patents have issued in Europe, Japan, China and several other countries.
Meanwhile, we received a new patent from the USPTO in relation to our RECALL-VAXTM technology platform. Patents for RECALL-VAXTM have issued in Europe, Australia, New Zealand and South Africa and corresponding patent applications are pending in Canada, China, Japan and Israel. The patent was originally filed at the USPTO in 1999. RECALL-VAXTM is a method to immunize people to produce highly specific natural antibodies against the beta amyloid ("Aβ") protein before it causes irreversible damage by accumulating in the brains of Alzheimer's patients. The vaccine has the potential to delay onset or prevent Alzheimer's disease in individuals susceptible by age, genetic or other risk factor.
Addition of new consultant:
I am especially pleased to have recruited Michael Grundman, MD, MPH to Intellect's Clinical Advisory Board. Dr. Grundman is currently an Adjunct Professor of Neurosciences at the University of California San Diego (UCSD). He previously served as Vice President of Clinical Development at Janssen Alzheimer Immunotherapy Research & Development, LLC and Vice President of Clinical Development at Elan Pharmaceuticals. We were gratified by Dr. Grundman's comments on accepting the appointment: "I am honored to be part of Intellect's esteemed Clinical Advisory Board and look forward to helping Dr. Chain and his team at Intellect meet the company's drug development and commercialization objectives. I am impressed by the strong science at Intellect and believe that important new drugs could potentially emerge from its pipeline." Dr. Grundman was already very helpful with respect to the interpretation of safety, pharmacokinetic and cognition data collected during Phase 1 clinical trials of OX1 and we expect him to play an important role as the company undertakes planned future development of its various programs to address Alzheimer's and other neurodegenerative conditions.
Net loss from operations increased by $185,474, from a loss of $232,702 for the three months ended March 31, 2010 to a loss of $418,176 for the three months ended March 31, 2011. The increase in net loss was primarily due to an increase in G&A patent and corporate attorney fees.
Other (non-cash) expense increased by $7,216,908, from a loss of $719,513 for the three months ended March 31, 2010 to a loss of $7,936,421 for the three months ended March 31, 2011. The increase primarily was due to an increase in non-cash interest expense of $1,711,092, resulting from issuances of securities with fair values in excess of proceeds received and a non-cash loss of $6,944,842, resulting from the changes in the fair value of derivative instruments that we have issued.
In addition, we recognized a deemed dividend on our Series C Preferred Stock issued in March 2011 resulting from an excess of a beneficial conversion feature over the proceeds allocated to the issuance of the Series C Preferred Stock. This deemed dividend decreased the net income allocable to common shareholders by $5,850,000.
The vast majority of these charges are non-cash expenses recorded in accordance with GAAP, which requires that we adjust the recorded value of derivative securities that we have issued, such as convertible notes and warrants, to their fair value on the balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date. If the fair value of the derivatives was higher at the subsequent balance sheet date, we recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, we recorded non-operating, non-cash income. Our derivative instruments were valued using the Black-Scholes option pricing model.
Increased public awareness:
We have continued our efforts to increase public and investor awareness of Intellect Neurosciences through media outreach and other activities.
I have been invited to speak at the International Conference of Drug Discovery for Brain Disorders to be held in Panama City 30-31st May 2011. This is the fourth international conference to which I have been invited to speak since my key note speech at the International Conference on Monoclonal Antibodies in March last year. My speech in Panama is entitled "Immunotherapy for Alzheimer's Disease: Rational Drug Design." I am gratified to have been nominated for the Panama National Plaque of Honor Award from the National Secretary for Science, Technology and Innovation (SENACYT), Republic Panama which will be awarded during the conference to me among 17 world leading neuroscientists by His Excellency President Ricardo Martinelli Republic of Panama.
The support we receive from world class scientists and organizations such as FARA help motivate us to continue with our work developing innovative products that will ultimately benefit patients suffering from fatal neurodegenerative conditions and I continue to remain optimistic regarding Intellect's near and longer term prospects.
We thank you for your continued support of our important mission for the ultimate benefit of patients all over the world.
Daniel Chain, PhD, Chairman and Chief Executive Officer
About Intellect Neurosciences, Inc.
Intellect Neurosciences, Inc. is a Manhattan-based biopharmaceutical company engaged in the discovery and development of disease-modifying therapeutic agents for the treatment and prevention of Alzheimer's disease and other serious neurodegenerative disorders. The Company's ANTISENILIN® monoclonal antibody technology platform for treatment of Alzheimer's disease, invented fourteen years ago by Dr. Chain, was the first to specifically target the soluble "floating" beta amyloid that is now generally believed to be responsible for most of the damage in the brain of Alzheimer's patients. Importantly, ANTISENILIN® antibodies bind the major classes of beta amyloid including soluble and plaque-bound forms, but avoid binding to the amyloid precursor protein from which beta amyloid is produced in the body. This high degree of specificity is an important safety feature, significantly reducing the potential for adverse affects for Alzheimer's immunotherapy. Patents have been granted in Europe, Japan and several other countries with corresponding patent applications pending in the United States. The Company's most advanced internally developed product is OX1, which has been tested in Phase 1 clinical trials and has broad potential to treat diseases in which tissues especially nervous tissue, is damaged by oxidative stress. The Company plans to conduct clinical proof of concept patient trials for OX1 in Friedreich's Ataxia, a rare inherited disease that brings about free-radical mediated progressive damage to the nervous system.
The Company is developing IN-N01, a next generation humanized monoclonal and Recall-Vax, a vaccine technology that has the potential to delay or prevent Alzheimer's disease in people who are at risk.
Safe Harbor Statement Regarding Forward-Looking Statements:
The statements in this release and oral statements made by representatives of Intellect relating to matters that are not historical facts (including, without limitation, those regarding future performance or financial results, the timing or potential outcomes of research collaborations or clinical trials, any market that might develop for any of Intellect's product candidates and the sufficiency of Intellect's cash and other capital resources) are forward-looking statements that involve risks and uncertainties, including, but not limited to, the likelihood that actual performance or results could materially differ, that future research will prove successful, the likelihood that any product in the research pipeline will receive regulatory approval in the United States or abroad, or Intellect's ability to fund such efforts with or without partners. Intellect undertakes no obligation to update any of these statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date hereof. Accordingly, any forward-looking statements should be read in conjunction with the additional risks and uncertainties detailed in Intellect's filings with the Securities and Exchange Commission, including those factors discussed under the caption "Risk Factors" in Intellect's Annual Report on Form 10-K (file no. 333-128226), filed on October 13, 2010, and information contained in our Quarterly Report on Form 10-Q for the three month period ended March 31, 2011, filed on May 23, 2011.
CONTACT: Intellect Neurosciences, Inc. Elliot Maza, JD, CPA, President and Chief Financial Officer Tel. 212-448-9300 45 West 36th St.